In his theory of value, Marx analyses critically the economic processes and relations that regulate social reproduction under capitalism.1 This chapter interprets the meaning and significance of Marx’s value analysis in the light of the materialist dialectics developed in chapter 1. This is achieved in three sections. The first analyses the relationship between the division of labour, exploitation and the value relation. Although Marx’s analysis is valid for capitalism only (see section 1.1), its background is broader: the need to divide labour in order to reproduce human society. This can be achieved in potentially very different ways, one of which is capitalism.2
Section 2 discusses the capital relation. It shows that, on the one hand, capital is a relation of production in which labour power, the products of labour, and goods and services more generally, tend to become commodities. On the other hand, capital is a class relation of exploitation defined by the ability of the capitalists to compel the working class to produce more than it consumes or controls, and by the capitalist command of the surplus. Section 3 draws the main conclusions of this chapter.
The concept of value cannot be grasped immediately.3 In order to explain value and its significance under capitalism, Marx departs from human labour in general. Labour is the process of transformation of given natural and social conditions in order to achieve predetermined outcomes, the goods and services necessary for social reproduction, that Marx calls use values:4
Labour, then, as the creator of use-values, as useful labour, is a condition of human existence which is independent of all forms of society; it is an eternal natural necessity which mediates the metabolism between man and nature, and therefore human life itself.5
In every society the social labour power (the capacity to work of all individuals, including their knowledge, ability and experience)6 is a community resource employed according to cultural, natural and technological constraints.7 Labour is everywhere divided according to gender, age, lineage or class, and the product of social labour must be similarly divided. In addition to this, in most societies, groups or classes of non-producers live off transfers due to the exploitation of the producers.8
Class relations of exploitation are determined by the form of extraction of surplus labour from the direct producers (see section 3.2 and chapter 4).9 These relations include the structures and processes that compel the producers to produce more than they consume or control, and the mechanisms of appropriation of the surplus by the exploiters. Even when narrowly defined in purely economic terms exploitation is a totality, including several aspects of social life, among them the property relations, the distribution of labour, control over the production process, and the distribution of the output.
The defining characteristic of capitalism is the exploitation of the wage workers by the capitalists through the extraction of surplus value (see below).10 In order to explain this mode of exploitation, Marx starts from its most abstract feature, the value relation. For Marx, the value relation and its grounding upon the social division of labour do not need to be demonstrated; they are indisputable facts:
even if there were no chapter on “value” at all in my book, the analysis I give of the real relations would contain the proof and demonstration of the real value relation. The chatter about the need to prove the concept of value arises only from complete ignorance both of the subject under discussion and of the method of science. Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish. And every child knows, too, that the amounts of products corresponding to the differing amounts of needs demand differing and quantitatively determined amounts of society’s aggregate labour … And the form in which this proportional distribution of labour asserts itself in a state of society in which the interconnection of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products.11
The value relation can be analysed at distinct levels. At a relatively abstract level, or in non-capitalist societies where commodity production and exchange are marginal, value is significant only as exchange value, a mental generalisation that expresses the rate of exchange of one commodity for another. In this case,
The “value-form”, whose final shape is the money-form, is completely without content. The category of exchange-value leads an “antediluvian existence”. One can find exchange-values in ancient Rome, in the Middle Ages and in capitalism; but different contents are hidden behind each of these forms of exchange-value. Marx stresses that “exchange-value” detached from the concrete relations under which it has arisen is an unreal abstraction, as exchange-value “can never exist except as an abstract, one-sided relation to an already given concrete and living whole”12
At this level of analysis, abstract labour is also a mental generalisation because, first, production aims primarily at the creation of specific use values, rather than the valorisation of capital.13 Second, the labour markets are thin, highly fragmented and often absent.14 Third, the division of labour across society and within the workplace remains relatively undeveloped.15 Fourth, the exchange values are highly dependent upon non-market relations, rather than being determined primarily by the forces of production and competition.16 In this case, the labour process has few social determinations, products take the commodity form only if they find their way into exchange, and the abstraction of labour is contingent upon sale.
In contrast, in capitalist societies wage labour is the form of social labour, and the products, other assets and social relations generally have the commodity form. In these societies labour is essentially abstract, and exchange value is the form of expression of the value relation:
For Marx the value of a commodity expresses the particular historical form that the social character of labour has under capitalism … This suggests first, that the generalisation of the commodity form of human labour is quite specific to capitalism and that value as a concept of analysis is similarly so specific. Secondly, it suggests that value is not just a concept with a mental existence; it has a real existence, value relations being the particular form taken by capitalist social relations.17
The abstraction of labour and the commodification of the social product can be analysed at two levels. First, in production, wage workers are typically hired on the labour market and compelled to work in order to produce goods and services primarily for profit (surplus value) rather than need (use value), using commercially available inputs. Consequently, the products are commodities since their inception, and abstract labour predominates logically over concrete labour (see sections 1.1 and 2.2.1 and chapter 5).18 Second, the exchangeability of the products demonstrates, in the sphere of exchange, the substantive identity of all types of labour. Marx contrasts the determinations of labour in simple commodity exchange and in capitalism as follows:
what is it that forms the bond between the independent labours of the cattle-breeder, the tanner and the shoemaker? It is the fact that their respective products are commodities. What, on the other hand, characterizes the division of labour in manufacture? The fact that the specialized worker produces no commodities. It is only the common product of all the specialized workers that becomes a commodity … The division of labour within manufacture presupposes a concentration of the means of production in the hands of one capitalist; the division of labour within society presupposes a dispersion of those means among many independent producers of commodities … Division of labour within the workshop implies the undisputed authority of the capitalist over men, who are merely the members of a total mechanism which belongs to him. The division of labour within society brings into contact independent producers of commodities, who acknowledge no authority other than that of competition.19
Marx opens his best known book with the following statement:
The wealth of societies in which the capitalist mode of production prevails appears as an “immense collection of commodities”; the individual commodity appears as its elementary form. Our investigation therefore begins with the analysis of the commodity.20
The expression ‘in which the capitalist mode of production prevails’ is essential, because it situates the subject of Marx’s analysis and the historical limits of its validity.21 Although commodities have been produced for thousands of years, and their production and exchange are historical premises of capitalism, commodities produced under capitalism are essentially distinct from those produced in other modes of production. This difference arises because, under capitalism, the social output typically takes the commodity form and, more importantly, labour power also takes this form:
Two characteristic traits mark the capitalist mode of production right from the start … Firstly. It produces its products as commodities. The fact that it produces commodities does not in itself distinguish it from other modes of production; but that the dominant and determining character of its product is that it is a commodity certainly does so. This means, first of all, that the worker himself appears only as a seller of commodities, and hence as a free wage-labourer-i.e., labour generally appears as wage-labour … [T]he relationship of capital and wage-labour determines the whole character of the mode of production … The second thing that particularly marks the capitalist mode of production is the production of surplus-value as the direct objective and decisive motive of production. Capital essentially produces capital, and does this only as long as it produces surplus-value.22
Marx’s view of capital and capitalism has four important implications for value analysis:
Capital is often defined as an ensemble of things, including means of production, money and financial assets. More recently, individual or social attributes have been defined as forms of capital, for example human, cultural or social capital.23 These definitions are wrong, because the existence of those assets or attributes does not imply that capital also exists. Some (e.g., instruments of production, knowledge and social relations) have existed since the dawn of humanity, while others (e.g., money) predate capitalism by many generations. It is historically misguided and analytically vacuous to extend the concept of capital where it does not belong, as if it were universally valid.24 More specifically, an axe, draught animal, or even one million dollars may or may not be capital; that depends upon the context in which they are used. If they are engaged in production for profit through the (possibly indirect) employment of wage labour, they are capital; otherwise, they are simply tools, traction animals, or banknotes.
Capital is a social relation between two classes, capitalists and workers, that takes the form of things. This social relation is established when the means of production, including the buildings, machinery, tools, vehicles, land and so on, are monopolised by a class, the capitalists, that employs wage workers in production for profit. The workers must sell their labour power regularly and continually because they do not own means of production, cannot produce independently and, in commodity societies, need money in order to purchase the use values that they covet. Once this class relation of production is posited, capital exists in and through the means of production, commodities and money employed in the process of self-expansion of value, that Marx called valorisation:
Capital is not a thing, any more than money is a thing. In capital, as in money, certain specific social relations of production between people appear as relations of things to people, or else certain social relations appear as the natural properties of things in society … Capital and wage-labour … only express two aspects of the self-same relationship. Money cannot become capital unless it is exchanged for labour-power … Conversely, work can only be wage-labour when its own material conditions confront it as autonomous powers, alien property, value existing for itself and maintaining itself, in short as capital … Thus wage-labour, the wages system, is a social form of work indispensable to capitalist production, just as capital, i.e. potentiated value, is an indispensable social form which must be assumed by the material conditions of labour in order for the latter to be wage-labour. Wage-labour is then a necessary condition for the formation of capital and remains the essential prerequisite of capitalist production.25
Capital is a relation between two classes, the capitalists and the working class, which ultimately determines how goods and services are produced and distributed across society.26 As a totality engaged in self-expansion through the employment of wage labour, capital is primarily capital in general. This is the general form of capital.27
Capital in general is best represented by the circuit of industrial capital, M-C-M’, where M is the money advanced to buy commodities (means of production and labour power), C, for processing and, later, sale for more money M’. The difference M’—M is the surplus value, which is the foundation of industrial and commercial profit and other forms of profit, including interest and rent. The circuit of industrial capital represents the essence of capital, valorisation through the production of commodities by wage labour.28 In this circuit, capital shifts between different forms, money, productive and commodity capital, as it moves between the spheres of exchange, production and, upon its completion, exchange. Although this movement is critical for the process of valorisation, profit is due to the surplus labour performed in production only.29 However, profit is not the only thing that capital produces: the social outcome of its circuit is the expanded reproduction of capital, the renewal of the separation between capitalists and wage workers. In this sense, ‘Accumulation of capital is … multiplication of the proletariat.’30
One word of caution. Capital in general has been described by some, drawing on the work of Roman Rosdolsky, as the sum total of the existing capitals. This macroeconomic aggregate is allegedly the subject of analysis in Capital 1 and 2, whereas ‘many capitals’, analysed in Capital 3, includes rival capitals in competition (see chapter 7).31 Rosdolsky’s approach is valuable and it has contributed decisively to the appreciation of the distinct levels of analysis in Capital. However, the presumption that Capital 1 is concerned with the total social capital and Capital 3 with many capitals in competition is incorrect for two reasons. First, capital exists only as a myriad of capitals in competition, and it is nonsensical to presume that it could exist otherwise:
Conceptually, competition is nothing other than the inner nature of capital, its essential character, appearing in and realized as the reciprocal interaction of many capitals with one another, the inner tendency as external necessity … Capital exists and can only exist as many capitals, and its self-determination therefore appears as their reciprocal interaction with one another.32
Second, Marx distinguishes between two types of competition, between capitals in the same branch of industry and capitals in different branches. The former is examined in Capital 1,33 and it explains the sources of technical change, the tendency towards the differentiation of the profit rates of capitals producing similar goods with distinct technologies, and the possibility of crisis of disproportion and overproduction. The latter is examined in Capital 3;34 it explains the possibility of migration, the tendency towards the equalisation of the profit rates of competing capitals, and other equilibrating structures and processes associated with competition (see chapters 5 and 7). The former is relatively more important than the latter because, first, profit must exist before it can be distributed and tendentially equalised and, second, although migration can raise the profit rate of individual capitals, only technical progress can increase systematically the profitability of capital as a whole. In spite of the considerable merits of his analysis, Rosdolsky fails to appreciate the differences between these two forms of competition, and analyses explicitly only the latter, as if the more abstract form of competition did not exist.35
The capital relation implies that the means of production have been monopolised by a relatively small number of people.36 In contrast, the majority are forced to sell their labour power in order to purchase commodities which, as a class, they have produced previously (see chapter 4):
The process [of production] only becomes a capitalist process, and money is converted into capital, only: 1) if commodity production, i.e., the production of products in the form of commodities, becomes the general mode of production; 2) if the commodity (money) is exchanged against labour-power (that is, actually against labour) as a commodity, and consequently if labour is wage-labour; 3) this is the case however only when the objective conditions, that is (considering the production process as a whole), the products, confront labour as independent forces, not as the property of labour but as the property of someone else, and thus in the form of capital.37
It follows that, first, there is a relationship of mutual implication between capitalism as the mode of social production, wage labour as the form of social labour, and the commodity as the typical form of the output.38 Second, capital is a class relation of exploitation which allows capitalists to live off the surplus value extracted from the working class.39 In this sense,
The capital-labour relation is itself a contradiction which forms the fount of class struggle, while the reproduction of both capital and labour incorporate a contradiction between individuality and collective class action.40
Wage labour employed by capital in commodity production for profit performs both concrete and abstract labour, and produces surplus value. This type of labour is productive:
productive labour in a capitalist economy … [is] all wage labour hired out of capital that both produces use values in the form of commodities and, in so doing, directly produces surplus value for capital. Thus, productive labour contributes to the commodity both in some physically determinate effect and in surplus value. This holds true for both ‘mental’ and ‘manual’ labour, labour producing luxury commodities, and labour producing both ‘goods’ and ‘services’ as commodities. Unproductive labour, which is all wage labour that is not productive labour, includes all labour hired out of revenue and two types of labour hired out of capital: labour expended in the genuine costs of circulation and labour expended in the exploitative managerial functions of capital.41
In contrast, workers employed in circulation activities, for example those involved in the transformation of commodity capital into money capital, or the latter into productive capital, are unproductive:
Marx distinguishes labor hired by “productive” capital, or more precisely by capital in the phase of production, from labor which is hired by commodity or money capital, or more precisely capital in the phase of circulation. Only the first type of labor is “productive”, not because it produces material goods, but because it is hired by “productive” capital … The productive character of labor is an expression of the productive character of capital.42
The distinction between productive and unproductive labour, and between these types of labour and other activities that are not generally considered labour (e.g., non-commercial activities including housework, gardening, childcare and leisure, see section 1.1), underpins the concept of surplus value. This distinction is historically specific, and it has no bearing upon the usefulness of the activities or the significance of their outcome. It is merely a reflex of the social relations under which these activities are performed.
Marx’s value theory departs from the ontological principle that human societies reproduce themselves, and change, through labour. Labour and its products are socially divided and, under capitalism, these processes and their outcomes are determined by the monopoly of the means of production by the class of capitalists, the commodification of labour power and the commodity form of the products of labour. In these circumstances, the products of labour generally take the value form, and economic exploitation is based upon the extraction of surplus value. In other words, the capital relation includes the monopoly of the means of production, wage labour, and the continuous reproduction of the two large and mutually conditioning social classes, the capitalists and the workers.43
When analysed from this angle, the theory of value is a theory of class, of class relations and, more specifically, a theory of exploitation. The concept of value is useful because it expresses the relations of exploitation under capitalism and allows them to be explained in spite of the deceptive appearances created by the predominance of voluntary market exchanges.