My last column ended with a question. I find two commodities – a newspaper and a pint of milk – on sale in a shop at the same price.
What is the connection between the two? Why should each exchange for the same amount of money?
Marx argued that all commodities have two kinds of value.
The first is use-value. “The utility of a thing makes it a use-value,” wrote Marx. “But this utility is not a thing of air. Being limited by the physical properties of the commodity, it has no existence apart from that commodity.”
In other words, the thing that our two commodities have in common is definitely not their use-value.
They have very different physical properties and very different uses.
The second kind of value is exchange-value, the amount of one commodity that you can get for another. For example, one newspaper exchanges for one pint of milk. They have the same exchange-value.
But I showed last week that this is not simply an exchange of “things”. When I exchange money for a commodity I am tapping into a vast network of social relationships that went into producing the thing I am buying.
Marx argued that the newspaper and the pint of milk have a certain important property in common – they are both the product of a certain quantity of human labour.
He argued that under the surface of exchange-value lies something he called simply “value”.
The value of a commodity reflects the amount of labour that went into producing it and “the quantity of labour… is measured by its duration… in weeks, days and hours”.
Here value plays a role a bit like gravity does in astronomy.
We can’t see, touch or smell gravity. However, the concept allows us to understand why the planets go round the sun.
As anyone falling down a mineshaft realises, the effects of gravity are real.
Similarly value allows us to understand why two commodities have the same exchange-value – we can’t see value but its effects are real.
Of course, to return to our example, it is unlikely that a shop would swap a newspaper for a pint of milk.
Under capitalism a third commodity, money, plays the role of the universal commodity, making the whole process seem more mysterious.
There are two obvious objections to the concept of value. The first is that not everyone’s labour is the same. Some people work harder or better than others.
As Marx wrote, “Some people might think that if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskilful the labourer, the more valuable would his commodity be, because more time would be required in its production.”
This problem is overcome if you consider “socially necessary labour time” – the labour time needed by a society to produce a commodity with the “average degree of skill and intensity prevalent at the time”.
The second objection is more fundamental – commodities are not simply produced by people. The newspaper is also the product of machinery, ink, paper, and so on.
But these too are commodities and hence the product of earlier labour.
So, in capitalist production two things come together, “living labour” – the labour put in directly by workers adding to the value of a new commodity, and “dead labour” – the labour contained in raw materials and machinery.
The distinction is important because, Marx argued, living labour adds new value to the end product, while dead labour only passes on existing value.
Consider a newspaper that is produced by one hour of living labour (the labour of the printers) plus two hours’ worth of dead labour (the value of raw materials consumed and of machinery worn away in the process).
Then the total value of the newspaper is three hours worth of labour.
But the capitalist who owns the printing press will have to pay for the machinery and raw materials, so the capitalist will have to fork out for two hours worth of labour.
Only living labour creates new value – in this case one hour’s worth.
But this raises a new question. If everything exchanges for its value, what is the price of living labour?
If our print worker takes away the value she creates the capitalist is left with nothing.
We know from our experience that capitalists tend to pocket large profits. Next week I will look at the source of this profit.