anwar shaikh, karl marx (lecture 8 – 10/19)

For Smith and Ricardo, the argument about the rude and early state grounds the discussion of value and labour-time. They complicate this, insofar as different capital-labor ratios affect relative prices, once you allow for the equalization of profit rates, etc. Marx proceeds very differently (and takes three volumes to get to the discussion of capital-labor ratios)—he begins by looking at exchange.

The argument, of course, is the that abstraction from use-values is necessary to exchange also implies an abstraction from concrete forms of labour.

The strange part about this is that capitalism regulates its reproduction through exchange—through prices. That's the immediate regulator (Marx will argue, later, of course that profits are really the regulator; nevertheless). Demand determines the quantity; but the structure of cost determines the price. These aren't immediately linked, as neo-classical economics imagines them to be.

Individual labour is assessed as social labour only through its being sold on the market (under 'objectified huk'--the commodity)

With this in mind, then, what stands behind the common property of commodities is 'abstract labour'. It is the inner-basis of exchange-value (an analogy to mass and weight—abstract labour plays the same role that mass does, and weight is the expression of that abstract quality in the concrete and in relation to other objects).

From this, a series of properties follow ('The fetishism of commodities')

It seems that commodities possess quantitative worth 'naturally'. This is, of course, not true—they only do this under particular social circumstances. It is social'.

This position, though, leads to an inversion—exchange becomes primary (since it's on the surface), and the social division of labour becomes secondary.

A further implication of the inversion argument is that the relationship amongst people becomes a relationship mediated by 'things' (your worth is only the worth of the commodities that you bring to the market).

No one mandates that you have to produce water bottles/pencils, etc. You can choose to move from bottles to pencils—you're formally free, in this sense. But there has to be a mechanism that can assert itself on your decision (the market, of course, is this mechanism). So the social division of labour, which appears to be just an agglomeration of individual decisions, asserts itself on the social structure. This is the way that capitalism balances social demand and production (disarticulation becoming articulation)

Orthodox economics goes out of its way to claim perfect articulation (or, 'general equilibrium'). Everyone fully employed, all resources in use: classical view is of forcible articulation, but the neo-classical vision is of immediate articulation (the trick is to assume that capitalism is a mechanism in which there is a person who articulates your demands: you start with an auctioneer, who has perfect knowledge. everyone gets up in the morning and says how many hours they'll work, how much they'lll consume, etc. I offer to work so much, etc. A series of buy offers and demand offers—the giant computer adjusts prices, according to what doesn't work. You arrive at a situation, then, after this adjustment. Only once it's adjusted, the computer says 'go!' [The foundation of modern economics—and some hesitate to engage with it because it's opaque, he's suggesting])

Intrinsic value – the amount of socially-necessary abstract labor-time which stands behind a commodity. Abstract labour means that something is being produced by exchange—the average is what counts. 'Value', in this sense of Marx, is different then from Ricardo and Smith, insofar as it invovles a claim about the inner determinant—the inner-basis.

It's not a mystery where he's going to go from this. He's going to argue that prices are regulated by this inner basis.

Marx's answer, also, to the question of the foundation of profit is very different from Ricardo.

With this concept of value in hand, exchange-value gets 'dissolved', and is replaced by these two form: the inner-basis, and also the 'form' of value.

Assuming that goods exchange at their value, his immedate question is where does profit come from.

The process of exchange itself raises questions. If a commodity has many forms, I have to know its exchange with every other commodity. So the number of 'bits of information' required to understand the the exchange process becomes increasingly difficult. You need, therefore, a reference commodity—and that, thus, becomes a general form of money.

Three Properties of Money

1. Measure of Pricing: 1. Measure of Value—the substance of pricing (silver); 2. Standard of Pricing—the units (lb.)

Same as the concept of weight/length. Everything is compared to something common – so say you use a piece of iron (gives the substance, and the unit)

If over time, I had a department of weights and measures which changed the standard of pricing (cut it by half, say – since this is socially and historically mandated), it is possible that the unit can change and the substance stay the same (Rulers, especially, find it convenient to keep the money name--'pound'--but reduce the silver content. So one money pound, say, becomes half a weight pound, in terms of the weight of silver it 'equals'. Why would they do this? Well, to finance their wars, etc.--it's a tremendously useful way to pay off debts). In short, the money name might change, to give the illusion of rising prices misleads—it's a reflection of the 'change' in the money name.

Whether or not something has risen in price, then, depends on how you measure it.

Price, in Marx, is not just the form of value—it is the 'money' form of value. Expressed, in other words, in terms of the money commodity. Price as 'the ticket', which is hung on a commodity. Pricing is an 'ideal' act.

2. Medium of Circulation

Now, money needs to appear in person.

(a) Money as means of purchase (has to be present, to function in this way)

(b) Money as means of payment (validation of the debt, or validation of the price of the commodity)

3. Money as Money

Money which functions as validation 'in the last instance' (hoards, including bank reserves)

You've worked, got a $1000 in your bank account—you do that because you believe that your money is actually there. The bank has to have something to back up all the money it owes, and all the money it doesn't have. It has to keep reserves, of course (distinct from deposits).

World money is a similar issue—if I want to go on the world stage, it might not be useful to use your own national currency. You need to convert your money into a universal equivalent—but, this raises the question of what stands behind those currencies? It's not the State, Shaikh is arguing, but it's the market (before every crisis, the price of gold shoots up).

The State tends to back it through a fixed exchange rate; the market tends to back it through a flexible exchange rate.

4. Possibility of Crisis Within Simple Commodity Production

(a) C – M – C = Circuit of Revenue (you sell in order to buy; the money goes away from you)

(b) M – C – M' = (start with money, invest it, in order to accumulate more money)

In circuit (a), a crisis can only happen if, when you sell, you don't buy again. In other words, a crisis is possible, if C – M does not lead to M – C. If you decide to hoard your money, then you must be cutting back on your expenditure ('effective demand' drops, etc.). There's no necessity, though, because there's nothing that would tell you that this would happen—this kind of a crisis would be abnormal/accident.

One thousand pages later, Marx is going to focus on the necessary reasons for crisis in the second circuit, due to the falling rate of profit.

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Marx argues throughout that money is 'endogenous' – the quantity of money in circulation adapts to the requirements of effective demand (this is true of credit today, most obviously).