At this point we have to ask ourselves two questions:
- How does the breakdown of production based on exchange value affect the terrain of classical Marxist strategy?
- Why would this impact on strategy have already been built into Marx’s assumptions from the beginning?
To begin to answer these questions it is necessary to understand what it means to say “production based on exchange value breaks down”.
According to Marx in the fragment on the machine, breakdown occurs because direct employment of human labor in production has been eclipsed by machines as the primary means of production of use-values. As machines become more important to the production of commodities than the direct expenditure of human labor, exchange value ceases to be the measure of use value.
In plain English, prices and profits begin to fall, an economic condition economists call deflation. Collapsing prices and profits are a signal to capitalist firms to curtail production. They begin to cut back their schedules, reduce orders, lay off workers, cut wages — all of which only serve to aggravate the crisis.
However, it is important to note that Marx argues exchange value itself ceases to be the measure of use value. This statement does not mean wages, prices or profit are too high or too low; rather, it implies that the very structure of production itself has changed. It is no longer individual production carried on for exchange.
Commodity production has been replaced by a cooperative social form of the labor process, involving the conscious technical application of science, the methodical cultivation of the soil, and the socialization of the instruments of labor for use as means of production by a combined, socialized labor.
Apart from whether society recognizes the material change that has occurred here, the actual transformation of production from individual production carried on for exchange to cooperative social form of the labor process is a real, material alteration in the material economic foundation of society.
As Marx explains in chapter 1 of Capital, use-values become commodities only because they are products of private labor carried on independently. These individual producers do not come into contact with one another until they exchange their products and their products do not exhibit a social character except in the act of exchange. Only by being exchanged do the products of labor acquire a uniform social status as values. The only evidence we have of the uniform social status of use-values as values are their exchange values.
Cooperative social production of the sort Marx identifies in chapter 32 involves no exchange of the products of labor similar to what he discusses in chapter 1 — a fact he even telegraphs by explicitly citing the modern factory example in chapter 1. Exchange value is, therefore, entirely foreign to this sort of mode of production.
This is a big problem for capital for two obvious reasons.
First, Marx traces the origin of money to exchange value. This would suggest that a system that is incompatible with exchange value is, therefore, incompatible with money. Given this, we should expect to see the breakdown of production based on exchange value to be expressed in a massive global monetary crisis of the sort that occurred at the onset of the Great Depression in 1929.
Second, labor power is simply a use-value unique to the mode of production, whose historically specific use for capital is the production of surplus value. If exchange value ceases to be the measure of use-value, this situation is true not only for a newly produced pair of shoes, but also for the labor power of the worker who produces them. If money (exchange value) is incompatible with social production generally, so is the buying and selling of labor power.
This is essentially the argument made by Grossman in his remarkable reconstruction of Marx’s theory of breakdown in 1929 on the eve of the Great Depression: at a certain point in the development of the mode of production, either wages have to be cut continuously or a reserve army must come into being. What mattered is not that wages were too high, but that they would always be too high.
It is also the argument made by Keynes from the viewpoint of the bourgeois class:
“A fall in real wages due to a rise in prices, with money-wages unaltered, does not, as a rule, cause the supply of available labour on offer at the current wage to fall below the amount actually employed prior to the rise of prices. To suppose that it does is to suppose that all those who are now unemployed though willing to work at the current wage will withdraw the offer of their labour in the event of even a small rise in the cost of living.”
“Wages must be cut continuously,” says Grossman, “or massive unemployment will result.”
“Oh, I have a plan for that,” Keynes responds.
So how do you cut wages once and for all?
Simple, if you sever your national currency from commodity money, it now will always express the exchange value of commodities, including labor power, as zero. No matter how high wages appear to be in currency denominated terms, its real (i.e., exchange value) equivalence will always be zero.