Chapter Title v The Value of Marx Political economy for contemporary capitalism Alfredo Saad-Filho London and New York RECTO RUNNING HEAD The Value of Marx Karl Marx’s writings provide a uniquely insightful explanation of the inner workings of capitalism, which other schools of thought generally have diffi- culty explaining. From this vantage point, Marx’s works can help to explain important features and economic problems of our age, and the limits of their possible solutions. For example, the necessity and origin of money, the growth of the wage-earning class, uneven development, cycles and crises, and the relative impoverishment of the workers, leading to debt and overwork. The Value of Marx demonstrates that: • Capitalist production necessarily involves conflicts in production and in distribution. • Competition is an essential feature of capitalism, but it often generates instability, crises and unemployment, showing that capitalism is not only the most productive but also the most systematically destructive mode of production in history. • Capitalist economies are unstable because of the conflicting forces of extraction, realisation, and accumulation of surplus value under com- petitive conditions. This instability is structural, and even the best economic policies cannot avoid it completely. The author critically reviews the methodological principles of Marx’s value analysis and the best known interpretations of his value theory. He develops an interpretation of Marx focusing primarily upon the processes and relations that regulate social and economic reproduction under capitalism. When analysed from this angle, value theory is a theory of class and exploitation. The concept of value is useful, among other reasons, because it explains capitalist exploitation in spite of the predominance of voluntary market exchanges. The most important controversies in Marxian political economy are reviewed exhaustively, and new light is thrown on the meaning and significance of Marx’s analysis and its relevance for contemporary capitalism. Alfredo Saad-Filho is a lecturer in Development Economics at the School of Oriental and African Studies, the University of London. vi David Corkill First published 2002 by Routledge 11 New Fetter Lane,London EC4P4EE Simultaneously published in the USA and Canada by Routledge. 29 West 35th Street,New York,NY 10001 Routledge is an imprint ofthe Taylor &Francis Group This edition published in the Taylor & Francis e-Library, 2002. © 2002 Alfredo Saad-Filho All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording,or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0–415–23434–4 (Print Edition) ISBN 0-203-46827-9 Master e-book ISBN ISBN 0-203-77651-8 (Adobe eReader Format) Chapter Title ix Contents Acknowledgements xi Introduction 1 1 Materialist dialectics 7 1.1 Real abstractions and mental generalisations 8 1.2 Marx, Hegel and ‘new dialectics’ 15 1.3 Conclusion 20 2 Interpretations of Marx’s value theory 21 2.1 Embodied labour approaches 21 2.2 Value form theories 26 2.3 Conclusion 33 3 Value and capital 35 3.1 Division of labour, exploitation and value 35 3.2 Capital 38 3.3 Conclusion 42 4 Wages and exploitation 44 4.1 Wage labour and exploitation 44 4.2 Value of labour power 48 4.3 Conclusion 53 5 Values, prices and exploitation 54 5.1 Normalisation of labour 55 5.2 Synchronisation of labour 62 5.3 Homogenisation of labour 66 5.4 Conclusion 69 6 Composition of capital 71 6.1 Understanding the composition of capital 71 6.2 Production and the composition of capital 73 6.3 Capital accumulation 78 6.4 Conclusion 79 x Contents 7 Transformation of values into prices of production 81 7.1 Surplus value, profit and the composition of capital 82 7.2 From values to prices of production 84 7.3 The transformation of input values 87 7.4 Conclusion 90 8 Money, credit and inflation 92 8.1 Labour and money 92 8.2 Money and prices of production 97 8.3 Credit, money and inflation 99 8.4 Conclusion 105 Conclusion 107 Notes 111 Bibliography 148 Index 168 Acknowledgements I am grateful to those who have read and commented upon various drafts of this book, including Chris Arthur, Paresh Chattopadhyay, Nick Hostettler, Costas Lapavitsas, Michael Perelman, Alejandro Ramos Martinez, John Rosenthal, Simeon Scott, David Spencer, Nicola Taylor and John Weeks. I am especially indebted to Andrew Brown and Ben Fine for their valuable support and exhaustive comments, which have helped to improve every aspect of this book. The Conference of Socialist Economists has kindly consented to the reproduction of sections of my papers ‘A Note on Marx’s Analysis of the Composition of Capital’, Capital & Class 50, Summer 1993, pp. 127–146 and ‘An Alternative Reading of the Transformation of Values into Prices of Production’, Capital & Class 63, Autumn 1997, pp. 115–136. Verso and Lawrence and Wishart have kindly consented to the citation of extensive passages of, respectively, Capital and the Theories of Surplus Value,for which I am grateful. RECTO RUNNING HEAD Introduction More than one hundred years after his death, Marx’s writings continue to attract interest across the world.1 In spite of speculation that his readership would dwindle after the collapse of the Soviet bloc, Marx’s life and work have continued to attract the attention of social scientists, trade unionists, militants in anti-capitalist or environmental causes, and many others. I have been fortunate enough to witness this revival of interest in the university sector. Student demand for courses dealing with Marx’s work is often overwhelming, leading to over-subscribed classes and lively debates. Marxian scholarship has also been developing strongly, as is shown by the publication of several outstanding books across the social sciences, and the continuing success of those journals open to Marxian contributions. Although significant in themselves, these successes are a far cry from the dynamism and influence of Marxian scholarship thirty, or even twenty years ago. Today, inequity and exploitation are more heavily cloaked by ‘market’ ideology and by the vacuous discourse of ‘globalisation’ (although both have been fraying at the edges). These shifts, and changes in government policies, among them funding restrictions for education and research, have had a significant impact upon academic interests and student choices. It seems that, although much can be done to promote academic interest in Marxian themes, more significant and lasting achievements depend upon the success of social movements beyond the universities. Mass action is, obviously, urgently needed in order to constrain the erosion of the remaining social safety nets, improve the distribution of power and income across the globe, curtail the influence of financial interests and the ‘sole superpower’ and, more broadly, in order to preserve the possibility of life on this planet in the face of rapid environmental degradation. The positive implications of mass action for academic pluralism in general, and for Marxian research more specifically, cannot be underestimated. Karl Marx offers no ready-made answers to the urgent problems of today. However, his writings provide a uniquely insightful explanation of the inner workings of capitalism and the articulation between distinct aspects of this economic system, and they show the enormous potential of capitalism for good and evil. From this vantage point, Marx’s writings 2 Introduction can throw light upon both the problems of our age and the limits of their possible solutions. Three criticisms are often raised against Marx, that his writings are inconsistent, wrong or dated. This book reviews several charges of in- consistency and, within the limits of the analysis, dismisses these charges. The second criticism is not assessed directly for reasons of both space and method. However, I think that analyses inspired by Marx’s writings can provide interesting answers to important questions affecting large numbers of people, and this book provides pointers for further research. Finally, the argument that Marx’s works are dated because they were written in the nineteenth century is ludicrous. To the best of my knowledge, no one has been foolish enough to raise similar claims against Marx’s contemporary, Charles Darwin, or against Newton, Aristotle or the Prophets, whose writings predate Marx’s by centuries. The credence that this argument has received in certain circles suggests that Ronald Meek was right when he argued that: All too often, writers seem to assume that when dealing with Marx it is permissible to relax academic standards to a degree which they them- selves would regard as quite illegitimate when dealing with any other economist.2 Even more puzzling than the dismissal of Marx’s analysis of capitalism is the implicit recognition of the validity of the labour theory of value,3 for example when the importance of labour productivity for the determination of prices, living standards and international competitivity are discussed in the press and in political circles. However, in this context Marx’s name is invariably ignored.4 This book critically reviews selected aspects of the Marxian political economy literature, and develops it further.5 Two issues are analysed in detail: first, the essential aspects of economic reproduction under capitalism, including what is produced and how, and the social structures underlying this mode of production, especially the structures of exploitation; second, Marxian studies are shown to explain important features of capitalism which other schools of thought, including the neoclassical, Keynesian and institutionalist, have difficulty analysing.