William J. Blake: An American Looks at Karl Marx

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British Critics of Marxism

The two leading economic critics of Karl Marx in England, by the usual happy British paradox, have been philosophers. The first is the old-time perpetual contributor to Mind, the Oxford don, H. W. B. Joseph,¹ and the second the Master of Balliol, A. D. Lindsay.² A third critic, F. R. Salter, in his Karl Marx and Modern Society (London, 1921), has a host of objections that are also formulated by Joseph and Lindsay.

Joseph’s Basic Objections

Marx holds that labor is inherent in commodity-crystallized labor-time. But Marx also holds that competition produces a single average price for any given commodity. The sum total of values is the sum total of prices. Marx’s error is simple.

He wrongly holds this total value to be an average of individual values, a mere addition of the several parts of the total stock of commodities. His account turns on a single market valuation for each kind of commodity, different from a single market price, and yet each of these is different from ultimate price of production.

Under the term market-value Marx deftly conceals, at one time, market price, and at another price of production, and nowhere shows that there is a third thing which is neither price, to wit, value measurable by labor-time, for this never figures at all.

Marx does not understand the nature and limits of averaging. He speaks of an average value of all commodities, which is an impossible concept. From a given ratio between the average quantities of two features in a set of terms, he supposes a constant ratio between the quantities of these features in the several terms to be deducible. It is not.

He uses the notion of an average when he constantly substitutes the value of a given article for the labor spent on its production (the socially necessary labor), and does not see that then no man should receive payment according to his labor.

Of the two methods by which Marx says we should determine how much homogeneous, simple labor is equal to a given length of any specific labor, his first method begs the question, and his second, the cost of training specific labor, would not conform to the values thus ascertained. Homogeneous, simple labor, to which the specific different labors are reducible, is logically erroneous, for Marx confuses a unit of measure with generic identity.

Errors in the Theory of Exchange

Exchanges spring from mutual wants for different things, not from the want of some element in things, of which those that contain more would be the more valuable. No common element would give a measure, for the act of exchange is opposed to a common quality, and does not arise by reason of it, as Marx held. The fact is concealed, but not removed, by price-fixing. Men do not want the same things in the same proportion. Thus value cannot be transformed into prices of production, for in this way, instead of the determination of exchange relations by values, is substituted their determination by prices of production, and it must be one or the other.

Marx conceals a profound heterogeneity; value is congealed labor-time, price a sum of money. They do not coincide, says Marx. In Volume III, page 207, of Capital Marx speaks of the value of instruments of labor of two producers as differing, and yet of each containing in his products an equivalent of the cost-price of the means of production consumed by their labor, as well as the equal amounts of new value created by those labors. He has made a substitution, for you cannot add values and prices to a homogeneous total, yet that is how he arrives at prices of production.

Suppose two men (savages) exchanged goods into which both put the same labor-time. Yet one had tools twice as good as the other. The man with the better tools employs nobody. He has fashioned the better tools himself. He makes a profit on the exchange. Where is the surplus-value?

How, then, do we reduce artisan time before mass capitalism? By the market? That is a contradiction. Yet, to get out of his dilemmas, Marx tells us in Volume III of Capital (p. 85) that to obtain the average rate of profit in different spheres of production, various rates of profit had first risen from selling goods that coincided with surplus-value obtained in each sphere of production. But this averaging is not intelligible. For each capitalist obtains surplus-value that he has not got out of his own workers or workers in his sphere of production.

But in Volume I of Capital he must hold that there is an average surplus-value in each sphere, for in each sphere there is the same organic composition, and therefore for that sphere the average rate of surplus-value and of profit must coincide, generally speaking.

But in Volume III he confuses average surplus-value in each sphere with an average rate of profit all around. What Marx should have said was that the average rate of profit in each sphere is fused into an average rate of profit all around, and the determinant of that average rate of profit is the single market price.³

But Marx here must assume that prices fetched by equal portions of the stock of any given commodity will reflect equal values. But for averaging he has used prices of production that do not coincide with values.

But he says individual values are established as a single and common market value. Market-price vaguely corresponds. But prices are equalized by competition. Thus the single market-price assimilates the market prices that reflect values.

Market-value thus must differ from individual value, and from market price, and yet again from prices of production.

Marx’s fallacy is obvious. An average is ascertained by arithmetic, not by competition. Competition produces a unity, but not an average. Now if labor-time is reduced, and with it values, why should market-value be reduced if prices of production are not reduced?

But you say when labor-time is reduced the profit is raised? Then more capital enters the composition. Hence profits always remain the same, since they are computed as a rate of the larger composition. Then it is labor-time that is the variable in the equation and never the capital. Thus the process of market prices has everything to do with values and labor-time has nothing to do with values. This is Joseph’s great paradox of Marxism. If rates of profit do not vary with their proportion of wages to their costs, in any given industry, since surplus-value is not derived from that industry, but from the pool of surplus-value, how is it that any capitalist who economizes on wages he pays makes more profits?

Average Rates of Profit

Marx says that total value of commodities regulates total surplus-value and this total surplus-value regulates the level of average profit; and the average rate of profit, by way of the law of value, regulates, in the last instance, the prices of production. (Capital, III, 212.)

But if prices of production are attached to commodities, these must have weights, and yet the ratio of average prices of production to average weight is single! Marx substituted for the ratios of individual market prices in different spheres of production to the varying amounts of labor embodied in them, the ratios of their averages.

How are we to adjust the conception that value in an article depends on labor, with value depending not on labor put into an article but upon the want of labor in it, such as must arise in prices of production? Under Communism this could be solved, but how under capitalism?

The relation of abstract, social labor to concrete labor is effected by way of exchange. But what determines these exchange relations? Abstract labor, says Marx, equates all concrete labors. But how do we recognize this abstract labor at all? By way of exchange manifestations. But the very question is, do the prices represent anything of the kind? Marx confuses the question with the answer.

It is false that differences of quality can be expressed as differences of quantity, within the genera. There is no correspondence.

The Positive Concept of Joseph

But Joseph must explain a market. If there are no common properties that can be expressed quantitatively, how is exchange effected? He argues that differing wants are expressed by a conventional common factor, to wit, money. The least common denominator is dollars and cents or pounds and shillings. These utterly differing wants are expressed by prices. That is all. The differing levels are due not to their being quantities of some common exchange element but to differing intensities of incommensurable wants.

The seemingly intricate objections of Joseph get down to a few basic concepts. They will be best examined, though, in connection with the more fundamental examination of A. D. Lindsay.

Lindsay is clever, philosophic, erudite, and basically sympathetic to labor. It is not easy to see why Strachey refers to his little book as superficial. It is candid and well grounded; if its objections are not tenable, it would not be an amateur who could discover its fallacies.

Lindsay’s Objection to Labor-Value

Marx’s labor theory has two defects. The first is disregard of monopoly, and the second of demand. A theory of value which ignores demand must, whatever its other merits, be one that ignores valuing. Marx assumes demand but neglects its variations. Hence his admitted idea that goods must be of use to somebody else than the producer concedes utility but gives it no quantitative element. Marx’s intrinsic exchange-value is the one a commodity would have in a proper society where labor was performing its functions but is invalid for capitalism.

Lindsay now quotes Capital (III, 221) to illustrate his point. First you say that quantity of labor-time is value; then if you wish to determine units of skilled labor in terms of unskilled labor, you say that in experience this reduction is constantly being made. Granted, but how? By the act of exchange. The amount of labor-time, then, is not a real sum arrived at by adding units to each other; you first have to ascertain its amounts in exchange value and then you must infer how many units there may have been. But in Marxian theory it is exchange value that is the manifestation of immanent value, not the contrary.

Marx now covers two factors. The first involves no demand. That one is socially necessary average labor-time. The other involves demand. For it postulates that this labor must be expended in a form useful to others, as otherwise it does not count as labor. So one definition avoids social wants, the other implies them. Then a third question arises. Does Marx mean goods that are demanded by society or only by individuals with effective demand? The latter is relevant to capitalism only.

How can there be a quantity of labor in the sense of definite units if the character of these units depends upon the social necessity of the labor which is being constantly changed by subtle processes, some of them subsequent to the act of labor?

If labor is to be socially necessary to create value, the laborer must come up to the general standard of skill and even rightly anticipate demand. Then these two factors must be reckoned equally with hard work and ordinary skill as factors in the production of value. The social necessity of labor can be determined only by the proportion between men’s capacity to produce and their wants. Social necessity of labor depends on differing skills and varying success in anticipating demands. Are we not really back to something like supply and demand?

Is it true that exchange (mere circulation) creates no value? If skill in anticipating demand is a factor in value, proper skill is a factor in value because it avoids misdirection, that is, it saves circulation wastes. Why not say that the laborer incorporates time and the merchant sees that the time is socially necessary and that both conjoin in producing value? Marx knows that the merchant in circulation realizes value. Marx admits that the merchant, by alleviating the time of sale, sets free some time for production (Capital II, 149). Then the rate of turnover not only adds to profit but to value. But if mere buying and selling promotes the realization of more value by increasing time for turnover, then new value is added in the sphere of circulation and we have answered the dilemma how does M—C—M become M—C—M’.

Difficulties in the Theory of Surplus-Value

Marx shows A selling to B (Capital, I, 174). This is a disingenious way of avoiding the issue by taking two isolated persons in the act of exchange. Exchange is social. A multitude of A’s face a multitude of B’s and in order that this meeting in the market place may take place to best advantage they delegate someone to find out somebody else, and so profit is realized as the reward of delegation. Take the village shopkeeper. You say he makes a profit merely out of dividing surplus-value originally dedicated by the producing working class. But he employs nobody and he functions in getting goods to the consumer. Whom does he exploit? Where would the value be in the factory if it did not emerge in those village sales?

Marx is right: there is a surplus-value. But not in his sense. For he got over the contradiction that if the laborer got his subsistence then he was not paid for initiative and extra energy as a class. But this initiative and extra energy is the only reason the bourgeoisie assign for their own income.

Marx thus gave the worker a weapon, for he proved that the worker is regarded on a basis that excludes active participation in profits. Even piecework, which appears to be a reward for his initiative and energy (for the traits the bourgeoisie affect to think so admirable), acts in the end, as Marx rightly shows, as a depressant of wages, as a threat to subsistence.

But that is not to say that Marx’s individual analysis of exploitation is correct, however, deep his moral contribution. Marx is haunted by the heritage of Rousseau, of the French Revolution, of the Rights of Man, however he mocks these ideas. If he were social he would not fall into the trap of the hours given by the laborer and the surplus hours above. He has carried over, implicitly, the right to the whole produce of each worker, even if he thinks the contrary.

A businessman can afford to have several bad workers, but he can never afford a bad manager. Thus management must be important for value, for we judge of contributions to production by what would happen were they abstracted. Scientific achievements and gifts of organization have far more to do with the increase of wealth than manual labor. If value above that of each individual laborer is a result of co-operation of a mass of laborers then there should be a common, not a distributed, reward. The labor theory of value is transcended. The case for separate individuals must be given up. But Marx both sees this and does not see it.

Marx Not Socialistic Enough

When Marx gave up the individualistic assumptions of the difference between individual labor-values and the surplus due to co-operation above the sum of individual labor-values, he was forced to the notion of a pool of value in the third volume of Capital, and this does explain things better. But then, for what did Marx need all that useless analysis of individual commodity value?

For his social production and total prices of production coincide with total value, which coincides with total social labor-time, and this transcends the labor-theory of value. Were it not for Marx’s dependence on implied individualistic assumptions he would be a still greater man than the great man he was, for he discovered the new organon of economic science, but his mistakes are many and they come from a relic of former thinking.

In plain words, Lindsay maintains that Marx’s mistakes are due to a contradiction between his vestigial individualistic assumptions and the new socialism of which he was the correct prophet. This at least, is the foremost social, not capitalist, critique of Marx.

Marxist Commentary

The Marxist reply to both Joseph and Lindsay would probably be something like the following, for there is no record of any specific detailed reply in the literature:

Reply to Joseph

Marx does not hold total labor-value to be an average of individual values at all. Joseph imagines this. It is a total social value of which individual values are aliquot parts. Marx begins with social value; he does not arrive at it by counting individual acts of labor and adding them up, nor does he divide the number of commodities by total labor-time to produce an average value. There are so many socially necessary labor-hours utilized and that is the pool of value. Each individual amount of labor-time may be above or below aliquot value, but no matter what these differences the total social value is unchanged.

A total that cannot be changed by variations in the relations to that total of individual elements in it, is a concrete given fact: the foundation of a theory of value. Hence Joseph’s scholastic distinction as to averages of a set of terms is put aside. True, there is a difference between total market-value and individual prices of production, etc. But it is not true that labor-time does not figure at all. For it is the total of values which rise and fall as a social mass.

The price of production includes labor-time and average rate of profit, divided by the ratio of any given capital to total capital employed. But this average rate of profit is itself an abstraction from total labor-time by way of the mechanism of total surplus-value. Hence labor-time is decisive for prices of production since the totals must coincide.

Marx Opposed Individual Labor Attribution

It is true that no man should be paid for his labor according to individual labor-time. If Joseph had read the Gotha Program notes of Marx he would never had made the objection. Marx points out that any such deduction is Lasallean, and contrary to Marxian principles. Labor as a class is historically entitled to own the means of production, not for ethical reasons, but because capitalist production gives rise to historic contradictions which defeat its original purposes of a gaining productivity, and because social production makes individual competition or monopoly the carriers of crises, disorders, war, and misery.

Generic Differences Objection

Does Marx confuse a unit of measure with generic identity in computing the value of skilled labor in terms of average social labor-time? Here Joseph assumes that skill is not reducible to time; he assumes a generic difference. But no one says it is so reducible. Marx says the concrete labor (which is how we recognize skill) is irreducible, is not social. It becomes social—that is, has value as against use-value—by becoming abstract labor, and abstract labor is reducible to time. Joseph confuses irreducibility of concrete labor, which Marx affirms, with its common modes of measurement, for which Marx gives a criterion. It is he and not Marx who assimilates genera and measurement.

Refutation of Joseph on Exchange

It is true that acts of exchange take place not because two commodities are the same but because they are different. That is the foundation of Marx’s doctrine. People make what they do not want and exchange for what they do want, and utilities, says Marx, are incommensurable. True. But that does not explain levels of exchange, it explains only the act of exchange. Hence Marx says, the act of exchange means that a useful commodity is transferred to the buyer, and it carries, in its utility, the abstract value of the article exchanged for it. The incommensurable use is a carrier of that abstract commensurability that makes up the differing levels of value. Thus the objection of Joseph that value cannot be transformed into prices of production because of alleged incommensurability is ill-founded.

It is true that in the price of production of any goods there is incorporated a previous price of production in the instruments of labor, and that for the individual product of any factory each commodity is a composite of its own new value and the transferred prices of production of its ingredients. But the question for Marx is social. All commodities, as a total, embrace only labor-time; prices of production are the capitalist forms of dividing this value, and in any given commodity there are differing prices of production, but they differ for each commodity and compensate each other in the total.

After all, Joseph is looking for a categorical contradiction between value determination by labor-time and the price of production, whereas the categories (social totals) are in harmony. He has no logical case whatever as he flatters himself, for he has confused the mode of manifestation of value with value itself.

Primitive Surplus-Value

As to the two men with the tools. The labor-time required to reproduce the first tool is not a source of profit but a source of higher value. The time in which it can be reproduced by the other savage (there is no capital here) would equate their earnings. These Robinson Crusoe analogies have nothing to do with a society in which the varying costs of the means of production, as against the subsistence earnings of labor, result in class divisions in production. But even so Joseph’s illustration is futile.

The theory that an average is assumed by arithmetic, but only unity of price by competition, in turn assumes the theory of averages already answered.

Joseph’s Dilemma Examined

Now as to the dilemma of Joseph. If surplus-value is not derived from the particular laborers employed by any given capitalist, how is it that if he lowers wages he makes more money? The answer is simple. The individual capitalist’s share of the total surplus-value at any given time is not determined by the individual laborers he employs, but if he lowers wages he is able to outsell some competitor and so he obtains a larger section of surplus-value, the total of which remains unchanged.

There is an enormous difference between saying that a proportion of surplus-value to total value is not a specific function of the quantity of labor employed, and saying that this lack of relationship is total; that it cannot vary as a proportion.

If total surplus-value is expressed as $1,000,000 and a manufacturer obtains a surplus-value of $50,000 out of only 3 per cent of total labor employed, one can say that prices of production result in 5 per cent surplus-value being extracted from 3 per cent of workers; but if the employer increases relative surplus-value, and beats a competitor, why cannot he make $60,000 out of the $1,000,000 out of 3 per cent of the workers and still leave the principle of the relation of any given capitalist to the pool of surplus-value logically intact? It is question of which actors fill which roles in the show, but not of the show itself.

Certainly Marx substituted for ratios of the averages of prices of production in each sphere, the ratio of total prices of production to total value, which is unity! If we say that five red apples are five to three as red apples to three yellow, that seven oranges are seven to five to five mandarin oranges, why cannot we take these two spheres of fruits and say that the ratio of all apples and oranges to the total number of fruits is unity, twenty to twenty? This is not an analogy, because, for Marx, the prices of production are determined by the total of values, but the classification principle is identical.

The Paradox of Exchange-Value Explained

The paradox that we know of immanent value only by its manifestation in exchange-value, and this in turn illuminates immanent value, simply does not exist. We know of immanent value by exchange manifestations, but it is not by some inherent quality in this manifestation but by repeated acts of exchange that we note that the manifestation is in concord with labor-time. Everything in nature is known by manifestation, and it is the repetition and order of the manifestations which reveal the law underneath. Hence the immanent value, of which exchange-value is the manifestation, is not known metaphysically, but by reason of certain continuities which are compatible alone with that identification. Joseph is so immersed in metaphysics that he has forgotten the ordinary day-to-day methods of any science. Marxism does employ categories but not as originating tools. It validates them empirically, exactly as mathematical categories in the celestial movements are validated in observatories.

On Lindsay

The Marxian reply to Lindsay is more facile—not that his objections are not better, but they are less finely spun as cobwebs.

Alleged Defects of Marxian Value

That the Marxist theory of value disregards monopoly is not to the point. Marx refers to an idealized capitalist exchange of equivalents as a hermeneutic procedure to ascertain the laws of motion of capitalism. In the third volume of Capital, on the real state of business, he deals extensively with price (not value) distortions due to monopoly, and this is of the essence of the Leninist theory of imperialism.

As to demand, that has been answered as to the Austrian school. That Marx ignores valuing is a petitio principii of which a Master of Balliol should be ashamed. Valuing can be done socially, by way of recognizing the labor-time; why is it always to be a psychic phenomenon, without an objective determinant? He assumes the definition in the question.

It is as absurd as the celebrated error of John Stuart Mill that as the only test of visibility was being seen, the only test of desirability is being desired. Marx does not ignore valuing; he is concerned with the conditions under which it must take place.

As to Lindsay’s theory that only under a Communist society would labor-time value obtain, this is completely wrong. Under Communism there would be no “value” whatever, for value arises by reason of exchange in a commodity society. It is just because value does not coincide with price that we recognize a contradiction in capitalism; were value harmonious with price we would be at a loss for analysis.

On Rightly Anticipating Demand

The objection that the units of skilled and unskilled labor are ascertained in exchange has been answered more comprehensively for Joseph. Now as to differences in rightly anticipating demand and special skill as non-time-factors in value. Marx does not say that labor-time is value. He says socially necessary labor-time. There is no “time” isolation to which other “factors” are added. The notion of value is a complex of several simultaneous agreements, labor plus time, plus social labor, plus social demand, plus average skill. Labor-time is the measure of all the ingredients, but their efficiency in value itself (not their measure) is given as a limit in the value-complex. Lindsay confuses measure of value with value. Certainly we are back to “demand,” but this demand is the limit of value, not the determinant of quantity of value. Besides which Marx points out that concrete labor has its nexus in utility, abstract labor in quantity of value.

Circulation and Value

Circulation creates value, says Lindsay. The first objection would be Boudin’s—why does anyone go to the trouble to produce? Labor is hard. Circulation involves no labor-time in fashioning goods.

But, it is objected, goods are brought to the market. By labor? Yes, there are locomotives and trucks and warehousing and wrapping and storing on counters. But apart from labor, as a pure act of circulation, how is value created? Out of the former value? Or out of new value? That is the very problem.

Certainly realization is needed for value. An unrealized value is wasted labor, is not manifested as value at all. But the question here is new value.

The merchant sets free time, says Lindsay, so he speeds up production. He is a faetor in new value by aiding turnover.

How does he speed turnover? For the totality of merchants? Then that becomes the prevailing social mode of production, and the ratio of capital to labor is back to the original proportion. How do you then explain surplus-value in circulation, given a certain level of production?

For some merchants? Then the social question is not advanced at all; what one gains the other loses.

Lindsay is thinking of merchandising not as a class phenomenon but as an interclass competition.

As to a multitude of A’s facing a multitude of B’s and delegating merchants to act for them, what difference is there here? Either A bests B or B, A, or B’s best A’s delegates, but the social total of value is unchanged.

As to the village shopkeeper, he is a compound of laborer (he devotes time to work on goods) and realizer of value in goods. The man is a self-employer and composite of worker and circulator. As worker he adds to value; as circulator he realizes it.

The Theory of Management

That a business can rather maintain a couple of bad workmen than a bad manager is profoundly true. But what is the deduction? Can the capitalists as a class have workers so bad that they do not reproduce their own subsistence and a surplus besides? No. This is the social content of production. Certainly for any given business competing, the ability to extract surplus-value (good management) is a life-or-death matter. For a slave plantation, one or two bad field workers were not as important as a good overseer. But what was the job of a good overseer? To get production out of Negroes whose instinct told them overwork was not for their good.

To appeal as Lindsay does from competitive prowess to social production is to make a logical leap. If “management” can be dispensed with and “labor” alternate “management” under a system of democratic fusion of manual and intellectual work, where is Lindsay’s dichotomy? It arises in class society and is certainly valid for that society but not necessarily for any other.

If Lindsay contends that science and organization have done more for production than manual labor he may be right in this regard. The single invention of the steam engine or cotton gin gave labor a far greater power of transferring value and some of adding new value. A million workers laboring at the Pyramids of Egypt for ten years might not accomplish as much production as the brain of James Watt or Jacquard.

But what is the value-deduction? Are the relations of capitalist and laborer in socially constantly renewed production any different? Or does Lindsay contend that inventors are entitled to the full increment of productivity? In that case the descendants of the original discoverer of fire ought to own the world; whoever fashioned the first wheel should hold a permanent mortgage on mankind.

Even so, where does the capitalist class come in? They benefit by increased productivity far more than the workers do. As a class they invent less than the workers do.

Certainly productivity is social. Thus the individual case for value is overthrown, and society, heir of technique, is, by its efforts, the sole fabricator of daily renewed and reproduced value. Either technicians should own everything, or capitalists or the community. But there can be no warrant from technique for class relations in the ownership of the means of production by which alone inventions are utilized.⁴

Again, if it can be shown by communal experience in the future that present-day production, by competition and waste, enormously reduced the total productive result far below its capacity, would not the present management be debited rightfully with waste, and charged with the difference between class production and social production for use? Management is thus seen to be a specific function of a given society, but not a factor in “value.”

Was Marx a Lame Socialist?

As to the assumption that Marx inherited relics of individualism, the point is not what Lindsay imagines. True, co-operation means that the sum of production is greater than the sum of individual labors. So Marx postulates socially necessary labor of average intensity, that is, as given at a certain level of co-operation and technique. Lindsay must have been confused by one of two factors. Either he accepted Menger’s naïve idea that Marx believed labor entitled to “its” full product, or he confounded the purpose of Volume I (to illustrate capitalism by stereotyping it) with the great total fabric of Marx in the three volumes of Capital.

Cole

G. D. H. Cole is a crypto-Marxian. In his What Marx Really Meant⁵ he could have been more exact had he stated What Marx Should Have Meant If He Were As Snappy As an Up-to-date Commentator. He begins his vindication of “his” Marx by stating that bourgeois economists want to abstract everything into a static equilibrium, especially like Marshall, or the more thoroughgoing Pareto. (He ignores dynamic economists such as François Simiand and Henry Ludwell Moore.)

Stock-exchange ownership prevents polarization of classes. It offsets the effects of concentration, for the displaced capitalist is now an investor. Friendly societies, lodges, even trades unions, are involved in the system as investors. The significant question is no longer the number of individual producers, but rather the present relation of whole masses of people as having a pecuniary interest in the maintenance of capitalism. This blunts class relationships. Professional men, such as fashionable surgeons and divorce lawyers, are wedded bigamously to the rich, first by excessive fees and then by investments.

Apart from class analysis, Cole has made some remarkable discoveries in Marxism. The prices now prevailing are determined by supply and demand and there is no tendency for them to return to a level of values (apparently not even as a social total). Labor includes the activity of the “brain worker.” Unless the system of production is “wholly irrational” it will demand more use-values. (Perhaps Mr. Cole has never heard of crop destructions, restrictions, quotas, etc.) For Marx exchange-value equals objective use-values! (Apparently, then, Marx was as impressed as Bastiat by the harmony of production and value!) All costs of production enter into values, whether wages or claims of ownership. (Perhaps the prices paid for common stocks in 1929 enter into production costs. Who knows? Cole here goes beyond any bourgeois reactionary, and says that Marx said this.) But the fact that mortgages and notes and graft and whatnot enter into costs of production is perfectly compatible with the idea that labor creates value, for it is the only active agent! (Man is merely another force of nature, says Engels; it is not his activity but his human significance that is central.)

“If more value must be used to produce a unit of bank manager than of cotton weaver, the difference in cost of production is a measure of value.” Marx’s ideas of labor-value were valid only if certain kinds of skill and productivity were reproducible at will. True, for certain kinds of technical competence, the Marxian thesis might be upheld, but not to such gifts as men owe to “original endowments” of mind or body.

It would have been better if Marx had defined value as that which arises out of the expenditure of any scarce agent or instrument of production. Thus value would still be created only by human agency and transferred from things. But it would have enabled Marx to recognize that scarce material things have value apart from any contribution added by human labor. But values are still social, for they depend on the objective social conditions in which they exist.

Comment

It is difficult to restrain oneself from writing a humorous commentary on this astonishing olla podrida of theoretical effrontery. The class theory—that the rich really have transferred the independent competitor into a co-operative investor, instead of facing the brutal theory of the role of the stock exchange itself as a concentrating agent—marks the limitations of Cole’s “Marxian” mind.

To say that the investments of “friendly societies” are an alleviation of exploitation, whereas the building and loan society is an indirect tax lowering wages, and the “contributed” protection of the workers reduces wages by that difference, is to ignore the class content of Marxism one hundred per cent.

This is not to say that Marx is right in this contention, but no Marxian can deviate from that position, which is central to Marx’s entire analysis of production.

As to the caricature of Marxian doctrine, any student can by now recognize its utter unreliability. The costs-of-production hypothesis is a delight. As to the allegation that values can exist due to scarcity but nevertheless that all value is created by labor, but though labor creates all value there are values it does not cause, but these are increments of scarcity: the mind does not contain such concepts. One has not the originality of endowment (not reproducible at will, like “common” labor) to fathom such syntheses. The book deserves complete neglect.

A. L. Rowse

This is the fourth Oxford theoretician, Joseph, Lindsay, and Cole being the other three. The only positive contribution of Rowse is in the Criterion (1929), in which he points out the inadequacy of the class struggle hypothesis in that it simplifies society into proletariat and capitalist, whereas society contains several class struggles, not merely one.

To anyone who has read the rich analyses of classes and their elaborately antagonistic political moves in such a classic as The Eighteenth Brumaire of Marx, this will come as a surprise. The Communist Manifesto, too, has the largest catalogue of class antagonisms ever made.

But what Marx meant was that in the sphere of production, which is central to the commodity society in which we live, the primordial class conflict gives the special character to our age.

If anything the criticism of the French scholar, Turgeon, that Marx over-refined class moves, and made them too fragmentary, may be nearer the truth than Rowse’s naïve criticism.

From Oxford to Cambridge: Maurice Dobb

Cambridge, from the great days of Alfred Marshall, overlord of British economics, down to its present most famed specimen, John Maynard Keynes, has usually outdistanced Oxford in pure economic theory. Even logicians such as W. E. Johnson and F. P. Ramsay (a genius who died young) were there harnessed to the economic chariot. The most important Cambridge commentator on Marx is the avowed Marxian Maurice Dobb, who is placed among the critics partly because of his emendations, but mostly because of his examination of other critics. Incidentally, Dobb is the Marxist scholar that English-speaking students can pursue to the greatest profit.

Dobb’s latest book will be our point of departure.⁶ He begins with a summary of opponents of any theory of value, Marxian included. Among these are Cassel, who holds that an empirical price theory is all we need; von Mises, who in his Socialism contends that value is merely an equational system which generalizes the relation between scarce means and given ends in all situations; and Myrdal (see Bibliography), who states that any theory of value based either on real costs, including labor-costs or utility, is an ethical obsession carried into economics. And he cites P. M. Sweezy, who even held that the modern doctrine of value (presumably the Austrian) is more useful to socialism than is Marx’s because of its objectivity and greater generality. Since the concept of scarcity covers all objects and that of social labor-time only commodities produced in capitalism, the generality, that Marx rejected for that very reason, is urged as an asset.

Principle of Value Unifying

Dobb holds that in political economy the unifying principle or system of general statements in quantitative form is the principle of value. The adequacy of a system of value is known by the conditions which such a set of statements fulfills to determine equilibrium and movement in the economic system as a whole. Value is expressed as an equational system in which the number of known conditions is equal to the number of unknown variables within that determined system (note the limitations; they are like those of Marx, exceedingly concrete in application). The specific or concrete content is equal to the constants, for these constants, postulated independently, are determining, but not determined, for their specific context. In other words, we have certain assumptions, taken for granted until they make good, which assumptions do not arise out of the system they determine but which govern that system.

Now in the real economic world there are no such petty, isolated systems. A law of value, since it assumes such a system, can only approximate complex economic reality. It is perfect for a certain type of forecast but not for every type, but it has the most general validity for the largest possible complex data. More than this no theory can furnish.

Now let us study value theories in this light. The smaller the complexity of data—that is, the less general the economic subject studied—the easier the principle. Take a fish market. Supply and demand would be nearly enough to explain the prices, if we knew how much money the goodwives had who come to buy.

In an isolated community, perhaps cost of production would apply.

But when we reach the stage of generality of the capitalist system as a whole we cannot use the present level of wages, profits, rents, as determinants, for these levels are themselves a result of the value of commodities as well as an influence.

Value must solve distribution, that is, the price of labor-power, capital, the use of land, as well as give us commodity values. Neither theories that begin with distribution (which shirk the question) nor “isolated” systems, so dear to the Austrians, can solve this, for they express values by values. There must be a determinant which itself is not a value. It was for this reason that Ricardo disdained “supply and demand,” for this reason, that Mill’s Cost of Production is not a contribution, nor is any theory of relative value.

Value Must Be a Quantity of Something Else

Value must, therefore, be a quantity, though not necessarily a single dimension or character (although really it is that, we are speaking here of pure logic). Price variables must have a common term. A cost theory cannot express price as a function of two elements if they have nothing in common. The principle that value results from subjective desires and subjective estimates of obstacles to those desires (the marginal utility school) requires as a postulate that they would be equal in equilibrium.

Now Marx satisfies these conditions. He makes labor-time an independent, objective representation of human activity, capable of independent, quantitative expression, and by separating it from its sale as labor-power showed that the determinant of value was itself, as a commodity, measurable.

Which is the common factor, an objective or subjective one? Smith and Ricardo’s errors are known: Ricardo assumed a level of wages uniform at a given time for labor of uniform quality. Land was an exception. Ricardo implied that the ratio of labor to capital was always equal (without reference to organic composition). This is the real onus of Böhm-Bawerk’s attack on Marx. But all abstractions (such as the labor theory of value) are merely approximations to reality; it is their later congruence that counts. As early as 1847 in his annihilation of Proudhon, Marx saw the point; he knew that a rise in wages in differing industries would produce quite contrary effects—would produce a price rise in one and a fall in the other, owing to the ratio of manual labor to fixed capital.

The Method of Successive Approximations

Now Ricardo knew his limitations, but he had a restricted purpose. Marx finally increased his labor-time approximations to reality by his price of production theory in Volume III of Capital. Mill had spoken of cost as wages plus average rate of profit, but what determined the average rate?

Marx says that price of production equals profit as a quantity depending on surplus-value. His second approximation depends on the first, exactly as later approximations do in physics. (This is exactly the approach by Kuczynski in Zurück zu Marx.)

Marx asks, What determines differences between labor-power and commodities? If wages rose would the difference change? Profit and rate of profits depend on the difference: this is the key to distribution. Which element is to be used to open the economic door? Labor?

Well, why not land or capital? But acres are more dissimilar in fertilities and locational uses than labor-hours as a social unit. Capital is excluded because it is a value depending on other values.

The question is not logical, it is human. Humanity begets change and increase. Nature produced wealth, but man, social man alone, values. The essence of value is cost; the essence of cost to human beings is expenditure of human energy as applied to nature. Labor, conceived objectively, is the measure of this expenditure. Human beings even make the tools they use. These tools show no cost in their mere use, as labor does (apart from depreciation), nor do they cost by postponement of their use in time. Use cannot be counted twice. Labor is taken not as a formal principle, but because by taking it we are enabled alone to differentiate one type of income from another.

Specific Position of Human Labor

To begin with one distinction—the sale of a property right is not necessary like the upkeep of machinery or labor is a necessary cost. Now in the subjective theory of value the very concept of a surplus, contrasted with cost, is missing; there is no fundamental reason given for persistent differences in class incomes.

Marx’s theory of labor-value enables us to classify these types of incomes; his joining of the descriptive and classificatory methods of the historical school to the analytical and quantitative methods of abstract political economy, by the use of the value concept (as an approximation to an empirical reality, and not as a closed logical dogma) enable him to achieve this permanent contribution.

Class revenues are due to the motions of capitalism. The concepts we use, although not a picture of this complex reality, are much better than fiction, and enable us to explain wide areas of fact.

The rival theory of subjective, individual utility is a bourgeois necessity, since once you grant objective value political economy must end in a socialist analysis. The Austrians make value independent of the influence of class incomes on demand. Otherwise their precious demand schedules would not depend wholly on utility. A few Austrians have seen what was wrong; von Wieser (Natural Value) declared demand schedules valid only for equal incomes and thought it applicable to Communism!

The Austrians identify desire with satisfactions. These must be one, for otherwise desire (demand) cannot be a function of satisfaction (utility). Now this theory explains no surplus; only a cost theory can.

Surplus is a relation between a given income and some productive activity. Böhm-Bawerk can explain economic contributions only in terms of what eventuates, not of what originates. On Böhm-Bawerk’s theory, whoever gets a price has made a contribution. Surplus need not then be explained.

Why then the persistent differences between the price of labor-power and commodities? Why does not demand press the capitalist down to zero? Why is one class rich and another poor? What stops pure demand from equating the pack?

But the Marxian theory explains that if labor is required to produce more than it uses up, there is a surplus. The economic question is not who contributes, as determined eventually by price, but who appropriates, as realized in price. Not exchange of products but of labors is what really competes.

Ricardo held this, and that higher wages came out of profits. Spoliation as held by the sentimental school of Sismondi does not explain why after spoliation profit persists and is reproduced as a class income.

Dobb’s Proof of Marxist Social Totals

Homogeneous simple labor is objected to. Marx assumed pure competition in Volume I, a Tableau Économique in Volume II, concrete economic determinants in Volume III of Capital. This simple labor-power is expanded in concrete treatment later on.

As to Böhm-Bawerk’s great contradiction: he states that Marx utters a tautology, a total equals a total. But surely if value of labor-power = total of surplus-value (total of profit equal to total of surplus-value) is valid for society, and total of wages and surplus-value equals total value of commodities, it can be tested as a social whole by varying total wages and seeing the result. There would be no tautology. Profits would go down as a mass and wages rise. That is consistent with the theory that the share in the pool of profits is determined by the size of individual capitals.

Marx held that provided competition of capital in the subsistence industries was similar to industry as a whole, Volume I still governed.

Monopoly cannot increase total profits, but only the part due to the individual monopolist, unless it succeeds in lowering wages. On subsidiary issues, Dobb holds against the mere underconsumptionists, among whom he places Rodbertus (a mere disciple of Sismondi), Malthus, Lassalle, Dühring, Keynes, Luxemburg, J. A. Hobson, Cole. These theories deny that saving is an investment in other labor, that increased production makes goods cheaper with the same profit. But relative surplus-value tries to escape from declining rate of profits by increasing production and so increasing the mass of profits. This is what savings are used for largely.

Rate vs. Mass of Profit Is Not a Mechanical Process

Which tendency will outstrip the other? To Marx this is not fully determined. It is more than a question of production techniques, for class resistances come into the calculation. Strachey, for example, is much too mechanistic in his theory of declining rates of profit. It is the pull of the tendential fall in the rate of profit against the schemes to counter it that results in a persistent strain and it is so-called “accidents” in that strain that produce crises.

The tendency to fall in the rate of profits periodically curtails new investments, production, and employment. This tendency, though, is not realized, but marks what would happen if constant capital were not cheapened and a relative overpopulation were produced that depressed wages, thus cheapening costs for capitalists. If population increases faster than capital accumulation; if the amount of labor superseded by machinery is more than absorbed; if primitive accumulation goes on additionally, then an increase of production is an increase of profits, for labor costs no more, other costs are less, and markets are greater (if the cheapening of means of production and means of subsistence keep pace).

Hence the concordance of increasing relative surplus-value, accompanied by a cheapening of constant capital, is the capitalist counter-move against the tendential fall in the rate of profit. This is a permanent contest, and no mechanical prophecies will help us as to its intermediate outcomes, except that the strain is always growing greater.

Tugan-Baranowski Centers on a Rarity

Tugan-Baranowski held, completely against Marx, that a higher organic composition must raise the rate of profit: Suppose surplus-value doubled and rate of constant to variable not doubled. (But here Tugan-Baranowski assumes this is possible and the question is, is it possible?) But, says Dobb, only where the price of labor-power is constant and the price of commodities does not fall, the relations between higher labor-power productivity and the degree of change in organic composition becomes a counter-tendency to the tendential fall in the rate of profit. This is the rarest of theoretical possibilities; it is not much seen in practice.

Dobb’s Theory of Cyclic Recovery

In a crisis, the industrial reserve army is increased and labor-power cheapened. But, it may be asked, a crisis also deflates sales by reducing purchasing power through unemployment and low wages? But lowered wages increase surplus-value, as a rate, and so encourage investment and subsequent employment. A crisis also retards technical change, and thus clots the permanent tendency to lower profits. In other words, in ordinary “boom” times, capital tries to make money by increasing constant capital; in bad times, by technical stagnation and putting the burden of “recovery” on the backs of labor.

Dobb cites an interesting Marxian emendation of Ester Boderup, a Danish economist who holds that in a class society, such as ours, there is a one-way relation between demand for consumers’ and producers’ goods, both rising and falling together; there is no compensatory tendency. Hence interest rates depend on the fact that there are no countervailing class tendencies to enforce an equilibrium of demand, and do not depend upon the rate of profit.⁷

Dobb concludes that the conflict leading to crisis is ultimately one between productive power and class relations in production. When a Varga, in his Great Crisis, says it is between productive power and consuming power, it is oversimplified and very near underconsumptionism. If these Marxists will study Capital (III, 303) they will have a firm grip on a real theory of crises.

Dobb cites favorably J. M. Clark’s Strategic Factors in Business Cycles, which points out that consumers’ demand follows production of consumers’ goods. This is decisive as against the underconsumptionists. Wages rise more as the boom grows and production relatively increases more slowly. This leads to the profits contradiction.

Dobb skirts the central question of intensive vs. extensive fields of investment (the core of the debate around Rosa Luxemburg’s accumulation theory); there he has no special contribution, although he is always suggestive.

The Dynamics of Capitalism

He asks, If we have no population theory like that of Malthus, why does not labor finally extinguish profits? It is a legitimate question. Take France—in 1870 she had 38 millions, in 1935 merely 42 millions. Why does not the tendential fall in the rate of profit, with no increase in population, result in a premium on labor and an end of the profit system?

In the first place the cheapening of constant capital is one capitalist escape. But most decisive of all, the moment profits weaken investment recoils, and consequently employment crashes, whether the population be gaining or static or declining. It is not a question of numbers but of class relations.

New production is a function of profits. Capital goes on strike if there is none. There are always new supplies of labor, from agricultural displacement, colonial exploitation, etc. When wages are too high, tending to lower profits, capital calls these defensive means into play, exactly as an octopus pours out ink when cornered.

Notes on Dobb’s Contribution

Dobb belongs to the small group of Marxians who have tried to present Marxian doctrines from a different angle. The theory of value as a central organizing concept, whose validity gains with its area of reference, is an ingenious defense of the view that Marx’s theory of value is the center of his economic system. His social theory of crises (that their tendencies are not purely economic but are significant because of a class setting) is also productive of real thought. That political economy is a logical system which, at given points finds no solutions in that logic, must appeal either to experience or outside living factors, reiterates the principal thesis of Engels in Anti-Dühring. On the other hand, some of Dobb’s statements are extreme.

That the bourgeoisie have no theory of surplus is not as exact as it might be. Böhm-Bawerk held a subjective theory of value, but his time theory of a surplus (even if untrue) is an attempt to explain surplus without a costing hypothesis valid for the present.

That acres are more dissimilar than labor-hours is not a necessary, nor even a probable, hypothesis, in order to show why land cannot be taken as a source of surplus-value.

One gets just a bit of the feeling in the first part of Dobb’s brilliant book that he is making sure that no opponent can escape through the meshes of analysis. This is just what Marx never does as a logical method.

His theory of crises, on the other hand, is in the best tradition of Marxism, but it is a pity that he did not make his excellent approaches more exact by studying the mechanisms of internal accumulation and their exact relation to the noncapitalistic world. The Leninist insistence that the general crisis of monopoly capitalism presents certain features that negate previous crises (in the dialectic sense), opens a real possibility of new Marxist edifices.

J. A. Hobson—“Economics and Ethics” (Boston, 1929)

The veteran economic historian, whose Evolution of Modern Capitalism and Imperialism were honored by Lenin, is a non-Marxist hero of the Marxists. He attempts a critique of certain concepts of Marx. He says that when Marx attributes to each employer the ability to take and keep labor’s product in the face of competition, he fails to distinguish economic payments necessary under capitalism to the providers of capital and organization, and payments made in excess of this amount. Thus costs and surplus are distinguished: that part of profit required to replace capital and to reward enterprise is a necessary cost of business, the same as is labor, whereas any payments above these necessary costs, and “saved” by the capitalists, are parasitic and are the real cause of crises and consequent low wages.

This combined theory of quasi-rents of ability, like that of Alfred Marshall, links Hobson to other Fabians like Sidney Webb. The theory that savings produce disaster is an old Proudhonist concept.

Hobson further holds that because monopoly enjoys a permanently higher rate of profit than capitalism as a whole, such industries in England as banking (credit monopoly), brewing, and tobacco (monopolies due to “tied” retailers and immense excise taxes) have a permanently excessive rate of profit which forces them to oversave and provoke crises.

There is a fair amount of truth in some of these criticisms. Obviously a certain section of surplus-value is reinvested in more production, but according to Marx it must be; that is the law of extended reproduction. Of course, it is a “necessary” cost under capitalism, but how is it to be differentiated from money “saved”? “Saved” money is rarely hoarded; it too is reinvested.

When capital goes on strike, practically no money is reinvested; when there is a boom practically all money is reinvested.

Hobson’s distinction seems stiff and formal. As to the rent of ability, that has been dealt with ad nauseam in previous sections of this book.

On the question of monopolies, Marx is more profound than Hobson, and anticipated him, for it is by the mechanism of price warfare, which leads to the monopolists’ obtaining a higher than average rate of profit, that the phenomenon of centralization is accomplished. Marx gives an exact economic description of the function of monopoly profits; Hobson a purely ethical view of the situation.

Edwin Cannan

The veteran economist mentions Marx rarely and seems to have hit on only one objection. Labor a homogeneous mass? he inquires haughtily. What! An hour of labor spent in discovering radium, in hop-picking, or in muddling a business, are all equal in value?

It is not too much to ask that even veteran economists read at least two pages running of an author they criticize. For Marx replies to the question raised, completely, at least as far as his theory is concerned, within the first few pages of Capital. Cannan could have found out that the words average socially necessary and simple, homogeneous, conditioned the notion of labor-time. Instead he reiterates in quite a number of places his meaningless objections.

Henry Clay

The economist whose textbook is the most widely circulated in the British Empire and who is, I believe, consultant to the Bank of England, puts in a wand-waving critique of Marxism so far below that of Lindsay and of Joseph that one wonders if it could have been written in the same country. If his ideas for the Bank of England are as competent as those on Marxism the “old lady,” as the bank is called, is in for a really bad time.

Clay says that Marx defines labor by duration and that he accounts any labor as unskilled average labor, as simple abstract labor. Why, then, says Clay, do we credit an hour’s work of a cotton weaver to be two and a half times that of a farm laborer?

The question here is answered as was the celebrated one of King Charles II: “Why does a dead herring weigh more than a live one?” The answer is, “It doesn’t.”

The wages of agricultural labor in Norfolk, England, in 1937 were about 70 per cent of that of weavers in Lancashire, in the same country, and the difference is explained by subsistence, that is, by differences of cottage rents, and the right to do a bit of truck farming on one’s own account, thus making potatoes and vegetables cheaper. More than that, unemployment, by reason of crises, was more of a factor in the cotton industry. When one compares this kind of flippant argument with the careful American wages studies of Paul H. Douglas, the superiority of science over café wit becomes apparent.

Clay then brings out the old war-horse that the way in which we proportion socially necessary labor to value is in the market and the rate at which it exchanges is its value, so that value depends on value (see the much more refined objection of Joseph).

But Clay’s greatest offering is that the difference between the utility of a tub and a teapot is greater than that between a carpenter’s and a potter’s work, hence that utility is at least as good a basis as labor-hours. When it is recalled that Marx agreed in his first few pages that (a) all utilities are so different as to be incommensurable, and (b) concrete labor was as different as the utilities it produced, and that for these two reasons we look for another source of value, we must put the distinguished economist of the Bank of England at the bottom of the class.

Sidney and Beatrice Webb

It is a pleasure to turn to the two veteran Fabians, whose critiques are never made without a thorough knowledge of their subject. In their remarkable History of Trade Unionism the Webbs indirectly counter Marxian ideas as a socialist basis.

They reject the notion that labor is the sole creator of value. They justify this by the notion that economic “rent” is the foundation of a collective economy. Here they are the English equivalents of Rodbertus,⁸ except that they do not accept his theory of the primacy of labor. For them the differential rent of land, above the worst soil, is a pure appropriation. This notion is the reverse of Marx’s, who holds that pure appropriation (absolute rent of land) is what can be commanded by the worst soil.

The Webbs continue. A worker uses “marginal tools,” that is, the minimum barely required to make his subsistence, hence the reward of the use of any tools above that reward is interest, a differential rent for superior productivity. This inheres unjustly to the capitalist. The rent of ability is the third rent (derived from Alfred Marshall’s Principles of Economics).

In their Problems of Modern Industry (1898) the Webbs state that wages must be retained under State Socialism. Socialism must be a philosophy not for the working class but for the community. Socialism is gaining everywhere, more municipal and government functions occur, so does regulation. A larger part of income inheres to the state.

The class struggle does not explain this evolution; it is social and takes place in a steadily gaining tendency under capitalism. Hence democratic, peaceful gradualism is the path of economic development, and not the convulsive class struggles pictured by Marxian theory.

The Webbs, and their disciple, Bernard Shaw, as well as John A. Hobson and other Fabians and reformists, thus are based on Ricardo’s theory of differential rent and Marshall’s ideas of quasi-rents. Unfortunately both Alfred Marshall and F. Y. Edgeworth, the leaders of the Cambridge school, have vigorously attacked the mathematics of Hobson and the Fabians. Hobson’s hypothesis that crises are determined by savings being put into means of production instead of into means of consumption is pretty much the motor of the Fabian theory.

The difficulty here is in the theory of interest. For an answer to the simple idea of the Webbs, the review of all productivity theories of interest in Böhm-Bawerk’s Capital and Interest is recommended. With that rebuttal, the Webbs and Hobson go out, and with their theory of productive differentials goes their hope of analyzing political economy outside of class relationship in the production process.

John Strachey

Strachey is a Marxist. His Theory and Practise of Socialism and his Nature of Capitalist Crisis are the most widely read Marxian studies in the British Empire, and perhaps in the United States. Not that he has escaped charges of heterodoxy from the more rigid Marxists; he has had his share of adverse criticism from their experts. But he believes himself to be a rigorous Marxian, and so his studies present a serious interest, as non-German or Russian pure theory, is rather rare.

Strachey’s Review

He begins by regretting that there is no Marxian survey of bourgeois economics as a totality. Since the Theorien über der Mehrwert, which dissected the body of economic doctrine until Marx’s time, no complete survey is available, except perhaps Dobb’s Introduction to Economics.

(a) Fortunately the Austrian theory of a schedule of wants is not much held today. (It certainly is, in America. Strachey must be speaking of England.) It is argued by critics that Marxism is not significant, for in the Marxian theory it is only labor that is well-directed, that turns out values, and even that value does not enable us to forecast prices. But the character of labor, whether useful or not, is determined by price. Falling prices warn us that we have all the wheat, say, that is required, and that labor-time should be devoted to something else.

(b) You sell labor (dead, or completed, labor) when you sell a commodity, but you sell labor-power for potential transformation into a commodity to be made to sell. Capitalists, therefore, are persons that sell dead labor, workers persons that sell living labor-power. But a worker too can sell labor, if he is a self-employer, as a baker selling the bread he makes. It is class relations that makes the distinction of labor and labor-power a significant distinction instead of a verbal difference.

(c) As to the widespread “technocratic” notion that automatic machinery and the “selective eye” of the photo-electric cell have superseded labor, the fact remains that this no more changes the problem than did the invention of the steam engine as against the horse. For until machines build themselves and make their own raw materials and reproduce themselves, the relation of labor to production remains unchanged. They would also have to transport themselves and thus complete their supersession of labor. These Aladdin’s-lamp concepts have no place in economic science.

Marx predicted torrents of wealth, once man was liberated from the restrictions on production caused by class division of society and the consequent limitation of investment to profits and of wages by exploitation. Yet today the “social credit” critics have the “crust” to say that Marxian analysis was valid only for an epoch of scarcity, and that today, for an economy of abundance, only changes in credit structure are required. What Marx really holds is that wealth is constantly increasing but value for each unit is being steadily cut down.⁹

(d) Lindsay, Hook, and Postgate, three critics of Marx, are assailed by Strachey. Lindsay asks that Marxism should forecast price for any given commodity on the basis of the actual labor-time put into it; Hook opposes the labor theory of value because it is not an instrument of predictions that other theories cannot do as well; and Postgate regards the price-of-production concept as a departure. Postgate is the opposite of most critics of the concept: they oppose it because it is true but contradicts what they think is the explanation of value in Volume I. As to Lindsay, he does not understand the function of the value theory in Volume I; value is true for the social mass of commodities, and price alone is relevant for any trade. As to Hook’s objections, look at the record! Marx by the use of his instrument predicted the composition of capital, concentration, centralization, nature of crises, etc., and what on earth did all the classical economists from Jevons down to Taussig ever predict that was worth anything, on the basis of their science? The value concept of Marx alone forecasts.¹⁰

(e) Strachey seeks to solve the old question: If a capitalist makes a surplus-value without reference to the labor he employs, how does each capitalist contribute and yet survive? For example, a man who employs 1,000 workers might make less than one who employs 100, provided total capital investment were less. Exactly how does he contribute in the price process to the pool of surplus-value? Strachey argues that the question of value and therefore of surplus-value applies only to sum totals. Strachey agrees with Böhm-Bawerk that for specific goods, supply and demand is needed. Marx was interested in the motion of the system as a historic whole; the bourgeoisie and their professors in specific acts of exchange. This theory of Strachey approaches close to the concordance concepts of Emil Lederer and Tugan-Baranowski.

(f) It was the everlasting tendency of capital to produce less profits that produced capitalist successes. Driven by this frantic demon, which had to be exorcised, the capitalist multiplied inventions and increased constant capital and so built up our gigantic apparatus. This primitive drive has served its purpose; this is now over. The counteracting tendency is to exploit each laborer far more intensively; production per man-hour has risen steeply in America in the last two decades and very much in all other countries.¹¹

(g) The theory of crises is specially illustrated. Wages are so low relatively during a boom that they cause a glut and so high absolutely that they diminish accumulation. Capital must produce more than a given amount of value per dollar of invested capital, as otherwise the capitalist’s share will also be reduced.

(h) The value of constant capital does not increase as much as its volume. That is a capitalist advantage. Another is that imports, by reducing the cost of means of subsistence, increase profits. But above all, capitalists try to sink wages below value (as in Germany) and take in profits from foreign investments to make up for strain at home.

(i) Strachey has a population theory: soon there will be no new labor to exploit because of the collapse of the birth rate, therefore capital must seek to tap ever-new sources of exploitable labor abroad.

(j) Another method of restoring capitalist relations is to write down constant capital. The greatest writedown of constant capital in the annals of man took place in the 90 per cent fall in share values in the United States from 1929 to 1932. It was the swiftest reduction in value of constant capital ever known. Capitalist profit rate is then renewed on a lower basis and worked on lower wages. This is a reiteration of the barroom wisdom of 1930 that when a nickel again looked like a cartwheel men would get the sniff of money in their nostrils and race like thoroughbreds for a small profit.

(k) Another peculiarity of the present epoch is that it actually pays capitalists to refrain from accumulation. Strachey further holds that during the 1923 boom variable capital fell greatly with reference to constant capital, but that the rate of surplus-value did not increase enough to compensate investment of constant capital, owing to higher real wages.

(l) Strachey considers 1914 as the watershed of capitalist history. If the rate of development from 1860 to 1913 had continued, then in 1933 the wealth of the world would have been twice what it was. The general crisis of capitalism has begun. That crisis was not due to the war, for the war was a function of the general crisis, as Fascism is today. Here Strachey sets himself squarely with the analyses of Stalin and Dimitroff.

(m) He is pungent and just on social credit. They talk of the lack of buying power (that is, Major Douglas and his followers, the Social Credit school) for consumers’ goods, but more than 91 per cent of production is concerned with producers’ goods. As a matter of fact, Strachey says rightly, Marx anticipated the whole “social credit” thinking and refuted it in Volume II, p. 457 of Capital, in analyzing J. B. Say’s theory of copious goods.

(n) Strachey also counters the notion of J. A. Hobson that savings push down the price of consumers’ goods below the cost of production. Hobson argues that only a steady, controlled, compensatory inflation can remedy this. Strachey agrees that Hobson would be right if he spoke of hoarding, but not with regard to investment, whose one object is to lower costs. As to the compensated price theory, such as that maintained by Irving Fisher, as a panacea, Strachey rightly calls attention to the fact that the price level of commodities was rarely more stable than from 1923 to 1929 during the greatest speculative orgy in decades.

(o) As to the special income of the professional classes, these are a function of profits. A distinguished specialist gets 500 guineas ($2,500) for an operation only when there are profits to pay him out of. In a depression the rich tell him to whistle for their lost appendix.

Comment on Strachey

It is hard to place Strachey’s contributions in the arcana of Marxian science. If the author may be permitted a personal appraisal, they rank as quite unsatisfactory, despite a native talent for pedagogy and popularization and great flashes of insight and a high sincerity and intelligence. But there are doubts that come with nearly every proposition.

(a) For example, he states that for specific goods he agrees with Böhm-Bawerk that supply and demand govern, but not for the social total of value. But how is this possible? The sum total of prices, however arrived at, must coincide with the sum total of values, given a money expression as the universal equivalent. Values, says Marx, are manifested in the useful body of other commodities than the one offered. Money is a universal expression of the general equivalent. The sum total of value is realized in a general equivalent; that is, its sum total manifestation. The meaningless subjective theory of Böhm-Bawerk explains nothing, for it has no referent.

By ignoring the compensatory relation in prices, that make their total congruent with total value; by ignoring the fact that in the last instance value is the regulator, that hours of labor are the efficient cause of changes of investment, Strachey allows of a concordance without purpose. It is a disastrous theoretical concession.

If he means to say that the apparent reason for the deviation of the price of any given commodity from its aliquot part of total value, takes on the form of haggling in the market, then he is right, but that is not what Böhm-Bawerk says. The form by which value is discovered as a total is the haggling around every price as a unit, but there is a law that governs that haggling, and that is the Marxian law of reality behind phenomenal appearance.

(b) His gratuitous statement that the drive of the tendential rate of profit is now over, is unprovable, and theoretically inadmissible. It is identical with the theory of Trotsky, an economist whose politics are anathema to Strachey. Lenin distinctly held that during the most degenerate phase of capitalism you might have gains in production, even as a total, and that the catastrophe prophets were baying at the moon. What Lenin did say was that this gain would be much smaller than before, tend to get less, and that it would be based on more uneven developments; some countries going ahead, others falling back, and that the reason for this uneven development would be in new factors, to some extent superimposed on the older factors, such as Fascism, adventurism, devaluation, dumping, quotas, subsidies, etc. This wooden theory may lead Strachey into curious by-paths, which he obviously wishes to avoid.

(c) As to his statement that a reduction of value produced per capital invested would also injure the capitalist, this can have objective meaning only because the minimum means of subsistence needs of the workers are irreducible. Otherwise the capitalist could have an “out.”

(d) That imports are a means of increasing profits by lowering food costs is really much too unilateral and is against experience. We are in an age of imperialism, when the need to retain income from abroad and to compete in a military sense are as important as other aspects of capitalism.

With the tendency to agricultural protectionism initiated by Bismarck in Germany and Méline in France; with the development of autarchy and quotas for food, with the destruction of cheap coffee and beef in the tropics so as to support “values,” it is clear that great limitations have to be set on the mechanical idea that “reducing means of subsistence by food imports,” and hence reducing wages, is a directive move of capitalism. Here as at dozens of points in his Marxian study, one gets the impression that Strachey is a prize scholar, who has learned the answers seriatim, and is not a creative interpreter of Marxism, in a total and changing setting.

(e) His theory of population is altogether un-Marxian. For it is a simple fact that the birth rate has been declining ever since the 1880’s, and the fewer babies we have the more people are permanently out of a job. The industrial reserve army was small when Marx predicted its dread future: as the perambulators became empty the breadlines increased.

Finally, when ten million young men were slaughtered, and thirty million crippled, and the influenza carried off between 1 and 2 per cent of the human race, the general crisis of capitalism has produced an unemployment problem never seen before and one reducible only by charity or slavery, in “labor camps” or the army, or by some species of “dole.”

The destruction of labor-power has not led to a need for exploiting all the labor at home and the drive toward exploiting labor abroad needs no birth rate studies of this type.

Marx’s law of population marks his, theoretical superiority even to a Charles Darwin and a Karl Pearson, and Strachey ought to understand it better than he does. It is the core of Marx’s analysis of the class struggle over wages.

(f) As to the writedown of share values being the greatest writedown of constant capital, etc., one is a bit taken aback. The value of constant capital is its cost of reproduction in labor-time and there was no such decline in that respect as the share capital revealed. The price of shares is their anticipated possibility of cashing in surplus-value in the future. That is different from the value of constant capital. It has an analogy with it: it is interpenetrated with it, but it is not it. Identity is not conformity.

That the capitalist finds it more profitable to refrain from accumulation, presumably means that he hoards. For any other meaning would be so anti-Marxian that it cannot be believed Strachey holds it. He probably means that the capitalist would like to produce at a profit, but will not do so at a loss. Well, this is no more a feature of present crises than of that of 1837.

(g) As to the statement that the ratio of constant capital to variable rose in 1923-1929 (it seems to have been an investment boom) but that the surplus-value rate did not rise, because real wages rose, this seems paradoxical. Also that wages rise too slowly, relatively, during a boom, so that there is a glut, and yet too high absolutely, so that there is a diminished accumulation—this is strange theory.

The rate of surplus-value is certainly calculated otherwise by Varga in his Economics of Stabilization.

The divorce between glut and accumulation has no precedent in the Marxist analysis of crises. Strachey means something else: what he says is not faithful to his real thinking. It is rather a pity, for in some of his recent coquetting with purchasing-power expedients, his theoretical shortcomings have led him into greater deviations from a complete formulation. The critique of Marxian theory, as attempted by the Austrians, for example, is entirely in order, or even that of the revisionists, but the acceptance of its external doctrines in the Stracheyite form may lead to a reduction of the level of discussion itself.

Footnotes

1. Labor Theory of Value in Karl Marx.

2. Karl Marx’s Capital.

3. Marx does say this.

4. We pass by the pertinent fact that inventors as a class work within a certain technical and cultural setting which is social.

5. New York, 1934.

6. Political Economy and Capitalism (New York, 1939).

7. This appears to contradict Marx, but Miss Boderup would probably explain that the rate of profit limits interest rates but does not determine rates up to that limit.

8. See chapter on Sources of Marxian Economic Theory.

9. The opposite rebuke to Marxians is made by Werner Sombart. He holds that the great increase of production in the nineteenth century is a swindle; that it relies on foolish societies stripping the coal mines and oil wells, etc., secreted for geological epochs, and utilizing them by squandering the heritage of æons in a few hundred years. Socialism lies—there can be no permanent increase in welfare. Rather we are likely to become so poor as to revert to a new barbarism when, like wicked children, we will have eaten up all the jam in the pantry and discover we were not so clever after all, and we would have been better off without technicians.

10. Some bourgeois economists would accept the challenge of forecasting. For example, see H. L. Moore’s ambitious mathematical effort to forecast the yield and price of cotton (New York, 1916).

11. In a formal sense (without Marx’s analysis), John Stuart Mill considered the tendency of profits to fall to a minimum as the basic law of capitalist economics (1847).

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