What does Karl Marx offer economics without the baggage of revolutionary socialism? The post-Keynesian economist Steve Keen, in several papers, particularly here and here, and in a chapter in his excellent book Debunking Economics, attempts to bring about the demise of Marx’s Labour Theory of Value (LTV). The latter posits that labour is the only source of value production under capitalism. In Marx’s analysis, capitalist producers bring together means of production (MP) and labour power (LP) and use them together to try to produce a value of output greater than the value of inputs, the difference between the two being surplus value. If the sale of the output is successful and they reinvest at least part of the resultant surplus in expanding output, they will have played a part in the capital accumulation or economic growth which is the motor driving the capitalist mode of production.
Neo-classical economics suggests that consumption for utility is the final motive of a market economy, while Marx claims that profitable growth is the driving force: ‘accumulate, accumulate, that is Moses and the prophets’ is a famous quote from Marx’s magnum opus, Capital.
Marx’s claim that only labour is a source of surplus value gives rise to his argument that the capitalist class exploits the working class in production by forcing the latter to work longer than is necessary for them to be ‘reproduced’ and paid the value of their output as a wage. Some form of robbery is apparently taking place here, enabling the capitalist to extract surplus value, which is the source of profit and provides the funds for investment and expansion. If only the working class could realise that they are being exploited in this way, then their altered mass consciousness would give rise to revolution. The overthrow of the capitalist class would lead to socialism and finally communism, a ‘classless’ society with production planned according to human need rather than simply driven by surplus value and profit.
Marx thought that his analysis was scientific, in contrast to the French utopian socialists who had influenced him. In this way, exploitation under capitalism could not be denied and was an inevitable outcome of the system which, though admired by Marx for its role in raising the standard of living of society, surely contained the seeds of its own destruction. It was, he thought, part of a stage of history rather than a mode which would last forever.
Steve Keen criticises Marx’s LTV, but proposes that, shorn of the latter, his rich philosophical and historical analysis of capitalism should be retained. Keen does this by showing how both MP and LP are sources of surplus value in production, and that evidence for this can be found in Marx’s own writings, particularly the Grundrisse, the posthumously published collection of notebooks which were the foundation for Capital. Here Marx says that all commodities under capitalism, which include labour, are a dialectical social unity containing both use value (value in use or usefulness in consumption) and exchange value (value in exchange or the money price paid for their purchase).
Keen’s criticism boils down to the fact that when the capitalist purchases MP and LP for use in production, he pays their respective exchange values, but receives their use values or the value of their usefulness in production, which can be greater than the exchange value in both cases. If the products are successfully sold for a profit, the capitalist will have realised the surplus value which all inputs to production have played a part in producing. Marx went on to argue inconsistently that the use value of labour would be greater than its exchange value (it would produce surplus value) but that this would not be the case for MP and that for the latter, use value and exchange value would be equal, and the value of MP would be transferred to the output, without adding any surplus value. He thus ultimately sided with his LTV, rather than his more general philosophy of commodities.
According to Keen, Marx’s LTV and its denial that MP can add surplus value equates the depreciation of a machine with its productive capacity, or the exchange value with the use value. But there is no reason why these should be equal. Indeed a successful capitalist would only pay for MP if he thought that it could add greater value in use (production) than he paid for it (exchange). Thus the LTV is shown to be erroneous.
There is no doubt that without human labour, production would be impossible, but I would concur with Keen and argue that this does not mean that the other inputs to production add no value in the process. For example, the production of cars is equally impossible without either inputs of MP (robots, components, and basic commodities further back in the chain of production), or LP, or indeed of management. The manager of a particular firm may treat workers badly and refuse them a pay rise, engaging in some forms of exploitation, and this may be widespread in the economy. But is this inevitable and universal under capitalism? Even if you think that the latter is deeply flawed, it can claim huge successes in its ability to improve the material conditions of life, as Marx himself realised.
Without the LTV and the inevitability of capitalism’s revolutionary overthrow, much of Marx’s analysis is rich and thought-provoking. He put forward theories of what he called the circuits of capital, which combine production, consumption and distribution in a dynamic process, laying the ground for various current understandings of a capitalist system in motion. He also described ideas about the business cycle and the inevitability of crises or recessions. All these theories can be grounded in his philosophy of materialist dialectics which describes contradictory processes of social change. The notion of value can also be rescued. Marxist analysis can be seen as inter-disciplinary social science. Using it to predict a future under socialism, and a just one at that, may be as misplaced as more mainstream economists’ claim prior to the Great Recession that improved economic management had produced a ‘Goldilocks’ economy. While Marx may not have been all right, there is much to be learned and built upon in his writings.