Three Books on Marxist Political Economy (Pt 12)

John Smith’s ‘Imperialism in the Twenty-First Century’ (Pt 2)

John Smith’s “Imperialism” is aimed against what Smith calls the “Euro-Marxist” or “orthodox Marxist” tendency. This tendency holds that workers in the U.S., Western Europe, and Japan are often more exploited than workers of the “global South”—previously called the colonial and semi-colonial countries and later the Third World (1)—despite the far higher level of real and money wages in the countries of the “global North.”

Marxists who hold this view rest their case, at least in part, on the following quote from Marx that appears in Chapter 17 of Volume I of “Capital”:

” … it will be found, frequently, that the daily or weekly, &tc., wage in the first [more advanced—SW] nation is higher than in the second, whilst the relative price of labour, i.e., the price of labour as compared both with surplus-value and with the value of the product, stands higher in the second [less advanced—SW] than in the first.”

Marx writing in the sixties of the 19th century is saying that English workers could be more exploited than the wage workers of poorly developed capitalist countries. To fully understand the debate around this question, including John Smith’s stand, it is necessary to delve into value theory in general and the theory of surplus value in particular. In doing this, we will explore many questions in regard to both the nature of contemporary imperialism and value theory.

Value, equivalent exchange and the market

All human societies have to find a way of distributing the available human labor—always measured in some unit of time—among the various branches of production to meet the needs of their society. The distribution of labor is called the division of labor.

The earliest societies took the form of small isolated communist communities that knew neither classes, private property, the family, or the state. Within these communities, division of labor was organized by tradition according to age and sex. For example, grown men did the hunting of large game while women, assisted by their children who had passed infancy, gathered fruits and vegetables and hunted small prey. The job of raising the next generation fell to the female sex.

To the people who lived in these early communities, this division of labor seemed both natural and eternal. Indeed, these early human societies and their productive forces evolved at an incredibly slow pace over hundreds of thousands of years.

But at a certain stage of development, these communities begin to engage in the exchange of products with other communist communities. A product of a given use value that cost the community a certain quantity of labor began to be exchanged for another product of a different use value that required an equivalent quantity of labor to produce. And here lies the origin of the exchange of equivalent quantities of labor and economic value. Over time, stimulated by growing exchanges among the communist communities, the rate of growth of the productivity of human labor quickened.

Rise of the family, private property, the division of society into classes, and the state

At a certain stage of development, the exchange of the products of human labor also began to develop within these communities. (2) These exchanges led to the dissolution of the old communist relations where the division of labor was regulated by what appeared to be unchanging tradition. The division of labor now came to be regulated by what eventually would be called “the market.”

However, it is only with the rise of capitalism that the market became all embracing, regulating virtually every aspect of society. With the coming of capitalist society, everything is bought and sold. Money becomes all-powerful. Local markets merge into national markets, and national markets merge into the world market. Today, we call this “globalization.” If you travel around the world, a MacDonald’s can be found every few blocks whether you are in downtown or suburban Los Angeles, New York, Beijing, Moscow, Berlin, Auckland or Sydney.

Yet no matter how all-embracing the world market becomes, its basic function remains allocating the labor available among the various branches of production in such a way that the basic needs of our now-global society are met.

Within this global market, each individual is expected to strive to achieve his or her maximum advantage measured in terms of money. It is all against all with no overall plan. The question becomes not why such a society must eventually break down but rather how it can work at all.

As the world market began to develop in the wake of the gold and silver discoveries of the 16th century, the science of political economy was born in order to answer this question. Those Marx later called the classical political economists explained how such a society functions. But they went further, claiming that the struggle of all against all—called free, not perfect, competition—is the only way any human society can function. It has always been this way, the economists claimed, and so it always will be.

As capitalism developed further in the 18th century, economic liberalism was born. The economic liberals held that to achieve the best possible results neither the government nor anybody else should interfere with the free workings of the market any more than was absolutely necessary.

Many of the post-classical “vulgar economists,” as Marx called them, took the arguments of economic liberalism further. In the late 19th century, as Shaikh explains in his “Capitalism,” the concept of free competition was replaced by the notion of “perfect competition.” Increasingly complex mathematics were developed that purport to demonstrate the truth of the assertion that the more “perfect” competition is, the closer the outcomes will approach the optimum and the better off everyone will be. However, only the initiated can understand the complex mathematical demonstrations, which can only be mastered over years of study.

Despite these mathematical demonstrations, the free exchange of the products of human labor—commodities—for other products of labor containing equivalent quantities of labor produces surprising consequences in practice that cannot be explained by the economists’ models. Something is obviously wrong, not with the mathematics but with the underlying assumptions of these models.

Two of these consequences are particularly dramatic. One is the periodic return of global crises of general relative overproduction of commodities. The mathematical equations that supposedly demonstrate how capitalism works cannot explain why these crises occur.

If these models were correct, the crises would emerge quite naturally from the mathematics. In natural science, whenever a theory that has been formalized by mathematics is in glaring contradiction to the observed facts, the theory must be abandoned. The same should be true in the social sciences such as economics. The fact that modern bourgeois economic theory—marginalism—has not been abandoned shows that modern economics, much like theology, is not a science but an ideology whose job is not to explain reality but rather to conceal it.

The other result of the operations of the “free market” that modern economics cannot—or rather does not want to—explain is that the owners of capital become incredibly rich while the people who actually produce the wealth—the wage workers—have to constantly struggle to merely tread water. For those of us who have grown up in a capitalist society, we tend to take this fact for granted. That is just how the world is and has always been.

But if society is at bottom based on the exchange of the products of equal quantities of labor and there is no serf or slave labor (3), how can these results arise? Something is not quite right here. With the exception of prison labor, nobody is legally forced to work for another person or group of persons against their will. Why then do business owners and other owners of capital become so much richer than anybody else? Don’t capitalists—defined as the owners of capital— purchase all their commodities including workers’ capacity to labor just like everything else at more or less its value? Doesn’t free competition enforce this?

Yet the owners of capital can accumulate fortunes that swell from millions to tens of millions to hundreds of millions and finally to billions. To find the answer to this question we must turn to the work of Marx.

Concrete labor, abstract labor and value

As we have repeatably stressed throughout this blog, value is not concrete human labor embodied in commodities measured in terms of some unit of time but rather abstract labor measured in terms of some unit of time. This is not an easy concept to grasp.

Rosa Luxemburg asserted somewhere that understanding abstract labor is the key to understanding the nature of money—and I would hold by extension crises of overproduction. As we have seen in this blog, Marxists after Marx, taken as a whole, have not done well at these tasks. I will now assert that to understand imperialism fully in a truly scientific, as opposed to an impressionistic, way, we have to begin with the difference between concrete and abstract labor. We will see the truth of this assertion as our extended review of John Smith’s “Imperialism” proceeds.

Before a quantity of labor can be compared with another quantity of labor, we must first make the two different quantities of labor qualitatively identical. Only then can different labors embodied in different commodities be quantitatively compared.

Looked at concretely, the labor performed by different workers—or even the same labor performed at different stages of workers’ lives, or even at different times of the day—will inevitably differ qualitatively. In the morning—or at the beginning of a shift—a worker will likely work faster and with fewer errors than will be the case later in the day. If a worker has a cold or the flu, he or she will likely work slower with more errors. Or the worker will work better when things are going well with her or his life than when things are not.

Even greater differences in concrete labor are found in terms of different skills. The labor of a ditch digger—the traditional representative of unskilled labor in economics—is different than the labor of a jeweler—the traditional representative of skilled labor. The labor of a carpenter—also an example of skilled labor—is different than the labor of a jeweler. There isn’t one type of concrete labor but many types.

Yet the labors performed by human beings do have something in common. What is it? All such labors are examples of human labor. The very fact that we can use the term human labor to describe all the diverse types of labor that occur in the real world shows the truth of this.

When commodities are exchanged that are produced by different types of concrete labor, what is being compared is human labor as such, stripped of all the particular characteristics that cause one instance of concrete labor to differ from another.

How does this abstraction occur in the real world of commodity exchange? It occurs through the exchange itself. When commodities are exchanged, all the differences that exist in the concrete—actual—human labor that went into their production are abstracted away. Once this happens, only human labor as such is left.

Gold bullion—money material—represents social wealth as such with all the specific use values that represent real-world concrete wealth—food, clothes, houses, automobiles, airplanes, computers, and so on—abstracted away leaving in its place the undifferentiated glittering substance of the yellow metal. However, social wealth as such—gold bullion—can always be converted into any desired specific use value on the market through an act of exchange.

Just like we can compare different quantities of social wealth only when we compare their prices—specific quantities of gold bullion that are qualitatively identical—we have to reduce actual concrete human labor in the world to one qualitatively identical social substance—abstract human labor. This is why it took Marx, a German revolutionary who was a student of the great German philosopher and logician GWF Hegel (1770-1831) to at last consciously understand in 1857—not so long ago—a process that had been going on unconsciously for many thousands of years.

Value is a relationship among human beings

Occasionally, it is suggested that the labor of non-human animals should be considered productive of value and surplus value. Adam Smith, for example, believed that the labor of what he called “laboring cattle” was productive labor. Animal rights advocates who have some knowledge of Marxist theory are attracted by this argument. Shouldn’t animals and their labor be respected? In my opinion, they certainly should.

However, value is a relationship of production among humans and not between human and non-human species. This is not just—at least in my opinion—because under capitalism animals are often treated with incredible cruelty. But this doesn’t change the fact that economic value is a relationship among humans engaged in production and exchange—not humans and animals.

Labor versus labor power and the nature of surplus value

Once we explain value, we have to deal with surplus value, whose value form is profit. Profit is the driving force of capitalist production. In order to explain surplus value, Marx and anybody following his logic must first make a series of simplifying assumptions. First, we must assume, using the power of abstraction, that all human labor is qualitatively identical.

This also necessitates the assumption that all labor powers are qualitatively identical. We must make this assumption because it is impossible for labor powers that differ qualitatively from one another to perform qualitatively identical labor. And as we saw above, labor must be made qualitatively identical before different labor embodied in different commodities can be compared quantitatively. Once we make these assumptions, the term abstract human labor becomes redundant. Now we simply have human labor.

Second, we must assume that all commodities sell at their values—direct prices—and not at their prices of production. The nation and nation states are also abstracted. The world is one big capitalist nation, and identical commodities sell at exactly the same price everywhere. In this imaginary world of “pure capitalism,” we have no imperialism, no racism and no sexual oppression. No nation or nationality exploits other nations and nationalities.

As we saw last month, starting in 1857—the year of the global economic crisis that sparked his interest in political economy anew—Marx began to make the distinction between labor and labor power—the ability to work—which neither he nor classical political economy had previously made. This is a vitally important distinction, as we will soon see.

When workers are hired, the boss is not buying their labor but their ability to perform labor. Everybody who has ever had a job and thinks about it for awhile will understand this. The boss—more formally speaking, the industrial capitalist or the agent of the industrial capitalist such as the shop foreman—then assigns a task or a series of tasks to the worker. Isn’t this exactly what happens on the shop floor or other work place?

Workers if they are to keep their jobs must perform the tasks assigned to them. If they deviate from the instructions in any way, the shop foreman or other supervisor lets them know. This shows that for the duration of the workday, their labor power is no longer theirs but the bosses’. They are not chattel slaves and can break their contract and reclaim their labor power at any time. But in that case, they will be let go and will either have to find a new job or live without wages. Only after the workers sell their labor power—actually for credit, since they are not immediately paid—their latent ability to work is transformed under the boss’s command into actual labor.

The economists’ argument

Now let’s shift from the workshop to the college classroom, the domain of the professional economist. How will the transaction between the boss and the workers selling their labor—as the economists say—be explained by an instructor in an introductory college or maybe high school economics class. I say instructor because a professor would not be assigned to teach an introductory class. However, in an advanced economics class taught by a full professor what the instructor explains in the introductory class will form the foundation of the argument.

Our instructor explains to his students that the workers sell their labor—the instructor will not say labor power—to the employer. What will determine the price that the boss will pay for the workers’ labor—also known as the workers’ wage? The instructor will explain to his eager young students that the boss will pay the workers for the full value that their labor produces. Not a penny more and not a penny less. Nothing could be more fair. No exploitation here at all!

Let’s suppose the worker is paid a wage of $100 daily for performing eight hours of labor. Notice our college or high school instructor—who here represents all of modern (bourgeois) economics—and the post-1857 Marx agree on one thing: the quantity of labor must be measured in terms of some unit of time, in this case hours.

But how do we know, you might ask the instructor, that the commodity eight hours of labor is actually worth exactly $100 in terms of its value and the value it produces, instead of $75 or $125 or some other amount? The instructor will tell you that competition on the market guarantees that the commodity labor sells at least on average at its value, just like the market sees to it that all other commodities, such shoes, dresses, pants, peanut butter, and so on, sell at their values.

True, the instructor might grant that because of some disequilibrium in the market the commodity labor might sell for $75 per eight-hour day but produce $100. In that case, the instructor will concede that the worker is indeed exploited. As a result of this exploitation, the boss will realize what the instructor calls an “economic profit” of $25 on every eight hours of labor purchased from the worker. That would be unjust, the instructor will concede.

But since our employer like everybody else in the economy behaves rationally in the economic sense—that is, he aims to enrich himself in terms of money as much as possible—he will take advantage of the situation and hire additional workers. Soon the demand for labor will exceed the supply at a price of $75 for every eight hours of labor. The workers, who also want to maximize the money they are earning, will take advantage of the situation and demand a higher price—wage—for their labor. This will continue until the wage rises to $100.

At that level, the employer’s windfall disappears and the supply and demand for labor are equal. The workers are no longer exploited since they are paid exactly the amount of value that their labor creates, and the story ends happily—not despite of but because of the operation of the free market.

Our instructor is a Republican—assuming we are in the USA. He will explain that he is a Republican—and not a progressive—because his knowledge of scientific economics tells him that the way to fight the exploitation of labor that may occasionally arise is not through trade unions and collective bargaining but rather through individual bargaining between the worker and the boss. Trade unions, the instructor explains, are monopolies that only make the economy perform less efficiently and in the long run hurt the workers.

If our students are progressives—Bernie Sanders supporters—they aren’t at all happy that their economics instructor is a reactionary Republican. But can they refute his arguments? Suppose another student who is, like the instructor, a Republican and not a progressive raises his hand. That student asks, is it possible that the workers might be paid a wage of $125 for each eight hours of labor they sell to the employer when their labor actually created only $100 of value? In that case, won’t the employers, who create all the jobs, be exploited by the workers?

Our Republican economics instructor explains that it is indeed possible that some disequilibrium in the labor market, perhaps brought about by the trade unions and minimum-wage laws, could lead to a situation where the workers are exploiting the employers. For example, the employers might have to pay $125 in money to purchase a day’s worth of labor from the workers but get only $100 worth of value back in exchange. Now that wouldn’t be fair, would it? But as long as perfect competition prevails, the free market will soon eliminate this exploitation by the workers of the bosses.

Since the employer, just like the worker, is a perfectly rational person, the employer will say that he can’t keep losing money like this. He will reduce his purchases of labor and this might even cause some “involuntary” unemployment—a recession will be on. But as soon as unemployment occurs, the supply of labor at the price of $125 for every eight hours of labor will exceed demand. The workers being economically rational just like the employer will realize that to demand a $125 wage for every eight hours of labor they perform is unreasonable.

The supply of the commodity labor will now exceed demand at current prices—wages. As a result, wages will start to fall. Once they return to a price of $100 for every eight hours of labor performed, the employer will no longer be losing money for every hour of labor he employs, and workers will no longer be unemployed.

Thanks to the operation of the free market, our Republican instructor emphasizes, the recession will soon end and full employment will be restored. Not only that but now both the workers and the boss will be paid according to the value they actually produce, not a penny less and not a penny more. Full employment and perfect social justice march hand in hand thanks to the operation of the free market and perfect competition.

These arguments the economist uses and the marginalist methods (4) along with the mathematics to drive the argument home seem quite compelling even if like the progressive student we want to reject them. After all, the instructor who we will now name—Mr. Economics—is a Republican who thinks that the only thing wrong with present-day society is that “government” through minimum-wage laws or other regulations, or the trade unions that bargain collectively and don’t allow the workers to bargain individually, are preventing the economy from operating in the “optimum” way.

As long as we don’t challenge the assumption that the workers are selling their labor to the employer, we will have a hard time refuting Mr. Economics’ argument. However, as soon as we make the distinction between labor and labor power, Mr. Economics’ argument starts to fall apart.

As we saw, the college instructor correctly measured the quantity of labor in some unit of time—in this case hours. We must give him that much credit. But now what do we find if we make the distinction between labor power—the capacity to labor—and labor itself, something our college instructor does not do? Once we make the distinction between labor power and labor, we realize that the commodity that is being sold is not “labor” at all but labor power.

The three values of labor power

Like all commodities, labor power has three values: a use value, a value, and an exchange value.

The second value of labor power is economic value, or simply value that represents some quantity of human labor (5). Unlike the case with use value, which has many standards of measurement depending on the particular commodity that is being measured—for example, bushels of wheat, barrels of oil, grams of gold, and so on, value has only one standard of measurement. Without exception, the value of all commodities is measured by the quantity of labor it takes to produce them. Therefore, the standard of measurement is some unit of time—for example, hours of labor.

Finally, there is the form of value named exchange value, which with the exception of the money commodity is measured in terms of some quantity of money. In the case of the money commodity itself, exchange value is the expanded form of price lists read backwards—which include the price (wage) of labor power. (6)

Therefore, the measure of value is some unit of weight of precious metal expressed in terms of currency names that are nothing but special units of weight—our familiar dollars, euros, pounds, yuan, rubles and so forth. Therefore, the exchange value of labor power is measured in terms of the quantity of currency the worker receives for selling a given quantity of labor power—for example, $15 an hour.

Labor power is unique

Labor power as a commodity is unique in that the unit of measure of its use value and its value is the same, some unit of time. This gives rise to endless confusion, which the economists and other apologists for capitalism take full advantage of.

Let’s forget about the money measure of labor power, which is not of interest to us here. Instead, look at the value of labor power versus the amount of labor that workers actually perform at the command of the boss—industrial capitalist—or his agent such as the shop foreman. In other words, we want to compare the value of the workers’ labor power to the value the workers actually produce when they perform their labor.

There is no reason why the quantity of labor that labor power as a commodity represents and the quantity of labor that the workers perform should be the same. In fact, we can be pretty sure that the quantity of labor represented by the labor power of the workers will be considerably less than the quantity of labor the workers will be commanded to perform under the penalty of losing their employment.

Let’s return to our assumption that the boss makes the workers work for eight hours at a wage of $100 a day. Workers cannot live—let alone raise their children— without consuming commodities that function as means of subsistence. Let’s assume in order to (re)produce—including raising the children who will one day replace them in the labor market—the workers must each consume means of subsistence representing four hours of labor.

When workers consume means of subsistence they purchase with their money wage— which does not itself produce any value—the value contained in the means of subsistence is transferred to their labor power and the developing labor power of their children. Therefore, under our assumption, the value of the workers’ labor power is four hours for each worker and its exchange value—money price—is $100. Yet the workers are each obliged under pain of being fired to provide eight hours of labor, or in money terms $200.

The secret of capitalism revealed

But wait minute! Aren’t the workers being cheated here? They provide eight hours of labor a day but are only paid for four hours! Isn’t this a violation of the law of the exchange of equal quantities of labor, the basis of bourgeois freedom and equality? Not at all! The workers’ labor power can be reproduced for only four hours of labor a day. That is its “economic value.” In terms of exchange value, this comes to $100 per worker under our assumptions. Remember, it is their labor power—their ability to work—that the workers are selling to the boss, not their labor. And under our assumptions, they get that amount in full by the boss. No cheating here at all.

However, what is true is that the workers are only paid, under our assumption, for four of the eight hours of labor they perform. Half the workday they work for themselves, and half the workday they work free of charge. The workers can of course refuse to work under these terms, since we are assuming a free capitalist society and not a slave society. But if they do, they will have to live on air.

So as long as the workers do not own the means of production needed to perform their labor but that instead is owned by another class—the capitalists—they if they want to live and raise families have no choice but to perform unpaid labor for the capitalist class.

This is the secret of capitalism that virtually all modern “economists” work night and day to cover up. Now we understand why our economics instructor, Mr. Economics, does not and dares not make the distinction between labor and labor power. If he did, the dirty little secret of capitalism would be laid bare.

Surplus value and the use value of labor power

Marx called the value that the unpaid labor the workers create surplus value. The ratio between the unpaid portion of the working day and the paid portion, both measured in terms of time, is called the rate of surplus value, or sometimes the rate of exploitation. When the value of a commodity is realized in money form, the surplus value becomes profit. But how do we know that the value of eight hours of labor power is less than the value produced by the labor each worker actually performs?

We know that it is because the use value of the commodity labor power to the capitalists is precisely that it produces surplus value. And as we have seen throughout this blog, once the surplus value has been realized on the market in money form, that surplus value becomes profit. And profit is the only aim of capitalist production. If there is no profit, there is no capitalist production.

Therefore, if ever the exchange value of labor power—the wage—rises so high that the surplus value disappears, the use value of the commodity labor power will also disappear. As a result, demand for labor power will drop to zero, because like all people the boss won’t spend money on a commodity that has no use value.

Indeed, forced by the pressure of competition to earn the highest profit possible, the capitalists are driven to pay the lowest possible wage they can get away with. All other things remaining equal, the lower the wage and the higher the rate of surplus value, the higher the rate of profit.

Therefore, the capitalists will do everything possible—whether as an individual or
as a class—to increase the rate of surplus value. To do this, they must drive wages down to the lowest possible level. They can’t, however, drive wages down all the way to zero because if they did labor power would not be (re)produced and surplus value itself would disappear.

An illustration from contemporary politics of the capitalist drive to increase the rate of surplus value is the U.S. Democratic and Republican opposition to single-payer health care.

Since the election of Donald Trump and Republican majorities in both chambers of the Congress, the Republicans have repeatedly tried and failed by razor-thin margins to repeal the Affordable Care Act, often called “Obamacare.” The idea behind the ACA was originally developed by the Republican Party and first instituted on a statewide basis in Massachusetts under billionaire Republican then-Governor Mitt Romney.

The Republican plan is seen as the “conservative”—as in neo-liberal—alternative to single-payer health care, or health care as a right and not a commodity, which exists in one form or another in virtually all other advanced—and some not so advanced—capitalist countries. Some U.S. progressives have pointed out that it would be more accurate to call the ACA Romneycare rather than Obamacare

Since the current Republican Congress and Trump assumed office last January, Republican leaders in both chambers of the U.S. Congress, egged on by Trump, have tried to “repeal and replace” Obamacare, as they prefer to call it. The Republican leaders are not completely united on this, however. A minority believe that the ACA should be kept basically intact as the “conservative” alternative to single payer. Another minority wants to repeal the ACA entirely because it makes too many concessions to the “socialist” idea that access to health care should be a human right and not a commodity.

The majority of the Republican leadership, including President Trump, believe that the Affordable Care Act should be gutted though not repealed entirely, which will result in tens of millions of people being thrown off their current health insurance. These tens of millions of uninsured people will be added to the tens of millions of people who don’t have health insurance under the current version of the ACA.

Progressives in the U.S., most notably Vermont Senator Bernie Sanders, strongly oppose the drive of the majority of the Republican leadership and the Trump administration to gut the ACA. All the Democratic Party members in both chambers of Congress have opposed attempts by the Republicans and President Trump to gut the act.

A minority of Democrat Congresspeople and senators, most famously Bernie Sanders, but not the Democratic congressional leadership, advocate a single-payer health care system, sometimes called in the U.S. Medicare for all.

Under single payer, when you have to go to the doctor you don’t have to worry how the bill will be paid, because the doctor is not paid by the individual patient but by the national health care system. As single-payer systems spread around the world after World War II, health care came to be increasingly regarded as a basic human right rather than a commodity. (7)

How do the progressives that support single payer—a position that all recent polls show is supported by the majority of the U.S. population—including many rank-and-file Republicans but no Republican leaders—explain the Republican Party attempts to gut the ACA? More importantly, how do progressives explain the Democratic Party leadership’s continued opposition to single-payer health care?

The progressives’ explanation

Let’s start with how the progressives explain the Republican Party proposals to gut the Affordable Care Act. They explain correctly that the Republican “replace and repeal” proposed bills—all of which so far have failed to pass—are really a gigantic tax cut for the rich.

On the other hand, the Republican politicians are concerned about the impact of their highly unpopular “repeal and replace” proposals on their re-election prospects. Repeated polls show that U.S. voters overwhelmingly oppose all the Republican bills to replace and repeal the ACA.

However, the progressives point out, the Republican politicians are dependent on wealthy donors. These donors are of course capitalists—though the progressives generally avoid that ugly term when referring to them.

To the right of the progressives, the “mainstream” center-right Democrats prefer to explain the Trump-Republican drive to replace and repeal Obamacare as flowing from an irrational obsession to destroy President Obama’s legacy. The implication is that the Republican leaders—and especially Trump—are motivated by racism. And there is no doubt an element of truth here, especially as regards Trump.

But neither of the above explanations for the Republican “repeal and replace” efforts explains why the Democratic leadership is still resisting single payer—a reform that polls show is highly popular and experience has shown can easily be realized within the capitalist system. If the Democratic Party had instituted a single-payer system when they had control of both houses between 2009 and 2011 and the legislation had been signed into law by then-President Obama, the Democrats would certainly have been rewarded by many years of domination of Congress and the White House—at least from the 2010 through the 2016 elections.

If the Democrats had instituted health care as a right rather than as a commodity, the Republicans would have been left with two choices. One, they could have advocated the “repeal and replacement” of the single-payer system and faced extinction at the polls. Or two, they could have done what the right wing and far-right parties of Europe have all done, however reluctantly, accept health care as a right. From the viewpoint of beating the Republicans, passing single payer between 2009 and 2011 would have been a smart move by the Democratic Party.

But the Democrats under President Obama’s leadership managed to blow the golden opportunity provided to them by the disastrous presidency of George W. Bush and passed what turned out to be the highly unpopular, Republican-inspired Affordable Care Act instead. President Obama not only made no attempt to pass single payer, he failed to support even such a half-way step toward single payer as a “public option.” It isn’t as if Obama never heard of single payer. As an Illinois state senator just a few years earlier, he had supported it.

The Republicans for their part took full advantage of the Democratic Party’s failure to implement single payer by running against their own unpopular health care act they now dubbed “Obamacare.” As a result, the Republicans—also helped by gerrymandering and voter suppression, and not least the appeals to the racism of many white voters—soon regained control of Congress and made huge gains in state and local elections.

This process finally led to the surprise victory of Donald Trump in the 2016 president elections, much to the private—and increasingly not so private—horror of the Republican leadership, which had expected and largely desired the election of the conservative Democratic candidate Hillary Clinton. The bottom line is that if Obama and the Democratic leadership had implemented a single-payer health care system in the U.S., making health care a right and not a commodity, not only would many lives been saved but Donald Trump would almost certainly not be president today.

Why did the Democrats follow this disastrous course? Progressives admit that it is not only Republican politicians but Democratic politicians as well who are dependent on “wealthy donors”—capitalists. Obviously, the insurance companies that sell health insurance will lose this business if single payer is implemented and many of these companies are donors to the Democratic candidates. Therefore, the “corporate Democrats,” dependent on insurance companies and other wealth donors for donations, were under tremendous pressure to oppose single payer.

Once, the progressive argue, we convince the Democrats to nominate people for public office—including the House, the Senate and the presidency—who refuse “corporate money,” they will be elected and will implement single payer at long last.

Why medical-insurance-industrial complex supports the Affordable Care Act

Some U.S. capitalists—not just progressives—are opposed to the repeal of or gutting the Affordable Care Act. What I call the medical-insurance-industrial complex support of the ACA is similar to the support of the military-industrial complex for increased military spending, even when there is no case—from the viewpoint of the interests of U.S. imperialism—for it. The U.S. industrial capitalists who are part of the military industrial complex are always for increased military spending, because it increases the markets for the products they produce—nuclear weapons, for example. This is the military-industrial complex that President Eisenhower famously warned against.

The increased access to health care that the Affordable Care Act has brought about means expanded markets for many private for-profit hospitals and drug companies as well as medical doctors. The generous subsidies under the ACA that are granted for private for-profit insurance companies are much appreciated by the shareholders of those companies.

Many businessmen doctors are also happy with the expansion of their markets that Obamacare has brought about. Their representative, the American Medical Association, long known for its opposition to “socialized medicine”—health care as a right rather than a commodity—has opposed the Republican proposals to gut the ACA. However, some businessmen doctors—such as Trump’s former and now disgraced Secretary of Health Dr. Tom Price—have opposed the ACA because they fear that it might modestly limit the profits they can earn on their far-flung capitalist medical enterprises.

While the specific profit interests of individual capitalists lead them to take opposing positions on the Affordable Care Act, there is an important difference within the capitalist class toward the specific demands of the medical-insurance-industrial complex and the military-industrial-complex. The capitalists outside of the military-industrial complex only mildly if at all oppose proposals to increase military spending. However, the majority of U.S. capitalists outside of the medical-insurance-industrial complex are very much in favor repealing and replacing the ACA and are bitterly disappointed in the failure of the Republican Congress so far to do so.

Elephant in the room progressives do not talk about—surplus value

Progressives as a general rule have a weak grasp of economic theory and often have trouble answering the arguments of reactionary Republican leaders such as U.S. House Speaker Paul Ryan. Ryan is educated in Austrian school and “modern” neo-classical economics. The House Speaker is also a follower of the Soviet émigré U.S. philosopher and novelist Ayn Rand (1905-1982).

The capitalist Rand family-owned pharmacy business in St. Petersburg Russia was expropriated by the Soviet government after the October Revolution—whose 100th anniversary we are now celebrating. Embittered, the Rand family left the Soviet Union in 1926 and moved to the United States, where “private enterprise” is respected.

In the U.S., Rand made a career as a fanatical defender of capitalism. Though her defense of capitalism made in a series of “philosophical writings” and novels reduced the arguments of the bourgeois economists to a caricature, her writings and novels acquired a cult following among right-wing college students such as the young Paul Ryan.

Once Ryan entered bourgeois politics as a right-wing Republican, he was forced to disown Rand because her “Objectivist” philosophy is atheist. Almost all U.S. bourgeois politicians—especially those who are right of center like Ryan—are forced to pretend to be either pious Christians or pious Jews. In the case of Ryan, it is pious Catholic. However, the policies that Ryan supports indicate that his disowning of Ayn Rand and her viciously pro-capitalist but atheistic Objectivist philosophy is far from sincere.

Like former U.S. Federal Reserve Board Chair Alan Greenspan, who was a close associate of Rand, Ryan rages against entitlements such as Medicaid—government health insurance for the poor that was expanded under the ACA—and Medicare—government health insurance for people over age 65. Ryan wants to abolish both these “entitlement” programs.

If Ryan had his way, seniors who can afford private health insurance—wealthy capitalists—will be able to purchase it. Otherwise, the elderly can attempt to find an employer who will offer some type of health insurance. This way seniors have the opportunity to show that they can still enrich the capitalist class by producing surplus value. Otherwise, when its time for them to go, its time to go. This is very much in the spirit of Ayn Rand’s “philosophy.”

U.S. employer-centered health care system versus health care as a right

While the rest of the world moved toward single-payer systems after World War II, the U.S. adopted the so-called employer-centered health care system. The idea is that the boss provides health insurance as part of the wage. If you want health insurance and are not rich, your only recourse is to hit the pavement and attempt to find a boss that will buy your labor power at a price that includes health insurance.

The beauty of this from the viewpoint of the capitalist class is that the maximum number of people are forced into the labor market and competition among the sellers of the commodity labor power is increased, causing the price of labor power—wages—to fall. The result is that the ratio of labor that the workers perform for free for the bosses rises in proportion to the labor that the workers perform for themselves.

The result is higher profits for the bosses and lower living standards for the workers. This is the real reason why not only the Republican but the Democratic leaderships are united in opposing the introduction of single payer or Medicare for all, which would establish health care as a right and not a commodity.

This is true despite the fact single-payer systems lower the cost of medical care, and to that extent cheapen the cost of the commodity labor power. For example, the single payer trust fund that pays the medical bills for all individuals that are covered by the single-payer plan is able to use its position as a monopolistic buyer to hold down medical costs, whether they consist of drugs, hospital care, or bills of doctor engaged in private practice.

For example, New Zealand, which has a single-payer system, spends about half as much of its GDP on health care, with better outcomes, than the U.S. does. Wouldn’t therefore the introduction of single payer be in the interest of the U.S. capitalists as a whole?

However, despite the great superiority of the New Zealand and other single-payer health care systems in terms of costs and results, in the U.S. the great majority of the capitalist class outside of the medical-insurance-industrial complex are still resisting introducing single payer. Instead, they prefer Republican proposals to either abolish or gut the Affordable Care Act, or at best more or less favor retaining the Affordable Health Care Act in its current form. Don’t the U.S. capitalists know their own class and competitive economic interests?

The answer to the apparently economically irrational opposition to single payer by the U.S. capitalists and their political representatives, whether Democrats or Republicans, is this: It’s fine if the portion of the value of labor power represented by medical care drops as long as there are still enough workers available healthy enough to produce surplus value.

Therefore, the best solution, as far as the capitalists are concerned, to the high cost of medical care is to make sure there are a sufficient quantity of young healthy workers able to produce surplus value who need little or no medical care. This as we will see as we proceed with this extended review of Smith’s book is one of the key aims of U.S. foreign policy and the Pentagon budget necessary to enforce it. The beauty for the capitalists with this approach is that when the current generation of young workers gets old and sick, they can be allowed to die off as quickly as possible, since there will be plenty of healthy young workers to replace them. Is this humane? Certainly not! Is it in the interest of capital? It certainly is, assuming that the workers and their allies allow the capitalists to get away with it.

Second, the capitalist are not only interested in economizing on the cost of labor
power represented by medical costs but on the costs of labor power overall. The more desperate the overall conditions of the workers the more they will be willing to work for lower wages and the cheaper will be the cost of labor power for the capitalists.

To the extent that the workers allow the capitalists to get away these “health care” policies, the higher will be the ratio of unpaid to paid labor and consequently the higher the rate of profit on total capital advanced. That these are indeed the calculations currently being made by the majority of U.S. capitalists is shown by the fact that almost all sections of the capitalist class—and not only those with special interests such as insurance companies and private for-profit hospitals, whose interests might conflict with the capitalist class as a whole—are stubbornly opposing single payer though they are divided on whether to retain or “repeal and replace” the Affordable Care Act.

The link between the struggle for health care as a right and labor rights

What Marx’s theory of surplus value shows us is that there is an unbreakable link between the struggle for labor rights in the U.S.—the right to form a trade union and bargain collectively, which is effectively denied today to the overwhelming majority of U.S. workers—and health care as a right and not a commodity.

Let’s assume that you get your health insurance through your boss. The health plan is pretty good. But then your child is diagnosed with a curable childhood cancer. Due to the progress of medical science, an increasing number of childhood cancers that in the past would be fatal can now be cured. The treatments are extremely expensive—relative to the money wage your boss is paying you—but the treatment is covered by your employer-provided health plan.

But then there is a union organizing drive. You want to support it and are willing to risk your wage and maybe even your life in order to gain union protection for your fellow workers. But since health care in the U.S. is not a right but a commodity—even under the Affordable Care Act—your boss has a powerful weapon. He can not only take away your job and income—which you are willing to risk—he can take away your child’s health care, condemning your child to certain death. Do you have the right to sacrifice your child’s life for the union?

The European working class was able to win health care as a right because it organized itself into separate working-class parties, which were inspired by the work of Marx. Generations of workers were educated by the working-class parties in the theory of surplus value. Once the workers had grasped the real nature of surplus value, they could see right through the arguments advanced against health care as a right by the capitalist politicians, who in their time fought against making health care a basic human right just like the U.S. politicians are doing today. Even if the European workers haven’t so far won a socialist Europe, they have forced the capitalist ruling class to concede health care as a right—at least for now—if only to “fight communism” and “win the Cold War.”

As we have seen, winning of health care as a right not a commodity weakens the capitalists in the labor market. They can still deprive the workers of the bulk of their income, of course, but the bosses have at least lost the power to take away the workers’ and their families’ (including their children’s) access to health care.

Therefore, the struggle for health care as a right and not a commodity is a necessary part of the struggle for labor rights in the U.S. This is one reason why in these days of Donald Trump it is crucial for the U.S. working class and its basic organizations the trade unions to at long last form its own political party that will represent not the interests of the capitalist exploiters but those who have to sell their labor power to the capitalists in order to make a living.

Next month, the struggle over the value of labor power.


1 Since there is no longer a “Second World”—the socialist camp headed by the Soviet Union—the term “Third World” has been largely replaced by “the global South.” (back)

2 The development of commodity exchange within communities coincides with the emergence of private property and the replacement of the old communist communities with a society divided into private property, classes, and the state. The remains of the old communist community finally shrinks down in capitalist society to the nuclear family—the chief unit through which private property is passed down from one generation to another. (back)

3 Chattel slavery still exists in the dark corners of bourgeois society, but it is with one major exception no longer legal in most capitalist countries. The exception is the forced labor of people convicted by the capitalist courts of a crime. People who are convicted often perform forced labor for the state such as making license plates. But they can also be forced to work for private capitalists and corporations.

An exception to the proviso that nobody is subjected to forced labor unless convicted of a crime is the concentration camp system. In the legal sense, concentration camps are prisons that hold people not convicted of a crime. They might be held for example for their “own protection” or due to a “national emergency.” For example, the U.S. government during the Cold War had plans to intern leftists in concentration camps in the event of a war with the Soviet Union, much as people of Japanese descent were interned in concentration camps during World War II. Today, there is talk of interning Muslims in what in effect would be concentration camps. The most notorious but not only instances were the concentration camps of Nazi Germany, though concentration camps were actually invented by the British during the Boer War.

In Nazi Germany, people were first subjected to forced labor for having the wrong political beliefs. Within a little more than a month after Hitler was appointed chancellor on January 30, 1933, the first concentration camps began to operate within Germany. The first German concentration camp prisoners were German Communists. Later, especially after World War II broke out, this was extended to people who belonged to the wrong “race,” mostly the so-called Jewish race but also the Roma people.

It should be pointed out that even today people in the U.S. who belong to the “wrong” race—above all African-Americans but also Latinxs and other “people of color”—are far more likely to be convicted of crimes and subject to legal prison forced labor than are white people. So in the U.S. today, even if more shamefacedly than was the case in Nazi Germany, race plays an important role in the chance of any particular individual being subject to prison forced labor.

However, even in the Nazi concentration camps, inmates, though they were forced to work for German corporations, did not legally belong to them. This was not, however, necessarily to the advantage of the concentration camp inmates nor is it necessarily to the advantage of prisoners who have been convicted of crimes—whether they are guilty of the crimes is another subject—that are held in ordinary prisons as opposed to concentration camps. The idea in Nazi Germany was that the forced labor of the concentration camp prisoners would quickly lead to their deaths, thus hastening the much-desired—by the Nazi authorities—biological extinction of the Jewish and Roma “races.”

Under chattel slavery, the slaves are a form of fixed capital, so their owners have an economic incentive to keep them alive under pain of losing their investment. This is not the case with prison labor, where the capitalists merely borrow the prison laborers. Therefore, from the capitalist point of view, prisoner laborers still represent circulating and not fixed capital. Prison labor—whether in regular prisons or concentration camps—is therefore a form of labor that combines the worst features of wage and chattel slave labor.

One phenomena in the U.S. today that has the potential of reviving full-scale legal chattel slavery is the growing use of private for-profit prisons. The government, either at the federal or local level, in effect sells its slaves—people convicted by the capitalist courts of a crime—to these private for-profit prisons. These people are then the legal slaves owned by private for-profit corporations for the period of their sentences, which can be for life under U.S. law.

These private prisons are then free to loan out their legal slaves to other private capitalists for additional profit. The only element of legal chattel slavery still missing here is that the private prisons cannot yet sell their prisoners to other private prisons.

President Obama announced just before he left office that he was ending the policy of “housing” federal prisoners in private prisons, which raised hopes that the private prison system might soon be phased out. However, President Trump has reversed Obama’s policy in this regard and as a result the stocks of the for-profit prison corporations have been doing exceptionally well on the stock market. (back)

4 The economists who reject labor value—virtually all post-Ricardo economists—begin with the assumption that all factors of production and not just labor produce value. The factors of production are then grouped into three classes—land, which produces rent; capital, which produces interest; and labor, which produces wages.

This “trinity theory,” as Marx called it, seems reasonable at first glance, since land, the wealth provided by nature; the means of production produced by humans, such as factory machinery; and labor are all needed to produce use values, or utilities as modern economists put it.

But how do we determine the “contribution” of each factor of production to the value of the final product? In order to do this, the economists use what is called the “marginal method.”

Suppose, they say, we add an additional acre of land leaving everything else unchanged. We can then see how much the value of the agricultural produce measured in terms of money will increase. Or we add another unit of capital—for example, another machine. We can then measure the increase in the value of the total product measured in terms of money. Or we can hire an additional worker and see how much the money value of the product will have increased.

The economists hold that it is the marginal productivity—the production of value—of an additional unit of an additional factor of production that determines the value it creates. They then explain that assuming perfect competition prevails—no unions, no government regulation, and so on—each factor of production will be compensated in proportion to its marginal productivity. The landlords get rent in proportion to the marginal productivity of the land, the capitalists earn interest in proportion to the marginal productivity of their capital, and the workers earn wages in proportion to the marginal productivity of their labor.

As long this is true, the economists claim, no factor of production—the modern economists’ way of referring to social class—exploits another. (back)

5 Since at our current level of abstraction we are assuming that every unit of labor performed is identical to every other such unit, it is redundant to make the distinction between concrete and abstract labor here. However, since this distinction is crucial for John Smith’s analysis of imperialism, the distinction will become important later. (back)

6 Here we are assuming that every unit of labor power is identical to every other unit of labor power. Later we will see that though this is not true in terms of use value, labor power can be reduced through the power of abstraction to a single type of labor power that performs only abstract labor. Once we do this, it becomes possible to compare the labor powers of workers quantitatively. This is true because all the concrete types of labor power, however much they differ from each other qualitatively, are still instances of human labor power. Again, grasping this is crucial to understanding Smith’s “Imperialism,” so I will have much more to say on this later. By assuming that every hour of labor power is identical to every other hour of labor power, I have already made the abstraction. (back)

7 Single-payer systems in capitalist countries cover essential medical services. They don’t necessarily cover everything such as plastic surgery for the sole purpose of improving one’s personal appearance—for example, nose jobs. People are free to buy—and the wealthy often do—additional medical insurance to cover these unnecessary procedures. Again, the details vary from country to country.

However, the medical procedures necessary to keep you alive are covered by the national health plans under any decent single-payer system. It is important to understand that single payer does not eliminate the profit motive from medicine and therefore does not equal socialist medicine. Single payer is simply a reform within the capitalist system and can be won within capitalism. What single payer does do is loosen the chains of wage slavery but by no means eliminates them. (back)