outline of Value, Price and Profit by Karl Marx

Introduction

  • written and delivered as a lecture in 1865 to the First International Working Men's Association

  • in it Marx refutes the assertions and underlying economic theory of socialist John Weston

  • Weston said: (1) wage increases cannot improve the social and material prospects of the working class and (2) trade unions have a harmful effect on other branches of industry

  • in the process of criticizing Weston, Marx's explains his labor theory of value, and other other phenomena of capitalism, like value of commodity and labour, price, and profit, and how they are determined

  • in this text Marx goes through Weston’s arguments by using his own reasoning to bring about contradictions, using real examples to show his fallacies, and along the way Marx explains in detail how the phenomena Weston speaks of actually work in capitalism

  • because the whole text takes on this polemical style, it is my hope that this outline can more easily carry one through each claim and counterclaim, also simplifying Marx’s term definitions and summarizing how each different value is determined

 

I. Production and Wages

page 5

  • Weston’s argument is based on his belief that these things are fixed/constant: how much a country produces over time & how much the workers make/can buy with their wages

  • Marx says amount produced increases over time & $ needed to circulate growing production always changes

  • even if population stayed the same, diff amount of capital accumulated & productive powers of labour change (with new machines etc)

page 6

  • Weston admits if workers demand higher wages, which they can technically do, there will be a reaction by capitalists to try to maintain it at the fixed level.

    • but he also knows capitalists can decrease wages, which would also cause the workers to react. 

    • but wouldn’t that be the workers demanding a raise of wages since it has now lowered? and that would return the wages to the fixed level.

  • he must say then the amount of wages is not constant. it cannot rise, but it can fall, when a capitalist wants to lower it.

  • too simple to say there is only difference between wages if the capitalists want there to be

  • what would make one capitalist want something different from another?

  • instead of trying to understand that^ we should ask about the capitalist’s *power* & the limits of that power & character of those limits

 

II. Production, Wages, Profits

 

  • this is Weston’s basic reasoning: if working class demands higher wages and they get it, the capitalists will just make commodities more expensive.

  • this is because the amount of $ involved is fixed. but why is it fixed at that particular sum?

  • if it was because there is a law external to capitalists that demands it, Weston should have said that and also proved that the capitalists always adhere to it.

  • if it’s just changed by the will of the capitalist, it can also be changed against his will

page 7

  • does change in price of commodity depend on the will of the capitalist? or do certain circumstances give him that will? if not there’s no making sense of the fluctuations of market prices

  • if nothing else (like productive powers of labor etc) changes and just the wages change, how could rise in wages affect price of commodities? it would change ratio of supply:demand

  • since working class spends its income on necessities, rise of wages would raise demand & thus prices of necessaries.

  • then the capitalists would get more $. but what about the many other capitalists who don't produce necessities? their profit would fall if all wages rose because they wouldn't make more $. less demand for commodities bc ppl would have to spend more of their smaller income on necessities now, so prices of commodities fall. 

    • “In these branches of industry, therefore, the rate of profit would fall, not only in simple proportion to the general rise in the rate of wages, but in the compound ratio of the general rise of wages, the rise in the prices of necessaries, and the fall in the prices of luxuries.”

  • because of different rate of profit in different spheres of production, capital and labour would move from less lucrative to more lucrative branch until supply in 1 meets increased demand. then the different branches again all have equal rate of profit.

    • prices would return to normal. however now rate of profit falls because rise of wages is now everywhere, not just in luxuries. there was no change in total amount of production, just in how it was dispersed

page 8

  • then there would be more necessities produced than luxuries. rise in wages would ultimately result in fall of profit w/out change in prices of commodities. 

  • *for this argument Marx assumes working people would buy more necessities if their wages increased, but as an aside he describes what would happen if working people instead started buying more non-necessities: their increase of purchasing power would be obvious. the capitalists would have decrease of purchasing power. so total demand for commodities wouldn’t increase, just who demands them would change.

  • this is the dilemma: either extra wage is equally spent on all articles of consumption as before (so working class spending makes up for loss of capitalist spending) OR extra wage spent on only some articles (so w increased demand those prices then rise). the 2nd will make rate of profit diff so to counteract it there will be change in distribution of capital and labour, until supply raises to equal new demand in 1, and lowers to equal smaller demand in other.

    • 1st means no change in price, 2nd means some change in price before leveling out again. in end of BOTH there is same price from before wage increase. there is only fall in rate of profit.

  • Weston says huge rise in demand for necessities would bring huge rise in their prices (this being the thing that’s so bad about raising wages). 

page 9

  • so Marx describes instances of rise of wages in his recent history

    • when wages rose in England, like from Ten Hours Bill of 1848, it resulted in workers producing even more commodities and thus prices going down.

page 10

  • when import of foreign corn more than doubled, Weston’s theory would say increase demand upon markets for corn must have made them more expensive. however, corn prices fell and America produced so much extra they had to burn the surplus

  • Marx says this is Weston’s basic argument: some given amount of production causes rise in demand, therefore the supply never increases only their prices do.

    • however, it is observed that increased demand sometimes leaves prices unchanged and other times causes rise in price followed by more supply followed by price return to original price or below it.

 

III. Wages and Currency

page 12

  • when cotton wages fell to 1/4 their former amount, wages in general fell. but instead of falling, price of wheat rose. then more currency was made.

    • this is at odds with Weston’s idea, which is that if wages rise then more currency must be made. here, wages fell and more currency had to be made.

  • also, there are other ways of paying than with actual cash currency

  • and ultimately instead of using a misconception of the laws of currency into an argument against a rise of wages, Weston should inquire into the laws which enable a currency to adapt itself to circumstances so continually changing

 

IV. Supply and Demand

page 13

  • Weston says higher wages are bad. but what are high vs low wages?

    • Marx compares his lack of using standard points to if someone lectured on the thermometer and just said there are high and low degrees. he wouldn't be sharing any knowledge. he would need to talk about freezing point, boiling point, etc.

  • value of labour is not fixed by supply and demand, because supply and demand only regulate the temporary fluctuations of market prices. they show how price is above or below commodity’s. don’t prove the value itself. when supply=demand they cease to work because neither is pushing the other. when that happens, market price coincides with real value.

 

 

V. Wages and Prices

page 14

  • Weston says: the prices of commodities are determined/regulated by wages

    • profit and rent also determine price, but to Weston wages are the root

  • other economists have also said this, proving it by treating profit and rent as “mere additional percentages upon wages”

    • they don’t say these percentages are based on an economic law, but seem to think they’re based on tradition/will of the capitalist.

    • if they say they’re based on “competition” they say nothing, as “competition is sure to equalize the different rates of profit in different trades, or reduce them to one average level, but it can never determine the level itself, or the general rate of profit”

  • Weston had said that when wages rise, prices rise. but now he’s saying price is based on wages? we are moving in a circle

  • and also, what is really said when we say prices are determined by wages? that price of labour determines the price of commodities

    • but what is the price of a person’s labour?! 

    • saying “wages determine the price of commodities” is actually just saying comes that “value is determined by value” which is saying nothing at all

 

VI. Value and Labour

page 15

  • what is the value of a commodity and how is it determined?

  • value of a commodity=proportional quantities in which it exchanges with all other commodities

  • thus it’s value is relative (to other commodities)

  • but how are these proportions regulated?

  • common substance of all commodities=social labour

page 16

  • measure quantities of labour by the time spent labouring

  • commodity’s value=crystallization of social labour

  • wage is different from relative quantity of labour necessary for production of commodity. 

  • “Their wages can, of course, not exceed, not be more than the values of the commodities they produced, but they can be less in every possible degree. Their wages will be limited by the values of the products, but the values of their products will not be limited by the wages.”

page 17

  • to calculate exchangeable value of a commodity, add not just time to finish product in factory but all time previously spent on it, right down to mining coal to make the spindle itself. then proportion of labour to make spindle is calculated by amount used for 1 commodity vs. how long it lasts total

  • this is not total for just one person (bc there are some outliers of course, lazy slow etc)

  • value of commodity is based on quantity of labour crystallized in it, referring to “quantity of labour necessary for its production in a given state of society, under certain social average conditions of production, with a given social average intensity, and average skill of the labour employed”

  • if machine gets better and a worker can make more per time than before, the worker of the same product elsewhere w/out that machine must work more time than before just to make the same amount of $.

  • if amt of labour determines value, more labor=more value, less=less. if there was always same amount of work, always same value of commodity. but that’s not the case, as productive powers of labour changes so much.

  • more produced in a given time of labour if machines improve - price goes down. if less is produced bc of conditions, price goes up. 

  • so, productive powers of labour depend on: 1 natural conditions of labour like fertility of soil, etc. 2 social powers of labor (every way that the unnatural/scientific conditions affect it) such as machinery etc

page 18

  • price=monetary expression of value=conversion of value into price 

    • *but the literal gold or silver is just another commodity which is exchanged by the country that produces it to England or wherever for a certain amount of its national products (in which certain amt of its natl. labour is crystallized)

    • conversion of value into price=process by which you give to the values of all commodities an independent and homogeneous form

  • market price=average amount of social labour necessary with average conditions

  • commodity’s value=its natural price

page 19

VII. Labour Power

  • value of man, his price, is however much would be given for the use of his power.

  • but what is this strange phenomenon, Marx asks, wherein on one side there is set of buyers possessed w land & products of labour, and on other side sellers w nothing to sell except labouring power????

page 20

  • the value of labouring power is:

    • ...the resources (now commodities but the necessities) needed to live a full life. but also enough to raise your kid, and also enough to be educated to do the labour (Marx mentions here that just as cost of producing labour power (cost of living) differs for diff ppl, so does value of their labour power differ in diff trades, thus there can’t and shouldn’t ever be an equality of wages across all fields)

    • ...determined by the value of the necessaries required to produce, develop, maintain, and perpetuate the labouring power.