The Value of Labor Theory: Money is a political weapon of one class over another
Here is a fact that is absolutely vital to your material standard of living and that of your children:
Money is political.
It is a political weapon employed by one class in society to subjugate the other class and force it to labor ceaselessly.
Yet, today, we have a bunch of useless labor theorists running around who approach money as if it is above classes. There are two classes in society and, therefore, two antagonistic and incompatible expressions of the socially necessary labor time of society. This cannot but give rise to two fundamentally incompatible money forms. The struggle in society over which money form will be established as the universal equivalent cannot be divorced from the struggle over what constitutes the socially necessary labor time of the working class.
Our labor theorists have shown that inconvertible fiat dollar serving in the role of money is the expression of the rule of capital over the world market, but these labor theorists have never once shown the implications of this money form for labor time itself.
Here is the thing: Money in the form of a state issued inconvertible fiat is no longer tied in any way to the materially necessary labor time required for production of commodities; it has lost the capacity to express the socially necessary labor time of society, to express the value of commodities as exchange value. This loss cannot be explained by money itself, nor does it constitute a “movement” of money in the sense Paulani employs this term. The only reason money could lose its capacity to express the values of commodities is that the prices of these commodities no longer reflect the socially necessary labor time required for their production.
This fact points to a problem with how labor theorists approach the category of money: Among some of these labor theorists money does not express the values of commodities — the socially necessary labor times required for their production — it gives commodities their values, or, as Chris Arthur argues, “only money makes value actual”:
“Marx shows that the universal aspect of commodities is secured only insofar as they posit it through their common relation to a universal equivalent, namely money. This money form does not represent the presupposed value of commodities, rather, it presents it to them as their universal moment. Money is not a re-presentation of something given in commodities, but the only way of making value present, i.e. being there concretely, rather than as some unreal abstraction. Once value is thus presented explicitly for itself (rather than a mere immanence) in money it posits the commodities as values in themselves, immanently.
The relationship of force and expression flips: instead of money passively expressing the activity of value-positing commodities, money becomes the power socially validating them as of worth. Thus if money does not have value, like other commodities, nevertheless it is value, the sole adequate existence of value, as we saw.”
In Arthur’s view, value does not actually exist until money imparts value to the commodity through an exchange; labor is always concrete particular labor until money makes it abstract labor. In Arthur’s view there is no distinction to be made between inconvertible fiat or gold, since both serve the function of rendering concrete particular labor into abstract labor.
It follows from this that Bernanke could walk to a Federal Reserve Bank computer terminal in 2008 and “actualize” the value of worthless AIG derivatives by creating dollars out of nothing and exchanging them for the worthless derivatives. While everyone else thought Bernanke was counterfeiting currency, Arthur shows why he was actually making the value of the unmarketable AIG derivatives “actual”.
I am, of course, being totally unfair to Arthur, who can probably explain why what Bernanke did differs from what Geithner did when the latter sold bonds and used the proceeds to bailed out GM. Perhaps the distinction to be made here may be that AIG is “fictitious capital”, while GM is “productive capital”. And. of course, once the currencies enter circulation, we all know the difference between the dollars used to bail out AIG and that used to bail out GM, right?
On the other hand, if both the value of the AIG derivatives and GM stock was zero, the money used to buy them out did not represent exchange value and is not money. In labor theory, money is exchange value — the expression of the value of a commodity — but in this case the “commodities” purchased with the counterfeit have no value to be expressed. Since the financial assets had no value in the first place, (and since, therefore, their exchange value is also zero), a piece of valueless paper scrip was the adequate money form.
But, in truth, isn’t my reasoning here suspect?
Saying the currency had no value because the commodities for which it is exchanged has no value is odd, because if the commodities have no value, how do we explain the persistence of money and money relations in society — no matter how valueless the currency serving as money is? The persistence of money and money relations — even in the form of a valueless piece of paper — suggests something else is at work.
“Wages have to be cut …”
If, on the one hand, a valueless scrip serving as money in the world market suggests commodities themselves have no value; on the other hand, the persistence of money and money relations suggest commodities continue to have value. So which is it?
The contradictory conclusions to be drawn from these above assumptions suggest we have to explain instead is why, although commodities continue to have value, the object serving as money must always express this value as zero. We must explain why the values of commodities are being actively suppressed in the world market — in other words, we have to explain why commodities must now always sell below their values.
The fact that commodities must now sell below their values suggest that, at present, the production of surplus value is no longer compatible with exchange of commodities at their values.
I cannot avoid the fact that this explanation appears to violate one of the most basic tenets of labor theory: In Capital, as I noted in the second part of this series, Marx assumes all commodities are sold at their values. Marx then goes on to explain how, on this basis, capital creates surplus value.
I think a lot of labor theorists mistake Marx’s argument here: Marx is simply showing that even when we assume commodities are sold at their values, surplus value is created by capital — which is to say, profit is not made by selling a commodity above its value nor by buying it below its value. However, what they miss is that this argument is made within a larger argument where Marx assert production on the basis of exchange value breaks down.
According to Marx, even if we begin with the assumption that commodities sell at their values, we end up with a collapse of production on the basis of exchange value; which means, ultimately commodities can no longer be sold at their values.
Marx’s conclusion is not based on the direct result of production on the basis of exchange value, but on the impact production for profit must have on production on the basis of exchange value — production for profit emerges from within production on the basis of exchange value, but inevitably destroys it. The result has nothing to do with the values of commodities, which we can assume is always realized; but with the use value of one commodity in particular: labor power.
In Capital, labor power is always bought at its value and the product of labor is always sold at its value; yet the sum value of the latter is always greater than the former. The value of labor power is symbolized by “v”, while the value of its product is symbolized by “v+s”. At some point in the development of the capitalist mode of production the assumption that labor power is sold at its value no longer holds true.
Now, nothing I am saying here is new: Labor theorists have known about this at least since Henryk Grossman reiterated why this must be true in a paper he wrote in 1929. There is no question that Marx was correct, since his prediction was expressed rather explosively in the Great Depression; and there has been no refutation of Grossman’s argument in the 80 years since he laid it out. After almost a century, not a single labor theorist has come forward with any credible proof refuting Grossman’s argument.
Grossman labeled the point where labor power had to be sold below its value as “capitalist breakdown”; but this name may be a semantical error: In the Grundrisse, Marx called it the breakdown of production on the basis of exchange value. In the paper, Grossman argues that due to the chronic overaccumulation of capital, the capitalists would begin to run into what, a year later, Keynes would call “technological unemployment”: too much capital and a population of unemployed workers:
“There is a growing shortage of surplus value and, under the given conditions, a continuous overaccumulation. the only alternative is to violate the conditions postulated. Wages have to be cut in order to push the rate of surplus value even higher. This cut in wages would not be a purely temporary phenomenon that vanishes once equilibrium is re-established; it will have to be continuous. After year 36 either wages have to be cut continually and periodically or a reserve army must come into being.”
Obviously the “violation of postulated conditions” Grossman speaks about here is the assumption that labor power is bought/sold at its value. Thus, although Marx initially makes the assumption that all commodities are bought and sold at their values, at a certain point in the development of production for profit this assumption would be violated because the ever increasing improvement in the productivity of labor would make it impossible for labor power to purchased at its value.
Once production for profit comes into direct conflict with production on the basis of exchange value and labor power must be sold below its value, what happens to exchange value and money? Exchange value in the form of a commodity money expresses (and can only express) the value of the commodity. If the commodity is sold below its value, the commodity money realized in a market transaction must be below the value of the commodity.
And when might the prices of commodities fall below their values? When there is a glut of commodities on the market, of course — a depression. The argument Marx was making in Capital is that capitalist production for profit inevitably produces a glut of commodities in the market, leading to a depression and the breakdown of production on the basis of exchange value.
There is nothing exceptional about this observation, it is so obvious as to not even be worthy of notice — every asshole simpleton economist will admit to the possibility of too many commodities being thrown on the market and, therefore, falling prices, or what some call deflation. What Marx also showed is that these were not simply ordinary commodities — they were capital in the form of commodities. Thus, the falling prices not only affected the prices of commodities as simple values, but also their prices as capitalist commodities: the collapse of production on the basis of exchange value also had implications for production for profit.
However the collapse of production on the basis of exchange value is not the same thing as the collapse of production for profit and the two should not be confused. While chronic overproduction meant commodities had to be sold below their values, a way needed to be found for this to be done at a profit — and this is the “genius” of Keynes: Keynes realized that the price of labor power was always denominated in some state issued currency. If the currency issued by the state could be severed from commodity money, the value it represented would then represent would be purely notional — it would become a numeraire having no value.
A debased currency — lacking any definite connection to a commodity — would, in other words, represent no value at all — not even symbolically. The values of commodities could be suppressed simply by severing the currency in which their prices were deniminated from commodity money.
Modern inconvertible fiat currency is just this sort of object; representing no value and expressing the values of all commodities as zero. The value of commodities expressed in dollars or euros is always zero — no matter the quantity of currency in question. Thus it is not, as Moseley asserts, that inconvertible state issued fiat dollars function as a measure of value, but that the value of commodities when expressed in modern fiat is always zero.
In other words, with modern fiat, commodities are not treated as values at all; they are treated as use values of a special type — capital.
The implications of this will be examined next.
To be continued