Paris, July 28, 2013
My research on the labour theory of value has led me to the insight that Marx’ vision as expressed in Vol. I of Capital is basically correct. In a competitive economy prices are proportional to labour values, commodities exchange according to their labour values.
In Marx’ analysis the markets have the role of establishing prices through supply and demand which reflect the abstract labour which is socially necessary to produce the commodities. These prices, of course include the capitalist’s profit margins, that is that part of socially necessary labour which is exploited from the labourers and appropriated by the capitalists.
Marx, considering profits, had concentrated on this aspect of exploitation and “Entfremdung” or alienation of labour. But for him it was clear that these profits were socially necessary in order to accumulate. After all the progressiveness of capitalists as opposed to the feudal classes is precisely the fact that they accumulate capital in the form of means of production. But how they do that does not coincide with the interests of society as a whole and because they pursue their private individual interests in an anarchic manner or under “organised capitalism” as a class their class interests that accumulation of capital becomes a nightmare for the great majority of society, the wage-earners.
However, the process of capital accumulation is a very important socially necessary activity and the costs involved, that is the labour which is devoted to it is reflected in the market prices and under competitive conditions these correspond to the prices of production.
It is a serious fallacy of Western Marxist economists and indeed of the Marxists of the Second Internationale not to have understood this properly. This led them to the erroneous proposition that prices of production are not proportional to labour values and they got lost in their, that is Engel’s, “invention” in Vol. III of Capital, that values are transformed into prices. Pseudo-Marxists up to the present times are trying to defend this error by sticking to the “naive conception of labour value” which simply neglects these costs of capital accumulation as part of socially necessary labour. This is the core of the crisis of Marxism, because once the link between prices and labour values is broken, labour, the activity of keeping humans alive, ceases to be the determinate factor of the history of mankind!
The central issue is the understanding of investment, that is capital accumulation, as a socially necessary activity and its costs as part of the prices of production and labour values. But then it becomes immediately clear that the task of the labour movement is to take control over this activity of capital accumulation which the capitalists and their economists insist that it is their exclusive right to exercise. And this is indeed the ultima ratio of power of the capitalist class!
Here is a quote from John R. Hicks on the powerful force making … unemployment:
“an increase in the supply of capital will raise the real wage at which a given number of labourers can be employed; similarly it will raise the number who can be employed at a given level of real wages. On the other hand, a reduction in the supply of capital will reduce the number whose employment at a given wage-level is consistent with equilibrium. Thus, if capital is destroyed, through firms becoming bankrupt, and replacement funds and circulating capital being paid out in dividends and not reinvested, that is a powerful force making for the increase of unemployment.”
John R. Hicks. 1932 (2nd ed. 1963). The Theory of Wages. Chap. X. p. 199.
Hicks points here to the power of the capitalists as a class to control the level of employment and indeed the reserve army. Hick in his seminal book which is one of the founding bricks of modern economics does not speak of labour values, he does not even discuss the concept and defends a wrong definition of exploitation. According to his analysis, in equilibrium, the worker is payed a wage equal to the value of the marginal product of labour. But he does not mention at all the fact implicit in his argument, that the output of the working process is evaluated at marginal labour value, which is the reciprocal of the marginal product of labour. The difference is gross surplus value. As we may have to assume Hick’s had well read Jevon’s chapter V of “The Theory of Political Economy” and may be even H. H. Gossen’s “Entwickelung der Gesetze”. Hicks does refer in chapter X of his “Theory of Wages” to von Hayek, who, in 1927, just a couple of years before, had prefaced a new edition of Gossen’s book. Gossen’s Theory of Pleasure is nothing else but a general equilibrium analysis based on labour values! But this leads us too far.
It is precisely because the accumulation of capital is deciding over the destiny of society that society as a whole has to take control over it via investment contributions as part of the salary and collective investment funds, controlled by the representatives of the wage-earners, the trade unions. Either the labour movement learns to control capital and the accumulation of capital or it remains under the control of that capital.
Workers of All Countries Unite to Control Capital!