This is an hour-long interview with dialectical scholar and Marxist philosopher Bertell Ollman. Ollman is a professor of politics at New York University and author of “Dance of the Dialectic: Steps in Marx’s Method” and “Alienation: Marx’s Conception of Man in Capitalist Society”. Both books are great reads (and available for free download at the above links), very accessible, and quite helpful in getting one’s head wrapped around the dialectical method. Fans of left trivia might also recognize Ollman as the creator of the board game “Class Struggle”.

The topic of Abstraction (also the topic of my next video in the Law of Value series) is an easy one for Ollman to talk about as he has devoted a lot of his intellectual activity to an understanding of what it means to make abstractions. I barely had to ask him any questions over the course of the interview in which he explains many of the key concepts in his book Dance of the Dialectic.

What fascinates me is Mitt Romney’s response, which recapitulates an old argument from Adam Smith, and Provost’s complete inability to articulate a response to this argument. Romney responds with a simple question, “Where do you think corporate profits go?” Provost responds by arguing that profits could be hoarded or they could go to the 1%.

Romney had apparently been waiting for this question for a long time. He responds with a well-scripted, tight argument: “Corporations are collections of people that are trying to have good jobs for themselves and promote the future.” Profits go to shareholders, “some of which may be the 1%” (notice that he is perfectly comfortable embracing the 1% lingo) but also to people with pensions. Profits also go into growing businesses which creates new jobs. All the money always goes to people. “The money goes to hire people or to shareholders, and so they’re made up of people. So somehow thinking that there’s something else out there that we can just grab money from and get taxes from that doesn’t involve people- well they’re still people!”

Adam Smith made this exact same argument a couple centuries earlier. The argument is that the prices of commodities, or the total value in society, all resolve themselves back to wages. If you trace the price of a commodity back to all of the costs that went into its production all of these eventually end up at wages paid to workers. Now, you may ask where profit comes from then, since profit is, by definition, money you made above your cost of production. Profit, says Smith, is going to be spent on future wages. The greater the profit, the more jobs we can create in the future. So, for Smith, profit and capitalism are good news for workers. All value eventually resolves itself to wages paid to workers.

I can’t help but point out here that Adam Smith didn’t need to live in an age of “corporate personhood” to make this argument. This is because the basic logic of capital remains the same regardless of the specific legalese within which capital may find itself enmeshed at various times in history.

But back to Mark Provost…. Provost doesn’t get a chance to respond to Romney until he appears on Democracy Now two days later. Provost says that he doesn’t understand how Romney’s argument really related to his question which was meant to be a question about the growing disparity of wealth in the country, which he somehow, vaguely, sees related to corporate personhood. On Democracy Now he merely manages to mumble something about corporations needing to pay more taxes but he fails to try to take on Romney’s argument that corporations are just collections of people and that all corporate profits eventually go to job creation. He just repeats that there is growing wealth disparity in this country.

Then the discussion on Democracy Now immediately turns to a discussion of tactics: Are mic-checks still a legitimate way of interrupting public speeches? What are Occupy’s plans for the NH primary? This discussion takes up the majority of the interview. This is to be expected for a movement that is focused primarily on protest tactics and not on theory.

Now, if we take Provost’s comments and try to formulate them into a coherent argument it seems that they would be this: Corporations aren’t people because not all of the profit made by them goes to the workers. He defends this position by pointing to empirical data about wealth disparity, not by providing a theoretical counter-argument to Romney. Where does this profit go? Apparently, for Provost, they go to the personal consumption of CEO’s and shareholders, and to “deferred investment”.

Now, if there was no deferred investment (say, we were in a boom phase of the economy and profits were being channeled into growing businesses) and this money was instead plowed into production, and if wages were higher and CEO salaries were lower (say, because of a resurgent labor movement), then it seems that Provost would be forced to agree with Romney that corporations are just collections of people. Provost hasn’t actually shown that capital contains “something outside” of people. By focusing on wealth distribution and deferred investment he makes it sound like the problem is just the distribution of wealth between people within the corporation.

But I think that the beef with corporate personhood goes deeper than this. I think that what people are really upset about is not the legalistic framework of corporations. It is that we are intuitively aware that there is a greater, dominant force in society, something that is beyond relations between people. There is an autonomous, cold, calculating, impersonal nature to capital that follows its own rules. We work to enrich it more than we work to enrich the CEO’s that serve it. When Romney claims that there is nothing to see here, when he makes his “pay no attention to the man behind the curtain” argument that there is nothing “outside” of people in the corporation, we have two choices: 1. We agree with him that capitalism resolves itself to workers producing value for themselves and thus give up a real anti-capitalist project; or 2. We can try to identify what exactly this “something outside” is.

Something Outside

I couldn’t help but beat my head against a copy of Vol. 2 of Kapital and moan disconsolately as I watched the broadcast of Democracy Now. Marx tackles this very argument of Smith’s in Vol. 2 of Kapital. He shows that there is a rather significant part of capitalist production that does not resolve itself to wages, that does not go to serve workers at all. It does not exist to enrich the capitalist. It is merely self-perpetuating accumulation of capital for its own sake. This is the real nightmare of capitalist production, a greater nightmare than wealth disparity or deferred investment. Marx’s argument is a long, complex argument which eventually exposes a very crucial insight about the nature of capitalist production, one that is quite relevant for contemporary debates over crisis theory. I attempt to summarize it here.

Building a model of the interrelated investments that make up a capitalist economy Marx divides production into two departments. Department 1 (D1) produces means of production. Department 2 (D2) produces consumer commodities.

Let’s take a look at D2 first. The capitalists of D2 spend their money on wages and non-labor inputs like machines and raw materials. Marx calls these non-labor inputs ‘constant capital’. From the perspective of D2 it looks like Romney and Smith are correct. The wages of D2 obviously go to workers and the money spent on constant capital seems like it should all go to the workers of D1. (Yes some of the money they pay to D1 also goes to the capitalists as profit. But if this profit is spent as revenue for the consumption goods of capitalists then it just goes to the workers of D2 who make these consumption goods. And if the money is used to plow back into production then it goes to hire more workers…. or so it seems thus far.)

But when we ask the same questions about D1 things look different. Obviously the money spent by D1 capitalists on wages goes to workers. But where does the money spent on constant capital go? It goes to other firms in D1. In other words, capitalists in D1 buy and sell constant capital from each other. This means that there is a portion of value in society that never actually ends up in the form of wages. It is constantly circulating within D1 in the form of constant capital (or money which has just been paid for constant capital and is about to be reinvested in constant capital.)

This is the “something out there” that Mitt Romney and Adam Smith don’t want you to know about. They are not hiding the 1% from you. They are hiding this. Why? Does this really destabilize Romney’s argument that what is good for corporations is good for people? Even if there is a small portion of value that never makes its way into wages isn’t it still true that growing corporations creates jobs and that most of this investment goes to into wages?

No.

Marx’s argument continues as he examines what is necessary for capitalism to grow, to expand the total amount of production each period. Through a series of complicated illustrations he shows that what must grow first, before anything else can grow, is this chunk of value that is not wages. By expanding the means of production capital can then expand the total size of production. But in order for this to happen money must be diverted away from consumption (away from consumer goods) and into the production of means of production. As capital grows the portion of the total value in society dedicated to the production of means of production grows at the expense of the portion dedicated to consumption goods.

Thus Romney is not correct that what is good for corporations is always good for people. What is good for capital is what is good for capital and this will always involve people getting the short end of the stick. When capital grows it may lead to some more employment (in certain conditions) but there will be a greater growth of capital value that never makes its way into wages.

Another way to put it is that as capital grows in the expansionary phase of an economic cycle it will need more workers. But the expansion of capital happens faster than the expansion of wages and worker’s consumption. This is because this expansion happens at the expense of workers. Oftentimes capitalists enrich themselves by siphoning off a lot of this expansion in the form of bonuses and dividends. But these bonuses and dividends are not the driving force of capital. The driving force of capital is expansion for the sake of expansion. Machines for the sake of machines. Money for the sake of money. The real entity that dominates the corporation is not a person. It a constantly growing chunk of value that takes the form of money and anonymous objects that have no purpose but to grow forever in a nihilistic quest to expand for the sake of expansion. I discuss this from a slightly different perspective in my latest video Subject/Object.

I am indebted to Andrew Kliman for helping me to understand the significance of Marx’s argument in the latter half of Vol. 2 of Kapital. Interested readers should keep in mind that Kliman is currently working on a study guide to all 3 volumes of Kapital that should be ready in the next year of so. Also of interest is a section of Kliman’s brand new book “The Failure of Capitalist Production” which discusses these reproduction schemas (the models of a capitalist economy broken up into D1 and D2). Kliman tracks the growth of D1 empirically over that last century showing that as capital grew D1 grew at the expense of D2. Kliman also draws some important conclusions from this, conclusions that I don’t have room for here but will summarize/bastardize in short: if D1 can grow on its own, creating its own demand for its product, then there is something wrong with theories of crisis that claim that capitalism goes into crisis because of a lack of consumer demand due to low wages. If D1 can create its own demand, and if it is the growth of D1 which causes capital to grow, then lowering wages should actually be good for the economy not bad for it. This means that politics of wealth distribution that claim we can have healthy capitalism if wages are higher are logically flawed. Low wages are good for capital. Capital is good for capital but it is bad for people. Capital is not people.

My girlfriend chides me that I am too quick to criticize and too slow to offer constructive advice. In the spirit of rectifying this character flaw, I offer the following advice for Mark Provost and all others who may care to debate Mitt Romney in the future on this topic. When Romney tells you that corporations are just made up of people you can respond by saying one of the following:

1. “Actually there is a huge and growing portion of the value of corporations that never ends up in the pockets of workers or the pockets of capitalists! It is money that stays in the form of factories, machines, etc. and just grows for its own sake. It grows at the expense of the worker. We work for it not the other way around.”

2. “Put down the Book of Mormon and read volume 2 of Marx’s Kapital.”

3. “If I wrote Volume 2 of Kapital on a gold tablet and buried it in the hills of New York would you take the time to read it?”

4. “Fuck you, clown.”

[everything in brackets is a note about possible visual images for video production]

(everything in parenthesis is something I’m considering cutting out and relegating to footnotes)

Law of Value 9A: Abstract Labor

Money can really fuck you up. It can make you lose your home. It can make you go to work. It can topple governments, cause wars, pave the jungles…

Of course it’s really nothing by itself: pieces of paper, digits in a computer… And of course money doesn’t literally take away homes, topple governments, cause wars or fuck you up. People do these things. Money then seems to have a strange power to compel people to do things. It has a certain social power.

What kind of social power does money have? It seems to have any social power we might want it to have. In a society in which social life is coordinated by market exchange money has the ability to buy any aspect of this social life, to compel any action, to coordinate any complex activity. The more money we have, the greater our ability to command this social power. This is a non-specific power. It is not tied to any particular activity, commodity or person. It is social power in the abstract. [word 'abstract' appears]

This abstract social power goes by another name: value. The subordination of society to the rule of value we call: The Law of Value.

[Title Sequence]

Value, then, is quite an abstract substance. It does not refer to any specific concrete thing. It is just value in the abstract, social power in the abstract. Our society is ruled by an abstraction. But it is certainly not true that all societies in all times were ruled by abstractions, by value. Only in a certain type of society is social life ruled by abstractions. This begs the question: “What sort of organization of society is necessary for the existence of value in the abstract?” [question appears on screen]

(We ask this question not for fun but because the answer will allow us to figure out how to create a society not ruled by the law of value.  There are several possible answers to this question but not all of them are complete answers. We will move through several answers, several perspectives, the incompleteness of each vantage point driving us to probe further into the social fabric of a capitalist society.)

Free Market

The existence of value implies the free exchange of things between people. Perhaps this is the essential feature of a society ruled by the law of value, by abstractions. In bourgeois theory this free exchange is often deemed all that is necessary to characterize the fundamental elements of our society. We are told that we live in a “free market society” (or that we should live in one), or a “free enterprise system”. Since this narrow picture seems only to show consenting individuals freely engaging in mutual agreements it is often used by apologists of the status quo to defend the system. After all, what is wrong with freely making mutual agreements with others? The positive aspects of this vantage point have influenced some anarchists that seek to build mutualists societies of freely exchanging individuals, as well as market socialists who want to cooperatize the workplace yet leave market exchange in tact.

But we need more than just the phenomenon of free exchange to explain the existence of value in the abstract. It is one thing for two isolated individuals to make one exchange [this could be any image of two isolated people exchanging something... dudes in a desert, etc. I would change the text to fit the image]. But it is quite another thing in a society organized through exchange where we can observe regular, predictable exchange ratios between commodities.

A boat equals a thousand cigars. A book equals 4 pears. These are relations of value between things. In order for us to form predictable, reliable exchange ratios between things (in order for us to know how many boats to exchange for cigars) there must be some predictable knowledge of the supply of these things. And in order for exchange to continue everyday there must be a regularly recurring supply that we can predict to some degree. The force that constantly replenishes these supplies is, of course, human labor.

This brings us to a fuller picture of our society ruled by abstractions. Rather than just a society of free exchange, it is also a society in which this exchange is regulated by production. The production of commodities by people creates both the demand for and supply of these commodities. It determines (at one level of abstraction) the exchange ratios between these commodities.

At the same time the exchange of commodities is the means by which the division of labor is regulated. It is only the raising and lowering of prices that can apportion labor between different tasks. Thus we have a society in which exchange and production constantly regulate each other.  Behind the movement of commodity values in the market lies a parallel process of the movement of labor from one task to another. The social power of money, of value, lies in its ability to move about this labor.

Abstract Labor

If the social power of labor comes from its ability to measure and command labor, what kind of labor is this labor? Knitting? Building? Singing? [any examples suffice, depending on good images] It is any kind of labor. Labor in general. Abstract Labor.

We began by asking what sort of society makes the rule of abstractions possible, makes the law of value possible. After penetrating the surface appearance of market exchanges we found that it is a society in which the value relations between commodities are directly related to the labor that produces these commodities. And now we have seen that the abstractness of these value relations is paralleled by an equally abstract aspect of human labor, abstract labor. Does this answer our question as to what sort of society makes such abstractions possible?

No.

Marx is sometimes taken to task for his concept of abstract labor. “How is it possible,” some ask, “for Marx to theoretically equate all of these different sorts of labors? Manual and intellectual labor? Skilled and unskilled labor? etc?”  “Labor is never abstract,” they argue, “but is always a specific type labor.”

Marx’s reply is typical of Marx: We don’t have to theoretically equate all these different labors. Society does it for us. Society already treats all labor as an abstraction. For us as individuals our work seems very concrete and very important. But when we suddenly lose our job because of an economic crisis, when we see jobs move to other countries, when we see entire skill sets replaced by machines, we realize that our own livelihood means nothing to capitalism. For capitalism our work is just an abstract unit in a giant profit calculator. We are just another digit to be moved around. In this sense, though our work seems very specific and concrete to us, for capitalism it is completely abstract. All that matters is that it produces value.

If abstract labor is not a philosophical idea but a real phenomena, a real abstraction that is made by capitalism itself then that leads us to ask again: what sort of society makes this possible?

The answer is this:

People only become abstract units in the profit calculator of capitalism when they sell their work as a commodity in the market. A society ruled by the law of value requires wage labor.

[OWS sign that says "people are not commodities"] People are not commodities but their ability to work is. This is called “labor power”. How does the exchange of commodities apportion labor? This apportioning takes the form of the buying and selling of labor power. Wage-labor is the mechanism by which the “hidden hand of the market” moves labor inputs about.

We finally have an answer that seems adequate to our initial question: what sort of society makes possible the law of value, the subordination of society to the abstraction of value? We see that this abstraction of value is tied to the abstraction of labor. And this abstract labor relies on the existence of labor power as a commodity. When labor-power is a commodity then the specific uses of that labor become irrelevant to capital. All that is important is that profit can be produced by exploiting this labor. It doesn’t matter if this labor knits sweaters or makes guns. It doesn’t matter if we work 80 hour weeks or work dangerous jobs. It doesn’t matter when the mines collapse on us. It doesn’t matter when we are replaced by robots or when our jobs move somewhere else. It doesn’t matter when unemployment drives down our wages. Our work is just an input into the production of value, of social power. Capital is the expansion of this value, of this social power, for its own sake, not for any particular purpose.

Yet our answer to this question still points to other questions. What sort of society is necessary in order for wage-labor to be the dominant form of labor? We must have a society in which people don’t have access to their own means of production but instead must sell their labor power in the market in order to survive. This requires private property, a capitalist state to guard this property, and lots of drugs and smooth jazz to keep us passive.

So the institution of wage-labor which forms the foundation of the social power of the law of value require a whole host of political, institutional and social factors. In searching for an answer to our question we have encountered, rather than one simple answer, an assemblage of factors, like pieces in a complex puzzle.

Conclusion

We’ve heard demands to “end capitalism”, “end exploitation”, “end private property” and “abolish class”. That all sounds great. We don’t usually hear people talk about “abolishing Abstract Labor”. It certainly sounds like an obtuse philosophical demand. But, as we’ve seen, Abstract Labor is a very real thing, not just a philosophical idea.

When critiquing capitalism it can sometimes seem difficult to identify what it is we want to end- what exactly would be required to break with the capitalist mode of production. Different political positions on this issue come from different ways of seeing the way the complex array of pieces of capitalism fit together. (Here we’ve traced the abstract social power of money and value to wage-labor. But we’ve also seen that this wage-labor is dependent on a complex assemblage of social and political arrangements.)

For the market-socialist vision, it seems that all we need to do replace the class-relationships in the workplace with a cooperative workplace, leaving market exchange in tact. But such a cooperative society would still have wage labor, socially necessary labor time, value in the abstract, and abstract labor. Cooperatives would still be compelled by competition to produce surplus value in order to expand production and stay competitive. Production would still be for the sake of producing surplus value, and not for the sake of bettering society. It is probable that the most efficient and successful firms would be those with the least cooperative structure and the highest disciplining of labor.

For the 20th century communism of the USSR and China it was the seizure of state power by a vanguard of the working class, the nationalization of property, and the administration of  production by a plan that was thought to be sufficient to break with the capitalist mode of production. Yet the plans of the planners resembled the most despotic plans of the capitalist workplace. In order to compete in the world market planners found that they needed to extract the highest amount of surplus value from workers as possible. There was still wage labor, socially necessary labor time, surplus value and abstract labor. The same year the conveyor belt was introduced to Soviet Russia they revised their textbooks to claim that the law of value applied to socialism.

This means that if we are to be serious about anti-capitalist politics we have to be series about our analysis of capitalism. What is it we are really trying to do-away with? And what forms of organization can replace capitalism effectively?

Law of Value 9B: Abstraction

Jackson Pollock- Number 8

The word “abstract” can mean many different things. A painting is abstract if it doesn’t have any references to representational objects. An idea is abstract if it moves out of the realm of concrete examples and deals with general principles. When Marx talks about “abstract labor”, as we discussed in video 9, he is using the term in a unique way. For Marx the abstraction that is abstract labor is not one that happens in the minds of philosophers. It is one that happens in reality. It is a “real abstraction”.

This seems an interesting enough proposition to warrant this brief supplementary video on the topic of Abstraction.

To Abstract or Not to Abstract

What does it mean to abstract? We abstract all of the time. When we say “woman” we are not talking about any concrete specific woman. We are talking about women in general. Yet, there is no such thing as a woman in the abstract. We cannot meet her at a bar and buy her a drink. We can only experience concrete women, specific women.

To attempt to look at the complex totality that is a capitalist society only in its concreteness, only in the specific actions of trillions of individuals all happening at the same time, would be madness. We have to separate out the patterns, finding terms that can encompass a broad swath of concrete behaviors into general, abstract terms. Instead of talking about rice, tanks and DVD’s we have to talk about commodities. Instead of talking about carpentry, dentistry, and bicycle repair we must talk about labor.

When we use the word “abstract” we can mean the verb, the act of abstracting, or we can mean the noun, the concept which forms an abstraction.

There are many abstractions which we may choose to extract out of the complex totality of capitalism and label as the most important, fundamental defining abstractions. In forming our abstractions we have choices to make. The way we abstract and the way we piece together these abstractions determines what full picture of the totality we come up with.

An abstraction by itself will always be an incomplete picture of the totality. In the video on Abstract Labor we began with the abstract power of money. This did not seem adequate to explain capitalism. We were left wondering how there could exist this strange phenomenon of value in the abstract. There was something incomplete, lacking, in our abstraction. We looked to the sphere of exchange, where the exchange of commodities form value relations between commodities. We found that this perspective was still incomplete because it didn’t explain how we could have regularly recurring supplies of and demand for commodities. This led us to examine a labor process that was coordinated by exchange which gave us the idea of Abstract Labor.  But this too was an incomplete picture until we introduced the notion of wage-labor which explains how it is that labor can be come an abstract accounting unit in the profit calculator of capital. But wage-labor then implies a certain class relation, private property and a capitalist state. It was only when these political and institutional factors all came together that our initial abstract was grounded enough to give us an adequate answer to our initial question.

Hegel (Schlesinger 1831)

This movement from the abstract to the concrete is a key feature of Hegel’s dialectical method. Yet there is something quite distinctive to the way Marx uses this method: the way Marx’s abstractions are grounded in the real material practices of capitalism.

When we talked about the abstract term “woman” we noted that we cannot ever meet “woman in general”, but only specific women. However we can meet “value in general”. In fact, we carry it around with us everyday in our pocket. It is money. So the abstraction that is value is not a mental or philosophical one. It is a real one. This is why Marx begins his analysis of capitalism with an analysis of the value-form.

This also differentiates Marx’s method from bourgeois methods of understanding capitalism. For Austrian economists like von Mises it is the abstraction of free human action that is the foundational abstraction that frames the theory of capitalism. But we cannot ever see “human action” in the abstract. It is merely a philosophical device and thus appears as an arbitrary starting point for a philosophical system, begging the charge of being an ideologically motivated starting point.

Because abstract labor is a real abstraction this means that the theoretical system that we build out of it is not just a question of logically extrapolating principles and ideas in our heads from a given a starting point, like we would do in bourgeois philosophy. Rather, since the abstraction is a real one, we must proceed by trying to ground this abstraction in real social practice. It becomes an anthropological investigation. This is why, in video 9, the question that always propelled us forward in our analysis was “what sort of society makes this abstraction possible?” We had to uncover a complex system of social practices that allowed such an abstraction to emerge. Such an approach of grounding our analysis in real social practices keeps us from falling into the trap of fetishism.

Fetishism

We have talked about the fetishism of commodities in several videos, uncovering different aspects of the fetish along the way. In one sense the fetish is a bad abstraction. A fetish attaches the social power of the whole to an isolated, abstracted part of the whole. For instance, when we say “money is power” we are taking the social power of labor, as commanded by the value form, and attributing it to little pieces of paper. To treat money like it has some inherent social power is a fetish.

On the other hand, the social power of money doesn’t go away just because we have exposed the fetish with our fancy theories. Money really does have power because value is a real abstraction. This makes Marx’s fetish argument quite mysterious and tricky. It is one thing to make a bad abstraction and attribute the powers of the whole to one piece of the whole. It is quite another when this abstraction is a really existing phenomenon that can’t be changed by theory.

Depending on our vantage point we can argue two different points. One the one hand money and commodities are just objects and do not have any inherent social powers. They derive their value and social power from a specific organization of labor. On the other hand the social power of money and commodities is not an illusion. In a capitalist society they really do have value and social power. The fetish is real.

This strange phenomenon of commodity fetishism leads to all sorts of confusion when we think about capitalism. It can lead people to the conclusion that money has some inherent value, that capital creates its own surplus value without labor, and that exchange value comes from the material properties of commodities. We often call these ideas fetishes but it would be more correct to call them ideas generated by the fetishism of commodities.

Marx does not just dismiss such ideas. Instead he subjects them to the same sort of analysis that we have just discussed: he seeks to ground these ideas in real social practices. All of video 9 could be seen as a Marxist critique of the idea that money has some inherent value. Rather than dismissing the idea we acknowledge the fact that money does have power. We then show that this power is not a result of the material properties of money but a result of a specific sort of social organization of labor. Thus we can show that such an idea, the idea that money is power, is the result of a specific type of social relation. In this way Marx destabilized bourgeois theory. He takes bourgeois ideas and shows why they are possible.

There is a new website in town. Now, perhaps you are already maxed-out on new websites, but I would urge regular readers to consider paying a bit of attention to this new site as it is a bit unique. The project is called “Network for the Circulation of Theoretical Struggles” (NCTS). You might remember that about a year ago I spoke at a panel at a conference in New York called “The Economic Crisis and the Left Response” that featured some heavy characters like Rick Wolff and Andrew Kliman. The conference was a great success, bringing together a lot of disparate thinkers all interested in exploring the relevance of Marx not just to the academic exercise of analyzing the crisis but to the concrete problem of politics. An idea came out of the conference: the formation of a platform for theoretical struggles that brought together many people interested in Marx for real discussion. Let’s face it, a great deal of discussion that happens on the left happens in echo chambers, where leftists preach to the choir. A great deal of “conversation” is often just people talking past each other, using discussions for platforms to advocate a party line rather than a real place for exchange of ideas.

This website, the Network for the Circulation of Theoretical Struggles, aims to provide a platform for real dialogue between disparate tendencies, not with the goal of coalescing around a party line, or deciding on one correct analysis, but instead of fostering the development of a theory-praxis relation that will be relevant to contemporary political struggles. There has been a large resurgence of interest in Marx in recent years, including Capital reading groups and the like, and we seem to be in a unique historical moment for the development of Marxist thought.

I was honored to be asked to compose an introductory essay to help start discussion on the site. My essay is a critique of David Harvey’s crisis theory, which I find to be problematic on many counts. But the essay is more than that. It is also a call to those of us looking for ways to develop Marxist thought in a new way to also be critical of our role-models and teachers. We have to remember that their ideas come from a specific place and time and that they don’t necessarily have to be the ideas of this time. It appears my essay was a bit long (14 pages) so it will appear on the site in 3 installments.

Here is the site: Network for the Circulation of Theoretical Struggles

(note this link changed since the first day I posted it… technical glitch!)

And here is the first installment of my essay: That 70′s Show, Starring David Harvey, Overaccumulation, and the Baggage of the 70′s

Commenting is restricted to members in order to foster the community of discussion mentioned above. Consider this your invitation to become a member of the Network. You read this blog. You care about this stuff. You have something to say. Join the site. It’s a brand new project and its direction will be shaped by the ideas of participants.

This is what you will feel like when engaged in theoretical struggle:

And here is the official invitation to join the website:

Dear Friends,

We are writing to invite you to become a participant in a new international initiative, the Network for the Circulation of Theoretical Struggles (NCTS). Capitalism’s most severe financial crisis since the 1930s and the Great Recession have left us with an especially uncertain future. “The new normal” may prove to be very difficult, economically and politically. In order for the Left to be prepared for what may happen and prepared to respond effectively, more and more activity and organization will not be enough. We also need the organization of thought. Wide-ranging dialogue is key, not only so that all views can be heard, but, above all, so that we can test different ideas in debate and work out answers to the questions we face.

We are encouraged by the relatively large number of reading groups (study groups) on Marx and Capital that have sprouted up in the U.S., the UK, Germany, and elsewhere, largely in response to the crisis and slump. Nothing like this has been seen since the economic crisis of the 1970s. We are also encouraged by the seriousness with which the causes and consequences of the recent crisis have begun to be discussed.

We have formed NCTS to help facilitate and bring together these and similar initiatives. Everyone throughout the world who is interested in this project is invited to participate in it. We hope to bring together individuals in reading groups and related projects, and all other interested people, so that we can engage in dialogue, provide mutual assistance, and share information. NCTS will supplement, not replace, the activity that is already taking place.

The term “theoretical struggles” combines two seeming opposites, theory and practice, that NCTS will try to help unify. It is for people who recognize that activity and organization, without theory, will not be sufficient, and who are deepening their grasp of theory not simply for the sake of knowledge, but so it can serve as a guide to action.

What is needed, in our view, is not a theory, but the doing of theory. The point is to work out answers to the questions we face on a rational basis, and this requires critical examination of all ideas, taking nothing for granted. So NCTS is not a project that will select some particular theory from among the existing alternatives, and certainly not an opportunity for adherents of different positions to fight to have their position adopted as the “correct” one. We want it to be an ongoing, collaborative process in which we engage with one another, explore and test ideas, and develop our thinking in order to respond in a rational and effective manner to the new challenges of our times.

The doing of theory does not mean adopting political positions, but rather digging deeply into the ideas that underlie differing views of the crisis. In order to contribute to the fight against capitalism, we need to examine the theories that are contending and what their ramifications may be. NCTS therefore does not have a political or theoretical “line.” It is open to all who share its goals, participate in it, and abide by the procedures and rules it sets for itself. All participants have equal voice and vote.

NCTS’ first project is the website we have established, www.nctswebsite.wordpress.com. It will provide a forum for dialogue as well as an archive of articles, readings, and links.The first topic for discussion is a critique of David Harvey’s crisis theory and “the theoretical baggage of the 1970′s” by Brendan Cooney. One of NCTS’ initiating participants, Brendan also operates the Kapitalism101 YouTube channel and associated blog, and he was active in a reading group on Marx in Philadelphia for several years.

Because we want NCTS to facilitate dialogue and mutual assistance, not just be a source of information, use of the website is limited to active participants in NCTS. Our working definition of “active participant” is someone who engages with what others say and write. (Those who just express their own views or publicize what they’ve written are not actively participating in the project we’ve outlined above.) In order to facilitate dialogue, the website’s moderator(s) will ensure that posts do not divert, engage in ad hominem critique, or contain remarks that are racist, sexist, heterosexist, or that demean members of any nation, nationality, or ethnic group.

Please consider becoming a participant in NCTS, and please forward this invitation to others who you think may be interested. For information on how to apply, and to view sample content from the NCTS website, please visit nctsinfo.wordpress.com.

David Adam
Brendan Cooney
Mike Dola
Alan Freeman
Mac Intosh
Anne Jaclard
Tom Jeannot
Andrew Kliman
Sander
Seth Weiss
Charlie Winstanley

part 1:

part 2:

part 3:

part 4:

One of the more common objections raised to Marx’s theory of value, at least here in the theoretical void of cyberspace, is the objection posed by subjective value theory. Though these modern objections often take quite a crude, simplistic tone, they are echoes of a rather old debate, one that dates back to debates between Marxists and Austrian economists that took place in the late 1800′s and early 1900′s. Austrian thinkers like Bohn-Bawerk and Mises were staunch defenders of free markets and private property, seeing capitalism as the ultimate expression of human freedom. In response to the revolutionary challenge of Marx’s economic ideas they advanced an alternative view of economics in which economic value was not determined by human labor but by the subjective valuations of individuals.

The Austrians called their theory Subjective Value Theory (STV), also known as marginal utility theory, and they called Marx’s theory an Objective value theory. Marx himself never used this sort of language to describe his theory because such a simplistic dichotomy would have robbed his theory of much of its nuance and depth. Nevertheless, Marx’s defenders often accepted this dichotomy, advancing a staunch defense of Marx’s supposed “objective” theory of value. If we really want to understand Marx’s theory of value we need to dig a little deeper than this.

At first it may seem that this debate over value theory is purely an academic one, not so urgent an issue in these times of crisis and political upheaval. But value theory actually sits at the center of any theory of capitalism and is therefore extremely relevant if we are to understand this crisis of capitalism. The Subjective-objective debate is more than just an academic feud about how to theorize prices. It is a debate about two rival visions of the world, one deeply apologetic of capitalism and one radically critiquing it.

Though mainstream neo-classical econ has sought to distance itself from the  the particularly extreme capitalist apologetics of the Austrian school, both share a common origin in the theory of Marginal Utility. (1) This economic crisis has brought to light the utter bankruptcy of mainstream economics as its ideologues stutter and stumble in the face of an economic depression that doesn’t fit into their models, bringing into question its most foundational theories, like the theory of marginal utility. In this crisis it is important to understand the failures of the dominant ideology so that we know what we are fighting and how not to replicate those mistakes in our own movements. Therefore we will need to spend some time in this video laying out some of the fundamental failures of the subjective, or marginalist approach to economics.

The mantra of all ideologies is the phrase “that’s just the way things are.” Econ professors and right-wing pundits love to use this phrase. When factories close they tell us “that’s just the way things are”. When people are poor and live in degradation we are told that this is the way of the market and that nobody is to blame but the poor themselves. They can make this argument because their theory of the market is based on a theory of subjective value. If economic value is subjective, as the theory of Marginal Utility argues, then the marketplace is just a clearinghouse for our desires. It serves as a vast, unconscious, democratic network, adjusting needs and production with scarcity to provide the best possible organization of our competing subjectivities. The outcome of this market process can’t be critiqued because it is just the spontaneous result of our desires. There is nobody to blame if something goes wrong. Responsibility is dispersed between millions of individuals. The only thing we can critique, from the Austrian perspective, is those who try to interfere with this market process, like unions, social movements or the government.

If value is entirely subjective then we also can have no theory of exploitation. The division of the social product into wages of workers, profit of capitalists and rent to landlords is not explained by the power of these social classes. Instead it is seen as the result of purely technical factors, like the scarcity of inputs relative to the subjective decisions made by workers and capitalists as they enter into free contracts. Rather than a theory of classes, we have a theory of pure individuals, all seen as equals in the market. And since individuals have always had subjective values the subjectivists can argue that capitalism is the expression of universal human characteristics and not a particular historical form subject to change.

It certainly is true that when we go to the grocery store to spend our meagre wages we get to choose between Coke and Pepsi. But if this sort of choice is the ultimate horizon of human freedom then we really haven’t achieved much as a species. While subjectivists busy themselves with complex models of consumer behaviour as we choose between Coke and Pepsi, they miss the fact that these choices happen within the context of larger institutional arrangements which we have no choice over at all. It is these larger structures that Marx is interested in: private property, wage-labor, commodity exchange, and the law of value. For Marx the market is a place where blind economic laws dominate over us, where subjects are powerless and where objects like money and commodities are imbued with social powers. We are all hyper-aware of this fact today as we watch the most powerful people and states in the world flounder helplessly in the face of this economic crisis. The Law of Value commands, people obey.

a point of clarification:

Great confusion comes from the fact that the word “value” is used to mean different things. Some people think that because you and I make personal value judgements when we go shopping that these judgements must be the source of the value of commodities.  But the personal value judgements we make in our heads are not the same as the exchange values of commodities. Commodities have exchange values, the quantitative ratios in which they exchange with other commodities. People make value judgements, judgements which are not measurable or quantitative. Just because we use the same word, value, for both phenomenon doesn’t mean that they are the same thing or that there is any relation between the two at all. This relation has to be proven. Many logical mistakes are made by people who don’t distinguish between these two uses of the same word. Don’t be one of those people!

STV argues that we can understand exchange-ratios solely through a theory of the subjective, psychological motives of consumers. It’s attempt to do so is fatally flawed, shot through with unwarranted assumptions, shoddy abstractions and circular logic. Let’s take a look at some of these problems

The Subjectivist Vacuum, or, Pay No Attention to the Man Behind the Curtain

Welcome to Subjectivist Island. Here lives Eugene, our happy island barbarian. Everyday Eugene makes choices. He decides to spend his time building his teepee, catching fish, or practicing his backstroke. He likes the backstroke most of all, but after so many laps around the island he gets tired of it and starts to prefer catching fish or teepee building. Intent on maximizing his utility, Eugene gets out some paper and a pencil and makes himself a preference scale so that he can figure out the exact proportions to devote to all 3 activities each day. He cherishes this preference scale because it is the source of his freedom. It’s just like the preference scale you carry around in your pocket everyday….. you carry one don’t you? (2)

Ok, now setting aside the fact that most of us don’t carry around a preference scale in our pockets, there is a bigger problem: Subjectivists want you to believe that this little story about Eugene and Subjectivist Island is all that you need to know in order to understand the functioning of modern capitalist society. Funny then, that we had to abstract away all of capitalism, all society in fact, in order to arrive at our theory of preferences. Were we to think critically we might begin to suspect that there is something fishy going on with this abstraction. That fishy something is the stink of an ideological abstraction. We discussed such ideological abstractions in the last video, Law of Value 7, but let’s review a few points here.

The point of a dominant ideology is to make it seem like the present order of things is a universal order; that the status quo is the natural expression of things, unchangeable. How convenient then, for our bourgeois theorists, that our natural, universal man, Eugene, happens to contain the seed of modern capitalist society in all of his preferenc-ing and acting. It’s as if every choice made by every human since the dawn of time was just an expression of innate capitalist instincts, waiting to come into being in our modern society.

But it’s not enough just to point out the obvious ideological basis of subjectivist theory. We must also prove that this ideological abstraction is illegitimate. Let’s do that. It should only take a few minutes.

The parable of Subjectivist Island leads one to think that human desires are formed privately, independent of society. But this has never been the case. Desires are taught, socially constructed, and can’t be understood independently of society. How do subjectivists respond? They say “Yes desires may be constructed but this is out of the scope of economics so we don’t have to consider it.” In fact, this is how modern economics deals with all criticism- it ignores it and says it’s the topic of another discipline. How convenient! It’s like saying that we don’t have to consider the fact that the earth is round because that’s beyond the scope of flat-earth theory.

We can’t understand desire without also understanding the ways in which we go about attaining our desires. Here’s where the abstraction of Subjectivist Island breaks down. On the island Eugene attains his desires by directly acting to get the things he wants. But these are not the sort of choices we make in a capitalist society. In capitalism we have to sell our labor to someone else so we can make a wage that we can then spend on the things we want, but only after we’ve given most of our wage to the landlord, the mortgage company and the state. Subjective value theory has to prove that it can move this abstract model of choice from Subjectivist Island to a full-scale capitalist economy. It does this through the fantasy of barter.

Let’s say Eugene, while back-stroking one day, discovers another island called Barter Island. Here lives Ludwig who cracks coconut all day. They decide to trade fish and coconuts, each one carefully measuring their utilities for fish and coconuts on their preference scales, calculating the precise exchange ratios to maximize their utilities, resulting in an exchange ratio between coconuts and fish. “Now,” says the subjectivist, “we have shown that our abstraction was legit and that we can explain exchange ratios purely through the science of preference scales.” If only it were that simple.

The first thing we might notice is that the exchanges on Barter Island can only take place because Eugene and Ludwig have different resource endowments. If they both had access to coconut and fish then there would be no reason to trade. In order for trade to continue in a sustained way, trade must reproduce these differences.

This means that in order for a capitalist market to work there must be the constant reproduction of a certain type of property relations in which people have to enter the market in order to get what they need to live. Specifically people must be deprived of their own means of production, forced to enter the market to sell their labor in order to buy the things they need. This property relation must be continually reproduced through exchange so that there is always scarcity and people are always dependent on the market.

Thus, we can see that something very sneaky has been done. Hmmm… what is it?  We were trying to form a theory of barter based solely on subjective preferences when all the sudden we realized we needed to assume a certain type of property relation in order to make any sense of it. Thus, abstracting away property relations and forming a theory of exchange without them is impossible and illegitimate.

Even more damning is the fact that capitalist societies don’t have anything to do with barter. People don’t produce to directly exchange products for other products. We produce in order to exchange things for money. Money is an intermediary in all economic activity. So it makes no sense to say we measure our subjective utility for coconuts against fish when exchanging. We measure everything against money. When you are in the supermarket calculating your preference scales with the Preference App on your iPhone you aren’t just considering your preferences for fish and coconuts in the abstract, as if on a desert island. You are also considering the market prices of these commodities. This market price already exists before you make your subjective value judgements.

But this is problematic. Subjective valuations were supposed to explain price, but now we have to assume the prior existence of prices in order to explain subjective value judgements. It seems we are stuck in a big messy circle.

And if we are exchanging everything for money then we must have a utility for money right? But money has no direct utility. It’s not even good for blowing your nose on. The value of money is what it will buy. And this is not set by our preferences but instead reflects the relation of money to all other commodities, reflecting the vast interpenetration of millions of markets all over the world. There is no such thing as a personal utility for money because money’s value is already established by forces beyond our control. (3)

And there are more difficulties presented to subjective value theory by the presence of money. On Barter Island Eugene and Ludwig had direct knowledge of what they were getting from each exchange. But in our world we don’t know exactly how much everything is going to exchange for ahead of time. When we sell a product in the market we don’t know exactly what products we will be able to buy with that income. There is a high degree of uncertainty. But with so much uncertainty how are we ever to form those nice, rational preference scales where we’ve perfectly calculated the exact utility relations of all commodities to each other? Well, we can’t!  (4)

It seems that every time we try to abstract away property relations and production relations they end up sneaking back into the picture. This is because it is absolutely illegitimate to try to explain capitalism without a theory of the social relations between people as they actively produce the world they live in. Luckily we have a better theory, that of Karl Marx.

In the Real World….

In the real world, outside of the fantasies of bourgeois economics, subjects and objects have no meaning apart from their relations to each other. There is no such thing as a subjective individual floating in a vacuum. We develop our subjectivity through our relation to the objective world we inhabit. And the objective world can’t be understood apart from the actions of societies of individuals who transform this world, bending it to their will, giving it meaning. Subjects and objects always exist in a relation, deriving their meaning from this relation.

On Subjectivist Island it seems like subjects form their value judgements through passive contemplation before they act on them; judging happens first and then action. In the real world we can only understand our subjective preferences once we understand the active process by which people relate to and transform the world. People work on nature. We chop trees and make houses. We build cars and dig up oil to power them. In transforming the objective world we also transform ourselves. The modes by which we work upon the world determine our views of the world, the sort of values, needs and desires we have in this world and the manner in which we pursue those desires. These different modes of producing have changed throughout history, each mode producing very different sorts of societies with very different value systems. These different modes of relating to and transforming the world Marx calls “modes of production”. (5)

Capitalism is not the first mode of production characterized by extreme inequality, war, exploitation and instability. These qualities are part of all class societies. What is unique about capitalism is the way this domination of one class over another takes the form of relations between commodities. This is due to a particularly unique subject-object relation in capitalism, something Marx refers to as “subject/object inversion”. We will return to this in a moment.

Subjects, Objects and their Prices

Objections to Marx’s theory of value often have to do with the way his theory of value relates to market prices. If value comes from the amount of labor that goes into producing things, then how do we explain the fact that a rise or fall in demand changes market prices? The fact that demand influences price makes it seem like subjective decisions influence value as much as labor time.

The value-price relation is not an easy one to enclose in neat, tidy definitions. The more we look at it the more complex the network of social relations that go into the formation of prices. I will deal with the value-price topic in more detail in a future video (Law of Value 11: Price), but a few remarks are in order here. We’ve actually covered this ground briefly before in Law of Value 3 where we talked about the way private labor becomes social labor. (6)

Private labor is the amount of labor an individual worker devotes to the production of a commodity. The goal of the worker is for her private labor to become social labor, that is, that her commodity be sold in the market and thus be equated with all the other commodities in the market, making her labor part of the total social labor of society. But this isn’t so easy. Because production is only coordinated through the fluctuation of market signals, it is always uncertain whether commodities will be sold, and whether private labor will become social labor.

As we’ve seen in previous videos, in order for private labor to become social it must produce at the socially necessary labor time. SNLT is a way in which the social level of productivity acts back upon the private labor of the individual, disciplining the individual to work at the social average. Individuals or firms that can’t work at the SNLT go out of business, like when American auto-workers lose their jobs due to competition with plants in other countries. Their labor is then reallocated to other areas where they can be more profitable, or they don’t work at all. As many of us know, losing a job and having to find new work is a long, hard, painful process. But these discomforts don’t matter to the market. The market treats all labor like digits in a calculator, anonymous units to be moved around in the search of profit. The gap between private labor and social labor is the mechanism by which labor is moved around and reapportioned through the blind forces of the market, in the absence of a social plan. (7)

Now all this should sound familiar. But what does this have to do with the relation between demand changes and price? The same process of reapportioning labor happens with changes in demand.  Just like the need to produce at the SNLT, society must also apportion the right amount of labor to produce the right amount of things so that markets don’t become over-saturated or under-stocked. If the supply of elevator music exceeds demand then some of this music will remain unsold and some of this private labor will not become social. Producers will be forced to move their labor elsewhere. This apportioning of labor happens through the fluctuation of price. [insert image of person thinking, though bubble creating a commodity, or a price sign or something] This does not mean that demand creates value. Demand hasn’t created anything. It has merely indicated, through price signals, that labor needs to be reallocated. This is how demand effects the distribution of social labor in a society coordinated through the fluctuations of prices. This distribution is only possible because there is a relation between prices and labor time.

A further examination of demand

So we can show that demand, rather than creating value, is part of the reallocation of labor that is implied in the gap between private and social labor. But we can also take the analysis further and show how demand itself is produced in capitalism. From the perspective of subjectivist island it seems like demand is the product of free, independent minds, viewing reality from some distant, objective standpoint. But in reality our subjectivity is a part of a mode of production. This is nowhere more apparent than in the capitalist mode of production. In capitalism the only type of demand that counts is “effective demand”, that is demand backed up by purchasing power. Consumer demand comes from wages paid to workers. That means we can’t understand demand without first understanding wage labor and exploitation.

The products which consumers buy with this money are not just the random result of psychological preferences. In fact, most of our money goes to the purchase of very basic things we need in order to keep us alive as workers so that we can produce more value for capitalism each day: rent, food, clothes. (8) These are needs and desires dictated to us by capitalism, for the purpose of perpetuating capitalism, not the abstract psychological preferences of isolated individuals. (9)

But the bulk of the demand in society comes not from consumers but from capitalists. You and I buy toothbrushes and pay rent. Capitalists buy factories, assembly lines, natural resources, and private armies. This demand has nothing to do with the personal preferences of capitalists. (10) It has to do with the technical requirements of production, the amount of inputs it takes to make a widget at the SNLT. Some people think that capitalists enter production only in order to meet the demands of consumers. This is a myth. The advertising industry is the best refutation of this myth. Capitalists produce in order to make a profit. Then they go looking for markets. Most of the time they have to create the market by convincing people there is a need for their product. But capitalist firms also sell to each other, totally bypassing the need to find consumer markets. (11.)

This all gives us a very different picture of the subject-object relation than we get in bourgeois economics. Rather than a free society of empowered individuals who are free to act upon their abstract desires and take full-responsibility for their lot in life, Marx’s critique of the capitalist mode of production reveals a world in which individuals are at the mercy of the coercive laws of the market. The sorts of superficial freedoms they have to choose between coke and pepsi pale in comparison to the disciplining of our lives to SNLT and the pursuit of profit.

Subject/Object inversion

[Mitt Romney quote about corporations being people]

There is a lot of talk in the Occupy Wall Street movement about ending “corporate personhood”. The problem with this demand is that the legal status of corporate personhood is just the icing on the cake. In a capitalist society corporations are much more like people than people are. Capital is the active subject and people its object. This is what Marx means by “subject/object inversion.” Rather than people being the active agents of the social order it is the “objective” logic of the market that dominates subjects. Blind economic laws rule and people obey. Money becomes more powerful than life. Corporations become people and exert more power in society than individuals or even social movements. While people run around in the street with signs begging the system to take notice of them, the cold-logic of capital becomes the active agent in society, using the body of the worker like a passive expendable commodity, subordinating societies, governments and even nature itself to the impersonal motives of profit.

The crazy thing is that this “objective” world is still just the product of our own creation. We actively reproduce it everyday. This is what makes Marx’s critique of capitalism so powerful: The world we live in, despite the incredibly disempowering structure of our current situation, is always only the result of our own actions and we do have the ability to collectively change it. But in order to exercise such collective power we must break with the capitalist mode of production.

conclusion:

In case you were wondering Subjectivist Island and Barter Island don’t exist. They are abstractions. Now every theory needs abstractions- we must sift through a world of data and identify the broad contours and important categories that define reality. Subjectivist and Barter Islands are “ideal abstractions”, that is, abstractions that exist only in the minds of philosophers.  Marx makes a different kind of abstraction, a “real abstraction”. A real abstraction is not made by philosophers arbitrarily leaving out parts of social reality. A real abstractions is made by reality itself.

In a capitalist society human labor becomes abstract. In the caste system of feudalism where people were born into certain types of work and there were strict divisions between castes there was no such thing as labor in general, or a worker in general. But in a capitalist society labor loses all of these specific features. Capital treats us like anonymous digits in a profit-calculator, moving us from place to place in the search for profit. Our labor becomes abstract labor. We become, not peasants, knights, or artisans, but workers in general. Marx’s theory of value is based on this real abstraction that is made by the mode of production itself, not the minds of philosophers.

This doesn’t mean that the perspective of marginalism comes from nowhere. Marginalism comes from a real existing standpoint within capitalism, the standpoint of the atomized individual contemplating commodities. This standpoint is real. We experience it everyday at the grocery store. But it is an incomplete perspective because it leaves out the entire world of social production that puts commodities on the shelves and money in our pockets. This perspective is the perspective of commodity fetishism, in which the social power of our own labor takes the form of inherent properties of objects. (12)

But in times of economic crisis we see cracks in the walls of this reality. Old ways of thinking lose their relevance. Crises are a time when the economic laws of capitalism are exposed not as eternal, universal laws as the bourgeois economists would want us to think, but as the particular laws of this time, laws that we might be able to overthrow. As the law of value breaks down, as people start to question the order of things, the capitalist state must enter the picture, replacing the failing law of value with the brutal law of the state. The charming, freedom-loving world of the market apologists is revealed for what it really is, an exploitative order based on violence. Like a schoolyard bully, a system is always the most violent when its weakness is exposed. When the law of value breaks down the politics begin. Subjects must become active. This can be the politics of the ruling class as it scrambles to reassert the status quo or it can be the politics of radical movements that posit the possibility for new social orders.

Footnotes:
1. Undoubtedly I will raise the ire of both neoclassicals and Austrians by treating the two camps as one for much of this video. Both schools of thought have their historic origin in the theory of marginal utility, though the way this theory has been treated and evolved in the two camps has diverged over time. This video deals with marginal utility on a very basic level, analyzing the types of abstractions needed to sustain a theory of marginal utility (namely extracting away production relations) and thus should serve as an appropriate starting point for a critique of either school of thought. There are many more critiques to be made of both camps.

2. Prior to his preference scale Eugene used utils to measure all the objects of his desire. These were basically little bits of his subjectivity that he kept in his pocket like gold coins. He exchanged them with himself every time he made a decision. At some point in the 20th century bourgeois economists decided that utils didn’t exist and replaced them with graded preference scales. These look sort of like a combination of a bar graph and an abacus and all of us carry them with us at all times and consult them before we engage in any human action. They are the primary instrument of our freedom but the government wants to take them away from us and make us slaves.

3. Austrians will be quick to point out that the ‘great’ Ludwig Von Mises provided a solution to this problem of the subjective value of money. He argued that since money was originally a commodity like gold that originally, in barter, people did have a subjective value for the particular uses of gold. Thus the original exchange value of gold was a result of these subjective valuations. Once gold became money, of course, its exchange value was altered by its role in the circulation of commodities. It became worth “what it could buy”. People formed their subjective estimations of gold based on this objective “what it could buy” measure. Yet the fact that we can trace a historic path from the original subjective valuations of the use of gold, to the subsequent layers/sequences of valuations that eventually arrived at the objective value of money seemed, to Mises, a solution to the problem. In Bukharin’s “Economic Theory of the Leisure Class”, in a footnote, he points out that this “solution” by Mises merely replaces an idiographic, historical description for a theory. It doesn’t matter if we can describe some historic process whereby a commodity becomes money. The value of money is not created or altered by subjective preferences for money.

4. The neo-Austrian response to this problem is to distance themselves from the neo-classical idea of the rational consumer and to stress the imperfect information of the consumer. Rather than consumers being super-rational beings that can calculate the relations between the objects of desire, the fallibility of human understanding is stressed and the market is seen as the ultimate informational clearing house which adjusts the imperfect desires of the multitude, smoothing them out, allocating resources in the most efficient and democratic way. Their language often takes on religious overtones here, stressing the inherent insufficiency of human judgement against the omnipotent, mysterious power of the market. The problem is that these magic moves of the hidden hand of the market are just asserted and never proven. Rather than actually proving that the market can do this Austrians prefer to stress that the only alternative is the State-Communist BogeyMan.

5. For Marx the subject-object relation is not just a matter of personal psychology, of people thinking about objects in the abstract. Instead it is based in the real, concrete working activity of people actively transforming the world. This is what is by “materialism.” Often people think that “materialism” means that individuals are unimportant, or history is predestined, but this is not what Marx means. He wants us to understand the specific ways in which subjects and objects relate through the real activity of social groups in their day-to-day activity, in their mode of production.

6. The first thing to note is that, just as the commodity passes through many different hands and fulfills different functions as it moves through the vast network of capitalist social relations, so too value takes many different forms. Different aspects of the value relation come in and out of focus depending on where we turn our gaze. Value can take the form of private labor, social labor, and market price. These three forms of value all act back upon each other, co-determining each other, just as all the various moments of production and exchange influence each other.  Market prices can fluctuate from day to day due the seemingly chaotic way information about prices is transmitted through markets. But through these fluctuations we can observe law-like regularities. etc.

7. And this is why the dream of running your own business and “being your own boss” is only possible in the cracks and interstices of capitalism, in those few paltry industries that it is not profitable for big firms to enter. The amount of resources a large firm has at its disposal make it quite difficult for the self-employed to work at a competitive socially necessary labor time.

8. A timely tangent: The consumption habits of the unemployed and underemployed are also largely dictated by capital. Being unemployed is expensive and time-consuming. One must drive to interviews, have a clean suit to look good for those interviews, send out tons of resumes, etc.

9. This is why we need a theory of distribution before a theory of price. The theory of marginal utility tries to explain price first, and then explain the distribution of the social product between classes afterwards. The most extreme version of this would be the price theory of Mises who argues that not even the cost of production enters into the formation of prices. For Mises, consumers determine prices through their valuations, then the revenue from the sale of the commodity is distributed amongst the factors of production according to the competitive bidding of capitalists. On the contrary, the classical economists before Marx formed their theory of price only after the distribution of the social product between classes… Thus the price of the commodity would be the wages paid to workers plus the profit of the capitalists plus the price of inputs (which go to other capitalists) plus any interest or rent owed to other parts of the capitalist class. Obviously a class analysis of society is only possible with the classical approach.

10. Nor does the capitalist production have anything to do with “corporate greed”. Please, Occupy Wall Street, stop using this ridiculous term. It doesn’t mean anything. There is no such thing as corporate greed. Corporations don’t have personalities. They aren’t greedy. Capitalism is the problem, not the subjectivities of capitalists.

11. Underconsumption theory, one of the more prominent radical theories of the current crisis, is based on idea that production is for consumption. Underconsumption theory argues that since all production is eventually for consumer consumption that a shortage of demand or purchasing power from consumers can cause an economic crisis. This neglects the role of capitalists in creating their own demand for products, not for the personal leisure of capitalists, but for productive consumption, as inputs in the production process.

12. See my video on commodity fetishism: Law of Value 2

Further Reading/Bibliography:

Marx, Marginalism and Sociology by Simon Clarke. This is available online, and I wrote about it recently on this blog.

From Political Economy to Economics by Fine and Milonakis. This is a great history of economic thought with a focus on methodology. It discusses the way economics has been narrowed from the broad social questions of classical economics to the narrow, mathematical abstractions of the modern neo-classical method.

Human Action- Ludwig von Mises. This book is ridiculous. Good for a bathroom read. And if you run out of toilet paper…

Economic Theory of the Leisure Class by Nikolai Bukharin. I have written about this book here.

Dialectical Phenomenology by Roslyn Bologh. This book was quite influential on my thinking about the subject-object relation and the concept of mode of production. It runs cheap on Amazon. It is a discussion of Marx’s method through a reading of the Grundrisse. I highly recommend it.

Disassembling Capital by Nicole Pepperel. This is available here. Pepperel’s blog Uncomfortable Science (formerly Rough Theory) is a fascinating read. She has a really fresh and deeply knowledgeable take on Marx.

My goals in this revision were:

1. Address the effect of demand on market prices and explain why we don’t need a subjective theory of value to explain this or why this is not a problem for marx’s theory of value.

2. Tie the point about “real abstraction” to the concept of subject/object inversion and fetishism.

3. re-order the flow of concepts to make things as succinct as possible and less academic sounding. This point still needs work.

Here it is:

Subject-Object, draft 4, second half:

In the Real World….

In the real world, outside of the fantasies of bourgeois economics, subjects and objects have no meaning apart from their relations to each other. There is no such thing as a subjective individual floating in a vacuum. We develop our subjectivity through our relation to the objective world we inhabit. And while the objective world can surely exist without subjects, it has no meaning for a social theory like economics except the meaning that people give it. Subjects and objects always exist in a relation, deriving their meaning from this relation.

This relation is not just one of coexistence. It is an active process of by which subjects engage with the objective world, transforming it. People work on nature. We chop trees and make houses. We build cars and dig up oil to power them. In so doing we transform the objective world and also transform ourselves. The manner in which groups of people work on and transform the world around us has changed through history. These different modes of relating to and transforming the world Marx calls “modes of production”. (brief mode of production chart with Feudalism, Slaveocracy, Capitalism, Communism, etc. and some picture depicting S/O relation?) (footnote on materialism)

This productive activity doesn’t just transform and create the objective world around us. it also creates our subjectivity. It determines what sort of things we value, how we go about getting the things we desire and how we relate to other people. Different modes of production produce drastically different types of societies with different value systems, different ways of relating to our desires, and different social relations between people.

Every mode of production is limited in terms of the social results it can achieve. The capitalist mode of production, for instance, though quite good at producing lots of stuff, is unable to solve basic social problems like poverty, exploitation, war, and economic crisis within the parameters of the capitalist mode of production. This is because capitalism has a very interesting quality as a mode of production, a quality Marx calls “subject/object inversion”. We will return to this quality in a moment.

Subjects, Objects and their Prices (image of commodity and person, both with price tags)

Objections to Marx’s theory of value often have to do with the way his theory of value relates to market prices. If value comes from the amount of labor that goes into producing things, then how do we explain the fact that a rise or fall in demand  changes market prices? The fact that demand influences price makes it seem like subjective decisions influence value as much as labor time.

The value-price relation is not an easy one to enclose in neat, tidy definitions. The more we look at it the more complex the network of social relations that go into the formation of prices. I will deal with the value-price topic in more detail in a future video (Law of Value 11: Price), but a few remarks are in order here. We’ve actually covered this ground briefly before in Law of Value 3 where we talked about the way private labor becomes social labor. (footnote on price)

Private labor is the amount of labor an individual worker devotes to the production of a commodity. The goal of the worker is for her private labor to become social labor, that is, that her commodity be sold in the market and thus be equated with all the other commodities in the market, making her labor part of the total social labor of society. But this isn’t so easy. Because production is only coordinated through the fluctuation of market signals, it is always uncertain whether commodities will be sold, and whether private labor will become social labor.

As we’ve seen in previous videos, in order for private labor to become social it must produce at the socially necessary labor time. SNLT is a way in which the social level of productivity acts back upon the private labor of the individual, disciplining the individual to work at the social average. Individuals or firms that can’t work at the SNLT go out of business, like when American auto-workers lose their jobs due to competition with plants in other countries. Their labor is then reallocated to other areas where they can be more profitable, or they don’t work at all. As many of us know, losing a job and having to find new work is a long, hard, painful process. But these discomforts don’t matter to the market. The market treats all labor like digits in a calculator, anonymous units to be moved around in the search of profit.
(long footnote on self-employment)

In addition to producing at the average level of productivity, there also must be a demand for the products of labor if private labor is to become social. If too much private labor goes into the production of elevator music than there is demand for elevator music then some of this music will remain unsold and some of this private labor will not become social. Producers will be forced to move their labor elsewhere. But rather than this being an example of demand creating value, it is an example of how changes in demand effect the distribution of social labor. This is part of the phenomenon Marx is explaining in his theory of value: the labor of society is coordinated through the fluctuations of prices, a phenomenon only possible because there is a relation between prices and labor time.

Furthermore, demand itself can only be understood if we abandon the concept of the isolated individual and see demand as part of a huge social process whereby capitalist production reproduces itself. The only type of demand that counts in the market is “effective demand”, that is demand backed up by money. Consumer demand comes from wages paid to workers. The products which consumers buy with this money are not just the random result of psychological preferences. In fact, most of our money goes to the purchase of very basic things we need in order to keep us alive as workers so that we can produce more value for capitalism each day: rent, food, clothes. (footnote on consumption) These are needs and desires dictated to us by capitalism, for the purpose of perpetuating capitalism, not the abstract psychological preferences of isolated individuals.

The bulk of the demand in society comes not from consumers but from capitalists. You and I buy toothbrushes and pay rent. Capitalists buy factories, assembly lines, natural resources, and private armies. This demand has nothing to do with the personal preferences of capitalists. (corporate greed footnote) It has to do with the technical requirements of production, the amount of inputs it takes to make a widget at the SNLT. Some people think that capitalists enter production only in order to meet the demands of consumers. This is a myth. The advertising industry is the best refutation of this myth. Capitalists produce in order to make a profit. Then they go looking for markets. Most of the time they have to create the market by convincing people there is a need for their product. But capitalist firms also sell to each other, totally bypassing the need to find consumer markets. (footnote on undercon)

This all gives us a very different picture of the subject-object relation than we get in bourgeois economics. Rather than a free society of empowered individuals who are free to act upon their abstract desires and take full-responsibility for their lot in life, Marx’s critique of the capitalist mode of production reveals a world in which individuals are at the mercy of the coercive laws of the market. The sorts of superficial freedoms they have to choose between coke and pepsi pale in comparison disciplining of our lives to SNLT and the pursuit of profit. (images of clocks)

Subject/Object inversion

[Mitt Romney quote about corporations being people]

There is a lot of talk in the Occupy Wall Street movement about ending “corporate personhood”. The problem with this demand is that the legal status of corporate personhood is just the icing on the cake. In a capitalist society corporations are much more like people than people are. Capital is the active subject and people its object. This is what Marx means by “subject/object inversion.” Rather than people being the active agents of the social order it is the “objective” logic of the market that dominates the subjects. Blind economic laws rule and people obey. Money becomes more powerful than people. Corporations become people and exert more power in society than individuals or even social movements. While people run around in the street with signs begging the system to take notice of them, the cold-logic of capital becomes the active agent in society, using the body of the worker like a passive expendable commodity, subordinating societies, governments and even nature itself to the impersonal motives of profit.

The crazy thing is that this “objective” world is still just the product of our own creation. We actively reproduce it everyday. This is the core of what makes Marx’s critique of capitalism so powerful: The world we live in, despite the incredibly disempowering structure of our current situation, is always only the result of our own actions and we do have the ability to collectively change it. But in order to exercise such collective power we must break with the capitalist mode of production.

Now…. do you get any of that heavy stuff with marginalism?

conclusion:

In case you were wondering Subjectivist Island and Barter Island don’t exist. They are abstractions. Now every theory needs abstractions- we must sift through a world of data and identify the broad contours and important categories that define reality. Subjectivist and Barter Islands are “ideal abstractions”, that is, abstractions that exist only in the minds of philosophers. [footnote on praxeology] Marx makes a different kind of abstraction, a “real abstraction”. A real abstraction is not made by philosophers arbitrarily leaving out parts of social reality. A real abstractions is made by reality itself.

In a capitalist society human labor becomes abstract. In the caste system of feudalism where people were born into certain types of work and there were strict divisions between castes there was no such thing as labor in general, or a worker in general. But in a capitalist society labor loses all of these specific features. Capital treats us like anonymous digits in a profit-calculator, moving us from place to place in the search for profit. Our labor becomes abstract labor. We become, not peasants, knights, or artisans, but workers in general. Marx’s theory of value is based on this real abstraction that is made by the mode of production itself, not the minds of philosophers.

This doesn’t mean that the perspective of marginalism comes from nowhere. Marginalism comes from a real existing standpoint within capitalism, the standpoint of the atomized individual contemplating commodities. This standpoint is real. We experience it everyday at the grocery store. But it is an incomplete perspective because it leaves out the entire world of social production that puts commodities on the shelves and money in our pockets. This perspective is the perspective of commodity fetishism, in which the social power of our own labor takes the form of inherent properties of objects.

But in times of economic crisis we see cracks in the walls of this reality. Old ways of thinking lose their relevance. Crises are a time when the economic laws of capitalism are exposed not as eternal, universal laws as the bourgeois economists would want us to think, but as the particular laws of this time, laws that we might be able to overthrow. As the law of value breaks down, as people start to question the order of things, the capitalist state must enter the picture, replacing the failing law of value with the brutal law of the state. The charming, freedom-loving world of the market apologists (ron paul picture) is revealed for what it really is, an exploitative order based on violence.

Like a schoolyard bully, a system is always the most violent when its weakness is exposed. When the law of value breaks down the politics begin. Subjects must become active. This can be the politics of the ruling class as it scrambles to reassert the status quo or it can be the politics of radical movements that posit the possibility for new social orders.

Subject/Object

One of the more common objections raised to Marx’s theory of value, at least here in the theoretical void of cyberspace, is the objection posed by subjective value theory. Though these modern objections often take quite a crude, simplistic tone, they are echoes of a rather old debate, one that dates back to debates between Marxists and Austrian economists that took place in the late 1800′s and early 1900′s. Austrian thinkers like Bohn-Bawerk and Mises were staunch defenders of free markets and private property, seeing capitalism as the ultimate expression of human freedom. In response to the revolutionary challenge of Marx’s economic ideas they advanced an alternative view of economics in which economic value was not determined by human labor but by the subjective valuations of individuals.

Eugene Bohm-Bawerk

The Austrians called their theory Subjective Value Theory (STV) and they called Marx’s theory an Objective value theory. Marx himself never used this sort of language to describe his theory because such a simplistic dichotomy would have robbed his theory of much of its nuance and depth. Nevertheless, Marx’s defenders often accepted this dichotomy, advancing a staunch defense of Marx’s supposed “objective” theory of value. If we really want to understand Marx’s theory of value we need to dig a little deeper.

At first it may seem that this debate over value theory is purely an academic one, not so urgent an issue in these times of crisis and political upheaval. But value theory actually sits at the center of any theory of capitalism and is therefore extremely relevant if we are to understand this crisis of capitalism. The Subjective-objective debate is more than just an academic feud about how to theorize prices. It is a debate about two rival visions of the world, one deeply apologetic of capitalism and one radically critiquing it.

Though mainstream neo-classical econ has sought to distance itself from the  the particularly extreme capitalist apologetics of the Austrian school, both share a common origin in the theory of Marginal Utility. This economic crisis has brought to light the utter bankruptcy of mainstream economics as its ideologues stutter and stumble in the face of an economic depression that doesn’t fit into their models. An economic crisis is also a time of political and ideological crisis. In an ideological crisis it is important to understand the failures of the dominant ideology so that we know what we are fighting and how not to replicate those mistakes in our own movements. Therefore we will need to spend some time in this video laying out some of the fundamental failures of the subjective approach to economics.

If economic value is subjective, as the theory of Marginal Utility argues, then the marketplace is just a clearinghouse for our desires. It serves as a vast, unconscious, democratic network, adjusting needs and production with scarcity to provide the best possible organization of our competing subjectivities. The outcome of this market process can’t be critiqued because it is just the spontaneous result of our desires. There is nobody to blame if something goes wrong. Responsibility is dispersed between millions of individuals. The only thing we can critique, from the Austrian perspective, is those who try to interfere with this market process.

If value is entirely subjective then we can have no theory of exploitation. The division of the social product into wages of workers, profit of capitalists and rent to landlords is not explained by the power of these social classes. Instead it is seen as the result of purely technical factors, like the scarcity of inputs relative to the subjective decisions made by workers and capitalists as they enter into free contracts. Rather than a theory of classes, we have a theory of pure individuals, all seen as equals in the market.

And since individuals have always had subjective values the subjectivists can argue that capitalism is the expression of universal human characteristics and not a particular historical form subject to change.

Marx would not disagree with the obvious fact that individuals make subjective choices in the market. But he would not be very interested by this fact since these choices happen within the context of larger institutional arrangements which we have no choices at all over. It is these larger structures which we don’t have choices over that Marx is interested in: Private Property, wage-labor, commodity exchange, and the law of value.

Individuals may have the power to choose coke over pepsi but this pales in comparison to our lack of freedom to chose what sort of world we want to live in, to chose meaningful occupations, to live in a world without poverty, injustice war or exploitation. In a capitalist society economic laws have power over people and governments and there is nothing we can do about it. We are all hyper-aware of this fact today as we watch the most powerful people and states in the world flounder helplessly in the face of this economic crisis. The Law of Value commands, people obey. For Marx the market is a place where blind economic laws dominate over us, where subjects are powerless and where objects like money and commodities are imbued with social powers.

a point of clarification:

The argument for a subjective theory of value may appear self-evident at first when we consider the obvious fact that everyone makes subjective value judgements when they go shopping, deciding which commodities we prefer over others. But the personal value judgements we make in our heads are not the same as the exchange values of commodities. Commodities have exchange values, the values they possess in relation to other commodities. Exchange value is most often expressed in money prices.

The discussion can get confusing if we forget that we are using the word “value” in two different ways. In the first sense we are talking about personal, subjective, psychological value judgements that are immeasurable and unquantifiable. In the second case we are talking about quantitative, measurable exchange ratios between commodities (so many apples exchange for so many pencils). Just because we use the word “value” for both things doesn’t mean they are the same.

STV argues that we can understand exchange-ratios solely through a theory of the subjective, psychological motives of consumers. It’s attempt to do so is fatally flawed, shot through with unwarranted assumptions, shoddy abstractions and circular logic. Let’s take a look at some of these problems

The Subjectivist Vacuum, or, Pay No Attention to the Man Behind the Curtain

Subjectivist Island

Welcome to Subjectivist Island. Here lives Eugene, our happy island barbarian. Everyday Eugene makes choices. He decides to spend his time building his teepee, catching fish, practicing his backstroke. He likes the backstroke most of all, but after so many laps around the island he gets tired of it and starts to prefer catching fish or teepee building. Intent on maximizing his utility, Eugene gets out some paper and a pencil and makes himself a preference scale so that he can figure out the exact proportions to devote to all 3 activities each day. He cherishes this preference scale because it is the source of his freedom. It’s just like the preference scale you carry around in your pocket everyday….. you carry one don’t you?

Ok, now setting aside the fact that most of us don’t carry around a preference scale in our pockets, there is a bigger problem: Subjectivist want you to believe that this little story about Eugene and Subjectivist Island is all that you need to know in order to understand the functioning of modern capitalist society. Funny then, that we had to abstract away all of capitalism, all society in fact, in order to arrive at our theory of preferences. Were we to think critically we might begin to suspect that there is something fishy going on with this abstraction.

That fishy something is the stink of an ideological abstraction. We discussed such ideological abstractions in the last video, Law of Value 7, but let’s review a few points here. The point of a dominant ideology is to make it seem like the present order of things is a universal order; that the status quo is the natural expression of things, unchangeable. How convenient then, for our bourgeois theorists, that our natural, universal man, Eugene, happens to contain the seed of modern capitalist society in all of his preferenc-ing and acting. It’s as if every choice made by every human since the dawn of time was just an expression of capitalist instincts, waiting to come into being in our modern society. (footnote re Hayek)

But it’s not enough just to point out the obvious ideological basis of subjectivist theory. We must also prove that this ideological abstraction is illegitimate. Let’s do that. It should only take a few minutes.

The parable of Subjectivist Island leads one to think that human desires are formed privately, independent of society. But this has never been the case. Desires are taught, socially constructed, and can’t be understood independently of society. How do subjectivists respond? They say “Yes desires may be constructed but this is out of the scope of economic so we don’t have to consider it.” In fact, this is how modern economics deals with all criticism- it ignores it and says it’s the topic of another discipline. How convenient! It’s like saying that we don’t have to consider the fact that the earth is round because that’s beyond the scope of flat-earth theory.

We can’t understand desire without also understanding the ways in which we go about attaining our desires. Here’s where the abstraction of Subjectivist Island breaks down. On the island Eugene attains his desires by directly acting to get the things he wants. But these are not the sort of choices we make in a capitalist society. Subjective value theory has to prove that it can move this abstract model of choice from Subjectivist Island to a full-scale capitalist economy.

It does this through the fantasy of barter. Let’s say Eugene, while back-stroking one day, discovers another island called Barter Island. Here lives Ludwig who cracks coconut all day. They decide to trade fish and coconuts, each one carefully measuring their utilities for fish and coconuts on their preference scales, calculating the precise exchange ratios to maximize their utilities, resulting in an exchange ratio between coconuts and fish.

“Now,” says the subjectivist, “we have shown that our abstraction was legit and that we can explain exchange ratios purely through the science of preference scales.” If only it were that simple.

The first thing we might notice is that the exchanges on Barter Island can only take place because Eugene and Ludwig have different resource endowments. If they both had access to coconut and fish then there would be no reason to trade. In order for trade to continue in a sustained way, trade must reproduce these differences. This means that in order for a capitalist market to work there must be the constant reproduction of a certain type of property relations in which people have to enter the market in order to get what they need to live. Specifically people must be deprived of their own means of production, forced to enter the market to sell their labor in order to buy the things they need. This property relation must be continually reproduced through exchange so that there is always scarcity and people are always dependent on the market.

Thus, we can see that something very sneaky has been done. Hmmm… what is it?  We were trying to form a theory of barter based solely on subjective preferences when all the sudden we realized we needed to assume a certain type of property relation in order to make any sense of it. Thus, abstracting away property relations and forming a theory of exchange without them is impossible and illegitimate.

Even more damning is the fact that capitalist societies don’t have anything to do with barter. People don’t produce to directly exchange products for other products. We produce in order to exchange things for money. Money is an intermediary in all economic activity. So it makes no sense to say we measure our subjective utility for coconuts against fish when exchanging. We measure everything against money. When you are in the supermarket calculating your preference scales with the Preference App on your iPhone you aren’t just considering your preferences for fish and coconuts in the abstract, as if on a desert island. You are also considering the market prices of these commodities. This market price already exists before you make your subjective value judgements. But this is problematic. Subjective valuations were supposed to explain price, but now we have to assume the prior existence of prices in order to explain subjective value judgements. It seems we are stuck in a big messy circle.

And if we are exchanging everything for money then we must have a utility for money right? But money has no direct utility. It’s not even good for blowing your nose on. The value of money is what it will buy. And this not set by our preferences but instead reflects the relation of money to all other commodities, reflecting the vast interpenetration of millions of markets all over the world. There is no such thing as a personal utility for money because money’s value is already established by forces beyond our control. (footnote on how weak Mises’s response to this is).

And there are more difficulties presented to subjective value theory by the presence of money. On Barter Island Eugene and Ludwig had direct knowledge of what they were getting from each exchange. But in our world we don’t know exactly how much everything is going to exchange for ahead of time. When we sell a product in the market we don’t know exactly what products we will be able to buy with that income. There is a high degree of uncertainty. But with so much uncertainty how are we ever to form those nice, rational preference scales where we’ve perfectly calculated the exact utility relations of all commodities to each other? Well, we can’t!

[The neo-Austrian response to this problem is to distance themselves from the neo-classical idea of the rational consumer and to stress the imperfect information of the consumer. Rather than consumers being super-rational beings that can calculate the relations between the objects of desire, the fallibility of human understanding is stressed and the market is seen as the ultimate informational clearing house which adjusts the imperfect desires of the multitude, smoothing them out, allocating resources in the most efficient and democratic way. Their language often takes on religious overtones here, stressing the inherent insufficiency of human judgement against the omnipotent, mysterious power of the market. The problem is that these magic moves of the hidden hand of the market are just asserted and never proven. Rather than actually proving that the market can do this Austrians prefer to stress that the only alternative is the State-Communist BogeyMan.]

It seems that every time we try to abstract away property relations and production relations they end up sneaking back into the picture. This is because it is absolutely illegitimate to try to explain capitalism without a theory of the social relations between people as they actively produce the world we are living in. Luckily we have a better theory, that of Karl Marx.

Real Abstraction, or Why Karl Marx is Still Relevant

In case you were wondering Subjectivist Island and Barter Island don’t exist. They are abstractions. Now every theory needs abstractions- we must sift through a world of data and identify the broad contours and important categories that define reality. Subjectivist and Barter Islands are “ideal abstractions”, that is, abstractions that exist only in the minds of philosophers. [footnote on praxeology] Marx makes a different kind of abstraction, a “real abstraction”. A real abstraction is not made by philosophers arbitrarily leaving out parts of social reality. A real abstractions is made by reality itself.

In a capitalist society human labor becomes abstract. In the caste system of feudalism where people were born into certain types of work and there were strict divisions between castes there was no such thing as labor in general, or a worker in general. But in a capitalist society labor loses all of these specific features. People aren’t peasants, soldiers or guildsmen. They are just workers. We have “a job”. Our education prepares us for “work”, and we move between multiple jobs in a lifetime. Most of all, economic value is not tied to this work or that work but to labor in general. It is labor in the abstract that creates value, regardless of the specific nature of this work. We will discuss this more in Law of Value 9: Abstract Labor.

Outside of the ideal abstractions of philosophers, in the real world, subjects and objects have no meaning apart from their relations to each other. There is no such thing as a subjective individual floating in a vacuum. Subjects form their sense of self, their meaning, in relation to an objective world. While the objective world can surely exist without subjects, it has no meaning for social theory except the meaning that people give it. If people decide that gold is valuable then it is valuable. Subjects and objects derive their meanings from each other.

Furthermore, subjects and objects don’t derive these meanings by coexisting side-by-side. There is an active process of by which subjects engage with the objective world, transforming it. In other words, people work on nature. We chop trees and make houses. We build cars and dig up oil to power them. In so doing we transform the objective world and also transform ourselves. The subject-object relation is an active one. In different times and places the way we as subjects transform and relate to the objective world has varied. These different modes of relating to and transforming the world Marx calls “modes of production”. Modes of production are inherently social, defining the way large groups of people transform and relate to the material world. The capitalist mode of production is his primary topic of interest to Marx.

Notice that the subject-object relation, as we are talking about it here, is not just an ideal relation, based on our ideas about the world. It is based in real, concrete working activity of people actively transforming the world. This is what is meant when Marx talks about “materialism.” He wants to stress this real-world process of human activity as opposed to theories that dwell in ideas and psychology, like that of the subjectivist school that think we can understand capitalism just by an examination of the psychology of consumers. Often people think that “materialism” means that individuals are unimportant, or history is predestined, but this is not what Marx means. He wants us to understand the specific ways in which subjects and objects relate through the real activity of people in their day-to-day activity, in their mode of production.

A curious thing happens in the capitalist mode of production: the subject-object relation gets inverted. Objects take on social power and individuals are left powerless. Blind economic laws rule and people obey. All along subjects are still the active participants, the ones working and transforming nature into objects for human use. But somehow people cease to act for themselves and instead act for objects. Money becomes more powerful than people. Corporations become people and exert more power in society than individuals or even social movements. While people run around in the street with signs begging the system to take notice of them, the cold-logic of capital becomes the active agent in society, using the body of the worker like a passive expendable commodity, subordinating societies, governments and even nature itself to the impersonal motives of profit. Capital appears as the subject and the worker as its object. The subject-object relation is inverted.

Economic laws are another name for this subject-object inversion. Economic laws cause people to do things they don’t want to do. When capitalism crashes due to its inherent cycles of instability it compels capitalists to lay off workers and compels governments to impose austerity.

But crises are also a time of instability in the system, a time when the economic laws of capitalism are exposed not as eternal, universal laws as the bourgeois economists would want us to think, but as the particular laws of this time, laws that we might be able to overthrow. In a crisis, the order of the market breaks down and political will must move into the picture to assert some semblance of order. When the law of value breaks down the politics begin. Subjects must become active. This can be the politics of the ruling class as it scrambles to reassert the status quo or it can be the politics of radical movements that posit the possibility for new social orders.

Fetish.

[diagram of capitalist society, with all property relations, production relations, etc.]
This is a capitalist society in all of its complexity, all social relations subordinated to the imperative of profit.

[zoom into image of exchange within picture]
This is capitalism as depicted by subjective value theory, all social context abstracted from the picture. Bourgeois  economists, sitting in their offices, playing idle mental exercises argue that we can abstract away all of this, and still explain a capitalist society. But in doing so they run into all sorts of problems because their theory can’t explain any of the things it wants to explain without bringing questions of class, property, and exploitation back into the picture. It’s original abstraction is illegitimate. Yet this abstraction is understandable. After all, we live in a world of fetishized social relations. The relations between people appear as relations between individuals and commodities. It is the perspective of the isolated individual interacting with a world of commodities, not of commodities coordinating the relations between people.

But this fetishized perspective is not just a lie. It represents a particular vantage point within the larger phenomenon that is commodity fetishism. It’s not that the world of commodity exchange is all an illusion. The illusion is real. Commodities really do have social power. Corporations really are people in the sense that they have more social power than social movements. Capital becomes the subject and society its object.  There is a real subject-object inversion. But the other side of the coin is that capital’s power only comes from us, not from some divine, natural eternal essence. It rests only on a particular configuration of production relations. That means that capitalism is only sustainable to the extent to which we are willing to sustain it. Were the political will sufficient we could reconfigure our social relations in a more human way where people actively, consciously control our working activity as we shape the world in conscious ways. This is the task of radical politics, and this is the time for it.

I say “reflections” but this post is mostly a summary of parts of this great book by Simon Clarke. I read Clarke’s book “Marx’s Theory of Crisis” a year ago and found it an incredibly helpful history of the evolution of Marxist crisis theory. Both this and “Marx, Marginalism and Modern Sociology” are available in their pre-publication format for free on Clarke’s website, along with dozens of other books and publications of his . “Marx, Marginalism….” actually has two editions, a fact I only discovered after reading the first. The second is definitely an improvement, containing an entire chapter of critique of specific aspects of marginalist value and profit theory that are not in the first edition.

Simon Clarke

I post this summary/reflection as part of the “lead-up” to my next video, Law of Value 8:subject/object, which aims to address sum of the problems of the old debate over subjective and objective value that dates back 100+ years to early debates between Austrian economists and Marxists. This means that I am more interested in Clarke’s critique of marginalism than his critique of sociology. However the two critiques are related. It was the early marginalists’ desire to shrink the field of economics to theories of consumer preferences in their relation to price that excluded all sorts of important questions from the new “sciences”, questions that had previously been a part of political economy. Issues of social power, the molding of the individual by society, class, etc were excluded and taken up by the emerging field of sociology. Clarke’s book is about this process by which the unrealistic and obnoxious abstractions of marginalist thinkers bifurcated political economy into economics and sociology rendering both disciplines full of theoretical problems and lacking in the analytical tools to explain the real contradictions of capitalism.

Marx himself never read any of the founders of marginal utility theory and so we might feel that we cannot look to him for a critique of marginalism. However, Clarke is able to develop a strong marxist critique of marginalism based on Marx’s critique of the bourgeois economy that came before him. It is Clarke’s argument that both classical bourgeois economy and marginalism suffer from many of the same faults.

The essential fault is the attempt by both bourgeois theories to “naturalize” the social relations of capitalism. This the basic hallmark of any dominating ideology, to make the current state of affairs seem like the permanent, unchangeable, natural order of things. Bourgeois economics does this by claiming that capitalist-specfic categories like class, profit, capital, and wages, are just natural expressions of the technical division of labor.

Marx called this the Trinity Forumula: the idea that wages equalled labor’s contribution to the social product, that profit equalled the contribution of capital, and that rent was equal to the contribution of land to productivity.  Thus the distribution of the social product between wages, rent and profit seemed like natural, technical properties of commodities themselves and not social relations between classes.

Clarke argues that marginalism is making basically the same claim, and thus falls prey to the same problems of classical economics. It is not clear exactly which properties of commodities correspond to profit. Does profit come from money, capital or means of production? Is it due to abstinence of the capitalists, the supervisory work of the capitalist, the capitalist’s ingenuity, risk, or the time of production? Are wages related to the value of means of subsistence, the disutility of work or the productivity of labor? Is rent related to the scarcity of land or the marginal fertility of land?

Regardless of the ways in which bourgeois thinkers have answered these questions we can’t escape the fact that things can’t have social powers unless bestowed upon them by social relations. Thus it makes no sense to isolate these social relations from our analysis and try to relate all economic categories to purely technical properties of commodities/production. Marx calls this mistake the fetishism of commodities and Clarke’s critique, in the end, boils down to an accusation of fetishism. (1)

Marginalism’s scope of analysis

Despite their similarities, marginalism’s subjective approach to value came as a response to some inadequacies in classical economics. In classical political economy prices were only theorized after a consideration of distribution. Once the contribution of land, labor and capital were analyzed independently price was just the adding of up of these sums. Thus we can only understand markets and prices through an understanding of class, leaving the way open for more radical interpretations of the theory that might question this distribution. (2)

Marginalism responded by developing a theory of price that directly related price to the subjective valuations of individuals contemplating objects. All social phenomena were abstracted away. This narrowed scope achieved three things: 1. Class and distribution were spirited away, allowing marginalists to claim that such questions were outside the sphere of economics; 2. The obviously political nature of distribution could be reduced to purely technical explanations (marginal productivity, etc) thereby allowing marginalists to claim that they were engaged in pure, non-partisan theory; 3. It provided a naturalistic justification of capitalism.

Clarke argues that the early founders of marginalism were not wholly ideologically motivated by the need to establish a new theory of capitalist apologetics, but that by the 1890′s the marginalist ‘revolution’ had taken on a deep apologetic nature, playing a central role in the worker movements of the late 1800′s in debates between reformist and revolutionary factions. Also, this was a time of rapidly growing social movements for reform. Marginalists wanted to develop some science of economics that could measure the effects of state intervention on the economy. This brought together people of different political persuasions to the marginalist project.

The Irrationality of Marginalism

Marginalism can abstract away all of society from economic theory because of its claim that capitalism corresponds to a formal rationality rather than a substantive rationality. Formal rationality is a purely technical calculation of means and ends as opposed to substantive rationality which is oriented around values or higher aims. For instance, in Human Action Mises claims that the basis of economics is the natural quantitative relations between objects… so much input can produce so much output, etc. For marginalism any constraints  or limits to the system are purely technical, a result of natural scarcity in relation to our timeless wants, not social, and the market is the best mechanism for organizing these desires. This means that the marginalist model will fail if it can be proven that capitalist institutions have a ‘necessary substantive significance in subjecting individuals to social constraint’. In other words, if the limits and constraints of our society can be shown not the result of technical aspects like scarcity but rather the result of social institutions with particular values oriented toward the interests of certain groups of people (ie the capitalist class) than marginalism has not justification for its formal rationality, for its abstraction of society from economics, and the entire edifice of marginalism falls. It is not enough just to point to this abstraction as proof of the ideological nature of marginalism. We have to prove that it is an illegitimate abstraction. This is the common thread underlying all of Clarke’s specific critiques of different aspects of marginalism. (3)

Marginalists begin with the isolated individual making choices in a vacuum and erect all of their basic ideas upon some simple observations about these choices. As the model becomes increasingly complex, adding in more people, more commodities, money, the division of labor, private property, etc. it is claimed that all of their basic observations still hold. The expansion of the model is seen as just a formal matter. But Clarke argues that when we move from individual exchange to a system of exchange we are actually dealing with different phenomenon. In a market economy exchange is no longer and exchange for direct utility; in other words, we aren’t  measuring our actual utility for the commodity we give up with the utility for the commodity we buy. Money intercedes as a mediary. We exchange things against money. Use-values are exchanged for values which are socially determined. Any claim to the formal rationality of the individual’s behaviour becomes dependent upon the rationality of the system as a whole.

The existence of money demands that we immediately abandon the basic principles of marginal utility. In the simple barter models posed by marginalists both actors can fully judge the use-values of items they are trading. But when we are exchanging things for money we are not just trading two commodities in isolation. Money links each commodity to an entire of world of commodities. Now if it was possible to know the future values of all commodities then it would be possible to generalize the marginalist barter model into a theory of indirect exchange. But we don’t know the future values of things. These are entirely uncertain. In fact, If the values of all commodities were always known we wouldn’t need money because any commodity could serve as money. This compromises the entire marginalist model.

In other words, marginalism can only have a theory of indirect exchange (of commodities traded for money instead of commodities bartered with each other) is all parties have perfect information on prices. But if we make this assumption we can no longer explain competition (or money).

Clarke then goes on to summarize and critique various failed solutions to this problem by Walras, neo-Austrians, Marshall, and Keynes. I won’t go into them all, but I will mention the neo-Austrian take on this issue: The 2nd generation Austrians like Mises were worried that Walras’s awkward solution to this problem left the door open for arguments for a socialist planner, a person that would know all prices and therefore eliminate the need for market. They therefore rejected the general equilibrium approach that we today associate with neo-classical economics and developed a theory of markets as dynamic information systems. Rather than individuals requiring perfect information, rather than markets tending to a state of perfect equilibrium, the new-Austrians argued that individuals lack perfect information. Prices are what carry information and the market is the place where this information is “processed”, creating the most efficient clearing house of information. The problem with this argument is that the defense of the market relies merely on faith and assertions. Just because the market is an expression of individual preferences doesn’t mean that it is a realization of those preferences or that it is the best way to organize individual behaviours. Instead the neo-Austrian defense of the market is based more on critiques of bureaucracy and state-planning. (4)

Theories of Profit

Similar difficulties face marginalist theories of profit. The ideological defense of capitalist profit must establish that profit is a naturally occurring result of some technical aspect of production (the contribution to the product of machines or land, subjective preferences over time, etc.) and not the result of social relations of domination/exploitation. This is impossible because profit is a category of value not of physical quantities of products, thus capitalist profit always presupposes the existence of capitalist social relations. Yet the various marginalist theories of profit will maintain that wages, rent and profit are not qualitatively different categories based on different social relations to production. Instead marginalists will argue, as did the classical economists, that wages, rent and profit are a result of technical aspects of production. But not only is profit a value category and not a physical quantity category, profit is also determined by the general rate of profit which implies a society of capitalist production not isolated producers.

Time-preference theory, usually associated with Bohm-Bawerk, attempts to work dig its way out of this hole by explaining profit not through the physical/technical aspects of production but through the differences in subjective time preference between those who want things now (workers desire wages) and those who are willing to wait (capitalists who wait for their profit).

But here too we can’t really understand a period of production time without recourse to the very social features that time-preference theory wants to abstract away. A production period is dependent on the rate of profit and of wage rates, both social phenomena that can’t be reduced to time preferences. Clarke argues that concepts like ‘marginal productivity of capital’ and the ’roundaboutness of production’ have no meaning abstracted away from the social relations of capitalism since the aim of capitalist production is to produce value, not physical quantities. We can’t measure productivity or roundaboutness in non-value terms because without value we have no standard of unit that all of these diverse inputs and outputs can be reduced to. Also, what reason do we have for being so sure that time preference is always positive and not negative? Sometimes, in conditions of uncertainty for instance, we prefer to delay gratification. This absolute assertion that we prefer present goods over past goods seems an indefensible assertion. Even further, capitalist investment strategies have nothing to do with delaying gratification or measuring investments against consumption. Capitalists constantly invest in production in pursuit of profit for profit’s sake, compelled on by competition not their subjective preferences.

Sneaking in the Back Door

In abstracting away the social relations of capitalism marginalism must assume that these abstract individuals enter exchange with given needs and given resources. Where do these needs and resources come from? The marginalist answer is that this question is outside the sphere of economics- that it doesn’t matter to economic theory where these needs and resources come from. But what if our economic system actually reproduced these needs and resources? If we could show that capitalism produced the hedonistic consumer as well as the conditions of scarcity the consumer confronts then we could expose a disastrous feedback loop at the core of marginalism. It seems that when we just assume given needs and resources we are actually only pretending to abstract away from capitalist social relations. While on the surface marginalists appear to be talking about a universal individual in universal conditions, in actuality they are sneaking all of the social relations of capitalism in the back door. This is very similar to the Bukharin critique I mentioned a few weeks ago.

I like the way Clarke develop his proof this problem: Commodity exchange presupposes individuals with different needs and different resources because if everyone had the same stuff there would be no reason for exchange. Thus exchange presupposes differences. If exchange is systematic these differences must also be systematic. Thus the formal equality and freedom of exchange is founded on different resource endowments. This means that the content of exchange can’t be reduced to its form (free, juridically equal relations between people) but must be found outside of exchange in the realm of production and property.

Scarcity

Scarcity relates to the application of labor to produce for need. The basis of exchange is the sale of the products of this labor. Thus the need for a theory of value based on human labor, not subjective whims.

Different types of exchange presuppose different production and property relations. The simple commodity exchange (independent producers exchanging the product of their labor in the market) is a popular image in marginalist accounts of exchange (as well as market-anarchism fantasies) yet such a system of exchange has only existed within larger societies dominated by other social relations (ie feudalism, capitalism, state-capitalism/20th century communism). Capitalist exchange presupposes social relations between two social classes, one owning the means of production, the other nothing. As we’ve seen, Marginalism tries to treat all factors of production with the same theoretical tools of subjective preference theory. But the division of the social product into rent, profit and wages actually presupposes antagonistic social relations between classes and thus requires different theoretical ideas.

Marginalists would like to treat the unequal resource endowments of individuals as due to extra-economic factors, consigning these concerns to the fields of history and sociology. But these inequalities don’t just proceed exchange historically. They are actually reproduced by exchange. Capitalism generates a world in which individuals must maintain a certain standard of living in order to survive (try paying the bills without a phone, house, car, work clothes, haircuts, health-care, etc.) and must engage in wage-labor. And wage-labor actively reproduced the two social classes of capitalist and worker and their violently divergent relationships to the means of production. Without scarcity we couldn’t have wage labor. There would be no reason to work. Thus capitalism must constantly reproduce scarcity.

Don’t Take My Word For It, Read the Book (5)

This is just a cursory synopsis of some of Clarke’s book. If readers are looking for some good, solid critiques of marginal utility theory, Clarke’s book is a great way to start.

Footnotes:

(1) Well… fetishism is more than just wrong ideas about the economy. It’s also about the way social relations take the form of material things, how material things obtain social power and dominate subjects. My critique of the subjective-objective value debate will directly relate the concept of fetishism of reframing this debate.

(2) This is not the only defect of the classical economics that motivated the marginalists. Another important one, mentioned by Clarke, is the contradiction in Ricardo’s theory of value: the problem of how to account for different organic compositions of capital under conditions of average profits. See my video “what transformation problem?” for an explanation, or my summaries of vol. 3 of capital.

(3) Here I intended to make a brilliant comparison between Clarke and Bukharin’s critiques of marginalism, one that caught some subtle yet meaningful distinction… but I didn’t get around to it.

(4) I would add that a great many aspects of the neo-Austrian argument are heavily based on “faith” and religious-y thinking. The market is this all-powerful, all-knowing entity that we as mere individuals can’t ever comprehend. Attempts to understand the market, control it or influence it are seen as foolish and arrogant. The fallibility of human understanding is stressed against this omnipotence of the market. Given these religious parallels it makes sense that this theoretical tradition has resonated so strongly with culturally-conservative politics.

(5) To the best of my recollection this is the famous slogan from the 80′s television show Reading Rainbow.