Both Bailey and Malthus confuse the determination of value on the basis of quantity of labour with the determination of value on the basis of the value of labour-power.
“In the latter case, one presupposes the values whose measure is being sought, that is to say, their external measure, their representation as value. In the first case one investigates the genesis and immanent nature of value itself. In the second, the development of the commodity into money or the form which exchange-value acquires in the process of the exchange of commodities. In the first, we are concerned with value, independent of this representation, or rather antecedent to this representation.” (p 155-6)
Bailey and other “fools” (p 156) seek to determine value – as opposed to exchange-value – on the basis of this external measure, or monetary expression. Where Bailey differs from these other fools, however, Marx says, is that where they seek some invariable external measure of value, which, thereby stands outside the category of value,
“Bailey says that one does not need to understand it, since one does in fact find the expression of value in practice, and this expression itself has and can have variable value without prejudice to its function.” (p 156)
On the one hand, Bailey has admitted that the same six workers might produce 100, 200, or 300 quarters of corn, depending on the level of productivity, so that the same quantity of labour may be represented in different quantities of use values. The unit prices of these use values, measured in labour, can then differ considerably. But, for Bailey, the value of this same quantity of labour, of six workers is not measured by this quantity of output, but only by the proportion of that output which is paid for it as wages, and that might be only 12.5, 25, or 37.5 quarters per worker.
“The quantity of labour and the value of the same quantity of labour are therefore, according to Bailey himself, very different expressions. And how can it be the same if the value is expressed first in one thing and then in something essentially different?” (p 156)
If the productivity of labour, in corn production, falls, instead of producing 300 kilos of corn, the six men may produce only 100 kilos. If previously 3 kilos of corn exchanged for 20 metres of cloth, if productivity in cloth production remains constant, now 1 kilo of corn will exchange for 20 metres of cloth. The value of corn will have risen, and its exchange-value will have risen relative to cloth, and the exchange-value of cloth will have fallen relative to corn, even though its value remains constant. But, this change in value has nothing to do with the “value of labour.” It is clearly only to do with the quantity of labour required to produce each commodity.
In terms of the “value of labour”, on Bailey's definition, this could have remained completely constant. In other words, if the value of labour/wages is equal to say 12.5 kilos of corn, this could have remained exactly the same, and would have no consequence for any change in the relative values of corn and cloth.
“If we take a single commodity, then Bailey’s assertion makes no sense whatever. If the labour-time required for the production of shoes decreases and now only one-tenth of the labour-time formerly required is necessary, then the value of shoes drops to one-tenth of the former value; and this also holds true when the shoes are compared with, or expressed in, other commodities, provided the labour required for their production has remained the same or has not decreased at the same rate. Nevertheless, the value of labour—for example the daily wage in shoemaking as well as in all other industries—may have remained the same; or it may even have increased. Less labour is contained in the individual shoe, hence also less paid labour.” (p 156-7)
Obviously, if the rate of surplus value falls by more than the rise in productivity, this latter point may not be true. For example, if the rate of surplus value is 400%, so that out of €1,000 of new value €200 goes to wages, and €800 to profit, then, if this represents 100 pairs of shoes, each pair of shoes contains €2 paid and €8 unpaid labour. If productivity doubles, so that 200 pairs of shoes are produced, each pair contains €1 paid and €4 unpaid labour. However, if wages rise, so that the rate of surplus value falls to 100%, in each pair of shoes, €2.50 will represent paid labour, and €2.50 unpaid labour. The amount of labour, in total, falls from €10 per pair to €5 per pair, but the fall in the rate of of surplus value means the amount of paid labour rises from €2 to €2.50, per pair.
“Bailey’s proposition could have meaning only in relation to the total product of capital. Suppose 200 pairs of shoes are the product of the same capital (and the same labour) which formerly produced 100 pairs. In this case, the value of the 200 pairs is the same as [previously] that of 100 pairs. And it could be said that the 200 pairs of shoes are to 1,000 yards of linen (say the product of £200 of capital) as the value of the labour set in motion by the two amounts of capital.” (p 157)
A capital of €200 produces 100 pairs of shoes. A capital of €200 also produces 1,000 metres of linen. Assuming an equal rate of profit, 100 pairs of shoes has the same value as 1,000 metres of linen. If productivity in shoe production doubles, so that €200 now produces 200 pairs, these 200 pairs of shoes will exchange for 1,000 metres of linen, so that the price of shoes, relative to linen, falls.
Marx assumes no constant capital component in the value of the shoes and linen. On that basis, the value of both resolves solely into labour, which itself is divided into paid and unpaid labour. If the rate of surplus value is the same in shoes and linen production, then €200 of capital (wages) in both represents the same proportionate amount of the working-day, and of the output value in both cases.
In that case, if the value of shoes, relative to linen, is proportionate to the total labour-time, represented by each, it is also then proportionate to the paid labour-time contained in each.
To illustrate this, Marx sets out the following equations:
“C (commodity:C`=TLT (total labour-time [embodied] in C): TLT` (total labour-time [embodied] in C`).
TLT/x = the paid labour-time in C, and TLT`/x = the paid labour-time in C`, since it is presupposed that the paid labour-time in both commodities constitutes the same proportional part of the total labour-time
C:C` = TLT:TLT`
TLT: TLT`= TLT/x:TLT`/x
therefore C : C’=TLT/x: TLT`/x
or the commodities are to one another as the quantities of paid labour-time contained in them, that is, as the values of the labour contained in them.” (p 157-8)
But, of course, commodities do not consist solely of immediate labour, and it is not just variable capital, but constant capital that is used in their production. That means that even if the rate of surplus value is the same in shoe and linen production, the relative price of shoes and linen can only be proportionate to the amount of labour, if the rate of profit in both spheres is different.
Suppose that in both shoe and linen production, labour divides as 1 hour of unpaid labour to 10 hours of paid labour. If, in shoe production, the capital divides into 50c + 50v, that means that it produces 5s, i.e. 50v:5s = 10:1. But, in linen production, the capital divides into 90c + 10v. In that case, it produces only 1s.
In terms of the total labour advanced (immediate and congealed, i.e. variable and constant capital, the paid labour-time, in shoe production, amounts to 50%, i.e. 50/100, whereas in linen production it amounts to only 10%, i.e. 10/100. The total labour, i.e. the value of shoes is 100 + 5 = 105, whereas for linen it is 100 + 1 = 101. Similarly, the rate of profit for shoes is 5%, but for linen only 1%. This was the basis of the error of Ricardo who insisted on trying to make the exchange-value of the commodity the price around which market prices fluctuate. Bailey picks up this weakness in Ricardo's argument, and turns it against the law of value itself. Marx's refutation of Bailey, here, is also evidence against those, such as Bohm-Bawerk, who later argued that Marx, in Volume III, had been forced himself to overthrow the Law of Value, in order to establish prices of production.
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