A short note on Labour Value

In my previous post I argued that labour was the sole source of value. This may have caused some rather strange looks. So I'm going to quickly set out why this is so.

In classical economics it is often asserted that it is demand, or more accurately Utility, that sets prices and therefore determines the value of an item. This is correct, if we hold all things as constant and ignore the possibility for commodities to change. If we are simply exchanging apples, nails and wood and doing nothing with them then the utility generated from possessing and consuming theses items will determine their exchange value. But what if we say that there is a fourth value, labour, and we also allow for items to be used and combined, making new items; such as a chair or more apples. When we exchange again we suddenly haver a more complicated system where labour can be consumed to create more items and the sole difference between these items and the previous items is the labour imbued in them. So a chair is more valuable than the nails and wood. Here labour is the sole commodity that can be consumed at the same time as producing more.

From this it is clear that it is from labour and labour alone that value is created (assuming that desires do not change - even then a change in desires will simply change the values once and the values can go up and down. Only labour has a constantly positive effect)

In short value (prices) are determined by many things but only labour can increase overall value in a system or the value of a set of items.

It is from this that Marx draws his most important concepts of SNLT and surplus labour and exploitation

Marxist Economics - A Justfication

I seem to spend a lot of my time defending Marx, and in particular Marxist economics from my coursemates and friends. The main line of attack is (as you may have guessed) his labour theory of value as expounded in Capital Volume I chapter 1. Here Marx, correctly, distinguishes between use value (utility) and exchange value (price). He then argues that the sole determinant of exchange value is labour or more specifically “Socially Necessary Labour Time” (SNLT). [SNLT is the average amount of time required to produce an item in a particular society, assuming that the item is needed]. The big problem with this is that Marx here seems to treat utility as binary (as either wanted or not) which after even a brief examination of the real world it clearly isn’t.

Friends 1 – Marx 0

The problem is that once this has been established, people tend to just throw Marx out the window and deem his work on economics as not worthy of their time. This is a rather critical mistake. It is true that much of Marx’s writings are incorrect or rely on rather shaky assumptions. But then so do the works of Ricardo, Smith and Say. In fact much of these poor / shaky assumptions are shared amongst all of these authors, Marx having read all of them in detail and Capital being a critique of their stance. Yet nobody dismisses Smith like they do Marx, not even Ricardo is treated with as little respect as the work of Marx even though most of what they have written has long been discarded and only a few principles remain in use.

There are 2 reasons for this. One - the most obvious – is that Marx and his works are linked to USSR and Soviet era, where they were preached almost like the work of god and followed dogmatically until the very end. The fact is that his disciples refused to criticise or rectify or even just update Marx’s work while the followers of Ricardo and Smith did and developed significantly more accurate representations of capitalist society and trade. So in that sense Marx and Marxists has been left behind to wallow in the past, muttering about the “bourgeois economists” and “pseudo-science” and talking in louder and louder voices about the “Great Man” that was Marx.

Second – and the less obvious – is that once you throw out the prophecy of the communist revolution and the faulty theory of general equilibrium you are left with a discussion which is not in the same arena as the more traditional economist. Marx’s Capital is well known as having the subtitle “a critique of political economy” [what is now called economics]. However in the first translation into English (edited by Engles) from the third German Edition the subtitle was “A Critical Analysis Of Political Economy”. Now you may argue that I’m using semantics, that they both is essence mean the same thing. And you’d be right. But the difference is important, as the second title spells out exactly what Marx did. The value of Marx is not found in the sphere of Economics, it is found in the sphere of meta-economics. Too often people treat economics as given and the invisible hand of Adam Smith has too easily replaced the invisible hand of God in creating and legitimising a new world order. The work of Marx is an attempt to dispel this illusion of an almighty system which will bring goodness to all if only we’d obey the rules. His writings are an attempt to put things in context, to demonstrate that labour is the only way that value can be added to an object. That wealth is not created by trade but by employment. That our current social relations are historically limited and not universal. And most importantly, that this is only one way of organising society, that it is flawed and is dependent on exploitation through economic coercion. Where those that work receive less than they add and those that don’t work receive the rest.

Finally to show that things can change - but to what?

Nobody really knows……

Referenda, and why we shouldn’t fetishise democracy

It's important to note that the word democracy comes from the Ancient Greek words demos and kratos, meaning ‘people’ and ‘power’. It originally meant ‘rule of the people’, or ‘rule of the mob’.

And it can come in many forms. For example, Communist East Germany’s official name was Deutsche Demokratische Republik. You might think it stretching the term ‘demokratische’ a bit. However, the founding Soviet myth was of bringing down the Russian Empire, an aristocratic regime that brooked little input from the commoners. You were fabulously wealthy, of high birth, or nothing. East Germany’s political class, by comparison, was astonishingly representative. Erich Honecker, the East German Leader from 1971-1989 (see Wikipedia for his actual titles) was a son of a coal miner. His predecessor, Walter Ulbricht, was trained as a joiner. They were people from fairly ordinary backgrounds, the ‘mob’, who managed to rise through the party ranks and exercise power.

However, the East German model of democracy is not desirable. There were significant restrictions on free speech, they suffered under a staid economy, and had pretty limited freedom of movement.

Democracy comes in many forms. Not every form is desirable.

You might think that the main problem with East Germany was that it was not democratic enough. You might also think that it's on the whole a good thing to make a state more democratic.

There are many ways that you might go about, prima facie, making a modern western democracy 'more democratic’. You could give children the vote. You could allow people to say whatever they want, to whoever they want, no matter how inflammatory or intimidatory. You might not want to, though.

Making a country ostensibly ‘more democratic’ is not necessarily desirable.

This is represented in some sense, in our modern western notion of liberal democracy. This notion has free speech, representation in government, right to vote, freedom of assembly and freedom from discrimination amongst many other ideas as central to any true democracy.

Often, these principles are in tension. For example, the right to vote comes into conflict with the right to freedom from discrimination whenever anybody votes BNP. We have to find a balance between the different fundamental principles of our liberal democracy.

A measure that appears to make a country ‘more democratic’, in the etymological sense, might not in terms of liberal democracy. We have to consider democracy in the round - in the liberal democratic sense.

Referenda represent precisely this danger. They give citizens a powered-up right to vote - the right to vote on legislation, rather than the right to vote on those that vote on legislation. However, a powered-up right to vote, without significant checks and balances, diminishes the right to freedom from discrimination. A good example is the most popular petition on the new Government epetitions website. It calls for those who rioted during the recent disturbances to “loose” their benefits. It has gained over 80,000 signatures in just over a day. This is, probably, the majority public will. However, its implementation would, in my opinion, diminish the strength of our democracy.

A right to referenda, even given certain checks and balances, would make us less democratic, not more.

And furthermore, there are things that matter other than how democratic we are as a nation. We value justice, happiness, relationships and much much more. I believe that a blanket right to referenda diminishes all of these things. So the next time somebody espouses referenda as the über-democratic solution to all our problems, don’t feel somewhat guilty for not agreeing (although I usually still do). Tell ‘em their definition of democracy is flawed - they are thinking of democracy in the pure, etymological sense, and not the liberal democratic sense - and that there are things other than democracy that matter too.