A Complete Theory of Capitalist Economic Crises? An Appreciation of the Work of Sam Williams

Guest post by Terry Coggan, a New Zealand Marxist and trade unionist.
Part One (of two parts): The implications of Marx’s theory of commodity money

Few of us will ever make an original contribution to economic science. We necessarily remain its consumers rather than its producers. Even Marxist parties, although they have the advantage over individual activists in that they can function as “collective thinking machines,” are to some extent reliant on professional “experts” in the field – government statisticians, academic economists, business journalists, market analysts of one sort or another. But revolutionary politicians must know enough to be able to approach critically the output of these specialists, including, or perhaps especially, the Marxist ones, to recognize what is useful and what is not.

Remembering Lenin’s injunction that “Without revolutionary theory there can be no revolutionary movement,” every serious workers’ party knows that it must educate its members in Marxist theory, including economic theory. But how much economics do its cadres need to know?  Some, undoubtedly.  For instance, every communist should be able to acquaint his or her fellow workers with what Marx regarded as his greatest scientific achievement, the theory of surplus value, i.e., to describe theoretically what many workers know from their life experience, that capitalist society is based on exploitation. More generally, while they avoid drawing up detailed blueprints for the society after capitalism, communists should be able to outline some of its broad features, and this already assumes an acquaintance with some basic economic concepts and their historical development. You can’t say, for example, that under communism there will be no money, without being able to explain the origin and functions of money in class society, in other words quite a chunk of Marxist economics.

What about the question of the crises that recur in the capitalist economy? Are there common causes for the Great Depression of the 1930s, the “stagflation” recessions of the mid 1970s and early 1980s, and the slump of 2007-09 and the subsequent “secular stagnation”? What is the connection between ten-year trade or industrial cycles, and longer term shifts in the curve of capitalist development? Do these “long waves” even exist?

Do such questions even have to be definitely nailed down before a successful socialist revolution can be made? Not necessarily, in my opinion. It is doubtful whether many members of the Bolshevik Party or the July 26th Movement solved these problems before the victory of the revolutions they led. But to be able to do so, or even to make substantial progress in that direction, would greatly strengthen the armature of the workers movement in its fight towards its ultimate goal. At the very least, communists need to be able to demonstrate that crises are lawful outcomes of the laws of motion of the capitalist system, and not just more or less accidental events which can be avoided if governments or central bankers adopt the correct economic policies, which is the assumption that all bourgeois or “mainstream” economists, from the left or right, start from.

I believe that in his blog A Critique of Crisis Theory (https://critiqueofcrisistheory.wordpress.com/), the subject of this article,1 Sam Williams  has made a significant contribution in this direction. When commentators point to inadequacies or omissions in Marx’s work, the fault is usually theirs and not Marx’s, but it is undeniably true that Marx did not leave a complete crisis theory. This has left room for different schools of crisis theory to emerge under the general Marxist umbrella.  The two most influential are the under consumption or lack of effective demand school, and the falling rate of profit school.  Williams extensively reviews both and, while not rejecting either, considers them inadequate as they stand.

Overproduction of Commodities and Underproduction of the Money Material

His own theory is based on the understanding that he shares with Marx and Engels, that capitalist crises are crises of overproduction, which arise from the peculiar ability capitalism acquired, after about 1825, to increase production faster than it can expand markets. “If the expansion of the market,” Marx says simply, “had kept pace with the expansion of production, there would be no glut in the market, no overproduction.” (Marx-Engels Collected Works (CW) Vol. 32, p. 154.) But as Marx acknowledges, this just states the problem, it doesn’t explain it. Similarly, Engels writes “the enormous expansive force of modern industry” is not matched by “the capacity for extension, extensive and intensive, of the markets”, which is “primarily governed by quite different laws that work much less energetically”. (CW 24, p. 315.) Unfortunately, neither Engels nor Marx spelt out what these laws are. That is the task that Williams, ambitiously, has set himself. “Once we have solved the laws that govern the expansion of markets,” he declares, “we have developed a full theory of capitalist crises.”

Williams begins by recognizing the implications of the fact, ignored, he believes, by most Marxist and all of bourgeois economics, that Marx spends the whole first part of Volume One of Capital, his economic magnum opus, elaborating a theory of commodity money.  He goes as far as to state at one point “I believe that without understanding the distinction between value and form of value, we not only fail to fully grasp Marx’s theory of value, we cannot fully understand either capitalist crises or the evolution and fate of modern capitalist society.” And understanding this distinction in forms of value is,  “in plain language, … understanding the relationship between commodities and money.”

Gold is a commodity in terms of which the value of all other commodities is measured, and thus becomes money.

The value of a commodity can never be measured directly in terms of quantities of abstract labour, which are measured in units of time, but only through the form of exchange value.  In its turn, a commodity’s exchange value, its price, (although not necessarily in the first instance its market price), must be measured in terms of the use value of another commodity, and when one particular commodity has come to perform this service for all other commodities, when it has become the independent existence of their exchange value, it has become money.  The relevance of this analysis for crisis theory may not be immediately apparent – Marx wasn’t investigating capitalist crises when he developed it in Volume One – but Williams believes it is crucial.

Surplus value must not only be produced, it must be realised in real money terms on the market.  And “real” money must be a commodity requiring labour to produce, since only that can perform all the functions of money, the most important of which is to measure the value of all other commodities in terms of its own use value – in quantities  of gold, if gold is the money commodity. Capitalism, which allocate society’s total labour resources among the production of all the different commodities the society needs through price and profit fluctuations on the market, couldn’t work otherwise. The quantity of money, in terms of the purchasing power available to realize the value of all other commodities, is therefore limited by the quantity of real money – gold bullion – in existence. Other forms of money, token money and credit money, can only be understood in relation to this basic fact (more on this below). The development of modern currency systems, clearing houses, banks and credit allows the economising of the money material, but in the end expanded reproduction  –  and capitalism can only exist as expanded reproduction, a point Williams repeatedly makes –  cannot proceed without a certain level of gold production.2

If gold is not produced in sufficient quantities, the circulation of commodities breaks down, and capitalist reproduction experiences a crisis – a general overproduction of commodities, or more precisely a general overproduction of commodities in relation to one special commodity, the money commodity. Gold in its role as money material can also be overproduced in proportion to other commodities. (Williams actually corrects himself on this point in the course of his blog).  Gold mining is counter-cyclical. Williams writes “One of the great peculiarities of gold production — or the production of whatever commodity serves as money material — is that an under-production of gold bullion is by definition identical to an overproduction of all other commodities, while an overproduction of gold is identical to under-production of all other commodities. Capitalism is doomed to fluctuate between these two states. Under-production of gold, or what amounts to the same thing, a generalized overproduction of commodities, leads sooner or later to a crisis of overproduction, while an overproduction of gold — or a generalized under-production of commodities — leads sooner or later to a recovery and boom.”

Whether enough real money is produced depends on the profitability, both absolutely and relative to all other industries, of the gold bullion-producing industry. And this comes down to the relationship between the values (or more precisely, prices of production) and the market prices of commodities. During the expanding phase of the economic cycle, prices of commodities rise because demand outruns supply at existing prices. (It’s important to remember we’re talking prices in terms of gold at this stage of the exposition.) The costs of mining gold increase, the industry becomes less profitable – by definition, unlike other capitalists, gold-producing industrial capitalists are not in a position to raise the “price” of their commodity – and so the production of the money material declines.  “The inevitable result,” says Williams, “is that the growth in the quantity of metallic money — which in the long run drives the expansion of the market — slows down, tending to grind towards a halt as prices keep rising. Or what comes to exactly the same thing, the more the production of commodities expands, the slower in the long run will be the expansion of the market for them. The tendency towards the generalized overproduction of commodities is thus built right into the commodity foundations of capitalist production.” (His emphasis)

The crisis when it inevitably comes lowers prices in relation to values, making gold production again more profitable.  The subsequent rise in the quantity of metallic money swells bank reserves and forms the material basis for another expansion of the market. But how, exactly?

It has to do in the first place with the adverse relationship between profit of enterprise and interest, the two components of capitalist profit. If the rate of interest is low because the quantity of metallic money, potential money capital, has grown in relation to the quantity of real capital – Williams here bases himself on Marx’s basic explanation of what determines the rate of interest – the profit of enterprise will be high, giving industrial capitalists the incentive to undertake surplus-value-producing activity. On the eve of the expansion of the market, the growing mass of hoarded money is “burning a hole” in the collective pockets of the industrial and commercial capitalists.  If the crisis/depression phase of the cycle has liquefied enough commodity capital and written off enough fixed capital (in other words, depreciated enough existing capital, a function of crises particularly emphasized by the falling rate of profit school), at some point they are ready to invest. As this occurs, what bourgeois economists call the “multiplier” and “accelerator” effects kick in. (These economists can sometimes get things right at the descriptive level, we must allow.)  “The combination of the multiplier and accelerator effects at the beginning of the period of prosperity occurs at a time when there is a huge amount of idle money – potential demand – to draw on. Working together, the multiplier and accelerator effects transform this potential demand into actual demand. The market suddenly expands.”

The Gold Trail

California Gold Rush miners at Auburn Ravine 1852. Photo: California State Library

Williams tests his theory by examining historic trends in gold production. He makes the general statement “Every major period of prosperity in the history of capitalism since the middle of the 19th century has been preceded or accompanied by a major rise in gold production, while every period of major crisis has been accompanied or preceded by major declines in gold production.” The two great international gold rush booms of the 19th century, (of which more below), are obvious cases in point. Williams also points to two more recent examples: a decline in gold production triggered by the rising prices of “the long boom” of the 1950s and and 1960s, preceded the slump of 1974-5. A similar decline in gold production, triggered by the rising prices of “the great moderation” of the 1990s, preceded the slump of 2007-09. Or conversely, the 1974-75 and 1981-82 recessions lowered prices (in gold terms), and led, after the necessary time lag, to the increase in gold production that underlay the 1990s expansion, just as the steeper fall in commodity prices during the 1930s had boosted gold production and made possible the post World War Two boom. (His explanation of the severity of the 1930s “super depression” itself is that the “contracted  reproduction” of World War One had not allowed commodity prices to drop, the opposite in fact, so that they were already too high relative to labour values when the 1920s boom began, keeping the downwards pressure on gold production that had begun as the pre-war expansion was peaking unrelieved for decades).

This movement of  market prices in relation to underlying values and its effect on gold production is the bare bones of  Williams theory, but two other factors, not necessarily cyclical, are operating in the real world that might work in the same or in the opposite direction, and these variable interactions have to be taken into account. The first  is the dollar price of gold, which has been subject to variations, sometimes wild variations, since the end of the last remnants of the international gold standard with the collapse of the Bretton Woods system in 1971; and the second is the physical capacity of the world’s supply of gold to increase (it never actually decreases), and the related question of the productivity of gold mining relative to other industries, i.e., changing labour values of gold relative to all other commodities.

Illustration for Shakespeare’s Timon of Athens: Timon and the gold
Marx quoted Shakespeare on gold:
thou visible god,
That solder’st close impossibilities,
And makes them kiss!

Although, strictly speaking, the dollar price of gold is not a “price” at all, but rather a rate of exchange between two forms of money, its ups and downs also have an effect on the profitability and output of the gold mining industry. In the long run, the price of gold is determined by the ratio of the growth of dollar-denominated token money (and its satellite currencies)  to the growth of gold bullion. That is the underlying reason gold has risen from $35 an ounce the last time the price was fixed in 1971 to $1,250 today – or, for that matter, why a Big Mac cost 50c then and $4 now. But the rise in the price of an ounce of gold, unlike that of a Big Mac, has not been a steady one. (This is just as well for capitalism because, as Williams points out, if the paper currency were continuously devalued, “the  ‘bulls’ in the gold market would always win, the devaluation of the currency would very quickly get out of hand, and the currency would lose its ability to function as a means of payment, hoarding, or even as a means of purchase.”)

The “price” of gold reached $875 in 1980, fell to $253 in 1999, only to climb to an all-time high of $1905 in 2011.  Speculation is clearly one factor behind these movements, but they are also influenced by the changing level of demand for gold at different points in the business cycle. When capitalists sense an approaching crisis they increase their demand for and holdings of gold.  This happened in the 1970s and again in the run up to 2007-09. As Williams says, “the resulting depreciation of paper money against gold leads to a rise in the purchasing power of gold, or what comes to the same thing, a fall of the price of commodities in terms of gold.” This encourages gold production, i.e. after the time lag, it works in the same direction as the boost to gold production caused by the 1970s and 2008-09 recessions. But the very increased supply has “bearish implications for the dollar price of gold,” as happened after 2012, when the falling dollar price of gold – rising commodity prices in terms of gold – caused  gold production to decline, after the recession conditions of 2007-09 had led it  in the opposite direction.

The effect of changes in the relative productivity of the gold mining industry is especially evident during the two expansionary “long waves,” or upturns in the curve of capitalist development, which occurred after 1848 and 1895, when the opening up of new gold fields and improved mining techniques flooded the world market with gold, each ounce of which had also cost less labour time to produce. In both cases, for a prolonged period comprising more than one industrial cycle, prices, with profits following them, were pushed upwards to reflect the lowered relative value of gold money. Marx witnessed the first of these periods, and called it “a second sixteenth century.” Unfortunately for the capitalist class, there has been no similar golden bounty since. Today mines are yielding gold less readily, and it’s costing more labour time to bring each ounce to the surface, raising the value of gold relative to most other commodities, increasing the costs of mining gold, and causing a fall in the rate of profit in the gold producing industry relative to that in other industries.  This factor acts as a brake on gold production even when recession-induced falls in the gold price of commodities encourages an increase, as in the 1930s, the 1980s, or after 2007-09. Similarly, notes Williams, the decline in gold production that occurred between 2001 and 2008 was not just cyclical but reflected a worsening in the natural conditions of producing gold, especially in South Africa.

Workers mining gold in South Africa

Predictions that the world is approaching “peak gold” appear to be even more solidly founded than those that have it approaching “peak oil.” If this is the case, Williams argues, the implications for capitalism in the longer term are ominous. The rise of gold in value relative to other commodities will become permanent. “As present-day mines are depleted, the price of production of commodities will fall. Future crises will have to progressively lower market prices in terms of gold down to — and for periods of time below — the falling prices of production in order to stimulate new gold production from poorer ores — or in the more distant future maybe even from asteroids if capitalism were to last that long. A long-term downward trend in the prices of production, however, intensifies crises and prolongs the periods of stagnation that follow them:  in other words it creates heavy headwinds for the process of expanded capitalist reproduction resulting in secular stagnation.” A new period of expanded capitalist reproduction without any revolution in the production of the money material, such as occurred after World War Two, is not in theory impossible, but it would require a “super-crisis” of such economic and social severity that the consequences for humanity are scarcely imaginable.


1. Williams began his blog in 2009, and to date (April 2017) there have been over 150 postings, covering all areas of economics, ranging from theories of international trade to the economics of post-capitalist societies. In this article I have concentrated more narrowly on crisis theory. Supporters of the blog have promised an eBook summarizing Williams’ theory, but in lieu of that any new reader can only select from the listed posts. The following posts might offer a good sampling of his views: https://critiqueofcrisistheory.wordpress.com/michael-heinrichs-new-reading-of-marx-a-critique-pt-1/michael-heinrichs-new-reading-of-marx-a-critique-pt-3/;


2. Williams’ argument follows that of Marx in Volume Two of Capital where he begins to discuss expanded reproduction: “The additional money required for the circulation of this greater quantity of commodities must be secured either by greater economy in the circulating quantity of money – whether by balancing the payments, etc., by measures which accelerate the circulation of the same coins – or by the transformation of money from the form of a hoard into that of a circulating medium…….To the extent that all these measures do not suffice, additional gold must be produced, or what amounts to the same, a part of the additional product exchanged, directly or indirectly, for gold – the product of countries in which precious metals are mined.” (CW 36, pp. 343-44)



6 responses to “A Complete Theory of Capitalist Economic Crises? An Appreciation of the Work of Sam Williams

  1. You say,

    “The value of a commodity can never be measured directly in terms of quantities of abstract labour, which are measured in units of time, but only through the form of exchange value. In its turn, a commodity’s exchange value, its price, (although not necessarily in the first instance its market price), must be measured in terms of the use value of another commodity, and when one particular commodity has come to perform this service for all other commodities, when it has become the independent existence of their exchange value, it has become money.”

    But, if the value of a commodity can never be measured directly in terms of quantities of abstract labour, it is impossible to determine the exchange value of a commodity, which is only the expression of the relative values of two commodities! It is impossible to say that 1 unit of A exchanges for, i.e. has the same value as 10 units of B, unless I first know what the value of A and B are, and that can only be determined by the amount of abstract labour, which each possess.

    Engels describes the long historical period, and process by which products become commodities, and by which the value of products, by this process of comparison if values, become turned into exchange values, as the visible manifestation of their value “stamped on their face”, as Marx puts it in Vol. I. Marx would have spent long describing this in Vol III. Engels says had he lived.

    Moreover, although the value form does indeed involve expressing the value of commodity A as a certain quantity of use value B, it is not the value of A that is being compared with the use value of B, which is like comparing apples and oranges, but is the value of A compared with the VALUE contained in a certain quantity of use value B.

    The idea that the value of a commodity can only be represented by its exchange value for a certain quantity of use value B, is back to front, because you cannot determine exchange values, i.re relative expressions of value without first determining values, i.e. objectively determined absolute quantities of value, measure by labour-time.

    The argument presented, of value as exchange value, is essentially the same argument as was presented by Charles Ganilh, and taken apart by Marx in Theories of Surplus Value Part I. Moreover, as Marx sets out, in Theories of Surplus Value, all commodities, in so far as they are quantities of value, and thereby equivalents of other commodities, exchange value, are money.

    In fact, as Marx sets out, most transactions end up being a quantity of one commodity being bought by quantities of other commodities, with money only acting as means of payment to settle balances. That is why commercial credit can fulfil the function of money, reducing the quantity of the actual money commodity required in circulation for any level of transactions.

    • Terry replies:
      If anyone wants to understand why we need to measure value – embodied abstract human labour – indirectly through the value form of exchange value rather than directly, or why as Marx put it, “the value-determining element, labour-time, cannot be the element in which prices are expressed“, there is no better place to go than the first three chapters of Volume One of Capital where the whole thing is laid out. A useful angle from which to approach the issue is to ask yourself why labour money – workers being paid with vouchers saying they have worked x number of hours which they can then exchange for the commodities they need – wouldn’t work in capitalist, or any commodity-producing society. If you can answer that question, you are on the way to grasping Marxist value theory. Sam Williams provides a clear explanation at several places on his blog A Critique of Crisis Theory, especially in the posts entitled “Money as the Universal Equivalent” , and “ ‘The Failure of Capitalist Production’ by Andrew Kliman – Part 2”.

      • Except, as Marx makes clear in those chapters, and in Theories of Surplus Value, that prices are not a measure of value, but of exchange value. Money is merely the universal equivalent form of value, i.e. not value itself, but value expressed as exchange value.

        Here is what Marx says, in response to Ganilh, for example, who confused Exchange Value with Value, and argued that wealth consists of exchange value.

        “Exchange-value consists of the relative proportion in which products exchange for each other. The total quantity of products has therefore no exchange-value, since it is not exchanged for anything. Hence, society, whose wealth consists of exchange-values, has no wealth. Consequently it follows not only, as Ganilh himself concludes, that the “national wealth, which is composed of the exchange-values of labour” (p.108), can never rise and can never fall in exchange-value ( therefore there is no surplus-value), but that it has no exchange-value whatever, and so is not wealth, since wealth consists only of exchangeable values.” (p 208)

        And its precisely, for this reason that value itself cannot be measured by money. Only exchange value can be measured by money. If 1 metre of linen exchanges for 1 ox. of gold today, and exchanges for 2 oz of gold tomorrow, and gold is the money commodity. Can you confidently tell us that the value of linen has risen?

        No, of course you cannot, because all you can tell us is that the proportion of value of gold has changed relative to linen. It can just as easily be the case that the value of gold has fallen, rather than the value of linen has risen!

        Moreover, it is wrong to talk about value being “embodied abstract human labour”. Only individual value is embodied abstract labour. The value of commodities is determined not by the abstract labour embodied within them, but by the amount of social labour, which they represent, which itself is constantly changing, as a result of changes in social productivity. As Marx puts it in rejecting this concept of “embodied labour”,

        “The materialisation, etc., of labour is however not to be taken in such a Scottish sense as Adam Smith conceives it. When we speak of the commodity as a materialisation of labour – in the sense of its exchange value – this itself is only an imaginary, that is to say a purely social mode of existence of the commodity which has nothing to do with its corporeal reality; it is conceived as a definite quantity of social labour or money…Therefore, the materialisation of labour in the commodity must not be understood in that way. (The mystification here arises from the fact that a social relation appears in the form of a thing).”

        (Theories of Surplus Value, Part 1, Chapter IV, p 171-2)

        In other words, the labour is not embodied or materialised as value in the commodity. The phrase is simply intended to reflect the fact that, at any one time, each commodity represents a certain quantity of social labour-time, irrespective of the actual labour that was embodied within that particular commodity unit, and indeed irrespective of the individual value of the commodities produced by that particular producer.

        The value of each commodity unit is determined not by the labour embodied within it, but by the socially necessary labour-time required to produce that type of commodity, of which each individual unit is merely a representative. This exchange of things – commodities – creates the illusion that it is these things that have value, rather than being merely the representatives of value. As Marx puts it, every commodity is money, it is a claim to a certain quantity of labour-time, and that quantity of labour-time is equal to the socially necessary labour-time required for its own production.

        The commodity does not embody labour within it as value, thereby making that value some intrinsic quality of the commodity. The commodity is rather merely a vessel within which value is contained, and the quantity of that value can be greater or smaller, within the same individual commodity, in accordance with the proportion of social labour time it represents, a proportion which is constantly changing, as social productivity changes.

        Moreover, the concept of embodied labour within a commodity, is Smithian in another sense, that it limits value to only material commodities. What about the value of immaterial commodities or services? Do they not have value? What about transport? The labour involved in transporting a commodity from one palce to another, or transporting passengers from one place to another is not embodied in any material commodity, like a service it is consumed in the very act of production.

        As Marx says,

        “It may be that the concrete labour whose result it is leaves no trace in it. In manufactured commodities this trace remains in the outward form given to the raw material. In agriculture, etc., although the form given to the commodity, for example wheat or oxen and so on, is also the product of human labour, and indeed of labour transmitted and added to from generation to generation, yet this is not evident in the product. In other forms of industrial labour, the purpose of the labour is not at all to alter the form of the thing, but only its position. For example, when a commodity is brought from China to England, etc., no trace of the labour involved in the thing itself (except for those who call to mind that it is not an English product).”

        (Theories of Surplus Value, Part 1, Chapter IV, p 171-2)

        When an actor, gives a performance, their labour creates value, but it is not embodied in any commodity, the performance itself is the commodity, a product with value, produced for the purpose of sale.

        Finally, of course as Marx says, ““the value-determining element, labour-time, cannot be the element in which prices are expressed“, because it is irrational to say that 1 hour of value is equal to 1 hour of value! Value is labour, and its measure is labour-time. Prices on the other hand, are exchange values, not values, They are exchange value expressed in money. But, you cannot determine exchange values without first the commodities being exchanged having value, and it is only because products, i.e. use values produced by labour, first have value, and then start to become traded, that these values can be brought into equivalence with each other – as described in Chapter 3 of Capital I – that values become transformed into exchange values, and products become transformed into commodities, and finally that one single commodity becomes separated off as the universal commodity – money.

        That is why Marx and Engels argue that value, and the measurement of value existed prior to commodity production and exchange, and will continue after commodity production and exchange. As Marx puts it,

        “… after the abolition of the capitalist mode of production, but still retaining social production, the determination of value continues to prevail in the sense that the regulation of labour-time and the distribution of social labour among the various production groups, ultimately the book-keeping encompassing all this, become more essential than ever.” (Capital III, Chapter 49, p 851)

        Engels describes the historical process by which value is first measured directly by peasant producers, and then these values are brought into relations of equivalence of commodities, in his Supplement to Capital III.

        “The little that such a family had to obtain by barter or buy from outside, even up to the beginning of the 19th century in Germany, consisted principally of the objects of handicraft production — that is, such things the nature of whose manufacture was by no means unknown to the peasant, and which he did not produce himself only because he lacked the raw material or because the purchased article was much better or very much cheaper. Hence, the peasant of the Middle Ages knew fairly accurately the labour-time required for the manufacture of the articles obtained by him in barter. The smith and the cartwright of the village worked under his eyes; likewise, the tailor and shoemaker — who in my youth still paid their visits to our Rhine peasants, one after another, turning home-made materials into shoes and clothing. The peasants, as well as the people from whom they bought, were themselves workers; the exchanged articles were each one’s own products. What had they expended in making these products? Labour and labour alone: to replace tools, to produce raw material, and to process it, they spent nothing but their own labour-power; how then could they exchange these products of theirs for those of other labouring producers otherwise than in the ratio of labour expended on them? Not only was the labour-time spent on these products the only suitable measure for the quantitative determination of the values to be exchanged: no other way was at all possible.” (p 897-8)

  2. This is a fantastic introduction to some fundamental concepts in Marxist economic theory. Terrry has demonstrated his mastery of the issues raised by Sam Williams in the Critique of Crisis Theory Blog and is to be congratulated on being able to explain them in relatively abridged format of a review.

  3. You say,

    “A useful angle from which to approach the issue is to ask yourself why labour money – workers being paid with vouchers saying they have worked x number of hours which they can then exchange for the commodities they need – wouldn’t work in capitalist, or any commodity-producing society. If you can answer that question, you are on the way to grasping Marxist value theory. ”

    Why? All this shows is that the value of labour-power, i.e. what underlies wages, is different to the value created by labour, that difference being the surplus value produced by that labour-power. The idea that workers could be given such labour tokens representing the labour-time they have provided, and then take out an equivalent value from a collective store in a socialist society, is the view presented by the Lassalleans in the Gotha Programme, that was critiqued by Marx.

    Marx makes clear that no such equivalence in a socialist society is possible for various reasons. Firstly, the value of the constant capital (mean of production in a socialist society) has to be reproduced on a like for like physical basis, before any output can be allocated for consumption. Secondly, a proportion of output must be set aside to provide for the needs of those who cannot work, and for those who perform necessary labour, but which does not produce new value. Thirdly, a proportion of output, the surplus product, must be set aside to provide for increases in population and future output, and to add to the potential for raising social productivity etc. Only after these deductions from the total output have been made is what is left available for distribution back to workers.

    As Marx put it,

    “Accordingly, the individual producer receives back from society — after the deductions have been made — exactly what he gives to it. What he has given to it is his individual quantum of labor. For example, the social working day consists of the sum of the individual hours of work; the individual labor time of the individual producer is the part of the social working day contributed by him, his share in it. He receives a certificate from society that he has furnished such-and-such an amount of labor (after deducting his labor for the common funds); and with this certificate, he draws from the social stock of means of consumption as much as the same amount of labor cost. The same amount of labor which he has given to society in one form, he receives back in another.

    Here, obviously, the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values. Content and form are changed, because under the altered circumstances no one can give anything except his labor, and because, on the other hand, nothing can pass to the ownership of individuals, except individual means of consumption. But as far as the distribution of the latter among the individual producers is concerned, the same principle prevails as in the exchange of commodity equivalents: a given amount of labor in one form is exchanged for an equal amount of labor in another form.”

  4. Pingback: The falling rate of profit and other explanations of capitalist crisis | A communist at large·

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