In the Oxford Handbook of Karl Marx, Thomas Rotta and Rodrigo Teixeira have a chapter called the commodification of knowledge and information. In this chapter, they argue that knowledge is ‘immaterial labour’ and ‘knowledge commodities’ are increasingly replacing material commodities in modern capitalism.
“Examples of knowledge- commodities are all sorts of commodified data, computer software, chemical formulas, patented information, recorded music, copyrighted compositions and movies, and monopolized scientific knowledge.”
According to Rotta and Teixeira, these knowledge commodities do not have any value in Marxist terms because their reproduction tends to be costless. Knowledge can be reproduced infinitely without cost. Previous authors have claimed that because knowledge commodities have no value, Marx’s law of value no longer holds. Rotta and Teixeira argue that they can restore Marx’s law of value as an explanation of knowledge commodities. And their solution is that, although knowledge commodities have no value, the owners of such commodities through patents and copyrights etc can extract rents from productive capitalist sectors, in the same way, as Marx explained, rents were extracted by landlords (through their monopoly of land) from productive capitalists. They conclude by estimating the increased amount of value being extracted in the form of ‘rents’ by ‘knowledge industries’.
Does Rotta and Teixeira’s apparent defence of Marx law of value in relation to the information industry hold up? I don’t think so. Here’s why. First, Rotta and Teixeira, like other authors before them (Negri etc), misunderstand Marx’s value theory on this question. Just because knowledge is intangible, it does not make it immaterial. Knowledge is material. Both tangible objects and mental thoughts are material. Both require the expenditure of human energy, which is material, as shown by human metabolism.
More specifically, the expenditure of human energy that constitutes the cognitive process, thinking, causes a change in the nervous system, in the interconnections between the neurons of the brain. This is called synapsis. It is these changes that make possible a different perception of the world. So to deny that knowledge, even if intangible, is material is to ignore the results of neuroscience. After all, if electricity and its effects are material, why should the electrical activity of the brain and its effect (knowledge) not also be material? There is no ‘immaterial’ labour, despite the claims of all the ‘knowledge Marxists’ , including it seems Rotta and Teixeira. The dichotomy is not between material and mental labour, but whether it is tangible or not.
The second mistake that Rotta and Teixeira make is that because knowledge is ‘immaterial’, it is unproductive labour that produces no value. But productive labour is labour expended under the capitalist production relation. Productive labour is not just what produces physical goods. Productive labour also includes what mainstream economists call services. As Marx explained: if a capitalist has a servant, that is unproductive labour. But if he goes to a hotel and uses a valet to take his luggage to the room, that valet delivers productive labour because he/she is working for the capitalist owner of the hotel for a wage.
Rotta and Teixeira give us the example of a live concert performance. “Hence, what we call a concert is in act a bundle of several commodities, among them knowledge- commodities such as musical compositions. The live performance is a combination of the productive labor of musicians and technical staff, plus the unproductive labor of those who composed the songs in the first place.” But what is unproductive about the composer? He/she can sell that piece of music as copyright and performance royalties on the market. Royalties must be paid if the music is used in the concert. Surplus value is created and realised.
Then there is the example of a smart phone. “When you buy a smartphone, part of the phone price covers the production costs of the physical components. But another part of the price remunerates the patented design and the copyrighted software stored in the memory. The copyrighted parts of the phone are therefore knowledge-commodities, and the revenues associated with these specific components are knowledge-rents.” But why are the revenues from copyright and patents considered only rents? The idea, the design, and operating system have all been produced by mental labour employed by capitalist companies. The companies exploit that labour and appropriate surplus value by selling or leasing the software. This is productive labour and it produces value. It is no different from a pharma company employing scientists to come up with a formula for a new drug which they can sell on the market with a patent held for years.
For the same reason, the production of knowledge (mental labour) can be productive of value and surplus value if it is mental labour performed for capital. In this case, the quantity of new value generated during the mental labour process is given by the length and intensity of the abstract mental labour performed, given the value of the labour power of the mental labourers. Surplus value, then, is the new value generated by the mental labourers minus the value of their labour power; and the rate of exploitation is that surplus value divided by the value of their labour power.
The value of knowledge (and of any mental product) might be incorporated in an objective shell or not. In both cases it is an intangible but material commodity whose value is determined by the new value produced plus the value of the means of production used. The computer programmer or website maker is in principle just as productive as the worker making the computer if both work for the computer company. Thus, knowledge production implies production of value and surplus value (exploitation) and not rent. Once produced, the capitalists owners of mental products (knowledge) can then extract ‘rent’ from their intellectual property (the knowledge produced by mental labourers for them) by applying to it intellectual property rights. But there is production of value first. The difference between production and appropriation is fundamental.
Also it is not correct to say that the value of mental labour and knowledge commodities cannot be quantified. Rotta and Teixeira, to back their claim that reproduction of knowledge has no value, quote Marx: “But in addition to the material wear and tear, a machine also undergoes what we might call a moral depreciation. It loses exchange- value, either because machines of the same sort are being produced more cheaply than it was, or because better machines are entering into competition with it. In both cases, however young and full of life the machine may be, its value is no longer determined by the necessary labour time actually objectified in it, but by the labour time necessary to reproduce either it or the better machine. It has therefore been devalued to a greater or lesser extent.”
Rotta and Teixeira think this shows that, because the labour time to reproduce a machine might fall below the value of the first machine due to technical progress (moral depreciation), Marx is suggesting that knowledge commodities will tend to have no value at all because knowledge can be reproduced infinitely without labour time expended. But this quote from Marx refers to the value of each new production process where the labour time involved in the value of a commodity (machine) falls. But that would not lead to a fall in the profitability of capital invested right down to zero. The average rate of profit is determined by the initial fixed capital costs and any circulating capital costs involved in reproduction. Profitability would still be determined by all the stages of production of the commodity, even if the value of each newly produced commodity falls.
And knowledge commodities cannot be produced for nothing because they are material. The productivity of physical, tangible commodities is measured in units of output per unit of capital invested. This holds just as much for mental production, or knowledge commodities, say, a video game. The mental product can be contained in an objective shell (a DVD). The DVDs produced can be counted. It can also be contained in a digital file and be downloaded from a website to a computer and then onto another. The number of downloads can be counted. In short, mental output or knowledge commodities can be counted. On websites, the number of hits can be counted. The reproduction becomes the numerator for productivity and profitability.
The original capital invested, the denominator, can be also be measured. First, there is the capital invested in the prototype. This is not only fixed constant capital (computers, premises, facilities, chips foundries, assembly plants, etc.). It is also circulating constant capital (raw materials) and variable capital, wages, which go from very high (for highly qualified developers) to low. Then there are the costs of administration, of presale advertising and other marketing costs. Then there is the additional capital invested in the reproduction of the replicas of the prototype. In reality, the total value of the knowledge commodity can be high, not zero. The unit value is then given by the total value divided by the number of replicas made. It is directly proportional to the total value and inversely proportional to the quantity of the replicas. The value of reproducing such knowledge commodities won’t go towards zero because there are always replication costs of the knowledge commodity in delivery to the user.
Again, the reproduction of any knowledge commodity is no different from the reproduction of a new drug by a pharma company. Built into the price of the drug is the initial cost of employing mental labour, testing the drug for humans etc, the production of the pills, liquids plus any equipment for administering it and so on. Sure, the unit cost of the production of each new pill may fall to a very low value, but that does not mean that total value and unit value has fallen to zero.
In sum, knowledge is material (if intangible) and if knowledge commodities are produced under conditions of capitalist production ie using mental labour and selling the idea, the formula, the program, the music etc on the market, then value can be created by mental labour. Value then comes from exploitation of productive labour, as per Marx’s law of value. There is no need to invoke the concept of rent extraction to explain the profits of pharma companies or Google. The so-called ‘renterisation’ of modern capitalist economies that is now so popular as a modification or a supplanting of Marx’s law of value is not supported by knowledge commodity production.
Much of the arguments I have presented here were first comprehensively and brilliantly created by Guglielmo Carchedi in his paper, Old wine, new bottles and the internet, in Work, Organisation, labour and Globalisation, Volume 8, Number 1, Autumn 2Ol4. His mental labour has been very productive, but as he did not patent it, the reproduction of his arguments here have cost me little (zero?). So any credit that I get will thus be a huge extraction of rent from him.
Michael Roberts Blog 
I totally agree that “knowledge commodities”, or I would say “information commodities” (may be the meanings of the words differ a little in English and German, in German “knowledge” means essentially what is incorporated in persons and society, not in data media) or more common here is “digital commodities”, have value. Mental Labour producing them (or more exactly: the content) creates value (the production of the physical data media does anhow).
Nevertheless I would say that extraction of rent is very important for the corporations producing and dealing with those commodities like the GAMFA, because the huge profits they make can not be explained and dont arise only or mainly from the value created by the labour they emploit (directly and indirectly via self-employed workforce), but from value produced elsewhere in the economy worldwide. They can appropriate rents using their monopoly intellectual property rights and network advantages and so setting higher prices for the use of their services, mainly advertising, than is justified by the unit value of these services, and so attract monopoly information rents.
I had an article about this “information rents” already 2004 in the
German Historical-Critical Dictionary of Marxism, and more special now about value creation and surplus appropriation in the digital economy in a German marxist journal 2017. There I especially argue against the theorie, that the users of the digital services create the value by “producing” data als “prosumers”, as eg. Christian Fuchs argued. Only in German, sorry:
http://www.zeitschrift-marxistische-erneuerung.de/article/3172.wertschoepfung-und-mehrwertaneignung-in-der-digitalen-oekonomie.html
A question arose in a discussion forum. Can you please answer this, if possible?
How should we theorize ‘value , ‘surplus’ and ‘profit’ in the age of Data Capitalism and Knowledge Economies?
“…With the fourth industrial revolution, the real worry even in OECD countries is about the huge displacement of human labor by machines.
This is not just about automation and lessening of human physical labour. This is about the way global industrialism now transforms the nature of labour.
For instance, Facebook employs some 50,000 people only.
Unlike the earlier industrial giants, in Google also there are hardly more than 55,000 employees. When Facebook bought Whatsapp, only twelve employees were working in the company.
Facebook bought Whatsapp for 2.2 billion dollars!
Data societies urge us to ask many perplexing questions. In the classical political economy terms, where does this value come from? Is this the value created only by these twelve employees? Without considering and understanding this drastic change in the nature of global industrialism, we are unable to explain life and experiences of our times.”
I would say transforming the form of labour, not its “nature”.
Machines contain labour.
Machines need and will still need some people to maintain them, to push the button, etc unless of course you are talking about a distance future where machines would generate themselves.
Facebook, as you mentioned, still need human labour.
But Facebook also uses the users’ labour and sells what the users’ provide in form of information to the company. Facebook sells that information to Cambridge Analytics, for example, and makes a profit. The Facebook users spent energy. The value is materialised in what they added to Facebook.
Newton ‘if I have seen further it is because I have stood on the shoulders of giants’…
Private ‘ownership’ seems to be the problem with knowledge production because knowledge production is inherently social (as is material production) so apportioning private portions is seen to be a charade because the relative power of the actors allows the poroducers of knowledge to be heard. So in material production (where the proles are) its ownership of the means of production whereas in knowledge production (non-proles) its ownership of the results of knowledge production.
Dear Michael,
Thank you very much for this article, and I hope also for an interesting discussion to follow (!)
First of all, I fully agree that there has to be a systematic way for the law of value to link knowledge/information commodities to the labor expended for their production. I don’t like the idea of a rent being attributed to the product of human labor, unlike something that “comes for free” as natural resources (land, minerals etc).
However, I find Carchedi’s arguments, as well as yours in this article, to not live up to this objective.
I also believe we have to be more fair to Rotta and Texeira, since they don’t use arguments about “immaterial labor” or commodities. I even think they criticise Negri etc about this.
I fully agree that no labor and no commodity is fully objective or mental (material or immaterial is not the correct distinction). We call knowledge/informational/mental commodities those commodities for which the determinant element of their use value is their knowledge/informational/mental content. However, a material substrate, as well as expenditure of corporal effort, even if it is only thinking, is necessary for their production.
Moreover, I don’t agree that the reply to Rotta/Texeira should be based on the fact that a unit marginal cost approaching zero with increasing output is not …exactly zero, and therefore, their productivity (output/cost) is not infinite, even if it approaches it! Problems to the value theory could appear, and they do so, even if instead of zero and infinity we have a limit towards zero and a limit towards infinity.
Instead, I think their problem lies with confusing the labor for the production of a novel use-value, against the process of (re)production of the same use-value, i.e., copies’ production, for different consumers.
So, the following distinctions have to be made:
a. Objective (“material”) labor in industry or services aiming at consumption of reproduced use-values-copies (most of the production we already understand pretty well).
b. Mental/knowledge/informational labor in services aiming at consumption of REproduced use-values-copies (as is the case of musicians performing an already composed music in a concert, in which case production and consumption are concurrent, therefore a service). Education also falls mostly in this case, and sometimes to in next one.
c. Mental/knowledege/informational labor in services aiming at consumption of NOVEL produced use-values aiming at ONE AND ONLY consumption instance/case. This is the case with studies’, designs etc for a completely case-by-case use, such as medical therapies’ consulting, music improvisation for a concert, architecture designs for a particular building, studies for a particular bridge etc In this case, consumption is completed with production, i.e, the definition of a service. The same design/use-value cannot be used again anymore.
d. Finally, and this is the complicated case, we have mental/knowledege/informational labor in industry or services that produces NOVEL use-values, i.e., prototypes, encoded in some material substrate (prototypes, electronic encoding, in paper etc), which can be used as something LIKE a means of production, for the REproduction of commodities that are copies-use-values for final consumption as means of production or means of consumption. Therefore, the difficulty is with the labor aiming at innovation, at the creation of new products with all that this includes (testing, standardisation validation etc).
The outcome of this labor is the possibility to use the prototype to guide a production process of a final commodity. This is its real use-value, and it shouldn’t be confused with the use-value of the final commodity. For example, the use-value of the chemical synthesis of a pill, is not the same as the use-value of the pill itself, and the use-value of the composed music, is not the same use-value of the performed music, or of the CD-commodity, i.e., the encoding/recording of music to a specific material substrate.
Similarly, the innovation labor should not be either confused with
a. the labor of EDUCATION/TRAINING, i.e., the labor that aims at reproducing this knowledge to the intellect of other people, or
b. the copying labor, the labor of reproducing knowledge/information to another material substrate, e.g., its recoding.
The problem we have with the prototypes, either when a company also produces under its own branding the final product (i.e., iPhone) or when it only sells/rents the prototype/patent (movies, etc), is that they have some properties that result from what they really are,
i.e., the intellectual representation of a production process, not the process itself (i.e,. what makes human labor unique against let’s say the bees’ labor, according to Marx!):
a. They are never CONSUMED, i.e., their use doesn’t cause any wear. This poses a question about how they transfer their value, assuming they have value. When a capitalist invests on a factory (constant and fixed capital) knows that it can be used for the production of a maximum mass of output. If he wants to produce more, he has to build another one. This is not the case with this kind of commodities, e.g., patents.
b. Instead, they undergo only MORAL DEVALUATION, which is INFINITE, in the absence of IP law. So, without IP law, prototypes cannot be commodified, since no-one will buy something that can have for free, just like air or water, even if it is the product of someone else’s labor.
c. They are non-inlcusive and non-rival. So, their use is unlimited not only in terms of their NON-consumption, but also, in the sense that they can have approximately INFINITE users at the SAME time.
The problems arising from the above points have to do with how can society attribute a social value to such commodities.
I have to insist, as Texeira/Rotta, (and Jeon on another article https://ideas.repec.org/h/eme/rpeczz/s0161-7230(2011)0000027009.html ) do, that (social/potential) value doesn’t equal individually embodied labor. The fact that we can distinguish between labor PRODUCED in production and labor REALIZED in circulation is due to the fact that society can evaluate value OBJECTIVELY based only on production, i.e., it can evaluate the upper limit of value realisation a commodity can support via the maximum use-value consumption it can support, until it wears out and loses all of it.
It is only on top of that evaluation what we get the moral devaluation that affects (a) the reduced costs of reproduction which Texeira/Rotta insist upon, and (b) the reduced demand for this commodity, as new ones, more efficient/desired, of higher quality etc appear in the market.
Measuring how many units have been eventually sold of the use-values-copies, in order to estimate the value the prototype-use-value realises is not correct, since there is nothing in the prototype that objectively determines the number of the sold copies, which in this case, totally depends on the demand! This practically means something like: we estimate the value of a use-value that is used as something like a means of production, with the number of copies-use-values that have been produced by that “means of production”, and eventually SOLD! i.e,. like estimating the value of a robot by the number of cars that have been eventually produced AND sold. We cannot do this for the robot, and we cannot do it either for the prototype/design of the car!
Moreover, I want to mention the following: I think there is a qualitative difference between technical innovation that leads to productivity increases, and therefore more relative surplus value, against technical innovation that leads to new commodities, either new commodities for production, or new commodities as means of production, that aim to absorb a larger portion of the total purchasing power of the market, i.e., of the existing total amount of surplus value circulating. Even when the innovation is the innovation of a means of production, it is not sure that it is increased productivity what makes the innovation desirable. But, even if that innovation is about a new means of production of higher productivity, it is likely that the capitalist who produces this new means of production is different from the capitalist who is going to use this improved technical process in his production process. The latter capitalist, as long as he is one of the first ones to upgrade his production process will gain some value in the within-branch competition, and relative surplus value will indeed increase as long as the increased productivity affects the means of consumption of labor. But, the former capitalist, who introduced the innovation will gain market share against HIS competitors, in another branch of production, because he is selling something that NO OTHER has and can sell, e.g., a new more intelligent robot. Given the unique position he is in, and which he can retain for a possibly long time thanks to modern IP law, he really is in a (temporary) monopoly position, not in a position of increased productivity. In this case, I tend to believe, unfortunately, that this capitalist really benefits from rents.
Now, why is this possible at the modern stage of capitalism?
Well, in the past, innovation was not a separate labor/production process from the production process of commodities as copies of use-values. It is only the development of the means and the capitalistic mode of production itself, that this process becomes more and more separate and more and more important, as the organic composition of capital increases via the automatisation of production, and it is less and less the direct labor used for REproduction of commodities.
Today, the most successful enterprises are those that only deal with R&D/innovation plus the marketing, sales and other administrative costs, whereas they outsource almost all of the actual REproduction of commodities where labor is cheap.
For me this is the way capital responds to the tendency of the profit rate to fall: on the one hand a new capitalistic aristocracy is formed based on the legal ownership of patents, innovation, high technology, and extremely concentrated CAPITAL, and supported by the dollar, the euro, the banks, the WTO, the IMF, the EU, NATO, their armies etc, i.e., imperialist states’ power.
On the other hand, we have the rest of the world who competes on the basis of cheap labor, cheap natural resources, etc
Additional surplus value gets into the system due to the super-exploitation of labor in low-technology sectors mainly in under-developed/developing economies, and is captured by the high-technology sectors mainly in imperialist countries.
This is also what Carchedi supports in his writings, but he believes that it is solely an issue of oligopoly power, i.e., of the fact that an enterprise has to spend a huge amount in order to enter a branch of production in which (high) technology (a whole history of patents…) is oligopolised. This is true, but it is not a phenomenon only in the sphere of circulation/competition. Its base is in production, in the separation of the innovation labor from the rest of the labor process, in the separation between competition for relative surplus value, i.e., or increased productivity, from the competition for the purchasing power of the reduced new value (due to the falling profit rate/rising organic composition) that actually leads to super-exploitation.
For me, imperialism is the stage of capitalism where super-exploitation for labor (see Smith, Higginbottom, but also Carchedi etc) and knowledge/innovation related monopoly/oligopoly rents for capital (but not exactly as Rotta/Texeira describe) is the response of a super-mature capitalism to the crisis of relative surplus value due to automatisation/rising organic composition of capital.
The fact that modern IP law, as well as state’s investment on education, science, research etc, for innovation rents on the one hand, and, on the other hand, modern anti-immigration law and state militance to repress labor mobility and increase the exploitation rate in underdeveloped countries, are phenomena of the 20th century, the century of Lenin’s capitalistic imperialism. It is what the oligopoly-dominated state does in order to aid the reproduction of the modern super-mature capital. In that way, the state not only secures the power of capital against labor, but it does so by intervening directly in the production process. It does so against the formal equality of all commodity sellers/buyers, be it labor or capital, that the capitalistic mode of production is supposed to be based upon, when for instance, it suppresses free labor mobility or secures monopoly superprofits/rents.
Does this comes as a surprise? Well at least, not to Marx! Besides the well known nowadays passage from the Grundrisse about scientific labor, and abstract labor stopping to be the measure of “wealth” (not of value as Carchedi correctly comments), I have also posted here before this one (from https://www.academia.edu/28968938/Theories_of_Imperialism)!:
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Lenin’s concept of imperialism, as a transitional stage of capitalism corresponds with the dynamic analysis of capitalist development framed by Marx. In his rough draft of Capital, Marx summarised:
‘As long as capital is weak, it still relies on the crutches of the past modes of production, or of those that will pass with its rise. As soon as it feels strong, it throws away those crutches, and moves in accordance with its own laws. As soon as it begins to sense itself and become conscious of itself as a barrier to development, it seeks refuge in forms which, by restricting free competition, seem to make the rule of capital more perfect, but are at the same time heralds of its dissolution and of the dissolution of the mode of production resting on it.’ (Marx, 1973: 651)
Here the actual course of capitalist development, its refuge behind mercantilist tariff barriers, its emergence as free trade, and its retreat into monopoly and protection are pictured as the expression of capital’s own transition. Perceptively, Marx anticipates Lenin’s theme that capital will ‘take refuge in forms’ that are at odds with its own laws, such as monopoly, financial oligarchy, cartels and the export of capital. The specific features are not taken out of history, but related to the historical development of capital; they are, as Lenin explains, transitional forms.
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Theorising the historical development of capital(istic mode of production) in terms of phases that correspond to the first appearance, the formation of its own basis of development, and final its maturity, can also be found in the work of the Soviet philosopher Vazioulin (see more here: http://www.ilhs.tuc.gr/en/index.htm).
Still, I think there is something missing here. Using the pharma case for clarity, it is clearly the case that the (huge) difference in price between brand name drugs and generics is only due to patents. After the amortization of the initial knowledge-capital needed for a new drug (ie the material costs of research, tests and, let’s not forget, PR, advertisement and general bullshitting,) the cost of *reproduction of knowledge* is (should be) indeed zero. But the patent system prevents this from happening. Patents are a form of rent, which, as a pre-capitalist form, does slow down the diffusion of knowledge. Chemists are not allowed to use what they learned at the university, s/w engineers cannot apply what is common knowledge etc, because the law (which in this case is external to the production) does not allow it, similar somehow to the way the serfs were not allowed to deny their duties by the (external to the production) army of their lord. This is no small matter: a capitalist laborer is “free” to bargain the price of his power in the market and does so willingly, a serf is not free and does not offer his surplus work willingly. In principle (well, only in principle…), surplus value does not need external coercion in order to be extracted: Market “freedom” is suppressed by patents.
You are right!
I have to correct/add the following:
The non-consumption property of innovations has to do with our inability to understand in how they transfer value, i.e., how much value they can potentially realise.
However, there is also a problem with having value altogether.
If what I am saying is correct, namely that innovation labor is about creating a prototype use-value and therefore distinct from the use-value of the copies-commodities, then, society cannot attribute a value at all to it, since its production is not reproducible at all. (Of market can attribute a price, but this is a whole different issue, and there is also a lot of speculation around patents etc).
One can copy a prototype, or reproduce a prototype knowledge in his intellect via training, but one cannot reproduce an innovation.
Competing capitalists can produce innovative commodities that can substitute existing ones in the market, therefore having similar use-values. However, these use-values are never identical, and therefore, their prototype designs are non-reproducible.
So, here comes the challenge for marxist political economy and the theory of value: if we don’t like rents are a result of human labor, we need to connect the labor expended for innovation production, to the income of their owners in a systematic way, similar to the way Marx connected the realised value and profits to the innovation a capitalist incorporates to a production process based on the resulting increase in productivity, and therefore lowering of the cost of production, which allows him to set a price lower than the socially determined production price of that commodity in the respective branch. I doubt that there is any general solution to this problem to the degree that demand and IP law are so much involved in the commodification of innovative products.
Therefore, we might have to admit that similar to the basing the whole of value theory to the unique fact that labor power can produce more value than it consumes, innovative commodities also have a special intrinsic property: innovation labor is labor that produces a kind of human-made “natural resource”, it is commodification of something that used to come almost for free (namely science) to capitalists when Marx wrote Capital.
For the moment, I don’t see a better way than an extension of the theory of rent to incorporate this kind of commodities or labor, into value theory.
The whole problem arises from the fact that the Capitalistic Mode of Production (CMP) is a repetitive process itself: it is the process of total capital’s reproduction as an end to itself (with profit as its measure) to which society’s production process is subsumed. A production process that produces a commodity as a unique event, cannot be conceived as a value producing process within this mode of production (which is an aspect of its historical limits).
Marx linked technical innovation (a use-value property) in production to (exchange) value based on the QUANTITATIVE results of innovation to productivity, i.e., the efficiency of repetitive production of identical units of outputs. Instead, innovation that aims at increased market share, especially in the sector of production of means of consumption, is clearly only a QUALITATIVE use-value property. Advertising comes as a necessity to capitalists to compete for the demand of their innovations, i.e., for the market purchasing power the current levels of circulating surplus value can support. In that respect, innovation labor seems to be more of a function of capital, similar to advertising, i.e., a non-productive activity. On the other hand, the fact that the prototype design instructs/guides the production process of the final commodity-copies, speaks in favour of considering it a productive activity. Well, it might be a productive function, similar to the one of managers that take production-related decisions, but there is no way for the moment to theorise it as a surplus value productive activity.
Finally, one should distinguish the two different cases:
a. either innovation becomes itself a commodity (patents, cultural products like movies etc), which leaves the case open that a different capitalistic enterprise takes innovation into production than the one that produced it (including the case where the innovative product is produced by self-employed people as it is often the case e.g., with music),
b. or the enterprise that produces the innovation (e.g., automobiles, pharmas, electronics etc) is the same that also produces the final copy-commodity for consumption either as a means of production or as a means of production.
A third case that directly links with the hypothesis of super-exploitation (Smith, Higginbottom), the one of outsourcing of the actual (re)production should be counted as belonging into (a), even if the final product (e.g., iPhone) is branded by the innovative company (Apple) and not by the manufacturing one (Foxconn).
The material dimensions of socalled immaterial things… Indeed, it is misleading and has been applied to the internet and as a central argument in (anti)copyright debates in the context of digital ‘stuff’. As such it follows the usual colonial, racist, economistic ideas of externalities: the baseline of reality in Euro-America rests on the invisible infrastructures (or colonies) where the real – and material – price is paid, in the same way as server farms make the ‘free’ services of Google and Facebook very expensive. Out of sight, out of mind. The liberal brigade and the cyberspace libertarians, beginning with John Perry Barlow’s manifesto, has done much to muddy the waters. Conceptual clarity is a rare phenomenon when it comes to these (very material) matters. Thanks for adding some here!
In a capitalist society within the realm of commodity production, intellectual labour always consumes capital in its research & development stage. Accordingly this capital can only be recouped with a profit if the use value that results from this labour is amortised. The general law applies: the greater the relative share of intellectual labour in the genesis of that commodity the larger will be the share of selling price comprising amortization. Thus there is no priceless product. Moreover, if that intellectual labour has been provided by an external vendor and takes the form of Intellectual Property it forms part of c and not v in the price matrix. Therefore this form of intellectual labour adds to capital in the normal way raising the organic composition of capital, not so much by raising c but by rapidly diminishing v, the source of future profits. Consequently, the question of rents is a sideshow whereas the effect on the rate of profit is the main show. It is for this reason that I have repeatedly stated: the combination of intellectual labour contributing to the rapid devaluation of physical production is incompatible with the rate of profit. Also readers may wish to “Google” RISC-V which because it is now domained in Switzerland, is unaffected by the trade war. It brings open source to hardware for the first time undermining the IP and “rents” of Qualcomm, Arm, Intel etc.
What is the source for Marx’s comments about the servant VS the valet? Work, page number etc?
“The determinate material form of the labour, and therefore of its product, in itself has nothing to do with this distinction between productive and unproductive labour. For example, the cooks and waiters in a public hotel are productive labourers, in so far as their labour is transformed into capital for the proprietor of the hotel. These same persons are unproductive labourers as menial servants, inasmuch as I do not make capital out of their services, but spend revenue on them.”
“The cook in the hotel produces a commodity for the person who as a capitalist has bought her labour—the hotel proprietor; the consumer of the mutton chops has to pay for her labour, and this labour replaces for the hotel proprietor (apart from profit) the fund out of which he continues to pay the cook. On the other hand if I buy the labour of a cook for her to cook meat, etc., for me, not to make use of it as labour in general but to enjoy it, to use it as that particular concrete kind of labour, then her labour is unproductive, in spite of the fact that this labour fixes itself in a material product and could just as well (in its result) be a vendible commodity, as it in fact is for the hotel proprietor.
https://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch04.htm
The cook is actually involved in a manufacturing process. Capital and material inputs plus labour are being used to produce a commodity that is sold to the diner at a price that delivers a surplus for the owner of the means of production.
This conforms with the laws applying to tangible good production.
The role of the waiter is completely different. He/she is not involved in manufacturing but purely in interacting with the diner in a constructive way.
Obviously, value is being created in this interaction. Why would the owner of the restaurant hire the waiter otherwise? That value is intangible.
It is only subjectively perceptible at the level of the individual but it is nevertheless real to both the diner and to the waiter.
What determines how much the waiter is paid?
There are two elements:
1 The wage paid by the owner of the restaurant, which is determined by the subjective view of the waiter’s role in value creation in the meal that’s been delivered.
This clearly will be shaped by the owner’s desire for profit (surplus value) in the process of making and delivering the meal.
2 The tip paid by the diner. This is determined by the subjective view of the value of the interaction between diner and waiter from the diner’s perspective.
The amount paid to the waiter therefore is the result of two value-creation processes:
1 Tangible commodity production (preparation of the meal)
2 Intangible service interaction (involving diner and waiter)
Conflating tangible production and intangible creation leads to erroneous conclusions about the scale of value production in a restaurant and the laws determining how much the workers in restaurants are paid.
This is true of all transactions where tangible and intangible value commodities are simultaneously delivered.
The key is breaking down any service transaction into two parts:
1 The process involving tangibles
2 The relationship involving people
You can find it in TOSV, Chapter 4. Or I have a summary of Marx’s view of productive labour here.
The general rule of labor as value (and when it is not value) is found at book I of Capital.
“According to Rotta and Teixeira, these knowledge commodities do not have any value in Marxist terms because their reproduction tends to be costless. Knowledge can be reproduced infinitely without cost.”
This is false in every sense.
Even when you abstract the individual capital from the system as a whole, you have that the intellectual worker will necessarily work in a context where his “knowledge” is always applied to a reproducible process.
Using an example of the area of my expertise, art, we have, e.g. the musician composing the music. But the process doesn’t end here, does it? No, the musician will now have to record the composed music in a studio for a company. This company will then use this music in a normal industrial (reproducible) process — cd production — to then extract surplus value. In this case, it is not the musician who is exploited, but the workers of the album assembly line. That’s why album sales were so important in the pre-internet era to measure a musician’s success.
When the cd is absent — pure digital sales only — the same logic applies: the consumer still has to pay for the track, the difference being that the price of cost will change. The record label will have to recalculate it based on the new assembly line — from cd production to costs of online server maintenance etc. etc. The music is still reproduced; indeed, at an even larger scale than in the cd era.
In both cases, the musician is not exploited: he’s part of fixed capital. His work, in isolation, indeed has no value since art is, by definition, unique. But, in capitalism, this kind of labor never exists in isolation. The musician may or may not receive royalties on his music sales, but that’s just a juridical issue: if he does, then he becomes a capitalist himself. Indeed, the most famous artists today are capitalists, they have a participation over their music in many forms (sponsorship, clothes etc.). The only difference is that the musician works for himself, a la small and medium business owners.
But how about piracy? It matters in sales terms, but doesn’t change the overall capitalist nature of the enterprise. The only thing that changes is that the label will now have to diversify its portfolio in order to extract surplus value from somewhere else. In fact, today most labels don’t profit from album sales, but use them as leverage to collect profit from other sectors. They promote live shows, but also sponsorship for other companies (clothes, cars, watches etc. etc.). The music sales itself then becomes an means to extract profit in another, also reproducible, process. Needless to say, the social profit rates falls.
The same logic applies to football players: the superstars become really rich not when they get a brand new contract from their clubs, but when they begin to sign sponsorship contracts with big business (e.g. Nike, Adidas, Puma, Ferrari, Rolex, etc. etc.). That’s because the wealth from the clubs don’t come from ticket sales anymore, but from TV contracts; and the TV money comes from the big business who pay for prime time commercials because the audience of football games is very high. By signing directly with these big businesses, the football player cuts two intermediaries: the club and the TV channel.
But, even if you abstract all the context, we have that intellectual labor is still material: teachers are still paid salaries to teach and colleges have very well defined prices. People have to work to transfer knowledge to other people, and knowledge can — an is — destroyed: by the time of the French Revolution, many painting techniques from the Renaissance were already lost, and the quality of the paintings were already very inferior.
I think you are missing a point here.
Let’s assume that there were a capitalistic enterprise of music production, which hired workers-music composers.
It is not important here if the company pays them according to hours worked or in a piecemeal fashion (e.g., for let’s say each song).
Now, to this original labor of music composition, the same company, let’s assume, hires also musicians, technicians etc and produces a number of unit outputs, i.e., CDs, which eventually become the final commodity that enters the market.
What we have here is the following:
the value this company CAN realise in the market of this commodity has NO relationship with the time neither the music composers nor the musicians as workers worked for the production of the CD commodity.
The company can produce an infinite number of outputs without any need for the composers or the musicians to ever work again.
The demand for this CD commodity has nothing to do with the QUANTITY of the supply of the composers or musicians’ labor.
It is only the QUALITY of the musical composition and performance (as well as of the technical quality of the recording of course) that determines the demand for this CD commodity, and this demand can be met by further supplying only one kind of labor: the copying labor to produce more CD copies of the original recording.
Now assume that we add to the picture the phenomenon of musical piracy. Since the material substrate, the CD, is neither the determinant element of the CD-commodity use-value (instead, it is the music encoded in it), nor of the concrete labor to produce it (it is not the copying labor that matters, but the music composition, performance and original recording…), the CD commodity will loose almost all of its value, if the consumers can find for free the musical content.
All these problems would never arise if music composition and performance wasn’t physically separated from the production of CD-commodities, and/or if the musical composition and performance labor was not so much more expensive than the copying-labor that the production of CD requires.
In reality of course, at least music composition today is not performed by workers, since musicians are either capitalists or self-employed.
However, if you substitute music with chemical synthesis, and CDs with pills, you get the pharmaceutical industry example.
In all my reasoning, being “material” or “immaterial” is irrelevant.
What matters if a labor product is innovative/non-reproducible, or reproducible.
The capitalistic mode of production can assign social values only to use-values that are REproduced repetitively, in the repetitive self-production of capital.
It cannot assign values to use-values that have either NOT be produced by human labor (natural resources), or that can be produced only ONCE by it.
The oil companies exploit the labor to get the oil out of the ground. They don’t exploit the labor to FIND oil, which cannot be repeated, i.e., you cannot find oil again and again at the same place, and even if we have some idea about how much labor we will need to spend the next time in order to find a new source of oil of the same quality, we have no idea how much labor we need to spend in order to produce the next Madonna best-seller, or the next best medicine for cancer.
In this case, the musicians and producers assume the same role of the high-paid, liberal, white collar workers in a production line (e.g. an engineer, a software developer, etc. etc.). Neither produce value in isolation, but only in the context their intellectual output can be translated into something mass reproducible.
The chief engineer of a building is definitely necessary: without him, there’s no building to be built by the construction workers. However, without the construction workers, the engineer’s project is just an intellectual leisure, philosophy, without any real world (social) meaning.
Both are necessary (the engineer and the construction workers) to the process as a whole, but it is only the construction workers who produce surplus value. Indeed, many construction companies are founded by engineers who once worked for another construction company and gained the know-how of the business there due to his proximity with the capitalist himself. The same is true for artists in capitalism: if they get very popular, they become capitalists themselves (owners of their own “brand”, and royalties receivers). Royalty here is another term for participation on the profits of album and music sells.
The exception to the rule in the art sector is the visual artist: since visual art must be a unique object (or a unique set, in the case of multiples) by social convention (so they cannot, by definition, be reproduced, even if they objectively can in the real world), then the visual artist must convert his art directly into fictitious capital. In this case, it is pure supply and demand that determines the prices of works of art — hence they are sold with the auction model. Needless to say, visual arts depends on a juridical architecture that enables it as a fictitious capital: in this case, tax evasion legislation and tax haven containers. But that’s true for all fictitious capital, as Marx well defined in book III.
Note that uniqueness is only relevant in capitalism when it is socially convened. Uniqueness is not value: if that was the case, every individual should receive infinite wages, since they are genetically (with the exception of identical twins) unique. An art object can be falsified by professionals — indeed, the result is often better. Louvre’s Mona Lisa is, half of the year, a reproduction: the original travels to foreign museums on lease. The visitors don’t notice the difference — mainly, because there are none to be noticed: the reproduction is almost perfect, if not better, than the worn down original.
“The oil companies exploit the labor to get the oil out of the ground. They don’t exploit the labor to FIND oil, which cannot be repeated, i.e., you cannot find oil again and again at the same place, and even if we have some idea about how much labor we will need to spend the next time in order to find a new source of oil of the same quality, we have no idea how much labor we need to spend in order to produce the next Madonna best-seller, or the next best medicine for cancer.”
Just no so, referring to oil companies. a) the companies do exploit labor to find oil. it’s called “finding costs” as opposed to “lifting costs.” and yes “finding the oil again” does take place in that the amount of oil that can be extracted is an economic relation, just as oil reserves are an economic determination not a geological determination. Reserves are defined as the amount of oil that can be extracted with current technology, at current price, yielding a profit.
Horizontal drilling, seismic imaging making it possible to “find the oil again” — that is increase the amounts extracted profitably. Same thing with the advances in fracking technology that allowed fewer rigs to produce a greater number of wells and “find more” of the oil.
Indeed oil companies do know how much it will cost to “find” more oil in the same place.
“It cannot assign values to use-values that have either NOT be produced by human labor (natural resources), or that can be produced only ONCE by it.” Huh? Cowflop has a use value in manuring fields, bird guano likewise.
And certainly a use value can be assigned to a specific genetic therapy, suitable to a single person, or a very limited number of people. The value may be problematic, as it may be impossible to amortize the value over enough time and replications, but again, these are all factors dependent on the overall development of society, of social labor, which capital retards.
“we have no idea how much labor we need to spend in order to produce the next Madonna best-seller,”
Of course record companies do know how much they need to spend to get air-play, to arrange a tour, to get Spotify on-board, to arrange the advertising, etc.
How do you think Madonna became a “star” to begin with? Natural talent? Meritocracy? Free markets?
OK. So, I guess that oil will never finish, because the capitalists know how much they need to invest to “find more”. I guess the same argument would also go for fertile land. We can always work to find/create more. Therefore, there is anyway no base for the theory of rents in general. Finally, yes, there are use values that have no values. Air for instance. Also, use values produced in free time. etc It is not out of the question that one day capitalists will try to put a price even to air (water is already there). This doesn’t mean that this price will be proportional to the abstract labor expended on the water service. Because water is a natural resource, non reproducible by ABSTRACT human labor, and also relatively scarce. Innovative intellectual labor (which creates new knowledge) creates something like “water” that additionally never wears out, and can be used without being consumed by infinite people at the same time. I still do not believe that we can reduce this to a quantity of abstract labor. Obviously the capitalists have managed to put a price on it via IP law. But, how is this price determined? And yes, when it comes to intellectual labor, talent, intuition, etc can become very crucial. I don’t think that “productivity” in intellectual labor approaches a mean value with a sample of let’s say 5 scientists (I am referring to a passage from Capital I on farming labor, that about every 5 farm workers you get the average productivity). I don’t believe that this kind of labor fits in the capitalistic mode of production, although capital certainly tries to fit it, in order to exploit it.
“OK. So, I guess that oil will never finish, because the capitalists know how much they need to invest to “find more”. I guess the same argument would also go for fertile land. We can always work to find/create more. Therefore, there is anyway no base for the theory of rents in general.”
I think that your argument becomes an iteration of scarcity theory- that there are “natural” limits that cannot be overcome, with objects, substances that cannot be reproduced. Will the oil run out? That’s not the question, really. The question is does the price of oil, the reproduction of oil have anything to do with scarcity or or those things moments generated by capital itself?
Rent theory, or rather rent-practice, has nothing to do with the “natural scarcity” of land, but rather the private ownership of land which may generate a scarcity.
As for this, “Finally, yes, there are use values that have no values” that’s not what you said in the previous post, nor what I responded to. There you wrote, .“It cannot assign values to use-values that have either NOT be produced by human labor (natural resources), or that can be produced only ONCE by it.”
Of course capitalism does assign values to use-values not produced by human labor.
“Because water is a natural resource, non reproducible by ABSTRACT human labor, and also relatively scarce.”
The scarcity is socially generated, a result of property relations, not natural limitations. Take a look at water scarcity in India, and Capetown, South Africa.
Michael, a very astute and accurate presentation from the first half I’ve read in detail, whilst skimming the second half. I have made the same arguments in my response these arguments about information having no value, as presented by Paul Mason, in my critique of his Postcapitalism.
I wrote, for example,
“The real reason that accounting and orthodox theory has a problem in valuing information is actually because information, of itself, has no value. The labour undertaken to obtain information is value creating, in so far as the information it produces is usable information that is then embodied in some product/commodity. If an author spends 100,000 hours of simple labour researching, analysing and codifying data, the resultant information only has value in so far as someone wants to utilise this information, i.e. it is, for them, a use value. If we say 1 hour of simple labour is equal to £1, the labour required to produce the paper and so on required for a book to be published may amount to say £5, the labour to typeset it, and print it a further £5. But, if only one book is produced it would have a value of £100,010, at which price its unlikely to sell any copies. If however, 100,000 copies of the book can be sold, it would have a value of £11 per book, and have the potential to be sold.”
What Paul, as well as Rotta and Teixeira seem to miss in the argument on rent, is that for Marx, rent is surplus profit, and surplus profit implies that commodities sell at prices above their price of production. Marx explains that this exists in agriculture because the monopoly of land ownership prevents capital accumulating in agricultural production so as to be able to drive up production/supply so as to drive down agricultural prices to the level of the price of production.
In industrial production is exists because of frictions in the free movement of capital and labour – one reason Marx would have opposed Brexit. Here, these frictions prevent the required accumulation of capital to drive down prices, and remove the surplus profit. The existence of patents and intellectual property laws represent one such friction.
But, the same can apply to things such as the pay of premier league footballers. One argument that has been put to explain that is the existence of rent. The argument is put back to front. It is put that these high wages and rent enables football clubs to charge high prices, and from that they pay high wages. But, the reality is that the high prices must proceed the high wages on Marx’s theory of value. It is because consumers place a high value on the labour of the footballer – i.e. they view it as very highly complex labour – which means that the football club that employs these players makes surplus profits. In theory, more capital should be employed in football to obtain these surplus profits, but to do so, it would need to employ more footballers. Their labour is not in limitless supply. So, instead, some of the surplus profit of the football club is soaked up as higher wages for footballers.
It may not be that the footballer’s labour-power is significantly of higher value than that of any other form of labour-power, and so their wages should only match the value of that labour-power, but the fact that their wages may be much higher than that is an indication that they also obtain additional revenue as rent, arising from this constraint on the supply of that labour-power.
Similarly, it is not rent that explains the value/price of knowledge goods/services, but the high value of those knowledge goods/services, as the product of very complex, high value labour, that explains the existence of the rent.
According to Rotta and Teixeira, these knowledge commodities do not have any value in Marxist terms because their reproduction tends to be costless. Knowledge can be reproduced infinitely without cost. Previous authors have claimed that because knowledge commodities have no value, Marx’s law of value no longer holds. Rotta and Teixeira argue that they can restore Marx’s law of value as an explanation of knowledge commodities. And their solution is that, although knowledge commodities have no value, the owners of such commodities through patents and copyrights etc can extract rents from productive capitalist sectors, in the same way, as Marx explained, rents were extracted by landlords (through their monopoly of land) from productive capitalists. They conclude by estimating the increased amount of value being extracted in the form of ‘rents’ by ‘knowledge industries’.
Nonsense. Knowledge commodities do have a cost of reproduction. That the cost is social, that it depends on the development of society, on the level of education, training, equipment and time made available, doesn’t make it costless.
Where and when can, or has, knowledge ever been reproduced without cost? Is a library without cost? A research lab? The recreation of a genome is without cost?
That these costs are borne by society makes them invisible to those so firmly trapped within commodity fetishism.
The cost of reproduction has to be a capitalistic cost of reproduction for the concrete labor to be converted to abstract labor. State spending is not capital investment, but consumption of surplus value. The distinction is not just conceptual, since different social/productive relationships are in play in the two cases.
Moreover, reproduction has to be reproduction of the same commodity. Not of an equivalent one, or of the “next one” in technological development.
The same knowledge cannot be (re)produced twice. Neither the same algorithm, or chemical synthesis etc.
I disagree with Rotta that the use-value of the original prototype is the same as the use-value of the copies derived from it. The original prototype’s use value is to command further production processes. The labor to produce it brings with it several processes of testing, validation, standardisation of a product, in order for this use-value (possibility to command a production process) to be created. Instead, the use-value of the copies relates to consumption either as a means of consumption or as of a means of production.
In any case, the fact that the original production of the prototype is based mostly on what Marx called “universal labor”, funded to a large degree by state, and eventually patented and exploited by some private enterprise, speaks in favour of the explanatory power of rent theory together with a process of dispossession.
In other words, no-one says that knowledge doesn’t have a price or a cost. The problem is whether this cost can be understood in terms of abstract labor, i.e., if its cost is proportional to the necessary social time for its reproduction, and consequently, whether its price is determined by such a value/cost.
“State spending is not capital investment, but consumption of surplus value. The distinction is not just conceptual, since different social/productive relationships are in play in the two cases.”
it depends on the type of state spending. Taxes, as Marx defines them, are indeed a revenue deducted from profits, where they are used simply for the administration of the state. However, the state engages in many activities that are not simply about such administration. The state also acts as a state capitalist. It produces commodities, and employs wage labour.
Nationalised energy, steel, car producing, transport and other such industries utilise state money-capital, to acquire productive-capital. They produce these commodities, and in the process produce surplus value. Whether all of this value/surplus value is realised in the sale of these commodities is irrelevant. For example, when UK nationalised industries sold energy to private firms at prices below the price of production, some of the average profit it should have obtained is transferred to the private companies that were its customers. If we assumed that the commodities were sold at their exchange-values, in other words, some of the surplus value produced in these industries was transferred to the consuming industry.
If we take another commodity produced by the capitalist state, education, then again, the state provides the money-capital to acquire the productive-capital as buildings, auxiliary materials, wage labour. The workers, teachers, assistants etc. produce surplus value, i.e. they produce new value greater than their wages. Again, whether this value, and surplus value is fully realised is irrelevant. The payment for this commodity produced and sold collectively is paid for out of what appear to be taxes, but on Marx’s definition of ta is not really tax, but a social insurance premium, paid collectively by workers to finance the purchase of this commodity to educate its children.
The payment of this social insurance premium to provide a wage good required for the reproduction of labour-power comes not from surplus value, but necessarily from the wage fund, i.e. from variable-capital.
As Engels says, this function of the state simply makes the state into the epitome of the capitalist relation.
The question is can the cost be captured and reproduced in, and as, value.
I tend to agree regarding this problem with the analysis provided by ucanbepolitical.
”However, the state engages in many activities that are not simply about such administration. The state also acts as a state capitalist. It produces commodities, and employs wage labour.
Nationalised energy, steel, car producing, transport and other such industries utilise state money-capital, to acquire productive-capital. They produce these commodities, and in the process produce surplus value.” Agreed!
”If we take another commodity produced by the capitalist state, education, then again, the state provides the money-capital to acquire the productive-capital as buildings, auxiliary materials, wage labour. The workers, teachers, assistants etc. produce surplus value, i.e. they produce new value greater than their wages.” Unconvinced!
To whom is this commodity sold? It is delivered free to the student at the point of use. How might the surplus value be calculated? I know of no state school accounting that attempts to measure the profitability of a school. Any accounting is to measure expenditure against a school budget. A similar accounting would surely apply under socialism? The state, as you say, clearly buys the school buildings as a commodity from the capitalist . But I cannot understand how the labour of the teachers produces a commodity. It is quite different with so-called academies, where the purpose is to realise a profit that belongs to the owners who invest their capitals.
J,
The situation with education is no different to with energy etc. A private school, or tutor provides a labour service/commodity if you like, the commodity being education. Let’s ignore prices of production here, because given that this is a labour intensive service industry, the organic composition of capital is low and rate of turnover high, so that the rate of profit would be high causing a lot of capital to enter this sphere, pushing down the market price to way below the exchange value.
Let’s instead assume that the service commodity sells at its exchange value, thereby also ignoring fluctuations in market price. The exchange value of the commodity/service is determined by the value of the constant capital consumed (wear and tear of fixed capital, consumption of auxiliary materials, paper, chalk etc) plus the new value added by labour of teachers etc. The surplus value is equal to this new value created by labour, less the wages paid to that labour.
In terms of these different categories the form in which they appear is irrelevant. For example, suppose a manufacturer sets up the school, as was the case in the 19th century. They provide education to their child operatives for free, at the point of use. Does this in any way change the value and surplus value created? No. The children educated do not pay for their education, but likewise, nor do they or their parents have to have wages of a sufficient level to cover the cost of paying for that education. The manufacturer simply cuts out the intervening process of paying wages that cover the cost of education, and instead provides the education directly, much as they utilised the Truck System to sell commodities directly to their employees.
The employer, likewise obtains the labour-power they require now suitably enhanced by this education. There was an obvious incentive for employers to do this at a time when socialists and cooperatives were setting up schools for workers, which had the capacity to educate workers in ways that the employer would not like. When workers and communists established the Plebs League, and the National Labour Colleges Network for example, the employers were quick to try to provide a safe, cheap alternative via their connections to the TUC, to establish the Workers Educational Association.
You are confusing the creation of value and surplus value, with its realisation and accurate measurement. When the state takes on this function, just as when it takes on the production and sale of steel, this does not change the underlying value relations. The state could give steel away free at the point of use if it so chose. It would not change the value of the steel only its form of realisation. Those industries that consumed the steel would now acquire the steel for free rather than paying for it at its value. They would appropriate some of the surplus value produced by workers in the steel industry. They would sell their output at a lower price than they would previously have done and the consumers of these commodities would thereby appropriate that value. For example, to the extent that workers consumed these products, it would reduce the value of labour-power, and so raise the rate of surplus value. All capitals would thereby appropriate additional surplus value, being a fraction of that created in the steel industry, whose output is now given away free.
It does not matter whether state education is paid for by students paying individual school fees, or whether it is paid for via a collective payment, via social insurance. Think of any other form of insurance. It doesn’t matter to the car repairers or the builders whether the work they do to repair the damage to your car or house is paid for directly by you, or by an insurance company.
Or think of the other example I’ve given, which is a bridge. If a company builds a bridge for the purpose of making a profit from doing so, it is clearly a commodity. It uses constant capital, and labour. The value of the constant capital can be calculated, but how to calculate the value added by labour? How then to calculate the surplus value. The value added by labour can only be determined by the price that drivers are prepare to pay to use the bridge, multiplied by the amount of traffic during the lifetime of the bridge. But, does it matter to the bridge builder whether they obtain this value by operating the bridge themselves, which involves additional costs, and taking individual tolls, or whether they sell annual tickets for unlimited use to drivers, or that they make usage free, but charge companies to be able to advertise along the bridge, or that the bridge was commissioned by the local authority/government, who pay for it as a lump sum? Answer no.
If the local authority/government enable free usage, this does not change the underlying value relation. The bridge still has value, and each time someone uses the bridge they obtain use value from having done so. Whether they pay individually for that use value or not is irrelevant. If the bridge is owned by the government, its financed out of “taxes”, which means its paid for by consumers collectively. If the bridge owner takes in money from advertisement, the buyers of the commodities being advertised pay for it, in the part of the price of those commodities equal to the advertising cost.
Boffy, Thank you for your considerate and indeed considerable reply, which I shall need to think about. I believe like me you hold that for Marx value expresses itself as value, use value and exchange value. Unfortunately, I do not have access to my Marx works at the moment so cannot give references, but I think he argues this in TSV. Certainly I agree then that Schools produce value i.e an educated workforce, but I cannot see how they produce surplus value.
However that may be, this is true also of private schools. No doubt institutions like Eton, Harrow etc. have considerable capital holdings, but many private schools are not run to produce a profit and so increase their capital, but to produce educated young people, their accounts recording income and expenditure so as not to go into the red. Thus my disappointment at Labour’s promise to abolish the privilege of private schools to be replaced with state ones, which will do nothing to abolish class distinctions; a matter of seeking to cure the symptoms rather than the causes of class distinctions, thus rendering class society more appealing to the upwardly mobile: bourgeois socialism as Marx calls it. Recall that Marx himself opposed state education and Engels supported the existence of religious schools, so long as they were financed by their users. Yet again Labour shoots itself in the foot!
J,
“Certainly I agree then that Schools produce value i.e an educated workforce, but I cannot see how they produce surplus value.”
If you accept that they produce value, then you must accept that they can produce surplus value, because the surplus value is only the difference between the value they create, and the value of the labour-power/wages that creates it. It doesn’t matter whether this labour-power is employed by a private capitalist or a state capitalist, just as with labour-power employed in steel production, coal production or anything else.
The Law of Value is not fulfilled.
Karl Max recognizes him in the first chapter of his first volume.
I don’t understand why Marxists believe in everything Karl Max says, except this.
Michael Roberts wrote:
“But productive labour is labour expended under the capitalist production relation. Productive labour is not just what produces physical goods.”
This is the view that Marx appeared to have when he wrote the manuscripts for Theories of Surplus Value and the first volume of Capital. In volumes two and three there is a shift to a different definition since Marx appears to recognize that not all labor employed by a capitalist is ipso facto productive. Some forms of employment, such as mercantile labor, belong to the “faux frais” of production and create neither value nor product. Some labor – what we now call services – are in fact simply an extension upon the production process of products themselves and the value of the labor employed is transferred onto products being transported or prepared.
”Some labor – what we now call services – are in fact simply an extension upon the production process of products themselves and the value of the labor employed is transferred onto products being transported or prepared.”
I cannot at the moment recall where but I seem to remember a passage where Marx says that the shop worker adds value to the commodity by their labour in preparing and parcelling a product. This should not be confused with the actual act of selling, which does not add value, as it is merely the transfer of ownership. That his argument is correct I think may be realised by comparing a butcher with an abattoir worker.
“Some labor – what we now call services – are in fact simply an extension upon the production process of products themselves and the value of the labor employed is transferred onto products being transported or prepared.”
Not true.
““If we may take an example from outside the sphere of production of material objects, a schoolmaster is a productive labourer when, in addition to belabouring the heads of his scholars, he works like a horse to enrich the school proprietor. That the latter has laid out his capital in a teaching factory, instead of in a sausage factory, does not alter the relation.”
(Capital I, Chapter 16)
“In short, the production of these services can be in part subsumed under capital, just as a part of the labour which embodies itself in useful things is bought directly by revenue and is not subsumed under capitalist production.” (TOSV 1, p 167)
“… an entrepreneur of theatres, concerts, brothels, etc., buys the temporary disposal over the labour-power of the actors, musicians, prostitutes, etc.—in fact in a roundabout way that is only of formal economic interest; in its result the process is the same—he buys this so-called “unproductive labour”, whose “services perish in the very instant of their performance and do not fix or realise themselves “any permanent” (“particular” is also used) “subject or vendible commodity” (apart from themselves). The sale of these to the public provides him with wages and profit. And these services which he has thus bought enable him to buy them again; that is to say, they themselves renew the fund from which they are paid for. The same is true for example of the labour of clerks employed by a lawyer in his office—except for the fact that these services as a rule also embody themselves in very bulky “particular subjects” in the form of immense bundles of documents.” (TOSV 1, p 166)
“It is true that these services are paid for to the entrepreneur out of the revenue of the public. But it is no less true that this holds good of all products in so far as they enter into individual consumption. It is true that the country cannot export these services as such; but it can export those who perform the services. Thus France exports dancing masters, cooks, etc., and Germany schoolmasters. With the export of the dancing master, or the schoolmaster, however, his revenue is also exported, while the export of dancing shoes and books brings a return to the country.” (TOSV 1, p 166)
“These definitions are therefore not derived from the material characteristics of labour (neither from the nature of its product nor from the particular character of the labour as concrete labour), but from the definite social form, the social relations of production, within which the labour is realised. An actor, for example, or even a clown, according to this definition, is a productive labourer if he works in the service of a capitalist (an entrepreneur) to whom he returns more labour than he receives from him in the form of wages; while a jobbing tailor who comes to the capitalist’s house and patches his trousers for him, producing a mere use-value for him, is an unproductive labourer. The former’s labour is exchanged with capital, the latter’s with revenue. The former’s labour produces a surplus-value; in the latter’s, revenue is consumed.” (TOSV 1, p 157)
I repeat:
“In volumes two and three there is a shift to a different definition since Marx appears to recognize that not all labor employed by a capitalist is ipso facto productive.”
Your quotes demonstrate Marx’s attitude in TOSV and Capital vol.1. Do you think that Marx was wrong to change his mind about this issue, or did you simply miss the first half of my comment?
This is what Marx has to say on the topic in volumes two and three of Capital:
“But there are certain independent branches of industry in which the product of the productive process is not a new material product, is not a commodity. Among these only the communications industry, whether engaged in transportation proper, of goods and passengers, or in the mere transmission of communications, letters, telegrams, etc., is economically important.”
(Capital vol.2, ch. 1)
He later concludes:
“If it [the service] is consumed individually its value disappears during its consumption; if it is consumed productively so as to constitute by itself a stage in the production of the commodities being transported, its value is transferred as an additional value to the commodity itself.”
(ibid)
In a separate chapter, Marx wrote:
“In order to simplify the matter (since we shall not discuss the merchant as a capitalist and merchant’s capital until later) we shall assume that this buying and selling agent is a man who sells his labour. He expends his labour-power and labour-time in the operations C — M and M — C. And he makes his living that way, just as another does by spinning or making pills. He performs a necessary function, because the process of reproduction itself includes unproductive functions. He works as well as the next man, but intrinsically his labour creates neither value nor product. He belongs himself to the faux frais of production.”
(Capital vol.2, ch.6)
In volume three of Capital, Marx wrote:
“Since the merchant, as a mere agent of circulation, produces neither value nor surplus-value (for the additional value which he adds to the commodities through his expenses resolves itself into an addition of previously existing values, although the question here poses itself, how he preserves this value of his constant capital?) it follows that the mercantile workers employed by him in these same functions cannot directly create surplus-value for him.”
(Capital vol.3, ch.17)
No, I didn’t miss the first part of your comment, but the references to the comments in Capital II and II are not relevant, as the quotes you have given demonstrate.
I could, of course, respond that Capital Volume I, is the only volume actually published by Marx himself as a completed work, and that Volumes II and III, were put together by Engels, who was asked by Marx, to “make something of these”, referring to his scattered notes in a series of notebooks. Its not that Volume I was written much prior to Volumes II, and III, and that, therefore, the contents of Vol II, and III, represent some later more developed thinking. Nor indeed, is that true in relation to TOSV. In his original plan for Capital, the contents of TOSV were intended to be historical excurses, elaborating the development of thought on the particular topics under discussion. They are written alongside the same topics discussed in Capital, as can be seen by reading TOSV, and connecting it to the relevant passages of Capital, that Marx had originally intended them to accompany. But, Marx decided that these excurses were so extensive that they would have cluttered the discussion of the specific topic, and so decided to collate them as a fourth volume of Capital in their own right.
However, I will not answer your point in that way. I will deal with the quotes you have given.
Ist. Quote. Read the full text in Volume II. Marx classifies communications as productive. He classifies the labour employed as productive. It adds vale and surplus value. Marx says the value of a commodity is only determined at the point it reaches the market where it is to be consumed, and so whilst transport of those goods, say by train, is clearly not a “product”, the value and so surplus value created by the labour involved in that transport adds to the value of the goods at the point they reach the market.
“Quantities of products are not increased by transportation. Nor, with a few exceptions, is the possible alteration of their natural qualities, brought about by transportation, an intentional useful effect; it is rather an unavoidable evil. But the use-value of things is materialised only in their consumption, and their consumption may necessitate a change of location of these things, hence may require an additional process of production, in the transport industry. The productive capital invested in this industry imparts value to the transported products, partly by transferring value from the means of transportation, partly by adding value through the labour performed in transport. This last-named increment of value consists, as it does in all capitalist production, of a replacement of wages and of surplus-value.” (Capital II, Chapter 6, p 153)
Note that Marx says that although the capital and labour employed in transport/communications does not create a product (usually the definition of a service) he does describe it as a “production process” which creates and adds value and surplus value, i.e. it is productive-capital and productive labour. This is entirely consistent with what he says in TOSV and Capital I.
Quote 2, directly contradicts our argument itself. It means this. If the transport, say a train ride, is for passengers, then it is consumed individually by the passenger. Its value disappears on consumption, just as, if I eat a piece of cake, its value disappears on consumption. But, note here that Marx says that the value disappears, which means that there must have been value there to begin with!
The second part of this quote simply confirms what Marx says in the quote from Chapter 6 I have given. In other words, if the transport is a transport of goods rather than passengers, the value is not immediately consumed, but becomes a part of the value of the commodities being transported.
Quote 3. But, no one challenges the idea that commercial capital does not create new surplus value. The argument is about service industry, not commercial capital. Even in relation to commercial capital, Marx is clear that whilst it does not produce additional surplus value, it does produce additional realised profit, by reducing the costs of circulation. That is precisely why productive-capital farms out these activities of the circulation process to commercial capital, because it raises the average annual rate of profit! In short you are confusing service industry and the productive capital employed in it with the circulation process of capital and the commercial capital employed in it. These are two completely different things, just as Marx shows that transport is a productive industry that is completely separate from the actual merchant capital involves in selling goods on the market.
Quote 4 simply continues this confusion and conflation of service industry, which is productive with the circulation process of industrial capital, and the role of commercial capital. What does a service industry such as healthcare or education, or entertainment and so on have to do with the circulation of industrial capital, in the way that a supermarket acts to circulate commodity-capital? Nothing. The only thing connecting them is that in service industry, because the product is consumed coterminously with its production, the productive-capital employed in services acts to simultaneously circulate its own capital. But, as Marx says in Capital II, what defines commercial capital is that it is ONLY involved in the circulation process, whereas all productive-capital engages to some extent in the circulation process.
A coal producer, for example, must employ purchasing clerks and sales clerks who deal with a part of the circulation process of its capital, even if it also sells its coal via a wholesale coal merchant.
But, you have not given the full quote rom marx from Chapter 17, which also illustrates the point made earlier that whilst commercial capital does not create additional surplus value, it does create additional realised and profits, and that the labour it employs to achieve this result, thereby appears to the commercial capital as productive labour in so far as it creates this additional profit.
“It is only through its function of realising values that merchant’s capital acts as capital in the process of reproduction, and hence draws on the surplus-value produced by the total capital. The mass of the individual merchant’s profits depends on the mass of capital that he can apply in this process, and he can apply so much more of it in buying and selling, the more the unpaid labour of his clerks. The very function, by virtue of which the merchant’s money becomes capital, is largely done through his employees. The unpaid labour of these clerks, while it does not create surplus-value, enables him to appropriate surplus-value, which, in effect, amounts to the same thing with respect to his capital. It is, therefore, a source of profit for him. Otherwise commerce could never be conducted on a large scale, capitalistically…
Just as the labourer’s unpaid labour directly creates surplus-value for productive capital, so the unpaid labour of the commercial wage-worker secures a share of this surplus-value for merchant’s capital…
To industrial capital the costs of circulation appear as unproductive expenses, and so they are. To the merchant they appear as a source of his profit, proportional, given the general rate of profit, to their size. The outlay to be made for these circulation costs is, therefore, a productive investment for mercantile capital. And for this reason, the commercial labour which it buys is likewise immediately productive for it.”
(Capital III, Chapter 17)
In the field of commodity production in a capitalist society, intellectual labor often absorbs capital in its stage of research and development. Accordingly, only if the usage cost arising from this labor is amortized can this capital be recovered with a profit. General law applies: the greater the proportion of intellectual labor in the production of that commodity, the greater the proportion of intellectual labor
If the price comprises c+v+s and the article discusses the devaluation of v+s then it is clear that c is important especially when R&D forms an increasing part of c when it forms an external input. So the logic of what you say is this, depending on the size of the R&D and volume of output in which v+s is found will be the contribution to price from the element of amotization. So it is not simply the form that intellectual labour takes on either side of production process but it’s changing importance.
I should have added: the discussion is over magnitude not form.
Michael, we’ve discussed this so this will be short..
In services, value is created through constructive human interaction (this is another way of stating the labour theory of value).
That value is intangible and immaterial but objectively perceptible (and therefore real in a meaningful way to humanity).
The price paid is determined by the relationship between the participants in a service transaction. The party that has greater financial resources and the law behind them can exploit the other party and parties (in other words, there’s class and exploitation in services that is objectively perceptible and consequently real).
The argument that: “the expenditure of human energy that constitutes the cognitive process, thinking, causes a change in the nervous system, in the interconnections between the neurons of the brain” and is therefore material is unconvincing.
it involves complicating to almost incomprehensibility what is in fact a fairly simple truth about service transactions (including teaching).
In service industries (which create intangible goods) only constructive labour creates value and the price paid is determined by the balance of power in the transaction.
This is an attempt to reconcile C1 V1 of Capital with the reality of contemporary services: https://www.academia.edu/34013631/Marx_and_the_irresistible_rise_of_intangible_capitalism.
Apologies for being repetitive.
Boffy wrote:
“Its not that Volume I was written much prior to Volumes II, and III, and that, therefore, the contents of Vol II, and III, represent some later more developed thinking. Nor indeed, is that true in relation to TOSV.”
As far as I know, Marx wrote the manuscripts used for TOSV prior to 1863. Later, he began working on his (second) plan for Capital but only completed volume one by early 1867. From 1868 until his death he worked sporadically on completing volumes two and three but did not finish. If Engels can be trusted, his editing of volume two was limited “to matters of form.” Part 1 of volume two, the source for some of our discussion, was said to be largely worked out by Marx in his manuscripts and the only “somewhat complete” elaboration of volume two was written in 1870 – after the first volume had been edited and published.
So I think it’s entirely within the realm of possibility that Marx changed his mind on certain details between writing the manuscripts for TOSV and volume one during one period and the manuscripts for volumes two and three during another period.
Boffy wrote:
“Marx says the value of a commodity is only determined at the point it reaches the market where it is to be consumed, and so whilst transport of those goods, say by train, is clearly not a “product”, the value and so surplus value created by the labour involved in that transport adds to the value of the goods at the point they reach the market.”
Amazing! It’s like you finally understand what I said in my original comment! I wrote,
“Some labor – what we now call services – are in fact simply an extension upon the production process of products themselves and the value of the labor employed is transferred onto products being transported or prepared.”
Boffy wrote:
“In short you are confusing service industry and the productive capital employed in it with the circulation process of capital and the commercial capital employed in it.”
I didn’t confused anything. I commented on two separate types of employment to illustrate my point. You’re making a strawman argument.
Hopefully someone with better reading comprehension can actually gain something from this exchange.
”“Some labor – what we now call services – are in fact simply an extension upon the production process of products themselves and the value of the labor employed is transferred onto products being transported or prepared.”
I think you did not express yourself too clearly. I understood you as claiming that the some part of the value of the labour employed in a commodity’s production is transferred to to the product when transported i.e. no additional value is created, merely part of the original value is transferred as a kind of ‘faux frais’. But perhaps you meant that the labour expended in transporting adds to the value of the commodity?
J,
My understanding of what was being claimed is exactly the same as you say here. As I said its the same argument about services leaching off the value created by manufacturing industry as put by Brien Green in the previous thread.
As I said, I wasn’t relying on the fact that the notes for TOSV and Capital I were written alongside Marx’s work on the notes for Capital II and III. I think in any case you are confusing the work on the notes for publication with the actual publication dates. Your comment in relation to Engels’ publication of Volume II, illustrates that point. In other words, Engels’ only made presentational changes other than where, as he says he and Sam Moore had to produce whole new calculations and tables in relation to tables etc. In other words, Engels’ was only publishing material that Marx had written in his notebooks much earlier. The same is true for Volume III.
Your argument is clearly framed so as to suggest that “services” are not productive, but that they are just an extension of productive industry, absorbing the value and surplus value produced at these earlier stages. It is the same false argument that was proposed by Brien Green (UCANBPOLITICAL), in the previous thread.
For example, you say above,
“In volumes two and three there is a shift to a different definition since Marx appears to recognize that not all labor employed by a capitalist is ipso facto productive.”
What are we take from this other than that you are arguing that this labour that is not productive is the labour under discussion, i.e. that involved in services, which you also conflate with commercial labour, and labour involved in the transport industry, all of which for Marx are different?
What is the evidence for that? Its your immediately following two sentences.
“Some forms of employment, such as mercantile labor, belong to the “faux frais” of production and create neither value nor product. Some labor – what we now call services – are in fact simply an extension upon the production process of products themselves and the value of the labor employed is transferred onto products being transported or prepared.”
So, it could be that as JLowrie says you simply express yourself badly, or it could be that if we interpret what you are saying here as meaning that transport and service industry is after all productive of value and surplus, then this is rather at odds with you coupling this with the idea that Marx had changed his view about productive labour in later volumes of Capital from what he wrote in Volume I, and TOSV, because that is wholly consistent with his view in Capital I, and TOSV. What do you now claim that Marx changed? Marx never claimed that commercial capital, and labour employed by commercial capital was productive of surplus value. So what is different?
I’ll let others decide whether you were actually conflating service industry with commercial capital in your earlier comments where you completely fail to state that you are presenting these two examples as contrasts. But, the simple question to resolve that as stated above is this. Marx never in TOSV or Capital I considered commercial capital, or the labour employed by it as productive of surplus value. So, of you believe that in Capital II and III, Marx’s view differs from his view in TOSV and Capital I, you should tell us how it differs! Which labour exactly is it that Marx describes in these later volumes as being unproductive compared to having claimed it to be productive in TOSV and Capital I.
1. I agree that profit comes from exploitation and from differences in the organic composition of capital and that mental labour produces surplus value if employed in capitalist production. Nevertheless the profits of google, facebook, microsoft, apple and s on are much higher than can be explained this way. This is because in addition to the profit they produce and appropriate this way the appropriate high rents, that is value produced in other parts of the economy, in this lowering the profits of other capitalists.
2. Some other people argue, that production of services is not productive labour, even if done in capitalist mode of production. I think this is a very wrong view and not the one of Marx. In my view even Marx should be read critically when he writes that labour in circulation (but that is only a minr part of services) is not productive. Here a longer text of mine translated from German, so the pages in quotations are referring to German issues of MEW:
Marx depends exclusively on the social form and not on the material content of the work or on whether the work is spent on the production of goods or services. In Marx’s definition, it must always be clear what its meaning is and that it does not mean an evaluation of the work from the perspective of society as a whole. I suggest, to avoid misunderstandings, that we write about the meaning in which the term is currently being used, that is, that it is capitalist productive work.
First, therefore, he extends the concept of productive work for a work process based on cooperation to all activities that are necessary components of the total work (cf. MEW 23, 531), even considers managerial activity as “productive work that must be carried out in every combined mode of production” (MEW 25, 397). On the other hand, it narrows the concept of productive labor by specifying it for capitalist production. Here, labor is only productive if it produces commodity value, and that is not enough: if it produces added value for capital. If this is the case, services are also regarded as productive (cf. MEW 23, 532; as an example, Marx here takes an employed teacher at a commercially run private school, but the same also applies, for example, to wage workers in gastronomy or other service sectors).
Not productive in the capitalist mode of production are those jobs that are not performed as wage labor for the purpose of capital utilization, but within the framework of the private household or non-capitalist production, i.e. also services that are purchased from household income (revenue) and serve unproductive consumption (even if they are capitalist households), such as the work of a housekeeper, hairdresser or private tutor. But if they are wage earners in capitalist enterprises, their work would be considered productive again, for it would not be the household income of the customers from which they are paid directly, but they would receive wages. However, all public services are considered unproductive because the wage workers employed there do not produce any added value. Marx presents his view in detail and coherently in the section “Productive and unproductive work” of the text “Results of the immediate production process”. Marx writes there: “The same work (e.g. gardening, tailoring, etc.) can be done by the same workingman in the service of an industrial capitalist, or a direct consumer, etc. In both cases he is a wage worker or a day labourer, but in one case he is a productive, in the other he is an unproductive worker, because in one case he produces capital, in the other not; because in the one case his work forms a moment of the process of self-realization of capital, in the other not.”
Another aspect of Marx’s theory of value in relation to services, however, in my opinion does not make sense, namely in relation to commercial or circulation activities in the broadest sense. Marx sums it up in such a way that neither value nor added value is produced directly in the circulation process (although value-added production is indirectly promoted in the direct production process), because there only changes of form or changes of ownership of the already existing mass of goods and value are carried out, but no additional product or value is added. additional use value is produced as a condition of value (MEW 25, 300 – but in my opinion this contradicts p. 290, Fn 38: “The use value of a good is greater in the hands of the consumer than in the hands of the producer, because here it is realized in the first place”). “The general law is that all circulation costs, which arise only from the transformation of the form of the goods, do not add any value to the latter. The capital invested in these costs (including the work it commands) belongs to the faux frais of capitalist production. The replacement of the same must take place out of the multi-product and forms, considered the whole capitalist class, a deduction from the added value or multi-product, just as for a worker the time which he needs to the purchase of his food is lost time.” (MEW 24, 150)
However, the capital employed here is considered to be part of the total social capital, which is included in the profit rate equalisation and thus appropriates a corresponding share of the added value produced. The following also applies to the work of commercial wage earners: “It is work that realises values, but does not create values”. (MEW 25, 309). But Marx also rightly writes: “To industrial capital the circulation costs appear and are expenses. They appear to the merchant as the source of his profit … So also the commercial work that it buys is directly productive for it.” (MEW 25, 313) The perspective quoted above by Marx, “the whole capitalist class considered”, is in reality only that of the industrial fraction of that class. It is dominant, but not the whole class. And the category of “expenses” is problematic or superfluous overall, because “expenses” are actually all those costs that are avoidable, not socially necessary, and therefore do not increase the value of the product. However, this does not apply to circulation costs at the normal social level, but also to production costs, especially labour costs, which exceed the socially necessary level. Productive work would thus have to be defined as work that is socially necessary (and to the extent that it is) (and capitalistically productive work more closely with the corresponding restriction to capitalistically form-determined work processes).
Although it remains true that capitalist production is the basis of the overall reproductive process of capitalist society, the perspective of industrial capital seems to me too narrow for an adequate analysis of today’s conditions. A consideration of the work done in the circulation process as productive, however, seems to call into question the principle that there is only one social value for the same goods. But just as Marx himself does not regard goods in different places as the same and the necessary transport labor as productive, so goods in the distribution warehouse of a factory are not the same as goods in the salesroom of trade. In my opinion, it is justified to include work necessary for the overall economic reproductive process and to regard it as productive (and as capitalistically productive, as far as it is capitalistically organized), even if it is not necessary for direct production, but “only” for the change of form.
In my opinion, in a social production the work necessary for the regulation and circulation of production must also be regarded as productive, and in a capitalist economy this is of course called the work necessary for capitalist regulation and circulation. This also leads to a conception of the social value-added rate that is closer to the proportions relevant in the socio-political distribution debate. The exclusion of circulation work from the category “productive”, which refers to the specifically capitalist determinacy of form of these activities (and thus implicitly to their superfluity under other social conditions), introduces a foreign yardstick of assessment into the analysis, the validity of which is not founded in the capitalist mode of production itself – materialistically. Even if it should be the case (which is only partially true) that these works would be unnecessary under other social conditions, the criterion of the social necessity of work can always only be related to the society analyzed in each case, not to one possibly different one.
Sorry, deepl.com did some mistakes in translation I realised just now, so please exchange the translated cancel the post above and take this.
1. I agree that profit comes from exploitation and from differences in the organic composition of capital and that mental labour produces surplus value if employed in capitalist production. Nevertheless the profits of google, facebook, microsoft, apple and so on are much higher than can be explained this way. This is because in addition to the profit they produce and appropriate this way they appropriate high rents, that is value produced in other parts of the economy, in this lowering the profits of other capitalists.
2. Some other people argue, that production of services is not productive labour, even if done in capitalist mode of production. I think this is a very wrong view and not the one of Marx. In my view even Marx should be read critically when he writes that labour in circulation (but that is only a minor part of services) is not productive. Here a longer text of mine translated from German, so the pages in quotations are referring to German issues of MEW:
Marx refers exclusively on the social form and not on the material content of the work or on whether the work is spent on the production of goods or services. In Marx’s definition, it must always be clear what its meaning is and that it does not mean an evaluation of the work from the perspective of society as a whole. I suggest, to avoid misunderstandings, that we write about the meaning in which the term is currently being used, that is, that it is capitalist productive work.
First, therefore, he extends the concept of productive work for a work process based on cooperation to all activities that are necessary components of the total work (cf. MEW 23, 531), even considers managerial activity as “productive work that must be carried out in every combined mode of production” (MEW 25, 397). On the other hand, it narrows the concept of productive labor by specifying it for capitalist production. Here, labor is only productive if it produces commodity value, and that is not enough: if it produces surplus value for capital. If this is the case, services are also regarded as productive (cf. MEW 23, 532; as an example, Marx here takes an employed teacher at a commercially run private school, but the same also applies, for example, to wage workers in gastronomy or other service sectors).
Not productive in the capitalist mode of production are those jobs that are not performed as wage labor for the purpose of capital utilization, but within the framework of the private household or non-capitalist production, i.e. also services that are purchased from household income (revenue) and serve unproductive consumption (even if they are capitalist households), such as the work of a housekeeper, hairdresser or private tutor. But if they are wage earners in capitalist enterprises, their work would be considered productive again, for it would not be the household income of the customers from which they are paid directly, but they would receive wages. However, all public services are considered unproductive because the wage workers employed there do not produce any surplus value. Marx presents his view in detail and coherently in the section “Productive and unproductive work” of the text “Results of the immediate production process”. Marx writes there: “The same work (e.g. gardening, tailoring, etc.) can be done by the same workingman in the service of an industrial capitalist, or a direct consumer, etc. In both cases he is a wage worker or a day labourer, but in one case he is a productive, in the other he is an unproductive worker, because in one case he produces capital, in the other not; because in the one case his work forms a moment of the process of self-realization of capital, in the other not.”
Another aspect of Marx’s theory of value in relation to services, however, in my opinion does not make sense, namely in relation to commercial or circulation activities in the broadest sense. Marx sums it up in such a way that neither value nor surplus value is produced directly in the circulation process (although value-added production is indirectly promoted in the direct production process), because there only changes of form respectively changes of ownership of the already existing mass of goods and value are carried out, but no additional product or value is added respectively additional use value is produced as a condition of value (MEW 25, 300 – but in my opinion this contradicts p. 290, Fn 38: “The use value of a good is greater in the hands of the consumer than in the hands of the producer, because here it is realized in the first place”). “The general law is that all circulation costs, which arise only from the transformation of the form of the goods, do not add any value to the latter. The capital invested in these costs (including the work it commands) belongs to the faux frais of capitalist production. The replacement of the same must take place out of the surplus-product and forms, considered the whole capitalist class, a deduction from the surplus value or surplus product, just as for a worker the time which he needs to the purchase of his food is lost time.” (MEW 24, 150)
However, the capital employed here is considered to be part of the total social capital, which is included in the profit rate equalisation and thus appropriates a corresponding share of the surplus value produced. The following also applies to the work of commercial wage earners: “It is work that realises values, but does not create values”. (MEW 25, 309). But Marx also rightly writes: “To industrial capital the circulation costs appear and are extra-expenses. They appear to the merchant as the source of his profit … So also the commercial work that it buys is directly productive for it.” (MEW 25, 313) The perspective quoted above by Marx, “the whole capitalist class considered”, is in reality only that of the industrial fraction of that class. It is dominant, but not the whole class. And the category of “extra-expenses” is problematic or superfluous overall, because “extra-expenses” are actually all those costs that are avoidable, not socially necessary, and therefore do not increase the value of the product. However, this does not apply to circulation costs at the normal social level, but also to production costs, especially labour costs, which exceed the socially necessary level. Productive work would thus have to be defined as work that is socially necessary (and to the extent that it is) (and capitalistically productive work more closely with the corresponding restriction to capitalistically form-determined work processes).
Although it remains true that capitalist production is the basis of the overall reproductive process of capitalist society, the perspective of industrial capital seems to me too narrow for an adequate analysis of today’s conditions. A consideration of the work done in the circulation process as productive, however, seems to call into question the principle that there is only one social value for the same goods. But just as Marx himself does not regard goods in different places as the same and the necessary transport labor as productive, so goods in the distribution warehouse of a factory are not the same as goods in the salesroom of trade. In my opinion, it is justified to include work necessary for the overall economic reproductive process and to regard it as productive (and as capitalistically productive, as far as it is capitalistically organized), even if it is not necessary for direct production, but “only” for the change of form.
In my opinion, in a social production the work necessary for the regulation and circulation of production must also be regarded as productive, and in a capitalist economy this is of course called the work necessary for capitalist regulation and circulation. This also leads to a conception of the social value-added rate that is closer to the proportions relevant in the socio-political distribution debate. The exclusion of circulation work from the category “productive”, which refers to the specifically capitalist determinacy of form of these activities (and thus implicitly to their superfluity under other social conditions), introduces a foreign yardstick of assessment into the analysis, the validity of which is not founded in the capitalist mode of production itself – materialistically. Even if it should be the case (which is only partially true) that these works would be unnecessary under other social conditions, the criterion of the social necessity of work can always only be related to the society analyzed in each case, not to one possibly different one.
I think you raise some pertinent points. As I indicated above Marx regarded shop workers as productive labourers. Surely all labour necessary to prepare goods to be in a condition ready for sale might count as productive labour. But take a capitalist who has goods sitting in his warehouse, sitting at his computer. He can sell such goods to another capitalist by the ‘click of a button.’ Only then are the goods circulated, but surely no additional value has thus been created?
Michael. I appreciate the fantastic work you do. But seriously: CHINA IS A CAPITALIST EMPIRE, run by a vicious anti-worker plutoklatura. This is not hard. China in 2019 is literally a continental-sized clone of Chiang Kai-shek’s 1955 Taiwan, only one juiced up with China’s vast 2008-2018 real estate bubble, currently coming apart at the seams. There are little bits of potential socialism in China, sure — public education, renewable energy, some infrastructure. Just little bits. But the state is a repressive Han-centric thugocracy which bans unions, built 1,000 coal plants 2005-2015 because never mind climate catastrophe, arrests people for reading Marx, and incarcerates 2 million Uighurs, precisely where Hindutva India has jailed 8 million Kashmiris and neoliberal US jails millions of poor people.
‘This is not hard. China in 2019 is literally a continental-sized clone of Chiang Kai-shek’s 1955 ‘ I would agree, and I recall reading a similar argument on The C.I.A. censored Wikipedia. But let us not regurgitate C.I.A. propaganda about 2 million incarcerated Uighurs.
I incorrectly posted G Carchedi’s comments and he has upbraided me. Here are his comments.
The idea that huge profits cannot be explained by exploitation in production alone is right but for the wrong reason. The surplus value appropriated comes not only from (a) the surplus value generated in production (exploitation) but also from (b) the surplus value appropriated through unequal exchange in the market (a redistribution of the surplus value produced). Rent is a further redistribution. While (a) plus (b) are essential for the functioning of capitalism, rent is not. Profit appropriated through unequal exchange (b) is not the same as that from rent. This is important for the thesis of ‘renterization’.
This confusion between unequal exchange and rent leads to an overestimation of the size of rent. If the producer of a knowledge commodity (but the same holds for any commodity) does so with a high organic composition of capital, the surplus value generated through production might be relatively small per unit of capital, but the absolute amount of the surplus value appropriated (unequal exchange) might be higher if the scale of production and thus the number of labourers are sufficiently higher.
Having distinguished unequal exchanged from rent, we can now deal with the idea that “without rent, there would be no profit for information producers because knowledge innovation would be diffused to others.” This too is mistaken. Without rent there would still be profits because of factors (a) and (b) above. This concerns the production of a commodity, be it mental or objective. After it has been produced, a knowledge commodity can be sold for profit or it can be given for free to other producers. In this latter case there is indeed no profit. But then this has nothing to do with rent.
The idea that the cost of reproduction of knowledge heads to zero because of ‘moral depreciation’ is also mistaken. Take a knowledge commodity (A), as the output of a process of mental production. Like objective commodities, it is subjected to technological depreciation. But this does not mean that the value of A tends to zero when it is reproduced.
(a) Suppose that the production of a mental commodity, A, costs 100. Ceteris paribus this is what it costs each time it is reproduced. The same inputs etc. are employed. This is its constant cost of reproduction.
(b) The reproduction of A costs less if its inputs cost less, as in all commodities. But the decreasing costs of A’s inputs have nothing to with A’ moral (technological) obsolescence. There is technological depreciation if A is replaced by a new knowledge, B, which costs less because of its cheaper inputs.
(c) But this does not mean that As value tend to zero. Suppose that the higher cost (value) commodity, A, continues to be produced and becomes an input of a new production process side by side the same production process using B as an input. Both production processes produce the same output. A’s value does no tend to zero if it is reproduced. It remains constant. But a part of its value and surplus value is appropriated by the producer using B due to the tendential equalisation of the output prices within sectors. A’s value is the same, but A loses value to B.
(d) This of course assumes that A keeps being reproduced. If A is fully replaced by B due to A’s technological obsolescence, A’s value is zero simply because it is not reproduced any longer.
(e) In short, A’s reproduction costs less if its inputs cost less and not because of A’s technological obsolescence. But it cannot tend to zero because of the value of its inputs, which might become cheaper but never be valueless. What tends to zero is the value retained by A (while the value appropriated by B rises and tends to 100% of A’s value) inasmuch as B replaces A.
Say that the cost of production of the A necessary for a prototype of a drug is 100. If that drug is reproduced on the basis of the same A, the cost of the reproduced A is not zero because it is reproduced by mental labour involving some labour time, even if A itself does not have to be produced anew. For example, suppose that the initial A is knowledge that has been written down on a piece of paper, which must be subsequently used as an input in the next production process by the mental labourer who must produce that drug. The mental labourer must read and understand that A (incorporated in that paper). This is mental labour that comes with a certain cost in labour time.
Michael,
Its rather unfortunate that, you have removed the original comment, because it also means that the three extensive comments I had posted in response to it, have also now disappeared.
Perhaps it would be useful to reinstate the original comments so that we may contrast with the revised version, and my responses to the original could then be seen also, and I could respond to the amended version in the appropriate manner.
sorry did not realise that would happen
Incidentally, this comment by Marx is also relevant.
“A writer is a productive labourer not in so far as he produces ideas, but in so far as he enriches the publisher who publishes his works, or if he is a wage-labourer for a capitalist.
The use-value of the commodity in which the labour of a productive worker is embodied may be of the most futile kind. The material characteristics are in no way linked with its nature which on the contrary is only the expression of a definite social relation of production. It is a definition of labour which is derived not from its content or its result, but from its particular social form.” (TOSV 1, p 158)
The first part is interesting, because here, Marx notes that the publisher may make profit out of an independent writer who is not their wage worker. This also follows on from Marx’s comments about the Scottish pebble collectors, a discussion that is also relevant to Uber Drivers. The Scottish Pebble Collectors were independent small producers. They sold the pebbles they collected, as commodities to local stonemasons.
However, as Marx notes, there were so many of these independent producers, who could enter business on their own account at little real cost, only requiring the constant capital of a basket in which to collect the stones, that the prices they could get from the stonemasons were way below the value of the stones themselves. In practice, the price the collectors got for the stones were only equal to the value of their labour-power. Thereby the stonemasons extracted surplus value from the collectors even though they were not wage labourers.
I think it was here that Marx affirmed that Milton wrote ”Paradise Lost” as an expression of his nature? The poem becomes a commodity only for the capitalists who decide to publish it in book form.
J,
Quite right, and Marx notes that Milton sold the work for £5, whilst endless amounts of pulp were sold for huge amounts of money.
“Suppose that the production of a mental commodity, A, costs 100. Ceteris paribus this is what it costs each time it is reproduced. The same inputs etc. are employed. This is its constant cost of reproduction.”
That is not true, any more than for any other commodity that comprises fixed capital. If I take a commodity such as a chair. Let’s say to produce the chair I require a factory with a cost of 100, and I require wood with a cost of 10, and I require labour with a cost of 10. If I only produce the 1 chair its cost is 120. However, as soon as I produce a second chair, its cost drops to 70, because now the fixed cost of the factory is shared between the two chairs, i.e. I do not need to reproduce the factory in order to produce a second chair. If I produce 100 chairs, then the cost is 21, because the fixed capital cost is spread over 100 chairs. This is fairly elementary cost accounting, not even economics. Its true that the value of the building itself hasn’t changed here, but we are not talking about the value of the building, but the value of the commodities produced in the building.
Where, a knowledge commodity differs is this. If I spend 100 hours producing the ideas contained in a book, the book itself becomes the commodity. But, again, I do not have to undertake the same 100 hours of labour creating the ideas contained within the book, for each copy of the book produced. If I produce just the 1 book, and produce it myself, with the materials costing 10, and my labour for printing being equal to 10, then the book has a value of 120, but likewise, when I print the second copy it does not have a value of 10, precisely because it does not cost the same each time it is reproduced. It does not require me to undertake a further 100 hours of labour to produce the ideas contained in the book. The additional cost of producing the second book, its marginal cost, is now only 20, because I do not have to spend 100 hours of labour again developing the ideas contained within it. I simply copy them from the first book. If I take the average cost, it now falls to 70.
This is precisely the point Marx made.
Here is what Marx says, in TOSV, Chapter 24, citing Richard Jones, who was quoting Ure.
“The astonishing expedition with which a great cotton factory, comprehending spinning and weaving, can be erected in Lancashire, arises from the vast collection of patterns of every variety from those of gigantic steam engines, water wheels, iron girders and joists, down to the smallest member of a throstle or loom in possession of the engineers, mill-wrights, and machine makers. In the course of last year Mr. Fairbairn equipped water wheels equivalent to 700 horses power and steam engines to 400 horses power from his engineer factory alone, independent of his mill-wright and steam-boiler establishment. Hence, whenever capital comes forward to take advantage of improved demand for goods, the means of fructifying it are provided with such rapidity, that it may realise its own amount in profit, ere an analagous factory could be set a-going in France, Belgium or Germany” (Andrew Ure, [Philosophy of Manufactures, London, 1835, p. 39,] Philosophie des Manufactures etc., tome I, Paris, 1836, pp. 61-62). “ (p 442)
In other words, the builders of factories etc. did not have to undertake the labour of design each time they produced a new factory or machine, having undertaken it once, they simply used their existing plans and patterns to reproduce the factories and machines, and thereby at much less cost. What is being confused in the point made by Carchedi is the value of the knowledge/information/technology which provides the basis of a commodity, and the value of the commodity itself in which this knowledge/information/technology is embedded. The value of a plan for a factory or machine may be 100 hours, and will remain 100 hours until a plan for some other better factory or machine is developed. But, the value of this plan is not the same as the value of the factory or the machine itself. The value of the plan may remain the same, but the value of the machine or factory will diminish the more of them are produced using that plan, just as the value of fixed capital itself diminishes as a proportion of the value of the output it produces, the greater the volume of that output, and correspondingly, the value of the output itself is thereby diminished.
“The reproduction of A costs less if its inputs cost less, as in all commodities. But the decreasing costs of A’s inputs have nothing to with A’ moral (technological) obsolescence. There is technological depreciation if A is replaced by a new knowledge, B, which costs less because of its cheaper inputs.”
But, this begs the question what are we talking about when we talk of A. If I spend 100 hours setting down ideas that are the result of my thought processes, then obviously once undertaken this resultant information has a value of 100 hours, provided, of course, that someone accepts this information as a use value. I could, at this point sell this information/use value as a commodity in its own right, and obtain 100 hours of value in exchange for it. Let us say a publisher buys this information from me. The publisher, now uses this information to publish books. The value of the information has not changed, but the value of the books/knowledge commodities in which the information commodity is itself embedded certainly does. Why, because having bought the knowledge/information once, they do not need to buy it again for every copy of he book they print. The more copies they print, the smaller the proportion the value of the information as a component of it.
The problem for an initial producer of A, is that they have expended 100 hours in the creation of the information/knowledge contained in the book. They amortise this cost in the price of each book they produce. If each book costs them 10 hours for paper, and 10 hours for labour, and they believe there is a market for 100 copies of the book at a price of 21 hours labour/£21 per book, they can recover these costs. However, if another publisher acquires a copy of the material, they could publish bootleg copies of it. They have not expended 100 hours/£100 either in their own labour, or by buying the information from the author. Their only cost is the 20 hours labour/£20 to cover the cost of paper and labour for printing. They could sell the book, therefore, for just £20 per copy, thereby undercutting the initial publisher, who would now have to reduce their own prices accordingly.
“But this does not mean that As value tend to zero.”
This is vague. In reality, if someone else, here another publisher does not have to bear the cost of the initial knowledge, the value of the initial knowledge does tend to zero, because the first publisher can no longer recover it in the price of the books they publish. But, secondly, what does “tend to zero” mean here? The value of the information itself might not tend to zero, but its value as a proportion of the value of the commodity, for example a book, in which it is embedded will certainly tend to zero, as the output of those books increases!
“Suppose that the higher cost (value) commodity, A, continues to be produced and becomes an input of a new production process side by side the same production process using B as an input. Both production processes produce the same output. A’s value does no tend to zero if it is reproduced. It remains constant.”
This again is flat wrong, for the reasons Marx sets out in capital describing moral depreciation. Suppose A is a lathe, and B is a cheaper lathe. Both produce the same volume of output. The wear and tear of lathe B is thereby less than the wear and tear of lathe A. The wear and tear is a part of the cost of production of the widgets produced by both lathes. The widgets produced by lathe B will, therefore, have a lower value than the widgets produced by lathe A. The produce using A will, therefore, be uncompetitive with B, and will have to reduce the price of their widgets to the market value set by B. They will not be able to pass on the full amount of wear and tear to their production, and correspondingly the value of their lathe is devalued, causing them to suffer a capital loss.
Marx sets this out clearly in Capital III, Chapter 6, where he flatly contradicts the argument of proponents of historic pricing.
“The continual improvements which lower the use-value, and therefore the value, of existing machinery, factory buildings, etc. This process has a particularly dire effect during the first period of newly introduced machinery, before it attains a certain stage of maturity, when it continually becomes antiquated before it has time to reproduce its own value. This is one of the reasons for the flagrant prolongation of the working-time usual in such periods, for alternating day and night-shifts, so that the value of the machinery may be reproduced in a shorter time without having to place the figures for wear and tear too high. If, on the other hand, the short period in which the machinery is effective (its short life vis-à-vis the anticipated improvements) is not compensated in this manner, it gives up so much of its value to the product through moral depreciation that it cannot compete even with hand-labour.
After machinery, equipment of buildings, and fixed capital in general, attain a certain maturity, so that they remain unaltered for some length of time at least in their basic construction, there arises a similar depreciation due to improvements in the methods of reproducing this fixed capital. The value of the machinery, etc., falls in this case not so much because the machinery is rapidly crowded out and depreciated to a certain degree by new and more productive machinery, etc., but because it can be reproduced more cheaply. This is one of the reasons why large enterprises frequently do not flourish until they pass into other hands, i. e., after their first proprietors have been bankrupted, and their successors, who buy them cheaply, therefore begin from the outset with a smaller outlay of capital.”
As Marx also says in that chapter this applies also to other forms of constant capital such as raw material.
“If the price of raw material, for instance of cotton, rises, then the price of cotton goods — both semi-finished goods like yarn and finished goods like cotton fabrics — manufactured while cotton was cheaper, rises also. So does the value of the unprocessed cotton held in stock, and of the cotton in the process of manufacture. The latter because it comes to represent more labour-time in retrospect and thus adds more than its original value to the product which it enters, and more than the capitalist paid for it.”
Again this clear statement by Marx that the value of inputs is retrospectively devalued, as a result of changes in productivity, directly contradicts the arguments of the proponents of historic pricing. Yet, it is fundamental to Marx’s theory of social reproduction.
“This of course assumes that A keeps being reproduced. If A is fully replaced by B due to A’s technological obsolescence, A’s value is zero simply because it is not reproduced any longer.”
But, why on Earth would it continue to be reproduced under those conditions? The buyers of A, given the choice of buying A or B, would clearly buy B, which is cheaper! The producers of A would not be able to sell A at its value, because given the choice buyers will buy the cheaper B. As Marx puts it,
“The value of the machinery, etc., falls in this case not so much because the machinery is rapidly crowded out and depreciated to a certain degree by new and more productive machinery, etc., but because it can be reproduced more cheaply.”
The problem you have here is due to working with an embedded labour theory of value, or historic pricing model rather than Marx’s theory of value based upon current reproduction cost. The current reproduction cost of B, which provides the same use value as A, has fallen, and so the value of A is depreciated retrospectively along with it.
“In short, A’s reproduction costs less if its inputs cost less and not because of A’s technological obsolescence. But it cannot tend to zero because of the value of its inputs, which might become cheaper but never be valueless.”
But, for the reasons set out above, and described by Marx, the value of A will fall, even if the value of the inputs for producing A, remain constant or even rise. That is because what buyers are buying is the use value that A provides. As its admitted that B provides exactly the same use value, but at a lower value, the value of A must fall likewise. The value of A is not determined by the labour embodied in it, but is determined by the socially necessary labour required to produce the use value it provides. That socially necessary labour as manifest in B, has fallen, and so the value of A falls accordingly.
“What tends to zero is the value retained by A (while the value appropriated by B rises and tends to 100% of A’s value) inasmuch as B replaces A.”
This follows from the earlier,
“A’s value does no tend to zero if it is reproduced. It remains constant. But a part of its value and surplus value is appropriated by the producer using B due to the tendential equalisation of the output prices within sectors. A’s value is the same, but A loses value to B.”
Again this is vague and confused. I assume that what the second quote means is that, using the example of the lathes, if we take total output of widgets, by A and B, the market value will be the average. A will produce at an individual value above this average and B at an individual value below it, so that A will lose surplus value, B appropriate more of it. But, this is wrong for the reasons I have set out previously. Suppose A has a value of £1,000, and B a value of £500. Both, produce 1,000 widgets. The argument here is that £1500 of fixed capital is absorbed as wear and tear in 2,000 units of output, equal to £0.75 per unit. Let us suppose this is the case, at the end of the period, the owner of A will have recovered £750 in wear and tear in the value of their output, the same as B. But, both A and B, will only need to have recovered £500 to replace their fixed capital.
The owner of A, will either buy lathe B, for £500, or will demand that the producer of lathe A sell it to them for the same price as B. The owner of B, will simply replace their existing B lathe. Both will thereby have extracted £250 more in the value of their output as wear and tear than is required to replace their fixed capital on a like for like basis. They will, thereby have made a trading profit, not from having produced surplus value, but simply by overcharging for their output! They will in this sense have made a profit not from the exploitation of labour, but from their constant capital, thereby undermining the labour theory of value. This is a similar error to that made by Ramsay as described in Chapter 22 of Theories of Surplus Value. The fact is that, the value of A is reduced to the value of B, as soon as B becomes available, just as with the example Marx gives in relation to cotton. As soon as the value of newly produced cotton falls, the value of all existing cotton is devalued retrospectively.
“For example, suppose that the initial A is knowledge that has been written down on a piece of paper, which must be subsequently used as an input in the next production process by the mental labourer who must produce that drug. The mental labourer must read and understand that A (incorporated in that paper). This is mental labour that comes with a certain cost in labour time.”
This is like saying that the printer who prints a book must have the same kind of capacities as an author! Why does a printer need even to be able to read, as opposed to a compositor, who does, rather than being able to mind the printing press from which copies of the book roll off? Nor does the compositor need to understand the contents of the paper from which they set the type that the printer then uses to print the book!
The assembly line worker who is told, screw this bolt in here, does not need to understand the complex designs undertaken by a car designer to produce a car, they only need to follow the instructions given to them for their particular part of the production process of the car.
After a chemist has spent many hours, or more typically hundreds of chemists have collectively spent hundreds of thousands of hours researching and developing a new chemical formula for a new drug, the labourers who actually undertake the labour to produce that drug in thousands of copies do not at all need to be able to read or understand the formula for producing that drug. Like the labourer on the assembly line they only need to be able to follow simple instructions. Provided with the required chemicals, and the required equipment for those chemicals to be combined, the production labour only needs to be able to follow a set of operating procedures, such as take x amount of A, combine it with y amount of B, undertake process C, and so on.
That is why its not chemists cooking meth in kitchens on deprived estates across Britain! Following these standard operating procedures is only a function of routine, which can and increasingly is undertaken not even by labour, but by robots.
Or take the following analogy. Its possible to work out how to solve a Rubik’s cube mathematically. If I spend a few hundred hours developing the mathematical formula for such resolution, and then apply the formula to be able to solve it. I can codify this information. It might go something like, start with this cube in the top left hand corner. It would then say, make these following moves, which will result in the problem being solved. The first time someone follows these instructions, it may take them several minutes to read them and implement them. It certainly will not take them the same several hundred hours it required me to produce the mathematical formula and codify it into a set of instructions. Nor will it require them to understand any maths whatsoever, only to be able to read, and follow instructions. On each occasion they solve the problem, they will become faster and faster at it, increasingly not requiring even to read the instructions.
Incidentally, robots themselves can now solve Rubik’s cube following precisely such a set of instructions.
As Gugliermo says, the reason that knowledge based, often service, industries make large profits can be attributed to one of two reasons. Either these industries naturally produce a high rate of profit, because, by nature, they have a low organic composition of capital, and/or a high rate of turnover of capital, or else, they have some monopoly position, which enables them to utilise monopoly pricing, so as to be able to appropriate surplus value from elsewhere, via a process of unequal exchange.
In an age of oligopolistic competition, its unlikely that the latter option is sustainable, particularly for the reasons discussed here, in relation to knowledge based commodities/services, that once the original knowledge is produced, it is difficult to prevent its wide, and more or less cost free dissemination. In other words, the contents of a book, once published can be simply copied. The copying has a cost, but that cost no longer includes the initial value of the labour of the author. A drug, or other technology can be reverse engineered, so that, again, the cost becomes only one of production of the commodity, not of the process of developing the knowledge on which it is based, and so on. Various methods to prevent this free dissemination can be employed, copyright, physical copying protection, patents and so on, but all these have costs for the initial producer, and have varying degrees of effectiveness.
As Marx says, in The Poverty of Philosophy, monopoly leads to competition, which leads to monopoly, which leads to competition on a higher level. Work done by Marxist economists in the 1980’s questions the degree to which monopoly pricing can persist. For example, see Willi Semmler – Theories of Competition and Monopoly, C & C 18, Winter 1982). For example, given that Marx demonstrates that marginal costs continue to fall as output expands, due to economies of scale, contrary to the neoclassical/Ricardian assumption of diminishing returns, its clear that, for monopolies as much as for any other firm, there is an advantage in maximising the mass of profit, by continuing to expand output up to where demand continues to exist for that output, and, as Marx describes in Capital III, for large capitals, their main concern is to maximise this mass of profit, not the rate of profit.
So, its unlikely that the reason for large profits by knowledge based/service industries is that they utilise monopoly pricing so as to produce surplus profits, from unequal exchange, and thereby rent in the form of those surplus profits. But, as Gugliermo says, consistent with Marx, in that case, the large profits would not be the product of rent, the rent is the product of the monopoly profits, and the ability to protect them against competition.
If the large profits of knowledge based/service industries are not then the product of monopoly pricing then they must be the consequence of a naturally high rate of profit in these spheres, resulting from a low organic composition of capital, and/or a high rate of turnover of capital in those spheres. Both of those factors generally apply to knowledge based/service industries. By nature, such industries are labour intensive rather than capital intensive. Either they employ a lot of simple labour, or else they employ a relatively small amount of very complex concrete labour, that amounts to a large amount of simple labour. The nature of this production, as often immaterial production, is consumed coterminously with its production, as distinct from the initial production of the underlying knowledge upon which the commodity is based. The initial knowledge, thereby assumes the same kind of form as fixed capital, with the commodities that are then based on this knowledge being replicated. The rate of turnover of this capital, as with any other, is then calculated on the basis of the turnover of the circulating capital, which would now exclude this “fixed variable-capital” represented by the initial knowledge creating labour. As with other fixed capital, this fixed variable-capital “transfers” value and surplus value piecemeal to the end product, as a sort of wear and tear. The greater the volume of output, the smaller the proportion this element of fixed variable-capital comprises of it. Like other fixed capital, it is subject to moral depreciation. For example, other producers might steal the knowledge and use it for free, new knowledge might make it redundant or reduce its use value, and thereby its value. So, the producer will want to amortise the value of this fixed variable-capital as quickly as possible, as with any other fixed capital, by increasing output as much and as quickly as possible, before it is depreciated.
As capitals with a low organic composition of capital, and very high rate of turnover, these capitals would have a naturally high rate of profit. That is they would produce a lot of surplus value, relative to the capital advanced for their production. Engels calculated that, at the time Capital III was published, the rate of turnover, in Britain, was approximately 8.5 times per annum. Today, as a result of rises in productivity (approx. 2% p.a. compounded), in production and circulation, that figure is probably around 50 times per annum. However, because this knowledge based/service industry is characterised, generally, by the coterminous nature of production and consumption, the rate of turnover in these sectors is likely to be much higher, in many cases, thereby, amounting to 300 times a year, or more. That means that, even aside from the lower organic composition, in these spheres, compared to older, mature industries, based on manufacturing, and the processing of materials, the annual rate of profit (on which the average rate of profit is calculated) will be around 6 times higher. Factor in the lower organic composition of capital in these spheres, and the annual rate of profit is likely to be around 10 times higher than in other spheres.
This explains the foundation of the higher profits in these knowledge based/service industries. It also explains why these sectors have grown so rapidly, because new capital formation naturally gravitates to these naturally high profit rate spheres, rather than the old manufacturing sectors. It is why these knowledge based/service industries now account for around 80% of all new value and surplus value creation.
As Marx says,
“This is due to the cheapness and abundance of disposable or unemployed wage-labourers, and to the greater resistance, which some branches of production, by their very nature, render to the transformation of manual work into machine production. On the other hand, new lines of production are opened up, especially for the production of luxuries, and it is these that take as their basis this relative over-population, often set free in other lines of production through the increase of their constant capital. These new lines start out predominantly with living labour, and by degrees pass through the same evolution as the other lines of production. In either case the variable capital makes up a considerable portion of the total capital and wages are below the average, so that both the rate and mass of surplus-value in these lines of production are unusually high. Since the general rate of profit is formed by levelling the rates of profit in the individual branches of production, however, the same factor which brings about the tendency in the rate of profit to fall, again produces a counterbalance to this tendency and more or less paralyses its effects.”
(Capital III, Chapter 14)
The significant growth of these industries, and the vast amounts of new surplus value they produce, thereby raises the average annual rate of profit, by the process of the formation of this average rate via competition, and the creation of prices of production. As Marx describes in Theories of Surplus Value, Ricardo was wrong, as against Adam Smith, in believing that competition resulting in this average rate must always result in that rate being reduced. As Marx sets out, whenever capital is advanced to some new sphere, which produces a higher rate, and a greater mass of additional surplus value, the consequence must always be, thereby, to cause the average rate itself to rise.
The process is set out by Marx clearly. Where such a new sphere arises, the capital in that sphere sells its output at modified exchange-values. They are modified exchange-values for the reason Marx sets out in Capital III, Chapter 9,
“We had originally assumed that the cost-price of a commodity equalled the value of the commodities consumed in its production. But for the buyer the price of production of a specific commodity is its cost-price, and may thus pass as cost-price into the prices of other commodities. Since the price of production may differ from the value of a commodity, it follows that the cost-price of a commodity containing this price of production of another commodity may also stand above or below that portion of its total value derived from the value of the means of production consumed by it. It is necessary to remember this modified significance of the cost-price, and to bear in mind that there is always the possibility of an error if the cost-price of a commodity in any particular sphere is identified with the value of the means of production consumed by it.”
In other words, as soon as capitalist production begins, even non-capitalistically produced commodities are made using inputs that are sold at a price of production not their exchange value. So, the cost price of these commodities already differs from the exchange value of the constant capital consumed in its production. This is why input prices must be transformed into prices of production simultaneously with output prices, because the output prices of one sphere are simultaneously the input prices of other spheres. So, even a non-capitalist producer, who does not sell their output at a price of production, does not sell it at its exchange-value either, but at a modified exchange-value, i.e. modified by the fact that its input prices are no longer themselves exchange-values.
If we take some new line of production, the output will sell at this modified exchange-value. In other words, all of the surplus value produced in this sphere will be added to the cost price. This will result in a surplus profit, because this surplus value will form a greater proportion of this capital advanced than the average. As Marx explains the process whereby this surplus profit is competed away, as an average rate of profit is formed, alongside prices of production, this high rate of profit in this sphere/s, will cause capital to accumulate much more rapidly in that sphere/s, and may even result in capital leaving other lower profit spheres, so as to be able to obtain this higher rate of profit. This explains the rapid growth of these knowledge based/service industries, since the 1980’s, and the rapid and large increase in the mass and rate of profit from that period onwards, which also caused the glut of loanable money-capital, and significant and persistent fall in global interest rates.
The rapid accumulation of capital in these new spheres means that the price of production of the commodities/services produced in this sector falls way below the exchange value of those commodities/services, whereas, as capital accumulates far more slowly in the old manufacturing sectors, the prices of production of manufactured goods rises further above their exchange value. The natural process of formation of an average annual rate of profit, thereby transfers large amounts of surplus value from the new knowledge based/service industries, where the rate of profit is high, to the old manufacturing industries, where the rate of profit is low.
This process can proceed to transfer surplus value from knowledge based/service industries to the old manufacturing industries, so long as competition is allowed to play its role in driving down the prices of knowledge/service goods, and driving up the prices of manufactured goods. However, as Marx describes in relation to the role of landed property, and the formation of rent in agriculture, if frictions exist, limiting or preventing this competition, capital will not flow freely into the high profit areas, and so prices will not be reduced, and similarly capital will continue to accumulate in the older low profit areas, so that the prices of those commodities will not rise.
In that case, just as with agriculture, surplus profits based upon a lower average organic composition of capital will persist. In that case, the surplus profit will be appropriated as rent. In agriculture, it is appropriated by the landlord; in knowledge based/service industries, it is appropriated by patent holders, copyright holders, complex labour providers, whose labour is not in limitless supply – celebrity chefs, designers, footballers, actors, singers etc. But, just as with the case of monopoly profits, it is the existence of the surplus profit that is the source of rent, and not rent that is the source of the surplus profit. As Marx describes in relation to agricultural rent, it is not the existence of this rent that causes agricultural prices to rise, but rather the fact that higher agricultural prices based upon their exchange-value, arising from a lower average organic composition of capital in agriculture, compared to industry, results in the surplus profits in the first place. It is only the monopoly of landed property that enables this surplus profit to end up in the pocket of the landlord rather than the farmer/miner. Similarly, it is not rent in knowledge based/service industry that explains higher prices and profits, but the naturally higher prices and profits, in that sphere, due to the lower organic composition of capital, and higher rate of turnover. That results in surplus profits, some of which is not competed away, because of the existence of various frictions due to patents, copyright, the limited supply of certain types of complex labour etc.
You write:
“The initial knowledge, thereby assumes the same kind of form as fixed capital, with the commodities that are then based on this knowledge being replicated.”
Knowledge is embedded in the minds of the workers creating the services in question. Knowledge, therefore, must be an element of human labour and is not a separate factor of production or creation.
Speaking with experience as a bottom line manager of a service company, fixed capital was of very little importance.
Employees required desks, chair and laptop. Therefore the fixed capital of each employee was less 5,000 pounds at current prices. The furniture was depreciated by 10 per cent a year. The laptops at 33 per cent year. That meant the the annual cost of all equipment used on average by each worker was less than 2,000 pounds a year. This was nothing compared with the wages, commission, NI, pension contribution etc paid to each employee which ranged up to well above 50,000 pounds a year.
Office space was leased. Again: per capita cost a year was a fraction of total gross wages.
Profitability was high: around 30 per cent of turnover. This was at least twice the level seen in tangible good manufacturing. The company previously owned print plant. This was sold off because margins and returns were too low.
So the shift into intangible knowledge service industries is completely comprehensible. The margins and return on capital are much higher.
In pursuit of surplus value, capitalists are shifting out of industries with high organic capital to ones with low organic capital with very low constant capital requirements.
But that means that capital accumulation by capitalists should have collapsed and, logically, capitalism should have died decades ago.
If the present dominant mode of production (intangible service creation) doesn’t require capital, why do capitalists still exist?
One explanation is that capital has shifted into low-cost labour economies where the bulk of the tangible goods needed in advanced economies are now manufactured.
And yet the value (market capitalisation) of companies supplying advanced economies has never been higher (check out the FTSE, DJ index etc).
How is it possible that a falling organic capital ratio is occuring at the same time as the price of capital controlled by corporations has gone up?
Why does capitalism still exist in economies where service creation is dominant?
The conventional argument is that a transfer of surplus value is taking place from tangible good manufacturing in low-labour cost economies to advanced economies.
But does that explain the sheer scale of corporate balance sheets in advanced economies (the market capitalisation of FTSE100 companies is now around the same as UK GDP)?
Perhaps.
But this must also be connected to the ability granted to corporations by law and accounting codes to count projected income streams from service creation (ie employing knowledge and other service workers) as balance sheet items (capital).
Capital accumulation in advanced economies now no longer depends upon the extraction of surplus value but on the power of corporations to count projected and therefore (effectively) imagined surpluses as capital.
So not only is the bulk of value creation by workers in advanced economies now intangible.
So too is capital.
Eddie,
A few brief points.
“Knowledge is embedded in the minds of the workers creating the services in question.”
Maybe in some cases, or as with the instances I quote, maybe they simply start with that knowledge produced by others, as the basis of their production. Take an example. A designer clothes label. Its the name/skill of the designer that creates the value. The machinists cutters who take the design and work it into a garment only have to follow the instructions.
Be careful in the way you use the values of fixed and circulating capital. In calculating the annual rate of profit its the total value of the fixed capital advanced, not just that consumed that is the basis. So, if there are 100 workers and each has £5,000 of fixed capital in PC’s, desks etc., that is £500,000 of capital that the firm has tied up a advanced capital, and against which the profit must be measured. The wear and tear is significant in determining the value of output, upon which the rate of profit/profit margin is calculated.
Also, this applies in reverse to the wages and other circulating capital.You cite £50,000 for wages each, but if the output is turned over every week, that means only £1,000 of wages per worker is actually advanced as capital. At the end of the week, that capital returns to be advanced again. So, the actual amount advanced s fixed capital is greater than you suggest, whilst the amount advanced as wages is much less. That means that the annual rate of surplus value is much higher, and the annual rate of profit is much higher than 30%, despite the actually higher figure for advanced fixed capital.
Advanced capitalist economies clearly do still require capital, but a large part of that capital is now advanced as variable-capital, plus a lot is advanced in lumps as fixed capital including large amounts of infrastructure investment – broadband, telecommunications infrastructure and so on. Its long since been the case that the continued requirement for capital did not require the existence of capitalists. Workers themselves produce capital both physically in the shape of the commodities that form the elements of capital, and in terms of the surplus value that is the equivalent form of that capital.
There is a simple explanation for where all of this profit/surplus value goes to in conditions where less physical capital or less value of capital – because productivity reduces the unit values of the commodities that comprise the capital – is required, and that is that it goes into unproductive consumption by the recipients of these revenues, including into gambling on financial markets, which soaks up those revenues by continually the prices of one asset class after another, protected by the safeguard of central bank policies of QE to buy up those assets should god forbid their prices begin to fall.
Therein is also the explanation for the high stock market valuations you referred to.
Boffy.
Knowledge in my head –whether it’s acquired using this blog or in a London Business School course costing more than 50,000 pounds — is part of me.
It can’t be separated from me. It’s part of my body. It’s mine (though UK copyright law deems any knowledge acquired during employment by a corporation belongs to that corporation. But that’s law determined by parliament not economics).
The idea that technology — the application of human knowledge — is a separate factor of production rather than the result of human effort and endeavour is one of conventional economics’ many contentious assertions.
Data and information are used by knowledge service workers (like financial advisers) in the way material inputs are in manufacturing. They have no value unless and until used in service creation by a worker with knowledge about how to use that information/data.
The accounting period is of course critical. Most corporations work on a 12-month basis. So outlays on wages and other elements of variable capital are quantified for the year as a whole and measured against revenue and profit for the year as a whole.
Constant capital applied in the same period in most services is comparatively negligible and that is empirically testable, as previously testified from detailed personal experience.
It is also empirically demonstrable that the bulk of variable capital deployed in most services takes the form of wages.
The market capitalisation of quoted corporations is heavily dependent on expected future profit trends That explains why Facebook’s market capitalisation is now $525bn compared with its profits last year of $22bn (that’s a multiple of more than 25).
Such profits are imagined not real. That’s why buying Facebook shares involves investing in intangible capital.
Eddie,
“Knowledge in my head –whether it’s acquired using this blog or in a London Business School course costing more than 50,000 pounds — is part of me.
It can’t be separated from me. It’s part of my body. It’s mine”
I agree entirely. Its what in part determines the value of your labour-power. It has to be remembered, thereby, that that value obtained from the course, or reading a blog or whatever, is pre-existing knowledge that you have absorbed, in the same way as you eating food reproduces your labour-power, but the food was the product of someone else’s labour.
What we are talking about here is new knowledge created by the worker. That knowledge can then also be embodied in a commodity. For example, I might acquire the knowledge of how to write as a result of going to school, but that is not the same as me using that knowledge to write a novel, which is entirely my own new construction. This is new knowledge/information. Writing the novel involves me in a labour process of my own. It requires me to spend several hundred hours of labour researching, thinking and so on to set down the ideas in the book. The point here is that having done so, those ideas are no longer just mine alone, They are accessible to anyone who reads the book, and are so without them having to have acquire my own knowledge of how to write or having undertaken the labour I undertook to research or write the book.
Provided someone, like a publisher, finds the book to be a use value, and is prepared to buy it from me, then I can realise the value of my labour in writing the book. The point here is that, having bought the knowledge from me, the publisher can now print as many of these books as they can sell. They only pay me once for the knowledge, or maybe as an equivalent of piece work, they pay me a commission on each copy they sell. If the value of my initial labour is £1,000, then if the publisher publishes 1,000 copies, it will comprise £1 per book, but if the publisher publishes 100,000 copies it will comprise just £0.01 pr book. This is the real meaning of the knowledge, as a form of fixed capital, diminishing to zero, i.e. not that the value of the knowledge itself is diminished – at least by this process – but that it diminishes towards zero as a proportion of total output value.
“The idea that technology — the application of human knowledge — is a separate factor of production rather than the result of human effort and endeavour is one of conventional economics’ many contentious assertions.”
Quite correct. But, I don’t see what this has to do with the argument. Technology raises labour productivity, and thereby increases the output of use values by any given quantity of labour, and so diminishes the unit value of those use values. And, as more use values are produced, not only does the proportion of labour in total output value fall, but so does the proportion of fixed capital, including this fixed variable-capital in the form of materialised knowledge.
“They have no value unless and until used in service creation by a worker with knowledge about how to use that information/data.”
Quite true, but this second form of knowledge is not the same as the first, i.e. the knowledge/data they utilise. The knowledge of how to print a book is not the same as the knowledge contained in the book. The knowledge of how to read instructions and implement them so as to combine chemicals to produce crystal meth is not the same as the knowledge of the chemist who understands chemical processes, and undertakes it to create crystal meth, and then writes it down for others to utilise.
If we take your initial figures of £5,000 for fixed capital, and annual wages of £50,000, with a profit margin of 30%, you calculate wear and tear as around £2,000. Let’s add in say another £3,000 per worker to cover rent and other costs. So, cost of production per worker is £55,000, and with a profit margin of 30%, that gives profit of £16,500. But, as I said, if the capital turns over more frequently, we get a different picture.
The fixed capital cost must be advanced in its entirety. But, suppose the circulating capital turns over ten times a year, then we have wages of £5,000, and £1,000 for other costs. The total advanced capital is then only £11,000. The annual rate of profit is then not 30%, as with the profit margin, but 150%.
I agree about future profits being imagined. Its also necessary to drill down into actual profits to see what is put off book, what is related to capital gains from speculative activities and so on. But, the main driver of asset prices today is not even those imagined future profits, but is quite simply a desire to acquire capital gains from future asset price rises. That is why p/e ratios are high, and using Schiller’s CASE measurement even higher. It is driven into such territory, because central banks have put a safety net under asset prices via QE. This is one reason that profits are sent in search of these speculative capital gains rather than into real productive investment, and also thereby why economic growth has been held back, itself a deliberate policy, as with austerity, to prevent interest rates rising and asset prices crashing.
Not sure whether we are agreeing or disagreeing.
1 Trying objectively to value the knowledge residing in my brain is impossible. What can be agreed is that when that knowledge is applied it creates value, though that value is non-physical (therefore, non-material, intangible). It’s impossible objectively to value non-material things since they have no measurable characteristics. if they did, they wouldn’t be intangible. They can only be subjectively valued at the level of the individual. For example, how could you objectively value a lesson taught by a teacher? You could ask the students what they thought (but how objective might that be?). Get in Ofsted?(don’t tell JC). Ask the person paying (mum and dad?).
2 What someone’s prepared to pay for a book has no relationship to the value of the content of the book from the view of the writer. It’s a subjective and unstable calculation that can change radically in an instant. Which is one reason why viable book publishers are so rare.
3 The complaint about technology is the idea that it’s a separate factor of production and independent from labour. Technology can only produce higher productivity/value creation when it’s used by knowledgeable workers. Conventional economics treats technology as if it were a higher performance form of gasoline that the driver has no influence over. Using the metaphor, the worker is both the driver and the fuel in all value creation activities, both in tangible and intangible industries.
4 Crystal meth. The recipe is valueless. The person preparing the stuff using the recipe is the value-creator. And the valuation by the buyer of the crystal meth is wholly subjective. An addict will pay a lot. It’s valueless powder to me, but that’s subjective too.
5 Not arguing about s/c+v point. But there is no doubt that service workers need much less constant capital than a tangible good production worker. This can explain service corporate profitability, but that’s irrelevant. The perversity which seems to fly in the face of conventional Marxist theory is why capitalism hasn’t collapsed in advanced economies dominated by industries that require so little c in the value-creation process. Why do capitalists exist when demand for capital in services is both lower than in tangible industries and falling?
6 Contrary to what you suggest, there is a direct connection between projected profits and the valuation of a company. This has been witnessed first hand and very close up. The convention seems to be:
* project expected future revenue, cost and profit streams for five years
* Apply the requisite discount rate plus a terminal valuation for year five’s profits
* Sum the resulting five figures and that’s the valuation.
The projected profits are, by definition, imagined.Therefore the valuation is imagined too. See WeWorks today for this nonsense in practice.
Thank you for your comments.
“Trying objectively to value the knowledge residing in my brain is impossible. What can be agreed is that when that knowledge is applied it creates value, though that value is non-physical (therefore, non-material, intangible).”
See my answer in respect to this in a later comment. In essence you are confusing the value of labour-power, which includes the knowledge in your brain, with the value created by labour, i.e. the application of that knowledge/skill in the labour process. The former most certainly can be calculated. It is calculated on the basis of the cost/labour-time required to reproduce that knowledge skill, for example cost of education and so on.
“It’s impossible objectively to value non-material things since they have no measurable characteristics. if they did, they wouldn’t be intangible.”
Not true, as Marx sets out in the Labour theory of value. The service provided by a prostitute is immaterial not a material product, yet its value is measurable in terms of the quantity of labour undertaken by the prostitute. Trying to measure value as use value is the error of the subjective value theorists such as Bailey or the Neoclassical School. the objective measure is the quantity of abstract labour. The client of the prostitute for example has no difficulty putting a value on it, because otherwise they would not exchange money for the service.
“What someone’s prepared to pay for a book has no relationship to the value of the content of the book from the view of the writer. It’s a subjective and unstable calculation that can change radically in an instant. Which is one reason why viable book publishers are so rare.”
All that this tells you is what the demand for the book is at its market value. Either there is demand or there isn’t. If there isn’t then the labour expended was not socially necessary, and so had no value. If the value can’t be reproduced then additional copies of the book don’t get printed, and if publishers continue to publish such books they go bust.
“Technology can only produce higher productivity/value creation when it’s used by knowledgeable workers.”
Experience says otherwise. Technology take the skill of the craft or skilled worker and embeds it in the machine instead. It means the machine can then be operated by an unskilled machine minder.
“Crystal meth. The recipe is valueless. The person preparing the stuff using the recipe is the value-creator.”
Not true. The recipe is the work of highly complex labour in developing it. The cook is merely unskilled labour, whose labour adds to the value contained in the recipe, which acts as fixed capital.
“And the valuation by the buyer of the crystal meth is wholly subjective. An addict will pay a lot. It’s valueless powder to me, but that’s subjective too.”
Again this is just the confusion of neoclassical commodity fetishism. the subjective valuation of the buyer has nothing to do with the value of the commodity, which is determined by the quantity of labour required for its reproduction. The subjective evaluation of the buyer merely determines whether for them it is a use value, and so whether or not they will buy it. It is the determinant of demand, not of value.
“The perversity which seems to fly in the face of conventional Marxist theory is why capitalism hasn’t collapsed in advanced economies dominated by industries that require so little c in the value-creation process. Why do capitalists exist when demand for capital in services is both lower than in tangible industries and falling?”
Because, service industry demonstrates an increased demand for variable-capital rather than constant capital, and is thereby also a source of higher masses and rates of profit.
“Contrary to what you suggest, there is a direct connection between projected profits and the valuation of a company.”
That’s exactly what I said. The trouble is projected profits are not actual profits. Moreover, the fact that p/e ratios have expanded significantly shows that prices are rising as a result of speculation/momentum in addition to projected profits. Look at some of the tech companies where p/e ratios are of the order of 1,000:1, even on the basis of forward earnings.
It’s now clear that there is fundamental difference of view that looks unbridgeable.
You say:
“Technology take(s) the skill of the craft or skilled worker and embeds it in the machine instead. It means the machine can then be operated by an unskilled machine minder.”
This is an interesting sentence.
No matter how much skill is “embedded” in a machine, you still need to have a person capable of operating the machine to create value.
The difference between what is termed a skilled worker/craftsman and an unskilled machine minder is subjective.
The owner of the means of production might argue that it’s the machine that does most/all of the work. The worker will probably have a different view.
For example, workers in the Rolls Royce factory in Derby control machines making aircraft engines for widebodied jets– the largest capital items in British manufacturing — by tapping in instructions into keboards in a factory space which is as clean as offices in investment banks.
Despite the fact they expend no more energy than I am doing this, they regard themselves as among the most highly-skilled and most productive workers on earth.And this is reflected in their pay!
Someone else might consider them to be unskilled machine minders doing something that involves computer skills most school students have!
What is objectively true is that an unskilled machine minder (even if they think they are highly skilled) is creating more value for each hour of labour expended than the skilled worker not using a machine.
One of the lamentable features of conventional economics is that it presents output as the result of a combination of factors of production, conventionally termed capital (for which no economist has yet established a universally accepted definition); technology (which is also indefinable) and labour (the only productive/creative factor that can be unambiguously defined).
This configuration facilitates computation but it also disseminates the view that labour not only is not the sole source of value in all modes of production but it can be in some instances a small contributior to value creation.
“The difference between what is termed a skilled worker/craftsman and an unskilled machine minder is subjective.”
No its not. Firstly, the value of labour-power is different one to the other, because one requires more education and training etc. Secondly, the value created by one will tend to be complex relative to the other. If the value created by the labour of an unskilled worker is high, the employer of this unskilled workers will make surplus profits, because they will pay them lower wages in line with the lower value of their labour-power. This will encourage more capital into that sphere increasing the supply of that type of commodity reducing its value, and thereby the new value created by that labour. If workers in this sphere get higher wages, then assuming no frictions, more labour will enter that sphere, so that competition between workers pushes down those wages. This is all objectively determinable on the basis of the labour theory of value.
“Someone else might consider them to be unskilled machine minders doing something that involves computer skills most school students have!”
Precisely, and if those skills actually are or become abundant then the wages of those workers will fall accordingly!
“What is objectively true is that an unskilled machine minder (even if they think they are highly skilled) is creating more value for each hour of labour expended than the skilled worker not using a machine.”
Not true, for the reason Marx describes. If we talk about the same type of labour i.e. simple labour then it produces the same amount of new value per hour whether it uses a machine or not. That is the fundamental basis of the LTV. What differs is that the labourer who produces using a machine produces far more use values, so that the new value they create forms a much smaller portion of the total value of their output relative to the worker not using a machine. If they are producing the same commodity, widgets, then the market value of widgets will be determined by the former, and the latter will have to sell their output at this market value, below the individual value of their output.
The same is true where labour is employed on more fertile rather than less fertile land. labour employed on the former produces as much new value per hour as on the latter, But, the former produces more use values, because of the greater fertility, so that the new value they create is spread across this greater quantity of output, and thereby form a smaller proportion of it.
The difficulty of defining not just the difference between a skilled and an unskilled worker but the scale of the difference this made to the relative productivity of skilled and unskilled workers was one of the main issues causing industrial disputes in UK manufacturing after 1945.
No matter how much empirical data is studied, the critical factor was always subjective.
This issue is even more challenging in service industries when the inputs and outputs are intangible and consequently impossible to quantify.
Perhaps it might be useful to refer to personal experience. Learning at school and at college was non-linear, The capacity to acquire knowledge was influenced by mood, weather, context, likability of the teacher, atmosphere among peers, day of the week etc.
In other words, the acquisition of knowledge is non-linear and interactive involving peers and teacher. The relationship between teaching “inputs” and knowledge “outputs” is unstable and unpredictable.
If it wasn’t teaching people would be much easier.
This applies to the deployment of knowledge, including in the operation of machinery. And sometimes the difference between the productive/creative capacities of individual workers simply can’t be scientifically explained.
As you can see, this resists the idea that a person is bit like a laptop whose performance can be measurably improved by upgrading a particular type of RAM. We are not machines!
“In other words, the acquisition of knowledge is non-linear and interactive involving peers and teacher. The relationship between teaching “inputs” and knowledge “outputs” is unstable and unpredictable.”
Marx deals with this argument in TOSV Chapter 4. He says, the fact that a doctor expends labour-time providing healthcare to a patient is the determinant of the value of that service, not the outcome. One day, the doctor may cure the patient, the next the patient might die.
You are confusing two different things a) the value of the service provided by the teacher/doctor, and b) the value of the labour-power of the worker who buys this service. The value of the former is determined by the abstract labour-time required for its production. The value of the labour-power of the individual worker is determined by the abstract labour-time required for its reproduction. If we take 2 workers, one may be receptive to learning and so requires less labour-time to acquire the required level of education. The other may require much more labour-time to acquire the required standard.
The individual value of the labour-power of the first will be lower than the individual value of the labour-power of he second. But, labour-power, as with any other economy does not have its value determined by the concrete labour required to produce it, i.e. it is not its individual value that is determinant. The value of labour-power is determined by the average, i.e. its market value not its individual value.
So, wages as the phenomenal form of the value of labour-power, will reflect this average amount of labour-time required for educating the worker. the wages of the first worker will be rather more than is required to reproduce their labour-power, the ages of the second rather below what is required for the reproduction of their labour-power.
I should have clarified here that both receive the same money wages, but this money wage is more than required to reproduce the labour-power of the first, but less than required to reproduce the labour-power of the second.
I agree with most of the first part of this revised version. However, the discussion of appropriation of surplus value via unequal exchange is a bit vague and misleading. Is this appropriation of surplus value, for example, due to the normal operation of the formation of an average annual rate of profit, and prices of production, whereby commodities with a high organic composition sell at prices above their exchange-values, and vice versa, and thereby appropriate a greater quantity of total surplus value than they contribute, or is it a result of monopoly power, and monopoly pricing?
The two things are completely different, and have different implications. If its the former then no rent arises; if its the second then a rent does arise as a consequence not of the appropriation of surplus value, as part of the normal appropriation of average profit, but of the formation of a surplus profit above the average annual rate of profit.
In reality, the former is unlikely to be the case with knowledge based commodities, because by definition they have low organic compositions being based upon large amounts of abstract labour (even if relatively small amounts of concrete, but highly complex labour), relatively little fixed capital, and often little in the way of circulating constant capital, which often takes the form of auxiliary rather than raw materials.
If we assume that knowledge commodities do have a low organic composition, then, of course, it would be these commodities that would produce a lot of surplus value, and whose exchange-value would be higher than their price of production. It would then be these commodities that would normally pass on this surplus value to other capitals with high organic compositions. However, if as with agriculture, we assume that these knowledge based industries have various frictions restricting entry or competition, so that the exchange value of their output is not reduced as a result of capital entering this sphere and increasing competition, they would continue to sell at exchange values, not prices of production, and would consequently appropriate the high mass of surplus value from their own production, and would consequently produce a surplus profit/rent.
“If the producer of a knowledge commodity (but the same holds for any commodity) does so with a high organic composition of capital, the surplus value generated through production might be relatively small per unit of capital, but the absolute amount of the surplus value appropriated (unequal exchange) might be higher if the scale of production and thus the number of labourers are sufficiently higher.”
This is just flat wrong. In this case the additional surplus value appropriated is not due to “unequal exchange”, but simply to the fact that more labour is advanced. In other words, if we have
c 100 + v 500 + s 500, the mass of surplus value both created and appropriated is greater if we have a capital with a higher organic composition, but more capital, such as
c 2000 + v 1000 + s 1000.
The fact that the surplus value in the second case is double that in the first has nothing to do with unequal exchange, and everything to do with there being more labour employed! The unequal exchange that results in capitals with a high OCC appropriating additional surplus value, is a function of the formation of an average annual rate of profit, and prices of production.
I’ll come back on the rest later.
The high profits and market capitalisation of the monopoly digital corpaorations as well as of some other corporations relying on knowledge production is not because of the knowledge embodied in the workforce, but because of the high value of their intellectual property rights, in which the intellectual labour is materialized. This labour is expended in advance, before the commodities/units of content or of products based on them are produced (be it software-copies or cultural content or material products with high “intellectual content” like advanced high-tech maschinery or pharmaceutical products). So economically these IPR are fixed capital, that transfer their value pro rata to the produced units. Even the national accounts book “originals of intellectual property products, such as computer software and entertainment, literary or artistic originals” as fixed assets. So the capital invested for producing (or buying) these assets is relevant for the appropiated surplus in the formation of the production prices and average profit rate. Nevertheless this is only one factor, in addition there is appropiation of rent by the GAMFA and other corporations based on monopolistic IPR and on network effects.
Intellectual property rights were unknown as a financial asset in Marx’s lifetime.
He wouldn’t have recognised or accepted the validity of the concept which stems from the false idea that workers and the ideas/knowledge in workers’ heads can be separated.
There is a substantial body of literature, mainly from a libertarian perspective, which fundamentally challenges IPR in all forms on the grounds that it entails the legal enforcement of a claim against what is in another person’s head.
The fact that IPR and other forms of intangible capital including brands and goodwill have been accepted in law and accounting codes shows the extent to which owners of capital, facing declining profitability in tangible good manufacture and collapsing demand for tangible assets as a factor of production in services, have been able to exercise influence on legislatures and accounting standards bodies.
IPR plays no role in value creation in services.
Value in services is exclusively created by workers using their bodies including their brains (and the ideas and knowledge they contain) and interacting with colleagues and people paying for the services they create.
Monopoly is at work and it’s deployed exclusively by the owners of capital to assert a claim (sometimes indefinite) over the knowledge/ideas/creativity of the people they employ using legislation that has no validity in economic theory.
The principal challenge facing owners of corporations working in high-value knowledge industries is how they can turn high projected surpluses into balance sheet assets.
This is now done mainly through accounting conventions and codes that permit auditors to sign off as balance sheets assets the net present value of projected (ie imagined) profits.
These have no physical characteristics and contribute nothing to the value-creation activities of their workers.
There are a growing number of examples of balance sheet manipulation from Enron, to every commercial and investment bank in 2008/09 and this week in WeWork, which was being valued at more than $1bn despite reporting losses running at around $2bn year. This is the tip of the iceberg that is likely to be exposed by the recession Michael is forecasting.
We have to analyse new developments in a marxist way, that is analyse critically how they really function in the capitalist mode of production. The capitalist economy evolved IPR and they are relevant and we have to analyse and not ignore or deny that. Critical analysis has to say, as other forms of constant capital they do not create value, only labour does that. value is always created only by labour, but surplus value as a part of it (at whole society scale, in particular enterprises the appropriated surplus can be higher than the produced value added) is appropriated by capitalist owners of means of production (IPR are means of production) as (average) profit and in some cases in addition as rent based on monopolistic property or market position.
Looking at the capitalist valuation of IPR based on expected profits that is a form of fictious capital, which Marx analysed well. But in difference to financial assets, which are only a doubling of the real assets they represent, IPR are real assets and have a real value based on the societal necessary (mainly intellectual) labour time to produce them. It is like with other fixed assets, that are not “normal” commodities that can be reproduced arbitrarily, buildings eg., their valuation is kind of fictious capital including capitalisated ground rent, nevertheless the buildings have value as a product of labour.
“He wouldn’t have recognised or accepted the validity of the concept which stems from the false idea that workers and the ideas/knowledge in workers’ heads can be separated.”
This is not correct, for the reasons I’ve set out above. It confuses labour-power with labour. Its true that the knowledge/skill of the worker is a part of the worker, and forms the use value of their concrete labour-power. It cannot be separated from them. The labour-power of the worker can only be reproduced by reproducing the worker. The capitalist buys the labour-power of the worker for a specific period.
However, having bought the labour-power, the reason the capitalist buys it, is to obtain the action of labour by the worker, the action of creating new value. As soon as the capitalist contracts to buy the labour-power of the worker, their labour is separated/alienated from them. It now belongs not to the worker but to the capitalist. The worker’s labour, as opposed to their labour-power is necessarily embodied in a use value, be it a material commodity, or an immaterial service, and being so embodied it is alienated from them, and becomes the property of the capitalist.
It is the difference between the new value created by labour in this process, which is immediately alienated from them, and becomes the property of the capitalist, as opposed to the value of the labour-power which is the source of the surplus value. The value of the labour-power has no elation whatsoever to the value created by that labour as evidenced by the fact that absolute and relative surplus value can increase or decrease.
One correction to previous. Ludicrously, WeWork was initially valued at $47bn (that’s not a typo!) More here: http://theconversation.com/fallout-from-weworks-failed-ipo-shows-the-folly-of-excessive-valuations-125014
House of cards.
Ralph.
You say:
“We have to analyse new developments in a marxist way, that is analyse critically how they really function in the capitalist mode of production. The capitalist economy evolved IPR and they are relevant and we have to analyse and not ignore or deny that…”
That is totally correct, but IPR is not being ignored and is being subject to critical analysis.
Marx was acutely aware of the capitalism’s historic processes and therefore it is relevant to note that IPR was only invented in the 17th century (by the British Empire!) in the first copyright laws..
They were originally used by the state to control what was printed and have evolved continuously as the result of specific historic societal processes.
It is clear that IPR (like Marx’s concept of capital) is a social construct mainly used now by owners of capital to enforce claims over ideas and preventing workers and their families from freely using developments in knowledge, most notoriously in pharmaceuticals.
The concept of IPR is rigorously disputed in principle and practice by libertarian writers.
An excellent introduction to their arguments can be found in this short and clear report:
Click to access Against%20Intellectual%20Property_2.pdf
Best wishes
Dear Michael and Prof. Carchedi,
Unfortunately I find your theses non satisfactory for a truly critical political economy of the modern capitalistic mode of production.
I think we are all until now making a crucial mistake.
A chemical synthesis, a musical composition, an algorithm etc cannot be a capitalistically produced commodity for the simple reason that it is UNREPRODUCIBLE.
Novel knowledge and information cannot be produced twice.
By definition the second time it is copied, which is a completely different labor process.
Moreover, the notion that knowledge can be a commodity, completely disassociates knowledge from its material substrate, which is also a kind of metaphysics.
Knowledge exists either in the intellect of human labourers or encoded via some symbolic language in a material substrate (books, designs, hard disks etc).
It is clear that
– inventing/discovering new knowledge,
– copying knowledge from one material substrate to another via the same or different symbolic language,
– training other people to assimilate knowledge,
– and using knowledge to instruct other labourers or machines to perform a production process (e.g., play music, produce cars or pills etc),
are 4 different labour processes with different products, out of which the first one cannot produce capitalistic commodities on its own.
To put it differently:
The production of new knowledge cannot be separated from the development of the labour power that performs it and from the labor of encoding knowledge to some material substrate.
So what is the commodity of “new knowledge/information”?
One cannot commodify the labourer who embodies new knowledge (this would be slavery, not capitalistic production).
And if one sells the original paper, hard disk etc where new knowledge is encoded, it is not “new knowledge” that is sold, but the disk or paper, and therefore, the cost of reproduction of such a piece of paper or hard disk etc is minimal, and depends on the abstract labor expended in the copying labor process.
“Reproducing new knowledge” can therefore be only a metaphorical sentence.
Of course, capital tries to make a commodity out of knowledge, the same way it also does for land, water, maybe even air in the near future. There is a big difference obviously between natural resources that are not products of human labor, and new knowledge that is the product of human labor.
However, I am not saying that this kind of labor cannot produce commodities at all. What I am saying is that the commodities that it produces cannot be “new knowledge” in abstraction of its material substrate (the human labourers mainly).
Let’s make this concrete.
Definition: a service is a commodity the production and consumption of which cannot be separated in time and logically.
For instance, when someone is paid to clean our shoes, we pay for the cleaning service, not for the cleaned shoes. The labor product cannot be separated from the labor process.
There is intellectual labor of this kind: medical consulting (the labor of doctors employed in private hospitals or medical centres), private education, designing a particular building or bridge etc Each instance of this labor is unique, in the sense that no student – teacher interaction, or doctor-patient one can be identical to any other. On the other hand, society clearly defines the content of a commodity as a reproducible service in all these cases, so that the labor expanded can be reduced to abstract labor.
In all these cases, also, production and consumption are concurrent.
Now, when labourers work in the R&D department of a capitalistic enterprise the object of their labor is their intellect (mainly) together with objects like computers, prototype machines etc, The product of their labor is again the modified state of mainly their intellect, as well as that of objects upon which new knowledge is symbolically codified. There is nothing unique in the labor power that performs this labor. On the condition of proper education and training, any labourer can perform it, so that as long as there is free mobility of labor power, this labor can be reduced to abstract labor. Eventually, this labor is embodied into final commodities (cars, medicines, computers, software etc).
The only really novel issue here is that such technologically advanced commodities usually have a very big initial cost, and subsequently a low marginal cost that can approach -as a limit case- zero. This is a consequence of the fact that, due to technological progress and the high organic composition of capital of the actual reproductive processes of mass commodity production, the (complex) labor intensive R&D part costs much more.
In any case, given that the R&D labourers cannot be separated from the collective worker that produced the final commodity, their labor IS productive.
Until this point, i.e., in the absence of IP law, we could imagine a capitalistic society where the state produces most of new knowledge as a NON commodity, and subsequently capitalists are free to compete for producing innovative products for their personal benefit (to realise more surplus value against their competitors) as well as for the benefit of the average profit rate due to speeding up the capital’s circulation time by stimulating demand via the supply of new products, i.e., the creation and satisfaction of new social needs.
The capitalists would NOT invest large amounts to product innovation, though, since innovation alone produces no new commodities. It can only give a temporary advantage to the capitalist that first introduces a commodity (assuming that there is truly a social need for it). Obviously, the capitalist would not invest more than he would expect to gain from this temporary surplus profit due to innovation. This is why the state would take over most of the expenses for producing new knowledge (which actually is the case anyway).
But, apparently such a situation is not profitable enough for capital.
This is where IP law comes in order to create new “commodities”, which are not produced capitalistically, but, instead, are just the result of an institutional process, and therefore, bear similarities to a dispossession process. These are commodities that are based on exclusivity of the use of new knowledge. They simply generate monopoly rents for their owners. Thus, they extend the time that a capitalist can capture surplus profits due to the exclusive use of the innovation. In that way, the capitalist can also invest more on the production of new knowledge. But, the amount of rent he is going to capture in the market has no systematic relationship with the abstract labor expended for the production of new
knowledge/innovation. We can only speak about its minimum, which has to correspond to an average profit, without which the capitalist would not get into the trouble anyway.
Therefore, if we imagine now a capitalistic enterprise that produces NO capitalistic commodities, but only new knowledge, in the form of designs, brands, etc, this is the only case where the collective labourer is unproductive. This collective labourer would perform a labor like before (in which the object and product is mainly his own intellect, plus paper, computers’ hard disks etc), only to see the capitalist generating a kind of fictitious capital (an expectation of future profits when/if the innovation is used in the actual commodity production) based on that labor. Are there such enterprises today?
Well… We are getting very close to this.
Let’s see a few examples:
Company A produces movies and then sells copies of it (DVDs or streaming). Microsoft produces Office software. La Roche produces pills. In all these cases, the labor is productive, but the enterprises receive monopoly rents to the degree that they produce commodities based on an exclusive use of novel information/knowledge products (but not commodities) their labourers have produced.
However, let’s imagine a Company B that only produces the original innovation, and then sells the rights of exploitation to other companies. Then, it is only the latter companies that produce capitalistic commodities, and therefore their labourers perform productive labor. The collective labourer of Company B is NOT productive. The “right to exclusive exploitation of a piece of new knowledge” is not a commodity these labourers have produced.
It is true that in the absence of IP law restrictions, companies of both the first type (A), as well of the second (B) would not manage to realise value compared to their costs. So, they wouldn’t have existed in their current form . This is especially true for companies that sell software commodities, or movie DVDs, music etc, unless they found a technological solution to prevent their customers from making free copies. The state would be the only source of innovation, and capital would not benefit from monopoly rents, i.e., from transfers of value from sectors of the economy where knowledge and technology use is not exclusive.
I refer to this paper for details about how the current system functions, i.e., the different rents that accrue to the owners of IP law made “commodities”:
Value, Rent, and the Political Economy of Social Media
Jakob Rigi & Robert Prey
https://www.researchgate.net/publication/282439801_Value_Rent_and_the_Political_Economy_of_Social_Media
My only disagreement with these authors is that I don’t consider that knowledge commodities are capitalistically produced commodities that have a very low cost of reproduction (and therefore very low value). Instead, I think they are not capitalistically produced commodities at all.
Having said all the above, I don’t think that rents are more important than profits for modern capitalism. As Michael wrote on his previous article, the global proletariat increases, and lately, it might be even increasing faster than the services’ sector (only a part of which is unproductive). However, we DO have a new situation, in the one extreme of which we have monopolies that capture value they don’t produce via rents, and on the other extreme we have super-exploited labor in labor-intensive -but of low technology- sectors. The two extremes are to a large degree separated geographically and internationally as well, and form the basis of the modern imperialistic system. Therefore, imperialism is founded on the historical evolution of capitalistic production itself (namely the physical separation of intellectual, innovative labor from the reproductive labor of mass production of commodities) and not on the sphere of circulation (Lenin’s monopoly competition, the dollar domination etc) or of interstate rivalry (military etc), all of which follow logically in the ascend from the abstract essential laws to the concrete reality!…
Michael is doing a very good job in revealing the quantitative aspect (the one of abstract labor, organic composition and low profit rate of capital) of the super-maturity of the modern capitalistic system.
However, critical political economy has to deal also with the qualitative aspect, i.e., the one of the modern organisation of globalised production process in value chains, where intellectual/innovative/managerial etc labor is physically separated from manual/repetitive etc labor, and where they are linked now mainly SOCIALLY, via the (international) labor division. The former kind of labor cannot produce commodities without the later, but it is very important for the capitalistic competition. At the same time, the former is in a much better position to negotiate/struggle against capital than the latter, whereas monopoly superprofits/rents lead to the formation of a large labor aristocracy.
Monopoly rents on the one hand due to IP law, anti-immigration laws on the hand obstructing labor mobility, the law of value has to be modified in the modern international market for a critical political economy to serve the objective of labor emancipation.
The question of reproducability here is a red-herring. To use Marx’s example of Milton and Paradise Lost, the fact that Milton’s initial labour in creating a new piece of knowledge cannot be reproduced does not prevent the knowledge itself having a value. This knowledge once transferred outside Milton’s head on to a manuscript becomes a product, and thereby potentially a commodity. It has value, because it is the product of labour.
When Milton sells the knowledge/manuscript as a commodity to a publisher he realises that value. It is then not the original labour process that is sold, the product of the knowledge in Milton’s head, but the commodities produced by utilising the materialised form of that knowledge in a commodity/manuscript. This is no different than the use of any other piece of fixed capital as an input.
If I am an engineer, and produce and buy a lathe, I use the lathe to produce other commodities. In producing those commodities I do not physically reproduce the lathe. I only ideally reproduce the value of the lathe (wear and tear). What i reproduce is totally different commodities. A publisher does not reproduce the commodity that Milton/an author sells to them, as a commodity/manuscript, but simply uses this input as with any pother constant capital to produce different commodities, i.e. books.
A prostitute in selling their labour service to a client provides something unique that is not reproduced with the next client, but it does not mean that the prostitute does not create new value each time via their labour, and the money they take in exchange is the measure of that new value, as Marx describes.
You wrote:
“This knowledge once transferred outside Milton’s head on to a manuscript becomes a product, and thereby potentially a commodity.”
Isn’t this just a change in which the knowledge is transmitted?
Milton could have stood on a street corner and read it out to a paying audience. Same knowledge, different way of circulating it.
What essentially has changed in Milton’s decision to put his knowledge in a book rather than reading it out live?
The answer can be found in the argument that the value-creation in Milton’s works resides exclusively in the interaction with his readers.
The more individuals involved, the larger the scale of value creation and consequently the greater scope for the value creater to secure more money in the form of payment from customers.
More people in an era before effective amplification and speedy travel could enjoy Milton’s work when it was in a book form than they could for a live performance.
You can see that principle working in a different way for contemporary popular musician.
They now make more money from touring than from recordings, all now done digitally. Ed Sheeran’s live tour has made more than 600m pounds, a record.
Live performance allows direct interaction with fans and gives fans the opportunity to interact with other fans.
The other advantage is that bands can avoid losing control over IPR over its music. Previously, record companies made most of the money. Remember EMI and The Beatles.
This line of thinking applies to all knowledge however it is shared: digitally, Skype, live teaching, books etc.
Regards
“Isn’t this just a change in which the knowledge is transmitted?
Milton could have stood on a street corner and read it out to a paying audience. Same knowledge, different way of circulating it.
What essentially has changed in Milton’s decision to put his knowledge in a book rather than reading it out live?”
It depends whether he can read it out to consumers individually or not. If he can, then, what is he going to charge each individual for this service? If he charges them the value of the service, he may obtain no takers. Suppose the value is £10,000. Any one potential customer might think, “Hmm, I don’t know whether this offers me the use value/utility I am prepared to pay £10,000 for.
However, if Milton can get an arena (forget about the costs of hiring the arena etc.) and read his work to 10,000 simultaneously, he can charge them collectively the £10,000 value of the service, whilst charging each of them only £1. This is what is the same with all fixed capital, whose value per unit diminishes as the volume of output rises. Now, each punter may think, “yeah i remember Milton’s last gig, and it was good. I’m quite happy to risk a quid to go and listen.”
Alternatively, Milton can sell his work to a publisher for that £10,000, and let the publisher sell 10,000 books for a quid each.
Either way, the value of the commodity that Milton produces either as a material commodity/manuscript, or as a labour service is determined objectively by the labour-time required for its production. It is not determined subjectively as you and neoclassical theory believe by what consumers of that commodity/service are prepared to pay for it. That only determines the degree of demand for the commodity/service at its predetermined value.
I’ve explain this elsewhere like this. Take a farmer who can produce potatoes and carrots. In 100 hours of labour they can produce either 2 tons of potatoes or 1 ton of carrots. Put another way, the carrot price of 2 tons of potatoes is 1 ton of carrots. If I produce the former, I give up the latter potential production. Now, if I like carrots far more than potatoes, this might determine that I indeed spend the 100 hours of labour producing carrots rather than potatoes, but it most certainly does not change the exchange relation of carrots for potatoes and vice versa, because it does not change the objective fact that to produce 2 tons of potatoes requires 100 hours of labour, and so does 1 ton of carrots.
The utility of each only determines my demand for each given their pre-existing value, and exchange relation. For example, suppose that in 100 hours I could only produce 0.1 tons of carrots. Given my need to eat and to survive, I might then decide that no matter how much I prefer carrots to potatoes, my demand for carrots must be reduced. Instead, I will choose to produce potatoes and so be able to live. It doesn’t change my natural proclivity for carrots as against potatoes, it simply means that it has to be balanced against the relative value of one to the other.
That in itself is evidence that the value is objectively determined in production by labour-time, and not subjectively in circulation by utility.
Ta
I categorically deny believing neoclassical theory.
First, as is readily conceded by conventional economists, there is no neoclassical microeconomic theory explaining value-creation and prices in service industries.
All conventional texts either ignore the issue or treat intangibles as if they were tangibles.
This is bizarre since nothing could be more different to a tangible than an intangible.
The logical conclusion of the line of thinking indicated is that the market not only doesn’t work; it doesn’t exist.
And that means the role in the system of price as the vector is deposed.
The individualism that is the foundation of neoclassical and all conventional economic theory is also deposed in favour of the idea that value is exclusively the result of construction human interaction. This is the LTV adapted to encompass services.
The difference being ventilated is about whether human labour power can be objectively quantified in services.
You say it can be.
I say it can’t and have indicated circumstances where that seems to be validated (teaching, John Milton, live music performance).
There doesn’t seem to be a way to close the gap.
“I categorically deny believing neoclassical theory.”
Yet, you reject the idea that value is determined by the quantity of labour-time, and claim instead that it is determined by the subjective valuation of use values by consumers! The former is the labour theory of value, the latter is neoclassical theory!
“This is bizarre since nothing could be more different to a tangible than an intangible.”
That is only true if you are confused by commodity fetishism. Marx makes clear that an intangible and a tangible are both use values, and what the consumer buys in each case is the use value. If the consumer considers either a tangible or an intangible to be a use value, at its value, then they will buy it at that value. If they don’t consider it a use value at its value they won’t buy it. In other words their subjective evaluation of whether it is a use value or not for them only determines whether they will demand it or not, it does not determine the value of that use value, which is objectively predetermined by the amount of labour-time required for its production.
(As I have set out elsewhere, this does not mean that the role of this demand does not have an effect, but the effect is indirect as a result of feedback. In other words, a commodity that can be produced on a large scale, as a result of a lot of demand, can also thereby be produced at lower cost, so that its value falls, and vice versa.)
“The difference being ventilated is about whether human labour power can be objectively quantified in services.”
This again seems to confuse the use value/commodity labour-power, and its value with labour, the value creating activity. It is certainly possible to objectively determine the value of different types of labour-power, as determined by the labour-time required for its reproduction. That is true whether that labour-power is employed in the production of tangible or intangible use values. Unless that is the case the LTV collapses. It is also possible to determine the quantity of labour-time that any specific concrete labour undertakes in the production of some use value, again whether tangible or intangible. The only additional factor here is determining whether this particular labour represents simple labour or complex labour, which as Marx says can only be verified post facto in the market, by what consumers are prepared to pay for the product of that labour.
I think its that fact that confuses you into thinking that the value of the commodity/use value is determined by that valuation, rather than what it is, which is simply an evaluation of the complexity or not of the labour. But, that applies as much to tangible use values as to intangible use values. In other words, consumers may consider the labour of a master carpenter as complex labour, and the labour of a machine minder as simple labour so that they may value an hour of labour of the former as the equivalent of five hours of labour of the latter.
They may, therefore, be prepared to pay more for a chair produced by Chippendale than for a chair produced by Fred Bloggs and Co, using machine tools, only because they consider the value produced by an hour of the former’s labour to be greater than that produced by an hour of the latter.
Boffy
On Milton and Paradise Lost you say:
“This knowledge once transferred outside Milton’s head on to a manuscript becomes a product, and thereby potentially a commodity. It has value, because it is the product of labour.”
But the publication of Paradise Lost did not change the knowledge Milton was communicating. It was the way it was communicated that changed. The content (the words) remained the same.
He could have held live readings and charged people for coming to listen to him.
The reason why Milton chose to publish a book rather than deliver readings live to an audience is that it expanded the number of people he interacted with.
Since value in knowledge and all other service industries is exclusively created in the interaction between the creator (in this case Milton) and the audience/customer, the decision to publish a book massively increased the scale of value creation both then and over time.
The same process is at work in the decision by popular musicians who are choosing to rely more on live performance than on recordings. This approach underpins value creation between the musicians and their audience, partly because it also facilitates the interaction among audience members that makes live performances so distinctive.
This also allows the creator to escape IPR claims made by intermediaries (including recording companies). This demonstrates that IPR in this (and all other knowledge industries) adds nothing to value creation and is simply a mechanism used by capitalists to secure surplus value from creators/workers and and the people they interact with. In other words, it’s parasitical.
The significance of this development is highlighted by the fact that Ed Sheeran’s current live performance tour has generated income of more than 600m pounds (beating the previous record held by U2).
There will of course be objections to one person being paid so much, but it’s difficult to see how Sheeran is actually exploiting his fans in the way capitalists exploit workers.
This,
“The reason why Milton chose to publish a book rather than deliver readings live to an audience is that it expanded the number of people he interacted with.”,
directly conflicts with this,
“The same process is at work in the decision by popular musicians who are choosing to rely more on live performance than on recordings. This approach underpins value creation between the musicians and their audience, partly because it also facilitates the interaction among audience members that makes live performances so distinctive.”
Surely, if Milton published a book to expand the number of people he interacted with, and thereby,
“massively increased the scale of value creation both then and over time”,
then surely, the equivalent today for a musician should be to do the same, i.e. to produce a recording so that far more people now, and in the future can interact with it, and so increase the scale of value creation in the same way. In fact, what we have seen with the Internet is that these recordings are sold electronically, rather than requiring any physical media, and this is true in relation to the transmission of things like football matches across the globe too.
None of this changes the fundamental source of value and surplus value, in production, it only changes the manifestation and form of its realisation in circulation.
Using the internet to circulate songs increases the audience and value creation.
The problem is the ability to secure payment when it’s on the web.
That’s a technical issue and nothing to do with value creation.
Indeed, “normal” commodities can be reproduced as much as you like, but that does not mean that commodities which cannot be reproduced this way are no commodities. In capitalism there are even commodities that are no products of labour and have only value as fictious capital. Certainly this is because of the legal forms of this in capitalism, but it is. But there are also commodities that are unique products of labour and have the form of IPR, and may be they are valuated as fictious capital, but nevertheless they also have a intrinsic value resulting from the socially necessary labor time to produce them.Their value is usually realised by selling the products/copies based on this IPR, and it is special bacause you dont know in advance how many copies you will sell, and in the end it is a formation of average over several of these products. This may be difficult to determine exactly, and it may include the labour that on average is wasted in trying to produce such knowledge/information product-originals which is not successful. These expenses of capital are considered in the formation of the production price based on average profit. We have to see it as a part of the social division of necessary labour, that is spent in r&d and in production of content of cultural products, and that produces value as a social form of recognition/appreciation of the socially necessity of this labour, resulting in an appropriate claim of a share of the socially produced value for the producers = income (from which a big part is appropriated by the capitalist employers). But these content and originals, which are protected by IPR (patents, copyrights …), are not only in the head of the knowldge worker, but objectified in a material product, a data medium of any kind. But the product is not the data medium, this is only a random and exchangeable medium, but the content, the information itself. capitalism is able to give these kinds of products the form of commodities, and the labour producing them creates value.
I will respond only once, because I don’t like participating in a debate where it seems obvious that the other part doesn’t even read what I a have said.
Ideas cannot be objectively alienated from their creator because:
– Ideas do not exist outside their material substrate.
– Ideas are nor created/produced twice.
Ideas do not “wear out” as fixed capital does, therefore they cannot transfer on their OWN an amount of value that would objectively relate to the amount of labor expended for their “production”.
When ideas are produced in the context of a service, i.e., of a labor process where production and consumption cannot be separated in time, logic and reality, so that the labor process and its product are one and the same, then they can be objectively alienated. This is true for medical doctors, educators, as well as for civil engineers and architects producing designs on a use-by-use case, and, Boffy, yes, also for prostitutes, so please do not repeat this example for a fourth time in this debate. In all these cases, the labourer is paid for the time she/he spent with/for their clients and not for the medical consult, the design, the education result or the …pleasure she/he offers them.].
When production of ideas form part of a collective labourer that (re)produces cars, pills, software etc, then the labor expanded for their production is objectified into the products and commodities of the mass production.
Until now, in all these cases the labourers are productive, and the price of the final commodity is determined by its value, i.e. the amount of abstract labor it represents any time moment. However, in the absence of IP law protection, in many cases this value would not be realised because competitors would produce similar commodities by imitation, thereby reducing considerably their price. On the other hand, though, IP law allows the capitalists to realise superprofits due to monopoly rents, by creating fully monopolised sectors (for some time).
Note the special case where IP law obstructs labourers to perform a labour for a new employer based on ideas they embody due to their past labour for another employer. In this case, IP law doesn’t forget that there is no idea without a carrier, and gets back to a system that resembles feudalism or even slavery…
Now, in the case where an idea, a design, a formula etc becomes a commodity as such, outside any process of objective commodity production (no matter if mental/intellectual or “material” dimensions as more important), the commodity form it takes is that of a kind of fictitious capital, i.e., an expectation for future profit if/when this idea objectifies in the mass production of a commodity.
Yes, capitalism converts everything into a commodity and puts a price on it, but not all commodities can have an objective value that corresponds to the socially necessary mount of time of abstract labor for their production. Dividing post-hoc the initial cost by the total amount of units produced and sold doesn’t lead to an objective determination of the price and value of such commodities. Such value should be computable upon production, not after full realisation.
All the above goes according to Marx’s theory of value.
Of course, one can create his own theory of value, a metaphysical one according to which:
– ideas circulate without any material substrate, and therefore can be objectively alienated,
– where an amount of fixed capital can transfer an objective amount of value to other commodities although it is never fully consumed (it doesn’t wear out with its use),
– one where we need to arbitrarily postulate a specific supply and demand outcome in the sphere of circulation in order to compute the amount of value produced in the sphere of production and subsequently transferred by fixed capital (I remind you that the assumption Supply = Demand of classical political economy, for the Marxist political economy means that everything produced is consumed and not that how much is produced depends on how much is consumed…, i.e., circulation follows logically from production in their mutual unity, and not the other way around).
Such a “theory of value” is not a critical, but an apologetic one, since it conceals:
a. the dispossession of parts of the general intellect as a product of universal social labor (by large NOT produced capitalistically but either by the state or in free time, and some times by self-employed labourers, e.g., artists, i.e., by simple commodity production) by capital, via institutional/state violence that obstructs independent producers from circulating and using them,
b. the transfers of value from non-monopolised productive activities to monopolised and to a large degree non-productive activities, with well known social and international/geographical/geopolitical dimensions,
c. the systematic differences of exploitation rates that (a) and (b) result in, together with the anti-immigration laws.
The mainstream apologetics about value accruing to imperialistic states and part of it to their extended labour aristocracies due to “productivity differentials” is a characteristic example.
Interesting reply that demands closer study.
The argument that ideas can’t be separated from the person in whose brain the ideas reside is convincing.
The issue that springs immediately from the post arises from this sentence;
“In all these cases, the labourer is paid for the time she/he spent with/for their clients and not for the medical consult, the design, the education result or the …pleasure she/he offers them.].”
It is indeed the case that lawyers charge by time (as do many service workers including builders).
But what determines the price sought by the service supplier.?
It’s hard to see how the supplier can objectively price the service purely based on a calculation of the labour power expended in learning a skill (perhaps over a lifetime) and then work out an accurate hourly charge.
It must be at least subjective.
This observation is based on personal experience.
I was a service supplier (economic and political consultancy) and worked for a private company (originally listed and then PE owned).
My employer wanted to charge me out on a time basis (hourly and daily) and preferred a market benchmark.
This was unconvincing. Which service supplier was strictly comparable? There was more than one choice. It seemed obvious anyway that the service provided was unique to me and to the person(s) benefitting from it.
Reference to cost of production was overcomplicated (which part of the knowledge acquisition process should be priced? Parenting? Informal learning?).
Opportunity cost was also unsatisfactory (what else could have been done when the consultancy work was occuring?).
The preferred option (which the employer was unaware of) was shaped by subjective factors including perceptions of the buyer (were they likeable?), industry they were in (some were boycotted), desire for further transactions etc. This worked.
It was also obvious that value creation in each transaction was interactive and depended upon constant feedback from the buyer.
In addition, it highlighted the truth that value in a knowledge industry is always co-produced and that it’ssolely perceptible subjectively at the level of the individual.
What’s harder to do is reconcile this idea of value creation with Marx’s writings.
This can be done by recognising that not only exchange value but use value is a subjective category.
Thank you.
The more common a service, the better the market sets a price for it closer to its objective value. This is true for any commodity, be it a service or not, be it intellectual, or more manual. This objectivity emerges from thousands or millions of subjective interactions between service providers (e.g., lawyers, doctors, engineers, trainers etc) and consumers, i.e., the “market” of that service.
It is exactly why the REPRODUCTION of a commodity in several instances by several independent producers is a necessary condition: the objectivity of the price around the commodity’s price of production (which depends on its objective value, namely the socially necessary abstract labor time) emerges from social processes, practices etc of competition among the individual producers. It is not the result of a computation of a subjective intuition etc Without a possibility for reproducing a commodity, such social processes just do not exist, and therefore, the labor embodied in such a uniquely produced commodity, cannot be equalised with other workers’ labour, and therefore cannot be reduced to abstract labor, i.e., it hasn’t got an objective value.
If you were providing a service that doesn’t have a clear comparable service provider, this would be equivalent to producing a monopolised commodity. If your supply could not meet the demand for that service, and assuming that IP or other law doesn’t obstruct other people to provide a similar service, after the appropriate training, this monopoly situation wouldn’t last for long. Soon, the market would converge to an objective price.
You see all Marx’s abstractions are REAL abstractions, i.e., abstractions stemming from real social processes. Abstract labor time exists only to the degree
a. labour is versatile and mobile,
b. labour produces commodities, i.e., use-values that are reproduced systematically by versatile and mobile labour…
For a use-value that is produced only once, by definition labour cannot be versatile and mobile. We have only embodied labour, but it cannot be reduced to abstract labour.
This is why the product of this labour cannot be objectively alienated from the producer.
Thank you also for a nice discussion.
I would recommend this reading that helped me a lot comprehend all this:
https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.336608
Thank you. It seems we essentially agree.
But, you say:
“If you were providing a service that doesn’t have a clear comparable service provider, this would be equivalent to producing a monopolised commodity.”
It wouldn’t be a monopoly in the sense applied to tangible goods where there is a quantifiable physical absence of an alternative.
The situation would be one where the service creator is the sole creator of that service as it is subjectively perceived by the potential buyer of that service.
Since services are intangible and have no measurable characteristics, buyers are unable to form an objective view of the value of the services they seek.
Therefore, any restriction in supply can only exist in the buyers’ mind.
Creators can’t produce a physically quantifiable scarcity for things that have no physical existence.
Consider a live performance by Ed Sheeran (annual turnover of more than 500m pounds, which is greater than the majority of UK corporations).
It could be entirely possible for another performer to sing Sheeran’s songs identically to Ed Sheeran.
Why wouldn’t Sheeran fans say: same song, sound and setting. Let’s go to that performance and it will probably cost less.
They don’t because fans have in their head an entirely subjective compulsion to see and hear Ed Sheeran.
The monopoly, to the extent that it exists in this situation, resides in the subjective relationship between Sheeran and the fan.
In other words, it’s the relationship (an entirely subjective factor) — not the observable characteristics of Sheeran’s live show (sound, light, ambience ctc) — that is driving the transaction.
You also say:
“For a use-value that is produced only once, by definition labour cannot be versatile and mobile. We have only embodied labour, but it cannot be reduced to abstract labour.”
Use-value in services — being intangible — can be consumed by many different people at the same time.
A use-value in services (including an Ed Sheeran live show) therefore can be both versatile and mobile.
This rule applies again to Ed Sheeran.
Once use-value is perceived as being subjective rather than being shaped by physical characteristics, the implications are profound.
They include the conclusion that in services, there is no such thing as a market (or a market-clearing price).
There are instead a mass of human interactions which are unique to the people involved that can only be individually assessed on a subjective basis and where relationships — not prices — are the key vector.
The underlying question is how can this depiction of value creation be reconciled with Marx?
The answer resides in recognising that use value is essentially subjective.
Use value (usefulness or utility) presupposes it has a use to someone and this is a shaped by subjective factors.
For example, a flint stone that could be used 10,000 years ago to make a cutting implement is useless to us.
Same physical item.
Different use value.
The laws of value and of surplus value and the profit rate are essential because they regulate the functioning, the division of labour and the distribution of the products and the development of the capitalist mode of production, which is not individal production, but societal production. Every work and lobour is regulated by thinking, by planing and designing what and how to produce, ad this becomes more important the more the productive forces develop and technical developmemts and “ideas” are embodied in the products.
In contemporary capitalism the production of such “ideas” is necessary for modern production, is a growing part of the societal labour, all the research and development and content-production. This is socieatal necessary labour and therefore produces value. (We would like better if all the “general intellect” and science and basic product developments were done in public institutions and the products were not commodities but free to use for everybody, but in fact most r&d is done in capitalist corporations, and even worse, also much of the scientific institutions meanwhile are organised capitalistically and not in public universities and institutions that work for the public.) The ideal products / intangibles this labour produces are materialised/objectified in code on data media. They cannot exist without any material substrate, may it be a living person or such media, but nevertheless the product of the intellectual work is not the substrate, but the content, that can be objectified in different carriers, but can be abstracted from them and operated in the minds of persons and economically as commodities, as IPR, no matter what the particular carrier is, that can be changed (may be in the brain of a person, on paper, on a CD or usb-stick, on a server in internet …).
We have to analyse what that means for capitalist production, there are some specialitiies, but it works in reality and operating with IPR as commodities is relevant not only for rent appropriation, but also for regulating the societal division of labour and the production of value and so on. So we have to recognize and analyse it, as a part of the production of commodities and value in the capitalist economy and society. And we have to analyse it critically and sophsticated, the several ways and forms in operation here, differentiate value produced by labor and value appropriated by redistribition of value by the average profit rate and value appropriated/redistributed as rent on monopolistic property. And by the way, we also have to recognise the differecies in the producitivity of labour especially internationally (look at Marx, the capital I, chapter 20), which has to be differentiated from just imperialist super-exploitation, which also exists, but is not the main story in explaining the different levels of wealth in the different countries.
You write:
“They cannot exist without any material substrate, may it be a living person or such media, but nevertheless the product of the intellectual work is not the substrate, but the content, that can be objectified in different carriers, but can be abstracted from them and operated in the minds of persons and economically as commodities, as IPR, no matter what the particular carrier is, that can be changed (may be in the brain of a person, on paper, on a CD or usb-stick, on a server in internet …).”
The problem is that an idea cannot be a use-value unless within some material substrate, and therefore cannot become a commodity otherwise.
It is only via such an objectification that an idea can be alienated by its producer, and enter subsequent production processes to produce means of consumption or means of further production.
I wrote above that in such a case, intellectual labour IS productive, because it cannot be separated by manual labour, within the collective labourer that produces the final commodity, be it a means of consumption or a means of production alike. So we have no disagreement there.
I only said that a patent is NOT a commodity, i.e., if we imagined a capitalistic enterprise that only produces patents, i.e., chemical syntheses, algorithms, musical compositions etc, without producing pills, software copies, music DVDs etc, and only sells the rights for the use of the original prototypes, this is not a productive process, and it rests on IP law obstructing the reproduction NOT of the original idea, music or chemical composition etc, because those cannot be reproduced, but of the objectified final commodities.
Then, the rights of use become a fictitious capital, and the labourers employed on producing original prototypes do not produce fixed capital, but fictitious capital. Their labour cannot be equalised with social labour, and reduced to abstract labour, because there is no REAL social process that would lead to such a result. Therefore, the “IP rights” is not a commodity the value of which can be objectively determined (not “computed”, or subjectively set), by the amount of labour time expended for its production, because that labour is not equalised and reduced to abstract labour.
If the company that produced the original prototypes also produced the final commodities, then we have two cases: without IP law, then these commodities function like any other commodity. However, we couldn’t expect a company to invest a lot on R&D, if competitors are allowed to imitate its innovative products, therefore risking to NOT realise the value expended for their production (a big portion of which would be the R&D labour). Then all innovation would be produced outside the capitalistic production, e.g., by the state, or by isolated inventors. If there IS IP law, it usually leads to temporary monopolies, in which case, the capitalist can realise MORE value than the one expended for the production of those commodities. In either cases, the law of value is causing problems to modern capitalists: the problem stems from the fact that production is so automatised and innovation so important for competition, that capitalists have to spend a big part of the invested capital on R&D. The capitalistic mode of production reaches its historical limits.
Also, in either cases of IP law enforcement (unproductive labour for “patents” on prototypes) or productive labour for monopolised objective commodities, IP law “enslaves” partly the intellectual labourers themselves, in order to “objectify” knowledge as a commodity. Most such labourers sign contracts of secrecy, which also obstruct them from working for competitors for some years etc This is regulation that goes beyond the capitalistic mode of production and gets us back to feudalism or caste systems.
Finally, I agree that the different levels of capitalistic development in the different countries is a historical outcome that goes far beyond monopoly rents. The capitalistic mode of production never functioned in the international sphere as in isolated countries. There were always borders, states, military, colonies, imperialism etc mediating capitalistic development. Therefore, today’s different levels of capitalistic development correspond also to different levels of productivity, organic composition of capital, moral and historical elements of labour power value etc etc, as a historical outcome.
However, today, the more the capitalistic production globalises the more it is the law of value that mostly determines future development. It is in our modern world that technological monopolies have become more important for the development around the world. Before industrialisation had expended around the world, this was not the case.
You write: “I only said that a patent is NOT a commodity, i.e., if we imagined a capitalistic enterprise that only produces patents, i.e., chemical syntheses, algorithms, musical compositions etc, without producing pills, software copies, music DVDs etc, and only sells the rights for the use of the original prototypes, this is not a productive process, and it rests on IP law obstructing the reproduction NOT of the original idea, music or chemical composition etc, because those cannot be reproduced, but of the objectified final commodities.”
This is the point I disagree. The “idea” is a product itself, I discribed it, and in fact patents and other IPR can be commodities and they are in real economy. They can be sold and bought, they are products of labour, they have value, the labour producing them is productive nevertheless if the company uses the IPR in its own production of final products or sells it to other companies to do that. Certainly this is based on laws, but that is not a difference to other commodities. If the product would be a maschine, that is sold and used for production by a capitalist lets say over the day only, it is the law that restricts other people from using it in the time the owner does not use it, eg at night. The point is more obvious if this property eg. is a forest. Those IPR are used for a certain time, normally several years, for producing final products and their value is transfered to those like the value of the maschine, like other fixed capital. It also “wears out” economically, as new and better “ideas” (software, design, content etc.) are produced and after some time/years there is not much value anymore their use adds to the final products. (However, this is only one point besides monopoly rents that are appropriated by exceptional successful IPR. But I do not see that the capitalist mode of production has a limit here in itself, only if we are are not able to overcome it politically.)
Indeed we disagree.
Although, I must refine the disagreement.
Patents are indeed a commodity like land, a kind of fictitious capital.
Obviously the big difference is that unlike land, ideas/knowledge is indeed the product of human labour.
What you don’t seem to understand though is that not all human labour can be equalised with abstract labour, and obtain a value determined by the amount of socially necessary homogeneous labour for its reproduction.
You keep confusing the categories of
– embodied labour: the labour congealed in an individual product of labour
– abstract labour: the essence/substance of value, e.g. socially equalised labour due to labour versatility and mobility,
– socially necessary homogenenous labour time: the magnitude of value after all complex, skilled labour is reduced to homogeneous, socially average, simple labour.
The labour that produces highly original products (ideas, designs etc) lacks versatility, since by definition those products cannot be reproduced by independent producers, so that social mechanisms of competition, education, training, imitation etc would equalise the individual embodied labours with abstract labour, and therefore, to different amounts of homogeneous labour.
Instead, such objectification happens only after:
– either knowledge is embodied in massive production of normal commodities,
– or if their production becomes a common social practice (lose its originality) as it is the case for instance for services of medical treatments.
Something that is uniquely produced cannot be objectively alienated, i.e., it is tied to the subjectivity of the (collective) labourer and of the specific labour process that has originally produced it. This is why it cannot obtain a social value via labour time. Obviously, though, it is bought, rent or sold, just like land, i.e, it has a price, but this price has no systematic relationship with its embodied labour time.
Labour commodified as patents is not the only kind of labour that produces useful products for consumption or production, but not value as labour time. Labour for state’s services such as education and medical ones, or when state enterprises provide water or electricity but not as commodities is another example. The fact that the users might be still paying a price for part of those services doesn’t make them a normal commodity (in market competition), nor the embodied labour equalised with abstract labour.
Similarly, you confuse the “wear and tear” which has some systematic relationship with the use of a commodity, i.e,. the more you use it, the more it wears and tears (even if not linearly), i.e., it is CONSUMED, i.e., its value is transferred to other commodities, with moral devaluation due to lack of demand, because it becomes technologically obsolete, in which case its value is just lost, not transferred. Therefore, there is no way to determine the value that is transferred by such commodities without reference to demand and the sphere of circulation, which though follow logically the sphere of production. Instead, for normal commodities as fixed capital, this is not the case: they can transfer a maximum value equal to …their value, and its output unit transfers total value / total number of outputs that can be produced before full consumption (i.e., full wear and tear), i.e., this amount is determined already at production time.
Finally, you confuse the property rights of capitalists concerning the products of labour, i.e., the right of capitalists to sell the products of labour as commodities and realise their embodied value and surplus value and appropriate that value for themselves, with the IP law obstructions to other labourers or capitalists to repeat the same or a similar production process to produce other similar commodities. Here we have a law that reminds us of social castes (masonries etc) of simple commodity production in feudalistic social systems.
What you are describing above is metaphysical, because “ideas” do not exist outside their material substrate.
If this substrate is other human beings, then obstructing them to use them, is a property relationship imposed upon part of human beings (i.e., part of their intellect), something that is not in accordance with the essence of the capitalistic mode of productions that rests on the formal equality of all producers, either capitalists or labourers, that confront each other in the market as sellers or buyers of commodities, i.e., it is a kind of pro-capitalist oppression.
If this substrate is a piece of paper, or a computer hard disk etc, then the rights of property should be limited to that particular paper or hard disk.
This is not the case with IP law, though, that today can even protect the discovery of a particular gene! I have read, in another example, that Monsanto won the trial against a farmer, in the field of whom, some of Monsanto’s grains have grown when the wind brought them there! The court decided that the farmer should have known that Monsanto owned the rights for that grain, and should have prevented it from growing in his field…
I have written in a reply above that a version of the marxist political economy that considers these social phenomena as the normal functioning of capitalism stops being critical, and becomes apologetic of the modern reactionary monopoly-imperialistic stage of capitalism, which employs more and more pro-capitalistc-like means of oppression and exploitation.
This by no means that capitalism can be superseded without conscious political action to overthrow the power of capital.
Actually, these reactionary extremes are just capital’s effort to accommodate universal social labour to the confines of value as abstract labour, measured by homogenised labour time, by force…
Sorry Dionysios, in my view we have to analyse the capitalist production and valuation of IPR as it is, which has certainly specialities and modifications from “normal commodities”, instead of just saying it is different.
Recognizing labour as socially nececessary abstract labour is a social process “behind the back” of the individuals realised in competition and so on. We for that do not have to look at individual commodities and labour, but for averages in a branch of the division of labour. Most “ideas” then protected by IPR-laws are produced or exploited by capitalist corporations, and these make a capitalist calculation of their expenses and the surplus they expect from the results (as a whole, not only for one special patent eg., they produce a lot of them every year) and therefore the division of labour also in this sectors is regulated by the law of value and the law of profit rate. Nevertheless I agree that in particular there is also and in some cases the main part appropriation of rent, as I wrote already. But we have to see both and it is not uncritical to analyse the realisation of profit from IPR not only as realisation of rent but also as realisation of value produced by the labour exploited in the r&d departments of those corporations, which is in the aggregate part of the socially necessary labour, no matter if in particular some of this labour results in very successful eg. patents that in the end realise surplus-profits and rent and some other part of this labour is not successful and wasted. But these unsuccessful attempts are also part of the necessary. And patents on biological organisms is a special case again and we agree that there should not be such patents, but that is a political and not an analytical position.
So difference between us in the view o this is that you see IPR only as kind of new feudalism and I see it also as element of capitalist organisation of r&d and the production of value there. This is also not in contradiction to the personal freedom and equality of the workers in capitalism, even if you are not allowed to use some special part of your knowledge for economic purposes you are not a slave, you cannot be sold to someone else etc. Also the even harder cases of eg. football-stars that are “sold” to other clubs is based on contracts beetwen free persons, they are no slaves. Harder and nearer to slavery is debt bondage, but even this is to differentiate from slavery, when you are personally property of someone else.
And as I already wrote, there is nothing metaphysical in my view, cause certainly ideas as everything else only exist with material substrate. But nevertheless they are not this substrate, they can be communicated and operated with psychically and for the regulation of technical and social processes and can be dealt as a commodity abstracted from the specifical substrate they are ligated to in particular. You somehow deny that it makes sense to talk about ideas at all when you state the only relevant thing (and commodity) is the substrate.
I am willing to study with an open mind any theory that will try to show how the value, and therefore the price, of a patent-commodity, i..e, of an “idea” that has not yet participated in the massive production of any other commodity, but stands only as a possibility for such a massive production, systematically relates to the expenditure of human labour for its production.
I have thought several possibilities myself as well.
For instance, the “uniqueness”of each such labour and production process could be overcome by comparing other such processes that lead to similar, albeit not identical commodities, i.e., the production of a pharmaceutical chemical synthesis could be evaluated as a social average over all current productive processes of this kind independent of the particular chemical synthesis, a piece of software similarly, among a specific kind of such software (i.e., logistics, Office suites, industrial etc). Of course, this is not the classical notion of a branch, since this refers to industries that produce the SAME commodity. Mind also that Marx hypothesises that any capitalist, as long as he is willing to invest the necessary capital amount, can enter any branch of production. However, I am not sure that there are infinite scientific solutions to a problem of production or consumption (e.g., medicines for cancer) so that inventing a new one would be only a matter of investment and time (how much time??, what happens in the meantime?? etc)
The “metaphysics” problem of the objective alienation could be overcome by accepting the IP law function of obstructing otherwise free labourers and capitalists to repeat the same or similar labour/production process for some time (a few decades usually). I fully agree that this is not slavery, although it is very similar to the masonry/caste system of feudalism. Still, we could accept, although critically, this fact as well.
The monopoly situations that arise from such obstructions could account for some of the superprofits, but only in addition to the objective “value” of the patent-commodity. This is fine if, again, we study this critically, and not apologetically, for instance in respect to what it means for the international division of labour between imperialistic developed countries and exploited (non/under)developing ones.
Finally, we could assume that the fact that such commodities cannot be consumed -they don’t wear and tear- just increases the role of the demand side and the sphere of circulation, against the usually mostly determinant sphere of production in marxist political economy. We could assume that each such product devaluates with time as a function of competition that can produce similar or better commodities with less effort, by imitation, improvement etc hinted by the original. Under such circumstances, and as time goes by, the patent-commodity transfers progressively less value to its output unit produced using it, until this value reaches 0, i.e., it becomes technologically obsolete and it is not sold at all. This time could be the time the patent-restriction ends, or it could be earlier due to new competitive commodities. We could even accept that there is a general -on average- relationship between the size of the original investment and the difficulty for competitors to produce an equivalent commodity. Even in this case, still the value, and therefore the price, of such a commodity would be extremely volatile around its production cost, and it wouldn’t be really determined at the point of production.
After all these assumptions or other similar, we don’t have any more the marxian labour theory of value as we know it. I am not saying that we shouldn’t perform this study, because after all, it IS human labour that is alienated and exploited, not nature as in the case of land.
So, I would agree with you under the following conditions:
a. we acknowledge that this is not the “normal” functioning of capitalism, that it constitutes a change in the substantial laws of the capitalistic mode of production, that to the degree that there is a tendency for this kind of labour to generalise and become dominant, we speak of a new stage of the development of capitalism, which affects one way or another all aspects of social life,
b. we study critically the new modes of oppression and exploitation all this entails against theories that suggest a smooth transition to some meta-capitalism of no exploitation at all, where machines will work for us, with equality around the globe etc etc
In the light of the above conditions, I DO insist that this kind of universal labour is not in agreement with the essence of the capitalistic mode of production, and the adjustments capital has to do to keep the system working to its own interest, adjustments that also modify the functioning of the law of value accordingly, are in a reactionary direction.
For instance, even if patent-commodities are NOT fictitious capital, even if we can determine their social value objectively based on the social necessary homogeneous labour time for their reproduction at any time moment, they do encourage monopoly rents and fictitious valuations, and therefore they DO capture value generated in other branches of production.
Similarly, the international hierarchy of profit and exploitation rates that result, or the feudal-like obstructions in the mobility of technology or science are oppressive phenomena that function against the progress and prosperity of humanity.