The equality of commodity producers as autonomous economic agents is expressed in the exchange-form: exchange is in essence an exchange of equivalents, an equalization of exchanged commodities. The role of exchange in the national economy is not confined to its social form. In the commodity economy, exchange is one of the indispensable components of the process of reproduction. It makes possible an adequate distribution of labor and the continuation of production. In its form, exchange reflects the social structure of the commodity economy. In terms of its content, exchange is one of the phases of the labor process, the process of reproduction. Formally, the act of exchange refers to an equalization of commodities. From the standpoint of the production process, it is closely connected to the equalization of labor.
Just as value expresses the equality of all products of labor, so labor (the substance of value) expresses the equality of labor in all forms and of all individuals. The labor is "equal." But what does the equality of this labor consist of? To answer this question, we must distinguish three types of equal labor:
1) Physiologically equal labor
2) Socially equalized labor
3) Abstract labor.
Since we will not treat the first form of labor here (see Chapter Fourteen), we must explain the difference between the second and third form of labor.
In an organized economy, the relations among people are relatively simple and transparent. Work acquires a directly social form, i.e., there is a certain social organization and determined social organs which distribute labor among individual members of society. Thus the labor of every individual directly enters the social economy as concrete labor with all of its concrete material properties. The labor of each individual is social precisely because it is different from the labor of other members of the community, and it represents a material supplement to their labor. Work in its concrete form is directly social labor. Thus it is also distributed labor. The social organization of labor consists of the distribution of labor among the different members of the community. Inversely, the division of labor is based on the decision of some social organ. Labor is at the same time social and allocated, which means that in its material-technical, concrete, or useful form, labor possesses both of these properties.
Is this labor also socially-equalized?
If we leave aside social organizations which were based on an extreme inequality of sexes and individual groups, and if we consider a large community with a division of labor (for example, a large family-community - zadruga - of Southern Slavs), then we can observe that the process of equalization had to, or at least could, take place in such a community. Such a process will be even more necessary in a large socialist community. Without the equalization of the labor of different forms and different individuals, the organ of the socialist community cannot decide whether or not it is more useful to spend one day of qualified labor or two days of simple labor, one month of the labor of individual A or two months of the labor of individual B, to produce certain goods. But in an organized community, such a process of equalization of labor is basically different from the equalization which takes place in a commodity economy. Let us imagine some socialist community where labor is divided among the members of the community. A determined social organ equalizes the labors of various individuals with each other, since without this equalization a more or less extensive social plan cannot be realized. But in such a community, the process of equalization of labor is secondary and supplements the process of socialization and allocation of labor. Labor is first of all socialized and allocated labor. We can also include here the quality of socially equalized labor as a derived and additional characteristic. The basic characteristic of labor is its characteristic of being social and allocated labor, and a supplementary characteristic is its property of being socially equalized labor.
Let us now examine the changes that would take place in the organization of labor of our community if we imagined the community, not as an organized entity, but as a union of separate economic units of private commodity producers, i.e., as a commodity economy.
The social characteristics of labor which we traced through an organized community are also found in a commodity economy. Here too we can see social labor, allocated labor, and socially equalized labor. But all of these processes of socialization, equalization and allocation of labor are carried out in an altogether different form. The combination of these properties is completely different. First of all, in a commodity economy there is no direct social organization of labor. Labor is not directly social.
In a commodity economy, the labor of a separate individual, of a separate, private commodity producer, is not directly regulated by society. As such, in its concrete form, labor does not yet directlyenter the social economy. Labor becomes social in a commodity economy only when it acquires the form of socially equalized labor, namely, the labor of every commodity producer becomes social only because his product is equalized with the products of all other producers. Thus the labor of the given individual is equalized with the labor of other members of the society and with other forms of labor. There is no other property for determining the social character of labor in a commodity economy. Here there is no previously designed plan for the socialization and allocation of labor. The only indication of the fact that the labor of a given individual is included in the social system of the economy is the exchange of products of the given labor for all other products.
Thus if a commodity economy is compared to a socialist community, the property of social labor and the property of socially equalized labor seem to have changed places. In the socialist community, the property of labor as equal or equalized was the result of the production process, of the production decision of a social organ which socialized and distributed labor. In the commodity economy, labor becomes social only in the sense that it becomes equal with all other forms of labor, in the sense that it becomes socially equalized. Social or socially-equalized labor in the specific form which it has in the commodity economy can be called abstract labor.
We can present some citations from Marx's works which confirm what we have said.
The most striking place is in the Contribution to the Critique of Political Economy, where Marx says that labor becomes "social only because it takes the form of abstract universal labor," i.e., the form of equalization with all other forms of labor" (Critique, p. 30). "Abstract and in that form social labor," - Marx often characterizes the social form of labor in a commodity economy with these words. We can also cite the well-known sentence from Capital that in a commodity economy, "the specific social character of private labor carried on independently, consists in the equality of every kind of that labor, by virtue of its being human labor" (C., I, p. 74).
Thus in a commodity economy, the center of gravity of the social property of labor moves from its characteristic of being social to its characteristic of being equal or socially equalized labor, equalized through the equalization of the products of labor. The concept of equality of labor plays such a central role in Marx's theory of value precisely because in the commodity economy, labor becomes social only if it has the property of being equal.
In a commodity economy, the characteristics of social labor as well as allocated labor have their source in the equality of labor. The distribution of labor in the commodity economy is not a conscious distribution consistent with determined, previously manifested needs, but is regulated by the principle of equal advantage of production. The distribution of labor among different branches of production is carried out in such a way that commodity producers, through the expenditure of equal quantities of labor, acquire equal sums of value in all branches of production.
We can see that the first property of abstract labor (i.e., socially equalized labor in the specific form which it has in a commodity economy) consists of the fact that it becomes social only if it is equal. Its second property consists of the fact that the equalization of labor is carried out through the equalization of things.
In a socialist society the process of equalization of labor and the process of equalization of things (products of labor) are possible, but are separate from each other. When the plan for the production and distribution of different forms of labor is established, the socialist society performs a certain equalization of different forms of labor, and simultaneously it equalizes things (products of labor) from the standpoint of social usefulness. "It is true that even then (in socialism) it will still be necessary for society to know how much labor each article of consumption requires for its production. It will have to arrange its plan of production in accordance with its means of production, which include, in particular, its labor forces. The useful effects of the various articles of consumption, compared with each other and with the quantity of labor required for their production, will in the last analysis determine the plan." [1] When the process of production is finished, when the distribution of the produced things among the individual members of society takes place, a certain equalization of things for the purpose of distribution, society's conscious evaluation of these things, is probably indispensable [2] It is obvious that the socialist society does not have to evaluate the things during their equalization (during their evaluation) in precise proportion to the labor expended on their production. A society directed by the goals of social policy may, for example, consciously introduce a lower estimate of the things which satisfy the cultural needs of the broad popular masses, and a higher estimate for luxury goods. But even if the socialist society should evaluate things exactly in proportion to the labor expended on them, the decision on the equalization of things will be separate from the decision on the equalization of labor.
It is otherwise in a commodity society. Here there is no independent social decision on the equalization of labor. The equalization of various forms of labor is carried out only in the form and through the equalization of things, products of labor. The equalization of things in the form of values on the market affects the division of labor of society, and it affects the working activity of the participants in production. The equalization and distribution of commodities on the market are closely connected with the process of equalization and distribution of labor in social production.
Marx frequently pointed out that in a commodity economy the social equalization of labor is realized only in a material form and through the equalization of commodities: "When we bring the products of our labor into relation with each other as values, it is not because we see in these articles the material receptacles of homogeneous human labor. Quite the contrary: whenever, by an exchange, we equate as values our different products, by that very act, we also equate, as human labor, the different kinds of labor expended upon them. We are not aware of this, nevertheless we do it" (C., I, p. 74). Social equalization of labor does not exist independently; it is carried out only through the equalization of things. This means that the social equality of labor is realized only through things. "The exchange of products as commodities is a determined method of exchange of labor, a method of dependence of the labor of one on another" (Theorien uber den Mehrwert, III, p. 153). "The equality of all sorts of human labor is expressed objectively by their products all being equally values" (Kapital, I, p. 39; C., I, p. 72). [3] "The social character that his [the individual's] particular labor has of being the equal of all other particular kinds of labor, takes the form that all the physically different articles that are the products of labor, have one common quality, viz., that of having value" (C., I, p. 73-74).
There is nothing more erroneous than to interpret these words as meaning that the equality of things as values represents nothing more than an expression of physiological equality of various forms of human labor (see, below, the chapter on Abstract Labor). This mechanical-materialistic conception is foreign to Marx. He speaks of the social character of the equality of various types of work, of the social process of equalization of labor indispensable for every economy based on an extensive division of labor. In the commodity economy, this process is realized only through the equalization of the products of labor as values. This "materialization" of the social process of equalization in the form of an equalization of things does not mean the material objectification of labor as a factor of production, i.e., its material accumulation in things (products of labor).
"The labor of every individual, as far as it is expressed in exchange value, possesses this social character of equality and finds expression in exchange value only in so far as it is a relation of equality with the labor of all other individuals" (Critique, p. 26). In these words, Marx clearly expressed the interconnection and mutual conditioning of the processes of equalization of labor and equalization of commodities as values in the commodity economy. This explains the specific role which the process of exchange plays in the mechanism of the commodity economy, as an equalizer of the products of labor as values. The process of equalization and distribution of labor is closely connected with the equalization of values. Changes in the magnitude of value of commodities depend on the socially necessary labor expended on the commodities, not because the equalization of things is not possible without the equality of labor expended on them (according to Bohm-Bawerk, this is how Marx gives a foundation to his theory), but because the social equalization of labor is carried out, in a commodity economy, only in the form of an equalization of commodities. The key to the theory of value cannot be found in the act of exchange as such, in the material equalization of commodities as values, but in the way the labor is equalized and distributed in the commodity economy. We again come to the conclusion that Marx revealed the properties of "value" by analyzing "labor" in a commodity economy.
This makes it obvious that Marx analyzes the act of exchange only to the extent that it plays a specific role in the process of reproduction and is closely connected with that process. Marx analyzes the "value" of commodities in its connection with "labor," with the equalization and distribution of labor in production. Marx's theory of value does not analyze every exchange of things, but only that exchange which takes place: 1) in a commodity society, 2) among autonomous commodity producers, 3) when it is connected with the process of reproduction in a determined way, thus representing one of the necessary phases of the process of reproduction. The interconnection of the processes of exchange and distribution of labor in production leads us (for the purpose of theoretical analysis) to concentrate on the value of products of labor (as opposed to natural goods which may have a price; see above, Chapter Five), and then only those products which can be reproduced. If the exchange of natural goods (for example land) is a normal phenomenon of the commodity economy, connected to the process of production, we must include it within the scope of political economy. But this must be analyzed separately from phenomena related to the value of products of labor. No matter how much the price of land influences the process of production, the connection between them will be different from the functional connection between the value of products of labor and the process of distribution of labor in social production. The price of land, and, in general, the price of goods which cannot be multiplied, is not an exception to the labor theory of value, but is at the borders of this theory, at its limits - limits which the theory itself draws, as a sociological theory which analyzes the laws determining the changes of value and the role of value in the production process of the commodity society.
Thus Marx does not analyze every exchange of things, but only the equalization of commodities through which social equalization of labor is carried out in a commodity economy. We analyze the value of commodities as a manifestation of the "social equality of labor." We must connect the concept of "social equality of labor" with the concept of equilibrium among individual forms of labor. The "equality of labor" corresponds to a determined state of distribution of labor in production, namely to a theoretically conceived state of equilibrium in which the transfer of labor from one branch of production to another ceases. It is obvious that transfers of labor will always take place and are indispensable if there is a constant distortion of proportionality in the distribution of labor due to the spontaneity of the economy. But these transfers of labor serve precisely to remove the distortions, to remove the deviations from the average, theoretically-conceived equilibrium among individual branches of production. The state of equilibrium takes place (theoretically) when the motives which stimulate commodity producers to pass from one branch to another disappear, when equal advantages for production are created in different branches. The exchange of products of labor among different branches according to their values, the social equality of different types of labor, corresponds to thestate of social equilibrium of production.
The laws of this equilibrium, examined from their qualitative aspect, are different for the simple commodity economy and for the capitalist economy. This difference can be explained by the fact that objective equilibrium in the distribution of social labor is created through competition, through the transfer of labor from one branch to another, a transfer which is connected with the subjective motives of commodity producers [4] The different roles of commodity producers in the social process of production thus create different laws of equilibrium in the distribution of labor. In a simple commodity economy, equal advantage of production for commodity producers employed in different branches is realized through the exchange of commodities in accordance with the quantity of labor necessary for the production of these commodities. S. Frank is suspicious of this proposition. According to Frank, "Equal income propensity in different branches of the economy presupposes that the price of the product will be proportional to the producer's expenditures, so that a certain sum of income will come from a certain sum of production expenditures. However, this proportionality does not presuppose equality between the social labor expended by the producer, and the quantities of labor which he gets in exchange for his production." [5]
However, S. Frank does not ask what the content of the production expenditure is for the simple commodity producer, if it is not the labor spent on the production. For the simple commodity producer, the difference in the conditions of production in two different branches appear as different conditions for the engagement of labor in them. In a simple commodity economy, the exchange of 10 hours of labor in one branch of production, for example shoemaking, for the product of 8 hours of labor in another branch, for example clothing production, necessarily leads (if the shoemaker and clothesmaker are equally qualified) to different advantages of production in the two branches, and to the transfer of labor from shoemaking to clothing production. Assuming complete mobility of labor in the commodity economy, every more or less significant difference in the advantage of production generates a tendency for the transfer of labor from the less advantageous branch of production to the more advantageous. This tendency remains until the less advantageous branch is confronted by a direct threat of economic collapse and finds it impossible to continue production because of unfavorable conditions for the sale of its products on the market.
Starting with these considerations, we cannot agree with the interpretation of the theory of value given by A. Bogdanov. "In a homogeneous society with a division of labor, every economic unit must receive, in exchange for its goods, a quantity of products (for its own consumption) which is equal in value to its own products, in order to maintain economic life at the same level as in the previous period." "If individual economic units receive less than this, they begin to weaken and collapse and they cease to be able to perform their earlier social role." [6] Exchange of products which is not proportional to the labor expended in the production of these products means that individual economic units receive from society less labor-energy than they give. This leads to their collapse and to the interruption of production. This means that the normal course of production is only possible when the exchange of products is proportional to labor expenditures. [7]
However original and seductive this interpretation of the labor theory of value based on "energy" may be, it is not satisfactory for the following reasons: 1) It presupposes a total absence of surplus product, and this presupposition is superfluous for the analysis of the commodity economy and does not correspond to reality. 2) If such a premise is accepted, the law of exchange of products in proportion to their labor costs will be seen to be effective in all cases of interaction among different economic units, even if the foundations of a commodity economy do not exist. What one gets is a formula applicable to all historical periods and abstracted from the properties of the commodity economy. 3) A. Bogdanov's argument presupposes that the given economy must receive (as a result of exchange) a determined quantity of products in kind which is necessary for the continuation of production, i.e., he has in mind the quantity of products in physical terms, and not the sum of values. A. Bogdanov describes the absolute limit beyond which the exchange of things between a given economic unit and other economic units becomes destructive to the first, and deprives it of the ability to continue production. However, in analyzing the commodity economy, the decisive role is played by the relative advantage of production for commodity producers in different branches, and the transfer of labor from less advantageous to more advantageous branches. In conditions of simple commodity production, equal advantage of production in different branches presupposes an exchange of commodities which is proportional to the quantities of labor expended on their production.
In the capitalist society, where the commodity producer does not expend his labor but his capital, the same principle of equal advantage is expressed by a different formula: equal profit for equal capital. The rate of profit regulates the distribution of capital among different branches of production, and this distribution of capital in turn directs the distribution of labor among these branches. The movement of prices on the market is related to the distribution of labor through the distribution of capital. The movement of prices is determined by labor value, through the price of production. Many critics of Marxism were disposed to see in this the bankruptcy of Marx's theory of value. [8] They overlooked the fact that the theory analyzed not only the quantitive, but above all the qualitive (social) side of the phenomena related to value. "Reification" or fetishization of working relations; production relations expressed in the value of products; equality among commodity producers as economic agents; the role of value in the distribution of labor among the different branches of production - this whole chain of phenomena, which was not adequately examined by Marx's critics and was elucidated by Marx's theory of value, refers equally to a simple commodity economy and to a capitalist economy. But the quantitative side of value also interested Marx, if it was related to the function of value as regulator of the distribution of labor. The quantitative proportions in which things exchange are expressions of the law of proportional distribution of social labor. Labor value and price of production are different manifestations of the same law of distribution of labor in conditions of simple commodity production and in the capitalist society. [9] The equilibrium and the allocation of labor are the basis of value and its changes both in the simple commodity economy and in the capitalist economy. This is the meaning of Marx's theory of "labor" value.
In the previous three chapters we dealt with the mechanism which connects labor and value. In Chapter Nine, value was first of all treated as the regulator of the distribution of social labor; in Chapter Ten, as the expression of social production relations among people; in Chapter Eleven, as the expression of abstract labor. Now we can turn to a more detailed analysis of the concept of value.
[1]Frederick Engels, Anti-Duhring, New York: International Publishers,1966, p. 338.
[2] Here we have in mind the first period of the socialist economy, when society will still regulate the distribution of products among its individual members.
[3] In the original German edition, Marx did not speak of the "substance of value" (namely labor), but of "labor objectiveness" (Wertgegenstandlichkeit) or, more simply, of value (this is the way this term is translated in the French edition of Capital, edited by Marx). In the Russian translation this term was frequently translated erroneously as "substance of value" (i.e., labor).
[4] The following comment by Bortkiewicz is to the point: "The law of value is left suspended in mid-air if one does not assume that producers who produce for the market try to obtain as great an advantage as they can by expending the least effort, and that they are also in a position to change their employment" (Bortkiewicz, "Wertrechnung und Preisrechnung in Marxschen System," Archiv fur Sozialwissenschaft u. Sozialpolitik, 1906, XXIII, Issue I, p. 39). But Bortkiewicz wrongly considers this proposition a basic contradiction of Hilferding's interpretation of Marx's theory. Hilferding does not ignore competition nor the interrelations between supply and demand, but this interconnection "is regulated by the price of production" (Hilferding, Bohm-Bawerk's Criticism of Marx, New York: Augustus Kelley, 1949, p. 193). Hilferding understands that economic actions are carried out by means of the motives of economic agents, but he points out: "Nothing but the tendency to establish the equality of economic relations can be derived from the motives of economic agents, motives which are in turn determined by the nature of economic relations" (Finanzkapital, Russian edition, p. 264). This tendency is the premise for the explanation of phenomena of the commodity capitalist economy, but not the only explanation. "The motivation of agents of capitalist production must be derived from the social function of economic actions in a given mode of production" (Ibid., p. 241).
[5] S. Frank, Teoriya tsennosti Marksa i yeyo znachenie (Marx's Theory of Value and its Significance), 1900, pp. 137-138.
[6] Kratkii kurs ekonomicheskoi nauki (Short Course in Economic Science), 1920, p. 63. The same reasoning can be found in his Kurs politicheskoi ekonomii (Course in Political Economy), Vol. II, 4th Part, pp. 22-24.
[7] Such arguments can also be found in rudimentary form in the work of N. Ziber. "Exchange which was not based on equal quantities of labor would lead to the devouring of some economic forces by others. This could not in any case last for an extended period. Nevertheless only a long period is fit for scientific analysis" (N. Ziber, Teoriya tsennosli i Rikardo [Ricardo's Theory of Value and Capital), 1871, p. 88).
[8] Thus, for example, Hainisch says: "What is labor value after these explanations (in Capital, Volume III - I.R.)? It is an arbitrarily constructed concept, and not the exchange value of economic reality. It is not the real fact which was the starting point of our analysis and which we wanted to explain" (Hainisch, Die Marxsche Mehrwerttheorie, 1915, p. 22). Hainisch's words are typical of a whole field of criticism of Marxism which was provoked by the publication of Volume III of Capital. The more acute critics did not attach any significance to the ostensible "contradiction" between Volume I and Volume III of Capital, or at least they did not consider it essential (See J. Schumpeter, "Epochen der Dogmen und Methodengeschichte," Grundriss der Sozialoekonomik, I, 1914, p. 82, and F. Oppenheimer, Wert und Kapitalprofit, Jena: G. Fischer, 1916, p. 172-173). They direct sharp criticisms at the basic premises of Marx's theory of value. On the other hand, critics who insist on the contradictions between Marx's theory of value and his theory of production price, recognize that the logic of the theory of value cannot be challenged. "In fact it is possible to adduce formal objections to the deductions applied in Marx's theory of value, and in reality they have been adduced. But without doubt, these objections have not achieved their goal" (Heimann, "Methodologisches zu den Problemen des Wertes," Archiv fur Sozialwissenschaft u. Sozialpolitik, 1913, XXXVII, Issue No. 3, p. 775). The impossibility of "refuting Marx, starting from the theory of value," was even recognized by Dietzel. He saw the Achilles' heel of Marx's system in the theory of crises (Dietzel, Vom Lehrwert der Wertlehre, Leipzig: A.Deichert, 1921, p. 31).
[9]See below, Chapter Eighteen, "Value and Production Price."