DOCUMENT 17 Fundamental Features of Marx's Theory of Value and How It Differs from Ricardo's Theory (1924)

Isaak Il’ich Rubin

Source: Introduction to I[saiah] Rosenberg, Teoriya stoimosti u Ricardo i u Marksa: kriticheskii etyud (Moscow: Moskovskii rabochii, 1924), pp. 6-62.^[1007]

Introduction by the Editors

In his essay on Marx’s teaching regarding production and consumption, Isaak Rubin analysed the relation between use-value and exchange-value, emphas­ising that the concrete use-value of particular commodities was not a primary concern for Marx as distinct from the economists of the Austrian school.

Just as marginal utility theory emphasises concrete use-values rather than the value ‘form’, so Ricardo studied the material-technical process of produc­tion, and particularly the result of changes in labour productivity, without ref­erence to the particular ‘social form’ of capitalist production relations. Both essays express Rubin’s recurring theme that the fundamental distinction of Marxist political economy, deriving from awareness of the specificity of the capitalist mode of production, is Marx’s elaboration of historically formed pro­duction relations between people. While Adam Smith was aware of historical stages, moving from the Age of Hunters to that of Shepherds, then to Agricul­ture and eventually to Commerce^[1008] - which he regarded as most appropriate for the flourishing of human nature - Ricardo turned the study of political economy in a different direction by taking capitalist relations to be fixed and beyond the scope of inquiry.

Throughout all the works by Rubin that we have translated for this volume, he assesses economic theory with reference to ‘determinations of form’ in their historical context. The dialectical logic of Marx’s work apprehends in theory the logical succession of production relations arising from the fundamental contradictions of commodity production and exchange. In terms of philo­sophical sophistication, Rubin’s work is reminiscent of the pioneering essays by Georg Lukacs in History and Class Consciousness. Lukacs declared that the bourgeoisie is at home with its non-historical and formal-mathematical way of thinking - which he described as ‘false consciousness’ in a world of ‘reifica­tion’ - because an historical awareness, and particularly an attempt to theorise the periodic crises that generate historical change, would require a dialectical approach, demonstrating that capitalism points beyond itself to socialism.^[1010] In their consciousness of Marx's methodological debt to Hegel, Rubin and Lukacs far surpassed most of their Marxist contemporaries.

Following Hegel's principle that the whole is logically prior to the parts, Marx emphasised in the Contribution to the Critique of Political Economy that political economy presupposes capitalist society as its subject, and that the resulting economic categories are exclusively those of the capitalist social formation. Labour and means of production certainly predate capitalism, but when Marx writes of labour and means of production his concern is wage-labour and means of production that are owned by capital. The categories of political economy are ‘abstractions' that ‘retain their full validity only for and within' a specific historical context.^[1011]

Just as in general when examining any historical or social science, so also in the development of economic categories it is always necessary to remember that the subject, in this context contemporary bourgeois soci­ety, is presupposed both in reality and in the mind, and that therefore categories express forms of existence and conditions of existence - and sometimes merely separate aspects - of this particular society, the sub­ject; thus the category, even from the scientific standpoint, by no means begins at the moment when it is discussed as such.6

In terms of logic, Hegel also believed that the whole is implicit in the parts and can therefore be deduced from them.

The equalisation of all types of labour through market equalisation of all the products of labour as values - this is what Marx means by the concept of abstract labour. And since the equalisation of labour through the equalisation of things results from the social form of commodity economy, in which there is no direct social organisation and equalisation of labour, it follows that abstract labour is a social and historical concept. Abstract labour does not express a physiological equality of the various types of labour, but rather the social equalisation of various types of labour that occurs in the specific form of market equalisation of the products of labour as values.^[1013]

Value, money, capital, and the various other categories of political economy are, on the one hand, relations between people; but they are simultaneously ‘things’ that have acquired a social-functional existence. Exchange-value is not the inherent property of a useful product of human labour, nor is wage-labour the natural form of human productive activity. Nevertheless, the requirement that labour become abstract in order to appear as social labour also entails the consequence that the resulting social forms appear to be real and concrete. ‘This “reification”^[1014] consists of the fact that the thing, with respect to which people enter into a certain relation between themselves, fulfils a special social function of linking people together, the function of mediator or “bearer” of the particular production relation between people'.

It was perfectly understandable, therefore, for classical political economy to treat earlier social formations as ‘obsolete' or ‘artificial'. Capitalism appeared to be ‘rational' and ‘natural' precisely because it answered, at least for a time, the need of the productive forces to develop. But, in that sense, the social forms of reification also became objectively necessary. Previous human communities mediated diverse human labour activities through culture, consensus, or some recognised social authority. Capitalism, in contrast, depends upon the regulat­ing role of the law of value. Marx saw that reification will only end when the associated producers socialise the means of production and consciously plan their own labour activities. All the elements of social labour will then become concrete and truly rational through the exercise of conscious foresight.

In this essay, Rubin emphasises the integrity of Marx's work at the same time as he explains its originality. He shows the logical connections between the three volumes of Capital, refutes the allegation of a contradiction between the labour theory of value and the average rate of profit, and concludes that Marx, while he was Ricardo's successor in terms of seeing labour as the content of value, also advanced far beyond Ricardo in his differentiation between concrete and abstract labour, and the resulting treatment of value as a specific historical form. With his elaboration of the ‘dual character' of both labour and value, Marx, rather than completing the theory of the classics, became the originator of an entirely new economic theory.

Isaak Rubin on Marx's Theory of Value and How It Differs from Ricardo's Theory

1 Introduction

The question of the relationship of Marx's economic theory to the theories of his classical predecessors, and especially to Ricardo's theory, is one of great sci­entific interest. We can confidently say that without a clear grasp of Marx's relationship to Ricardo we cannot achieve a proper understanding of the nov­elty that Marx brought to theoretical economics or of the place he occupies in the history of economic thought.

Strange though this phenomenon may first appear, there is a twofold reason for it. On the one hand, since the end of the nineteenth century bourgeois eco­nomic science has been intensively reconsidering its formerly prevalent views concerning the theory of value in Smith and Ricardo. Until that time the eco­nomic theory of the classics, with one or another modification, represented the generally accepted basis upon which newer theoretical constructs arose. The historical school’s attacks on the abstract, deductive method of the classics failed because the historical school quickly revealed its own complete theor­etical inadequacy. Things changed dramatically at the end of the nineteenth century. The theory of marginal utility appeared on the scene of official sci­ence and speedily prevailed. This theory could not ignore the objective theory of value that the classics set out in their day and that served as the starting point for Marx’s theory of value. The most uncompromising representatives of the subjective school launched a decisive frontal attack on the classics, attempting to show how incorrect, contradictory and unsubstantiated their theories were.

If bourgeois economic science has recently busied itself with ‘reapprais­ing what was valuable' in the classical school, Marxist thought, on the other hand, has acquired in the three volumes of Theories of Surplus-Value new and extensive material that permits us to look more deeply into the relationship between Marx's theory and the theories of his predecessors. This question awaits detailed study. In our day it not only continues to cause disagreements between supporters and opponents of Marxism, but even within each of these two camps it fails to find a unanimous response. The complexity and debate­able character of the question of Marx's relationship to the classics fully justi­fies translation into Russian of Rosenberg's book on theories of value in Marx and Ricardo. The author - a supporter of Marx's theory of value - clearly and systematically presents the teachings of Ricardo and Marx and compares their merits. On a whole series of points, he attentively traces both the similarit­ies and the differences between the two thinkers. However, this systematic and detailed analysis of separate points in the two theories, which is the great achievement of Rosenberg's book, is also the source of its weaknesses.^[1015] The author does not elucidate the general, methodological foundations of the two theories and, as a result, is inclined to treat them as similar without sufficiently clarifying the difference of principle between them. Rosenberg is also led in this direction by his heated and completely successful polemic against the crit­ics who claim that Ricardo's theory has no connection with the theory of labour value. His forceful emphasis upon Ricardo's importance as a theorist of labour value on the one hand, and the absence of any characterisation of the general methodological principles of Marx's theory of value on the other, lead Rosen­berg to an extreme convergence of the two theories. The author notes several disagreements between them on individual questions, but he is unable to show just what is new in principle in Marx's contribution to economic science and what distinguishes him from Ricardo. The author himself senses this fact, and he even asserts that the disagreements between Ricardo and Marx are ‘only very slightly' a result of differences between their theories of value and are explained, for the most part, by the differences between their ‘historical, soci­ological and philosophical views' (p. 112). It is not possible to agree with this opinion. There is a fundamental difference between the economic theories of Ricardo and Marx in general terms, and particularly between their theories of value. Our intention in this article will be to clarify this aspect of the ques­tion and thus to correct the perspective that one gets from reading Rosenberg's book. In conformity with this objective, our article cannot undertake a detailed

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analysis of individual questions but instead provides a general outline of the methodological foundations of Marxist economic theory and a general charac­terisation of his theory of value. We then turn to a comparison of the theories of Ricardo and Marx in which we touch upon our points of disagreement with Rosenberg’s presentation.

2 Methodological Foundations of Marx’s Economic Theory

In conceptual terms, Marx’s economic theory is closely related to his sociolo­gical theory, the theory of historical materialism. Years ago Hilferding noted that the theory of historical materialism and the theory of labour value have a common starting point, namely, labour ‘in its importance as the element that constitutes human society and whose development determines, in the last instance, social development’.^[1016] We can study the labour activity of people, joined together in a society, from two different perspectives: either as the aggregate of means of production and technical devices, with whose assistance man overcomes nature and produces the products he requires, or as the sum total of social relations that connect people in the process of production. Hence the difference between the technical and the economic - between the material- technical process of production and its social form, between the productive forces and the social relations of production among people. Both the theory of historical materialism and Marx’s economic theory revolve around one and the same basic question of the relationship between the productive forces and the production relations among people. The subject of investigation is the same in both cases: the change of production relations among people in accordance with development of the productive forces. The adjustment of people’s produc­tion relations to development of the productive forces - a process that occurs in the form of a gradually increasing contradiction between them, which in turn brings cataclysms - represents the basic theme of the theory of historical materialism. Taking the same general methodological approach to commodity­capitalist society, we come to Marx’s economic theory. It investigates the pro­duction relations among people in capitalist society, the process of their adapt­ation to the given level of development of the productive forces, and growth of the contradiction between them, which is expressed, among other things, in crises.

Thus political economy does not study the labour process as such, in terms of its material-technical aspect, but rather the socialforms of labour organisation in capitalist society. Marx's economic theory includes the technique of pro­duction, or the productive forces, in the investigation - and the same holds for the theory of historical materialism - only as the precondition or starting point, and they are invoked only insofar as they are needed in order to explain the actual subject being studied, namely, the production relations between people. Marx's consistent distinction between the production process as such and its social form provides him with the key for understanding the entire eco­nomic system. It immediately determines the method of political economy as a social and historical science. In the diverse and multifaceted chaos of economic life, which involves ‘socially combined and scientifically arranged' processes of production,^{[1017] [1018] [1019] it immediately directs our attention precisely to the ‘social com­binations' of people in the process of production, to their production relations, for which the technique of production serves as the precondition or the basis. Political economy is a science not of the relations of things to things, as vulgar economists have supposed, or of the relations of people to things, as the theory of marginal utility claims, but of the relations of people to people in the process of production.}

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Investigating the production relations among people in commodity-capi­talist society, political economy presupposes a specific social form of economy and a specific type of society. We cannot properly understand a single com­ment in Marx's Capital unless we keep in mind that it concerns phenomena occurring within a specific society. ‘Just as in any historical social science, so with regard to economic categories it is always necessary to remember that both in reality and in the mind there is a given subject, in this case contem­porary bourgeois society, and that the categories therefore express forms of being, conditions of existence - and often only separate aspects - of this spe­cific society, of this subject'd³ ‘In the theoretical method of political economy the subject, that is, society, must always be envisaged as the presupposition'?⁴ Beginning with a specific sociological presupposition, namely, with a definite social structure of the economy, political economy must above all provide us with a characterisation of this form of economy and its attendant production relations between people. Marx gives us such a general characterisation in his ‘theory of commodity fetishism', which is best understood as a general theory of the production relations of commodity-capitalist society. Once we have famili­arised ourselves in this chapter with the general character of these production relations, we shall deal in the following chapter with one of these relations, namely, the relation between commodity producers, which is investigated by the theory of value.

Turning to analysis of commodity-capitalist society, we must regard it first of all as a commodity economy consisting of a multitude of separate private undertakings, organised and directed by separate commodity producers on the basis of private property right. The general structure of commodity eco­nomy displays the following basic attributes: 1) the individual cells of the eco­nomy, that is, the separate private enterprises, are formally independent of each other; 2) they are materially connected with each other as a result of the social division of labour, in terms of which they are complementary; and 3) a dir­ect link between individual commodity producers is established only through exchange, which also indirectly influences their productive activity. Within his own enterprise, each commodity producer can freely decide to produce any product with the use of any suitable means of production. But when he takes the finished product of his labour to market for the purpose of exchange, he is not free to establish the exchange proportions but must comply with condi­tions in the market (the conjuncture) that are the same for all producers of the given product. The producer’s dependence upon the market means depend­ence of his productive activity upon the productive activity of all other mem­bers of society. If cloth makers have sent too much cloth to market, then Ivanov, a cloth maker who has not increased his production, nonetheless suffers from a fall in cloth prices and is compelled to curtail his production. If other cloth makers have adopted improved means of production (machines, for example), our cloth maker must likewise improve his production technology. In terms of the pattern, scale and methods of production, an individual commodity pro­ducer, who is formally independent from the others, is in fact closely tied up with them through the market, through exchange. Individual commodity pro­ducers, who are not linked with one another through social relations in the actual production process, are connected through exchange, through the pro­duction relation of buying and selling, through the movement of things. The labour activities of people are connected through the products of labour, and people are connected by things. The exchange of things affects the labour activ­ities of people, and without exchange the very process of capitalist production is impossible. ‘[T]he capitalist production process, taken as a whole, is a unity of the production and circulation processes’.^[1020]

This role of exchange, as a necessary moment of the production process itself, results from the unorganised character or so-called ‘anarchy’ of capitalist production. In a socialist society, exchange in its contemporary form would be redundant. Social organs would determine in advance the specific production relations between people that are needed for a proper and steady course of the material-technical production process. Consumer goods and means of produc­tion would move from one person to another not on the basis of exchange, or through buying and selling, but in a pattern that is predetermined by society and meets the requirements of the technical production process.

In capitalist society we have an example of organised production relations in the organisation of labour within the enterprise (the technical division of labour), compared with the unorganised distribution of labour between the separate private enterprises (the social division of labour). Suppose that one employer owns a large textile factory that includes divisions for spinning, weav­ing and dyeing. The engineers, workers and employees are assigned in advance between these divisions according to a definite plan. They are linked together beforehand by definite and permanent production relations that correspond to requirements of the technical process of production. And that is precisely why, within the process of production, things move from one person to another according to the position of these people in production and the production relations between them. Having received yarn from the mill and worked it up into cloth, the director of the cloth division does not send the fabric back to the director of the spinning mill as an equivalent (replacement) for the yarn he previously received. He sends it on to the dyeing department, because the permanent production relations that are established between workers of the weaving mill and those of the dyeing department predetermine the movement of things, the product of labour, from the people employed in the previous phase of production (weaving) to those employed at the next stage (dyeing). The production relations between people are organised in advance for the purpose of the material production of things, but not by way of the things. On the other hand, the thing moves in the production process from some people to others on the basis of the production relations that exist between them, but its movement does not create the production relations. The produc­tion relations between people have an exclusively social character, while the movement of things has a purely technical character. Both of these aspects are consciously adjusted to each other beforehand but retain a different charac­ter.

The case is quite different if spinning, weaving and dyeing belong to three different entrepreneurs, A, B and c. Here A does not transfer the yarn he has produced to B solely on the basis that B can rework it into cloth, that is, give it a form useful to society. That is not his business; generally speaking, he has no desire simply to deliver his yarn but rather to sell it, that is, to transfer it to the sort of person who will give him a corresponding sum of money in exchange, or else some other thing of equal value, an equivalent. Who this person might be is a matter of indifference to him. Not being connected with anyone else by permanent social production relations, A enters into the production relation of buying and selling with anyone who has a definite thing, an equivalent sum of money, and who is willing to give it to him in exchange for the yarn. This production relation is confined to the movement of things, namely, by the yarn going from A to the buyer and by the money going from the buyer to A. Thus, the production relations between commodity owners do not exist in advance but are established in the act of purchase and sale, by means of the transfer of things from one person to another; they have, therefore, not only a social character but also one of things. On the other hand, the thing moves from one person to another not on the basis of production relations previously existing between them but through purchase and sale, which is limited to the transfer of this thing. The transfer of things establishes the production relations between people and has not only technical but also social significance.

As we see, the basic production relation between people in a commodity society, namely, purchase and sale, is distinguished from production relations of an organised type by the following peculiarities: 1) it is established volun­tarily, depending upon how advantageous it is to the participants, so that the social connection takes the form of a private transaction; 2) it links the parti­cipants for a brief interval without creating any permanent production rela­tions between them, yet these brief and interrupted deals of purchase and sale, taken together, must secure the permanence and continuity of the social process of production; 3) it links people at the moment when transfer of a thing occurs between them and is limited to this transfer, so that the relation between people takes the form of an equalisation of things. The establishment of production relations between people does not precede the transfer of things but rather coincides with it. ‘The exchange of commodities is the process in which the social exchange of things, i.e., the exchange of particular products of private individuals, involves simultaneous establishment (Erzeugung) of def­inite social production relations, into which individuals enter through this exchange of things’.^[1021] To put it differently, exchange, or the act of purchase and sale, combines within itself social-economic moments (relations between people) and material-objective moments (the movement of things in the pro­cess of production) that are inseparable. In commodity-capitalist society these two moments are not organised and coordinated in advance, and that is pre­cisely why each separate act of exchange can be accomplished only as a result of the joint and simultaneous occurrence of both of these moments, each of which entails the other. The transfer of things is not possible without the spe­cial production relation of purchase and sale being established between their owners. And conversely, people enter into relations with each other not as members of a society, in which they occupy a definite place in the social process of production, but merely as the owners of things.

If any given person enters into production relations with other people merely as the owner of a certain thing, it follows that the thing in question, no matter to whom it belongs, gives its owner the possibility of assuming a def­inite place in the system of production relations. Insofar as possession of the thing is the condition for establishing production relations between people, it appears that the thing itself possesses the ability, the property, of establishing production relations. If owners of commodities associate through the exchange of things, and if the given thing enables its owner to enter into an exchange rela­tion with other commodity owners, then the thing itself acquires the special property of being exchangeable - it has ‘value’. If the given thing links together two commodity owners, one of whom is a capitalist and the other a worker, then it is not merely a ‘value’ but also a ‘capital’. If the capitalist enters into a production relation with a landowner, then the value or the money that he transfers to the landowner, and through which he enters into a production rela­tion with him, represents ‘rent’. The money paid by an industrial capitalist to a financial capitalist for the use of capital borrowed from him is termed ‘interest’. Every type of production relation between people attributes to the things, through which people enter into a production link, a special ‘socialproperty’, a ‘social (eco­nomic) form’. A particular thing, besides being a use-value, or a material thing with definite properties that qualify it to be an item of consumption or a means of production - that is, to fulfil a technical function in the process of material production - also fulfils the socialfunction of linking people together. People establish their mutual production relations through the medium of things. The things, therefore, become the ‘mediators’, the ‘bearers’ of social relations between people. The relations between people are expressed in these social properties acquired by things; they become ‘reified’.^[1022]

Thus, people in commodity-capitalist society enter into social production relations exclusively as commodity owners, as owners of things, while the things, conversely, thereby acquire special social properties, a special social form. In place of ‘direct social relations between persons and their work’, which are established in societies with an organised economy, here we find ‘mater­ial [dinglich] relations between persons and social relations between things’.^{[1023] [1024]} These two particular characteristics of commodity society - ‘personification of things and reification of the relations of production⁴⁹ - are essentially but two sides of one and the same phenomenon that we have described above: the intimate connection and ‘direct coalescence’ between the process of establish­ing production relations between people and the movement of things in the process of material production. This ‘coalescence’ of the technical and social moments of production is regarded by everyday thought, and also by ‘vulgar economists’, as their identity, and thus the errors arise that Marx disclosed in his theory of commodity fetishism. The errors of bourgeois economists are two­fold: 1) either they derive social from technical phenomena, attributing definite social properties (value, money, capital etc.) to things as such, as elements of technical production (for instance, by deriving the property of capital from the technical functions of means of production); or else 2) they derive technical from social phenomena (for instance, they assign to capital - i.e. to the social form that capitalist society imposes upon the instruments of labour - the capa­city of means of production to raise labour productivity, which is their technical function). Both of these errors, which at first sight appear to be opposite in char­acter, involve one and the same basic methodological defect: identification of the material process of production with its social form, of technique with eco­nomics, and of the technical with the social functions of things. This defect was eliminated by Marx’s new sociological method.

As we have seen, Marx’s method involves consistently distinguishing be­tween productive forces and production relations, between the material pro­cess of production and its social form. Political economy investigates the labour activity of people not in terms of its technical devices and instruments of labour but with regard to its social form. It studies the production relations established between people in the process of production. But since people in commodity-capitalist society are connected by production relations through the transfer of things, it follows that the production relations among people take on a reified^[1025] character. This ‘reification’^[1026] consists of the fact that the thing, with respect to which people enter into a certain relation between themselves, fulfils a special socialfunction of linking people together, the function of medi­ator or ‘bearer’ of the particular production relation between people. In addi­tion to its material or technical existence as a concrete item of consumption or means of production, the thing acquires, as it were, a social or functional exist­ence, that is, a special social property (value, money, capital, etc.) that expresses the given production relation between people and gives to the thing a special socialform, a ‘determination of form’ (Formbestimmtheit). Thus the basic con­cepts or categories of political economy express fundamental social-economic forms that characterise the different types of production relations between people and are communicated by the things through which, or involving which, these relations between people are established.

Turning to investigation of the ‘economic structure of society’, or the ‘totality of these relations of production’ between people (see the preface to A Contribu­tion to the Critique of Political Economy^), Marx distinguishes the specific forms or types of production relations^{[1027] [1028] between people in capitalist society. The order in which Marx studies them is established as follows. Certain of these rela­tions between people presuppose the presence of other types of production relations between members of the given society, while the latter relations do not presuppose the necessary existence of the former and are thus their pre­condition. For instance, the relation between the money capitalist c and the industrial capitalist B, expressed in the latter receiving a sum of money from the former, already presupposes production relations between the industrial capitalist B and the worker A (or, to be more accurate, many workers). On the other hand, the relation between the industrial capitalist and the worker does not entail the need for the former to receive money on loan from capitalist c. Hence, it is understandable that the economic categories ‘capital’ and ‘sur­plus value’ precede the categories of ‘loan capital’ and ‘interest’. Furthermore, the relation between the industrial capitalist and the worker has the form of purchase and sale of labour power, and it additionally presupposes that the [capitalist] produces a commodity for sale, i.e. is linked to other members of society by production relations of commodity owner to commodity owner. The relation between commodity owners, i.e. of purchase and sale, does not pre­suppose a necessary production link between industrial capitalist and worker. It is understandable, therefore, that the category of ‘commodity’ or ‘value’ pre­cedes the category of ‘capital’. The logical order of economic categories issues from the character of the production relations they express. Marx’s economic system investigates a series of increasingly complex types of production relations between people, expressed in a series of increasingly complex socialforms that are assumed by things. Through all the economic categories, we can follow this link between a given type of production relations among people and the cor­responding social function or social form of things.}

The fundamental production relation between people, as commodity own­ers exchanging the products of their labour, gives to [their products] the unique property of being exchangeable in the special ‘form of value’, as if it were inher­ent in their nature. Regular exchange relations between people, as a result of which the social activity of commodity owners singles out one commod­ity (gold, for instance) as a universal equivalent that can be exchanged dir­ectly for any other commodity, give to this particular commodity the special function of money, or the ‘money form’. This money form, in turn, represents several different functions or forms depending on the character of the produc­tion relations between buyers and sellers. If transfer of the commodity from seller to buyer and the reverse transfer of money occur simultaneously, then money fulfils the function or takes the form of ‘means of circulation’. If transfer of the commodity precedes the transfer of money, and the relation between seller and buyer turns into the relation between creditor and borrower, then money acquires the function or form of ‘means of payment’. If the seller holds on to the money that he receives through sale, postponing the moment of his entry into a new production relation as buyer, then money acquires the func­tion or form of a ‘hoard’. Each social function or form of money expresses a different character or type of production relations between the exchanging parties.

With the appearance of a new type of production relations, namely capitalist ones, that link the commodity-owning capitalist with the commodity-owning worker, the money, whose transfer between them establishes the production relation, acquires the new social function or form of ‘capital’. More precisely, the money, which directly links the capitalist with the worker, fulfils the func­tion or has the form of ‘variable capital’. But, to establish production relations with workers, the capitalist must also possess means of production, or money that indirectly serves the establishment of production relations between cap­italist and workers and has the function or form of ‘constant capital’. Insofar as we are considering production relations between the class of capitalists and the class of workers in the process of production, we are dealing with ‘product­ive capital' or ‘capital in the phase of production'. But before production can begin, the capitalist has entered the market as buyer of means of production and labour power. To this production relation, between the capitalist as buyer and the other commodity owners, corresponds the function or form of ‘money capital'. At the conclusion of production the capitalist emerges as seller of his commodity, which finds expression in the function or form of ‘commodity cap­ital'. Thus the metamorphosis, or ‘transformation' of capital's form, reflects the different forms of production relations between people.

But we have still not exhausted the production relations linking the indus­trial capitalist with other members of society. In the first place, through com­petition between capitals and their transfer from one branch to another, the industrial capitalists of one branch are linked to all other industrial capital­ists, and this link is expressed in the formation of a ‘general average rate of profit' and the sale of commodities at ‘prices of production'. Moreover, the class of capitalists is itself divided into several social groups or sub-classes: industrial, merchant and money (or financial) capitalists. Together with these groups, representing the aggregate class of capitalists, there is also the class of landowners. The production relations between these various social groups create new social-economic ‘forms': merchant capital and commercial profit, loan capital and interest, along with rent. Capital ‘steps as it were from its internal organic life into its external relations, relations where it is not capital and labour that confront one another, but on the one hand capital and cap­ital, and on the other hand individuals as simple buyers and sellers’.^[1029] Here the issue concerns different types of production relations: 1) between capitalists and workers; 2) between capitalists and other members of society, who appear in the role of buyers and sellers; 3) between separate groups of industrial capit­alists and also between the industrial capitalists as a whole and other capitalist groups, i.e. merchant and money capitalists (including the relation between capitalists and landowners). The first type of production relations, represent­ing the basis of capitalist society, is studied by Marx in Volume I of Capital, the second type in Volume ii, and the third type in Volume iii. As for the funda­mental production relation of commodity society, the relation between people as commodity producers, Marx provides this analysis in the Critique of Political Economy and repeats it in the first section of Volume I of Capital under the heading ‘Commodities and Money', which represents, as it were, the introduc­tion to Capital.^[1030] Marx’s system investigates a series of increasingly complex types of production relations between people, to which corresponds a series of increasingly complex economic forms.

Thus the basic categories of political economy express different types of pro­duction relations that take on the form of things. Values are only ‘relations of men in their productive activity’^[1031] that are expressed in things. Capital is a social relation expressed ‘between things and as things’?^[1032] Since production relations connect people in commodity society only through things, the latter fulfil a special social function. If economic categories express the production relations between people, we can say with equal justification that they express different socialfunctions that are fulfilled by things as the ‘bearers’ of different production relations. From this point of view, value, money, capital, constant and variable capital, fixed and circulating, etc. represent different social func­tions. ‘What is at issue here is not a set of definitions (of fixed and circulating capital - I.R.), under which things are to be subsumed. It is rather definite Junc­tions that are expressed in specific categories’^[1033] ‘The property of being capital cannot be attributed to things as such... but is rather a function with which they are or are not endowed according to the given conditions’?^[1034]

We can see that the categories of political economy express different social functions of things that correspond to the different production relations of people. But, as Marx says, the social function performed by a thing gives it a particular social character, a definite social form or ‘determination of form’ (Formbestimmtheit). In the preface to the first edition of Volume I of Capital, Marx speaks of the difficulties ‘in the analysis of economic forms’ in general, and particularly of the ‘value-form’ and the ‘money-form’.^[1035] The formation of money represents a new ‘determinate form’^{[1036] [1037] [1038] The different functions of money are at the same time various ‘determinate forms’.32 Capital is ‘the social form which the means of reproduction assume on the basis ofwage-labour’,33 a specific ‘social determination’.[1039] Marx’s system analyses a series of increasingly complex economic forms or ‘determinations of form’ (Formbestimmtheiten) that corres­pond to a series of increasingly complex production relations between people. These forms or functions have a social character since they inhere not in things as such, but in things that are part of a definite social context, things through which, or relative to which, people enter into certain production relations between themselves. These forms do not reflect the properties of things but the properties of the social context.}

Sometimes Marx speaks simply of ‘form’, or ‘determinate form’, but he fre­quently uses the following expressions: social form, economic form, historical- social form, social determination of form, economic determination of form, or historical-social determination. Sometimes Marx speaks of things acquiring ‘social existence’, ‘functional existence’, ‘formal existence’ or ‘ideal existence’, all of which contrast with their ‘material’, ‘objective’, ‘immediate’ or ‘actual’ exist­ence. In the same sense, the social form or function contrasts with ‘material content’, ‘material substance’, ‘content’, ‘substance’, ‘elements of production’, material and objective elements and conditions of production. All of these expressions, which convey the difference between the technical and social functions of things, between the technical role of instruments and conditions of labour and their social form, essentially point to the fundamental difference that we established previously.

At issue is the fundamental distinction between the process of material pro­duction and its social form, or the two aspects, technical and social, of one and the same labour activity on the part of people. Political economy studies the production relations between people, i.e. the social forms of the produc­tion process as distinct from its material-technical ‘content’ or ‘substance’. Of course, the production relations between people emerge on the basis of a cer­tain condition of the productive forces, and the economic categories presup­pose definite technical conditions. But the latter appear in political economy not as conditions for the process of production, viewed in technical terms, but rather as preconditions of the determinate social-economic forms that the production process assumes. The subject of investigation for political eco­nomy involves these ‘economic forms’, or types of production relations between people that have taken on the form of social functions and the social forms of things.

3 Marx’s Theory of Value

We can see that all the basic concepts of political economy express reified^[1040] production relations between people. If we come to the theory of value from this perspective, we face the task of showing that value expresses 1) a social relation between people that 2) has taken the form of things and 3) is connected with the process of production.

At first sight value, as with the other categories of political economy, appears to us as the attribute of a thing. Observing the phenomena of value, we see that every thing in the market exchanges for a certain quantity of every other thing or - in conditions of developed exchange - for a certain sum of money (gold) with which one can purchase any other thing in the market (of course, within the limits of the given sum of money). That sum of money, or the price, changes almost daily, depending upon the conjuncture in the market. Today there is a shortage of cloth in the market and its price rises to 3 roubles 20 kopeks per yard. A week later the cloth offered in the market exceeds the normal supply, and the price falls to 2 roubles 75 kopeks per yard. These daily changes and fluctuations of price, taken over a more or less prolonged period, move about a certain average level, an average price that is equal, for example, to 3 roubles per yard. In capitalist society this average price is proportional not to the labour-value of the product, that is, to the quantity of labour needed for its production, but to the so-called ‘price of production’, which equals the sum of the costs of production for a given product plus the average profit on the capital invested.

To simplify the analysis, however, we shall now abstract from the fact that the cloth is producedby a capitalist with the use of hired labour. Indeed, Marx’s entire method, as we have seen, consists of singling out for investigation partic­ular types of production relations that provide a picture of capitalist economy only in the aggregate. For now we shall analyse only a single fundamental type of production relations between people in commodity society, namely, the relation between them as individual commodity producers who are form­ally independent of each other. All we know is that the cloth is produced by commodity producers and brought to market for exchange or sale to other com­modity producers. We have before us a society of commodity producers, or a so-called ‘simple commodity economy’ as distinct from a more complex capit­alist one. In the conditions of a simple commodity economy, the average prices for the products of labour, which are proportional to their labour-value, repres­ent the average level about which market prices fluctuate and with which they would correspond in the event that social labour was proportionally distrib­uted between the different branches of production and, as a result, a condition of equilibrium was established between them.

Every society that is based upon division of labour necessarily presupposes a certain distribution of social labour among the different branches of produc­tion. Every system of division of labour is, at the same time, a system of labour distribution. In primitive communist society, in the patriarchal peasant family or in socialist society, the labour of all members of a given economic unit is consciously allocated in advance between particular kinds of tasks, depend­ing upon the character of the needs of members of the group and upon the level of labour productivity. In commodity economy there is no one to regu­late the distribution of labour between individual branches of production and the separate enterprises. Not a single cloth-maker knows in advance how much cloth society requires at a particular moment or how much is being produced at the same time in all the cloth-producing enterprises. Consequently, cloth pro­duction at one time outpaces demand (overproduction) and at another time lags behind it (underproduction). In other words, the quantity of social labour expended on cloth production turns out first to be excessive and then to be insufficient. The equilibrium between the cloth industry and other branches of production is gradually disrupted. A commodity economy is a system of con­tinuously disrupted equilibrium.

But if that is the case, how does it continue to exist as an aggregate of different branches of production that complement each other? Commodity economy can only exist because every disruption of equilibrium calls forth a tendency towards its restoration. This tendency to restore equilibrium is inher­ent in the very mechanism of the market and market prices. In commodity society not a single commodity producer directs another either to expand or to curtail production. But, through their activity in relation to things, people influ­ence the labour activity of others - without knowing that they are doing so - and motivate them to expand or curtail production. Overproduction of cloth and the resulting fall in prices below value induce cloth-makers to curtail pro­duction, and the reverse occurs in the case of underproduction. The deviation of market prices from value represents the mechanism through which over­production and underproduction are overcome, creating a tendency towards re-establishment of equilibrium between a given branch of production and the other branches of the economy.

Thus, the exchange of two different commodities according to their value cor­responds to a condition of equilibrium between these two branches of production, in which case all movement of labour from one branch into the other ceases. But it is obvious, in that event, that the exchange of two commodities accord­ing to their value equalises the benefits that commodity producers derive from production in the two branches and eliminates any motive for moving from one branch to the other. In simple commodity economy such equalisation of the conditions of production in the various branches signifies that some def­inite quantity of labour, expended by producers in the different spheres of the economy, furnishes a product of equal value. The values of commodities on the market are directly proportional to the quantities of labour requiredfor pro­duction. If, given the current state of technique, production of a yard of cloth requires on average 3 hours of labour (including also the labour expended on material, means of production, and so forth), while production of a pair of shoes requires 9 hours of labour - assuming that the labour of cloth-makers and shoe-makers is equally skilled - then the exchange of three yards of cloth for one pair of shoes corresponds to a condition of equilibrium between cloth and shoe production.

But if value is determined by the quantity of labour that is socially neces­sary to produce one unit of the commodity, this quantity of labour depends in turn on labour productivity. The development of labour productivity reduces the socially necessary labour-time and lowers the value of a unit of the com­modity. Introduction of machines, for example, makes it possible to produce a pair of shoes in 6 hours instead of the former 9 and thus lowers their value from 9 roubles to 6 roubles (an hour of labour in shoe-making being understood to create, on average, 1 rouble’s worth of value). The cheaper shoes begin to penet­rate into the countryside, squeezing out bast sandals and homemade footwear. The demand for shoes grows, and shoe production expands. A certain realloc­ation of productive forces occurs in the economy. Thus development of labour productivity brings about a change in value of the products of labour; and the change of value, in turn, affects the distribution of social labour between the various branches of production. From labour productivity, to labour value, to the distribution of social labour: such is the scheme of a commodity eco­nomy in which value plays the role of regulator, establishing equilibrium - amongst all the constant deviations and fluctuations - in the distribution of social labour between the various branches of the economy. The law of value is the law of equilibrium in commodity society.

The theory of value investigates the laws of exchange, equating things in the market only insofar as they are connected with the laws of production and labour distribution in a commodity economy. Every exchange proportion involving two commodities - meaning average proportions, not fortuitous market prices - corresponds to a certain state of productivity and labour distribution between the branches that produce those commodities. Through the equalisation of things, as products of labour, the market equalises different concrete types of labour as components of the aggregate social labour that is distributed between various branches. The common understanding of the theory of value, as a theory limited to investigation of the exchange relations between things, is therefore mistaken. Through the law-governed equalisation of things, it endeavours to disclose the laws of labour equilibrium. However, the view that Marx's theory studies the relation of labour to the thing, as the product of labour, is also incorrect. The relation of labour to the thing involves a particular concrete type of labour and a particular concrete thing; this is a technical relation, which, in itself, is of no interest to the theory of value. The subject matter of the latter is the relation between various types of labour in the process of its distribution, which is established through the exchange relations between things as the products of labour. Thus the Marxist theory of value fully satisfies the previously mentioned general methodological demands of Marxist economic theory, which studies neither the relation between things nor the relation of people to things, but rather the relation between people who are connected by way of things.

We have now set out the general movement of ideas leading to Marx's theory of value. According to the critics, on the very first pages of Capital Marx begins his discussion with the fact of equality between two commodities in exchange and asserts that equalisation of things on the market is impossible without equality of the labour expenditures required for their production. This view of Marxist theory is fundamentally incorrect. Marx takes commodity society as his starting point, with all of its characteristic production relations between individual commodity producers. Due to the anarchy of production, changes in the productivity and distribution of various types of labour cannot become manifest in any other way except as changes of the exchange proportions of commodities on the market. Changes in the labour activity of people necessar­ily take the form of changes in the value of commodities. This law of ‘labour­value' represents the distinguishing feature of a commodity economy.

Let us imagine a society with a regulated equalisation and distribution of labour, in which individual members have the right to exchange products and, for one reason or another, do practise such exchange. This exchange represents a social phenomenon of a completely different order from the exchange that occurs in commodity economy. In the latter, the exchange is part of the very process of reproduction, whereas exchange in the former takes place alongside of production and is not part of it. It neither regulates the distribution of labour nor is it regulated in turn by the law of ‘labour value'. If it happens that some regular pattern of exchange also occurs in this society, it will nevertheless not be a pattern connected with law-governed distribution of social labour. As we see, the law of labour value does not result from the exchange and equalisation of things as such, but ratherfrom the peculiar socialfunction of this exchange in commodity production, from the peculiar social form of the economy.

This brings us to the socialform of value. In commodity economy value fulfils the role of regulator in the distribution of social labour. Does this role of value result from the technical or the social specificities of commodity economy, i.e. from the condition of its productive forces or from its intrinsic production rela­tions between people? It is enough simply to pose the question in order to answer it in the latter sense. It is not every distribution of social labour that imparts to the product of labour the value form, but only such labour distribu­tion that, instead of being directly controlled by society, is regulated indirectly through the market and the exchange of things. In a primitive communist com­munity or a feudal village, the product of labour is ‘valuable’ in the sense of usefulness, or use-value,^{[1041] [1042] but it does not have ‘value’. It acquires the latter only in conditions where it is produced especially for sale and acquires in the market an objective and precisely determined ‘valuation’37 that equalises it, through money, with all other commodities and gives it the ability to be exchanged for any other commodity. In other words, a definite form of economy (commod­ity economy) is presupposed along with a definite form of labour organisation in the form of separate, privately owned enterprises. It is not labour as such, but only labour organised in a particular social form (the form of commodity economy) that imparts ‘value’ to the product of labour. If the relation between the producers is one of mutual independence as autonomous commodity pro­ducers, then the products of their labour confront each other in the market as ‘values’. The formal equality of commodity producers, as economic sub­jects and counterparts in the production relation of purchase and sale, finds its expression in equality of the products of labour as values. The value of things reflects a determinate type of production relations between people.}

If the product of labour acquires value only within a particular social form of labour organisation, it follows that value is not a ‘property’ of the product of labour but a determinate ‘socialform’ or ‘socialfunction’, which the product of labourfulfils as a connecting link between scattered commodity producers, as an ‘intermediary’ or ‘bearer’ of the production relations between them. At first sight, of course, value does appear simply to be one of the properties of the thing. When we say that ‘a table is made of oak, that it is round, finished, and costs or has a value of 25 roubles’, it may appear that this sentence imparts information concerning four properties of the table. But if we think further, we realise that the first three properties of the table are quite different from the fourth. They characterise the table as a material thing. Insofar as the table is a product of human labour, these properties represent the result of con­crete labour by the wood-worker; they give us certain information about the technical aspect of wood-working labour. A person familiar with these prop­erties of the table creates a picture of the technical aspect of production and acquires an idea of the material, the auxiliary items, the technical devices and even the technical skill of the wood-worker. But, however long he contemplates the table, he knows nothing of the social relations of production between the person who produced the table and other people. He does not know whether the producer is an independent artisan, a handicraftsman, a wage-worker, per­haps a member of a socialist commune or simply a person fond of tables who made it for himself.

The properties of a product of labour, when expressed by saying ‘the table has a value of 25 roubles', are of a completely different order. This expression indicates that the table is a commodity, that it is produced for the market, that the person who produced it is connected with other members of society through the production relations of commodity owners, and that the economy has a specific social form, namely, the form of commodity economy. We learn nothing about the technical side of production or the thing itself, only about the social form of production and the people participating in it. This means that ‘value' characterises not the thing but the human society in which it is produced. This is not a property of the thing but a ‘social form' that the thing acquires due to the fact that through it people enter into definite production relations with one another. Value is ‘a social relation regarded as a thing', a production relation between people that has assumed the form of a property belonging to the thing. The labour relations of commodity producers, or social labour, is ‘reified'^{[1043] [1044] or ‘crystallised' in the value of the products of labour. This means that a determinate social form of labour organisation imparts a special socialform to the products of labour. The Marxist theory of value does not study the relation between labour as a technical activity and the product of labour as a material thing, but rather the relation between the social form of labour and the social form of the products of labour. ‘The labour that creates (or more accurately, determines, setzende) exchange-value is a specific socialform oflabowj.39 It creates a ‘specific socialform of wealth, exchange-value'.[1045]}

Marx's teaching on the ‘form of value’ (i.e. the social form taken by the product of labour) is the result of a particular social form of labour itself and represents Marx’s new and unique contribution to the theory of labour value. The proposition that labour creates value was known long before Marx, but in Marx’s theory it acquires a completely different meaning. Marx drew a precise distinction between the material-technical process of production and its social form, between labour as an aggregation of technicalfunctions (concrete labour) and labour viewed in terms of its socialform in commodity-capitalist society (abstract labour or universal labour). The specificity of commodity economy consists of the fact that the material-technical process of production is not organised by society and is undertaken by separate commodity producers. Concrete labour is simultaneously the private labour of separate individuals. The private labour of the individual commodity producer is connected with the labour of all other commodity produces and becomes social labour only insofar as its product is equated with all other commodities in the market. As we have seen, this market equalisation of all commodities, expressed through the valuation of them all in terms of one and the same commodity, gold (or money), simultaneously signifies the equalisation of all the concrete types of labour expended in the different spheres of the economy. This means that the private labour of a separate individual assumes the character of social labour not in the process of production itself but in the act of exchange, which represents an abstraction from the concrete specificities of particular things and particular types of labour. The equalisation of all types of labour through market equalisation of all the products of labour as values - this is what Marx means by the concept of abstract labour. And since the equalisation of labour through the equalisation of things results from the social form of commodity economy, in which there is no direct social organisation and equalisation of labour, it follows that abstract labour is a social and historical concept. Abstract labour does not express a physiological equality of the various types of labour, but rather the social equalisation of various types of labour that occurs in the specific form of market equalisation of the products of labour as values.

The uniqueness of the Marxist theory of value resides in the fact that it clarified precisely what labour creates value. ‘Marx... investigated labour from the point of view of its value-creating quality, and established for the first time what labour, why, how it formed value, and that value in general is nothing more than congealed labour of this kind’.^[1046] It is precisely in the ‘dual character of labour’ that Marx saw the central element of his theory of value^[1047]

Thus, the dual character of labour reflects the difference between the material-technical process of production and its social form. This difference, which we explained in the previous chapter, is the basis of the whole of Marxist economic theory, including the theory of value. From this fundamental dis­tinction follows the difference between concrete and abstract labour, which in turn is reflected in the contradiction between use-value and exchange-value. In the first chapter of Capital, Marx's exposition moves in the reverse direction. He begins his analysis with market phenomena that are susceptible to obser­vation, with the contradiction between use-value and exchange-value. From this contradiction, which can be discerned on the surface of phenomena, he probes more deeply into the dual character of labour as concrete and abstract - in order at the end of the first chapter, in the section on ‘commodity fetish­ism', to reveal the social forms assumed by the material-technical process of production. Marx moves from things, through labour, to human society; from phenomena that are visibly obvious to phenomena that must yet be revealed by scientific analysis. But the structure of Marx's argument is the reverse of his exposition in the first chapter of Capital. From the difference between the pro­cess of production and its social form - from the social structure of commodity economy - he turns to the dual character of labour, viewed in its technical and social aspects, and to the dual nature of the commodity as use-value and exchange-value. From a superficial reading of Capital it may appear that, in the contradiction between use-value and exchange-value, Marx sees different properties of the thing as such (that is how Bohm-Bawerk and a number of other critics have understood Marx). What is actually involved is the distinc­tion between the ‘material' and ‘functional' existence of the thing, between the product of labour and its social form, between the thing and the produc­tion relations of people that have ‘coalesced' with the thing, that is to say, that appear by way of the thing.

Thus we have a deep and inseparable connection between the Marxist the­ory of value and the general methodological foundations set out in his theory of commodity fetishism. Value is the production relation between autonom­ous commodity producers that has taken the form of a property of the thing and is connected with the distribution of social labour. Or, to regard the same phenomenon from the other perspective, value is the ability of every product of the labour of every commodity producer to exchange for products of the labour of any other commodity producer in a certain proportion that corres­ponds to the level of productivity and the proportional distribution of social labour. What is involved is a relation between people that has taken on the form of a property of things and is associated with the process of the distribution of labour in production - or, in other words, a reified production relation between people.^[1048] The reification^{[1049] [1050] of labour in value represents the most important conclusion from the theory of commodity fetishism, which explains the inevit­able ‘reification’45 of production relations between people in commodity eco­nomy. The theory of value does not affirm the material condensation of labour, as a factor of production, in things, as the products of labour - a phenomenon that occurs in all historical formations and represents the technical precondi­tion of value but is not its source - rather, it concerns the fetishised and reified expression4[1051] of the labour relations of people in the value of things. Labour is ‘crystallised’ or takes form in value in the sense that by taking on the social ‘form of value’ it thereby finds expression or ‘presents itself’ (sich darstellt). Marx uses the latter expression most frequently to characterise the relations between abstract labour and value. One cannot help but be surprised by the fact that Marx’s critics have failed to notice this inseparable connection between his theory of value and his teaching with regard to the reification4[1052] or fetishisa- tion of production relations between people, and that they have understood the Marxist theory of value in a mechanistic-naturalistic rather than a sociolo­gical sense.}

Thus the Marxist theory of value is built upon two essential foundations: 1) on the doctrine of the form of value as a reified expression^[1053] of social pro­duction relations between autonomous commodity producers; and 2) on the doctrine concerning the distribution of social labour and the dependence of the magnitude of value upon the development of labour productivity. These are two sides of one and the same process: the theory of value studies the social form of value that is assumed by the process of the distribution of labour in commodity-capitalist economy. ‘The form in which this proportional distri­bution of labour asserts itself in a state of society in which the interconnec­tion of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products’^[1054] Value, therefore, is connected simultaneously both with the social form of the social production process and with its material-technical labour content. And this is understandable if we recall that value, as in the case of all other economic categories, expresses not the relations between people in general but precisely the production relations between people. Labour is the ‘content’ or ‘substance’ of value - these expressions by Marx mean that the process of labour dis­tribution and the development of labour productivity in commodity society assume the social form of value. The mysterious ‘substance’ of value, which has provoked such attacks upon Marx by his critics, means nothing more nor less than the material-technical labour process that occurs within the given social form.^{[1055] [1056] [1057] Labour, as the ‘substance’ of value abstracted from its form, is simply the expenditure of labour with no regard to the social form of labour organisation; and labour in that sense is only the presupposition of the the­ory of value. The subject matter of the latter is labour expenditure expressed not directly in units of social labour but in the quantity of products received in exchange for the given commodity, i.e. labour expenditure that has taken the form of the value of the commodity. But, on the other hand, the social ‘form of value’ must be substantiated with a determinate material-technical labour content; the form of value, like all other ‘economic forms’ or ‘determinations of form’ (Formbestimmtheiten), is investigated by political economy precisely as the organising social form of the material-technical process of production.}

Insofar as Marx studies value as a social form of the product of labour, which is conditioned by a determinate social form of labour organisation, it is the qualitative, sociological aspect of value - abstract labour - that comes to the forefront. Insofar as the process of labour distribution and the development of labour productivity occur within the given social form, and the movement of the ‘quantitatively determined amounts of society’s aggregate labour’5¹ is subordinate to the ‘iron law of strictly defined proportions and relations’,5² it is the quantitative aspect of the phenomena of value or, if one may put it this way, the mathematical aspect (socially necessary labour) that takes on enormous significance. The fundamental error of the majority of Marx’s critics consists of the fact that 1) they have completely misunderstood the qualitative, sociological aspect of the Marxist theory of value, and 2) they have restricted themselves to the quantitative aspect, to the investigation of exchange proportions - that is, to quantitative relations between the values of things - while ignoring the quantitative relations of the masses of the social labour that is distributed between the separate branches of production and individual enterprises and is the basis [for quantitative relations of value].

4 Marx and Ricardo

Turning now to the question of the relation of the Marxist theory of value to Ricardo’s theory of value, we propose the following thesis: Marx was Ricardo’s successor in terms of his teaching on the content of value but not on the form of value. Marx found in Ricardo the teaching that changes in the magnitude of the value of commodities depend on changes in the productivity of labour, but he did not find there any understanding of the socialform of value as the reified expression^[1058] of social production relations between people. Marx’s unique sociological method entailed a change in the object of the investigation itself: from being a property of things, value becomes the social production relation between people that has taken the form of things.

We have seen that the basis of Marx’s doctrine concerning the form of value was the clearly defined difference between the material-technical process of production and its social form. Ricardo was unaware of this difference, with the result that the social form of value lay beyond his field of vision. Ricardo’s theory of value differed from Marx’s in that: 1) the material-technical process of production is not distinguished from its capitalist social form; 2) the result is lack of any clear understanding of the dual character of labour, regarded in terms of its technical aspect (concrete labour) or its social aspect (abstract labour); and 3) there is no understanding of the social form of value as the result of a definite social form of labour organisation. Let us consider each of these logically interconnected points in turn.

a) The Production Process and Its Social Form

Classical political economy, which pioneered freedom for industrial develop­ment, opposed the obsolete restrictions of feudal, guild and mercantilist ori­gin - on the grounds that they were irrational and artificial - in favour of the new capitalist form of industry as the rational and ‘natural order’. The capitalist system, which answered the need of the productive forces to develop, appeared to classical economists to be ‘as much a self-evident and nature-imposed neces­sity as productive labour itself’.^{[1059] [1060] [1061] [1062] They regarded the capitalist form of economy as ‘the eternal natural form of social production’.55 The social forms charac­terising a given social formation were transformed into ‘absolute forms’56 and ‘natural laws’ of production forms.57 Economic categories were transformed from being historical into being eternal, from being social into being natural. The economic laws resulting from a given social form of production were taken to be inherent in the material-technical process of production as such.}

Once the material process of production is inextricably merged and iden­tified with its social form, then, of course, any contradiction between them is impossible. ‘Ricardo regards bourgeois, or more precisely, capitalist produc­tion as the absolute form of production, whose specific forms of production relations can therefore never enter into contradiction with or enfetter’^[1063] pro­duction as such. These words from Marx affirm, in the best way possible, that the difference between the process of production and its social form repres­ents the common starting point both for the theory of historical materialism and for Marx’s economic theory. With Ricardo, the productive forces move together with the production relations, and thus contradiction between them is excluded.5^[1064] With Marx, the productive forces move within the given produc­tion relations, constantly running into their limitations and straining to break free of them.

b) The Dual Character of Labour

Identifying the process of production with its social form makes it impossible to draw any clear distinction between the technical and social aspects of produc­tion, or between concrete and abstract labour. Ricardo consistently put forth the idea that value is determined by labour. But precisely what labour or, more precisely, which aspect of labour - to this question he provides no answer. Ricardo never says that the thing becomes value not because it is a product of labour but because it is a product of labour organised in the social form of commodity economy. He lacks any clear understanding of the dual character of labour. ‘Classical political economy... nowhere distinguishes explicitly and with a clear awareness between labour as it appears in the value of the product, and the same labour as it appears in the product’s use-value’.^[1065] Ricardo ‘con­fuses’^[1066] these two aspects of labour. The result of this confusion of the technical and social aspects of labour is that the first aspect comes strikingly to the fore­front, and it is precisely the social form of labour organisation that is ignored. Ricardo ‘did not understand the specific form in which labour is an element of value, and failed in particular to grasp that the labour of the individual must present itself as abstract general labour and, in this form, as social labour’.^[1067]

Rosenberg does not once mention the absence in Ricardo of any clear concept of abstract labour - a point that Marx considered of paramount importance. After posing the question of ‘precisely what labour creates value’, Rosenberg looks at the difference between Ricardo and Marx in their teachings on socially necessary labour and productive labour.6^[1068] But this difference, des­pite its obvious importance, recedes into the background by comparison with the fundamental difference between concrete and abstract labour. Rosenberg’s only possible justification is the fact that the Marxist concept of abstract labour has generally been understood in a physiological sense. From this point of view, it really is difficult to discern a difference in principle between Ricardo’s under­standing of labour and Marx’s. After all, Ricardo also examined the labour that creates value from the quantitative side, and there is no doubt that he under­stood the general physiological unity of different types of labour. The concept of abstract labour in the physiological sense was known not only to Ricardo but also to [Benjamin] Franklin^[1069] But the concept of abstract labour as a special social form of labour organisation, in which the ‘qualitative unity or equality’65 of different types of labour is established through market equalisation of the products of labour, is unique to Marx’s theory of value and distinguishes it from the classics’ theory of value and especially from Ricardo’s.

c) The Form of Value

The consistent distinction that Marx draws between the process of produc­tion and its social form, between concrete and abstract labour, allowed him to develop the doctrine of the social ‘form of value’ that is assumed by the products of labour and expresses a definite type of social production relations between people as autonomous commodity producers. Marx’s new and ori­ginal contribution to the theory of labour value, when compared to Ricardo, is his teaching on the form of value. ‘It is one of the chief failings of classical political economy that it has never succeeded, by means of its analysis of com­modities, and in particular of their value, in discovering the form of value which in fact turns value into exchange-value’.66 An understanding of the value form is decisively important, for it is ‘the most universal form of the bourgeois mode of production' and stamps it as ‘a particular kind of social production of a his­torical and transitory character'.^{[1070] [1071] [1072] Without understanding the value form it is impossible to grasp the given social - namely, capitalist - form of economy and all of its characteristic economic forms: the money form, the form of cap­ital, and so forth. The ‘value form' means that in commodity society the labour expenditures of people take the form of value, as a property of the products of labour, and quantitative changes in labour expenditures take the form of quant­itative changes in the value of things. The production relations between people are ‘reified'.68 The teaching on the ‘form of value' reveals the true social nature of value, which is not a property of the thing but rather a reified expression*’9 of the production-labour relations between people.}

If labour expenditures take the form of the value of things, then the ‘form of value' represents the mediating link that connects the development of labour productivity with a change in the magnitude of value on the part of the prod­ucts of labour. Ignoring this mediating link, Ricardo directly connected the two antipodes, seeing in the alteration of exchange proportions between commod­ities a direct and natural consequence of the fact of the development of labour productivity, regarded in technical terms and independently of the social form of production. For this reason labour appears as a technical factor of produc­tion, and value appears as a property of the thing. From a social form that expresses the social connection between people, which is established through the medium of things, value was transformed into a property of the thing, which results from the technical connection between the product of labour and labour as a factor of production. Ricardo disclosed the technical fact of the development of labour productivity, which is the basis for changes in the magnitude of value, but he was not interested in the question of why this tech­nical fact assumes precisely the given social form of value. He reduced value to labour, as its technical ‘content' or ‘substance', but he did not clarify why labour takes on the social ‘form of value'.

The conclusion that we have come to appears paradoxical at first glance. In any event, it is sharply at odds with the opinion of most of Marx's critics, who claim that the fundamental difference between Ricardo and Marx is to be found precisely in the latter's teaching on labour as the ‘substance' of value. In their opinion, Ricardo established the causal dependence between changes in the magnitude of value on the part of commodities and changes in the quantity of labour required for their production, leaving aside the question of the nature or essence of value itself. Not being satisfied with a study of causal connections of the phenomena of value, Marx taught that labour not only determines but also is value, that it is the substance or essence of value. This metaphysical teaching by Marx on the substance of value represents, in [the critics’] view, Marx’s original contribution to the theory of value - and this novelty detracts from rather than improving upon Ricardo’s theory. This view on the part of Marx’s critics is explained by their mistaken impression that Marx sees in labour some sort of metaphysical essence of value, its material substratum so to speak. As we already know, such a naturalistic view of the relation between labour and value is foreign to Marx. The expression that labour represents the ‘content’ or ‘substance’ of value simply means that at the basis of changes of value lie changes occurring in the material-technical process of production, in the development of labour productivity. This aspect of phenomena was especially emphasised precisely by Ricardo, with the consequence that the fundamental difference between him and Marx is found not in the teaching on the ‘substance’ of value but rather in the doctrine concerning the ‘form of value’.

This is exactly how Marx posed the question for himself. As he said in his own words, Ricardo directly emphasised in various places that ‘labour is the factor the different commodities have in common, which constitutes their uni­formity, their substance, the intrinsic foundation of their value. The thing he failed to investigate, however, is the specific form in which labour plays that role’.^[1073] Ricardo ‘does not even examine the form of value - the particular form which labour assumes as the substance of value. He only examines the mag­nitudes of value...7¹ Marx expresses essentially the same idea in his chapter on commodity fetishism, only he replaces the term ‘substance’ with the term ‘con­tent’: ‘Political economy has indeed analysed value and its magnitude, however incompletely, and has uncovered the content concealed within these forms. But it has never once asked the question why this content has assumed that particular form, that is to say, why labour is expressed in value, and why the measurement of labour by its duration is expressed in the magnitude of the value of the product’?² In other words, the classics demonstrated that labour is the content of value, whereas Marx wanted to clarify why labour takes the form of value. The attention of the classics was directed to revealing the material- technical basis of the given social forms, which they simply took as given and not subject to further analysis. Marx, for his part, took up the goal of discover­ing the laws of the emergence and development of the social forms assumed by the material-technical process of production at a given stage of development of the productive forces.

This is the most profound difference between the method of the classics and that of Marx, and it reflects different necessary stages in the development of economic thought. Scientific analysis begins ‘with the results of the process of development ready to hand’,^{[1074] [1075] [1076] with the multitude of social-economic forms that it finds already established and fixed in the surrounding reality (value, money, capital, wages, etc.). These forms ‘already possess the fixed quality of natural forms of social life before man seeks to give an account not of their his­torical character, for in his eyes they are immutable, but [only] of their content and meaning’?4 Not analysing the given social-economic forms, the classics wanted only to disclose their content, their material-technical basis. In value they found labour; in capital, the means of production; in wages, the means of the workers’ subsistence; and in profits, the abundance of products provided by growth of labour productivity. Starting from pre-given social forms, and taking them to be the eternal and natural forms of the production process, they did not raise the question of their origin. ‘Classical economy is not interested in elabor­ating how the various forms come into being, but seeks to reduce them to their unity by means of analysis, because it starts from them as given premises’?5 Once the given social-economic forms were reduced to their material-technical content, the classics considered their work to be finished. But at precisely the point where they conclude their analysis, Marx goes further. Not being confined within the horizon of a capitalist economy, and seeing it merely as one of many possible forms of economy that have existed, Marx poses the question: Why is it that a given material-technical content, at a certain stage in development of the productive forces, takes exactly the given social form? Marx’s method­ological formulation of the problem runs approximately as follows: Why does labour take the form of value; the means of production, the form of capital; the means of workers’ subsistence, the form of wages; and growth of labour productivity, the form of an increase of surplus value? He directs his attention to analysis of the social forms of the economy and to the laws of their origin and development, to the ‘real, formative process (Gestaltungsprozess) in its dif­ferent phases’.[1077] [1078] This genetic method of Marx is the opposite of the analytic method of the classics.77The specific feature of Marx’s genetic method is found, as we see, not only in its historical but also in its sociological character, in its close attention to investigation of the social forms of economy. The classics, starting from the social forms as given, endeavoured mainly to disclose their material-technical basis. Beginning with the existing condition of the material production process, and with the given level of productive forces, Marx endeav­ours to explain the origin and character of the social forms assumed by the material process of production. This is what accounts for Marx’s predominant interest, as we have already mentioned, in economic forms in general and the value form in particular.}

d) Value and Labour Productivity

If his teaching on the form of value is the most original part of Marx’s value the­ory and distinguishes it from Ricardo’s theory, Marx is also heir to Ricardo in his doctrine of the dependence of changes in value on the development of labour productivity. Whereas Ricardo did not investigate the connection between the phenomena of value and the social form of production, the link between these phenomena and the material-technical process of production attracted closer attention and constituted the central theme of his theory. If Marx’s theory of value could be called one of social production, Ricardo’s would have to be termed one of production. Ricardo’s theory of value is a doctrine of the causal dependence of changes in the magnitude of the value of commodities in cap­italist society on the development of labour productivity. We have deliberately accentuated the specific words that distinguish the particular characteristics of Ricardo's work from that of his predecessors, Adam Smith in particular. 1) With Smith, study of the causal dependence of changes in the value of com­modities is confused with the search for a measure that accurately defines the degree of these changes. The confusion of these two methodologically differ­ent approaches did enormous harm to political economy as a science, [and that harm] continues to be felt right up to the present day. To Ricardo belongs the great service of consistently adopting a scientific-causal point of view in the theory of value. 2) As a result of confusing the cause of value changes with the measure of value, Smith also confused the labour expended on produc­tion of the commodity with the labour that might be acquired in exchange for the given commodity. Hence, the entanglement of objective labour value in his theory with subjective labour value. Ricardo, having posed the question of the cause of value changes, located this cause in changes of the quantity of labour expended on production of the commodity. He consistently adopted the viewpoint of objective labour value. 3) Smith saw the law of labour value (in its objective formulation) holding only for pre-capitalist forms of economy. Ricardo regarded it as a law that also operates (with certain deviations) in a capitalist economy, without contradicting the phenomena of profit and rent. 4) In the development of labour productivity Ricardo saw the final cause of the economic phenomena he was investigating. The development of labour productivity determines the value of commodities in general and of workers' means of subsistence in particular, thereby determining both wages and the profit that depends upon them. Differences of labour productivity on various land parcels create differential rent, the sole type of rent known to Ricardo. On the one hand, we see a strict mathematical formulation of the laws of change of the magnitude of value (and also of wages, profit, rent and so forth), depend­ing upon quantitative changes in the mass of labour in production; on the other hand, there is indifference to the social forms of production. These are the two basic features of Ricardo's theory. The first feature makes him the precursor of Marx; the second reveals to us what was missing from Ricardo's theory and what Marx contributed to science.

If Ricardo had no interest in the social nature or form of value, or in the given social form of labour, he nevertheless fully understood that changes in the magnitude of value, like the underlying changes in labour productivity, are essentially social phenomena. He studied these changes as law-governed phenomena that are both objective (not depending on the will of separate individuals) and far-reaching - or, as N. Sieber puts it, typical and average.^[1079] He saw the ultimate cause of changes in the magnitude of value in changes occurring in social production, although he regarded the latter not in terms of its social form but in terms of its material-technical content - not as the totality of production relations but as a sum of technical, concrete labour activities. But his consistent discernment of value in the social process of production was, in itself, Ricardo’s great service that prepared the way for Marx.^[1080] We are totally unable, therefore, to agree with Rosenberg, who sees one of the fundamental differences between Marx and Ricardo in the fact that the latter allegedly studied the phenomena of value from a private perspective and not from the point of view of political economy. If that were really the case, one could only be amazed as to how Ricardo, beginning from a private-economic point of view, managed to give a theory of capitalist economy so elaborate that ‘In his theory of value’, according to Rosenberg’s exaggerated expression, ‘Marx stands upon the shoulders of Ricardo’ (p. 186). In reality, it was only the point of view of political economy that allowed Ricardo to construct his theory. He took the national economy as the subject of his investigation, although he did not examine its social form.

e) Relative and Absolute Value

Similarly, we cannot agree with Rosenberg’s view that the second fundamental difference between Ricardo and Marx involves neglect by the former of ‘abso­lute value' (pp. 188,185,116,118). This opinion is widespread in both the Marxist and the anti-Marxist literature. However, we find it impossible to see any dif­ference in principle between Marx and Ricardo on precisely this point. In one place Marx notes that ‘Relativevalue means first of all magnitude of value in con­tradistinction to the quality of having value at all... and secondly, the value of one commodity expressed in the use-value of another commodity'.^[1081] In other words, we are dealing here with three different concepts: 1) the value of the commodity expressed in the use-value of another commodity, for instance, the value of one pair of boots equals three yards of cloth; 2) the magnitude of the commodity's value as determined by the amount of labour expended on its production, for instance, the magnitude of value of a pair of boots is defined as nine hours of labour, or the magnitude of value of a pair of boots relates to that of a yard of cloth as nine hours of labour to three hours of labour; 3) the qual­ity of value in general, without specifying its magnitude, for instance, a pair of boots has the form of value in general. The first concept is called relative value; the second, as Marx indicates, is also sometimes called relative but more often absolute value^[1082] The third is always called absolute. It would be more correct to dispose of this unclear terminology and to characterise these three concepts as 1) the exchange proportion between two commodities, 2) the quantitatively determined labour value of the commodity, or its magnitude of value, and 3) the quality or form of value in general terms, without any determination of its magnitude.

Can one say that Ricardo studies only relative value, in the sense of the first concept, i.e. the exchange proportions of commodities apart from any depend­ence upon labour expenditures in their production? It is enough just to read the first chapter of Ricardo's work in order to convince oneself that, in studying any exchange proportions between commodities and the changes that occur, Ricardo invariably poses the question of whether there was any change in the quantity of labour expended on production of the given commodity^[1083] Ricardo investigates the second sort of phenomena that we mentioned - that is, labour value from the quantitative side - and ignores only the third problem: the qual­ity of value in general or, more accurately, the social form of value. To call this

‘form of value’ absolute value would involve a misuse of terminology. In his fre­quent observations that Ricardo is interested only in the magnitude of value, Marx intended primarily to emphasise the absence in Ricardo of any teaching on the social form of labour or the form of value.^[1084] It is here, and not in the teaching on absolute value, that the fundamental difference between Ricardo and Marx is to be found.

It is from this fundamental difference that the difference in formulating the theory of money also arises. It was only his teaching on the form of value that allowed Marx to develop his theory of money. Ricardo was not able to explain the need for the formation of money, which for him remained something external and circumstantial that did not necessarily follow from the character of a commodity economy. It is thus impossible to agree with Rosenberg, who, drawing an extremely close affinity between the theories of value on the part of Ricardo and Marx, finds one of the fundamental disagreements between them in their different views concerning the theory of money (pp. 179,188). The dif­ference between Ricardo and Marx on the theory of money is not fundamental but derivative, resulting from their differences in posing the theory of value.

f) Capital and Surplus Value

If Ricardo, already in the theory of value, had to encounter insurmountable difficulties because the social nature of value, as a production relation between people, was not clear to him, the same must be said all the more with regard to the theory of capital and surplus value.

Marx’s method, as we have seen, consists of singling out and consistently investigating the different types of production relations between people in a capitalist economy, beginning with the simplest. After considering the rela­tions between people as autonomous commodity producers (the theory of value and money), he analyses the relation between capitalists and workers (the theory of capital and surplus value) in order to turn then to relations between industrial capitalists in various spheres of production (the theory of the equal rate of profit and the price of production). The manufacturer sells the cloth produced in his factory. Would it seem that there could be anything simpler than this transaction? Yet for Marx this transaction represents a very complex social phenomenon in which several relations are intertwined: the relation of the manufacturer 1) to the buyers, 2) to his workers, and 3) to other industrial capitalists. By force of logical analysis Marx highlights these different types of production relations between people, studying them consistently in the order of their complexity. Ricardo, whose attention is fixed not on produc­tion relations between people but on the movement of prices for things, sees here only a single transaction in the sale of cloth, in which it is presupposed, from the very outset, that the seller is a capitalist who, because of competition with other capitalists, receives from the sale an average profit on his capital. Ricardo assumes beforehand the simultaneous existence of all the types of pro­duction relations between people. From the very first pages of his book, which investigate value, he already presupposes the existence of capital and the aver­age norm of profit. ‘It is precisely Ricardo's mistake that in his first chapter, on value, all sorts of categories that still have to be arrived at are assumed as given’.^[1085] Marx arranges these categories in terms of a certain scientific per­spective, whereas Ricardo has them all on a single plane where they clash and contradict one another.

In Marx's system, the theory of capital is set out after the theory of value and precedes the theory of prices of production and the equal norm of profit. Since Ricardo assumes all these categories to be in existence from the very beginning, the results are that 1) the category of capital is frequently confused, on the one hand, with the simpler category of value, and 2) surplus value, on the other hand, is confused with the more complex category of profit.

Consequently, Ricardo is unable to understand ‘the specific distinction between commodity and capital’,^{[1086] [1087] [1088] [1089] that is, he cannot understand that con­version of the commodity (value) into capital presupposes that, apart from the production relations between people as commodity producers, there also exists a new type of production relations between people as capitalists and workers.}

1) Whereas for Marx, capital is a reified expression⁶ of the production rela­tions between capitalists and workers, Ricardo gives a material or tech­nical definition of capital as means of production in the broad sense of the word, including also the workers' means of consumption^⁷ Rosen­berg completely ignores this decisive point (p. 177).

2) Ricardo's capital is simply ‘accumulated labour', as opposed to living, or ‘immediate, labour'.88 The social distinction between capital and labour is transformed into a technical distinction between accumulated and immediate labour. Both of the basic categories of capitalist economy, capital and labour power (hired labour) are dissolved into ‘labour’, a category of simple commodity economy.

3) If, for Ricardo, the exchange of capital for labour power - the fundamental production relation of capitalist society - has the character of a simple exchange between accumulated and immediate labour, then the forma­tion of surplus value becomes incomprehensible. From the viewpoint of the formation of value, immediate labour and accumulated labour play completely different roles;^[1090] and exchange between them in accordance with the law of value, i.e. the exchange of equivalents, evidently leaves no place for surplus value.

4) Resolution of this problem of the formation of surplus value requires that accumulated labour and immediate labour acquire a specific social character. ‘Accumulated labour’, in the hands of a small part of the popu­lation (the capitalist class), serves as the means for social domination and exploitation of the labour of workers, i.e. as ‘capital’. ‘Immediate labour’, as distinct from the means of production monopolised by the capitalists, is transformed into a special commodity, ‘labour power’ (hired labour), which is sold by workers to the capitalist. Only the social relation between capitalists and workers, between ‘capital’ and ‘labour power’, can explain how the formal exchange of equivalents is in fact an exchange of non­equivalents.

In his preface to Volume ιι of Capital, Engels pointed out that Marx, with his teaching that capital exchanges not for labour but for labour power, solved ‘one of the difficulties which had caused the Ricardian school to founder’^[1091] Rosenberg disputes Engels’s view on the grounds that ‘Ricardo, in his theory, did in fact always distinguish the two concepts of labour and labour power’ (p. 119)^[1092] But the whole question, really, is whether Ricardo sees a technical or a social difference between them.

Instead of labour, Ricardo should have discussed labour power. But had he done so, capital would also have been revealed as the material con­ditions of labour, confronting the labourer as power that had acquired an independent existence, and capital would at once have been revealed as a definite social relationship. Ricardo thus only distinguishes capital as ‘accumulated labour' from ‘immediate labour'. And it is something purely physical, only an element in the labour-process, from which the relation between labour and capital, wages and profits, could never be developed.^[1093]

These words from Marx explain his thinking excellently: when Ricardo says that capital exchanges for labour, of course he understands this to mean that the exchange involves living, immediate labour (labour power in the technical sense), but he loses sight of the special social-class form of this ‘immediate labour', which is deprived of means of production and thus sold to the capitalist as a commodity - labour power (hired labour or labour power in the social sense). The difference between ‘labour' and ‘labour power' has a social, not a technical, character^[1094]

If, on the one hand, Ricardo confused capital and labour power (the fun­damental concepts of capitalist economy) with labour as the creator of value (the fundamental concept of a simple commodity economy), he also confused, on the other hand, surplus value with the more complex category of profit. Nowhere did Ricardo investigate ‘surplus-value as such, i.e. independently of its particular forms, such as profit, ground rent, etc.'^[1095] This means that he never singled out for special study the production relation between the class of capit­alists and the class of wage-workers, viewed apart from the production relations that exist between separate groups of capitalists or between capitalists and landowners. Ricardo mistakenly ‘identifies surplus-value with profit' and con­fuses the laws of surplus value with the laws of profit^[1096]

If the weakness of Ricardo's theory of surplus value lies in ignoring social forms and the production relations between people, its strength comes in the study of the magnitudes and quantitative changes of surplus value (which he confuses, as we have shown, with profit). The law, according to which wages and surplus value change in opposite directions (although formulated in too absolute a form), and the influence of changes in labour productivity on the magnitude of wages and thereby on the magnitude of surplus value - these are the basic phenomena investigated by Ricardo. And here, as in the theory of value, we find Ricardo’s predominant interest in changes of labour productivity as the fundamental cause of changes in the magnitude of surplus value; in other words, he is predominantly interested in relative and not in absolute surplus value.^[1097] As for factors of a social character that influence the magnitude of surplus value - such as the length of the working day, the intensity of labour or the number of workers - they are left unexplored by Ricardo.9^[1098] ‘He recognises no change either in the length of the working day or in the intensity of labour, so that with him the productivity of labour becomes the only variable factor’^{[1099] [1100]}

g) Prices of Production

After completing his investigation of the production relations between com­modity owners (the theory of value) and between capitalists and workers (the theory of capital), in Volume iii of Capital Marx turns to study the produc­tion relations between industrial capitalists in different spheres of production (the theory of prices of production).99 The competition of capitals in different spheres of production leads to formation of a general average rate of profit and to the sale of commodities at prices of production, which are equal to costs of production plus the average profit and do not correspond quantitatively with the labour value of commodities. But since the magnitudes of production costs and of the average profit, as well as their changes, are explained by changes in labour productivity and in the labour value of commodities, this means that the laws governing changes in the prices of production can only be understood by starting with the law of value. On the other hand, the average rate of profit and the prices of production, being regulators of the distribution of capitals between the separate spheres of production, also indirectly - through the dis­tribution of capitals - regulate the distribution of social labour between them. The capitalist economy is a system of dispersed capitals within a moving equi­librium of capitals, but at the same time it never ceases - as with any economy built upon division of labour - to be a system of labour that is also dispersed and in equilibrium. All that is required is the ability to discern, beneath the vis­ible process of distribution of capitals, the invisible process of the distribution of social labour. Marx succeeded in clearly showing the connection between these two processes because he clarified the concept that serves as the connect­ing link between them, namely, the organic composition of capital. Knowing the division of capital into constant and variable, together with the norm of surplus value, we can easily move from the distribution of capitals to the dis­tribution of labour. Let equal capitals of 100 be invested in two spheres of the national economy. The organic composition of capital in the first sphere is 80c + 20v, and in the second sphere 70c + 30v (‘c’ stands for constant capital and ‘v’ for variable). If the rate of surplus value is equal to 100 %, then we know that the general sum of both dead and living labour that is involved in production consists in the first sphere of 120, and in the second of 130. The correspond­ing magnitude of living labour is 40 in the first sphere and 60 in the second.^[1101] From the distribution of capitals we come to the distribution of labour.

Thus, while Marx gives inVolume iii of Capital the theory of prices of produc­tion as regulator in the distribution of capitals, this theory, in both of its aspects, is connected with the theory of value; on the one hand, prices of production are derived from labour value, while on the other hand, the distribution of capitals leads us to the distribution of social labour. In place of the scheme of a simple commodity economy (labour productivity - labour value - the distribution of social labour), we get a more complex scheme for a capitalist economy (labour productivity - labour value - prices of production - the dis­tribution of capitals - the distribution of social labour). The Marxist theory of prices of production does not contradict the theory of labour value; it is built upon and includes it as one of its component parts. And this is understandable if we recall that the theory of labour value studies only one type of produc­tion relations between people (those between commodity owners), whereas the theory of prices of production presupposes existence of all three basic types of production relations between people in capitalist society (the relation between commodity owners, between capitalists and workers, and between separate groups of industrial capitalists). If we confine ourselves, as we are doing here, only to these three types of production relations, then a capital­ist economy can be likened to a three-dimensional space in which orientation is possible only with the aid of three measurements or three planes. Just as a three-dimensional space cannot be reduced to a single plane, so the the­ory of capitalist economy cannot be reduced solely to the theory of value. But just as orientation in space requires determination of the distance of a given point from each of the three initial planes, so the theory of capitalist economy already presupposes a teaching concerning the production relations between commodity owners, i.e. the theory of labour value. Marx’s opponents, who see a contradiction between the theory of labour value and the theory of prices of production, do not understand Marx’s method, which entails consistent invest­igation of the various types of production relations or, so to speak, of different social measurements.^[1102]

Whereas Marx locates these three types of production relations on different but coordinated scientific planes, thereby eliminating the seeming contradic­tion between them, Ricardo, as we have seen, locates all these phenomena on a single plane, compelling them, so to speak, to meet head-to-head. In the very first chapter of his work, which is devoted to value, he already presup­poses both a capitalist economy in general and the average norm of profit. Ricardo was the first to understand and formulate the contradiction between the theory of labour value and the tendency, peculiar to a capitalist economy, towards equalisation of the profit rate. (Adam Smith circumvented this contra­diction by locating the operation of the law of labour value in the period before capitalism). But due to the very method of his investigation, which included immediate juxtaposition of various economic categories while ignoring the intermediate links between them, he was unable to pose the problem in all its breadth. Since Ricardo presupposed an average rate of profit from the very out­set, i.e. the sale of commodities at prices proportional not to their labour value but to prices of production, he could thereby avoid the fundamental problem of formation of the average rate of profit and the conversion of value into the price of production. His attention was focused, therefore, on a partial ques­tion: Does an increase or decrease of wages, independently of changes of labour value, influence the relative prices of commodities produced by capitals of dif­ferent organic composition? (Ricardo has in mind different relations between fixed and circulating capitals, with the consequence of different periods of time during which capital must be advanced by the capitalists). With Ricardo, this partial question occludes the fundamental problem of conversion of surplus value into the average profit, and of value into the price of production. Whereas for Marx the price of production, as compared with value, represents a new ‘determination of form’ corresponding to a more complex type of production relations between people, Ricardo sees it as an ‘exception’ to the law of labour value. Wishing, however, to preserve the latter, he calms his own doubts by concluding that these ‘exceptions’ play a secondary role, and that the result­ing deviations of prices from value are insignificant compared to the influence that the quantity of labour required for the production of commodities has upon their value.

Summarising the conclusions of this chapter, we think it necessary to recall that it has no intention of providing a detailed analysis of the complex ques­tion of Marx's relation to Ricardo; its purpose is merely to note the general standpoint from which, in our opinion, the question must be approached. Examination of the specific partial theories of Ricardo and Marx, and compar­ative analysis of their points of similarity and difference, can only be fruitful if they are illuminated by a clear understanding of the basic methodological specificities of the two theories. We see the difference in principle, which sep­arates Marx's theory from Ricardo's, in the distinction Marx draws between the material-technical process of production and its social form^{[1103] [1104] - a difference that excludes neither their interaction nor the causal dependence of changes in people's production relations upon development of the productive forces. Political economy studies the social form of the economy; and Marx's position in this regard threw new and unexpected light upon all economic phenomena, including those that had already been studied by the classics. Marx showed us all the economic categories in a new perspective and from a new standpoint that fundamentally changes our view of the nature of economic phenomena. From being the properties of things, economic categories are transformed into production relations between people that assume reified form.ω3 Marx con­sistently follows this general methodological approach in his doctrine of value, money, capital and so forth. In terms of the theory of value, this general meth­odological approach brings to the forefront the doctrine of the social ‘form of value'. The teaching on value, as a social form of the product of labour that fol­lows from a determinate social form of labour organisation, is Marx's new and original contribution to the theory of value. Rather than completing the theory of the classics, it makes him the originator of a new economic theory.}