Sunday, 18 December 2016

Capital III, Engels Supplement - Part 7

Consequent upon this development of commodity production and exchange is the development of metallic money. This has a significant consequence itself, because prior to this time, the value of the commodities being exchanged could still quite easily be seen as being an exchange of equal amounts of labour-time. This labour-time Marx defines as abstract labour, but with the development of money, as the universal equivalent form of value, the labour required to produce this money commodity takes on the mantle itself of abstract labour.

“The most important and most incisive advance was the transition to metallic money, the consequence of which, however, was that the determination of value by labour-time was no longer visible upon the surface of commodity exchange. From the practical point of view, money became the decisive measure of value, all the more as the commodities entering trade became more varied, the more they came from distant countries, and the less, therefore, the labour-time necessary for their production could be checked. Money itself usually came first from foreign parts; even when precious metals were obtained within the country, the peasant and artisan were partly unable to estimate approximately the labour employed therein, and partly their own consciousness of the value-measuring property of labour had been fairly well dimmed by the habit of reckoning with money; in the popular mind, money began to represent absolute value.” (p 899)

So, Engels says its clear that the determination of value by labour-time, and the exchange of commodities on the basis of an exchange of equal amounts of labour-time exists during all of that period from when this commodity production and exchange begins, and it continues right up to that point when capitalist production begins to take place, and thereby modify the prices at which these commodities exchange. Once again refuting the claims of those who maintain that value and the Law of Value only pertains under capitalism, Engels insists to the contrary,

“Thus, the Marxian law of value has general economic validity for a period lasting from the beginning of exchange, which transforms products into commodities, down to the 15th century of the present era. But the exchange of commodities dates from a time before all written history — which in Egypt goes back to at least 2500 B.C., and perhaps 5000 B.C., and in Babylon to 4000 B.C., perhaps to 6000 B.C.; thus, the law of value has prevailed during a period of from five to seven thousand years.” (p 900)

In fact, Engels is using the term Law of Value himself in a restricted sense here to apply only to the law as the basis of commodity exchange. Its clear from what Engels himself has said that value itself even pre-dates commodity production, and from what Marx says, in his letter to Kugelmann, and in what he says about communist society, he believes that the Law of Value applies to all societies as a law of nature, but merely changes its form of appearance.

Moreover, its clear that Marx believes that the Law of Value applies, therefore, under capitalism. What does not apply is the exchange of commodities on the basis of their respective values, because, as soon as capitalist production begins, in the 15th century, capitalistically produced commodities begin to be sold at modified prices. In addition, as Marx makes clear, in Chapter 10, its not just capitalistically produced commodities that are thereby affected.

Non-capitalist producers buy materials and other inputs from capitalist producers. So, the now modified market prices of capitalist producers' output simultaneously become the cost prices of inputs for other producers, which thereby modifies their own output prices, causing a chain reaction throughout the economy. This is Engels' reason for saying that the Law of Value does not apply after the start of capitalist production, in the 15th century, even though such production was very far from dominant at that point.

“The foregoing statements have at any rate modified the original assumption concerning the determination of the cost-price of commodities. We had originally assumed that the cost-price of a commodity equalled the value of the commodities consumed in its production. But for the buyer the price of production of a specific commodity is its cost-price, and may thus pass as cost-price into the prices of other commodities. Since the price of production may differ from the value of a commodity, it follows that the cost-price of a commodity containing this price of production of another commodity may also stand above or below that portion of its total value derived from the value of the means of production consumed by it.” (Chapter 9, p 164-5)

This is important because, as I've demonstrated elsewhere, Marx later shows why the implication of this is also that the price of production of wage goods may be higher than the value of wage goods. The consequence is,

“... the labourer would work a longer, or shorter, time to buy them back (to replace them) and would thus perform more, or less, necessary labour than would be required if the price of production of such necessities of life coincided with their value.” (Chapter 12, p 207)

In other words, where prices are determined by prices of production, rather than exchange values, this does not change the total value produced by society, because the same total social labour-time is expended, but the distribution of this value is thereby changed. If workers must work longer to reproduce their labour-power, because the prices of wage goods are higher than their exchange value, then the amount of surplus value falls correspondingly, and so, therefore, does the rate of profit.

But, this does not at all change the fact that the Law of Value continues to operate under such a regime, precisely because the total value produced continues to be determined by the total social labour-time required for its production, and moreover, changes in value, i.e. in the labour-time expended in production in each sphere, because it continues to influence cost-prices, also determines the movement of prices of production. If the labour-time required to produce commodity X, either the labour embodied in the constant capital, or the new labour required to process it, increases, then the cost-price of X will rise, and consequently, as its price of production is k + p, its price of production will also rise and vice versa.

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