Archive for March, 2015

Che Guevara and Marx’s Law of Labor Value (Pt 2)

March 29, 2015

Bourgeois value theory after Ricardo

As I explained last month, the rising tide of struggle of the British working class obliged Ricardo’s bourgeois successors to abandon the concept of value based on the quantity of labor necessary on average to produce a commodity of a given use value and quality. They were forced to do this because any concept of labor value implies that profits and rents—surplus value—are produced by the unpaid labor performed by the working class. The challenge confronting Ricardo’s bourgeois successors was to come up with a coherent economic theory that was not based on labor value. Let’s look at some of the options open to them.

Malthus, borrowing from certain passages in Adam Smith, held that the capitalists simply added profit onto their wage costs. Like Smith and Ricardo, Malthus assumed that what Marx was to call constant capital could be reduced to wages if you went back far enough. Therefore, constant capital really consisted of wages with a prolonged turnover period—what the 20th-century “neo-Ricardian” Pierro Sraffa (1898-1983) was to call in his “Commodities Produced by Means of Commodities” “dated labor.”

Malthus held that since capitalists are in business to make a profit, they simply added the profit onto their costs—ultimately reducible to the price of “dated labor,” to use Sraffa’s terminology.

The idea that profits are simply added onto the cost price of a commodity is known as “profit upon alienation.” This notion was first put forward by the mercantilists in the earliest days of political economy. In this period, preceding the industrial revolution, merchant capital still dominated industrial capital. After all, don’t merchants make their profits by buying cheap and selling dear?

But what determined the magnitude of the charge above and beyond the cost of the commodity to the capitalist? And even more devastating for Malthus, since every capitalist was overcharging every other capitalist—as well as working-class consumers who bought the means of subsistence from the capitalists—how could the capitalists as a class make a profit? If Malthus was right, the average rate of profit would be zero!

But perhaps we don’t need the concept of “value” at all? Why not simply say that the natural prices of commodities are determined by the cost of production that includes a profit? But then what determines the prices of the commodities that entered into the production costs of a given commodity? Following this logic to its end, the natural prices of commodities are determined by the natural prices of commodities. This is called circular reasoning.

We haven’t moved an inch forward from our starting point. To avoid a circle, we have to determine the prices of commodities by something other than price. There is no escaping some concept of value after all.

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Che Guevara and Marx’s Law of Labor Value

March 1, 2015

This March marks the 30th anniversary of the election of Mikhail Gorbachev to the post of general secretary of the then-ruling Communist Party of the Soviet Union. At first, the election of Gorbachev seemed to involve a long overdue shift of power to a new generation of Soviet leaders. As we now know, it involved a lot more.

A process was unleashed that was soon to be called “Perestroika.” In the name of “radical economic reforms,” the Soviet planned economy was progressively dismantled. Perestroika ended not only with the restoration of capitalism but the breakup of what had been the Soviet federation.

The combined process of the restoration of capitalism and breakup of the Soviet federation was accompanied by a massive collapse of both industrial and agricultural production. The living standards and life expectancy of the working class plummeted. A generation later, the economies of not only the Russian federation but the economies of the other former republics are yet to recover.

Perestroika led to a wave of capitalist counterrevolutions that in 1989 swept through eastern Europe with the active support not only of imperialism, as would be expected, but also the Gorbachev government. As part of this process, Germany was reunited on a capitalist basis while staying in NATO. The former socialist countries that had been members of the now dissolved Warsaw Pact joined NATO as did the former Soviet Baltic republics of Latvia, Lithuania and Estonia. The Georgia Republic—Stalin’s homeland—is very close to NATO and openly striving to become a formal member, while the new right-wing government in Ukraine has joined NATO in all but name.

Perestroika, therefore, resulted in a massive expansion of the U.S. world empire into the one area of the planet—the Soviet Union and its allies—that remained outside the Empire after World War II.

The destruction of the Soviet Union and the Soviet bloc and their planned economies would have been enough if that was all that was involved. But it was not. The capitalists and their spokespeople everywhere pointed to the Soviet collapse as final proof that “socialism had failed.” The result was a wave of demoralization that spread through a workers’ movement that was already in retreat before the neoliberal capitalist offensive symbolized by such political figures as Ronald Reagan and Margaret Thatcher.

National liberation movements were also pushed back, though the hopes of political figures such as Ronald Reagan and George W. Bush that the old-fashioned colonialism that had dominated the world in 1914 would return—with the difference that the United States and not Britain or France would be the chief colonizer—has not been so easy to achieve.

Between November 7, 1917, when the Bolshevik-led Congress of Soviets seized power, and the election of Gorbachev as general secretary of the CPSU Central Committee in March 1985, the peoples of the oppressed nations got accustomed to the idea that they should be independent and not colonial slaves of the West. Therefore, attempts by the U.S. world empire to push these nations and peoples back into something like pre-1914 colonial relationships have met, to the chagrin of the imperialists, unexpected and growing resistance.

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