On November 15, Donald Trump announced his candidacy for the Republican presidential nomination. Under the U.S. Constitution, the next election will be in November 2024. The victor will be inaugurated on January 20, 2025. The mid-term election held on November 8, 2022, did not go Trump’s way. There was no landslide for the Democrats either. There was little change in the composition of Congress. The Democrats managed to maintain a tiny majority in the Senate (1) while suffering small losses in the House of Representatives. The losses were sufficient to shift to a thin Republican majority. Republican control gives Democrats the excuse they need not pass any remotely progressive legislation. During the first two years of the Biden administration, party leaders blamed conservative Democrat Senators Kyrsten Sinema and Joseph Manchin for failure to pass promised legislation. Now they’ll blame the Republican House of Representatives.
At the state level, Republicans suffered losses. Trump-associated Republicans did poorly, while Trump enemies — increasing in number — fared better. For example, those pro-Trump were defeated in races for Pennsylvania, Arizona, Massachusetts, and Maryland governorships. In Georgia, reactionary Governor Brian Kemp considered a Trump enemy since the 2020 election, won reelection. Kemp isn’t a liberal or moderate, but he refused Trump’s demand to find the few thousand votes to put him over the top in the race for Georgia’s electoral votes. In Florida, reactionary Ronald DeSantis sailed to victory over his Democrat opponent. DeSantis is widely considered Trump’s chief rival for the presidential nomination in 2024, more than enough to make him a Trump enemy.
On their face, the election results don’t seem particularly startling. They weren’t what pre-election polls indicated would happen — sweeping victories for Republicans with solid GOP majorities in both houses of Congress. This happened in the 1994 mid-term elections during the first term of President Bill Clinton, and the pattern was repeated in the 2014 mid-terms during Barack Obama’s first term. In the wake of these elections, Republicans dominated Congress and an increasing number of state governments throughout the remainder of the Clinton, Bush, and Obama years.
The Clinton and Obama administrations had promised major reforms following reactionary Republican administrations. Both came into office with solid congressional Democrat majorities during their first two years. Clinton and Obama promised major reforms to the healthcare system. The United States is the only advanced nation in the world that doesn’t treat health care as a right rather than a commodity. In both cases, progressives and liberals believed a new New Deal was dawning. And in both, the Democrat administrations and Congressional majorities failed to deliver.
In the case of Obama, the minimal Obamacare health reform program was passed. This Republican-designed program was a market-based alternative to universal single-payer healthcare. It has reduced the number of uninsured but falls short of establishing health care for all. Moreover, it’s a bureaucratic nightmare to navigate. It features healthcare insurance exchanges where incomes below a certain level allow government subsidies to make private plans affordable. But that eligibility requires strict means testing. Fail that test, and the consequence is paying market rates for insurance — or going without.
Many factors pointed to a Democrat defeat in the 2022 elections. Biden is a less skilled politician than either Clinton or Obama. Biden passed his 80th birthday a few weeks after the election, and many voters are concerned about his mental and physical abilities. The only major pieces of legislation passed during his administration’s first two years were a public works program passed with the support of Republican senate leader Mitch McConnell and the anti-inflation act.
Despite its name, there’s nothing in the bill to combat inflation. It has some subsidies for developing green energy and nuclear power, but it expands the land on which fossil fuel companies can extract more carbon-rich fuels from the earth. This is something climate scientists warn against. Not passed was legislation to make unionizing workers easier, guaranteeing the right to vote, extending a child tax credit — Democrats boasted it had cut child poverty in half — or a law establishing the right to abortion on the federal level. If the latter passed, it would have overridden the Supreme Court decision to take away the constitutionally guaranteed right to abortion established by an earlier decision in 1973. When we factor in the inflation that raged during the Biden administration’s first two years that led to a fall in real wages, everything indicated the Democrats were facing an election rout — and that’s what the polls showed would happen. The polls were wrong. Why?
Because they polled only the most likely voters. In mid-term elections, general interest is less than in presidential election years, and reactionary voters tend to dominate the turnout. If this country had even a reformist bourgeois labor party to defend the immediate economic interests of the working class and labor unions, things would be different. Here, the only electoral alternative to the Democrats is the Republican Party. Republicans appeal to the most reactionary sections of the population, leaving the workers and their allies without representation. Polls showed the most likely voters were only concerned about economic issues such as inflation, not the Republican Supreme Court’s decision to take away abortion rights. Nor were these voters concerned about abortion rights at the state level. (2) Voters told pollsters they believe the GOP is better than the Democrats when it comes to fighting inflation, a euphemism for anti-working class and racist policies. (3)
A majority of the American people, unlike the most-likely voters, care about abortion rights, an area where the two parties differ. Democrats say they are pro-choice, though they failed to pass a federal law to guarantee that right. Most Republican candidates oppose the right to abortion. In August, a vote in solid-Republican Kansas to put an anti-abortion measure into the state constitution. To the pundits’ surprise, the measure was defeated by 18 percentage points in November. Ballot proposals to establish abortion rights in state constitutions passed in every case while anti-abortion measures failed. While the GOP cemented its alliance with the Catholic and right-wing Protestant Christian churches with its anti-choice stand, it paid a political price at the polls.
Another factor in this election was Donald Trump. He enjoys enthusiastic support among an overwhelmingly white and middle-class minority of the American people. His support is strong among those concerned that whites will soon become a minority of the population. More people, especially those of color and young people, hate everything Trump represents. The mid-term elections indicate that Trump has a chance of winning the GOP primaries, where his reactionary views play well, and becoming the Republican nominee again. He will likely lose to the Democrats in the general election.
But there is a wildcard. The inflationary COVID-19 aftermath boom has led to massive overproduction stimulated by credit-financed overtrading globally. For the sake of argument, let’s assume that in the months ahead, overproduction is liquidated with only a modest rise in unemployment, followed by a new upswing in the industrial cycle by 2024. Then Democrats should have good prospects in the 2024 presidential election. This would be especially true if Trump is the Republican nominee. But if the recession is prolonged and severe, or if the Federal Reserve System, to head off a downturn, manages to trigger a wave of 1970s-type stagflation, all bets are off. (4)
The powerful capitalists of the party of order, fearing an approaching economic crisis, are doing all they can to stop Republicans from nominating Trump. For now, they’re putting their hopes in the relatively young 44-year-old DeSantis, who could claim, like John F. Kennedy did in 1960, that he represents a new generation. This is especially true if he runs against the 80-something unpopular Biden. (5)
I am out of writing space for this month. There are important developments that have unfolded in recent days. They include the collapse of the FTX crypto-trading exchange swindle with billions of dollars vanishing, new developments in the Russian-Ukrainian war, and China-U.S. relations closely tied to the evolving global economic situation. I’ll examine the economic situation, its political implications, and diplomatic consequences in the next months as these events unfold in real time.
Now I must return to my examination of the work of Anwar Shaikh and look closely at the value-creating power of human labor. What follows may seem abstract. Yet, it’s necessary to comprehend if we’re to understand the deep economic roots, the political, military, financial, and economic developments and events unfolding before us at such speed in real-time.
Value: qualitative versus quantitative analysis
Marx pointed out that Ricardo analyzed value quantitatively, not qualitatively. He realized that if one commodity takes twice the labor to produce, it is twice as valuable. What gives labor its value-producing quality? This question was of great interest to Marx. Today’s Marxists — including Shaikh — remain on a largely Ricardian level when analyzing value.
We often hear that a proposed government project (for highways and public works, green energy, exploration of the outer solar system, etc.) will cost a lot of money that we can’t afford. The same is true when capitalists who control large corporations debate whether or not to invest money in a major industrial investment such as building a new plant. Boardroom skeptics and bankers say the project will cost a lot of money. Do the likely profits justify such a large expenditure of money? The same is true when working-class families debate whether or not to purchase a new car or put it off for another year. A new car would be nice, and the old one is breaking down, but can the family afford to spend so much money at this time? (6)
Scientists sometimes speculate why, as far as we know, the earth hasn’t been visited by extraterrestrials. One explanation is it would cost an extraterrestrial civilization too much money to mount an interstellar expedition. I don’t have any idea whether this explanation is true or not. There are plenty of other reasons why extraterrestrials haven’t visited the earth. Perhaps the technological civilization on earth is unique in the galaxy, if not the entire universe. However, let’s for a moment assume extraterrestrials have not visited us because it costs too much money.
What would be the nature of this alien money? It presumably wouldn’t be denominated in dollars! We don’t know how alien economic and social systems capable of interstellar flight are organized. We can assume alien creatures would have to engage in some type of labor — not human labor! — to create and maintain their civilization. Let’s say they wouldn’t have enough money to mount such an expedition or that aliens would conclude that the potential benefits of such an expedition aren’t worth the money that would have to be spent. We are really saying that our imagined extraterrestrial civilization wouldn’t have enough labor available for the proposed expedition without disrupting their society and economy. If they could do so without disruption, perhaps they’ve concluded there are better uses for their available labor than to use it to visit our humble planet. This is true whether or not our aliens have anything we earthlings would recognize as a monetary system.
Returning to our planet, behind money lurks the amount of human labor it takes to build a new highway or green energy project, build the rocket engine, cameras, radio equipment, computers, etc., necessary to launch a mission to the outer solar system, to build a new highway a new automobile, or perhaps mount an expedition to explore another solar system. Labor is measured in some unit of time, be it minutes, hours, weeks, years, etc. So cost comes down to the quantity of labor measured in some unit of time necessary to carry out a project or build a product. But not all human labor produces value. When embodied in products meeting human needs, labor takes the form of value only under definite social and economic conditions. These conditions include that the products are not produced for consumption by the individual producer or their community but for exchange. Under these conditions, the products of labor with specific use values become commodities that possess value. Once a commodity economy develops to a certain level, commodities are products produced for sale — exchanged for money. From that point on, the costs of carrying out projects or investments by the government, individual capitalist enterprises, or purchases by individual workers appear as money costs.
For those who believe the state creates money by fiat, why should money cost be such an all-important question? The supporters of Modern Monetary Theory believe the purchasing power of the central government, which alone creates money through state fiat, is only limited by the availability of things to buy. But the critics of MMT, including most capitalist economists, realize that this common-sense argument is wrong.
To explain why it’s wrong, the nature of value must be understood. Why do some types of human labor in some circumstances produce value while other types of labor do not? Why, in capitalist crises, does the lack of money — but not of labor — become a paralyzing obstacle to the production of needed projects and products? To understand this, one must understand value, not simply quantitatively but qualitatively. It took the genius of Marx, standing on the shoulders of another genius, Hegel, to penetrate this question. Classical bourgeois economists were unable to analyze value qualitatively.
Marx showed that the production of commodities, an economy where products are produced for exchange, not consumption by the producers, at a certain point leads to a money economy, a commodity-money economy. In such an economy, the labor necessary to produce things is expressed not in quantities of labor but in the use value of the money commodity. Since precious metals, particularly gold, become the money commodity(s), costs are measured in weights of precious metals — silver and gold — and finally, gold alone. The essence of the whole process becomes hidden. Gold bullion and coins, products of human labor, appear to acquire a mysterious power that seems as though it’s inherent in their physical nature. The next step is when coins that contain given quantities of a precious metal of a given weight are given specific names. For example, the Roman denarius was a silver coin. Then the names appear to take on the mysterious powers of money independent of the quantity of metal contained in the coin.
This gives rise to the view that the state has the power to confer the mysterious power of money on anything it chooses. Roman emperors claimed that a denarius — the core of the Roman empire’s monetary system — represented the same quantity of money no matter how much the silver content of the denarius was reduced. Whenever the Roman treasury was short of silver, the emperors explained that a denarius was a denarius no matter its silver content because the state said it was. Modern Monetary Theory is not so modern after all.
From my youth reading in the newspapers or hearing on the radio or TV, I remember President Nixon assuring us that the devaluation of the dollar would in no way impair the dollar’s buying power. Notwithstanding the rise in the dollar price of gold, Nixon assured us, a dollar was still a dollar. You only have to compare the dollar prices of commodities of those days with those of comparable commodities today to understand the extent tricky Dick Nixon was telling the truth!
Roman emperors and U.S. presidents have championed a version of modern monetary theory. That it’s human labor measured in terms of some unit of time that lies behind the surface phenomenon of prices and costs has become even more hidden since the decline and the end of the international gold standard. Today governments and economists insist that prices and costs are reckoned in mysterious units called dollars, euros, pounds, etc., completely independent of gold or any other particular commodity. Long before Marx, classical political economy realized that behind money prices and money costs is human labor. This realization was the great achievement of classical political economy. Marx considered this to be what divided scientific from vulgar political economy. Neoclassical and Austrian economics are the most highly developed forms of what Marx called vulgar political economy.
Let’s examine the question classical political economy did not answer. What gives human labor its value-creating power, and what are the limits of this power? For example, if I build a table for my own use with no intention of selling it, the table has no value. The gross domestic product (GDP) that capitalist economists use to measure the size of national economies consists of all the goods and services sold during a given year. The table I produced for my own use, which I won’t sell, makes zero contribution to the GDP, though it did increase the wealth of the nation. The wealth of a nation consists of all the use values existing within the nation, whether or not produced for sale, or in the case of my table, for the personal consumption of its producer. As far as capitalism’s economists and statisticians are concerned, my table and the labor that went into making it contributed nothing to the national economy.
Not all labor — not even labor that produces material wealth — produces value. Only labor used to produce goods and services for exchange creates value. In a developed commodity economy, production for exchange means production for monetary sale. Ricardo realized this much. But do all concrete human labors produce equal quantities of value in equal periods of time? No. Let’s go back to our table example. I produce tables for sale, and other people are engaged in table-making. Here we imagine a pre-capitalist commodity-money economy where producers haven’t yet been separated from the means of production.
Now I’ll concentrate on value, not its monetary expression. Instead of measuring value in terms of money, we’ll measure it in terms of hours of labor. Hours of labor (or some other unit of time) is the immanent measure of value. For example, suppose I take a 10-hour working day to produce a table of a given type and quality. Other people more skilled at table making can produce a table of the same type and equal quality in half a day — five hours — or two tables a day. But they’re the exception. Still others less skilled require two days, or 20 hours, to make a table. But I am of average skill. When we average how long it takes an average person to produce a table, the average is one ten-hour day. According to the law of value, the social value of the type and quality of the table I make is one day or 10 hours of labor. Since I am a worker of average skill, the individual value of my table is 10 hours of labor, and its social value is also ten hours of labor. In this case, there is no difference between individual and social value.
But what is the value of tables produced by a minority of highly skilled people who can produce two tables in ten hours? Here individual value and social value diverge. The individual value of tables produced by the fast workers is only five hours of labor, half the individual value of tables produced by the average worker. To the buyers of the tables, it makes no difference whether that particular table took five or ten hours to produce since their use value and quality are identical. So the social value of tables produced in only five hours is still 10 hours of labor.
What about the tables that took two days — 20 hours — to produce? These have an individual value of 20 hours of labor. But like the five-hour tables, they’ll still have a social value of 10 hours of labor. Not everybody’s labor produces the same amount of (social) value in equal periods of time. Only the labor an average person of average skill produces one hour of value in an hour of labor. From now on, the term value means the social value unless otherwise indicated.
What happens when I learn through practice, experience, and hard work to produce not one but two tables in a 10-hour day? Will my individual labor produce more value than before? Assuming no change in the average time it takes the average workers to produce the table of a given use value and quality; the answer is yes. This is because my individual labor, which formerly produced an hour of value for every hour of labor I expended, will now produce two hours of value for every hour of labor I expend.
If over time, average table-producing labor becomes more productive, the average worker learns to produce a table in half the time it took them before. If the number of workers and the hours of labor they perform in a given time remain unchanged, society will have twice as many tables of a given type and use value than before. The value produced by these workers remains unchanged. However, the same value is now spread over twice the number of tables. In this case, the value of individual tables falls by 50%.
Suppose it took longer for the average worker. In that case, if it took twice the time to produce the same quantity of tables as before, the value of the total quantity doesn’t fall because the same quantity of labor is applied to the production of tables. But the same amount of value is now spread out over half as many tables. The value of an individual table doubles. We see that a rise in the productivity of human labor increases the wealth of society and a fall reduces the wealth of society. But unless the total quantity of labor measured in a unit of time increases, the total value produced by society will not change.
So far, we’ve assumed the labor performed by individuals differs only in terms of the amount of use value it produces in a given time but is otherwise identical. Things become more complicated when we compare individual workers producing different use values. The labor required to make a table is different than the labor needed to make a pair of shoes, an ounce of silver, or a loaf of bread. We can compare quantitatively only qualitatively identical substances. Tables, shoes, silver, and bread are not identical physically and cannot be compared quantitatively. This is reflected in the old saying that you cannot compare apples and oranges. Before we can compare apples and oranges, we must reduce them to a qualitatively identical substance. The concrete labor-producing tables and shoes are not the same types of labor and are not quantitatively comparable.
The fact that commodities with different use values — tables, shoes, silver, bread, etc. — can be exchanged with one another shows they have some quality in common. But what is this quality? They are products of human labor. But not any type of labor because, as we see, different concrete laborers differ qualitatively and cannot be compared quantitatively. Different types of human labor are not qualitatively identical but have one quality in common. The very word labor shows what the types of qualitatively different laborers have in common. They are instances of human labor. To make them quantitatively comparable, one must reduce them to common labor but not any particular type. Marx called human labor reduced to a common social substance general labor (later, he uses the term abstract labor) because all the features that differentiate one type of labor from another are left out. Marx wasn’t the only one to do this. The reduction of concrete labor to abstract labor is done whenever commodities produced by different laborers are exchanged in the marketplace.
Value is labor embodied in a commodity, but not every type of labor produces value. It’s also labor performed with average productivity but not any particular productivity. The labor embodied in a commodity is the substance of value. Value is not a physical substance but a social one. In the table example used above, I assumed one type of concrete labor, the labor that produces the commodity of a particular use value and quality. As long as we deal with table-creating labor, we don’t have to distinguish between concrete labor that produces use values and abstract labor that produces value to make quantitative comparisons. Labor performed by someone twice as productive as another produces twice as much value. We can make this quantitative comparison because we are dealing with labor of the same type. If there were only one type of concrete labor producing one type of use value, there would be no exchange and no value.
More subtle is how we compare types of labor that differ qualitatively. We can’t say that because a shoemaker produces twice the quantity of shoes in a given time than a maker of tables makes in the same time that the shoemaker produces twice the value. This compares two types of labor that differ qualitatively and are not comparable. Shoes and tables can be exchanged directly in barter or indirectly through money — which itself is produced by a third type of labor. Our task as economic scientists is to do consciously what producers exchanging their products with one another have done unconsciously for thousands of years.
It would be a mere coincidence if an average hour of shoe-producing labor produced the same value as table-producing labor. The distinction between concrete labor, the kind we all perform in one way or another, and abstract value-producing labor is one of Marx’s most difficult concepts to grasp. But if we don’t, we remain at a Ricardian level of theory of value, analyzing value quantitatively, not qualitatively, and prone to logical paradoxes. (7)
From simple commodity to capitalist production
In simple commodity production, producers work privately for their own accounts. They retain private ownership of the means of production, including the most important, labor power. In a simple commodity economy, labor power is not a commodity. With the transition to capitalism, workers cease to own any means of production aside from labor power. The means of production are owned by a separate class — capitalists. Under capitalism, the ability of workers to perform work is separated from the things that make work possible. This separation is overcome by the sale by the worker of their ability to work for a defined period to a capitalist who owns the means of production. Once the sale is made, the capitalists own all the means of production, including the worker’s labor power.
Like other commodities, labor power is measured in a unit appropriate to it. The unit of measure of labor power is, like labor, a period of time — a minute, hour, month, or year. The fact that labor power — the ability to perform labor — and labor are measured by the same unit of measurement is a source of endless confusion in political economy.
Once commodity production has developed to its highest stage — capitalism — labor power is sold by its owner, like other commodities, for money. (8) Behind the money price or form of value of labor power lurks value. It takes a certain quantity of value-producing labor to produce the commodities necessary to produce the means of subsistence necessary for the (re)production of labor power.
Unskilled labor and qualified or skilled labor
In one important sense, labor power is different from other commodities produced in a pure capitalist economy. Labor power is not sold by capitalists for profit. The worker is not interested in realizing the average rate of profit on advanced capital. The worker owns no capital, only labor power, and only before it is sold. The commodities the worker consumes to (re)produce labor is sold by capitalists at, on average, their prices of production (that Anwar Shaikh shows is close to their values — direct prices). The value of the commodities the worker consumes to have labor power to sell is then transferred to the worker’s labor power through personal consumption. If all concrete human labor was qualitatively identical, with no difference between concrete and abstract labor, we could stop the analysis here. But this is not the case.
We must deal with the different labor powers expending labor that differ qualitatively. One must get training to acquire special skills like shoemaking, carpentry, welding, etc. Under capitalism, that training is itself sold as a commodity. One must pay to go to a trade school or receive higher education beyond high school. Here, trade school is anything more than that offered in high school. Skilled labor power that requires expensive training has a higher value — it sells for a higher price — wages — than ordinary or unskilled labor.
Are special skills tools?
A view dating back to the days of the Second International is that training is like a tool a worker must possess to perform labor. In the United States, the craft unions of the building trades require potential union members to own their tools as a condition of union membership. (9) As these tools are gradually worn out with use in the construction of a building, they gradually transfer their value to the buildings like other tools or machines used in commodity production. Why can’t the skills workers acquire in trade school be viewed the same way?
According to the “special skills are tools” theory, the labor embodied in the skill is gradually passed into the value of the commodities that skilled labor produces during the working lifetime of the worker. But this explanation is flawed. While it’s true that special training increases the value of the labor power of skilled workers, nobody goes to trade school just to recoup the cost of it throughout their working life. If that were true, why not just enter the labor force immediately? The earnings would be somewhat less, but there would be no paying for school, no student debt or interest. Workers attending any type of trade school — including university studies — after completing their basic education expect to earn considerably more than unskilled worker wages plus the cost of their education, including the interest on student debts.
A logical paradox
There is a logical paradox involved with the view that a skilled worker’s extra training transfers value to a product like a worker’s tool does to the commodities produced in the course of the worker’s lifetime (much as tools transfer their value to the products produced in the course of the tool’s lifetime). The logical problem that skilled labor’s extra value-producing power represents the value added by trade-school teachers is that it assumes that the value of the labor power represented by training costs is transferred to the value of the commodities skilled labor produces. When workers perform labor, it replaces the value of the capital capitalists advance to pay for the workers’ labor. (10) The workers don’t transfer the value of their labor power to the commodities produced for the capitalists. Why should it be any different for the part of the value of labor power representing the worker’s special skill?
Indeed, labor power that requires special training sold to workers as a commodity does add to the value of the worker’s labor power, just as the value of food and shelter the worker must consume to reproduce their labor power. But this doesn’t mean the value of the worker’s training is passed on to the value of the commodity like a tool passes its value to a commodity the tool produces. Instead, this is replaced by the workers’ paid labor.
The example of unskilled labor given in the socialist movement when discussing the greater value-producing nature of skilled or qualified labor relative to unskilled, perhaps unfairly, is the labor of a ditch digger. The idea is any person of average strength can dig a ditch with little training. The example of skilled labor traditionally given is that of a jeweler. It takes years of training to master the jewelry trade. So I’ll use these examples despite my suspicion that the unskilled ditch digger reflects the prejudices of the rising bureaucracy based on the privileged skilled trades of the Second International.
The jeweler’s skilled labor produces five or even ten times the value that the ditch digger’s labor produces in an hour. If the special tool of the skill necessary to be a jeweler is ten times as much value as that of the ditch digger’s unskilled labor, then it’s clear a great majority of the jeweler’s labor value is transferred to the jewelry by the jeweler’s teachers. In the case of the unskilled ditch digger, their teacher’s value is assumed to be nonexistent. Let’s assume that a machine is invented that automates ditch digging. With the unskilled ditch digger’s labor eliminated, if we accept the view that skill is a tool possessed by skilled labor whose value is passed on to the commodity, the value of an average hour of labor now creates more than an hour of value. This contradicts the principle that an hour of labor, on average, has no particular skill that produces an hour of value.
The law of value holds that it is not the least skilled workers whose hour of labor produces one hour of value, but the labor of the average worker of average skill with no special training translates on the market to one hour of abstract labor.
Does more intense labor produce more value?
Another idea often put forward to explain the greater value-producing power of certain types of human labor is the intensity of labor. What is the unit of measure that measures the intensity of labor? Certainly, if an individual capitalist increases the intensity of the workers, an hour of their labor produces more value than before. Every capitalist, every minute of the day, tries to do this. If one hour of concrete labor in a factory produces more use values than before because the intensity in that factory was increased, one hour of labor produces more than an hour of value. Or, as Marx put it, one hour of labor in that factory counts as more than an hour. But as soon as the capitalist’s competitors adopt the intensification of labor, an hour of labor performed by our original capitalist’s workers again translates to one hour of value. (11) Here, an hour of labor performed at average intensity prevailing at a given moment translates into an hour of labor value. A general intensification of labor increases the number of use-values produced but doesn’t increase the total value produced.
The example of Henry Ford and his assembly line
During the 1920s, Henry Ford was famous for paying assembly-line workers $5 a day. It doesn’t sound like much today, but the 1920s dollar price of gold was $20.67, compared to about $1700 an ounce at present. A dollar in the 1920s went a lot further than it does now. Five dollars a day was far above the average wage of the time for unskilled labor. Ford paid these wages not because he believed workers should be highly paid. Like all capitalists, he was obliged to aim for the highest possible profit. Paying workers the least amount possible is crucial to the pursuit of maximum profits.
In reality, Ford was forced to pay high wages because work on an automobile assembly line was, and is, physically exhausting, mind-numbing work. If Ford had paid only the average in the industry of the time, he would have found it impossible to find workers to run his factories. But by paying higher wages, he was able to attract many young men not trained in a skilled trade. They were willing to work on the assembly lines for as long as they could take the pace and intensity of the job because they were able to make more money than they could in any other way.
Because of the intensity and unpleasant nature of assembly line work, automobile manufacturers had higher labor costs than most other industries. If the labor power employed had not produced considerably more value, and surplus value, per hour than that of other industries, industrial capitalists engaged in automobile production would have realized a profit rate on their total capital well below the average rate if they made any profit at all. If this had been so, over time, they would have moved their capital into more profitable branches of production.
Why does the labor power on high-speed assembly lines produce more value per hour than that employed in more average industrial conditions? Some say that the greater value-producing nature of assembly-line labor stems from the amount of energy expended and that the value of commodities is energy embodied in commodities.
Value is the relationship between people engaged in the production of products produced for exchange. Energy is vital for the production of use values. Both workers and machines expend energy in the process of production. Physicists define energy as the ability to work, though work in this sense involves not only human labor. Only a tiny percentage of the total energy in the universe is expended through human labor. If value is a relationship between things, an energy theory of value might make sense. But value is a relationship between people involved in production. So the energy theory of value fails.
The law of value governing commodity production states that average labor power produces, on average, one hour of value for every hour of work. Because workers won’t perform labor on assembly lines unless they receive higher pay than most other types of work, the value of an hour of labor performed on high-speed assembly lines produces much more than an hour of value. The law of value dictates: the higher the value of a particular type of labor power relative to the value of the average, the more value it creates. The key word here is relative.
Labor powers producing more than an hour of value for every hour of labor performed are multiplies of simple labor powers. Like concrete labor — the labor of specific skills producing specific use values — can be reduced to abstract labor that produces value, labor powers that expend labor can be reduced to simple labor powers.
We have to be careful with what we are saying and what we are not saying here. We are not saying that the higher the value of simple labor power, the more value labor creates at any given time. If in the course of the class struggle, workers succeed in raising the value of all labor power across the board, this doesn’t mean labor power creates more value than before. The reason is that the law of value holds that a given quantity of simple labor power employed for a given period always creates the same quantity of value regardless of skill or productivity. The effect of a general rise in the value of labor power — the length of the work day unchanged — will be a fall in the rate of surplus value and a fall in the rate of profit. The total amount of value produced will be unchanged.
We’re also not saying that a rise or fall in money wages of a particular type of labor power necessarily affects the value-creating power of that type of labor power. If the change in the relative wage of a certain type of labor power reflects a temporary shortage or glut of that labor power, no change in the value-creating power of that labor occurs. As with any other commodity, gluts and shortages of labor power cause its price or wages to fluctuate around its value. As with other types of commodities, fluctuations in the prices of types of labor power equalize the supply with the demand of types of labor power over time. Only if wage differences persist over time with no monopoly factors involved do wage differences reflect differences in the values of different kinds of labor powers.
Fractional labor
An hour of concrete labor that produces more than an hour of value is called complex labor. Complex labor is simple labor multiplied by a number greater than one. The laws of arithmetic allow us to multiply by the numbers one, greater than one, or by a fraction of one. When we multiply by a number greater than one, the result is a higher number; by one, the number is unchanged. When we multiply labor powers more valuable than average labor power, we multiply simple labor power by a number greater than one. The labor performed by such workers is called complex labor because an hour of such labor counts for more than an hour of average or abstract human labor when embodied in a commodity. If labor power is average in every way, meaning it has no particular skill — which doesn’t mean no skill — an hour of such labor power represents simple labor power producing one hour of value in one hour of work. To translate from hours of concrete labor to quantities of abstract labor, we multiply the total hours of labor expended by one.
How do we translate one hour of concrete labor of workers whose labor power is below average into a quantity of abstract labor? An hour of concrete labor performed by these workers has to be a number that’s a fraction of one. When we perform this operation, the result is an hour of concrete labor produces less than an hour of value.
It is often assumed that an hour of labor from the least skilled workers (the proverbial ditch diggers) represents an hour of abstract labor. One hour of a ditch digger’s labor produces one hour of value. This view is wrong. If this were true, an hour of any other type of concrete labor would produce more than an hour of value. To retain mathematical and logical consistency, some types of concrete labor count as complex labor only to the extent that other types of labor count as fractional labor.
All concrete labor can be reduced to simple, average, or abstract labor. Similarly, labor power — the ability to work embodied in human beings, though this varies among different human beings, can be reduced to simple labor power. Once we make this reduction — as the market does every day — we reduce labor power to simple labor powers that always produce an equal quantity of value in a given time. One hour of labor expended by these simple labor powers always produces one hour of value. This is known to be true because the exchange value of labor power of any given type of labor power — its money price or money wage — is reckoned in the same medium as every other type of labor power — money. Though wages differ, they’re all reckoned in a common substance of both a social and physical substance. Exchange value becomes money price once a given commodity emerges as the money commodity or universal measure of value. Money allows us to quantitatively compare the prices of different types of labor power, from ditch diggers to jewelers and from jewelers to brain surgeons. This shows that all types of labor power have a common quality. When we state the law of value theoretically by reducing concrete labor to simple abstract labor, we are simply doing consciously what the people who trade in the market do every day unconsciously.
Marx pointed out that with the development of capitalist production, complex labor powers tend to be replaced by simple labor powers. Industrial capitalists figure out ways to eliminate skilled labor and replace it with machines that are tended by workers with little training. To the extent de-skilling becomes a reality, most types of concrete labor approach simple average labor power with the result that an hour of concrete labor equals something close to an hour of simple labor.
Many factors determine how an hour of a particular type of concrete human labor translates into a definite quantity of abstract human labor. Training paid for in money is the most important factor, but not the only one, as Henry Ford’s assembly line illustrates. If work is especially hard, unpleasant, or dangerous, the value of labor power doing such work is higher than labor power employed in other types of labor, and an hour of such labor power produces more value in an equal period than the average labor power.
Due to special oppressions, such as against people of certain races and national origins, many workers may not get the full value of their labor power. Such workers are forced to sell their labor power below its value. Racism against the descendants of enslaved Africans has been a crucial factor in the history of the U.S. and the history of its labor market. Women are paid less than men. The effect on relative prices of commodities is the same though the value of such labor power is lower. Democratic struggles to remove this special oppression and bring the price of labor power — wages — into line with the value of labor power to remove the distorting effects on prices that paying certain workers less than the value of their labor power has. However, the result is a lowering of the overall rate of surplus value and the rate of profit. This is why the capitalist class has an interest in maintaining racism, sexism, and all the other types of special oppression found in capitalist society.
Value and the world market
Until now, we’ve assumed the world market is a single national market. But within it, commodities of the same use value and quality have a common social value even if individual values differ. Since the world market began to develop with the 16th-century gold and silver discoveries, the world market has been divided into separate national ones. Within national markets, what constitutes the average value of labor power can be different than that of the world market. This has consequences for world trade.
Commodities have individual values, national social values, and internationally traded commodities have global social values. The individual value is determined by the quantity of labor that went into producing it after reducing concrete labor of different skills to average simple labor. Then we calculate the individual value by how much labor (measured in some unit of time) it took to produce that commodity. The national social value is the average quantity of abstract labor necessary to produce that commodity under the conditions of production prevailing within the nation-state.
If traded on the world market, its global social value is determined by how much abstract human labor it takes on average to produce it under prevailing global conditions of production. Those not traded globally have two values, the individual value, and the social value. In this case, the national social value plays the decisive role in price formation. Globally traded commodities have three values: individual value, national social value, and global social value. The more a commodity is globally traded, the more global social value dominates price formation. Tariffs and non-tariff barriers aim to ensure that national values play a decisive role in price formation. The more globalized the world economy, the more global social value dominates price formation. The difference between national and global value is crucial to understanding world trade.
Unequal exchange
Assume money wages — those measured in universal money, gold bullion — are equal in all trading nations. We can safely assume the value of gold is determined globally. This is one reason gold can function as universal money. Under these conditions, the ability of individual industrial capitalists to undersell others is determined by their ability to produce commodities of the same use value and quality with less (abstract) labor than the competition. What happens when the social values of commodities (other than gold) are determined nationally but not globally, the capitalist with higher labor productivity sells commodities in a nation with lower labor productivity?
Since universal money — gold — has the same social value in all countries, this means that commodities produced in countries with lower labor productivity have higher prices reckoned in gold terms. Capitalists with lower labor productivity selling at higher prices remain competitive only because they are protected from foreign competition by tariffs, other state-imposed trade barriers, or natural barriers to global trade. (12)
Suppose these trade barriers break down. Capitalists with higher labor productivity can sell at a higher price in a nation with lower productivity than in their own country since the competition — the native industrial capitalists — produce commodities with higher individual value. In the national market of less industrially advanced countries, an hour of labor in more industrially advanced countries represents more than that of the less developed country. Assuming commodities sell at their values — direct prices — the more developed country receives more money in return for commodities than it would if they were sold on their home market. Unequal quantities of labor are being exchanged. The more advanced nation is exploiting the less advanced nation through the unequal exchange of commodities. The capitalists in the less industrially advanced country have to sell their commodities below both their individual value and their social national value. Since we assume that capitalists in both countries pay the same wages to their workers, those in the less advanced country make lower or no profits and will be forced out of business.
The more the world economy becomes globalized — free trade — the more the capitalists in the industrially less advanced country will be obliged to give up entire branches of production. (13)) To the extent that happens, the industrially less advanced country becomes de-industrialized. Unequal exchange among nations caused by differing productivity of labor leads to the development of underdevelopment in the nation with the lower productivity of labor.
Those capitalists in less industrially advanced countries will be able to hang on longer if they start paying workers lower wages, calculated in terms of gold, than capitalists in the more advanced country. The cost prices of commodities in different nations are determined by a combination of how much is paid for the labor power commodity and the productivity of labor. Wages can’t be lowered to zero, while the development of labor productivity knows no such limits. In the long run, if the capitalists of a given nation want to increase their share of both the home and the world market, they must increase the labor productivity of their workers at a pace faster than those of other nations. Protectionism and other neo-mercantilist policies combined with lowering the workers’ wages can only buy time.
As we saw in earlier posts, Anwar Shaikh is correct when he points out that the law of comparative advantage does not prevail either nationally or internationally under the capitalist mode of production. Instead, the law of absolute advantage prevails. The capitalist who can produce a given commodity of a given use value with the least money cost will prevail in the competition, whether it’s national or international. Money costs are, in the long run, dominated by the relative productivity of labor between countries.
Depending on the use value of the labor commodity, productivity is a function of both the level of technique and the natural conditions of production. You can’t mine copper in a country without copper ore-bearing land, no matter how advanced your technology is relative to your competitors. Nor can you grow coconuts in countries not warm and humid enough year-round for the coconut palm to survive and bear fruit.
When it comes to manufacturing, the level of technique, not the natural condition of production, dominates. When it comes to extractive industries and agriculture, natural conditions often play the decisive role. Even highly underdeveloped capitalist countries often enjoy an absolute advantage when it comes to extractive industries and certain agriculture sectors. The economies of the Global South are dominated by agriculture and extractive industries, while the Global North is dominated by manufacture, where technique, not nature, plays the decisive role in the determination of relative labor productivity.
Simple and complex labor and the global division of labor
Within a capitalist nation-state, skilled labor that requires considerable training functions as complex labor, while labor that doesn’t function as fractional labor. This is because acquiring skills can take years of training and cost a lot of money. The period before the worker’s working lifetime begins is extended. To make up for the later start and training costs, workers must earn higher wages during the working portion of life. If these higher wages are not forthcoming, few people will bother with the time and expense of acquiring the skills. And if higher wages are not paid, skilled labor power will be scarce to nonexistent in the labor market. As an approximation, the more time and money it takes to acquire a special skill, the greater the value of the qualified labor power emerging from the process relative to average labor power, and the more value (abstract labor) that qualified labor power produces for every hour of concrete labor performed.
This doesn’t hold true on the world market. As we know, the value of labor power varies in different countries. Labor power has higher value in countries that grew out of colonial settler states, such as the United States, Australia, Canada, and Israel, where land — stolen from the Indigenous population — was initially cheap. As a result, only a relatively small part of the settler population has to sell their labor power to capitalists. Labor power also has a higher value in countries with a long history of labor unions and workers’ political parties — for example, Germany — than in countries lacking such a history. The standard of living for peasants that prevailed before capitalism, before the separation of producers from the means of production, also played an important role in determining the value of labor power.
As long as we are analyzing the different values of labor power within a country, we’re dealing with a situation where the value of a type of labor power with certain skills is compared with the value of the average value of labor power within a given nation. This isn’t true on the world market. If all countries produced the same commodities — no international division of labor — an average value of each type of concrete labor power would exist governing how much value measured in some unit of time a given hour of concrete labor performed would produce.
In reality, world trade leads to a division of labor. Let’s return to the example of the type of labor necessary to grow bananas. Some types of bananas can be grown in subtropical climates, but most commercial varieties require a full-fledged tropical climate with warm, humid weather all year.
Since most Global North countries have temperate or subtropical climates unsuitable for most commercial banana varieties, growing them is confined to certain countries of the Global South where the value of labor power is low, giving them a big advantage. Yet because the value of labor power in the nations of the Global South as a whole is low, the world market treats the labor of banana growing as fractional labor. This is true, despite the fact the labor expended in certain countries of the Global South is the most productive in the world when it comes to producing the commodity bananas. An hour of concrete labor performed on a banana plantation counts for less than an hour of abstract human labor value. In contrast, an hour of concrete labor in the production of an airplane in a factory in the Global North counts for more than an hour of abstract human labor or an hour of value.
In general, countries with low levels of capitalist development are forced to specialize in extractive and agricultural industries where the natural production conditions, rather than technological developments, determine absolute advantage. Ultimately the fact that the world market treats the labor performed in the extractive and agricultural industries of these countries as having less value reflects the national oppression of them by the nations of the Global North. In contrast, because of the oppressing nature of the capitalistically developed nations, the world market treats the concrete labor performed there as complex labor. If (bourgeois) democratic revolutions succeed in removing the exploitation of the countries of the Global South by the countries of the Global North, the labor — such as banana growing labor — will lose its character as fractional labor, as the concrete labor performed in the Global North will lose its nature as complex labor.
The movement of industry to the Global South and the value of labor power
The movement of industrial production to the Global South means that types of concrete labor previously performed only in the Global North are being performed more in the Global South. This means increasingly that the average value of labor power since the late 20th century draws nearer to the average labor power of the Global South in more and more branches of production. The result is not a general reduction in the value of commodities because they are performed by cheap labor. The result is a rise in the rate of surplus value worldwide. (14)
We shouldn’t confuse the above phenomena with the transformation of values into prices of production through the working of capitalist competition and the equalization of the rate of profit. Capitalist competition leads to a situation where the capitalist doesn’t appropriate the surplus value of their own workers. They share in the total surplus value produced by the workers of all the capitalists in such a way that each capitalist receives profits in equal periods of time in proportion to the quantity of the total capital they advance. This means that, as a rule, the branches of industry with a higher-than-average organic composition of capital are in the countries of the Global North, while those with a lower-than-average organic composition tend to be in the Global South. High wages are less of a problem for capitalists operating in industries with higher-than-average organic compositions because the wage bill forms a smaller percentage of the total cost price.
From the viewpoint of global capital, paying high wages in the high organic composition of capital industries in the Global North does less damage to the global profit rate. This is due to a relatively small amount of the total surplus being produced in the Global North, where the organic composition of capital is higher than the global average. We’ll examine this phenomenon in a future post, which will critique Anwar Shaikh’s views on monopoly.
I will examine Shaikh’s concept of regulating capital in next month’s post.
(1) The exact nature of the Democrat Senate majority depends on the outcome of the runoff election in Georgia, scheduled to be held on December 6. The runoff elections pit Democrat Senator Raphael Warnock against pro-Trump Republican Herschel Walker. If Republican Walker wins, 50 senators will be Democrats, and 50 will be Republicans, just like the current Senate. In her capacity as Senate President, Vice President Kamala Harris holds the tie-breaking vote, giving Democrats control, as is the case with the outgoing Senate. If Warnock wins, the Democrats will have an outright majority of 51 Democrats to 49 Republicans. (back)
(2) The anti-abortion decision by the Supreme Court didn’t make abortion illegal everywhere. Instead, it left it up to the states to decide whether to keep it legal or to ban it. In Republican-controlled states, anti-abortion measures have been passed. But in Democrat-controlled states, abortion is still legal. (back)
(3) In the distant past, there was some basis for the view that Republicans were better than Democrats for preventing inflation. In the late 19th century, the Democrat Party coalition included the Jim Crow agricultural South and the indebted small farmers and business people of both the South and the North. Small farmers and business people wanted a cheap silver dollar that they believed would lighten the burden of their debts. Silver-mining interests also supported the Democrats because they would be able to exchange their cheap silver for more valuable gold — until the silver dollar’s exchange rate fell to the value of the silver contained within it. In the late 19th century, the Democrat Party was divided into pro-Wall Street gold Democrats and inflationary cheap dollar silver Democrats like William Jennings Bryan. In 1933-1934, Franklin D. Roosevelt, in a major victory for the cheap-money, pro-silver wing of the Democrat Party, carried out an unnecessary devaluation of the dollar, raising the dollar price of gold from $20.67 to $35 an ounce. This led to a rise in the dollar-denominated cost of living in the decades following the Depression.
Events of the last 50 years give no basis to the view that the modern Republican Party is in any way the lesser evil when it comes to inflation. It was Republican President Richard Nixon who ended the international gold standard, allowing the dollar price of gold to soar from around $40 in 1971 to well into the triple digits, peaking at $875 in early 1979. The devaluation of the dollar, followed by the depreciation of the dollar, unleashed the great inflation of the 1970s. It was the current Republican chairperson of the Federal Reserve Board, Jay Powell, who carried out dollar printing quantitative easing policies that unleashed the recent wave of price increases. On the other hand, in the early 1980s, it was the Democrat chairperson of the Federal Reserve Board, Paul Volcker — appointed by Democrat President Jimmy Carter — who finally brought stagflation to an end — at the price of double-digit interest rates, deep recession, and double-digit unemployment. (back)
(4) Many commentators have described what I call the COVID-aftermath boom as stagflation. The 2021-22 period has seen not stagnation but an economic boom. Stagflation will develop out of the now fading inflationary aftermath boom only if the Federal Reserve System attempts to halt the rise in interest rates before a recession has adequately liquidated overtrading and overproduction sufficiently to lay the basis for a full-scale upswing of the industrial cycle. (back)
(5) Biden, born in 1942, belongs to the pre-baby boom generation, as the baby boom describes people born after World War II. DeSantis, in contrast, was born in 1978 and, if elected (by the electoral college) president in 2024, will be at 46, one of the youngest U.S. presidents. (back)
(6) A lack of money, as opposed to a lack of available labor, is often a barrier to projects under capitalism. The need to economize the total labor measured in some unit of time available to society applies to all human societies. (back)
(7) Understanding how concrete labor is reduced to a common quality is crucial to understanding money. None of the classical economists, including Ricardo, understood the necessity of reducing concrete labors that differ qualitatively from one another to a common quality that can then be quantitatively compared. None of the classical economists understood money. In a money-commodity economy, commodities of different use values are compared quantitatively with one another only by first converting them into different quantities of the physically identical substance of a money commodity. (back)
(8) More strictly, labor power is sold for credit. The worker is only paid after the capitalist buyer of labor power has consumed it. (back)
(9) To the extent that building trade workers own their tools, they are not proletarians. By requiring workers to own their tools, pure proletarians who cannot afford the tools are excluded from union membership and the ability to work in unionized building sites. The supply of workers is limited, which maintains higher wages at the expense of real proletarians. Members of these types of labor unions traditionally viewed themselves as members of something akin to pre-capitalist guilds rather than unionized proletarians. (back)
(10) The money used by capitalists to pay for labor power is money capital from the viewpoint of the capitalists but is revenue from the viewpoint of the worker. (back)
(11) You can be sure that under the pressure of competition if one capitalist figures out a way to increase the intensity of labor, their competitors will also increase the intensity of labor. (back)
(12) The transport of a commodity is an extension of the production process. Labor engaged in transportation, as opposed to that engaged in exchanging titles of ownership, creates value. If labor productivity were equal in all branches of industry in all countries, the home-produced commodities would almost always be cheaper because they would have lower transportation costs. There would be little world trade. I’m abstracting transportation costs here because they don’t affect the basic argument. (back)
(13) This is what happened to the Indian industries that dominated the world market before steam power came to dominate the British textile industry. Under the free-trade policies British colonizers imposed on Indian industry, the once-dominant Indian textile industry was ruined, resulting in British control of the world textile market. A similar process lies behind China’s century of humiliation. China, along with India, was the world’s leading manufacturing nation for centuries. However, in the 19th century, the free-trade policies imposed by Britain during the Opium Wars led to the collapse of Chinese manufacturing and the enslavement of the nation that only ended with the victory of the great Chinese peoples’ revolution in 1949, which finally liberated the country from its free-trade enslavement. (back)
(14) This is why it’s so important that Marxists of the Global North support all the struggles against all forms of imperialist nationalist oppression. This democratic struggle, though not in and of itself a socialist struggle, is absolutely necessary for the world socialist revolution to be victorious. (back)
A Critique of Crisis Theory 