Revisiting value and exploitation
11 June 2010
When her father died in 1883, Eleanor Marx wrote an article celebrating her father’s achievements. At the heart of these was “his theory of value, by which Marx explains the origin and the continued accumulation of capital in the hands of a, thereby, privileged class.” (1) What was seen as so important at the time of his death has fallen by the wayside over a century later among the majority of those calling themselves “Marxist.” So-called Marxists today are content to forget Marx’s true theory of value because of the embarrassing fact that it would, if taken literally, preclude most First World workers from being exploited. It would count them outside of the proletariat, outside the revolutionary class. It is the mark of a scientific theory that it has a higher degree of explanatory and predictive power than its competitors. Whether Marx’s theory of value is the most scientific theory today is still an open question. However, Marx’s actual theory, in its best version, is far more scientific than the kind of butchered “Marxist” theories so often put forward by First Worldists. Not only does Marx’s theory gives us the tools, the language, to account for the rise of the mall economy of the United States and other First World countries, it helps us predict and explain the lack of revolutionary sentiment amongst the vast majority of those in the First World. Marx’s theory of value is the astronomy to the astrology of the First Worldist soothsayers.
Eleanor Marx describes the origin of value under capitalism:
“The sum thus entering the pocket of the capitalist Marx calls surplus-value. It is not all profit, but includes the employer’s profit. He has to share it with others: with the Government in the shape of rates and taxes, with the landlord for rent, with the merchant, etc… Thus, all of the classes of society not composed of actual and immediate producers of wealth… all classes, from kings and queens to music-masters and greengrocers, live upon their respective shares of this surplus value. In other words, they live upon the net producer of the surplus labor which the capitalist extracts from his work people, but for which he does not pay. It matters not whether the share of surplus-labor falling to each member of society not actually a producer is granted as a gift by Act of Parliament from the public revenue, or whether it has to be earned by performing some function not actually productive. There is no fund out of which they can be paid, but the sum total of the surplus value created by the immediate producers, for which they are not paid.” (2)
According to both Karl and Eleanor Marx, the value that makes society run has only one source, the “immediate producers of wealth.” In the England of Marx’s day, most of this class would have been industrial, waged workers — this would include workers on industrial farms since peasant direct producers were passing from the scene. Marx predicted that the trends that he witnessed in Western Europe would occur globally. He thought that society would become polarized into two great classes, the industrial capitalists and their workers. Thus, as capitalism advanced, the paradigmatic direct producer would come to be represented by the industrial worker. He saw the industrial working class as the proletariat, the revolutionary agent. Marx thought competition and development would even out from country to country. Thus revolution was a matter of “workers of the world, unite!” However, things did not work out exactly the way Marx foresaw.
It is always important to note that many of Marx’s conclusions were arrived at because he extrapolated from abstract models just as economists do today. This and a good deal of teleology informed his views. However, the real world is more complex. Global society has not polarized exactly in the way that Marx foresaw. Instead, there exist different configurations of class society across countries. In some countries, there are very few direct producers at all. These are First World mall economies. Factories no longer dominate the lives of First World peoples. Only a small percentage of people in the First World work in factories anymore. A far greater number are employed in management, services, etc. This can be described in Marx’s terms as a decline in the percentage of the population engaged in productive labor, labor that adds to the total social product. Many First World economies can be described as a mall writ large. Nothing, or very little, is produced at the mall. Yet people are employed managing, transporting, securing, etc. goods that are produced elsewhere but are sold at the mall. It is the influx of goods from outside the mall that keeps the mall afloat. Production is going on outside the mall, in the Third World. It was the evaporation of direct production, and along with it the evaporation of revolutionary consciousness, that caused Friedrich Engels to write of the bourgeoisification of the English working class on the back of India and the world. Of English workers, Engels writes, “workers merrily share the feast of England’s monopoly of the colonies and the world market.” Even though Marx may have been wrong on unitary development and about the polarization of class, his theory of value does account for today’s world.
The world economy is made up of chains of economic interaction. Each commodity has a point where it was produced. Before a commodity finally leaves circulation it might be exchanged several times. Let’s say a commodity was produced at point A. It was bought by a middleman company and transported and sold again at point C. After being sold at the department store, the commodity leaves circulation. This chain can be represented thus:
At each stage of the commodity’s journey profit may be obtained. Let’s suppose profit is obtained when the commodity is sold from the factory at A to the middleman at B. Profit is obtained when the middleman company B sells it to the retail store C. And profit is also obtained when the retailer C sells the commodity to the consumer. Even though profit is obtained at each point in the circulation chain, surplus value can only be produced by the direct producer. Even though profit is obtained by the middlemen and distributor, this profit is not produced by the workers employed by either the middleman B or the retailer C. This allows Marx to make the point that the merchant does not get rich by cheating his clerks:
“We must make the same distinction between him and the wage-workers directly employed by industrial capital which exists between industrial capital and merchant’s capital, and thus between the industrial capitalist and the merchant. Since the merchant, as mere agent of circulation, produces neither value nor surplus-value… it follows that the mercantile workers employed by him in these same functions cannot directly create surplus-value for him… In other words, that he does not enrich himself by cheating his clerks.” (3)
When Marx is at his most consistent he extends this point very broadly. There is no reason we cannot extend Marx’s point about clerks to all of those outside production. Even if Marx isn’t always clear, and sometimes contradictory, one has to make this generalization to be consistent with the Labor Theory of Value. Direct production is the origin of value and the original source of all profit in the Marxist Labor Theory of Value paradigm. Thus, as Eleanor Marx points out, the value that is obtained by all classes has its origin in the direct producers. This is true not just of true of the traditional ruling classes, but also of those who are employed but are not direct producers or part of direct production. These workers may help realize value but they do not produce it as the direct producer does. A bank does not create its profit by squeezing value out of its tellers. A bank obtains its profit by receiving a share of the total social product produced by direct producers. Banks obtain their share through investments and financial manipulations, but the origin of that value lies in direct production. The same is true of supermarkets. It isn’t like they grow the lettuce in the store parking lot. Santa’s elves are not toiling away in the back of the Toys ‘r’ Us.
Because of the tremendous productive capacity of capitalism, these unproductive sectors have expanded significantly. These unproductive sectors have come to dominate whole national economies in the First World. Walmart, for example, is the biggest employer in the United States, with over 1 million employees. (4) The total population of the United States is 309 million. Of the 145 million people who are employed (this includes the undocumented too) within the United States, roughly 26 million are employed in those sectors of the economy that loosely (since we are relying on Bureau of Labor Statistics’ data) correspond with direct production. (5) However, it is important to note that many of those employed in these sectors are not the direct producers themselves. Many in these sectors are management, etc., even if they are employed in the direct production sector of the economy. It is a conservative estimate that at least 10% to 30% of this sector can be considered to not be direct producers in a literal or extended sense. We can generously say that 23.4 million to 18.2 million people in the United States can be counted as direct producers in the loosest sense of the term. By contrast, 126.8 million to 121.6 million in the United States are employed but are not direct producers. (6) This tremendous lopsidedness is why the United States’ economy can be described as a mall economy. As great as the productive forces may be, 23.4 million to 18.2 million people cannot account for the sum of the incomes of the 145 million employed plus the incomes of those tens of millions who are not employed but still have incomes, i.e. capitalists, the petty bourgeoisie, the unemployed, those on welfare, retirees, students, etc. Rather, it stands to reason, the value that allows for this tremendous lopsidedness has to be coming from outside “the mall,” from the Third World. It is, of course, no accident that the increase of this lopsidedness in the United States corresponds to the rise of the United States as the supreme imperialist power after World War II and the decline of inter-imperialist rivalry. Imperialism aided this lopsided development, and continues to maintain it. The lopsidedness is production, but also in wealth and power, after World War II, is why Lin Biao noted that revolution in the First World had halted even while revolution was bursting on the historical stage in the Third.
“Since World War II, the proletarian revolutionary movement has for various reasons been temporarily held back in the North American and West European capitalist countries, while the people’s revolutionary movement in Asia, Africa and Latin America has been growing vigorously.” (7)
Another assumption Marx made was that the incomes of the direct producers under capitalism, which for Marx mostly meant the industrial workers, would be reduced to subsistence or sub-subsistence. This is because in a pure model competition between capitalists results over time in equalization of technique. So, the only way left for a capitalist to increase profits is to reduce wages. So much did Marx think this an inevitability of capitalism that Marx identified the value of labor-power with the bare minimum necessary to keep the worker reproducing his labor from day to day. Although this immiseration of direct producers does bear out in much of the Third World, it hardly characterizes any worker in the United States except perhaps some negligible undocumented workers at the very edges of the economy. Often, this does not even characterize the situation of prisoners who are forced to produce. Even those who produce in the First World obtain a wide range of incomes, all of them well above the value of labor-power as set by Marx. Their incomes and standard of living are so high as to make them generally happy with their lot within the system. They align with the imperialist system. Even though Marx was wrong about the exact details of immiseration, this view of value allows for what is seen today. Under Marx’s model, it is possible for value to be transferred from direct producers to others. It is also possible for value to be transferred from direct producers to direct producers. In other words, First World direct producers can obtain a share of the surplus that originates in the Third World. Even if a direct producer in the First World is adding to the global social product through his labor, at the same time, he is subtracting from the global social product the same way that other exploiters do. He is obtaining a share of value from the Third World. This offsets whatever value he produces. This makes him a net-exploiter, just like members of other exploiting classes.
Marx’s theory of value allows for these possibilities that go a long way in explaining current reality. The claim by First Worldists that if profit is being obtained by a particular business, then there is exploitation by that business of its workers does not follow. An epistemological problem arises: how do we know whether a worker is an exploiter or not? Because value can be transferred in so many ways from one person to another, from one direct producer to another, it is necessary to establish a way to measure who is and who is not exploited. Either it is necessary to assign a value to labor-power or it is necessary to find another way to measure exploitation. Today virtually the entire world’s economy is integrated into one giant imperialist formation. The production of a commodity may take place across several countries. To complete a commodity it is not unusual for producers across vast distances to have contributed to its completion. To maintain that the labor-power of First World producers is different than the labor-power of Third World producers is pure chauvinism, especially since economies are so globalized today. Any approach to solving this problem should apply to workers everywhere. Comrade Serve the People has advanced a solution to the problem that establishes a rough estimate for the value of labor-power:
“Comrade Marx pointed out that labor is the substance of value. He said that the number of hours of average abstract socially necessary labor needed to produce a commodity represents its value. That means labor of average productivity under the given working conditions for the specified type of work. Therefore, if traded at value, one hour of labor put into harvesting parsnips is exchangeable against one hour of assembling washing machines (if the labor in both cases is of average productivity).
The nominal GDP of the entire world was $31.9 trillion in 2002. This figure represents everything produced in the world, including services (which tend to be overvalued), in a year’s time. The population is about 6.4 billion people. Assume that 2/3 of them work full time on a typical US schedule of 2000 hours per year. Then the value of average labor is $7500 per year, or about $3.75 per hour. (Slightly higher, actually, since the world’s population was a bit lower in 2002 than it is today.)
Elsewhere I have seen estimates from the UN that the world’s nominal GDP in 2005 is about $36 trillion. That would put the value of labor at $8400 per year, or $4.20 per hour. What is the implication? In the US, the minimum wage is $5.15 per hour, and even higher in some states and cities. If average labor is worth $4.20, then even people making the minimum wage are overpaid on average by about 23%. The average wage in the US is about $18 per hour, which is more than 4 times the value of labor.” (8)
Let’s look at another, stronger, less orthodox solution. In her characterization of her father’s theory of value, Eleanor Marx discusses the distribution of the global social product under capitalism. Her father’s theory of value implies certain distributions are capitalist ones, other distributions are socialist ones. Eleanor characterizes the society of her day as a capitalist one with a distribution where those who do not contribute to the global social production receive shares from it. In fact, the majority of the shares of surplus-labor are distributed to non-producers of various kinds under capitalism. It is correct to criticize the distribution of the social product to reactionary non-producing classes. However, any contemporary socialism has to direct distribution toward not only producers, but also the vast destitute stagnant, non-working poor across the Third World. The non-working destitute are a very significant, potentially explosive, class that is coming into its own as a class in the slums of Third World cities. Had the world polarized as Marx suggested, then a socialist distribution aimed at producers, to near exclusion of others, makes sense. However, this is not our world today, or our socialism. Our problem is that given that, under Marx’s scheme, value can be transferred from producers to both non-producers and to other producers, a bar needs to be set to establish who is and who is not exploited. I have advanced another possible solution to this problem that moves away from Marx’s theory of value, but can be said to be implicit in the Marxist criticism of imperialism:
“Some might object that a socialist distribution is not an egalitarian distribution. Rather, a socialist distribution is one where wealth is spread out, not evenly, but to those who do the work and those nations who do the work: she who does not work, shall not eat. Whereas the labor theory of value may be necessary for explaining the mechanics of exploitation, the distribution principle associated with it is not adequate to rectify the problem of inequality between countries that has been generated by imperialism. Such a distribution principle does not address the problem of underdevelopment. Surely populations in the most underdeveloped parts of the Third World, that have been rendered unproductive by imperialism, should not continue to remain in dire poverty under a global socialism. Whole countries of the “industrial reserve army” in the Third World may not currently be productive, but should not resources and development be directed to such populations under socialism? According to demographers, very soon, for the first time in history, the majority of the world’s populations will be living in cities. The new “global countryside” as the base areas of the global people’s wars may very well be the ghettos of Third World megacities. These ghettos are less sites for production then blights that show just how capitalism’s anarchy of production has failed to bring huge segments of the human population into production. Surely socialism must speak to these vast populations that will be the soldiers of the people’s wars over the next century.
The global economy is a causal nexus where value in various forms is transferred around the globe from one person to another. So, if one person is receiving more than an equal share, then somebody else is receiving less somewhere in the causal nexus. Likewise, if someone is receiving less, someone else is receiving more. Imperialism has created a world order where those who receive less and those who receive more correspond to populations in the Third World and First World respectively. Using egalitarianism as a regulative idea, one is exploited when one does not receive an equal share. One is an exploiter when one receives more than an equal share. A country is exploited when its population is largely made up the exploited who have less than an equal share. A country is an exploiter when its population is largely made up of exploiters who have more than an equal share. Implicit in the Marxist critique of imperialism is the idea that countries of the world should exist side by side as equals. The opposite relationship to the imperialist one is a relationship based on egalitarianism and self-determination.” (9) (10)
Marx avoided the problem by ascribing historical necessity to the trends he saw around him. Even though Marx’s real theory of value is largely forgotten, it is much better than anything advanced by First Worldists today. We must start from, but also go beyond, Marx’s theory of value in order to answer what Mao called the question of first importance, the question of class: “Who are our enemies? Who are our friends?” Global society looks very different today than in Marx’s day. Lenin writes, “Imperialism has the tendency to create privileged sections also among the workers, and to detach them from the broad masses of the proletariat.” (11) Today this division has evolved such that whole countries lack the proletariat as the revolutionary class. This is why the world revolution has taken a very different shape than that in Marx’s day. Lin Biao writes:
“[T]he contemporary world revolution also presents a picture of the encirclement of cities by the rural areas. In the final analysis, the whole cause of world revolution hinges on the revolutionary struggles of the Asian, African and Latin American peoples who make up the overwhelming majority of the world’s population.” (12)
Today’s revolutionary path will be much different than that of Marx’s time. It will be different than both the Bolshevik and Chinese experiences. The changing world requires a new strategy to really make revolution. Our path is the Global People’s War led by the Leading Light.
1. Marx, Eleanor. “Marx’s Theory of Value,” in When Karl Marx Died, ed. Foner, Philip S. International Publishers. USA: 1973, p. 230.
2. ibid., p. 235.
3. Marx, Karl. “Capital“, Vol. 3, Chapter XVII.
5. Data extrapolated from BLS statistic from 2009 and 2010. Retrieved from: http://www.bls.gov/cps/faq.htm#Ques8 and ftp://ftp.bls.gov/pub/suppl/empsit.cpseea21.txt
6. The method here is to add up all industries that can loosely be considered “direct production.” We do the same for other sectors. Also, 10% to 20% is subtracted in order to roughly account for those employed in the direct production sector, but who are not themselves direct producers, i.e. management, etc. The numbers are from the employment charts at the Census Bureau.
7. Lin Biao. “Long Live the Victory of People’s War!“ Retrieved from: http://www.marxists.org/reference/archive/lin-biao/1965/09/peoples_war/ch07.htm
8. Serve the People. “A Rough Estimate of the Value of Labor.“ Retrieved from: https://llco.org/a-rough-estimate-of-the-value-of-labor/
9. LLCO. “Real versus Fake Marxism on Socialist Distribution.“ Retrieved from: https://llco.org/real-versus-fake-marxism-on-socialist-distribution/
10. LLCO. “Global Inequality or Socialist Equality.“ Retrieved from: https://llco.org/global-inequality-versus-socialist-equality/
12. Lin Biao. “Long Live the Victory of People’s War!“