A new labor theory of value? Not to be found in Marx’s work

30 April, 2021

«Detroit», by Diego de Rivera

It is common to ascribe a labor theory of value to Das Kapital. But this is incorrect. In fact the opposite is the case. And the difference matters, and very much so, for understanding what capitalism really is and how to fight against it under today’s conditions.

In this article

What is the labor theory of value

Adam Smith, father of classical British economic theory and exponent of the labor theory of value.
Adam Smith, father of classical British economic theory and exponent of the labor theory of value.

The labor theory of value is a theory of British classical economists aimed at explaining the nature of value. According to it the value of a commodity is a measure of the labor that it contains or embodies.

The critique of the theory of value is not an alternative labor theory of value

First edition of "Das Kapital" with handwritten dedication from Marx to Eccarius.
First edition of “Das Kapital” with handwritten dedication from Marx to Eccarius.

Das Kapital is subtitled A Critique of Political Economy, which put in today’s terms would be rather: a demolition of economic theory. To execute that demolition, that is, to reveal the ideological character of economic science and, in the process, to discover what the capitalist economic system really consists of, Marx starts by dismantling the theory of value then common to the economists of the time.

The labor theory of value of the classical economists (Smith, Ricardo, etc.) is pure metaphysics. Marx tackles it, with tons of irony and references to the Aristotelian origin of the theory, against the idea that human labor adds value by a sort of magic, as if value were composed of particles or a substance detached from the body of the worker and permeating the produced object (as some of the great English economists went so far as to enunciate).

Marx does not take the value category for granted. On the contrary, he refutes its objective material existence. Value does not exist as a natural property of objects, such as their temperature or their volume. It is a mere social creation, a concept created to cover up capitalist social relations, a set of relations which do not exist to produce value but to exploit and direct wage labor.

In other words, he is interested not in what value is, but in what economists call value. It is abundantly clear to him that value is only a screen, an ideological concept used to cover up exploitation. That is why Marx does not construct an alternative theory of value, just as Darwin did not construct an alternative theory of the Garden of Eden.

The scheme used to demolish the labor theory of value is not intended as a substitute for the analysis of capital accumulation

Marx did not work out an alternative labor theory of value, but rather the demolition of the concept of value
Marx did not work out an alternative labor theory of value, but rather the demolition of the concept of value

To discover what lies beneath what economists call value, Marx needs to examine step by step the whole set of capitalist relations starting from their foundation. But he holds the dialectic at the basis of his critique, so he does not do so by aggregating parts, but by starting from a global aggregate representation. For ease of analysis he reduces all capital to a single capitalist with a single application for that capital – a firm – and a single group of workers.

And there becomes clear what is that thing economists cloak under the term value: the product of exploited labor.

Obviously Marx realizes that this outline is… merely an outline, useful for unveiling the true meaning of value whose efficient maximization would be the greatest virtue of capitalism according to both past and present economists. He is well aware that this is not a total description of capitalism as a system.

In fact he is very clear on the idea that such a scheme leaves two fundamental parts out: the extra-capitalist markets – without which the system would go into decadence from its very first minute because by definition the purchasing power of wages will always be less than the value of the total produced – and the capital markets (and therefore the theory of competition), without which the essential dynamics of the system cannot be understood: the accumulation of capital.

The first question he will begin to address in the materials recovered and edited after his death as the third book of Das Kapital and will not be fully developed as part of Marxist critique until the publication of Rosa Luxemburg’s The Accumulation of Capital. For the latter, Marx would produce a long and lengthy book of notes – published post-humously as Theories of Surplus Value – which he intended to incorporate into future books of Das Kapital which he never got around to write because of his early death.

But what does this have to do with the Labor Theory of Value?

Surplus value = profit or the recycling into ideology of the critique of value

However, the vulgar Marxism taught by the state in its institutions and made its own by quite a few people calling themselves Marxists, takes Marx’s explanatory outline intended to demolish the labor theory of value and turns it into an alternative labor theory of value, basically turning it back into ideology.

To do this juggling act it must pretend that the synthetic model, which for pedagogical reasons reduces capitalism to a single enterprise, a single group of workers and a single capitalist, is… a description of what goes on in each factory or enterprise.

The absurdity jumps out because by asserting that surplus value is produced in a single enterprise, they equate surplus value with profit, something Marx vigorously rejected and accused the Ricardians of doing. But that equation, which tends to be true in the global economy as a whole, is not and cannot be true country by country, sector by sector or company by company.

Why? Because it leaves out the capital market… which is in the end the central metabolism of accumulation, the moment in which the bourgeoisie appears as a class in the productive system.

What the capital market does, its function in the system, is to equalize -or tend to equalize- the rates of profit of the possible placements of capital (the enterprises). Equalizing them necessarily destroys the equivalence between the extracted surplus value and the profit obtained. In fact, as a general rule, Marx stresses, surplus-value will be different from profit.

Of course, to the vulgar Marxism taught by stalinists and trotsko-stalinists, falsifying the critique of the labor theory of value and attributing to Marx yet another contradiction is of no concern to them. But academic Marxism went further. It made of trying to square what cannot be squared away except in isolated cases, a veritable academic industry. Its product, fortunately now almost forgotten, was a whole infamous literature on the conversion of values into prices.

But is it really that important? Actually, yes. Turning the critique of the labor theory of value into an alternative labor theory of value is not just theoretical nonsense, it has political consequences.

The political consequences of falsifying the critique of the labor theory of value

Alcoa workers, Spain, demanding a reduction in energy prices for the company that is laying them off.
Alcoa workers, Spain, demanding a reduction in energy prices for the company that is laying them off.

As we have seen, turning the critique of value into an alternative labor theory of value leads to defining capitalism as a process which can take place in a single firm. The single enterprise-to-enterprise struggle, in isolation, would already be class struggle and not just a step towards it.

Not only is the struggle for particular conditions of the workers of a given company elevated beyond its real scope, which is already dangerous, to say the least. It is that the bourgeoisie, as such, as a body articulated through the capital market vanishes from the picture. And to top it off, in the current historical phase with its universalized state capitalism, this means that the state and its role are also left out of the frame and become invisible.

The result for the class’ understanding of possible and necessary forms of struggle is shattering. This is true for facing closures and layoffs for instance, but in general in situations where capital cannot give in without going into losses in a company, sector or region, it is fundamental to understand that struggle is only possible as a class, not as workers of a specific company or even of a sector. And that it is therefore fundamental to extend strikes and self-organize them by centralizing them in open assemblies.

From Nissan or Alcoa in Spain to Chubut and Neuquén in Argentina, situations like this happen year after year. And trade unions and the left keep leading the strikes towards sterility and defeat when not throwing themselves into the arms of the state or a group of investors in order to save the company.