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Understanding of Karl Marx
Most of the criticism of Marx’s economic theories, both favourable and unfavourable, concerns itself with the truth of specific propositions in his analysis. At best it considers the connections which exist between one proposition and another, but it overlooks the further double connection between 1) the entire set of propositions contained in Capital and Marx’s methodology of abstraction, and 2) the relation between his economic analysis and the political and economic struggles of the working class.
In what way does the method of abstraction enter into Marx’s analysis? For Marx the social process is a developing whole in which man and the conditions of human activity are in continuous interaction. An analysis of any aspect of the social process, for example, its economic organisation, will necessarily seem to involve tearing certain institutional aspects of social life out of their living context and transforming them into self-acting agencies. Over any given period of time, other social factors, in the interests of the analysis, will have to be regarded as constant even though everyone knows – and no one more than Marx – that they are not constant. A further distortion, however, enters when the analysis of the economic organisation of society begins. For economic life is not made up of discrete and haphazard activities which are fully intelligible in their own immediate context; they are organic parts of a process, too – a process in which the material needs of society, whether it be as ends or means, are gratified. The simple economic act, then, with which Marx begins Capital – commodity exchange – involves a twofold abstraction, once from the whole complex of social activity, and once from the specifically economic process which, in relation to the social process, is itself an abstraction. This double initial abstraction is necessary to any analysis which seeks to disclose the complicated rhythm of social life, and to discover why it takes the direction it does.
The methodological difficulties involved in this approach may be clarified by expanding an analogy which Marx himself employs. The system of human needs and activities which Hegel called civic society, Marx refers to as a social organism. Political economy, he calls the ‘anatomy’ of that organism. Now, it is clear that the anatomy of an organism may be studied independently of its nervous, vascular and digestive systems, as well as of its embryology and comparative history. Nonetheless, its function within the organism can be properly understood only in relation to these other processes. A detailed study of the bone structure – its composition, rate of growth, etc – reveals that the anatomy, too, is a process to be explained in the light of other aspects of the organism as a whole, and that it has a history which is illuminated by a study of the skeletal structure of other animals. The more we learn of the way in which the body functions as a whole, the more we may be compelled to modify our conclusions about the nature of anatomical structure. But we can only study the organism as a whole by beginning with an analysis of its parts. What is true of the relation between anatomy and the organism as a whole, is true of the relation between the anatomy as a whole and any part of it. Whether we take as the anatomical unit, the bone cell, or the mechanical configuration of a limited area of the skeletal structure, the knowledge derived by analysing the unit in isolation will have to be modified as other aspects and areas are considered. Just as the organism as a whole cannot be studied unless parts are abstracted from it, so here, too, the anatomy as a whole can only be studied by beginning with a relatively isolated unit and showing how the larger system of interrelations is involved within it. This will involve modifying some of the conclusions arrived at in the preliminary analysis of the isolated unit.
Marx was interested in the analysis of capitalist production as a whole. But he necessarily begins with an analysis of a part – its tiniest part, the economic cell-form – the value-form of the commodity. In ordinary life no one can see this economic cell; it is embedded in a huge structure. ‘But the force of economic abstraction replaces the microscope.’ [1] Marx attempted in the course of his analysis to show how all the characteristic phenomena of economic activity are already involved in this simple cell-form:
In the value-form of the commodity there is concealed already in embryo the whole form of capitalist production, the opposition between capitalists and wage-labourers, the industrial reserve army, the crisis. [2]
The leading assumptions of Marx’s analysis are such as to permit him to derive all the known phenomena he was interested in. Practically, it was necessary for Marx to begin his analysis with the simple abstraction – the unit of commodity exchange; theoretically, it would have been possible to begin anywhere, for the nature of capitalist production is revealed in all economic phenomena. Similarly, in the interest of analysis, he was compelled to assume, at the outset, that the exchange of commodities took place under a system of ‘pure’ capitalism in which there were no vestiges of feudal privilege and no beginnings of monopoly; that the whole commercial world could be regarded as one nation; that the capitalist mode of production dominates every industry; that supply and demand were constantly in equilibrium; that having abstracted from the incommensurable use-values of commodities, the only relevant and measurable quality left to determine the values at which commodities were exchanged, was the amount of socially necessary labour-power spent upon them.
Marx’s distinctive contribution to economic theory was not the labour theory of value, nor even the application of the labour theory of value to the commodity of labour-power – all this is already found in Adam Smith – but his claim that the use-value of the labour-power purchased by the entrepreneur was the source of more exchange-value, under normal conditions of demand, than what the labour-power itself possessed, and that out of the difference between the exchange-value of labour-power and the exchange-value of what labour-power produced was derived profit, rent and interest. Marx ‘proves’ his claim by showing that if there were a system of ‘pure’ capitalism, and if we were to disregard for a moment the presence or absence of revolutionary action of the proletariat (which as we shall show Marx never really does), then his theory of labour-power, together with the labour theory of value, play the same logical role in the explanation of the mechanics and dynamics of the economic system as, say, the Copernican hypothesis in the explanation of the movements of the solar system. To say that Marx’s assumptions play the same logical role as the Copernican hypothesis is not to say that they play the same role. For in one case, our knowledge and our activity make no difference at all to what is going to happen, while in the other case, they decidedly do; in one case, the reliability of prediction is overwhelming, in the other, only tendencies and directions can be charted; in the first, the occurrence of new phenomena can be inferred, in the second, nothing not already known can be inferred, so that fundamental assumptions take on the character of elaborate ad hoc hypotheses; as a consequence, in the first, no laws are historical, in the second, all laws are.
By pure logic alone no one can prove or disprove any theory of value. In this respect theories of economic value may be compared to theories of geometry. The same relations of physical space may be described by many different geometries. Here, no matter what the deliverances of experience are, so long as we retain a narrowly theoretical view, spatial experience can be described in either Euclidean or in one of the many varieties of non-Euclidean geometry. The deliverances of experience can never refute a geometry, if we resolve to cling by it. It can only make it more complicated. Of course, experimentally, it makes considerable difference whether experience compels us to complicate our geometry or not. The ‘true’ geometry, for the physicist, is the one that, on the basis of his experimental findings, he need complicate least. But where experimental control is not in question, the geometer may save all the appearances by introducing subsidiary assumptions and spin out his theories in any geometrical language he chooses. The same may be said of theories of economic value.
Indeed, the analogy between the different theories of value and different theories of geometry may be pressed further. Just as it is possible to translate any description of a physical relation, written in terms of Euclidean geometry, into the language of non-Euclidean geometry, so theoretically it is possible to restate any explanation of an empirically-observed economic phenomenon offered from the point of view, say, of the labour theory of value into the marginal utility theory of value and vice versa. In the instance in question, this is all the easier because both the Marxian and the marginalist schools allow that both utility and labour-cost enter into determination of price but differ in their assignments of relative primacy to the two factors involved. The marginalists, although insisting that labour-costs must ultimately be derived from price, admit that price may be affected by supply, which, in turn, is controlled by labour-costs. Marx, in consonance with the classical school, [3] insists that price must ultimately be derived from labour-cost; but in qualifying labour-cost by the phrase, socially necessary, he admits the powerful influence of demand. [4]
Subsidiary hypotheses play even a larger part when a theory of value is applied to economic phenomena than they do when theories of geometry are applied to physical existences. That is why no theory of value can be refuted by pointing to alleged contradictions. These contradictions can always be regarded as difficulties to be solved by introducing special conditions or assumptions. The latter may be additional analytical principles or particular historical data. The much heralded contradiction between the first and third volumes of Capital may be taken as an illustration. Instead, however, of introducing a subsidiary hypothesis to solve the difficulties, all Marx did was to point to the fact that the abstract and ideal conditions postulated as holding in the first volume did not actually exist.
Let us look a little closer at the contradiction. It arises as follows. The source of profit is surplus-value. Surplus-value can be produced by labour-power alone. The wages of labour-power represent the variable capital of the concern. If the same total capitals are involved, and if the rate of exploitation is the same, the larger the variable capital, the greater should be the profit, and the greater the rate of profit. Let a represent a concern whose total capital is $1,000,000, of which $900,000 is invested in constant capital c, and $100,000 in variable v. The rate of exploitation being 100 per cent, the profit or surplus-value s will be $100,000. The rate of profit, which is given by s divided by c plus v, will equal 10 per cent. Let b represent a concern whose total capital is $1,000,000, of which $700,000 is invested in constant capital c1 and $300,000 in variable capital v1. The rate of exploitation being 100 per cent profit or surplus-value s1 will be $300,000. The rate of profit which is given by s1 divided by c1 plus v1 should be 30 per cent. Is it? It is not. The rate of profit is independent of the organic composition of capital.
It was Marx himself who pointed out the apparent contradiction and it was he who offered an explanation of it. In this connection, one can say of him what has been said of Darwin, that there was hardly a single criticism directed against his theories which he himself had not already anticipated and stated. In his chapter on Different Composition of Capital in Different Lines of Production and Resulting Differences in the Rates of Profit, he writes:
We have demonstrated, that different lines of industry may have different rates of profit, corresponding to differences in the organic composition of capitals, and, within the limits indicated, also corresponding to different times of turnover; the law (as a general tendency) that profits are proportioned as the magnitudes of the capitals, or that capitals of equal magnitude yield equal profits in equal times, applies only to capitals of the same organic composition, with the same rate of surplus-value, and the same time of turnover. And these statements hold good on the assumption, which has been the basis of all our analyses so far, namely that the commodities are sold at their values. On the other hand there is no doubt that, aside from unessential, accidental and mutually compensating distinctions, a difference in the average rate of profit of the various lines of industry does not exist in reality, and could not exist without abolishing the entire system of capitalist production. It would seem, then, as though the theory of value were irreconcilable at this point with the actual process, irreconcilable with the real phenomena of production, so that we should have to give up the attempt to understand these phenomena. [5]
How does Marx account for the fact that in the normal processes of production and exchange an average rate of profit would result from varying rates of profit in different industries? By assuming that the variations in the rate of profit would give rise to competition for larger returns between capitals of varying organic composition, producing in this way an average rate of profit. At any given time, the price of a commodity is determined not by the amount of socially necessary labour-power contained in it but by its cost of production plus the average rate of profit:
Now, if the commodities are sold at their values, then, as we have shown, considerably different rates of profit arise in the various spheres of production, according to the different organic composition of the masses of capital invested in them. But capital withdraws from spheres with low rates of profit and invades others which yield a higher rate. By means of this incessant emigration and immigration, in one word, by its distribution among the various spheres in accord with a rise of the rate of profit here, and its fall there, it brings about such a proportion of supply to demand that the average profit in the various spheres of production becomes the same, so that values are converted into prices of production. [6]
It is clear that Marx’s explanation implies that commodities, as a matter of fact, are never actually exchanged on the basis of the amount of socially necessary labour-power contained in them, but always over or under this norm. The analysis of the economic cell-form in the first volume of Capital was not an empirical description of what actually took place in the observable world, but an attempt to discover the tendencies of capitalist production if variations in supply and demand could be ruled out, if no monopolies existed, if the organic composition of all capitals was the same, etc. It is only under the latter presuppositions that the theoretical analysis of exchange would correspond to the actual empirical practice, that the price at which a commodity was sold would correspond with its true value. But Marx was not interested in the variations of price. He could accept any of the orthodox psychological theories from Jevons to Pareto which concern themselves with price variations from one moment of time, to another not far removed from it. When it came to explaining the pattern of price variations over a long period of time, psychological notions were irrelevant.
The significant point to be made here, however, is that no matter what the deliverances of market experience are, the labour theory of value can be saved. But why save it? Some have claimed that it should be saved for the same reason that any other scientific hypothesis should be saved, that is to say, because of its power to predict. Yet neither the labour theory of value nor any other theory of value can predict anything which is not already known in advance. War and crisis, centralisation and unemployment, were already quite familiar phenomena when Marx reformulated the theory of value. He could show that their existence and increasing frequency were compatible with that theory and that the most significant phenomena of economic life could be described in its terms. It is a mistake to believe, however, as, for example, Bukharin does, that one can predict anything specific on the basis of the labour theory. That wars and panics will occur and capitalism break down are propositions too general to be enlightening; for unless these events are given specific temporal coefficients, it can be shown that they follow just as readily from economic assumptions other than those used by Marx. To counter in the familiar way by saying that economic phenomena are too complicated to permit of prediction is to concede the point at issue, for it is to admit that the theoretical assumptions are not adequate to what one has started out to explain; that no method of measuring the degree of relative indeterminacy in the conjunction of events exists, and most important of all, that no specific guide to action can be derived from these allegedly true general propositions. Theories of value have no predictive power.
Why, then, save the labour theory of value? Save it, say some radical thinkers who in their hearts are convinced of its scientific untenability, because it is a good rallying cry to stir the proletariat into action. It teaches the worker that he is being robbed of what he has produced, that exploitation is as natural and automatic in social life as expansion and contraction of the lungs in breathing. It is one of those necessary myths that arise to gratify the universal need for a doctrine which will fortify by logic the heart’s immediate demand. Karl Liebknecht [7], Helander, Beer and the theoreticians of the syndicalist movement throughout the world, represent this view.
This position has nothing to recommend it but its simplicity. It involves an un-Marxian theory of the nature of a myth and of the relation between the myth and the environment in which it functions. If we were to assume that a social myth is tacked on to a movement merely for purposes of helping its propaganda along, any one of a half dozen myths which painted the worker as the incarnation of all virtue and the entrepreneur as a personally wicked oppressor would be an improvement upon the labour theory of value and surplus-value. If we were to assume that a social myth owes its efficacy to the poetic way in which it ritualises the fighting demands of a group, then the theory of value with all its analytical curlicues would have to be discarded as an aesthetic blasphemy. From a Marxian point of view, a myth is an element in a general system of ideology. It consequently reflects in a distorted form its social environment, and the activities and purposes which develop within that environment. No large myth which grips millions of people can be an arbitrary creation.
The theory of value and surplus-value in its specifically Marxian form is neither an arbitrary intellectual construction nor a myth. It is not even an ideology. For it is not an unconscious reflection of class activity. It is rather the self-conscious theoretical expression of the practical activity of the working class engaged in a continuous struggle for a higher standard of living – a struggle which reaches its culmination in social revolution. It states what the working class is struggling for and the consequences of its success and failure. In this respect it is no different from the whole of Marx’s doctrines which he himself tells us in the Communist Manifesto, ‘only express in general terms the circumstances of an actually existing class struggle’. [8] In its full implications it can be grasped only by one who has accepted the class struggle from the standpoint of the working class and thrown himself into its struggles. To the extent that economic phenomena are removed from the influences of the class struggle, the analytical explanations in terms of the labour theory of value grow more and more difficult. The labour theory of value is worth saving if the struggle against capitalism is worth the fight.
This may seem a cavalier way of settling the problem but anyone who has read Marx closely will see that the whole theory of value and surplus-value bears upon its face the marks of this continuously experienced struggle between those who own the social means of production and those who must live by their use. Every struggle between capital and labour expresses a conflict between two theories of value – one which would leave the distribution of the social product of collective labour to the brutal historic fact of legal possession and the operation of the laws of supply and demand, and the other which would distribute the social product in accordance with some social plan whose fundamental principle is not the accumulation of capital for private profit but its intelligent use on behalf of mankind. Every struggle of the working class is an attempt to wrest surplus-value from the control of the propertied classes and to apply it to its proper social use. The final victory in the conflict for the possession of surplus-value can be won only by political means. Meanwhile every concrete economic struggle is also a theoretical struggle between economic principles. Speaking of the victory of the English working classes in carrying the Ten Hours’ Bill, Marx said:
This struggle about the legal restrictions of the hours of labour raged the more fiercely since, apart from frightened avarice, it told indeed upon the great contest between the supply and demand laws which form the political economy of the middle class, and social production controlled by social foresight, which forms the political economy of the working class. Hence the Ten Hours’ Bill was not only a great practical success, it was the victory of a principle; it was the first time that in broad daylight the political economy of the middle class succumbed to the political economy of the working class. [9]
The practical import of the theory of value is clearest in its bearing upon wage-labour. However it may be with other commodities, the value of wage-labour, in the strictest economic sense, depends to a large extent upon the class struggle. According to Marx, the value of labour-power is determined by the value of the means of subsistence necessary to sustain the labourer. What is necessary to his sustenance? At least the gratifications of his natural wants. Are his natural wants fixed and determined by nature? Marx writes:
The number and extent of his [man’s] so-called necessary wants, as also the modes of satisfying them, are nevertheless the product of historical development, and depend therefore to a great extent on the degree of civilisation of a country, more particularly on the conditions under which, and consequently on the habits and degree of comfort in which, the class of free labourers has been formed. In contradiction therefore to the case of other commodities there enters into the determination of the value of labour power an historical and moral element. [10]
The historical and moral element which enters into the determination of labour-power is measured by the intensity of the class struggle. Its existence explains the continuous transformation in the ‘meaning’ of a subsistence wage. It is the living link between economics and politics. The outcome of today’s class struggle affects the measure of value tomorrow. When crisis comes or war or unemployment, their social and political consequences are not merely a matter of economic laws inevitably working themselves out, but of the presence or absence of working-class activity. This is what Marx means when he says that man is at the basis of production and all the laws of production. The portion of surplus-value which goes to the entrepreneur, the landowner, the banker on the one hand, and to the proletariat, on the other, is not only an economic fact, but a political and moral one as well. It is a moral fact not because it depends on an abstract theory of justice, but on the concrete practice of struggle on behalf of class needs and interests. Marx’s revolutionary outlook was not something which he ‘added on’ to his economic analysis. It was involved in his economic analysis.
The fundamental deviations from Marx’s economic theories on the part of international reformism are not to be sought in the substitution of different explanations of the economic process, but in its refusal to carry on a fundamental struggle against the domination of capital. This is the root deviation from Marxism.
The philosophy of Marx does not involve fatalism either in the metaphysical or economic sense. Social institutions exhibit a definite structure in the course of their organic growth. But the pattern of this structure never realises itself in its pure form. Within limits, human beings are able to re-determine its development. Indeed, it was Marx himself who insisted that the activities of human beings were the material basis of all social institutions. Knowledge of the ways in which man can react upon the social conditions which seem to control him, brings power and freedom!
Man himself is the basis of his material production as of everything else he established. All institutions [Umstände] in which man, the subject of production, expresses himself, modify more or less all his functions and activities including those concerned with the production of material wealth – commodities. In this connection it can easily be proved that all human relationships and functions influence material production and exercise more or less of a determining effect upon it. [11]
1. Hook seems to be referring to the following from Karl Marx, Preface to the First German Edition, Capital, Volume 1: ‘In the analysis of economic forms, moreover, neither microscopes nor chemical reagents are of use. The force of abstraction must replace both.’ Available here. – MIA
2. Friedrich Engels, Anti-Dühring, p. 336 [available here. – MIA]
3. ‘Possessing utility, commodities derive their exchangeable-values from two sources: from their scarcity, and from the quantity of labour required to obtain them ... Economy in the use of labour never fails to reduce the relative value of a commodity ...’ (David Ricardo, Principles of Political Economy and Taxation (Everyman edition), pp. 5, 15)
4. Emphasis on this point is one of the distinctive merits of Lindsay’s interesting volume, Karl Marx ’s Capital (London 1925), pp. 78ff.
5. Karl Marx, Capital, Volume 3, pp. 181–82. [available here. – MIA]
6. Karl Marx, Capital, Volume 3, p. 230 [available here. – MIA]
7. Liebknecht, however, offers his own economic construction in which wages do not represent the exchange value of labour, but always less than its value, so that the worker is cheated not only of the surplus exchange-value which results from the use of his labour-power, but of the actual price of reproducing that labour-power (Karl Liebknecht, Studien über die Bewegungsgesetze der gesellschaftlichen Entwicklung (München 1922), p. 259).
8. Karl Marx and Friedrich Engels, The Communist Manifesto, available here. – MIA
9. Karl Marx, Inaugural Address of the International Working-Men’s Association, October 1864, available here. – MIA
10. Karl Marx, Capital, Volume 1, p 190, italics mine [available at here. – MIA
11. Karl Marx, Theorien über den Mehrwert, Band I, p. 388 [Theories of Surplus-Value, Part 1, available here. – MIA]
Last updated: 26 February 2020