More than one hundred years after his death, Marx’s writings continue to attract interest across the world.1 In spite of speculation that his readership would dwindle after the collapse of the Soviet bloc, Marx’s life and work have continued to attract the attention of social scientists, trade unionists, militants in anti-capitalist or environmental causes, and many others. I have been fortunate enough to witness this revival of interest in the university sector. Student demand for courses dealing with Marx’s work is often overwhelming, leading to over-subscribed classes and lively debates. Marxian scholarship has also been developing strongly, as is shown by the publication of several outstanding books across the social sciences, and the continuing success of those journals open to Marxian contributions.
Although significant in themselves, these successes are a far cry from the dynamism and influence of Marxian scholarship thirty, or even twenty years ago. Today, inequity and exploitation are more heavily cloaked by ‘market’ ideology and by the vacuous discourse of ‘globalisation’ (although both have been fraying at the edges). These shifts, and changes in government policies, among them funding restrictions for education and research, have had a significant impact upon academic interests and student choices. It seems that, although much can be done to promote academic interest in Marxian themes, more significant and lasting achievements depend upon the success of social movements beyond the universities. Mass action is, obviously, urgently needed in order to constrain the erosion of the remaining social safety nets, improve the distribution of power and income across the globe, curtail the influence of financial interests and the ‘sole superpower’ and, more broadly, in order to preserve the possibility of life on this planet in the face of rapid environmental degradation. The positive implications of mass action for academic pluralism in general, and for Marxian research more specifically, cannot be underestimated.
Karl Marx offers no ready-made answers to the urgent problems of today. However, his writings provide a uniquely insightful explanation of the inner workings of capitalism and the articulation between distinct aspects of this economic system, and they show the enormous potential of capitalism for good and evil. From this vantage point, Marx’s writings can throw light upon both the problems of our age and the limits of their possible solutions.
Three criticisms are often raised against Marx, that his writings are inconsistent, wrong or dated. This book reviews several charges of inconsistency and, within the limits of the analysis, dismisses these charges. The second criticism is not assessed directly for reasons of both space and method. However, I think that analyses inspired by Marx’s writings can provide interesting answers to important questions affecting large numbers of people, and this book provides pointers for further research. Finally, the argument that Marx’s works are dated because they were written in the nineteenth century is ludicrous. To the best of my knowledge, no one has been foolish enough to raise similar claims against Marx’s contemporary, Charles Darwin, or against Newton, Aristotle or the Prophets, whose writings predate Marx’s by centuries. The credence that this argument has received in certain circles suggests that Ronald Meek was right when he argued that:
All too often, writers seem to assume that when dealing with Marx it is permissible to relax academic standards to a degree which they themselves would regard as quite illegitimate when dealing with any other economist.2
Even more puzzling than the dismissal of Marx’s analysis of capitalism is the implicit recognition of the validity of the labour theory of value,3 for example when the importance of labour productivity for the determination of prices, living standards and international competitivity are discussed in the press and in political circles. However, in this context Marx’s name is invariably ignored.4
This book critically reviews selected aspects of the Marxian political economy literature, and develops it further.5 Two issues are analysed in detail: first, the essential aspects of economic reproduction under capitalism, including what is produced and how, and the social structures underlying this mode of production, especially the structures of exploitation; second, Marxian studies are shown to explain important features of capitalism which other schools of thought, including the neoclassical, Keynesian and institutionalist, have difficulty analysing. For example, the necessity and origin of money, technical progress and the rising productivity of labour, conflicts over the intensity of labour and the length of the working-day, the growth of the wage-earning class, the inevitability of uneven development, cycles and crises, and the impoverishment of the workers – not because of declining living standards but, rather, because of the growing distance between their ‘needs’ and what they can afford to buy, often leading to debt and overwork.
Value plays an essential role in Marx’s critique of capitalism. This is not a simple concept, and it has been interpreted in widely different ways: ‘virtually every controversy within Marxist economics is at bottom a controversy concerning the nature and status of value theory.’6
This book develops an interpretation of value theory drawing upon a range of contributions, especially those of Ben Fine and John Weeks.7 This interpretation is orthodox in the sense of Lukács, i.e., it follows Marx’s method closely, but there is no presumption that Marx’s every scribble was right, or that every silence implies disapproval. As Heller rightly put it,
there is no such thing as an interpretation of Marx which is proof against being “contradicted” by means of quotations … What interests me is the main tendency (or tendencies) of his thought8
The main purpose of value theory is to explain the relationship between labour and exploitation in capitalism:
the theory of value enables us to analyse capitalist exploitation in a way that overcomes the fragmentation of the experience of that exploitation … it enables us to grasp capitalist exploitation as a contradictory, crisis-ridden process, subject to continual change … [and] it builds into our understanding of how the process of exploitation works, the possibility of action to end it.9
Drawing upon the capitalist monopoly of the means of production, the generalisation of the wage relation and the diffusion of commodity exchanges, value theory reaches important conclusions about the structure and dynamics of capitalist accumulation, including class, conflicts, prices, distribution, credit and finance. These findings offer useful guidelines for empirical studies, and they may inform policy conclusions, although these avenues are not pursued here. This book is incomplete in other areas too. It does not discuss important aspects of value theory, including interest-bearing capital, the tendency of the rate of profit to fall and crisis theory, it ignores non-economic forms of exploitation, and it does not review many important contributions to value analysis.
In spite of these limitations, the book achieves three main objectives. First, it demonstrates that analyses inspired by Marx’s theory of value can be developed cogently, and explain important features of modern capitalism. Second, it evaluates critically the trajectory of Marxian value theory in the past half century, showing that it has become increasingly sophisticated, flexible, and better able to incorporate contributions from across the social sciences. Third, it contributes to the development of this theory in several areas, described below.
This book is divided into eight chapters. Chapter 1 explains the methodological principles of Marx’s analysis, and their relationship with his critique of capitalism. This chapter is inspired by the ‘materialist dialectics’ of the Soviet philosopher E.V. Ilyenkov, and it provides the springboard for the critique of a recent Hegelian interpretation of Marx, the ‘new dialectics’.
Chapter 2 reviews critically two interpretations of Marx’s value theory, the ‘embodied labour’ views, including ‘traditional Marxism’ and Sraffian approaches, and value form theories, including those associated with Rubin and the ‘new interpretation’. These are the best known value analyses developed in the past half-century, and they have contributed significantly to our understanding of capitalism. However, these interpretations are found wanting for several reasons. The shortcomings of traditional Marxism have led to its stagnation and fragmentation. Sraffian analyses misconceive both value and capital, and mirror important shortcomings of neoclassical economics, among them the inability to explain money and economic dynamics satisfactorily. The Rubin tradition has recast the value debate on a new, and much more fruitful, level in the early 1970s. However, its focus upon the value relation is often at the expense of the analysis of capital and capitalism, which reduces its usefulness and is often misleading. Finally, the new interpretation offers a valuable contribution for the development of a radical critique of macroeconomic policy. Even so, this interpretation suffers from significant theoretical shortcomings, especially the tendency to conflate phenomena at different levels of abstraction and to shortcut the mediations that structure value analysis and contribute to its unique explanatory power.
Chapter 3 outlines the value analysis developed in this book. It shows that value theory focuses primarily upon the economic processes and relations that regulate social reproduction under capitalism. This analysis departs from the division of labour. On this basis relations of exploitation are defined and, subsequently, capital and capitalist exploitation are introduced. This chapter shows that capital is, on the one hand, a relation of production in which labour power, the products of labour, and goods and services more generally, 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. In these circumstances, the products of labour generally take the value form, and economic exploitation is based upon the extraction of surplus value. When analysed from this angle, the theory of value is a theory of class and, more specifically, a theory of exploitation. The concept of value is useful, among other reasons, because it expresses the relations of exploitation under capitalism, and allows them to be explained in spite of the predominance of voluntary market exchanges.
Chapter 4 explains surplus value as the difference between the value produced by the workers and the value of labour power, advanced as the worker’s wage; alternatively, it is that part of the social value product appropriated by the capitalists. Following the conceptualisation of capital in chapter 3, these terms are analysed as aggregates defined by class relations, rather than being merely the sum of individual subsistence needs, wages or profits. This chapter also surveys different conceptions of the value of labour power, the bundle and the share approaches, and finds them wanting on several counts. An alternative is proposed, in which the value of labour power is neither a quantity of goods nor a quantity of money; it is a quantity of value, the abstract labour time spent by the working class producing necessities. This value is determined at the aggregate level, through the exchange between the capitalists and the working class, and the performance of labour and exploitation in production.
Chapter 5 reviews the relationship between values and prices, through the normalisation, synchronisation and homogenisation of labour. This chapter shows that the value form of the product is due to the social division of labour, and that value creation is a social process determined by the relations of production and by society’s productive capacity. Analysis of normalisation, synchronisation and homogenisation of labour explains the value-producing potential of intense and skilled labour, deskilling, intra-sectoral competition and the use of machinery and technical change, including their significance for prices, economic reproduction and crises. Finally, this chapter discusses the meaning and significance of values and prices when demand and supply do not match.
Chapter 6 discusses Marx’s concept of the composition of capital, including the technical, organic and value compositions (TCC, OCC and VCC). Although the composition of capital plays an important role in Marx’s analyses of the value-price relationship, technical change, the tendency of the rate of profit to fall and other processes, this chapter shows that the TCC, OCC and VCC have been generally understood only superficially and generally incorrectly. The concept of TCC is straightforward; this is the physical ratio between the material inputs and the living labour necessary to transform them into the output. The OCC and VCC are more difficult to grasp, and they are compared and contrasted in two situations, static and dynamic. The static case contrasts the value of the constant capital productively consumed per hour (VCC) with the mass of means of production processed in that time (TCC and OCC). In a dynamic context, the OCC is the ex ante evaluation of the constant capital technically required per hour, while the VCC is the ex post ratio between the new value of the circulating constant capital and the variable capital spent in the last phase of production. The static case illuminates Marx’s transformation of values into prices of production, whereas the dynamic case is useful for the analysis of the tendency of the rate of profit to fall, when capital accumulation occurs simultaneously with technical change.
Chapter 7 analyses one of the most vexed issues in Marxian political economy, the transformation of values into prices of production. The literature has often explained the transformation ‘problem’ as the determination of prices under conditions of intersectoral competition, but this neoclassical perspective is misguided. In his transformation procedure, Marx is interested primarily in explaining the distribution of capital, labour and surplus value across the economy. In order to do this, a more complex form of value is necessary, which Marx calls price of production. In other words, the transformation is essentially a change in the form of value, in which case Sraffian procedures are insufficient because they conflate the levels of analysis. The approach developed in this chapter shows that, properly understood, there is no ‘problem’ in Marx’s transformation, and no inconsistency in his analysis. His theory is valuable because it explains the meaning and significance of prices. Calculation of the price vector is elementary in this context.
Finally, chapter 8 summarises the value analysis developed previously, through a critical review of Marxian and other radical contributions to the theory of money, credit and inflation. Marx’s theory of money has often been examined as if it were significant only because of his derivation of money from the commodity. This chapter argues that this viewpoint is infertile, and that this theory can be developed in important ways, including the explanation of inconvertible money and inflation. The former is important because it shows that Marx’s approach is internally consistent and it can accommodate important aspects of modern capitalism. The latter is a significant current problem, and analysing it is relevant both theoretically and politically.
Applications such as these demonstrate the vitality and contemporary relevance of Marxian political economy, and indicate its potential usefulness both as an analytical and critical policy instrument.