[OPE-L:2403] Re: Re: the employment contract and capitalism

From: Steve Keen (s.keen@uws.edu.au)
Date: Wed Feb 23 2000 - 15:53:50 EST

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marx had much the sort of hypothetical conversation you develop with
Ricardo--in which case Marx played the role of Samuelson. He didn't need
any help from OPE, as it happens! Instead, OPE needs to read him a bit more

The position you ascribe to Marx, he actually ascribes to Ricardo (of the
single "c"!), and in one of my favourite lines, notes that "Ricardo has in
fact no answer, other than ... the law of supply and demand ... He
determines *value* here, in one of the basic propositions of the whole
system, by *demand and supply*---as Say notes with malicious pleasure."

Marx's "conversation" with Ricardo, from Theories of Surplus Value Vol. II,
is reproduced between the dashes:
15.2.1 Quantity of labour and value of labour. [As presented by Ricardo
the problem of the exchange of labour for capital cannot be solved]

"It is clear that the proportional quantity of labour contained in two
commodities A and B, is absolutely unaffected by whether the workers who
produce A and B receive much or little of the product of their labour. The
value of A and B is determined by the *quantity of labour* which their
production costs, and not by the *costs of labour* to the owners of A and
B. Quantity of labour and value of labour are two different things."(TSV 2:
p. 395)

"Now wage-labour, however, is a *commodity*. It is even the basis on which
the production of *products* as
*commodities* takes place. The *law of values* is not applicable to it.
Capitalist production therefore is not governed at all by this law... The
second ... [problem] ... lies in the fact that the *utilisation* of a
commodity (as capital) is proportional not to the amount of labour it
contains, but to the extent to which it commands the *labour of others*,
gives power over *more* labour than it itself contains. This in fact is a
second latent reason for asserting that since the beginning of capitalist
production, the value of commodities is determined not by the labour they
contain but by the living labour which they command, in other words, by the
*value of labour*."(TSV 2: p. 397)

"But how does the commodity labour differ from other commodities? One is
*living labour* and the other *materialised* labour. They are, therefore,
only two different forms of labour. Since the difference is only a matter
of form, why should a law apply to one and not to the other? Ricardo does
not answer---he does not even raise this question."(TSV 2: pp. 397-98)

"The question is just why *labour* and the *commodities against which it is
exchanged*, do not exchange according to the law of value, i.e. according
to the relative quantities of labour. Posed in this way, *presupposing the
law of value*, the question is intrinsically insoluble, because *labour* as
such is counterposed to *commodity*..."(TSV 2: p. 398)

15.2.2 @subsection = Value of labour power. Value of labour. [Ricardo's
confusion of labour with labour-power. Concept of the "natural price of

Summarising Ricardo, Marx says that in Ricardo's system "The *value of
labour* is therefore determined by the *means of subsistence* which, in a
given society, are traditionally *necessary* for the maintenance and
reproduction of the labourers.

But why? By what law is the *value of labour* determined in this way?
Ricardo has in fact no answer, other than ... the law of supply and demand
... He determines *value* here, in one of the basic propositions of the
whole system, by *demand and supply*---as Say notes with malicious
pleasure."(TSV 2: p. 400)

"As wages are equal to the necessary means of subsistence,... If the value
of the means of subsistence changes, then the value of the real wage
changes... And here we have the *hidden reason* for Adam Smith's assertion,
that as soon as capital, and consequently wage labour, intervenes, the
value of the product is not regulated by the quantity of labour bestowed
upon it, but by the quantity of labour it can command. The value of corn
determined by labour-time, changes; but, so long as the natural price of
labour is paid, the quantity of
labour that the quarter of corn can command remains the same. "(TSV 2: p.

15.2.3 @subsection = Surplus-value. [An analysis of the source of surplus
value is lacking in Ricardo's work. His concept of the working day as a
fixed magnitude.]

"Apart from the confusion between labour and labour-power, Ricardo defines
the average wages or the value of labour correctly. For he says that it is
determined ... by the *labour-time which it costs to produce it*; that is,
by the *quantity of labour materialised* in the means of subsistence of the
labourer."(TSV 2: p. 404)

However Marx argues that he failed to show that only part of the worker's
working day is used to reproduce this value, while another part becomes

"Ricardo starts out from the actual fact of capitalist production. The
value of labour is smaller than the value of the product which it
creates.... The excess of the value of the product *over* the value of the
wages is the surplus-value.... For him, it is a fact, that the value of the
product is greater than the value of the wages. How this fact arises,
remains unclear. The total working-day *is greater* than that part of the
working day which is required for the production of wages. Why? That does
not emerge."(TSV 2: pp. 405-06)


Typically, Marx does not provide his own answer clearly at this point (what
Marx really lacked was a good editor!). Instead, you can find a reasonable
didactic statement of it in his critique of Wagner (between the dashes again):


"Secondly, only an obscurantist, who has not understood a word of
*Capital*, can conclude: Because Marx, in a note to the first edition of
*Capital*, overthrows all the German professorial twaddle on `use-value' in
general, and refers readers who want to know something about actual
use-value to `commercial guides',---therefore, *use-value* does not play
any role in his work...."(Wagner: p. 198-99.)

"Whoever satisfies his own need through his product, does create a use
value, but not a commodity. In order to produce a commodity, *he must not
only produce a use value,* but *use-value for others, social use value*. So
use value itself---as the use value of the `commodity'---possesses an
historically specific character."(Wagner: p. 199.)

"On the other hand, the obscurantist has overlooked that my analysis of the
commodity does not stop at the dual mode in which the commodity is
presented, [but] presses forward [so] that in the dual nature of the
commodity there is presented the twofold *character* of *labour*, whose
product it is: *useful* labour, i.e., the concrete modes of labour, which
create use values, and abstract *labour, labour as the
expenditure of labour-power*,... that *surplus value* itself is derived
from a `specific' *use-value of
labour-power* which belongs to it exclusively etc etc., that hence with me
use value plays an important role completely different than [it did]] in
previous [political] economy, but that, *nota bene*, it only comes into the
picture where such consideration [of value, use value, etc.] springs from
the analysis of given economic forms, not from helter-skelter quibbling
over the concepts or words `use-value' and `value'."(Wagner: p. 200.)


Marx's "way out", in other words, is not that labor is not a commodity, but
an analysis of the commodity itself which differs from any preceding
commodity, and in which the concept of use-value is crucial. The best
statement of that is in Capital I:

The past labour that is embodied in the labour-power, and the living labour
that it can call into action; the daily cost of maintaining it, and its
daily expenditure in work, are two totally different things. The former
determines the exchange value of the labour-power, the latter is its use
value. The fact that half a [working] day's labour is necessary to keep the
labourer alive during 24 hours, does not in any way prevent him from
working a whole day. Therefore, the value of labour-power, and the value
which that labour-power creates in the labour process, are two entirely
different magnitudes; and this difference of the two values was what the
capitalist had in view, when he was purchasing the labour-power... What
really influenced him was the specific use-value which this commodity
possesses of being a source not only of value, but of more value than it
has itself. This is the special service that the capitalist expects from
labour-power, and in this transaction he acts in accordance with the
'eternal laws' of the exchange of commodities. The seller of labour-power,
like the seller of any other commodity, realises its exchange-value, and
parts with its use-value. (Capital I: p. 188)

Finally, Marx's reason is somewhat clearer: his analysis of why
surplus-value arises from labor/labor-power is derived from a (dialectical)
analysis of the commodity, in which the concepts of use-value and
exchange-value are essential. The basic notion is that a consumer of *any*
commodity in capitalism pays a commodity's exchange-value in order to
commandeer its use-value. As to why this distinction exists, we have to
turn to earlier in Vol I:

"The exchange of commodities, therefore, first begins on the boundaries of
such communities, at their points of contact with other similar
communities, or with members of the latter. So soon, however, as products
once become commodities in the external relations of a community, they
also, by reaction, become so in its internal intercourse. The proportions
in which they are exchangeable are at first quite a matter of chance. What
makes them exchangeable is the mutual desire of their owners to alienate
them. Meantime the need for foreign objects of utility gradually
establishes itself. The constant repetition of exchange makes it a normal
social act. In the course of time, therefore, some portion at least of the
products of labour must be produced with a special view to exchange. From
that moment the distinction becomes firmly established between the utility
of an object for the purposes of consumption, and its utility for the
purposes of exchange. Its use-value becomes distinguished from its
exchange-value. On the other hand, the quantitative proportion in which the
articles are exchangeable, becomes dependent on their production itself."
(Capital I: p. 91)

Marx's analysis of the commodity therefore is his "way out", with his
argument being that the labor exchange is like that of any other commodity,
but that this commodity has the peculiar attribute that its use-value to
its capitalist consumer is not qualitative but quantitative. Since the
general rules of commodity exchange, according to marx, mean that use-value
and exchange-value are incommensurable, this translates to a quantitative
difference between the two in the case of this exchange, and this is the
source of surplus value.

However, I argue that this "way out" generates another dilemma for Marx
which he can't solve: how to prove that labor/labor-power is the only
commodity to which this applies.


At 01:29 PM 2/23/00 -0500, you wrote:
>---------- Forwarded message ----------
>Date: Wed, 23 Feb 2000 19:17:07 +0100
>From: Ernesto Screpanti <screpanti@unisi.it>
>Dear comrades,
>It seems to me that the discussion on the employment contract is going in
>several directions that, although very interesting, are inducing us to lose
>focus on the real theoretical problem. Therefore I hope you will allow me
>to try to redress the discussion. And let me start with an attempt to
>bring to light two important theoretical difficulties of Marx's theories of
>exploitation and class. These are the problems that prompted my research
>agenda on the employment contract.
>1. The "labour-power value" paradox. Marx and Engels assume the so called
>"law of value" or "low of exchange", whereby any commodity is paid in the
>market its real value (to avoid entering the TLV question, let me assume
>that commoditities exchange at production prices). Competition brings about
>this result. Marx and Engels make this assumption to make sure that the
>analysis of exploitation is focused on production conditions and not on
>unequal exchange in the market. In analytical terms the law of value can be
>reformualte as follows: The price of any commodity coincides with its
>production costs and with the present value of its future streams of
>The question is: Where does a positive profit come out if labour power too
>is a commodity? If competition compels it to receive a price coinciding
>with the present value of its future streems of services, there can be no
>exploitation. Marx would answer - If the capitalists earn no profit they
>reduce investments, the industrial reserve army rises, etc. etc. Therefore
>the capitalist must earn at least a "normal" profit.
>Samuleson would answer: Oh, yes! This precisely what I say. In fact the
>normal profit in competitive equilibrium is nil.
>Marx - But the value of labour power is a subsistence wage.
>Samuelson - But certainly not a purely physical subsistence.
>Marx - Certainly not. There are habits and customs and trade unions and
>Samuelson - No. You assumed comnpetition. Therefore no bargaining.
>Marx: OK. So what?
>Samuelson - The long run equilibrium prices are fixed by the forces of
>competition at the level that makes them coincide with the cost of
>production. The value of labour power must be established accordingly, if
>labour power is a commodity. And also the production conditions of labour
>power must be determined accordingly
>Enters Veblen - Pricesely what I say: Habits and customs are endogenous in
>the long run.
>Marx - Yes, but I insist: so what?
>Samuelson - If there is a positive profit, investements increase, the
>industrial reserve army shrinks and wages (and habits and customs, in the
>long run, and therefore the real production cost of labour power) rise to
>their equilibrium value. When they reach this value profits must be nil.
>Marx - But the subsistence wage changes slowly, certainly much slower than
>the the market prices of the other commodities.
>Samuelson - This means that the law of value, that you assumed to avoid
>explaining exploitation as a production phenomen and not as a market
>phenomen, does not apply to labour power. You can account for exploitation
>only if the law of value does not apply to labour power.
>Marx - what does that mean?
>Samuelson - It means that you are explaing exploitation as a market
>phenomenon: there is exploitation because there is no perfect competition
>in the labour market!
>Marx - OPEL comrades, help!
>Screpanti - there is only one way out: Labour power is not a commodity. The
>wage is not a price of a commodity. The labour market does not exist. Trade
>Unions and labour movements do exists. Exploitation is the consequence of
>the exercise of power in the labour process. It occurs because the wage
>rate is fixed through bargaining ex ante (before the beginning of the
>production process), while labour productivity is determined by the
>capitalists' power ex post (i.e. in the labour process).
>2) The paradox of "class demarcation". Now I have no time to present you
>this second problem. Let me reserve it for another message.
>Ernesto Screpanti
>Dipartimento di Economia Politica
>Piazza S. Francesco 1
>53100 Siena
>tel: 0577 232784
>fax: 0577 232661
Dr. Steve Keen
Senior Lecturer
Economics & Finance
University of Western Sydney Macarthur
Building 11 Room 30,
Goldsmith Avenue, Campbelltown
PO Box 555 Campbelltown NSW 2560
s.keen@uws.edu.au 61 2 4620-3016 Fax 61 2 4626-6683
Home 02 9558-8018 Mobile 0409 716 088
Home Page: http://bus.macarthur.uws.edu.au/steve-keen/
Workshop on Economic Dynamcs: http://bus.macarthur.uws.edu.au/WED

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