Grossman on how the Marx exposed the ‘flaw’ in the Law of Value

by Jehu

In this quote Grossman explains, as clearly as I have ever seen it put, why, eventually, exchange value can no longer be the measure of use-value, and why, ultimately, production based on exchange value must breakdown as predicted in the Grundrisse by Marx.

Source, Henryk Grossman Works, Volume 1, page 475:

In his critique, Marx proceeds from the mystifying character of the reified forms of value, that is the fact that relations that people enter into in the process of production appear as relations between objects, things, and that these reified forms conceal true relations between people. Marx therefore speaks of the deceptive appearance of all forms of value. In contrast to transparent, precapitalist forms, the relation between exploiter and exploited in the modern capitalist form of value is opaque because in the wage-relation, that is a form of value which regulates the ‘exchange’ between the wage labourer and the entrepreneur, it appears that the worker’s wage fully compensates all his labour and no unpaid labour is performed.

According to classical theory, all exchange transactions correspond strictly to the law of value, i.e. equal labour times always exchange for equal labour times. This principle also applies to the exchange relation between the worker and the entrepreneur. Now, according to Marx, it is quite evident that there is no exchange of equivalents between worker and entrepreneur. If workers were to receive as much in wages (measured in labour) from entrepreneurs as they give in labour then profit, surplus accruing to entrepreneurs, and hence also the capitalist economy, which is based on this profit, would be impossible. Since both profit and capitalism do, however, exist, no exchange of equivalents can take place. Marx’s entire effort is directed at showing that the transaction between capitalist and worker is as much an exchange of nonequivalents as of equivalents, depending on whether this transaction is regarded within the sphere of circulation (on the market) or during the process of production. The exchange of equivalents between worker and capitalist on the market is merely an appearance arising from the form of exchange. Despite the alleged exchange of equivalents, the laws based on the production of commodities … become changed into their direct opposite … The relation of exchange between capitalist and worker becomes a mere semblance belonging only to the process of circulation, it becomes a mere form, which is alien to the content of the transaction itself, and merely mystifies it. The constant sale and purchase of labour power is the form; the content is the constant appropriation by the capitalist, without equivalent, of a portion of the labour of others, which has already been objectified, and his repeated exchange of this labour for a greater quantity of the living labour of others.

Marx regards it as one of Smith’s great merits that he at least sensed that the exchange between capital and wage labour is a flaw in the law of value. Although Smith could not clarify it, he could see ‘that in the actual result the law is suspended’. According to Marx, it is precisely the form of exchange value which mystifies the real content. ‘The wage form thus extinguishes every trace of the division of the working day into necessary labour and surplus labour, into paid labour and unpaid labour.5 Just as the wage form does, so too all the other forms of value that emerge in the process of exchange mystify. The reified forms of value (exchange value, ground rent, profit, interest, wages and prices, etc.) conceal and invert the real relations between people, by making them appear as the ‘fantastic form of a relation between things’, ‘a social hieroglyphic’, ‘something dark and mysterious’.