The Value of Labor Theory: “Our friend, Moneybags, should be so lucky …”

by Jehu

In part I of this series, I explained how the events of 1971 — the collapse of Bretton Woods — had its roots in a process Marx first fully described in Capital: the ever increasing separation of the useful qualities of the commodity from its value, i.e., the socially necessary labor time, required for its production. In this separation, for the first time the labor time required to produce the commodity takes a form that is independent of the useful qualities of the commodity.

banqueroThis fact has significance for us because unless Marx established in the opening chapter of Capital that these two characteristics of the commodity take on forms that are independent of one another, he could not show that Keynes’ so-called “technological unemployment” was an inevitable result of capitalist commodity production. In other words, Marx intended to show that absolute overaccumulation — in the form of an excess mass of capital and an excess population of workers — had to develop, leading to the complete breakdown in production on the basis of exchange value that he predicted in the Grundrisse.

The first step in the proof was to show how the emergence of production on the basis of exchange value itself created the possibility for this breakdown; but this is just the first step: As Paulani shows, the emergence of money carries with it the progressive separation and growing antagonism between the commodity as a useful object and the labor time required to produce it as expressed in so many units of a money.

This leads to what Paulani calls the second and third movements of money.

In the second movement money, which is arises from the role money plays as measure of value, money’s relation to its substance — the physical material of the commodity serving as money — becomes increasingly tenuous. This occurs, says Paulani, because the role money plays as measure of value — i.e., as measure of the socially necessary labor time embodied in a specific commodity in a transaction — conflicts with its role as the standard of prices generally:

“the need for money to appear as a standard for the monetary expression of the commodities’ value reveals itself as something far more complex, making what is required from money as [standard] of prices oppose what is required from money as measure of value. This appears in two moments in chapter 3 of Capital. In the first, Marx argues that as a measure of value, gold only fulfils its function because, as a product of labour, it is a potentially variable value, therefore not stable, whereas to function as standard of prices ‘the stability of the measurement is of decisive importance’ (Marx, 1990 [1867], p 192).”

The contradiction identified here means money appears in circulation as a mere token of itself and can, in practice, actually be replaced by a valueless paper token. Marx is making the argument that the needs arising from the circulation of commodities within society, leads to the appearance of money — initially simply the expression of the value of commodities — not only in a form independent of the commodities, but also in a form that is independent of physical material of the commodity that serves as money.

Further into her argument, Paulani revisits what she calls the third movement of money in which the circulation of money becomes more or less detached from the circulation of commodities and establishes its own movement as credit money, i.e., as means of payment. To show why this occurs, she quotes Marx, who explained how credit money and hoards of commodity money temporally separates the circulation of commodities from the circulation of money:

“The means of payment enters the circulation, but only after the commodity has already left it. The money no longer mediates the process. It brings it to an end by emerging independently, as the absolute form of existence of exchange-value, in other words, the universal commodity. (Marx, 1990/1867, p 234, emphasis added)”

The result of this long process of development of social production through exchange is that what is originally only the expression of the socially necessary labor time required for production of a use value — money — in time develops only the most tenuous connection to the physical material that originally gave the value of commodities an independent form.

Wherein Paulani assumes she has a can-opener.

I think the best case Paulani can make with this line of argument is that in simple commodity production exchange value was always messy and subject to failure from any number of purely accidental causes. Over time the relation between the use value of a commodity and its exchange value could get fairly tenuous — as in the case of honor, land and that sort of stuff Marx refers to in chapters 1-3. Ultimately, however, no matter how tenuous the relation use value and value, money (itself an object containing both use value and value) kept this relationship intact.

However, Paulani wishes to carry this argument beyond this limit and runs into a necessary theoretical obstacle: How can she conceptually reduce all commodity production to capitalist commodity production — as she does in her paper?

“One may ask why we are going to pass directly to the movements concerning capital circulation without first building a movement that would describe the transition from the circuit C-M-C to the circuit M-C-M’, that is, the passage of money to capital.”

Her answer is that Marx did it first.

“This question is analogous to the question of whether the last two sections of chapter 3 of Capital continue to speak of simple circulation or already inexorably refer to capitalism with its developed system of credit and payments. What happens is that it is impossible to think the money fully constituted apart from the capitalist system for it is only there that its third determination has a practical existence. The description of the third movement is, in this sense, also the description of the necessary transformation of money into capital and, as such, the description of the opening that the existence of capital produces for autonomization movements that are not registered in the object money, but in its position as potential capital.”

What utter bullshit: Essentially Paulani argues, in direct contradiction to Marx’s own argument in Capital, that somehow the contradiction between use value and value implicit within commodity money could, of itself, go beyond the bounds of money:

“If we consider the second and third movements together,  it’s easy to see that the conditions are given for money to become free from the intrinsic value that commodity money bears  and assume the form of inconvertible money”.

What Paulani should have said is what Marx said: that money as pure abstraction — as the most abstract embodiment of the socially necessary labor time of society and, therefore, of wealth in its social form — exists only as potential within simple commodity circulation: a commodity produced for the market may not find a buyer, a debt incurred may not be paid, or the state may counterfeit the national currency. As commodity production spreads and becomes more sophisticated, any number of points emerge where circulation can break down as a result of accidental causes. The point of the exercise, however, is to figure out how these accidental causes become inevitable, leading to 1971 and breakdown. Since Paulani knows she hasn’t done this, she asks us to assume that Marx is already talking about capitalist commodity production in chapter 3.

In fact capitalist commodity production is not at all simple commodity production because commodity production is the production of value, while capitalist commodity production is the production of surplus value. As Paulani knows very well, in simple commodity production, Marx defines the value or socially necessary labor time of a commodity by the notation, “v”; however, he defines the value or socially necessary labor time of a capitalistically produced commodity by the notation, “v+s”.

It may be true that “v” appears in both modes of production as some portion of the value of commodities,  but the additional quantity of value “s” is what is historically specific to capitalistic commodity production. There is, in labor theory, no natural transition from simple commodity exchange to capitalistic commodity exchange and, therefore, no natural transition from money to money-capital.

The problem posed for Marx’s analysis in Capital was to explain how the labor power of society itself — the source of value — came to be a commodity:

“The change of value that occurs in the case of money intended to be converted into capital, cannot take place in the money itself, since in its function of means of purchase and of payment, it does no more than realise the price of the commodity it buys or pays for; and, as hard cash, it is value petrified, never varying. Just as little can it originate in the second act of circulation, the re-sale of the commodity, which does no more than transform the article from its bodily form back again into its money-form. The change must, therefore, take place in the commodity bought by the first act, M-C, but not in its value, for equivalents are exchanged, and the commodity is paid for at its full value. We are, therefore, forced to the conclusion that the change originates in the use-value, as such, of the commodity, i.e., in its consumption. In order to be able to extract value from the consumption of a commodity, our friend, Moneybags, must be so lucky as to find, within the sphere of circulation, in the market, a commodity, whose use-value possesses the peculiar property of being a source of value, whose actual consumption, therefore, is itself an embodiment of labour, and, consequently, a creation of value. The possessor of money does find on the market such a special commodity in capacity for labour or labour-power.”

And this, Marx took pains to explain, is not a natural occurrence:

“The historical conditions of [labor power’s] existence are by no means given with the mere circulation of money and commodities. It can spring into life, only when the owner of the means of production and subsistence meets in the market with the free labourer selling his labour-power. And this one historical condition comprises a world’s history. Capital, therefore, announces from its first appearance a new epoch in the process of social production.”

Paulani wants to treat this problem as merely a philosophical one of a ‘dialectical movement’, but in reality it was rather bloody. If Paulani had thought this through, then, picking up on Chris Arthur, she would have noted that wealth does not appear in its most abstract form until labor appears in its most abstract form: i.e., when the labor power that alone produces value appears itself as a commodity for sale on the market. Money as capital is money divorced from any useful aim but the creation of additional value.

In looking at this from Paulani’s viewpoint — as a movement of value (the socially necessary labor time of society) away from use value — it has to be admitted this movement is nothing more than labor time expended solely for the purpose of increasing the total labor time of the producers. Paulani wants to make the argument that this result is already given in the money form, when, as Marx directly argued, it actually comprises a world history. The appearance of labor power on the scene as a commodity in its own right is not given in simple commodity circulation, but announces the impending collapse of simple commodity production and its replacement by directly social labor.

Thus, only on the basis of the premises of capitalistic commodity production can we explain the collapse of Bretton Woods agreement and the emergence of the dollar as world money.

To be continued