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Peter M. Green

The Necessity of Value – and a Return to Marx

Part I: The Theory of Value

(Winter 1978)

From International Socialism 2:3, Winter 1978/79.
Transcribed by Christian Høgsbjerg.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Marx’s theory of value is the cornerstone of his whole investigation of capital. It is at this point that he breaks decisively with all bourgeois economics. [1] Value, and the ceaseless pursuit of value, divorced from all consideration of human need, alienated from the human activity which creates it, is the guiding principle of capital, the principle without which capitalism as a mode of production is impenetrable. Once grasped the theory of value reveals the historical specificity of capitalism, and the contradictions which both power its unprecedented dynamic and augur its eventual destruction. It is not simply or even primarily about the reduction of the prices of commodities directly indirectly to the labour-time necessary for their production.

The current assault on the labour theory of value from the academic wing of ‘left reformism’ is thus neither accidental nor innocent. Presented as a break with the stale cliches of the Stalinist era, dressed up in the language of the latest intellectual fashions, the criticisms have taken a variety of forms. Some ascend to the heights of a critique of epistemology and reject all general theories or laws of history, in a manner reminiscent of Karl Popper – of these Hindess and Hirst [2] have at least the merit of explicitly confronting Marx’s method and drawing the appropriate political conclusions. The tendency to be considered in the course of this article, commonly termed Neo-Ricardian, has usually preferred to hide behind a daunting array of matrices. The content of their criticisms though is even less original, echoing v. Bortkiewicz, [3] at the turn of the century, and finding a crude statement in Joan Robinson’s An Essay in Marxian Economics (1942). [4]

The ground here is treacherous. In this mystifying world the labour theory of value is divested of its qualitative and revolutionary dimension, and becomes a matter of the determinacy of equations and the utility of aggregation devices. [5] It becomes almost impossible to distinguish between the mathematically significant or curious and the complexities of the real system that is capitalism. Those who obstinately feel that the exposure of the fetishism of commodities, or the insights into the labour process, or the account of the dynamics of capitalist accumulation provided by Marx have some inherent connection to the theory of value are assured that these matters are beside the point. They are questions for sociological or historical investigation, irrelevant to the equilibrium models of relative price determination of concern to the academic economist. Fetishism and alienation cannot be put into the equations.

With this divorce of the quantitative and qualitative an academic division of labour is sustained, and the argument about the labour theory of value can proceed on a plane in which the doyen of bourgeois economists, Paul Samuelson, can participate with ease. [6] His conclusions are not at all dissimilar, though much less subtly put, to those of Ian Steedman whose work Marx after Sraffa is the most forthright statement of a Neo-Ricardian position. [7] Marx’s value analysis is both inconsistent and redundant. It is a ‘major fetter’, in Steedman’s words, on the development of a ‘materialist account of capitalist societies’. [8]

Behind the equations lies a distinctive view of the world and a well-defined political programme. Neither should prove unfamiliar to readers of this journal once brought to the surface. To the divorce of the quantitative and qualitative there corresponds a divorce of the

economic and social. Production becomes a matter of technology, the social is removed to the spheres of distribution and ownership. Marx’s social relations of production are split up into neutral technical relations between man and nature on the one hand and property relations on the other. Remove the archaic factors interfering with the untrammelled growth of the productive forces, abolish the shareholder and the speculator, regulate the vagaries of the market and the problems of the British economy will be resolved. Class relations cease to be fundamental to the structure of the economy and are defined in terms of the unequal distribution of wealth and income alone. Capitalism ceases to be a mode of production, or a world society, and socialism loses all connections to working-class self-activity. [9]

This truly superficial analysis finds its theoretical rationale in models which abolish the distinction between use-value and exchange-value and its political conclusions in the diverse reformist currents of Tribunite Left and the Communist Party. In the ‘Cambridge School’ renowned in academic circles for its attacks on the tattered neo-classical orthodoxy, and more popularly for its strident advocacy of import controls and a strong dose of economic autarchy, the descendants of Keynes and Stalin have been reconciled. [10] The return to the principles of classical political economy, leavened with a dose of Keynes at the level of Government policy proposals, marks this school out firmly from the ‘vulgar’ economics which still prevails in most bourgeois circles. It has, however, a tendency to explain inflation by trade-union militancy and wage-increases, and a strong penchant for the sort of ‘alternative economic strategies’ also to be found under the name of the Stuart Hollands of this world.

This may seem too speculative for some. Nor will this article be concerned with examining in any depth the economic theory of reformism, though it is a task that needs to be done. Nor is there any one-to-one correlation of political views and theoretical position. Certainly a theory cannot be judged by its politics alone. But the political conclusions may provide the clue to the real content of the criticisms of Marx.

The first part of this article, however, is devoted to restating what I consider to be the decisive features of Marx’s theory of value on which we must build a genuinely revolutionary critique of both the theory and the politics of the critics. [11] In particular I have sought to emphasise the unity of Marx’s work, the impossibility of separating out the labour theory of value for attack without undermining the essential structure of his analysis of capitalism. All that is distinctive about Marx’s discussion of how the working class is exploited, and thus of his entire understanding of the class nature of capitalist society, is lost if the theory of value is abandoned. Similarly, the ‘laws of motion’ of the capitalist system, the compulsion to accumulate, the concentration and centralisation of capitals, the displacement of living labour and the effects of the accompanying rise in the organic composition of capital (the ratio of dead to living labour), are all predicated on the theory value, and in particular, the theory of surplus value.

The second underlying theme of the first part is the nature of Marx’s critique of all ‘political economy’, the radical character of his break with Ricardo, which has been so obscured by defenders and critics of Marx alike. The commonplace understanding of the theory of value as essentially a theory of ‘relative prices’ must be rejected if the full depth and penetration of Marx’s own search into the hidden structure of capitalism is to be revealed. In the first part, therefore, I follow, if at times tangentially, the order of Capital, Volume One, itself. The concern is with such questions as ‘What is money?’, ‘What is price?’ ‘What is capital?’, questions which reach to the heart of capitalism, by asking precisely what sort of society it is; questions which the classical economists, including Ricardo, were unable to pose.

In the second part (to be published in IS 2:4), I will consider specific criticisms levelled at Marx by Ian Steedman and others. There I will argue that the critics have failed to understand the break between Ricardo and Marx, that they have an essentially Ricardian understanding of the nature of the labour theory of value as nothing but a theory of relative prices. I will spell out the differences between Marx’s method and the Neo-Ricardian tendency to see ‘value’ as nothing but a logical tool. Finally, I will consider the real issues involved in the infamous ‘transformation problem’ and the manner in which Marx deals with the determination of specific relative prices. Such a discussion presupposes an understanding of the nature of capital itself, of the basic social framework within which the complicated fluctuations of market-prices can be set. In Marx’s terms, in the terms of the order of Capital, the production of value and surplus value must be discussed before their circulation and distribution in the course of exchange.

The laws of value

The laws of value express the most general characteristics of capitalism as a system of commodity production. Private acts of production are regulated by the unplanned phenomenon of exchange. All societies require the expenditure of a certain amount of social labour on producing the goods necessary to the survival and reproduction of that society. Indeed the boundaries of a society can be defined by the extension of its division of labour, by the mutual interdependence of its members. In a society where the division of labour takes the form of a division between private property-owners this interdependence is secured through the mechanisms of exchange. [12]

The social character of labour is not given automatically but is dependent upon whether or not the things it produces are actually sold. Production is no longer immediately for use. We do not normally consume the things we make ourselves, nor do we simply hand them to a collective pool to be allocated according to social criteria such as need. The purpose of production is exchange and if goods are not sold they have no value. The measurement of that value is not a thing’s usefulness, or any natural property of the object, but its price, the amount of money we can get for it.

Hence Marx’s definition of the commodity as a contradictory combination of use-value and exchange-value. [13] Why contradictory? Because in such societies situations can arise in which a mass of commodities lie rotting unsold whilst simultaneously people starve because they haven’t got the money to buy them. Why a combination? Because while the commodity has no use-value for the person selling it, only an exchange-value, or a potential for sale, it must have a use-value or nobody else will be willing to buy it.

In such societies therefore labour still has a social character, is still a matter of producing what other people need or want. But this social character is not given immediately, is not determined by a conscious process of collective decision-making as it is in a primitive society where tasks are shared out in a manner which all can see. Rather the social allocation of labour to the production of use-values is established through the fluctuations of the market, through the rise and fall of prices which determine the movement of producers or firms from one sphere of production to another. The production of use-values is thus subordinate to the production of exchange-values, or, more accurately, values.

The value of a commodity can be regarded, at least as a first approximation, as its potential for exchange, as the property of the commodity which makes it exchangeable. At the most general level, things which are freely available, which require no human labour for their production, such as air, water or the fruits off trees will have no value in this sense. If exchange is seen as a social relation, simply, as a mechanism for assessing the social character of human labour, and for distributing the products of that labour, the exchangeable potential of commodity will be governed by the amount of labour contained in it. The value of the commodity thus expresses the quantity of human effort and sacrifice of time contained in it as a portion of the total expenditure of such effort and time in the society. [14]

At the same time, however, that value is not automatically recognised as such in the course of exchange. On the contrary if exchange is a mechanism by which that expenditure of labour is assessed according to its value to society, as socially necessary, then the prices of commodities must tend to deviate from their ‘values’. If the labour expended upon a commodity is of a lower than average productivity, if the workers in question are slower or less efficient than the others engaged in producing the commodity, then their labour will not be recognised as such on the market. In the ‘eyes of society’ it is wasted effort. If more has been produced than people are willing to buy, if more producers are engaged in the production of the commodity than society requires – then the price will fall and the least efficient producers will be forced out of operation.

There is a danger here. Marx defined the value of a commodity, or more precisely the magnitude of that value, as the quantity of socially necessary labour-time required to produce it. Socially necessary, however, has a double reference as the last paragraph suggests. It refers both to a comparison of individual acts of labour with other such acts engaged in producing the same commodity, and to a comparison of the total labour expended on the commodity with the requirements of society. Marx himself argues that if supply exceeds demand the labour expended by the most productive unit will determine the value regardless of the average, and that if demand exceeds supply then value will be regulated by the productivity of the least efficient producer. This variation of the value with the conditions of the market might suggest that it is the market itself which determines the value of the commodity, that the value is simply given by the price. This is not the case. The value can vary only within the limits set by the range in the conditions of production. It cannot rise higher than the quantity of labour-time expended by the least efficient or fall lower than the limit set by the most efficient. [15]

It is absolutely imperative to clearly distinguish value from exchange-value or the price of a commodity. [16] The former expresses the amount of socially necessary labour-time contained in the commodity; the latter, the quantity of use-values, or the sum of money which can be obtained in exchange by the owner of that commodity. The entire analysis contained in the laws of value of the manner in which production is regulated by exchange depends upon the disparity between the value contained in the commodity and the ‘value’ received by its owner. It is precisely the deviations of prices from values which govern the movement of producers, which encourage, indeed at times enforce, the departure of firms or units of capital from one sphere of production or industry and the entry of new firms etc. into other industries.

There is another danger, however. The laws of value can be taken to imply that when the movement of producers has ceased, when the fluctuations of supply and demand have worked themselves out, that prices will be proportional to values. The continual pursuit of the maximum return on the labour employed will at least tend towards a state in which the ‘rewards’ for the expenditure of different amounts of labour are equalised, in which no producer has any incentive to move from one sphere of production to another. There are two problems with this idea. The first concerns the fact that such a concept of general equilibrium only makes sense in a society of generalised commodity production, where all labour is engaged in production for exchange, and thus applies only to capitalism. Capitals, however, are concerned to maximise their returns, not on the amount of labour they employ invested. Equilibrium here, in the sense of a state in which no unit of capital has any incentive to move, necessarily involves an equalisation of rates of profit on capitals, not, directly at least, of ‘rewards’ to labour. This is the question which Marx considers only in Volume 3 of Capital, the source of what has come to be known as the transformation problem. It will be discussed in the second part of the article.

The reality of value

One of the most striking insights to be gained from reading Marx’s Capital concerns the reality of value. It is something which is produced, transferred, circulated, distributed and, not least, accumulated. Once these properties of value are understood the absurdity of interpretations which subsume value under exchange-value or regard it as a type price becomes evident. Nor can value as the product of labour be identified with the act of labour which creates it, or with a simple expenditure of labour-time. Least of all can value be regarded as merely logical tool, or a conceptual category. [17]

The reality of value is not easy to grasp. It is no more observable than gravity, although like gravity we can see its effects, and unlike gravity it assumes an independent bodily existence in money. As something which is not directly accessible, which does not appear as such the surface it demands a scientific investigation to establish its existence. This investigation will necessarily involve a process of abstraction from the concrete appearances precisely in order to establish the determinants of these appearances, their causes. Value therefore is an abstract category, but that does not mean that it is unreal, any more than gravity, evolution or the state are unreal. The failure to grasp the reality of value is thus a scientific failure, a failure to penetrate sufficiently deeply behind the appearances of the system which is capitalism.

The very fact that we need a scientific investigation of capitalism that political economy ever arose at all, says something fundamental about the nature of that society. [18] The reality of value is a purely social reality. The fact that value is unobservable, is hidden in the commodity, is simply an expression of the fact that the social relations of capitalist society are themselves hidden from the participants in that society. In a situation in which human beings relate to each other directly and not through the mediation of things, in which labour is allocated by a conscious process, the social character of labour is obvious. Correspondingly class relations or relations of exploitation are transparent. The feudal serf knows exactly what proportion of his labour-time is spent on maintaining his lord in luxury and what proportion is spent meeting his own needs. Under capitalism this division between necessary and surplus labour is concealed by the forms of value, by the manner in which labour-power is sold, and by the fact that profits are only realised through the sale of commodities.

If we visit a shop or a market all we can see is a thing with a price-tag. This price expresses the exchange-relation of the commodity with another commodity, money. It is measured simply by a quantity of a particular use-value, so many ounces of gold or so many pounds and pence. Value in other words appears only as a relation between two things, or two use-values. This relationship is in fact quite mysterious unless we understand that it is essentially a social relationship-predicated on a particular type of division of labour, or social organisation of production.

To explain exchange therefore we must look at production. The exchange of things must be grasped as an exchange of labour. What is exchanged is not simply the commodities taken in their physical aspect alone, is not simply the product as use-value. What is exchanged is also the commodity as a social substance, as the capacity to be exchanged, as a claim on the products of the labour of others. The seller is clearly losing something in exchange for the money he receives. This cannot be the use value of the commodity for it may have none for him. What is lost is thus the value of the commodity sold which must be clearly distinguished from the value of the commodity received in exchange, the value contained in the sum of money. The two quantities of value may or may not be equal.

To explain this value carried by the commodity we must examine the labour which produces it. Yet if we visit a factory we do not see any production of value going on, only the production of a mass of use-values. The combination of machines and human beings performing a wide variety of different activities has no apparent connection to the prices of the commodities in the shops. What connection there is is established through a costing operation which seems to bear no inherent relation to the character of the labour-process. There is little it seems in principle to distinguish the activity we observe from the labour of slaves building the pyramids other than the technology or the number of machines littered about. The social character of the production process is no more apparent than the social character of the exchange-relation.

Value is always a quantity of dead labour, labour which has been preserved, embodied, in the form of a commodity. The accumulation of value is thus always an accumulation of dead labour, whether it be in the form of a stock of commodities waiting for sale, means of production, or money. It is not simply a matter of dead labour, however. The objectification of labour in things occurs in all societies. Only with the generalisation of exchange does the objectification of labour occur through the alienation of labour, or the creation of value.

Value therefore is labour which is embodied in a commodity destined for sale and thereby separated, alienated from the labourers who produce it. It is thus a specific social relation, expressing both the labour expended on the commodity as a portion of the total social labour, and the manner in which that relationship between the different acts of private labour is secured. [19] Only in the course of sale does this value appear, and take on an independent existence. Hence the necessity of the realisation of value, when the value contained in the commodity as a mere potential is transformed into another commodity or money. The production of value and the realisation of value are necessarily connected but must be distinguished. The value may be realised for more or less than its actual quantity.

The social character of abstract labour

The task is only partly to reduce the commodity to the labour which creates it. That was achieved by the classical economists. The more in important objective which Marx set himself was to examine the manner ex in which labour is alienated, in which dead labour is preserved, exchanged and consumed, the different forms of value. Only thereby could Marx investigate the specific social character of the labour itself, something that Ricardo could not grasp because he saw only a natural, technical process of production.

A commodity with a single market-price has only a single value. Already in this idea we have an abstraction from the wide varied different types of labour engaged in producing that commodity. Exchange therefore serves to equalise the labour of different skills, efficiency and intensity spent on producing say coats, as a single quantity of socially necessary labour-time. As such, as a quantity of value, the labour expended upon coats is also directly comparable with the labour expended upon potatoes, houses and all other things to the extent that they have also become commodities and can be bought and sold. This labour which is related to all other labour through exchange is abstract labour.

The abstraction is as real as the value which is its consequence. It is not something that occurs in the heads of economists but it performed by the mechanisms of exchange themselves. These serve to equate the mass of different concrete labours with each other as expenditures of social labour-time at the same time as they measure the mass of heterogeneous use-values against each other as quantities of a single commodity, money.

To the distinction between the use-value and value of a commodity there corresponds the distinction between concrete and abstract labour. The difference is not between two types of activity but between the material and social aspects of the same activity. For Ricardo the labour which governs the value of commodities has no social characteristics, and is in principle no different from the labour of the stone-age. Marx right from the beginning poses the question of the type of labour which can only obtain a social recognition by taking the form of the exchange-value of commodities. Labour which is itself transformed by the requirements of production for exchange, which is subordinated to the dictates of the market, which is assessed only as a given quantitative portion of total social labour-time by mechanisms of which it is scarcely conscious, is abstracted or alienated labour.

Value as the product of abstract labour is a social phenomena over which the producers have lost all control. The labour of human beings is carried by things, commodities and money, and value appears as the natural property of those things. The coercive character of the laws of value discussed in the last section presupposes this ghoulish power of dead labour, the domination of human activity by the acquisition and exchange of things. When labour itself becomes a commodity, is bought and sold as a mere capacity to labour, the subordination of human activity to the value which is its creation is complete. [20] Here the abstraction of the expenditure of time and effort from the personality of the labourer is fully accomplished with the real distinction between the sale of his labour-power by the worker and his actual performance of labour under the command of capital.


The necessary counterpart to abstract labour is money. [21] If abstract labour involves the equalisation of private labours as social labour all measurable in units of labour-time, money is the means by which those connections are established. It is the necessary result and precondition of a generalisation of exchange-relations. With money exchange-value as the relation of two use-values, as the measure of the value of one commodity in a quantity of another (l table = 2 chairs) becomes the relation of one commodity to all other commodities. This is measured by the quantity of a thing with the unique social property of being exchangeable for all things (l table = 2 ounces of gold).

Money as the ‘universal equivalent form’ of value is the final development of the fact that value exists only in the form of exchange-value appearing only in the exchange of one commodity for another. With money we are no longer concerned with any particular act of barter or any individual value but with the social relations between all units of production, with value in general.

It is not money that renders the commodities commensurable. Quite the contrary. Because all commodities, as values, are objectified human labour and therefore in themselves commensurable, their values can be communally measured in one and the same specific commodity, and this commodity can be converted into the common measure of their values, that is, into money. Money as a measure of value is the necessary form of appearance of the measure of value which is immanent in commodities, namely labour-time. (Capital, Vol. 1, p. 188)

Marx’s theory of money is both one of the most important and one of the most neglected parts of his work. For the classical economists money was either a mere technical device or a symbol of no real significance for the process of production. [22] The failure to grasp the social character of abstract labour goes hand in hand with the neglect of its counterpart in the realm of exchange. As Marx comments:

All commodities can be reduced to labour as their common element. What Ricardo does not investigate is the specific form in which labour manifests itself as the common element of commodities. That is why he does not understand money. That is why in his work the transformation of commodities into money appears to be something merely formal which does not penetrate deeply into the very essence of capitalist production ... Ricardo does not sufficiently differentiate between labour as it is represented in use-values or in exchange-values. [23]

The consequence of the neglect of money is the inability to grasp value in general as the product of the total social labour expended upon commodities. The relationship between labour and prices is considered only on the basis of individual commodities. Consequently the deviation of prices from values in any particular case poses insuperable problems for Ricardo’s theory of value. The social relations of production as a whole are not grasped, and as a result the absolute amount of value in the system and its expression in money have no meaning for Ricardo, or indeed for his latter-day followers.

More generally the social reality of value distinct from both labour which produces it and the prices in which it appears is understood. It can be argued that only with the emergence of money does value fully exist, and this in a double sense. Firstly only then can abstract labour, as the source of value, become the general form of labour, can labour be totally dependent on the exchange of commodities. Secondly, with money, value itself acquires an independent objective existence separate from the particular commodities produced by human labour. With money, value is ‘realised’ in a commodity whose function is to act as pure ‘value’, and in which it can be preserved and stored and thereby accumulated.

There is no space here to give an adequate account of Marx’s analysis of money or the manner in which it provides the foundation for his whole analysis of capitalism in terms of the production circulation and distribution of value and surplus value. All that can be done is to stress four points in particular which are especially relevant to the themes of this article.

1. Prices and value. Marx’s analysis entails that there will always be a definite relation between the sum of money-prices and the sum of value or the total quantity of labour contained in the raw materials and machinery used up and the new products created (or the sum of dead and living labour) in any period of production. The terms of this relation will change with the value of money or the ratio at which money exchanges for all other commodities. It will for example be greatly altered in a period of rapid inflation. If money serves as the measure of value, however, such a relation must always exist and be in principle calculable. [24]

A given quantity of money or a particular price thus always represents a particular sum of value, a definite portion of the total social labour-time. Any commodity thus has a dual relationship to abstract labour, a duality which has not always been fully understood. On the one hand it is itself a quantity of value, referring it back to the labour actually engaged in its production. On the other, it has a price, and thereby is exchangeable for a particular sum of money or a claim on the total product of human labour. Marx does not suppose, contrary to common report, that these two quantities of value will normally be equal, that equal values generally exchange. [25] Again we see the necessity of strictly distinguishing between value a5nd exchange-value, or the production of value and its realisation in the course of sale. Indeed it is possible for things which contain no labour and therefore have no value to be exchanged. Here ‘price ceases altogether to express value’. [26] Land is the most obvious and important example.

The sale of land, or of commodities whose price exceeds their value, can only mean that all other commodities sell at a price below their value. In the aggregate these deviations can only cancel out. Abandon this idea and Marx’s whole analysis of the necessary relationship between total value and the sum of prices collapses.

2. The fetishism of commodities. Once value is grasped as a social property which has itself to be produced it becomes obvious that only human labour can create it. Material objects may possess a value, indeed in general value will be preserved only by its embodiment in a commodity of money, but they cannot be its source. By contrast Marx insists that labour is not the sole source of ‘wealth’ or use-values and that both nature and machines can contribute to the production of these. [27]

To attribute the powers of human activity to inanimate things, such as land, machines or money, is to exhibit what Marx termed ‘reification’ – a consequence of the fetishism of commodities. As such it constitutes the appearances of the system, the standpoint of the individual landowner, capitalist or banker for whom land, machines and money do indeed seem to have the power of creating value. They are able not only to replace their own value (which in the case of land is anyway non-existent if uncultivated) but seem to have the power of increasing it, receiving a share of total surplus value as rent, profit and interest. [28]

The fetishism of commodities arises out of the reality that value exists as a property of things, of the fact that, as Marx puts it, capitalism is about ‘material relations between persons and social relations between things’ (Capital 1, p. 166) or the ‘personification of things’ and the ‘reification’ of human activity. [29] With money this total inversion of reality, this ‘topsy-turvey world’ is complete. Value, a quantity of labour-time or human activity, takes on a bodily existence, is transformed into a thing which is nothing but value. With money the sole apparent measure of value appears as the sole source of value. It appears as if money no longer stems from the fact that commodities have a value but that commodities have a value because they are measured by money. [30]

The theory of alienated labour, the theory of commodity fetishism, and the labour theory of value are all aspects of the same theory.[31] They are inseparable. Removed from the labour theory of value, all talk of fetishism becomes a mere critique of illusions, of ideas in people’s heads when in fact it is the fetishism that is real. Similarly taken in isolation the notion of alienation becomes the moralistic ‘utopian’ critique of capitalism that it has so often been taken to be.

3. Contradictions and crises. Money, Marx observes repeatedly, resolves the contradiction of use-value and value within the commodity only by reproducing it at a higher level. [32] The commodity as use-value now confronts not another commodity as in barter but money, as pure objectified value. With money we have the generalisation of exchange-relations, the solution to the inherent difficulties of barter which all historians of money recognise. Hence the positive side of money, resolving the ‘contradictions’. The negative side, which the historians completely ignore, is that with money we have a separation of sale and purchase, the fact that you can sell a commodity without immediately buying another. Money in other words can be withdrawn from circulation, disrupting it in the process. With this, Say’s Law, unquestioned by Ricardo, is thrown out of the window and Marx anticipates Keynes by over 60 years. [33]

Money and the generalisation of exchange bring with them the inherent anarchy of the system whereby private labours are related to each other as ‘social labour’ only through the unregulated chaos of the ‘market’. The extended dependence on exchange only accentuates the consequences of a breakdown of that exchange. Workers are no longer peasants who can eat the food they cannot sell. On the one hand, prices serve as the immediate regulators of production as the equilibrating mechanisms acclaimed by Adam Smith and the textbooks of today. On the other, the movement of producers which they provoke continually disrupts all tendencies to equilibrium (a bit like a swing which once started never stops, or the perpetual motion-cyclical in form-of capitalism). The coercive character of the laws of value only begins to apply in this context as they

assert themselves in spite of anarchy, in and through anarchy ... and enforce themselves on the individual producers as compulsory laws of competition. [34]

With money therefore we have the possibility of crises inherent in the very separation of sale and purchase, and really located right back in the contradiction between the utility of a commodity and the fact that it has to be sold. As Marx insists, a proper analysis of crises must consider their real roots in the social character of the production process, in the conflict between the enormous growth of the productive forces under capitalism, and the limits set by capital itself as a social relation. The effect of the equilibrium models in such common use among economists is to abolish these contradictory effects of money-largely by ignoring the social necessity of money itself, as the seam which holds the fragmented society of private property together. [35] In this sense Marx is not an equilibrium theorist at all.

In his criticism of Say’s Law Marx writes of the manner in which the separation of sale and purchase takes the form of a vast over-expansion of production in response to the widening opportunities of exchange made possible by the existence of money, an over-expand which finds its limits eventually in the underlying necessity of a balance between sales and purchases. The crisis is described as the forcible unity of elements which have become separated. In other words, it is the crisis itself that serves as the equilibrating mechanism, one, which like the swing, always goes too far.

It is not, as the bourgeois economists suggest, the crisis which is disequilibrium, generated by the failure of prices to adjust, or the market to work freely. Both Marx and the bourgeois economists see the ‘market’ and the movement of prices as a mechanism for the adjustment of supply and demand, or of the regulation of ‘private’ acts of production by the demands of society, or most fundamentally in Marx the manner in which private, concrete and disparate acts of labour are assessed as social labour, as so much socially-necessary labour-time.

For the bourgeois, however, following Adam Smith this ‘hidden hand’ operating through competition is essentially harmonious, the pursuit of individual self-interest serving the interests of all. For Marx, the whole process is riven with contradictions, between use-value and value, private labour and social labour, concrete labour and abstract labour. It is a system in which social relations are established only through the exchange of things, a system of alienation in which the powers of human beings become the properties of objects, a system out of control, revolutionising human existence but demanding the creation of socialism if its contradictions are to be resolved, its lunacies ended. [36]

The interpretations of the labour theory of value taken over by the critics serve to remove the contradictions at the heart of capitalism. Their failure to understand money, and the role played by money in Marx’s theory of value, epitomises their total confusion over the nature of Marx’s critique both of ‘political economy’ and the capitalist system which it reflected. The use of equilibrium models in which money has only a nominal or symbolic significance, exactly in the spirit of Ricardo, in itself obscures the crisis-prone nature of the system, the manner in which the system can only correct itself at an immense human and social cost.

4. Money and capital. The analysis of money as value shorn of its moorings in human activity and moving under its own steam, is the basis for an account of the nature of capital. For Ricardo the categories of capital and profit are defined quite independently of the category of value, as prior to the social relations of exchange. Capital is the stock of machinery or means of production analysed only as accumulated or dead labour and thus as something with prehistoric origins. Distribution is considered in terms of the ‘net product’, or total surplus over and above that required for replacing the stock, as a collection of physical use-values. These are then assumed to be divided up between wages and profits according to criteria which are not really justified but are effectively governed by the assumption that labour only receives a subsistence wage. The fact that wages and profits necessarily take a monetary form, that they are distributed in the course of exchange, has no place. Capital itself becomes a thing, a mere natural relation between values, and thus something which has no history and an eternal future. [37] This despite the fact that machines are considered as quantities of dead labour which is not even acknowledged by the more ‘vulgar’ economists.

The categories of the commodity, value, exchange-value and money are all presupposed in Marx’s analysis of capital. Capital first appears as a sum of money in search of more money, as a quantity of value which seeks more value. In part only is this an historical analysis resting on the emergence of capital out of mercantile or trading capital. [38] More decisively it expresses the actual structure of capitalism as a mode of production. The ceaseless pursuit of profit presupposes the existence of money, of value external to each unit of capital which can be seized and accumulated without limit. The unprecedented dynamism of capitalism has its origins here, although it is only when capital turns to production and revolutionises its forces that it really takes effect.

All previous types of exploitation rested on the consumption of use-values, on the satisfaction of the exploiters’ wants. With money these wants become insatiable. Greed becomes a dominant human passion, money is fetishised as the supremely desirable use-value. This alone does not give us capital however:

Use-values must therefore never be treated as the immediate aim of the capitalist; nor must the profit on any single transaction. His aim is rather the unceasing movement of profit-making. This boundless drive for enrichment, this passionate chase after value is common to the capitalist and the miser, but where the miser is merely a capitalist gone mad, the capitalist is a rational miser. The ceaseless augmentation of value which the miser seeks to attain by saving his money from circulation is achieved by the more acute capitalist by means of throwing his money again and again into circulation. (Capital 1, pp. 254–55)

This self-expansion of value is a complete mystery. With capital value really takes off and dead labour acquires the truly occult ability to regenerate itself. This is absurd, however it may appear to the banker lending out sums of money which return grotesquely enlarged. Value can no more be its own creator than God or money.

The problem therefore is to explain this increase of value, the origins of surplus-value. Adam Smith, and many textbook authors who only recognise profits when they are monopoly or exceptional profits (otherwise they become a type of cost), explain it in terms of unequal exchange or imperfect competition: as something which arises in the course of exchange, by fraud or trickery, or simply by selling a thing for more than its value. The difficulty here is simple. How can the exchange or distribution of value itself serve to increase the total sum of value? If one commodity is sold above its value, another must be sold below. In the aggregate the capitalist class cannot cheat itself and therefore cannot exist on this basis.

At this point for the first time Marx assumes that commodities exchange at their values. [39] It is an assumption made solely for the purpose of considering the essential nature of surplus-value, with the effect of isolating the specific exchange relation between capital and labour. Whilst it does not underlie the whole theory of value as so many suppose, it is only with this assumption that the real secret of capitalism can be exposed.

This is not the place to elaborate the decisive innovation made by Marx in clearly distinguishing the value of labour-power, the commodity which the worker sells, and the value which the labour actively engaged in production creates. The secret of capitalism lies in the fact that a commodity, labour-power, whether purchased at its value or not, has a use-value, labour, with the unique capacity of creating value in the course of its consumption. It could thus be said that value does have its origins in use-value, and thus a material source, but this is a very socially specific type of labour, a fact that must not be forgotten. Capital thus rests on the sale of labour-power as a commodity, which in turn presupposes that labour has been denied access to the means of production, that a class has been created which owns nothing but its labour-power. With this we are thrown into the real bloody history of the origins of capitalism, a tale of class-struggle and revolution, which no bourgeois economists, be they Neo-Classical or Neo-Ricardian, can even dare to admit lest it blow their mathematically beautiful towers of paper skyhigh.

The exchange of capital and labour is only superficially an exchange, and scarcely the exchange of equivalents between equal property-owners as described by the economists.

The exchange of equivalents, the original operation with which we started, is now turned round in such a way that there is only an apparent exchange, since, firstly, the capital which is exchanged for labour is itself merely a portion of the product of the labour of others which has been appropriated without an equivalent; and, secondly, this capital must not only be replaced by its producer, the worker, but replaced together with an added surplus. The relation of exchange between capitalist and worker becomes a mere semblance belonging only to the process of circulation, it becomes a mere form which is alien to the content of the transaction itself and merely mystifies it. (Capital 1, pp. 729–30)

But there is a sense in which this form is not ‘mere’ as Marx goes on to argue. It is the form taken by exploitation under capitalism and thereby serves to distinguish it from all other class societies. It is wage-labour we are talking about, not slave-labour, and labour which is paid in kind provides no basis for capitalism even with a collection of state-capitals. Only the theory of value can explain both the reality and the manner in which it appears, not just the existence of exploitation but reason why workers do not immediately, or always, see it as such.

Some definitions of capital

I have argued that the labour theory of value is just a fuller expression of the theory of alienation and the theory of commodity fetishism. It should now be apparent that it is also the basis for Marx’s account of exploitation and thus of his whole analysis of the character of classes and class struggle under capitalism. Abandon the theory of value and one is left either with no theory of exploitation at all or the simple assertion that labour does not receive all of the product. [40] The latter is scarcely a matter of contention and simply leads to moralistic arguments about whether it should, or not. One can follow Ricardo and reduce surplus value to a mere physical quantity, a surplus-product, and thus abolish all that is specific to capitalism as distinct from feudal and slave societies (and indeed socialism – given that surplus-product is defined as the excess of the product over that required for the subsistence of the workers!). Or one can follow the vulgar economists and engage in futile attempts to explain profits as the reward for the productivity of machinery or the sacrifice of capitalists not consuming all of their millions.

Capital is not just a product of labour. Many a bourgeois has said as much. Capital is the product of labour which has become embodied in a commodity and congealed in money, which has taken the form of value divorced from its own creators. Capital is dead labour, alienated labour which has come to dominate living labour. It is not a thing but a process of production but such means monopolised by one class and actually utilised to subordinate another. [41] This domination is not given simply by the nature of the technology, by the character of the machines, but is indeed contained in capital as simply a sum of money, a sum of value, used to purchase labour-power on the market.

Capitalism is, and has always been, a system full of paradoxes. Each individual capital is engaged in a limitless pursuit of value, of money external to each unit of the system, a pursuit which presupposes the existence of exchange, competition, and thus ‘many capitals’. Yet the constraints of the system drive each capital to the point where it will cannibalise other capitals, where growth occurs by means of war, conquest, and violence as well as ‘peaceful’ trade; and where the concentration and centralisation of capitals reaches the level of the nation-state, and the ‘planned’ economy, only to reproduce the anarchy of the system on a world-scale. [42]

It is a system which remains dependent on living labour, whilst continually seeking to free itself from that dependence, to mechanise, automate at all costs. The pace of technical change reaches unprecedented speeds, disrupting whole industries, intensifying the competitive pressures, wiping out even large units of capital or, at least, enforcing even greater concentration under the aegis of the state. The rise in the productivity of labour multiplies enormously the mass of use-values in existence, but can only serve to lower the value of each commodity (the amount of labour-time socially necessary for its production). This is the fundamental contradiction of capitalism. An increase in the amount of dead labour in the system, in the ratio of machinery, or means of production to living labour, will serve to increase the productivity of labour, or the amount of use-values produced in any period of time. It cannot increase the amount of value created in the same period, an amount given simply by the size of the labour-force and the length of the working day. [43]

Hence such fundamental distinctions, introduced only by Marx and constituting again a radical break with the classical economists, as: the difference between constant and variable capital (between that capital used to purchase means of production the value of which enters into the commodities they help to produce but which cannot create any new or surplus value – and that capital used to purchase labour-power which alone has the power of increasing itself), or the difference between absolute and relative surplus value (the former obtained simply by extending the length of the working day, the latter through a reduction in the value of labour-power, or the proportion of that day devoted to necessary rather than surplus labour).

Neither of these two basic distinctions are to be found in any version of bourgeois economics. Even Neo-Ricardian economics obscures the difference between constant and variable capital, as it returns to Ricardo’s old emphasis on the secondary distinction between fixed and circulating capital. Confusing use-value and value, the critics of Marx are unable to grasp what is absolutely distinctive about the human contribution to the production process, to see that the vast expansion of use-values is accompanied by a ‘devaluation’ of each commodity. Isolating technology from the social relations of capital they can perceive only the ‘positive’ contribution of machinery, its productive role. They fail to see that capital is interested not in ‘use-values’ but ‘value’, not in a quantity of surplus-product, however gargantuan, but in a quantity of surplus value, in the monetary return it can obtain for those goods in exchange – a monetary return the basis of which in surplus labour-time is obscured by the character of money but is always there.

The fundamental contradiction between use-value and value finds its most far-reaching manifestation deep within capitalism, in the dual character of the labour process as the production of both use-value and value. The conflict between the two aspects is perhaps better known as the conflict between the growth of the forces of production and the social relations of capitalism. The real basis of the crises made possible by the existence of money lies here. Capitalism discovers its own limits in the limits set to the values of commodities by the fact that they have to be exchanged. In seeking to overcome this limit by increasing the productivity of labour and utilising technical change capitalism accentuates the problem, increasing the mass of use-values and acclerating their devaluation. [44]

A failure to distinguish between use-value and value will thus have the most far-reaching and incalculable consequences. With the orthodox neo-classical economics of the textbooks these are not too difficult to discern. As Rubin so clearly puts it, they either (1) derive social phenomena directly from technical phenomena, or value from use-value, such as capital’s ability to yield profit from the role of the means of production, or (2) they derive technical phenomena directly from social phenomena, e.g. the power of machinery to increase the productivity of labour is attributed to capital as a class relation. [45]

The latter-day Neo-Ricardians are nowhere near so crude as this. On the contrary they insist on rigidly distinguishing between capital defined as machinery and means of production and capital as private property or a sum of money the possession of which enables its owner to receive a profit. [46] Some even claim that this is an essentially Marxist distinction and it would appear that they are merely echoing the remarks of Rubin which I have just summarised. Nobody has done more than Rubin however to stress that capital really does appear as the property of things, as the intrinsic power of means of production. For the Neo-Ricardians Capital is either a thing, means of production, at best seen simply as a quantity of ‘dated labour’, as dead labour in Ricardo’s sense, and thus something which has always and will always exist; or Capital is merely a matter of private property, something superficial which does not reach into the heart of the production process, something which is in no way subject to the ‘laws of motion’ discussed by Marx, and which provides no basis for understanding capitalism as a mode of production, as the world system we are still confronted with today.

This feature of their work appears most clearly in their discussion of distribution of the product between wages and profits. Here we are right back to Ricardo and the procedure just discussed. Wages and profits are ‘explained’ by abstracting from their monetary form-and thus from exchange, and postulating a physical quantity of use-values as the ‘net product’. This is then divided up according to criteria which are either quite arbitrary or have a seemingly radical aura such as ‘class struggle’. The main achievement of the Neo-Ricardians m academic terms has been to have distribution characterised as ‘exogenous’ as something given prior to, and thus inexplicable within economic analysis. [47] The bourgeois definition of the economic is not challenged by this, merely limited in scope. There is a failure here to analyse distribution as, in the first place, a distribution of the conditions of production, as a division between classes, one controlling the means of production and the other owning only its labour-power.[48] As a consequence the social character of the production process is not recognised, nor the manner in which surplus value is extracted in the course of forcing the worker to work longer than is necessary to replace her labour power.

Matters go deeper than this however. Surplus value can only be understood as the form taken by the surplus-product in a monetary economy. The specific social character of the capitalist production-process stems from the fact that it is simultaneously a production of values and use-values. With the abolition of exchange, value and with it abstract labour disappear and wage-labour is nothing but the reality of abstract labour under capitalism. This moreover is but one aspect of the general inability to grasp the significance of the fact that we live in what is a monetary economy through to its roots, and of the general Neo-Ricardian tendency to collapse exchange-value into use-values. As so often Marx has said it before, commenting on Ricardo that:

Money and exchange itself (circulation) therefore appear only as formal elements in his economics; and although, according to him, economics is concerned only with exchange value, profit etc. appears there only as a percentage share of the product, which happens just as much on the basis of slavery. He never investigated the forms of the mediation. [49]

Neo-Ricardian economics has been subject to a variety of interpretations. The equations can be closed in a variety of ways, and a whole number of other sets of equations or theories can be added on to provide a more comprehensive ‘picture’. In particular the use of Sraffa for a ‘general equilibrium’ theory of prices tends to be supplemented by an essentially Keynesian model to deal with the ‘dynamics’ of the system, or monetary phenomena. These are complicated matters which cannot be adequately dealt with here. I would just like to conclude with two observations.

The first concerns the fact that, whereas in all bourgeois economics the theory of value is defined as a matter of ‘relative prices’, filling an academic box on its own, to which other boxes labelled ‘money’, ‘aggregate demand’, ‘trade-cycles’ can be ‘added on’, piled on top of each other in higgledy-piggledy fashion – in Marx’s Capital such divisions do not exist. The theory of value captures the deeply hidden reality of the social relations of capitalism. It expresses the underlying structure of the whole system. Money, for example, is not something that can be ‘added on’ to the equations, but is central to the whole theory of value, and the manner in which it is simultaneously the theory of alienated labour, commodity fetishism, and capitalist exploitation.

The second very important thing about Marx’s theory of value which must be stressed, is that the notion of contradiction lies at its heart. In the most radical versions of Neo-Ricardian theory, all of the contradictions of the system are subsumed into a single conflict struggle between classes over the distribution of the product. It is absolutely wrong to suppose that Marx had a similar view. The contradiction at the root of the system, appears in Capital long before the entrance of the working class, or the sale of labour-power. It is located in the commodity as both use-value and exchange-value, for as Lenin observed:

In this very simple phenomenon (in the cell of bourgeois society) analysis reveals all the contradictions (or the germ of all the contradictions) of modern society. [50]

The contradictions of capitalism are really not difficult to observe: the fact that production is for exchange rather than immediately for use; for profit rather than for human need. They are apparent in the capitalism of today - a world in which mountains of butter coexist with mass famine in the ‘Third World’, in which the introduction of new technology produces mass redundancies and fear and insecurity for the workforce which remains, in which tens of millions are unemployed while the various states cut back on schools, hospitals and housing. For all this the Neo-Ricardians blame a struggle over ‘distribution’, the class struggle. But it is not the working class that is to blame for the crisis, it rests instead with the system whose contradictions will only be resolved with its destruction. It is the labour theory of value that provides the necessary basis for fully understanding it.


1. This is by no means generally acknowledged. Standard works such as M. Dobb, Theories of Value and Distribution (CUP 1973), R. Meek, Studies in the Labour Theory of Value (L&W 1973, 2nd ed.) and M. Howard and J. King, The Political Economy of Marx (Longmans 1975), all tend to obscure the difference between Marx and Ricardo’s Labour Theory of Value. This is located by them in such areas as the sale of labour-power, or the analysis of capital, but Ricardo’s failures here are not related to the fundamental character of his whole conception of value particularly his understanding of the very nature of price and money. Marx’s repeated criticism of Ricardo’s neglect of the ‘form of value are turned into a matter of the latter’s neglect of history which is only part of the point. Althusser in Reading Capital (NLB 1973) is quite correct to criticise this view of Marx as merely ‘Ricardo set in motion’ (p. 92) and to emphasise Marx s understanding of the ‘structure’ of capitalism, but his own discussion of the matter is so up in the air that we lose all sight of Ricardo, and the break in ‘problematic’ becomes quite mystical.

2. A. Cutler, B. Hindess, P. Hirst, A. Hussein; Marx’s Capital and Capitalism Today 1 (London 1977). See the review by Alex Callinicos in IS 2:2.

3. Value and Price in the Marxian System (International Economic Papers, No. 2), which is a far more revealing work than the essay included in E. von Böhm-Bawerk, Karl Marx and the Close of his System (1977 London). Von Bortkiewicz was the first explicit Ricardian to take on Marx and to criticise Marx s failure to use the method of simultaneous equations. His conclusions anticipate many of the recurrent features of Neo-Ricardian work, especially the overwhelming emphasis placed on wage-rises as a cause of a fall in the rate of profit.

4. For a criticism of Robinson cf. R. Rosdolsky, The Making of Marx’s Capital, Ch. 33 (London 1977), who captures the relationship between her ‘populist’ politics and her theory very succinctly.

5. If you are interested in these questions have a look at M. Morishima, Marx’s Economics (CUP 1973), which is a truly astonishing example of how to read Marx through mathematical blinkers and not understand the point of it at all.

6. P. Samuelson, Transforming the Marxian Notion of Exploitation, Journal of Economic Literature, June 1971.

7. I. Steedman, Marx after Sraffa (NLB 1977). Sraffa’s own work, The Production of Commodities by Means of Commodities (CUP 1960), has had an astonishing history. Originally it seems designed as a critique of orthodox neo-classical theory in its own terms using the most abstract of equilibrium models. It was then taken up by CP economists such as Dobb and Meek as a return to classical principles and a vindication of Marx. Dobb jointly edited with Sraffa the works of Ricardo and his later work strongly bears his influence. Meek’s Introduction to the 2nd ed. of his book (op. cit.) states his belief that ‘our Sraffa-type sequence of models does essentially the same set of jobs which the Marxian theory was designed to do.’ This is true only to the extent that both isolate conditions of production and the distribution between wages and profits as the determinants of prices of production when rates of profits are equalised. Sraffa’s work can thus be regarded as a purely technical exercise which sheds light on a number of specific problems concerning the effects of distribution on relative prices. It can in no way serve as an alternative basis for a theory of value in the Marxist sense. Steedman’s use of Sraffa for a full-blooded attack on the labour theory of value is a quite recent turn of events, indicative perhaps of the changing political climate. The ground for it is however laid by Sraffa’s own isolation of ‘technical relations’ or the physical conditions of production from the social relations of capitalism. This undermines any claims that Sraffa might have to be a Marxist although it is worth noting that according to Joan Robinson ‘Piero has always stuck close to pure unadulterated Marx and regards my amendments with suspicion’ (Review of Meek (op. cit.) in Monthly Review, Dec. 1977, Vol. 29, No. 7). The best summary of Sraffa in Marxist terms is in a chapter in R. Meek’s Economics and Ideology and other Essays (London 1967).

8. Steedman, op. cit., p. 207.

9. This is a very sweeping summary. For a useful selection of quotations from various Neo-Ricardian authors, especially Joan Robinson, and an elaboration of the points in this paragraph cf. F. Roosevelt, Cambridge Economics as Commodity Fetishism in Review of Radical Political Economics (USA), Vol. 7, pp. 1–32; for a shorter but more hard-hitting version try M. Lebowitz, The Current Crisis of Economic Theory in Science and Society, Vol. 37, No. 4, Winter 1973–4. Lebowitz describes Neo-Ricardianism as the ‘Economic Theory of the Technostructure’.

10. Just examine the dedication, consider the affiliations of its editorial board, and the history of its patrons, in any issue of the Cambridge Journal of Economics.

11. The most important influences on my reading of Marx have been the works of Rosdolsky (op. cit.) and I. Rubin Essays on Marx’s Theory of Value (Black and Red, Detroit 1972). This and my approach in the first section of this article will lay me open to the charge of ‘fundamentalism’ used to bracket Rosdolsky with such thinkers as Mandel and Yaffe. To the extent that all three fail to develop Marx’s categories in the face of the changing nature of world capitalism, and all three are unable to grasp the state-capitalist nature of Russia, the accusation is justified (cf. C. Harman, review of Late Capitalism in IS 2:1). Fine and Harris though are wrong to treat fundamentalism and Neo-Ricardianism as somehow errors of equal weight in opposite directions. Their middle position becomes very wobbly at times (Controversial Issues in Marxist Economic Theory, Socialist Register 1977). There is all the difference at this level of having some grasp of Marx’s categories and having no grasp at all, the difference between a revolutionary, however dogmatic, and a reformist. To the extent that this work has an excavatory character, simply reasserting a tradition which has been lost, it too fails to develop Marx s categories, a fact of which I am all too conscious.

12. Marx, Letter to Kugelmann, July 1868, M/E Selected Correspondence (Moscow 1975). It is worth emphasising following the last footnote that it is the autonomy of the units of capital that matters here, not their character as private property, a point that Engels stresses very strongly in the Critique of the Erfurt Programme (see K. Marx & F. Engels, Werke, Berlin 1963, Vol. 22, pp. 231–2, quoted in P. Binns, The Theory of State Capitalism, IS 1:74, p. 22).

13. K. Marx, Capital, Vol. 1, Ch. 1 (Penguin, London 1976). The rest of this section and the whole of the next two can be taken as a commentary on Parts One and Two of Capital 1. References in detail except for a few particular points would be superfluous.

14. M. Kidron, Marx’s Theory of Value in Capitalism and Theory (Pluto 1974) has a brief but useful discussion along these lines.

15. K. Marx, Capital, Vol. 3 (Moscow 1972), pp. 182–86. This is a complicated matter. I have preferred Marx’s definition but there are problems with it. Both Rosdolsky (op. cit., pp. 89–95) and Rubin (op. cit., ch. 16 & 17) have an extended analysis of the issues at stake.

16. Marx’s own intellectual history reveals how he moved from the essentially Ricardian identification or rather confusion of the concepts of value and exchange-value (distinguished from market prices) in both the Contribution to the Critique of Political Economy (Moscow 1971) and the Grundrisse (Penguin 1973) to a clear distinction between the two in Capital 1 (pp. 126–8 & p. 152). Exchange-value is always in Capital seen as the relation of one commodity to another and is measured in the quantity of the other use-value for which the commodity exchanges. Price is thus merely a developed form of exchange-value measured in a quantity of money. This leaves us with a notion of value as something absolute, an inherent property of the commodity but as Marx commented, any particular value is still the expression of a social relation. Marx defends Ricardo against the attacks of the ‘value is only relative’ school with the comment: ‘He has reduced the apparent relativity which these things (diamonds, pearls etc.) possess to the true relations hidden behind their appearance, namely their relativity as mere expressions of human labour.’ (Capital 1, p. 177).

17. This is the position usually adopted by those who enjoy playing with the equations including several who want to defend the theory of value against Steedman’s attacks; e.g. P. Armstrong, A. Glyn and J. Harrison, In Defence of Value (Capital and Class 5, Summer 1978) and M. Morishima & G. Catephores, Value, Exploitation and Growth (London 1978). To the extent that these authors are prepared to take Steedman on his own ground they provide a useful service. They are not however capable of really challenging the Neo-Ricardian interpretation of the theory of value which they obviously share to a great extent. My views on their overall understanding of value will emerge in the course of the article.

18. See the discussion in Capital 1, pp. 166–76, comparing societies of commodity production with other earlier societies and with socialism.

19. On value as a social relation which necessarily takes the form of a relation between things nobody is more insightful than Rubin (op. cit.).

20. See the excellent account of abstract labour generally in L. Colletti, From Rousseau to Lenin (NLB 1972), pp. 82–88.

21. The neglect of money as the counterpart of abstract labour vitiates Rubin’s otherwise painstaking account of abstract labour (op. cit., ch. 14). As a result he gets bogged down in trying to distinguish abstract labour from the notion of ‘socially-equalised labour’ as something applicable to all societies. His discussion of the theory of value as an equilibrium theory suffers from the same neglect of money, and thus lays itself open to the charge that it implies that any deviation from equilibrium will lead to the collapse of social organisation, levelled at it by Cutler and co. (op. cit., ch. 3).

22. Capital 1, p. 185, and Rosdolsky, op. cit., p. 113. The acceptance of Say’s Law by Ricardo was merely the other side of the same coin, the inability to grasp the real difference made by the shift from a barter economy to a monetary economy. See Marx’s very sarcastic remarks on James Mill and Say, which could be applied to almost all ‘vulgar economy’ since (Capital 1, pp. 209–10).

23. Marx, Theories of Surplus-Value, Vol. 3 (1969), p. 138.

24. There are a number of very complex issues here again. Marx argues that money either is a commodity, and therefore produced by labour, or that in the case of credit of paper money, it bears a definite relation to gold or a money-commodity base. On this basis he assumes that the exchange-relation of money with all other commodities will be given by the value of money. The sum of prices will be given by the sum of values divided by the value of a unit of money. Marx thus rejects the crude quantity theory of money which fails to grasp that the exchange of money for any good is a special case of the exchange of any two commodities. With paper money, however, an expansion of its quantity in relation to the amount of gold in circulation amounts to a devaluation, or a fall in the hidden labour content of each piece of paper, and the quantity theory which explains inflation on the basis of an increase in the money-supply is confirmed in accordance with the labour theory of value (Capital, Vol. 1, Ch. 3). The theory rests on the idea that money must always have a base in a commodity produced by labour such as gold and this has been questioned as inapplicable to contemporary capitalism. I would argue, however, that gold still constitutes the basis of the world monetary system (cf. the discussion by Mandel in his introduction to Capital, Vol. 1 (Penguin ed.), pp. 74–79.).

25. G. Kay, Why Labour is the Starting Point of Capital (Critique 7), a review of Böhm-Bawerk, is one of the few to emphasise this point. He argues that interpretations of the theory of value as a theory of equal exchange involve a ‘positivism which is utterly inconsistent with Marxism’.

26. Capital, Vol. 1, p. 197.

27. Ibid., p. 31 and the Critique of the Gotha Programme in Marx/Engels, Selected Works (Moscow 1968), p. 319. The failure to grasp this distinction is a common source of confusion, and the effect of reducing exchange-values to relations between use-values (as Sraffa and Steedman do) is to deprive labour of its position as the source of value. Hence the view put by Robinson that ‘a language which compels us to say that capital (as opposed to ownership of capital) is not productive rather obscures the issue’ (Robinson, op. cit., p. 19). Capital here becomes a thing, machinery.

28. Some of the most striking passages on ‘fetishism’ in Marx occur in his discussion of ‘distribution’ in Capital, Vol. 3, esp. Ch. 24 on Interest Bearing Capital and Ch. 48 on the Trinity Formula.

29. cf. Rubin (op. cit.), especially Ch. 3.

30. Capital, Vol. 1, p. 187.

31. Colletti (op. cit.), pp. 88–91, and Rubin are almost alone in the literature I have read in emphasising this.

32. Capital, Vol. 1, p. 198. ‘The further development of the commodity does not abolish these contradictions, but rather provides the form within which they have room to move. This is, in general, the way in which real contradictions are resolved.’ I am indebted in this section to Rosdolsky (op. cit., Ch. 5), who carefully elucidates some very Hegelian passages on the same theme in the Grundrisse, and emphasises the centrality of the notion of ‘contradiction’ to Marx’s theory of value.

33. Keynesians however have tended to regard monetary phenomena as the basic cause of the crises of capitalism, failing to distinguish between the ‘possibility’ of crises created by money, and the nature of capitalist accumulation which turns the possibility into a reality.

34. F. Engels, Anti-Dühring (New York 1972), p. 297.

35. The exclusion of money from Sraffa’s analysis in particular renders the social character of the economy his equations are supposed to represent somewhat vague. Whilst we are clearly supposed to be in a capitalist economy in which there are rates of profit, the units of production with which he deals are industries not firms, connected by their technical inter- dependence and not by money. We could for example be in a single autonomous planned economy in which prices and rates of profit have a purely notional significance as accounting devices. In other words the social character of exchange as a relation between ‘private’ units of production does not appear. In such a world, value, as external to each capital, no longer exists and the surplus is just a collection of use-values appropriated directly by this single all-embracing capital. Surplus value becomes surplus-product (see later in the article) and, despite its title, with Sraffa we are not really in a world of commodities at all.

36. This is the character of Ricardo’s famous corn-model, in which corn is supposed to be the sole input apart from labour into the production of corn, giving a corn ‘rate of profit’ measurable in terms of a single use-value, as a physical ratio independently of money. The obvious difficulty with such a model is that it excludes exchange altogether (why bother to exchange corn for corn?). For a clear summary see the chapter on Ricardo in Dobb (Theories, op. cit.), Sraffa’s own introduction to Ricardo, On the Principles of Political Economy and Taxation (CUP 1951), and the excellent critical discussion by D. Levine, Ricardo and the Conditions of Classical Political Economy (Economy and Society, Vol. 3, 1974, pp. 292–314). Sraffa’s own Standard Commodity is nothing but an attempt to reproduce the properties of a ‘corn-model’ by reducing a mass of different use-values to what is effectively a single use-value. The effect is similarly to abstract from exchange (see the previous footnote) and to reduce profits to a quantity of surplus-product not surplus value.

37. Marx Grundrisse (op. cit.), pp. 257–8, for an important criticism of Ricardo, making just this point.

38. The question of the relationship between Marx’s ‘logical development’ of the categories and the actual history of capitalism is complex. Meek in his Karl Marx’s Economic Method (in Economics and Ideology, op. cit.) argues that Marx’s approach has an essential historical element, but is important to remember the passage in the Introduction to the Grundrisse: ‘It would therefore be unfeasible and wrong to let the economic categories follow one another in the same sequence as that in which they were historically decisive. Their sequence is determined, rather, by their relation to one another in modern bourgeois society …’ (p. 107).

39. cf. note 25. Certain passages earlier in Capital, Vol. 1 can be interpreted as making this assertion but they are not I think in accord with the general tenor of the argument and only at this point does the assumption of equal exchange become vital to the analysis.

40. Steedman’s (op. cit., pp. 57–9) argument that you can retain a notion of exploitation in his analysis in terms of physical quantities, amounts to little more than this.

41. Capital, Vol. 3, pp. 814–15.

42. N. Bukharin, Imperialism and World Economy (London 1972).

43. Marx Grundrisse (op. cit., pp. 415–16) which locates this limit as but an expression of the basic contradiction between use-value and exchange-value, of the fact that an increase in the productivity of labour increases the mass of use-values produced whilst the value of each commodity (the amount of labour-time socially necessary for its production) falls. This in turn underlies the ‘limit, not inherent to production generally, but to production founded on capital’.

44. I have deliberately made no reference to the rate of profit in this analysis. Criticism of Marx in this area has failed to grasp that the fall in the rate of profit is but a particular index of this more basic contradiction which is inherent in the labour theory of value and irrefutable in its terms (note 43). This emerges more clearly in the Grundrisse (pp. 704–8).

45. Rubin (op. cit.), p. 28.

46. cf. Roosevelt (op. cit., note 9) for several lengthy quotations; note 27 for Joan Robinson, and the articles by E. Nell, Theories of Growth and Theories of Value, and A. Bhaduri, On the Significance of Recent Controversies in Capital Theory: a Marxian View, in the Penguin collection Capital and Growth, ed. G. Harcourt and N. Laing (London 1971).

47. Sraffa (op. cit.) – his one degree of ‘indeterminacy’, although Sraffa himself suggests, rather oddly, that it might be closed by the money rate of interest determining the rate of profit (p. 33). It was people such as Dobb who introduced the class struggle, out of mid air as it were, to fill the gap. The result in Neo-Ricardian analysis generally has been to make trade-union militancy largely responsible for the fall in the rate of profit and the onset of the world crisis.

48. Marx, Capital, Vol. 3, pp. 878–79, part of a savage attack on those, such as J.S. Mill, who separated relations of distribution from relations of production and saw only the former as ‘historical’ and open to change.

49. Marx, Grundrisse, p. 327.

50. V. Lenin, Collected Works, Vol. 38, Moscow (n.d.), p. 36.

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