[OPE-L:1699] Re: surprising agreement?

Gilbert Skillman (gskillman@mail.wesleyan.edu)
Fri, 5 Apr 1996 00:39:46 -0800

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Replying to Rakesh's post. Rakesh writes:

> Gil has argued that Marx "asserted, invalidly, that surplus value must be
> explained on the basis of price-value equivalence."
> 1. Proudhon or Marx
> No one has doubted surplus value can be appropriated by usurers and
> merchants and that these circuits have historically depended on
> non-equivalence.

Actually, people have doubted it all over the place: e.g., various
Marxist critics of Roemer's work; various participants in the
"transition from feudalism to capitalism" debate initiated by Sweezy
back in the 50s; Jim Devine in response to me, etc., etc. The issue is this:
if returns to usury and merchant's capital represent mere redistribution of
existing value, they don't constitute surplus value in Marx's sense
of the term, which involves capital as self-valorizing value, or
appropriation of newly created value.

But in his discussion of these forms Marx distinguishes between
merely redistributive forms of usury and merchant's capital and forms
which support and appropriate newly created value: usury extended to
small producers and proto-industrial merchant's capital. He
typically reserves the term surplus value, and by extension capitalist
exploitation, for the latter.

>But this was hardly Marx's discovery. Indeed it was so
> well understood that independent producers were selling at below value that
> this became a central concern of a powerful petty-bourgeois movement:
> Proudhonism.

But this misses Marx's careful distinction between "profit upon
alienation"--based on redistribution--and profit and interest based
on appropriation of newly created value.

> So Gil, aren't you interested in a 19th century problem? Isn't Marx's
> effort at least a part in the clarification of the interests of the working
> class--that they cannot be free of exploitation even if the ideals of the
> market are to be realized, as called for by the petty bourgeois opposition?

Of course I am. But I would take the point a step further--contrary
to Marx's evident value-theoretic suggestion, the working class will
also not be free of exploitation even if capitalists stop buying
labor power and consuming it within capitalist-run production
processes (though the average rate of exploitation might thereby be

> I know that Mike L has asked you a similar, though undoubtedly better
> formulated, question very early in this exchange, so perhaps you (or Mike
> if he is reading) will kindly refer me to the post # of your reply, which
> I have also read but obviously since forgetten.

Actually, Mike and I have moved beyond this question. We agree that
Marx's focus on the purchase and subsumption of labor power beginning
with Vol. I, Ch. 6 cannot validly be justified on the grounds that
surplus value must be explained given price-value equivalence.

> 2. Self-expanding value, not simply surplus value.
> Now I am assuming that Fred shows why Marx was justified in making the
> assumption of price-value equivalence and in deriving the labor/labor power
> distinction as key to the explanation of surplus value.

Bad assumption. At best Fred has corroborated that surplus value
*can* be explained on the basis of price-value equivalence via the
purchase and consumption of labor power, not that it *must* be
explained this way, as Marx insists. [And we all agree that Marx
must establish *necessity* in this regard.]

Fred's stronger claim depends on two premises: first, that
price-value equivalence is the only condition consistent with Marx's
aggregate approach to price and value in Vol. 1. He gives no
argument for this claim, and its validity is far from evident: *no*
particular connection between individual prices and values is implied
by these aggregate relationships.

Furthermore, there is at least one obvious counter example: recall
Marx's stipulation that surplus value must originate outside of
exchange, but be appropriated via exchange. Very well. Suppose that
appropriation of newly created value requires divergence of prices
and values, as in the case of usury and merchant's capital extended
to small producers. Imposition of price-value equivalence in this
case eliminates any surplus value! Hardly a neutral assumption.

Fred's second premise is that Marx in Vol. I confined himself to
"actually existing capitalism". But of itself this restriction
establishes neither the necessity for capitalist exploitation of the
purchase and consumption of labor power in capitalist production, nor
the irrelevance of price-value disparities. As I pointed out, the
"actually existing capitalism" of Marx's day included
proto-industrial capital, interest capital extended to worker
cooperatives, and price-value disparities. On what basis, then, can
one conclude from this restriction that the purchase and subsumption
of labor power is necessary for the existence of surplus value?

>(I should say that
> I do not think Gil's response to Fred's macro interpretation of vol I is
> persuasive, but obviously the matter is not settled at this point and I
> look forward to their further exchange.)

And thus so do I.

> Remember however that Marx is not only attempting to explain the fact of
> surplus value but what makes possible the ceaseless self-expansion of
> value. After all chapter 4 introduces capital as not simply surplus value
> but as what Marx calls an automatic subject.

I agree that Marx anticipates the "ceaseless self-expansion of value"
in Ch. 4--that is, production of surplus value as an *ongoing*
process--, but with regard to Marx's actual argument in Ch. 5 I could
not disagree more. There he is quite explicit in saying that the
immediate purpose is to account for surplus value. The conditions
which support "ceaseless self-expansion" are taken up in part 7 of
Volume I.

Furthermore, even if I granted this point, the invalidity of Marx's
conclusion that surplus-value must be explained on the basis of
price-value equivalence remains.

> Ultimately the self-expansion of value is inherhent in the money-form where
> the commodity has become the dominant social relation (a very complex
> argument indeed, have not yet read Tony's Logic of Marx's Capital); but
> suffice to say every capitalist knows you don't go broke from an excess of
> surplus value, so this class is driven in its attempt to expand value.

No denial, but this has nothing to do with my argument.

> Not only (as Mike L brilliantly argues in OPE-L 1421) are the merchant and
> interest-bearing circuits inadequate to the concept of capital in its
> being, i.e., as self-expanding value (though of course they were critical
> in its historical becoming, as Rosdolsky would put it),

Marx repeatedly and emphatically denies this *categorical* claim with
respect to merchant's and usurer's capital, noting that when extended
to small producers, they constituted "surplus value" [I, 1023];
"self-valorizing value" based on the appropriation of "surplus
labour" [MECW 33, 12]; and thus constitutes "capitalist exploitation
without a capitalist mode of production" [MECW 34, 119]

However, Marx is also quite clear that capitalist exploitation cannot
be sustained on the simple basis of usury once the era of the
capitalist mode of production is attained [III, 501-503]. But Marx's
reasons as to why usury was viable prior to the capitalist era but not
after are historical-strategic, not value-theoretic, as suggested by
Marx's Vol. I Ch. 5 argument. And it's not at all clear to me that
Mike would disagree with this assessment, though he would certainly
insist on a different formulation of the relevant
historical-strategic argument. But that's surely a secondary issue

> capital cannot even
> rest on the foundation of manufacture based on labor-power freely hired at
> its value.

Here the argument is necessarily ongoing. However, the truth of this
proposition necessarily rests on historical-materialist grounds, not
value-theoretic ones.

> In other words, what Gil has not considered is the inadequacy of these
> historically prior forms of capitalist exploitation, as he would put it, to
> the self-expansion of value. (I think Mike has said all this much better
> before, right?)

**Of course** I've considered the inadequacy of these historically
prior forms! This is a central aspect of my representation of Marx's
historical-strategic argument. But the *basis* for their necessary
inadequacy, as indicated by Marx, is historical-materialist, not
value-theoretic. On this point note that my disagreement with Mike
was solely in the details, not in the ground of the argument, which
was manifestly historical-strategic.

> Moreover, Marx has not himself solved the problem of the self-expansion of
> value (the general formula of chapter 4) solely by discovering the
> use-value of the commodity labor power. This only explains how despite all
> exchange at equivalence M' can be produced systematically and collectively
> for all those who purchase labor power.

Yes, I agree that surplus value *can* be explained on the basis of
price-value equivalence given the purchase and consumption of labor
power within capitalist production--I've never suggested otherwise.
But this is not the issue. The issue is whether surplus value *must*
be explained on the basis of price-value equivalence, as Marx insists
at the conclusion of Ch. 5. But this stipulation does not follow
from the value-theoretic arguments advanced in that chapter.

> Marx does not prove that M' can expand continuously through the consumption
> of a special commodity bought at its value: labor power.

Nor does he prove in Vol I that surplus value *must* be explained on
the basis of price-value equivalence, which is the central issue at

> For the self-expansion of value,

This usage suggests you are equating "self-expansion of value" with
"continuous expansion of M' ". But Marx does not use the terms in
this way: instead, Marx uses "self-expansion of value"
(Moore-Aveling translation) ("valorization of value" in the Fowkes
translation) as a synomym for "surplus value".[ Cf. I, 252, 259,

> the capitalist mode of production is
> actually required. Indeed one of Marx's main vol I theoretical efforts is
> the demonstration that self-expansion of value is only possible on the
> foundation of relative surplus value, itself the product of the transition
> from manufacture to machino-facture, the continuous revolutionisation in
> the conditions of labor, the real subsumption of labor.

But as you can see from my responses to Mike, I don't necessarily
disagree with this proposition, except in the details. My point is
that the basis for any such argument of necessity is
historical-strategic, and not value-theoretic--and *certainly* not
derived from the proposition that surplus value must be explained on
the basis of price-value equivalence.

> Moreover, all capitals rely on each other to revolutionize the actual mode
> of production in their respective branches, produce the revolutions in
> value characteristic of this mode and therefore create the conditions for
> the production of relative surplus value--that is, the reduction of
> necessary labor time. Without continual revolutions in the mode of
> production, there would be greater physical limits to reduction in
> necessary labor time.

Same response as above. Why do you think this contradicts what I've
been saying?

> The development of real subsumption can also be understood as conscious
> strategic behavior (as Gil may put it) on the behalf of capitalists as they
> find the self-expansion of value limited by the rebellion of the working
> class to absolute exploitation. Capitalist strategy in other words is
> materialized in technology. But the strategic manuvering of capital (what
> is otherwise called technical progress)is to be explained on the basis of
> value theory.

Yes, perhaps one can *couch* these strategic arguments in the
language of value theory. But the strategic considerations which
dictate such "maneuvering" are necessarily foreign to value
theory. I see no demonstration to the contrary. Furthermore, they
certainly don't derive from the invalid claim that surplus value must
be explained on the basis of price-value equivalence.

> Another very complicated argument would be that once Marx has demonstrated
> how the self-expansion of value is only possible through continual
> revolutions in the capitalist mode of production, he shows further how
> industrial capital must come to dominate and subordinate to its own
> expansion merchant and interest-bearing capital, thus reversing in logical
> and theoretical order the historical forms of capital.

Fine. This does not contradict my position.

> It would be his theoretical demonstration of the tendential subordination
> of these other forms of capital to industrial capital that would
> retroactively justify his exclusion of these historically prior forms in
> chapter 5.

"Retroactively justify"? What? The reason that these other forms
are "tendentially subordinated" to industrial capital has nothing
whatsoever to do with his ch. 5 claim that surplus value must be
explained on the basis of price-value equivalence. The reasons are
historical-materialist, and specifically historical-strategic.

> 3. Marx or Bohm-Bawerk?
> There is also one other implication of Gil's argument to which I would like
> to call attention.
> Once we drop the assumption of price-value equivalence, there is no reason
> to confine ourselves to interest-bearing and merchant capital as equally
> viable routes to surplus value
> What is to rule out Bohm-Bawerk's pure time preference theory (PTPT) for
> the explanation of surplus value: "production processes do take time, hence
> the present *price* of input services must, given positive time preference,
> systematically and repeatedly fall short of the nominal *value* yielded in
> the future by their marginal productivity." (Israel Kirzner, "Pure Time
> Preference Theory of Interest" in The Meaning of Ludwig van Mises. Kluwer
> Academic, 1993, p. 172)

Here's what rules this out: There is no connection whatsoever
between the assumption of price-value equivalence and the
interpretation of profit as a return to impatient time preferences.
On one hand, one could assume price-value equivalence and yet still
interpret any profit or interest resulting from the purchase and
subsumption of labor power as at least in part a return to
"abstinence"--what squares this with the above quote is that in
Marx's canonical case, industrial capital is not treated as a
commodity with a price, so any profit it receives is not treated as a
divergence of price and value.

Perhaps this is most easily seen if I put this the other way around:
if industrial capital is understood as a commodity, then price-value
equivalence is *automatically* contradicted if profit exists. This
has nothing to do with the validity of PTPT.

Conversely, one could reject price-value equivalence and yet
consistently reject that profit or interest can be primarily
explained as a return to abstinence, as in fact I do.

Thus the Austrian interpretation of profit is entirely beside the point.

> So from this Austrian perspective, the assumption of price-value
> equivalence would rule out by definition the PTPT explanation of surplus
> value.

Yes, but not from the *Marxian* (or more generally, classical)
perspective, for reasons given above.

Notice also that even if I granted this argument, its converse does
not hold. Thus, granting that price-value equivalence rules out
profit as a return to abstinence does *not* imply that rejection of
price-value equivalence constitutes acceptance of profit as a return
to abstinence. And there are powerful independent reasons to doubt
that profit is simply a return to abstinence, for reasons suggested
below. So again, this has nothing to do with my argument.

That is, if one simply assumes final value must be fully imputed
> to all the prices of input services, he has simply defined out of existence
> PTPT of surplus value.
> Would you agree?

No. The key is that Marx does not understand industrial capital to
yield a flow of "input services", and if he did, price-value
equivalence would be destroyed by the existence of profit *in any
case*, independent of interpreting profit as a return to abstinence.

> By the way, I bet you are a closeted Austrian

You lose the bet. What a silly idea! While Austrians occasionally
have something interesting to say, as a group they are essentially
clueless about issues of distribution, class and class conflict that
we're addressing here.

To take an example connected with the preceding discussion: one
might grant the possibility that individuals have impatient time
preferences. Indeed, there is consistent evidence for this
possibility, so ruling this out on a priori grounds would be a
dangerous way to proceed. But does accepting this rule out Marx's
interpretation of profit as exploitation? No.

There is also consistent evidence that time preferences are significantly
income- (wealth-) elastic, so that wealthy people enjoy dramatically lower
opportunity costs of "abstinence" than do poorer folk. But then
necessarily profits to wealthy capitalists represent economic rent as
long as material productive assets (and thus financial capital) are relatively
scarce, which is a necessary condition for profits to arise in any
case. And any such profit is based on the existence of surplus
value, as Marx argues and Roemer confirms, whether or not...

> Roemer is the Walrasian.

"the" Walrasian?

In solidarity, Gil