Value theory reconsidered in the light of recent debates, with application to the nature of value, the composition of capital, and the transformation problem

Value Theory Re con sidered in the Light of Recent Debates, with Ap pli ca tio n to the Nature of Value, Capital, the Composition of and the Transformation Problem Al fredo Antonio Saad Filho Department of Economics School of Oriental and Afr ican Studies Uni versity of London Thesis submitted for the degree of PhD, 1 BIBl\ ioivsojv umv July 1994 ProQuest Number: 10672830 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is d e p e n d e n t upon the quality of the copy subm itted. In the unlikely e v e n t that the a u thor did not send a c o m p le te m anuscript and there are missing pages, these will be noted. Also, if m aterial had to be rem oved, a n o te will ind ica te the deletion. uest ProQuest 10672830 Published by ProQuest LLC(2017). C opyright of the Dissertation is held by the Author. All rights reserved. This work is protected against unauthorized copying under Title 17, United States C o d e M icroform Edition © ProQuest LLC. ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 4 8 1 0 6 - 1346 ACKNOWLEDGMENTS In the course of preparing this thesis, by m an y people. I have been helped I owe a great debt to those who read drafts of this work and offered criticisms and encouragement: Arthur, Suzanne Dumenil, de Du nc an Laurence Harris, Kerr, Richard Foley, Ryoji Carchedi, Freeman, Paolo An drew Brian McGrail, De bo rah Kliman, Gerard Giussani, Johnston, Costas John Miller, Derek Lapavitsas, Simoh Mohun, Fred Alej an dr o R a m o s - M a r t i h e z , Adolfo Rodriguez-Herrera, Ali Shamsavari, Frank Thompson and John Weeks. My greatest thanks go thesis. Alan Guglielmo Ishizuka, Ketley, Patrick Mason, Moseley, Brunhoff, Chris He successful to contributed Ben more Fine, than who supervised anyone else to this its completion. Support from my parents, and Benito Caparelli, Zina and Alfredo, was indispensable. and from To them, Marina my warmest thanks. I am pleased to acknowledge the receipt from the Br az ilian Ministry Education, of of a scholarship through w hi ch made possible my studies in the Un ited Kingdom. This work is dedicated to Rita, 2 my companion, my wife. CAPES, ABSTRACT This thesis is a contribution labour theory of value features of the LTV; (LTV). to recent debates first, the relations; the It builds upon two distinctive categories inquiry are historically determined modes capitalist social on second, used of the existence it rejects are analysed in the light of these elements and literature. First, Six issues the previous between dialectical logic and the LTV is addressed through an evaluation of 'new dialectics'. reconstruction in thought of Second, the the main whose aim is the characteristics relationship be tween labour value is assessed through the real processes that value and price, homogenization the normalization, (NSH) of labour. the LTV are assessed in this Sraffian, Third, and the the socialist' mon et ar y economists reform of the NSH of labour. the devised by the Fifth, the plan, di st inction and viewpoint between capital the (TCC, The evolution of Marx's use of these terms reconstructed, of 'Ricardian the organic and value compositions of OCC and VCC). views w h i c h was centred are investigated from the and view. 'l a b o u r - m o n e y '. This Fourth, determine traditional, in the 19th Century, Marx's critique of it, light. light; well- kn ow n of and synchronization Three 'abstract labour' around the institution of a technical, the This approach to Marx's me th od understands the LTV as a systematic dialectical theory, capitalism. of equilibrium as the organizing principle of the investigation. the relationship in is and their place in his analysis is brought to the transformation of values into production is reinterpreted in the light of the between OCC and VCC. This view the approach. the contribution of the the transformation problem detail. 3 to of the contrasted w it h Sixth, concerns of the the LTV prices of distinction transformation critics of is Marx's 'new approach' to is evaluated in TABLE OF CONTENTS Introduction 1 - The .. .............................................6 ’N ew Dialectics' 1.1 - 1.2 - and the Labour Th eo ry of Value ..13 The Labour The ory of Value as a Systematic Dialectical T h e o r y ................ ................. 14 The Starting-Point of 1.3 - Conclusion ’Capital' ................. 23 .............................. ............30 2 - Normalization, Synchronization and Hom oge nization of Labours in Marx's Theory of Value ................... 34 2.1 - Commodities, Labour and Va lue .................... 35 2.2 - The Normalization of Labours 2.3 - The Synchronization of Labours 2.4 - The Hom ogeniz ation of Labours ....... ........... 42 44 .................... 48 2.5 - The 'Embodied Labour' Approach to Marx's Value Th eor y ............................................... 56 2.6 - The 'Abstract L a b o u r ’ Version of Marx's Theory of Value ........ 2.7 - Conclusion 64 .......................................70 3 - Labour, Value and Money: A Comment on M a r x ’s Critique of John Gray's Proposed Moneta ry Re form ................ 72 3.1 - John Gray's Mone tar y Analysis .................... 73 3.2 - Normalization, Synchronization and Ho mog enization of Labour and the Labour-Money Scheme ............................................... 79 3.3 - M one y as the Measure of Values 3.4 - Other Functions of Mo ney 3.5 - Conclusion ...................83 .......................... 89 .......................................... 94 4 4 - The Development of the Concepts of Technical, Organic and Value Composition of Capital: An Interpretation ..98 4.1 - The Static Case \ 4.2 - The Dynamic Case 4.3 - Conclusion .................................... 102 ...................................112 ..........................................118 5 - Organic or Value Composition of Capital? a Reevaluation of the Transformation of Values into Prices of Production ..................................... 121 5.1 - Surplus Value, Profit, and the Composition of Capital ...................................... . .123 5.2 - The OCC and the Transformation Problem ........ 125 5.3 - From Values to Prices of Production.. ........... 128 5.4 - The Transformation of Input Values 5.5 - Conclusion ............. 135 ......................................... 139 6 - The 'New Approach' to the Transformation Problem and the Changing Face of the Labour Theory of Value ...... 143 6.1 - An Ov erview of the Early Debates 6.2 - The Context of the 6.3 - General Equilibrium, 'New Approach' ............... 146 .............. 148 Competition and Prices 6.4 - Value and General Equilibrium ................... 163 6.5 - The Operation on the Net Product ................166 6.6 - The Value of Mo ney and Commodity Prices 6.7 - The Value of Labour Power 6.8 - Conclusion ...156 ....... 170 ........................ 174 ....................................... 179 C o n c l u s i o n .................... 184 R e f e r e n c e s ....................................................... 190 5 INTRODUCTION This thesis builds upon the labour theory of value analyse the relationship between labour, price at increasing investigation, and levels the conclusions predicated upon two analytical categories of value relations; second, drawn should of of value, they are from be existence to and This it, are that the treated as first, of capitalist that equilibrium should not be one of the org anizing principles of the inquiry. are essential, money complexity. principles; analysis histori ca lly determined modes social of value, (LTV) These features because they are at the core of Marx's theory and distinguish it from other views. useful for the 6 critique of some In addition, well-known conceptions of the labour theory of value. Broadly speaking, these conceptions are rejected because of their build upon some of the most distinctive failure aspects of to Marx's critique of political economy, and because of the conflation of some of its features those approach, with typical of Ricardo's or even the neoclassical. This thesis has six chapters. Each of them builds upon the previous literature to present a distinctive contribution to the matters being discussed, in such a way that each and they have chapter can contribution to the topic covered. relationship between dialectical of value. several this stand The chapter subject 'new dialectics'. a Marx's method, that the systematic theory dialectical dialectics', of feature value theory. the new thought of approach is the be seen Acco rd ing to the capitalist mode of production. main features To achieve this, The contribution first, complex of the 'new dialectics' issues of the structure second, it places upon relationship and economic intellectual 'new is the of the labour with is it the logic between In important, addresses of because of the analysis. the the the labour emphasis this re-evaluation of this link most important aspects of this line of thought to a which dialectical respect, the connection between Hegel and Marx is essential, and the careful difficult which and theory of value and, method as logic. because of the rigour with the to claim the theory of value should be developed in accordance rules of dialectical a so-called should the for through the principal objective of this theory reconstruction in a the dispute it of relatively whose distinguishing labour as examines of addresses contribution is alone first critical evaluation of the This structured logic and the labour theory This issue has been the decades; been the is still identify the 7 'new is one dialectics'. in its infancy, essential of the However, which makes elements of it this approach and Therefore, first, distinguish it from the contribution of this it presents the argument thoroughly and systematically, the past. Second, it briefly previous chapter for the is 'new which has not considers analyses. the two-fold; dialectics' been done in main problems with this approach to Marx's method. The second chapter investigates the contrast with most previous studies, nature of values, this through the identification of chapter relationship between labour and of It is shown that value argues value is the real underlie the determination of value and price. value. the that best the understood processes its commodity or that expression values find synchronization and real processes, homogenization as their expression as prices as the labours that have produced go through three distinct In that concentrate either on the logical derivation of the concept calculation of them the normalization, of labour. identification and description is one of the most Their important contributions of this thesis. The processes of normalization, synchronization ho mogenization of labours provide a useful and framework for the study of competition between capitals of the same branch of industry, In addition, and for they the are analysis used in of technical the relationship between value and price, assessment The latter concepts of living and departs distinction from the virtual of is labour. between the quantitative grounded Their the upon socially ne cessary to the definition labour socially nec es sa ry to transform the inputs into the and the labour time the and in the development of the basis of a distinctive approach to determination of value. change. time output, reproduce the inputs. This approach to value theory is not conventional, useful but it is and illuminates some aspects of the relations between labour and value that are often neglected. Therefore, be used to assess the cogency more of other, views of the labour theory of value. it can traditional This chapter considers in detail three of the best-known views of this theory; traditional, developed by Maurice Dobb, Ronald Meek and Paul Sweezy, the relatively more modern approach of the school, and the 1970s by writers 'abstract labour' view, Sraffian developed in the inspired by the Soviet economist Rubin. The third chapter assesses the monetary reform the so-called Ricardian socialist economists and mid-19t h Century. The most reform is the institution of a important proposed in the aspect 'labour-money', a pound sterling or whatever. its this form of mo ney would According lead to to a because any of of the proponents, crisis-free whose development would no longer be limited by stemming from the mon etary sphere. this form instead by early of money whose standard is the hour of labour, is important, the economy, constraints The critique of this idea discussion of based on the labour theory of value has value to and money to terms come with the apparently very reasonable concept of labour money. In spite of the frequent scheme in the literature, ways; for first, a references to this chapter socialist John Gray; through second, the evaluates works the careful critique of the labour-money scheme labour-money is innovative in because it systematically labour-money the of the brings to case utopian scrutiny of Marx's light important aspects of Marx's own theory of value In addition, the and some money. this study lends itself to the analysis of functions of mo ney and the role of mo ney as two the the general equivalent. The fourth chapter analyses a complex the source of studies of the (much) confusion and labour theory between the technical, organic 9 of and issue, that (insufficient) value: value the has debate been in distinction compositions of capital. matter, Even though this seems its importance is composition of capital, in his analyses of be a undeniable. rather Marx abstract employs the and the concepts wh i c h represent it, the accumulation of capital, various types of rent, to use and the not to organic composition of of machin es dis tinction speak capital in of in the the industry, between role the of the transformation values into prices of production and the der ivation of of the law of the tendency of the rate of profit to fall. This chapter begins with a brief survey of interpretations of these concepts in the shows that their meaning different manners. This has been provides the different literature, under st oo d the in background This helps bring to meaning of the technical, also light not only widely for reconstruction of the evolution of Marx's own use terms. which of the the these precise organic and value compositions capital, but their respective analysis. It is shown that the progressive these terms is a symptom of the places in of Marx's introduction of refinement of increasing Marx's own perception of certain theoretical problems, and that they enable him to clarify the presentation of his own point of view. The fifth chapter applies composition of capital to transformation of values approach developed Fine's (1983) in the a prices chapter seminal contribution, is central transformation. of production. argues value This approach the is in transformation Ben that the shows that much of the criticism that Marx's misguided; derive from the analysis of a quite often, different and with it transformation these set of critiques problems, that ma y have little in common with Marx's own concerns 10 of Marx's contrast problem, The upon compositions sharp the Marx's for the correct interpretation of traditional views of has received is of of elaborates which distinction between the organic and capital analysis re- interpretation into this previous and jthe issues that he addresses in his own study of the relationship between values and prices of production. The innovative approach to the transformation developed here argues that, once the pr oblem in which Marx is interested is adequately defined - namely, different proportions of the effect labour production employed by each value of the means of prices power capital, production becomes clear that Marx on and of the means of irrespective or labour of power the - is not primarily concerned with it the calculation of the vector of prices of pr od uction as most of the literature has argued. On the his main de monstration that and that price is a form objective in the transformation is profit is a form of surplus value, of value. As a result, contrary, the the two aggregate equalities, surplus value and profit, and value and price, between naturally follow . Finally, the sixth chapter critically analyses of one of the best-known mod ern analyses of the labour recently put forward by Duncan Their 'new approach' upon a scrutiny. interpretation value and price, Even though increasingly popular, the most part, as this Dumenil. of and the it based relationship deserves perspective careful has become for escaped the attention of the literature. This the ’new s o l u t i o n ’ to means to contribution to value theory. the Gerard value, the analysis of its premises has, chapter addresses the problem and of to the transformation pro bl em is distinctive between labour, Foley theory 'new solution' on the net product, evaluate the transformation Dumenil Three innovative are investigated in detail; and the definitions of and Foley's elements the value of emphasis of money and value of labour power. One of the most that, even important conclusions though Dumenil and of Foley's this approach important contributions to the labour theory of 11 chapter is offers value, the method associated with this approach is The 'new approach' conception of value, has an ex open post, m one y and price. to question. circulation-based Because of cannot una mbiguously distinguish between variables value and surplus value, as price and profit; approach to analysis make of Nevertheless, this makes it difficult progress, profit it has the rate merit for or of, to such as and that this is economic at an use example least recognizing that equilibrium is an unwarranted value analysis, it and their forms of expression further the this, inadequate in such this the crises. implicitly, context for organizing principle for inquiries based on the labour theory of value. Even though much of the material covered in this thesis been worked over many times before, the contribution of illustrious much to add to the current only by introducing perspective and has benefitted scholars, literature. new elements It and this perhaps even from study has contributes not an innovative into some of the most important debates labour theory of value but, has more on the importantly, by pursuing the logic of Marx's own methodology consistently and rigorously from one chapter to thesis as a whole. 12 the next, and in the 1 - THE 'NEW DIALECTICS' AND THE LABOUR THEORY OF VALUE This chapter discusses dialectics, underlying the labour theory of abstract issue, labour, value, but it is and the value. essential price Instead of surveying applied in the vast This for these analysis of dialectics' the contribution (Arthur, 1993b). method a highly analysis forthcoming literature C a p i t a l , this chapter addresses the is the logic or the extensive debate concerning of as on chapters. dialectical Marx's issues the This method through literature, in the so-called ’new relatively new interpretation of the method of the labour theory adds much to the previous of of value but still needs to be adequately systematized and critically examined. Even though the roots of the back several decades 1920s; until see, 'new dialectics' can be (at least to L u k a c s 1 work for example, Lukacs, 1971 [1922]), in the 1 it the late 1980s that there was a consistent consolidate and expand this body of traced early was effort knowledge. not to The distinguishing features of this approach are the emphasis on the relationship between Hegel and Marx, and the attempt read Marx's works with a view to Hegel's method. not imply ignored that Marx's critique of Hegel's This does idealism (even though Marx himself never fully developed nor that there is an attempt Hegel's dialectics with Marx's. dialectics' to produce On the a synthesis contrary, the to is it), of 'new emphasizes the need to re-interpret Hegel's work with Marxian eyes; on this basis, new insights with regard to the structure of Marx's own work, are sought especially Capital. References such as Lukacs (1971 [1922]) indicate that the work was originally published in 1922, but the reference is from the 1971 edition. 13 The early stage of elaboration of the 'new dialectics' it difficult to pinpoint the main elements of this makes line of thought and determine the body of work that belongs to it. In spite of this, of the 'new dialectics' problems. is proposed, To do this, by Fred Moseley, Smith in what follows an interpretation (even in these this chapter draws he avily upon works Patrick though homogeneous which tries to overcome Murray, their every Ali Shamsavari writings respect), are and not and necessarily substantiates their claims by recourse to earlier writings by Karel Kosik, Ilyenkov, divided discusses the case into for the three sections. understanding The first of the labour theory of value as a systematic dialectical theory, aims at the thought the reconstruction in of categories of the capitalist mode of production. the main claims of the 'new analyses one specific issue, reasons why Marx starting-point of the book, dialectics', This section upon these issues. Finally, claims its second Capital, as the commodity are questions that have 'new dialectics', important The the commodity perspective of the most and and the status of the at this stage in the analysis, discussed for decades. essential the starting-point of chose which This is one implications need to be investigated in detail. The E. V, Jindrich Zeleny and others. This chapter is of Tony will that spell sheds been out new the light the third section summarizes the of the 'new dialectics', and critically evaluates their consistency and persuasiveness. 1.1 - THE LABOUR THEORY OF VA LUE AS A SYSTEMAT IC DIALECTICAL THEORY There are widely different interpretations of the method analysis appropriate to the labour theory of value example, 1979, Althusser, 1969 Baran and Sweezy, Engels, 1981b [1895], [1965a], 1966, Mandel, 14 1970 Carver, 1968, (see, [1965b], 1980, Meek, for Banaji, Dobb, 1956a, of 1940, Moseley, 1993a, 1968 Pilling, [1942]). 1980, Roemer, More traditional logico-historical (for a approach, critique, see 1986, Smith, views, such as Engels' for decades popular Shamsavari, 1991). the late 1960s and the mid 1970s 1979), and Sweezy, have been structuralism has also been influential, and van Parijs, 1990, (see, esp ecially however, Analytical Marxists are confronted by 1993a). between Hunt, and the so-called Analytical is now in vogue in the US and other countries Smith, Althusser's 1984, Marxism (the claims of Lebowitz, 1994a The controversies sparked by different of Marx's method have played a significant development of the labour theory of value, role and reasons to believe that they will be at least as and views in the there are lively in the future. It is doubtful, however, become as far-reaching, Marx had been Capital, less these disputes would have and developed such a prominence, cryptic in his writings, if especially with regard to the method used in his own analysis. In the postface to example, that the Marx notes that been little understood' second edition of Volume 1, for 'the method employed in Capital (Kl, 2 p . 99). confirmed by the widely different and reviewers of the book. This opinions Unfortunately, detailed analysis of the subject, and has conclusion of is translators Marx avoids a more mo de rn readers are left unsure about Marx's view of his own method. This reticence can mutually exclusive) be ways. explained For Arthur in at (1993a, is due to Marx's lack of clarity on the with regard to his own relation to Hegel. p . 47), least two p p . 63-64), matter, (not this especially For Smith (1993b, Marx deliberately downplayed the met hod of Capital to ^ In this thesis Capital (Marx, 1976 [1867], 1978b [1884], 1981b [1894]) is referred to as K, the Th eories of Surplus Value (Marx, 1978a [1956], 1969 [1959], 1972 [1962]) as TSV, the Contrtfcuiion to the CritiQue of Poli tical Economy (Marx, 1987 [1859]). as CCPE, and the Grundrisse (Marx 1981a [1953]) as GR. All italics in quotations are original unless otherwise stated. 15 make the book more accessible to his wo rk in g-class Therefore, Smith's conjecture indicates between Marx's desire to find an book, the and the intrinsic complexity of its content, led him issues and, material explicit perhaps, consideration even to historical prolonged periods include of R o s d o l s k y , 1977 illness, which matters; edition demands more careful to (it is known that Marx's him Murray, 1988, accept from and of Capital scrutiny. Smith's If it is true that es pe cially the relation of Marx was issues affecting his his own method the consequences would be far-reaching interpretations of the labour theory of value. issue cannot be discussed here. The approach this chapter presumes that it is possible to labour theory of .value as a position, letters and the Preface 3 t, Ar thur's argument unclear about important methodological Hegel's, historical pr ev ented see especially in view of some of Marx's own work, more [1968]). it is relatively easy French methodological analysis was included due to working on more abstract to the of than would be strictly necessary 'extra' Whilst tension for the attractive the form to neglect some that readers. systematic for modern This thorny developed dialectic which has recently the theory. Marx's been subject of renewed attention from distinct perspectives. 3 in interpret This pe rs pective emphasizes the relationship between method and Hegel's dialectics, with the 4 In a letter to Engels in December 8, 1861, Marx says that his new book {Capital) 'will nonetheless be much more popular and the method will be much more hidden than in part 1 [the Contribution]' (quoted in Murray, 1988, p . 109). In the Preface to the French edition of Capitol t f Marx approves of the transformation of his book into a serial, in which case 'the book will be more accessible to the working class, a co nsideration which to me outweighs everything e l s e . ' (K 1 , p .104). 4 The Hegel-Marx connection was regarded as highly important by Lenin (1972 [1929]) for whom, as is well-known, '[i]t is impossible completely to understand Marx's C a p i t a l , and es pe cially its first chapter, without having thoroughly studied and understood the whole of Hegel's L o g i c . 1 (p.180). He also stated (p.319) that '[i]f Marx did not leave behind 16 This approach does not imply that other interpretations 1 •jthe labour theory of value should be rejected, nor does claim that every aspect of Capital works) is a necessary reconstruction of thought. However, the step (or for that (see Smith, of the C a p i t a l , and its inner logic as a whole, M a r x ’s the capitalist mode it contends from this point of view of 1993b, it earlier dialectical production in features of main can of be understood p . 25). When considered as a systematic dialectic theory, the labour theory of value is a theory of categories. categories belong to distinct relatively abstract analytical (value, levels, labour power, These some etc.), simpler and and others more complex and concrete (market price, productive labour, 5 and so on). For Smith (1993a, p . 115), a theory follows a dialectical logic if: him a "Logic" (with a capital letter), he did leave the logic of C a p i t a l , and this ought to be ut ilised to the full in this question. In C a p i t a l , Marx applied to a single science logic, dialectics and the theory of knowledge of ma ter ialism ... which has taken everything valuable in Hegel and de veloped it f u r t h e r . 1 The relationship between Hegel and Marx is discussed by Banaji (1979), Fracchia and Ryan (1992), Ilyenkov (1982 [1979]), Moseley (1993a), Murray (1988, 1993), Pilling (1980), Rosdolsky (1977 [1968]), Shamsavari (1991), Smith (1990, 1993a, 1993b) and Zeleny (1980 [1972]); for a different opinion, see Colletti (1973 [1969] ) . 5 Marx uses the term ’concrete' in two distinct circumstances. First, to distinguish the actual from the conceptual and, second, to distinguish, within the sphere of the conceptual, concepts that are more or less determinate in thought. The latter meaning is used here; the former is used below; the context should make the mean ing of the term unambiguous. By the same token, the term ’a b s t r a c t ’ also has two different meanings: first as an empty, simple or deficient concept, poor in determinations and alienated from concrete reality; second, as the concept itself, that is determined through reasoning and plays a nec es sa ry role in the identification of the essence of things (see Carver, 1980, p . 199, Echeverria, 1978, p . 205, and Murray, 1988, p . 115) . 17 (a) categories that articulate simple and abstract social structures are ordered prior to more complex category and fixes concrete a categories structures structure and define (b) each incorporates the structures presented in the prior categories and in turn is incorporated in the categories. that that structures fixed by subsequent In this sense early categories are principles for the derivation of later ones. For the 'new dialectics', scientific investigation should be organised around the construction of categories, for two their essence, the reasons; appearance of the 1993 systems phenomena concrete. first, does or inner relations. [1812-16]), the appearance is The because not the form immediately For Hegel the concrete neces sar y because the essence immediate existence. the essence can appear of ma nifestation phenomenon, its it. form The reflection that As contradiction between [1830], form of has no only as immediacy phenomena; it is the unity of the essence 7 forms of appearance. itself and However, for this is not the only justification The second reason why the that nothing exists whole, and is intrinsic to the essence implies that the the contrary, other things. of simultaneously reality is more than a collection of sensual stance. is reveal (1991 man ife station of the essence conceals of because thought cannot immediately apprehend the complex determinations of complex organized concrete is in isolation but only in a In other words, the and it has organic unity. concrete the its above complex system is a on is with complex Despite the fact that this g Hegel and Marx use the term phenomenon for the merely apparent, that has no relation with the real, and for the visible side of the essence (Dussel, 1988, p . 349). The latter is the sense of interest in this chapter. ^ See Oakley (1984, p . 151). It follows that, for Hegel, laws derived from the immediate appearances (empirical regularities) lack explanatory power, because they do not contain the proof of their objective necessity. 18 system is logically prior to each particular thing, not appear as such. thing is an The only element interacting things, of relations, (moment) of recognize a concrete to the of concrete, particular overall picture of reality each system of system or the step-by-step definitions (see Ilyenkov, 1982 into [1979], an p . 57, 1993). Science is not, therefore, merely the through the externally given form of the underlying essence. the essence, identification of the work of appearance piercing to reveal There is another side to it: it must also show why the appearances belong to, aspect of, that or a concrete manife st at io n of a combination and Murray, to does is through the progress of scientific analysis from the abstract logical way it and are a necessary which can be done only mediations whereby through the the essence of phenomena are expressed through their form of appearance: The concrete and material has a depth its surface level of appearances. first to pierce through the level ... and then to appearances proceed assert the this task it is not its independence; appearances to to the sufficient by the that To for to thought its primacy real ... the] material can only be grasped of the through over process. reconstruction of categories allows for intelligibility that appearances. dialectical [Hence, is depth mediations given it must assert generated underlying The task of thought connect the depth level with the fulfill level A this concrete and asserting the priority of the thought process over how the concrete and material is given in emphasis omitted; 1993a, appearances. see also (Smith, Pilling, 1972, 1990, and p . 37, Smith, p . 78). Therefore, the concrete understanding of the relationship between essence and appearance can be achieved only a two-way process; means of an first, analysis the essence should be that 19 departs from the through grasped by appearance; second, the intrinsic relationship between appearance and the essence should be result, the features of virtue of the the underlying recognized as a complex accounted appearance essence, logical the are form of As a for. explained and the figure which reality comprises by is the essence, the appearance which reflects it, and the form of g their necessary interdependence. For the ’new dialectics', this is precisely the work that Capital. logic, With this aim modified it, systematic he Marx took over and d eveloped his reconstruction in thought sets out Hegel's own to the categories of the capitalist mode of production. in dialectical method of do for the essential 9 The soundness of this method and the validi ty of its results are contingent contradictions upon two requirements. First, in the simpler concepts should be the of the more complex ones. reject the former; However, instead, concept should reveal the latter the more complex the inner potential source should forms of the the of not the simpler D See Dussel (1988, p . 242). This approach may be used to shed new light on the problems in Ricardo's value theory, because it shows that the ability to identify the essence of value is insufficient. One must also show why the essence appears as it does (in this case, why and in which circumstances does labour appear as value; see Fine, 1982, 1986a, and Pilling, 1980). The Ricardian socialists' idea that a 'labour-money' wou ld do away with economic crises suffers from a similar inability to link essence with appearance (see chapter 3). Marx's account of the value-form, on the contrary, not only identifies the essence of value, but also explains its (changing) form of appearance (see chapters 2 and 5). q According to Smith (1993a, p . 37), Marx's aim in Capital is 'to trace "the intrinsic connection existing between economic categories or the obscure structure of the bourgeois economic system ... [to] fathom the inner connection, the physiology, so to speak, of the bourgeois system." [T S V 2 , p . 165] This is nothing more than the Hegelian goal of reconstructing the world in thought through working out a systematic theory of categories' (emphasis omitted). See also p p . 15-20 and Kl, p p . 90, 92, K3, p p . 428, 817, 956, Arthur, 1992, Banaji, 1979, p p . 19-20, Dussel, 1988, p . 242, Kosik, 1976, p p . 2-3, and Murray, 1988, p p . 40-45, 158-59). 20 ones in a more concrete context. Second, each step of analysis must be developed with the utmost care and attention to detail. Every concept introduced by means of particular, the their interrelations, unfolding of that, precise or category should be procedure outlined above; in no assumption should be made with regard to structure of the inquiry, addition, the new the role of each concept in it, unless it derives from the process concepts from more the analysis should take abstract into since all concepts are linked, concept by others the the of ones. account sublation the 10 or In fact of a (or the sublation of a form of the concept by a more complex one) often changes the meaning of other 11 concepts. This process of systematic evolution in the structure of the analysis plays a major role in the determination contradictions or concepts should be developed, at any given point. framework, coexist Because of concepts at distinct in dialectical analyses. this of which or unfold, intrinsically dynamic levels of abstraction always Moreover, the evolution the reconstruction of the concrete in thought depends the development of the contradictions concepts 10 wi th in of upon and The word 'sublate' is used as the English equivalent of Hegel's 'A uf h eb un g1 (to p reserve the previous category while clearing away and substituting it). 'Supersede' and 'suspend' have also fulfilled a similar role in the literature; see Hegel (1991 [1830], p p .xxxv-xxxvi and 154). 11 This issue is discussed further by Arthur (n.d.), Engels (1981a [1894]), Murray (1988, 1993), Shamsavari (1991), and Smith (1990, 1993a, 1993b). This has not escaped the attention of the more careful analysts of Marx's work. For example, in their study of the composition of capital, Groll and Orzec h (1989a, p . 57) point out that '[t]he basic difficulty in fully grasping the meaning and significance of the composition of capital is rooted in Marx's methodological approach to his economic research. Being strongl y influenced by Hegel's method, Marx's concepts have a dynamic meaning in their appearances and transformations. His categories rarely have the straightforward, unequivocal meanings so familiar to, and expected by, the modern economist. On the contrary, they usually have multiple, sometimes complementary and sometimes contradictory, m e a n i n g s .' 21 6et *^en interrelated concepts. followed at every stage, the logical which may faults, Unless these analysis steps becomes eventually are prone to handicap its development and lead it astray. As the investigation progresses, abstraction are bridged, successive and the analysis and more concrete features of reality; levels of encompasses in other more words, it gradually reconstructs the concrete: Ascending from the abstract to the concrete is a movement for wh ich every beginning is abstract and dialectics consists of transcending this abstractness ... Ascending from the abstract to the concrete the ... dialectics of the concrete totality in wh ich intellectually reproduced on all levels and only the clear chaotic whole in of ideas but outlined, determined and comprehended, see also GR, inquiry completed, which determination. the follows this all approach concepts subject to This is not a one of its virtues, are of itself is 1976, defect of this between thought and reality, method because autonomy that the However, features of it of the bridge life. This thought of the is the real the would gap be unable material regardless of the complexity of the analysis: 22 but, and present an all-encompassing explanation of certain aspects of intrinsic be greater thought from an attempt to exercise, and because it recognises categories that capture the essential world is quite distinct never intrinsically transformation should be noted that the reconstruction in overcome the all whole (Kosik, can elements and properties of reality are endless. self-defeating in transforms whole too. is p p . 100-02) because contradictory and process, a concepts; rather, this into is reality d i m e n s i o n s . The process of thinking not p . 15; An whose a to world, The dialectics of the concrete totality is not a method that would naively aspire to know all aspects of exhaustively and to present a "total" with all image of its infinite aspects and properties it is a theory of reality as a concrete reality reality, ... Rather, totality. This [is a] conception of reality, of reality as concreteness, as a whole that is structured (and thus is not that evolves (and thus is not immutable and for all), and that given once is in the process of forming (and thus is not ready-made in its whole, or their ordering, subject to with only its parts, change). 1.2 - THE STARTING-POINT OF The process of reconstruction and chaotic), of the (Kosik, ’CAPITAL' reality in thought requires the identification of some starting-point analysis. This fundamental appearances. cell-form, is potentially the single, concept, These that synthesizes characteristics Marx's method, concept is because the failure the most abstract and make to the reconstruction of identification of this for the whose gradual unfolding leads, of mediations, we alth this of concept through the the to 1976, a mortals select the a series concrete. sal to the The of correct starting-point will prevent the analysis from accounting for important aspects of reality or lead to was seen above theory that a dialectical inconsistency. of n ec es sa ri ly departs from the real and concrete; the immediate perception of the knowledge of its inner structure, the concrete needs to be whole does the sensual theorized. It categories however, not as lead to experience of Therefore, the See also Fine (1982, p . 12) and Reuten (1993). In other words, the aim of the exercise is not me rely an asymptotic reconstruction of the real per se, but to use the knowledge thus obtained as a means to intervene in reality. In this sense, Marx's dialectics is a ph il osophy of praxis (see Elson, 1979b, and Sanchez Vazquez, 1977 [1966]). 23 starting-point one, is an element of reality, but a very specific whose identification is already the first result of the application of the dialectical method Smith, (see Arthur, 1992, and 1990). Marx could not begin Capital with the analysis of value (even though this is the measure of capitalist wealth), with the dissection of the concept of capital is the subject of the book and the most of production in capitalism), nor (although this important relation because these concepts cannot immediately be grasped from the inspection of reality; need to be developed simpler concepts. on the basis years of relatively and until he identified the commodity as 13 adequate starting-point for his book. The commodity the attempts, chosen because unit of we alth cell-form, it is the immediate, in the capitalism. unfolding concept of commodity capital p . 100-02, The many other, study, several It took Marx of they fact to be Marx, of allows that this the into [1930], commodities As is and a the such as analysis p . 544, and Campbell, exist in several in the value and (see GR, 1993). modes production does not disqualify this concept as the starting-point thought. term has for However, two a reconstruction of actual legitimate contradictions concepts introduced 1989b elementary, was of adequate capitalism in it indicates that in Marx's analysis distinct meanings; first, it this stands for commodities as the product of commodity-producing labour general, a form that has existed for mi llennia and is one of the historical premises of capitalist production. means commodities as the product of specifically relations in of production. The difference meanings of the term lies on the fact that, modes of production, Second, capitalist between under these previous the production of commodities does 13 it not The process of identification of the commodity as the starting-point of Capital is retraced in Echeverria (1978, 1980). For a different opinion, see Carver (1980); see also Elliott (1978-79) and Evans (1984). 24 exist for itself, while in independence and necessity. capitalism it acquires 14 The choice of the capitalist commodity as the starting-point of Capital means that the latter is meaning of this concept in Marx's which is the production that concept, starting-point work. that expresses a concrete or a general most important the commodity As belongs is to be explained, abstract universal the to this the is a universal, notion. between concrete and abstract universals mode legitimate and The of not an distinction is very important, and needs further scrutiny. Abstract universals analysis; they are formal resemblance, other determined through empiricist abstractions based on superficial and they directly without exception In are all (otherwise they would not be words, investigation comprehend of they the are external determined From the standpoint of dialectics, or (Gunn, abstract universals). through relations, abstraction from, the phenomena concerned particulars 1992, the through p . 23). universals are useful but provide little scientific understanding, because they cannot account objects that they represent. for the 15 14 specificities of the See chapter 2. For Marx, '[t]he commodity as it emerges in capitalist production, is different from the commodity taken as the element, the starting-point of capitalist production. We are no longer faced with the individual commodity, the individual product. The individual commodity, the individual product, manifests itself not only as a real product but also as a commodity, as a part both really and conceptually of production as a whole. Each individual commodity represents a definite portion of capital and the surplus value created by it.' (TSV3, p p . 112-13) 15 ’Pro.dxic tion in general is an abstraction, but a rational abstraction in so far as it really brings out and fixes the common element and thus saves us repetition. Still, this general category, this common element sifted out by comparison, is itself segmented many times over and splits into different determinations. Some determinations belong to all epochs, others only to a few. {Some} determinations will be shared by the most modern epoch and the most ancient. No 25 Real un der standing requires concrete science deals with the actual, determinate. essence of Concrete the and the actual abstractions phenomenon. abstraction, They points towards the internal this reason, the As such, through and have a genetic concrete abstraction relations of the subject; it allows the identification of of the particulars. objective determined abstraction in an d through the phenomena, relation with the particulars. is complex and express are because The cell-form should the be for cell-form understood in the double sense of expre ssing the specific concrete content of the particulars, or their most general characteristic, and of ex pr essing not some arbitrary form of development the object, but only that wh ich constitutes the of actual foundation from which the particular forms develop: A concrete universal concept wealth of the particulars" in two senses expresses content single, in (the ... First, its wealth" a concrete the itself of the It comprises of the definitions of this Second, universal in of a development of an itself form, "the its of and which universal really only whole structure it does not express of the object as a whole but that, the concrete structure) definitions some arbit rarily chosen form constitutes "the concept specific law-governed quite definite form and its specificity. in in its concrete definitions definitions internal object under study. comprises in its development that, basis form or product ion will be thinkable without them; however ... just those things which determine their development, i.e. the elements which are not general and common, must be separated out from the determinations valid for prod uc ti on as such, so that in their unity - wh i ch arises already from the identity of the subject, humanity, and of the object, nature their essential difference is not forgotten.' (GR, p . 85; the term in braces was added by the editors.) 26 foundation on wh ich formations grows. "the whole (Ilyenkov, The fact that the categorial 1982 that the main [1979], of of the objective of other pp.8 4 - 8 5 ) ^ reconstruction of the is predicated upon the ex istence implies wealth" concrete developed Capital system is reconstruction of the capitalist mode of production actuality, and not its historical genesis. the in its Therefore, the logical development of the concepts discloses not the actual process of becoming of this system (its historical but the inner logic of its development (which helps why Capital t does not start with the analysis of 17 accumulation nor commercial capital). As the stages of theory do not have to coincide of history, Capital commodity, without 'simple any commodity capitalism critique, 1981). i can start with the implication, production’ On the contrary, that the production of 1983, primitive with analysis for 1981b Shamsavari, the beginning of commodities explain is and Ca pi ta I i the the that preceded [1895]; 1991, those of example, hi st orically (as is presumed by Engels, see Anderson, genesis), most for a Weeks, implies abstract See also p p . 48, 76-83 and Murray (1988, p p . 121-22, 143-44). For a comparison between dialectics and formal logic, that works with abstract universals, see Gunn (1992) and Kay (1979). For a critique of the me thod of classical political economy, that is based upon the search for abstract universals, see T S V 2 , pp. 106, 164-65, 191, Dussel (1988, p . 209), Murray (1988, p p . 117-23, 144), Pilling (1980, p p . 25-28 and 72-74) and Shamsavari (1991, p p . 87-90). 17 '[I]t is only [the] logical development of categories that is guided by the relation in which the elements of the analysed concreteness stand to one another in the developed object, in the object as the highest point of its development and maturity, that discovers the mystery of the genuine objective sequence of the formation of the object, of the mou lding of its internal structure ... Logical development of categories in science contradicts temporal sequence exactly because it corresponds to the genuine and objective sequence of the formation of the concrete structure of the object under study. Herein lies the dialectics of the logical and the historical.' (Ilyenkov, 1982 [1979], p p . 218, 221) 27 feature of capitalist starting-point production. 18 The fact is a capitalist commodity has, bearing upon the existence or the the of course, importance production in other modes of production; that of commodity more generally, suggests that the argument and conclusions of no the book it do not have immediate application for modes of production other than cap italism (see Arthur, 1992, p.xiii, and Smith, 1993a, p . 102). It follows that, even though contain historical analysis, in essent ially the book historical It would is large passages the ordering of the logical, and Capital categories the role of investigation is of secondary importance: ... be unfeasible and wrong to let the categories follow one another in that in which they were sequence is determined, the rather, the opposite of that which order or whi ch same historically seems corresponds economic sequence decisive. to w hi ch to be is one precisely their historical as Their by their relation to another in modern bourgeois society, (GR, of natural development. p . 1 0 7 ) 19 Therefore, the commodity with capitalist (and not historically 18 which Capital general) begins product, is a and a Capital i begins (p.125) with the following statement: 'The wea lth of societies in which the capitalist mode of production prevails appears as an "immense collection of commodities"; the individual commodity appears as its ele mentary form. Our investigation therefore begins with the analysis of the c o m m o d i t y . ' The expression 'in which the capitalist mode of production prevails' is essential, for it situates the concrete from which the analysis departs. 19 In other words, 'the method of rising from the abstract to the concrete is only the way in which thought appropriates the concrete, reproduces it as the concrete in the mind. But this is by no means the process by wh ich the concrete itself comes into being.' (GR, p . 101). See also p . 103, K3, p . 400, Banaji (1979, p p . 29-30), Murra y (1988, p . 182), Shamsavari (1991, p p . 73-75), Smith (1990 and 1993a, p . 102), and Zeleny (1980 [1972]). For a different view, see de Brunhoff (1973a) and Milonakis (1990a, 1990b). 28 concrete universal notion). (and not an abstract universal In other words, the concrete, the starting-point but the concrete as a of category Capital unifying particular forms which it may assume in reality. this, or general but the man ifo ld exchanged problem; of under capitalism. if Capital and if the most commodities be However, departs from the important objective reconstruction of capitalism method that distinguished in are thought, from raises one commodity, book how Hegel's, is can where category supposedly validates the choice of the the last first and, the last logically follows? For the the main difference criteria for the verification system is idealist, the sphere of investigation Therefore, their because it cannot ideas, are of while validated the adequacy of the starting-point of Capital the lies in the theories. Hegel's verified outside be results through the Marx's given the first category, 'new dialectics', good, and capitalist the of produced this of all Because the commodity does not represent any particular is of Marx's material (capitalist) praxis. commodity as the is granted not only by the power of the labour theory of value to reconstruct the dynamics of capitalism on its basis, identify the fundamental but also by its capacity relations of this system, to and the limits of capitalism's ability to accommodate . 20 social change. economic and Once the concept of commodity grasped, the labour theory of value uses capital, and many others. is adequately it to construct the concept of The construction of these concepts is ne ce ssa ri ly a gradual process, 20 with several mediations 'The "distance between thought and reality" is, of course, bridged by thought in works of theory, since the formulation of concepts in social science comes by definition through thinking. Whether this distance is truly bridged or not, is, as Marx puts it, to be judged in practice, in "the general process of social, political and intellectual life". The "process of knowledge itself" does not ... confer "validity".' (Carver, 1980, p . 217-18; see also Cohen, 1974). 29 (for example, before he develops Marx discusses exchange value, the concept money and of capital, surplus value). Marx held that it could not be otherwise: To develop the concept of capital begin not with labour but with it is value, necessary and, with exchange value in an already developed circulation. It is just as precisely, movement impossible to transition directly from labour to capital to of make the as it is to go from the different human races directly to the banker, from nature to the steam engine. Therefore, the 'new (GR, dialectics' p . 259) holds that starting-point of the inquiry is correctly the analysis of the concrete, the original procedure, concrete the identified from a reconstruct rigorous scientific based upon the gradual unfolding of new from the contradictions ones. if it is possible to through in other, dynamic possible to achieve (though not complete) concepts relatively less If this procedure is rigorously adhered to, eventually be a or rich, developed it should complex and representation of the concrete in thought. 1.3 - CONCLUSION This chapter has made a systematic principles of the 'new dialectics'. prese nt at io n This approach to method conceives the labour theory of value as a theory, whose main objective thought of the essential of production. This of is the reconstruction systematic capitalist should through the application of the rules of Marx's reconstruction categories of the be through concrete cell-form (in be achieved dialectical reconstructed, abstraction. this case, determination of relatively 30 the The contradictions commodity) simple w hi ch and lead abstract in mode logic. It should start from the identification of the cell-form the concrete that is to the is in to of done the the concepts (use value, exchange value, money, unfolding unveils other concepts, (surplus value, which the capital, labour etc.)* more complex and rate of profit, theory of Their value and so concrete on), gradually systematic and intelligible reconstruction of gradual with makes the a original concrete. Because of the method employed, the meaning of the concepts, the level of abstraction of the inquiry, between different Therefore, the concepts are except contradictions through connection ob je ctively no concept can legitimately analysis and the the be determined. introduced development in more abstract ones, and no The of 'new d i a l e c t i c s ’ holds that between essence and appearance forms ability reconstruct to of nor outside rigorous application of this method should reveal the (deceptive) the concept assumption can be arbitrarily imported from the imposed by the analyst. into and, appearance a thereby, of the complex or the links explain the phenomena. The reality from the development of contradictions in its cell-form, through this procedure, inquiry gives scientific character to the prevents it from being arbitrary. Eventually, to main the identification capitalism, of the it should lead characteristics the sources of its dynamics, and and the of ultimate limits of this system. This approach is elegant and appealing, add to previous analyses of the M a r x ’s work. Nevertheless, outlined above is first, and it has structure and much to content of the application of the principles troubled the need to prove that by two the fundamental choice of the problems; correct starting-point and the application of the dialectical method are sufficient to reconstruct the concrete and, need to prove that the unfolding of two used as alternative starting-points, substantially different outcomes, analytically unacceptable. 31 second, distinct n ec es sa ri ly of which at least the concepts, leads to one is Whilst the latter concerns the rationale for the the commodity as the starting-point of Capital unfolding of another concept also led to the of the capitalist economy in immanent reason starting-point internal of thought, to select the book), If the the former concrete progress of the periodical concepts analysis, or unfolding no the the relatively introduction the for of the inquiry incorporation of social and claims of the as a further historical 'new dialectics' would the needs that cannot be derived from within the analysis, central be addresses of necessary if the This difficulty may be abstract concept does not lead to the relatively would commo dit y consistency of the approach. expressed as follows. (if of reconstruction there the choice the elements some of the be seriously weakened. These issues belong to Hegelian addressed here in detail. the 'new dialectics' unscathed. has shown 1994b) it For, However, can pass it the very 1991, of difficult, if departs from 1994, not in the and derive the contemporary (changing) in token, the and/or it predominance of is of value-forms 1, which Marx uses to derive the concept or to unders tan d the to logical functionalism inconvertible paper money directly from the Capital 1970s Lebowitz, strictly reductionism are to be a v o i d e d ) . By the same to consistency impossible, a be whether contradictions commodity (at least if the charges of difficult cannot doubtful test Holloway, conceptualize the capitalist state framework which is and as the state derivation debate of the (see Clarke, is studies, in money, limits of state intervention in the economy purely through the analysis of the logic of wealth of capital. In more general the concrete is terms, the presumption that contained in the the com modity and can revealed by the application of the dialectical method smacks of idealism, for it implies that reconstructed in thought purely through 32 capitalism abstract be alone can be analysis, regardless of the dialectics' historical indicates context that required at some stage, (although historical the research 'new may be its role is little more than to fill out the pre-determined structure of the s y s t e m ) . This leaves little space for class relations or class struggle influence the shape and evolution of the system, the question of how Bonefeld, Fracchia 1992, capitalism and can be Ryan, and raises transcended 1992, and to (see Holloway, 1992) . This seems distant from Marx's presumes that reality cannot be conceptual own perspective, reduced presentation that he adopts to concepts. in Capital necessary in view of his method and goals, but is For the concrete and histo ric al ly determinate, and it is in perpetual because it subject conflicting original shaped, social concrete, the analysis. and forces. This to is and constantly nature of, of the these limits are recognized, motion alters (changing) in changes only reality. the use of dialectical by the changes but be specific these cannot be grasped by thought processes alone, the concrete analysis surely intervention, which requires corresponding The need for, The it cannot argued that it is sufficient. is that by Unless logic in the reconstruction in thought of the capitalist economy runs into the risk of Therefore, the degenerating in spite of the 'new dialectics' has into idealist substantial given to contribution the Marx's method and the content of his works, seems insufficient to capture either concrete or the we alth of the analysis 33 speculation. the which unders ta nd in g of this perspective we alth in Capital. of the 2 - NORMALIZATION, SYNCHRONIZATION AND HOMOGENIZATION OF LABOURS IN MARX'S THEORY OF VALUE A vast body of literature has hundred years or so with object. been Marx's pr oduced theory of the value last as its The continuing interest it has attracted often finds its expression in the form meaning and significance of these controversies, the value, comprised that are of disputes its fundamental substance, particularly prominent. its concentrates within the them, processes This the cogency of underlie approach literature. often traditionally of of chapter the does On the neglected aspects of the relations between labour and value, the In that concept this unconventional because it sheds light upon some used to assess the become studies wh ich not amount to a rejection of the previous form have determination, real determination of value. contrary, and In contrast with most quantitative on concepts. ma gn itude emphasize either the logical derivation of or concerning the relations between labour and value, and the issues of value in it can be established views of Marx's theory of value. This chapter has seven sections. concepts of commodity, abstract labour. It adopts is circulation. In the shown ways, point addition, notions of normalization, of labour. first labour and value and conceived in different analysis The that these depending of view this discusses the nature categories upon whether two. are the or section introduces the synchronization and homogenization The normalization of the diverse concrete labours discipline and efficiency The synchronization of distinct moments of technologies, considered is time is these and in discussed labours, with the use levels of in. section performed of section three, is analysed in section four. 34 at diverse and homogenization between labours producing different kinds commodities of of production that produce each kind of commodity with different skill, the the of V ^Section five critique of uses this framework 'labour embodied' writers such as Steedman, of the 1977, labour make views of and section six evaluates the version to and value Sweezy, so-called theory of Despite their differences, (favoured to labour' developed (1975 the by [1928], shown by [1942]), 'abstract it is approaches give analytical priority systematic 1968 value, followers of the Soviet economist Rubin [1927]). a 1978 that study both of the capitalist economy from the point of view of circulation and not production. Section seven summarizes the results of the in v e s t i g a t i o n . 2.1 - COMMODITIES, LABOUR AND VALUE The capitalist division of labour is characterized by the formal independence of the production units from each other, their specialization in the production commodities by means of wage labour, commodities at a profit. these features, to relate the them its form, of nature with reveal their inner contradictions. three m ain aspects: and the sale Marx's theory concept of value to explain of of value and each certain these uses ne ce ssity other, and The concept of value substance and magnitude. chapter discusses the concept of value and the character value-pr odu cin g labour th rough the analysis of the the of to has This of real processes of determinatio n of value. The division of labour in capitalism can two different ways. (exchange), From the point of be view it seems to be an unco-ord ina ted competing activities, approached of circulation collection distinguished from one another by commodities produced in each firm and the po ssibly technologies adopted. This perspective tends to the complex processes that bring stability of some the economy and ensure that needs are satisfied constraints). in of the distinct emphasize sort to (subject to The investigation may be subsequently extended 35 into why these processes at times fail, in w hi ch case there is disproportionate production and crisis."^ The analysis of the mode of circulation of commodities calls into question their exchange labour across the economy ratios, and the the incomes of the different classes. distribution relation Therefore, between it bring These issues are to light Unfortunately, worthy important of detailed aspects of the naturally leads to the investigation of the distribution of the produced. of value study and capitalism. they are not conducive to the analysis of the mode of production. This is regrettable, because Marx's theory of value distinguishes capitalism from other modes of production through the relation between workers and of means of production and the mode that from it are, first, brought output). that, (in other words, if of labour workers separated from the means of production, and then into contact with them and with each other to create One of the most the analysis important claims of this theory is is or restricted to circulation some of hidden or production, it the most important features of capitalism remain 2 blurred. if the inquiry commences becomes potentially deeper and richer. the stems by the manner in w hi ch the distribution and ignores the sphere of production, However, owners division of labour has a Decentra liz at ion of decisions and lack the activities, circulation, that seem essential from From this perspective different of in coordination the become of secondary importance. of view of production, character. analysis From the of of point the capitalist division of labour is 1 Clarke (1994), Howard and King (1989, 1991) and Shaikh (1978) discuss the theories of crisis that have sprung from Marx's theory of value. 2 For Marx, production is the most important sphere m capitalism. He discusses the relative importance of production, circulation, distribution and consumption in the Introduction to the Grundrisse (see also Fine, 1980, 1982). 36 a unifying process whose social hand role is two-fold. (as the study of circulation emphasizes), members of society to satisfy their variety of use values, need On the one it allows the for an enormous even though they are specialized may have only one kind of commodity to offer for sale. the other hand, the division of labour is and reproduces, the social domination of the workers by capitalists; thus, it is appropriation of part value. the of vehicle the value predicated for and the On upon, the continuous produced as surplus As the analysis of circulation is blind to one of the aspects of the division of labour, the inquiry should the relations of production to reveal the source and the nature of the social relations in enter of profit capitalism, distinguish them from relations typical of other and modes of production. The analyses of production and circulation lead to concepts of abstract labour and value. labour performed is private and product that may or may concrete labour becomes labour if and commodities not part labours be of because and demanded. the when the product produced are effectively members of society. For circulation, concrete, carried out independently of other distinct it or demanded a and division sold, is creates Private social is the if of the by other The ownership of money gives the seller an abstract command over part of the social product, because money is the general equivalent and can be exchanged for any commodity (see Arnon, 1984, and de Brunhoff, 1976 [1966]). The value of the commodity is determined by the share of the social product that its seller commands, or the quantity money that s/he acquires with its sale. Consequently, of from this st andpoint the abstraction of labour is contingent upon the sale of the product, and simultaneous det er mination of the value produced. sold, the private and concrete 37 with the If the commodity is not labour, applied does not become abstract nor part of the social does not produce value It is different this angle, labour performed, (see section 6). from the perspective the concept of of abstract production. labour social quality of the labour performed. the the relationship between abstract labour and wage labour. argues that wage capital labour However, the detail typically labour of performed under the command of is also abstract and social. private and social, values for sale, In other words, when commodity, market more but the analysis of production performed Wage labour is simultaneously labour it is not The perspectives production and circulation agree that the is private and concrete. the activity, Let us investigate in capitalist form of labour, From indicates Therefore, primarily associated with the result of with the mode of labour. and 3 to because concrete it is and hired abstract, and produce use to in order to valorize the capital wage labour labour power becomes the has been advanced. social form transformed into of a in wh ich case the workers are hired on the labour produce commodities, making commodities as means of production. labour market is 4 The use of existence essential, because it proves other of that the the workers are versatile and may be employed in whatever sector of the economy addition, the highest rate of profit. In its existence reveals that most products of labour are commodities, the brings pr ev alence of and can be purchased with money. wage labour 3 is tantamount Therefore, to the Elson (1979b) makes a lucid analysis of the concepts of private, social, concrete and abstract labour. See also Shaikh (1981) and Weeks (1981). 4 1[C]apitalist production is commodity production as the general form of production, but it is only so, and becomes ever more so in its development, because labour itself here appears as a commodity, because the wo rk er sells labour, i.e. the function of his labour power, and moreover, as we have assumed, at a value determined by the costs of its reproduction.' (K2, p . 196; see also Sekine, 1975, p . 850). 38 performance of abstract labour diffusion of monetary relations national economic space; Obviously, see in (or production the Aglietta and formation and of Orlean, 1982). job, but that the action market mechanisms can satisfy the demands of capital particular kind of concrete labour. determined by, and expresses, Hence, the wage social define the capitalist mode of production. mental product of a concrete society transfer from in one which labour not totality another, specific kind is a matter of chance for indifference. Not only the category, merely of with and where The perspective K 1 , p . 134 and Bonefeld, of circulation is hence the standpoint of production. perspective labour wage is As wealth with p. 104; p p . 100-01) in further the inquiry above, adopts from this concrete of monetary creates use value their the commodity-form of the product expresses 5 double character of wage labour. It follows that expresses the historically production and social domination 5 typical specific of this of value. Therefore, val ue-form and the objectification of the concrete aspect of labour creates the and its abstract aspect (GR, 1992, pervasiveness In this context, of creating simultaneously and the existence and exchanges are presumed. seen the labour discussed in sections 5 and 6. From now on, commodities, ease and has ceased to be or ga nically linked 776, a but particular individuals in any specific form. see also p. to can labour, the labours. them, in reality has here become the means of in general, is that corresponds individuals to labour As Marx puts it, Indifference towards specific labours form of of for any relations [T]his abstraction of labour as such is abstract, the the existence of the labour market does not imply that any worker can do any detail the form the the of system. As Postone (1993, p . 155) rightly argues, the commodity 'is not a use value that has value but, as the materialized objectification of concrete and abstract labor, it is a use value that is a value and, therefore, has exchange v a l u e . 1 39 Because of this, abstract or val ue-creating labour cannot be 1 assimilated with the expenditure of physiological energy that the performance involves. Even of though sections 5 and 6), any many kind of accept this it is wrong because labour to a historically universal concrete labour definition it reduces category (see abstract analogous to concrete labour. The fact that wage abstract, private and labour is immediately social, does not concrete imply and that the production of any commodity immediately gives the capitalist command over a share of the social product. emphasized by the circulation approach, As is this claim can be expressed through money, the m a te ri al iz at io n of labour. produced The commodities rightly must exchange for money realizes the abstract be abstract sold; labour their performed, and money allows the capitalist to claim part of the product. However, only social in contrast with the analysis of exchange, this per spective argues that value is created in production, and that the quantity of value created may be distinct from the value of the money (see section 4). exchanged ... prices production, then exploited, that are although the than worke r the price is certainly his exploitation is not realized as surplus-value involve extracted, must be or happens only partly, less the capitalist and may even not the commodity the total product, If this does not happen, or only at of the In other words, The total mass of commodities, sold for or any only such of for realization a partial This chapter focuses on the relationship between the performance of wage labour and the creation of value, as opposed to the monetary aspect of this process. This is necessary, given the state of the literature; however, it does not imply that the theoretical importance of money should be denied or neglected (for, if value has an independent form as money then, with respect to money, all labours are abstract and all use values are commodities). The importance of these issues is made evident by Marx's own presentation in Capital i. 40 realization; complete indeed, loss of it may his even capital. mean The a partial conditions immediate exploitation and for the realization exploitation Not separate theory. are not identical. in time and space, The former productive they are is restricted only forces, the latter by only also by the The analysis of individual the value of the output, labour (K3, separate relations. social relation involving all commodities and by cannot reveal of commodities can are be performed in a which summarized they in the discussed as are equivalence with one another through a relation as measure of value. a aspects of the labours processes, produced, in money, performed, and expresses the value of the commodity * * 8 form of* price. 3 and 4. They is specific Commodity values are disclosed only involves three real the 7 predominance abstracts the concrete and individual in s o c i e t y ’s because the creation of value social After the they proportionality processes process determined by the sections 2, that are the p . 352) social This relation for of between the different branches of production and society's power of consumption. or in follows. put with into money This relation reflects upon the labours production, such that (a) all individual labours are no rma lis ed with other labours producing the same kind of commodity; (b) they are sy nc hr o ni ze d with other 7 The relationship between wage labour and abstract labour is discussed in de Angelis (1993), Brighton Labour Process Group (1977), Cleaver (1979), Gleicher (1983), D. Harvey ( 1982 ) and Postone ( 1993); see also Kl, pp..134, 138, 149, 159, 186 and Braverman (1979). This perspective does not imply that only wage labour creates value. On the contrary, the objective is to shed light on the distinguishing features of labour in capitalism, bearing in mind the broader characteristics of this mode of production. g 'Equality in the full sense between different kinds of labour can be arrived at only if we abstract from their real inequality, if we reduce them to the characteristic they have in common, that of being the expenditure of human 1a b o u r - p o w e r , of human labour in the abstract.' (Kl, p . 166). 41 labours that have produced the same kind of commodity in the past or with different technologies, and (c) they are h om og eni ze d with all other kinds of labour as the commodity is The of equalized processes workers, with shows ideal how money. commodities making use of diverse points in time are put analysis produced technologies by distinct at different into equivalence and can be exchanged for each other on a systematic basis. In addition, that value can only appear as exchange value, is not a physical these but a social it shows because value property of commodities. 9 2.2 - THE NORMALIZATION OF LABOURS Concrete labours are distinguished primarily by their effect, value. Thus, from one another the production of a specific the classification of commodities according their use value, which occurs on the market, corresponds the classification of the concrete labours performed economy. say, Once they reach the market all pieces produced in the economy are in reality one another, use in of to to the linen, assimilated to and each of them becomes merely a sample of the mass of linen produced. linen-producing labours elements of a social Because become of this, the individual qua li ta ti ve ly identical they are, As commodities with the same use value can satisfy the same thereby, need, 1inen-production normalised. they have the same value, regardless of the individual characteristics of their own production words, the normaliz ati on productivities; value process; of labours process. averages In other out their this is why the labour time which determines is socially, and not individually, g determined. Because This analysis is inspired, despite their differences, by El son ( 1979b), Fine (1980, 1989), Lee ( 1990, 1993), Himmelweit and Mohun (1981), Mohun (1991), Reuten and Williams (1989), Shaikh (1981), and Weeks (1981), among others. 42 individual labours are normalized, inefficient, skilled and in spite of the fact the former take The fact that labours are normalized across those producing the same kind disciplined those labourers, longer to be produced. of use value leads unruly produced to workers by zealous, recognition a very different or in the skill firms, of of the important differences or changes in the length working-day, are by more than or produced not valuable unskilled, commodities or the conclusion: intensity wor kers of employed between the value-creating capacity labours producing a kind of commodity does not stop last stage of production but includes the because the final product synthesizes everything: inputs flax, machines, energy, commodity and, These inputs are in reality, blended of at the used up, (ten million yards of linen, labours of many different kinds performed in etc. by are indistinguishable in their e f f e c t s . 1^ The assimilation and places, the say) transport, various into times the become one single thing. final As the products of ma ny different concrete labours are nec essary to create the use value of linen, of the social Hence, labour process these labours count which part of the value of linen production process, is produces created as the in and part is determined by the part linen. its value own of the means of production nec essary for its p r o d u c t i o n . 1'*' 10 In other words, the normalization of labours shows that, just as the val ue- creating capacity of simple labour cannot be deduced from the value of labour power nor the wage rate, there is no fixed relation between the value-creating capacity of skilled labour and the value of skilled labour power, the cost of acquiring the skill or wage differentials. This issue cannot be developed here in further detail. For an overview of the polemics that surround it since Bohm-Bawerk (1949 [1896]) first criticized Marx's argument for its circularity or worse, see Attewell (1984), Bowles and Gintis (1977, 1981), Devine (1989), Fine (1990b), Giussani (1986, 1994), Gleicher (1983, 1989), D. Harvey (1982), P. Harvey (1983, 1985), Hilferding (1949 [1904]), Itoh (1987), Mor ishima (1978), Roncaglia (1974), Rosdolsky (1977 [1968]) and Rowthorn (1980b). 11 'The labour-time required for the pro duction of the cotton, the raw material of the yarn, is part of the labour 43 2.3 - THE SYNCHRONIZATION OF LABOURS The classification of commodities to use value reveals that the labours that have produced them are parts of a single social commodity, according labour process. In the use value the technologies of production date of ap pl ication are immaterial. commodities produced in that individual possibly in time. the and the The simultaneous sale of different moments shows concrete labours are s y n c h r on iz ed with those that have produced the same kind point adopted of of The synchronization of commodity at diachronous labours ensures the continuity of production and such that the necessary and inevitable another concrete exchanges, n o n- si mul tan ei ty of human actions does not paralyse the economy. It is because labours are normalized and all commodities of a kind have the same value, of how, when and by whom normali za ti on (N), they were the labour time nec essary necessary to produce the inputs. this labour production, occurred time is that to Because a and comprises that Because of presently value is a of produce synchronization necessary and not that necessary when prod uc ti on may (in other words, that irrespective produced. kind of commodity is socially determined, (S), synchronized social relation for have that necessary to produce the yarn, and is therefore contained in the yarn. The same applies to the labour embodied in the spindle, without whose wear and tear the cotton could not be spun ... Hence in determining the value of the yarn, or the labour-time required for its production, all the special processes carried on at various times 'and in different places wh ich were necessary, first to produce the cotton and the wasted portion of the spindle, and then with the cotton and the spindle to spin the yarn, may together be looked on as different and successive phases of the same labour process. All the labour contained in the yarn is past labour; and it is a matter of no importance that the labour expended to produce its constituent elements lies further back in the past than the labour expended on the final process, the s p i n n i n g . 1 (Kl, p . 294) 44 measures the ability of society to services necessary for its produce the self-reproduction, goods and and not a substance physically blended into the body of the product of 12 labour, and which is carried over inside it through time). Two implications follow from this; conceptual) value indeterminacy reflects the first, intrinsic situation in the real to the which (but not magnitude values are of not ascertained once and for all when commodities are produced, but are soc ially attributed at every moment. does This not contradict the previous conclusion that wage labour produces value as it transforms inputs into outputs. it shows that capitalist production is process of value embodiment but a social creation, not On the contrary, an process and that the products of labour have a because specific social capitalism, individual of value value-form relations of production prevail. commodities exist as samples of their kind, each kind of commodity is but one amongst m an y others. In and Their Marx was absolutely clear about this (despite protestations to the contrary in, for example, Cohen, 1981, Freeman, 1994, and Mirowski, 1989): ’The definition of constant capital ... by no means excludes the possibility of a change of value in its elements. Suppose that the price of cotton is one day sixpence a pound, and the next day, as a result of a failure of the cotton crop, a shilling a pound. Each pound of the cotton bought at sixpence, and worked up after the rise in value, transfers to the product a value of one shilling; and the cotton already spun before the rise, and perhaps circulating in the market as yarn, similarly transfers to the product twice its original value ... The value of a commodity is certainly determined by the quantity of labour contained in it, but this quantity is itself socially determined. If the amount of labour-time socially necessary for the production of any commodity alters ... this reacts back on all the old commodities of the same type, because they are only individuals of the same species, and their value at any given time is me as ure d by the labour socially necessary to produce them, i.e. by the labour necessary under the social conditions existing at the time’ (Kl, p p . 317-18). The same argument is found in K l , p p . 130, 238, 676-77, K3, p . 522, T S V 1 , p p . 109, 232-33, T S V 2 , p . 474, TSV3, p p . 154, 280, and GR, p . 135. This form of assessing the magnitude of value is particularly useful because of its immediate reference to the possibility of technical change; it will be seen below that other readings of Marx's theory of value may have a different view of this issue. 45 value is determined by the general, ^production of each commodity, ^processes; historical process of alongside all other production and the quantity of value produced depends on the 'ability of society to reproduce each commodity. Second, it was shown above creates a commodity that the comprises labour not process only the transformation of the inputs but also their own (and not only conceptual) final production, no matter how long ago this occurred or how complex The real that it was. integration of the production of inputs into the production of the output shows that Marx's assertion that the value of the output sum of the input values with the new created not be und erstood in the sense that carried over in production, them 1991, to infinite transform them into the labour final labour, have only as much, regression; commodity. as see production necessary Therefore, it value as corresponds those to past and commodities produced in the or how little, to synchronic measure curre ntl y labour creates value only in so far should 'added' value of the means of and the qua ntity of living the values are somehow 1994). Value is a that expresses the present present social 'old' while new values are (which may be conducive C a r c h e d i , 1984, value is to past currently produced. In other words, commodity values have two parts; corresponds to the necessary quantity abstract to transform the inputs into present time, and another labour currently necessary material of that to composition of the labour the inputs is sources, labour; that correspond of to a their the abstract inputs (the determined by commodity di fferent socially the present techniques of production of the output). the two parts of the value which output at represents produce one the Therefore, have distinct of abstract kinds one that was applied in the production of the output of this period (say, linen), (also in this period) in and another the that production of was the applied inputs presently nec essary to reproduce the linen - even though the 46 inputs actually used distant) past. up were produced The former will be called the latter virtual labour. in the living (possibly labour, An example will help clarify these concepts. Suppose in a very simple economy, commodity produced, flax consumption good. that only two kinds (F) and linen alone and used as an input (L). to of linen, (I) and linen pr od uction produce and two hours of labour and one unit of one unit of linen. that, are Flax is pro duced by labour The technologies of four hours of simple labour flax, and 13 is the are one such unit flax of produce Thus: 41 -> IF 21 + IF -> 1L The (normalized and synchronized) nec essary to reproduce hours, but what argument above, labour time 'technically' (LTTNR, \) the flax is clearly four 14 is the LTTNR of linen? Ac co rding to the it is two hours of living LTTNR of one unit of flax, four hours. labour Therefore, plus the the LTTNR of one unit of linen is six hours: xt Fr = \ 41 = 2 + [4] = 61 The term in square brackets is the LTTNR of flax, that is determined in another production process. 13 The traditional term 'dead labour' is rejected because it may induce the idea that the value of the inputs is a substance carried over through time. The term 'virtual labour' is more adequate because it conveys the view that the value of the inputs is determined by labour processes other than those which produced the inputs actually used up. 14 The reference to 'technically' required labour is heuristic and should not obscure the fact that the techniques of production are socially determined; this point is forcefully developed in Brighton Labour Process Group (1977), Levidow and Young (1981, 1985), Postone (1993) and Slater (1980). 47 \ Let us see what is the impact of a technical production flax. of If, in the change following in the period, the technologies of production change to: 21 -> IF 21 + IF -> 1L the LTTNR of flax falls to two hours. The living necessary to produce the linen is unaltered but the virtual fact that at labour has fallen to two hours two hours, (despite it took four hours of labour to produce of flax consumed in the production of this unit Therefore, labour the of the unit linen). the LTTNR of linen falls to four hours: X L = 2 + [2] = 4 This example virtual illustrates the distinct labour in though both are differ because the roles determination normalized and of commodity, while sector(s) pro ducing the input(s). living the virtual Even (NS), they sector labour and LTTNR. synchronized living labour is NS in the the final of is producing NS in the 2.4 - THE HO MO GENIZATION OF LABOURS The third and last stage of the abstraction of labour is the of labours of different qualities. It occurs when the commodities produced are equalized w it h ideal money and receive a price (see Saad Filho, 1993a). is the nece ss ar y form of appearance of the word 'necessary' was used in the previous values cannot directly appear labour; in terms of money. is one of essence, 48 price-form value-form. sentence quantities they can appear only as price, commodities of value as The of The because hours of the exchange value of This indicates that the logic and not of appearance; it must appear, but it can only chapter 1 and TSV1, appear as something else (see p . 95). The reason why value cannot appear as a quantity of hours of labour is that the value of a commodity is determined by the abstract labour time that commodity, it takes society to reproduce this and not the concrete labour time that it any individual worker or firm to produce one sample object (see Elson, 1979b, indicated by the clock p p . 137-38). and the duration of specific concrete of Concrete stopwatch, labours, takes the time, estimates performed by the workers who operate a particular set of instruments with given skill and intensity and, production in doing this, transform 15 into a pre-conceived output. It was shown in sections 2 and characteristics of the 3 that labours the certain producing time 'technically' a particular point and, therefore, labour is The NS of labours are determines kind However, the and not and intensity of abstract, the because labour performed regardless of their relation with the other sectors. return to the flax and linen economy depicted to clarify this very important in it NS is and the there, Let section us 3 issue. In the first part of the example, it was assumed takes society four hours to produce a unit of flax hours to produce a unit of linen. 15 at NS labours are concrete determined by the technology adopted in each sector, skill labour do not determine the magn it ude of value. concrete, of normalized ne ce ssary to reproduce each commodity in time. of individual each commodity are abstracted when these labours and synchronized. means Whilst it is that and it six conceptually Needless to say, the performance of concrete labour is subject to the careful control of the capitalist. The reaction of the workers against capitalist control of the production process is discussed in the analysis of class struggle in production. This issue cannot be considered here, but see Carchedi (1991), Cleaver (1979), and Lebowitz (1992 ) . 49 simple to derive the LTTNR of four hours from the individual flax-producing processes opinions on how this Jndart, n.d., should be C a r c h e d i , 1991, is not true of linen. sum (even though there may be different (living) done; see, and Carling, for example, 1986), the The problem is caused by the linen-producing flax-producing labour, labour same need with (virtual) an operation that does not make sense in concrete time because of the different dimensions of parcels (see Weeks, 1990, the p p . 4-5). In the example this difficulty was avoided because of the assumption that the labours involved were simple, in case the same power undiffere nti ate d applied in all sectors of presumption makes the acceptable by way of the sum type of labour economy. of Even different example, the and not its point of which though is this types of labour perfo rm anc e of simple labour throughout the economy should be the analysis, to result departure. of the Conceptual difficulties such as this show that the labour time socially necessary to reproduce a commodity labour time that determines (LTSNR), not the in concrete, time. Mag nitudes such as LTSNR and value belong to the realm abstract be time; is is determined of value, wh ich therefore, they cannot measured with the s t o p w a t c h .^^ The distinction between concrete and between LTTNR and value, is abstract important labour, because the and value produced by one hour of NS labour depends upon the sector in which the labour is applied. different levels of skill of the of the labour power employed, one hour of NS labour applied in For example, computer because programming creates more value than one hour of NS labour in strawberry-picking. For the same reason, a person may produce quantities of value in one hour according to the distinct sector in which s/he works. 16 Postone (1993) discusses the relation bet ween concrete and abstract time in Marx's theory of value. 50 The distinct different value-produc tivities sectors of the homogenization of economy (H) of labour. labours are applied ironed out This process transforms qualitative differences into distinct quantities (equally value-productive) abstract now, labour in each labour necessary to produce them parts. It was seen above appear as a length of time but between the value money-commodity. that only commodities and The expression of establishes an equivalence between ideal quantity of money, converted into this of be real money. The value as in the economy, different to be the produced labours performed forms. de te rmined normalization, by the sy nc hronization and of homogenization (NSH) of the labours producing all commodities, the is complex unity particular kinds of and is established through the relation between commodities and money. instance If of commodit ies and money, the result each the the of commodity universal mass the of is seen values produced use application of the expenditure at pr od uctivity of current the branch (synchronized) of industry. value -p ro du ct iv it y of the labours applied social level a between labour power allocated to each sector, the as relation (normalized) single, an even though they are perf or me d in completely The value of each kind of commodity becomes and between commodity and money shows that the labour that has the commodity is equivalent to all other the price claim equivalence ratio of commodity their and cannot the value and expresses measured labour the The living price, each simple sector. can as the these of regardless of the difference between their virtual by in is The total and its level of distinct brought to (homogenized) when the commodities a are related to money and their prices are determined. The formation of prices marks the end of the phase production and the beginning of circulation. It the NSH of the economy, labours performed 51 in the of synthesizes which isolates the abstract 'labour expended, pommodity, labour applied determines the LTSNR and expresses their broader perspective, from and values the concrete value as of prices. the NSH of labours not each From only indicates the equivalence of each commodity with a specific amount money, but also the need to sell the commodities differences, the simultaneously, realize produced). processes this of NSH their are and each of them depends The normali zat ion of all equivalence Despite a of (or analytical carried upon the out others. labours producing a particular kind of commodity requires their synchronization, as are not simultaneously the market and labours cannot be leave produced, it in a continuous synchronized unless labours with flow. they but reach However, are normalized, commodities because only the same quality can be put into technical and t i m e - e q u i v a l e n c e . Finally, homogenization must obviously preceded by the other two, but they can only take place when commodities are ideally equalized to money, be which characterizes homogenization itself. These demands are not s e l f - c o n t r a d i c t o r y , because production is a continuous social process that culminates exchanges of commodities for money. As commodities under cap italism are meant for sale, are generally also commodities they have a va lue -fo rm living (concrete) universal spheres The form of reference to of inputs (inclusive of labour the start. performed Because even this value and money and life power), of this, synchronized and appearance of production, produced and since their labours are normalized, homogenized as they are conceived. from in individual as process that as a they are is the pervades whole, and all under capital ism. It was shown above that the price of the form of appearance of the abstract produce it. In spite of this, between the share of the social (NSH) there may is the labour necessary to be a difference labour ne ces sar y to the commodity and the share of the social 52 commodity produce product which its seller commands (see section 1). In other words, (money-) price is the form of expression of the sale price of the commodity may monetary expression of its value. differences between price and be 17 value even though (labour-) distinct The is value, from the possibility intrinsic to of the price form: The magnitude of the value of a commodity ne ce ssary inherent relation to social ... expresses a labour-time in the process by which value is the transformation of the magnitude of price this nece ss ar y relation appears which is created. value into the the exchange- ratio between a single commodity and the mo ney commodity which exists outside however, may express both the magnitude of value of the commodity and the greater or lesser quantity of mo ney for which it can be sold under therefore, it. given relation, circumstances. of a quantitative and magnitude of value itself. This as With ... The incongruity is inherent This is not a defect, but, on possibility, between in the the price price-form contrary, it makes this form the adequate one for a mode of production whose laws can only assert themselves operating averages between constant as blindly irregularities. (Kl, p . 196) The prices of commodities may differ from their all manner of reasons, such as fluctuations values in supply for or demand, mono pol y power or the inability to sell because of a crisis. However, none of them modifies the basic values are determined in the sphere of production, 17 fact that and that This can be expressed more simply by saying that the price of the commodity may be distinct from its value. However, the reader should beware that the word 'value' does not stand for LTSNR, because it is impossible to make a quantitative comparison between a sum of mo ne y and a length of time. 'Value' is used here as a shorthand for 'monetary expression of value'. Marx uses this simplified form extensively in his work. This form is also adopted in chapter 5. 53 phenomena of circulation or distribution can influence their expression as prices. in detail, only Let us investigate one such case because it illuminates from another angle the other, and relationship between value and price. Suppose that the workers are identical that the firms producing case (as seen mag nitude above), to its to each linen are also identical. the LTTNR. LTSNR of Despite linen In is this, equal the This will happen, (or too small) for example, a share of the social the pr od uction of linen, from if labour too is in monetary expression of the value of linen may be different market price. this its large applied when compared with the social in need for this commodity: Let us suppose market ... that contains labour-time. every nothing piece but In spite of this, normal great a if on ex pended stomach the whole quantity at social labour-time has each individual The effect weaver had necessary. As the German proverb has hung together. it: is the expended labour-time on his particular product than was the too been same more socially caught together, All the linen on the market counts as single article of commerce, and each piece only an aliquot part of it. (Kl, 18 as labour-time. price of 2 shillings a yard, this proves that portion of the total the necessary all these pieces taken expended in the form of weaving. as linen socially a whole may contain superfluously If the market cannot of of linen one is p . 202 ) ^ In other words, 'The total quantity of labour-time used in a particular branch of production may be under or over the correct proportion to the total available social labour, although each aliquot part of the product contains only the labour-time necessary for its production, or although each aliquot part of the labour-time used was ne cessary to make the corresponding aliquot part of the total product ... From this standpoint, the necessary labour-time acquires another meaning. The question is, in what quantities the necessary labour-time itself is distributed among the various spheres of production ... If too large a qu antity of social 54 If the distribution of labour in the economy does correspond to the social need for each commodity, realized in sales may be different In other words, from the value expression of this value as price. Marx shows that, workers whose average. The (demand) produces In the skills or efficiency difference, produce colleagues this. If, however, in on the in excess of demand were is had that the same time, (above) their more and the commodities contrary, (the employed relatively than the above, below value of the case the the effect of less value only quotation is the same as if they money-ex pre ss ion of the reflects produced. but for the individual producers, inefficient workers efficient value differences between supply and demand do not affect the value-creating capacity of labour, excess supply the not merely whole above), branch the lower quantity of money realized per hour of labour is due to the deviation between the sale price of the its value. To sum up, commodity the ironing out of differences between the value-creating capacity of labours emp lo yed branch takes place at the end of production, are normalized. expression In contrast, created as price is a the phenomenon of subject to conflicting determinations 19 di s t r i b u t i o n . The difference between necessary in production the and the in when of from concrete plus the virtual that and and is usually market values) time labour nec essary is individually (that labour value production time LTSNR same labours the relates the efficiency of each producer with the individual value is the the circulation labour called the relation between individual production, and norm. applied to The in reproduce labour-time is used in one branch, the equivalent can be paid only, as if the correct quantity had been u s e d . ’ (TSV1, p p . 231-32; see also K3, p p . 288-89.) 1Q See Shaikh (1981, 1984) for a different interpretation of the relation between the production of value and its expression as price. 55 the inputs used impossible parcels, up because (strictly of the but it is often Therefore, the individual speaking, different used by dimensions way of fully is wrong is that independent are the determined. the division of labour, basis of a On that the are not happen to contrary, previously which imposes an the values. commodities labours confront one another on the market. are created on of it is wrong to see commodity values as The reason why this by is approximation). values weighted average or mode of the individual produced sum values can become known only after the labours are NSH and the market Because of this, this given intrinsic they social equivalence between individual labours arid makes them part of the social division of labour (see section 1). In spite of this, the comparison bet ween individual and social values is because it shows that the individual commodities value produced by more advanced technologies norm. is of lower useful, than Their sale allows the more adventurous capitalists capture extra surplus value in circulation, powerful stimulus for cost-reduction, to which provides a technical the rationalization of methods of pro duction the (see change and Fine and H a r r i s , 1979 ) . 2.5 - THE 'EMBODIED LABOUR' APPROAC H TO MARX'S VALUE THEORY Some of the most influential readings of M a r x ’s theory hold that value is the labour embodied in commodities during 20 production. Two such views are considered in this section, 20 Hodgson (1981, p . 88), for example, argues that for Ricardo and Marx '[t]he embodied labour value of a commodity is defined such that the total embodied labour value of the gross output of a process equals the emb odied labour value of all the inputs plus the amount of socially necessary living labour e m p l o y e d . 1 The reader should note that this section and the following are not surveys the various interpretations of M a r x ’s value theory. On the contrary, the 56 the traditional 1968 [1942]; 1973, 1981, (Dobb, 1940, see also Mage, Pasinetti, 1967, 1963) 1977, and Steedman, Sweezy, (Hodgson, 1977, interpretation, 1981b). Marx's theory is not ess entially different from Ricardo's. be summarized as follows Postone, 1956a, and the Sraffian and According to the traditional of value Meek, (see de Vroey, 1982, It may 1985, and 1993) : (1) The main object of the theory of value is of exploitation. the analysis The categories developed in the first three chapters of Capital (commodity, value and indirectly related with this issue, money) are only because they belong to a wider category of modes of production; (2) The analysis of profits requires the prices of commodities, the inclusive of labour power, is done through a set of assumptions equil ibr ium determination (simple reproduction). that include Because of of which general this, prices are only relative to a numeraire; (3) The theory focuses on the magnitude of value, the quantity of labour nece ss ar y to each commodity. Abstract produce labour is defined concrete labour; it is labour in the form of the activity. regard (embodied in opposition general, Scant abstracted is substance and form of value, that have no real analysis. value ignored. The link between A theory of mo ney is and defined as paid to from the impact on the m on ey unnecessary, to in) is and effectively considered a means of facilitating all but mo ney is exchange (a v e i 1); (4) The determination of relative first, prices it is assumed that all capitals compositions (OCCs), in which case has have two stages; equal organic exchange ratios are objective is to present some of the most important views briefly and cogently, following the best writers, and evaluate their merits on the basis of the analysis in the previous sections. 57 \ determined by embodied fallowed to vary; labour alone. Second, in this case relative the prices OCCs are differ from tatios of embodied labour, but it is presumed that the ' 21 latter determine (in a mathematical sense) the former; (5) The conceptual apparatus is elementary. put out for sale is a commodity; with exchange value, value Any is use often value confused and the articulation between values and prices is left unclear (even though they are presumed to be quantitatively comparable). Traditional M ar xi sm is wrong in presuming that Marx's critique of ca pi talism begins with the introduction of the concept of surplus value, it was for in section 1 above shown that the concepts of commodity and value already reference to the specifically subordination of the workers. capitalist In addition, make form of the concern with exploitation is indicative of the emphasis which traditional Marxists place on the relations of distribution. a clear resemblance with Ricardo's interest distribution, as opposed to the wh ich Marx criticized heavily The emphasis upon distribution approach capitalism from the Because of this, of the has point led of of circulation and example the market and private property; bears laws 1993, p . 54). is insufficient, However, because 1982). some Marxists view of to exchange. the basis distribution, for in the contrast, (see section the perspective it takes the forms 21 of production, labour and the subordination of the workers production become of secondary importance Postone, of the system is conceptualized on structures role of wage in the relations (see Fine, This of of in 1 and exchange labour and The concept of OCC is discussed in chapter 4, and its influence on the det erm ination of prices of production in chapter 5. It will be seen that what this approach calls 'OCC' is in fact what Marx terms value composition of capital (VCC). 58 wealth for granted. social In other words, and historical It cannot explain determinations. Lack of satisfaction with traditional development of two labour* and alternative Marxism approaches, version of Marx's theory of value the Sraffian. their 22 The Sraffian led the (see ap proach formalize the traditional model with a view to to the 'abstract section 6) attempts to articulating the value and the price systems, drawing from Bohm-Bawerk (1949 [1907], 1952 [1906-07]), [1896]), Bortkiewicz and Tu ga n- Baranowsky as follows (1) There (1905). is almost complete disregard for the substance and and its investigation. The equ ili bri um (simple commodity values direct This approach may be summarized (see also chapters 5 and 6): form of value, A is the (1949 (nxn) mag nitude analysis is assumes reproduction). a sole state The is given b y \ = ^ A + (lxn) object of of general vector I = 1(1 - A ) - 1 , technical matrix and 1 is the of where (lxn) vector of labour; (2) Money has no autonomous role all) the and (when considered at it is merely a numeraire; (3) The def inition of value is the basis of critique of alleged inconsistencies in Marx, the conclusion that the project of deter mi nin g embodied labour that an overall leads value to from is flawed and must be abandoned. There is no space here for an account of the long-running 23 disputes between Sraffians and Marxians. In what follows, 22 The term Sraffian does not refer to Sraffa himself but to the critique of Marx elaborated by some of his followers. It is preferred to the term 'n e o - R i c a r d i a n * because Ricardo was committed to a labour theory of value, while the Sraffians reject the concept of value altogether (see Fine and Harris, 1979, and Fine, 1980). 23 See, however, chapters 5 and 6 and de Brunhoff (197j>b, 1974-75), Desai (1989), Dostaler and Lagueux (1985), Eatwell 59 the labour-embodied conceptions of value are probed from the point of view of their approach to abstract labour and the processes of determination of value. The focus upon distribution and the standpoint of exchange lead both versions of the embodied labour approac h to define abstract labour as section mental 1). However, labour if abstract labour, by any purposeful because, through form (see labour is defined through a the general physical exertion required transformation of nature. and not abstract, money. physiological The This is labour leads to of an abstract ahistorical of production. Moreover, instead of the real outcome of the adoption of this concept of value approaches arbitrarily separates of concept of in surfaces transformation most chapters clearly problem, controversy in the related and Ma rx ia n in it value 5 and 6; see also Arthur, The assimilation between abstract of the requires to has ideal, labours. The labour and the problem of how prices. di sc ussion led 1993a, mode form theory labour is from (real) the the embodied content at a later stage of the analysis, (ideal) values should be value NSH and not as regardless of this concept is labour because the transformation of nature always energy, wrong labour and is measured in time, definition the ex pe nditure of physical issue of as was shown in section 4, physiological concrete, poses, devoid general iz at io n such as this it becomes identical with physiological value, concrete to (see of a the major below and Mohun, and This and 1991). physiological labour implies that the value of a good is determined by the physiological labour time necessary to produce it. it was shown in section 3 that this is best, the LTTNR of the good. not value However, but, at Let us examine the implications of this incorrect definition of value from the point of view (1974-75), Fine (1986a), Fine and Harris (1976, 1977, 1979), Hodgson (1973), Schwartz (1977a, 1977b) and Steedman (1981a). 60 of the NSH of process labours. of The first normalization consequence is conflated classification of concrete labours values produced. a This is considerable is not the nor malization of labour, Because of normalization, (and other) here, the use its point for example, the skill a given producing is of not the case where these differences have to be dealt with by force of assum ptions The to the classification but only This the simplification, this differences between workers kind of commodity are averaged out. that with according because it was shown in section 2 that departure. is effect (see below). of synchronization thought process, dated labour. is simulated by another the calculation of values as quantities The projection production into the indefinite of present (conceptual) of conditions of past allows the calculation of the total mass of labour ne ces sar y to produce the output given the present techniques, value. This technique does not (mainly determined by the commodity, the that those who Sraffians) admit that labour time ne cessary adopt to is predicated upon eq ui librium absence of technical over this issue. change), reproduce Because of this, labour surface as spent. (thus, there is no room this value instead of the labour time origi nal ly the analysis virtual imply wh i c h is called its for upon is a As the concern the concepts of living and 'direct' and 'indirect' labour, that correspond more closely to an equil ib riu m analysis. Finally, the hom ogenization of the labours reduced to the quantitative relation between the commodity the LTTNR numeraire. of (its the 'value', performed LTTNR of mea sured in hours of labour) and commodity arbitrarily The problem posed by the distinct capacity of labours performed in distinct the is chosen as the value-creating sectors of the economy is eliminated by the assumption that all workers are identical (see section 4). 61 The incorrect con ceptualization of abstract in Sraffian analyses has by the equation widesp rea d led to the representation of values \ = AA + i. acceptance this Marx's concept of value. labour and value However, equation in does Let us see why. not lie in the form of the spite equation, not The that problem rightly its inputs w it h the living labour ne ce ssary to the purposes of this analysis, the states value also be admitted that the labour of it. represents output. For it can be admitted that A drawn from the input-output tables of the tables; does produce The matrix A the inputs nec es sa ry to produce a unit of its represent that the value of the commodity is the sum of the The di ff iculty lies in the parcels. of economy. It is may I can be der ived from these it represents the number of labour-hours required to transform the inputs into the output. homogeneous labour, but only NS labour. mea sured in hours of labour shipbuilding, (weaving, However, labours are as distinct (heterogeneous) however, In other words, I is printing, activities can be added result called goods they va lue-producing etc.). These produce, it is assumed that the workers em ployed in economy are identical, section 3). the not and 24 cannot be added as the Sraffian equation wr ongly presumes. If, as is use this the the labour-times required by distinct (as was done, by way of example, This is what the Sraffians us ua ll y do, and in the (measured in hours of labour and not money), is 25 'value'. It was shown above that this is not what In other words, one hour of weaving cannot be added to one hour of printing, for the same reason why ten yards of linen cannot be added to five books. The same holds for pr oof-reading and printing, even if both activities aim at the production of books for sale. The common objective of the work does not alter the fact that the activities involved are qu ali tat iv ely distinct (see Weeks, 1982, 1983; see also Bellofiore, 1989, Benetti, 1974, and Naples, 1989). 25 Steedman (1977, p . 19) departs from the assumption that all labour is simple and of equal intensity and skill, 'so that each individual expenditure of labour-time is an expenditure of socially nece ss ar y l a b o u r - t i m e . 1 Accor din g to him, this implies that '[t]he impossible task of adding together quantities of different concrete labour-times will not be 62 Marx calls value, but merely the LTTNR of the commodities. The dif ficulty with this calculation of value the simplifying assumptions are relaxed. workers have different skills, and where. For example, one hour of may create more or less value, appears when if the concrete labour depending on who performs it, Consequently, the analyst needs reduction coefficients that indicate the relation between concrete labour performed and value created. As the labour embodied approaches labours and produce presume the that commodities mediation of money, (money-) concrete labour. On the this value labour can be the time expressed NSH of necessary to without these reduction coefficients derived from the allow the misco nc ei ve be they are calculated. necessary Therefore, coefficients have to be derived from elsewhere, the cost of the skill or wage differentials. as seen above, and the va lu e-p ro duc ti vit y of labour, existence of a entirely basic conception of abstract flaw in labour) the because another does not improve the for example, between To study sum (the implies that the the them (for example, quality of up, the incorrect removal relationship (such between as the the cost pos tulation of the value-creating capacity of the workers; see of the identity the inquiry, it forces the analyst to resort to arbitrariness kind to and the postulation of arbitrary. one kind of arbitrary assumption of skills) be Unfortunately, there is no nec essary relation a correspondence is cannot value actually created per hour of contrary, to the of skill a fixed and section of the 2 and P e r e l m a n , 1993 ) . attempted ... All summations of labour-times are summations of quantities of abstract l a b o u r . 1 However, the conflation of abstract labour with physiological labour is obvious, in spite of S t e e d m a n 1s protes tations to the contrary. 63 I 2.6 - THE 1 ’ABSTRACT LABOUR' VERSION OF MARX'S THEORY OF VALUE The widespread dissatisfaction with the traditional led, in the late 1960s, to renewed views such as those of [1928], 1978 the [1927]). interest Soviet In in economist addition to dissenting Rubin an interpretation of Marx's theory of value, approach alternative Rubin's works also offered the grounds for a critique of the Sraffian that was grafted upon 'abstract labour' traditional Marxism. Rubin's [1969], 1976 de Brunhoff, and de approach The so-called approach to Marx's value theory stems from an Alt hus ser ian reading of 1990, (1975 1973a, Vroey, 1982, works (Backhaus, [1966]; 1985, see for Saad surveys 1974 Filho, of the literature on this approach). In contrast with the emphasis on the mag nitude of value relative neglect approaches, of this typical is essentially view concentrates upon between abstract money, the form of of (see labour qualitative, value labour and money embodied and the Messori, and and relations 1984). It departs from the fact that commodity production is a form of social division 'separated' of labour where (Benetti and Cartelier, they are formally independent and unaware of, and unc onstrained by, (the standard reference 11th July 1868; this freedom is commodity, Brunhoff, see Marx, the letter to produce The one a and approach produced by private the abstract and social converted into social (see section and abstract 64 produce at best, 1). counterpart to is sold (de [1976]). constraint, the commodities are are These labour if useful commodities the 1979 that others of socially monetar y concludes labours which, to Kugelmann that see also Aglietta, 'separation' labour to calls the imperative to sell 'monetary constraint'; abstract what the choices of the [1928]). are in the sense that decide 1988 need producers 1980), wh ich in practice means 1978, Because of is Marx's the potentially labours and when are the commodities are exchanged for money, because product of immediately social (gold-mining, labour money is the say). As the labour producing the mon ey- commodity is directly social, the analytical stature of the value of money is distinctive. In instance, the last labour-time it necessary money-commodity, but to from establishes the currency. commodity but a social is not determined produce a the political In this sense, relation unit 1989, and de Vroey, money sanctioned product. 26 income, that is At the social claim level, 1979 a state, Reuten and a fraction share of labour performed indicates how many hours of abstract chapter 6, Aglietta, not the (see for working-hour of which the ratio between the income and the total value-creating to add £1 to the value the 1985). a mon etary expres sio n of the of is by The sale of the commodity gives the producer a the social the authority even if it has the form of gold or silver Williams, by the [1976], (M E W H ). labour were commodities Foley, 1982, the total is the The MEWH necessary produced and of (see Lipietz, 1990) . The form of the relations between commodities and mo ney two very important defined as social second, implications; labour first, indirectly abstract formed by the value Non-sale s of the money for which indicate that the decision to it labour through the ma gn itude of value of a commodity is is produce has is sale; determined exchanged. was wrong and that the labour performed is useless and does not create 27 value. In other words, this approach holds that the concept 26 'The exchange transaction realizes the uniformity of products as commodities by establishing an equivalence in which private labour appears simply as a fraction of the overall labour of society. This uniform character of labour, as a fraction of overall social labour, is what is known as abstract labour' (Aglietta, 1979 [1976], p . 38, emphasis o m i t t e d ). 27 'Labour is first performed as private labour, initiated by an independent decision. It is transformed into social 65 of value does not production, performed. refer to the expenditure of labour but to the validation in exchange of the Consequently, there is no intrinsic labour relation between the performance of wage labour and the value of product; that in addition, is discussed the only social in detail through the market. value -fo rm derives exchange, wh ich This leads to the from is version of the traditional definition of of that of goods most (see de Brunhoff, theory commodities conclusion the the for abstract 1973a). value abstract the capitalism of production considered Marx's of is the exchange det erm ination of capitalism This aspect in rejects labour the as the (physiological) labour nec essary in production, because of its ahistorical character. concept of abstract The alternative labour conceived as indirect way, through the private labour for money. sufficient, social because it restricts the clearly based on a logical 1993, Banaji, pointing out that in value and a However, value-form, labour is This inversion is caused money -fo rm of value and by the characteristic of this school. is the of considered of value to argument is 1983): is and that conflation of de instead of simultaneously exchanged substance This products the product has a argued becomes abstract when the product an (see section 1 therefore, it in is this and Gleicher, capitalism abstract and concrete and, the concept inversion 1979, of formed modific ati on com modity-producing societies. Angelis, labour exchange This is a labour for approach only money. between value to use that the is abstract labour through, and only through, the sale of its product. When social labour is formed in this context, it is called abstract Iabour ... Thus the notion of u a L u e , r a ther than being linked to a mere embodiment of labour, r efers to the validation of private labour ... [I]n the absence of circulation - that is, of sale - there is no creation of value at all.' (de Vroey, 1981, p p . 176-77); 'Value is abstract labour formed from concrete labour by market exchange.' (Mattick, Jr., 1991-92, p . 34). An extreme version of this approach is adopted by Eldred and Hanlon (1981) and Eldred ( 1984 ) . 66 labour and value will now be probed from the point of its implications for the normalization, of view synchronization and hom ogenization of labours. The most significant aspect of this definition labour is that it can hardly performed production, contrary. in 28 exchange, As abstract be connected despite of to In effect, subsumption of labour to the labour is considered ideal prior this productio n det ermination of value dislocation by no was seen above that this longer relation capitalist labours amounts circulation, social all is to into to the because reflects relation between labours that produce wage labour and the protestations this approach dislocates the NSH of circulation. abstract the the intrinsic commodities. est ablished relations, expressed by the money- for m of the product. It through and it is On the contrary, for this approach labours are abstracted in and through actual relation between individual commodities and money. If this is the case, the normaliz ati on purely a market phenomenon. of labours not because production process, they are part of implicitly synchronized, is to the single same social recognizes The abstract that sales measured. and not However, to the labour labours since it accepts that the magn itu de instantaneously attributed a kind but because competition imposes a single price for goods wi th the same use value. approach becomes Labours producing the same of commo dity are related to each other and create value the this are of value effect relation is between For example, de Vro ey (1981, p . 177) argues that '[ejxchange creates value but production determines the magnitude of value', becau se the price at wh ic h commodities are sold is allegedly dete rmined by the average conditions of production. However, if labour becomes abstract only through the sale of its product, and if its measure is the quantity of money for which the commodity is exchanged, it is safe to conclude that, in the last instance, abstract labour is both qua litatively created and quantitatively determined in circulation (see Lee, 1990, p p . 142-45, and Shaikh, 1981). 67 commodities and ideal money, Finally, labours 'homogenized' established producing because in price-format i o n . distinct their not commodities are into products are converted because the abstraction (homogeneous) money, and their heterogeneous characteristics reveals their of common value-producing essence. The dislocation typical of of the NSH 'abstract disregard for the the theoretical This actual labour' relation production of value; price. into approach, between in addition, wage it drawback is revealing because, abstract labour neces sar y to reproduce diminished relevance of the analysis production and, exchange. labour is the and the eliminates relevance of the process of determination of 1 and 4, price is the form the that reflects virt ual ly sections that exchanges, the the on in of the commodity. The of creation focuses seen expression determination neglects instead, of as price of shows value in its realization in One of the effects of the ensuing subsumption of production by circulation is the dilution of the differences between living and virtual un dif fer ent iat ed concept of abstract conceptual labour labour, into an und erstood as labour represented in money. As a result, the fundamental differences bet wee n production and the production of commodities petty producers are all example, unable performed under to but lost. reflect the command the of The by that capital labour or that performed. In is, wage for labour produces of value created is determined by the quan tit y socially necessary) autonomous analysis fact regardless of the sale of the product, capitalist the value quantum of (simple, contrast, petty producers make commodities but do not ge ner all y employ workers, in which case production, the undetermined; actual price even quantity of though value value created it can be inferred only by of the commodity. The capitalist production and petty commodity 68 is wage created is a reference co nf lation pro duction in priori to the between (and, in effect, the election of petty commodity production as the subject of study) makes it difficult to grasp the conceptual difference between the production value, the realization and this difficulty has created serious troubles the further development of the (see, and for example, de Vroey, 'abstract labour' in produ ct io n and the dislocation of with the failure content of the production process involves wage differences, labour. More approach abstract NSH to is into recognize that transformed generally, in (see section such as the distinct by 1). Because of of va lue-creating workers are not eliminated at the passage their adopts embodied of from skilled production instead, where they have to be dealt force of assumptions and with recourse to it 'anomalies' capaci ty into circulation by the NSH of labours but, over into circulation, the this, the when spite the point of view of circulation favoured labour circulation this approach to Marx's theory of value labour views for 1985). The relative neglect of the performance of are associated of carried with market by processes such as supply and demand. Another way to see the limits of the abstract is by scrutinizing its conception of money. holds that m on ey represents convention or law, only through actual ideal. abstract and argues that sales, As the labour labours the NSH of are lost. approach Consequently, grasp the this objective nature denies is rendered of Instead of being an aspect of human labour paradoxically, between happened necessity or, at abstract abstract 69 are least, labour. labour a characteristic of the products labour that are exchanged for money. of abstracted independently performed and whose products their reality and becomes, force comparison to be ex changed for money; cannot analysis by labours It becomes an e x p o s t , arbitrary labours labour version of 2.7 - CONCLUSION \ This chapter has made a processes behind systematic the analysis abstraction of of the real and the exchange. This labour equivalence between distinct commodities in led to the determination of the concept of abstract the identification and synchronization and description of homogenization the of definition of the two kinds of abstract as value, living and virtual labour, normalization, labours, labour and which of two of most wi dely accepted views of the relation between and Sweezy, the 'traditional' approach of that was later incorporated critique of Marx, and the count labour. This was the basis for a thorough critique labour and value: the more version of Marx's value theory, into modern abstract Dobb, the by Meek Sraffian 'abstract advocated the labour' followers of Rubin. It was shown that both economy from the production. approaches point of view of the capitalist circulation and This is at the root of their otherwise (mis)conceptions of abstract embodied analyse labour approach physiological labour, latter, abstract the reduces and value value. abstract to labour determination of abstract where the causal labour and the opposing Whilst the labour to quantum version not of the dislocates the labour and value into circulation, factor is the exchange of commodities for money. In spite of their deficiencies, something to commend recognizes that value while the abstract it; each the of embodied is created by labour to recognize views labour in the specific However, approach money both characteristics this reason, they cannot 70 adequately is views of relationship between commodity-producing labours and for has production, labour version points out that nec essary for the expression of value. fail these reflect the money; the processes of normalization, homogenization of labours. several theoretical detail The failure to do this inconsistencies, and leads to that were considered in in sections 5 and 6 above. Further research sy nchronization should and concepts of living integrate ho mogenization and virtual derivation of the concepts of money. synchronization In addition, the of labours, labour, abstract w it h labour, the NSH of labours m ay integrate analyses of the labour normalization, process be w it h value production, such that the pitfalls of the approach and the inconsistencies of the provide a deeper determinants of technology. 71 unders ta nd in g the of the formal value and employed to studies of traditional abstract version of Marx's theory of value are avoided. moreover, and labour This would, the social 3 - LABOUR, VA LUE AND MONEY: A COMMENT ON MARX'S CRITIQUE OF JOHN GRAY'S PROPOSED MONETARY REFORM Throughout his 'Ricardian socialist* Utopians. mature work Marx economists often criticizes w ho m he regards the as This chapter concentrates on Ma rx 's attack against one of their main proposals: institution of a a monetary reform aiming at the labour-money. A l t ho ug h advanced some version of this idea, is focused upon here, as his is several John Gray's probably authors formulation the best-argued case for such a r e f o r m . * Despite this, cogent neither the review of presen ta ti on objectives of this of Marx's chapter. Gray's critiques Marx's plans are polemic labour-money scheme is used here as a means of nor the against the main the scrutinizing his own theory of mo ney and of shedding light on some of its remarkably rich perspectives. money builds upon the This study of Marx's theory of analysis in chapter concentrates on the relations between labour and 2, value and and the study of the functions of money. Limited to these aims, this chapter does not attempt to give a comprehensive account of the various formulations received The Eng lish economist John Gray (1799-1883) is not widely known. He was influenced by Smith, Mill, Maithus and McCulloch, and his ideas were close to Robert Owen's. Deeply impressed by the distress he witnessed in London during economic crises, he joined the ranks of the social reformers of his time. Gray wrote his first book in 1825, the Lecture on H u m a n Happiness, whi ch was soon followed by others. In 1826 he founded in Edinburgh, with his brother James, the firm of J. and J. Gray and started publishing the 'North Br iti sh Advertiser'. Gray's business success ma y have been influential in his increasing political moderation, which ulti mat ely led him to retire from the public scene after publishing the Lectures o n the Nature a n d the Use of Money, in 1848 (see Beer, 1953, A. Gray, 1947, Foxwell's introduction to Menger, 1899, and, especially, Kimball, 1948). 72 by the labour-money idea, nor does it discuss the of the Ric ar dia n socialists on the evolution of thought. 2 In the first section of mon eta ry analysis is summarized, introduction of a this influence Marx's chapter, and his arguments labour-money are this occasi ona lly complemented with references to works Bray, Alfred Darimon second, and Pierre-Joseph the concepts of normalization, hom oge nization of labour, G r a y ’s for presented; by Proudhon. own the is John In the synchronization and developed in chapter 2, are used to clarify Marx's critiques of the labour-money scheme. In the third, the relations between value, in Marx and in Gray are contrasted, and measurement of value and determination of them are discussed. The other and Marx's views contrasted w ith Gray's. The for Marx, final prices the processes of prices in each of functions subsequently discussed, reasons why, m o n e y and of mo ney are detailed and summarizes the are section a labour-money cannot be money. 3.1 - JOHN GRAY'S MO NETARY A N ALY SI S In the ear ly and mi d- ni net een th century, capitalist development was seen by many as generating wi des pre ad misery among the working class, manifest disproport ion al iti es production and frequent economic crises. apparently took place between workers not receiving back the 'capital' a 'just price' for exploited when taking credit). 2 and exchanges 'labour' (the 'full fruit of their labour') and between capitalists themselves command Unequal in (some their Based on of w ho m did not commodities or were these conceptions, See King (1983). This is an important issue, because although their works are plagued by inconsistencies and contradictions (some of which are discussed below), it would be a serious error to un derestimate the Ricardian socialists' contribution to the development of socialist theory. 73 authors such as Gray, Bray, Proudhon, and Dar imon elaborated plans to change the economic system. They did not have the same perception of the causes social misfor tun es of time, arrangements for Nevertheless, they shared to a large socialist the their ideals, and heavily upon Ricardo's. value future devised organ iz ati on their Robert committed) scientific investigation. for them, value Rather, drew theory was, Perhaps most that labour is the sole source of Owen's conceptions the Ricardian socialists did not reach postulate; society. Their view of the labour (to wh ich they were deeply the distinct of extent economic very distinct from the latter's. all, and of however, important the a detailed they uph eld it as a this is something that ought the moral to be, real of their emphasis upon sphere of exchange as the locus of inequality and society, changes which should in production. saw the mon et ar y sphere problems. the be reformed as the main this source 'wrongly' injustice view, of exchange of they economic organized of precious metals such as gold because of their m on opo ly of the independently In accordance with This is because it was 'privilege' that, 1979 p p . 347-48). This view is part and parcel in and world because of the vices of the present system (see Rubin, [1929], of conclusion after that is pre vented from asserting itself in of around and silver equivalencies, were the sole form of money: A defective system of exchange is not other evils of nearly equal one importance: the disease - the stumbling block of the (Gray, 1831, amongst many it is the evil whole society. p . 90)^ 3 Darimon, an author with similar views, wo u l d add that 'The root of the evil is the predominance w hi ch opinion obs tinate ly assigns to the role of the precious metals in circulation and exchange ... Thus the privilege held by gold 74 Acco rdi ng to Gray, society creates measure the relative values of m on ey as commodities a scale and them to be exchanged in correct proportions; to enable such, the quantity of mo ney in circulation should be equal to the sum of prices, and money should be promptly its services were needed (Gray, 1831, as to available wherever p p . 58-59). However, since for Gray it was easier to increase the production of the mass of commodities than to increase the production of gold, the requirement that the aggregate value of circulation should equal the value of commodities implied that commodities' gold for prices would tend to fall quantity increased faster than the qua ntity of in sale as their gold. This would bring distress instead of reward for the producers: money ... must increase just exa ctly fast as all other mar ketable for if it do not do this, commodities greatest Economy and in money-price; most from our commercial Therefore, main evil put than money principle in (Gray, 1848, capitalism, while commodities was seen as impossible. the 4 the Political the cause of D e m a n d is system. itself expelled p. 69) Gray considered the un de rp rod uct ion of money of as together; and from that instant, important ... - P roduction precisely every commodity multip li abl e by the exe rcise of human industry faster ... will fall and over pro duc tio n However, he the of believed that all difficulties could be overcome: and silver, that of being the only authentic instrument of circulation and exchange, is responsible not only for the present crisis, but for the periodic commercial crises as well' (quoted in GR, p p . 115, 125). 4 For Proudhon, on the other hand, the 'main evil' was the unjust exchanges between 'capital' and 'labour', that pr evented the workers from 'buying back' the produce of their labour and thus generated overpro duc tio n (see Allio, 1978, p p . 124-25). 75 \ it wo uld be by no means difficult to place the commercial | affairs of society upon such a footing, would become the demand; or, rendered, uni form and in other words, at all times, buy w ith money. never that production failing cause of that to sell for money may be precisely as easy as it now is to (Gray, 1831, p . 16; emphasis omitted) Gray assumed that labour alone bestows value and that labour itself should be the measure of values. by the use of gold values, The problems (a valuable commodity) as a caused measure of and by the unequal exchanges between capitalists and workers and between capitalists themselves, through the creation of a valueless average labour time as its privileges enjoyed by directly exc hangeable another. For him, unit. gold; for (paper) This all mo ne y could be money, wou ld thus stability to prices, the would be for one also this arrangement would bring wh i c h should correspond to with abolish commodities and solved m uc h needed the labour time ne ce s s a r y to produce commodities. The p os se ss io n of a given amount of labour-money certify a worker's true participation in social and wo ul d enable him or her to draw production, commodities equivale nt value from the whole of that produce. would ensure ham pered by that a finally prevail, society defective and no longer mone ta ry exploitation had system; w ou ld of an This system its progress justice no would longer would take p l a c e .^ John Bray went much further. He was p a ss ion ate ly committed to socialist ideals, and considered the ex pl oitation of the workers 'the great wr ong for w hi ch a remedy is wanted' (Bray, 1931 [1831], p . 20). His views were remarkably developed: 'An exchange implies the giving of one thing for another. But what is it that the capitalist ... gives in exchange for the labour of the working man? The capitalist gives no labour, for he does not work - he gives no capital, for his store of wealt h is being pe rp etually augmented The whole transaction, therefore, plainly shews that the capitalists ... do no more than give the wor ki ng man, for his labour of one week, a part of the wea lt h which they 76 At the c entre of Gray's system was the Bank' that wo uld print the labour-money. would first sell all their pro pe rty would pay them a 'just' amount of labour-money; then be remunerated with the usual their old businesses. they would sell When they 'National to or Standard The capitalists that Bank, which they would rate of profits to manage had pro duced them to a network of commodities 'National Warehouses', again receiving labour-money in return. As the value of all commodities for sale plus the value of the social stock of wea l t h wo uld be e x a ct ly ma tched by the amount money in circulation, mo n e y could always buy all goods at once: Under the Social System, goods in the national equivalent, the money in ci rc ulation and the stores would always be increasing and decreasing together. wo uld be the demand, the pr operty wo uld and the one wo uld ever be 1831, of equal to be the exactly The money the supply, other. (Gray, p p . 251-52) This implies that demand would never fail, in wh i c h case crises w ou ld be abolished forever: by the adoption of the plan described, each other. of exchange that is goods of every kind wo uld be m a d e to Selling wo uld be me re ly the pr operty in a particular place; buying the act of taking of it back again; and act wo u l d mo ne y here pay of lodging be merely wo uld m e r e l y the receipt wh ic h ev ery man w ou ld require to in the interim between the period of selling and that buying. (Gray, 1831, for be keep of p . 86) obtained from him the week before! - wh ich just amounts to giving him n o t h i n # for s o m e t h i n # - and is a me th o d of doing business wh i c h ... is by no means compatible with a working man's ideas of justice' (p.49). Bray's ideas are discussed in Hend er so n (1985). 77 If the Warehouses could not, commodity, its producer previously received; price, would whatever have to reason, return a (Gray, 1848, the producer p . 117). Thus, w ou ld in get the reduced the Wa re houses wo uld be that of a neutral same group of authors also the end, a money he or she wo uld have to return the difference and, would receive the sale price of commodities, The sell the if it could only be sold at sold at a higher price, profit for if extra producers and the role of intermediary. cri ticized credit interest, although there is, again, opinions. Gray himself does not have a firm point of view on these issues, and changed his no u n if or mi ty in and (superficial) their judgement between 1831 and 1848. At first he considered interest as source of injustice, since its addition to commodity values would not only prevent workers from buying back the of their labour, but also prevent borrowers fair reward for their efforts. Later on, his mind and argued that interest is a from fair product having however, ’remuneration while own ideas for the reorganization of society were not (see Kimball, 1948, 'equivalent Proudhon and others, for a full exchanges' we should, fully reward of the labour performed, and that for have both a form of mo n e y that of interest in the economy; his p p . 33 e t . seq.).^ The discussion above could be summarized by saying establish a he changed for c a p i t a l ’, wh ich should be preserved at least implemented a the to Gray, allowed absence this would render harmonious and fair an otherwise anarchic and unjust ec onomic system. In contrast, Proudhon wanted credit to be 'free', because for him capital was unproductive and could not generate income. The el im ination of interest would also help realize one of his dreams of enabling everyone to become a capitalist (Proudhon, 1923, V o l . 2, p p . 129, 134, 139-40; see also Allio, 1978). Bray also deplores the injustices of the credit system, but does not specify how they should be dealt with. 78 3.2 - NORMALIZATION, SYNCHRONIZATION AND HOMOGENIZATION OF LABOUR AND THE LABOUR-MONEY SCHEME A discussion of Marx's critique of the labour-money requires an exposition of his theory of money. chapters 1 and 2, Marx derives the category the cont radictions in the concept of between use value labour. and value, and of concrete seen money commodity, of and syn chronization and homogenization (NSH) involved production. in their In the of by means of a review of the most from abstract discussed normalization, of what connection between m one y and the NSH in especially The determination of commodity values was in chapter 2 from the point of view out, As scheme the labours follows, labours the is important drawn issues in Marx's critique of the labour-money scheme. It was seen above that when a commodity reaches the private labour that produced it loses its in a real process with three stages: wit h all individual commodity, its kind; labours (a) producing (b) it is synchronized normalized same mere other have pr oduced the same kind of commodity which are concurrently for sale; is the with kind of sample of labours in and (c) it market individuality it w hi ch converts each good into a the the is past that but homogenized with all other kinds of labour as the co mm odity is equalised with ideal money. The labours of the commodity normalized are distinct reaches the market, as producers every of each individual labours are links of a unique throughout society; consequently, have the same value, required labour to all pr ocess 79 them. of all these carried out individual commodities irrespective of the produce of commodity where they are identified as samples a single general product put up for sale. As such, of time kind different Therefore, amounts commodity values are determined not by their own production time, but by the labour time socially necessary to produce them. In the market, commodities produced in time are also assimilated, as they are general product for sale. It inherently diachronous is diverse parts this concrete Therefore, of the labour processes exchanges of same synchronization ensures the continuity of production and time. moments of that through the value of a commodity depends not on the labour time socially necessary when it was made, but on social production, labour time presently necessary for its or the labour time socially necessary for its Hence, in Marxian analysis values are the reproduction. not given commodities once and for all when they are produced, to but are socially attributed at every moment. This does not contradict themselves have value, the fact that commodities but only reveals the social nature of this concept: as the pr od uction of commodities is one of the features the of social division of labour, individual commodities only exist as samples of their kind, kind of commodity only exists as one among several It is the general, commodity, each others. historical process of production of alongside all other production determines the values they have physical and and not each processes, the that amount of labour one applies to produce a given good. When different kinds of commodities are related to mo ne y the heterogeneous qualities of the concrete labours applied in their pro duction are abstracted, treated as and they mat eri alisations of equal human labour. then homogenized; only becomes relevant, and matter. in their only essence their are Those of labours abstract quantitative Comm od it y prices are thereby determined. chapter 2 synchronization simultaneously, that and the processes homogenization of 80 labour relations It was seen normalization, are and each of them depends on the its fulfillment. are carried others out for Let us now review Marx's critique of Gray's value starting w ith the pre liminary 'sale' point is of commodities to the Warehouses. A that if a Ware ho us e commodities and later on return to their to pay him or her the consumers analysis, price (as seen above), actually original paid then the Bank, the labour-money are unn ecessary - they If we by buy producer the final the Warehouses and change the capitalist reality of uncertain sales, and possible bankruptcies. should ignore nothing floating this in prices, possibility, three cases are worth discussing: (a) If the 'just price' that the Warehouses would pay for commodity was directly determined by the concrete time its producer had worked, the economy wou ld disarray: six a chair produced in hours twice as mu ch as a similar one that took producer only three hours to make. quickly fall, normalize worth' efficient say, while the 'valuable' Total pr od uc ti vi ty would stems from by wor king the com modity-producing neglect less then her intensively. of labours, be second because everyone wo uld try to m ak e his or commodities more This absurdity five pounds. more into The first chair could exchanged for ten pounds of potatoes, would only equal a labour be set wo uld 'be a the and need from to the assumption that their homogenization could be reduced into a direct identity between individual labour-time and money. This dif fic ul ty shows that Gray's Bank and Warehouses have to be ent rusted w ith the power to determine the labour time socially nece ssa ry to reproduce all commodities establish their values), role in the economy to their (see below). was paper labour-money, 'Weitling French after, (or which considerably increases (b) Suppose that we had a society whose sole form proposed by would what Marx called currency would lead to labour severe 81 them' money 1l a b o u r - c h i t s ', ... with Englishmen ahead of Proudhon & Co. among there was a change in of (GR, productivity, difficulties. hi m p . 135). this kind Suppose, as and If of for example, that between two moments of time labour product iv ity doubled in all sectors of the economy. case, goods that in the previous period could for a six-hour chit, a three-hour one. say, be a constant In general terms, appreciation commodities. This creditors at the this exchanged wo uld today be equivalent only the would, of of expense mo ne y course, of the to synchronization the labour processes carried out in the economy to In in would of lead relation benefit debtors. the to cursed Moreover, if pr od uctivity constantly changed, [t]he time-chit, representing average labour time, would never correspond to or be convertible into actual time; i.e. the amount of labour time objectified commodity would never command a quantity of equal to itself, rather, and vice versa, either more or less, just labour but as labour would at in a time command, present oscillation of market values expresses itself in every a rise or fall of the gold or silver prices of commodities. (GR, p . 139) (c) Alt ho ug h metals would be, in Gray's scheme, unfit to act as a measure of value, coins could be 'auxiliary instruments of e x c h a n g e 1 (1831, and sold for labour-money. commodities used p p . 75-76) bought In the case of copper and silver, if their pr od uction times varied their weights would to preserve their mo ney prices, their importance and traditional weight but in value [1937], p p . 208, (Gray, 1848, while use, gold wo uld p p . 180-84; change coins, vary given not see Viner, us consider the first case only, coin was struck out of gold. line of thought, assuming that reproduction and that all increased, the 1965 Suppose that the labour in gold mining. synchroniz ation 82 let the typical Bank charged for gold coins the labour time socially ne ce ss ar y for except in 284). To simplify matters and follow Marx's constant, as productivities latter their were If the of gold-pr od uc in g kept constantly labours would subject all coins to a constant dep reciation the idealization of their name, a or to inconvertibility - between an old six-hour 'worth' specific 'six-hour' and to form of coin and a commodity. This would happen because, as gold pro duc tiv ity rose, labour-time necessary to produce a coin of given size decrease, and so would its value. gold-mining new doubled, a given the would Had labour productivity in coin would be devalued, exchanging for only half as many commodities as it once did. An old 'six-hour' coin, say, would that took only three hours to make. Gold money wit h the plebeian now equal commodities Because of this, title x ho'urs of would be exposed to greater fluctuations than labour any other sort of mo ney and particularly more than the present gold money, gold because gold cannot rise or fall (it is equal to itself), while accumulated in a given quantity must con stantly rise or fall living In labour convertibility, time. of relation the labour gold, in in relation order to the productivity have to be kept stationary. in of time contrast, to present, maintain labour to its time would (GR, p . 135) 3.3 - MONEY AS THE MEASURE OF VALUES For Marx mon ey is a special commodity, equivalent to all the others and wi th the formal use value of representing values. Therefore, from the mon ey is, form reciprocal of for him, social dependence a social articulation of commodity mo ney -co mmo dit y is for Marx a social below), (say, relation that derives and reflects producers. value a As the priori (see the concrete labour of the individuals producing gold miners) is directly social labour, for the material expression of abstract 83 or the labour. the it medium Commodities' values are disclosed in a relation between each of them and money; as such, money is their mea sure of value: The first main function of gold is to supply with the material for the expression of their values, to represent their denomination, comparable. ... It values as qualitatively ma gn itudes equal of and the not commensurable. commodities, mo ney Quite as values, that renders the contrary. quantitatively the value commodities Because all are objectified human labour, therefore in themselves commensurable, be com munally measured or same It thus acts as a universal me asure of is commodity, commodities in one and their the values same can specific and this commodity can be co nv erted common measure of their values, and into that is into money. the Money as a mea sure of value is the nece ss ar y form of appearance of the meas ure of value w hi ch is immanent na mely labour-time. in commodities, (Kl, p . 188) Marx stresses that as a measure of value money is merely ideal: Every owner of commodities knows that he is nowhere near turning them into gold when he has given their value form of a price or of imaginary gold, and that it not require the tiniest particle of real gold to valuation in commodities. gold of millions of pounds' In its function as measure of p . 190; see de Brunhoff, 1976 give value, alr ead y value of the commodity is expressed in a price, (1979, p p . 49-50) as de Brunhoff rightly put it, 84 money values social as and the soon the meas ure of value is divided into the conventional Thus, of [1966]) As the value of mo ney is of a standard of prices. a capacity. The comp arison of a commodity with mo n e y relates the of them both. does wo rth therefore serves only in an imaginary or ideal (Kl, the as units Ewenczyk As measure of value and standard of prices, price form to commodities; it expresses mo ney gives a the value commodities in quantities of the mo ney commodity (gold), and relates at the same time these m ag ni tu de s to a unitary qu antity of weight of gold, of prices. that is the of fixed standard The mon et ar y name - the price form - expresses at the same time these two functions. 7 It is this step that reduces the heterogeneous labours that create each commodity into homogeneous labour: the price relations between commodities is wh ich an equivalence concrete labours, homogeneous abstract (Fine, mo ne y- co mm odi ty Moreover, different what Marx called p . 124) In this case, would production times which, process. in Gray believed that no commodity could commodities irrespective 8 1980, neutral) measure of value, itself have a value. the between labour that counts as value, labour. (i.e. established form the means by wh ich these are reduced to In contrast w ith Marx, be a good is the as of for him, he changes in the modify the because it the prices stability of would disturb the believed that would value of their of all own exchange increasing the production of metals was more difficult than increasing the 7 In other words, '[a]s measure of value, and as standard of price, mo ne y performs two quite different functions. It is the measure of value as the social incarnation of human labour; it is the standard of price as a quantit y of metal with a fixed weight. As the measure of value it serves to convert the values of all the manifold commodities into prices, into imaginary quantities of gold; as the standard of price it measures those quantities of gold.' (Kl, p . 192). 8 In Ri cardian fashion, Gray (1831, p p . 60-61) argues that 'money, as it is at present used, is mer el y a commodity, the price of w hi ch rises and falls, like every other commodity, in pr op ortion as the demand for it is great or small ... Thus the value of mo ne y is continually liable to change, and if weights and measures were subject to the same kind of variation, greater confusion and mischief wo uld not be the r e s u l t .' 85 production of the other commodities as a whole, tend to fall, thus reducing generating a de flationary crisis p p . 25-27 and Cartelier, However, profits and (see Brunhoff, de ultimately 1979, 1987). this is neither a reasonable theor y of value nor good theory of crisis. simply prices would not a Gray's valueless me asure of value measure since, as we have seen, a is the Bank-Warehouses complex would be the true measurers of value in his scheme. Furthermore, even if prices tended over time this would not by itself lead to the of sales; other difficulties such as interruption outst an di ng but Gray terms, fails Gray's to men tion statements un de rstanding of the synchronisation labours that are inherent in commodity changes fall debts or in the renewal of fixed capital would also have to be invoked, general factors to them. reveal and In a more defective normal is at io n production, of whereby in the value of money modify the price of the inputs at the same time and in the same proportion the price of the outputs (see Clarke, 1994, as for they a alter critique of the Ricardian socialist theory of c r i s i s ) . Another side of Marx's critique of the labour-money regards its identification of prices w it h values. at the same time that prices express scheme For commodities' Marx, values they allow for the possibility of differences between values and prices, for him an intrinsic characteristic of the price g form. The distinction between prices and values for him is a consequence of the nature of commodity production, has a role in the social regulation of the and it amounts of concrete labour applied in the production of each use value. For example, supply and commodities, may These differences ma y occur irrespective of tr ansformation problem, that is ignored here (see p p . 196-97; the transformation problem is discussed chapters 5 and 6). the Kl, in demand, the changing relations that do not affect the values 86 be tween of cause variations in their prices, wh ic h producers the relation between the social production guide and, thus, signal wants of their to the society and allocation of labour (see chapter 2). According to Marx, the identification of prices with values reveals the unfami li ar it y of Gray and others with the nature of commodity production. As Gray considered be the me asure of values and proposed a labour-money, would become the unit of both values and the Warehouses' automatic purchase of values. express commodities' Values would individual prices. any make private labour immediately social, identical to labour-time mech an is m then either times lead to production that was noted in section from determinations made by (which wo uld make them the the Moreover, would wh ic h renders prices labour and time commodity would and demand the 2), Bank or and signalers, directly (which deprive society of the relations between supply as a signalling to collapse would the of result Warehouses instead of the m a r k e t ). These ideas would, production and for Marx, thus of imply the capitalism end itself. commodities are products of private labour, immediately social value. The 'identity' and mo ney - to w hi ch Gray aspires social from the outset, longer commodities. conditions for the - such, makes the conversion of commodity For him, and mo ney is an between commodities or makes it produce As of private labour money, discus sio n commodities and of no the into money becomes meaningless: The first basic illusion of the time-chitters consists in this, that by annulling the nominal real value and market value, price - that is, between exchange by expressing value in units time itself instead of labour time, dil//erertce in a given value of the real difference and contradiction between also and labour objectif ica tio n say gold and silver - ... they 87 between of remove price and value. Given this illusory assumption it is that the mere introduction of with all crises, the self-evident time-chit does all faults of bourgeois production. money price of commodities = their real value; supply; production = consumption; abolished and preserved; wh ich is wo uld need only to be time money, of which me a s u r e d time-chits. in In in the this co mmodity wo uld be directly transformed into gold and silver, for their part, rank of all other commodities. p p . 321-22 and Backhaus, 1974 production and = the in the order to form of a way every money; and would be demoted to the (GR, p . 138; see also CCPE, [1969]) In Gray's economy the Bank would n ec es sa ri ly aspect of demand ma te ri al iz ed create a corresponding mirror-image value-symbol, The m o n e y is simultaneously the labour commodity is the product, commodity, away enjoy control absolute general buyer and seller of commodities, it would have to evaluate the social power. we have labour every As the seen time that necessary to produce each commodity and thus to oversee all production processes. It wo uld also have to become the general - both because the average pr od uctivity in the eco nom y w ould have to identical rates) be kept all constant sectors (or each market, to make really convertible into commodities.^^ would order, grow of at to avoid the development of disproportions, and because supply w ould have to balance demand, aggregate and in planner control, receive, the both in the labour-money In the end, determine the price for all products, and all individuals would be to its decisions. But then we are no longer the and pay subordinated in convn&dity production and thus no longer in a capitalist society 10 Bank - an Gray (1831, p . 38) seems to be at least partly aware of this: 'The specific object of the pro posed commercial association ... is to make production the infallible cause of demand, and to give the greatest possible effect to labour and capital ... by means of a thoroughly organized plan of production, exchange, distribution, and a c c u m u l a t i o n '. 88 inevitable result of Gray's proposals to reform the economic system. 3.4 - OTHER FUNCTIONS OF MO NEY Marx's critique of the labour-money scheme can be understood more tho roughly by following functions of money. As m on ey his analysis personifies makes them 'acquire universal the abstract its concrete equivalence with commodities, sale, of other labour, achieved in their social validity as an e q u i v a l e n t - f o r m 1 (Kl, p . 201). When commodities are exchanged for money and m one y occupies their place, it acts as a means of circulation.** Since for Marx equal value, exchanges occur between the role of money as requires the previous a commodities means normalization, of circulation synchronization ho mogenization of the labours involved. However, and commodities are soon less than their face value. exchanged although that in an abstract exchange the involved equals circulation as a whole, the value value of wear and worth exchanges it of gold coins The continuity of these circumstances shows that, mo ne y for and the coins used as means of circulation are subject to tear, with is the the essential amount of commodity, in matters are different: what has be preserved is no longer the value each participant at times has, but exchanged; in the this value-equivalence case, mo ney of the operates representative or symbol of their value. in all commodities me re ly Symbols to as of a money may thus per fo rm exactly the same service as pure gold: 11 . As there is no a priori guarantee that the value of any specific commodity will be realized in money, the need to sell implies the po ss ibility of non-sale, or the formal possibility of crises (see TSV2, p p . 507-09 and Shaikh, 1978). 89 The fact that the circulation of m o ney itself splits nominal content of coins away from their dividing their metal l i c existence from existence, this fact implies the real their latent ... Relatively such as paper notes, (Kl, valueless content, functional possibility replacing metallic money w i t h tokens made of material the some objects, of other therefore, can serve as coins in place of gold. p p . 222-24) Many divergences between Marx and different views of money. For Marx, Gray stem from their money is the unity of a measure of value and a means of circulation: The commodity which functions as a measure of value therefore also as the m e d i u m of either circulation, its own body or through a representative, p . 227; Gray, see Lapavitsas, on the contrary, sees m o n e y as a single, of prices would (he does not distinguish them) sale, certify the labour-time p r o d uction of each commodity. object, so that at the concretely, nec e s s a r y to It should not be any Gray wanted in the same quantity as all the valuable goods and time. Hence, Gray's synchronisation of labour processes thus In its role labour-money w h i c h would enable it to purchase all same and it could be most easily reproduced and as a means of circulation, together, static value/standard capable of reflecting the values of commodities. present (Kl, 1991) of a in is money. non- c o n t r a d i c t o r y object that as measure in and to wealth be put commodities misconception of the leads h im to a confusion between the fact that the sum of prices of must equal the sum of money paid for them, all commodities and the idea that that sum of prices w o uld have to equal the total of m o ney in circulation, or that the velocity of c irculation of money should be unity. For Marx (GR, p . 213), Gray makes no more than a 'clumsy confusion b e t ween the contradictory functions of m o n e y ' . 90 To be a m e a sure of values, ^the d e t e r mination of \private product money must itself have value, the amount social floats around the c o m m o d i t y ’s value. This concrete equivalence between commodities Such sales may, however, token representatives of money, Arnon, in a The result of this comparison is a given in the units of the standard of market sale. labour is made first through an ideal comparison of the commodity w ith money. price, of since such prices, is followed by a and in a money, be made as which against mere notes (see paper 1984) . The exchan g e a b i l i t y of commodities does not for Marx from the intervention of m o ney (as is the case for Gray) but is a characteristic of commodity production. compose the means exchanges of circulation in their lifetime aggregate, values several exchanged. Gray's; All of in all, p a r t i cipate They may thus times in the than present commodity in for simply which a means own, whose they sharply of of by the their it is the dialectical unity of a me a s u r e w ith in amounts Marx's m o n e y contrasts that works as an ideal body, that several realize, greater while in e ach exchange they are value equals that The units (or in each period), circulating more than once. result are with value, circulation that m a y be substituted by symbols. Let us now see how the functions of reserve value, means of payment, u n ity of and world m o n e y derive in Marx from the measure of values and the means value of money, like the value of any given at moment each reproduction; it is not physical bod y of a coin, by the of 'preserved' circulation. other social the commodity, conditions its through time inside the and changes in this value surface c o m m odity prices. in At the same time, exch a n g e a b l e commodity, is always due to the u n v a rying value- p r o d u c i n g labour processes. 91 is of in the form of generalised variations money The nature of values for and any of On this basis it is possible to understand w hy interruptions in the c irculation of money m ay lead to its use as a reserve value and to the formation of hoards. a very important role, both H o a r d i n g plays in Marx because the circulating m o ney must respond to the needs itself, volume of of circulation and because m o ney represents universal wealth, may be retained to symbolize a general However, this power is not absolute, power of purchase. since the value of hoard depends upon its size and the present value (see Lapavitsas, that of the money 1992). If commodities are sold today to be paid for only later if they are rented), that transaction, their buyer becomes a debtor. close s/he must either sell commodities and then transfer a given amount creditor, To (or of means or gradually hoard of m o ney circulation as reserve later on use it to pay the outstanding debt. to the value and As such, money is used as a means of payment. Att e n d i n g to the needs of trade and finance, of m o n e y are performed in the international money, that is value in pure abstract form and all sphere by an world incarnation labour recognized as such in e v ery Of course, functions single nation. all domestic currencies must be convertible world m o n e y to allow national commodities for foreign ones, to be of into exchanged or to insert nationally p e r formed labours into worldwide commodity production. Gray makes no careful disc ussion of m o n e y either as value, means of payment, p resented above, or world money. labour-money would be appreciating currency and c r e ditor-debtor relations, w ith however, normal best associated persistent since for him aimed at consumption: 92 case, with an turbulence in at the same time as hoards s y stematically gain p urchasing power. be, In his reserve would M o n e y hoards would not production was directly A man ... having acquired property in the standard of the country, bank-notes, as proved by his possession standard is sure to require som e t h i n # in exchange them - the notes themselves being of no (Gray, of stock 1848, value for whatever. p p . 118-19) In the international sphere, gold would continue to perform the role of w o rld money: gold, silver, kinds, and copper goods, or classes, class w o uld countries; be ( c o i n s , ) of two should be m anufactured required to to buy goods from pay disposed to store up to do so (Gray, [etc.] 1831, The balances foreign enable persons, ... distinct to foreign countries me t a l l i c first ... to property, p p . 7 7 - 7 8 ) 12 It m a y be concluded that Gray's valueless labour-money, should m e r e l y reflect the intrinsic values could at best be a means of circulation of that commodities, (which is ironic, since in his economy commodities would not really circulate as s u c h ) . The means payment, to functions of measure reserve value and world money, gold's cursed 'exclusivity', performed by m o n e y but by the would still be carried out of value, intrinsically linked w o uld either Bank-Warehouses by gold. Gray's not be complex, or failure to articulate the diverse functions of m o n e y is related to Ricardian conception of the general equivalent, w h ich h im to try to derive these functions from money's means of circulation. of related to the The impossibility (underlying) exchange wit h barter, and the of assimilation (associated) leads role as so is doing of commodity conception the value of m o ney derives from its use as a his currency, that and not from the conditions of production of the m o ney-commodity (see Pilling, 1980, p p . 191-93). 12 The 'second class' of coins would be used, to make small payments. 93 as seen above, 3.5 - CONCLUSION The proponents of the labour-money scheme recognized as the source of value and crises and unjust exchanges. wished to To do so, eliminate prices equal values. The Bank if supply would economic they devised that w o u l d take as its starting point the fact very high level of abstraction), labour a that (at equals then try However, as the Bank to do be socialized a priori content and, making labours an would regardless of their specific form therefore, or every commodity would also be money. Since prices would be identical lose its role, the guarantees 'equivalent e x c h a n g e ’ for anything produced, a demand, converse - identify prices with values as a means of supply m a tch demand. Bank wit h values, money would products would no longer be commodities - and the very basis of capitalism would be abolished, as a result of this effort to implement Say's law. It was also shown above that the proposed labour-money could not fulfil all the functions of money, fact be a non-money, in Marx's sense. and that it would This is a consequence of the fact that Gray's labour-money has no role to play the socialization of c ommodity-producing that is carried out by the Bank and labours, the in a Warehouses, in task which occupy in his scheme the role of m o ney in Marx's. In sum, Gray's m i s a p p rehension money and commodities of the lead him either to contradictions of commodity production, solution to a Bank. When he analyses gold is a commodity like any other, value. also In this case any commodity, be money, objective basis. since view that money, and or he m o ney a he away the of of shares is says mer e all the former being added 94 assume between or to transfer their privileges At the same time, (and also mistaken) from commodities, the relations that symbol them, gold the of could have no opposite totally different to world the by convention, after the full development of commodity production. These difficulties do not happen by chance. who advocate a labour-money essence of values but general equivalent, 'labour' do declare not they is not what Marx 'labour' admit make it calls Whe n the authors a to be the commodity as the transparent 'abstract notion of labour comes hand-in-hand w ith that their labour'. Their the belief commodity production and capitalism are eternal, relations of production. In fact, behind every is that ahistorical they see of the is the e xpenditure of human energy required by any enterprise, all commodity the labour that m e rely labour concrete forms that it acquires in use over h i story - physiological demands, labour, in this labour. at all times, respect, As the the it seems possible values; it is them of of that it equivalent production expenditure to devoid all this goods kind commodities immediately exchangeable for m o ney and for eac h other. It was shown in chapter 2 that physiological fundamentally distinct from Marx's abstract the former is incompatible with the historicity concept and the transitory nature of As a result of his inconsistent between labour, value and money, Marxian concept of value; vulnerable to self-contradiction. commodity views of charges 13 Marx's relations at the his thought is inconsistency This is what leads his is production. Gray cannot arrive of were and that of the quite the contrary, of 13 labour labour, to m o n etary and system The concept of capital of the Ricardian socialists is also ahistorical. For them, capital is labour accumulated and put in moti o n to create more wealth, or even mere m o n etary savings (see Gray, 1831, p p . 18, 40, and Bray, 1931 [1831], p . 55). There is an obvious parallel b e t ween these authors and Ricardo, whose theory of value has been criticized by Marxists for failing to distinguish b e t ween abstract and concrete labour (see chapters 2, 5 and 6, Fine, 1986a, and Shamsavari, 1991, p p . 241-43). 95 to the paradox of ultimately denying the ver y kind of social division of labour that he sees as eternal. According to Marx, Gray's mistaken a p p r e ciation of commodity production and m o n e y is closely associated w i t h the utopian belief that changes in the form of m o n e y w o u l d be sufficient to m o d i f y in a fundamental wa y the form of socialization private labour and to change the whole. Similarly, exchanges' that we for Marx it capitalist is eliminate not surplus value on th r o u g h capitalism, crises - and it should be borne in mind the economy e xploitation that he equivalent Marx's critique of the case for credit' emphatic, but it will not be that the e limination of detailed interest here. w o uld but would only (at best) the forms of surplus value. He the distr i b u t i o n of income among the not, in itself, equally considers neither it prevent products one would e x p l oiters or exchanges do away wit h Consequently, a explains was e x p l o itation nor allow workers to buy back the their labour, as ’equivalent assumption of 14 between capitalists and workers. 'free of but improve the lot of the w o r k i n g people. of of affect would Marx used this as an example of the utter ignorance of the nature of capitalist 15 proposals. credit shared 14 by those who made such Marx develops these points further in the Critique of the Go th a Progr amm e (Marx, 1989a [1891]). 15 For Marx (K3, p . 743), 'As long as the capitalist mode of p r o d u c t i o n persists ... interest-bearing capital persists as one of its forms, and in fact forms the basis of its credit system. Onl y that same sensationalist w r iter who wanted commodity pro d u c t i o n to continue while m o n e y was abolished (Proudhon) could dream up the enormity of a credit gratuit, the ostensible realization of the pious wish arising from the p e t t y - bourgeois standpoint.' Credit and interest in Marx are discussed in detail by Fine (1985-86, 1988); for a stimulating interpretation of the historical context of the R i c ardian socialists' ideas, see Bologna (1993a, 1993b). 96 This chapter has reviewed the case for the institution of form of m o n e y based on Gray, labour-time, as advanced and c o m m ented on similar ideas held by, Bray, Proudhon and Darimon. Their among their theoretical weaknesses ahistorical approach to economics analysis of commodity production. are and symptoms of This an main has objective were of of to an undeveloped led to be and that if it were to exist money could no longer the others, according conclusion that the proposed labour-money cannot it no w is. However, John conceptions criticized following Marx's line of argument, whom by a this the money, be what chapter concerned the study of Marx's own theory of value and money. The analysis of this theory from the point of normalization, has not only contradictions v iew of the synchronization and ho m o g e n i z a t i o n of labours helped to identify in Gray's proposals, important aspects of Marx's own 1i g h t . 97 the weaknesses and but it also allowed some theory to be brought to 4 - THE DEVELOPMENT OF THE CONCEPTS OF TECHNICAL, ORGANIC AND V A LUE COMPOSITION OF CAPITAL: AN INTERPRETATION Marx's innovative approach to scientific analysis led him to introduce several new concepts into the economic literature of his time and to attribute a distinctive m any already-known categories, which significance he felt would relevant to a critical u nderstanding of the capitalist to be mode of production. However, the unfinished status of m a n y of his 1 works, and the complexity of his method, make the meaning of several of his concepts and categories far from Their role in Marx's investigation discussed in a vast body polemics, both of of of literature w h ich c apitalism and inquiry. money, increase objects of our of its value although debates concerning price of production, of profit and its tendency to fall, prominent. is number The controversy about the nature of is proba b l y the best-known case, abstract labour, a c onsiderably u n d e r standing of M a r xian economics and the critical obvious. rent, among others, This chapter is concerned with the the rate are also concept of notion of composition of capital. A l t hough several composition of interpretations capital exist relevance of in have Marx's the complexity and recognized. It is an e x t r emely important concept, is central in some of Marx's analyses. The essential, for example, concept of not literature, most always relevant composition to the discussion been of fully because it and of its polemical capital is the of use Marx's most important economic wr i t i n g s are the Cont r i b u t i o n to the Criti que of Political Economy, the G r u n d r i s s e , the Theories of Surplus Value and Capital. Only the C o n t r i b u t i o n and the first volume of Capital were completed during his lifetime, while the others were left in a more or less unfinished state and were published posthumously. 98 machines in industry and transformation of values accumulation of capital, into prices of production, of the tendency of the rate of profit the the law and the composition of to fall, distinctions between the various types of rent. Widely different understandings of capital found in the literature may, the at least partly, from Marx's use of three forms of the concept: composition of capital capital (OCC) (TCC), the organic and the value composition of his inquiry m ay look capital evident there are moments when Marx seems to use even in a contradictory way; the technical composition of While the content of each term is quite them and at times, large puzzling. the A difficulties involved or parts brief review of differing views of the composition of capital give a better idea of of (VCC). randomly as a consequence, arbitrary result may in this study. Paul Sweezy (1968 [1942]), composition of capital variable capital production. believes is the relation of (v) For him, for example, in the total although 1[s]everal ... the convenient of constant capital' (p.66). the ratio Thus, constant capital to indicate this relation, is one he defines the (1957) used which as as m ay (1949 rates of profit organic compositions of to the the gathered distinct invested [1907]), (1989). discussion below and in chapter 5, attributes the sectoral most q = c/(c+v). and Desai be serve to total his discussion of the transformation pr o b l e m Sweezy B o r t k i e w i c z !s treatment and, to in seems capital OCC the (c) ratios would This formulation has its roots in Bortkiewicz and it is also adopted by Seton that value capital, In follows from the different and w h ich not is contrary to M a r x ’s a r g u m e n t . Michio M o r i s h i m a (1973) is closer in his but m i s i n terprets the OCC by defining it as the name Marx would have given to the un derstanding of the TCC and the VCC, 99 to the mark V C C , in case the TCC underwent changes relative values were left unaltered such that (in other words, for him OCC is the name of the VCC when the changes in the TCC precisely V CC as reflected by changes in the - productivity increase is proportionate across all M o r i shima believes that Marx only simplify his treatment of technical defined changes, all are if sectors). the OCC but it will to be shown here that this is incorrect. Nobuo Okishio (1974), 'Okishio theorem' who elsewhere formalizes the so-called dismissing Marx's analysis of the the tendency of the rate of profit 1961), to fall law (see of Okishio, works wit h the value composition of capital under the name of the organic composition transformation, his treatment of the and he is by no means the only one to do so. Kliman and McGlone and Meek in (1956b), (1988), Laibman for example, (1973), share the Lipietz same the OCC can be defined once and for all as (1982), belief c/v, that and they transform values into prices on the basis of this view. Marx matters wer e slightly more complicated, below. Roemer (1979), in his analysis of tendency of the rate of profit to fall, should really be termed VCC, For as will be seen the law of the also calls OCC what and his whole d iscussion bears the mark of this misconception. Shaikh (1977), in his now classic paper proposing iterative solution to the transformation problem, the ratio (c+v)/v, formulation Sherman which (see also cannot Shaikh, accepted 1973, p . 38). (1983) defines the OCC as v/(c+v), calls OCC the ratio c/(v+s), while otherwise v e r y useful textbook, capital' be as v/(c+v), and Orzech (1987, discussion of the and the 1989a, defines the 'OCC' 1989b, composition Foley as of each other) argue that 100 the valid contrast, Mage (1963) an 'composition of Finally, in their capital OCC OCC in (one merits is the careful distinction of the TCC, from a (1986), c/v. 1990), as In and calls an is OCC a Groll detailed of and whose VCC long-run value-concept while the VCC is measured in market prices and refers to the short-run, probably not agree. something wit h which Marx would 2 The problems m e n tioned above are m e rely a sample of the difficulties one encounters in literature concerned with the c omposition of capital. This chapter searches for a interpretation of Marx's understanding of this important aspect of progress Marx, himself, it is shown that, employ the the study is the correct concept. An identification of made in this field. In what follows while in the Grundrisse Marx does not concepts which he w o uld later call composition of capital, in the Theories of Suorplus Value introduces the physical (technical) and the organic composition Capital of composition capital and, he uses the technical composition of of in their most developed form. The p rogressive introduction of increasing refinement matters at stake and, of as will be own terms finally, capital, capital Marx's views shown, on and the precise m e aning of TCC, become clear. reflects perception clarify the p resentation of his own point of argument progresses, he in the of 3 these Marx's the capital organic composition of capital and the value composition capital yet the OCC allows view. of him As composition and VCC the the to the of will A l t h o u g h the form of Marx's arguments changes, 2 There is no space to make a detailed critique of Groll and Orzech's work, that shows a h i ghly sophisticated u n d e r standing of the composition of capital. See, however, Fine (1 9 9 0 a ) . 3 The Gru ndrisse was written in 1857-58 and the Theories of Surplus Value derive from the 1861-63 manuscript, w h i c h also contributed to all three volumes of Capital. Apart from that, Capital 3 was w r i tten in 1864-65 and 1875; Capital £ in 1865 (or 1867), 1870, and 1877-78, and Capital t was written after the other two volumes, p u b l ished in 1867 and improved for later editions (see Engels' Preface to K 2 , and Dussel, 1985, 1988, 1990, Negri, 1984, Oakley, 1983, 1984, 1985, and Rosdolsky, 1977 [1968]). 101 it will not escape the reader that the problems wit h he essentially deals and the results he reaches are which unaltered through the years. The argument develops in two chapter first follows Marx's analysis of the composition of capital in the absence of technical change. be defined and its steps. This Each concept use d by Marx introduction justified. The section discusses how the definitions of TCC, OCC are affected by technical progress. be It will the a c c u m ulation innovation. of capital particular occurs second and VCC concluded that one of Marx's aims in distinguishing the OCC VCC is for a focused analysis of a will from case, the where with technological The arrangement of this chapter, w h i c h contrasts a static case to the dynamic imposed by technical change, essential, not only to the concepts that concern us, introduction but also to their contradictions, limits arrangement in is useful orderly and its the the appreciation changes. direct of Moreover, c o n n ection distinct levels of abstraction involved in the is of this with the analysis of the composition of capital. 4.1 - THE STATIC CASE For Marx the determined, p roductivity and he defines of it labour as the is mass technically of means of production that can be processed into final commodities in a given labour time: The specific development of the prod u c t i v i t y of labour in each particular sphere of prod u c t i o n varies in degree, higher or lower, social depending quantity of means of production are set definite quantity of labour, how in moti o n and, by consequently, a q u a ntity of labour is required 102 large a a hence in a g i ven working-day by a definite number of labourers, how small on for a on given ‘ q u a ntity of means of production. i p . 773). This notion compost tion is captured of capital by the (TCC, composition of capital). The between the mass of material (K3, p . 163; concept earlier TCC of technical e n t itled is inputs see also Kl, the (dead physical physical labour) ratio and amount of living labour necessary to t r a n s f o r m them the into a by a produce a definite output: A certain quantity of certain number of labour-power, workers, is represented required certain volume of products in a day, to for example, and this involves putting a certain definite mass of means of production in m o tion and consuming machines, raw materials etc them ... p r o d u ctively This p r o p ortion constitutes the technical composition of capital, and the actual basis of its organic composition. p . 244) (K3, As the TCC is a relation between a h e t e r ogeneous use values (the material inputs) and a q u a n t i t y it cannot be mea s u r e d by a comparison of the reasons, a capitals engaged shipbuilding, p rocessed impossible. say, per We be know, of the commodities; sectors use labour is however, raw materials because index; technical distinct where hour produced inputs, to in single labour, for similar c omposition (weaving ver y different) in Marx's the of and of in of of value that of bundle is inputs is c apitalism all terminology, tend this, the technical composition of capital can be assessed in value terms. This value-a s s e s s m e n t of the TCC gives us the organic composition of capital (OCC), or the value of the means of production required to absorb one hour of living labour in a particular industry: The organic composition the following: [of capital] can be taken to mean Different ratios in w h i c h it is 103 necessary to expend constant capital in the different spheres pr o d uction in order to absorb the same amount of (TSV3, labour. p . 387). The OCC is, for Marx, an immediate value-reflex of the and both are determined in the sphere of production. of this, the OCC is that synthesizes, called a 'technological in value terms, the typical of the production process other words, capital Because composition’ technical under TCC, relations consideration. circulation-based between its fixed and circulating parts) time required to transform the distinction to the total inputs (whether labour paid or Marx refers to the OCC in the following terms: The ratio between the different capital ... [can be] elements determined ... composition of productive capital. technological labour, composition. labour, of [b]y By this With a gi ven w h i c h can be taken as change occurs, constant the amount of the we organic m ean of so as no means of long and constant capital definite quantity of living labour (paid or unpaid), is, elements var iable to the material of d etermined in every sphere of p r o d uction There is, however, 4 organic - in to a that capital, (TSV3, a major difficulty w ith the from the point of view of its the pr od uctivity the amount of raw material that is, productive terms of its material elements - w h ich corresponds capital In the OCC relates the total value of the constant (irrespective of the unpaid). of p . 382) analysis is 4 of composition. In other words, if 'it is assumed that no change has taken place in the organic composition of capital ... [or] that no change has taken place in the manner of production decreasing or increasing the amount of living labour employed in proportion to the amount of constant capital employed ... [£]fte sarnie rvum£>er of workers as before is required ... in order to work up the same volume of raw material wit h the same amount of mac h i n e r y etc., or, where there is no raw material, to set into m o tion the same amount of machinery, tools, etc.' (TSV2, p . 276) 104 As the value of a bundle of means of p roduction product of the values of its components used up, it seems by the impossible to tell w h e ther is the quantities changes in certain OCC result from modifications in the underlying (and thus from changes in the p roductivity consideration) of of the technology of labour in the a TCC production and industry under or from alterations in the value of the means production used up (that reflect changes production processes of other industries). was no ambiguity, though. As immediate value-reflex of TCC is kept constant, the OCC the TCC, For is the Marx defined there as it must not change whatever the changes the elements of capital m ay be, in in the despite the ifthe value fact OCC is a v a l u e - c o n c e p t . Having made this clear, an that of the Marx says: [I ]f one assumes that the organic c omposition of capitals is given and likewise the differences the differences in their organic value ratio can change which composition, although composition remains the same ... the capital then any change i n d e p e n d e n t [ly] of means of p r o d uction c o nsideration but commodities into it as ... The organic changes and those of subsistence that are not produced in the sphere of outside the it can only occur because a fall or a rise in the price enter from technological If there is in [e.g.] the value of variable of the organic composition, arise under brought from about by changes of value can have a similar effect on the rate of profit in c e r t a i n 'c i r c u m s t a n c e s . They in the following way. differ however If the latter are not due simply to fluctuations of market temporary, they are change in the prices and invariably spheres that constant or of variable capital are caused provide (TSV3, therefore by the an organic elements p p . 383-86, not of various paragraphs) Thus, Marx is clearly aware that, process, for a given changes in the value-ratio between the 105 production (fixed and circulating) constant capital quantity of labour either technically variations technological in the ('organic') this d e f i nition of changes should modifications, and the of changes in be (paid required, value OCC, not the and and can stem the aware conflated from inputs production. well unpaid) or Based that with on value technical Marx planned to discuss in Chapter 2 of Part 5 3 of Ca.pi tal : 1. Different organic composition of capitals, partly conditioned by the difference between variable and constant capital of p r od uc tio n in so far as this arises from the - the absolute quant it at iv e stage relations between mac h i n e r y and raw materials on the one hand, the quantity of labour w h ich sets them in differences relate to the labour-process. between fixed and circulating capital motion. arising from organic composition. which do not arise These arise from the value parti c u l a r l y of the raw the ... in the relative value of of different capitals These The differences c irculation process have also to be considered 2. Differences and the parts from their difference materials, even of assuming that the raw materials absorb an equal quantity of labour in two different spheres. 3. The result of those differences the rates of profit in different p r o d uction (TSV1, is diversity spheres of of capitalist p p . 415-16) Marx even t u a l l y realized that an adequate treatment of these problems w o uld require between the effects an of even the more refined a p p l i cation technologies and the consequences of the use distinct values. W i t h this aim, 5 he introduces, distinction of different of inputs in of Capita 1, Oakley (1983) analyses the stages of Marx's elaboration of Capital and the various subdivisions considered for the book; see also Dussel (1988), Negri (1984) and Rosdolsky (1977 [1968]). 106 the concept of valve compost ttort of capital (VCC). The VCC is a c i r culation-based c o n c e p t , defined as the ratio between the value of the circulating part of (inclusive of the depreciation of the constant fixed capital capital) and the variable capital required to produce a unit of the commodity (in other words, it is the ratio between the two of the commodity's cost price; see D. Harvey, components 1982, p . 126). Let us no w follow Marx's discussion of the same problem both before and after the definition of the VCC. the place of the VCC in his analysis, This and relation to the TCC and the OCC.^ Marx wants that if the technical capitals are equal, of organic its to show precise point compositions of out two but the value of the means of production used up is different, from the point and will the value-assessment view of circulation of their may analyst into the belief that their TCCs are TCCs mi s l e a d also the distinct. In the Th&orios of Surplus kalu© he argues as follows: In the case of capitals of equal composition m a y be production, the same size in ... different the different values instruments and raw materials used. instead of iron, cotton, etc. of For iron instead of lead, (TSV3, p . 386; organic spheres but the value ratio of the primary parts of constant and variable capital m a y according to the be the component different amount example, wool emphasis omitted). of of copper instead of 7 Clarke (1994) compares Marx's thoughts on the composition of capital w i t h the relatively less dev e l o p e d approach of Ricardo (1951 [1821]). 7 Marx presents the same argument elsewhere: 'With capitals in different branches of production - with an otherwise equal physical composition - it is possible that the higher value of the m a c h i n e r y or of the material used, may bring about a difference. For instance, if the cotton, silk, linen and wool {industries} had exactly the same physical composition, the mere difference in the cost of the material used could create such a variation' (TSV2, p . 289; emphasis omitted). 107 The introduction rigorous, and, of the VCC allowed Marx to be more in C a p i t a l , he says: [I]t is possible for the proportion [the TCC] to be the same in different branches of industry o nly in so far variable capital power, serves simply as an index of labour- and constant capital as an index of the volume means of p r o d uction that labour-power sets Certain operations in copper or iron, involve the same p r o p ortion means of production. iron, the value for between in motion. may labour-power and is between dearer than v a r iable and constant capital will be different in eac h case, and therefore will the value composition of the two taken as a whole. (K3, of example, But because copper relationship as so capitals p . 244) These examples concern the impact of a diff e r e n c e in the value of the means of p r o d uction used per labour hour in two sectors w h i c h otherwise have equal TCCs example, if copper and iron utensils clothes) are m a n u f a c t u r e d w i t h identical thus by capitals compositions, w ith the same (or In Surplus Value, However, first example, from organic will inputs the are Theories the 'observing' of OCCs. as the OCC reflects the TCC from the point of view it disregards the differing value of the inputs consumed by the two capitals. to and compositions material For cotton and he measures the TCCs only t h r o u g h of the p r o d u c t i o n process, then, and technologies, Marx says that their value the OCCs. wool technical be distinct because the values of the different. and that capitals Marx is reduced, that use means of production of d i f f ering values m a y have equal TCCs and OCCs. In the second case, proceeds differently, capitals presented in composition, different value, his argument by directly p o i nting out that in distinct sectors have the thus organic) Capital, same but use means of 108 two technical (and p r o d uction the e q u ality of their TCCs and appear di s t o r t e d by their differing VCCs. if OCCs of would I iThe inverse attention. VCCs, situation was also the subject of If we now suppose that two sectors had equal (and hence could they still have different OCCs Marx's distinct TCCs)? His answer is in the affirmative: A capital of lower organic composition ... considered simply in terms of its value composition, could evidently rise to the same level as a higher composition, constant capital of simply by an increase in the parts ... Capitals of the value of same organic composition can thus have a differing value and capitals of the same percentage can stand at varying levels its composition, {value} of organic o r ganic composition composition, displaying various different levels of development of the social p r o d uctivity of labour. Therefore, (K3, p p . 900-01) if in two production processes a of labour power transforms different production into the final product, given masses of means they will have TCCs and thus distinct OCCs. However, capitals used up compositions will be equal. see that differences in is if the value of then value in of while differences not be a ccurately reflected by their VCCs. OCC is important because it allows the sphere of production, differences between them. circulation, value as will be seen while the VCC Given Marx's view that The 109 their may concept of of technical below) in associated cannot and this the value distinguish production, is the dominant sphere in capitalism, come as no surprise that he considered can concern in but study irrespective of the (or changes), the constant industries technologies of p r o d uction affect their OCCs (or changes, and their the distinct their VCCs but not their OCCs, d ifferences these From the two cases above we the variable capital consumed equal, of different inputs is such that the ratio between the constant variable quantity differences and it in not will the TCCs and OCCs theoretically more important than differences in the V C C s . 8 A final example will show the precise scope and of the concept of OCC and the place of the limitations VCC in Marx's analysis: [L]et us assume that the labour ski IZ.)is (of greater proportion. workers, In where this raw material is dearer, him £100 - as much labour is dearer in case {capitalist} {capitalist} B employs 25, as the 25 dearer and they their (their surplus labour is therefore material, worth {£}500 and B's workers work of raw material, x, w o r t h {£}500 100 lbs. 5 cost because These 5 workers work lbs. same employs w o rth more). y, the A workers, up and also of up raw 1,000 ... The value ratio here - £100 u to {£}500 c is the same in both cases, the organic compo sit ion is different (TSV3, p . 387) This example is clear enough. Al t h o u g h capitalists A spend equal amounts of m o ney on means labour power - w h ich means that their value compositions c ompositions are - Marx distinct of that because they and production capitals states but have their adopt B and equal organic different t echnologies of production. D See GR, p p . 99-102. The relative preponderance of p roduction is also quite obvious in the following passage, which refers to a situation where two capitals have distinct TCCs and OCCs, but equal VCCs: '[W]e immediately see, if the price of the dearer raw material falls down to the level of that of the cheaper one, that these capitals are none the less similar in their technical composition. The value ratio between variable and constant capital would then be the same, although no change had taken place in the technical p roportion between the living labour applied and the quantity and nature of the conditions of labour required' (K3, p . 900). 110 We can therefore conclude that, the V CC are although b oth value-assessments undeniably distinct concepts. of the Their the OCC and TCC, they are d i f f erence stems from the manner in w h ich the value of the means of production and labour power is assessed. An OCC - c o m p a r i s o n technologies of production adopted in give results that are independent values of the components of defined with Distinctions reference (or, two of capital, to the the industries will differences because sphere as shown below, of the of variations) in the OCC production. in the values of constant and variable capital are d e t ected by the VCC, separate concept circulation. 9 that pertains to Onl y if this point is the made does it become possible to apprehend sphere absolutely Marx's is a of clear definition in ful 1: The c o m p o sition of capital twofold sense. As is value, to it is be determined proportion in w h ich it is divided into ... and variable capital u n d e rstood constant ... As material, in the process of production, all capital in by the capital as it functions is divided into means of production and living labour-power. This composition is determined by between the a relation latter the mass of the means of production employed on the one hand, and the mass of labour n e c e ssary for their employment 9 on For example: '[I]n this part of the work we also proceed from the premise that commodities are produced under normal social conditions and are sold at their values. Hence, we assume in each case that the productivity of labour remains constant. In effect, the value-c o m p o s i t i o n of a capital invested in a branch of industry, that is, a certain proportion between the.variable and constant capital, always expresses a definite degree of labour productivity. As soon, therefore, as this proportion is altered by means other than a mere change in the value of the material elements of the constant capital, or a change in wages, the p r o d u ctivity of labour must likewise undergo a corresponding change, and we shall often enough see, for this reason, that changes in the factors c, v, and s also imply changes in the productivity of l a b o u r 1 (K3, p p . 50-51). Ill the other. I call the former the value-composition, latter the technical composition of c a p i t a l . There close correlation between the two. To express call the value-c o m p o s i t i o n of capital, determined by its technical changes in the latter, (Kl, the is a this, I in so far as it is composition and mirrors the the organic composition of capital p .762)10 4.2 - THE DYNAMIC CASE It is e n t irely legitimate to ask at this point, could po s s i b l y est a b l i s h equality between the sectors w i t h the same TCCs, if the value of w h i c h values OCCs the of means production consumed per hour of labour is different case? the In what follows it will become clear static abstractions, moreover, case d i s c ussed above that, such in a dynamic environment they do the dist i n c t i o n between the OCC and two in of each while in values are exist and, VCC provides invaluable clues to an u n d e r standing of the accumulation of capital. Marx firmly believes that in capitalism there is a towards the development of Technical the techniques of tendency production. change is usually introduced in individual raising their TCCs and, consequently, their OCCs firms, and VCCs. As a result of the adoption of new technologies, these firms enjoy a higher level of generate productivity and greater mass of use values w i t h the same may labour power. the individual value of their commodities falls below social value, profits, innovative capitalists w h i c h is the object of the can whole capture a As their surplus exercise (see chapter 2). 10 Or, what amounts to the same, '[t]he o r g a n i c composition of capital is the name we give to its value composition, in so far as this is determined by its technical composition and reflects it.' (K3, p . 245; emphasis omitted). 112 Competition between firms of the same bran c h will generalise these technical advances, w h i c h reduces the value commodity and eliminates the scope for permanent of surplus profit by some capitalists Lebowitz, social 1992, 1994a, and Weeks, (Cleaver, 1981, technical change). This process subsequent diffusion of technical of mass of living labour competition innovation is processes tend to fall. 11 where ever In all of a larger this case capitals and the values of all commodities In abstract terms, it may every cycle of production the individual, social and typical an and the organic compositions of tend to rise through time, and introduction quantity of means of production into outputs. the technical 1990, in detail the an intensified expanded reproduction of capital, given the absorption 1979, discuss forces in action beneath capitalist of be said that in as well as the 12 (or the e c o n o m y - w i d e ) , TCCs and OCCs rise, and that 11 A cc o r d i n g to Fine and Harris (1979), whe n the accumulation of capital is based upon its concentration it takes the form of an extended expanded reproduction, with a constant composition of capital. In developed capitalism, where c e ntralization predominates, accumulation tends to take the form of an intensified expanded reproduction. In this case, the use of m a c h i n e r y for the production of relative surplus value brings about rises in the TCC and in the OCC. 12 In the Gru ndriss& Marx was already aware of the importance and the wide implications of this fact. D e s pite this, he had not yet defined the appropriate concepts to develop the analysis of the composition of capital, and we read in p . 389: ’if the total value of the capital remains the same, an increase in the productive force means that the constant part of capital (consisting of mac h i n e r y and material) grows relative to the variable, i.e. to the part of capital which is exchanged for living labour and forms the wage fund. This means at the same time that a smaller qu a n t i t y of labour sets a larger quantity of capital in motion' (emphasis omitted). In p . 831 we have: 'The fact that in the development of the productive powers of labour the objective conditions of labour, o b j e c t i f i e d labour, must grow relative to living labour ... appears from the standpoint of capital not in such a w a y that one of the moments of social activity objective labour - becomes the ever more powerful body of the other moment, of subjective, living labour, but rather 113 the values of all commodities fall. In other words, rise w i t h time, (inclusive of the TCC and OCC of labour power) capital-in-general and this leads the value of all commodities to fall. One must, however, level of analysis. concerned, capitals, to a or be extremely careful to As with far the as an analysis d i s t inguish individual at the the introduction of a technical change compositions. in its technical, capital level of organic its VCC tends to fall, reduction in the values of its inputs. However, increase in the value is more of the matters are quite different w ith regard to capital-in-general. level of analysis, leads and because is many innovation As time passes and the n ew technique w i d e l y adopted, the At this technical progress is synonymous w i t h technical and organic an compositions, immediately leads to a reduction in the unit value and of the of all output. As technical change p otentially modifies the values commodities, whether directly or indirectly, it can safely be concluded that the determination of the OCC and VCC in dynamic environment is contingent upon the production affect commodity way circulation. changes An w h ere exist at the beginning of the cycle ('earlier which the inputs are purchased, w h ich the output is sold Carchedi, 1984, though this is 1991, a ('later 1994, and conceptual are higher values'; Fine, the in adequate u n d e r standing of this situation can only be achieved an analysis of capital-in-general, through values that values'), than see 1990a, a at those at chapter 2, 1992). d istinction rather Even than a ... that the objective conditions of labour assume an ever more colossal independence, represented by its very extent, opposite living labour, and that social wealth confronts labour in more powerful portions as an alien and dominant p o w e r . ’ (see also p p . 388-98, 443, 707 and 746-47) 114 \ ^chronological one, it is of extreme relevance for the analysis of accumulation and the dynamics of circulation: [S]ince the circulation c ompleted in one day but period until the capital process of capital extends over a is not fairly long returns to its original great upheavals and changes take place in the the course of this period of labour and commodities, ... therefore [and] starting-point, [and] also in in the the it is quite clear, of one of ... market in productivity real that the prerequisite capital, its return at the end form these value between the and the time of periods, great c atastrophes must occur and elements of crises must gathered and develop ... The comparison of value period with the value of the same c o m modity period is no scholastic illusion fundamental capital Now, principle (T S V 2 , p . 495; w h i c h set of values the OCC and the VCC, lower? For Marx, (lower) circulation 13 emphasis omitted) variable capital, a the one later process (higher) n ew values newer of of the of the technologies elements component affect of the at the constant and or the values already t r a n sformed 13 and The OCC reflects while the VCC reflects the TCC values in is to be used in the calculation of before the value of the output, have ... but rather forms the the answer is unambiguous. parts of capital, in the older and higher or the the TCC at the initial final of of by the In the same vein, Marx says in K2, p . 185: ’If social capital value suffers a revolution in value, it can come about that his [the capitalist's] individual capital succumbs to this and is destroyed, because it cannot meet the conditions of this movement of value ... These periodic revolutions in value thus confirm what they ostensibly refute: the independence w h i c h value acquires as capital, and which is maintained and intensified t h r ough its movement ... This sequence of metamorphoses of capital in process implies the continuous comparison of the change in value brought about in the circuit w i t h the original value of the capital' (see also TSV3, p . 154, and Bologna, 1993b). 115 process of production and accumulation. measures the TCC in the values conditions of production, sphere of exchange. Therefore, determined by the and the OCC prevailing at the production, regardless of impact of production process Consequently, the reference to the process of production (see Fine, 1989, In other words, normalization, the labours in the of exchange. with (surplus) value 1990a). the OCC is determined at values prior to the synchronization and homoge n i z a t i o n applied in production, w h ile determined after these labours are NSH result, of a ccumulation of the time changes conditions it measures the results of in measures TCC on the basis of the values the VCC changing newly e stablished On the other hand, upon the (NSH) of VCC is the (see chapter 2). As a changes in the social VCC will capture the rise in the social TCC commodity values, as well as the previous fall in inclusive of those that have been used as inputs in the last production period. will tend to increase ensuing Consequently, (if it increases at all) the more VCC slowly than the social TCC and OCC: This change in the technical composition of capital is reflected in its v a l u e - c omposition by the increase the constant constituent of capital variable constituent ... However, of at the expense of its ... this change in the composition of the value of the capital, provides only an approximate indication of the change in the of its material constituents ... The composition reason with the increasing p roductivity of labour, is mass of the means of production consumed by labour increases, but their value in comparison Their value therefore with rises their mass absolutely, proportion to the increase in their mass. The social OCC, values, on the other hand, diminishes. but not in (Kl, p p . 773-74) is m e a s u r e d at 'earlier' and rises in concert wit h the 116 the simple: social TCC. In our the context of intensified expanded reproduction and centralization of capital (where, increasing as we have seen, technical progress is the main lever of accumulation), Marx points out that we may well OCC find that the TCC and faster than social capital the grow itself: [T]he development of the productivity of labour the change in the organic composition results from it, They of accumulation, develop because simple accumulation, the total of social capital, at capital the change in the technical a or the much is which composition of growth quicker a ccompanied elements, rate, by and the original in comparison between contrasting situations. two capitals at the same moment of time, labour processed determines their TCCs (Kl, distinction one of productively as was done in in the and OCCs). clarity of this distinction, 14 consumed a compares the one would contrast the value (which defines their VCCs), pr o d uction If the capital. between the OCC and the VCC can only be made by means capital the because change It is quite obvious at this stage that a prop e r first part of this chapter, of composition of the additional capital goes hand in hand w i t h a similar the constant and or the absolute expansion of centralization of its individual technical 14 p . 781) ... are things w h ich do not m e r e l y keep pace wit h the progress social wealth. even per hour of of w i t h the mass of means of same labour-time Despite the (that conceptual the values that should be used Or, from another point of view: 'Since the demand for labour is d e t e rmined not by the extent of the total capital but by its variable constituent alone, that demand falls p r o g r essively wit h the growth of the total capital, instead of rising in proportion to it, as was p r e v iously assumed. It falls relatively to the magnitude of the total capital, and at an accelerated rate, as this m a g n itude increases. With the growth of the total capital, its v a r iable constituent, the labour incorporated in it, does a d m i ttedly increase, but in a c onstantly diminishing proportion.' (Kl, p p . 781-82). 117 in c alculation of the OCC are abstractions. of c alculating the OCC in the static The case difficulty does not that it is without use as a concept, since it was in a static comparison of with capitals compositions that Marx developed, in precisely distinct Part 2 imply of organic Capital 3, his t r a n s formation of values into prices of production (see chapter 5). In a dynamic environment, this chapter, as discussed in the second part of matters are remarkably different, OCC and VCC of a capital undergoing technical calculated. and both the change can It was shown above that they diverge because the OCC is an ex ante evaluation of the value of the circulating) of labour, while the VCC is the ratio between the new value of the variable production. Thus, capital the spent and in the dynamic case, production, while end of its the the phase at c i r culation-based at production, normalized, synchronized and homogenized, w hen the VCC labours (new) values It was w i t h reference to this dynamic where the organic composition of a through time because of single technical are fall, changes that p resented his law of the tendency of the rate of of context, capital progress, is are determined and commodities are about to enter the sphere circulation. of production-based m easurement calculated post) constant last the hour (ex (circulating) in nature of the OCC is reflected in time of (fixed constant capital technically required per (paid and unpaid) and be Marx profit to in Part 3 of Capital 3 . 4.3 - CONCLUSION The use by Marx of the notions of TCC, times look ambiguous, terminological VCC may since both the OCC and the VCC the TCC in value terms. concepts have ver y OCC and However, different changes Marx 118 we have theoretical g r a d ually seen assess that roles, adopts at these and the almost certainly indicate his growing awareness of of the c omposition of capital for the the importance analysis of the accumulation process. This chapter confirms, Fine (1982, and Weeks 1983, (1981). and builds upon, 1989, 1990a, 1992), previous findings in Fine and Harris The results can be s ummarized as Marx defines the OCC as the technical variable, v a l ue-measurement means to in value terms. of the TCC the He TCC, a recognizes that a be itself, values affected as of well its the sphere of production by as by components. Since the OCC is incapable of d i s c r i minating any outside follows. the would d ifferences or changes in the TCC differences or changes in assess (1979) phenomenon (inclusive of the distinction between fixed and circulating capital and of the effects of differences or changes in the creation upon the actual level of develops the concept of VCC, between the (circulating) process c o m modity defined as of value values), the Marx value ratio constant and the variable parts of the advanced capital. In a static situation the OCC assesses that cannot be environment, the OCC is but abstractions. the However, determined (for the level of values, 'new* (ex post prevail circulation, where the a values dynamic calculable capital-in-general) ’old' and by an (ex ant© and while the VCC evaluates the TCC and lower) values of 'new values' at in these values are t h e o r etically assessment of the constant capital at the higher) TCC at the evolving passage the inputs. to the conditions of These sphere of production d etermine a ne w level of values and these are exp r e s s e d m o ney terms as the new set of prices. of The use at both in OCC and VCC as forms of assessing the TCC enable Marx to discuss the processes of capital accumulation and from the points simultaneously, of v iew of production technical and which is otherwise impossible. 119 change circulation Therefore, in spite of the difficulties arising from inability to conclude m u c h of his work, Marx's it is still possible to identify the precise meaning of the concepts of TCC, OCC and VCC and to situate them relative to the main body of his writing. Apart from d ispelling w i d e spread with regard to the m e a ning of these concepts, has also p r o vided the grounds for further misconceptions this research intrinsic connections between issues such as the of relative surplus value, the transformation chapter on production problem the law of the tendency of the rate of profit to fall, have g e n erally escaped the literature. 120 the and which 5 - ORGANIC OR VALUE C OMPOSITION OF CAPITAL? A RE-EVALUATION OF THE T R ANSFORMATION OF VALUES INTO PRICES OF PRODUCTION The t r an sformation of values into prices of production, Marx discusses in the (especially chapter 9), best-known controversies Marx, first has chapters given of rise to Capital 3 one of determined by their values alone, otherwise cannot capitals distinct organic compositions would have different rates In reality, the in political economy.'1' According to the exchange relations between commodities profit. that however, be with of competition and the possibility of mig r a t i o n from one sector to another create for the e q u a l ization of profit rates. This a is tendency achieved by the sale of commodities at prices of p r o d uction that are not proportional to values. The consequences of the transformation of values into prices of production are far-reaching, aspects of production, capitalism and (the for it performance exploitation through surplus value) w ith the external prices, profit, the expression of interest and rent, see the aims of Marx's adopted by Marx, work, and the have ensured attention of a vast array of 1 of the value relation Lipietz, centrality of the transformation, the 1984, given the extraction as writers it would of in of relative industrial between the p . 355). The structure and counter-intuitive that internal labour (the structure of surplus and revenues of the classes; links solution receive widely the different The literature on the transformation is vast; hundreds of papers, articles and books discuss this issue, from widely different points of view. There is no need nor space for a survey of these contributions here. See, however, Desai (1989, 1992), Dostaler (1978), Dostaler and Lagueux (1985), Fine (1986a), Fine and Harris (1976, 1977, 1979), Laibman (1973), Lee (1990), Mandel and Freeman (1984), M o hun (1991), Rosdolsky (1977 [1968]), Steedman (1981a), Sweezy (1968 [1942], 1949) and Yaffe (1974). 121 persuasions. The interest on this issue remains after one hundred years of Volume of Capital, the publication alive of even the third and the polemic w ith regard to the status of the p r o b l e m and the impact of the various solutions has become increasingly sophisticated. Some writers dismiss the expression of fundamental transformation p r o blem flaws in Marx's method, as and the argue that it shows that analyses based on his theory of value are doomed to [1896], 1977). failure (see, Samuelson, 1957, for example, 1971, 1973, Bohm-Bawerk, 1974, and Others blame the d ifficulty on a trivial Marx's procedure, and argue that the continuing relevance of Dumenil, 1980, and Foley, its his mistake (see, 'correction' most w r i ters have transformation, his verdict the the individual context solution. on the the adequate solution, the remaining parts of Capital, of and that it 1974). Unfortunately, m i s i n t erpreted irrespective of their example, 1982). Yet others have argued that (Yaffe, p r o blem and the nature of in indicates for Marx's a p p roach to the transformation is cogent, needs no Steedman, correction work 1949 In however, of Marx's other words, importance or its of impact the upon and regardless of the merits contributions to the debate, the discussion has often focused a problem distinct from Marx's. The contrast interpreters' a careful between Marx's approach was first pointed out by Fine (1983), in w h i c h the organic, based on organic on Capital 3 of is the pivot of the transformation. This reading is conventional the of and composition internally not reading his value, only and of The following study draws Fine's work to make an unconventional not most study of the differences between the value compositions of capital. capital and consistent, interpretations to logic of his approach. 122 but Marx's also own closer aims and than the 5.1 - SURPLUS VALUE, PROFIT, AND THE COMPOSITION OF CAPITAL The terms of Marx's transformation of values into prices 2 production are spelled out in the first part of The first issue that he tackles in this profit (n). In accordance with Capital i, Capital 3 . Volume distinction between the concepts of surplus of value surplus is the (S) and value is the value created in excess of the value of the labour power purchased; in contrast, profit is the excess of the value of the product over the value of the constant (V) capital Therefore, invested (see Dumenil, (C) and 1980, the value of the constant capital for the d e t e r mination of the surplus is value; affects the magnitude of profit (see K3, The same holds for their rates. Whilst the rate value, e = S/V, variable p p . 16-18). irrelevant however, p p . 136-39, of 144-45). surplus measures the surplus value created per of variable capital, the rate of profit cannot it account unit for the distinct role of the means of production (MP) and labour 3 power (LP) in (surplus) v a l u e - p r o d u c t i o n . The general rate 2 In this chapter, 'value' is the mon e y - e x p r e s s i o n of the labour time socially nec e s s a r y to reproduce commodities, determined prior to the transformation, and 'price' stands for price of production. B oth are measured in money. Therefore, the transformation of value into price of p roduction is a change in the form of e x p r e s s i o n of social labour in money, and not a transformation of labour time into quantities of m o n e y (as the Sraffian tradition wants; see Elson, 1979b, and Kliman and McGlone, 1988, for interesting analyses of this issue). The reader should beware of the possible confusion that is caused by the need to c o nform w i t h the current literature. 3 'Because the rate of profit measures surplus-value against the total capital and the latter is its standard, surplus-value itself appears in this w ay as having arisen from the total capital, and u n i f ormly from all parts of it at that, so that the organic distinction between constant and variable capital is obliterated in the concept of profit. In actual fact, therefore, s urplus-value denies its own origin in this, its transformed form, w h i c h is profit; it loses its character and becomes u n r e c o g n i z a b l e . ' (K3, p . 267; see also p p . 126-27 and 139-40) 123 of profit (R) measures the relative capital's ability to produce value. ( 1 'i R — value social ^ C + V where C/V is the in It is given by: ^ 1 } increase " (C/V) composition + 1 of capital (see K3, p . 161). In the sequel, the quantity, Marx considers the impact on R of changes quality and value of the inputs used the effect of variations in the rate of turnover time. surplus up, and value and In chapter eight of Capital 3 Marx notes, an important but seldom me ntioned factors that affect the general passage, rate of cause differences between the individual in in that the same profit m ay also rates of profit of capitals in distinct spheres of production: [T]he rates of profit in different spheres of that exist simultaneou sly differ if, other things alongside remaining one between the organic capitals in different branches pre v i o u s l y viewed as d istinctions between of the we now consider as capital or the investments the value of production. that will either components changes underwent in succession, another equal, turnover times of capitals invested differ, relations production these What same we capital simultaneous that exist alongside one another in different spheres of production. (K3, p . 243) Subsequently, he makes a detailed analysis of of technical, organic and value composition of capital OCC and VCC; the book, see chapter 4). This leads to chapter w h ere Marx presents the into price. the t r a n s f ormation concepts (TCC, nine of value It is essential to d i s t inguish the influence the OCC from the VCC in the rate of profit, of otherwise of it cannot be u n d e rstood w h y Marx concentrated on the OCC in the transformation. 124 5.2 - THE OCC AND THE T R ANSFORMATION PROBLEM It was seen in chapter 4 that the TCC is d e t e rmined material ratio production. of MP and LP, or the by the technology of The OCC is a value-assessment of mirrors differences or changes in the latter, discriminate production; any phenomenon because of this, the OCC are abstractions values (in the outside the values case). In TCC and does not sphere of the u sed to (in the static case) dynamic the that determine or the contrast, 'old' the VCC synthesizes the conditions of production and circulation; it is given by the assessment of the TCC of values d e t e rmined Therefore, by the at the technology of new production. the difference between OCC and VCC corresponds to the d i s t inction between differences or changes and in the values useful, because of they accumulation from the its components. allow points circulation simultaneously. the of in Both the TCC concepts are analysis view of of capital production connects this rate to the sphere of production, labour produces (surplus) value, sphere of circulation, and 4 Both the OCC and the VCC affect the rate of profit. capital set where the The OCC where living and the VCC links it to the growth of the advanced is me a s u r e d by the new values of the MP and LP. Marx describes the different impact on the rate of profit of changes in the OCC and the VCC saying: 4 'Failure to appreciate this distinction [between the OCC and the VCC] reflects a failure to u n d e rstand the complex unity of production, exchange and distr i b u t i o n ... The new levels of p roductivity are created in the sphere of production, but only become e s t a b lished as new values through the exchange of the commodities concerned. Thus the VCC is onl y formed on the basis of the complex articulation of production, exchange and distribution. The OCC, however, exists at a higher level of abstraction; it exists within the sphere of production abstracting from exchange and d i s t r i b u t i o n . 1 (Fine and Harris, 1979, p p . 60-61) 125 Fluctuations in the rate of profit that are independent of changes in either the capital's organic components or its absolute magnitude are possible only if the value of the capital advanced, whatever might be the form - or c irculating - in which it exists, If the changed circumstances mean time, rises or that ... the profit as ... much is required for the same physical capital to be reproduced, un c h anged value of m o ney falls twice or a l ternatively only half as much, fixed then given an is also expressed a c c o rdingly in twice or only half the m o n e t a r y if it involves a change in the organic c omposition of the capital, the ratio between the variable and the part of the capital, the same, rising then, share of variable rise capital with and remain relatively fall with a (because of (K3, p p . 2 3 7 - 3 8 ) 5 while a variation in the value of the MP technical a But constant if other circumstances the profit rate will relatively falling share. Thus, sum. change in another sector, say) m o d ifies the the value of the newly produced commodities and the rate 5 VCC, of Marx goes to greater lengths in K3, p p . 246-48. Taking e = 100%, he says: 'If a capital invested in sphere of production A spends only 100 in variable capital against 600 in constant, for each 700 overall, while in sphere of production B 600 is spent in variable capital and only 100 in constant, then ... [the rate of profit] w o u l d be 100/700 = 1/7 = 14 2/7% in the first case, and 600/700 = 85 5/7% in the second case ... The same result follows in fact if the technical conditions in the one sphere of p r o d uction are the same as in the other, but the value of the constant capital element is greater or less ... The d i s t i n c t i o n ... is simply this: The e q u a lisation of A and B in the second case would require no more than a change in the value of the constant capital, either in A or B, with the technical basis remaining the same; in the first case, on the other hand, the technical composition itself ... would have to be transformed in order for such an e q u a l isation to occur Capitals of the same size, or capitals of different magnitude reduced to percentages ... produce ver y different amounts of surplus-value and therefore profit, and this is because their variable portions differ according to the differing organic composition of capital in different spheres of production' (see also p p . 142-45 and TSV2, p p . 28, 383-88 and 426-27). 126 profit, the effect of a change in of simple 'labour n e c e s s a r y in production (because of technical change 'in this industry) first, is two-fold; and the quantity of second, profit the qua n t i t y it modifies (surplus) value created it changes commodity values, (see D. Harvey, in the production; the VCC and the rate of 1982). If M arx were primarily interested on the effect on the of profit of the variable capital, distinct ratios b e t ween Even though most of the the OCC shows that Marx is effect on prices of the distinct primarily capacity of the advanced capitals, of the different qnumtil £ means and in of literature (see section does not correspond to Marx's own procedure. the constant he would focus on the VCC in the approaches the p r o blem from this angle t r a n sform rate or the impact on prices of differences the value of the MP and LP, transformation. OCC it The emphasis on c o n c erned (surplus) wit h the value-creating or the impact labour 5), power on prices n e c essary to of production into the output, 0 irrespec tive of the value of the MP. Let us see why. When the OCCs are compared, MP and LP, differences in the value of and the impact of the conditions upon the rate of profit, are netted out, conditions of production are influential. the capital w i t h the lowest OCC of employs circulation and It the only the follows that relatively more 0 Ben Fine (1983, p . 522) was the first to point out this essential feature of Marx's transformation: 'Because Marx discusses the transformation p r oblem in terms of the organic c o m p osition he is concerned with the following problem: what is the effect on prices of differences across sectors in the quantities of raw materials worked up into commodities irrespective of the value of those raw materials? The tr ansformation problem as traditionally concerned would wish to take account of differences in the values of raw materials. Usually, following on from this, account is also taken of the differences in the prices of raw materials (which differ from the differing values).' Fine concluded (p.523) that 'Marx did not get w r ong the problem that posed, although it differs from the one w h i c h he is presumed to have failed to solve.' Rubin (1975 [1928], chapter 18) has a similar approach to the problem. 127 workers, produces more surplus value, profit rate, regardless of the and has commodity the produced. analysis of the rate of profit through the O CC is for two reasons; surplus value p erformed first, and in because profit it firmly pins down production, which to Caffentzis, 1993, and Fine, 1985-86, and of labour substantiates rent) are m e r e l y shares of the surplus value The source unpaid (industrial profit, 7 important the arguments that machines do not create value, different forms of profit highest Marx's that the interest and produced Shamsavari, (see 1991, p p . 85-86). Second, it connects the concepts being introduced analysis (rate of profit, surplus value, production, analytical the distribution of into the labour and and price of production) w i t h the that houses the reconstruction of essential sphere elements capitalism. These for of the categories cannot be grounded upon circulation or d i s t ribution because, according to Marx, these spheres important, and express in a distorted determined in production Pilling, are relatively manner (see chapter 1, GR, the less concepts p p . 85-108, and 1980). In the aftermath, Marx illustrates how the general profit is formed, and determined, through how a the prices comparison of rate of production five capitals of are with distinct OCCs. 5.3 - FROM VALUES TO PRICES OF PRODUCTION It is w e l l - k n o w n that, in the with five capitals w o r t h £100. 7 'When the rate of s u rplus-value capital, that is capital of given p . 376) transformation, Because of Marx their works distinct of surplus-value ... is given, the amount depends on the organic c omposition of the to say, on the number of workers w h ich a value, for instance £100, employs.' (TSV2, 128 OCCs, these capitals have different profit rates. From the calculated/ and from this average Marx derives the prices of production. In individual rates of profit an spite of its importance, average is the reason w h y Marx of £100 in the transformation has escaped uses the capitals literature; this has p r o b a b l y been attributed to c o n v e nience or ease exposition However, (see, as Marx for is example, Catephores, interested in the 1989, OCC, of p . 88). this is a n&cG&siiy: [T]he organic composition of capital considered in percentage terms. composition of a capital constant and o n e - fifth formula 80c + 20v. We ... express that consists variable (K3, p . 254, must the of capital organic four-fifths by using the trivial assertion that 1/5 is equal to 20%? Because once capitals are 70c+30v, 80c+20v, in the transf o r m a t i o n and elsewhere), etc., As a result, index of the quantity of variable simple put w h ich he does at becomes an capital labour power purchased, value created K3, there is 146, 243-46). In addition, relation between the labour put in motion, output and p recisely the what rate of profit Marx wants the differing (see to of is placed labour performed and value and surplus p p . 137, in the ratio of means production to labour power per unit of capital the forefront. the emphasis added) Why should Marx bother himself with percent form (60c+40v, be a (see direct the value of below), e m p h asize w h ich in the is the transformation: As a result of organic compositions of capitals applied in different branches of production, as a result therefore of the circumstance that according to the different percentage that the variable part forms in a total capital of a given size, ver y different of labour are set in motion by capitals of equal too very different amounts a p propriated by these capitals, 129 of surplus amounts size, labour so are or very different amounts of surplus-value are produced by them. The rates of profit p revailing in the different branches of production are a ccordingly originally ver y different. Therefore, (K3, Marx uses the percent form in the transformation because this is a simple way to represent the OCC, the difficulties and chapter 4). approach. capital intrinsic to its m easurement Let us see what is the p . 257) and avoid (see section 2 impact of The value of the commodities p r o duced by this the ith is: (2 ) u x1 . = c1 . + 1v . + 1s . =1k . +1 s . where fj is the vector of (lxn) vector of commodity values, quantities produced, (k = c + v ) . The variable capital (3) v. v 1 where v is and k x the the cost (nxl) price is: = vL. 1 the value of labour power and L the quantity labour power purchased; in the aggregate, the total value produced in the economy V = (M = m x If ), the M of is total surplus value is: S = M - (C + V) = M ~ (4) where S = (■*?■■ ■ 7 -L m = wo r k i n g - h o u r (M-C)/L (MEWH), is the or the (C+ vL) => v) L = (m - v) m o n etary value L equivalent p r o duced per of hour the of g abstract labour (see chapters 2 and 6). g Before the transformation, the MEWH can also be defined as the q u a ntity of abstract labour n e c e ssary to produce a unit of the m o n e y - c o m m o d i t y (see Foley, 1982, and Mohun, 1993). 130 If the capital advanced in each sector (k. a djusted to the percent form and called k * (k = c. + v.) * is = £100), the output, the a djusted value of the product is: ( 2 1) V / jux* = k? +1 s* = k* + v(m - v) ' L*i ^ 1 1 where x , s and L are, respectively, surplus value and the labour power purchased a dvanced capital (in a djusted output, surplus value and labour ( 2 1)shows what follows, (1), (2') and product, per are £100 called power). Li, of the Equation is an index ^x*. Moreover, from (4), (m r (5) Thus, they that the adjusted labour power, of the adjusted value of the the v) L. ----- - = the adjusted labour power is adjusted rate of profit, also as Marx wanted. an index of the Therefore, for two capitals i and j. The adjusted average rate of profit is: _ (6 ) R* = * E s.i Z * s. 1 nk‘ (c* + V*) where n is the number of capitals p is the (lxn) price vector, production are given by: 131 (m - v) L' i* nk (in M a rx's case, the adjusted five). prices If of (7) * s. k' * Pxi = k (1 + R*) 1 = nk' Therefore, the total product of every capital has the same g adjusted price of production. These prices reflect the competition between capitals in different branches, predicated upon the p o s s i bility of capital that mig r a t i o n (see chapter 6). They are such that the average capital of branch has the same profit rate; capitals are connected as parts of because the of whole, every this, and p p . 258, all profit becomes a d i v idend drawn from the social surplus value K3, is (see 298-99). iH* From (7) and the definition of k , the total P , is equal to the total adjusted value, (8) M adjusted price, : P* = nk* + S* = C* + V* + S* = M* By definition, the adjusted profit, fix , is the adjusted price minus the adjusted cost price: (9) V } nx*1 =* px* - k* 1 From (8) and (9), the total adjusted profit, n & , is equal to the total adjusted surplus value: n* (10) The aggregate = P* - nk* = S* equalities (8) and (10) u n d e rstood as two independent conditions, and the same levels): profit (albeit influential at should not be for they are one distinct total price is equal to total value is equal to total surplus value. 9 analytical because Whilst the total latter See K3, p . 264. This conc lusion holds as long as the sum of variable plus circulating constant capital is equal in all sectors. This p r e s u mption is not essential for the results of the analysis. 132 holds because profit is nothing Rvalue, the former shows that jvalue. In other words, but price redistributed is merely surplus a form the equalities express the fact value is created in production and not profit is a form of surplus value. exchange, abstraction from the value of the inputs and the m o n e y - c o m m o d i t y (see section 4), be u n d e rstood in the conceptual, the and not algebraic, and sense The convenient, is value because reveals the effect of the distinct OCCs on the profit However, because it equalizes all capitals to £100, this (even the modifies are unaltered), A quantities produced to x ^ . Consequently, of the product, rates mx *, m ay be different and the calculate adjusted data, unless the the price vector, technologies given - w h i c h Marx declines to do. of p, the value original, and M* may be different from M. Because of this, impossible to though the adjusted from it rate. form changes the average rate of profit to R individual of that surplus price and profit. form the value wit h their own forms of appearance, (percent) that these equalities should they express the relation between value adjusted that and Because of this, of it is from the production are 10 'In our previous illustration of the formation of the general rate of profit, every capital in every sphere of production was taken as 100, and we did this in order to make clear the percentage differences in the rates of profit and hence also the differences in the values of the commodities that are produced by capitals of equal size. It should be understood, however, that the actual masses of s urplus-value that are produced in each particular sphere of production depend on the magnitude of the capitals applied, since the composition of capital is given in each of these given spheres of production. Yet the particular rate of profit in an individual sphere of production is not affected by w h e ther a capital of 100, m. x 100, or xm. x 100 is applied ... [I]t is evident that the average profit per 100 units of social capital, and hence the average or general rate of profit, will vary greatly according to the respective magnitudes of the capitals invested in the various s p h e r e s . ' (K 3 , p p . 261-62) 133 Since the percent form is necessary to assess the OCC, as it precludes the calculation of actual prices, be argued that Marx's primary it objective and cannot in the transformation is to devise a method for the calculation of the price vector, given the value of the means of production and labour power. Even though some (especially those in the Bortkiewicz tradition) m a y find this d i s a p pointing or worse, it is h a rdly surprising: the issue in the transformation not the calculation of unit prices, but the claim that price is a more complex form of expression of social value, 1992). labour for it takes into account the d istribution of and surplus value across the economy (see ensuing controversy, important for another reason: than labour Baumol, The input values are irrelevant to this end. light of the is M a r x ’s 1974, In the objectives are they can be fulfilled only the t r a n s formation starts from differences in the OCC, if and not the turnover times or the VCC. As the change in the level of abstraction in and the d i f f erence between value and price upon the distinct OCCs, that it follows average OCC produces commodities whose value; if the OCC is greater price is also p p . 263-64). value In addition, vector (Pasinetti, result). greater if the 1977, From ( 2 1) and a than a absorb Sraffian predicated equals with their average, the the analysis capital than the price vector is workers has are price (smaller) (smaller) the value the (K3, equal to whole product p r e s e ntation of the this (7): L* (11) (p - fu) x ± = (m - i>) (L* - — One p r oblem remains to be addressed: the value of the inputs. 134 the ) t r ansformation of 5.4 - THE TRANSFORMATION OF INPUT VALUES Marx abstracts from the input values in for two reasons; first, the transformation because they are irrelevant for analysis of the relation between surplus v a lue (as the seen above); t r a n s formation of second, input because and output In this case, only two opposed and profit simultaneous values undetectable the process of distribution of and would make surplus apparently value. unrelated systems, one mea s u r e d in values and the other in prices, visible. Price and profit cannot be assessed in the and value and surplus value are meaningless However, does, the in the if the value of the MP is a b s t racted from, are former, latter. as Marx the dic h o t o m y is brok e n and the change in the level of abstraction can be 'seen*, through the d i s l ocation of surplus value across the branches. In other words, the a bstraction from the shows the d i s t r ibution of surplus value de t e r m i n a t i o n of prices of production, v a lue and of the irrespective the MP ensuing of the systematic m o d i f i c a t i o n of the exchange ratios brought about by the transformation. In addition, it nets out of the tr a n s f o r m a t i o n of the value of the the effect money-commodity, that complicates further the relationship between values and 12 prices, and tends to obscure the concepts being introduced. 'When this moment of difference ("competition") is incorporated, the simple unity of cost price gives w ay to the complex unity - i n - d i f f e r e n c e of production prices [The transformation] captures the structural tendency for each unit of capital to receive a profit me a s u r e d as a function of total investment (c+v), and not by the amount of surplus value it has itself produced (a function of v alone). As a result the rate of profit is categorized on this stage as equal across the different units of productive capital.' (Smith, 1990, p p . 166-67) 12 See K3, p . 142. M a r x ’s abstraction from the transformation of the value of the m o n e y - c o m m o d i t y is another reason why actual prices cannot be calculated from his transformation tables (see Mattick, Jr., 1991-92, p p . 51-52). Lack of un d e r standing of this feature of Marx's a p p roach distorts the results of procedures that follow Bortkiewicz (1949 [1907], 1952 [1906-07]) and Sweezy (1968 [1942], esp. 135 This implies that the age-old objection that t r ansformation is wrong because he failed to value of the inputs is inapposite the value of the MP is their (changing) level in the is not influential Because it separates cause from effect, adequate for the derivation production. of Once this concept the is For, if in the result. Marx ' s procedure concept of price the p r o d uction out entirely on the basis of price. the transformation, introduced, reaches a m ore complex level, where OCC is superseded and the prices transform (see section 5). immaterial Marx's of analysis is carried realm of the (no longer values) of the there are two reasons why MP and LP enter into the picture, When the is the price of the commodity m ay be different from its value: (1) because the average profit is added to the cost price of a commodity, instead of the s u rplus-value contained in it; (2) because the price of production of a diverges in this way from its value enters as an into the cost price of that a commodity divergence other from the commodities, value of element w h ich the means means production consumed may already be contained in the price, that of cost quite apart from the divergence that may arise for the commodity itself from the average profit and surplus-value. d ifference (K3, between 13 p p . 308-09) the p p . 121-22). For a critique, see Mandel (1984), RodriguezHerrera (1994) and Yaffe (1974). 13 By the same token the cost price, pre v i o u s l y equal to the value of the inputs, is now their price: 'It was originally assumed that the cost price of a c o m m odity equalled the ualue of the commodities consumed in its production. But ... [as] the price of production of a commodity can diverge from its value, so the cost price of a commodity, in w h ich the price of production of others commodities is involved, can also stand above or below the portion of its total value that is formed by the value of the means of production going into it. It is n e c essary to bear in m i n d this modified significance of the cost price, and therefore to bear in mind too that if the cost price of a c o m m odity is equated w i t h the value of the means of p r o d uction used up in 136 This change in the point of view, from the conceptual derivation of price to the study of the e c o n o m y at the level of price, leads to the further d etermination of the concept 14 of price of production. Whilst the d e r i vation of price departs from the distribution of the surplus value produced, in a bstraction from the value of the MP c alculation of the price vector involves the of the inputs and the p p . 259-65, (price-) 308-09 and 990-92). rate of and current profit By the same token, surfaces as the ratio between the price of the wage bill. Therefore, Marx's method involves progressive t r ansformation of some concepts also gradual LP, MP not the price (see K3, the VCC and the only the into others, but shifts in the content of each concept, nec e s s a r y to accommodate the evolution of the whenever 15 analysis. producing it, it is always possible to go w r o n g . ’ (K3, p p . 264-65; see also p p . 1008-10, TSV3, p p . 167-68, Mattick, Jr., 1991-92, p p . 47-51, Moseley, 1993b, p . 168, and Yaffe, 1974, p . 46). 14 'It is of the essence of dialectical theories that simple and abstract determinations (prices proportional to values) lead to more complex and concrete ones (prices that are not so proportional) that cannot be simply reduced to the former. A theory can hardly be said to have refuted itself when it does what it sets out to d o l ' (Smith, 1990, p . 167). The (changing) meaning of concepts in dialectical theory is discussed in chapter 1; see also Arthur (n.d.), Engels' Preface to K3, Murr a y (1988, 1993), Shamsavari (1991), and Smith (1990, 1993a, 1993b). 15 The concepts of price of production and general rate of profit are mo d i f i e d again when Marx discusses commercial capital: 'Commercial capital thus contributes to the formation of the general rate of profit according to the proportion it forms in the total capital ... We thus obtain a stricter a n d more accurate defin iti on of the production price. By price of production we still understand, as before, the price of the commodity as equal to its cost (i.e. the value of the constant and variable capital it contains) plus the average profit on this. But this average profit is n ow determined differently. It is d etermined by the ... total productive and commercial capital together ... The real value or production price of the total commodity capital is therefore k + p+m (where m is commercial profit). The price of production, i.e. the price at w h ich the industrial capitalist sells as such, is therefore less than the real p roduction price of the commodity; or, if we 137 Having done this, Marx can claim that his price of production is: the same thing that A d a m Ricardo Smith 'price of production' and the Physiocrats 'prix calls or 'natural 'cost necessaire', these people explained the difference p r o d uction and value. of We call production', though b e t ween it the price of each p a r t icular u nderstand w h y deter m i n a t i o n reproduction sphere those of of of economists commodity value price of of We supply, can who by always speak of prices of production of commodities, production. very none production because in the long term it is the condition the condition for the p r i c e ’, in also oppose the labour-time as centres around w h i c h market prices fluctuate. They can allow themselves this production already because the price of completely externalized and prima facie of commodity value, a form that and is therefore present in is irrational appears the in vulgar economist. (K3, p . 300; see also form competition consciousness vulgar c a p i t a l i s t •and consequently also in a that p . 268 of the of the and Kl, p p . 678-79) Therefore, first, the impact of the it explains why market d e t e rmined by the labour reproduce the commodities; form of social labour. t r ansformation is exchanges not time second, are socially Capital, necessary The merit of Marx's approach is lend itself to the immediate prices or the general directly rate of profit. even though calculation In the Marx's procedure is important b e cause further the reconstruction in to it shows that price is it accounts for bot h aspects of the problem, does not two-fold; thought of the of context it a that it unit of develops capitalist consider all commodities together, the price at w h ich the industrial capitalist class sells them is less than their value ... In future we shall keep the e x p r ession "price of production" for the more exact sense just d e v e l o p e d . ' (K3, p p . 398-99; emphasis added) 138 economy, ' alone and substantiates the (and not the virtual ,of the means of production) In contrast, claim living labour labour represented by the values creates that (surplus) approaches that argue that input values be taken into account from the start, and that be t ransformed w i t h the output values, roles of living and virtual value, and can hardly machines in production that the labour in distinguish they the production between it is indicative of the in 6). It rigour the and follows of Marx's value profit in the labour in of is not a defect; Marx locates the of the workers inputs and the money-commodity, performance should conflate (see chapters 2 and By abstracting from changes should often 'non-transformation of the inputs' on the contrary, method. value. of the source production, and carefully builds the conditions in w h i c h circulation m ay brought safely into the analysis and add p o s i tively of be to its of the has two development. 5.5 - CONCLUSION This chapter has shown that Marx's transformation of value into price distinct stages. In the first, p resentation of production differences in the the of the means of production are abstracted from, to highlight the principle involved; that value alone. the greater is the variable part Because of this, the advanced capital, averaging out of the higher is these rates is value the different from values. profit distributes according to the size of each capital, 16 produced by labour rate. surplus of The value and this forms prices In the second stage, the economy is analysed at the level of prices; all commodities are sold at price, are and the input prices 16 taken into account. In the terms introduced in chapter 2, the transformation corresponds to a m o d i f ication in the process of h o m o g e nization of labour, but it does not affect the n o r m a lization or synchronization. 139 Therefore, the t r ansformation d e t e r mination in the form of social leads to a greater labour, and explains the d i stribution of labour and surplus value across the (Himmelweit and Mohun, one of distribution, Goode, 1973, 1981, rightly argue that the issue is as opposed to redistribution; D. Harvey, 1982, p . 68, and Salama, The use of the organic composition of capital to dist i n g u i s h these stages, because see of the process distinct from values. In that is it addition, interest lies in the conceptual price and profit, and gives not 1984). essential allows rise shows the and the to prices that Marx's relationship between labour, the prices or the rate of profit; it also 1975, identification of the cause of the transformation, d e s c ript ion economy algebraic moreover, calculation it indicates of that e qui l i b r i u m assumptions are u nwarranted in the study of 17 transformation. It follows that, even thou g h workers are e xploited the as they produce capitalist class as a whole specific divided among its commodities, (and not individual is the agent of exploitation, and members. the wit h Marx's This method, reconstr uction in thought of capitalist e c o nomy Murray, 1993a, 1988, (see p.262n23, the of the Capital 3 part of categories McGlone, Postone, 1993, evenly his of 1988, is the p . 62, p p . 133-34 and Smith, p . 41). In contrast, the use of the value c omposition of capital the tr a n s f o r m a t i o n w o uld tend to one, are reading and main Kliman and capitalists) results t ransf o r m a t i o n shows that the p resentation in consistent the in w h i c h case the appear as the external exchange value systems in conflate these stages process would relation between equilibrium, 17 collapse. one two in It in into would contrasting which the This point is aptly discussed by Baumol (1974, 1992). If Marx was interested in the calculation of an equilibrium price system values w o uld be unnecessary, given the technologies of production and demand (see chapter 2, Fine, 1983, p . 520, and Dumenil, 1983-84, p p . 428, 434). 140 exchange ratios are determined by the labour n e c essary to produce the commodities, equal (price-) Gerstein, rate of 1976, profit Kliman and time and another prevails McGlone, (see 1988, 1 9 9 3 b ) . Because of the arbitrary separation its form of appearance, irrational the and Shamsavari, and value (see 1980, Moseley, value produced value chapter 6, an from to and its and its Lee, 1993, 1987). The vast m a j o r i t y of the literature t r ansformation through the VCC. wrong, Fine, of and/or between surplus form of appearance as profit p . 470, where this approach tends to give rise relations between expressi on as price, socially has investigated the Whilst this is not in itself and m ay lead to important theoretical developments, this a p p roach has no immediate implications w i t h respect to Marx's t r ansformation problem. to The different solutions which this approach has led can be disti n g u i s h e d from each other by that they the contemplate, (necessarily partial) processes the relations that are put to and the treatment which is given to them the (in forefront, other the nature and form of the n ormalization c o n d ition words, adopted, the use of interactions or simultaneous equations, etc; Desai, 1991-92). 1989, Fine, Because of this, literature and Mattick, Jr., most transformation procedures found in the are l egitimately 1986b, see alternative claim to to Marx's; 'correct' errors they cannot the latter, in because they address different issues and have a conception of the relations between values and prices that is distinct from M a r x 's . In particular, lack of under s t a n d i n g of Marx's t r ansformation has led to the unjustified complaint that un w a r r a n t e d l y omitted the specification of the of produ ction (as in Desai, 1992) or, more did not t r a nsform the value of the inputs Bortkiewicz, 1949 Dobb, p p . 532-33, Foley, 1967, 1982, p . 44, [1907], p . 201 Dumenil, Lipietz, 1982, 141 or 1952 1980, p . 64, technologies often, (see, that Sweezy, he for example, [1906-07], p p . 8, he p . 9, 22-23, 1949, 51, p.xxiv and 1968 Hopefully, [1942], this p . 115, chapter objections are misplaced, are not the transformation, primary and has de Vroey, 1982, d e m o n strated p . 47). that these because they emphasize issues that object of and tend to obscure, n ature of his inquiry. 142 Marx's concern in rather than reveal, the the 6 - THE 'NEW APPROACH' TO THE TRANS F O R M A T I O N PROBLEM AND THE C H A NGING FACE OF THE LABOUR THEORY OF VALUE The c entury-old debate w h ich surrounds Marx's transformation of values into prices of production has, years, shifted its focus. Until the over the mid-1970s, important issue in the discussion was the which the equalities between total value and total surplus value and total attributed great importance to them, the w h ich conditions t r a n s formation any problem c o n v incingly explain away. longer pri m a r i l y concerned the total profit, hold. solution or, at this is issue. of indicates that two closely problem. connected no Several challenge now concerns the apparent abundance the least, today the debate wit h transformation Marx to which to the in price, approaches to the transformation now exist in 1 two equalities hold simultaneously. The solutions' most and they quickly became satisfy However, few circumstances and credible must last these theoretical This and 'Marxian diversity fundamental questions remain open within Marxian economics. The first is determination, the nature of value, its and its relation to price. quantitative The relevance this issue to the transformation problem is palpable, m a y be argued that each approach to the problem. first. The second question is closely highly related It concerns the method of investigation be used to answer questions like the and it transformation grounded upon a distinct perception of this former. they have been the subject X of w ith the that should Both issues In the last few renewed is complex have been exte n s i v e l y investigated in the last decades, c onsiderable advances have been made. of interest; and years much A non-exhaustive list should include Carchedi (1984, 1991), Dumenil (1980), Foley (1982), Kliman and McGlone (1988), Lipietz (1982), Mattick, Jr. (1991-92), Wolff, Roberts and Callari (1982, 1984b), Ramos-Martinez and Rodrigu e z - H e r r e r a (1994), Roberts (1987) and Yaffe (1974). 143 progress has been achieved, seems possible. addresses the It is in and a this 'new approach' major context Gerard Foley. chapter which detail are the relation previous (equilibrium) the forward that this this between Dumenil the and on future Therefore, the critique of the in most approach' with of the t r a n s f ormation 'new approach' is not the m a i n subject of attention; the c ontribution value chapter scrutinizes the positive contribution, phase problem. of the the issue In other approach' debate. chapter 'new approach' theory. 'new 5 here is, for the words, this searching for its and the means to develop it further. This chapter has eight early of the 'new from the point of view of the analysis of the transformation in on-going debates on Duncan approaches and the impact of the approach' rather, problem, considers 'new now chapter to the t r ansformation developed in the late 1970s by The issues step sections. debates The first around the outlines the transformation It broadly follows the development of B o r t k i e w i c z 's critique of Marx and the genesis of what became known as the Sraffian approach. the The second presents the basic elements of 'new a p p r o a c h 1 and shows shift in the debate. w hy marks This shift is due that the transformation is not a sense it (in w h i c h the m ain issue to problem is a qualitative the recognition in the the (i m p o s s i b i l i t y obtaining the aggregate equalities between value of p r o d uction and surplus value and equilibrium assumptions are unnecessary. and does not emphasize that the between variables, certain but the categories The most important m ain their that n a mely that issue q ualitative and price and in tr ansformation is not the quantitative relationship autonomous of profit), limitation of this approach is also pointed out, it Sraffian the between relationship own forms of competition and appearance. The third section considers the issues of p r i c e - formation in capitalism. This section price equation used in general e q u i librium 144 shows w hy the representations of Marx's theory of value , investigates the value i conception of value is inappropriate. equation. which It is underlies The argued general fourth that the equilibrium models is an inadequate representation of this concept; reasons for this failure are associated w i t h the restricted framework in w h ich e q u i l i b r i u m approaches operate. and fourth sections argue that the 'new than the traditional; in addition, The third approach' better unders t a n d i n g of the categories of the price has and they discuss the value reasons w h y general equi l i b r i u m representations of Marx's theory value are inapposite. It is concluded that their a of inability to obtain Marx's aggregate equalities is esse n t i a l l y due to the m i s r e p r e s e n t a t i o n of the concepts and the distortion of the structure of his to value theory that is intrinsic e q u i librium analyses. Sections five, six specific to the and seven evaluate the innovations 'new a p p r o a c h ' , namely the emphasis on net product and the definitions of value of m o n e y and of labour power. In these sections it is shown that, context in w h ich the 'new approach' on the gross product leads to operates, double counting. definitions of value of m o ney and value however, another are open to criticism at because they derive from a capitalism, to that fails and further the of of highlight limits shows that the shift to the departure, 'new approach' the transformation has opened the w ay for and, a u n derstanding of the labour theory of value. 145 'new' power, is approach to its most for Section This the This of brought debate The scope analysis. has in emphasis level. some summarizes the results of this chapter. value labour circulat i o n - b a s e d important characteristics development the the the eight investigation a as more qualitative a point of developed 6.1 - AN OVERVIEW OF THE EARLY DEBATES The relationship between values and prices of production may be seen in three different ways, and literature on the transformation p r oblem accordingly. 2 The first, the can extensive be organized and by far most extensive, phase of the polemic was esse n t i a l l y critical of Marx's approach. was opened by B o h m -Bawerk for his 'failure' in Capital Inspired [1907], (1949 [1896]), who to articulate the value attacked system t w ith the price system introduced in by 1952 procedure Tuga n - B a r a n o w s k y Marx developed Capital 3. Bortkiewicz (1949 [1906-07]) was also heavily critical of Marx's and, perhaps (1905), It most n o n - t r a n s f o r m a t i o n of input notoriously, values. Two of in the the irrelevance of luxury the deter m i n a t i o n of the rate of profit, his B o r t k i e w i c z 's c onclusions have become p articularly important of future developments: of and light goods the to general u n t e n a b i l i t y of Marx's two aggregate equalities. One of the most important aspects of B o r t k i e w i c z 's is that his judgement heavily on its equalities. Marx's of (in)ability Therefore, theory, Marx's they to deliver value the two relied aggregate part were criteria developed by Winternitz posited (1948), May as external This line of thought (1948), Seton of was (1957) and (several economists committed to M a r x i s m also flirted wit h this argument; 1956b, of instead of being treated as against w h ich it should be tested. others theory approach and Sweezy, see, for 1968 example, [1942]). Dobb, As it 1967, developed, B o r t k i e w i c z 's approach acquired a striking resemblance 2 Meek, with The opening shots of the discussion w ere fired in response to Engels' provocative preface to Capital 2, but they are not of interest here (see Howard and King, 1987, or 1989, chapter 2). There is no need nor space for a thorough survey of the vast literature on the trans f o r m a t i o n problem in these pages. See, however, Desai (1989, 1992), Dostaler and Lagueux (1985), Fine (1980, 1986a), Fine and Harris (1976, 1977, 1979), Laibman (1973), Lee (1990), Mandel and Freeman (1984), M o hun (1991), Rosdolsky (1977 [1968]), Steedman (1981a), Sweezy (1968 [1942], 1949) and Y a ffe (1974). 146 Leontief's input-output models. (1960) book s eemingly provided solid this The stream foundations, re-elaborated by M o r i shima others. The publication of latter, in of and (1973) and Steedman The Sraffians dropped B o r t k i e w i c z 's conclusions, of the faults in basic features technologies are of a production of flavour of correction w o uld render his it should be discarded themselves value previous critique the This result stems from the representation of Sraffians among system and Marx's popularized. derived a theory price Its from the system that incorporates variables of distribution such as the wage profit rates (the wage fixed bundle of goods, the value of this under the accepted assumption by most rate is defined as the price while the value of labour bundle). of B oth systems general analysts as 3 irrelevant for economic analysis. of value w h i c h the (1977), R i c a rdian transformation for them, was S r a ffian and alleged that Marx's value theory redundant; the with work a rticulated themes into what became known as the Marx. literature previous particular, Sraffa's (if of power are This implicitly) adequate framework for the transformation, a is constructed equilibrium. only and and it was as an suggests that the v a l i d i t y of Marx's theory hinges on the possibility of o b t aining the two systems in a logically equalities and connecting meaningful way. It was not the two difficult for the Sraffians to show that this is gen e r a l l y impossible. Those who attempted to salvage the labour theory from w i thin this model could at most provide some unconvincing) explanation for 3 the failure of of value (generally the two See chapter 2. These are the same conclusions drawn by Haberler (1966), Lerner (1972) and S a m uelson (1957, 1971, 1973, 1974). The latter openly states that '[m]y vantage point in the discussion was not neoclassical. It was Sraffian! ... What I said is exactly what Joan Robinson, no neoclassicist, has been saying all along' (Samuelson, 1973, p . 64; see also B r o n f e n b r e n n e r , 1973 and Robinson, 1966, 1973). 147 e qualities Gerstein, to hold 1976; simultaneously (see, for example, his approach is criticized by Fine, 1986b). It q u i ckly became clear to m a n y that the Sraffian attack was based on a serious misrepr e s e n t a t i o n of the concepts and the method appropriate to the labour theory of confrontation along these lines value. g r a d ually However, led to the impossibility of meaningful dialogue across the divide subsequently, the and, to the bitter collapse of the discussion. 'pessimists', impossibility of this debate 'validating' inauspicious circumstances. showed no more 4 than For the Marx's theory of value in such For the 'optimists', it opened ne w theoretical grounds. 6.2 - THE CONTEXT OF THE The disc u s s i o n around the for a few years, in transformation which a (see, 1984, and Schwartz, research for example, programmes elab o r a t i o n of the problem. This Elson, 1977a). led, to the 1979a, the Mandel to approach Foley (1982, 1983, 1984; see also 1986) Lipietz, (1980, and the not subsequent work and 1979a). draws Lipietz Their (1975 heavily these to the t r a n s f ormation a to the whole 1984), was Duncan (1982, 1983, interpretation [1928], upon of Freeman, only 1983-84, Alain value theory owes m uch to Rubin and gave theory 1970s, t r ansformation problem but to value theory as developed by Gerard Dumenil studies labour late approach* innovative of simmered The development of one of in 'new pr o b l e m succession gen e r a l i t y and more consistency value 'NEW APPROACH' 1978 of [1927]), Aglietta (1979 [1976]). This can be followed through the Bul le ti n of the Conference of Socialist E c o n o m i s t s . See also Baumol (1974, 1992), Fine and Harris (1979) and Steedman (1977, 1981a). 148 H o w e v e r , by the time the 'new approach' was developed, interest on the fundamental problems of the labour theory of value had already dwindled. This was pr o b a b l y previous hi s t o r y of the debate and to the of a g e n e ration of intellectual and due to growing political the maturity activists, whose interests g r a dually shifted away from such matters. addition, In concern over value theory had become unfashionable in the light of broader developments in economic arena. approach' the political and This m a y help us to unde r s t a n d wh y the ’new had a much cooler and more limited reception than earlier solutions, even though t h e o r e tically challenging. some of these The lack of appeal s o l u t i o n 1 m a y also be due to the mathematical some of its presentations, and to the fact of were less the 'new complexity that that lend support to Marx's conclusions are not of procedures interesting to some. The distinctive conception approach' of surfaces most clearly value t h eory through between this and previous solutions problem; first, product; second, money and, innovations, in effect, the emphasis on the net, three the 'new differences transformation and not the gross, the distinctive conception of the value third, labour power. to in the the changed definition W hen looked at of under the the value light of of of these the transformation p r o blem becomes trivial and, vanishes. Let us see why. Suppose that we know the hourly price vector p, the (nxl) gross labour inputs vector I and the 5 5 wage rate w,^ the (lxn) output vector x, the (lxn) (nxn) technical matrix It is assumed that all labours are productive, that production p e riod is un i f o r m and that wages and profits the only forms of income. 6 A of the are The wage rate is paid per unit of simple, unskilled labour power. Two simplifying assumptions are involved; that the workers are identical to one another, and that they produce equal quantities of value per hour of labour power sold. These assumptions are discussed in chapter 2; see also Lipietz (1982). 149 an economy. 7 They are not n e c e ssarily a reflex equi l i b r i u m conditions nor the prevalence of a of unique rate of profit across all sectors. Let X m be the value of mo ney (measured in hours of per pound s t e r l i n g ) . This variable is d e f ined as between the total labour performed in the price of the net product p(I - A)x, money indicates the quantity of labour unit of money, The ratio and the value represented by of the or the labour time ne c e s s a r y to add one pound sterling to the value of the [1976], the ec o n o m y or py. labour p p . 41-44, and Foley, product (see Aglietta, 1979 1982). In order to grasp the implications of the concept of value of m o n e y and the m ain features of the return to the 'flax and linen' presume a ver y simple economy, one unit of flax 'new approach', let us O example in chapter 2. Let us where the gross product (F) and one unit of linen Flax is produced by four hours of simple linen and by therefore, two all hours of labour flax is consumed p r o d uction of linen, and product of the economy. the unit (L) per labour one as an period. (1)/ unit of input of linen is is and flax; in the the net This can be represented as: 4 1 -> IF 21 + IF -> 1L It must be stressed that the flax produced in the current year will be used as an input to the pro d u c t i o n of linen in the next year; in in other words, the same period when it is the flax is not produced. It is consumed immediately 7 Matrix A is assumed indecomposable and productive in H awki n s - S i m o n terms; there are no joint products and no fixed capital. For a more general analysis, see Dumenil and Levy (1984, 1987, 1989, 1991), Ehrbar (1989) and Lipietz (1979b). g This is a development of the Glick and Ehrbar (1987). 150 'flax and linen' example in evident that the total labour performed in this ^the current p e riod is 61 and, ec o n o m y as m e n t i o n e d above, the tproduct is one unit of flax and one unit of linen, net product is one unit of linen. £6, If the linen in gross and is the sold at it follows that the value of m o n e y is: \m = 61/£6 = XI/£ In m ore general terms, the value of m o n e y is: xm _ “ ix_____ p(I - A)x The reader should beware of the fact that the value of m o ney is conceptually distinct from the v a lue of the m o n e y - c o m m o d i t y . In particular, it does not follow from the d e f i nition of value that are necessarily of money proportional to the commodity labour prices time socially ne c e s s a r y to produce the m (see below and s e c tion 6). The con c e p t i o n of value in the the fact that the total ’n e w approach' departs from labour p e r f ormed in the period (ix) is equal to the n e wly created value (Ixn) v e c t o r of c o m m odity values, (^y, where \ given by X s 1(1 - A) From this and the d e f i nition of the v a lue of m o n e y a important c o n c lusion follows: is identical to the total value of m o n e y p r o duced net d i v ided (if m is the inverse of the v a lue or the m o n e y - v a l u e added labour, the price of the v a lue then py = m \ y ) . 10 to is commodities Acc o r d i n g to the in one 'new of -1 the 9 ). h i ghly product by the money, hour of approach', 9 If \ = 1(1 - A ) - 1 , then \ y - 1(1 - A ) _ 1 (I - A)x = ix. 10 In this chapter, 'l a b o u r - v a l u e ' is the qu a n t i t y of labour socially n e c e s s a r y to produce a commodity. 'M o n e y - v a l u e ’ is the ratio be t w e e n the labour-value of a com m o d i t y and the labour-value of the money-commodity, and ’price' is the sum of m o n e y for w h i c h a c o m modity m a y be e x c h anged on the market. Thi s t e r m i nology conforms w i t h that a d o pted by the p roponents of the 'new approach' and avoids the possibility of confusion. 151 this expresses the content of Marx's eq u a l i t y between value and total price. 11 The u nderlying conception total is that the labour performed in the period creates the gross product of the e c o nomy but only the value of the net newly pro d u c e d m oney-value is allocated to in the net product as their price. Hence, of price-formation, product. the commodities whate v e r the rules Marx's first e q u ality must (the rationale for the use of the net, The always hold and not gross product in this e q u ality is discussed in section 5). Let us now proceed to the second surplus value and total profit. V, is defined as the share of equality, The value of the net between labour product total power, that is a p p r o priated by the workers, share of the capitalists and the surplus value as the 12 (thus, S = 1 - V ) . The value of labour power is the product of the value wage rate. If W is the total wage bill, W = wlx ; lx W = —c \y of money by the we have: W = ------- => Xm py 'The advantage of interpreting the value of m o ney as the ratio of aggregate labor time to aggregate m o n e y value added is that the sum of the value gained and lost by all producers in exchange will be zero. In other words, this i nterpretation of the value of m o ney corresponds to the idea that value is created in p roduction but conserved in exchange' (Foley, 1982, p . 41). The importance of the value of m o n e y in this context can be clearly grasped if one imagines that a country changes its cu r r e n c y from pounds sterling, say, to ECU. In this case the sum of prices will be modified, even though the quantity of labour performed and the total value produced remain the same. The modified value of m o n e y is a reflex of the change of the currency, and shows that one hour of labour n ow adds a different q u a ntity of m o n e y-value to the newly produ c e d commodities. 12 'If we assume that one hour of labour power sold yields one hour of labour time in production, the value of labour power will be a fraction between 0 and 1 and expresses the fraction of expended labour time the workers work "for t h e m s e l v e s , " or the fraction of labour e x p ended w h ich is "paid labour." The value of labour power is also, under the assumption that an hour of labour power yields an hour of labour time, equal to the wage share of value added.1 (Foley, 1982, p . 40; see also Dumenil, 1980, p p . 74-75). 152 vm via In the example above, W = __.j — V py £x - - If we suppose that w = £0.5/1, 6i, py = £6 workers as wages and profits. Hence, to (and price) W— and rules of revenue is equal of the net product: - py = > + -5— py capitalists wh a t e v e r the d istribution and price formation the social w + n \ m = il/£. then V = 0.5 and S = 0.5. The n e wly created value is distributed to the mone y - v a l u e and = 1 py It follows that: W PY + JL_ = v ♦ s PY as W/py s V, = S => n = mSX.y In the example, thus, n = £3. we know that W * 6 x £ 0 .5 = £3 and This is equal to the share of the py £6; money-value created per hour of labour seized by the capitalists, the mass of n ew value produced. = times It immediately follows that the shares of workers and capitalists in the net product are the same, whether they are measured in labour hours or money (see Aglietta, 1979 p p . 76, Thus, 124). exploitation, [1976], the p p . 48-49 rate of is: e = -S- = J L e V w 153 and surplus Dumenil, value, 1980, or of This ratio is determined when wages are revenues, paid. It is commodities unaffected by are the saving or hoarding (in our and use of w h i c h may include the consumption or luxuries, priced of case, wage necessaries e = S/V = 0.5/0.5 = n/W = 3/3 = 1, or 100%). The 'new approach' sees this as a m e rely redistributed surplus value. proof The that profit is (trivial) manner in wh ich Marx's two aggregate equalities are obtained Dumenil and Levy a "solution" (1991, [to the p . 362) to claim that transformation led '[rjather problem], adequate to refer here to an interpretation, has than it is more since there is 13 basically n o t hing to prove from the formal point of v i e w . ' Some writers have objected that the simplicity g e n e rality of this solution is the result definition of some key Because argue that the 'new variables. approach' fails to of the of and changed this, they produce any new insights and reduces the real problems in the transformation into a However, t a u tology (see, this is not example, the whole story. As sections 5 to 7 below, is based on a partial for Bellofiore, will this critique of the reading of Dumenil 1989). be seen 'new and in approach' Foley's work, which ignores the important contribution that their approach can offer to a non-equilibrium theory of value and, in interpretation particular to the of Marx's transformation debate. Whilst in the previous phase of this debate the was the d e t e r m i n a t i o n of the circumstances in main issue which total prices are equal to total values and total profits are equal 13 In other words, '[a]s far as the new interpretation of the t r ansformation p r o blem is concerned, the required conditions are the existence of a positive set of prices regardless of the rates of profit, g uaranteeing not necessarily uniform positive wages, and a positive aggregate price of the net output. If such conditions are fulfilled, the idea of a "transformation problem" becomes self-contradictory.' (Dumenil, 1984, p . 347; emphasis omitted) 154 to total surplus value, the 'new approach', is an advance, In fact, this is no longer in question. the two equalities always hold, given the previous state of the and this literature. the d i f f usion of this n ew pers p e c t i v e has polemic on to a new terrain, in w h ich the In led the transformation pr o b l e m does not posit a major d ifficulty for Marx's theory of value, and w h ere the development of this t h eory may be 14 freed from e q u i l i b r i u m assumptions. In what follows, it is argued that this is a significant advance u nder s t a n d i n g of the relations between Nevertheless, real the 'new approach' issue is not why product, and how the deter m i n a t i o n of the mod i f i e d defi n i t i o n of the value Marx's claims. The point values the net emphasis value of must expression of surplus value. rather than quantitative It is sense the this that the a confirm is, expression but in and e mphasized and nothing the power be values, is on money, labour that prices are nothing but forms of profit prices. The rather, that and the does not go far enough. of w h ich in two of form of qualitative, equalities should be understood. This conception of the detail in chapter circumstances in t r ansformation 5) implies which (developed in inquiries into that the two e q u a lities simult a n e o u s l y m ay be logically flawed, between certain variables and their forms These equalities are open to mathematical ver y restricted sense, because m athematics belong. production (and surplus relation appearance. is hardly able to to value w h ich and value profit) The failure of man y attempted investigations of 14 not analysis only in a capture the distinct levels of abstraction and price of of the hold because they do refer to autonomous entities but to the conceptual more the Regardless of the apparent similarity, the denial of the existence of a transformation p r o blem implicit in the 'new a p p r o a c h 1 has little in common with Steedman's (1977, p p . 14-15) argument that '[o]n the basis of certain common, reasonable assumptions it m a y be shown that ... the "transformation problem" is a pseudo-problem, a chimera1 (see b e l o w ) . 155 transformation to recognize this has frequently led conflation of these levels wit h one another The main c ontribution of the 'identity'. But a further discussion n ow has to appearance'. If step move this is from to is, still happen, and the contribution of the to that needed. 'identity' h o p efully final) phase of the t r ansformation prevail, therefore, 'equality' is the (see below). 'new approach' to shift the debate from the issue of to to a The 'form third debate 'new a p p r o a c h 1 has of of (and is to to be c arefully evaluated. 6.3 - GENERAL EQUILIBRIUM, C OMPETITION AND PRICES The a s s u mption of general e quilibrium or simple reproduction is an important feature tr a n s f ormation problem, of most solutions e s p e cially the Sraffian. eq u i l ibrium is presumed, to If the general the economy can be represented by a price e q u ation such as p = (p A + w i )(1 + r ). This equation been c o n s idered a useful depiction of the concept of has price of p r o d uction because of the u n i form rate of profit r, which allegedly expresses the results of competition. In addition, it ensures that input prices are identical to output prices, in w h i c h case Marx's alleged error of not h a ving transformed input values is avoided. Let us see how legitimate are these arguments for the use of general e q u i l i b r i u m assumptions analyses of the transforma tion problem, starting with in the uniform rate of profit. Everyone knows that profit rates are the economy. The issue is whether, not identical across given our interests, the p r e s umption that they are helps us unde r s t a n d some essential features of capitalism, grasp them. Marx, or w h e ther it for example, makes identifies two distinct kinds of competition in his work, of the same branch and between 156 it to qualitatively between capitals harder of capitals different 15 ^branches. C o m p etition between capitals of the same \is analysed in detail this is a powerful in Capital 1992). (see chapter Faster and shown that force behind the o v e r - e x ploitation of the workers and the introduction production i, where it is branch of 2, more technical Cleaver, demanding innovations 1990, and production in Lebowitz, lines, new methods of production and more advanced m a c hines ma y reduce the individual value of a commodity relative to social value and, thereby, producers. These profits are skimmed from backward grant e x c e p tionally high profits to some competitors, Therefore, its whose unit their costs competition between capitals in the relatively are higher. same branch leads to the divergence of individual profit rates. In the attention branches. first to two parts of competition This kind of Capital 3 between Marx capitals c ompetition operates shifts in his different through the (threat of) migration of individual capitals towards sectors in w h i c h the profit rates are commodities are not sold at labour-value higher. prices B e c ause of this, proportional to their (otherwise sectors w ith a lower than average organic c o m p o sition of capital would have ex c e p t i o n a l l y high profit rates). On the contrary, commodities are sold prices of p r o d uction formed on the basis of an equal rate across all sectors of 15 the economy. at profit Therefore, 'What competition w i thin the same sphere of production brings about, is the d etermination of the value of the c ommodity in a given sphere by the average labour-time required in it, i.e., the creation of the market-value. What competition between the different spheres of production brings about is the creation of the same general rate of profit in the different spheres through the levelling out of the different market-values into ... [prices of production] that are different from the actual market-values. C o m p etition in this second instance by no means tends to assimilate the prices of the commodities to their values, but on the contrary, to reduce their values to [prices of production] that differ from these values' (TSV2, p . 208, emphasis omitted; see also p p . 206-07, and Burkett, 1986, 1991; for a different opinion, see Heinrich, 1989). 157 competition between capitals of different branches leads to the ©cjoia Iiza t ion of profit rates across the economy. Marx's theory of value is a dialectical theory, recognizes that the contradictory forces put these two kinds complexity. of competition Therefore, have w i thin unre l e n t i n g motion by distinct levels of sectors e c o nomy is m o n o p o lization (in w h ich obliterated) ever-growing disparity of profit rates the in they cannot be added to give either a un i form rate of profit across the competition that of case or an (which would lead all sectors to of the e c o n o m y ) . The most important aspect of this analysis is that it captures the complex, conflicting and dynamic tendencies beneath capitalist competition. In contrast, the assumption that prices are basis of the uniform rate of profit progress from the picture and, formed eliminates with it, the on technical p o s s i bility c o nceptualising these real contradictions. In the ability processes to understand the competition and technical change important advantages economic theory), price system circumstances, of Marx's general that complex approach in it is for equilibrium, over certain vector; because This felt adequate solution to the transformation had to against the two (external) criterion of bargain that be of prices and the sum of profits, equilibrium, reproduction, the restrictive In conditions they were identified wit h the state w h i c h Marx analyses e xtensively in two volumes of Capital (see D e s a i , 1992, clear argument for this p r o c e d u r e ) . 158 for a probed the a price equation p = (pA+wl)(l+r) was considered a necessity. an aggregate As this involved the need to determine legitimise a this vector brings w i t h it the sought who to most offers has been considered acceptable by many, equalities. behind (restrictive) for identity between input and output prices. the for m a i n stream analysis deliver a determinate price of exchange (which are one of the equilibrium can, the sum such an of as attempt general of the simple first particularly More generally, the equation p = (pA+wl)(l+r) was introduced into the analysis conflated the of t r a n s f ormation issues that concerned interested Sraffa of changes the (1960): Marx writers wit h the e q u ation that effects Because of the Sraffa uses a price who those the investigation of in d i s t r ibution on prices. of his concerns, by nature tailored to impose e q u i l i b r i u m and preclude technical c h a n g e . ^ Moreover, he feels no n eed to consider how technologies are determined and why they change, to peer into the origin of the surplus, or to inner analyse capitalist society. production in process, the nature However, of class these limitations Sraffa's system resemble while capital can hardly be c ollection of use values. p roduction is either assumed a purely d e f ined away or developed in some of the best-known Sraffianism, Fine and Harris, for example, and Shaikh, 1982, This analytical context where the social and 1984; is pro d u c t i o n are heavily emphasized. he shows conditions that, for despite value the 1991). general that S raffa-based ones (see models Fine, and, 1982). distributional struggle X6 is much Marx's, capitalist in Capital themselves Carchedi, but less t are 1984, basis particularly, class struggle in producti on extensively, of of Marx of Rowthorn, from are (see is 1984). This conclusion cannot be justified on the equi l i b r i u m the technologies they value upon of critiques For example, fact a aspect 1979, aspects creation, determined through the law of Marxian distinct historical as (this argument see also Farjoun, clearly technical p r o j ected distribution in make except As a result, the social sphere of immediate interest, 1974, conflicts also his of of discusses analysis developed, in S raffa (1960, p . 3) defines prices as 'a unique set of e x c h a n ge-values which if adopted by the market restores the original d i stribution of the products and makes it possible for the process to be repeated; such values spring directly from the methods of production.' (see Harcourt, 1972, and Nell, 1967) 159 contrast w i t h Sraffa's. it unimportant, This is not because Marx considered but because it is more complex and concrete; it w o uld have been considered later, had he been able to fulfill his p l a n s . ^ Therefore, the use of a price equation d e r ived in the analysis of several reasons the transformation (of course, this does is Sraffa m i s l eading not equation should be rejected in general). from for mean that this First, Marx does not discuss the transformation in the context of equilibrium or simple reproduction, upon the equality and his own p r o blem does not between input and output imposed identity between them is therefore unwarranted, for it eliminates one of the dynamics in capitalism, the technical Marx's analysis of prices. The unne c e s s a r y and main the production are transformation, other the use of Sraffa's price than involved. e q u ation Third, subject of Marx's transformation is not the calculation on the contrary, as is the case in e q u i l i b r i u m Marx's of value In of approaches; is and that price is a form (see chapter 5). In addition, the e q u i librium assumption has implications another order: in equilibrium, the q ualitative relations determination between the variables are lost 1984). the the main intention is to show that profit are m e r e l y a form of surplus value, to requires knowledge of the technologies of production. values or prices, of Second, irrelevant distinct organic compositions of the capitals contrast, sources competition inside branches. conditions of depend (see of of Freeman, Systems of equations such as the S r a ffian do not have a clear internal structure, and they can h a r d l y reflect the See Lebowitz (1992), Campbell (1993) and Naples (1989). For Marx, the essence of contemporary social relations lies not in struggles for consumption goods but in capitalist control of p r o d uction and, because of that, of workers' lives: 'Forced labour rather than low wages, alienation of labour rather than alienation of the product of labour are, according to Marx, the essence of capitalist exploitation’ (Medio, 1977, p . 384). 160 distinct levels of abstraction w h ich M a r x ’s theory of uses to reconstruct the appearance (see Murray, relationship 1988, 1 9 9 3 b ) . Hence, general conceive transformation the 1993, b e t ween essence and Smith, e q u i l ibrium as and 1990, 1993a, can hardly approaches except value the attempted c o nstruction of a mathematical correlation between otherwise autonomous systems. connection arbitrary. price and value ('transformation') 18 system 'transformed' s ystem has equations, and the (see Kliman two degrees price and of in McGlone, freedom to be between w h ich 1988). it The (because the is price has n but n+2 unknowns, the n Therefore, while the (provided that the matrix the price equation can only be solved if other assumptions are introduced, such as the the value of labour power with the value of a of goods bound the it prices and the wage and profit rates). value system can usually be solved result, o pposition system one for each commodity, A is well-behaved), a between them is This is a result of the m i s l eading value As identity fixed (while the wage is the price of this bundle), of bundle plus some n o r m a l i z a t i o n condition such as one of Marx's aggregate equalities. shows that However, the the solution of this other aggregate system e q u ality is generally not also possible. 18 'Rather than justifying the concept of value on the basis of the results to w h ich it loads in price or distribution theory, Marx w i s h e d to demonstrate that value is a concept that has itself to be explained in terms of its c o rrespondence to relations that exist in the real world. The relevant questions are what is value and w hy does it exist, for in contrast to prices, for example, values are not a simple observational fact of ev e r y d a y life. Goods in a shop w i n d o w have their prices displayed to the world, the same cannot and could not be true for their value. Consequently, there is a certain methodological inconsistency when prices and values are introduced s i m u l taneously at the outset into an analysis of the relationship between them. For the two concepts have a different status, one requires justification for its existence, the other does not.' (Fine, 1980, p . 123; see also p. 125, and Kliman and McGlone, 1988). 161 There is surely one major difficulty wit h this it lies in the model and not M a r x ’s t h eory but one and not independent prices equal total values is that total profit equals total Unfortunately, inability represent of a d e q uately investigate, the complex reason many analysts disregarded general the the For total built-in same; value. why surplus value. the and of Marx was adamant that these equalities are conditions, result, equilibrium concepts which the models to want to they and ignored the problems of trying to represent internal structure of Marx's t h e o r y of value this context. Because of this Marx's e q u i librium models w h ich theory, improperly in and not the represented it, was analyses are blamed for the inconsistent results obtained. The anomalous results reached by discussed in a vast literature. equilibrium Because of their representation of Marx's theory of value and, the conf l a t i o n Sraffa's, of Marx' s transformation m isleading particularly, problem wit h several elements of Marx's m e thod and some of most important conclusions have been This is the case with his input values, the attribution of value rate of profit as 'unwarranted’ capitalism, 'error' stature and so on (see most of the literature indications that the be wrong. transformed 'undue i m p o r t a n c e 1 values to the in Steedman, has to of not h a v i n g opposed of d e emed been 1977). blind transformation to the rate, the analysis of price the is to his In addition, Marx's caused by clear the differing organic, and not value, compositions of capitals 19 in different sectors. To sum up, n e i ther Sraffa's concerns 19 See chapters 4 and 5. Most of the literature conflates the organic and value compositions of capital when discussing the t r a n s formation problem, and speaks of the former while working with the latter. However, there are telling exceptions. For example, Steedman (1977, p . 37) says that 'In [Capital] Volu m e III Marx turned to the ... question of how the profit rate and produc tion prices are determined when the value c omp osi tio n of capita.I differs b e t w e e n industries and c o n s e q u e n t l y commodities do not exchange at value' (emphasis added). Glick and Ehrbar (1987, p . 296), in their 162 nor his m e thod can be easily made 'either in general \ ^specifically, the or in above compatible the w ith M a r x ’s, transformation. discussion has More shown that p = ( p A + w i )(1 + r ) does not represent either Marx's perception of price formation nor his concerns in the analysis transformation. The difficulties aside, 'new 1982, rightly and obtains the two need to presume general Lipietz, approach' e q u i librium greatest merits, the sets these 'identities' with no (the 1983 are more limited). of formulations of its and it is against this b ackground that the a lternative perspective of the This 'new is one in approach1 should be evaluated. 6.4 - VALUE AND GENERAL E Q U I LIBRIUM The standard representation of commodity values, _ I equation X. = 1(1 - A) , is closely related assumption of general equilibrium. through the w ith This is not because it is valid only under these restrictive circumstances but, more seriously, adequately, because it does not with the living A must techniques of production, abstract labour. The I value labour vector reflect and the values the has be d etermination technologies of production requires the all commodities according to use value; of of values, the a average vector the this will is to the of social classification the various sectors into w h ich the economy its If socially to of n e c e ssary (see chapter 2). above e q u ation is to represent the matrix of (abstract) transform them into the final good technical represent rather although in e quilibrium it seems to do this. The value of a commodity is the sum inputs the of determine divided and careful argument for the 'new approach', also claim that the problem is due to distinct VCCs of capitals in different branches. This issue was first raised by Fine (1983); see also Fine (1989, 1990a), Fine and Harris (1979), Saad Filho (1993b) and Weeks (1981). 163 lead to the normal i z a t i o n of the labours applied. to Marx, the d e t e r mination of the c ommodity involves the According value of each kind out of the distinct averaging technologies of p r o d uction adopted in individual firms. of This is what determines the matrix A and the labour time socially n ecessary to transform a (socially into a d e t e rminate output, vector given) mass of inputs that should be represented by the I. However, the labour time represented abstract labour applied in production, value added; it is (physiologically) between merely the n e c e ssary in ' t e c h n i c a l 1 or nor labour I time not the quantum of 'technically' The labour physiological is the production. physiological labour is the following: by difference and abstract labour expresses the formless e x p e n diture of human energy n e c e s s a r y to transform given inputs into a p redetermined output. it merely q u a n t itative measure it ignores, the differences in skill w h ich make distinct sectors produce diverse hour of labour Therefore, labour A into among other workers quantities is things, employed of value tables of the of hours of 'technically' n e c e s s a r y to t r a n sform the elements of gross output by x. economy, the The the from vector labour is not given 'technically' in per while the matrix A can be ar g u a b l y inferred the a (see chapter 2). the input-output abstract Because number of process which nec e s s a r y labour w ith abstract labour relates is the c o nfrontation of the distinct kinds of c ommodities wit h each other in the market, through their e q u a l i z a t i o n as measure of value (see chapter 3). Because values are d etermined only through with the money relation between commodities wit h each other by means of money, can only become known through prices. However, imply that prices actually determine values sense), nor that values d e t e rmined by technology. and Rather, 164 prices are they this does not (in the logical independently this see m i n g l y paradoxical result is due to the fact that the logic of value is one essence and not of appearance. through the ideal e q u a lization between commodities and m o n e y and in the form of price. It only appears of 20 General e q u i l i b r i u m formulations of Marx's t h e o r y conflate the labour time 'technically' each kind of c o m modity with its value. of n e c e s s a r y to produce This is to due a s s u mption that all workers are identical w i t h one require, supply and demand, this case the I together with w h ich obviously they become equal to - c onceptually the same as - the the although abstract n ec e s s a r y to produce each commodity. (if equality must the another, an a ssumption w h ich systems such as these us u a l l y implicitly) value only between presume. they are labour In not directly The reasons behind the dif f i c u l t y of general equi l i b r i u m approaches to capture the concept of value have been (1983, aptly summarized by Ganssmann p . 301): the simple d e t e r mination of those dimensions of p aired concepts of complex labour) universal value abstract n e c e s s a r y labour. of (i.e., p r o blem and can govern prices identity the object of the values disregarding opened concrete, o nly in private-individual the capitalist the simple and a state and To assume such an identity inquiry, by of socially ... destroys economy, which cannot be understood without p r e s u pposing disequilibrium, or, more exactly, nonidentity Benetti, of without private and 1974 and Ganssmann, p r e s u pposing social labour a central (see also 1981) 20 The e ssence must appear. However, it 'is constrained by its o w n inadequacy to a p p e a r ; it must appear as something other than itself, because it harbors within itself an u n r e c onc iled contradiction between immediacy and reflection.' (Murray, 1988, p . 159; see also Himmelweit and Mohun, 1981, Kay, 1979, Mohun, 1991, Moseley, 1993a, Pilling, 1980, and Smith 1990). 165 Difficulties such as this are avoided in the which shows that it captures the than the Sraffian. 21 v i ctim p r oblem to is obviously an better 'new approach' illusion the given value that the of the c a l c ulation a set of is commodity impossible task in the e qui l i b r i u m framework in which it is posited (for, as seen above, This the concerns vector of prices of production, values. of Another merit of the that it has not fallen transformation concept 'new a p p r o a c h ' , Sraffian values can be calculated from technology, whereas prices depend upon distribution variables as thus, see Langston, tempted many prices cannot be a function of values; 1984). However, this is a task that has well; a researcher. 6.5 - THE OPERATION ON THE NET PRODUCT Dumenil (1980) and traditional view, Foley (1982) pointed out that in w h ich the aggregate equalities value and price and surplus value and profit between refer to gross product, is inconsistent with the definition of adopted in the 'new approach' because They argue that the profit on the production, say, of double production of counts first as part of the social and again as part of the cost of the means The same holds w i t h regard to the other money-value of the means of production. of the the value counting. means of profit, consumption. components Therefore, of the they must The Sraffian conception of value has been proved inconsistent for other reasons as well: if the value of labour power is identified w i t h the value of a bundle of c onsumption goods, as the Sraffians do, labour power becomes i ndistinguishable from other basic goods. In this case there is no reason w hy labour, and not another basic good, should create value (see Brody, 1974 [1969], Dmitriev, 1974 [1904], Vegara i Carrio, 1978, and Wolff, 1984). Dissenters within this appro a c h have attempted to salvage the role of labour by m a k i n g the system asymmetrical because of the n o n - c ommodity aspects of labour power (see Bowles and Gintis, 1981); for a critique, see Glick and Ehrbar (1986-87). 166 be subtracted, and only the net product and its value can be the subject of the transformation. This is one of the most a p p r o a c h ' . The product is important innovations rationale not 22 for the straightforward. of o p e ration Let us the on 'new the net start from the C ' - M circuit of capital: LP LP, C1 - M t+1 t+1 t+1, ;MP VMP, u t+ l t + 2, t+1 Figure 1: The Circuit of Capital In each p e riod power (t, t+1, etc.) the (LP) and means of pr oduction (...P...) capitalists (MP). During buy labour production the workers transform the means of p r o d uction into new commodities (C'). greater than value The newly the produced capital commodities originally have advanced (Mt + 2 > M t + 1 > “ t>The gross output of each period, C', p roducti on and means of consumption. is composed of means of The form in w h i c h they circulate e s t ablish links between the successive circuits of 22 'What is redistributed in the e c o nomy is the value created d uring each period, i.e. the value of the net product of the period. In the aggregate, productive w o r kers expend in a given pe riod of time a certain amount of labour which defines the added value during the period. This value is embodied in the net product of the period. The redistribution of value (the separation between its a ppropriation and realisation) must be interpreted on this basis, and not on that of the gross product of the period which leads to double-countings for inputs produced and consumed p r o d u c t i v e l y during the period or inherited from previous p e r i o d s . 1 (Dumenil and Levy, 1991, p . 363; see also Dumenil, 1980, p p . 26-30, 38, 55, 62-64, 79-82, 94-95; 1983-84, p p . 441, 448-49 and 1984, p p . 341-42, Dumenil and Levy, 1984, 1987, Ehrbar, 1989, Foley, 1982, p p . 41, 45; 1986, p . 22, Glick and Ehrbar, 1987, Lipietz, 1982, p p . 63, 76-78; 1983, p p . 34, 56-59, 85, and Mohun, 1993, p . 14). 167 capital (the proceeds of sales are capital, used as new but the circulation of commodities as use values is also relevant). are o b v iously partly Different interpretations to transformation. blame for of divergent This section discusses this process views the of the production of means of p r o d uction and the circulation of constant capital; the value of labour power and variable capital are considered below. There are product. output two distinct In terms of use value, over and above productive system, of ways production. that c o nceptualize to it comprises and the In terms of value, it is equal to the newly applied since the labour applied in a the level means of as was labour. raises the issue of what determines the value of product, net m a i ntain or to repeat the same pattern Therefore, the it is that part of the gross necessary consumption and net investment. shown above, to peri o d This the gross creates all the gross product but only part of its value. The part of the value of the gross output that is not produced in the period corresponds to the value of the means of p r o d uction use d up (which Marx calls c). different ways to conceptualize this value but, approach', it is determined ne c e s s a r y to reproduce by the the means labour of There are for the 'new time socially production, produce them w i t h the present level of technology. case, the when these irrelevant (possibly distinct) commodities were level of social o riginally In the abstract performed in the economy the present (socially necessary) with means of production to this technology produced (see chapter 2). This implies that the the gross output is the sum of or is value labour of newly value of the up. As the used p erformance of labour upon previously p r o duced MP not only creates the gross output and produces new but also determines the ne w value of the MP used value, up, it is indeed true that the value of the MP is counted twice in the of the gross product. It counts first as the 168 value value of the n e wly produced MP, I up. and again as the new value of the MP used This point will become clearer if we return to the \ and linen example above. We have pr e s u m e d flax that the t echnologies of production are: 41 -> IF 21 + IF -> 1L Given these technologies, the labour time socially necessary to produce a unit of flax (its labour-value) is X = 41, r and the labour-value of linen is X = 2 1 + [4i] = 61, where [41] Ju is the labour time n e c e ssary to reproduce a unit of flax. Therefore, in general we have: = lF H = CM + lL where [X_] ■F is the present labour-value of flax and represent the unit of flax product, Xx, (living) or labour time n e c e s s a r y linen. The labour-value and lT r Li to produce a of the gross is the sum of the labour-values of the flax and the linen produced in the period, Xx = 4 + 6 = 4 + X_ and X T : r Li [4] + 2 = 101 In other words, = \ F + X h = \ p + [XF ] + lL This example shows adopted by the that, given the d e f i nition 'new a p p r o a c h ’, the labour expended p r o d uction of the MP is counted twice in the value gross output; used first in the value of in the of the and, in the value of the final commodities produced 23 those M P . For this reason, the ’new approach' argues with 23 MP value up second, the of that This becomes even clearer if the t e c h nology of production of flax is allowed to change. If, in a subsequent period, we 169 only the value of the net product should be the the transformation, subject of otherwise double counting is inevitable. This is because the value of the means of p roduction used up does not correspond to labour actually p e r formed this period or ever; reflection labour of on the contrary, carried out it and either is in merely value a created elsewhere. The issue of double counting and the product are important in value theory, grasps emphasis in the light of the living and virtual labour the on-going because they show that the (albeit in a distorted manner) on ’new net debates approach' the difference between (discussed in chapter 2), and the need to conceptualize the transformation in a bstraction from the value of the MP used up light, (as seen in chapter 5). the focus on the net product emphasis upon the performance creation of value in of production, is tantamount living in In to the and the from the labour isolation this transmission of value through the productive consumption the elements significant of step constant forward capital. in This represents comparison with of a previous analyses of the transformation. 6.6 - THE VALUE OF M O NEY AND COM M O D I T Y PRICES If the value of the inputs is counted twice in the value the gross output, it follows that the value of m o ney be defined on the basis of the net, However, care. and not gross, the concept of value of m o ney It tells us how many hours of must be abstract necessary to add £1 to the money-value of the of should product. used with labour are output, but have 21 -> IF and 2L + IF -> 1L, the value of flax falls to - 21. In this case the n ew value of linen is F \ - 21 + [21] = 41. The labour-value of the gross product J-J is n o w 6L - a reduction of four hours, twice as m uch as the fall in the value of flax. See, however, Giussani (1991-92) for a critique of this argument. 170 only at the aggregate level; m o n e y - v a l u e m a y be added individual by a one different hour of quantity labour sector, for example because of skill 24 between the w o r k e r s . Another limitation of this concept mo ney is m e r e l y an e x post labour per f o r m e d Therefore, it produced and technology and becomes priced is is reflex of that the in the value relation in known after commodities the determined. socially In this the average respect, different scope than the M a r xian concept of of between added and any differences m o n e y-value only of period. are level of has a it value of the m o n e y - c o m m o d i t y , that is determined prior to c irculation and is related w i t h the function of measure of value, means of circ u l a t i o n as the (see Arnon, this, the regardless 1984, noti o n of money-commodity, and de of 'new' concept of value of Brunhoff, the value equi l i b r i u m or instead of 1976 of [1966]). money the Despite legitimate exi s t e n c e which can make it useful for of c o n t e m p o r a r y capitalism. In this respect, contrasts w i t h the concept of m o ney is used of the it in money a analysis favourably equi l i b r i u m analyses such as the Sraffian. In equilibrium systems mo n e t a r y analysis fruitless because all commodities are, C o n s e q u e n t l y all labours, money-commodity, are immediately Because of this, social not g e n erally by definition, and not only those labour dir e c t l y produces m o ney and is (in onl y sold. producing other the words, commodities). the choice of w h i c h c o m m odity fulfills the role of n u m eraire is a matter of fancy, w h i c h surely cannot 25 be the case w i t h money. In analyses where equi l i b r i u m is 24 It should be noted that the number of hours of abstract labour per f o r m e d in the economy m a y be different from the total hours worked, unless all workers are e q u a l l y skilled. 25 See CCPE, Innes (1981), Polanyi (1944), and Vilar (1984 [1969]). H o d g s o n (1981, p . 83) recognizes that '[a]lthough the Sraffa syst e m is c onceptually different from a general equi l i b r i u m system of the W a l r asian type, or even the von Neumann model, these all have one thing in common: they do 171 the o r g a nizing principle the study situations, uneven accumulation, impossible unless arbitrary of crises non-equilibrium and assumptions because the circuit of capital inflation are role. u n ity an and autonomous The real-monetary dichotomy premised in these analyses is in sharp contrast derive m o n e y from Capital w ith Marx's commodities painstaking and i, w h ich he considers achievements of the book. one In sum, general e q u i l i b r i u m approaches, sense, introduced, is collapsed into there is no instance in w h ich money can pla y is com m o d i t y of the money, is a as in important exists n o n - money in in in Marx's circulation realization of except trivially (see chapter 3). These tasks, w h ich in reality are carried out by money, Therefore, exchange it as prices or be related with the process of these models to most because it can hardly express values these values, effort by the assumption of this assumption occupies are fulfilled simple in in reproduction. these schemes the role of m o n e y in Marx's. The concept of value of m o n e y to w h ich the 'new approach1 adheres implies that m o n e y is e ssentially command newly p e r f ormed abstract labour. for prices, w h i c h are conceived as commodity over the abstract labour words, This notion is prices are between commodities, capitalist behaviour. performed money-values by society. con c r e t e l y claim In other reallocated in accordance w i t h rules determined There is no reason w h y prices and the former are irrespective between the the generalised owners' be identical to money-values, of over ratio should determined labour-value of commodities and the labour-value of the money-commodity. The absence of explicit reference to the m o n e y - c o m m o d i t y in the analysis allows for unequal exchanges the by (between commodities p roduced by distinct quantities of abstract labour) from the not include money. Glower has shown that m o n e y can never be introduced into a stationary-state, general equilibrium model' (see Clower, 1975). 172 start. This is, once again, such exchanges become in contrast w i t h Marx, systematic onl y for whom after the 26 transformation. This con c e p t i o n of price is met h o d o l o g i c a l l y questionable. Its m ain drawback is that this is simply a circulation-based view of price. Because of this, it fails to give analytical priority to c onceptually more fundamental processes such the performance of labour in production, in more superficial phenomena such relations as the contrast supply and demand for each commodity or m o n o p o l y other words, the internal structure in the with between power. 'new as In approach1 leads it to address the appearances from the start; this is the case in the analysis of unequal exchanges, lack of proportion between labour-values and prices, of a m o n e y - c o m m o d i t y in the economy. advantage exacts a heavy toll: develop the theory the and the absence However, this apparent it becomes v e r y difficult further without making arbitrariness in the choice of phenomena the judgement of their importance and to be use to of explained, their relation with the manifold (but other features of reality. This d i f f i c u l t y is u l t i mately caused by not haphazard) reality connections between the various (see chapter 1 and Murray, the recognition that Marx's surprisingly, the two 1988). B e cause equalities in itself insufficient to 'new a p p r o a c h ' . The existence of the transf o r m a t i o n p r o b l e m in w h ich shows that, at least as important 0 fi features hold grant diverse these as of of this, is, not va l i d i t y to solutions to equalities reaching the hold right 'Any particular commodity can be seen as embodying a certain fraction of the total abstract social labour expended in producing commodities; it also exchanges for a certain amount of m o n e y (its price), which represents a p o s sibly different fraction of the aggregate abstract social labour expended.' (Foley, 1982, p . 37). In this context, the unit of m o n e y is a 'claim to a certain amount of the abstract social labour expended in the economy' (p.37; see also Foley, 1983, Lagueux, 1985, and Mohun, 1990, 1993). 173 result, is how it is obtained. Unless a sound methodological procedure is followed from the become an object analytical in their significance, start, own right equalities with no may further and the analysis as a whole becomes prone to faults or unable to explain reality, the important and there is increasing risk that it aspects will be of led astray. 6.7 - THE VALUE OF LABOUR POWER Whilst the Sraffians define the value of labour power as the value of a (nxl) vector b of commodities whose is the n e c e s s a r y to reproduce a unit of consumption labour 'new a p p r o a c h ’ defines it as the share of the which the workers can claim with their wages, power, net the product the wage rate times the value of m o n e y (see section 2; however, Glick and Ehrbar, 1987, argue c onsidered a distinct others, differently). commodity to contrary, because, the e qualisation of in profit power is contrast to of value is d e t e rmined by struggle and Lipietz, 'new' 1982, definition class the On depends working on the class. Its (see Foley, 1986, of the of labour power value inherent in the Sraffian that once a fixed consumption bundle b is it follows that the general the industries w h ich goods in b. Much rate of profit depends (directly or has been made c ontradicts Marx's conclusion that commodities affects the general indirectly) of methodological power the only produce prod u c t i o n on the which of all rate of profit. owes much 'new' to the perspective of these approaches. 174 defined this result, The d ifference between the Sraffian and the of the value of labour the p . 75). s u ccessfully avoids the difficulty, approach, rates. the reproduction of labour power physical and social existence The Labour it is not created by a capitalist production process subject p . 41, or definition distinct The Sraffian conception reflects a very abstract understanding of the lvalue of labour power. It derives from M a r x ’s definition 'Capita.I t, finds which e x p l o itation capitalism. he is useful compatible w ith In this context, to d emonstrate equal how exchange it is legitimate to in under represent the value of labour power by the value of a bundle of goods, however it m a y be determined. very strict limits. relevant here; Two of first, Nevertheless, these and the implies that labour the transformation power is the only (see Mohun, this character of has particularly wage in purchased at its value after the Second, are image the use of this c o n c eption of value of labour power unjus t i f i a b l e limits this 1990, conception commodity transformation, to be w h ich is p p . 237-40). u l t i mately denies The adherence a m o n etary of value of labour power w h ich denies the wo r k e r s the power to spend their wag e wit h some is (albeit to the conception costly, the wage. problem restricted) because the Sraffians become u n a b l e the workers from the goods they consume. analytical error, it is a r b i trary to This d istinguish is a serious w h i c h has led some to the conclusion to because this model or e n ergy are freedom suppose that w o rkers leads to identical 'exploited' exploited, results if corn, (see above). have been aware of this difficulty, are that Marx m a y or but he iron ma y went to not great lengths to e m p hasize that it is simply w r o n g to presume that in c a p i t a l i s m the wage could, (see, for example, K2, in general, p p . 197, 245, A l t h o u g h the wage is a sum of money, be the right to co m m odity that they might want. otherwise, in kind 285 and 290-97). the workers' of a specific sum of the general equivalent to grant t hem paid purchase, as is possession insufficient a class, any It w o uld be naive to imagine because such a conception w o u l d ignore the social role of the w age as the sum of m o n e y w i t h w h i c h the class reproduces itself. working This implies that the wages be so low that the workers w o uld starve to death, high that t h e y could buy means of pro d u c t i o n or 175 cannot nor avoid so work over long limits, the periods. 'new' Whilst not incompatible definition of value of with labour these power unable to highlight them. This is due to the fact that is conception a c i r culation-based captures its (quantitative) limits, (qualitative) They m ay determinants. the analysis at another stage, of the be this wage, but cannot which reflect its incorporated from the conception of the value of labour power w i t h w h ich 27 view of the wage is associated. this (relatively more abstract) relation between the value of labour power and the value of a bundle (relatively more concrete) be into derived The but cannot is of goods, conceptualization of value of labour limits are (as was the w h ich makes Sraffian and the a direct set limits to the power case discussed in section 3) influential at levels, and with the competition, distinct confrontation wage. analytical between 'new1 conceptions of value of labour logically inadequate. The issue is ' r i g h t 1 and w h i c h is 'wrong1 in contribution each of them can make w h ich level of analysis the existence of the wage as a sum of money that m a y be spent wit h some freedom, These and not the to which of abstract, value other but is what analysis, at and how (see Fine, This is what Marx seems to be looking for in 27 power them they p lay a meaningful role, they should be connected to each the Capital, 1982). even 'He [the worker] actually receives a share of the value of the product. But the share he receives is determined by the value of [l a b o u r - p o w e r ], not conversely, the value of [l a b o u r - p o w e r ] by his share of the product. The value of [labour-power], that is, the labour-time required by the worker for his own reproduction, is a definite magnitude; it is determined by the sale of his labour power to the capitalist. This virtually determines his share of the product as well. It does not happen the other w ay round, that his share of the product is d etermined first, and as a result, the amount or value of his wages. This is precisely one of Ricardo's most important and most emphasized propositions, for otherwise the price of [labour-power] w o uld determine the prices of the commodities it produces whereas, according to Ricardo, the price of labour determines nothing but the rate of p r o f i t . 1 (TSV3, p . 94; see also TSV2, p . 418, Kl, p . 1066 and de Vroey, 1985.) 176 though his analysis of wage labour was left incomplete Lebowitz, 1992, The d efinition 'new' therefore, 1993). of the value of labour this definition value of labour power is hardly connected w i t h of creation of surplus value, approach' d istinction between p roduction or difficulty nec e s s a r y going exploitation, has beyond and one in excess In other words, in grasping surplus of which labour the the within effects the the 'Ricardian socialist' chapter this is also the only one w h i c h Sraffian analysts (see Bradby, 1984). and Giussani, This is not w r o n g but it is trivial, because lend itself e a sily to the distinction general exploitation. and 29 the specifically In addition, the 'new' n o t i o n production) and, in c a p i talism instead, (which induces the takes and not form of value of it the ability of theory to conceptualise the p r i mary conflict of exploitation of if to discuss does capitalist labour power can be mis l e a d i n g - e s p e cially class 3), it between of economists e mphasized in the e a rly 19th Century (see 1982, of process inability of the workers 28 purchase all the net product. This is the same aspect e x p l o itation n a mely the the value produ c e d of that n e c e s s a r y to reproduce labour power. in is, Because of its focus upon circulation and the p u r c hasing power of the wages, 'new power incomplete at best. But it can be criticized from another angle as well. the (see dilutes form place conclusion of in that nq See Foley (1982, p p . 42-43, and 1986, p . 15). The absence of a clear concept of n e c e ssary labour time makes the 'new approach' unable to show that '[i]ncrease or diminution in surplus-value is always the consequence, and never the cause, of the c orresponding diminution or increase in the value of l a b o u r - p o w e r . ’ (Kl, p . 658) 29 The risk that this might happen is recognised by Foley (1982, p . 43); see also Elson (1979b), G u i l l e n-Romero (1984) and Rowth o r n 1974). Szumski (1989, 1991) has a different analysis, and h e a vily criticizes Dumenil for the changed definition of the value of labour power. 177 expl o i t a t i o n is due to the unfair d i s t r i b u t i o n of There m a y also be d ifficulty w ith the surplus value, of workers' concept income. of relative w h ich tends to be blurred because the notion c onsumption goods is not clearly defined. This notion of value of labour power m a y also lead to if it induces the conclusion that 'unequal exchanges' exploitation between capitalists and was the R i c ardian socialists' opinion), o r d inary com m o d i t y values, determined and the value of labour power, (see de Brunhoff, 1951). Moreover, product is 1974-75, workers given by labour 'shared' c apitalists at the end of each to (which supply 1974-75, and and b e tween period of n ature of most of these difficulties is demand Sraffa, that workers production. clear the same is not true of the last of them. between embodied, it m ay also reinforce the belief somehow due dichotomy by Laibman, is error or if it directs the analyst towards the w e l l -known Classical net 30 enough, Let us see w hy the and The but it is w r ong and what are the implications. If all capitals have a b e g inning of period t, u n i form say, turnover period, at capitalists purchase MP produced in period t-1 and hire workers to tr a n s f o r m the former new output. These the workers m ay spend their wages into on commodities produ c e d in t-1 as well as t, d e p ending on they are paid and how their expenditures are 30 when 31 distributed. In analytical terms, class struggle in prod u c t i o n is more fundamental than class struggle in distribution, because the (qualitative) development of the concepts of surplus value and exploitation, on whose basis the real existence of capital and wage labour depends, is prior to the (quantitative) dispute over their magnitude. In practice, class struggle in p r o d uction is also more fundamental than in distribution, because the latter can h a r d l y point to a way of tran s c e n d i n g capitalism. 31 V a r i a b l e capital is conceptually advanced (with constant capital) at the beginning of the p r o d uction period, but this does not imply that, in Marx's analysis, the wages must be advanced. By the same token, the payment of the wages does not depend upon the sale of the output p r o duced by these workers, o t h e rwise workers employed in c o n s t ruction or 178 There is no analytical justification to impose restrictions upon the timing of payment or expenditure of the it is different wit h surplus value. The wage, surplus but value produced in period t is only realized at the end of t, the output of this period is sold. Hence, their income of a period to purchase produced in this period, commodities produced in period. Therefore, while this as capitalists means the of as m ay in a it is incorrect to argue that, of period t, there is a mass of products use consumption w o r kers well when to buy previous at the end be shared between the capitalists and their employees. More generally, it is incorrect to argue that part of the value added in each perio d is given to the workers as wage, because they m ay be paid, prior and the wages m a y be spent, to the sale of the output of the period. This analysis shows that aggregate profits not and wages are simultaneously determined as the result of a struggle for shares net product, however important distributional profits is, from fundamentally industrial profit, distinct interest and rent, claims over the mass of surplus workers. Consequently, the 'new' of in wages between conflicting e x t racted noti o n and that w h i c h are value the conflict capitalism may be. The relation between therefore, over the from value the of labour power cannot be the sole basis for the development of a theory of class conflict around income distribution, although it m a y seem to be sufficient at first sight Gleicher, 1974, and 1989, Lebowitz, 1992, Rowthorn, (see Weeks, 1982). 6.8 - C ONCLUDING REMARKS The c ontribution of the proponents of the 'new approach' the long-lasting polemic which surrounds the transformation agriculture would pro b a b l y starve to death before they paid. 179 to were p r o blem can be seen from two distinct angles; argue that the net product is the a ppropriate the a r b i trary transformation, dispose of conditions t h r ough the conceptualization money, first, they context for normalization of the value and adopt a more complex and concrete concept of value of labour eq u i librium power. In framework doing in which generally d i s cussed in the important issues for this, the past value they the reject the t r a n s f ormation and raise analysis. several Eac h was other of these contributions should be considered in their own right; are part of a w i der reconsideration of the labour theory value, of they of and they have a lot to offer beyond the strict bounds of the t r a n s formation problem. In spite of this, in their present form criticism on several grounds, t hey are relative reasons neglect is of the what focus Marx approach' categories of the difficult task. circulation and considers the introduced effort capitalist One production. innovations and Marx's own u pon best. himself determining sphere in capitalism, of links b e t ween the to and their c l aim to represent a development of Marx's own concepts is fragile at of the mai n open to The building by the 'new reconstruct the main e c onomy is an extremely Its complexity cannot be minimized, and the poss i b i l i t y of success cannot be taken for granted. The second angle from which the 'new solution' can be evaluated has to do w i t h the reduction of the transformation pr o blem into triviality. This is a changed d e f i n i t i o n of the variables c onsequence (and, redefinition of the p r o b l e m as a whole) of the ultimately, the that follows the view of the labour theory of value u pon w h i c h approach' because, is based. The in this context, transformation Marx's are turned into identities. important, because it transformation debate. two the becomes aggregate shifted As a result, 180 the the 'new trivial equalities This innovative result has from is very grounds of the vali d a t i o n of the \ \aggregate equalities is no longer an issue/ because they 'always hold. The simultaneous v e r i f ication of the two equalities 'new approach' definitions. is not simply the On the contrary, result derives from Rubin and Aglietta. meth o d general), and it the trivialities theoretical approach' of theo r y Unfortunately, account for the the c o m p lexity This of bogged down 'new of the structure grounded upo n Marx's method. The 'new approach' fail is reason to why the recognize the importance of the transformation of n on-t r a n s f o r m a t i o n p . 8, values into and agree with the Sraffians that 'error' 1980, some in it prices of production, 1993, approaches however, full more because proponents of the fundamental which value time, absence of a structure such as this is the Dumenil, value of (or e q u i l i b r i u m w h ich have, for a long lacks an internal with This vie w surely represents relationship between values and prices. conceptual play has shown its power by d i s p lacing advance. cannot theory of M a r x 's faithfully than the Sraffian a the it is the outcome of a careful development of that vie w of Marx's the concepts and of in in of Marx's input Lipietz, pro c e d u r e values 1982, (see, the is for p p . 64-65, the example, and Mohun, create severe p . 5). The p e culiarities of its internal structure problems for the further development of the The most important is that, because posits an identity between content expression (price), the content the (e.g., itself esp. not with its the own further outcome. 'new vu l n erable to the charges of tautology does lose p . 47). This w o uld be a sad the structure of the it and form of analysis In addition, (because approach' the 1985, validates value) for example, in de Vroey, in w h ich it approach'. 'new may d istinctive stature and become redundant development of the inquiry (see, 'new Marx's makes (because of the equalities) highlight the development underlies value analysis). 181 approach' and it way empiricism structures whose The best w a y to avoid these problems is to recognize logical context in w h i c h Marx develops his theory and put to involved the in forefront the the real transformation. aggregate relations between value value and profit, w h ich the and If instead, issues done, the and surplus 'new a p p r o a c h 1 obtains, could no the variables. hold because they are a reflex transformation of the variables themselves, should shift according to the level of analysis. is price, longer be attributed to the redefinition of They would, value logical this and of the In accordance w i t h this, of whose the meaning a bstraction of the their forms of appearance should become increasingly complex as the r e construction in thought of the m a i n categories of 32 production progresses. of For this reason, total profit is value is it is not 'equal' 'equal' to strictly Marx, 'identical' capitalist correct total price, or divided to the price of the say that eve n by net m ode to to total surplus value, l abour-value of the net product m o ney is the that total that the value product. c o m m odity prices are simply the form of appearance the abstract labour performed in the (inclusive of interest and rent) economy, cannot be one another because the cannot be essence; put into form of For of profits are nothing but the form of appearance of surplus value. Values and prices value and profits) and the quanti t a t i v e l y of quantitative (or compared appearance of relation with 33 the link between them is qualitative. surplus with something its own See chapter 5. As Smith (1990, p . 167) put it, 'It is of the essence of dialectical theories that simple and abstract determinations (prices proportional to values) lead to more complex and concrete ones (prices that are not so proportional) that cannot be simply reduced to the former. A t heory can hard l y be said to have refuted itself w hen it does what it sets out to do! ' The most conspicuous case of quan t i t a t i v e comparison between prices and values is pr o b a b l y the use of 182 The 'new approach' has labour theory of value. performed m any The greatest of services for them a is the major contribution for the recasting of previous debates under new of light, and the shifting of the terms tr ansfor mation debate into more substantive issues, as Marx's value theory is concerned value and price, money). the as far nature of the value of labour power and the value of This will help restore the (such as the a t r a n s f ormation to its rightful place within C a p i t a l . It will no longer be seen as a calculation of the of self- contained e q u i l ibrium prices, wages, exercise aimed at the and its connection w i t h a ccumulation and technical change, theory as well as the law of the tendency of the rate of profit to fall and the of crises, study will be more fully recognized. 'price-value multipliers' in Bortkiewicz (1949 [1907]) and Seton (1957), but value and price rates of profit are often compared (see Flaschel, 1984, Lipietz, 1984, Morishima, 1973, and Steedman, 1977). This procedure is criticized by Fine (1986a), Kliman and McGlone (1988), Pilling (1980), Smith (1990) and de V r oey (1982). 183 CONCLUSION This thesis analyses the relationship b e t ween labour, m o ney and price from the point of view of Marx's value. These determined modes relations, where categories of are conceived existence of as assumptions theory are in social a context unwarranted. conception of the labour theory of value d e v e loped study is based upon Marx's own methodology, some of the most distinctive features of historically capitalist and their features are considered equi l i b r i u m value, of The in this and builds upon his critique of political economy. The analysis of the of this thesis, 'new dialectics', in the shows that this approach first to chapter Marx's method has important contributions to offer to value analysis. 'new dialectics' conceives the labour theory of value systematic theory, thought of the main production. which aims features at of the the It strives to reach this obj e c t i v e the identification of the (capitalist) commodity. cell-form logic, of to the relatively simple and abstract concepts, exchange value and this The unfolding of the in the concept of commodity leads money. Their system, gradual and the a systematic of and and elsewhere. cannot be argued that the principles of the example, it the is m ain elements unde niable 184 of value, such As as the consistent in the mind. and Marx makes extensive use of a similar procedure in Capital encompass all the unfolding profit. reconstruction of the real gradually develops This a p p roach is persuasive, the introduction surplus value, continues, of contradictions more complex and concrete, process in starting from such as use own rate a mode through unveils other concepts, capital, as reconstruction capitalist a pplica tion of the rules of dialectical The of that However, it 'new dialectics' Marx's Marx method. For periodically incorporates masses of historical and social his analysis, and their accessory position, as role the chapter argues that the cannot 'new material be reduced dialectics' 'new dialectics' into to wants. an This fails to appreciate that the requirement that complex concepts should be derived from the contradictions in simpler ones is not important feature of Marx's use of dialectics. matters most material is why, how and when new the most Rather, what concepts and should be incorporated into the analysis, it becomes richer, more solid, new such that and better able to grasp the determining features of the concrete. The second chapter makes a systematic analysis of the real processes and the exchange. This behind the abstraction of labour equivalence b e t ween distinct commodities in study is predicated upon the contrast b e t ween production- and c i r culation-based views of the labour theory and leads to normalization, labours, the development of synchronization and the of value, notions of homoge n i z a t i o n of and the concepts of living and virtual provide the basis for a detailed critique of labour. three of best-known views of the relationship between abstract and value, Sweezy, the 'traditional the Sraffian Marxism1 critique of of Marx 'abstract Dobb, labour and by Ian Steedman and others, and the Marx's value theory, elaborated by followers of Rubin. These three approaches analyse the capitalist the point of vie w of circulation. to identify difficult adequately. abstract for In them labour to contrast, represent the version economy Because of this, correctly, the approach money based on the labour theory of value. 185 from makes concept of outlined it value in and used to develop an integrated analysis of labour, of they fail which chapter departs from the sphere of production, the Meek developed labour' They can value this be and These principles were applied chapter 3. In this chapter, in a different the structure of of value and m o n e y is scrutinized through of his critique important of because, the even though labour-money scheme accept that value the proposals are inconsistent. theory and, simultaneously, of the the v a lue of views developed of their uses the developed Marx's In doing this, the source chapter to d e m o nstrate the wit h the labour-money scheme. and usefulness is is of prescriptions), interpretation of the labour theory of chapter 2 to peer into the structure theory This proponents This in reconstruction scheme. labour (and use this to derive policy Marx's a labour-money context own in value difficulties the consistency in the previous chapter are put to the test. In the fourth chapter the concepts of technical, value comp o s i t i o n of capital are defined, from one another. first, The aim of this and chapter organic and d i s t i nguished is two-fold; it reconstitutes the evolution of Marx ' s own these terms through the years, and compares them use w ith of the different perceptions of the composition of capital held by the literature. in Second, it contrasts the OCC and the V CC a static environment, where there is no technical change, and in a dynamic one, where commodity values tend to fall at each period. Whilst the r e construction of Marx's use of important because it shows that most of m i s c o nceives the m e a ning of the technical, c ompositions of capital, these the terms literature organic and value the contrast be t w e e n the OCC the VCC in the static and dynamic cases is relevant it lends itself to the analysis of several in the labour theory of value, is complex and because problems among t h e m the transformation p r oblem and the law of the tendency of the rate of profit to fall (LTRPF), VCC upon the The impact of the d istinction between OCC t r a n s f ormation of prod u c t i o n is developed in chapter 5 186 values (the into impact prices of and of this d istinction wit h regard to the LTRPF is considered in Fine, 1992). The analysis of the transformation chapter shows that, for Marx, the into price has two distinct stages. problem in the fifth trans f o r m a t i o n of value In the first, the value of the elements of the means of production u sed up by capital analysis is immaterial; at this stage, emphasizes the principle that value is alone. For this reason, the p r o duced Marx says that the variable part of the advanced capital, by each labour greater is the higher is the the profit rate. W hen these rates are averaged out, the surplus value is distributed according to the size of each this is what determines prices of production capital; distinct from (the m o n e y expression of) commodity values. In the second stage, of price; prices Marx analyses the e c o n o m y at the all commodities are sold at price, are taken into account. t r a n s f ormation corresponds to abstrac tion of the analysis; a in process and surplus the input of about labour, value the level brings greater d e termination in the form of social the d istribution of labour the Consequently, change this and level a whereby across the economy is explained. The distinction between the OCC and the chapter 4, generally, is for essential the t r ansformation problem. for correct vector or the and not the (value or price) laid results out and, interpretation In particular, interest lies in the conceptual price and profit, these VCC, more of it shows that in the Marx's relationship between labour, c alculation of rate of profit. the price These results are contrasted w ith those reached by most of the literature, which tends to conceive the transformation as due to different VCCs of capitals invested in distinct branches industry. Because most writers' conception of the of relation between value and price is sharply distinct from Marx's, 187 the and as they address issues that are not of concern this stage, they cannot claim to transformation procedure; 'correct' rather, to Marx errors in their at Marx's approaches are either alternatives to those laid out in Capital 3, or they address a different set of issues. The sixth and final chapter makes a critical the c ontribution of the so-called t r ansformation problem. 'new e valuation approach' to This approach is c ontrasted previous Sraffian solutions, and shown to be them on two grounds; first, it rejects framework in w h i c h the transformation Second, it displaces circumstances in value and Instead, price, the result, and the aggregate of often discussed. w ith and profit, transformation the v a l i dation of the aggregate the between argues for the identity the to e quilibrium This result is very important, grounds with the equalities value the superior p r e o c cupation surplus 'new approach' these magnitudes. shifts the which the is of hold. between because debate; equalities it as is a no longer an issue in the discussion. Nevertheless, the the relationship between the m e thod adopted in 'new approach' and Marx's own is fragile. focuses upon circulation, production and neglects (that was discussed in the detail This perspective in chapter Because of the absence of an internal structure that of Capital, the 'new conceptualize either value or price. In particular, similar approach' cannot its of form (in this of 2). to adequately e xpression as because this approach departs from an identity between content and form of expression, itself approach case, value) distinctive stature and becomes e v e n tually increasingly the content loses its redundant own as the analysis develops. The further development of the work in the thesis will to a better integration of value theory w i t h the wages, a ccumulation and technical change, 188 and to lead theory a of better under s t a n d i n g of the dynamics of the profit also be useful rate. for the study of economic crises. 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