Communism: A New Critique And Counterproposal
Questions & Answers

V: Capital (Economic Theories Of Communism)

29. Briefly introduce Marx's Labor Theory of Value

According to the Labor Theory of Value, all commodities have a common quantitative element. This element is the quantity of labor or number of hours, involved in producing commodities, and it is the essence of commodity value. The use values of a commodity are not comparable with each other, and therefore, the use value cannot be the exchange value. Only the quantity of labor, which is the common quantitative element within all commodities, can become the exchange value. The monetary expression of the exchange value, or the quantity of labor, is the price of the commodity. The quantity of labor is measured by the socially necessary average labor hours. All commodities are regarded as products of labor, and "as values, all commodities are nothing but definite masses of congealed labor quantity."

30. Criticize Marx's Labor Theory of Value.

(1) First, if the price is really the monetary expression of the quantity of labor, the price must not fluctuate during circulation in the market. But in reality the price not only fluctuates continually but is always prone to rise. Marx explained such a separation between value and price of a commodity as the agreement between total value and total price in the whole society (Capital, Vol. 3). But this explanation is an example of abuse of the concept of average, and is not an adequate explanation for the difference between price and value.

(2) Secondly, according to Marx, complex labor is converted into simple labor in the market. But this assertion is inconsistent with his Labor Theory of Value, which states that the price (= value) is determined by the quantity of labor congealed in the commodity during the process of production. In other words, according to his Labor Theory of Value, the quantity of labor, and therefore the quantity of complex labor, must be the basic expression of value, which must not be determined from any other activities than the process of production. Nevertheless, he said that the quantity of complex labor is determined by the functions of the market. Thus the theory of labor conversion is a typical example of circular reasoning.

(3) Thirdly, in order that the Labor Theory of Value can be proven true, all commodities must be the products of labor. But the natural products such as land, power of water, coal, petroleum, are evidently not the products of labor, and yet they are circulated as commodities. The Labor Theory of Value is broken down by these facts and arguments.

31. Present briefly a counterproposal to the Labor Theory of Value.

(1) The quantity of labor cannot be the value of a commodity. A commodity has no other value than use value, because the value of a commodity is the internal character (Sung Sang) of the commodity.

(2) The commodity appears to consumers as efficacy, and appears to producers as profitability. It is because the commodity, as well as natural creation, serves man as an object of joy. But the objective quality of the commodity which gives consumers efficacy and producers profitability, is the commodity's use value.

(3) All the effect amounts of efficacy and profit, that is, all the effect amounts of use value, are the amount of mutual satisfaction. Therefore, effect amounts can be compared with each other in terms of the monetary expression of the effect. When both monetary representations expressed as price are in agreement, exchange occurs. In other words, the effect amount expressed as price is the essence of exchange value.

(4) Thus, exchange value is the same as effect value. Thus the "Effect Theory of Value" is established upon this basis instead of the Labor Theory of Value.

Here it is needless to say that effect value is essentially equal to use value, because effect value is the effect amount of use value.

32. Criticize briefly the stagnation of the economy in socialist society.

(1) The economy in a socialist society always encounters such phenomena as inability to attain goals, poor quality and accumulation of commodities. This is because they set up the economic plan based on the Labor Theory of Value.

(2) This stagnancy can be overcome only when profitability for producers and efficacy for consumers are raised. To raise profitability and efficacy, freedom of enterprise activities and a free market system must be assured.

(3) In the USSR, according to the suggestion of Professor Lieberman ("Plan. Profit. Compensation," September 1962), those plans which would give the profit motive to enterprises were set up, and applied to many factories. But they could not obtain the expected results. The solution of the stagnancy problem can be obtained only when their economic system changes into a free economic system, which can assure the effect of profit and the effect of efficacy most effectively.

33. Introduce briefly the theory of surplus value.

(1) The capitalist economy is the economy which seeks profit. This profit cannot be produced in the circulation process, but only in the production process and only by means of labor power. Therefore, the capital invested for the means of production (machinery) is regarded as constant capital. (It does not multiply value.)

(2) Profit is produced as surplus value in the production process, through surplus labor. Surplus labor means unpaid labor which is performed during surplus working hours.

(3) Surplus hours are the hours by which total working hours exceed necessary working hours. Necessary working hours are the working hours for which wages are paid.

(4) Wages are the price of labor power. Since labor power is a kind of commodity, it needs certain quantity of labor to be produced. This labor quantity is equal to the amount of labor needed to produce the necessities of life required to sustain life such as food, clothing and medicine. Therefore, the price of daily necessities of life equals the price of labor power, that is, wages.

(5) Therefore, the term "necessary working hours which corresponds to wages" is defined as the working hours necessary for the production of daily living materials.

34. What is relative surplus value?

(1) Marx said, "The surplus value gained by prolongation of the working hours, I call absolute surplus value. On the other hand, the surplus value gained from curtailment of the necessary working hours, I call relative surplus value."

(2) Relative surplus value can be explained as follows: By the introduction of new machinery many commodities of good quality are produced. As a result, the price of daily necessities of life decreases. This brings down the value of labor and therefore causes a decrease in wages. The reduction in wages by definition means a shortening of necessary working hours; and yet, surplus working hours remain as before. The surplus value gained by these surplus working hours is called relative surplus value.

(3) For this reason, even though capitalist society may make great progress and may improve the life of laborers, the deprivation of surplus value, or exploitation, remains. Thus the logic that capitalism must be overthrown is established.

35. Criticize the theory of surplus value.

(1) The theory of surplus value can be established only on the assumption that necessary working hours really exist. If there is no such concept as necessary working hours, and if it is only a fictitious concept, then surplus working hours cannot exist, either. Therefore, the concept of surplus value itself cannot be established.

(2) Marx says necessary working hours are the hours in which the laborer offers the labor worthy of wages. Wages are the price of labor power. The price of labor force as a commodity is determined by the labor quantity existing in the daily living materials (necessities of life) which are necessary for the reproduction of labor power. "Labor quantity of daily living materials" is defined as the working hours which are required for the production of daily necessity's of life. Therefore, necessary working hours are the working hours required for the production of daily necessities of life for the laborer.

(3) If that is true, the introduction of new machinery should be able to reduce wages. Since new machines can produce much more inexpensive commodities of better quality, the hours required for the production of daily living materials, that is, necessary working hours are shortened. Therefore. wages also should be reduced.

(4) But today, unlike the age of Marx, wages are seldom reduced, but are more likely to increase. This means that it is not appropriate to say that as newer machinery is introduced, wages are reduced and necessary working hours are shortened. In reality, the hours which correspond to wages cannot exist. The concept of "necessary working hours" is not established. In this way, the working hours which have the value equal to wages (necessary working hours) do not really exist. It is a deceptive artifice based upon fictitious concepts.

(5) Therefore, the theory of surplus value which was established upon the concept of necessary working hours is nothing but false logic.

36. Present a counterproposal to the theory of surplus value.

(1) Profit is gain based upon use value. Gains cannot exist apart from the concept of use value. In reality gain (profit) is obtained in the market. Therefore, profit has both the aspect of value produced during the production process and the aspect of gain formed in the circulation process.

(2) But the aspect of value itself means nothing but the use value of a commodity. This is not produced by surplus labor, but by the give-and-take action between the various elements including machinery in the production process. (Therefore, machinery is a kind of variable capital which produces profit.)

And the aspect of profit is gained by the give-and-take action with consumers (customers) in the circulation process. When producers supply consumers with value, they are given profit as their reward. That is actual profit.

(3) Profit is the social reward for the activity of creating value, through investment. Here, value means use value, that is, the commodity itself, whereas the activity of creating value means those creative activities of production, transportation and storage, etc. After producers or merchants produce, transport and store commodities, they supply and display them for the convenience of consumers' purchase. The reward which consumers return to producers or merchants is profit.

(4) Thus, the counterproposal of Unification Thought to the theory of surplus value is the "theory of social reward " or the "theory of reward for creation."

37. Introduce briefly the "Theory of Collapse of Capitalism."

According to Marx, capitalism will inevitably lead to ruin in accordance with certain laws of economic movement. These laws are "the Law of the Tendency of the Rate of Profit to Fall," "the Law of Increasing Poverty," and "the Law of Centralization of Capital."

(1) The Law of the Tendency of the Rate of Profit to Fall

In order to gain as much profit as possible, capitalists compete for introducing new machinery. Consequently, because of excessive accumulation of capital, profit is gradually reduced. Weak capitalists go bankrupt. Therefore, the capitalist production method will be destroyed because of profit itself. Marx explained this by means of the formula of the rate of profit:

This formula means that if the rate of surplus value (m/v) is constant, the rate of profit

automatically diminishes as constant capital increases.

In other words, if C < C', then

(2) The Law of Increasing Poverty

Since capitalists intend to increase profit, they always intend to reduce wages. Because machinery is constant capital, and labor power alone produces profit, they try to increase profit by keeping wages down and strengthening labor power. At the same time, because of the introduction of new machinery, many laborers are dismissed and become the unemployed.

In this manner, the increase of profit and the increase of wages are mutually contradictory. Therefore, in the capitalist society the increasing of poverty is inevitable.

(3) The Law of Centralization of Capital

In order to gain as much profit as possible, capitalists compete with each other and introduce new machinery. Thus, the capital invested for machinery increases, and capital accumulation is unavoidably required. Small capitalists go bankrupt, and their production means are absorbed by large capitalists. During the process of bankruptcy and absorption, capital is gradually centralized by a few large capitalists, and the entire middle class declines. Thus, two major classes, a small minority of large capitalists, and a large proletarian majority are formed. The proletarian masses, however, will finally unite and overthrow capitalist society.

38. Criticize the Theory of Collapse of Capitalism

(1) Critique of ''The Law of the Tendency of the Rate of Profit to Fall.''

Today, automatic production machinery has appeared and is producing enormous profit. Machinery is undeniably variable capital. On the contrary, labor power is relatively becoming constant capital. So, if machine depreciation is d, then the formula of the rate of profit becomes:

If the rates of profit in case of old machine and in case of new machine are respectively:

then we can see that the rate of profit in case of the new machine increases as follows:

(a) When the products are the same in quality and quantity:

(b) When wages and machine depreciation are the same:

cncc-5-49e.GIF (1719 bytes)

(c) When the above-mentioned two cases are simultaneous:

In this case the rate of profit increases even more as follows:

In this way as capital develops, the rate of profit increases. But because of the increase of wages and the rate of progressive taxation, the individual income of a capitalist tends to diminish. These outflows are not used for investment, but for distribution of increasing profit to laborers (increasing wages) and government, i.e. society (progressive taxation).

But even though the rate of profit increases, a proper economic policy and also a great spiritual reformation are required to prevent the improper distribution of profit.

(2) Critique of "the Law of Increasing Poverty."

History after Marx plainly proves that this law is erroneous. The economy of advanced capitalism has made great progress, and national income has increased tremendously. The increase of wealth has come about instead of the increase of poverty. This is because all production elements, especially machinery, are variable capital and capitalists can gain much profit, even though they raise wages. The problem left unsolved is whether or not proper distribution of profit is performed. For this purpose, enterprise ethics should be established as a part of the spiritual reformation.

(3) Critique of "the Law of Centralization of Capital."

It is true that today there are monopolistic practices of capital such as "cartels," "trusts" and "concerns," as Marx pointed out. But most of them take the form of a joint stock corporation. So, as a matter of fact, capital is not being centralized but scattered. Moreover, because of the remarkable progress of the third industry, especially service industry, the number of small enterprises has increased remarkably. This means the wide distribution of capital. Therefore, in the strict sense, monopolies have decreased, and small enterprises based upon joint stock corporations are characteristics of today's capitalist society.

The problems left, however, are: the enormous waste of men and materials in competition, degeneration of enterprise ethics, and expansion of materialism.

(4) From the preceding, we can know that, contrary to the three laws of Marx, "the Law of the Tendency of the Rate of Profit to Increase ... .. the Law of Increasing Wealth," and "the Law of Distribution of Capital" have been working up to today. It is true that capitalism has contradictions, but these contradictions come from man's attitude, resulting in the increase of confusion and social evils.

All these phenomena are attributed to materialism. What should be destroyed is not the capitalist social structure, but the attitude of materialism itself. Therefore, Unification Thought advocates the "theory of extinction of materialism" rather than the "theory of extinction of capitalism."

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