value theory

Richard Fidler rfidler at
Tue Feb 27 18:04:28 MST 2001

A rather good book on this subject is Murray E.G. Smith's Invisible Leviathan:
The Marxist Critique of Market Despotism beyond Postmodernism (Toronto:
University of Toronto Press, 1994). Murray, now a professor at Brock University,
St. Catharines, Ontario, is a long-time Trotskyist, once a member of the League
for Socialist Action, later with the Spartacists and now with the International
Bolshevik Tendency. Notwithstanding (:)), his book is a straightforward review
of the issues and a very good defence of the labour theory of value.

Here is an excerpt from his chapter 6, "An Assessment of the Value Controversy"
(pp. 135-39):

Theoretical considerations

There is, of course, no a priori basis upon which one can judge the 'truth' of
Marx's social ontology in relation to the nominalism and dualism that pervade
not only non-Marxist thought but much ostensibly Marxist thought as well. As
Marx remarks in his (eminently humanist) second thesis on Feuerbach: 'Man must
prove the truth, i.e. the reality and power, the this-worldliness of his
thinking in practice' (1989: 8). If the fundamental postulates of Marx's theory
of value can be sustained only on the basis of a realist-holistic ontology, this
in itself does not establish the probity of that theory. Rather, it is that
ontology which acquires credence to the extent that the theory and methodology
that it informs demonstrate their power to explain social reality.

What then are the substantive theoretical implications of the postulates that
'living labour is the sole source of new value' and that 'value exists as a
definite quantitative magnitude at the macroeconomic level'? Clearly, they are
immense, bearing on virtually every aspect of life in a capitalist society. To
begin with, they provide a powerful basis upon which to analyse the origins and
nature of social conflict under capitalism; and, as such, they serve to
radically distinguish the Marxist from the Weberian strands within the so-called
conflict-power paradigm. An explicit confrontation between Marx's
value-theoretical analysis and Weber's marginalist-informed account of 'power'
can only result in a much-deserved implosion of this artfully contrived but
hopelessly eclectic 'paradigm.'

But apart from such theoreticist considerations, the real power of these
postulates derives from the fact that they breathe life into Marx's account of
the historical limits of capitalism. Together they constitute the basis of
Marx's famous 'law of the falling tendency of the rate of profit' - a law that
Marx regarded as central both to his theory of cyclical crisis and to his
account of the historical-structural crisis of capitalism. In a nutshell, this
law states that the tendency of the social capital to increase its organic
composition (that is, to replace 'living labour' by the 'dead labour' embodied
in an increasingly sophisticated productive apparatus) must exert a downward
pressure on the rate of profit, the decisive regulator of capitalist

To be sure, Marx's law of value is merely a 'necessary presupposition' of the
law of the falling tendency of the rate of profit, not a sufficient one. Yet,
there is a sense in which the latter stands as a corollary to the former, even
if not a theoretically ineluctable one. For capitalism is the one mode of
production in which the object of production is only incidentally the production
of particular things to satisfy particular human wants, but in which this object
is directly and overwhelmingly the production of value, that 'social substance'
which is the flesh and blood of Adam Smith's all-too-fallible 'invisible hand' -
of our 'Invisible Leviathan.'

In the end, Marx's theory of value is concerned with the historical promise and
fateful implications of a labour process that has assumed the social form of a
'valorization' process. Marx's theory serves to remind us that the imperative to
'produce value' is a social imperative, an imperative of capitalist social
relations, not a technical or natural necessity inherent in the metabolic
relation between humanity and nature. Only a society burdened by the need to
'produce value' could give birth to so absurd, and monstrous, a phenomenon as a
'crisis of overproduction.' And only such a society can transform the potential
benefits flowing from labour-saving technological innovation into declining
living standards, unemployment, bitter trade rivalries, depression, and war.
Marx's theory of value, in sum, provides a compelling basis for the conclusion
that capitalism is, at bottom, an 'irrational' and historically limited system,
one that digs its own grave by seeking to assert its 'independence' from living
labour while remaining decisively dependent upon this labour for the production
of its own life-blood: the surplus-value that is the social substance of private

Programmatic Considerations

Neither Marx's theory of value nor the controversy surrounding it are divorced
from practical 'programmatic' considerations. Theoretical positions on Marx's
analysis not only generate programmatic perspectives, but tend to reflect them
as well.

First, it should be noted that the 'neo-Ricardian Marxists' constitute the left
wing of a neo-Ricardian school that has sought to find a microeconomic
foundation for Keynesian macroeconomic theory. Following the example of
Bukharin's analysis of marginalism, Lebowitz has unearthed the 'social roots' of
neo-Ricardian theory, locating them in the requirement of the managerial
functionaries of capital for an objective understanding of price and profit
formation: 'Neo-Ricardian theory in general is an attempt to analyze all of the
concrete forms that appear on the surface of society. It does so from the
perspective of the technostructure, and in this sense may be described as a new
"vulgar economy" ' (1973-4: 400- 1).

'Marxist' neo-Ricardianism has essentially the same analytical agenda, but it
claims to pursue its analysis in the interests of strengthening labour's
position vis-a-vis capital. Characteristically, left neo-Ricardians place great
emphasis on the role of the class struggle not only in altering the political
relation of forces between labour and capital (as all Marxists presumably
would), but also in engendering the crisis tendencies of the capitalist economy
in a quite 'direct' sense. Since the division of the (Sraffian) 'surplus'
between wages and profits supposedly reflects the balance of forces in the class
struggle, and since this division 'determines' the prospects for capitalist
accumulation, neo-Ricardians tend to echo the arguments of conservative and
liberal economists according to which capitalist economic crises are typically
the result of a 'wage-push/profit-squeeze' and/or declining labour productivity
resulting from labour strength or recalcitrance at the point of production.
However, whereas mainstream economists deplore the 'irresponsible and
unrealistic demands' of labour, left neo-Ricardians tend to celebrate them as
harbingers of consciously anticapitalist struggle.

Marxist fundamentalists take a very different view, even while arguing that
capitalist economic crises both create opportunities for and necessitate
anticapitalist action by the working class. In their view, capitalist economic
crises are not directly attributable to economistic class struggles, but are
produced by an ensemble of structural contradictions endemic to capitalism, as
summarized in Marx's pithy observation that 'the barrier to capitalist
production is capital itself.' But 'capital itself' encompasses a whole set of
social production relations that increasingly ensnares the capitalist economy in
a 'contradictory' logic and movement. To understand either conjunctural economic
crises or the historical-structural crisis of the capitalist mode of production
requires a scientific analysis of this contradictory movement that is endemic to

Fundamentalists do not deny that the class struggle, even as this manifests
itself in tepid 'business unionism,' plays some role in articulating the crisis
tendencies of the capitalist economy. But they emphatically reject the
neoRicardian/post-Keynesian notion that capitalism could enjoy a (relatively)
crisis-free evolution if the class struggle could somehow be 'rationally'
contained or managed. For the fundamentalists such a notion is a pure fantasy,
in the first place because no economic, political, or managerial policy can
'eliminate' the class struggle under capitalism, and in the second because it
involves a fundamentally false understanding of the etiology of capitalist
economic crisis.

Neo-Ricardians have frequently reproached fundamentalists for having a
'fatalist' outlook - for underestimating the role of human agency and
unjustifiably pinning their hopes for a 'general crisis' (or even a final,
irremediable breakdown) of capitalism on deterministically understood 'laws of
motion' - that is, laws that unfold inexorably toward an anticapitalist
'negation of the negation' (see, for example, Hodgson 1975). Contemporary
fundamentalists for the most part deny this charge. But they nevertheless insist
upon the need to tailor political practice, education, and program in light of
the results of Marx's scientific analysis of capitalism's laws of motion. On
this view, any socialist political program or anticapitalist strategic
perspective that ignores Marx's analysis must tend toward an accommodation with
bourgeois reformism - that is, with the view that continuing real progress
remains possible within the framework of capitalism.

The programmatic perspectives of the neo-orthodox value theorists are more
difficult to pin down. Some appear close to the neo-Ricardian view, others to
the fundamentalist. To some extent this reflects the theoretical heterogeneity
of the neo-orthodox school; in part, a characteristically nondeterminist
understanding of Marx's economic laws of motion. Even such neo-orthodox
theorists as Ben Fine, Laurence Harris, and John Weeks - all of whom lay great
emphasis on the role of the law of the falling tendency of the rate of profit in
the etiology of capitalist economic crises - tend to place this law on a
co-equal footing with tendencies that counteract the fall in the rate of profit
(Fine and Harris 1979; Weeks 1981). By doing so, however, they effectively deny
the inevitability of capitalist economic crisis and suggest the possibility that
the social capital (pre-eminently through state intervention in the economy) can
contain or manage crises through the adroit mobilization of the requisite
'counteracting tendencies.'

There is another area that should be considered as a programmatic touchstone in
the value controversy, namely how the transition to socialism as well as the
specific content of the future socialist society should be envisioned. It can
scarcely be stressed too strongly that the actual experience of 'socialist
construction' in the twentieth century has weighed heavily on how Marxists have
interpreted the theory of value and differed, often fundamentally, as to its

Several allusions have already been made to the fact that mid-twentieth century
'orthodox' value theory was strongly tinged by a Ricardian approach. As we have
seen, Ricardo regarded the law of value as 'eternal,' as a 'natural' constraint
on all conceivable human economies. Against this, Marx believed that the
socialist society of the future could and should dispense with the law of value
and substitute for it a method of allocating social labour based on conscious
planning and the satisfaction of human need. What, then, were academic Marxist
economists (like Dobb, Meek, and Sweezy), who were either sympathizers or
members of pro-Moscow Communist parties, to think when Stalin proclaimed in the
Soviet constitution of 1936 that socialism had been realized in the Soviet
Union? Moreover, what were Marxist economists to make of Stalin's opinion in the
early 1950s when he wrote: 'It is sometimes asked whether the law of value
exists and operates in our country, under the socialist system. Yes, it does
exist and operate. Whenever commodities and commodity production exist, there
the law of value must also exist' (Stalin 1972b: 458-9).

To those inclined to accept Stalin's view that a 'socialist system' was already
in place in the Soviet Union, the 'admission' that commodity production occurs
and that the law of value operates under 'socialism' could only open the way to
a Ricardian embodied-labour theory of value - for the Soviet Union obviously did
not evince the social production relations requisite for the social-structural
existence of 'abstract labour.' For many fundamentalist theorists, however,
Stalin was simply wrong to have characterized the Soviet Union as a 'socialist
system,' and the fact that commodity production occurred and the law of value
operated, albeit in an attenuated fashion, in the Soviet economy, only proves
that the Soviet Union was never socialist. Ernest Mandel (1967), for example,
argues that the Soviet economy was an economy transitional between capitalism
and socialism, and that in all post-capitalist transitional economies, the law
of value must continue to operate at some level until such time as planning
becomes the exclusive principle of labour and resource allocation, dispensing
with market allocation.

The neo-orthodox theorist John Weeks has also commented on Stalin's argument.
For Weeks, 'the confusions and internal contradictions in [Stalin's] Economic
Problems derive from considering the law of value as the "law of embodied
(concrete) labor" ' (1981: 94). Yet, while this argument has merit, it fails to
identify Stalin's contention that the Soviet Union is a 'socialist system' as
the most important faulty premiss of Stalin's argument. By failing to do this,
Weeks opens the door, perhaps unwittingly, to the notion that the kind of market
phenomena that Stalin subsumes under a socialist law of value are, in fact,
compatible with the operations of an authentically socialist economic system.
The result is that his argument lends itself to political support for the
'market socialism' idea now in vogue as an alternative to the bureaucratically
centralized planning of bankrupt Stalinism. But 'market socialism,' no less than
Stalinist bureaucratic-commandism, constitutes an obstacle to the realization of
a socialism that truly transcends the law of value, as I shall argue in chapter

Richard Fidler
rfidler at

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