Schrödinger’s Capital: Wherein Heinrich explains profit as a price markup over costs

by Jehu

NOTE 20: The fiction of wages

In an excerpt from his book, The Science of Value, Michael Heinrich argues, “the independent existence of exchange value is only expressed adequately as self-valorizing value”.

I have no idea what Heinrich means by this nonsense statement, so let’s see if we can parse it.

cheshire_cat_by_touchko-d4zd5abIn the first place, what is meant by “the independent existence of exchange value”? For exchange to have an independent existence can only mean that money, in the form of some particular commodity, has emerged as the universal equivalent of all other commodities. The problem with this view for the value-form school is that, according to the value-form school, no commodity has value, the latter being only an artifact of the exchange of commodities for money. If no commodity has value, including the commodity serving in the function of money, how can exchange value exist?

According to Arthur in his 2003 essay on the subject, we “posit the presupposition” use values have value by measuring their worth in units of a money. Money, says Arthur, creates the dimension of value and is the measure of value. The value of a commodity is nothing more than its money price.

By 2012, however, Arthur’s argument changed: now it was no longer money that turned use values into values, but specifically money capital:

Value as pure form is posited in developed circulation, culminating in the general formula (die allgemeine Formel) for capital; then this formula is shown to be the form of a content insofar as it sinks into production. But new value arises in production under the impulse of capital to valorise itself; in this perspective the capitalist production process is from the start considered as value-formed insofar as all inputs including labour–power are commodities purchased with money-capital.20 Production is form-determined when located in the circuit of capital.

Only after labor power was bought and sold in the market, could we say production as well as exchange was determined by the value-form. Thus, when Heinrich speaks of exchange value as having an adequate expression only with self-valorizing value, he imply means value only becomes actual when money becomes money-capital.

Okay, fine.

Wait! I thought value didn’t exist!

But even here Heinrich is deliberately dissembling: if value doesn’t really exist, as the value-form school insists, how could exchange value exist? Ultimately, exchange value is simply the value of some commodity money that is exchanged for a commodity. If use values don’t have values this must also include even the use value serving as the money in an exchange. If money has no value, it cannot serve as exchange value, as the universal expression of the values of commodities.

On the other hand, if Heinrich is simply trying to explain his reading of Marx, it is obvious that Marx never held to the view exchange value arises only with self-valorizing value, i.e., with money capital.

The only way Heinrich’s argument makes sense is that he is trying to appropriate the categories of value and exchange value much like Rothbardians in the US have tried to appropriate the political label, libertarian. The terms, value and exchange value, serve as a protective camouflage for a school that think commodities only have prices, not values. By using the terms “value” and “exchange value”, apparently the value-form school believe they can distinguish themselves from bourgeois simpletons economists.

Indeed, it would be fascinating to read an explanation by the adherents of the value-form school how their notion of value differs from the bourgeois notion that the value of any commodity is its market price.

Still, Heinrich’s argument has some interesting wrinkles because in the essay mentioned he purports to explain how capital valorizes itself. But he has to do this without invoking the notion of value or surplus value. Heinrich could have done this the easy why by stating directly that the capitalist make a profit by selling the product of labor for more than they pay for the costs of labor power and other inputs. but this is already how bourgeois simpletons explain profit:  As he explains, “Early economists had regarded capital profit as a mere premium upon the value of commodities.”

Your argument will not look very radical if it just restates bourgeois simpleton theory with lots of Marxist terminology. So, Heinrich has to say what the bourgeois theorists say, but he has to make it look like he is saying something radical and new.

Wages are fiction

And this is where the beauty of the value-form approach shines through.

Unlike the MELT school, the value-form school does not delude itself that fiat currency expresses the value of commodities. (Of course, they would say this about commodity money as well, but leave that aside for a moment.) Because the value-form school ‘knows’ fiat currency does not express the value of any commodity, (even if the conceded it exists), they hold this is true for labor power as well: even if labor power had value, there is no way a valueless fiat currency could express it in an exchange.

In a moment of brilliant insight, (uh, that would be Keynes’ insight, not Heinrich’s), Heinrich states wages are paid for with a fiat currency; a currency that is not redeemable for any commodity money; in other words, a valueless, inconvertible, fiat currency forced into circulation by the fascist state. Since the currency has no value of its own, under the assumption Marx makes in Capital it cannot express the value of the commodities for which it is exchanged.

Which means, essentially, by paying out wages in a valueless paper token, productive capital does not pay for labor power at all.

Yes. A paper currency is paid out, but this paper currency has no exchange value at all — it is a complete fiction. Whatever actual purchasing power the currency possesses cannot be determined until later, when the worker goes to the grocery store to find out what this scrip can buy.

As Heinrich puts it:

“[The] objection that Keynes raised against the neo-classical theory of wages can also be brought to bear upon Marx’s determination of the value of labour-power: the labourer does not receive a specific basket of goods as compensation, but rather a particular sum of money; the real wage and therefore the “value of labour-power” thus first emerge subsequently, when the prices for individual goods on the market have emerged.”

Based on his argument, Heinrich could have gone on to explain that just as the currency was severed from a commodity money beginning in the 1930s and culminating with the collapse of Bretton Woods in 1971, the values of commodities were severed from the prices of commodities and thus production of commodities was severed from circulation of commodities. The reason why Heinrich doesn’t say this is that he likely doesn’t even realize this happened when countries went off the gold standard. Like the rest of the value-form school, Heinrich thinks all Marx’s talk about value was bullshit from the start.

Unlike the MELT school, the value-form school isn’t dumb enough to think fiat currency can express the values of any commodity, including labor power. Apparently, however, it never occurred to them that if this is true the struggle over wages must itself be a fiction too.