H. N. Hyndman in To-day April 1889

Marx’s Theory of Value

Source: To-day, April 1889, pp. 94-104;
Transcribed: by Ted Crawford.

The Editor of this Review has asked me to re-state briefly Marx’s theory of value. This I have undertaken to do as clearly and as simply as I can. When I first read Mr. Hubert Bland’s suggestion, however, it seemed to me somewhat strange that, as the first volume of the “Capital” has been excellently translated, and several English works have been published which are more or less based upon Marx’s writings, it should be necessary to make any such re-statement. On reflection it nevertheless occurred to me that only two English authors with whose books or pamphlets I am acquainted appear to have grasped the full meaning of Marx’s investigations; while some, Mr. Philip Wicksteed, Mr. G.B. Shaw and Mr. Graham Wallas, for example, have, I venture to think, entirely misunderstood the real gist of Marx’s analysis.

To begin with, Marx is by no means the originator of the theory that labour – the cost of production in human labour – is the basis of the exchange value of commodities. No political economist of any note has ever disputed this, so far as I know. This does not ensure that Marx and his predecessors are right, any more than the fact that he was to this extent anticipated detracts from the importance and originality of his own demonstrations. But it does throw upon those who support the pretensions of such a man as the late Professor Stanley Jevons, whose own original views were so absurdly silly, the onus of proving that the whole school of political economists are wrong on this point, and that in Jevons we have the Kepler or Newton of the science. This would, indeed, be a strong claim to put forward on the part of one who declared with all the pedantic self-assurance of a charlatan that the spots on the sun were the cause of industrial crises! Compare such nonsense as that with Marx’s masterly analysis of the real causes of these recurrent social dislocations based on his elaborate theory of value and investigation of surplus value. Without Marx’s analysis as a key, I defy any man to give a reasonable explanation of these extraordinary, and from many points of view, terrible phenomena. With Marx’s analysis well in hand it is impossible to fail to understand the necessity for the recurrence of these crises under our present system of production, or to realise the manner in which the antagonisms that give rise to them will eventually be resolved.

It is often said also, Mr. Graham Wallas for one says so in the last number of TO-DAY, that political economy has not advanced sufficiently far as a science to enable us to predict the future. That is true of the bourgeois political economy with its undeveloped and unscientific labour theory of value. It is not true, but precisely the reverse of true, of the scientific or socialist political economy of which Marx is the founder and chief exponent. In his “XVIII Brumaire,” for example, Marx, writing at the time of the foundation of the Second Empire in France, predicted, on the lines of political economy, almost precisely the course which it would, and which, as a matter of fact, it did, run, Those who are incredulous had better read the pamphlet, Again, apart from the prediction of crises already referred to, I do not see how anyone can honestly deny that Marx and his school predicted more than forty years ago the lines on which the development of Nineteenth Century capitalism would proceed. We can, indeed, see under our eyes at this moment the evolution proceeding just as it was then sketched out. I refer, of course, to the growth of big capitals at the expense of small; to the advancing internationalisation of capital, especially of banking: to the tremendous increase of competition in neutral markets; to the consequent development of the company form in industry and to the formation of trusts and unions and syndicates; to the manifest and deepening antagonism between the two classes which alone really remain in our capitalist and proletariat society; and to the efforts even of the middle-class State to cope with and smooth down this antagonism by legislative interference and palliatives, as well as by taking industrial departments under its own control. These changes and developments were, I say, in the main predicted by Marx more than forty years ago, on the strength of that scientific political economy of which he was a master.

If this be so, and I challenge contradiction, then surely the basis on which this power of prediction rests is Well worth careful study, not with a view to mere clap-trap refutation, but in order to attain to thorough comprehension of the teachings of a man of genius. Marx’s life-work had two sides to it. There is the historical or dynamical side, the thorough exposition of the manner in which mankind has arrived, through centuries of class wars, at its present stage of industrial and social development. There is the statical side, consisting of his elaborate inquiry into the methods of production and exchange under the domination of capital, with the criticism on other political economists which such an inquiry necessarily entails. In this article I confine myself entirely to the latter portion of Marx’s work and only to a section of that.

What was it then, that Marx set himself to investigate? The laws which govern the production and exchange of articles for human use in a special sort of society. This was not a communal, nor a slave-owning, nor a feudal, but a capitalist society. He found that society in existence all around him, and he begins the “Capital” with an exhaustive examination of the basis of exchange of goods produced in these circumstances. “In all societies,” he says at the very opening, “in which the capitalist system of production prevails, wealth consists in an immense accumulation of commodities.” I presume that even those who are nibbling at Marx’s theory will not dispute that.

It is the ratio of the exchange of commodities, therefore, that we are to examine. But what, to start with, are commodities. It is with the answer to that question that the real analysis begins. Commodities are articles for human use or consumption produced in a society by producers who are more or less isolated and are producing them on their private account; they are primarily, therefore, private products. But the private products, originally produced on private account, first become commodities when they are so produced, not for the consumption of the producers themselves, but for the consumption of others, when they are produced, that is, for social consumption; and they enter into this social consumption by means of exchange. The private producers stand, therefore, in a social connection. Their products, though they may be the private products or each individual producer separately, are consequently at the same time, quite independently of them and whether they like it or not, social products too.

This, though put in an abstract form, is easily reduced by any reader to concrete illustration by a momentary consideration of the method of production of boots, coats, hats, tables, wheat, and so forth. These commodities, produced as they are for the consumption of others by those who produce them for private reasons, are manifestly social products, and become so by their exchange for other social products. Whether they are exchanged for gold and silver, or for one another, does not in the least affect this truth, though to some minds it may, and unfortunately does, obscure it.

Now the word “value” in political economy means and can only mean the value of these commodities, of these private products which are at the same time social products, relatively to one another when they are exchanged. Value can only be relative. Absolute value is unknown, and such a phrase as “value in use,” or “use value” ought to be definitely and finally given up as misleading and unscientific. It is here, in this examination of the value of commodities, that the importance and at the same time the difficulty of Marx’s analysis begins to be felt. The difficulty lies in apprehending the meaning of this social character of these private products. In what does this social character consist? It consists in two properties. Firstly, the products all satisfy some human want, they are useful articles, not only for those who produce them themselves but for others. Secondly – And here is the point where so many seem to me to go astray and to lose their bearings altogether – Secondly, although these products are the result of the most different sorts of private or individual labour, of the expenditure of simple human labour-force, yet are they all at the same time the products of human labour in general, of universal human labour. These products can enter into exchange because they constitute utilities for others; they can be estimated in exchange because, and in so far as, they embody universal human labour-force. In two private products of equal value, produced under the like social conditions, very unequal quantities of private or individual labour may be embodied, but invariably and by the nature of the case only an equal amount of universal human labour.

Here again we have a truth which, in practice, is daily recognised. A private producer is producing boots or tables by hand; suddenly he discovers that identically the same or equally useful goods are being steadily offered at a lower exchange value than his own have hitherto commanded. He sees at once his whole stock is reduced in its exchange value relatively to other commodities. Somebody has invented a machine or some new method, whereby with a less expenditure of labour-force articles of equal utility can be produced. The law of universal labour has asserted itself at the expense of the exchange-value of his own hand-made commodities, although they may have cost him twice the expenditure of labour-force which they have cost his machine-using competitor. A pair of his boots or one of his tables is worth no more, will exchange with other commodities for no more, than a pair of the new man’s boots or tables. The private labour of an individual producer expresses no more of the value-making universal human labour than is socially necessary to reproduce the commodity, or portion of a commodity, in which it is embodied.

Let the truth of these statements be admitted and I do not myself see how the consequences which follow from them can be: avoided. Marx was never for an instant led astray by that economical will-of-the-wisp “a unit of labour.” He points out so clearly that to my mind it involves a certain amount of perversity of intelligence not to recognise it that human labour of itself can have no value. Marx never doubted for a moment that corn in a besieged city will exchange out of all proportion to its ordinary value with respect, say, to diamonds. Nor did he overlook the fact that when Great Britain is used as a “slaughter-market” for a surplus of American cotton cloth, that cloth will temporarily exchange with other commodities below its usual level. Nobody, further, has spoken more plainly than Marx as to the steps adopted by the Dutch to keep up the value of their spice monopoly; while his exposition of the effects produced in periods of crisis, by the efforts of capitalists, who have to meet their engagements at any cost, to sell their goods, is far and away the ablest known to me.

To sum up. however, the main groundwork of Marx’s value theory in the actual words of his able coadjutor. “When therefore I say that a commodity has a definite value I say:-

“1. That it is a socially useful product.

“2. That it is produced by a private individual on his own private account.

“3. That though it is the product of private labour it is, nevertheless at the same time and similarly, without his knowledge or consent, the product likewise of social labour, and what is more of a fixed and determinate quantity of such social labour, which is arrived in a social way by means of exchange.

“4. I express this quantity not in labour itself, in so many hours of labour, but in another commodity.

“If, therefore, I say that this watch is worth as much as this bale of cloth and both of them are worth fifty shillings, I say that in the watch. the cloth and the money an equal amount of social labour is embodied. I state consequently that social labour represented in them has been socially measured and found to be equal. But not directly, absolutely, as people measure labour-time in days or hours of labour, etc., but indirectly and relatively by means of exchange. I cannot, therefore, express this determinate quality of labour-time in hours of labour, for their number remains quite unknown to me, but only in a roundabout way, and, as I say, relatively in another commodity which represents the expenditure of an equal amount of social labour-time.”

Here we have placed clearly before us the utter impossibility of estimating in our present society what a commodity is worth by labour-time. It is precisely because this cannot be done, precisely because the socially necessary amount of labour comes behind both seller and purchaser of commodities and settles the ratio of exchange irrespective of the amount of individual private labour expended on their production that this analysis became necessary. Only in a society where social production and social exchange, so to say, go hand in hand, will it be possible to state how many hours of labour-time are actually incorporated in any article destined for the use of that society. Then the problem will be approached directly and from the other side. Ten thousand bales of silk have been produced at the cost of so many hours of labour to the community with the means of production then at command. Therefore each yard embodies so much actual labour-time of the community. But we are far from this point yet, and therefore it is that Marx’s theory of value with his analysis of surplus value and the general operation of our capitalist system is of such crucial value at the present time. To go farther here into the various phases of the exchange of commodities and the varying ratio in which they exchange with one another, according to the greater or less quantity of social labour-force embodied in them, would be merely to reprint the first chapter of the “Capital.” Suffice it to say that the creation of such “corners” and “combines” as the “Copper Syndicate” and “Salt Union,” no more affects the truth of this law, than the imposition of a tax on a special commodity by a government, thus enhancing its price to the inhabitants of the country where the tax is exacted, affects it, as the Copper Syndicate has already discovered.

But from Marx’s investigation of value thus briefly put, we come to surplus value, and in regard to this also we are now informed that Marx was quite wrong. Mr. Kirkup in the Encyclopaedia Britannica for instance, far as he has advanced since he reviewed a book of mine in 1883, states, if I remember correctly, that Marx’s theory of surplus value is entirely unsound.

Is it? What does Marx say? He states that a capitalist when he produces commodities of any description, purchases raw materials at the market price, and expends during the process of production certain other materials such as coal, oil, gas, wear and tear of machinery and plant. This Marx calls constant capital. The raw materials of the manufacture change their shape during the process of manufacture, but their value, plus the value of the coal, etc., appears unchanged in the complete commodities. That surely is intelligible enough. But, in addition, a certain amount of capital is spent in wages, and is called by Marx variable capital. This also must be represented in the value of the completed commodities, and so far also no difficulty can arise. But over and above the value represented by the constant capital and the variable capital which has been embodied in the commodities during the process of manufacture, there is a surplus for which the capitalist has paid nothing but of which he gets the benefit. Is not that also indisputable? His commodities must be sold at the market price, or he would not be able to dispose of them, yet their price must include a surplus value for him and those who take under him. He must have in his completed commodities, that is to say, the value of his constant capital, the value of his variable capital and his surplus value, and yet be able to exchange with other completed commodities – the intervention of money makes, of course, no difference as to the truth of this; for money itself is simply a king of commodities – on the basis of the quantity of labour socially necessary to produce both. Whence then asks Marx does this surplus value, this mehrwerth, arise? I wish someone would explain, by the way, whence it does arise other than in the manner in which he says it does. But to proceed. Marx declares that in buying labour-force on the market at the cost of its production in food, education, clothes and houseroom , by buying labour-force for wages at the market price that is, the capitalist has purchased a sort of commodity which has the remarkable property of incorporating its own value in the completed commodity during the process of manufacture – and more.

Analyse any process of manufacture from electro-plating to soap-boiling and this truth springs to the eyes, as the French say. Everyone who has ever held a share in a manufacturing company or has watched the production of commodities can verify this for himself. As the hours of labour are lengthened the amount of surplus value which the capitalist gets without paying for it increases; as improved machinery enables him to get the same amount of product with less than the quantity of labour-force expended that is socially necessary to produce such product on the average, the amount of surplus value which the capitalist gets without paying for it likewise increases, though the hours of labour remain unchanged. Labour-saving appliances mean, so far as the labourers are concerned, merely wages-saving appliances. The labourers cannot prevent their labour-force from being thus used for the benefit of the employing class. They are bound by the inexorable laws of competition for employment among “free” workers to sell their labour-force from day to day or week to week. It is a commodity that won’t keep. Consequently they can only maintain themselves and their families by allowing their labour-force to produce the surplus value on which the non-producers live.

Now the full significance of this whole theory of value and of surplus value, of Marx’s division of the value of a completed commodity into constant capital, variable capital and surplus value – a very different category from the old “fixed capital and circulating capital” – only appears when the circulation of commodities is dealt with. Then the insufficiency of the analysis of the old school of political economists and the competence of Marx’s analysis to solve the problem of modern production exchange and accumulation is made manifest once for all. But I read in Mr. Graham Wallas’ paper, which I presume is the reason why the editor asked me to write this article, the following extraordinary statement:- “The great disadvantage of that method” – what method? – “is that Marx himself is tempted to forget, and his more ardent followers are emboldened to deny, the existence or importance both of those causes of variation in the ratio of exchange other than labour cost which are roughly summed up as the laws of supply and demand, and of those causes of variation in the efficacy of labour which are the occasions of Rent and Interest. In fact, as has been well said, Marx explains the existence of surplus value by stating that the produce of all equally efficient labour is the same, whereas in fact, surplus value is due to the constant variation of the product of equal labour"! I have a high regard for Mr. Graham Wallas, but surely it is somewhat discreditable to a writer and a lecturer on scientific socialism to have written such a sentence as that last. If he had taken the trouble to study what Marx really says, he would have found that Marx attributes surplus value to the power the capitalist possesses of purchasing the labour-force of free labourers on the market, at a cost in wages for the reproduction of that labour-force less than, when thus purchased and applied, it embodies in the commodities which, having been produced, the capitalist owns. Marx expressly says in his first volume and again in the second (German Edition p.379.), “The appropriation of surplus value, of a value in excess over and above the equivalent of the value laid out by the capitalist, although introduced by the purchase and sale of labour-force, is an act which fully completes itself within the process of production, and forms an essential motive (moment) of that process.” This very purchase and sale of labour-force rests upon the separation of the labour-force of the worker as a commodity from the means of production as the property of the non-worker. But Marx goes on to say that this appropriation or this separation in no-wise affects the substance of value itself, and the nature of the production of value. “The substance of value is, and remains, nothing but expended labour-force, labour independently of the particular useful description of this labour, and the production of value is nothing but the process of this expenditure.”

But possibly it may be the phenomena attendant upon money and consequently on prices which confuse so many writers on this subject. We have seen lately how even economists of good repute could be misled as to the main causes of the shrinkage in prices in years past, and how other economists and capitalists have imagined that they could permanently keep commodities above the exchange value of their cost of production. No doubt the capitalist, like any other producer, must first change his commodity, into money before he can turn it over any further; he must convert it into the form of the universal equivalent. Very well. Let us then take Marx’s own words, even at the risk of repetition, “Consider the product, the commodity before it is converted into money. It belongs entirely to the capitalist. It is, on the other hand, as a useful product – as a utility – wholly and solely the product of a past labour-process; not so its value. One portion of this value is merely the appearance in a new form of the value of the means of production expended in the production of the commodity; this value has not been produced during the process of the production of the commodity; for the means of production possessed this value before the process of production began, and independently thereof as carriers (Träger) of such value they entered into this process; what has been renewed and changed is only its exterior form. This portion of the value of the commodity constitutes an equivalent for the capitalist for the portion of his constant capital-value used up during the production of the commodity. It existed before in the form of means of production; it exists now as part of the value of the newly-produced commodity. As soon as this last is converted into money, this value, which now exists in the money, must be again turned into means of production. Nothing is changed in the value characteristic of a commodity by the function as capital of this said value.

“A second portion of the value of the commodity is the value of the labour-force which the wage-worker sells to the capitalist. It is determined, like the value of the means of production, independently of the process of production into which the labour-force is destined to enter and is fixed by a step in circulation, the purchase and sale of the labour-force, before this labour-force enters into the process of production. By its function – the expenditure of this labour-force – the wage-worker produces a commodity-value equal to the value which the capitalist has to pay him for the use of his labour force. He gives the capitalist this value in commodity, who pays him for it in money. That this portion of the commodity-value is only an equivalent to the capitalist for the variable capital which he has advanced in wages of labour does not in the least affect the fact that it is a commodity-value newly created during the process of production, which consists of nothing but the expenditure of labour-force. Just as little is the fact altered by the circumstance that the value of the labour-force, paid to the labourer by the capitalist in the form of wages, takes for the labourer the form of income, and that consequently not only is the labour-force continually reproduced, but also the class of the wage-workers as such, and therewith the basis of the whole capitalist production.

“The sum of these two portions of value does not constitute the total value of the commodity. There remains a surplus over and above them both – the surplus-value. This, just like the portion of value which replaces the variable capital advanced in wages, is value newly-created by the labourer during the process of production – crystallised labour. Only it costs the possessor of the entire product, the capitalist, nothing. This last circumstance, in fact, permits the capitalist to expend such surplus-value wholly as income, provided, of course, that he has not to part with shares of his booty to other participators – such as ground-rents to the landlord, etc. – in which case these shares constitute the income of such third persons. This self-same circumstance was also the actuating impulse by reason of which our capitalist has generally busied himself with the production of commodities. But neither his original beneficent intention to procure surplus-value, nor the consequent expenditure of it as income by himself and others, affects the surplus-value as such. Nor, furthermore, does it alter the truth that surplus-value is crystallised unpaid labour, or affect its amount, which is determined by very different considerations.”

If that is the “Hegelian dialectic” then all I can say is, I wish that Marx’s critics would adopt an equally clear process of exposition and argument. For my part I venture to think that when an investigator of economical and social problems takes refuge in a dense cloud of mathematical formulae, to which he can attach no definite signification in intelligible words, it is quite as probable that this anxiety to seek cover in wholesale mystification is due to the obscurity as to the clearness of the thoughts – if thoughts they be – that thus make off into their congenial fog. At any rate I am confident that those who will honestly endeavour to reason out the complicated phenomena of the circulation of commodities under Marx’s guidance will be satisfied with the increased knowledge they will obtain of the processes of capitalist production, and of the development of society at large. Certainly it is the duty of all Socialists to make sure that they understand before they criticise, with an air of pragmatical superiority, the Aristotle of the nineteenth century.