From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sun Oct 28 2007 - 07:39:20 EDT
Hi Philip, You are correct in a sense, and I agree Marx aims to explain the origin of the surplus value initially on the basis that equal values trade for equal values, i.e. M and C in the M-C transaction are equivalents and C' and M' in the C'-M' transaction are equivalents. He aims to explain very clearly why owners of capital would be motivated to invest directly in production at all, rather than simply trade in assets. Purely from the point of view of the creation of net new value, he argues, it does not matter a hoot whether commodities happen to be traded above or below their value. In practice, however, it does matter very much, for Marx's further argument, insofar as (1) beyond some limit, means of production and labour-power bought above their value cannot result in capital accumulation, (2) if the valorised capital is not realised, the owner of capital has lost capital, by investing it in production rather than something else (3) owners of capital aim to buy below value, ideally sell above value and realise an adequate or maximum profit, under the constraint that all competitors have the same objective, I was using unequal exchange in the more general, loose sense of "getting something for nothing" in a trading relationship. If hypothetically I buy e.g. a goose that can really lay gold eggs (okay, I don't believe that, but for the sake of argument) for the average, normal price of any goose in the market, I could of course argue that an exchange of equivalents has occurred, the normal price for a goose, but in fact I've got myself a bargain, since as soon as the goose has laid a gold egg, I have gained much more than I paid for it. That gold egg is not subjective, it is a really existing object which I can use in subsequent trading activities. Although formally speaking the exchange may therefore seem equal, "in substance" it is an unequal exchange. Most trade in capitalist society in reality involves unequal exchange to some extent or other, but insofar as all competing market actors are motivated to get their money's worth in a developed, open market, this narrows or constrains the differential between exchange-values and labour-values, such that labour-values regulate exchange-values, at least in the long haul. At least that is how I understand Marx's theoretical argument, abstractly speaking, assuming a MELT. If market actors discover that their trading activity means, that they continually perform more labour to obtain less product in return, they are motivated to change their trading activity, or change their labour activity. As they adjust their trading and labour activity, they effectively implement the rule of the law of value, even although they may not be aware of it. To put the same thing differently: it is quite possible to trade commodities representing more labour for commodities representing less labour, and indeed commerce aims to do just that, but in the normal situation the differential will not be so great nor enduring, since at a very great differential, trading parties would simply refuse to trade, or be motivated to seek an alternative source of supply. To use a simplified example, if product A takes 100 average labour-hours to produce and product B takes 10 hours to produce, a normal trading ratio between A and B would be (ceteris paribus) 1:10. If you can trade at 1:11 or 1:12 then the owner of A has the advantage, if you can trade at 1:9 or 1:8 then the owner of B has an advantage. If the trade was in terms of 1:5 or 5:1 then there would obviously be a very great trading advantage. In commerce, you aim precisely to realise that advantage, if you can, and as much as you can. Hence "globalisation", meaning the maximum exploitation of unequal exchange (more labour exchanging for less labour, i.e. the exploitation of the differential). But what you also have to explain is, why the trading ratio is rarely if ever 1:100 or 500:1 or something like that, i.e. the regularities of trade, rather than their irregularities. This sparks among other things the notion of "equilibrium price", and the theory of a system of equilibrium prices which ensure that all markets are cleared. But this doesn't yet explain why the trading ratio consistently happens to settle at "somewhere near" 1:10, rather than 1:100 or 500:1, at least in the normal or "natural" situation (Smith and Ricardo indeed refer to "natural prices"). Nor does it explain, why the normal trading ratio might shift gradually in favour of A or B, in the course of time. All we can really say in equilibrium theory is, that at a ratio of (say) around 1:10, supply and demand are observed to remain rather constant, and therefore that this ratio must reflect equilibrium (we have no other evidence for it). If it does not remain constant, but shifts gradually in favour of A or B, then either there is no equilibrium yet, or, we have to say something like that one state of equilibrium "is followed by another state of equilibrium" after a market adjustment in which disequilibrium is restored to equilibrium. Indeed, this is exactly what Fed chairman Alan Greenspan argues: "Globalization has altered the economic frameworks of both developed and developing nations in ways that are difficult to fully comprehend. Nonetheless, the largely unregulated global markets do clear, and, with rare exceptions, appear to move effortlessly from one state of equilibrium to another. It is as though an international version of Adam Smith's "invisible hand" is at work." (Bundesbank speech on January 13, 2004). Marx's theory aims to make Smith's "invisible hand" visible. Once we are no longer blind, we comprehend that global markets are not largely unregulated, that they do not always clear, that labour-effort is involved rather than mystical "effortlessness", and that the "invisible hand" is the flesh-and-blood hand of the worker producing the product. Jurriaan
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