-Caveat Lector-
- THE LAW OF VALUE - Part 1
"Labor is prior to, and independent of capital. Capital is only
the fruit of labor, and could never have existed if labor had
not first existed." Abraham Lincoln - Dec. 3, 1861
Labor creates all social wealth. Capital, in the hands of the
capitalist class, is wealth that has been legally stolen from
workers in past generations. Workers are exploited as
workers, not as consumers. If these and similar assertions
are true, it is obvious why we workers need to understand
Marx's Law of Value and the extraction of Surplus Value.
We will learn exactly how the owning class exploits and robs
the working class on a colossal scale - why the rich get
richer, and why economic and social power the world over is
increasingly concentrated into fewer and larger corporations.
Through its application, we will see the reason for the evils
and contradictions that beset society -unemployment and
mass poverty in the face of plenty, inflation, recessions,
depressions, war, etc.
The powers-that-be are well aware of the danger should
workers learn Marxian economics. Mainline economic
books and their teachers refer disparagingly to Marx's "labor
theory of value" as an frivolous theory.
It is one of the ironies of history though, that the Law of
Value is not, in its main premise, Marx's discovery at all. This
main premise is that it is the labor time embodied in
commodities that determines their exchange value.
As Marx wrote in "Critique of the Political Economy" (1859):
"The first sensible analysis of exchange value as labor time,.. is
to be found in the work of a man of the New World.. That man
was Benjamin Franklin, who formulated the fundamental law of
political economy in his first work which he wrote when a mere
youth..."
In 1729 at the age of 23, Franklin wrote in an essay, "A Modest
Enquiry into the Nature and Necessity of a Paper Currency":
"By labor may the value of silver be measured as well as other
things. As, suppose one man employed to raise corn, while
another is digging and refining silver; at the year's end, or at any
other period of time, the complete produce of corn, and that of
silver, are the natural price of each other; and if one be twenty
bushels, and the other be twenty ounces, then an ounce of that
silver is worth the labor of raising a bushel of that corn. Now if
by the discovery of some nearer, more easy or plentiful mines, a
man may get forty ounces of silver as easily as formerly he did
twenty, and the same labor is still required to raise twenty
bushels of corn, then two ounces of silver will be worth no more
than the same labor of raising one bushel of corn, and that
bushel of corn will be as cheap at two ounces, as it was before at
one..." (all other things being equal)
Note that Franklin pointed out that commodities do not always
stay in the same relationship. In his example, if a method opens
up where one can obtain 40 ozs. of silver in the same time it
formerly took 20 then the exchange relationship between silver
and corn will be altered.
Franklin concluded his reasoning with this point: "Trade, in
general being nothing else but the exchange of labor for labor,
the value of all things is, as I have said before, most justly
measured by labor"
In the early days of the capitalist system, economics was a
mystery. Economists in Europe searched for the answer to the
problem of why commodities exchanged as they did. Why, at a
certain period, did a bushel of wheat, a yard of linen and a bottle
of wine all exchange equally? What did they all have in
common in equal proportions.
It was under this compelling need for understanding the system
that Franklin, in the New World, and Adam Smith in the Old,
independently reasoned that commodities exchange in the
market on the basis of the amount of labor (measured in time)
embodied in them. In the 19th century, David Ricardo came to
the same conclusion in his study on taxation.
Marx agreed with their pioneering work and took up the
investigation where they left off.
Since capitalism, foremost of all social systems is
predominately involved in the production and sale of
commodities, Marx began his book "Capital"
with an analysis of a commodity. He wrote:
"A commodity is a product of human labor that by its properties
satisfies a human want of some sort or another and that is
produced for someone else's use, i.e., for exchange." In other
words, three conditions are essential to make a thing a
commodity. It must have a use, must be produced by labor and
it must be produced for sale.
As Marx explained:
"A thing can be a use-value, without having value. This is the
case whenever its utility to man is not due to labor. Such are
air, virgin soil, natural meadows, etc. A thing can be useful, and
the product of human labor, without being a commodity.
Whoever directly satisfies his wants with the produce of his
own labor, creates, indeed, use-values, but not commodities. In
order to produce the latter, he must not only produce use-values,
but use-values for others, social use-values. Lastly, nothing can
have value, without being an object of utility. If the thing is
useless, so is the labor contained in it: the labor does not count
as labor, and therefore creates no value."
So commodities are products of human labor produced for sale-
not for self consumption. In America's early days, most citizens
worked for themselves and used up the bulk of their produce. It
was only the surpluses left over that they wished to exchange.
And this is when they needed to determine the value of the
various commodities so they could carry on trade.
>From Marx's definition, we can see that a commodity has two
kinds of value - its value as a useful object and value as it
exchanges with other commodities. Obviously, commodities
like food and clothing are essential, and rank above diamond
rings and fir coats from a standpoint of utility. But, when they
exchange on the market, their value is determined by the
amount of "socially necessary labor time" required for their production and
they exchange according to the labor involved.
Marx used the term "socially necessary labor time" emphasizing
that wasted labor does not create value, whether that wasted
labor is due to slow workers or "outdated" equipment.
He wrote:
"The labor time socially necessary is that required to produce an
article under the normal conditions of production, and with the
average degree of skill and intensity prevalent at the time. "
He showed that when a better method of production is
developed, a more advanced machine for example, productivity
increases and the value of the individual product falls. The new
machine then becomes the preferred method of extracting more
value from the worker, so, to stay in business, every capitalist in
that same industry must introduce the new machine in his/her
workplace. And this faster method then becomes the norm for
that industry.
To illustrate this point, Marx wrote:
"The introduction of power looms into England probably
reduced by one-half the labor required to weave a given quantity
of yarn into cloth. The hand-loom weavers, as a matter of fact,
continued to require the same time as before; but for all that, the
product of one hour of their labor represented after the change
only an hour's social labor, and consequently fell to one-half of
its former value."
What happened to the hand loom weavers?
They went out of business.
When we go to the store we do not, of course, inquire as to the
socially necessary labor time embodied in the thing we're going
to buy. We think only about its price. This brings up the
question - What is price and how is it related to value?
Everyone is familiar with the law of supply and demand. It is
the most elementary law in economics. When the supply of a
commodity exceeds the demand the price goes down. When the
demand exceeds the supply the price rises. Thus though
commodities at any particular time sell above or below their
value, in the long run these factors tend to balance out and the
commodities sell at their values.
Capitalist monopolies may through conspiracies, hold
commodities whose production they control artificially above
what would be their market price. No society, however, can
long tolerate this interference in the economic processes and
therefore outlaws it.
Through the workings out of the Law of Value, capitalism
evolved from an economy based predominately on small
businesses and independent owners of their own land and tools
to a nation dominated by huge international corporations and a
vast army of wage-earners. We can understand why this
happened. Just as, in Marx's time, the hand loom weavers in the
small family-owned "cottage" industry went out of business so
too has this been the inevitable fate of small producers in every
industry - a trend that will continue as long as capitalism exists.
When we hear the "liberal" media refer to "greedy" capitalists as
if things would be different if they weren't greedy, we now
understand that the problem rests in the system, itself!
In this present era of declining living standards, the issue of
greed will be increasingly promoted particularly here in the U.S.
where we have the greatest spread between wealth and poverty
of the industrialized nations. Media pundits write about "kinder,
gentler capitalism" in Europe and elsewhere. For example,
recent hourly wage costs for production workers in the U.S.
were $17.30, Japan - $23.65 and Germany - $31.80. This
reflects the greater solidarity of the workers in these nations -
not kinder capitalists. More and more, European and Japanese
capitalists are looking at American capitalism's success in
breaking unions and eliminating social programs. Unless they
can emulate these measures and bring costs down, their
businesses will lose out.
Daniel De Leon, American Marxist theoretician and editor
(1891-1914) of the socialist paper The People, years ago
summed up the logical and most important consequences of the
Law of Value See if his predictions aren't right on the money:
1. Concentration of productive powers increases the volume of
wealth, lowers the value of goods, and clears the field of petty and
competitive elements;
2.Under capitalism, labor power, being a commodity like all
others, must decline in value;
3. Concentration of productive powers is an irresistible force;
4. the irresistible force congests wealth in the hands of a few
and pauperizes the masses;
5. Labor alone produces all social wealth; the wealth in the
hands of the capitalist class is plunder."
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