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Marx's Economics for Anarchists: "An Anarchist's Critique of Marx's Political Economy"

category international | economy | opinion / analysis author Monday December 12, 2011 15:15author by Wayne Price - personal opinonauthor email drwdprice at aol dot com Report this post to the editors

Chapter 10

Concluding chapter of the book, "Marx's Economics for Anarchists; An Anarchist's Introduction to Marx's Critique of Political Economy." Summarizes discussion. Kropotkin's view of Marx's economics. My anarchist criticism of Marx's economic theory. View of autonomous, far-left, Marxism. References for further reading on introductory Marxist political economy; on controversial issues of Marx's theory; on analyses of the post-Great Recession economy.

Marx's Economics for Anarchists - Chapter 10

An Anarchist's Critique of Marx's Political Economy

Marx’s economic theory is distinctive in several ways. He started from the issue of how labor is used and organized to produce and distribute goods and services. In order to consume things, people have to work to produce and distribute them, and organize their labor to do so. This focus on labor makes it possible to see how modern workers are exploited, even as were the serfs and slaves of old. Some work and others live off that work (even if they spend some effort in organizing those who work and in making sure that they do not rebel). Alternate theories do not make this clear, or, rather, obfuscate this reality.

Marx sees capitalism as a dynamic historical system, driven by internal conflicts. It had an origin, it reached its height, now it declines, and it will end. In this it is no different from previous socio-economic systems. (If humanity makes it to libertarian communism, it too will evolve, although how is beyond our ability to predict.) Bourgeois economists write as if the categories of capitalism have applied for all time, or at least as if they expect the “free market” to go on forever, the perfect economic system, the “end of history”.

Broadly speaking, Marx’s analysis has held up well. Unlike the classical political economists, he predicted the continuation of the business cycle, with its conclusions in crises. Similarly, he predicted the growth of ever-larger capitalist enterprises, into semi-monopolies. He expected capitalism to have class conflicts, wars, ecological decay, and an ever-expanding world market.

Marx’s critique of political economy is a set of useful theoretical tools for understanding the present conditions of the capitalist economy and its likely future developments. But the tools are no better than their user. It has been said that Marxist economists have predicted 20 of the last 5 recessions. More to the point, few Marxists predicted that World War II would be followed by an extended period of prosperity. Neither did many liberal or conservative economists, but Marxism was supposed to be superior. Once the post-war prosperity had settled in, most Marxist theorists of note declared that the epoch of capitalist decay was no longer in effect. They said that the prosperity would last indefinitely (the same was said by almost all bourgeois economists).

Most Marxist economists did not apply Marx and Engels’ concept of state capitalism to the Soviet Union or Maoist China. Most were political supporters of these regimes! Even those few who were not, did not expect them to transform into traditional capitalism. Even now few have much of an explanation for how this happened.

To be fair, understanding social structures (which is to say, people acting, thinking, and feeling together) is difficult. Marx was trying to be as scientific as the hard, natural sciences, but this is probably impossible. For over 30 years a few of us have been predicting the final collapse of the post-war prosperity, based on our understanding of Marxist political economy. Instead, the world economy has continued to gradually slide downhill, with ups and downs. I believe, with others, that 2008 was the beginning of a new period of crisis-ridden decline. We will see. (See references.)

Predicting this, I have often felt like a geologist in California saying, “Don’t continue to build houses; at some point there will be an enormous earthquake which will flatten cities”. People ask this geologist, “When will this great earthquake occur?” The geologist does not know. “Maybe this year. Maybe in a decade or two. Possibly in a century”. (This is all true.) “Forget about it! We will take our chances building our houses”. Political economics is much more complex than geology. Unlike geological strata, classes and social groups have consciousness and make choices (people have “free will”). So it is hard to make predictions and harder to persuade people when we do.

Kropotkin’s Criticisms

Despite bitter personal and political rivalry, Bakunin thought very highly of Marx’s economic theory. In the same period, the anarchist Carlo Cafiero published his own summary of Capital. Over the years, many other anarchists had the same positive opinion. Not Kropotkin, the most influential anarchist after Bakunin. He always held a negative opinion of Marx and Marx’s theories. He specifically rejected Marx’s views on economics.

Perhaps the best exposition of Kropotkin’s opinions on political economy are in his pamphlet, “Modern Science and Anarchism” (in my view, not one of his better works). In it he explained his general worldview: “Anarchism is a world-concept based upon a mechanical explanation of all phenomena, embracing the whole of nature—that is, including… economic, political, and moral problems. Its method of investigation is that of the exact natural sciences... “ (2002; p. 150).

Kropotkin rejected dialectics as unscientific mysticism. Otherwise he, in fact, had a similar approach to Marx’s, aiming to create an all-encompassing view of the universe, from the atoms to social movements, all in one theoretical system. The anarchist Errico Malatesta quoted the above statement by Kropotkin and responded, “This is philosophy, more or less acceptable, but it is certainly neither science nor anarchism…. This is [a] purely mechanical concept….In such a concept, what meaning can the words, ‘will, freedom, responsibility’ have?... One can no more transform the predestined course of human affairs than one can change the course of the stars. What then? What has anarchy to do with this?” (1984; pp. 41, 44). (It is precisely to get around this rigidity of mechanical materialism that Marx used materialist dialectics; how successful he was is another question.)

In this essay, Kropotkin has a section on “Economic Laws”. He gave his understanding of what economics was about. “…Political economy …ought to occupy with respect to human societies a place in science similar to that held by physiology in relation to plants and animals….It should aim at studying the needs of society and the various means…for their satisfaction….It should concern itself with the discovery of means for the satisfaction of those needs…” (p. 180).

This is a peculiar definition. Again, like Marx and Engels, Kropotkin denies a fundamental difference between the physical sciences and the social sciences (the role of consciousness). Even so, he leaves out a fundamental aspect of science, namely the objective study of how things function. In particular, he does not mention what is of great importance to Marx, the examination of how capitalism works. Instead he jumps to the question of how to organize an economy which would satisfy people’s needs. (See Bakunin’s comparison of Proudhon and Marx quoted in chapter 1.) This is a fine subject to work on, and Marx may justly be criticized for not doing much of this. But it still does not substitute for an examination of how capitalism works and what its tendencies are.

Kropotkin goes on to criticize “economists of both the middle-class and the social-democratic camps… socialist political economy…” (p. 179). It is plain that he means the Marxists by the latter. He specifically criticizes them for their labor theory of value. He claims that they maintain, “In a perfectly free market the Price of commodities is measured by the amount of labor socially necessary for their production” (p. 177). He claims that this “…is being presented with wonderful naivete’ as an invariable law” (p. 178). Actually, he points out, the relation among labor-time, exchange value, and Price, like other scientific laws, “…is very complex….Every law of nature has a conditional character” (pp. 178-179). Which is true, but, as I have repeatedly noted, Marx showed that all his political-economic “laws” are highly modified in practice and affected by counteracting forces. They always appear, he stated, only as “tendencies”. This whole criticism is based on ignorance of Marx’s method.

Kropotkin’s criticisms of Marx’s economic theory are summarized, “…Kropotkin believed that both subjective utility and exchange value shaped Prices, but he added that power relations also played an important role. [Alexander] Berkman developed the point, arguing that Prices were not simply a reflection of subjective individual choices or objective exchange values. Prices were affected by labor time, by levels of supply and demand, and were also manipulated by powerful monopolies and the state” (van der Walt & Schmidt, 2009; p. 90).

The problem with this “criticism” of Marx’s theory is that it is completely correct — and already part of the theory. I explained this in chapter 2. The “transformation” of values (socially necessary labor time) into monetary Prices is affected by a number of things. In particular, Kropotkin and Berkman leave out the average rate of profit, which changes the value composition of the commodity -- from the value of constant capital + the value of variable capital + the value of surplus value into the values of constant + variable capitals + the value of the average rate of profit (the new form being the “Price of production”).

I have discussed Marx’s views on the growth of giant corporations and the trend toward statification, both of which affect the growth of fictitious value — and Prices. “Subjective individual choices” are also already included in the theory, in that (1) the commodity must have a use-value in order to have an exchange value, that is, someone must want to buy it, and (2) Prices are assumed to fluctuate (around the Price of production) according to supply and demand — demand being the sum of “subjective choices.”

Microeconomists, studying how a firm creates Prices, can skip the calculations about labor-time and value. Certainly a businessperson will not deal with it. They aim to get back what it cost them to produce the commodities plus at least an average amount of profit; they seek to get as much work out of their workers as possible and to pay the workers as little as they can get away with. This much they know, but basically they stay on the surface of Price setting, which is appropriate for what they are doing.

But Marx was not interested in individual Prices. He studied the overall functioning of a society, how it generated profits, what caused its crises, how its firms would evolve overall, and how it could be expected to treat its workers. His purposes were to educate the workers as to what capitalism was doing, to warn them of its dangers, and to aid them in overthrowing capitalism (all purposes common to revolutionary anarchism). For these purposes, the labor theory of value is very useful. The multi-causal theory of Price-creation of Kropotkin and Berkman, cited above, while superficially true, does not even tell us where profits come from or whether workers are exploited.

The Problem With Marxism

Kropotkin’s criticism of Marx’s economics was a failure. However, we are still left with a problem. Marxism came out of the same socialist and working class movements as anarchism did, and it shares many of the same values and goals. Its critique of political economy is valuable for understanding the economy and fighting capitalism. This is what I have been saying in this book.

Yet Marxism’s history, as a movement, has been gruesome. To repeat, the Social-Democratic parties, directly influenced by Marx and Engels, became reformist, statist, counter-revolutionary, and pro-imperialist. They supported their warring imperialist states in World War I and fought against the Russian and German revolutions afterwards. They failed to fight the rise of fascism. In the Cold War they supported Western imperialism and abandoned all claims to be for a new type of society.

Lenin, Trotsky, and others tried to revive revolutionary Marxism during World War I and after, with the Russian revolution. Instead they established a one-party police state. Under Stalin, this evolved into totalitarian state capitalisms which murdered tens of millions of workers and peasants around the world. Finally these economies collapsed into traditional capitalism.

Marxism was not supposed to be a religious faith but a materialist praxis. As Engels liked to say, “The proof of the pudding is in the eating”. How did something which seemed to have such good goals, good values, and good theory repeatedly end up so badly? What does that tell us about the theory?

It may be argued that anarchism also has its failures. No more than Marxism did it ever lead the workers to socialist revolution. There were racist and authoritarian aspects to the views of Proudhon and Bakunin. Kropotkin betrayed anarchism by supporting the Allied imperialists in World War I. In the Spanish revolution of 1936-39, the mainstream anarchists abandoned their program and betrayed the working class by joining the liberal bourgeois government. They held back the workers’ revolution, resulting in the victory of Spanish fascism. This and more is true. Much needs to be done to improve anarchist theory and practice. (This work is a small contribution to that goal). At least anarchism did not murder tens of millions of working people in the name of communism.

In this work, I have referred to problems with Marx’s theory. One is his centralism. His vision of socialism in certain ways seems to be a purified capitalism. It would build on the collectivization and socialization of labor which are created by capitalist semi-monopolization and statification. These will be pulled together into a centralized agency (presumably run by a minority in a center) which will develop a vast overall plan covering the whole economy. For all his writing about “freely associated individuals”, he never considered the possibility of a decentralized, bottom-up, form of democratic economic planning. At most he advocated an improved representative democracy, at work and in the community. But he never conceived of rooting it in face-to-face direct democracy

The problem is not crude statism as such. Marx did not worship the state or advocate totalitarianism. But he was influenced by the Jacobin tradition in European leftism. The state seemed to him to be the natural institution to integrate the whole economy, as it tended to do even under capitalism. Therefore it made sense to use it (or to create a new state), which would then evolve into a non-state, non-coercive, public structure. This view was tied to the main tactical difference between Marx and the anarchists in the First International, namely that he wanted it to sponsor workers’ parties throughout Europe, to run for government offices, and they opposed this. I think that Marx’s pro-centralization, pro-state, view played a major role in the post-Marx Marxists developing authoritarian visions of socialism and authoritarian politics in general.

Another main factor in the degeneration of post-Marx Marxism was somewhat more philosophical and subtle. It was the concept of capitalism moving “inevitably” and “inexorably” to socialism. The wheels grind on, the workers develop class consciousness sort of as a by-product, capitalism moves into crisis, and the workers revolt, creating the lower phase of communism. (This has been critiqued by Ron Tabor; 2004.) This automatism is tied to Marx’s non-moralism, his failure to connect the Marxist movement to any sort of ideal values, so that the workers will fight for socialism because the workers will fight for socialism, not because it is the morally right thing to do. Therefore there is no need to say much about what a socialist society would look like, as a goal to aim for, because it can be relied on to happen, to work itself out.

As I have shown, there were alternatives to this view in Marx’s Marxism, a belief that there were not one but (at least) two possibilities, which required a moral choice. But this was not emphasized in their overall work and was easy to miss. Similarly, by scouring their writings, it is possible to find elements of a vision of a liberated communist society. It would be without a mental-manual division of labor, ecologically balanced, without a state, etc. But this too was rarely raised. Nor was there any effort to refer to a moral standard and ethical goals.

So what happens when what history produces is a totalitarian mass-murdering state-capitalist nightmare which calls itself “socialist”? Most revolutionary Marxists decided that since this was what came out of the historical process, it must be “actually existing socialism”. So it had to be accepted. The idea of comparing it to a vision of a free association of cooperating individuals did not come up; for most Marxists, there was no such vision.

Marx presented his thinking as an integral whole. “Marxism” (or “scientific socialism”) included the critique of political economy (my topic here). It included a broader background method for studying society: historical materialism. It included a philosophical approach: dialectical materialism. It included practical political strategies: building workers’ electoral parties, as well as labor unions.

This was a total world-view, justified because it was going to be the world-view of a rising new class, the proletariat. (Actually the bourgeoisie, the current ruling class, had more than one philosophy, economic theory, and political strategy, so it should be possible for the workers to have more than one set of views also.) It is because I cannot accept the totality of this world-view that I do not regard myself as a Marxist. (I call myself a “Marxist-informed anarchist”.)

As it turned out, Marxism, or something calling itself “Marxism,” did become the ideology of a rising new class all right: the state-capitalist collective bureaucracy. Within the growing managerial and bureaucratic layer of capitalism, a section became radicalized, rejecting rule by the traditional bourgeoisie. Instead they saw themselves as the new (benevolent) rulers. For them, a variety of Marxism became a justifying ideology and a guide to power. In the “Communist” countries, Marxism became a rationalization for keeping power. This development had been predicted by Bakunin and Kropotkin.

I do not at all deny the sincerity of Marx and Engels’ libertarian-democratic, humanistic, and proletarian views. This was — and remains — a real and valuable aspect of Marx and Engel’s Marxism. But throughout history class society had corrupted movements for liberation, turning them into tools of elites striving to replace the old rulers with themselves, using the people as a battering ram against the old rulers. Given the low level of productivity, it had to be so. But now it is possible to win real human liberation. There is a technology which could provide plenty for all — but which threatens total destruction if not taken out of the hands of the ruling class. And there is an international, socialized, working class which is capable — potentially — of really achieving an unalienated society.

But the old pressures are still there. Whatever makes a movement vulnerable to becoming elitist, authoritarian, and undemocratic, weakens the revolutionary libertarian aspects of the movement. So it has proved with Marxism, despite its contributions. Then even the genuinely liberatory aspects of the theory, including its scientific critique of political economy, can be misused by the new elite. The bureaucrats used even the truly democratic-libertarian aspects of Marxism to cover up the reality of state-capitalist tyranny. “Marxism” served as a distraction and a rationalization.

Libertarian Marxism

There is a range of people who accept Marx’s views and generally agree with his strategy of international proletarian revolution, but who also are anti-statist and close to anarchism in several ways. They are referred to as libertarian Marxists or autonomist Marxists or Left Communists or libertarian communists (the latter two terms do not clearly distinguish between anarchist-communists and far-left Marxists). They reject both Leninism and social democracy. These groups include the council communists, the Johnson-Forrest tendency (C. L. R. James, Raya Dunayevskya, and Grace Lee Boggs), Italian workerists, autonomes, early Socialisme ou Barbarie (Castoriadis), the British Solidarity Group, and others.

I do not have the time or space to examine these trends closely here. Their main virtue, to me, should be clear: that they use Marx’s critique of political economy while rejecting statist interpretations.

On the other hand, while remaining Marxists they fail to analyze sufficiently how Marxism developed such totalitarian trends. They lack a critique of Marxism. Some are, in a way, Leninists (Lenin was once right but conditions have changed: the view of the Johnson-Forest tendency, still held by followers of Dunayevskaya). Others are not, but still hold to centralizing or to non-moralizing determinism. Some are close to the Bordigist trend, which was far left but also centralizing and opposed to democracy.

At the same time, many such autonomous Marxists make the same mistakes as many anarchists. They often oppose building specific organizations of like-minded revolutionaries to participate in broader groupings. Many oppose participating in labor unions (even while opposing the bureaucrats), national liberation struggles (even while opposing the program of nationalism), or any type of united fronts, on principle. (But I think them correct in opposing electoralism.) That these are problematic politics are, obviously, my opinions; many anarchists agree with such politics.

Today many, perhaps most, radicals who regard themselves as anarchists do not accept a revolutionary proletarian strategy. They believe in gradually and peacefully building up counterinstitutions which will eventually replace the state and capitalism — essentially the old strategy of Proudhon. It is disappointing to me that even many who identify with the autonomous (libertarian) trend in Marxism similarly have come to reject proletarian revolution. Certainly not all, but many have replaced the working class with a concept of the “multitude,” or they water down the “proletariat” to include almost everyone. They reject revolution (popular insurrection overturning the state — which may be more-or-less violent in self-defense) in favor of somehow withdrawing from capitalism, a strategy they call “exodus”.

Whatever the faults and limitations of Marx and Engels, Bakunin and Kropotkin, they were correct in advocating working class revolution. Despite their disagreements and their flaws, we stand on their shoulders. We build on their work. Workers’ revolution is the only road to a classless, stateless, nonopressive, society, democratic and cooperative, of freely associated individuals, “in which the free development of each is the precondition for the free development of all”.


The following are suggestions for further reading. They include, (1) books for further introductory study of Marx’s economic theory. One or more of these might be read alongside of reading Marx’s Capital, preferably in a study group. (2) books on controversial topics in Marx’s theory, subjects which I did not go far into in this introductory text. (3) applications of Marx’s theory to the current economic situation — the Great Recession and afterward.

These are books I have on my shelves and which appeal to me, even though I do not always agree with all the theories of the authors. The introductory books are valued for being clearly written and covering the basic issues.

Introductory Readings

Leontiev, A. (undated). Political Economy: A Beginners’ Course. San Francisco: Proletarian Publishers.
--a “third period” Stalinist, with an exceptionally clear presentation of the basics of Marx’s economic theory.

Cleaver, Harry(2000). Reading Capital Politically. San Francisco: AK Press/ AntiTheses.
--A small book which derives Marxist economics entirely from, Chapter 1 of Capital I.

Fine, Ben, & Saad-Filho, Alfredo (2010). Marx’s “Capital”; (5th Ed.).
London/ NY: Pluto Press.

Harvey, David (2010). A Companion to Marx’s Capital. London/ NY: Verso.

Disputed Topics in Marx’s Economic Theory

The major area of controversy in the theory of Marx’s critique of political economy revolves around the question of value: the labor theory of value, the “transformation problem” (value into Prices), the tendency of the rate of profit to fall, business cycles and their crashes. The single best book, which is up-to-date on current arguments, is the first book below.

Kliman, Andrew (2007). Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency. Lanham MD: Lexington Books/ Rowman & Littlefield.

Mattick, Paul (1969). Marx and Keynes; The Limits of the Mixed Economy. Boston MA: Extending Horizons/ Porter Sargent.
-- Other books by Paul Mattick, Sr., are well worth reading; he was a leading economist of the libertarian Marxist “council communist” trend.

Grossman, Henryk (1992). The Law of Accumulation and Breakdown of the Capitalist System, Being also a Theory of Crises (J. Banaji, trans.). London: Pluto Press.
-- Although an unconvential Stalinist, his brilliant economic theory influenced the libertarian Mattick greatly.

Another controversial topic is that of state capitalism. Tell me where you stand on state capitalism and I will know what you mean by “socialism.”

Price, Wayne (2010). Anarchism & Socialism: Reformism or Revolution? Edmonton, Alberta Canada:
--Part III is on “The Nature of ‘Communist’ Countries and the Russian Revolution.”

Hobson, Christopher Z., & Tabor, Ronald D. (1988). Trotskyism and the Dilemma of Socialism. NY/ Westport CT: Greenwood Press.
-- Includes a section on “The ‘Russian Question’” and one on “The Law of Value and How It Operates in Russia.” I am in agreement with this version of state capitalism and also generally with the version in the next book.

Daum, Walter (1990). The Life and Death of Stalinism; A Resurrection of Marxist Theory. NY: Socialist Voice.
-- Although from an unorthodox Trotskyist viewpoint, it has very useful discussions about several topics, including the epoch of capitalist decay.

For Marx’s strategy of “Permanent Revolution”:

Draper, Hal (1978). Karl Marx’s Theory of Revolution: Vol II; The Politics of Social Classes. NY/ London: Monthly Review Press.

For what Marx and Engels really meant by the “dictatorship of the proletariat”:

Draper, Hal (1986). Karl Marx’s Theory of Revolution: Vol. III: The “Dictatorship of the Proletariat.” NY/ London: Monthly Review Press.

Draper, Hal (1987). The “Dictatorship of the Proletariat” from Marx to Lenin. NY: Monthly Review Press.

Price, Wayne (2007). The abolition of the state; Anarchist and Marxist perspectives. Bloomington IN: Authorhouse.
-- Chapter 4: “The Marxist transitional state.”

For Marx and Engels’ views on ecology:

Foster, John Bellamy (2000). Marx’s Ecology: Materialism and Nature. NY: Monthly Review Press.
-- Foster has written several books on Marxism and ecology.

Crisis: The Great Recession and Since

Daum, Walter, & Richardson, Matthew (Winter 2010). “Marxist Analysis of the Capitalist Crisis: Bankrupt System Drives Toward Depression.” Proletarian Revolution, No. 82; pp. 48, 35—45.
-- Perhaps the single best statement.

Goldner, Loren (2008). “The Biggest ‘October Surprise’ of All: A World Capitalist Crash.”

Mattick, Paul, Jr. (2011). Business As Usual: The Economic Crisis and the Failure of Capitalism. London: Reaktion Books.

Kliman, Andrew (2012). The Failure of Capitalist Production: Underlying Causes of the Great Recession. NY: Pluto Press.

Foster, John Bellamy, & Magdoff, Fred ((2009). The Great Financial Crisis: Causes and Consequences. NY: Monthly Review Press.

(Email for bibliography: drwdprice at aol dot com)

Previous parts:

Chapter 9 - What Marx Meant by Socialism and Communism
Chapter 8 - Socialism or Barbarism?
Chapter 7 - State Capitalism
Chapter 6 - The Post-War Boom and Fictitious Capital
Chapter 5 - The Epoch of Capitalist Decline
Chapter 4 - Primitive Accumulation at the Origins of Capitalism
Chapter 3 - Cycles, Recessions, and the Falling Rate of Profit
Chapter 2 - The Labor Theory of Value
Chapter 1 - An Anarchist's Introduction to Marx's Critique of Political Economy

author by Jpublication date Mon Jan 02, 2012 12:32author address author phone Report this post to the editors

How does Marx's analysis of capitalism differ from the analysis presented by Adam Smith in Wealth of Nations? They seem very similar in how they see the system working.

author by Waynepublication date Fri Jan 06, 2012 05:24author address author phone Report this post to the editors

Marx greatly respected the trend of political economy from Adam Smith to David Ricardo. He studied them carefully--unlike the later political economists whom he regarded as simply apologists for capitalism.

However, he went far beyond Simth and Ricardo. He broke up the concept of value into exchange value and use value. He described the value of the workers' labor power (not labor), as including "moral" and cultural factors as well as biological factors. As I note in the above chapter, unlike Smithand Ricardo, Marx had an historical approach to capitalism, understanding its origins in terms of primitive accumulain and its development into an epoch of decline. He undersstood the falling rate of profit as due to socioeconomic factors, rather than agricultural factors. He understood and explained the continuation of business cycles and of the trend toward centralization and concentration of ever-larger capials enterprises. And so on and so forth. All these are explained in this book and in other books, some of which are referenced here. The denial of differences between Marx and Smith is only based on ignorance.

author by dave b - spgbpublication date Tue Jan 17, 2012 03:22author email author address author phone Report this post to the editors

What Marx knew that Adam Smith did not, according to Karl, was that labour power becomes as a use-value and a commodity and something you can buy.

Thus from volume IV;

Theories of Surplus Value, Marx 1861-3 [Chapter III] Adam Smith

[1. Smith’s Two Different Definitions of Value; the Determination of Value by the Quantity of Labour Expended Which Is Contained in a Commodity, and Its Determination by the Quantity of Living Labour Which Can Be Bought in Exchange for This Commodity

"It is Adam Smith’s great merit that it is just in the chapters of Book I (chapters VI, VII, VIII) where he passes from simple commodity exchange and its law of value to exchange between materialised and living labour, to exchange between capital and wage-labour, to the consideration of profit and rent in general—in short, to the origin of surplus-value—that he feels some flaw has emerged.

He senses that somehow—whatever the cause may be, and he does not grasp what it is—in the actual result the law is suspended: more labour is exchanged for less labour (from the labourer’s standpoint), less labour is exchanged for more labour (from the capitalist’s standpoint). His merit is that he emphasises—and it obviously perplexes him—that with the accumulation of capital and the appearance of property in land—that is, when the conditions of labour assume an independent existence over against labour itself—something new occurs, apparently (and actually, in the result) the law of value changes into its opposite.

It is his theoretical strength that he feels and stresses this contradiction, just as it is his theoretical weakness that the contradiction shakes his confidence in the general law, even for simple commodity exchange; that he does not perceive how this contradiction arises, through labour-power itself becoming a commodity, and that in the case of this specific commodity its use-value—which therefore has nothing to do with its exchange-value—is precisely the energy which creates exchange-value.

Ricardo is ahead of Adam Smith in that these apparent contradictions—in their result real contradictions—do not confuse him. But he is behind Adam Smith in that he does not even suspect that this presents a problem, and therefore the specific development which the law of value undergoes with the formation of capital does not for a moment puzzle him or even attract his attention. We shall see later how what was a stroke of genius with Adam Smith becomes reactionary with Malthus as against Ricardo’s standpoint."

I have to confess that I read this tract, which is quite important I think, after reading Adam Smith and couldn’t be bothered re-reading Smith to test the veracity of it; but I suspect it is true.

I found Smith’s wealth of nations a bit of a confused hotchpotch of an economic analysis but for all that worth a read for a detailed history of ‘capitalism’ based on an assumption of the ‘labour theory of value’.

And I think it is erroneous to credit that basic idea to Adam Smith, thus;

"It is a man of the New World – where bourgeois relations of production imported together with their representatives sprouted rapidly in a soil in which the superabundance of humus made up for the lack of historical tradition – who for the first time deliberately and clearly (so clearly as to be almost trite) reduces exchange-value to labour-time. This man was Benjamin Franklin, who formulated the basic law of modern political economy in an early work, which was written in 1729 and published in 1731. He declares it necessary to seek another measure of value than the precious metals, and that this measure is labour.
"By labour may the value of silver be measured as well as other things.

As, suppose one man is employed to raise corn, while another is digging and refining silver; at the year’s end, or at any other period of time, the complete produce of corn, and that of silver, are the natural price of each other; and if one be twenty bushels, and the other twenty ounces, then an ounce of that silver is worth the labour of raising a bushel of that corn. Now if by the discovery of some nearer, more easy or plentiful mines, a man may get forty ounces of silver as easily as formerly he did twenty, and the same labour is still required to raise twenty bushels of corn, then two ounces of silver will be worth no more than the same labour of raising one bushel of corn, and that bushel of corn will be as cheap at two ounces, as it was before at one, caeteris paribus [other things being equal]. Thus the riches of a country are to be valued by the quantity of labour its inhabitants are able to purchase" (op. cit., p. 265).

From the outset Franklin regards labour-time from a restricted economic standpoint as the measure of value. The transformation of actual products into exchange-values is taken for granted, and it is therefore only a question of discovering a measure of their value."

I have just skimmed through some of Wayne’s stuff and I think it doesn’t look too bad in my opinion.

Whilst not necessarily disagreeing with his take on abstract labour. I tend to think of it as (the) human effort embodied in a product.

And in fact that is the ultimate simplification, reduction and abstraction of particular types of human labour or concrete labour.

Of course differences of skill or productivity can produce different amounts of products despite the same amount of effort being applied.

Thus I might try just as hard as somebody skilled in the mysteries of microsoft word but take twice as long to produce the same effect.

But that was also recognised and factored in by Karl himself.

It is sometimes argued that people in the third world, irrespective of differences in ‘skill’, apply more effort for less reward.

However it is often overlooked that Karl’s model was based on the free movement of labour and capital.

There were few legalistic restrictions on the movement of labour or economic migrants, in Karl’s time.

We can speculate on, or even observe, what might happen to the remuneration of western workers if this was removed and for that matter why it is in place at all.

But if the workers are prevented from moving to the capital the capital can move to the workers in Smith’s laissez-faire capitalism.

Karl’s das capital was not supposed to be an instruction manual.

author by Waynepublication date Mon Jan 23, 2012 07:09author address author phone Report this post to the editors

After a good discussion of the relation between Marx and Adam Smith, Dave B writes, " I have just skimmed through some of Wayne’s stuff and I think it doesn’t look too bad in my opinion." I will take this as a compliment.

Waht Dave describes as the interchange between capitalists in the imperial countries and the workers in the oppressed nations is what has been called "unequal exchange." The imperial capitalists get more labor (value) out of the workers than the capitalists would have gotten from the workers in the central nations of the empire. The (super-exploited) workers of the oppressed nations get less pay (value) than the (exploited) workers of the industrialized nations would have gotten. However, the globalized state of the capitalist world has been moving in the direction of equalization of wages, raising wages in poor nations and lowering those in rich ones. But this is far from accomplished.

author by Waynepublication date Mon Jan 23, 2012 07:49author address author phone Report this post to the editors

Incidently, Dave does not comment on my critique of Marx's theory (chapter 10).

author by dave b - Spgbpublication date Tue Jan 24, 2012 03:59author address author phone Report this post to the editors

Hi Wayne

I am quite happy to have a friendly discussion on this but I am not sure which aspect in your chapter 10 you would have liked me to deal with.

I am actually an anti statist, moral and humanistic Marxist; and for that a bit of an exception I suppose.

A minority in the SPGB admittedly, but not alone, and we do have periodic flare ups over it.

Actually Marx and Engels were moralising communists before the ‘Anarchist’ Stirner turned them in his Ego And His Own in 1844, a real intellectual tour de force on egotism.

Which intellectually crushed their previous Feuerbachian position of their unconditional ‘all we need is love’ approach.

Embarrassed ‘Marxist’ intellectuals tend to overlook it and Anarchists follow suit, as if wasn’t there.

Stirner, the slippery bastard, didn’t mind ‘love’ and ‘kissing troubled’ brows etc but it was hardly ‘unconditional’.

Fred and Stirner, at least, had been friends and Fred has provided the only Sketch on Stirners or Saint Max’s likeness.

Even Das Capital is riddled with moralistic judgements on capitalism although Karl cowardly dodges the moralist bullet by introducing the subjective matter by using quotations from “bleeding heart liberals” as he wasn’t one himself.

It is a suggestive argumentative technique that I shamelessly use myself and I know just as well how to work it, as he did.

The failure of both Karl and Fred, post 1844, to lay down a blue print of what communism was, or would be like, was a result of them having intellectually boxed themselves into a corner over ‘idealism’.

I am an idealist, humanist and a scientist by the way.

So from the 1844 period Fred to Karl;

“ The Teutons are all still very muddled about the practicability of communism; to dispose of this absurdity I intend to write a short pamphlet showing that communism has already been put into practice and describing in popular terms how this is at present being done in England and America. [12] The thing will take me three days or so, and should prove very enlightening for these fellows. I’ve already observed this when talking to people here”.

then we have;

Works of Frederick Engels Description of Recently Founded Communist Colonies Still in Existence;

Where as with the Shaker’s, which as I have been recently uncovering, seemed to have had a much more powerful seminal influence on 19th century ‘socialism’ than I had previously realised.

Where there was ‘not a single gendarme or police officer, no judge, lawyer or soldier, no prison or penitentiary’.


“The first people to set up a society on the basis of community of goods in America, indeed in the whole world, were the so-called Shakers. These people are a distinct sect who have the strangest religious beliefs, do not marry and allow no intercourse between the sexes, and these are not their only peculiarities of this kind. But this does not concern us here. The sect of the Shakers originated some seventy years ago. Its founders were poor people who united in order to live together in brotherly love and community of goods and to worship their God in their own way. Although their religious views and particularly the prohibition on marriage deterred many, they nevertheless attracted support and now have ten large communities, each of which is between three and eight hundred members strong.

Each of these communities is a fine, well laid-out town, with dwelling houses, factories, workshops, assembly buildings and barns; they have flower and vegetable gardens, fruit trees, woods, vineyards, meadows and arable land in abundance; then, livestock of all kinds, horses and beef-cattle, sheep, pigs and poultry, in excess of their needs, and of the very best breeds. Their granaries are always full of corn, their store-rooms full of clothing materials, so that an English traveller who visited them said he could not understand why these people still worked, when after all they possessed an abundance of everything; unless it was that they worked simply as a pastime, having nothing else to do. Amongst these people no one is obliged to work against his will, and no one seeks work in vain. They have no poor-houses and infirmaries, having not a single person poor and destitute, nor any abandoned widows and orphans; all their needs are met and they need fear no want. In their ten towns there is not a single gendarme or police officer, no judge, lawyer or soldier, no prison or penitentiary; and yet there is proper order in all their affairs.”

Lets not forget either that Berkman supported the Bolsheviks whilst they (the Bolsheviks) were openly advocating state capitalism, presuming that Berkman had read Lenin’s stuff.

The non Bolshevik Marxists as in the (left) Mensheviks, who are just enthusiastically misrepresented by modern Anarchists as by Leninists, thought the idea of a ‘workers’ party running (state) capitalism heresy.

The Bolsheviks actually followed the Blanquist strategy, as the Menshevik Trotsky said they would given the opportunity, in the ‘missing’ last chapter of his ‘Our Political Tasks’ in which he quoted;

“The Blanquists fared no better. Brought up in the school of conspiracy, and held together by the strict discipline which went with it, they started out from the viewpoint that a relatively small number of resolute, well-organized men would be able, at a given favorable moment, not only seize the helm of state, but also by energetic and relentless action, to keep power until they succeeded in drawing the mass of the people into the revolution and ranging them round the small band of leaders. this conception involved, above all, the strictest dictatorship and centralization of all power in the hands of the new revolutionary government.

Actually Fred in a pre Bolshevik letter to Vera ‘Trigger’ Zasulich predicted that Blanquists would overthrow the tsarist regime and do what Blanquist do; and make arseholes out of themselves.

I am probably rambling a bit now.



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