Julian Saurin @ Free University Brighton |
Exchange and consumption (ii)
Session 2 - Exchange and Consumption
We move on in this week's session to consider how money seems to carry value and how exchanging money and commodities, in capitalist society, creates value. The key to this transformation of value is to be found in labour (or strictly speaking, labour power).
We'll also see how exchange in the market through money is fundamental to the way we conventionally think about wealth, economic growth and of economic value all said. The production and consumption of capital seems to tell all. But does it ? |
Slides - Exchange and Consumption (ii)
David Harvey explaining 'Crises of capitalism'. Watch this carefully, especially from 05.00 minutes onwards, because Harvey explains what a circuit of capital is and how an economy may grow in capitalism. (The first part is also useful because he introduces his analysis of capitalism by first reviewing other explanations or theories. Don't be put off by some of the technical vocabulary and names of different economists and historical details. The main thing to take from this video is the idea of a continuous circuit of capital in which capital is "valorised" - i.e, given value - at different points of the circuit and with different techniques.
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Summary of Session TwoIn this session we were able to identify several theories of value and we explored one of those theories of value – the labour theory of value – in some detail.
What is a theory of value ? A theory of value is one in which some more or less coherent and systematic explanation is given of what value is and how it is produced or comes into effect. Such questions and discussion can seem to be quite dense philosophical stuff but also historically difficult to pin down. And what we can do in this course or in one session is to begin to scratch the surface of the problem. Still, we began by identifying six broad theories of value, namely
It was suggested that most people nowadays tend to have a mixture of the last three listed theories of value although, of course, we don’t usually name them as such because we’re mostly not aware. My own view is that in developed capitalist economies the most commonly held theory is that value is produced through exchange, for example, when people use the phrase “it’s all about supply and demand”, but when they’re confronted with why they’ve paid X amount for a good or service, they’ll refer to how useful or helpful it is to them i.e, a utility theory of value. Strangely enough, when it comes to certain commodities – for example, food or diamonds – many people leap onto a scarcity theory of value. In the sessions though, we concentrated on the labour theory of value. I focused our attention on this for three reasons. First, it is an important and neglected theory which, nevertheless, many people can instinctively understand i.e, it is labour which produces value. Second, we can point to a political economist – Marx in this case – who can take us step-by-step in the making of the theory. Third, in Marx’s labour theory of value we can also see how these basic economic ideas feed through to other parts of economy and society, ie, we can also see with the same theory how inequality is generated in capitalism, how classes form, and how capital comes to rule. In explaining the labour theory of value we followed Marx in building up the story. First we have the commodity and we asked “what is a commodity ?” Answer : a commodity is something appropriated (or got hold of) by human beings from nature and which has utility or use value. A commodity is not just any natural object, it has to have been ‘touched’ even minimally by human beings and put to human use. But while use value is a necessary condition of a commodity, it is not a sufficient condition; there’s something else. Marx argues that a commodity, in capitalist society, must also have exchange value (as well as use value) i.e, that somebody would wish to exchange the use values of that commodity. The second step that Marx takes us through is that of two, three, four, and more goods being exchanged for each other in different proportions. We all know this as barter, and we appreciate that once we try to exchange several commodities between each other it gets very messy because we forget how many of commodity X was equivalent to commodity Y and then again to commodity Z. Third, Marx introduced the universal equivalent as a concept which could measure the equivalent of things which otherwise had very, very different use values. In short, money is the universal equivalent. In reprising these steps we were roughly echoing the steps made by Marx in the first few chapters of Capital, Volume One. We also still more loosely echoed part two and chapter 7 of the same, when we emphasized two considerations. First, that it was human beings mixing of their labour power with nature that produced commodities; and that it was human beings, increasingly organized in an abstract market, who engaged in commodity exchange i.e, buying and selling commodities with money. Second, that work alone i.e, the transformation of a commodity, was not enough to produce value. Labour-power had to be expended directly or indirectly in the market-place of exchange. That was the point of contrast in the story of John “the client relationship manager” and Jane “the stay at home mother”. In other words, it doesn’t matter how hard you work, if you are not in the labour market (in which your labour-power can be exchanged) you’re not worth a penny. So the fuller story is this : (i) labour-power transforms nature into useful commodities; (ii) those useful commodities are exchanged with each other and with more labour-power to produce new use values or new commodities; (iii) those exchanged commodities, which contain ‘congealed’ labour-power, are exchanged in the abstract market which is increasingly global in scope. (iv) that global market also distributes value across the globe in a ‘transmission belt’ of value, taking from certain parts of society and concentrating (capital) value in other parts of society. Finally, having said all of that, we also identified a number of problems with the labour theory of value. One of the most frequent criticisms that were expressed was what I’ll call the “chrematistic criticism”, namely that how can a labour theory of value explain the increasingly common phenomena that we see of “money making money.” In conclusion, it’s not labour that creates value and wealth but money which creates value and wealth. Oh no !!! Haven’t we just tied ourselves up in knots … and all for nothing ? Next Week's PreparationReviewing this argument about the labour theory of value is the main task for next week, since we'll actually be spending much of the time in that session playing 'The Trading Game'.
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