Re: [OPE-L] What a whacky debate

From: Philip Dunn (hyl0morph@YAHOO.CO.UK)
Date: Sun Oct 28 2007 - 08:14:34 EDT

Hi Juriaan,

A worker puts in 100 hours of labour, gets paid a wage and spends it on
goods containing only 50 hours of labour. Is that equal exchange,
unequal exchange or neither?


On Sun, 2007-10-28 at 12:39 +0100, Jurriaan Bendien wrote:
> Hi Philip,
> You are correct in a sense, and I agree Marx aims to explain the origin of
> the surplus value initially on the basis that equal values trade for equal
> values, i.e. M and C in the M-C transaction are equivalents and C' and M' in
> the C'-M' transaction are equivalents.
> He aims to explain very clearly why owners of capital would be motivated to
> invest directly in production at all, rather than simply trade in assets.
> Purely from the point of view of the creation of net new value, he argues,
> it does not matter a hoot whether commodities happen to be traded above or
> below their value.
> In practice, however, it does matter very much, for Marx's further argument,
> insofar as (1) beyond some limit, means of production and labour-power
> bought above their value cannot result in capital accumulation, (2) if the
> valorised capital is not realised, the owner of capital has lost capital, by
> investing it in production rather than something else (3) owners of capital
> aim to buy below value, ideally sell above value and realise an adequate or
> maximum profit, under the constraint that all competitors have the same
> objective,
> I was using unequal exchange in the more general, loose sense of "getting
> something for nothing" in a trading relationship. If hypothetically I buy
> e.g. a goose that can really lay gold eggs (okay, I don't believe that, but
> for the sake of argument) for the average, normal price of any goose in the
> market, I could of course argue that an exchange of equivalents has
> occurred, the normal price for a goose, but in fact I've got myself a
> bargain, since as soon as the goose has laid a gold egg, I have gained much
> more than I paid for it. That gold egg is not subjective, it is a really
> existing object which I can use in subsequent trading activities. Although
> formally speaking the exchange may therefore seem equal, "in substance" it
> is an unequal exchange.
> Most trade in capitalist society in reality involves unequal exchange to
> some extent or other, but insofar as all competing market actors are
> motivated to get their money's worth in a developed, open market, this
> narrows or constrains the differential between exchange-values and
> labour-values, such that labour-values regulate exchange-values, at least in
> the long haul. At least that is how I understand Marx's theoretical
> argument, abstractly speaking, assuming a MELT. If market actors discover
> that their trading activity means, that they continually perform more labour
> to obtain less product in return, they are motivated to change their trading
> activity, or change their labour activity. As they adjust their trading and
> labour activity, they effectively implement the rule of the law of value,
> even although they may not be aware of it.
> To put the same thing differently: it is quite possible to trade commodities
> representing more labour for commodities representing less labour, and
> indeed commerce aims to do just that, but in the normal situation the
> differential will not be so great nor enduring, since at a very great
> differential, trading parties would simply refuse to trade, or be motivated
> to seek an alternative source of supply.
> To use a simplified example, if product A takes 100 average labour-hours to
> produce and product B takes 10 hours to produce, a normal trading ratio
> between A and B would be (ceteris paribus) 1:10. If you can trade at 1:11 or
> 1:12  then the owner of A has the advantage, if you can trade at 1:9 or 1:8
> then the owner of B has an advantage. If the trade was in terms of 1:5 or
> 5:1 then there would obviously be a very great trading advantage. In
> commerce, you aim precisely to realise that advantage, if you can, and as
> much as you can. Hence "globalisation", meaning the maximum exploitation of
> unequal exchange (more labour exchanging for less labour, i.e. the
> exploitation of the differential).
> But what you also have to explain is, why the trading ratio is rarely if
> ever 1:100 or 500:1 or something like that, i.e. the regularities of trade,
> rather than their irregularities.
> This sparks among other things the notion of "equilibrium price", and the
> theory of a system of equilibrium prices which ensure that all markets are
> cleared.
> But this doesn't yet explain why the trading ratio consistently happens to
> settle at "somewhere near" 1:10, rather than 1:100 or 500:1, at least in the
> normal or "natural" situation (Smith and Ricardo indeed refer to "natural
> prices"). Nor does it explain, why the normal trading ratio might shift
> gradually in favour of A or B, in the course of time.
> All we can really say in equilibrium theory is, that at a ratio of (say)
> around 1:10, supply and demand are observed to remain rather constant, and
> therefore that this ratio must reflect equilibrium (we have no other
> evidence for it). If it does not remain constant, but shifts gradually in
> favour of A or B, then either there is no equilibrium yet, or, we have to
> say something like that one state of equilibrium "is followed by another
> state of equilibrium" after a market adjustment in which disequilibrium is
> restored to equilibrium.
> Indeed, this is exactly what Fed chairman Alan Greenspan argues:
> "Globalization has altered the economic frameworks of both developed and
> developing nations in ways that are difficult to fully comprehend.
> Nonetheless, the largely unregulated global markets do clear, and, with rare
> exceptions, appear to move effortlessly from one state of equilibrium to
> another. It is as though an international version of Adam Smith's "invisible
> hand" is at work." (Bundesbank speech on January 13, 2004).
> Marx's theory aims to make Smith's "invisible hand" visible. Once we are no
> longer blind, we comprehend that global markets are not largely unregulated,
> that they do not always clear, that labour-effort is involved rather than
> mystical "effortlessness", and that the "invisible hand" is the
> flesh-and-blood hand of the worker producing the product.
> Jurriaan

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