v and the value of labor power

Roger Odisio rodisio at igc.org
Wed Aug 25 11:46:59 PDT 1999

Rakesh Bhandari wrote:

> Let me try to clarify. I'll do so at
> the risk of boring you.

Boring me? What nonsense. You and I have to talk some more cause we are still miles apart on these basic concepts.

Here's a good place to start. Rakesh, you can't hijack a marxian term, variable capital, and turn it into a bourgeios one, wages, as you have done here, and (1) remain coherent, (2) hope to get anywhere, or (3) still think you are doing marxian analysis.

> As I understand it, variable capital is the *money* paid by the capitalist
> class *as a whole* for the use of labor power in the production of surplus
> value

No. Money paid by capitalists "as a whole" is still called wages (in the national income accounts its called employee compensation, which includes wages, salaries, and fringe benefits).

> (I accept here the monetary-macro interpretation of Fred Moseley).

No. Moseley does not measure v as wages, but, as I do, as the reproduction cost of productive labor. I will say this until you tell me you are tired of hearing it: wages and v are not the same quantity.

> That money sum cannot be gotten at through the national accounts without
> major reworking--this is the point of the new quantitative marxism.

No (you're 0 for 3). v cannot be gotten from the NIPA at all; there is no such reworking possible. The NIPA is a summary of factors payments--depreciation of fixed capital, employee compensation, profits, interest payments, taxes. Other data sources must be used--labor dept. data on jobs and hours, and family consumption budgets. v = the number of productive laborers (translated into full time equivalencies) times the social subsistence family consumption budget (adjusted to reflect average family size) necessary for their reproduction. Then v, added to the constant capital used up in a production round (roughly depreciation), and subtracted from output, yields the residual--surplus value (s). s, realized in exchange, is used for many purposes--to pay the wages of unproductive labor (here is another disconnect between total wages and v, Rakesh, that you miss when you blur the distinction--the reproduction cost of productive labor is v, the wages of unproductive labor are paid out of s, and the difference between v and the wages paid to productive labor, should it be positive, is also paid out of s; labor can capture some of s as wages, and they have from time to time), profits, interest payments, most government (taxes), and on and on.

Time for a summary. A bourgeios economist looks at production and sees payments to factors: depreciation of fixed capital equipment, wages, and return on capitla invested (profits plus interest payments). Each factor gets paid according to its contribution. This, of course, is false even in neoclassical terms. Wages are not equal to workers' marginal product, and therefore capitalists' return deviates from its "contribution" too. But a marxist must go far beyond this. I'll spare you the talk on unequal exchange and exploitaion, which you know probably better than I. As to the categories, c,v,s, which is what we are talking about, Marx's analysis begins with an explanation of the *value* of each. And an understanding of v, in particular, is crucial. As I just said, you have to know what v is before you can know what s is. So it is crucial to see that v is reproduction cost of productive labor, and wages are merely the expression of relative social power of capital and labor, played out in the labor market bargain. Without a clear understanding of this difference, you are, I am afraid, lost.

A while ago I argued against Gordon's claim of circularity, by saying that, once you have grasped the difference between labor and labor power, and so understand the value of labor power, v is a concept designed to reveal things about the distribution of the product, not its quantity. Remember? If you and I disagree about the amount of v, for example, that changes only the amount of s, but not the value of the total product. Put another way, v is not a factor payment that you add up to determine the value of output, but is only relevant to the distribution of that output between capital and labor. The factor payment that you add up to determine the total exchange value of output is, of course, wages, not v.

This means that v deviates from wages and s deviates from profits. That's not a problem; it's capitalist reality. (This is not the transformation problem we are talking about; in fact the natural deviation, as capitalism developed, of v and s from wages and profits is one reason why the transformation problem is not very important. Fabian?) On the contrary, those deviations, and the contradictions they produce, are one of the main things you must understand to begin to make sense out the laws of motion today. Marx didn't go into this point, because, (1) capitalism being more primitive, wages and profits did more closely approximate v and s when he wrote, and (2) some simplifications were necessary to facilitate his explanation of the system as a sytem (e.g., often assuming wages = v). That's were you and I come in: to relax the simplifying assumptions where appropriate, while making use of the categories as explained by Marx, to better understand the laws of motion today.

One further point. I have not only criticized your formulation as wrong and unmarxian, I said it can lead to incoherence. Here's what I mean. Try substituting "wages" every time you use v or variable capital, which I argue you must do. Here's an example

> If capital tries to spread that variable capital too thin, then the wages
> will fall below labor power's value (and there's that hoary concept again):
> there will be too little v per worker for the worker to purchase the use
> values required to reproduce herself at society's customary standard (that
> same hoary concept).

Reworked it says: If capital spreads wages too thin, then wages will fall below the value of labor power: there will be too little wages for workers to use to purchase use values for reproduction. See how the explanatory power of this sentence disappears into a tautology when you remove the mask of "variable capital" as you try to use it?Here's an example where the explanatory power of what you say can be retained, with only the modification of concept:

> I beli eve that capital has been able to spread that v quite wide because
> it has employed at home and abroad foreign labor power the value of which,
> as historico-morally determined, is substantially lower in use value terms
> than the value of labor in the first world: the value of labor power varies
> over time and place (why the value of labor power is lower in, say, Mexico
> than the US is well explained by Alejandro Valle Baeza, "National
> Differences in Average Wages" International Journal of POlical Economy,
> Winter 1997-98). This allows capital to achieve a higher rate of
> exploitation (less v used per worker without the wage thereby falling below
> the value of labor power) and thus defer the breakdown tendency.

Yes, both the rate of exploitation and rate of profit are higher because both v and wages are lower (capital drives wages down toward v), while the value (price) of the product remains high on the world market.


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