Afternoon Comrades.
There has been a shift in schedules over at my end meaning that these last few weeks and for the foreseeable future I work Saturday’s - delaying the Monday dispatches a little, only because I am too exhausted to sit down at my desk Sunday nights to get these to you. Aptly, this also leads to today’s little rant / story time. A few days ago a comrade on here asked me if I could write a little about Keynesian economics, a, if not the cornerstone to the insanity we call capitalism and I was, or rather am keen. That will happen this week - but as I was lying in bed this morning trying to motivate myself to work out whilst ignoring all the aches and red flags this ageing profit producing machine called my body was sending me, realizing that 7 days after pay day I am broke once again, coupled with the a few hours into reading up the above mentioned theory - an age old question popped into my head.
Who determines the value of labour and how?
I know, I know, it is one of the, THE, main points of Marxism but I wanted to stay in our direct material reality and ask, how is it that I do mentally and physically gruelling work for 40-50, often more, hours a week and remain poor? Obviously, this whole setting is utterly subjective and individual and I know for a fact that many, many comrades are in a similar situation. A systemic analysis only goes so far to quelch the desire to rob a bank - in itself hardly worth it these days - so I can buy myself some rest and food. Furthermore, I am too bothered and fucked off to offer an introductory root cause analysis of something that the giants of economic philosophy have done for the past 300 years, Adam Smith, Karl Marx, Keynes - the list is long and well known, if only in name not content. Cue the Labour Theory of Value.
The Labor Theory of Value was one of the early attempts to explain how market prices form. It followed the idea that the main driver for goods’ value is the labor necessary to produce them. Under the theory, the labour hours it takes workers to produce a commodity is the source of its value.
The underlying concept argues that we can determine the economic value of a product or service by the total hours of labor it takes to produce the good or render the service. We commonly link the theory to Marxian economics, but it appears earlier in Adam Smith and David Ricardo’s works. And later, similar concepts are discussed within the premises of anarchist economics. Smith saw an item’s price as the labour hours the buyer has to expend to get the item.
The concept later became central to Marxist economics, where the working class is exploited under the capitalist and doesn’t associate price and value. The Labour Theory of Value was a dominant theory for some time in the late 18th to 19th century but then gave way to the Subjective Theory of Value. It is rarely supported in modern economics, but it’s a good starting point to understand how values work.
Logically, that is not how anything works, not then, not today. Before I get into the rage mode, a few key notes about Adam Smith and Marx.
Adam Smith’s Labor Theory of Value
Smith suggested a good was worth the labor we’d have to ‘spend’ to get it (value in trade), or the work we can ‘save’ by consuming the good (value in use), or both. His view on the concept doesn’t look at past labor that went into producing the goods. Smith only focuses on the amount of labor that the commodity can ‘save’ for someone else (the buyer).
The idea is that if no one wants to acquire a particular item, it’s worthless, no matter how much labor was spent during production. Also, not applicable today.
Value in Use vs. Value in Trade
Value in use is the value we get out of a commodity that we use or consume, while Value in Trade is the purchasing power to acquire other goods with this commodity’s possession. Adam Smith mentions the controversy of the relationship between those two. Often, they are mismatched. Take money, for example. Its value in trade is high, but the bills have a low value in use. Without the meaning and promise attached to it, money is nothing more than pieces of paper. In Smith’s theory, the value in trade relates to the amount of labor. Take a man who owns a product they do not intend to consume but rather use in an exchange. The value of this product to them is the number of labor hours they can purchase with it.
Therefore, in the Wealth of Nations (1776), Smith defines labour as the real measure for the value in trade of all goods.
How Labor Creates Value
The Labour Theory of Value mentions the ‘socially necessary abstract labor’ embodied in a commodity. As workers perform this labor with average skill and average productivity, we can say that a good’s value only increases proportionally to the completed work. If workers are more skilled and more productive, they generate more value by creating a larger quantity of finished products. However, each product still has the same value within its class of goods. Sloppy or unskilled workers produce less value, increasing the average labour time needed to create a single unit. But we cannot sell those at a higher price than their natural value, and they will remain the same value in exchange.
Marx & Labour
Marx never refers to his theory as a ‘labor theory of value.’
While Smith sees the value of a product as relative to labor it can command or save, Marx sees it as proportional to the labor for production. In Marx’s theories, the relation between value and price is known as the transformation problem. The issue is to define an algorithm where we can trace the magnitude of labor value (considering duration and intensity) after the value is distributed through prices reflecting an equal rate of return on the employed capital. In his work in 1865, Karl Marx sums up the problem. If supply equals demand, market prices of goods will correspond to their natural prices, which we determine by labor quantities for their production.
Smith theorizes that labor values are the measure of exchange for direct producers like farmers, fishers, and others. However, Marx says that goods must have a standard measurement element to be comparable, arguing that this common substance is labor.
He based his critique against the classical free-market economists based on the theory. Marx asked – if we sell all goods for prices reflecting their real value, and all values come from labor hours, how can capitalists profit unless they pay workers less than the actual value of their labor. This became the basis of Marx’s exploitation theory of capitalism.
Under the theory, capitalists exploit workers by paying them for fewer hours than they work, thus extracting ‘surplus value.’ For example, if you pay someone for an 8-hour workday, and they end up working 12 hours (which was quite common back then), the extra 4 hours are ‘surplus value’ for the capitalist.
And the story goes on and I will leave the theory at that as it still doesn’t answer the question why, say for example, people such as myself, nurses, teachers, care workers to essential work like waste management, essentially ALL ESSENTIAL WORK pay so badly in comparison to the needed money to survive? I am not even going to get into the reality that the majority of non-essential work pays seemingly absurd wages in comparison.
The frustrating part of this conversation is that when you start digging just beneath the surface of reality and get past these offensive words / sentences such as “well, the market determines wages & prices”, “the free market reigns” blah blah and just open your eyes for a few seconds these theories all become the metaphysical bullshit that they are. What is “the market”? Who is it and who do I have to “speak” to get paid for essential that I may live without fear? Who decided what is essential and what isn’t and where can I log a “formal complaint”?
The fact(s) as I see them is that the entire “market”, economy is rigged to the max, not in our favour, and clearly destroying a habitable environment in the process. I have never taken part in a meeting where we as a society as decided what is essential and what isn’t, let alone gotten a say and what we pay for said work? Yet, isn’t that exactly how it should be and not how it is? Yes of course, this is why we have had a Communist Movement since the 1800s, to at the very least create a reality where the above theories can be put into praxis - but it still leaves the question(s) of how we value work? We know who it is now and who it was in the past, but what of it going forward? Whilst the immediate need for a total revolution is becoming clearer and more unavoidable by the day, these questions are worth talking about. I like being a Chef and wildly, in a successful operation I am struggling to justify the work for the wages “the market” determines, from start to finish of my personal supply chain - so yeah, ask questions comrade. Whatever reality is fucking us today is man-made so we can remake it amongst us also. It just cannot go on the way it has.
Every Revolution starts with enough of us saying, No More.
Yours, warmly,
V.