Marx’s Law of Value Has Stood the Test of Time
Alex Gordon, Chair of the Marx Memorial Library, recently gave an introduction to Marx’s classic speech delivered to the International Workingmen’s Association (IWMA) general council setting out the law of value.
In Wages, Price and Profit, Marx delivered a distilled, popular exposition of labour theory of value and the wages system from whence surplus value derives and all capitalist profits are realised.
Just six months after the founding of the International on September 28 1864, the IWMA faced a confrontation in its general council between the prevailing liberal economic orthodoxies and the burgeoning trade union movement — the backbone of the International.
On April 4 1865 John Weston, a follower of Robert Owen — advocating co-operatives as the way forward for the working class — and a member of the general council, proposed a discussion on whether wage increases improve workers’ conditions (he thought not) and whether trade union struggles to win wage increases for some workers harm others (he thought they did).
Weston’s opposition to wage militancy was a crude retelling of an economic fallacy propagated by some of the “great and good” of Victorian society.
Philosopher John Stuart Mill was among supporters of this so-called “wages fund” theory.
This notion held that the capital available for wages is fixed and finite and therefore a wage rise for one worker must be compensated for by wage reductions for others.
Political and wage struggles by workers against capitalism are therefore useless.
Similar myths are put forward from time to time, not only by capitalist politicians — remember George Osborne’s talk in his June 2010 Budget of public-sector jobs “crowding out private endeavour” — but also historically by social fascists and by trade union reformist leaders when arguing for wage cuts.
Weston’s argument implied political abstinence by workers and subservience to the bourgeois class.
JS Mill’s theory was a weapon in the hands of employers.
Marx’s expressed his views on Weston’s nonsense in a letter to Engels: “If these two propositions were accepted, we should be turned into a joke both on account of the trade unions here and of the infection of strikes which now prevails on the Continent.”
However, Marx conducted his demolition of Weston’s fallacious argument with the utmost personal politeness. Stridency and waspishness are for those unconfident in their ideas.
Having disposed of Weston’s aggregate wage freeze proposal on June 20 1865, Marx returned the following week to deliver a stunning exegesis of the capitalist law of value, the central subject of Capital, the much longer and more detailed work he was engaged in researching and writing at that time in the British Library reading room.
The value of commodities is determined by the amount of socially necessary labour incorporated in them, not by the wages paid to the producers.
Workers receive wages for the use of their labour power — the ability to work for a defined period of time — not for their labour.
The value of labour power, which the employer pays for as wages, and the use of labour power, which is what he buys, are different.
By analysing this difference Marx shows that work can be broken down into paid and unpaid labour.
Unpaid labour is the source of all surplus value, which the employer shares with the landlord (as rent) and the banker (as interest). What remains is profit.
A number of consequences flow from Marx’s law of value, including the ability to calculate the rate of profit, which has a tendency to fall, and Marx’s so-called theory of increasing misery, that under capitalism the ratio of paid to unpaid labour, but not necessarily the worker’s standard of living, tends to decline.
Marx told the general council: “If wages fall, profits will rise; and if wages rise, profits will fall.”
The battle between wages and profits “is only settled by the continuous struggle between capital and labour … The matter resolves itself into a question of the respective powers of the combatants.”
Because technology causes redundancies and accumulation of capital outstrips demand for labour, the tendency is for wages to decline.
Workers resist this pressure but must realise they are only fighting capitalism’s symptoms, not their cause.
Marx recommended: “Instead of the conservative motto, ‘A fair day’s wage for a fair day’s work!’ they ought to inscribe on their banner the revolutionary watchword: ‘Abolition of the wages system’!”
The notes of Marx’s lecture were not published in his lifetime, but turned up among Engels’s papers and were published in 1895 by his daughter Eleanor Marx.