What is an explanation of prices?

One of the half-truths one hears of the Marxian economics is that it offers no explanation of prices. Even when the critic grants that the theory of capital accumulation is interesting and perhaps important, he asks hastily the question, “But what of prices?” Typically, the query is rhetorical. He stands ready and eager to cast his own theoretical pearls before the Marxian swine.

This charge against the economics rests upon a number of misconceptions. One of these is that modern pricing theory is the private property of the standard economics. But Marxists, too, have contributed to its creation and have found its theories useful for certain purposes. Marx himself utilized theories of supply and demand whenever he found it necessary to do so, and here and in successive chapters we shall do likewise without hesitation whenever the facts require that we do so. A more important misconception of the critics is that no historical explanation of prices can be scientific. The point here is that, unlike standard theory, the Marxian theory does not seek to explain prices alone but seeks their explanation in relation to exchange values and use values – all within the historical context. It seeks to explain the development of price-value relations in the real world, especially as they unravel with the rise of capitalism out of feudal society and as they subsequently evolve into those relations peculiar of the present state of affairs.

Value theory as a scientific imperative

In explaining the growth and change in composition of exchange values in capitalist development, the very meaning of exchange value was temporarily shunted aside. It must have been evident, even so, that the analysis always assumed the existence of certain values that, within the market economy, become manifest as prices in the course of their exchanges. Market prices and aggregate money values, such as aggregate demand, were assumed to approximate these values in exchange; long-run prices were “at their values,” as Marx phrased it. Now even among the Marxists there are and have been many who would let it go at that; or perhaps deny the need for such assumptions. There are revisionists who, perhaps fearing that value analysis will throw open Pandora's box, have tried to keep the lid on, avoiding as much as possible formulations in the theory of value. Others, for the usual, and sometimes for unusual, reasons, have sought to discredit Marx's analyses of values. On the value as on other questions, however, we must plumb to the bottom and build from there, if that is possible. It turns out that the bottom is solid enough.

For Marx it was a matter of both scientific and political necessity, a matter of political economy, in brief, that the determination and measurement of values be analyzed. According to this conception of labor values, at a given level of development of the productive forces definite value magnitudes of exchange values are the real substance of the flows of inputs and outputs within reproductive processes.

The development of economic inter dependencies

The commodity exchange out of which, under certain conditions, the capitalist mode of production itself develops, has its historical origins in the exchange of surplus product between communities. In early trade, what changes hands is what each party finds superfluous to its own economic reproduction, the excess of use values that it produces.

With the emergence of capitalism, exchange comes to encompass on an extending scale items that are industrially and reproductively vital to the communities or to the segments of communities (for example, the town and the country) involved. However, even as recently as the seventeenth and eighteenth centuries, this system of productive interdependencies was still in its infancy. At that time, economic relations between Western Europe and the peoples of Asia and of Africa were still largely relations of the more ancient form – the obvious exception to this, from the standpoint of the latter parties, being the slave trade, in which a vital commodity was exported – and did not feature a notable sacrifice of what was reproductively vital to their own productive consumption. With the industrial and commercial expansions of the past two centuries, under the political auspices of the capitalist nation-state, the composition of trade begins markedly to shift. The division of international labor, like the division of domestic labor, involves an extending interdependence of industrial and agricultural elements required for economic reproduction.

Scientific inquiry and the materialist standpoint

Despite the striking worldwide revival of theoretical Marxism – a revival whose signs include a heightened flow of books and monographs, some increase in the number of courses of academic instruction in colleges and universities (not unopposed), a growing volume of discourse in the media, and so on – a study such as this requires some explanation. Its subject is the rather formidable one of Marxian economics and its applications to political economy, a field only partly lit and from which mists of incantation now and again arise.

While Marx spent the great bulk of his energies as a mature scientist in precisely this realm of inquiry, much of the current revival has centered, curiously enough, on political (Frankfurt school,) social psychological (psychologists and alienation theorists), sociological (“new class” theorists), or other theories. My intention, however, is to follow Marx's own lead, to reconstruct his economic theories, and to use them to analyze the advanced capitalism. The goal is to explain the present phase of development in those countries and regions where the mode first put in its modern appearance and within which it is now entering its dotage. Eventually, we shall come to an assessment of the present state of class structure and relations and to an assessment, indeed, of the very hypothesis of class struggle itself. Is such a struggle at the center of the process of social change in the advanced context?

The dual accumulation and breakup of the middle class

Within the countries of the advanced capitalism – elsewhere the vitality may be greater – the mode of production is reaching the outer limits of its development. Industrial accumulation is slackened, weighed down by the burdens of circulation. Within the dual accumulation of unproductive and of productive labor, of circulatory and of industrial capitals, the productive forces are seriously weakened. The struggle between capital and labor intensifies, and this is seen not only in relations between capital and the industrial working class but within the so-called middle classes, where there is a sharpened tension between the managers, as executives of the ruling class, and the branch of the working class over which it rules directly, administrative labor.

The split between the managers and administrative labor divides white-collar labor into economically and politically opposed divisions in an ineradicable and growing schism whose depths we have yet to plumb. While we come immediately to this task, let us say first that this conflict between administrative labor and the managers is merely a part of the broad struggle between capital and labor. It, too, traces to the accumulation of capital, to old drives that are still powerful but working in an ever more eccentric manner. With the incidence of science and invention upon techniques of administrative utility – use values inherently serviceable for the coordination of social activities – the great accumulators have promoted the administrative capitals with mounting enthusiasm at the outset and with mounting desperation with the passage of time.

Input–output and value accounting

Under this formidable heading one might reasonably expect to find discussed some of the most abstract, complex, and at the same time purely scientific issues of economic science. If by purity is meant political purity, however, this is, quite frankly, not of our world. The Marxian economics avows its political impurity and seeks only to deal with it honestly, for instance, in determining whether or not exchange values measured in units of labor time can and should be used as guides to price planning. Evidently, this is a matter closely related to the old socialist ambition of eventually eliminating the market and its pecuniary categories of money and price, of merchandising and huckstering, from every department of social life.

The project of an eventual eradication of the market and all its mechanisms has long been stoutly resisted by those opposing all administrative setting of prices, preferring instead the market system of free competition, and by those monopolists and their spokesmen who would themselves control prices with a view to reinforcing property claims in the furtherance of appropriate activities. So strong has the opposition been to socialist planning, in fact, that the very question of whether or not this planning can utilize effectively a system of labor value accounts has suffered from a lack of direct analysis, not to mention practical application.

An approach to historical processes

As everyone knows, the main theses of Marxian political economy are two in number. The first is that conflict among social classes is a prime mover of history. The second is that the exercise of the productive force of social labor is a predominant and ultimately decisive concern of man in society. We begin with a simple elaboration of these theses and with the simple relation that they bear to each other. There is but one preliminary observation to be made.

The basic postulate is that of an evolving universe moving under the impress of definite laws of development, although not in a deterministic fashion as is sometimes implied in rigid concepts of law. The laws controlling the reproduction of social life are not at all obvious; thus there is a general problem of methodical procedures to be faced. Special methods of inquiry are required, and it is at this juncture that the two theses referred to may be brought to the fore. Their function is heuristic in the first instance. They are hypotheses serving as guides for the investigator, helping him to extract from the historical context the specific laws controlling the reproduction of social life. The guides to inquiry of which Marxism avails itself are numerous, of course; we single out only two that were preeminent in Marx's own study of historical development.

To avoid caricature …

Relations of production are class relations. They consist of the sum of economic, political, technical, and other interrelations among the social classes participating in the reproduction of the mode of production itself. The reproduction of the mode of production is, at least to the point at which the process undermines the social formation, the objective, so to speak, of class relations of production. In the Marxian theory the reproduction of the relations vital to the mode itself becomes increasingly difficult with the fettering of the productive forces; class struggles – a phrase merely summarizing ever more attenuated relations of production – become sharper and more clearly defined, not only to the outside observer, but even to the participants themselves (class consciousness). This is the thesis of class struggle, a struggle that assumes definite forms in the advanced capitalism, forms that we now proceed to distinguish and explain, beginning with Marx's own analysis.

There is a widely publicized although essentially distorted view of the class struggle that Marx envisioned within final phases of capitalist development. The picture so often tendered is of a world divided into numerically unequal classes, a small body of capitalists confronting a relatively larger industrial proletariat, the latter comprising the active labor army together with its own relatively growing industrial reserve of unemployed. Divided by an irreducible division of interests, these opposing classes are entangled in relations of sharpening tension.

Socialist theory and the advanced capitalism

From what we have seen of the evolutionary tendencies of the advanced capitalism, it is only reasonable to suppose that at some juncture, and probably in more than one country, a socialist administration will assume control of economic and other affairs. When that time comes, it will become possible to modify capitalist relations of production more or less radically; more or less depending upon many circumstances, among them the ability of the socialists to proceed systematically and methodically with methods appropriate to the work to be done. Whether or not, in the wake of the revolution, there is again a reversion to capitalist relations of production will then very much depend upon what is done during the early period of the socialist tenure. What must be done in order to promote a continuing movement toward socialist society must now be considered. What special problems of transition are sure to be encountered? How are they to be dealt with?

It will be understood, of course, that what is said in response to these questions in theoretical investigations such as the present one can only apply with more or less qualification in practice. In actual revolutionary situations, circumstances peculiar to countries and peoples will be decisive. Nevertheless, Marxists have always prided themselves – if not always with full justification – on their reliance on theory for formulating and implementing programs.

The capitalist mode as an analytical problem

The central core of the Marxian political economy is a general theory of the development and functioning of the productive forces, a theory that serves as a lever for prying open the secrets of social structure, its class composition, its organizational forms. The theory must illumine, moreover, not just the particular social formation but also the general movement among social formations, including, of course, the rise of modern capitalism and its development under the pressure of definite forces or laws of motion, some of which may be operative within more than one social formation, some of which will be peculiar to particular formations, for instance, to capitalism itself.

Were we to come at our mode in strict chronological sequence, then, we would come to it by examining its emergence from its historical predecessor, in the case of capitalism, Western feudalism; and the transition from feudalism to capitalism is one of the subjects to which Marxian scholars have made signal contributions, not to mention Marx's own indispensable leads for inquiry into the phenomenon. Hic et nunc, however, we can pay only passing attention to this fascinating subject and offer only a quick summary statement of the movement from feudalism to capitalism in order to help us to locate (so to speak) the main feature of capitalism that must always excite the historian's imagination, the remarkable industrial accumulation that, succeeding the transition, excelled in the pace and scope of its development anything previously experienced.

Approaches to the study of power

Since Marx, and despite – or perhaps because? – his insistence that the truth is to be found elsewhere, the study of social power, its sources and its vagaries, has centered on what might be termed the “agencies” of power. In an effort to solve the riddle, scholars have identified and examined with care the trusts, gentlemen's agreements, combines, vertical and horizontal and mixed integrations, conglomerations, infrastructures and technostructures, national and international corporation alliances, governmental departments and bureaus, and combinatory arrangements among these. The more or less explicit aim has been to clarify the functioning of the whole by providing an answer to the old question, “Cui bono?”

In practice, however, agency studies have shied away from politically hazardous answers to the old query, often concluding with the intimation that we would all be better off were economic organization a bit more competitive. The study of agencies mean while continues, and while it has yielded much that it is important to know, it has had one unwonted effect. It has distracted investigators from certain other fundamental questions. By whom are the devices of power utilized? For whom? Are the agencies class agencies? If so, what is the nature of the class whose agencies these are? On the other side, who are the ruled? How do the agencies figure in the class struggle? While sharpening social tensions have recently given rise to fresh studies of class structure and function, relations between these two lines of research are not really intimate.

The scientific issue

It is a notable fact that, while the theory of the unproductive utilization of labor and resources – the theory of unproductive consumption or of unproductive labor – occupies a prominent place both in Capital and in the Grundrisse, the subject has until recently received only cursory treatment by Marxists and still less consideration by students of the standard economics. For the latter this is not so surprising. In the philosophical folklore of economics, one must as a scientist avoid value judgments. Such judgments as may be required in order to distinguish between productive and unproductive employments of labor power, or between productive and unproductive uses of means of production and of wage goods (consumption) will, so they say, spoil irrevocably the work of the scientist. Whether or not a given activity falls into one or another of these categories has been taboo in scientific discourse. In orthodox economics, as a consequence, the blithe assumption has long been pervasive that all activity is productive. Indeed, it can be shown at the analytical level that the entire standard theory of production itself hangs upon the unraveling thread of this assumption.

Consistent with its prohibition, modern economics does not face up to the issue. Marx, to the contrary, holding strictly to the classical tradition, recognized the inescapable need to confront the phenomenon theoretically simply because historical observation throws up so much evidence of its ubiquitous presence.