Schrödinger’s Capital: FYI, Marx NEVER said labor creates value

NOTE 15: Some labor creates value

So, here is the problem with Heinrich saying we don’t need proof for Marx’s propositions: Not all labor creates a product that contains value.

Think of it this way: According to Arthur, money is simply use value with no labor value whatsoever, just like all other commodities. According to the value-form school, it is the physical material of money that gives all other commodities their value, by serving as the form of value, the value-form, the money-form. Commodities, says Arthur, are the product of concrete useful labor, not abstract labor. It is not until these commodities are exchange for the value-form, that they are reduced to values.

In the value-form argument, commodities do not have a social property of value prior to exchange; they remain simply incommensurable use values — objects that cannot be compared as values, because they are of completely different qualities. Thus, before exchange, we cannot say 10 apples equal one hoe because the usefulness of apples cannot be quantitatively compared to the usefulness of hoes. Somehow, the exchange of the objects for the value-form strips the commodities of their useful qualities and reduce them to abstract labor values.

Once this is done, the commodities can then be compared as so:

10 apples equal five dollars.
One hoe equal five dollars.
Therefore, 10 apples equal one hoe

What were previously incommensurable use values can now be compared as abstract values because they have been exchange for money. By each being exchanged for the same sum of money, we can conclude each must have the same abstract value.

If this is true, we should be able to extend this equalization via the value-form thus:

10 apples equal five dollars.
One hoe equal five dollars.
100 rounds of M16 bullets equal five dollars.
Therefore, 10 apples equal one hoe equal 100 rounds of M16 ammunition.

Unfortunately, now we have a problem: Does military hardware have any useful qualities? If not, how can it have abstract labor value? According to Marx, an object that does not have use value cannot have value. Yet the ammo appears to have value. Like the apples and the hoe, the use value of the ammunition was vetted by the same act of exchange when it ‘acquired’ the exchange value of five dollars.

Now, we can assume the ammo has use value. Or we can assume the dollars do not actually confer value on the objects for which they are exchange. Or we can accept exchange does not actually prove the apples and hoe are useful products of labor. How would we establish which might actually be the case?

We have three proposition to explain the ‘value’ of the ammo:

Case 1. The ammunition has value like the apples and the hoe;
Case 2. Exchange does not prove a commodity is a product of useful labor; or,
Case 3: The apples and the hoe are as without any usefulness as the ammo.

In Marx’s labor theory of value, human labor can be expended on objects that have no value resulting from that expenditure. Like water or virgin land, these non-useful products of human labor can appear in the market and be exchanged despite having no value at all. While almost all commentators on chapter 1 of Capital usually point to a case where a lazy producer spends more than socially necessary labor time on his good, it may just so happen that none of the labor expended is useful and produce an object lacking any use value — such as, for instance, the labor required to produce a Trident nuclear missile. This is not a case where the worker spent too much time producing his commodity, or too much of some commodity is produced: the object itself can’t be a commodity because it has no use value.

In any case, it is entirely possible the worker will still get paid for her labor power and the product of her labor will find a buyer in the market — thus, both the labor and its product is vetted through exchange. We already know not all labor produces value in Marx’s theory. If the labor produces nothing of use, the product of labor can not contain value. According to the value-form school the money in the transaction is also a mere use value, containing no value. Money will thus indiscriminately go where ever it is sent, unable to distinguish between useful objects and toxic ones.

The value-form school must explain why it does not matter if 5 billion dollars is paid out for education, or to build a nuclear power plant at Fukushima. Since, according to Arthur, anything can be money as long as the state says its money, the state can print money up and spend it on whatever. In other words, if we accept the value-form argument, the “value” of the Iraq war was more than two trillion dollars.

Marx did not invent the idea that labor is the source of value. He invented the idea that while labor is the source of value, not all labor creates value. Since not all labor creates value, not all the products of labor have value. If the exchange of a product of labor for money is simply the exchange of use values, as the value form school insists, does any transaction prove an object has value? How can you tell? How can you prove this? Heinrich says we do not have to prove it because every school child knows blah, blah, blah…

Why would the value-form school take Marx’s word on this? We don’t have to prove an expenditure of labor creates value because Marx said so, but we know Marx was wrong to assume (“a priori”, according to Harvey) that labor is the source of value? Cherry pick much, folks?

Once Marx proposes not all labor is the source of value, he then begins to tick off the things that do not create value:

  • Your lazy, inefficient approach to production does not create value;
  • Your tithes don’t create value;
  • Your gifts don’t create value;
  • The labor you expend on obligations to the state don’t create value;
  • The labor you expend producing military hardware doesn’t create value.

Critical to Marx’s argument is that his predecessors were wrong: labor does not create value. Some labors create value, but not others. Since you cannot see value, nor see the production of value, how do you distinguish what objects have value and what labors produces value, from what objects and labors do not?

The argument that exchange (Rubin), circulation (Heinrich) or capital (Arthur) turns use-values into abstract values has to fail.

6 thoughts on “Schrödinger’s Capital: FYI, Marx NEVER said labor creates value”

  1. I think you should clarify what you mean by productive here. For example, if I spend 100 dollars on ammo to seize 200 dollars of goods from the schmuck next door, is the ammo productive or not? Same with education, if I spend 100 dollars to educate someone who then goes onto use his intelligence to produce 200 dollars of goods, is that a productive investment or not?

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  2. Productive in the sense that it is “value valorising itself”. $100 of weaponry used to seize $200 or even $2000 from another isn’t expanding capital, it is just transferring that $200 from another person to me.

    That $100 of weaponry might be productive to you as an individual, but to capitalism as a whole, all it did was shift $200 around, while removing $100 from productive use: think instead that the $100 was used to buy a sewing kit and hire a worker to turn some fabric into shirts, which are then worth $110. With the weapon example, there is merely $300 in, $300 out. With the sewing example there is $300 in and $310 out. Despite bringing a tenth of the profit to you, it has nevertheless expanded the total value.

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  3. Conversion Of Surplus Value Into Unproductive Capital And Capitalists’
    Consumption:

    The conversion of the surplus value into unproductive capital is performed in two ways.

    Simple Conversion:
    The utility value of the goods produced by the productive sector is defined by their use in the productive sector. But it is obvious that at least part of the goods can be used in several ways. Bricks can be used to build a factory or bank. The same steel can be used to make tools and weapons, etc. In other words, because of their own utility value, the same goods may return to the productive sector or be used unproductively.

    Whenever the return in the productive sphere is not performed, but is replaced by a use in the sphere of circulation, we say that part of the surplus value produced is sterilized for the purposes of this circulation.

    At the stage of capital goods, this gain comes in the form of bricks, rebar, etc. When these commodities go to the unproductive sector, we say that there has been simple conversion of surplus value from the productive sector, as it exists in the form of commodities from the production process, into unproductive capital.

    The value of bricks, reinforcing concrete, etc., which will allow one to build a bank, as well as that of food for employees, this value is the surplus-value arising from the productive sector but no additional value is added (surplus-value) by the work of bank employees.

    At the end of the cycle, the bank capital will require new injection of new value from the productive sector. The unproductive sector consumes the surplus-value. It does not produce.

    Before continuing, let’s say you could say the same of the means of consumption of the capitalists. As exploiters, the capitalists produce no added value to their business, but on the contrary, only consume. For immediate reproduction, they need consumer commodities.

    The consumer commodities they use, however, do not seem the same as those of the workers. Therefore, the poor quality consumer commodities produced by the Department II (the one that produces consumer commodities) for the livelihood of the workers, and are a representative part of the surplus value produced in this branch, are innappropriate for the needs of luxurious capitalists. This mass of commodities, which correspond to the surplus-value of the Department II is partly for new workers who will be employed by the additional capital in the next cycle. For the other part, it is for the income of capitalists, as well as from coal, machinery, etc., which makes up the gain of the Department I (the one that produces the means of production). Fortunately, the bourgeois who eat cake also eat bread. In this way, a part of the surplus value produced by the Department II can undergo direct conversion to become the income of capitalists. More or less, they eat the same wheat, even the same livestock, etc., as their employees. Thus, this represents a simple conversion of surplus-value of Department II to the means of consumption of the capitalists.

    However, this simple conversion remains very limited. The bourgeois has caviar for dinner, Department II has not planned this for the proletarians menu. The banker wants a luxurious leather chair in his office, Department I did not expect this for its employees. A simple conversion is impossible in these cases.

    Complex Conversion:
    The consumption of the capitalists, individually and collectively, includes a mass of commodities that are not included in the inventory of utility values produced by the productive sector. Weapons, Government Departments 5 , luxury cars, golf courses, etc. are not the means of production for productive capital or means of consumption for the workers. To obtain these the capitalists have to resort to labor and unproductive capital.
    Start again from the simple conversion. Assume that a normal car is a means of subsistence necessary for the proletariat. The question is not whether it is justified or not. It suffices to know that such a commodity is part of the ensemble of commodities that the workers buy within their current lives to declare that this product is a necessary livelihood – whatever its value (real or symbolic or illusory) and use (effective or not). The production of this car is therefore part of the productive sector. If the capitalist is content with a modest Fiat, there is the simple conversion of surplus-value. With the ensemble of all cars built, a part of the surplus value produced, corresponds to income. If our capitalist takes one to make his trips, it simply converts this surplus value to income. Instead of becoming a “factor of capital” as a means for the proletariat to continue to work, she sees the value sterilized as the capitalist’s means of consumption. What happens if the Capitalist buys a Ferrari? The productive sector is not expecting that it may be necessary for subsistence of proletarians. But the steel, rubber, etc., necessary for the production of that Ferrari are the same as those used for the production of the Fiat, they are ordinary means of production. The work that produced them is productive. And when they enter the workshops of Ferrari, the added value they contain is converted into income by simple conversion. But the engine? It is very special and should be tailored to that single car model. Therefore, all the work that develops this magnificent engine is unproductive because the engine will not return as a “factor of capital”, as part of a subsistence of the proletariat in the equipment of an ordinary car of Department II. We are faced with a complex conversion, where the capitalist must provide machines and special workers – unproductive capital – to make it. He provides capital for the labor of the workers who will build the engine, the steel and other necessaries are kept simple. But what happens next is the field of complex conversion: living labor is applied to steel as in any productive work. Yet it is unproductive because the utility value of the commodity produced is not a “factor of capital”. This work does not produce a new way of producing (or a new subsistence).

    In equilibrium, the profitability of productive and unproductive capital is the same, and it helps to mask the difference. The first criterion we found in Marx is very clear but unusable: is that productive labor produces surplus value. This criterion is unusable because it is impossible to distinguish the surplus-value from profit. The surplus value never appears in the form of profit, and by definition, in equilibrium, all capital relates to profit. However, they are not all productive. This is why it is necessary to use another criterion, which is that of the utility value of the commodities produced, according to the ability that they can or cannot function as “factors of capital.”

    …..

    Instead of each individual capitalist spending his income for his security, the entire capitalist class decides to entrust this power to a group representing a portion of the social surplus value so that it forms a properly equipped army. First suppose a case of relatively simple conversion: the initial equipment consists of only barracks. Constructing factories and barracks is similar. Productive capital has produced surplus value especially in the form of red wine for masons, brick, cement, etc … The capital is therefore a ready means of production to adapt to military means. It sterilizes the capital gain from bricks etc…constructing barracks instead of placing them in factories where the proletariat could retain the surplus-value. The barracks have a cost price to the State, which includes a profit to the construction company, but the value that corresponds to them is lost: it will not be transmitted downstream, because a barracks produces nothing. It is not a “factor of capital.” For productive capital, which initially provided the needed surplus value, this value is lost: it burns, rusts, or is destroyed. Suppose now that the army wants to outfit with bulldozers, ordinary bulldozers suit it fine. The situation is still the same: the capitalists that produce bulldozers (productively) sell them to the army, according to the utility value, it “could” use them productively (eg by earthworks for construction of factories), but prefers to freeze the value into unproductive use: riot-control and rust. There is thus always a simple conversion, surplus-value (in the form of bulldozers) making an exit from the productive circuit to the collective revenue of the capitalists.

    But the needs of the army get complicated. It is not enough to use similar military (unproductive) civilian objects (having the utility value of production of goods). It now wants commodities that have undergone a specific adaptation. For example, the trucks
    must be shielded. The “service” of shielding is provided by a specific enterprise, an unproductive capital: trucks, buildings, tools, metal sheets, all these commodities undergo a simple conversion. They could return to the sphere of production, but the Army buys them for itself. The surplus value these commodities contain is sterilized. The extra labor is to strengthen the body with sheet metal. Welders who do that are unproductive labor. It must be sterilized for a part of the surplus-value corresponding to the subsistence they need, and all that is required for welding, etc ..

    New level of sophistication: the army needs specific materials, which can only be manufactured by custom machines that can’t be used for anything else. It is necessary in this case to make these machines especially for this purpose. The capital which manufactures it is unproductive. This capital buys from the productive sector the basic elements that utility value can equally serve in a productive way (iron, bolts, subsistence, produced by productive labor and thus is simple conversion situation …), but all that subsequently made from there must be counted as unproductive labor and capital and is considered complex conversion. As for profits that are pocketed by the “military industrial complex”, one can say the same thing as what Marx said of merchant capital “in the case of merchant’s capital we are dealing with a capital which shares in the profit without participating in its production.”7 And he says a little later: “The merchant’s capital participates in the compensation of the surplus-value to an average profit, although it does not take part in its production. So the average rate of profit implies that general deduction from surplus-value which falls to the share of merchant’s capital, a deduction from the profit of the industrial capital.” Just replace “merchant capital” with “unproductive capital” and “industrial capital” with “productive capital” to regain our analysis.

    …Thus, the unproductive capital that produce these commodities resembles “factors of capital”…but in fact it acts as unproductive capital. At first glance, the military-industrial complex works as an ordinary capitalist sector, where independent producers are selling each other the means of production. This producer makes the tool that can repair a bomber and do nothing else. This producer offers steel with depleted uranium which can be used only in ammunition, etc…All this small-scale commerce goes in a circle with itself as in the productive sector. Except that the production of the unproductive sector has a utility value where the return to the sphere of production is impossible. The value of commodities of the unproductive sector will be lost.

    By following the trail left by Marx on commodities that become “factors of capital”, it was possible to give a discriminatory definition of productive labor and unproductive labor on the basis of the utility value of the commodities produced.

    Namely:

    • Any commodity that can return to the sphere of production is the result of productive work, even if it actually doesn’t actually accomplish the return. In this case, its value is a portion of surplus value sterilized in unproductive consumption or production. This is a simple conversion of surplus-value.
    • Any commodity whose utility value does not allow a return to the sphere of production results from unproductive labor. Depending on the case, the means of production used within the unproductive work come from a productive capital (simple conversion) or unproductive capital (complex conversion).

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    1. Hmmm, I’m thinking over your post a little bit more, and something has me confused:

      “In equilibrium, the profitability of productive and unproductive capital is the same, and it helps to mask the difference. The first criterion we found in Marx is very clear but unusable: is that productive labor produces surplus value. This criterion is unusable because it is impossible to distinguish the surplus-value from profit. The surplus value never appears in the form of profit, and by definition, in equilibrium, all capital relates to profit. However, they are not all productive. This is why it is necessary to use another criterion, which is that of the utility value of the commodities produced, according to the ability that they can or cannot function as “factors of capital.””

      Does it seem kind of strange that capitalism can reward productive capital and unproductive capital with the same rate of profit?

      I understand that capital employed in a production process with a lower or higher than average organic composition of capital will end up making the average rate of profit even though individually it will be contributing more or less surplus value to the collective pool of surplus value. This is what the “transformation problem” is all about.

      Of course, the so-called “transformation problem” is not a problem at all, as it is often made out to be. It makes perfect sense. A more labor-intensive industry will produce more surplus value. All other things being equal, it would then also produce more profit. EXCEPT: capitalists aren’t dumb, they see that there are super-profits to be made in this backward, labor-intensive sector. So they flood into this labor-intensive sector with their investments, increasing the supply of the labor-intensive good. This drives the price of the good down below its value to the point where producing that good yields the average rate of profit. And then that relative “oversupply” of that good stays there permanently. So, labor-intensive goods will tend to get “oversupplied” and depreciated in price relative to their underlying labor values, and capital-intensive goods will tend to get “undersupplied” and increased in price relative to their underlying labor values, thus yielding an equal rate of profit between both sectors, even while the surplus value contributed by the labor-intensive production remains more than the surplus value contributed by the capital-intensive good.

      In this way, capital used to produce capital-intensive goods “exploits” the capital used to produce labor-intensive goods. It’s like the whole worldwide capitalist class is one big team that shares its surplus value. Some contribute more, contribute less, but everyone (if they handle their capital with average intelligence) gets the average rate of profit.

      And, in a way, an individual worker is not solely “exploited” just by his/her individual boss. Rather, everyone with capital participating in the world market gets an aliquot part of the exploitation of that worker based on the proportional sizes of their capitals invested in the world market.

      To extend the metaphor to unproductive investment, it’s almost like some capitalists, far from contributing surplus value to the big pool of surplus value that then gets transformed into and shared around as the average rate of profit, actually detract surplus value from that big pool of surplus value when they invest their capital in things unproductive of value (like military jets). That unproductive consumption of capital, to a slight degree, brings down the entire pool of surplus value, and thus the average rate of profit, for everyone—for all of the capitalists.

      I guess the way this would manifest itself for other capitalists is when they go back to the marketplace to buy more constant capital, and it turns out to be more expensive than it “ought” to be, where its price is above its labor value, simply because not enough of that input was produced as “ought” to have been produced if all capital had been plowed back into making more of that commodity or any of the other commodities re-entering the production process, rather than some of that capital having been consumed unproductively.

      It’s funny that the capitalist system doesn’t have a clear way of policing this behavior, of clearly identifying “YOU are producing surplus value, while YOU OVER THERE are not, thereby dragging down our entire rate of profit.”

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