Whoops! Did Michael Roberts and Fred Moseley just revise Marx?
by Jehu
In this morning’s compare and contrast, we look at two different formulations of the category, socially necessary labor time, in Roberts’ essay, Consistent, realistic, verifiable; his review of a new book on labor theory by Fred Moseley:
Formulation 1: “Marxist value theory is based on the view that commodities are priced in the market according to the labour time expended on them.”
Formulation 2: “The market decides whether certain amounts of labour time expended on producing particular commodities are ‘socially necessary’.”
In labor theory of value, socially necessary labor time, of course, is the labor time required for production of a commodity, its value. However, in Roberts’ summary of the argument made by Fred Moseley SNLT is first described as a quantity of labor existing before exchange. Then it is later described by Roberts as a quantity of labor determined by exchange — by “the market”.
So which is it, Mr. Roberts? Is socially necessary labor time determined by production or exchange? There is no rush on this, Mr. Roberts. I am sure the proletarian revolution can wait patiently while you theoreticians figure this out.
However, I do want to point out that the first formulation suggests SNLT is determined in production and cannot be altered by any changes in “market demand”. While the second formulation suggests changes in “demand” in the market, can increase or decrease SNLT. The first formulation suggests no amount of Keynesian countercyclical deficit spending can ever change the quantity of value produced.While the second formulation suggests the fascist state can increase SNLT by increasing deficit spending during depressions, as Keynes argued. The first formulation suggests changes in the quantity of money cannot increase the value of capital in circulation, while the second formulation says it can.
So, Mr. Roberts, what determines the duration of socially necessary labor time? The market? Or production?
(Here is the thing: For Moseley, both formulations have to be right; otherwise he could not argue, (as Roberts puts it) “The Marxist theory of value and his analysis of the laws of motion of capitalism is a macro-monetary theory.” This is a point to which I will return in a later post.)
Roberts, following Moseley (he says), argues capital begins and ends with money, so that the total quantity of money in circulation always equals the total value. But this is a tautological equality, since it must be true by definition, in the same way GDP = C + I + (X − M) + G. in bourgeois economics. The sum of all prices must equal the sum of all values and the sum of all profits must equal the sum of all surplus value.
What makes it a tautological statement is that it is true in year one and also true in year two; even if the currency depreciated in the interval, so that one dollar in year two now buys what 25 cents bought in year one. No matter how much inflation occurs, the sum of prices will always equal the sum of values in each year — by definition.
To put this another way, to say each of the three glasses in the picture below are full in no way tells us how much beer they each contain.
Two equal sums of prices will each equal the sums of values contained in them, but the sums of values may be unequal. At the same time, equal sums of value may be expressed in unequal sums of money prices.
This is always the case when the currency is deliberately devalued as was done by Roosevelt in 1933. In 1932 one troy ounce of gold was represented by 20.67 paper dollars; but in 1933 that same ounce was represented by 35 paper dollars. The quantity of gold did not change, but the “price” necessary to equal this quantity of gold increased.
While, by definition, the sum of prices will always equal the sum of values, Roberts and Moseley needed to demonstrate something else: namely, that unequal sum of prices will always represent proportionally unequal sums of values. This, of course, is necessary to demonstrate that we are dealing with a real relation between prices and values and not simply a tautology.
For instance, between 1932 and 1934 official US GDP rose from $58.7 billion to $66 billion. How would we know if this was because of a real increase in the value of GDP or simply an artifact of the devaluation of the currency? The only way to tell is to include the devaluation of the US dollar against gold to find out. After May 1933, Roosevelt devalued the US dollar so that it represented 40% less gold than before devaluation. If we adjust for this devaluation in the official statistics on gross domestic product, GDP did not rise between 1933 and 1934, but fell from $58.7 billion in 1932 to $39.6 billion in 1934 — a whopping 33% fall in gross domestic product.
Comparing US GDP adjusted for devaluation to the official GDP data provided by the fascist state gives us this chart:
Was GDP lower in 1934 than it had been in 1932? It all depends on whose numbers you use.
If I am correct in my calculation, a larger sum of prices represented a smaller sum of values.
Of course, by definition, in each year the sum of prices equaled the sum of values. What changed is not this tautological equality, but the real relation between values and prices. Roosevelt was now buying gold at a 40% markup — an astonishing windfall for the holders of gold, much like the Bernanke Federal Reserve quantitative easing program.
The question we have to ask is whether Roosevelt’s decision to pay a 40% premium on gold in 1933 increased the socially necessary labor time required for the production of a troy ounce of gold? According to one formulation offered by Roberts, the answer is “No”. But his other formulation suggests the answer is “Yes”. If the socially necessary labor time of a commodity is determined by production, devaluation of the currency had no impact at all. If the socially necessary labor time is determined in the market, Roosevelt’s decision to pay 40% premium on gold altered gold’s SNLT.
The reason these stumbling theorists are tripping over SNLT is they can’t comprehend the abstract labor “market” as separate from the price market. Labor is where workers are robbed to guarantee future profit and market share and must work to survive (hence the necessary in SNLT). The price market is where capitalists try to get sales and deny others market share.
These are two different concepts. They only see the paper. Prices don’t determine SNLT. Prices only determine how much of labor is paid to the laborer. Sure, eventually the process commits suicide because the laborers haven’t got enough money to buy the products they make, but the market is too fidgety and too fast to even include that final state in its calculations.
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I don’t know if this is what you are referring to NYNEX, but I have noticed that there is a serious problem with the MELT concept as it is currently formulated.
If you look at paid wages (such as the minimum wage) to compute MELT, then you are actually looking at a “Monetary Expression of Labor-POWER Time.” Because only labor-power is being paid for with these wages (these TSSI folks tend to forget that, it seems).
In order to really calculate “Monetary Expression of Labor-TIME,” you would need to take the paid minimum wage, and multiply it by a computed rate of surplus value. Then you would have an accurate measure of “the amount of labor that a dollar can command.” With the current way that MELT is commonly calculated, it is actually measuring “the amount of labor-power that a dollar can command.” Marx criticizes Adam Smith for making this exact mistake of conflating these two things in Theories of Surplus Value, Chapter 3.
Also, I would like to propose a simple way of determining whether labor is productive (of value) or unproductive (of value) in a way that avoids subjective judgments: if it leads to a sale, then it is productive.
So, for example:
1. Boeing workers build an F-16 and sell it to the U.S. Government for a profit. Productive of value (and surplus value), regardless of how the F-16 is then used downstream in the supply chain.
2. The U.S. air force takes that F-16 and sells it to Israel for a profit. Productive of value (and surplus value).
3. The U.S. air force takes that F-16 and hires out the air force’s services to a Somali warlord at cost. Productive of value (but not surplus value, because there is no profit).
4. The U.S. air force takes that F-16 and gradually consumes it for its own uses. Unproductive of value. Previously-created value is consumed.
5. Pfizer sells medical equipment to the U.S. Government for a profit. Productive of value (and surplus value), regardless of how that medical equipment is then used downstream in the supply chain.
6. The U.S. Government charges Americans for medical care, using this medical equipment from Pfizer, in order to make a profit. Productive of value (and surplus value).
7. The U.S. Government charges Americans for medical care, using this medical equipment from Pfizer, in order to break even. Productive of value (but not surplus value).
8. The U.S. Government gives away medical care to Americans at no charge. Unproductive of value. Previously-created value is consumed.
So: not all state spending is unproductive of surplus value. Only state spending that does not lead to the state reaping a profit is unproductive of surplus value. Of course, that is most of state spending in the U.S. If the state were trying to make a profit on every little thing it purchased, capitalists would see it as an unwelcome competitor.
By contrast, Russia’s government sells quite a bit of military equipment for a profit. The labor that goes into that military equipment is productive of surplus value. It is not Russia’s problem that other countries, when they buy that equipment, then go on to unproductively consume that value in the form of using the use-values of that military equipment.
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But this definition would encapsulate both superfluous and socially necessary labor time since both result in a commodity being sold on the market. Furthermore it tells us nothing about the amount of labor saved by moving to an alternative mode of production since all profitable sold labor is by definition productive. F-16s may be productive for the capitalist state (as they are instrumental in maintaining the market share of the state), and they may be profitable because of the extorted surplus value of the workers, but a communist society is not really concerned about maintaining market share.
The state is also not a single entity; it does not generate surplus value by itself but only extorts it from the population. Therefore, while we can definitely determine what is profitable and not profitable for the state, how are we suppose to judge all production in this way?
For example, all our power plants run on subsidies one way or another. The state therefore loses money on these power plants daily, making them unproductive labor. But these subsidies come from the labor of the workers, who in turn require the power to expand their productive capacities. That is, if a power plant generates 50 dollars in revenue but requires 100 dollars in subsidies, then the state loses 50 dollars, unproductive by definition.
However, that energy produced is then used by the working class to produce 200 dollars in output. Without the energy, their output would be zero, since hardly anything in this world runs without electricity anymore. So by limiting yourself to the state, you miss out on the total mass of surplus value increasing by 150 dollars. The unproductive spending of the state may actually be real productive spending if the flow of capital is fully tracked.
We could track the total expansion of labor consumption in many ways, be it GDP, hours worked, energy consumed, etc. However, I have not seen the third option being tried. If you are interested, I could elaborate on why I think measuring energy consumption could definitively prove absolute accumulation, but not today (as I have other things to do).
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If someone is buying something on the market, then that thing is not “superfluous” to that person or organization or corporation, no?
I think we need to be careful about automatically assuming that things we find distasteful are superfluous. Remember that we are only labeling things “superfluous” if they are superfluous to the creation of value under capitalism. Whether those things would truly be superfluous to the creation of desired *use-values* in a communist society is an entirely different matter.
For example, the labor of security guards might very well be socially-necessary *under capitalism* if the absence of those security guards would allow for widespread theft and lead to a breakdown of the mode of production and a regression to feudal warlordism. However, that same security guard labor would be deemed superfluous under communism.
Another example: a capitalist’s spending on personal servants is unproductive consumption of value, UNLESS those servants are somehow necessary for the capitalist to run his/her business. Then they would be productive of value, even while they still might be producing no use-value that we would care to maintain in a communist society.
I would agree that anything that the state pays for out of tax money (as opposed to internally-generated revenues) is unproductive consumption of value generated by the working class. There are very few cases where the capitalist state actually tries to sell things for a profit and support itself from internally-generated revenues. So, the state’s share of GDP can loosely be used as an approximation of the amount of unproductive consumption of value in the economy. (However, at the same time, that says nothing about the use-values being consumed. Theoretically, one could imagine a state that spent nothing on the military, and only spent money on public housing and food stamps. These use-values might be of use to a great money people, but it would still be just as unproductive of value as the military spending…UNLESS you factor in the extent to which that spending on public housing and food stamps thereby guaranteed the reproduction of a great deal of labor-power that might thereby re-enter production, thus showing that the spending was not unproductive consumption of value after all!
I think this addresses your point about public utilities operating at- or below-cost, Y.T. Basically, we can ask the question, “If the state were not paying for X, Y, or Z, would capitalists be obliged to pay for X, Y, or Z instead?” In the case of power generation, YES. Capitalists would need to find some way to generate power to conduct business. That power generation is socially-necessary. In the case of unemployment benefits, the answer is once again, YES. Unless the capitalists want their labor force to die off, or at least lose all of their skills and health during downturns, they would be obliged to offer unemployment benefits just as much as the current capitalist state does. The only thing that the capitalist state providing these things below-cost tells us is that the working class is subsidizing this for businesses and is thus losing part of its social wage in a subtle fashion by having to help pay for these things.
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If someone (namely, a state) prints up dollars and orders an aircraft carrier, is the labor time required to produce the aircraft carrier socially necessary? This is an honest question. Please give it your best argument.
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Want to make sure I understand the question. “Socially-necessary” can imply some judgment as to the necessity of a particular product of labor. Of course, Marx was interested in defining the TIME needed to produce commodities and how to measure that time.
Marx Vol 1, Chapter 1:
“The labour time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time.”
and
“We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour time socially necessary for its production.”
I don’t think your question is asking “Is the commodity X socially-necessary?”, but using an example of an aircraft carrier can be distracting.
If we assume that an aircraft carrier is a commodity (let’s provisionally say that it is), then the question comes down to whether commodities purchased from the state (via deficit spending) contain value (e.g., socially-necessary labor time).
Let us substitute a different commodity use value to illustrate. If the question were rephrased as “The state purchases cheese from the dairy industry using funds created via deficit spending (e.g., “printing dollars”), was the labor time used to produce the cheese socially-necessary?”, we might have a different answer, which could indicate we are injecting our own value judgments (pun intended) into the analysis.
However, you could claim that value WAS produced in making the cheese (or aircraft carrier), but was LOST during realization (exchange), with the reason being some argument about state purchases invalidating value realization. That could be a complicated argument, but I don’t dismiss it out of hand.
I think what you are really asking are two things: 1) is an aircraft carrier a commodity? and 2) do state purchases via deficit spending (or perhaps any state spending) eliminate/destroy any value contained in the commodities purchased by the state?
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Ok, first (just go with me for a second)…Let’s imagine that we lived in a socialist (not communist, but state-socialist) society where the state really was representative of the working class somehow (let’s imagine that this state is somehow thoroughly tamed by ongoing independent working-class organs of power, such that the state feels compelled to actually follow the wishes of the working class). If THAT state orders an aircraft carrier, then I think it is quite obvious that, YES, the working-class has judged the use-values offered by that aircraft carrier to be necessary for the reproduction (and perhaps defense) of their society.
You and me might disagree and think that it was a dumb decision of the working class to waste its labor on such things. But it would be the working class’s prerogative to build those aircraft carriers if that’s really what it wanted to do. Just like how, to one person, labor involved in making video games might seem unproductive. But what if the vast majority of the population for some reason felt incapable of dispelling stress and avoiding nervous breakdowns without access to video games? If they were to vote to devote labor to video games because they really think it is necessary to their lives, who would we be to judge?
I suppose, if there were multiple socialist states in economic and military competition with each other (such as China and the U.S.S.R. during the Cold War), there might even be a way to tell whether such labor devoted to aircraft carriers or video games really was OBJECTIVELY necessary for the maintenance of that society—namely, if you are the U.S.S.R. (let’s imagine a truly democratic socialist U.S.S.R. for the moment), and you built a bunch of aircraft carriers or make a bunch of video games at the bidding of your working-class, and there’s another socialist state like China that doesn’t build a bunch of aircraft carriers or make a bunch of video games, and if it turns out that China ends up being no worse off because of it—they do not get invaded, their society does not crumble, they aren’t any less happy, etc.—then that would be an objective indicator that, OOPS, those aircraft carriers and video games really weren’t socially-necessary after all.
The visible evidence of this would be that other commodities in China would have much lower “prices” and take much less labor to produce than in the U.S.S.R. because the U.S.S.R. had to produce extra of what turned out to be the real necessities in order to feed and clothe and support the workers working (unproductively, as it turned out) on the aircraft carriers and video games.
But without this competition to provide a tangible counterfactual scenario, I don’t see how one could tell whether such labor was really necessary in an objective sense. Just like, without the competition of the market under capitalism, one cannot really tell whether one’s private labors were socially-necessary or not until one sees how one has done against one’s competitors who, maybe, got by with lower costs by not wasting labors on things that you thought were necessary for the running of your line of production, but ended up not being necessary, as demonstrated by their greater profitability.
Now, all of this was supposing that our state was actually democratic and responsive to the desires of the working-class. It gets a little different when we are talking about the “really-existing” U.S. government.
Or does it? I know I didn’t vote to spend $700 billion a year building aircraft carriers. You probably didn’t either. But, I hate to say it, for a lot of Americans (maybe even close to a majority of Americans), building those aircraft carriers is seen as the CORRECT decision.
Are they just brainwashed by false consciousness into voting for politicians whose policies go against their interests? That’s one promising line of explanation. Or, maybe imperialism really pays off for these workers, and it is worth it to them to labor extra hours each week to feed and clothe those aircraft carrier assembly-line workers so that the U.S. can militarily protect those revenue streams coming into people’s 401k’s and pension funds from the Third World. That’s another promising line of explanation.
Whatever the case is, I would be hesitant to say that the American people, as a whole, did not vote for those aircraft carriers. I can’t help but shake a suspicion that, if 80% of Americans were dead-set against spending a single cent on a single aircraft carrier, then something would change. I’m not necessarily so naive as to assume that the capitalist-dominated political process is so responsive as to instantly change to register this popular will. There would probably be an election of a left-liberal who promised to cut off funding for aircraft carriers, and then when that left-liberal president inevitably broke that promise once in office, maybe there would be some sort of unrest or political rupture. I don’t know. But I tell you what: I see hardly any sign of serious discontent among Americans with current policies. Yes, a lot of them are voting for Bernie, but you know as well as I do that that hardly means squat. If Americans were really more dead-set against spending on stuff like aircraft carriers, I can’t help but suspect that we would detect greater visible signs of this in American politics.
Now finally, to your question: what happens when the state prints up dollars and buys an aircraft carrier? INSOFAR as that state really is a representative of the working-class, then YES, that is a validation that the labor devoted to those aircraft carriers has been judged (by the working-class and its representative state) as socially-necessary.
Basically, any time the state prints up more tokens, it is devaluing the existing tokens already in circulation and shaving off an aliquot part of their representation of commodity-money (and thus socially-necessary labor) for the state’s own uses.
This is where you go astray, Jehu. You say that, since the end of the Bretton-Woods gold peg in 1971, the U.S. dollar has been completely without exchange-value. I disagree. The only difference between then and now is, the exchange-value of the dollar is allowed to fluctuate on the open market. Before, a dollar represented 1/35th oz. of gold. Today, a dollar represents 1/1288th oz. of gold. Yes, quite the devaluation! But there’s quite a big difference between 1/1288th oz. of gold and worthless.
So, let’s say the state prints up a trillion dollars in new crisp dollar bills and buys an aircraft carrier. Let’s say there were $10 trillion already in circulation, representing 100,000 metric tons of gold on the world market. Now there will be $11 trillion in circulation representing that same 100,000 metric tons of gold on the world market. The dollar will have lost 10% of its value. So, in reality, the government has “only” managed to print up the equivalent of $900 billion “old” dollars. Meanwhile, it has just stolen 1/11th of the world’s gold supply for itself by printing up a new trillion dollars that now represents 1/11th of the world’s gold supply.
While that amounts to more gold-equivalent (value represented by token dollars) that can go towards the construction of aircraft carriers, that means there is now less gold-equivalent (value represented by token dollars) available for other things. So, contrary to the Keynesians and Monetarists, there is no free lunch here. The government cannot in this way stimulate aggregate demand. It can only forcibly re-arrange the aggregate demand from one sector to another. The decreased gold-equivalent available for other uses in the economy will show up as higher commodity prices, higher interest rates, less consumer discretionary income, and less profit of enterprise in those other sectors of the economy.
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At least you can say they are consistent – if you assert that sum of value always = sum of money, you have no choice but to say that value is “determined” in exchange.
The problem with the term “determined” is that it becomes easy to conflate production with realization. Value is realized in exchange, but only created in production.
Once the distinction between production and realization is ignored, then value “determination” at exchange can be confused with value production.
Why this is an important distinction is that if value realized (money) is > value produced, the excess value creates an imbalance, which is very different from saying that capitalism operates by normally realizing more value than created. So, value realized is typically < value produced (waste, loss, etc.).
In my view, total money NEVER equals total value.
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