The value-form or form of value (german: Wertform) is a concept in
Karl Marx
Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist, critic of political economy, and socialist revolutionary. His best-known titles are the 1848 ...
's
critique of political economy
Critique of political economy or critique of economy is a form of Social criticism, social critique that rejects the various social categories and structures that constitute the mainstream discourse concerning the forms and modalities of resourc ...
. Marx's account of the value-form is differently adopted in later forms of
Marxism
Marxism is a Left-wing politics, left-wing to Far-left politics, far-left method of socioeconomic analysis that uses a Materialism, materialist interpretation of historical development, better known as historical materialism, to understand S ...
, in the
Frankfurt School
The Frankfurt School (german: Frankfurter Schule) is a school of social theory and critical philosophy associated with the Institute for Social Research, at Goethe University Frankfurt in 1929. Founded in the Weimar Republic (1918–1933), dur ...
and in
post-Marxism
Post-Marxism is a trend in political philosophy and social theory which deconstructs Karl Marx's writings and Marxism itself, bypassing orthodox Marxism. The term "post-Marxism" first appeared in Ernesto Laclau and Chantal Mouffe's theoretica ...
. When social labor is split up into independent enterprises and organized capitalistically, its products take the form of an ensemble of ''commodities'' of diverse types, which face one another on the market.
Production and exchange are governed by ideas and facts expressible in the forms like:
* 20 yards of linen are worth one coat
* 20 yards of linen have an equivalent in one coat
* 20 yards of linen = one coat
* 20 yards of linen cost $100
* The price of 20 yards of linen is $100
* 20 yards linen = $100
The formulae above are 'expressions of value' (''Wertausdruck''). ''Worth'', ''price'', and ''equivalent'' are said to be
categories
Category, plural categories, may refer to:
Philosophy and general uses
*Categorization, categories in cognitive science, information science and generally
*Category of being
*Categories (Aristotle), ''Categories'' (Aristotle)
*Category (Kant)
...
of bourgeois life. Items that enter on one side or the other, here ''linen'', ''coat'' and ''dollar'', are said thereby to have different specific value-forms. A thing may have a value-form in the imagination – e.g. in the reasoning of a weaver who weaves 20 yards of linen with a view to getting a coat, thinking "20 yards of linen are worth one coat" or in a firm's attaching prices to its products (prices that may or may not be accepted). (An item with a price tag attached has thereby entered the price form in imagination.) But things can also be said to enter these forms objectively, as when it is simply a fact that e.g.
* About 20 yards linen are worth one coat
* The price of 20 yards of linen is about $100
The value-forms are ''social forms'' of a product of labor as organized asocially, privately and capitalistically. If the breakfast menu of a capitalistic restaurant chain reads:
* Toast (two slices) = $1
then toast has assumed a value form as a product of capitalistically associated labor. But in a household, e.g. when feeding the children, the work of making toast – the same 'useful labor' – is associated differently. No such thought will enter the mind of the toast-maker, who will think directly of the children's needs. Toast will not assume a form of value.
The value forms are also 'forms of appearance' (German sing.: ''Erscheinungsform''). The agents work with them, judge in terms of them, and in a sense measure things with them. The capitalistic organization of life operates through this 'appearance' of itself to its bearers. The value-form of a commodity contrasts with its physical features as a 'use value' or good – e.g. as a means of (further) production or as a means of life. The physical characteristics of a
commodity
In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them.
The price of a comm ...
are directly observable, and they enter into its direct use, but its social form is not thus perceptible nor inherent in the thing.
Narrating the paradoxical oddities and metaphysical niceties of ordinary things when they become instruments of trade, Marx seeks to provide a brief morphology of the category of economic value as such—what its substance really is, the forms which this substance takes, and how its magnitude is determined or expressed. He analyzes the forms of value in the first instance by considering the meaning of the value-relationship that exists between two quantities of commodities.
Basic explanation
When the concept of the form of value is introduced in the first chapter of ''
Capital, Volume I
''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Erster Band. Buch I: Der Produktionsprocess des Kapitals) is the first of three treatises that ma ...
'', Marx clarifies that economic value becomes manifest in an objectified way only through the ''form'' of value established by the exchange of products. People know very well that any product represents a value, i.e. there is an economic cost of supply for the product (some people have to work to produce and supply it, so that others can use it). However, Marx questions how value can be quantified, how it can exist, what its source is, and how differences in value can be explained.
Value relation
What something is economically "worth" can be expressed only ''relatively'', by relating, weighing, comparing and equating it to amounts of other tradeable objects (or to the labour effort, resources or sum of money those objects represent). The value of products is expressed by their "exchange-value": what they can trade for, but that exchange-value can be expressed in many different ways. Since exchange-value is most often expressed by a "money-price", it then seems that "exchange value", "value", "price" and "money" are really all the same thing. But Marx argues they are not the same things at all.
This point is important in the understanding of economic value and markets. Precisely because the political economists kept conflating and confusing the most basic economic categories, Marx argued, they were unable to provide a fully consistent theory of the economy. One might be able to quantify and measure economic phenomena, but that does not necessarily mean that they are measured in a way that they are fully understood.
In a preface to the first edition of ''
Capital, Volume I
''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Erster Band. Buch I: Der Produktionsprocess des Kapitals) is the first of three treatises that ma ...
'', Marx stated:
Marx gives various reasons for this ancient puzzle. The main obstacle seems to be that trading relations refer to social relations which are not directly observable. What these social relations are, has to be conceptualized with abstract ideas. The trading ratios between commodities and money are certainly observable, via prices and transaction data. Yet how exactly the things being traded get the value they have, is not observable. It seems like "the market" does that, but what the market is, and how that happens, remains rather vague. This story does not get much further than the idea, that things have value, because people want to have them, and are prepared to pay money for them.
Marx's comment clarifies, that according to Marx the value-form of commodities is ''not'' simply a feature of industrial capitalism. It is associated with the whole history of commodity trade ("more than 2,000 years"). Marx claimed that the origin of the money-form of value had never before been explained by bourgeois economics, and that "the mystery of money will immediately disappear" once the evolution of value-relations has been traced out from its simplest beginnings. This was probably a vain hope, since, as discussed below, even today economists and economic historians cannot agree about what is the correct theory of money.
Wolfgang Streeck
Wolfgang Streeck (; born 27 October 1946) is a German economic sociologist and emeritus director of the Max Planck Institute for the Study of Societies in Cologne.
Early life
Streeck was born "just outside Münster", the son of refugees – e ...
states that "money is easily the most unpredictable and least governable human institution we have ever known". Put another way, the possibilities for arranging any type of trade or deal are extremely diverse; the only operative requirement is that the trading partners agree to the terms of the arrangement, however simple or complicated it may be. It follows that, what specific role money has in the given arrangement, can vary greatly.
Only when market production and its corresponding legal system are highly developed, does it becomes possible to understand what "economic value" actually means in a comprehensive and theoretically consistent way, separate from other sorts of value (like aesthetic value or moral value). The reason is that, to a large extent, the different kinds of value have become practically separated in reality and become increasingly universal in their applications. When Marx considers "value" as such or in itself, as a general social form in the economic history of humans, i.e. "the form of value as such", he is abstracting from all the particular expressions it might have.
Marx admitted that the form of value was a somewhat difficult notion, but he assumed "a reader who is willing to learn something new and therefore to think for himself." In a preface to the second edition of ''
Capital, Volume I
''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Erster Band. Buch I: Der Produktionsprocess des Kapitals) is the first of three treatises that ma ...
'', Marx claimed that he had "completely revised" his treatment, because his friend Dr. Louis Kugelmann had convinced him that a "more didactic exposition of the form of value" was needed. Usually Marx-scholars refer to both versions anyhow, because each of them provides some extra information which does not occur in the other version.
Commodity form
Marx calls the commodity form, as a basic form of value, "the economic cell-form of bourgeois society", meaning it is the simplest economic unit out of which the "body" of West European capitalist civilization was developed and built up, across six centuries. Wares trade for money, money trades for wares, more and more money is made from this trade, and the markets reach more and more areas - transforming society into the world of business.
The capitalist mode of production is viewed as "generalized" (or universalized) commodity production, i.e. the production of commodities ''by means of'' commodities, in a circular self-reproducing flow of actions and transactions (money is exchanged for commodities (including the commodity
labour power
Labour power (in german: Arbeitskraft; in french: force de travail) is a key concept used by Karl Marx in his critique of capitalist political economy. Marx distinguished between the capacity to do work, labour power, from the physical act of w ...
), used to produce new commodities exchanged for more money, financing more production and consumption). Already in his ''
Grundrisse
The ''Grundrisse der Kritik der Politischen Ökonomie'' (''Foundations of a Critique of Political Economy'') is an unfinished manuscript by the German philosopher Karl Marx. The series of seven notebooks was rough-drafted by Marx, chiefly for ...
'' manuscript of 1858, Marx worked out his insight that "The first category in which bourgeois wealth presents itself is that of the ''commodity''" and that became the opening sentence of his 1859 ''Critique'' and the first volume of ''Capital'' (1867).
The "forms of value" of ''commodities'' are only the first of a series of social forms which Marx analyzes in ''
Das Kapital
''Das Kapital'', also known as ''Capital: A Critique of Political Economy'' or sometimes simply ''Capital'' (german: Das Kapital. Kritik der politischen Ökonomie, link=no, ; 1867–1883), is a foundational theoretical text in Historical mater ...
'', such as the forms of money, the forms of capital, the forms of wages, and the forms of profit. All of these are different forms of value, normally expressed by prices, yet they all presuppose the exchange of tradeable wares. In Marx's dialectical story, each of these forms is shown to grow out of (or "transform" into) other forms, and so all the forms are connected with each other, step by step, logically and historically.
Each form is expressed with categories, the content of which evolves or mutates to some degree in response to new distinctions or circumstances. At the end of the story, all the forms appear seamlessly integrated with each other in a self-reproducing, constantly expanding capitalist system, of which the distant historical origin has become hidden and obscure; the fully developed system appears other than it really is, and does not transparently disclose its real nature.
If the workings of the capitalist system were perfectly obvious and transparent, Marx argues, then there would be no need for any special economic "science"; one would just be stating platitudes. They prompt further inquiry, because they turn out to be not as obvious as they seem, and indeed become rather puzzling or even mindboggling, on further reflection. Economists are constantly trying to "second-guess" what the market will do, and what the overall effects might be of transaction patterns, but in truth they often don't succeed any better than astrologers. A critical re-examination is then called for, of precisely those ordinary phenomena which were previously taken for granted.
After his first cryptic attempt at telling the story (in 168 pages) flopped when he published it in Germany, Marx resolved to tell it another time, in a much more interesting, intriguing and elaborate way, so that people would really grasp the significance of it—beginning from exactly the same starting point. That became ''
Das Kapital
''Das Kapital'', also known as ''Capital: A Critique of Political Economy'' or sometimes simply ''Capital'' (german: Das Kapital. Kritik der politischen Ökonomie, link=no, ; 1867–1883), is a foundational theoretical text in Historical mater ...
'' (1867-1894), which is still being read and discussed today.
Marx initially defines a product of human labour that has become a commodity (in German: ''Kaufware'', i.e., merchandise, ware for sale) as being simultaneously:
* A useful object that can satisfy a want or need (a
use value
Use value (german: Gebrauchswert) or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a commodity (a tradeable object) which can satisfy some human requirement, want or need, or ...
); this is the object valued from the point of view of consuming or using it, referring to its observable material form, i.e., the tangible, observable characteristics it has that make it useful, and therefore valued by people, even if the use is only symbolic.
* An object of economic value generally; this is the value of the object considered from the point of view of its supply cost, commercial value, or "what you can get for it". The reference here is to the ''social form'' of the product, which is not directly observable.
The "form of value" (also a reference to
phenomenology
Phenomenology may refer to:
Art
* Phenomenology (architecture), based on the experience of building materials and their sensory properties
Philosophy
* Phenomenology (philosophy), a branch of philosophy which studies subjective experiences and a ...
in the classical philosophical sense used by
Hegel
Georg Wilhelm Friedrich Hegel (; ; 27 August 1770 – 14 November 1831) was a German philosopher. He is one of the most important figures in German idealism and one of the founding figures of modern Western philosophy. His influence extends a ...
) then refers to the specific ways of relating through which "what a commodity is worth" happens to be socially expressed in trading processes, when different products and assets are compared with each other.
Practically speaking, Marx argues that the product ''values'' cannot be directly observed and can become observably manifest only as exchange-values, i.e., as relative expressions, by comparing their worth to other goods they can be traded for (usually via money prices). This causes people to think value and exchange-value are the same thing, but Marx argues they are not; the content, magnitude and form of value must be distinguished, and according to the
law of value
The law of the value of commodities (German: ''Wertgesetz der Waren''), known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic ''The Poverty of Philosophy'' (1847) against ...
, the exchange value of products being traded is determined and regulated by their value. His argument is, that the market prices of a commodity will oscillate around its value, and its value is the outcome of the average, normal labour requirements to produce it.
Metamorphosis
Marx argues that the forms of value are not "static" or "fixed once and for all", but rather, that they develop logically and historically in trading processes from very simple, primitive expressions to very complicated or sophisticated expressions. Subsequently, he also examines the various forms taken by capital, the forms of wages, the forms of profit and so forth. In each case, the form denotes how a specific social or economic relationship among people is expressed or symbolized.
In the process of circulation, production, distribution, and consumption, value metamorphoses from one form to another. Different forms of value – currencies, commodities and capitals – all trade for each other, where buyers and sellers convert money into goods, and goods into money, or convert one type of capital asset into another type of capital asset, in markets where prices fluctuate all the time.
According to Marx, the individual acts of exchange in themselves cannot alter the underlying ''value'' of goods and assets, at least not in the ordinary situation. Put differently, value is ordinarily ''conserved'' through successive acts of exchange (a "conservation principle") even although the forms that value takes can change. If goods and assets did not at least hold their value upon exchange, then warehousing, freighting and commercial trade itself would very likely break down. That insight existed already in ancient times. In speculative activity, the conservation principle is, however, not always true.
Primitive exchange
Initially, in primitive exchange, the form that economic value takes does not involve any
price
A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the c ...
s, since what something is "worth" is very simply expressed in (a quantity of) some other good (an occasional
barter
In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distingu ...
relationship). Some scholars, such as
Hans-Georg Backhaus
Hans-Georg Backhaus (born 1929) is a German Marxian economist and philosopher. He is considered one of the most important theorists on the field of Marx's theory of value. He began a long-term cooperation with Helmut Reichelt already from his y ...
, argue that for this reason value simply did not exist in societies where money was not used, or where it played only a marginal role. The old
Friedrich Engels
Friedrich Engels ( ,"Engels" '' primitive communism value was unknown", because there was no regular commodity trade.
Marx, though, acknowledged that product-values "of a sort" did exist in primitive economies, although value did not exist as a separate "thing" in such communities. Establishing "how much products were worth", he says, followed "customary practices", rather than purely a comparison with the value of other products, or reckoning with money; thus, the valuation of products was expressed in a different way (see also archaeology of trade). An "economy of labour-time" existed, although no supremely exact measures were available for work effort, time, storage and energy. All the time, that is, people knew quite well that their products had value, because it cost work-effort to replace them, and, consequently, they also valued their products. They could hardly afford to trade products on very unfavourable terms, because that would take them beyond the limits of their own available work-time; that mattered, because average labour productivity was low - it took a lot of time to produce food, clothing, shelter, tools and weapons. Whatever the trading custom was, it had to be at least compatible with survival requirements. If not, the custom would die out.
*In the most primitive (simplest) situation, people acquire objects for which they have a use by borrowing, trading or bartering, in exchange for other goods that they don't particularly have a need for themselves. They value things directly because of their useful qualities and because it takes work-time to get them (their own work and/or the work of others). In the process, customary norms develop for what counts as a normal, balanced exchange. There isn't just one way to trade a good, goods could be traded on all kinds of terms, but to pick the appropriate method, all kinds of factors might have to be taken in consideration. If a good was traded in the wrong way, for example because cultural conventions were not respected, it might have consequences that the traders were not really looking for.
*At the most abstract, developed level though, the value form is only a purely monetary relationship between objects, or an abstract earnings potential or credit provision, based on some assumptions, which may not even refer to any tangible object of trade anymore at all. There is, for example, only a number on a computer screen. At that point, it appears that the value of an asset is simply determined by the amount of income that could be obtained if the asset were traded under certain conditions, and within a given time interval.
Social relations
By analyzing the forms of value, Marx aims to show that when people bring their products into relation with each other in market trade, they are also socially related in specific ways (whether they like it or not, and whether they are aware of it or not), and that this fact very strongly influences the very way in which they ''think'' about how they are related. It influences how they will view the whole human interactive process of giving and receiving, taking and procuring, sharing and relinquishing, accepting and rejecting—and how to balance all that.
Some social relations we choose and make ourselves, but we are also socially related simply by being part of a community and a nation (or part of a family, an organization etc.), whether we like that or not. In trading roles, people have to deal with ''both'' of these kinds of social relations - simultaneously competing to get the best deal, and co-operating to obtain what they want. The trading process has both a voluntary aspect (freedoms, things to choose) and an involuntary aspect (constraints, things that have to be worked with to make a deal). To make the trade, buyers and sellers must respect each other's right to their own property, and their right to do with their own property what they want, within the framework of laws, customs and norms (Marx discusses the notion of the formal equality of market actors more in the ''
Grundrisse
The ''Grundrisse der Kritik der Politischen Ökonomie'' (''Foundations of a Critique of Political Economy'') is an unfinished manuscript by the German philosopher Karl Marx. The series of seven notebooks was rough-drafted by Marx, chiefly for ...
''). If the market actors simply grabbed stuff from others, that would not be trade, but robbery (which would not qualify as civilized conduct, and carries a
reputational risk
Reputational damage is the loss to financial capital, social capital and/or market share resulting from damage to a firm's reputation. This is often measured in lost revenue, increased operating, capital or regulatory costs, or destruction of sh ...
as well as being subject to legal sanctions).
The forms of value of products do not merely refer to a "trading valuation of objects"; they refer also to a certain way of relating or interacting, and a
mentality
Mindset is an "established set of attitudes, esp. regarded as typical of a particular group's social or cultural values; the outlook, philosophy, or values of a person; (now also more generally) frame of mind, attitude, ecte: anddisposition." ...
, among human subjects who internalize the forms of value, so that the manifestations of economic value become regarded as completely normal, natural and self-evident in human interactions (a "market culture," which is also reflected in language use). Marx himself refers surrealistically to "the language of commodities", the talk and signals they send and receive in the topsy-turvy world (''verkehrte Welt'') of trading processes, and he adds satirically in a footnote that "in a certain sense, people are in the same situation as commodities…". The suggestion is that, by analogy, the recognition of a person's identity and worth occurs only through contact with other people, and that one person becomes the species-model for another, just as commodities need to relate to each other and to money to establish what the magnitude of their value is.
Marx's description of what goes on in commodity exchanges highlights not only that value relationships appear to exist between commodities quite independently of the valuers, but also that people accept that these relationships exist, even although they do not understand exactly what they are, or why they exist at all. We know that a particular market exists, if there are buyers and sellers. With experience, we can identify them, and estimate a normal turnover. However, the totality of interactions and transactions in all markets combined simultaneously, can easily appear as an unfathomable abstraction.
Genesis of the forms of value
Marx distinguishes between four successive steps in the process of trading products, i.e., in the circulation of commodities, through which fairly stable and objective ''value proportionalities'' (''Wertverhältnisse'' in German) are formed that express "what products are
worth". These steps are:
*1. The ''simple form of value'', an expression that contains the duality of relative value and equivalent value.
*2. The ''expanded or total form of value'', a quantitative "chaining together" of the simple forms of expressing value.
*3. The ''general form of value'', i.e., the expression of the worth of all products reckoned in a general equivalent.
*4. The ''money-form'' of value, which is a general equivalent used in trading (a medium of exchange) that is ''universally exchangeable''.
These forms are different ways of symbolizing and representing what goods are worth, to facilitate trade and cost/benefit calculations. The simple form of value does not (or not necessarily) involve a money-referent at all, and the expanded and general forms are intermediary expressions between a non-monetary and a monetary expression of economic value. The four steps are an abstract summary of what essentially happens to the trading relationship when the trade in products grows and develops beyond incidental barter.
Simple form of value
The value relationship in Marx's economic sense begins to emerge, when we are able to state that one bundle of use-values is worth the same as another bundle of (different) use-values. That happens when the bundles of products are regularly traded for each other, and thus are regarded as instruments of trade. It is a quantitative relationship between quantities, implicitly expressed in the same unit of measurement. The simplest expression of the form of value can be stated as the following equation:
where the value of X is expressed ''relatively'', as being equal to a certain quantity of B, meaning that X is the ''relative'' form of value and Y the ''equivalent'' form of value, so that B is effectively ''the value-form'' of (expresses the value of) A. If we ask "how much is X quantity of commodity A worth?" the answer is "Y quantity of commodity B".
This simple equation, expressing a simple ''value proportion'' between products, however permits several possibilities of differences in valuation emerging within the circulation of products:
*the absolute value of X changes, but the absolute value of Y stays constant; in this case, the change in the relative value of X depends only on a change in the absolute value of A (The absolute value, Marx argues, is the total labour cost on average implicated in making a commodity).
*the absolute value of X stays constant, but the absolute value of Y changes; in this case, the relative value of X fluctuates in inverse relation to changes in the absolute value of B, meaning that if Y goes down then X goes up, while if Y goes up then X goes down.
*the values of X and Y both change in the same direction and in the same proportion. In this case, the equation still holds, but the change in absolute value is noticeable only if X and Y are compared with a commodity C, where C's value stays constant. If all commodities increase or decrease in value by the same amount, then their relative values all remain exactly the same.
*the values of X and Y change in the same direction, but not by the same amount, or vary in opposite directions.
These possible changes in valuation enable us to understand already that what any particular product will trade for is delimited by what ''other'' products will trade for, quite independently of how much the buyer would like to pay, or how much the seller would like to get in return.
''Value'' should not be confused with ''price'' here, however, because products can be traded at prices above or below what they are worth (implying value-price deviations; this complicates the picture and is elaborated only in the third volume of ''
Das Kapital
''Das Kapital'', also known as ''Capital: A Critique of Political Economy'' or sometimes simply ''Capital'' (german: Das Kapital. Kritik der politischen Ökonomie, link=no, ; 1867–1883), is a foundational theoretical text in Historical mater ...
''). There are value-structures and price-structures. For simplicity's sake, Marx assumes initially that the money-price of a commodity will be equal to its value (ordinarily, price-value deviations would not be very great); but in ''
Capital, Volume III
''Capital. A Critique of Political Economy. Volume III: The Process of Capitalist Production as a Whole'' (german: Das Kapital. Kritik der politischen Ökonomie Dritter Band. Buch III: Der Gesammtprocess Der Kapitalistischen Produktion), is the ...
'' it becomes clear that the sale of goods above or below their value has a crucial effect on aggregate profits.
The main implications of the simple ''relative'' form of value are that:
*The ''value'' of an individual commodity can change relative to other commodities, although the real cost in labour of that particular commodity stays constant, and vice versa, the real labour cost of that particular commodity can vary, although its relative value remains the same; this means that goods can be devalued or revalued depending on what happens elsewhere in the trading system and on changes in the conditions of producing them elsewhere. It would therefore be wrong to claim, as some Marxists (Mandel, Ollman, Carchedi) argue, that for Marx "economic value ''is'' labour"; rather, the economic value of products really refers to the current social valuation of average labour effort implicated in products.
*That the absolute and relative values of commodities can change constantly, in proportions which do not exactly compensate each other, or cancel each other out, via haphazard adjustments to new production and demand conditions.
Marx also argues that, at the same time, such an economic equation accomplishes two other things:
*the value of specific labour activities is implicitly related in proportion to the value of labour in general, and
* private labour activities, carried out independently of each other, are socially recognized as being a fraction of society's total labour.
Effectively, a ''social nexus'' (a societal connection or bond) is established and affirmed via the value-comparisons in the marketplace, which makes relative labour costs (the expenditures of human work energy) the real substance of value. Obviously, some assets are not produced by human labour at all, but how they are valued commercially will nevertheless refer, explicitly or implicitly, directly or indirectly, to the comparative cost structure of related assets that are labour-products.
A tree in the middle of the
Amazon Rain Forest
The Amazon rainforest, Amazon jungle or ; es, Selva amazónica, , or usually ; french: Forêt amazonienne; nl, Amazoneregenwoud. In English, the names are sometimes capitalized further, as Amazon Rainforest, Amazon Forest, or Amazon Jungle. ...
has no commercial value where it stands. We can estimate its value only by estimating what it would cost to cut it down, what it would sell for in markets, or what income we could currently get from it — or how much we could charge people to look at it. Imputing an "acceptable price" to the tree, assumes that there already exists a market in timber, or in forests, that tells us what the tree would normally be worth.
Expanded form of value
In the expanded form of value, the equation process between quantities of different commodities is simply continued serially, so that their values relative to each other are established, and they can all be expressed in some or other commodity-equivalent. The expanded value-form expression really represents only an extension of the simple value form, where products alternate as relative and equivalent forms in order to be equated to each other.
Marx argues that, as such, the expanded form of value is practically inadequate, because to express what any commodity is worth might now require the calculation of a whole "chain" of comparisons, i.e.
What this means is, that if A is normally traded for B, and B is normally traded for C, then to find out how much A is worth in terms of C, we first have to convert the amounts into B (and maybe many more intermediate steps). This is obviously inefficient if many goods are traded at the same time.
General form of value
The practical solution in trade is therefore the emergence of a general form of value, in which the values of all kinds of bundles of commodities can be expressed in amounts of one standard commodity (or just a few standards) which function as a general equivalent. The general equivalent has itself no relative form of value in common with other commodities; instead its value is expressed only in a myriad of other commodities.
=
In ancient civilizations where considerable market trade occurred, there were usually a few types of goods that could function as a general standard of value. This standard served for value comparisons; it did not necessarily mean that goods were actually traded for the standard commodity.Paul Einzig, ''Primitive money in its ethnological, historical and economic aspects''. Pergamon, 1966. This rather cumbersome approach is solved with the introduction of ''money''—the owner of a product can sell it for money, and buy another product he wants with money, without worrying anymore about whether the thing offered in exchange for his own product is indeed the product that he wants himself. Now, the only limit to trade is the development and growth rate of the market.
Money-form of value
Just because quantities of goods can be expressed in amounts of a general equivalent, which acts as a referent, this does not mean that they can necessarily all be traded for that equivalent. The general equivalent may only be a sort of yardstick used to compare what goods are worth. Hence, the general equivalent form in practice gives way to the
money
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...
-commodity, which is a universal equivalent, meaning that (provided people are willing to trade) it possesses the characteristic of direct and universal exchangeability in precisely measured quantities.
=
But for most of the history of human civilization, money was not actually universally used, partly because the prevailing systems of property rights and cultural
custom
Custom, customary, or consuetudinary may refer to:
Traditions, laws, and religion
* Convention (norm), a set of agreed, stipulated or generally accepted rules, norms, standards or criteria, often taking the form of a custom
* Norm (social), a r ...
did not allow many goods to be sold for money, and partly because many products were distributed and traded without using money. Also, several different "currencies" were often used side by side. Marx himself believed that
nomadic
A nomad is a member of a community without fixed habitation who regularly moves to and from the same areas. Such groups include hunter-gatherers, pastoral nomads (owning livestock), tinkers and trader nomads. In the twentieth century, the popu ...
peoples were the first to develop the money-form of value (in the sense of a universal equivalent in trade) because all their possessions were mobile, and because they were regularly in contact with different communities, which encouraged the exchange of products.
When money is generally used in trade, money becomes the general expression of the form of value of goods being traded; usually this is associated with the emergence of a state authority issuing legal currency. At that point the form of value appears to have acquired a fully independent, separate existence from any particular traded object (behind this autonomy, however, is the power of state authorities or private agencies to ''enforce'' financial claims).
Once the money-commodity (e.g.,
gold
Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile met ...
,
silver
Silver is a chemical element with the Symbol (chemistry), symbol Ag (from the Latin ', derived from the Proto-Indo-European wikt:Reconstruction:Proto-Indo-European/h₂erǵ-, ''h₂erǵ'': "shiny" or "white") and atomic number 47. A soft, whi ...
,
bronze
Bronze is an alloy consisting primarily of copper, commonly with about 12–12.5% tin and often with the addition of other metals (including aluminium, manganese, nickel, or zinc) and sometimes non-metals, such as phosphorus, or metalloids such ...
) is securely established as a stable medium of exchange, symbolic money-tokens (e.g.,
bank notes
A banknote—also called a bill (North American English), paper money, or simply a note—is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand.
Banknotes were originally issued ...
and debt claims) issued by the state, trading houses or corporations can in principle substitute paper money or debt obligations for the "real thing" on a regular basis.
At first, these "paper claims" (legal tender) are by law convertible on demand into quantities of gold, silver etc., and they circulate alongside precious metals. But gradually currencies come into use that are not so convertible, i.e., "fiduciary money" or
fiat money
Fiat money (from la, fiat, "let it be done") is a type of currency that is not backed by any commodity such as gold or silver. It is typically designated by the issuing government to be legal tender. Throughout history, fiat money was sometime ...
which relies on social trust that people will honor their transactional obligations. These kinds of fiduciary money rely not on the value of money-tokens themselves (as in
commodity money
Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods.
This is in contrast to representati ...
), but on the ability to enforce financial claims and contracts, principally by means of the power and laws of the state, but also by other institutional methods. Eventually, as Marx anticipated in 1844, precious metals play very little role anymore in the monetary system.
Alongside fiat money, credit money also develops more and more. Credit money, although expressed in currency units, does not consist of money tokens. It consists rather of financial claims, including of all kinds of debt certificates (promissory notes) which entitle the holder to future income under contractually specified conditions. These claims can themselves be traded for profit. Credit arrangements existed already in the ancient world, but there was no very large-scale trade in debt obligations. In the modern world, the majority of money no longer consists of money tokens, but of credit money. Marx was quite aware of the role of credit money, but he did not analyze it in depth. His concern was only with how the credit system directly impacted on the capitalist production process.
The ultimate universal equivalent according to Marx is "world money", i.e., financial instruments that are accepted and usable for trading purposes everywhere, such as
bullion
Bullion is non-ferrous metal that has been refined to a high standard of elemental purity. The term is ordinarily applied to bulk metal used in the production of coins and especially to precious metals such as gold and silver. It comes from t ...
. In the world market, the value of commodities is expressed by a universal standard, so that their "independent value-form" appears to traders as "universal money". Nowadays the
US dollar
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
, the
Euro
The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
, and the Japanese
Yen
The is the official currency of Japan. It is the third-most traded currency in the foreign exchange market, after the United States dollar (US$) and the euro. It is also widely used as a third reserve currency after the US dollar and the e ...
are widely used as "world currencies" providing a near-universal standard and measure of value. They are used as a means of exchange worldwide, and consequently most governments have significant reserves or claims to these currencies.
Implications
Marx's four steps in the development of the form of value are mainly an ''analytical'' or logical progression, which may not always conform to the ''actual'' historical processes by which objects begin to acquire a relatively stable value and are traded as commodities. Three reasons are:
*Various different methods of trade (including counter-trade) may always exist and persist side by side. Thus, simpler and more developed expressions of value may be used in trade at the same time, or combined (for example, in order to fix a rate of exchange, traders may have to reckon how much of commodity B can be acquired, if commodity A is traded).
*Market and non-market methods of allocating resources may combine, and they can combine in rather unusual ways. The act of sale, for example, may not only give the new owner of a good possession of it, but also grant or deny access to other goods. The actual distinction between selling and barter may not be so easy to draw, and all kinds of "deals" can be done in which the trade of one thing has consequences for the possession of other things.
*Objects that previously had no socially accepted value at all, may acquire it in a situation where money is already used, simply by imputing or attaching a money-price to them. In this way, objects can acquire the form of value "all at once"—they are suddenly integrated in an already existing market (the only prerequisite is, that somebody owns the trading rights for those objects). Bertram Schefold notes that in medieval Japan, the
Empress Genmei
, also known as Empress Genmyō, was the 43rd monarch of Japan, Imperial Household Agency (''Kunaichō'') 元明天皇 (43) retrieved August 22, 2013. according to the traditional order of succession. Genmei's reign spanned the years 707 throug ...
simply decreed the introduction of minted coinage one day in 708 CE (the so-called
wadōkaichin
, also romanized as ''Wadō-kaichin'' or called ''Wadō-kaihō'', is the oldest official Japanese coinage, first mentioned for 29 August 708 on order of Empress Genmei. It was long considered to be the first type of coin produced in Japan. Ana ...
), to "lighten the burden of carrying around commodity equivalents" such as arrowheads, rice and gold.
It is just that, typically, what the socially accepted value of a wholly new kind of object will be, requires the practical "test" of a regular trading process, assuming a regular supply by producers and a regular demand for it, which establishes a trading "norm" consistent with production costs. A new object that wasn't traded previously may be traded far above or below its real value, until the supply and demand for it stabilizes, and its exchange-value fluctuates only within relatively narrow margins (in orthodox economics, this process is acknowledged as a form of
price discovery
In economics and finance, the price discovery process (also called price discovery mechanism) is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers.
Overview
Price discovery is diff ...
).
The development of the form of value through the growth of trading processes involves a continuous dual equalization & relativization process (this is sometimes referred to as a type of "market adjustment"):
*the worth of products and assets relative to each other is established with increasingly precise equations, creating a structure of relative values;
*the comparative labour efforts required to make the products are also valued in an increasingly standardized way at the same time. For almost any particular type of labour, it can then be specified, fairly accurately, how much money it would take, on average, to employ that labour and get the use out of that labour. To get any type of job done, there is then a normal price tag for the labour involved.
Six main effects of this are:
*The process of market-expansion, involving the circulation of more and more goods, services and money, leads to the development of the form of value of products, which includes and transforms more and more aspects of human life, until almost everything is structured by the forms of value;
*That it increasingly seems as though economic value ("what things are worth") is a natural, intrinsic characteristic of products and assets (just like the characteristics that make them useful) rather than a social effect created by labour-cooperation and human effort;
*what any particular kind of labour is worth, becomes largely determined by the value of the tradeable product of the labour, and labour becomes organized according to the value it produces.
*The development of markets leads to the ''capitalization'' of money, products and services: the trade of money for goods, and goods for money, leads directly to the use of the trading process purely to "make money" from it (a practice known in classical Greece as " chrematistics"). This is what Marx regards as the true origin of capital, long before capital's conquest of the whole of production.
*
Labour power
Labour power (in german: Arbeitskraft; in french: force de travail) is a key concept used by Karl Marx in his critique of capitalist political economy. Marx distinguished between the capacity to do work, labour power, from the physical act of w ...
that creates no commodity value or does not have the potential to do so, has no value for commercial purposes, and is therefore usually not highly valued economically, except insofar as it reduces costs that would otherwise be incurred.
*The diffusion of value relations eradicates traditional
social relations
A social relation or also described as a social interaction or social experience is the fundamental unit of analysis within the social sciences, and describes any voluntary or involuntary interpersonal relationship between two or more individuals ...
and corrodes all social relations not compatible with commerce; the valuation that becomes of prime importance is what something will trade for. The end result is the emergence of the trading circuit M-C...P...C'-M', which indicates that production has become a means for the process of making money (that is, Money Mbuys commodities Cwhich are transformed through production Pinto new commodities C' and, upon sale, result in more money M'than existed at the start).
Generalized commodity production
Capital existed in the form of trading capital already thousands of years before capitalist factories emerged in the towns; its owners (whether rentiers, merchants or state functionaries) often functioned as ''intermediaries'' between commodity producers. They facilitated exchange, for a price—they made money from trade. Marx defines the capitalist mode of production as "generalized (or universalized) commodity production", meaning that most goods and services are produced primarily for commercial purposes, for profitable market sale in a universal market.
This has the consequence, that both the inputs and the outputs of production (including
labour power
Labour power (in german: Arbeitskraft; in french: force de travail) is a key concept used by Karl Marx in his critique of capitalist political economy. Marx distinguished between the capacity to do work, labour power, from the physical act of w ...
) become tradeable objects with prices, and that ''the whole of production'' is reorganized according to commercial principles. Whereas originally commercial trade occurred episodically at the boundaries of different communities, Marx argues, eventually commerce engulfs and reshapes the whole production process of those communities. This involves the transformation of a large part of the labour force into wage-labour (the sale of
labour power
Labour power (in german: Arbeitskraft; in french: force de travail) is a key concept used by Karl Marx in his critique of capitalist political economy. Marx distinguished between the capacity to do work, labour power, from the physical act of w ...
as a commodity), and the capitalization of labour employed (
surplus labour
Surplus labour (German: ''Mehrarbeit'') is a concept used by Karl Marx in his critique of political economy. It means labour performed in excess of the labour necessary to produce the means of livelihood of the worker ("necessary labour"). The "su ...
creates
surplus value
In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to the owner of that product to manufacture it: i.e. the amount raised through sale of the product minus the cost ...
).
In turn, this means what whether or not a product will be produced, and how it will be produced, depends not simply on whether it is physically possible to produce it or on whether people need it, but on its financial cost of production, whether a sufficient amount can be sold, and whether its production yields sufficient profit income. That is also why Marx regarded the individual commodity, which simultaneously represents value and
use-value
Use value (german: Gebrauchswert) or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a commodity (a tradeable object) which can satisfy some human requirement, want or need, o ...
as the "cell" (or the "cell-form") in the "body" of capitalism. The seller primarily wants money for his product and is not really concerned with its consumption or use (other than from the point of view of making sales); the buyer wants to use or consume the product, and money is the means to acquire it from any convenient source.
Thus the seller does not aim directly to satisfy the need of the buyer, nor does the buyer aim to enrich the seller. Rather, the buyer and the seller are the means for each other to acquire money or goods. As a corollary, production may become less and less a creative activity to satisfy human needs, but simply a means to make money or acquire access to goods and services.
Richard Sennett
Richard Sennett (born 1 January 1943) is the Centennial Professor of Sociology at the London School of Economics and former University Professor of the Humanities at New York University. He is currently a Senior Fellow of the Center on Capitalis ...
provides a eulogy for the vanishing art of craftsmanship in capitalist society. As against that, products obviously could not be sold unless people need them, and unless that need is practically acknowledged. The social effect is that the motives for trading may be hidden to some or other extent, or appear somewhat differently from what they really are (in this sense, Marx uses the concept of "
character mask
In Marxist philosophy, a character mask (german: Charaktermaske) is a prescribed social role which conceals the contradictions of a social relation or order. The term was used by Karl Marx in published writings from the 1840s to the 1860s, and ...
s").
Reification
The concept of the form of value shows how, with the development of commodity trade, anything with a utility for people can be transformed into an abstract value, objectively expressible as a sum of money; but, also, how this transformation changes the organization of labour to maximize its value-creating capacity, how it changes social interactions and the very way people are aware of their interactions.
However, the quantification of objects and the manipulation of quantities ineluctably leads to distortions ( reifications) of their qualitative properties. For the sake of obtaining a measure of magnitude, it is frequently assumed that objects are quantifiable, but in the process of quantification, various qualitative aspects are conveniently ignored or abstracted away from. Obviously the expression of everything in money prices is not the only valuation that can, or should, be made. Mathematics is enormously important for economic analysis, but it is, potentially, also a formidable source of ultimate reification (since reducing an economic phenomenon to an abstract number might disregard almost everything necessary to understand it).
Essentially, Marx argues that if the values of things are to express social relations, then, in trading activity, people necessarily have to "act" symbolically in a way that inverts the relations among objects and subjects, whether they are aware of that or not. They have to treat a relationship as if it is a thing in its own right. In an advertisement, a financial institution might for example say "with us, your money works for you", but money does not "work", people do. A relationship gets treated as a thing, and a relationship between people is expressed as a relationship between things.
Marketisation
The total implications of the development of the forms of value are much more farreaching than can be described in this article, since (1) the processes by which the things people use are transformed into objects of trade (often called
commodification
Within a capitalist economic system, commodification is the transformation of things such as goods, services, ideas, nature, personal information, people or animals into objects of trade or commodities.For animals"United Nations Commodity Trad ...
, commercialization or marketization) and (2) the social effects of these processes, are both extremely diverse. A very large literature exists about the growth of business relationships in all sorts of areas, highlighting both progress, and destruction of traditional ways.
For capitalism to exist, markets must grow, but market growth requires changes in the way people relate socially, and changes in property rights. This is often a problem-fraught and conflict-ridden process, as Marx describes in his story about
primitive accumulation
In Marxian economics and preceding theories,Perelman, p. 25 (ch. 2) the problem of primitive accumulation (also called previous accumulation, original accumulation) of capital concerns the origin of capital, and therefore of how class distinct ...
. During the 20th century, there was hardly a year without wars occurring somewhere in the world. As the global expansion of business competition broke up the traditional social structures and traditional property rights everywhere, it caused political instability and continual conflicts between social classes, ethnic groups, religions and nations, in different places, as well as a series of revolutions and coups d'état (analyzed e.g. by sociologists like
Theda Skocpol
Theda Skocpol (born May 4, 1947) is an American sociologist and political scientist, who is currently the Victor S. Thomas Professor of Government and Sociology at Harvard University. She is a highly influential figure in both sociology and pol ...
and
Charles Tilly
Charles Tilly (May 27, 1929 – April 29, 2008) was an American sociologist, political scientist, and historian who wrote on the relationship between politics and society. He was a professor of history, sociology, and social science at the Univ ...
). Almost all socialist countries that appeared in the 20th century arose out of wars.
Wars are generally bad for business (except for the military industry and its suppliers), nobody likes them, and governments try to prevent them, but in reality the marketisation of the world has often been a very aggressive, violent process. Typically, therefore, the advocates of peaceful market trade blame "everything but the market" for the explosions of mass violence that occur, with the promise that, if people would just sit down and negotiate a deal, they wouldn't have to use force to get what they want. This assumes that market trade is something quite ''separate'' from political power, ''because'' it is market-trade, i.e. a free negotiation between trading partners who are equals in the marketplace.
Value-form and price-form
In his story, Marx defines the magnitude of "value" simply as the ratio of a physical quantity of product to a quantity of average labour-time, which is equal to a quantity of gold-money (in other words, a
scalar
Scalar may refer to:
*Scalar (mathematics), an element of a field, which is used to define a vector space, usually the field of real numbers
* Scalar (physics), a physical quantity that can be described by a single element of a number field such ...
):
:::::X quantity of product = Y quantity of average labour hours = Z quantity of gold-money
He admits early on, that the assumption of gold-money is a theoretical simplification, since the buying power of money tokens can vary due to causes that have nothing to do with the production system (within certain limits, X, Y and Z can vary independently of each other); but he thought it was useful to reveal the structure of economic relationships involved in the capitalist mode of production, as a prologue to analyzing the motion of the system as a whole; and, he believed that variations in the buying power of money did not alter that structure at all, insofar as the working population was forced to produce in order to survive, and in so doing entered into societal
relations of production
Relations of production (german: Produktionsverhältnisse, links=no) is a concept frequently used by Karl Marx and Friedrich Engels in their theory of historical materialism and in ''Das Kapital''. It is first explicitly used in Marx's publish ...
independent of their will; the basic system of property rights remained the same, irrespective of whether products and labour were traded for a higher or a lower price.
As any banker or speculator knows, however, the expression of the value of something as a quantity of money-units is by no means the "final and ultimate expression of value".
*At the simplest level, the reason is that different "monies" (currencies) may be used side by side in the trading process, meaning that "what something is worth" may require expressing one currency in another currency and that one currency is traded against another, where currency exchange rates fluctuate all the time. Thus, money itself can take many different forms.
*In more sophisticated trade, moreover, what is traded is not money itself, but rather claims to money ("financial claims" and counter-claims, for example debt obligations, borrowing facilities or stocks that provide the holder with an income).
*And in even more sophisticated trade, what is traded is the insurance of financial claims against the risk of possible monetary loss. In turn, money can be made just from the knowledge about the probability that a financial trend or risk will occur or will not occur.
Eventually financial trade becomes so complex, that what a financial asset is worth is often no longer expressible in any exact quantity of money (a "cash value") without all sorts of qualifications, and that its worth becomes entirely conditional on its expected earnings potential.
In ''Capital Volume 3'', which he drafted before ''Volume I'', Marx shows he was well aware of this. He distinguished not only between "real capital" (physical, tangible capital assets) and "money capital", but also noted the existence of "
fictitious capital
Fictitious capital (German: ''fiktives Kapital'') is a concept used by Karl Marx in his critique of political economy. It is introduced in chapter 25 of the third volume of Capital. Fictitious capital contrasts with what Marx calls "real capita ...
" and pseudo-commodities that strictly speaking have only symbolic value. Marx believed that a failure to theorize the forms of value correctly led to "the strangest and most contradictory ideas about money," which "emerges sharply... in he theory ofbanking, where the commonplace definitions of money no longer hold water".
Price-form
Consistent with this, Marx explicitly introduced a distinction between the form of ''value'' and the price-form early on in ''
Capital, Volume I
''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Erster Band. Buch I: Der Produktionsprocess des Kapitals) is the first of three treatises that ma ...
''. Simply put, the price-form is a mediator of trade that is separate and distinct from the forms of value that products have. Prices express exchange-value in units of money. A price is a "sign" that conveys information about either a possible or a realized transaction (or both at the same time). The information may be true or false; it may refer to observables or unobservables; it may be estimated, assumed or probable. However, because prices are also numbers, it is easy to treat them as manipulable "things" in their own right, in abstraction from their appropriate context. As
Viktor Mayer-Schönberger
Viktor Mayer-Schönberger (born 1966) is Professor of Internet Governance and Regulation at the Oxford Internet Institute, University of Oxford. He conducts research into the network economy. Earlier he spent ten years on the faculty of Harvard's ...
puts it, "...in the process of distilling information down to price, many details get lost."
Latin root
The ambiguity of the modern concept of "price" already existed in the Latin root meaning of the word, in Roman times. It has persisted in modern times. Thus, for example, in 1912,
Frank Fetter
Frank Albert Fetter (; March 8, 1863 – March 21, 1949) was an American economist of the Austrian School. Fetter's treatise, ''The Principles of Economics'', contributed to an increased American interest in the Austrian School, including the th ...
gathered 117 ''different'' definitions of "price" used by economists, which he grouped under three categories: objective exchange-value, subjective value, and ratio of exchange. The
words ''pris'' or ''prix'' (French), ''Preis'' (German), ''prezzo'' (Italian), ''precio'' (Spanish), ''preço'' (Portuguese) and ''price'' (English) were all derived, directly or via-via, from the Latin equivalent ''pretium'' or ''precium'' (which was possibly a contraction of ' or ', i.e., what goes across from buyer to seller, in an exchange). The Latin verb ''itio'' means "going, travelling", as in " itinerary", and the Latin derivation ''pretiosus'' means "valuable or costly".
"Pretium", the Latin word for price, had no less than ten discrete meanings, depending on the context:
*what something is worth: the value, the valuation, the (sum of) money represented, or the exchange-value of something.
*the purchase (or acquisition) cost, or the expense of something.
*the amount of a bid, a bet, an offer, or an estimate.
*a compensation, a requital or a return for a service.
*the worth, yield, or benefit of a thing or an activity, in terms of what is gained (as compared to cost or effort).
*a reward, an honour, or a prize granted.
*an incentive or a stimulus.
*the wage of a hireling, the payment for a slave or a harlot, the rent for a hired good.
*the penalty or retribution for a mistake, for a failure or for a crime.
*the amount of a bribe, a graft payment, or a ransom deal.
Each of these ten sorts of price ideas referred to different social relations. Each social relationship, in turn, involves some kind of transaction - an exchange, an investment, an award, a grant, a fine, a disbursement or transfer, a compensation payment etc. The word "transaction" is itself derived from the Latin ''transactionem'', meaning an "agreement", "an accomplishment", "a done deal". The Latin word ''transactor'' refers to the mediator or intermediary operative in some kind of deal, and ''transactus'' means "pierced", "penetrated", or "stuck through" (many Roman coins had holes through them, for storage on a string, or decorative purposes).
The word ''pretium'', or a price number, do not make all that explicit. Nevertheless, the classical concept of price already clearly displayed both an economic or
instrumental
An instrumental is a recording normally without any vocals, although it might include some inarticulate vocals, such as shouted backup vocals in a big band setting. Through semantic widening, a broader sense of the word song may refer to instru ...
dimension, and a moral dimension (some prices are appropriate and just, others aren't). According to Stephen Gudeman, one aspect of the fetish of prices can manifest itself, when "prices only refer to themselves". Prices refer only to themselves, when they are lifted out of the transactional and social context from which they originated, and acquire an independent reality, where price numbers only relate to other price numbers. In that sense, the price numbers might hide as much as they reveal. While people are focused on the numbers, they forget about the real context that gives rise to the numbers. By the time that price numbers decide how people will be relating, prices have acquired a tremendous power in human affairs.
The price resulting from a calculation may be regarded as symbolizing (representing) one transaction, or many transactions at once, but the validity of this "price abstraction" all depends on whether the computational procedure and valuation method are accepted. The modern notion of "the price of something" is often applied to sums of money denoting various quite different financial categories (e.g. a purchase or sale cost, the amount of a liability, the amount of a compensation, an asset value, an asset yield, an interest rate etc.). It can be difficult to work out, even for an economist, what a price really means, and price information can be deceptive.
A (simple) price is transparent, if (1) it expresses clearly how much money has to be paid to acquire a product, asset or service, and if (2) its meaning is understood in the same way by all concerned. Things get more complicated, if many prices have to be added, subtracted, divided and multiplied in order to value something (an aggregated total price). Here, a method of price calculation is involved which assumes conventions, definitions and concepts which could vary to some or other extent. In order to understand this price, it is necessary to understand how it is arrived at, and whether the method is acceptable or correct.
Value vs. price
According to Marx, the price-form is the idealized (symbolic) expression of the money-form of value that is used in trading things, calculating costs and benefits, and assessing what things are worth. As such, it is not a "further development" of the form of value itself, and exists independently of the latter, for five reasons:
* The (simple) price equates a quantity of one ''specific'' type of use-value to a quantity of money, whereas the meaning of "money form of value" is, that a given quantity of money will exchange for ''a quantity of any of the different kinds of use-values'' which the money can buy. So, the "money form of value" is not the same as a "price", in the first instance because the money form of value refers to an ''indeterminate'' variety of ''N'' commodities that are all equivalents for a given quantity of money. If we want to know "the price of fish", we need specific information about the kind of fish which are currently on offer. At best one could say, that the money form of value is an "index of monetized exchangeability".
*As Marx notes, prices may be attached to almost anything at all ("the price of owning, using or borrowing something"), and therefore need not express product-values at all. The price form expressing a type of transaction does not have to express a form of ''value''. Prices do not necessarily have anything to do with the production or consumption of tangible wealth, although they might facilitate claims to it. The prices of some types of assets are not formed by any product-values at all. This point becomes especially important when we leave the sphere of production and the distribution of products altogether, and enter other sectors of economic life.
*Each of Marx's four forms of value which mark successive developmental phases in the trading process can alternatively also be reckoned in terms of money prices, once a generally accepted currency exists. Money-prices can exist, even although stable product-values have not (yet) been formed through regular production and trade.
*Insofar as the price of a commodity does express its value accurately, this does not necessarily mean that it will actually trade at this price; products can trade at prices above or below what the goods are really worth, or fail to be traded at any price.
*Although as a rule there will be a strong positive correlation between product-prices and product-values, they may change completely independently of each other for all kinds of reasons. When things are bought or sold, they may be over-valued or under-valued due to all kinds of circumstances.
In Marx's theory of the capitalist mode of production, not just anything has a value in the economic sense, even if things can be priced. Only the products of human labour have the property of value, and their "value" is the total current labour cost implicated in making them, on average. Financial assets are regarded as tradeable claims to value, which can be exchanged for tangible assets. The "value" of a financial asset is defined by what and how much the owner can buy, if the asset is traded/sold.
Value relationships among physical products or labour-services and physical assets — as proportions of current labour effort involved in making them — exist according to Marx quite independently from price information, and prices can oscillate in all sorts of ways around economic values, or indeed quite independently of them. However, the expression of product-value by prices in money-units in most cases does not diverge very greatly from the actual value; if there was a very big difference, people would not be able to sell them (insufficient income), or they would not buy them (too expensive, relative to other options).
If prices for products rise, hours worked may rise, and if prices fall, hours worked may fall (sometimes the reverse may also occur, to the extent that extra hours are worked, to compensate for lower income resulting from lower prices, or if more sales occur because prices are lowered). In that sense, it is certainly true that product-prices and product-values mutually influence each other. It is just that, according to Marx, product-values are not determined by the labor-efforts of any particular enterprise, but by the combined result of all of them.
Real prices and ideal prices
In discussing the form of prices in various draft manuscripts and in ''
Das Kapital
''Das Kapital'', also known as ''Capital: A Critique of Political Economy'' or sometimes simply ''Capital'' (german: Das Kapital. Kritik der politischen Ökonomie, link=no, ; 1867–1883), is a foundational theoretical text in Historical mater ...
'', Marx drew an essential distinction between actual prices charged and paid, i.e., prices that express how much money really changed hands, and various " ideal prices" (imaginary or notional prices).
Because prices are symbols or indicators in more or less the same way as traffic lights are, they can symbolize something that really exists (e.g., hard cash) but they can also symbolize something that doesn't exist, or symbolize other symbols. The concept of price is often used in a very loose sense to refer to all kinds of transactional possibilities. That can make the forms of prices highly variegated, flexible and complex to understand, but also potentially very deceptive, disguising the real relationships involved.
Modern economics is largely a "price science" (a science of "price behaviour"), in which economists attempt to analyze, explain and predict the relationships between different kinds of prices—using the laws of
supply and demand
In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...
as a guiding principle. These prices are mostly just numbers, where the numbers are believed to ''represent'' real prices, in some way, as an idealization. Mathematics then provides a logical language, to talk about what these prices might do, and to calculate pricing effects. This however was not Marx's primary concern; he focused rather on the structure and dynamics of the capitalism as a social system. His concern was with the overall results that market activity would lead to in human society.
In what Marx called "vulgar economics", the complexity of the concept of prices is ignored however, because, Marx claimed in ''
Theories of Surplus Value
''Theories of Surplus Value'' (german: Theorien über den Mehrwert) is a draft manuscript written by Karl Marx between January 1862 and July 1863. It is mainly concerned with the Western Europe, Western European theorizing about ''Mehrwert'' (add ...
'' and other writings, the vulgar economists assumed that:
:::*Since they all express a quantity of money, all prices belong to the same object class (they are qualitatively the same, and differ only quantitatively, irrespective of the type of transaction with which they are associated, or the valuation principles used).
:::*For theoretical purposes, there is no substantive difference between price idealizations and prices which are actually charged.
:::*"Price" is just another word for "value", i.e., value and price are identical expressions, since the value relationship simply expresses a relationship between a quantity of money and a quantity of some other economic good.
:::*Prices are always exact, in the same way that numbers are exact (disregarding price estimation, valuation changes and accounting error).
:::*Price information is always objective (i.e., it is never influenced by how people regard that information).
:::*People always have equal access to information about prices (in which case swindles are merely an aberration from the normal functioning of markets, rather than an integral feature of them, which requires continual policing).
:::*The price for any particular type of good is always determined in exactly the same way everywhere, according to the same economic laws, regardless of the given social set-up.
In his
critique of political economy
Critique of political economy or critique of economy is a form of Social criticism, social critique that rejects the various social categories and structures that constitute the mainstream discourse concerning the forms and modalities of resourc ...
, Marx denied that any of these assumptions were scientifically true (see further
real prices and ideal prices
The distinction between real prices and ideal prices is a distinction between ''actual prices paid'' for products, services, assets and labour (the net amount of money that actually changes hands), and ''computed'' prices which are not actually cha ...
). He distinguished carefully between the values, exchange values, market values, market prices and
prices of production
Prices of production (or "production prices"; in German ''Produktionspreise'') is a concept in Karl Marx's critique of political economy, defined as "cost-price + average profit". A production price can be thought of as a type of supply price for p ...
of commodities.
However, he did not analyze all the different forms that prices can take (for example, market-driven prices,
administered prices Administered prices are prices of goods set by the internal pricing structures of firms that take into account cost rather than through the market forces of supply and demand and predicted by classical economics. They were first described by inst ...
, accounting prices, negotiated and fixed prices, estimated prices, nominal prices, or inflation-adjusted prices) focusing mainly on the value proportions he thought to be central to the functioning of the capitalist mode of production as a social system. The effect of this omission was that debates about the relevance of Marx's value theory became confused, and that Marxists repeated the same ideas which Marx himself had rejected as "vulgar economics". In other words, they accepted a vulgar concept of price. Koray Çalışkan comments: "A mysterious certainty dominates our lives in late capitalist modernity: the price. Not a single day passes without learning, making, and taking it. Yet despite prices’ widespread presence around us, we do not know much about them."
Fluctuating
price signal
A price signal is information conveyed to consumers and producers, via the prices offered or requested for, and the amount requested or offered of a product or service, which provides a signal to increase or decrease quantity supplied or quantit ...
s serve to adjust product-values and labour efforts to each other, in an approximate way; prices are mediators in this sense. But that which mediates should not be confused with what is mediated. Thus, if the observable price-relationships are simply taken at face value, they might at best create a distorted picture, and at worst a totally false picture of the economic activity to which they refer. At the surface, price aggregations might quantitatively express an economic relationship in the simplest way, but in the process they might abstract away from other features of the economic relationship that are also very essential to know. Indeed, that is another important reason why Marx's analysis of economic value largely disregards the intricacies of price fluctuations; it seeks to discover the real economic movement behind the price fluctuations.
Sources
Aristotle and Samuel Bailey
Marx borrowed the idea of the form of value from the Greek philosopher
Aristotle
Aristotle (; grc-gre, Ἀριστοτέλης ''Aristotélēs'', ; 384–322 BC) was a Greek philosopher and polymath during the Classical period in Ancient Greece. Taught by Plato, he was the founder of the Peripatetic school of phil ...
(circa 384-322 BC), who pondered the nature of exchange value in chapter 5 of Book 5 in his ''
Nicomachean Ethics
The ''Nicomachean Ethics'' (; ; grc, Ἠθικὰ Νικομάχεια, ) is Aristotle's best-known work on ethics, the science of the good for human life, which is the goal or end at which all our actions aim. (I§2) The aim of the inquiry is ...
''. Aristotle distinguished clearly between the concepts of
use-value
Use value (german: Gebrauchswert) or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a commodity (a tradeable object) which can satisfy some human requirement, want or need, o ...
and
exchange-value
In political economy and especially Marxian economics, exchange value (German: ''Tauschwert'') refers to one of the four major attributes of a commodity, i.e., an item or service produced for, and sold on the market, the other three attributes be ...
(a distinction taken over by
Adam Smith
Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——— ...
). Aristotle developed a fairly sophisticated theory of money, and in chapter 9 of Book 1 of his ''Politics'', he describes the circuits of commodity trade C-M-C' (''oekonomia'') and M-C-M' (''chrematistikon''). However, Marx criticized and developed Aristotle's ideas in an original way.
In so doing, Marx was also influenced by, and responding to, the "classical" political economy discourse about the economic laws governing commodity values and money, in Europe beginning (in Marx's view) with
William Petty
Sir William Petty FRS (26 May 1623 – 16 December 1687) was an English economist, physician, scientist and philosopher. He first became prominent serving Oliver Cromwell and the Commonwealth in Ireland. He developed efficient methods to su ...
's ''Quantulumcunque Concerning Money'' (1682), reaching a high point in
Adam Smith
Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——— ...
's ''An Inquiry into the Nature and Causes of the Wealth of Nations'' (1776) and culminating with
David Ricardo
David Ricardo (18 April 1772 – 11 September 1823) was a British Political economy, political economist. He was one of the most influential of the Classical economics, classical economists along with Thomas Robert Malthus, Thomas Malthus, Ad ...
's ''Principles of Political Economy and Taxation'' (1817).
In particular, Marx's ideas about the forms of value were influenced by
Samuel Bailey
Samuel Bailey (5 July 1791 – 18 January 1870) was a British philosopher, economist and writer. He was called the " Bentham of Hallamshire".
Life
Bailey was born at Sheffield on 5 July 1791, the son of Joseph Bailey and Mary Eadon. His father ...
's criticism of Ricardo's theory of value. In ''
Capital, Volume I
''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Erster Band. Buch I: Der Produktionsprocess des Kapitals) is the first of three treatises that ma ...
'', Marx stated that Bailey was one of the few political economists who had concerned themselves with the analysis of the form of value. Yet, Marx said, none of the political economists had understood its meaning, because they confused "the form of value" with "value itself", and because they only paid attention to the quantitative side of the phenomenon, not to the qualitative side. In ''
Capital, Volume II
''Capital. A Critique of Political Economy. Volume II: The Process of Circulation of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Zweiter Band. Buch II: Der Cirkulationsprocess des Kapitals) is the second of three volumes of ' ...
'', Marx criticizes Bailey again for "his general misunderstanding, according to which exchange-value equals value, the form of value is value itself", leading to the mistaken belief that "commodity values cease to be comparable once they no longer actively function as exchange-values, and cannot actually be exchanged for one another".
According to Marx,
Aristotle
Aristotle (; grc-gre, Ἀριστοτέλης ''Aristotélēs'', ; 384–322 BC) was a Greek philosopher and polymath during the Classical period in Ancient Greece. Taught by Plato, he was the founder of the Peripatetic school of phil ...
already described the basics of the form of value when he argued that an expression such as "5 beds = 1 house" does not differ from "5 beds = such and such an amount of money", but according to Marx, Aristotle's analysis "suffered shipwreck" because he lacked a clear concept of value. By this Marx meant that Aristotle was unable to clarify the ''substance'' of value, i.e., what exactly was being equated in the value-comparisons when the relative worth of different goods is valued, or what was the common denominator commensurating a plethora of different goods for trading purposes. Aristotle thought the common factor must simply be the demand or need for goods, since without demand for goods that could satisfy some need or want, they would not be exchanged.
According to Marx, the substance of product-value is human labour-time in general, labour-in-the-abstract or " abstract labour". This value (an average current replacement cost in labour-time, based on the normal productivity of producers existing at the time) exists as an attribute of the products of human labour quite independently of the particular forms that exchange may take, though obviously value is always expressed in some form or other. It is perhaps not a very interesting insight if we consider only one commodity, but it is of much more interest when we face a huge variety of commodities which are all being traded, at the same time.
Preparatory writings
Marx's value-form idea can be traced back to his 1857
Grundrisse
The ''Grundrisse der Kritik der Politischen Ökonomie'' (''Foundations of a Critique of Political Economy'') is an unfinished manuscript by the German philosopher Karl Marx. The series of seven notebooks was rough-drafted by Marx, chiefly for ...
manuscript, where he contrasted communal production with production for exchange. Some humanist Marxists think the origin of the idea really goes further back in time, to Marx's 1844 Paris manuscripts, specifically the section on "the power of money" where Marx analyzes excerpts on money in
Goethe
Johann Wolfgang von Goethe (28 August 1749 – 22 March 1832) was a German poet, playwright, novelist, scientist, statesman, theatre director, and critic. His works include plays, poetry, literature, and aesthetic criticism, as well as treat ...
's play ''
Faust
Faust is the protagonist of a classic German legend based on the historical Johann Georg Faust ( 1480–1540).
The erudite Faust is highly successful yet dissatisfied with his life, which leads him to make a pact with the Devil at a crossroads ...
'' and
Shakespeare
William Shakespeare ( 26 April 1564 – 23 April 1616) was an English playwright, poet and actor. He is widely regarded as the greatest writer in the English language and the world's pre-eminent dramatist. He is often called England's nation ...
's play ''
Timon of Athens
''Timon of Athens'' (''The Life of Tymon of Athens'') is a play written by William Shakespeare and probably also Thomas Middleton in about 1606. It was published in the ''First Folio'' in 1623. Timon lavishes his wealth on parasitic companion ...
''.
Marx felt that the playwrights had expressed the social meaning of money very well, and he discusses the magical power of money: why money can create a "topsy-turvy world" (''verkehrte Welt'') which unites opposites, fools people, or turns things into their contrary. However this textual interpretation is rejected by Althusserian Marxists, because of their separation of the stage of the "unscientific Young Marx" (1818-1845, from birth to age 27) from the stage of the "scientific Mature Marx" (1846-1883, from age 28 to age 65). According to Althusserians, these playwrights have nothing to do with value theory, because they belong only to the unscientific stage, and not to
socialist realism
Socialist realism is a style of idealized realistic art that was developed in the Soviet Union and was the official style in that country between 1932 and 1988, as well as in other socialist countries after World War II. Socialist realism is ch ...
or
scientific socialism
Scientific socialism is a term coined in 1840 by Pierre-Joseph Proudhon in his book ''What is Property?'' to mean a society ruled by a scientific government, i.e., one whose sovereignty rests upon reason, rather than sheer will: Thus, in a given ...
.
The form of value is also mentioned in Marx's 1859 book ''
A Contribution to the Critique of Political Economy
''A Contribution to the Critique of Political Economy'' (german: Zur Kritik der Politischen Ökonomie) is a book by Karl Marx, first published in 1859. The book is mainly a critique of political economy achieved by critiquing the writings of the ...
''. It is clearly evident in his manuscript of ''
Theories of Surplus Value
''Theories of Surplus Value'' (german: Theorien über den Mehrwert) is a draft manuscript written by Karl Marx between January 1862 and July 1863. It is mainly concerned with the Western Europe, Western European theorizing about ''Mehrwert'' (add ...
'' (1861–63). In correspondence with Friedrich Engels in June 1867, Marx provided a first outline of his text on the form of value. Marx first explicitly described the concept in an appendix to the first (1867) edition of
Capital, Volume I
''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Erster Band. Buch I: Der Produktionsprocess des Kapitals) is the first of three treatises that ma ...
, but this appendix was dropped in a second edition, where the first chapter was rewritten (rather hurriedly) to include a special section on the form of value at the end.
Engels and Dühring
The first "value-form theorist" who interpreted the significance of Marx's idea was his friend
Friedrich Engels
Friedrich Engels ( ,"Engels" '' Anti-Dühring
''Anti-Dühring'' (german: Herrn Eugen Dührings Umwälzung der Wissenschaft, "Herr Eugen Dühring's Revolution in Science") is a book by Friedrich Engels, first published in German in 1878. It had previously been serialised in the newspaper ''V ...
'' polemic of 1878 (when Marx was still alive) that "The value form of products... already contains in embryo the whole capitalist form of production, the antagonism between capitalists and wage-workers, the
industrial reserve army
Reserve army of labour is a concept in Karl Marx's critique of political economy. It refers to the unemployed and Underemployment, underemployed in Capitalist mode of production (Marxist theory), capitalist society. It is synonymous with "industria ...
, crises..." Discussing the concept, origin and development of the form of value, Engels intended to demonstrate that real socialism involved the ''abolition'' of commodity production and the
law of value
The law of the value of commodities (German: ''Wertgesetz der Waren''), known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic ''The Poverty of Philosophy'' (1847) against ...
, rather than their conscious integration in the economic system of a socialist commune, as
Eugen Dühring
Eugen Karl Dühring (12 January 1833, Berlin21 September 1921, Nowawes in modern-day Potsdam-Babelsberg) was a German philosopher, positivist, economist, and socialist who was a strong critic of Marxism.
Life and works
Dühring was born in Be ...
proposed.
As discussed in this article below, in the first few years of the
Russian revolution
The Russian Revolution was a period of Political revolution (Trotskyism), political and social revolution that took place in the former Russian Empire which began during the First World War. This period saw Russia abolish its monarchy and ad ...
, the
Bolsheviks
The Bolsheviks (russian: Большевики́, from большинство́ ''bol'shinstvó'', 'majority'),; derived from ''bol'shinstvó'' (большинство́), "majority", literally meaning "one of the majority". also known in English ...
and their theoreticians took that idea very literally. It was shelved during Lenin's
New Economic Policy
The New Economic Policy (NEP) () was an economic policy of the Soviet Union proposed by Vladimir Lenin in 1921 as a temporary expedient. Lenin characterized the NEP in 1922 as an economic system that would include "a free market and capitalism, ...
, but subsequently the
CPSU
"Hymn of the Bolshevik Party"
, headquarters = 4 Staraya Square, Moscow
, general_secretary = Vladimir Lenin (first)Mikhail Gorbachev (last)
, founded =
, banned =
, founder = Vladimir Lenin
, newspaper ...
set about eliminating almost all private enterprise and bringing almost all trade under state control. In a moral sense, commercial activity came to be seen as intrinsically bad, alienating, exploitative and oppressive, because it enabled some people to get rich from other people's work. The idea was, that once commerce was got rid of, this whole problem would no longer exist; the state would prevent all private accumulation, or at least it would be tolerated only on a very modest scale.
State-directed production seemed efficient and effective to the communist modernizers, especially in backward Russia. If infrastructure needed to be built, the state ordered it to be built, whether it made a profit or not. Business would never have built it, unless it made a sufficient profit at the end of a year. The central problem for the communists then was, that they had to get workers to ''cooperate'' and make sacrifices, to get things built, with promises of a better life in the future. The Party conceptualized this primarily as a matter of authority, education, ideological staunchness, exemplary practice, incentives, and penalties.
If workers did not cooperate, because they thought it was against their self-interest (for whatever reason), they were ''forced'' to do so, in peace-time as well as in war-time. Since workers resented this, producing things often became much less efficient, and output quality suffered. This caused endless management problems, and massive "policing" was required to ensure that things got done (as documented by Western historians like R. W. Davies and Donald A. Filtzer). Despite never-ending reforms and policy changes, the cooperation problem was never truly solved. There was a lot of cynicism about that in Soviet society, even when life gradually got better and living standards improved. On 30 October 2007, Russian President
Vladimir Putin
Vladimir Vladimirovich Putin; (born 7 October 1952) is a Russian politician and former intelligence officer who holds the office of president of Russia. Putin has served continuously as president or prime minister since 1999: as prime min ...
paid his respects to all the people killed under Stalin's dictatorship in the days of the
Great Terror
The Great Purge or the Great Terror (russian: Большой террор), also known as the Year of '37 (russian: 37-й год, translit=Tridtsat sedmoi god, label=none) and the Yezhovshchina ('period of Yezhov'), was Soviet General Secreta ...
. Putin stated: "Hundreds of thousands, millions of people were killed and sent to camps, shot and tortured. These were people with their own ideas, which they were unafraid to speak out about. They were the cream of the nation."
The theoretical conflict between Engels and Dühring about the role of value in socialism resurfaced in the Soviet Union in the 1940s and 1950s. Until the 1930s, the Russian communists had generally expected that the categories of value and the
law of value
The law of the value of commodities (German: ''Wertgesetz der Waren''), known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic ''The Poverty of Philosophy'' (1847) against ...
would disappear under socialism. Given that
Joseph Stalin
Joseph Vissarionovich Stalin (born Ioseb Besarionis dze Jughashvili; – 5 March 1953) was a Georgian revolutionary and Soviet political leader who led the Soviet Union from 1924 until his death in 1953. He held power as General Secreta ...
declared in 1936 that, with full state control over the whole economy, socialism had been achieved, it was logical to think that commodity production and the law of value no longer existed either. However, from 1941 this idea was in dispute.
Some Russian economists denied the existence of the law of value in the Soviet socialist republics, others affirmed its existence, and yet others said that the law existed in a "transformed" way. In 1951, Stalin settled the matter by affirming officially that commodity production and the law of value did exist under socialism, with the implication, that the planning authorities should account properly for true labour costs, as the basis for correct pricing of products, assets and salaries. In that sense, Stalin in the end sided with Dühring against Engels. However, Stalin apparently claimed the law of value to be reduced mainly to the sphere of consumption. This can be reconciled with Engels's idea of "labour certificates" that are stripped of the classic role of money, do not lead to extraction of surplus value, therefore being socialist. According to this view the law of value continues to operate but becomes socialist.
Issues of interpretation
Common difficulties
The difficulties Marxist academics often had with Marx's own texts about the concept of value is because, abstractly, "economic value" can refer at the same time to many different things:
*1. The concept of value, like the concept of money prices, can be applied or linked to anything and everything, from the most abstract to the most specific phenomena, and so the talk about "value" can go anywhere, with an unlimited range, depending on what one has in mind. What Marx had in mind, was the political economists he was arguing with, but the 21st century reader is often not familiar with those.
*2. Value has both quantitative and qualitative dimensions, which can be discussed separately, or combined in a measure. It often happens, that one knows definitely that something has a value, without being able to verify ''how much'' value it is.
*3. The dimensions of value can be stated according to both ''absolute'' criteria ("the quantity of units of a quality X") and ''relative'' criteria ("the quantity of X which is equal to a quantity of Y").
*4. Value itself can be expressed as (a) a subjective orientation or priority, (b) a relationship, ratio or proportional magnitude (c) an attributed characteristic of an object or subject, (4) an object or subject in its own right, or (5) a movement in a temporal sequence or in a space (the value of a good that exists at point A can change, if it is transferred to point B).
*5. The concept of value assumes principles which define or explain ''how we know'' that there exists (i) comparable value, (ii) value equivalence, (iii) value decrease, (iv) value increase, (v) conserved value, (vi) transferred value, (vii) negative value, (viii) positive value, (ix) value destroyed, and (x) newly created value. For economists all this may be "self-evident", but for statisticians, accountants, valuers and auditors it certainly is not.
*6. Value can refer to an ''actual'' value manifested in a real transaction, property right or transfer, or it can refer to an ''
ideal
Ideal may refer to:
Philosophy
* Ideal (ethics), values that one actively pursues as goals
* Platonic ideal, a philosophical idea of trueness of form, associated with Plato
Mathematics
* Ideal (ring theory), special subsets of a ring considere ...
'' value (a derived measure or a theoretical construct which is perhaps extrapolated from observations about the actual values of assets and transactions). It could refer to the ''actual'' value realized, or to the value that ''could be'' realized under certain conditions or circumstances.
*7. Values and prices, as actual or theoretical magnitudes, may not be so easy to distinguish from each other. For example, an ordinary accounting category such as "''value''-added" in fact consists of a sum of ''prices'' calculated according to assumed standard conditions (a uniform valuation).
*8. If goods are said to be "overvalued" or "undervalued", this assumes that one can reliably and accurately identify what the "true value" is. Yet the true value may only be hypothetical, since its definition depends on market conditions, and on the particular vantage point (or assumptions) adopted.
*9. The concept of value, like the concept of prices, is often used in a rather "loose" sense - referring to a cost or expense, a compensation, a yield or return, an asset valuation etc. The language of trade often does not make the social, legal and economic relations involved in trade very explicit.
*10. In the course of Marx's dialectical story, the meaning of the category of value itself evolves and develops, with increasingly finer distinctions, and the concept is used in somewhat different senses in different places. Since Marx did not finish a large part of his manuscript for publication, it is not always exactly clear from the text what he intends. The English translations may not get it exactly right.
So from the use of the expression "value" it may therefore not be immediately obvious ''what kind'' of valuation or expression is being referred to, it depends on the theoretical context.
Ladislaus von Bortkiewicz, the originator of the famous "
transformation problem
In 20th-century discussions of Karl Marx's economics, the transformation problem is the problem of finding a general rule by which to transform the "values" of commodities (based on their socially necessary labour content, according to his labou ...
" controversy, claimed confidently that in Marx's text, "the context always reveals clearly which value is meant". Nevertheless, there have been very lengthy academic debates about what Marx really did mean in particular passages. Rigorously investigated, the concept of "value" turns out not to be a "neat-and-tidy accounting concept" that can be manipulated with mathematical precision; it can be manipulated with mathematical precision only if a series of definitions are already fixed and assumed (it is a
fuzzy concept
A fuzzy concept is a kind of concept of which the boundaries of application can vary considerably according to context or conditions, instead of being fixed once and for all. This means the concept is vague in some way, lacking a fixed, precise me ...
).
At the end of his life,
David Ricardo
David Ricardo (18 April 1772 – 11 September 1823) was a British Political economy, political economist. He was one of the most influential of the Classical economics, classical economists along with Thomas Robert Malthus, Thomas Malthus, Ad ...
had to "conclude, rather sadly, that 'there is no such thing in nature as a perfect measure of value'... there is no such thing as an invariable standard of value". In Marx's ''
Capital
Capital may refer to:
Common uses
* Capital city, a municipality of primary status
** List of national capital cities
* Capital letter, an upper-case letter Economics and social sciences
* Capital (economics), the durable produced goods used f ...
'', it is understood from the start that there ''cannot'' be an invariable standard of value even in principle (this logically follows from the analysis of the form of value). Although there are absolute limits to the formation of value, value is in essence a ''relative'' magnitude, which has no absolute constant in time and space. If a standard of value such as gold is adopted (which Marx does), this is done only for the sake of argument, and for the sake of simplicity of exposition or reckoning (in the era in which Marx lived, there was very little price inflation).
Orthodox
economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
typically takes it for granted, that the exchange processes on which markets are based ''already exist'' and will occur, and that prices ''already exist'', or can be imputed. This is often called the "gross substitution axiom" by economists: the implication of this theorem is that''all'' products are, in principle, supposed to be mutually interchangeable with ''all'' other products, and therefore the "price mechanism" can allocate resources in such a way, that market equilibria are assured by the laws of supply and demand. This assumption is overturned only in special cases, where markets still must be brought into being and a process of "
price discovery
In economics and finance, the price discovery process (also called price discovery mechanism) is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers.
Overview
Price discovery is diff ...
" takes place. In modern economics, the "value" of something is defined either as a money-price, or as a personal (subjective) valuation, and the exchangeability of products as such presents no special problem; it normally does not merit any special inquiry since exchangeability as such is taken for granted (in the real world, it is not strictly true that any good can be traded for any other good, for legal, logistic and technical reasons).
In conventional economics, money serves as a medium of exchange to minimize the
transaction costs
In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a market. Oliver E. Williamson defines transaction costs as the costs of running an economic system of companies, and unlike produ ...
of
barter
In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distingu ...
among utility-maximizing individuals. Such an approach is very different from Marx's historical interpretation of the formation of value. In Marx's theory, the "value" of a product is something separate and distinct from the "price" it happens to fetch (goods can sell for more or less than they are worth, i.e., they are not necessarily worth what they happen to sell for).
Problematic
Marx's value-form analysis intends to answer the question of how the value-relationships of products are expressed in ways that acquire an objective existence in their own right (ultimately as relationships between quantities of money, or money-prices), what the modalities of these relationships are, and how these product-values can change, independently of the valuers who trade in them.Karl Marx, ''
Capital, Volume I
''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Erster Band. Buch I: Der Produktionsprocess des Kapitals) is the first of three treatises that ma ...
'', Penguin 1976, p. 167. Marx argued that neither the classical political economists nor the vulgar economists who succeeded them were able to explain satisfactorily how that worked, resulting in serious theoretical errors.
The political economists sought in vain for an invariable standard of value, and proposed theories of money which were hardly plausible. The reason behind the errors was — according to Marx — that, as market trade developed, the economic relationship between commodity-values and money increasingly appeared in an inverted, reified way. In reality, economic value symbolizes a social relationship between human subjects, as reflected by a thing or expressed by the relationship between things. Yet it often seems more like value is the thing which creates the social relationship. To understand the real causal relationships, not just economic calculation, but also an historical and sociological understanding of the subject was needed.
In vulgar Marxist economics, the commodity is simply a combination of
use-value
Use value (german: Gebrauchswert) or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a commodity (a tradeable object) which can satisfy some human requirement, want or need, o ...
and
exchange-value
In political economy and especially Marxian economics, exchange value (German: ''Tauschwert'') refers to one of the four major attributes of a commodity, i.e., an item or service produced for, and sold on the market, the other three attributes be ...
. That is not Marx's own argument. As he explains in ''
Capital, Volume III
''Capital. A Critique of Political Economy. Volume III: The Process of Capitalist Production as a Whole'' (german: Das Kapital. Kritik der politischen Ökonomie Dritter Band. Buch III: Der Gesammtprocess Der Kapitalistischen Produktion), is the ...
'', in an overall sense business competition among producers centres precisely on the discrepancies between the socially established ''values'' of commodities in production and their particular ''exchange-values'' manifested in the marketplace. Goods could be traded above or below their value, and that mattered for profits. Marx believed that correctly distinguishing between the form and content of value was essential for the logical coherence of a labour theory of product-value, and he criticized
Adam Smith
Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——— ...
specifically because Smith:
Smith had affirmed that labour is "the real measure of the exchangeable value of all commodities", but, as
David Ricardo
David Ricardo (18 April 1772 – 11 September 1823) was a British Political economy, political economist. He was one of the most influential of the Classical economics, classical economists along with Thomas Robert Malthus, Thomas Malthus, Ad ...
subsequently argued, Smith's definition confused the labour ''embodied'' in a commodity when it was produced, with the labour ''commanded'' by the commodity when it was exchanged. Marx believed that Smith and Ricardo were certainly right to identify labour as the substance of commodity value, but Marx realized early on that the definitions of both these political economists could not be correct. The fundamental reason for that was, that both economists mixed up "value" with "exchange value" and with "price" (and also mixed up actual prices with theoretical prices). That is, they mixed up the forms and substance of value, because they failed to distinguish correctly between them as qualitatively different things.
The labour theory of product-value could, Marx argued, be made coherent and consistent, only when it was understood that product-values,
prices of production
Prices of production (or "production prices"; in German ''Produktionspreise'') is a concept in Karl Marx's critique of political economy, defined as "cost-price + average profit". A production price can be thought of as a type of supply price for p ...
and the market prices of commodities could vary independently of each other. Product-values did not necessarily have anything to do in a direct way with the relationship between cost-prices and sale-prices determining the actual profitability of enterprises, because both inputs and outputs could be profitably traded at prices ''above'' or ''below'' their value, depending on the amount of sales turnover and the state of the market in a given time interval. It was more that the normal labour requirements for supplying products in the end set limits to the price-range and the terms on which the products could be commercially traded.
Althusserian interpretation
The form of value is often regarded as a difficult, obscure or even
esoteric
Western esotericism, also known as esotericism, esoterism, and sometimes the Western mystery tradition, is a term scholars use to categorise a wide range of loosely related ideas and movements that developed within Western society. These ideas a ...
idea by scholars (the "
holy grail
The Holy Grail (french: Saint Graal, br, Graal Santel, cy, Greal Sanctaidd, kw, Gral) is a treasure that serves as an important motif in Arthurian literature. Various traditions describe the Holy Grail as a cup, dish, or stone with miracul ...
" of Marxism). Simon Clarke commented in 1989 that "the value debates of the last few years have become ever-more esoteric." John Weeks referred in 2010 to the "essentially esoteric nature of Marx's scientific investigation of value", meaning talk about unobservables. There has been considerable debate about the real theoretical significance of the value-form concept.
Marx himself started off the controversy when he emphasized that ''
Capital, Volume I
''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Erster Band. Buch I: Der Produktionsprocess des Kapitals) is the first of three treatises that ma ...
'' was not difficult to understand, "with the exception of the section on the form of value." In his "Preface to ''Capital Vol. 1,''" the French philosopher
Louis Althusser
Louis Pierre Althusser (, ; ; 16 October 1918 – 22 October 1990) was a French Marxist philosopher. He was born in Algeria and studied at the École normale supérieure in Paris, where he eventually became Professor of Philosophy.
Althusser ...
mimicked Marx, and pronounced that:
Althusser's suggestions were taken up by many New Left Marxists, which meant that Marx's theory of the form of value and its significance was rarely taught. Paresh Chattopadhyay states that "very few writers in the Anglo-American tradition of Marx studies have paid attention to Marx's crucial analysis of value form". However, Marx very deliberately and explicitly made an effort to state his interpretation of commodity trade with absolute clarity in his first chapters. Marx aims to demonstrate that the "labour theory of value" that guided the classical political economists in interpreting the economy ''cannot'' be correct, because the concept of economic value itself is misconstrued.
Marx never referred to his own theory of value as a "labour theory of value" even once,Mike Beggs, "Zombie Marx and Modern Economics, or How I Learned to Stop Worrying and Forget the Transformation Problem." ''Journal of Australian Political Economy'', issue 70, Summer 2012/13, p. 1 Gary Mongiovi, "Vulgar economy in Marxian garb: a critique of Temporal Single System Marxism." In: ''Review of Radical Political Economics'', Vol. 34, Issue 4, December 2002, pp. 393-416, at p. 398. knowing very well (as indicated by his analysis of bank credit) that the value of many assets is not determined by labour-time. The ideas of the political economists had to be modified very considerably, before the theory of value could truly make sense. However, when the modifications were carried out, the previous understanding of capitalist economic life was also overturned. Hence Marx's own theory showed at the same time both continuities with the classical tradition, and radical discontinuities. This has been the cause of numerous controversies about the extent to which Marx broke with, or accepted, the previous theories of the political economists about economic value.
Fetishism
The theory of the forms of value is the basis for Marx's concept of commodity fetishism, commercial fetishism or economic reification. This is about how the independent powers acquired by the ''value'' of tradeable objects (and by market relationships) are reflected back into human thought, and more specifically into the theories of the political economists about the market economy. Marx himself never used the expression "commodity fetishism" as a general category (''Warenfetishismus''), rather he referred to the fetish(-ism) of commodities, money and capital. All kinds of objects of value could be "fetishized".
In Althusserian theory, however, this meaning is unknown, because Althusserian theory detaches the concept of "fetishism" from the concept of the form of value. In the Marxist–Leninist tradition of positivist science, Althusser regarded Marx's dramatic, theatrical and theological metaphors as "unscientific" coquetry, lacking objectivity. Almost none of the New Left discussions of commodity fetishism refer to Marx's value-form analysis in any analytical depth.
In the reified perception of the political economists and the vulgar Marxists, products have value ''because'' they are expressible in money-prices, but Marx argues that in reality it is just the other way round: because commodities have value, i.e. because they are all products with a replacement cost of social labour, their values can be expressed by generally accepted money-prices, accurately or not.
The true relationship can, according to Marx, be traced out only when the historical evolution of economic exchange is considered from its most simple beginnings to its most developed forms. The end-result of market development is a fully ''monetized'' economy (a "cash economy", although bankcards nowadays replace banknotes and coins), but how its workings appear to the individual at the micro-level, is often different or the inverse of its causal dynamic at the macro-level. According to Marx, this creates a lot of confusions in economic theorizing.
One aim of Marx's theory is to explain how the nature of the market economy itself shapes the way that people will perceive it. The secret of the form of value is, that the ''form'' in which the value of products is expressed (as a relationship between traded objects), simultaneously obscures and hides the ''substance'' of the value of products. It obscures how the value of products is formed, and the social relations between people that exist behind the relationship between things.
Knowing what the social substance of value is, in fact, completely unnecessary for the purpose of trade. All that is required to navigate the market, is knowledge of cost prices, sale prices, price averages and whether prices are going up or down. The conflation of value with exchange value, with price and with money grows spontaneously out of the relations of commodity trade themselves.
Criticism
Ecology
The ecological Marxist Paul Burkett has tried to create a "value-form approach" to understanding the relationship between capitalism and nature. He argues that:
By contrast,
Elmar Altvater
Elmar Altvater (Kamen, Province of Westphalia, 24 August 1938 – 1 May 2018) was Professor of Political Science at the Otto-Suhr-Institut of the Free University of Berlin, before retiring on 30 September 2004. He continued to work at the institut ...
argued that an ecological critique of political economy "hinges on an analysis of use-value".
Focusing on the human
metabolism
Metabolism (, from el, μεταβολή ''metabolē'', "change") is the set of life-sustaining chemical reactions in organisms. The three main functions of metabolism are: the conversion of the energy in food to energy available to run cell ...
John Bellamy Foster
John Bellamy Foster (born August 15, 1953) is an American professor of sociology at the University of Oregon and editor of the '' Monthly Review''. He writes about political economy of capitalism and economic crisis, ecology and ecological crisis ...
stated in 2018 that:
Harry Rothman stated in his 1972 book ''Murderous Providence'' that:
Women's studies
In chapter 8 of her radical 1977 critique of Freudian theory, ''This sex which is not one'',
Luce Irigaray
Luce Irigaray (born 3 May 1930) is a Belgian-born French feminist, philosopher, linguist, psycholinguist, psychoanalyst, and cultural theorist who examined the uses and misuses of language in relation to women. Irigaray's first and most well know ...
examined in some detail the relationship between Marx's story about the form of value of commodities, phallocracy and
kinship
In anthropology, kinship is the web of social relationships that form an important part of the lives of all humans in all societies, although its exact meanings even within this discipline are often debated. Anthropologist Robin Fox says that ...
systems. She argued that "Marx's analysis of commodities as the elementary form of capitalist wealth can... lsobe understood as an interpretation of the status of woman in so-called
patriarchal
Patriarchy is a social system in which positions of Dominance hierarchy, dominance and Social privilege, privilege are primarily held by men. It is used, both as a technical Anthropology, anthropological term for families or clans controll ...
societies." Specifically, "all the systems of exchange that organize patriarchal societies and all the modalities of productive work that are recognized, valued, and rewarded in these societies are men's business." When women are managed, farmed out and traded by men, women's bodies can become a manipulable abstraction. As commodities, Irigaray argued, women become "utilitarian objects and bearers of value". A mother becomes a use value; a virgin becomes an exchange value; and a prostitute becomes both a use-value and exchange value. The issues are about freedom, human dignity, social valuations, exploitation and oppression.
Irigaray did not necessarily mean that all women literally ''are'' commodities, but that (1) they are often ''de facto'' treated "as if" they are tradeable wares, (2) women are frequently subjected to all kinds of informal trade-offs, to obtain what they need, (3) the commodity form sinks deeply into the human psyche and intimate relations, creating a transactional mentality which is oppressive. Irigaray raised the question, of what would become of the social order, without the exploitation of women. People would be "socializing in a different way in relation to nature, matter, the body, language, and desire".
Though Irigaray's story had impact when it was first published, its appeal did not last. Among other things, her story is too grim and somber. The psychoanalytic model of human nature is no longer widely accepted. Women generally are not regarded just as commodities or victims, they have legal rights, and they have considerable power and control, individually and collectively. Although a "battle of the sexes" continues (competition), men and women also need each other and depend on each other (cooperation). So, in the real world (in contrast to the academic imaginary), "male domination" has definite limits, and women do fight back.
Most of all, it was rather unclear from Irigaray's story, what exactly would be the most effective methods to create better human relations, and how men and women could successfully work together to put them into practice. Often Irigaray seemed to be writing more at a spiritual level, and readers could take out of it what they liked. A postmodern Marxist reading of the form of value is offered by Katja Diefenbach. In her critical analysis of Islamic
hijab
In modern usage, hijab ( ar, حجاب, translit=ḥijāb, ) generally refers to headcoverings worn by Muslim women. Many Muslims believe it is obligatory for every female Muslim who has reached the age of puberty to wear a head covering. While ...
in Iran, Professor
Rebecca Ruth Gould Rebecca Ruth Gould is a writer, translator, and Professor of Islamic Studies and Comparative Literature at the University of Birmingham. Her academic interests are the Caucasus, Comparative Literature, Islam, Islamic Law, Islamic Studies, Persian li ...
claims that "The exchange value dimension to the commodity form crucially structures the hijab-as-commodity".
Marxist women and men have often argued that women's housework, shopping work, child-raising and volunteer work is neither highly valued economically nor very visible in bourgeois ideology, ''precisely because it is itself not paid and charged for'', as a job. The so-called " non-market" activity of women does not even register in national accounts, although its imputed market value (estimated from time-use surveys and occupational data) is very large. The values and valuations involved in women's "non-market" work are often quite different from commercial values. So capitalist market value and women's own valuations can clash, in various settings. Kathi Weeks and Kristin Ghodsee provide an overview of the modern debates.
The general implication is, that if a lot of what women ''do'' is not very highly valued (because it does not really make money, etc.), then women's social ''status'' also suffers - they aren't equals with men in the real world. In principle or in theory, capitalism is quite compatible with complete equality between men and women, with acknowledgement of essential differences between women and men. Indeed, formally speaking, all citizens in the West have the same rights in the marketplace, and equal status under the justice system. But in practice, capitalist society is a class society, structured by a market competition between unequally-positioned market actors. Faced by competitors, people will focus on where they are strongest themselves, and they will attack rivals precisely where rivals are the weakest and most vulnerable.
The usual overall effect is, that those who are already in the weakest position, will lose out the most; those in the strongest position can use their strength, to get even stronger. This general result is mitigated only by
love
Love encompasses a range of strong and positive emotional and mental states, from the most sublime virtue or good habit, the deepest Interpersonal relationship, interpersonal affection, to the simplest pleasure. An example of this range of ...
and
desire
Desires are states of mind that are expressed by terms like "wanting", "wishing", "longing" or "craving". A great variety of features is commonly associated with desires. They are seen as propositional attitudes towards conceivable states of aff ...
(including
mimetic desire The mimetic theory of desire, an explanation of human behavior and culture, originated with the French historian, literary critic, and philosopher of social science René Girard (1923-2015). The name of the theory derives from the philosophical ...
),
charity
Charity may refer to:
Giving
* Charitable organization or charity, a non-profit organization whose primary objectives are philanthropy and social well-being of persons
* Charity (practice), the practice of being benevolent, giving and sharing
* Ch ...
,
philanthropy
Philanthropy is a form of altruism that consists of "private initiatives, for the Public good (economics), public good, focusing on quality of life". Philanthropy contrasts with business initiatives, which are private initiatives for private goo ...
, government provisions,
trade unions
A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and Employee ben ...
,
credit unions
A credit union, a type of financial institution similar to a commercial bank, is a member-owned nonprofit financial cooperative. Credit unions generally provide services to members similar to retail banks, including deposit accounts, provision ...
, and
social justice
Social justice is justice in terms of the distribution of wealth, opportunities, and privileges within a society. In Western and Asian cultures, the concept of social justice has often referred to the process of ensuring that individuals fu ...
advocacy groups (or political parties). Individual cases can contradict the statistical patterns of inequality, but the statistical patterns of inequality for whole populations are quite persistent. This is very important to women, not just because they want to have the same civil rights as men, but because socio-economic inequality has very bad effects on bearing and raising children.
Erosion of the value-form and energy
After the global financial crisis of 2007–2009, more Western Marxist theorists and post-Marxists are discussing the spectre of the break-up and supersession of the value-form. Peter Kennedy claims that a "transition in social labour" and an "erosion of the value form" is occurring. Simply put, the theory of the "breaking up of the forms of value" means that:
*All kinds of markets can no longer function as they should (they become dysfunctional, inefficient and ineffective from the point of view of supplying what people need or want). Therefore, they give rise to non-market methods to obtain resources.
*In practice, the terms on which market trade can take place, are more and more strongly shaped by ''non-market'' influences at work in business competition, gaining access to resources, and deal-making. If you are an "insider", you can be a winner. If you are an "outsider" you are likely to be a loser. This tends to erode market freedoms.
*Pricing goods, services and assets no longer reflects true supply costs in ''money'' terms – exchanges of products, services and assets begin to occur more and more on all kinds of different terms, and not simply cash value. Therefore, monetary valuations no longer express the ''real'' valuations being made; non-monetary considerations are involved as well. A discrepancy is created, between the formal appearance of a transaction, and what really occurs informally.
The general result would be, that the market allocation of resources by standardized prices is displaced, combined, or replaced with non-market allocation principles – all kinds of "deals" can be organized, in which money is only one consideration, among many.
Gaining access to resources is, in that case, no longer simply a matter of having sufficient money in one's pocket to buy them. Money alone can no longer guarantee access to resources. It all depends on what kind of cooperation one can get, to clinch some kind of deal. If, for any reason, people do not cooperate, there is no deal. Successful trading then depends more and more on what kind of human (or political) relations there are between people who want to obtain something, and people who offer to supply something.
In the history of trade, markets have of course broken down plenty of times. So this phenomenon is not at all new. But the argument is, that the phenomenon is inevitably happening globally on a ''larger and larger scale'' in the long term, so that the whole functioning of capitalism is altered in a ''structural'' way. Economists might compute all kinds of complex price calculations for their econometric models, but, it is argued, those calculations can no longer adequately explain the way in which resources are ''really'' allocated in the economy. Money-prices may have less and less to do with that.
Ten broad trends can be mentioned that point in the direction of an erosion of the forms of value.
Market corrosion
The British post-Marxist journalist Paul Mason claimed in ''The Guardian'' that "Without us noticing, we are entering the postcapitalist era".Paul Mason, "The end of capitalism has begun". ''The Guardian'', 17 July 2015. Part of that shift, he claimed, is that "information is corroding the market's ability to form prices correctly… because markets are based on scarcity while information is abundant. (…) whole swaths of economic life are beginning to move to a different rhythm." Dave Elder-Vass states that "...vast swathes of the economy, including the gift, collaborative and hybrid forms... coexist with more conventional capitalism in the new digital economy."
Jeremy Rifkin
Jeremy Rifkin (born January 26, 1945) is an American economic and social theorist, writer, public speaker, political advisor, and activist. Rifkin is the author of 23 books about the impact of scientific and technological changes on the economy, ...
states that the
internet of things
The Internet of things (IoT) describes physical objects (or groups of such objects) with sensors, processing ability, software and other technologies that connect and exchange data with other devices and systems over the Internet or other comm ...
can facilitate an economic shift from markets to a collaborative commons, with near-zero marginal costs of production.
There is a lot of "free stuff" available these days that people can get hold of very fast – if they know their way around information. They can often share it very quickly too, all around the world – bypassing markets, money and laws. When information is shared, givers and receivers ''both'' have the information, unlike the ownership transfer of an alienable commodity. If people can get a lot of goods for free, it is going to be more difficult to sell things to them. In turn, that disturbs ordinary commercial trading, pricing and market functioning, so that "information corrodes value."
By contrast, however, the Hayekian
Viktor Mayer-Schönberger
Viktor Mayer-Schönberger (born 1966) is Professor of Internet Governance and Regulation at the Oxford Internet Institute, University of Oxford. He conducts research into the network economy. Earlier he spent ten years on the faculty of Harvard's ...
is optimistic about the potential for "information-rich" markets. Not only can the
internet of things
The Internet of things (IoT) describes physical objects (or groups of such objects) with sensors, processing ability, software and other technologies that connect and exchange data with other devices and systems over the Internet or other comm ...
link people and commodities very accurately and quickly. The new technology can also police people's property rights, and their market behaviour, creating the possibility of responding to it in real time. New rules, such as the
Directive on Copyright in the Digital Single Market
The Directive on Copyright in the Digital Single Market, formally the Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96 ...
in the European Union, could block the "free stuff".
Harvard philosopher
Michael Sandel
Michael Joseph Sandel (; born March 5, 1953) is an American political philosopher and the Anne T. and Robert M. Bass Professor of Government Theory at Harvard University Law School, where his course Justice was the university's first course t ...
stated that "Without being fully aware of the shift, Americans have drifted from having a market economy to becoming a market society ... where almost everything is up for sale ... a way of life where market values seep into almost every sphere of life and sometimes crowd out or corrode important values, nonmarket values." In this case, market values are not corroded by non-market values, but non-market values are corroded by market values.
The economist
Kenneth Arrow
Kenneth Joseph Arrow (23 August 1921 – 21 February 2017) was an American economist, mathematician, writer, and political theorist. He was the joint winner of the Nobel Memorial Prize in Economic Sciences with John Hicks in 1972.
In economics ...
explained, that markets require human trust to operate effectively, but that this trust may not be spontaneously generated by market activity itself:
If it is accepted, that non-market values are corroded by market values, as Sandel claims, then a "social structure" inspired by healthy moral virtues and just laws is also corroded. In turn, that would then increase the scope of
opportunism
Opportunism is the practice of taking advantage of circumstances – with little regard for principles or with what the consequences are for others. Opportunist actions are expedient actions guided primarily by self-interested motives. The term ...
and
corruption
Corruption is a form of dishonesty or a criminal offense which is undertaken by a person or an organization which is entrusted in a position of authority, in order to acquire illicit benefits or abuse power for one's personal gain. Corruption m ...
in trading activity, thereby ''reducing'' the trust that is vital for efficient market trade. International trust levels are nowadays surveyed by StrategyOne's Edelman Trust Barometer. John Authers, a senior investment columnist and editor with the ''
Financial Times
The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and published digitally that focuses on business and economic current affairs. Based in London, England, the paper is owned by a Japanese holding company, Nik ...
'' and ''
Bloomberg News
Bloomberg News (originally Bloomberg Business News) is an international news agency headquartered in New York City and a division of Bloomberg L.P. Content produced by Bloomberg News is disseminated through Bloomberg Terminals, Bloomberg Televi ...
'', stated in 2018 that:
The counterargument is, that trade on the basis of some deceit or dishonesty creates
reputational risk
Reputational damage is the loss to financial capital, social capital and/or market share resulting from damage to a firm's reputation. This is often measured in lost revenue, increased operating, capital or regulatory costs, or destruction of sh ...
. Dubious deals can mean that people go elsewhere to buy and sell stuff (if they have that choice), leaving shady traders without customers or suppliers. Honest trade and dishonest trade have always co-existed, despite policing by the state, but the gloomy point is, that it has become uncertain which of the two is likely to prevail in the future.
Loss of value
Since the 2007-2009 global financial crisis, there is growing concern about whether there are any types of assets left in the world, which can reliably hold their value. A gold standard for currencies is gone. Currency exchange rates can fluctuate very considerably, altering local prices. Global indebtedness continues to grow at a much faster rate than global value-added, accompanied by a sequence of financial bubbles that cause economic havoc and devalue assets when they burst. For the period 1970–2011, IMF researchers identified 147 systemic banking crises, 211 currency crises and 55 sovereign debt crises. Very low interest rates hurt bank profits; but at interest rates below the rate of price inflation, bank clients lose money just by keeping it in the bank. In the US, Robinhood co-CEO
Baiju Bhatt
Baiju Prafulkumar Bhatt (born 1984/1985) is an American entrepreneur of Indian descent. He is the chief creative officer and co-founder, along with Vladimir Tenev, of Robinhood, a US-based financial services company.
Early life
Baiju Prafulkuma ...
stated: "It's more expensive to have less money in this country. We think that's wrong." Although people become reluctant to do anything with their savings, from a financial point of view they should keep trading, to maintain value, or increase it.
In mid-2016,
Fitch Ratings
Fitch Ratings Inc. is an American credit rating agency and is one of the " Big Three credit rating agencies", the other two being Moody's and Standard & Poor's. It is one of the three nationally recognized statistical rating organizations (NRSRO) ...
estimated that, although the global economy had recovered, there were now $11.7 trillion worth of investments in bonds carrying ''negative'' interest rates in real terms, representing almost half of all sovereign bonds issued in developed countries. In November 2018, ''
Bloomberg News
Bloomberg News (originally Bloomberg Business News) is an international news agency headquartered in New York City and a division of Bloomberg L.P. Content produced by Bloomberg News is disseminated through Bloomberg Terminals, Bloomberg Televi ...
'' commented about a "brutal global market":
The financial press spoke of a "credit rout": credit markets had scored "the worst year since the global financial crisis" with yields on stocks, bonds and commodities all in retreat, often turning negative. High-yield and investment-grade notes were headed "for losses in both euros and dollars", the first time all four asset classes "posted negative total returns since 2008, based on Bloomberg Barclays indexes". U.S. investment-grade bonds "posted negative total returns of 3.71 percent in 2018". Morgan Stanley calculated that, for the first time since the 1970s, the yields for 21 major asset classes were ''negative'' for 2018 across the world, in real terms. Morgan Stanley judged that cash (meaning bank deposits and very short term bonds) was the best-performing asset class in 2018.
Michael Hudson noted that in mid-2018 US Treasury notes were approaching an
inverted yield curve
In finance, an inverted yield curve happens when a yield curve graph of typically government bonds inverts in the opposite direction and the shorter term US Treasury bonds are offering a higher yield than the long-term Treasury bonds. Lon ...
- the yields for short-term US Treasury bills almost outstripped long-term ones. Hudson said, that investors increasingly had no confidence in the economy, and just wanted "to park their money safely". The real economy wasn't growing, the only thing that was growing was debts. JP Morgan data showed that the ''global'' yield curve for bonds had already inverted (the difference in yields for bonds with 1 to 3 year maturities and those with 7 to 10 year maturities reduced to zero). The ''
Financial Times
The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and published digitally that focuses on business and economic current affairs. Based in London, England, the paper is owned by a Japanese holding company, Nik ...
'' stated that "global
quantitative easing
Quantitative easing (QE) is a monetary policy action whereby a central bank purchases predetermined amounts of government bonds or other financial assets in order to stimulate economic activity. Quantitative easing is a novel form of monetary pol ...
has created a seemingly insatiable demand for five- to 10-year Treasuries, pushing down yields". Others argued that the yield curve was not yet inverted, just flat. Morgan Stanley data showed that, in 2018, foreign institutions were putting US$100 billion into Chinese government bonds. The first true inversion in the US was observed in December 2018, when the yield on five-year US Treasury notes fell below that on two-year ones. A short time later, the difference in yield between 2-year and 10-year Treasury notes (the definitive indicator) dropped below ten
basis point
A basis point (often abbreviated as bp, often pronounced as "bip" or "beep") is one hundredth of 1 percentage point. The related term ''permyriad'' means one hundredth of 1 percent. Changes of interest rates are often stated in basis points. If ...
s. The ''
Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'' advised investors explicitly not to panic, because the phenomenon could just be a "temporary kink" which had "no predictive power"
The broader question which Michael Hudson raised, was about why this weird thing could happen at all, and what it says about the condition that the major part of US business is in, the mentality of investors, etc. In the US, recessions and depressions since
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
(so far 11 downturns in total, on average occurring every 6.6 years) are usually preceded by an inverted yield curve for Treasury notes (within an average time-frame of 21 months). Billionaire investor Stan Druckenmiller stated, in September 2018, that the next financial crisis would likely be worse than the last one, because of skyrocketing debt loads. "We have this massive debt problem. We tripled down on what caused the astcrisis. And we tripled down on it globally." Following this type of expectation, many investors put their money into government bonds, even if the real yield on the bonds was close to zero, or negative.
In the crash of 2007–2009, the property values of US homes dropped by about 30% on average, and around one in every five mortgaged homes was suddenly "under water" (where the loaned amount was at least 25% higher, than the estimated market value of the home - in the "normal" situation, at most 1 out of 50 mortgaged homes would be "underwater"). Between 2007 and 2016 there were 7.8 million
foreclosure
Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.
Formally, a mortg ...
s of mortgaged homes in the US, where households under financial pressure were forced out. This was equivalent to around one quarter of all mortgaged homes. Subsequently, the housing market recovered. Yet ten years later, more than 5 million American mortgaged homes (around one in ten owner-occupied mortgaged homes) were still seriously "underwater".
New School
The New School is a private research university in New York City. It was founded in 1919 as The New School for Social Research with an original mission dedicated to academic freedom and intellectual inquiry and a home for progressive thinkers. ...
researchers found that, between the spring of 2009 and the fall of 2011, about 45 percent of the US workers they studied saw their retirement account-balances decrease by thousands of dollars. For many workers, renewed gains in pension funds after the financial crash of 2008 could only partly offset the losses. In the old capitalism, working people were ''rewarded'' for saving money, but in the new financialized capitalism, they are often ''punished'' for saving. There is no certainty anymore what exactly their savings will be worth, when they retire. What is certain is that the current generation of US pensioners is the first one since
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
which is financially worse off than the preceding generation. The situation in Europe and Japan is much the same.
Price volatility
Price volatility can be a boon to speculators (if the trend goes their way), but to many business people it is a pain, as became clear for example in the
Brexit
Brexit (; a portmanteau of "British exit") was the withdrawal of the United Kingdom (UK) from the European Union (EU) at 23:00 GMT on 31 January 2020 (00:00 1 February 2020 CET).The UK also left the European Atomic Energy Community (EAEC or ...
controversy. Much of global production is now subject to
intellectual property
Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, cop ...
rights (IPRs), yet the commercial value of knowledge, data and information can be volatile. IPRs are often difficult to defend against raiders, when people's
privacy
Privacy (, ) is the ability of an individual or group to seclude themselves or information about themselves, and thereby express themselves selectively.
The domain of privacy partially overlaps with security, which can include the concepts of a ...
is destroyed. Knowledge and information can not only spike in value, but also quickly become worthless. Many financial products now exist, such as level 3 assets and
cryptocurrencies
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank
A bank is a financial i ...
, of which the exact value is unknown or highly variable. Global market volatility can rapidly wipe out trillions of dollars of value. ''
Financial Times
The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and published digitally that focuses on business and economic current affairs. Based in London, England, the paper is owned by a Japanese holding company, Nik ...
'' editor
Gillian Tett
Gillian Tett (born 10 July 1967) is a British author and journalist at the ''Financial Times'', where she is chair of the editorial board and editor-at-large, US. She has written about the financial instruments that were part of the cause of the ...
reported that:
Stock market volatility is measured by the
VIX
VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the stock market's expectation of volatility based on S&P 500 index options. It is calculated and disseminated ...
(the CBOE Volatility Index), colloquially known as the "fear index" or the "fear gauge". The financial community and the political class try to do their best to maintain the stability of society, but they cannot fully control what all the people and all the markets are going to do. For example, a majority of Brits unexpectedly voted for a
Brexit
Brexit (; a portmanteau of "British exit") was the withdrawal of the United Kingdom (UK) from the European Union (EU) at 23:00 GMT on 31 January 2020 (00:00 1 February 2020 CET).The UK also left the European Atomic Energy Community (EAEC or ...
, throwing a spanner in the works. After 28 January 2018, about $4 trillion worth of stock value in stock markets disappeared in little more than a week, although the stock markets subsequently recovered.
For well-insured rich people, it may not be so devastating if they lose part of their capital (they can often recover it within a few years, using the capital they still have), but the worry is what sudden, very large losses can do to the world economy. The magnitude and negative impact of price volatility on trade (including foreign exchange rates) is usually greater in less developed (poorer) countries, because they lack a sophisticated financial system, hedging facilities to reduce currency risks, and financial buffers to cope with sudden, major changes in prices.
Thomas Hobbes
Thomas Hobbes ( ; 5/15 April 1588 – 4/14 December 1679) was an English philosopher, considered to be one of the founders of modern political philosophy. Hobbes is best known for his 1651 book ''Leviathan'', in which he expounds an influent ...
, writing his ''
Leviathan
Leviathan (; he, לִוְיָתָן, ) is a sea serpent noted in theology and mythology. It is referenced in several books of the Hebrew Bible, including Psalms, the Book of Job, the Book of Isaiah, the Book of Amos, and, according to some ...
'' in the 17th century, remarked that:
In a digitalized, globalized 21st century world, buzzing with possibilities to connect or disconnect, people may start to regard ''themselves'' – seriously or surrealistically – as a kind of "stock" in the social marketplace, with a rather ''volatile'' value, which goes up and down all the time – whether they like that, or not. Depending on the public or private perceptions of what they do or don't do with themselves, their value goes up, or it goes down, and it can do so more or less instantly. The value of a person who is an
outlier
In statistics, an outlier is a data point that differs significantly from other observations. An outlier may be due to a variability in the measurement, an indication of novel data, or it may be the result of experimental error; the latter are ...
could go up and down like a
yoyo
A yo-yo (also spelled yoyo) is a toy consisting of an axle connected to two disks, and a string looped around the axle, similar to a spool. It is an ancient toy with proof of existence since 500 BCE. The yo-yo was also called a bandalore in ...
, because the process of
price discovery
In economics and finance, the price discovery process (also called price discovery mechanism) is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers.
Overview
Price discovery is diff ...
is difficult. This can become a challenge, causing uncertainty, discomfort or ambivalence, if it is difficult to control or evade. It creates pressures to "manage" the impressions that other people have (see also
impression management
Impression management is a conscious or subconscious process in which people attempt to influence the perceptions of other people about a person, object or event by regulating and controlling information in social interaction.Sanaria, A. D. (2016). ...
). It could affect the way people dress, where they go, who they connect with, and so on, all of which could influence perceptions of their "worth", and consequently whether they get endorsements or rejections.
All these forms of "price volatility" suggest, that there is a dimension of "value" now gaining prominence, which is to an important extent unpredictable, capricious, uncontrollable and elusive, tricking even the most powerful government institutions at times. The sociologist
Zygmunt Bauman
Zygmunt Bauman (; 19 November 1925 – 9 January 2017) was a Polish sociologist and philosopher. He was driven out of the Polish People's Republic during the 1968 Polish political crisis and forced to give up his Polish citizenship. He emigrate ...
refers to a new era of "
liquid modernity
A liquid is a nearly incompressible fluid that conforms to the shape of its container but retains a (nearly) constant volume independent of pressure. As such, it is one of the four fundamental states of matter (the others being solid, gas, ...
", which alters the whole way in which individuals see themselves, and their relationship with others and the world.
Unreliable valuations
To defeat competitors, dodge taxes and please investors, businesses increasingly fiddle their accounts and hide parts of their operations. Aided by multiple subsidiary or associated companies - often sited in different countries - company holdings, earnings and operations can be "tweaked": liabilities can be turned into assets, assets into liabilities; incomes can be turned into costs, and costs into incomes; and operating cash flows can be altered – according to the kind of accounting method that is most favourable for the business group (see also
creative accounting
Creative accounting is a euphemism referring to accounting practices that may follow the letter of the rules of standard accounting practices, but deviate from the spirit of those rules with questionable accounting ethics—specifically distortin ...
Morgan Stanley
Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...
stated that "The financial reporting system is completely broken." This begins to upset the traditional economic rationality of costs and benefits in market activity (in particular, it becomes legally possible to get rich through debt leverage which indebts other people).
If the value of a company to investors is defined as the ''present'' value of ''future'' cash flows, it is not primarily what the company has achieved financially in the ''present'' that is important, but what that achievement is "likely" to be worth in the ''future''. This motivates companies to present attractive numbers to investors. In
Australia
Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...
, the ''
Financial Review
''The Australian Financial Review'' (abbreviated to the ''AFR'') is an Australian business-focused, compact daily newspaper covering the current business and economic affairs of Australia and the world. The newspaper is based in Sydney, New Sou ...
'' reported in 2016 that 40% of ASX top-500 companies use "non-standard" financial measures such as "underlying profit" and "underlying earnings", calling into question the very purpose of having uniform accounting standards. KPMG researchers found that many ASX200 companies were not fully complying with government guidelines for reporting financial data to investors. Similar stories can be found in most other countries. The ''Financial Times'' quoted a boardmember of an auditing firm as saying that "The problem with
fair value accounting
Mark-to-market (MTM or M2M) or fair value accounting is accounting for the "fair value" of an asset or liability based on the current market price, or the price for similar assets and liabilities, or based on another objectively assessed "fair" ...
is that it's very hard to differentiate between
mark-to-market
Mark-to-market (MTM or M2M) or fair value accounting is accounting for the " fair value" of an asset or liability based on the current market price, or the price for similar assets and liabilities, or based on another objectively assessed "fair ...
, mark-to-model and mark-to-myth."
Through
stock buybacks
Share repurchase, also known as share buyback or stock buyback, is the re-acquisition by a company of its own shares. It represents an alternate and more flexible way (relative to dividends) of returning money to shareholders. When used in coor ...
a company can drive up its share price, and deliver earnings to shareholders without any change in company performance - if corporate officers get paid in stocks and stock options, they get a pay rise every time the stock's value rises. In February 2018, the US Senate Democrats released a special report which stated that a sample of just 33 corporations were planning $209 billion worth of buybacks in 2018, while at the same time laying off large numbers of workers. According to
Goldman Sachs
Goldman Sachs () is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered at 200 West Street in Lower Manhattan, with regional headquarters in London, Warsaw, Bangalore, H ...
, US companies authorized $1 trillion worth of stock buybacks in 2018, while Europe, Canada, Japan and industrialized East Asian countries also got into the act with a combined $248 billion of buyouts in the first half of 2018. The global equity market was "shrinking at the fastest pace in at least two decades" although its total value was still increasing, partly due to buybacks pushing up stock prices. The ''
Financial Times
The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and published digitally that focuses on business and economic current affairs. Based in London, England, the paper is owned by a Japanese holding company, Nik ...
'' raised the spectre of the "slow death of public stock markets"':
The general effect is, that the true economic value or benefit of what business does, becomes more difficult to know; transparency is lacking. Shareholders are encouraged to have faith in a company, although there may in truth exist no reliable valuation of company operations. In October 2010, the EU dropped the idea of a financial transactions tax (a
Tobin tax
A Tobin tax was originally defined as a tax on all spot conversions of one currency into another. It was suggested by James Tobin, an economist who won the Nobel Memorial Prize in Economic Sciences. Tobin's tax was originally intended to penali ...
or
Robin Hood tax
The Robin Hood tax is a package of financial transaction taxes (FTT) proposed by a campaigning group of civil society non-governmental organizations (NGOs). Campaigners have suggested the tax could be implemented globally, regionally, or uni ...
), citing among its reasons the bewildering complexity of international transactions, which makes implementing and enforcing the tax far too difficult and costly.
The commons
The ordinary capitalist logic fails to provide any agreed standard valuation, or property right, for new kinds of "semi-public" goods that are considered to have a lot of economic value, such as social networks, collective intellectual and cultural assets, eco-systems, and stocks of non-renewable natural resources. These resources are often called "the
commons
The commons is the cultural and natural resources accessible to all members of a society, including natural materials such as air, water, and a habitable Earth. These resources are held in common even when owned privately or publicly. Commons ...
" (nobody owns them, or everybody owns them, so therefore somebody can take them).
Realistic pricing by business presumes that things can be privately owned and sold (or leased, rented, hired etc.). If resources can be obtained and used without cost (because they are "free goods") or accessible at near-zero cost, they are more likely to be plundered or wasted. For example, in the
Pacific Ocean
The Pacific Ocean is the largest and deepest of Earth's five oceanic divisions. It extends from the Arctic Ocean in the north to the Southern Ocean (or, depending on definition, to Antarctica) in the south, and is bounded by the continen ...
, there are a lot of fish in the open sea, nobody owns them, and they are harvested using
industrial fishing
The fishing industry includes any industry or activity concerned with taking, culturing, processing, preserving, storing, transporting, marketing or selling fish or fish products. It is defined by the Food and Agriculture Organization as including ...
techniques with giant dragnets. The result is, that fish stocks are decreasing very fast (see also
Fishing down the food web
Fishing down the food web is the process whereby fisheries in a given ecosystem, "having depleted the large predatory fish on top of the food web, turn to increasingly smaller species, finally ending up with previously spurned Forage fish, small f ...
). The feasibility of generating new fish populations depends on whether the
food chain
A food chain is a linear network of links in a food web starting from producer organisms (such as grass or algae which produce their own food via photosynthesis) and ending at an apex predator species (like grizzly bears or killer whales), det ...
on which the fish depend is still there.
The invention of an ingenious system of global
carbon emissions trading
Emission trading (ETS) for carbon dioxide (CO2) and other greenhouse gases (GHG) is a form of carbon pricing; also known as cap and trade (CAT) or carbon pricing. It is an approach to limit climate change by creating a market with limited ...
, which priced carbon emissions, and promoted trade in pollution allowances to reduce pollution in the air that we breathe, failed to reach its goal. For the year 2015, health experts estimated conservatively that 9 million premature deaths in the world (that is 16% of all the deaths that occur in the world per year, i.e. 4 deaths out of every 25 deaths per year) were attributable to pollution, with air pollution being the biggest killer. The biggest numbers of pollution deaths occur in Africa, China, India, Pakistan and Bangladesh. Only around 155,000 Americans die from pollution per year (out of 2.7 million deaths per year, i.e. about 1 pollution death in every 17 deaths per year) - in the West, the pollution problem "dropped off the radar", as the focus was on global warming.
Network sites such as
Facebook
Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin M ...
and
LinkedIn
LinkedIn () is an American business and employment-oriented online service that operates via websites and mobile apps. Launched on May 5, 2003, the platform is primarily used for professional networking and career development, and allows job se ...
do not make their money directly from having access to other people's friendships, but from selling information, advertising, broadcasting, games, sponsorships and access privileges. The
Facebook–Cambridge Analytica data scandal
In the 2010s, personal data belonging to millions of Facebook users was collected without their consent by British consulting firm Cambridge Analytica, predominantly to be used for political advertising.
The data was collected through an app ca ...
indicated that the for-profit, legalized robbery and exploitation of information about people's known personal networks - amongst other things to dupe them into voting for right-wing politicians - has become a big business internationally. Gigantic data thefts nowadays occur every year, but the victims may never know that their data and work was stolen, or who stole it. In 2016, it was reported that an estimated 4 billion data records were stolen by hackers. However, when people sign up for accounts with Google, Amazon, Facebook, Microsoft etc. they have no idea of what their personal data (trillions of records) are going to be used for. People often don't even know how to protect their own data or their own privacy, other than not to use their computer. Corporations can legally "scrape" gigantic amounts of personal information, and do with it what they like - people will probably never know what happened, and they cannot find out what happened, even if they tried.
Misvaluation of work
The rewards and valuations for work effort, trade unionists complain, have gone way out of proportion, so that many people work extremely hard for long hours, just to earn a few dollars, while others get paid gigantic sums of money just to have a chat, to be present, or to give a bit of attention.
*A US study published in May 2018 by
Minnesota
Minnesota () is a state in the upper midwestern region of the United States. It is the 12th largest U.S. state in area and the 22nd most populous, with over 5.75 million residents. Minnesota is home to western prairies, now given over to ...
's Democratic US congressman Keith Ellison found that the average CEO-to-worker pay ratio had reached 339 to 1, with the highest pay gap approaching 5,000 to 1 (for every dollar an ordinary worker earns, a CEO on average gets $339 and can earn close to $5,000).
*According to Martin A. Sullivan, chief economist with
Tax Analysts
Tax Analysts is a nonprofit publisher offering the Tax Notes portfolio of products, including weekly magazines featuring commentary, daily online journals featuring news and analysis, and research tools, all focused on tax policy and administratio ...
, "The way you get rich in this world is not by working hard. It's by owning large amounts of assets and having those things appreciate in value." The argument is here not that CEO's "do not work hard", but that they and other wealthy people could never accumulate all the wealth that they do, simply from their own salary. The wealth accumulates faster, through wealth managers leveraging and trading personal assets for profit and capital gain. "Little of
Jeff Bezos
Jeffrey Preston Bezos ( ;; and Robinson (2010), p. 7. ''né'' Jorgensen; born January 12, 1964) is an American entrepreneur, media proprietor, investor, and commercial astronaut. He is the founder, executive chairman, and former preside ...
’ and
Bill Gates
William Henry Gates III (born October 28, 1955) is an American business magnate and philanthropist. He is a co-founder of Microsoft, along with his late childhood friend Paul Allen. During his career at Microsoft, Gates held the positions ...
's wealth, for instance, came from wages, salaries, and benefits... It came from owning stock".
Martin Wolf
Martin Harry Wolf (born 16 August 1946 in London) is a British journalist of Austrian-Dutch descent who focuses on economics. He is the associate editor and chief economics commentator at the ''Financial Times''.
Early life
Wolf was born in ...
stated in 2018 that "If the natural tendency of our economies is towards ever-rising rent extraction and inequality, with all its dire social and political results, we need to respond in a thoughtful and determined way. That is the great challenge."
*
Kevin Bales
Kevin Brian Bales, (born 1952), is Professor of Contemporary Slavery at the University of Nottingham, co-author of the Global Slavery Index, and was a co-founder and previously president of Free the Slaves. Free the Slaves is the US sister orga ...
reports that "for the first time in human history, there is an absolute glut of potential slaves... with so many possible slaves, their value has plummeted. Slaves are now so cheap, that they have become cost-effective in many new kinds of work. (...) Slaveholders get all the work they can out of their slaves, and then throw them away." In 2017, the
ILO
The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice by setting international labour standards. Founded in October 1919 under the League of Nations, it is the first and ol ...
estimated conservatively that across 2011–2016, 89 million people (roughly equal to the population of
Germany
Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
or the
Democratic Republic of Congo
The Democratic Republic of the Congo (french: République démocratique du Congo (RDC), colloquially "La RDC" ), informally Congo-Kinshasa, DR Congo, the DRC, the DROC, or the Congo, and formerly and also colloquially Zaire, is a country in ...
) were enslaved worldwide for shorter or longer intervals of time, 25 million were permanently subject to forced labour, 15 million females were enslaved in a forced marriage, and 152 million children aged between 5 and 17 were subjected to child labour. There are estimated to be about 400,000 slaves in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
. Of all slaves, two out of three are female (see also
Global Slavery Index
The Global Slavery Index is a global study of modern slavery published by the Minderoo Foundation's Walk Free initiative. Four editions have been published: in 2013, 2014, 2016 and 2018.
The 2018 edition builds on the Global Estimates of Modern S ...
).
*James Crotty argues that top executives in the financial world nowadays get richly rewarded regardless of whether there is a crash or a boom. Since they just keep getting huge bonus payments, even when their own company suffers very large losses, they are "perversely incentivized" to continue the high-risk and high-leverage investment strategies which destabilize the financial system as a whole. Yet even if CEO's would take a drastic pay cut, the fact remains that total debt levels are escalating regardless, and require more and more earnings from any source, to pay more and more interest on loans - which pits private investors against central banks when the banks try to raise rates.
The argument then is, that if the financial incentives and disincentives for work effort have gone totally out of kilter, markets cannot deliver a fair and efficient allocation of resources anymore.
Market failure
Governments are involved more and more in sorting out market failure (and pick up the tab for it - see also
lemon socialism
Lemon socialism is a pejorative term for a form of government intervention in which government subsidies go to weak or failing firms (''lemons''; see Lemon law), with the effective result that the government (and thus the taxpayer) absorbs part ...
). An editor of the
Financial Times
The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and published digitally that focuses on business and economic current affairs. Based in London, England, the paper is owned by a Japanese holding company, Nik ...
,
Martin Wolf
Martin Harry Wolf (born 16 August 1946 in London) is a British journalist of Austrian-Dutch descent who focuses on economics. He is the associate editor and chief economics commentator at the ''Financial Times''.
Early life
Wolf was born in ...
, remarked famously about the financial sector that "No
ther Ther may refer to:
*''Thér.'', taxonomic author abbreviation of Irénée Thériot (1859–1947), French bryologist
* Agroha Mound, archaeological site in Agroha, Hisar district, India
*Therapy
*Therapeutic drugs
See also
*''Ther Thiruvizha
''T ...
industry has a comparable talent for privatising gains and socialising losses." Some years later, he explained that "Today's banks represent the incarnation of profit-seeking behaviour taken to its logical limits, in which the only question asked by senior staff is not what is their duty or their responsibility, but what can they get away with." Yet the role of bank services is crucial to operate gigantic transaction volumes, and governments have fewer and fewer resources available to repair business damage, because of privatization, state corruption, and the looting of state funds or tax-dodging by private interests (
kickbacks
A kickback is a form of negotiated bribery in which a commission is paid to the bribe-taker in exchange for services rendered. Generally speaking, the remuneration (money, goods, or services handed over) is negotiated ahead of time. The kickbac ...
,
privatization
Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
,
pork barrel
''Pork barrel'', or simply ''pork'', is a metaphor for the appropriation of government spending for localized projects secured solely or primarily to bring money to a representative's district.
The usage originated in American English, and i ...
politics,
lobby group
In politics, lobbying, persuasion or interest representation is the act of lawfully attempting to influence the actions, policies, or decisions of government officials, most often legislators or members of regulatory agencies. Lobbying, which ...
power,
corporatization
Corporatization is the process of transforming and restructuring state assets, government agencies, public organizations, or municipal organizations into corporations. It involves the adoption and application of business management practices and ...
,
securitization
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling ...
,
rent-seeking
Rent-seeking is the act of growing one's existing wealth without creating new wealth by manipulating the social or political environment.
Rent-seeking activities have negative effects on the rest of society. They result in reduced economic effi ...
, arbitrary budget cuts, financial
bailouts
A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy.
A bailout differs from the term ''bail-in'' (coined in 2010) under which the bondholders or depositors of global syst ...
,
regressive tax
A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high ...
,
tax evasion
Tax evasion is an illegal attempt to defeat the imposition of taxes by individuals, corporations, trusts, and others. Tax evasion often entails the deliberate misrepresentation of the taxpayer's affairs to the tax authorities to reduce the taxp ...
etc.).
People across the world are now literally being priced out of markets, not just in poor countries, but also in rich countries.
*According to a McKinsey Global report, "In the United States, 40 percent of adults surveyed by the Federal Reserve System said they would struggle to cover an unexpected expense of $400. One-quarter of nonretired adults have no pension or retirement savings. Outstanding student loans now top $1.4 trillion, exceeding credit-card debt—and unlike nearly all other forms of debt, they cannot be discharged in bankruptcy."
*In
San Francisco
San Francisco (; Spanish language, Spanish for "Francis of Assisi, Saint Francis"), officially the City and County of San Francisco, is the commercial, financial, and cultural center of Northern California. The city proper is the List of Ca ...
, well-paid teachers are living in dorms, because they cannot afford to buy a home in the city anymore - house prices have gone beyond their reach. This is the reverse situation of what happened in the property boom up to 2007. At that time, quite a few Californian teachers found they could make more money from rising property values, than from their job. In 2017, only half of the households in California owned their homes, but one out of every three renters - roughly six million people - paid ''more than half'' of their total income to their landlord. In
Los Angeles
Los Angeles ( ; es, Los Ángeles, link=no , ), often referred to by its initials L.A., is the largest city in the state of California and the second most populous city in the United States after New York City, as well as one of the world' ...
, tenants staged a rent strike in protest.
*
Richard Florida
Richard L. Florida is an American urban studies theorist focusing on social and economic theory. He is a professor at the Rotman School of Management at the University of Toronto and a Distinguished Fellow at NYU's School of Professional Studies. ...
reported in 2017 that "An acre of central land in
New York City
New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...
is worth approximately 72 times more than an acre of central
Atlanta
Atlanta ( ) is the capital and most populous city of the U.S. state of Georgia. It is the seat of Fulton County, the most populous county in Georgia, but its territory falls in both Fulton and DeKalb counties. With a population of 498,715 ...
or
Pittsburgh
Pittsburgh ( ) is a city in the Commonwealth (U.S. state), Commonwealth of Pennsylvania, United States, and the county seat of Allegheny County, Pennsylvania, Allegheny County. It is the most populous city in both Allegheny County and Wester ...
, and almost 1,400 times more than the same in many small
Rust Belt
The Rust Belt is a region of the United States that experienced industrial decline starting in the 1950s. The U.S. manufacturing sector as a percentage of the U.S. GDP peaked in 1953 and has been in decline since, impacting certain regions and ...
and
Sunbelt
The Sun Belt is a region of the United States generally considered to stretch across the Southeast and Southwest. Another rough definition of the region is the area south of the 36th parallel. Several climates can be found in the region — des ...
metros."
*On behalf of many of the world's large cities, the
mayor
In many countries, a mayor is the highest-ranking official in a municipal government such as that of a city or a town. Worldwide, there is a wide variance in local laws and customs regarding the powers and responsibilities of a mayor as well a ...
of
Barcelona
Barcelona ( , , ) is a city on the coast of northeastern Spain. It is the capital and largest city of the autonomous community of Catalonia, as well as the second most populous municipality of Spain. With a population of 1.6 million within ci ...
called on the
United Nations
The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and international security, security, develop friendly relations among nations, achieve international cooperation, and be ...
to do something to help stop real estate speculators from driving up the cost of housing. The ''Cities for Adequate Housing'' statement signed by mayors of eight big cities calls for more powers for local authorities, to better regulate the real estate market; more funds to improve public housing stock; more tools to co-produce alternative public-private and community-driven housing solutions; urban planning schemes that combine adequate housing and quality neighborhoods that are both inclusive and sustainable; and city council cooperation in residential strategies.
*Although on average people are now living longer than they did before, the 2017 ''Global Medical Trends Survey Report'' by
Willis Towers Watson
Willis Towers Watson Public Limited Company is a British-American multinational insurance advisor company. The company was founded in 2016, following a merger of the Willis Group and Towers Watson.
Overview
WTW operates in more than 140 co ...
states that "The cost of medical care continues to rise across the globe with no light at the end of the tunnel." Americans like to see themselves as the most advanced nation on earth, but to get the same medical care and cover as Europeans, Americans spend 2.5 times more money; Americans have the highest medical bills on earth.
*In 2016,
New Zealand
New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island count ...
researchers reported that during 2013, at least one in every 100 New Zealanders was de facto homeless, compared with 1 in 120 in 2006, and 1 in 130 in 2001. They sleep at a friend's place or with relatives, in motels, garages, sheds, cars, stations etc. At that time, in 2016, the country was at the top of
Knight Frank
Knight Frank LLP is an estate agency, residential and commercial property consultancy founded in London by John Knight, Howard Frank and William Rutley in 1896. Knight Frank together with its American affiliate Cresa is one of the world's large ...
's global ranking of countries for property price-rises, and for the first time, the average house price in
Auckland
Auckland (pronounced ) ( mi, Tāmaki Makaurau) is a large metropolitan city in the North Island of New Zealand. The List of New Zealand urban areas by population, most populous urban area in the country and the List of cities in Oceania by po ...
hit NZ$1 million (=US$715,000, €585,000, £513,000). The ''median'' NZ salary was at US$35,000, meaning that the average Auckland house price was around 20x the median annual salary or around 10x median household income. Average Auckland house prices are expected to increase 300% in twenty years, and reach NZ$3 million by 2036.
The warped price structures of financialized capitalism increasingly cause large social dislocations and technical change across the world, because it is no longer economically possible for large masses of people to live and work in the normal way, within large geographic areas. They have to change their lifestyle drastically, or are forced out.
The rich buy up the beautiful areas, and the poor have to live in the ugly, derelict and polluted areas. As rich people cause the largest amount of pollution, many poor people take a dim view of bourgeois environmentalism aiming to protect nature.
Yet great poverty can also be destructive for the environment. Suffering hyperinflation of the
Zimbabwean dollar
The Zimbabwean dollar (sign: $, or Z$ to distinguish it from other dollar-denominated currencies) was the name of four official currencies of Zimbabwe from 1980 to 12 April 2009. During this time, it was subject to periods of extreme inflat ...
and absolute poverty, masses of people in
Zimbabwe
Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and Mozam ...
took to cutting down forest, wildlife poaching and gold or diamond mining on own initiative, to make a living and survive (See also
Marange diamond fields
The Marange diamond fields are an area of widespread small-scale diamond production in Chiadzwa, Mutare District, Zimbabwe. 'Although estimates of the reserves contained in this area vary wildly, some have suggested that it could be home to one ...
). It is estimated that between 1990 and 2005, Zimbabwe lost 21 percent (one-fifth) of its forest cover (i.e. 4.7 ''million'' hectares), and currently 313,000 hectares of forest disappear every year. In 2013, 15% of the deforestation concerned land-clearing for tobacco-farming, and getting firewood for tobacco-curing. According to a Zimbabwe Conservation Task Force report in June 2007, more than half of all Zimbabwe's wildlife had died since 2000, due to poaching and deforestation. Land degradation is expected to cause major soil erosion, plus flooding and groundwater-pollution problems, significantly reducing the habitable farmland area.
Rich people are increasingly on the move too, trying to escape from high taxes, unsafe conditions, environmental hazards and socio-political instability. According to the ''Global Wealth Migration Review 2018'', some 95,000 millionaires (
HNWI
High-net-worth individual (HNWI) is a term used by some segments of the financial services industry to designate persons whose investible wealth (assets such as stocks and bond (finance), bonds) exceeds a given amount. Typically, these individu ...
s) migrated in 2017, top destinations being North America, Australasia, United Arab Emirates, Israel, Switzerland and Singapore. The exit of wealthy people affected mainly China, India, Turkey, United Kingdom, France, Russia, Brazil, Indonesia, Saudi Arabia, Nigeria and Venezuela.
Organizational instability
The management of both business and government organizations has become permanently unstable, and restructuring is nowadays a never-ending process, so that staff is constantly being replaced or shifted around, while work systems are being redesigned all the time – giving rise to complaints that nothing works anymore like it should and that there is no job security anymore. If job security is gone, workers have less freedom, because they have less control over what will or might happen to their lives in the future; it becomes more difficult for them to make good life-choices and plans, if they don't even have reasonably good information about what is likely to happen, financially or otherwise. If things are in flux, or in a chaos, it gets hard to know what can be concluded from the experience of what happens and judge things well. Sufficient order and predictability are needed, to be able to learn and adapt constructively to new situations.
According to the Dutch central bank, half the fall of the Dutch wage-share in the country's net value-added across 1996-2015 was attributable to "labour market flexibilization".
Throwing more money at the problems however may not solve very much organizationally, although employees are grateful for extra cash. Repeatedly the money just disappears down a hole. When some of America's most powerful and well-resourced corporations were paid billions of dollars to rebuild
Iraq
Iraq,; ku, عێراق, translit=Êraq officially the Republic of Iraq, '; ku, کۆماری عێراق, translit=Komarî Êraq is a country in Western Asia. It is bordered by Turkey to Iraq–Turkey border, the north, Iran to Iran–Iraq ...
, it turned out that they couldn't even organize basic things properly, like getting the power, water and gas connected again.
There is much uncertainty and unease about what the future might bring, because nobody really knows for sure what will happen, except that new crises are likely. The Global Risks Report 2018 of the elite
World Economic Forum
The World Economic Forum (WEF) is an international non-governmental and lobbying organisation based in Cologny, canton of Geneva, Switzerland. It was founded on 24 January 1971 by German engineer and economist Klaus Schwab. The foundation, ...
group envisages the scenario of "the death of trade", or "the end of trade as we know it". This would involve escalating trade wars, currency wars, and geopolitical turmoil that spread quickly around the globe, with weak regulatory bodies powerless to resolve anything. International laws, agreements and conventions would no longer be heeded; commercial trade would be governed by the
law of the jungle
"The law of the jungle" (also called jungle law) is an expression that has come to describe a scenario where "anything goes". The ''Oxford English Dictionary'' defines the Law of the Jungle as "''the code of survival in jungle life'', now usual ...
and military power.
Similarly, in April 2018, IMF managing director
Christine Lagarde
Christine Madeleine Odette Lagarde (; née Lallouette, ; born 1 January 1956) is a French politician and lawyer who has been serving as President of the European Central Bank since 2019. She previously served as the 11th managing director of the ...
referred to anxieties about global trade and tariff wars, a few years into the future. She said that national protectionist policies could tear apart the institutional and legal frameworks governing global trade.
The informal circuit
Globally, the
shadow economy
A black market, underground economy, or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is characterized by noncompliance with an institutional set of rules. If the rule defines the s ...
, the
informal sector
An informal economy (informal sector or grey economy) is the part of any economy that is neither taxed nor monitored by any form of government.
Although the informal sector makes up a significant portion of the economies in developing countrie ...
, the scope of criminal activity, corruption and the unemployed " surplus population" all remain very large. A lot of petty crime is no longer reported or recorded, since the police does not have the resources to cope with it, and victims do not bother to report it anymore. Kiki Seokhee Yoon states that "To the best of our knowledge, the probability that a crime will be reported is about 50 percent or less." Buonanno et al. (2017) say that "measuring crime is a challenging issue for social scientists".
According to ''CNN Money'', "Top executives at the so-called "too big to fail" banks have avoided any criminal charges, even as their banks paid tens of billions of dollars in fines to settle charges of wrongdoing leading up to the financial crisis."
Friedrich Schneider however claims the shadow economy is decreasing in the long run.
The
Corruption Perceptions Index
The Corruption Perceptions Index (CPI) is an index which ranks countries "by their perceived levels of public sector corruption, as determined by expert assessments and opinion surveys." The CPI generally defines corruption as an "abuse of entru ...
is only an indicator of corruption in the ''public'' sector of the economy, and not of corruption in the private sector, even although the private sector is much larger than the public sector. This index cannot show whether the total amount of corruption globally is increasing, constant, or decreasing. A more comprehensive measure is the
Global Corruption Barometer The Global Corruption Barometer published by Transparency International is the largest survey in the world tracking public opinion on corruption. It surveys 114,000 people in 107 countries on their view of corruption.
Have you paid a bribe in 2013? ...
.
"In a criminalized capitalism, where the state and the private sector increasingly work together to rob and exploit the people, crime does pay. Yet the decay of bourgeois values does not automatically prompt a struggle for better values. It could also lead to a long-term degeneration of ''all'' human values, the destruction of
humanism
Humanism is a philosophical stance that emphasizes the individual and social potential and agency of human beings. It considers human beings the starting point for serious moral and philosophical inquiry.
The meaning of the term "humani ...
, and the disappearance of belief in the sanctity of human life and in the defense of human dignity."
Alternatives
More and more alternatives are developing to the capitalist mode of production, for the purpose of making a life, for allocating resources, for work and for organizing production (see also
Sharing economy
In capitalism, the sharing economy is a socio-economic system built around the sharing of resources. It often involves a way of purchasing goods and services that differs from the traditional business model of companies hiring employees to produce ...
). If people share instead of competing, they can often reduce their costs. This insight is especially important to people when they have become impoverished.
Prospects
The overall economic importance of these ten trends for capitalist value relations is disputed, among other things because they have always existed to some or other extent. It isn't clear, in what sense ''quantitative'' changes also imply ''qualitative'' changes in the functioning of capitalist society, or to what extent ''qualitative'' changes are ''quantitatively'' significant.
* Critics of capitalism argue that there are problems for capitalism today that cannot be solved at all, within the framework of capitalist value relations.
* Supporters of capitalism argue that ways will be found to get round the problems, and that capitalism is flexible or resilient enough to overcome all crises.
* The supporters of
Henryk Grossman
Henryk Grossman (alternative spelling: ''Henryk Grossmann''; 14 April 1881 – 24 November 1950) was a Polish economist, historian, and Marxist revolutionary active in both Poland and Germany.
Grossman's key contribution to political-economic t ...
are firmly focused on the collapse of capitalism, when total surplus value shrinks and class struggle intensifies.
* Another position says that the problems can be solved within capitalism in some piecemeal or ''
ad hoc
Ad hoc is a Latin phrase meaning literally 'to this'. In English, it typically signifies a solution for a specific purpose, problem, or task rather than a generalized solution adaptable to collateral instances. (Compare with ''a priori''.)
Com ...
'' way, but that this occurs at the expense of a gradual degeneration of capitalism.
* Some argue that capitalism is evolving or mutating into a
post-capitalism
Post-capitalism is a state in which the economic systems of the world can no longer be described as forms of capitalism. Various individuals and political ideologies have speculated on what would define such a world. According to classical Marxi ...
, managerial capitalism, hypercapitalism, cybercapitalism or semiocapitalism - with different kinds of property rights and work organization.
* The term
late capitalism
Late capitalism, late-stage capitalism, or end-stage capitalism is a term first used in print by German economist Werner Sombart around the turn of the 20th century. In the late 2010s, the term began to be used in the United States and Canada to ...
has made a comeback in the United States, as an ironic expression referring to absurd, hypocritical, unjust and fake aspects of contemporary business civilization.
Paul Krugman
Paul Robin Krugman ( ; born February 28, 1953) is an American economist, who is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for ''The New York Times''. In 2008, Krugman was th ...
stated in 2018 that "I’ve had several interviews lately in which I was asked whether capitalism had reached a dead end, and needed to be replaced with something else. I'm never sure what the interviewers have in mind; neither, I suspect, do they."
* There are also intellectuals on the Left and the Right who argue that, if present trends continue, we are headed for a mediocre, dumbed down capitalism, where expectations are low, economic growth is lacklustre and nothing works properly anymore.
So there is no agreement about the future of capitalism, the prognoses are difficult to prove, and all kinds of things could contingently happen. All the different perspectives may have part of the truth.
Hillel Ticktin
Hillel H. Ticktin is a Marxist theorist and economist. He was born in South Africa in 1937, but had to leave to avoid arrest for political activism. He then lived and studied in the Soviet Union, where his PhD thesis, which was critical of offic ...
, the editor of the socialist journal ''
Critique
Critique is a method of disciplined, systematic study of a written or oral discourse. Although critique is commonly understood as fault finding and negative judgment,Rodolphe Gasché (2007''The honor of thinking: critique, theory, philosophy''p ...
'', describes the global situation as "an intermediate period in a transitional world."
Mark Blaug
Mark Blaug FBA (; 3 April 1927 – 18 November 2011) was a Dutch-born British economist (naturalised in 1982), who covered a broad range of topics during his long career.
He was married to Ruth Towse.
Life and work
Blaug was born on 3 April ...
argued that "the central weakness of modern economics" is "the reluctance to produce the theories that yield unambiguously refutable implications, followed by a general unwillingness to confront those implications with the facts." These days accurate and comprehensive forecasts are worth gigantic amounts of money, and so, such forecasts often become a well-guarded secret. A lot of research is no longer being done, because if it is done, it is immediately stolen without trace (by hackers and burglars who want to cream off and head off the most advanced ideas at their point of production, in real time). In 2018,
The Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the research and analysis division of the Economist Group, providing forecasting and advisory services through research and analysis, such as monthly country reports, five-year country economic forecasts, ...
ranked a severe cyber attack crippling corporate and government activities among the top 10 risks to the global economy. At the micro-level, Dutch researchers studied a sample of 1,058 youths aged 12 to 18 years in 2018, and found that 5.1% of youths said they had sometimes hacked without permission into email accounts, 15,2% into mobile phones, and 5,4% into networks. Around 12% said they hadn't done it, but could do it. 54.6% said they would "never hack", but 45.4% said they might give it a try.
In the wake of each big capitalist crisis, both Marxists and non-Marxists have prophesied the end of capitalism.
Critics of breakdown theories, by contrast, argue that systemic crises, though hardly pleasant, are precisely the way through which the developmental problems and growing pains of capitalist business are resolved. Each crisis can also be approached not as a cause of misery, but as an opportunity to do things differently, or to realize the things that powerful people wanted to get done for a long time already. Things "get to the crunch" and when they do, business leaders and politicians have to do something about them. Through terrible ordeals, new techniques for managing, controlling and exploiting people are developed, which later go mainstream. And, after a fierce competition (or a war) involving capitalists, workers, states and nations, a new era of economic growth usually opens up. In the new era, typically a completely new group of capitalists takes the driving seat.
So although it might "seem like" the end of capitalism is nigh, it could also be merely a transition to a new kind of capitalism – a new capitalist regime, which evolved out of what was there before, but which few people had thought of, before it emerged. As an allocation principle, the forms of value could possibly be much more persistent and long-lasting than Marxists and socialists think, even if they mutate into new configurations.
It is also possible that a new scientific understanding of socialism and communism will still emerge in the future, that sheds new light on the role of value in human society. So far, this understanding is actively blocked and suppressed by Western Marxist academics, among other things because they believe that socialism never existed and/or cannot exist, and that value, markets and money are basically the same things. Some argue, that socialism ''should not'' exist, only full communism should exist - with many nice clothes, houses, Ferraris, yachts, etc.
Ernest Mandel
Ernest Ezra Mandel (; also known by various pseudonyms such as Ernest Germain, Pierre Gousset, Henri Vallin, Walter (5 April 1923 – 20 July 1995), was a Belgian Marxian economist, Trotskyist activist and theorist, and Holocaust survivor. He fo ...
states that, for the top communist functionaries in the
Stalinist
Stalinism is the means of governing and Marxist-Leninist policies implemented in the Soviet Union from 1927 to 1953 by Joseph Stalin. It included the creation of a one-party totalitarian police state, rapid industrialization, the theory o ...
era, there was a sense in which communism already existed. Firstly, whenever these communist leaders withdrew funds from their
Gosbank
Gosbank (russian: Госбанк, Государственный банк СССР, ''Gosudarstvenny bank SSSR''—the State Bank of the USSR) was the central bank of the Soviet Union and the only bank in the entire country from 1922 to 1991. ...
account to buy things, their debit was automatically cancelled out with a new credit to the same amount. Secondly, they could go to special shops not accessible to the general public, where they could buy almost anything they wanted. The elite banking practice was stopped by
Nikita Khrushchev
Nikita Sergeyevich Khrushchev (– 11 September 1971) was the First Secretary of the Communist Party of the Soviet Union from 1953 to 1964 and chairman of the country's Council of Ministers from 1958 to 1964. During his rule, Khrushchev s ...
's government.
Thermodynamics
John Bellamy Foster and Paul Burkett (2018) state that "...we are seeing today numerous attempts to conceptualize commodity value as the product not just of human labor, but of animal labor in general and, beyond that, of energy in general". Since 2016, the post-Keynesian economist
Steve Keen
Steve Keen (born 28 March 1953) is an Australian economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking ...
has argued that any credible theory of value, whether classical, neo-classical or heterodox, must be consistent with the physical laws of
thermodynamics
Thermodynamics is a branch of physics that deals with heat, work, and temperature, and their relation to energy, entropy, and the physical properties of matter and radiation. The behavior of these quantities is governed by the four laws of the ...
. He claims that "every school of thought from the Neoclassicals to the Marxists" had been wrong on this issue, and all previous theories of economic value are flawed for that reason.
This is not a new idea (it was raised by
Elmar Altvater
Elmar Altvater (Kamen, Province of Westphalia, 24 August 1938 – 1 May 2018) was Professor of Political Science at the Otto-Suhr-Institut of the Free University of Berlin, before retiring on 30 September 2004. He continued to work at the institut ...
in 1991,
Nicholas Georgescu-Roegen
Nicholas Georgescu-Roegen (born Nicolae Georgescu, 4 February 1906 – 30 October 1994) was a Romanian mathematician, statistician and economist. He is best known today for his 1971 ''The Entropy Law and the Economic Process'', in which he argu ...
in 1971, and
Frederick Soddy
Frederick Soddy FRS (2 September 1877 – 22 September 1956) was an English radiochemist who explained, with Ernest Rutherford, that radioactivity is due to the transmutation of elements, now known to involve nuclear reactions. He also prov ...
in 1921) but Keen proposes a new type of
production function
In economics, a production function gives the technological relation between quantities of physical inputs and quantities of output of goods. The production function is one of the key concepts of mainstream neoclassical theories, used to define ...
, in which energy plays an essential role. The economist Anwar Shaikh however rejects the neo-classical concept of the production function as kind of
sudoku
Sudoku (; ja, 数独, sūdoku, digit-single; originally called Number Place) is a logic-based, combinatorial number-placement puzzle. In classic Sudoku, the objective is to fill a 9 × 9 grid with digits so that each column, each row ...
game, preferring a reconstructed classical economics solidly based on empirical facts and econometric evidence.Anwar Shaikh, ''Capitalism: competition, conflict, crises.'' Oxford: Oxford University Press, 2016.
See also
*
Critique of political economy
Critique of political economy or critique of economy is a form of Social criticism, social critique that rejects the various social categories and structures that constitute the mainstream discourse concerning the forms and modalities of resourc ...
*
Monetary theory of value
A theory of value is any economic theory that attempts to explain the exchange value or price of goods and services. Key questions in economic theory include why goods and services are priced as they are, how the value of goods and services comes ...
*''
Neue Marx-Lektüre
(German for "New Reading of Marx") or NML is a revival and interpretation of Karl Marx's critique of political economy, which originated during the mid-1960s in both Western and Eastern Europe and opposed both Marxist–Leninist and social d ...
Socialist market economy
The socialist market economy (SME) is the economic system and model of economic development employed in the People's Republic of China. The system is a market economy with the predominance of public ownership and state-owned enterprises. Th ...
*
Types of socialism
Types of socialism include a range of economic and social systems characterised by social ownership and democratic controlArnold, N. Scott (1998). ''The Philosophy and Economics of Market Socialism: A Critical Study''. Oxford University Press. ...
*
Use value
Use value (german: Gebrauchswert) or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a commodity (a tradeable object) which can satisfy some human requirement, want or need, or ...