a simple essay

Apr15

Value and Exploitation and Other Thoughts

Marx’ Capital, a multivolume work devoted to explaining the inner workings of the capitalist system of production and the exploitation of the proletariat, was an attempt of an application of historical materialism. For Marx, history is but the constant struggle of classes as the society as a whole tries to develop the means of production. [1] With the constant development of the means of production, new relations of productions succeed previous ones to continually develop the means in the most optional manner. Yet, every new change in the relations brings about a new ruling class that exploits all the classes under it. This is the basis for the struggle of classes, and this system Marx claims, is still very central in capitalism, for which his work Capital is devoted to showing.

However, the central labour theory of value – the centerpiece of Marx’ critique of capitalism and the focus of capitalist exploitation – is a flawed theory. Though it is useful for showing how a possible exploitation in capitalisms works, the simple fact that labour creates value has been a controversial thought since its first publication with Adam Smith. If one can equate value to being produced by labour and that laborers do not receive a fare share of the value they create, one could say that there is an inequality here and that the laborer is exploited for his work. But, if one could prove that there is no reason to believe the labour theory, can there still exist this exploitation in capitalism? If historical materialism is to show the workings of history, then capitalism as part of history must show some form of exploitation, like the periods before it.

In the following pages an overview of value will be introduced. I will be looking at Cohen’s essay on value and exploitation to find why the labour theory feels like a vague theory as well. I will continue and form my own view (if perhaps flawed and unformed) on how commodities can be equated. Finally, I will finish with the question, is capitalism still exploitative? With out the labour theory of value, is this still a valid question to ask.

The Question of Value

The most controversial of Marx’ theories is the labour theory of value. It is a theory that uses two theses, the proper thesis and a popular conception of the proper thesis, which are contradictory. [2] The proper thesis is a market driven (socially necessary labour creates value) from the popular conception (labour and only labour creates value). While a popular theory with famous early economists, Smith and Ricardo, they both experienced problems when trying to relate their conceptions of capitalism to their respective labour theories. Smith even adjusted his original thesis labour theory (a popular conception) to one that was more acceptable in markets (similar to Marx’ proper thesis). My study is an amateurs look at how Marx came about to create value from labour, looking at a possible alternative, and finishing with an overview of Cohen’s argument against the labour theory of value.

Value starts off rather simply as the study of commodities. Commodities, however, being things outside of us, are a subset of objects – the things outside us. Objects can be said to be small, big, pretty, colorful; in fact they can be said to be many things, all of which are the objects properties. All of these properties are both quantitative and qualitative, but are also so diverse. Marx suggests that along with extreme diversity of objects a standard of measuring objects is needed; this is where value comes along. [3] However, not all objects include a general value; rather they all hold use-values. Use-values represent human materialistic wants of a thing, specifically any object existing outside us. Therefore, one could claim that a thing has use-value if and only if the object can be used by anyone for any reason. A simple statement that may or may not be true, but that will suffice for this study. Considering this to be true, one can now say the following objects have both properties and use-values.

So, we have now created a world where objects have properties, be it physical or abstract, and a use-value. In this world, a society could exist where objects are related to each other by this use-value.

Following with Marxist thought; commodities are the unit of which the capitalist mode of production is set upon and as objects have both use-value and properties but also have an extra value: exchange value. Not all objects have exchange-value, but all commodities have use-value. The exchange-value of a thing is the value which allows a commodity to be exchanged for other commodities. However, commodities have a great many exchange values, or rates of exchange, at which the commodity can be traded, “since x blackling, y silk, z gold, etc., each represent the exchange value of one quarter wheat, x blackling, y silk, z gold, etc., must, as exchange-value, be replaceable by each other, or equal to each other.” [4]

Taking a look at our current set up, commodities are things traded and exchanged by their exchange-value, which are themselves objects with properties and use-value. While there seems to be no inherent problem, there is something in Marx that is a little hard to follow. As stated above, since commodities exchange against each other and are therefore replaceable and equal, then the following equation is possible: “1 quarter corn = x cwt. iron.” [5] While there is a subsequent explanation that there is something common in both, a third also exists, to which their respective exchange-values are reducible to, the speculation that this third is labour is hard to comprehend. [6]

As stated before, Marx was not the only person trying to come to grips with looking at value as the creation of labour. While it makes sense for Marx to use this popular theory to explain why the capitalist system is exploitative, the proper theory of value only implies that the popular theory is false. [7] G.A Cohen does a great job invalidating Marx’ value theory. I will examine this further in order to figure out how labour can create value.

While the labour theory of value does not claim that “labour and labour alone creates value,” this statement is inferred from the theory. The theory which as Cohen explains can be summed down to three statements:

  1. Socially necessary labour time determines value.
  2. Value determines equilibrium price.
  3. Socially necessary labour time determines equilibrium prices. [8]

One could infer from statement 1 that labour creates value. This statement, used in Marxian Arguments for the justification of capitalist exploitation, is false by the labour theory of value. [9] Considering the labour theory implies that only current socially necessary labour is taken into consideration to determine the value of a commodity, socially necessary implying in the most efficient manner available to a society, then any previous labour done, or any labour “congealed” into a commodity before the time of exchanged is not considered for the determination of value. [10] Also, any labour done above the necessary labour time for that given commodity is not considered. Therefore, by the labour theory of value, the popular theory that labour and only labour creates value is false, for past actual labour is irrelevant and only conceptual labour is relevant. [11]

It is rather silly that proper theory, evolved from a more popular theory, only contradicts the latter. How can one continue to say that any type of labour creates value if it is false that labour creates value? However, Cohen continues and invalidates the proper theory by identifying premise 3 to be false. He notes a counter-example to 3, which implies that a pattern of ownership of means of production can also determine equilibrium price. Given a monopoly, the equilibrium price of a commodity made by a monopoly will be higher. [12] Therefore, considering that statement 3 is false, and that statement 1 and statement 2 entail statement 3, then statement 1 or statement 2 are false. More over, Cohen treats statement 2 as true by definition, therefore he says that statement 1 is false and “the labour theory of value is sunk.” [13] It is almost an anti-climatic end to a troubled theory. However, if labour does not create value, what of prices and exchange-values? Is there such a thing as ‘value’ to begin with that is a property of commodities?

While Cohen unarguably denies labour the ability to create value and therefore allows for the exchange of commodities in a Marxist view of capitalism, I would still like to know how commodities can be said to be equal or for that matter be exchanged? I have noted that there seems to be market based labour theories, based on socially necessary labour. Perhaps there is a more simplistic approach to the matter, even when using Marxist conceptions of commodities. By eliminating general value all together and looking more deeply at use-value, one can arrive at exchange-value, or rather price. Commodities do not need to have exact value to be exchanged, nor do they need some specific third to be considered equal. In fact, as long their exchange-values are equal, commodities are considered equal.

In trying to understand this problem, Marx attempts to eliminate that use-value plays any role in exchange-value by wrongly stating and simplifying the abstraction of use-values. While people could say that “A hundred pounds’ worth of lead or iron is of as great value as one hundred pounds worth of silver or gold,” that is only implying that in a market society, one could trade what wares he has for any other ware of equal exchange-value. [14] This is to say that the use-value of all commodities is its tradability. However, this is only true if there is a market for a given ware. How would one go about and exchange one hundred pounds worth of silver if there were no market for it, or rather any social institution for average social use-value of commodities? Therefore, one could say that silver as a commodity would have no use-value, for no one would trade for this commodity. One could argue then that if it does not have a use-value, then how can it continue to be a commodity? The prerequisite to being a commodity is having an exchange-value, and it is common for commodities in modern society to be produced that fall out of a market because of too high an exchange value – does this commodity fail to become a commodity? Yes, for it still has an exchange-value; therefore the simplified abstraction that the use-value of a commodity is mere tradability is wrong. But, what is important to note here is that we see Marx using market properties and applying them to a definition of value that is not market defined.

It is here that I will diverge on my separate path of development. I would like to propose another theory of value, one that uses the market forces of supply in demand as well as the use-value of commodities to find the exchange-value. Consider a world where 1 and 2 are true, and assume a simple barter economy with no money exists. Use-values of objects in this world are individually assigned by each person. So, if an object will not be traded, there is no need for it to be assigned general social use-values. However, since commodities are always in the realm of social relation, the use-values of commodities change to an average social use-value. This specific use-value abstracted by the forces of supply and demand determines exchange-value.

If there where no market for a given commodity, either by there being no way for the society to express the want of a commodity or because its supply is so limited that society can live without it, then the use-value of that commodity will be almost nonexistent. One could also say that a commodity is extremely useful because of its appropriate market. The average want of society for that commodity is great; therefore, its use-value would also be great. The relation between the use-value of a commodity and the average social want of the commodity is proportional. This is the demand relation between a commodity and its market. This relation affects exchange-value proportionally; commodities are capable of trading at high exchange-value only if they also have high use-value. This can be illustrated with water, a commodity with high use-value that can trade higher then many other commodities if it is scarce enough. However, how does water in most places have a relatively low exchange value?

Consequently, there is another relation between the commodity and markets which affect exchange-value, that of supply. This relation is inversely proportional, as the supply of a commodity increases, so does its ultimate exchange-value decrease. If the supply of the commodity then decreases and becomes scarce, then the ultimate exchange-value will rise. Therefore, while water has a high use-value, its relative abundance keeps its exchange value low.

Continuing with the assumption of a barter economy, commodities in this society are traded to each other as in the earlier examples from where one could say that x commodity-Y = z commodity-W, where x and z are quantitative values of their respective commodities. But, what is it that allows us to put forth such an equation? Without trying to abstract from a third, how can we say different quantities of different commodities can be said to be equal? You can not say that different commodities are equal, for commodities and objects differ from each other in both physical form and use-value. Saying that objects are equal would imply that all their properties and use-values are equal; instead this equation represents an equivalence relation, commodity-Y and commodity-W are equivalent because they fall in the same equivalence relation. The relation is a simple one: x R y iff exchange-value of x equals the exchange-value of y. This relation is reflexive, symmetric, and transitive. Therefore, if commodities are in the same equivalence relation, they can be considered equal when exchanged. While in this barter economy the exchange-value of a barter economy is an abstract, exchange-value represents price in a currency based system.

So far, I have looked at how Marx views commodities and how labour finds its way into equating them with value. Looking at Cohen’s rather simple processes of invalidating the labour theory, I continued to come to terms with the concept of value in commodities. Commodities need not have a central or general value to them that is generated by some externalized thing like labour. Instead, it is enough for them to have two simple quantitative values, one representing its average use and the other its exchange price. I noted how such a possible explanation of this comes about as well as looking into how in such an explanation things can be equated. Commodities which have the same price are said to be related and therefore equivalent. But, if there is no such thing as labour that drives exchange price, or that labour does not create value, how does capital exploitation come about?

Capitalist Exploitation

So, is it possible to look at capitalist exploitation without the labour theory? Marx my not have explicitly stated a theory of exploitation in historical materialism; however, exploitation is one of the many ways in which classes struggle with each other. So, one could go as far as to say that if there is no exploitation in capitalism, the historical materialism would lose some of its validity. The question now is can exploitation be related in terms other then labour, and could perhaps a general theory of exploitation for all of historical materialism be devised?

Roemer found an excellent solution to this question while trying to find possible exploitation in current socialist countries. [15] His solution was the proposal of a general theory of exploitation, one that as he developed could be seen in capitalist, feudal, and socialist exploitation. While originally this theory was based on the labour theory, basically that “the properties proletarians work longer than is socially necessary is called exploitation,” or rather as a more general statement that “an agent is exploited if, no matter how he spends his revenues from production, he cannot possibly purchase a bundle of goods which embodies as much labour as he in fact worked,” [16] it becomes a little problematic for I have already shown how Cohen proved the invalidity of the labour theory. Therefore, socially necessary really has no meaning anymore while the second statement uses labour embodied in commodities. We have seen now how objects can be congealed with labour as well.

Fortunately, this is also a problem for Roemer, for of the differences in labour endowments, makes his calculations rather impossible. [17] His solution is to remove the labour theory from the general exploitation theory and instead use a game-theoretic definition as follows: “An individual or coalition is considered to be exploited if he (or they) has (have) some alternative which is superior to the present allocation.” [18] Instead of using a debunked theory as assumption, this new definition can in fact explain exploitation in a rather simple manner throughout the different economical stages of development. Roemer concludes “thus, feudal exploitation entails a situation where producers have differential access to freedom from bondage; capitalist exploitation exists when they have differential access to alienable productive assets; socialist exploitation exists when inalienable assets are differentially endowed.” [19] In capitalism, both capitalist and socialist exploitation exist.

Thus, we find an answer and can subsequently claim that historical materialism does hold. Even when labour may not create value and it is not the source of exploitation; the system is still an exploitative one. So, even without Marx’ key theory in his critique against capitalism, his critique that it is an exploitative system is still justifiable. Only one question remains, what are Marx’ charges against capitalism, and are they morally based?

Footnotes

[1] Karl Marx, “The Communist Manifesto,” Karl Marx Selected Writings. ed. David McLellan ( Oxford: Oxford University Press, 2000), 245.

[2] This is the main point of Cohen’s Essay on the labour theory. G.A. Cohen, “The Labour Theory of Value and the Concept of Exploitation,” History, Labour, and Freedom: Themes from Marx. (Oxford: Clarendon Press, 1988).

[3] Marx, “Capital”, 459.

[4] Marx, “Capital”, 459.

[5] Marx, “Capital,” 459.

[6] While it may have been an easy abstraction to do at the time, to say that labour creates an abstract requires a lot of thought. It’s clear to see that labour creates something material, but that it also creates something congealed in the material thing, certainly requires some type of assumptions. Marx, “Capital,” 459.

[7] Cohen, 214.

[8] Cohen, 223.

[9] Cohen, “Labour Theory,” 214.

[10] My reason for using quotations is to show that while Marx complete thought may have been scientific, there are still parts that rely on either totally unexplainable ideas, or that there is some underlying magic still in the world of capitalism. Marx, “Capital,” 460.

[11] Cohen, 220.

[12] Cohen, 223.

[13] Cohen, 224.

[14] Marx, “Capital,” 460.

[15] John E. Roemer, A General Theory of Exploitation and Class. (Cambridge: Hardvard University Press, 1982).

[16] Roemer, 11, 17.

[17] While trying to test a hypothesis, the Class Exploitation Correspondence Principle, Roemer finds that given the von Neumann model of technology on an accumulation economy this hypothesis is false. Roemer, 18.

[18] This is the new definition for exploitation. Roemer, 20.

[19] Roemer, 21.

History and Philosophy

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