Utopian socialism is the term often used to describe the first current of modern socialism and socialist thought as exemplified by the work of Henri de Saint-Simon, Charles Fourier, Étienne Cabet, and Robert Owen.
Utopian socialism is often described as the presentation of visions and
outlines for imaginary or futuristic ideal societies, with positive
ideals being the main reason for moving society in such a direction.
Later socialists and critics of utopian socialism viewed utopian
socialism as not being grounded in actual material conditions of
existing society. These visions of ideal societies competed with revolutionary and social democratic movements.
As a term or label, utopian socialism is most often
applied to, or used to define, those socialists who lived in the first
quarter of the 19th century who were ascribed the label utopian by later
socialists as a pejorative in order to imply naïveté and to dismiss their ideas as fanciful and unrealistic. A similar school of thought that emerged in the early 20th century which makes the case for socialism on moral grounds is ethical socialism.
One key difference between utopian socialists and other socialists such as most anarchists and Marxists is that utopian socialists generally do not believe any form of class struggle or social revolution
is necessary for socialism to emerge. Utopian socialists believe that
people of all classes can voluntarily adopt their plan for society if it
is presented convincingly.
They feel their form of cooperative socialism can be established among
like-minded people within the existing society and that their small
communities can demonstrate the feasibility of their plan for society. Because of this tendency, utopian socialism was also related to radicalism, a left-wing liberal ideology.
The thinkers identified as utopian socialist did not use the term utopian to refer to their ideas. Karl Marx and Friedrich Engels
were the first thinkers to refer to them as utopian, referring to all
socialist ideas that simply presented a vision and distant goal of an
ethically just society as utopian. This utopian mindset which held an
integrated conception of the goal, the means to produce said goal and an
understanding of the way that those means would inevitably be produced
through examining social and economic phenomena can be contrasted with scientific socialism which has been likened to Taylorism.
This distinction was made clear in Engels' work Socialism: Utopian and Scientific (1892, part of an earlier publication, the Anti-Dühring
from 1878). Utopian socialists were seen as wanting to expand the
principles of the French revolution in order to create a more rational
society. Despite being labeled as utopian by later socialists, their
aims were not always utopian and their values often included rigid
support for the scientific method and the creation of a society based
upon scientific understanding.
Development
The term utopian socialism was introduced by Karl Marx in "For a Ruthless Criticism of Everything" in 1843 and then developed in The Communist Manifesto in 1848, although shortly before its publication Marx had already attacked the ideas of Pierre-Joseph Proudhon in The Poverty of Philosophy
(originally written in French, 1847). The term was used by later
socialist thinkers to describe early socialist or quasi-socialist
intellectuals who created hypothetical visions of egalitarian, communal, meritocratic, or other notions of perfect societies without considering how these societies could be created or sustained.
In The Poverty of Philosophy, Marx criticized the economic and philosophical arguments of Proudhon set forth in The System of Economic Contradictions, or The Philosophy of Poverty. Marx accused Proudhon of wanting to rise above the bourgeoisie. In the history of Marx's thought and Marxism,
this work is pivotal in the distinction between the concepts of utopian
socialism and what Marx and the Marxists claimed as scientific
socialism. Although utopian socialists shared few political, social, or
economic perspectives, Marx and Engels argued that they shared certain
intellectual characteristics. In The Communist Manifesto, Marx and Friedrich Engels wrote:
The
undeveloped state of the class struggle, as well as their own
surroundings, causes Socialists of this kind to consider themselves far
superior to all class antagonisms. They want to improve the condition of
every member of society, even that of the most favored. Hence, they
habitually appeal to society at large, without distinction of class;
nay, by preference, to the ruling class. For how can people, when once
they understand their system, fail to see it in the best possible plan
of the best possible state of society? Hence, they reject all political,
and especially all revolutionary, action; they wish to attain their
ends by peaceful means, and endeavor, by small experiments, necessarily
doomed to failure, and by the force of example, to pave the way for the
new social Gospel.
Marx and Engels associated utopian
socialism with communitarian socialism which similarly sees the
establishment of small intentional communities as both a strategy for
achieving and the final form of a socialist society.[9] Marx and Engels used the term scientific socialism
to describe the type of socialism they saw themselves developing.
According to Engels, socialism was not "an accidental discovery of this
or that ingenious brain, but the necessary outcome of the struggle
between two historically developed classes, namely the proletariat and
the bourgeoisie. Its task was no longer to manufacture a system of
society as perfect as possible, but to examine the historical-economic
succession of events from which these classes and their antagonism had
of necessity sprung, and to discover in the economic conditions thus
created the means of ending the conflict". Critics have argued that
utopian socialists who established experimental communities were in fact
trying to apply the scientific method to human social organization and were therefore not utopian. On the basis of Karl Popper's definition of science as "the practice of experimentation, of hypothesis and test", Joshua Muravchik
argued that "Owen and Fourier and their followers were the real
'scientific socialists.' They hit upon the idea of socialism, and they
tested it by attempting to form socialist communities". By contrast,
Muravchik further argued that Marx made untestable predictions about the
future and that Marx's view that socialism would be created by
impersonal historical forces may lead one to conclude that it is
unnecessary to strive for socialism because it will happen anyway.
Social unrest between the employee and employer in a society
results from the growth of productive forces such as technology and
natural resources are the main causes of social and economic
development.
These productive forces require a mode of production, or an economic
system, that’s based around private property rights and institutions
that determine the wage for labor. Additionally, the capitalist rulers control the modes of production.
This ideological economic structure allows the bourgeoises to undermine
the worker’s sensibility of their place in society, being that the
bourgeoises rule the society in their own interests. These rulers of
society exploit the relationship between labor and capital, allowing for
them to maximize their profit.
To Marx and Engels, the profiteering through the exploitation of
workers is the core issue of capitalism, explaining their beliefs for
the working class’s oppression.Capitalism will reach a certain stage,
one of which it cannot progress society forward, resulting in the
seeding of socialism.
As a socialist, Marx theorized the internal failures of capitalism. He
described how the tensions between the productive forces and the modes
of production would lead to the downfall of capitalism through a social
revolution.
Leading the revolution would be the proletariat, being that the
preeminence of the bourgeoise would end. Marx’s vision of his society
established that there would be no classes, freedom of mankind, and the
opportunity of self-interested labor to rid any alienation. In Marx’s view, the socialist society would better the lives of the working class by introducing equality for all.
Since the mid-19th century, Engels overtook utopian socialism in
terms of intellectual development and number of adherents. At one time
almost half the population of the world lived under regimes that claimed
to be Marxist. Currents such as Owenism and Fourierism
attracted the interest of numerous later authors but failed to compete
with the now dominant Marxist and Anarchist schools on a political
level. It has been noted that they exerted a significant influence on
the emergence of new religious movements such as spiritualism and occultism.
In literature and in practice
Perhaps the first utopian socialist was Thomas More (1478–1535), who wrote about an imaginary socialist society in his book Utopia, published in 1516. The contemporary definition of the English word utopia derives from this work and many aspects of More's description of Utopia were influenced by life in monasteries.
Saint-Simonianism was a French political and social movement of the first half of the 19th century, inspired by the ideas of Henri de Saint-Simon (1760–1825). His ideas influenced Auguste Comte (who was for a time Saint-Simon's secretary), Karl Marx, John Stuart Mill and many other thinkers and social theorists.
Robert Owen was one of the founders of utopian socialism.
Robert Owen
(1771–1858) was a successful Welsh businessman who devoted much of his
profits to improving the lives of his employees. His reputation grew
when he set up a textile factory in New Lanark, Scotland, co-funded by his teacher, the utilitarianJeremy Bentham and introduced shorter working hours, schools for children and renovated housing. He wrote about his ideas in his book A New View of Society which was published in 1813 and An Explanation of the Cause of Distress which pervades the civilized parts of the world in 1823. He also set up an Owenite commune called New Harmony in Indiana.
This collapsed when one of his business partners ran off with all the
profits. Owen's main contribution to socialist thought was the view that
human social behavior is not fixed or absolute and that humans have the
free will to organize themselves into any kind of society they wished.
Charles Fourier (1772–1837) rejected the Industrial Revolution
altogether and thus the problems that arose with it. Fourier viewed
societies of factories and moneymaking as cruel and inhumane. He thought
industrial development turned human existence bland and left people
unstimulated. Referring back to Adam Smith's Pin factory idea, although
production was roaring, one's day was filled with the same monotonous
tasks. Fourier proposed a system of harmony in which people would lead
fulfilling and purposeful lives by following their passions. He imagined
small communities called Phalanstere which would contain workshops,
libraries, and even opera houses. He envisioned people of many different
passions coming together to complete tasks they had to carry out. These
passions would create 810 different character types. There would be the
passion of the butterfly, the fondness of engaging in many different
activities. The passion of the cabalist, the desire for intrigue and
plots. There would be something to account for every person's true
desires. There would be no wages, but instead, people would share the
profits that the phalanstery made. Fourier waited for his phalansteries
to be brought to life, but this did not occur to his disappointment.
Fourier wrote about people growing tails with eyes on them, six moons
appearing, and the seas would turn into lemonade after setting up his
phalansteries. He also wrote that humans would form friendships with
wild animals and have friendly anti-tigers carry people around on their
backs. His writings often led to people thinking he was a mad man.
However, his ideas and writings brought to light an important question
that many utopian socialists faced: how will there be work that
stimulated all parts of one's personality? Fourier made various fanciful
claims about the ideal world he envisioned. Despite some clearly
non-socialist inclinations,
he contributed significantly even if indirectly to the socialist
movement. His writings about turning work into play influenced the young
Karl Marx and helped him devise his theory of alienation. Several colonies based on Fourier's ideas were founded in the United States by Albert Brisbane and Horace Greeley.
Many Romantic authors, most notably William Godwin and Percy Bysshe Shelley, wrote anti-capitalist works and supported peasant revolutions across early 19th century Europe. Étienne Cabet (1788–1856), influenced by Robert Owen, published a book in 1840 entitled Travel and adventures of Lord William Carisdall in Icaria
in which he described an ideal communal society. His attempts to form
real socialist communities based on his ideas through the Icarian movement did not survive, but one such community was the precursor of Corning, Iowa. Possibly inspired by Christianity, he coined the word communism and influenced other thinkers, including Marx and Engels.
Utopian socialist pamphlet of Swiss social medical doctor Rudolf Sutermeister (1802–1868)
Edward Bellamy (1850–1898) published Looking Backward
in 1888, a utopian romance novel about a future socialist society. In
Bellamy's utopia, property was held in common and money replaced with a
system of equal credit for all. Valid for a year and non-transferable
between individuals, credit expenditure was to be tracked via
"credit-cards" (which bear no resemblance to modern credit cards which
are tools of debt-finance). Labour was compulsory from age 21 to 40 and
organised via various departments of an Industrial Army to which most
citizens belonged. Working hours were to be cut drastically due to
technological advances (including organisational). People were expected
to be motivated by a Religion of Solidarity and criminal behavior was
treated as a form of mental illness or "atavism". The book ranked as
second or third best seller of its time (after Uncle Tom's Cabin and Ben Hur). In 1897, Bellamy published a sequel entitled Equality as a reply to his critics and which lacked the Industrial Army and other authoritarian aspects.
William Morris (1834–1896) published News from Nowhere in 1890, partly as a response to Bellamy's Looking Backwards,
which he equated with the socialism of Fabians such as Sydney Webb.
Morris' vision of the future socialist society was centred around his
concept of useful work as opposed to useless toil and the redemption of
human labour. Morris believed that all work should be artistic, in the
sense that the worker should find it both pleasurable and an outlet for
creativity. Morris' conception of labour thus bears strong resemblance
to Fourier's, while Bellamy's (the reduction of labour) is more akin to
that of Saint-Simon or in aspects Marx.
Many participants in the historical kibbutz movement in Israel were motivated by utopian socialist ideas. Augustin Souchy
(1892–1984) spent most of his life investigating and participating in
many kinds of socialist communities. Souchy wrote about his experiences
in his autobiography Beware! Anarchist! Behavioral psychologist B. F. Skinner (1904–1990) published Walden Two in 1948. The Twin Oaks Community was originally based on his ideas. Ursula K. Le Guin (1929-2018) wrote about an impoverished anarchist society in her book The Dispossessed,
published in 1974, in which the anarchists agree to leave their home
planet and colonize a barely habitable moon in order to avoid a bloody
revolution.
The LTV is usually associated with Marxian economics, although it originally appeared in the theories of earlier classical economists such as Adam Smith and David Ricardo, and later in anarchist economics.
Smith saw the price of a commodity in terms of the labor that the
purchaser must expend to buy it, which embodies the concept of how much
labor a commodity, a tool for example, can save the purchaser. The LTV
is central to Marxist theory, which holds that the working class is exploited under capitalism, and dissociates price and value. However, Marx did not refer to his own theory of value as a "labour theory of value".
The revival in interpretation of Marx known as the Neue Marx-Lektüre
also rejects Marxian economics and the LTV, calling them
"substantialist". This reading claims that the LTV is a
misinterpretation of the concept of fetishism in relation to value, and that this understanding never appears in Marx's work. The school heavily emphasizes works such as Capital as explicitly being a critique of political economy, instead of a "more correct" theory.
Definitions of value and labor
When speaking in terms of a labor theory of value, "value", without any
qualifying adjective should theoretically refer to the amount of labor
necessary to produce a marketable commodity, including the labor
necessary to develop any real capital used in the production. Both David Ricardo and Karl Marx
tried to quantify and embody all labor components in order to develop a
theory of the real price, or natural price of a commodity. The labor theory of value as presented by Adam Smith
did not require the quantification of past labor, nor did it deal with
the labor needed to create the tools (capital) that might be used in
producing a commodity. Smith's theory of value was very similar to the
later utility theories in that Smith proclaimed that a commodity was
worth whatever labor it would command in others (value in trade) or
whatever labor it would "save" the self (value in use), or both.
However, this "value" is subject to supply and demand at a particular
time:
The real price of every thing, what every thing
really costs to the man who wants to acquire it, is the toil and
trouble of acquiring it. What every thing is really worth to the man who
has acquired it, and who wants to dispose of it or exchange it for
something else, is the toil and trouble which it can save to himself,
and which it can impose upon other people. (Wealth of Nations Book 1, chapter V)
Smith's theory of price has nothing to do with the past labor spent
in producing a commodity. It speaks only of the labor that can be
"commanded" or "saved" at present. If there is no use for a buggy whip,
then the item is economically worthless in trade or in use, regardless
of all the labor spent in creating it.
Distinctions of economically pertinent labor
Value "in use" is the usefulness of this commodity, its utility. A classical paradox often comes up when considering this type of value. In the words of Adam Smith:
The
word value, it is to be observed, has two different meanings, and
sometimes expresses the utility of some particular object, and sometimes
the power of purchasing other goods which the possession of that object
conveys. The one may be called "value in use"; the other, "value in
exchange." The things which have the greatest value in use have
frequently little or no value in exchange; and, on the contrary, those
which have the greatest value in exchange have frequently little or no
value in use. Nothing is more useful than water: but it will purchase
scarce anything; scarce anything can be had in exchange for it. A
diamond, on the contrary, has scarce any value in use; but a very great
quantity of other goods may frequently be had in exchange for it (Wealth of Nations Book 1, chapter IV).
Value "in exchange" is the relative proportion with which this commodity exchanges for another commodity (in other words, its price in the case of money). It is relative to labor as explained by Adam Smith:
The
value of any commodity, [...] to the person who possesses it, and who
means not to use or consume it himself, but to exchange it for other
commodities, is equal to the quantity of labour which it enables him to
purchase or command. Labour, therefore, is the real measure of the
exchangeable value of all commodities (Wealth of Nations Book 1, chapter V).
Value (without qualification) is the labor embodied in a commodity
under a given structure of production. Marx defined the value of the
commodity by this third definition. In his terms, value is the 'socially
necessary abstract labor' embodied in a commodity. To David Ricardo
and other classical economists, this definition serves as a measure of
"real cost", "absolute value", or a "measure of value" invariable under
changes in distribution and technology.
Ricardo, other classical economists and Marx began their
expositions with the assumption that value in exchange was equal to or
proportional to this labor value. They thought this was a good
assumption from which to explore the dynamics of development in
capitalist societies. Other supporters of the labor theory of value used
the word "value" in the second sense to represent "exchange value".
Labor process
Since
the term "value" is understood in the LTV as denoting something created
by labor, and its "magnitude" as something proportional to the quantity
of labor performed, it is important to explain how the labor process
both preserves value and adds new value in the commodities it creates.
The value of a commodity increases in proportion to the duration
and intensity of labor performed on average for its production. Part of
what the LTV means by "socially necessary" is that the value only
increases in proportion to this labor as it is performed with average
skill and average productivity. So though workers may labor with greater
skill or more productivity than others, these more skillful and more
productive workers thus produce more value through the production of
greater quantities of the finished commodity. Each unit still bears the
same value as all the others of the same class of commodity. By working
sloppily, unskilled workers may drag down the average skill of labor,
thus increasing the average labor time necessary for the production of
each unit commodity. But these unskillful workers cannot hope to sell
the result of their labor process at a higher price (as opposed to
value) simply because they have spent more time than other workers
producing the same kind of commodities.
However, production not only involves labor, but also certain
means of labor: tools, materials, power plants and so on. These means of
labor—also known as means of production—are
often the product of another labor process as well. So the labor
process inevitably involves these means of production that already enter
the process with a certain amount of value. Labor also requires other
means of production that are not produced with labor and therefore bear
no value: such as sunlight, air, uncultivated land, unextracted
minerals, etc. While useful, even crucial to the production process,
these bring no value to that process. In terms of means of production
resulting from another labor process, LTV treats the magnitude of value
of these produced means of production as constant throughout the labor
process. Due to the constancy of their value, these means of production
are referred to, in this light, as constant capital.
Consider for example workers who take coffee beans, use a roaster
to roast them, and then use a brewer to brew and dispense a fresh cup
of coffee. In performing this labor, these workers add value to the
coffee beans and water that comprise the material ingredients of a cup
of coffee. The worker also transfers the value of constant capital—the
value of the beans; some specific depreciated value of the roaster and
the brewer; and the value of the cup—to the value of the final cup of
coffee. Again, on average, the worker can transfer no more than the
value of these means of labor previously possessed to the finished cup
of coffee.
So the value of coffee produced in a day equals the sum of both the
value of the means of labor—this constant capital—and the value newly
added by the worker in proportion to the duration and intensity of their
work.
Often this is expressed mathematically as:
,
where
is the constant capital of materials used in a period plus the
depreciated portion of tools and plant used in the process. (A period is
typically a day, week, year, or a single turnover: meaning the time
required to complete one batch of coffee, for example.)
is the quantity of labor time (average skill and productivity)
performed in producing the finished commodities during the period
is the value (or think "worth") of the product of the period ( comes from the German word for value: wert)
Note: if the product resulting from the labor process is homogeneous
(all similar in quality and traits, for example, all cups of coffee)
then the value of the period's product can be divided by the total
number of items (use-values or ) produced to derive the unit value of each item. where is the total items produced.
The LTV further divides the value added during the period of production, ,
into two parts. The first part is the portion of the process when the
workers add value equivalent to the wages they are paid. For example, if
the period in question is one week and these workers collectively are
paid $1,000, then the time necessary to add $1,000 to—while preserving
the value of—constant capital is considered the necessary labor portion
of the period (or week): denoted . The remaining period is considered the surplus labor portion of the week: or .
The value used to purchase labor-power, for example, the $1,000 paid in
wages to these workers for the week, is called variable capital ().
This is because in contrast to the constant capital expended on means
of production, variable capital can add value in the labor process. The
amount it adds depends on the duration, intensity, productivity and
skill of the labor-power purchased: in this sense, the buyer of
labor-power has purchased a commodity of variable use. Finally, the
value added during the portion of the period when surplus labor is
performed is called surplus value (). From the variables defined above, we find two other common expressions for the value produced during a given period:
and
The first form of the equation expresses the value resulting from production, focusing on the costs and the surplus value appropriated in the process of production, .
The second form of the equation focuses on the value of production in
terms of the values added by the labor performed during the process .
Relation between values and prices
One
issue facing the LTV is the relationship between value quantities on
one hand and prices on the other. If a commodity's value is not the same
as its price, and therefore the magnitudes of each likely differ, then
what is the relation between the two, if any? Various LTV schools of
thought provide different answers to this question. For example, some
argue that value in the sense of the amount of labor embodied in a good
acts as a center of gravity for price.
However, most economists would say that cases where pricing is
given as approximately equal to the value of the labour embodied, are in
fact only special cases. In General Theory pricing most usually
fluctuates. The standard formulation is that prices normally include a
level of income for "capital" and "land". These incomes are known as "profit" and "rent"
respectively. Yet Marx made the point that value cannot be placed upon
labour as a commodity, because capital is a constant, whereas profit is a
variable, not an income; thus explaining the importance of profit in
relation to pricing variables.
In Book 1, chapter VI, Adam Smith writes:
The real value of all the different component parts of
price, it must be observed, is measured by the quantity of labour which
they can, each of them, purchase or command. Labour measures the value
not only of that part of price which resolves itself into labour, but of
that which resolves itself into rent, and of that which resolves itself
into profit.
The final sentence explains how Smith sees value of a product as
relative to labor of buyer or consumer, as opposite to Marx who sees the
value of a product being proportional to labor of laborer or producer.
And we value things, price them, based on how much labor we can avoid or
command, and we can command labor not only in a simple way but also by trading things for a profit.
The demonstration of the relation between commodities' unit
values and their respective prices is known in Marxian terminology as
the transformation problem
or the transformation of values into prices of production. The
transformation problem has probably generated the greatest bulk of
debate about the LTV. The problem with transformation is to find an
algorithm where the magnitude of value added by labor, in proportion to
its duration and intensity, is sufficiently accounted for after this
value is distributed through prices that reflect an equal rate of return
on capital advanced. If there is an additional magnitude of value or a
loss of value after transformation, then the relation between values
(proportional to labor) and prices (proportional to total capital
advanced) is incomplete. Various solutions and impossibility theorems
have been offered for the transformation, but the debate has not reached
any clear resolution.
LTV does not deny the role of supply and demand influencing
price, since the price of a commodity is something other than its value.
In Value, Price and Profit (1865), Karl Marx quotes Adam Smith and sums up:
It suffices to say that if supply and demand equilibrate
each other, the market prices of commodities will correspond with their
natural prices, that is to say, with their values as determined by the
respective quantities of labor required for their production.
The LTV seeks to explain the level of this equilibrium. This could be explained by a cost of production
argument—pointing out that all costs are ultimately labor costs, but
this does not account for profit, and it is vulnerable to the charge of tautology in that it explains prices by prices. Marx later called this "Smith's adding up theory of value".
Smith argues that labor values are the natural measure of exchange for direct producers like hunters and fishermen.
Marx, on the other hand, uses a measurement analogy, arguing that for
commodities to be comparable they must have a common element or
substance by which to measure them, and that labor is a common substance of what Marx eventually calls commodity-values.
History
Origins
The
labor theory of value has developed over many centuries. It had no
single originator, but rather many different thinkers arrived at the
same conclusion independently. Aristotle is claimed to hold to this
view. Some writers trace its origin to Thomas Aquinas. In his Summa Theologiae
(1265–1274) he expresses the view that "value can, does and should
increase in relation to the amount of labor which has been expended in
the improvement of commodities." Scholars such as Joseph Schumpeter have cited Ibn Khaldun, who in his Muqaddimah
(1377), described labor as the source of value, necessary for all
earnings and capital accumulation. He argued that even if earning
"results from something other than a craft, the value of the resulting
profit and acquired (capital) must (also) include the value of the labor
by which it was obtained. Without labor, it would not have been
acquired." Scholars have also pointed to Sir William Petty's Treatise of Taxes of 1662 and to John Locke's labor theory of property, set out in the Second Treatise on Government (1689), which sees labor as the ultimate source of economic value. Karl Marx himself credited Benjamin Franklin
in his 1729 essay entitled "A Modest Enquiry into the Nature and
Necessity of a Paper Currency" as being "one of the first" to advance
the theory.
Adam Smith accepted the theory for pre-capitalist societies but saw a flaw in its application to contemporary capitalism.
He pointed out that if the "labor embodied" in a product equaled the
"labor commanded" (i.e. the amount of labor that could be purchased by
selling it), then profit was impossible. David Ricardo (seconded by Marx)
responded to this paradox by arguing that Smith had confused labor with
wages. "Labor commanded", he argued, would always be more than the
labor needed to sustain itself (wages). The value of labor, in this
view, covered not just the value of wages (what Marx called the value of
labor power), but the value of the entire product created by labor.
Ricardo's theory was a predecessor of the modern theory that equilibrium prices are determined solely by production costs associated with Neo-Ricardianism.
Marx expanded on these ideas, arguing that workers work for a
part of each day adding the value required to cover their wages, while
the remainder of their labor is performed for the enrichment of the
capitalist. The LTV and the accompanying theory of exploitation became
central to his economic thought.
19th century American individualist anarchists based their economics on the LTV, with their particular interpretation of it being called "Cost the limit of price".
They, as well as contemporary individualist anarchists in that
tradition, hold that it is unethical to charge a higher price for a
commodity than the amount of labor required to produce it. Hence, they
propose that trade should be facilitated by using notes backed by labor.
Adam Smith and David Ricardo
Adam
Smith held that, in a primitive society, the amount of labor put into
producing a good determined its exchange value, with exchange value
meaning, in this case, the amount of labor a good can purchase. However,
according to Smith, in a more advanced society the market price is no
longer proportional to labor cost since the value of the good now
includes compensation for the owner of the means of production: "The
whole produce of labour does not always belong to the labourer. He must
in most cases share it with the owner of the stock which employs him."
According to Whitaker, Smith is claiming that the 'real value' of such a
commodity produced in advanced society is measured by the labor which
that commodity will command in exchange but "[Smith] disowns what is
naturally thought of as the genuine classical labor theory of value,
that labor-cost regulates market-value. This theory was Ricardo's, and
really his alone."
Classical economist David Ricardo's labor theory of value holds that the value of a good (how much of another good or service it exchanges for in the market) is proportional to how much labor was required to produce it, including the labor required to produce the raw materials and machinery used in the process. David Ricardo
stated it as, "The value of a commodity, or the quantity of any other
commodity for which it will exchange, depends on the relative quantity
of labour which is necessary for its production, and not on the greater
or less compensation which is paid for that labour."
In this connection Ricardo seeks to differentiate the quantity of
labour necessary to produce a commodity from the wages paid to the
laborers for its production. Therefore, wages did not always increase
with the price of a commodity. However, Ricardo was troubled with some
deviations in prices from proportionality with the labor required to
produce them.
For example, he said "I cannot get over the difficulty of the wine,
which is kept in the cellar for three or four years [i.e., while
constantly increasing in exchange value], or that of the oak tree, which
perhaps originally had not 2 s. expended on it in the way of labour,
and yet comes to be worth £100." (Quoted in Whitaker) Of course, a
capitalist economy stabilizes this discrepancy until the value added to
aged wine is equal to the cost of storage. If anyone can hold onto a
bottle for four years and become rich, that would make it hard to find
freshly corked wine. There is also the theory that adding to the price
of a luxury product increases its exchange-value by mere prestige.
The labor theory as an explanation for value contrasts with the subjective theory of value,
which says that value of a good is not determined by how much labor was
put into it but by its usefulness in satisfying a want and its
scarcity. Ricardo's labor theory of value is not a normative theory, as are some later forms of the labor theory, such as claims that it is immoral for an individual to be paid less for his labor than the total revenue that comes from the sales of all the goods he produces.
It is arguable to what extent these classical theorists held the labor theory of value as it is commonly defined. For instance, David Ricardo
theorized that prices are determined by the amount of labor but found
exceptions for which the labor theory could not account. In a letter, he
wrote: "I am not satisfied with the explanation I have given of the
principles which regulate value." Adam Smith
theorized that the labor theory of value holds true only in the "early
and rude state of society" but not in a modern economy where owners of
capital are compensated by profit. As a result, "Smith ends up making
little use of a labor theory of value."
Warren is widely regarded as the first American anarchist, and the four-page weekly paper he edited during 1833, The Peaceful Revolutionist, was the first anarchist periodical published. Cost the limit of price was a maxim coined by Warren, indicating a (prescriptive) version of the labor theory of value. Warren maintained that the just
compensation for labor (or for its product) could only be an equivalent
amount of labor (or a product embodying an equivalent amount). Thus, profit, rent, and interest were considered unjust economic arrangements. In keeping with the tradition of Adam Smith's The Wealth of Nations, the "cost" of labor is considered to be the subjective cost; i.e., the amount of suffering involved in it. He put his theories to the test by establishing an experimental "labor for labor store" called the Cincinnati Time Store
at the corner of 5th and Elm Streets in what is now downtown
Cincinnati, where trade was facilitated by notes backed by a promise to
perform labor. "All the goods offered for sale in Warren's store were
offered at the same price the merchant himself had paid for them, plus a
small surcharge, in the neighborhood of 4 to 7 percent, to cover store
overhead."
The store stayed open for three years; after it closed, Warren could
pursue establishing colonies based on Mutualism. These included "Utopia" and "Modern Times". Warren said that Stephen Pearl Andrews' The Science of Society, published in 1852, was the most lucid and complete exposition of Warren's own theories.
Mutualism is an economic theory and anarchist school of thought that advocates a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labor in the free market.
Integral to the scheme was the establishment of a mutual-credit bank
that would lend to producers at a minimal interest rate, just high
enough to cover administration.
Mutualism is based on a labor theory of value that holds that when
labor or its product is sold, in exchange, it ought to receive goods or
services embodying "the amount of labor necessary to produce an article
of exactly similar and equal utility". Mutualism originated from the writings of philosopher Pierre-Joseph Proudhon.
Collectivist anarchism as defended by Mikhail Bakunin
defended a form of labor theory of value when it advocated a system
where "all necessaries for production are owned in common by the labour
groups and the free communes ... based on the distribution of goods
according to the labour contributed".
Karl Marx
Contrary to popular belief Marx never used the term "Labor theory of value" in any of his works but used the term Law of value, Marx opposed "ascribing a supernatural creative power to labor", arguing as such:
Labor is not the source of all wealth. Nature is just as
much a source of use values (and it is surely of such that material
wealth consists!) as labor, which is itself only the manifestation of a
force of nature, human labor power.
Here, Marx was distinguishing between exchange value (the subject of the LTV) and use value. Marx used the concept of "socially necessary labor time" to introduce a social perspective distinct from his predecessors and neoclassical economics. Whereas most economists start with the individual's perspective, Marx started with the perspective of society as a whole. "Social production" involves a complicated and interconnected division of labor of a wide variety of people who depend on each other for their survival and prosperity. "Abstract" labor refers to a characteristic of commodity-producing
labor that is shared by all different kinds of heterogeneous (concrete)
types of labor. That is, the concept abstracts from the particular characteristics of all of the labor and is akin to average labor.
"Socially necessary" labor refers to the quantity required to
produce a commodity "in a given state of society, under certain social
average conditions or production, with a given social average intensity,
and average skill of the labor employed."
That is, the value of a product is determined more by societal
standards than by individual conditions. This explains why technological
breakthroughs lower the price of commodities and put less advanced
producers out of business. Finally, it is not labor per se that creates
value, but labor power sold by free wage workers to capitalists. Another
distinction is between productive and unproductive labor. Only wage workers of productive sectors of the economy produce value.
According to Marx an increase in productiveness of the laborer does not
affect the value of a commodity, but rather, increases the surplus
value realized by the capitalist.
Therefore, decreasing the cost of production does not decrease the
value of a commodity, but allows the capitalist to produce more and
increases the opportunity to earn a greater profit or surplus value, as
long as there is demand for the additional units of production.
The Marxist labor theory of value has been criticised on several
counts. Some argue that it predicts that profits will be higher in
labor-intensive industries than in capital-intensive industries, which
would be contradicted by measured empirical data inherent in
quantitative analysis. This is sometimes referred to as the "Great
Contradiction".
In volume 3 of Capital, Marx explains why profits are not distributed
according to which industries are the most labor-intensive and why this
is consistent with his theory. Whether or not this is consistent with
the labor theory of value as presented in volume 1 has been a topic of
debate. According to Marx, surplus value
is extracted by the capitalist class as a whole and then distributed
according to the amount of total capital, not just the variable
component. In the example given earlier, of making a cup of coffee, the
constant capital involved in production is the coffee beans themselves,
and the variable capital is the value added by the coffee maker. The
value added by the coffee maker is dependent on its technological
capabilities, and the coffee maker can only add so much total value to
cups of coffee over its lifespan. The amount of value added to the
product is thus the amortization of the value of the coffeemaker. We can
also note that not all products have equal proportions of value added
by amortized capital. Capital intensive industries such as finance may
have a large contribution of capital, while labor-intensive industries
like traditional agriculture would have a relatively small one.
Critics argue that this turns the LTV into a macroeconomic theory, when
it was supposed to explain the exchange ratios of individual
commodities in terms of their relation to their labour ratios (making it
a microeconomic theory), yet Marx was now maintaining that these ratios
must diverge from their labour ratios. Critics thus held that Marx's
proposed solution to the "great contradiction" was not so much a
solution as it was sidestepping the issue.
Steve Keen argues that Marx's idea that only labor can produce
value rests on the idea that as capital depreciates over its use, then
this is transferring its exchange-value to the product. Keen argues that
it is not clear why the value of the machine should depreciate at the
same rate it is lost. Keen uses an analogy with labor: If workers
receive a subsistence wage and the working day exhausts the capacity to
labor, it could be argued that the worker has "depreciated" by the
amount equivalent to the subsistence wage. However this depreciation is
not the limit of value a worker can add in a day (indeed this is
critical to Marx's idea that labor is fundamentally exploited). If it
were, then the production of a surplus would be impossible. According to
Keen, a machine could have a use-value greater than its exchange-value,
meaning it could, along with labor, be a source of surplus. Keen claims
that Marx almost reached such a conclusion in the Grundrisse
but never developed it any further. Keen further observes that while
Marx insisted that the contribution of machines to production is solely
their use-value and not their exchange-value, he routinely treated the
use-value and exchange-value of a machine as identical, despite the fact
that this would contradict his claim that the two were unrelated.
Marxists respond by arguing that use-value and exchange-value are
incommensurable magnitudes; to claim that a machine can add "more
use-value" than it is worth in value-terms is a category error. According to Marx, a machine by definition cannot be a source of human labor.
Keen responds by arguing that the labor theory of value only works if
the use-value and exchange-value of a machine are identical, as Marx
argued that machines cannot create surplus value since as their
use-value depreciates along with their exchange-value; they simply
transfer it to the new product but create no new value in the process. Keen's machinery argument can also be applied to slavery based modes of production, which also profit from extracting more use value from the laborers than they return to laborers.
In their work Capital as Power, Shimshon Bichler and
Jonathan Nitzan argue that while Marxists have claimed to produce
empirical evidence of the labor theory of value via numerous studies
which show consistent correlations between values and prices, these
studies
do not actually provide evidence for it and are inadequate. According
to the authors, these studies attempt to prove the LTV by showing that
there is a positive correlation between market prices and labor values.
However, the authors argue that these studies measure prices by looking
at the price of total output (the unit price of a commodity multiplied
by its total quantity) and do these for several sectors of the economy,
estimate their total price and value from official statistics and
measured for several years. However, Bichler and Nitzan argue that this
method has statistical implications as correlations measured this way
also reflect the co-variations of the associated quantities of unit
values and prices. This means that the unit price and unit value of each
sector are multiplied by the same value, which means that the greater
the variability of output across different sectors, the tighter the
correlation. This means that the overall correlation is substantially
larger than the underlying correlation between unit values and unit
prices; when sectors are controlled for their size, the correlations
often drop to insignificant levels.
Furthermore, the authors argue that the studies do not seem to actually
attempt to measure the correlation between value and price. The authors
argue that, according to Marx, the value of a commodity indicates the
abstract labor time required for its production; however Marxists have
been unable to identify a way to measure a unit (elementary particle) of
abstract labor (indeed the authors argue that most have given up and
little progress has been made beyond Marx's original work) due to
numerous difficulties. This means assumptions must be made and according
to the authors, these involve circular reasoning:
The most important of these
assumptions are that the value of labour power is proportionate to the
actual wage rate, that the ratio of variable capital to surplus value is
given by the price ratio of wages to profit, and occasionally also that
the value of the depreciated constant capital is equal to a fraction of
the capital’s money price. In other words, the researcher assumes
precisely what the labour theory of value is supposed to demonstrate.
Bichler and Nitzan argue that this amounts to converting prices into
values and then determining if they correlate, which the authors argue
proves nothing since the studies are simply correlating prices with
themselves. Paul Cockshott
disagreed with Bichler and Nitzan's arguments, arguing that it was
possible to measure abstract labour time using wage bills and data on
working hours, while also arguing Bichler and Nitzan's claims that the
true value-price correlations should be much lower actually relied on
poor statistical analysis itself.
Most Marxists, however, reject Bichler and Nitzan's interpretation of
Marx, arguing that their assertion that individual commodities can have
values, rather than prices of production, misunderstands Marx's work.
For example, Fred Moseley argues Marx understood "value" to be a
"macro-monetary" variable (the total amount of labor added in a given
year plus the depreciation of fixed capital in that year), which is then
concretized at the level of individual prices of production, meaning that "individual values" of commodities do not exist.
Some post-Keynesian economists have been highly critical of the labor theory of value. Joan Robinson, who herself was considered an expert on the writings of Karl Marx, wrote that the labor theory of value was largely a tautology and "a typical example of the way metaphysical ideas operate". The well-known Marxian economist Roman Rosdolsky replied to Robinson's claims at length,
arguing that Robinson failed to understand key components of Marx's
theory; for instance, Robinson argued that "Marx's theory, as we have
seen, rests on the assumption of a constant rate of exploitation", but as Rosdolsky points out, there is a great deal of contrary evidence.
In ecological economics, the labor theory of value has been
criticized, where it is argued that labor is in fact energy over time.
Such arguments generally fail to recognize that Marx is inquiring into
social relations among human beings, which cannot be reduced to the
expenditure of energy, just as democracy cannot be reduced to the
expenditure of energy that a voter makes in getting to the polling
place.
However, echoing Joan Robinson, Alf Hornborg, an environmental
historian, argues that both the reliance on "energy theory of value" and
"labor theory of value" are problematic as they propose that use-values
(or material wealth) are more "real" than exchange-values (or cultural
wealth)—yet, use-values are culturally determined.
For Hornborg, any Marxist argument that claims uneven wealth is due to
the "exploitation" or "underpayment" of use-values is actually a
tautological contradiction, since it must necessarily quantify
"underpayment" in terms of exchange-value. The alternative would be to
conceptualize unequal exchange as "an asymmetric net transfer of
material inputs in production (e.g., embodied labor, energy, land, and
water), rather than in terms of an underpayment of material inputs or an
asymmetric transfer of 'value'".
In other words, uneven exchange is characterised by incommensurability,
namely: the unequal transfer of material inputs; competing
value-judgements of the worth of labor, fuel, and raw materials;
differing availability of industrial technologies; and the off-loading
of environmental burdens on those with less resources.
