The Poverty of Philosophy, Engels' Preface To The First German Edition (1885) - Part 10 of 14

Engels, then, sets out Rodbertus' schema by which, having established this “constituted value”, the state would issue labour paper money to firms, which they use to pay wages – and presumably materials at their respective constituted value – and workers then use these notes to buy the products they desire. All of this, of course, requires acceptance of Smith's “absurd dogma”, that the value of commodities resolves, entirely, into revenues (v + s), even though that value is comprised not just of revenues, but also of preserved constant capital, i.e. (c + v + s), and also requires acceptance of Say's Law, that supply creates its own demand. But, Marx demonstrates, in Theories of Surplus Value, Chapter 17 and 20, that neither of these are true, and this is the basis of crises of overproduction of commodities.

The value of commodities comprises c + v + s, and the value of c and v can change between the time it is advanced to production, and the time the commodities are sold, as well as changing between the time commodities are sold, and the replacement of consumed inputs are bought, meaning that the selling price may not reproduce the value of consumed materials and labour-power (tie-up of capital), or may exceed it (release of capital). That means that profits may, superficially, appear to have either shrunk or expanded, irrespective of surplus value. But, also, the fact that labour is expended in producing commodities, does not mean either that a) those who obtain the labour notes, in exchange, will spend them all, or b) there will be any demand for the things they have produced.

This confuses value and exchange-value with use value. If there is no demand, or insufficient demand for what has been produced, at the “constituted value”, then, in reality, no such value exists, because a commodity only has value if it is a use value for consumers, i.e. if there is effective demand for it. As Marx puts it,

“Here a great confusion: (1) This identity of supply, so that it is a demand measured by its own amount, is true only to the extent that it is exchange value = to a certain amount of objectified labour. To that extent it is the measure of its own demand -- as far as value is concerned. But, as such a value, it first has to be realized through the exchange for money, and as object of exchange for money it depends (2) on its use value, but as use value it depends on the mass of needs present for it, the demand for it. But as use value it is absolutely not measured by the labour time objectified in it, but rather a measuring rod is applied to it which lies outside its nature as exchange value.”

(Grundrisse)

“It is sheer tautology to say that crises are caused by the scarcity of effective consumption, or of effective consumers. The capitalist system does not know any other modes of consumption than effective ones, except that of sub forma pauperis or of the swindler. That commodities are unsaleable means only that no effective purchasers have been found for them, i.e., consumers (since commodities are bought in the final analysis for productive or individual consumption).”

(Capital II, Chapter 20)

Superficially, Rodbertus' scheme appears mathematically flawless, because it is a tautology. The value of output is equal to the value of labour notes distributed, in conformance with Say's Law, but its clearly nonsense for the reasons set out.

“In present-day capitalist society each industrial capitalist produces off his own bat what, how and as much as he likes. The social demand, however, remains an unknown magnitude to him, both in regard to quality, the kind of objects required, and in regard to quantity.” (p 19)

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