Marx The Economist

3. In doing so he not only displayed much keener perception of the nature of the problem involved, but he also improved the conceptual apparatus he received. For instance, he replaced to good purpose Ricardo’s distinction between fixed and circulating capital by the distinction between constant and variable (wage) capital, and Ricardo’s rudimentary notions about duration of the processes of production by the much more rigorous concept of “organic structure of capital” which turns on the relation between constant and variable capital. He also made many other contributions to the theory of capital.

We will however confine ourselves now to his explanation of the net return to capital, his Theory of Exploitation.

The masses have not always felt themselves to be frustrated and exploited. But the intellectuals that formulated their views for them have always told them that they were, without necessarily meaning by it anything precise. Marx could not have done without the phrase even if he had wanted to. His merit and achievement were that he perceived the weakness of the various arguments by which the tutors of the mass mind before him had tried to show how exploitation came about and which even today supply the stock in trade of the ordinary radical. None of the usual slogans about bargaining power and cheating satisfied him. What he wanted to prove was that exploitation did not arise from individual situations occasionally and accidentally; but that it resulted from the very logic of the capitalist system, unavoidably and quite independently of any individual intention.

This is how he did it. The brain, muscles and nerves of a laborer constitute, as it were, a fund or stock of potential labor (Arbeitskraft, usually translated not very satisfactorily by labor power). This fund or stock Marx looks upon as a sort of substance that exists in a definite quantity and in capitalist society is a commodity like any other. We may clarify the thought for ourselves by thinking of the case of slavery: Marx’s idea is that there is no essential difference, though there are many secondary ones, between the wage contract and the purchase of a slave—what the employer of “free” labor buys is not indeed, as in the case of slavery, the laborers themselves but a definite quota of the sum total of their potential labor. Now since labor in that sense (not the labor service or the actual man- hour) is a commodity the law of value must apply to it. That is to say, it must in equilibrium and perfect competition fetch a wage proportional to the number of labor hours that entered into its “production.” But what number of labor hours enters into the “production” of the stock of potential labor that is stored up within a workman’s skin? Well, the number of labor hours it took and takes to rear, feed, clothe and house the laborer. 5 This constitutes the value of that stock, and if he sells parts of it—expressed in days or weeks or years—he will receive wages that correspond to the labor value of these 5 That is, barring the distinction between “labor power” and labor, the solution which S.Bailey (A Critical Discourse on the Nature, Measure and Causes of Value, 1825) by anticipation voted absurd, as Marx himself did not fail to notice (Das Kapital, vol. i, ch. xix). Marx the Economist 27 parts, just as a slave trader selling a slave would in equilibrium receive a price proportional to the total number of those labor hours. It should be observed once more that Marx thus keeps carefully clear of all those popular slogans which in one form or another hold that in the capitalist labor market the workman is robbed or cheated or that, in his lamentable weakness, he is simply compelled to accept any terms imposed. The thing is not as simple as this: he gets the full value of his labor potential. But once the “capitalists” have acquired that stock of potential services they are in a position to make the laborer work more hours—render more actual services—than it takes to produce that stock or potential stock. They can exact, in this sense, more actual hours of labor than they have paid for. Since the resulting products also sell at a price proportional to the man-hours that enter into their production, there is a difference between the two values—arising from nothing but the modus operandi of the Marxian law of values—which necessarily and by virtue of the mechanism of capitalist markets goes to the capitalist. This is the Surplus Value (Mehrwert). 6 By appropriating it the capitalist “exploits” labor, though he pays to the laborers not less than the full value of their labor potential and receives from consumers not more than the full value of the products he sells. Again it should be observed that there is no appeal to such things as unfair pricing, restriction of production or cheating in the markets for the products. Marx did of course not mean to deny the existence of such practices. But he saw them in their true perspective and hence never based any fundamental conclusions upon them. Let us admire, in passing, the pedagogics of it: however special and removed from its ordinary sense the meaning might be which the word Exploitation now acquires, however doubtful the support which it derives from the Natural Law and the philosophies of the schoolmen and the writers of the Enlightenment, it is received into the pale of scientific argument after all and thus serves the purpose of comforting the disciple marching on to fight his battles. As regards the merits of this scientific argument we must carefully distinguish two aspects of it, one of which has been persistently neglected by critics. At the ordinary level of the theory of a stationary economic process it is easy to show that under Marx’s own assumptions the doctrine of surplus value is untenable. The labor theory of value, even if we could grant it to be valid for every other commodity, can never be applied to the commodity labor, for this would imply that workmen, like machines, are being produced according to rational cost calculations. Since they are not, there is no warrant for assuming that the value of labor power will be proportional to the man-hours that enter into its “production.” Logically

Marx would have improved his position had he accepted Lassalle’s Iron Law of Wages or simply argued on Malthusian lines as Ricardo did. But since he very wisely refused to do that, his theory of exploitation loses one of its essential props from the start. 7 Moreover, it can be shown that perfectly competitive equilibrium cannot exist in a situation in which all capitalist-employers make exploitation gains. For in this case they would individually try to expand production, and the mass effect of this would unavoidably tend to increase wage rates and to reduce gains of that kind to zero. It would no doubt be possible to mend the case somewhat by appealing to the theory of imperfect competition, by introducing friction and institutional inhibitions of the working of competition, by stressing all the possibilities of hitches in the sphere of money and credit and so on. Only a moderate case could be made out in this manner, however, one that Marx would have heartily despised.

But there is another aspect of the matter. We need only look at Marx’s analytic aim in order to realize that he need not have accepted battle on the ground on which it is so easy to beat him. This is so easy only as long as we see in the theory of surplus value nothing but a proposition about stationary economic processes in perfect equilibrium. Since what he aimed at analyzing was not a state of equilibrium which according to him capitalist society can never attain, but on the contrary a process of incessant change in the economic structure, criticism along the above lines is not completely decisive. Surplus values may be impossible in perfect equilibrium but can be ever present because that equilibrium is never allowed to establish itself. They may always tend to vanish and yet be always there because they are constantly recreated. This defense will not rescue the labor theory of value, particularly as applied to the commodity labor itself, or the argument about exploitation as it stands. But it will enable us to put a more favorable interpretation on the result, although a satisfactory theory of those surpluses will strip them of the specifically Marxian connotation. This aspect proves to be of considerable importance. It throws a new light also on other parts of Marx’s apparatus of economic analysis and goes far toward explaining why that apparatus was not more fatally damaged by the successful criticisms directed against its very fundaments.