[OPE-L:1255] Re: A weakness of capitalism

Alan Freeman (100042.617@compuserve.com)
Wed, 28 Feb 1996 13:33:14 -0800

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Re John's questions: I think one of the things
this further underlines for me is the extent to
which we use terms differently. So what I will
do is indicate the way in which I use them,
without at this time wanting to start a major
debate about whether this is right, or what
Marx says.

In particular I think we may need more clarity about
the meaning of 'social value'. Again, I am conscious that there
is a felt need for the debate to move onto other topics so
personally, I won't launch the discussion, just attempt to
state my own view as unprovicatively as I can.

John asks:

1. To what extent is this distinction related to that of individual
value and social value? Specifically, if the labor that gold
commands is greater than that used in its production, is not
its social value greater than its individual value?

My view is that individual value is the value of goods produced
by an individual producer, whereas social value is the average
value of all the goods produced in a sector. So for example if there
are two producers of gold, and one requires 20 hours to make
a gramme of gold while the other requires 40, then the individual
value of gold for the first producer is 20 hours per gramme, and
for the second 40 hours per gramme. The social value of gold
would depend on the relative quantities produced by these two.
If the first made 40 grammes and the second 60 grammes, then
the total gold would be 100 grammes and the total value would
be 40*30 + 60*40 = 3600 hours. Hence I would call the social
value the average value of a gramme of gold, 3600/100=36 hours.

But one gramme of gold may purchase goods worth 72 hours,
due to exceptionally low prices of other goods. In that case the
'Value-E' of one gramme of gold is 72 while its value-P is 36. Or,
and this is how I read Marx's terminology: the 'metallic value
of money' or the 'intrinsic value of money' is 36 while the 'nominal
value of money' is 72. Inversely, the 'monetary expression of labour'
is 1/72 gramme per hour, i.e. one hour of social labour is expressed
in exchange, on average , in 1/72 of a gramme of gold.

Now, it is also possible aside from this that the intrinsic value
of existing gold stocks is lower or higher than the intrinsic value
of new gold production. In that case, which is what I think you
are getting at, my own choice of terminology would be to say
that stocks, and new production, confront each other in the
market in just the same way as the produce of two individual
gold mines, and the same kind of averaging process takes place.

This is what I think happens also with fixed capital, and in this
respect I don't think gold is any different.

Thus I would be included to say that the individual value of 'new
production' can be higher or lower than the individual value of stocks.
A social value is formed as the weighted average of the two.

However this would be a controversial use of language and I
don't see any evidence that Marx used the terms in this way
in this connection (though he certainly discusses this *process*).

2. Can abstract labor time be measured independently? If so, how?
Clearly, in theory, we can imagine abstract labor time as an
activity that exists without reference to prices or actual
quantities of money, but, in capitalism, how else is abstract
labor expressed?

I take the simplistic view that total abstract labour is a simple
total of actual labour hours. One hour of labour can create more
than an hour of value, but I think Marx's view is that such
individual differences are rapidly ironed out in the labour market. So
to all intents and purposes, 1 hour of concrete labour *contributes*
1 hour of abstract labour to the product. Finally, I think there are
no differences between sectors or countries, as to the average
value added by one hour of labour. Thus, to the extent that A might
add more value in 1 hour than B (through being more clever, or
perhaps through working harder) this is only measurable, and
can only express itself, in the production of a single sector and
a single country.

This is a more complex argument and I am giving only what I see as
the bare bones. But the conclusion would be that yes, abstract
labour time is independently measurable and observable, and is
expressed as observed labour time, though there is some averaging
process within sectors.

3. To what extent does this distinction presuppose that the labor
time used in gold production is constant? Suppose it falls, is
the value of gold already produced affected?

This is a heavier one.

I would argue that if the labour time used in gold production falls,
then this will affect the value of already produced gold in proportion
as the new stocks of gold are larger or smaller in comparison with
the existing stocks of gold. That is, if someone hits a rich vein
in Peru which runs out after a year, it will have little effect on
the value of gold; but if a new production method arrives which
makes it possible systematically to refine all new gold for less
labour, then as the 'cheaper' gold arrives on the market and
begins functioning as money, the intrinsic value of gold will fall
(but slowly, over time). Mandel has what I think is quite a good
discussion of this in his article in 'Marx, Ricardo, Sraffa'

Then it remains to be said how this fall of the intrinsic value of
gold can feed through to the purchasing power of gold. Marx, I
think, discusses this in a number of places and I think his refutation
of the quantity theory lies in his discussion of this point. I think
that contra Hume and Ricardo, he denies that the mediation takes
place in circulation. I think he regards it as taking place in production.
He says in a number of places, for example, that the differences are
first felt in those areas where gold is directly produced and exchanged
for other products.

Hence if the intrinsic value of gold is high relative to its purchasing
power (high prices, low purchasing power) then the labour of a gold
producer brings in relatively less of other products. Since gold
like all other commodities takes part in the equalisation of the rate
of profit, one element of the general price adjustment of all
commodities in response to high prices (and hence high profits) will
be for capital to leave gold production and move into the production
of other commodities. The production of other commodities will
increase, raising their supply and diminishing their price. Insofar
as gold itself enters production as a consumed element, its supply
will reduce and this will further contribute to the tendency for
the prices of other goods to fall relative to gold.

This combined mechanism, operating at the speed at which the movement
of capital affects the scale of production (quite slow, about 3-4 years)
brings prices back down and to this extent the movement is no
different from the normal movement of prices during the business

But, because of the cheapening of gold in value terms, the centre of
gravity of the cyclical movement will now be lower.

This argument is also discussed by Mandel.

The key point is that the mediation of the adjustment lies in
the mechanism which governs the tendency for the profit rate
to equalise, which is located in capital movement and hence
via production. Moreover it is the production of all *other*
goods, not gold itself, which is the operative mechanism.

The quantity theorists would have it, I think, that the mediation
is confined to the sphere of circulation and that the only
quantity adjustment is in the quantity of gold.