Sunday, 29 July 2012

Capital I Chapter 1 - Part 2

The Exchange Value of commodities, the amount of one that exchanges for another e.g. 1 ton of iron for 1,000 yards of linen, is constantly changing according to time and place. It seems then that the Exchange Value of a commodity cannot be intrinsic to it, but must be determined outside it. This indeed, is what orthodox economics claims. It claims that Value is not objective i.e. is not something measurable within the commodity, but is subjective i.e. is in the eye of the beholder, and is a function of the utility that consumers derive from it. Different consumers derive different levels of utility, and so value each commodity differently (or even the same commodity differently depending on how much of it they already have, and depending on the time and place). Exchange Value then becomes a matter of the collective values that these consumers place upon different commodities at different places and times, what they are prepared to pay for them, and how much they demand in exchange to give them up. For orthodox economics then Exchange Value is identical to market price.

Marx's theory on the contrary, shows that Value is objectively measurable. What appears at first to be an accidental rate of exchange has very real material causes, and the reason that this rate of exchange is constantly changing is not because of different levels of utility derived by consumers, or changing preferences, but is due to the continually changing conditions of production, which bring about different Exchange Values even when the utility provided by the commodity remains exactly the same. Exchange Value is not extrinsic and subjective, but embodied, and objective.

That one commodity exchanges for another in a given proportion means that there is an equality between them in so far as some shared quality they possess. For example, if I am comparing the weight of different items, I might find that on one side of the balance I have to place four plums to balance two apples. The relation is determined by the relative weight of plums and apples. I can make the comparison only because they both share the quality of having mass.

If 1 ton of iron exchanges for 100 yards of linen, it means that, similarly, the Value of both is equal at this point. What quality is it that they share that makes this comparison possible. It is that they both possess Value. Just as the weight of 4 plums and 2 apples is expressible as a given quantity of some third item, e.g. a 1 lb. iron weight, so the Value of the 1 ton of iron and the 100 yards of linen is expressible in a single third term. This third term, Marx argues, cannot be reducible to some physical characteristic of the commodity, such as its weight, hardness, length, chemical composition etc. all of which determine its Use Value, because it is not possible to directly compare the Use Value of one thing with another, and, as stated above, Exchange Values change even when all of these physical characteristics remain the same.

What then is the common thing they all share? They are the products of human labour. But, as Exchange Values, rather than Use Values, the form of the commodity is now immaterial. The owner of a commodity has no interest in it as a Use Value. It does not matter whether it is a house or a table, or a ton of iron. In fact, the owner of a commodity does not see it as a Use Value, or otherwise they would not want to exchange it. Its only use to them is as an Exchange Value, as something they can exchange for something else they want. All we are concerned with is that it is an Exchange Value, and so when we consider the human labour that is the measure of this Exchange Value, it is not the labour of the builder, carpenter or ironworker that we are concerned with, but human labour in the abstract, i.e. general human labour, stripped of all its particular characteristics. In fact, we can no more compare the labour of a builder with that of a spinner than we can the Use Value of an apple to an orange, or a house to a length of linen.

It should be noted here that there is debate and controversy over the definition of this Abstract Labour. Marx uses different definitions for Abstract Labour. For example, on page 46 he describes it as total output divided by total labour used to produce it.

The total labour power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour power of society, and takes effect as such..”

He uses different definitions later.

The common substance that all of these commodities share is that they are Values, and the quantity of Value each possesses is determined by the amount of Abstract Labour required for their production. Because changing conditions in relation to time and place, mean more or less Abstract Labour is required for the production of any commodity, so the Value of the commodity rises or falls. The changes in the Exchange Value of the commodity are a consequence of these changes in its Value. Later Marx shows that where the Value of two commodities changes in the same direction, and in the same proportion, the Exchange Value of one with the other remains, therefore, unchanged. This is an indication of the difference between Value and Exchange Value.

The amount of this Abstract Labour contained in the commodity is measured by time. Value is measured by Labour-time in hours, days, weeks etc. In fact, capitalists themselves use this measure. Productivity in car factories is measured in terms of man hours required to build a car.

Why then do not the least efficiently produced commodities have the highest Exchange Values? Competition! Although all commodities, indeed all products of human labour, have their own Individual Value, there is only one Exchange Value, for commodities of the same type. If a producer is inefficient and requires more labour-time to produce a commodity than his competitors – the Individual Value of their commodity is still determined by the Labour-time used for its production – they are only able to sell the product at the Exchange Value, which is the average amount of labour-time required by all producers. So, the inefficient producer would make less profit, or even a loss. Every producer, therefore, has an incentive to keep the labour-time required for production to a minimum.

The average amount of labour-time required for the production of a commodity Marx calls the Socially Necessary Labour-time.

The labour time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time. The introduction of power-looms into England probably reduced by one-half the labour required to weave a given quantity of yarn into cloth. The hand-loom weavers, as a matter of fact, continued to require the same time as before; but for all that, the product of one hour of their labour represented after the change only half an hour’s social labour, and consequently fell to one-half its former value.” (p47)

Of course, whether something is a Use Value or not can only be confirmed if someone wants to buy it when it has been produced. If no one does then it is not a Use Value, and the labour used in its production was also, therefore, not socially necessary. As a result, the commodity has no Exchange Value, and the Labour used in its production had no Exchange Value either. This is one of the differences of capitalism with previous forms of production, and one of the problems with it. In previous forms of production, where production is for direct consumption by the producer and their family, or is to meet the needs of a feudal lord, clergy etc. all production is immediately of Use Values, because only what is needed is produced. Even where production of commodities occurs, on a small scale, to be exchanged by barter, this remains the case, because A asks B to produce X for them in exchange for A producing Y for B. For example, a blacksmith agrees to spend 2 hours shoeing a peasant's horse, in exchange for the peasant working on the blacksmith's land for 2 hours. Production and Consumption are always in balance. Capitalism produces masses of commodities without knowing if anyone wants them. Production and consumption are no longer necessarily in balance, and so huge shortages or surpluses can arise, causing huge amounts of waste, and leading to economic crises.

NB. To avoid confusion for those unfamiliar with Marx's economic theory it should be pointed out here that in speaking about labour-time required for production, he was not merely talking about the immediate labour, or as he calls it Living Labour. Marx was well aware that a part of the Value of commodities is comprised in part of other inputs, for example, the raw materials, the machinery and so on. But, as stated at the beginning, all of these are commodities too, and their Value is passed into the commodities they help produce, and is also, therefore, measurable as a certain amount of labour-time. Marx calls the labour, in those parts of capital, Dead Labour. When he talks about the labour-time required for production he means the sum of both this Dead and Living Labour.

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