Towards The Free Machine
The Labour Theory of Value
In order to explain his thesis that commodities become increasingly like free goods, Paul makes a diversion to explain Marx's Labour Theory of Value. The problem is that what he actually sets out is not Marx's Labour Theory of Value, but something closer to Adam Smith's cost of production theory of value, which, Marx explains, Smith was led into because he failed to distinguish between labour and labour-power. Paul makes the same error.
Marx explains that Smith correctly began by identifying that labour is value. This was his great advance over the Physiocrats. The value of a product/commodity is determined by the labour required for its reproduction, in other words, it is a measure based upon the quantity of labour, and that quantity is measured by time. Paul says,
“Standard textbooks will tell you Smith thought the labour-theory was valid only for primitive societies, and that when it came to capitalism 'value' was the combined product of wages, capital and land. This is incorrect.” (p 148)
But, essentially its not. First Ricardo, and then Marx both point out that Smith, having set out a labour theory of value, based upon quantity of labour, falls into a cost of production theory of value, whereby the value of commodities is determined by the “natural price” of the labour and of capital. As Marx points out in Theories of Surplus Value, Smith believes the labour theory of value stops being the basis of the value of commodities, as soon as landed property and capital comes into existence. He is forced into this argument, precisely because he fails to distinguish between labour and labour-power, and thereby cannot reconcile the existence of surplus value with the requirement that commodities, including labour exchange at their values.
Smith recognised that surplus value is surplus labour, and that surplus labour is that labour undertaken in excess of what is required to reproduce the labourer, but by failing to distinguish between the use-value labour-power (which becomes a commodity, as wage labour), and labour itself, as the essence and measure of value, Smith prevented himself from resolving the contradiction he found himself in. If the value of labour is, like any other commodity, determined by the labour required for its reproduction, how can the capitalist ever make a profit? The wages paid to the labourer for the labour they provide would have to equal the amount of labour they provide to the capitalist.
But, Paul falls into this same error of confusing labour and labour-power. So, he ends up determining the value of a commodity not in terms of the quantity of labour required for production, but on the basis of the value of the labour-power used in its production. He says,
“A commodity's value is determined by the average amount of labour hours needed to produce it. It is not the actual number of hours worked that sets the value but the 'socially necessary' hours of work established across each industry or economy. So the basic unit of account here can be summed up as 'hours of socially necessary labour time.' If we know what an hour of basic labour costs – in Bangladesh the minimum wage pays about 28 US cents an hour – we can express it in money.” (p 150-1)
This is exactly the error that Smith made, as discussed by Marx. Firstly, like Smith, Paul here omits the value of the constant capital used in production of T-shirts, used in his example. But, set that aside. Suppose then the Bangladeshi worker spends 10 hours producing the T-shirt, and Paul tells us that the minimum wage is $0.28 per hour. So the value of the T-shirt here is $2.80. But, then, where is the profit? If the worker is paid $0.28 per hour for 10 hours labour, their wages are $2.80, leaving nothing for profit! This is exactly the contradiction that Marx points out flows from Smith's cost of production theory of value, where he claims that value resolves entirely into the revenues of the factors of production used in its production. Those revenues, Smith continues revolve around the “natural price” of those factors. This natural price is determined on the basis of competition, by what is required to bring the particular factor of production to market. Its what leads Smith into confusion, sometimes using a Labour Theory of Value, at others using this cost of production theory, at points adopting elements of Physiocracy, at other being led back to Mercantilism, to explain profit as some kind of surcharge.
Paul notes the distinction between the dead labour or congealed labour represented by constant capital, which only transfers its value, and living labour which creates new value. Unfortunately, he undermines this distinction by the use of lax terminology. He says that value is created by work, whereas what he should say is that value is created by labour. Work is something done by a machine of some kind. It is the expenditure of energy to achieve a given result, i.e. to lift a ton of water by 1 metre. But,as Marx demonstrates, such work does not create new value. A machine can work all day long, lifting a ton of material by 1 metre, but it will create no new value in the process of doing so. It will transfer a portion of its own value in the process. In the same way, a horse or some kind of pack animal can undertake work, but creates no new value. It is only a biological rather than mechanical machine. Indeed, as Marx describes in The Grundrisse, a slave is only another kind of pack animal, in this respect, and creates no new value. It is only independent, free labour that creates new value.
In setting out the T-shirt example earlier, Paul says that, in judging the value of, say, a T-shirt, “we are unconsciously judging its value against the amount of other people's work that thing or service contains.” (p 150) In fact, of course, we are doing no such thing, nor could we conceivably do that, any more than we could perform the trillions of comparisons and calculation that marginal utility theories require us to do, for any single transaction. In his Supplement to Capital III, Engels describes the way that, under petty commodity production, peasant producers, in each village, had some reasonable knowledge of how much labour-time was required for the production of different commodities, and so their value. But, there is no way on Earth that anyone today could remotely guess how many minutes a Bangladeshi seamstress works to produce a T-Shirt, let alone how much labour-time has gone into the production of the cloth they process, the production of the sewing machines they use etc.
Moreover, even in terms of commodity production, as Marx sets out in Theories of Surplus Value, Chapter 20, even if I know this value, it has nothing to do with how much I am prepared to pay for something. That also depends upon its use value to me.
“The same value can be embodied in very different quantities [of commodities]. But the use-value—consumption—depends not on value, but on the quantity. It is quite unintelligible why I should buy six knives because I can get them for the same price that I previously paid for one.”
(Theories of Surplus Value, Part 3, p 118-9)
When I come to buy something, I do not have to trouble myself with trying to calculate its value, either by some convoluted calculation of labour-time, or of marginal utility. If I want to buy a litre of milk, I might first consider whether store A is cheaper than store B. If competition is working effectively (which Marx assumes in considering such situations) both stores should be led to sell a litre of milk for the same price. The stores, in turn, will buy milk from dairies, and the stores will again look to see which dairy sells milk cheaper, so that competition will again force each dairy to sell at the same price, or what Marx calls the market value.
The determining factor of this market value is labour-time. Each dairy requires a given amount of labour to produce a litre of milk. The dairies in turn will take a similar approach in buying unprocessed milk from farmers, and buying machines from machine makers, and each of these will be forced by competition to minimise the value (labour-time) of their own production, and of the inputs they utilise. So, when I come to buy a litre of milk, I do not have to consider how much labour went into its production. I can simply assume that, because of competition, it has been reduced to this average socially necessary amount. All I have to decide is whether I want to buy a litre of milk, rather than a litre of wine etc. at that particular price, which is simply a matter of subjective preference at that particular moment in time. These particular preferences move demand up and down, and thereby bring about fluctuations in the market price of the commodity, sometimes above, sometimes below the market value, but, contrary to the marginalists, they can never be the basis of determining the market value itself.
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