WHY VALUE THEORY?
Since the "marginalist revolution" of the late 19th century mainstream economists have dismissed Marx's conception of value as unscientific, bordering on the delusional. But before doing likewise, you might first want to consider how often in everyday life you accept without question the existence of immaterial forces which cannot be measured or directly perceived with the physical senses but which can be inferred from their objective and observable effects on the world.
I assume that you accept the law of gravity. Gravity is an immaterial force that has objective and observable effects on the natural world around us. In this regard, the law of gravity is like law of value, as Marx himself points out in Chapter 1. When we go to the main market of Oaxaca, Mexico, to buy a kilo of beef, and watch the butcher weigh our purchase on his scale, we will have a demonstration of Newton's law of gravity.
But when we ask why the kilo of beef costs 50 pesos, or why this kilo of beef is the same price as the kilo of cheese in the next stall, we will need a different kind of law, one whose effects in the social realm are just as powerful as the effects of Newton's law in the physical realm. We will need a theory of value that has law-like properties, which is what Marx's theory aims to give us.
The real question behind our Oaxaca shopping excursion is this: what is the purpose of a theory of value, any theory of value? Why do we need one in the first place and what is it supposed to do? If you believe that we need a theory of value to explain how subjective tastes, or what is often called consumer preferences, determine the prices of goods and services in a market, then mainstream economics is for you. On the other hand, if you believe that we need a theory of value to explain how the fundamental social relations of capitalist production operate and with what consequences not only in the market but across the entire length and breadth of society, then Marx is for you. To quote Harvey, Marx uses his concept of value to build "a theory of the processes by which capital rules over the conditions of life and labour of the working classes."
Central to Marx's conception of value is "labor power," or the capacity to labor. Capital is the first and only mode of production in history to treat labor power as a commodity. Take a moment to reflect on how strange this is: our capacity to labor, as distinct from our physical being as embodied laborers, is a commodity that can be bought and sold at market, like an iPhone 15, a share of Coca-Cola or a Barbie doll. Stranger still is that labor power must be bought and sold if the great majority of humanity who work for a wage wish to keep body and soul together.
Under capital labor power is a matter of life and death.
In accordance with Marx's tripartite conception of the commodity form, labor power possesses a use value, an exchange value and a value. For the worker the use value of labor power is that it can be sold for money with which to buy consumption goods. For the capitalist the use value of labor power is that it can be bought and used to make profit in industrial production. The exchange value of labor power is the wage that has been negotiated by the two parties.
What, then, is the value of labor power? It is the socially necessary labor time required to produce the laborer who is the bearer of labor power. It follows that the value of labor power is equal to the value of all the commodities workers must buy in order to live and reproduce themselves and their dependents as active or future workers.
Labor power is a unique commodity in one crucial respect: it is the only one that can produce value. What is more, it can produce value in excess of its own value. For capitalists labor power is the goose that lays golden eggs, a metaphor that Marx, who was deeply steeped in the literature of classical Greece, borrows from Aesop's Fables.
Under capital workers are desperate to sell their labor power, the only commodity they own, to the highest bidder. They would not be so desperate, or desperate at all, if they were independent artisans who owned their own tools and shops or self-sufficient farmers who had access to their own land and draft animals. But they own neither the means of production nor the means of subsistence, having been systematically and violently stripped of both through a process which Marx calls " original" or "primitive" accumulation. In the final chapters of Capital, Marx provides a broad-brush account of this historical dispossession, observing that it was written in "letters of blood and fire."
A number of Marxists have insisted that so-called primitive accumulation should not be regarded as a one-and-done event but a process that is woven into the very fabric of capital and continues to the present day. Harvey has proposed that we limit the term primitive accumulation to the historical transition from feudalism to capitalism, and use the broader term "accumulation by dispossession" when dealing with the ongoing nature of this particular form of class warfare.
Whatever we choose to call the naked violence that accompanies the accumulation process, as a practical reality workers who wish to eat rather than go hungry must exchange their labor power for money in the form a wage.
Industrial capitalists, taking full advantage of the "dull compulsion of economic relations," buy labor power and means of production. They then combine these two commodities in a production process from which emerges a new commodity whose value exceeds the value of the labor power expended in its production.
According to capitalists and bourgeois economists, this arrangement rests on the foundation of a free and equal exchange between two commodity owners, the capitalist who owns money and the worker who owns labor power.
But for Marx this freedom and equality are a sham. What the capitalist and economist carefully conceal is that at a certain point during working day, long before quitting time, workers will have produced new value equal to the value of their labor power. Beyond this point workers produce "surplus value" which the capitalist will appropriate as his justly earned profit. This act of appropriation is what Marx calls exploitation but which, in many other contexts, would be called extortion.
According to Marx, surplus value is actually unpaid labor time which the boss extracts from the worker in the "hidden abode of production." It is the historically-specific mechanism by which the dominant class appropriates the surplus product under the capitalist mode of production.
Surplus value is the source of the capitalist's golden eggs, the fuel powering capital accumulation and the terrain on which anti-capitalist struggle is waged, not only at the point of production but in the spheres of realization, circulation and distribution as well.
AGAINST THE CLOCK
Notwithstanding their vigorous critique of bourgeois political economy, both Marx and Harvey agree with mainstream economists on one crucial point: capitalism is an economic engine that generates continuous gains in labor productivity. Without the never-ending revolutions in productivity which are arguably capital's most important material legacy, the engine will sputter and die.
This engine analogy is worth exploring. By the second half of the 19th century mechanical engineers in Britain and North America were hard at work improving the design and operation of the steam engine, the universal symbol of the industrial revolution. One of their inventions was the automatic lubricator which used the internal movements of the engine to supply oil to the cylinders and bearings when the pistons were in operation. Think of capital as a self-lubricating engine and productivity as the oil coursing through its moving parts. If anything goes amiss with the automatic lubricator, the oil (productivity) will stop flowing and the engine (capital) will burn itself up.
What is the mechanism that serves as the automatic lubricator in this analogy? The answer is "relative surplus value." But before we can tackle this critical concept, it is necessary to examine more closely how Marx deals with the question of productivity. He approaches it by way of his value theory, which allows him to explain why labor-saving technology is a necessity under capital, and how individual capitalists internalize this necessity through the coercive laws of competition. Marx conceives of technology as encompassing not only the material means of production such as the steam engine but also the organizational forms of production such as the factories that produced the engines or used them to produce all manner of other things.
To see how Marx builds his argument regarding technology, competition and productivity let's return to surplus value, the alpha and omega of the capitalist mode of production. Marx visualizes the working day as consisting of two segments whose dividing line is continuously shifting back and forth: "necessary labor time" refers to those hours of the working day during which workers produce the value equivalent of their labor power; "surplus labor time" refers to the remaining hours, when workers are producing surplus value for the capitalist.
Capitalists have very simple wants and needs. They want and need more—specifically, more surplus labor time, as much as they can get. But to gain access to it, they must first pay workers for necessary labor time. Let me offer an analogy that will warm the hearts of all you poker players out there. If your leisure-time activities include an occasional game of five-card draw, the choice facing the capitalist should sound all too familiar: to get into the game with a chance of winning the pot, you must first ante up by putting a chip or two on the table. For the capitalist necessary labor time is the ante and the pot is surplus labor time.
Minimizing necessary labor time and maximizing surplus labor time are what capitalists think about when they roll out of bed in the morning and when they tuck themselves in at night. They can recalibrate the working day to their advantage in one of two ways, either by extending its length, say from 10 to 12 hours, while holding necessary labor time constant, or by reducing necessary labor time, say from 6 to 4 hours, while holding its length of the working day constant. The first strategy aims to produce what Marx calls "absolute surplus value," the second "relative surplus value."
The drive for absolute surplus value took centerstage during the early days of industrial capitalism. Manchester factory owners were notorious for the long hours they squeezed out of their workers. Marx shows how it finally took a combination of working-class struggle, middle-class humanitarianism and state intervention to prevent individual capitalists, who were acting out of self-interest and in accordance with the coercive laws of competition, from working their employees to death. Left to their own devices, mill owners seemed hellbent on canibalizing the lives and bodies of their employees, undermining the enabling conditions of their own reproduction as a class and destroying the capital-labor relation on which the mode of production rested. In 1847 the British Parliament said enough and passed the first Factory Act limiting the working day to 10 hours for women and young people.
The history of capitalism is littered with examples of short-sighted capitalists having to be saved from their own self-destructive behavior by public authorities who saw their duty as umpiring the class struggle in the interests of social order and capital accumulation as a whole. The regulation of the working day created a space in which a broader sense of capitalist class consciousnesses could take root, at least among certain segments of industrialists. To maintain productivity levels manufacturers began exhibiting a greater willingness to give their workers free time for recreation, self-improvement and what might be called metabolic restoration. Likewise, as a matter of enlightened self-interest, capitalists could see the wisdom in allowing their workers enough time to manage the basics of biological and social reproduction at home, thereby forestalling more radical state intervention in the class relation and guaranteeing a supply of future generations of wage earners.
As the practical and political limitations of absolute surplus value sank in, the advantages of relative surplus value came into sharper focus. This meant shortening necessary labor time through one principal means—reducing the value of labor power. As we have noted, the value of labor power is determined by the value of the wage goods consumed by the working class. If those branches of industry that specialized in the production of wage goods adopt new technologies that raise labor productivity, the price of wage goods will fall, bringing with it a decline in the value of labor power and an increase in the mass of relative surplus value across all sectors of the economy.
For Marx the production of relative surplus value raises the troublesome question of competition, a subject he generally avoided on the grounds that competition can never determine the laws of motion of capital but only enforce them. Even so, in making the case for relative surplus value he has to explain why an individual capitalist in the wage good sector would go to the trouble and expense of rolling out a brand-new, labor-saving innovation only to turn around and share it with the competition. Isn't this irrational and self-defeating in terms of market behavior? After all, capitalists are in the business of making money for themselves not handing out free gifts to their rivals.
Marx's answer is this: individual capitalists are short-termers who make their investment decisions in the here and now. They don't give a damn about the long-term implications of their behavior either for their own class or for any other. A new technology that promises to give an individual capitalist a competitive edge, no matter how ephemeral, must be taken advantage of. A capitalist who fails to seize the opportunity to increase market share by adopting an innovation that promises to bring down the cost of labor inputs will be left behind as others jump at the chance to upgrade their production methods.
Let's imagine an innovator who introduces a technological change in her production process that lowers labor costs. What happens next? The productivity of her workforce will rise as compared to that of other workforces producing the same commodities. Remember that the value of these commodities is equal to the average amount of socially necessary labor time required to produce them. Thanks to her new technology, the innovator is now producing commodities that contain less necessary labor time and therefore less value than the social average. This difference between the individual value and social value of the commodity is "extra" surplus value for the innovator. She can sell her commodity below the market price and still make a profit, and that's what she will do for as long as she can.
But this advantage won't last forever. The same competitors who have been momentarily caught flat-footed using the old technology will eventually notice that their profit margins are starting to dip as the growing supply of cheaper commodities made possible by the new technology drives down the average market price. They will respond by storming the citadel of innovation. The labor-saving method that for a time generated an extra surplus value for the fortunate trail-blazer will soon spread far and wide, becoming the new normal in this line of production. Market conditions will then settle down into something like equilibrium until the next leapfrogging innovator arrives on the scene with yet another labor-saving method which will set off a new round of intra-class scrambling for technological advantage.
Marx has unveiled the hidden source of capital's addiction to continuous gains in labor productivity. In their quest for relative surplus value and in compliance with the coercive laws of competition, capitalists take on board the logic of never-ending technological change. The productivity imperative is not only baked into the consciousness of individual capitalists but also absorbed into the reproduction requirements of capital as a whole.
THE NIGHTMARE OF CRISIS
If Marx and the mainstream can agree on something so fundamental as productivity, why are they at dagger points whenever the subject of capitalism comes up? Have the differences that separate them been overblown? Is this more akin to a squabble within the family than a war to the knife and knife to the hilt?
The differences are not overblown, as we can see by asking a simple question: is the productivity imperative good or bad for capitalism as a whole and for those who live under its laws of motion? You won't be surprised to learn that the mainstream answers with an emphatic good on both counts.
Nor will you be surprised to learn that Marx begs to differ.
For Marx capital is a mode of production cross-hatched with internal contradictions and crisis tendencies, as might be surmised from the title of what Harvey calls "the most dangerous book I have ever written," Seventeen Contradictions and the End of Capitalism. Published in 2014, Harvey's intervention was nothing if not timely. It appeared five years after the end of the worst economic downturn since the Great Depression and six years ahead of the financial meltdown and global recession triggered by the COVID-19 pandemic.
The multiple contradictions identified by Harvey have not gone away since the Great Lockdown of 2020-21. On the contrary, they have grown in intensity, thanks above all to the environmental catastrophe that is engulfing the planet, powered by capital's addiction to fossil fuel.
Has crisis become the new normal of 21st-century life? If so, is such a normal sustainable? How much instability and uncertainty can the institutional foundations of everyday life bear before they start to crack? Are they cracking right now? Does wave after wave of crisis signal that capital as a mode of production and capitalism as a social formation are reaching the day of reckoning? If the end is approaching for these conjoined totalities, will it come as a big bang, a series of dying gasps or a slow transition to something else? Is it possible to imagine a moment when a critical mass of humanity concludes that enough is enough and calls for the creation of an economic system that is not pre-programmed to inflict periodic doses of devastation on a global population that now approaches 10 billion?
The nature of capitalist crisis raises all manner of urgent, even existential, questions about where we and the planet are heading.
The Austrian economist Joseph Schumpeter, no particular friend of Marxism, coined the term "creative destruction" in order to highlight how capital creates new wealth, new material technology and new organizational forms by destroying old ones. If the history of capitalism is a "perennial gale of creative destruction," as Schumpeter declared in Capitalism, Socialism, and Democracy (1942), then crisis is the moment when the wind is at its strongest and most terrifying. To his credit Schumpeter did not ignore the suffering inherent in the process of creative destruction, in contrast with most mainstream defenders of the free market. But he did join the mainstream in insisting that any short-term suffering that might accompany economic progress was outweighed by the long-term material bounty produced by capitalism.
The destructive side of any crisis is plain to see. Crisis is the pot in which capital's contradictions are brought to a furious boil, producing laid-off workers, broken families, shorter life expectancies, higher addiction rates, bankruptcies, foreclosures, repossessions, idle production capacity, moldering inventory and, not least important, deepening alienation, unhappiness and loss of meaning. To be sure, much of the material damage will be repaired once the crisis has passed. But a lot of the psychic damage will remain. Every crisis leaves behind a legacy of personal and collective trauma, the stuff of nightmares.
Even so, crisis has a creative side by Marx's reckoning, a silver lining, if we can call it that. The destructive gale unleashed by a crisis restores conditions for future accumulation, creating new opportunities for profitable investment as productive assets such as labor power—the most productive asset of all—come on the market at fire-sale prices. Savvy investors will pick up the pieces and reassemble them in such a way as to open up a new round of accumulation. Some who have weathered the storm of crisis will enjoy smooth sailing and a steady wind when prosperity returns; others will drift with the tide until the next storm.
Anchoring Marx and Harvey's radical critique of bourgeois political economy, as well as Schumpeter's no-pain-no-gain defense of free-market entrepreneurship, is the contention that crisis is not an act of God or nature, both of which originate outside of human society. Nor is it an accident or a one-off event revealing little if anything about the underlying structures of society. For Marx, Harvey and Schumpeter crisis is a necessary feature of the accumulation process. Crises just don't happen; they must happen if capital is to innovate and reproduce itself on an expanded scale.
The photo above was taken in the gift shop of Milan's Palazzo Real museum. It is a face-in-the-hole version of Edvard Munch's image "The Scream," the original of which Allyson and I saw on exhibit there. The image has achieved iconic status because it symbolizes "the anxiety of the human condition," to quote the Wikipedia entry. As a historian by training and a documentary photographer by chance, I am deeply suspicious of talk about the human condition. It is worth noting that Munch created the first version of "The Scream" in 1893, the same year that a financial panic erupted in the US and spread to Europe, plunging Munch and his world in a brutal economic depression which lasted five years. In my opinion, the jury is out on whether anxiety defines the human condition, or if there is such a thing as the human condition, but there can be no doubt that anxiety lies at the heart of our crisis-prone mode of production, even if the couple I photographed hamming it up in the the gift shop seem anxiety-free.
What, then, are the specific mechanisms through which capitalist crises unfold? A powerful answer can be found in Marx's Capital and Harvey's The Limits to Capital, which together offer a theory of crisis formation grounded in the contradiction between the material forces and social relations of the capitalism.
This contradiction begins (but does not end) with Marx's famous law of the tendency of the rate of profit to fall in the primary circuit of production. To understand the law and how it operates let's return to the concept of relative surplus value and pick up the story where we left off in the last section.
What happens at the level of capital-in-general when individual capitalists compete for excess profit by incorporating labor-saving technology into their production methods? The short answer is that labor-saving technology removes living labor from production and replaces it with the "dead" labor congealed in machinery, raw materials and other means of production. Or to restate this in Marx's technical terminology, capitalists in pursuit of relative surplus value begin investing more in means of production and raw materials, which he designates as "constant capital" (c), in relation to labor power, which he designates as "variable capital" (v).
Herein lies the rub: since living labor is the source of surplus value (s), and surplus value is the source of profit, the declining share of living labor in production will have a deadening effect on the rate of profit (r), which Marx calculates as surplus value divided by the sum of variable and constant capital [r=s/(c+v)]. The fall in the rate of profit can be countered if, let's say, the rate of exploitation (v/s) increases faster than the organic composition of capital (c/v). But this is unlikely to happen over the long haul because squeezing more and more absolute surplus value out of workers by extending the working day and/or intensifying the work process through various forms of speed-up is guaranteed to provoke resistance among workers. The adoption of new labor-saving technologies avoids these obstacles but at the cost of driving down the aggregate rate of profit.
This is a textbook example of the contradiction between the material forces and social relations of capitalist production.
No profit, no surplus value; no surplus value, no capitalist class. It's as simple as that.
Or is it? Before concluding that capitalists in their quest for relative surplus value have signed capital's death certificate, we should take note of the language Marx uses in discussing the rate of profit. His law is a tendency not a teleology. There are many "counter-tendencies" at play beyond increasing the rate of exploitation relative to the organic composition of capital. These are spelled out in the third volume of Capital.
What is more, the falling rate of profit tells only half of the story; the other half is the rising mass of profit. Harvey insists that a fully developed crisis theory must take both sides of the law of profit into account.
To do so requires that we accept Harvey's claim that capital is a totality encompassing production, realization, exchange, distribution, consumption and circulation. He notes that many Marxists assign primacy to the sphere of production over all other spheres, on the grounds that this is where value originates and where the class struggle appears in its purest form.
Harvey reminds us that however central the production of value might be, it is but one moment in the totality of "value in motion." Emphasizing this moment to the exclusion of all the others, or casting it in the role of the deus ex machina of the accumulation process, can easily result in the kind of mechanical materialism which runs counter to Marx's dialectical method. Harvey urges us to see the sphere of production not in isolation but in co-constitutive relation to both the sphere of exchange, where value is realized, and the sphere of circulation, where it is distributed.
Because crisis tendencies can gain traction in any of these spheres as value moves through the industrial circuit, we need to keep an eye out for the bottlenecks that can form virtually anywhere in the circulation process.
With this insight in mind, let's revisit Harvey's diagram. At first glance, it resembles a well-designed transportation system like the German Autobahn, in which value flows smoothly and efficiently, beginning at the red rectangle of production and ending there as well.
But this would be a misreading of the diagram. Harvey wants to show that the potential for disruption lurks in all those junctures where value changes material form from money to commodity and back to money. From this standpoint his flow chart looks more like Midtown Manhattan at rush hour.
As a case in point, consider how slowdowns in the sphere of exchange, which is the site of value realization, can cascade throughout the system, disrupt the flow of value and create the potential for a full-blown crisis. While Marx and Harvey are adamant that value is created in the production process, they also stress that the magnitude of this value is not set in stone. It remains latent—hibernating, as it were—until the commodity finds a buyer in the market. Only when the commodity is exchanged for money is its value awakened or "realized," as Marx puts it. If a buyer never turns up for whatever reason, the commodity's value ceases to exist; it has died in its sleep.
I am reminded of the nightmarish scene from director Stanley Kubrick's 2001: A Space Odyssey, in which a HAL 9000 computer running the Discovery One spaceship goes bonkers and decides to cut off life support systems to three crew members who have been kept in a state of suspended animation until they reach their destination of Jupiter. We watch in horror as HAL's monitor flashes "Computer Malfunction" and the vital signs of the crew members tucked snugly into their coffin-like sleeping chambers begin to flatline, one by one, until only a single message remains on the screen, "Life Functions Terminated."
The unrealized value in an unsold commodity suffers a similar fate. Devaluation is capital's way of terminating the life functions of value. When devaluation occurs on a large enough scale, we have a crisis. Indeed, the best definition of a capitalist crisis is a system-wide devaluation of constant and variable capital.
Harvey's theory of crisis formation pivots on the concept of overaccumulation, which he defines as "surplus capital and surplus labor existing side by side with seemingly no way to put them back together." It goes without saying that surplus should be understood as relative to the needs of capital not people.
Harvey often refers to overaccumulation as the "surplus capital absorption problem." Whatever we choose to call it, this tendency has been at the center of crisis formation in recent decades.
Since the recession of 1973-75 capitalist class interests have coalesced around a political project called neoliberalism which seeks to restore conditions of accumulation, increase the rate of profit, strengthen capitalist class power, break the back of organized labor, dismantle the demand-management regime of postwar Fordist-Keynesianism and sweep away regulatory impediments to the free movement of capital. This neoliberal counter-revolution has gone from victory to victory over the last forty years, as it attested by the growth in the inequality of wealth and income, the declining share of labor compensation in gross domestic product and the hollowing out of the state's managerial and welfare functions.
These trends have heightened overaccumulation tendencies by exacerbating the problem of effective demand as working-class purchasing power in the advanced capitalist countries of the Global North fails to keep pace with the growing supply of inexpensive consumer goods imported from China and elsewhere in the Global South. While this problem has given rise to the proliferation of new forms of consumer credit and the spectacular growth of personal debt, financialization has simply shifted the epicenter of crisis tendencies from the spheres of production and exchange to the sphere of distribution, where finance capital has emerged as a major political-economic force on the global stage.
As Harvey likes to say, capital doesn't solve its inherent contradictions, it just moves them around.
Given the sharpening contradictions of capital in the era of neoliberalism, it seems likely that the sheer mass of surplus capital sloshing through the global economy will lead to massive and successive waves of devaluation by means of overaccumulation crises along the lines of those we witnessed in 2007-2009 and 2020-2021.
A nightmare scenario for sure. It makes you want to scream!
Edvard Munch. "The Scream." Gift shop, Palazzo Real Museum, Milan