1. Value and Wage Labor
To understand any modern society it is essential to probe beneath its surface and illuminate its fundamental economic laws of motion, as Marx did for capitalism. Since the Soviet system originated through the degeneration of a society transitional from capitalism to socialism, the laws of capitalism are a necessary starting point, even if we did not consider that system today to be capitalist.
The interesting fact came to light when U.S. president George Bush visited Hungary in 1989 that Karl Marx University in Budapest no longer requires the study of Marx’s major scientific work, Capital. More modern theories are needed, the public was told, and in any case the economic collapse of the Stalinist countries has discredited Marxism. The Hungarian authorities may indeed need capital rather than Capital to salvage their economy. But to understand why such things have come to pass there is no alternative but to consult Marx.
Marx gave Capital the subtitle, “A Critique of Political Economy.” It is indeed a highly polemical work, directed against the vulgar economists and bourgeois apologists of his day. But not only them: it is also a critique of the petty-bourgeois populists and anarchists who found the source of capitalism’s drives and crises in the sphere of distribution rather than production. It applies equally well to their modern counterparts, the middle-class Marxists who see the motive force of capitalism arising out of relations within the bourgeoisie.
In contrast, we stress the fundamental role of the struggle between classes in production – the conscious transformation of the material world – as the basis for the laws of motion of bourgeois society. At the core of Marx’s method is the recognition that society, like matter, is always in a process of change. The laws of any society therefore also develop and change through its internal contradictions. This too contrasts with the static conceptions of middle-class Marxism.
Capital opens with this brief paragraph:
The wealth of those societies in which the capitalist mode of production prevails presents itself as “an immense collection of commodities,” its unit being the single commodity. Our investigation must therefore begin with the analysis of a commodity.(1)
Marx begins his analysis with commodities, and for many Marxists that is where it ends. The clue to Marx’s real meaning, however, is in the wording presents itself – or in an alternative English translation, appears. Marx used such terms deliberately, to distinguish between appearance and essence. His volumes of economic work are devoted to exploring the reality beneath the appearance. The determining factor of capitalism is not simply the existence of commodities but rather the commodification of labor. This defines the system’s specific mode of exploitation, the way the ruling class appropriates the surplus product created by the producers.
To see that this was Marx’s view, we first note that the key to any society lies in the struggle between its ruling and producing classes. Thus the Communist Manifesto begins:
The history of all hitherto existing society is the history of class struggles. Freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman – in a word, oppressor and oppressed – stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open, fight, a fight that each time ended either in a revolutionary reconstitution of society at large or in the common ruin of the contending classes.
The main battlefield of the class struggle is the surplus product. What distinguishes one form of society from another is the way in which the ruling class exploits the producing class; that is, the way the surplus product is appropriated:
The essential difference between the various economic social formations, between for instance, a society based on slave labor and one based on wage labor, lies only in the mode in which this surplus labor is in each case extracted from the actual producer.(2)
Near the end of Capital Marx outlines the full significance of the difference between modes of exploitation:
The specific economic form in which unpaid surplus labor is pumped out of the direct producers determines the relationship of rulers and ruled, as it grows directly out of production itself and in turn reacts upon it as a determinant. But on it is based the entire formation of the economic community growing out of the productive relations themselves, and therewith its specific political form likewise.
It is always the direct relationship of the owners of the conditions of production to the direct producers – a relationship whose actual form always naturally corresponds to a definite stage of development in the ways and means of labor and hence its social productive power – which reveals the innermost secret, the hidden foundation of the entire social structure and hence also of the political form of the sovereignty-dependency relationship – in short, of the specific form of the state in each case.
This does not gainsay the fact that, due to innumerable different empirical circumstances (natural conditions, racial relations, outside historical influences, etc.), the same economic basis – the same in terms of the main conditions – can show infinite variations and gradations in the phenomenon, which can be grasped only by analyzing these empirically given circumstances.(3)
This masterful summation expresses the inescapable bond linking the form of exploitation, the social structure and the state. Applied to capitalism, it means that the wage-labor relation is the foundation of the bourgeois state. It notes further that this state and its accompanying social structure can take many different forms (“infinite variations and gradations in appearance”). Nevertheless, all will be capitalist (“the same economic base ... with regard to its principal conditions”), as long as the surplus labor is extracted through wage labor – which means that the surplus product takes the form of surplus value.
Well known though this passage is, it is all too often misrepresented. When Marx writes of the “specific economic form in which surplus labor is pumped out,” Marxist experts do not see that he is referring to the method of exploitation. Ernest Mandel, for example, interprets the passage as a refutation of the claim (by Milovan Djilas) that the USSR is state capitalist, since capitalism and Stalinism appear to have different ways of extracting surplus product:
For what is the form of appropriation specific to capitalism? Does this form still exist in the Soviet Union? Under capitalism, the surplus social product is appropriated by the owning class in the form of money following the sale of merchandise. In the USSR the surplus product is appropriated by the state in the form of merchandise through the realization of the plan; the financial bankruptcy of enterprises (which sometimes takes place in the USSR) has no effect either on this appropriation, or on accumulation.(4)
Whereas for Marx the form of surplus extraction means the mode of exploitation – that is, the relation between the ruling and producing classes – for Mandel it means only the superficial form taken by the surplus once it has been extracted: whether it is money or not. Mandel says that the essence of capitalism is “generalized commodity production,” which he recognizes only through the sale of merchandise for cash. But although capitalism is commodity production, the exchange of its products for money is only its appearance. Its essence is wage-labor exploitation.
Mandel has also been bewitched by a secondary (and temporary) phenomenon, the suppression of capitalist monetary forms in the USSR. But times change. The difference he perceived between East and West led Mandel to a conclusion now easily seen to be wrong. Since several “socialist” countries have reformed their economies to enlarge profit’s economic role, going so far as to force unprofitable enterprises to shut down, it is clear that financial bankruptcy does disrupt appropriation and accumulation – and it has been a disruptive factor all along. The policy of preserving unprofitable firms only hides the system’s inefficiency under the surface; if obsolescent firms stay in operation, their backwardness dampens accumulation. Bypassing monetary forms does not make the system non-capitalist; it only masks the operation of capitalism’s laws, as we will see in Chapter 5.
Another example: Branko Horvat, a leading Yugoslav economist and planner, uses a similar misreading of Marx to justify his view that the Soviet system is not capitalist but a third system he calls “étatism”:
The basic difference between a society based on capitalist wage labor and one based on étatist wage labor lies in the mode in which surplus labor is extracted: in the former case, private property, and in the latter, state property, determine this mode.(5)
Horvat admits that the two societies have wage labor in common but, like Mandel, insists that the “mode in which surplus labor is extracted” means the form in which the exploiters hold their property. He too has extracted a few words from Marx and left the content behind. One self-serving consequence of denying that wage labor characterizes a particular mode of exploitation is that Horvat can then conclude that the Yugoslav economy, although also based on wage labor, is neither capitalist nor étatist; it is characterized by “social property” and therefore avoids exploitation completely.(6)
Like bourgeois theorists, Mandel and Horvat accept the idea of a world fundamentally divided between market and planned economies. That the two modern variants of capitalism differ in how the rulers allocate the surplus value among themselves is important but secondary. These differences are among the “infinite variations and gradations in appearance” – of the same mode of production, capitalism. As we will see, they result from the fact that capitalism’s laws of motion are not static and of necessity give rise to different forms of distribution of surplus value at different historical stages of development.
Mandel and Horvat (and many others) reveal their misunderstanding of ordinary capitalism in distinguishing it from Stalinism. The mode of surplus extraction in capitalism for them is defined by relations among the capitalists, not the relation of class exploitation. What is missing is the proletarian root of Marxism, expressed at the very end of Capital, “In view of what has already been said, it is superfluous to demonstrate anew that the relation between capital and wage labor determines the entire character of the mode of production.”(7)
Evidently it is not superfluous for today’s Marxists.
We now trace the line of reasoning through which Marx derived the fundamental importance of wage labor.
The study of commodities begins with their value. Commodities are goods made by private – that is, separate – producers in order to be exchanged for other goods. Exchanging goods, as opposed to producing them in common, brings the producers into social relation with one another. For exchange to happen each product must have a use value, a useful quality required by others or by society generally – although utility is not what determines how they exchange.
The prices at which commodities are bought and sold are perceived in bourgeois theory as their true values. For Marx, however, a commodity’s price is only a semblance of its underlying value, the labor time required for its production. This value is first reflected in the form of money by the commodity’s exchange value: this much labor time corresponds to that much money, leaving aside refinements to be discussed shortly. In turn, the ever-changing price of the commodity on the market fluctuates around exchange-value.(8)
Marx is sometimes criticized for failing to prove the labor theory of value. In fact he made no attempt to provide a “proof” from abstract first principles; the real test was practice. His justification for using the theory was based, first, on its correspondence with economic reality, as we will see in discussing wage labor; and, second, on the laws of capitalism’s motion and development that he derived from the law of value. No other theory has been able to explain capitalism and, most important, its historical changes, with anything like the success of Marx’s.
The theory that value is based on labor time was not invented by Marx; it was the common understanding of the classic bourgeois economists. It allows capitalist apologists to declare the system’s basic principle to be equal exchange: that is, that commodities of equal value can be exchanged for one another. By this ideological self-justification capitalism presents itself as a society founded on equality – despite its great extremes of wealth and privilege,
Capitalism also claims to be the embodiment of economic freedom: owners of commodities are free in the sense that they have the right to find buyers of their choosing on the market in order to obtain the greatest possible value in exchange. It was no accident that “liberty” and “equality” were watchwords of the great French bourgeois revolution, or that the idea of democracy was entwined with the spread of capitalism.
Marx showed what was valid in these ideas: by overcoming feudal restrictions, capitalism set forces in motion that brought the masses onto the stage of history. It is the progressive function of capitalism to provide the material base for a society of genuine freedom in the future. However, a central purpose of Marx’s analysis was to puncture the illusion that capitalism itself could liberate humanity.
Capitalism in fact is a society of monstrous inequality. As well, especially in the present epoch of imperialism, it is the enemy of liberty on a world scale. Behind this reversed reality stands the law of value. As Engels wrote, “The value form of products ... already contains in germ the whole capitalist form of production, the antagonism between capitalists and wage workers, the industrial reserve army, crises.”(9) We will sketch how Marx unraveled the implications which value contains “in germ.”
First, labor embodied in different commodities must be comparable. So labor in every specific line of work, as well each different level of skill, is evaluated by reducing it to units of simple (unskilled) and abstract (as opposed to specific or concrete) labor. The value of a commodity is determined not by the production of that one item alone but rather as the fraction of society’s total simple, abstract labor devoted to it.
Second, the labor time determining the value of a commodity must be socially necessary: value is not determined individually. If, for example, a worker takes twice as long as the norm to produce a given commodity, the commodity’s value is not doubled – on the contrary, half the worker’s labor time has been wasted. Likewise, if capitalists in a given sphere of industry produce more of a commodity than can be sold, the totality of labor time embodied in those products cannot be realized as value. A portion of it has been wasted because it lacks social necessity, understanding that necessity in capitalist society has to be backed by money; it does not mean there are not people who lack such products and could use them.
On the other hand, if one capitalist finds a way of producing a commodity using less labor time than is normal, the value of that commodity need not immediately decrease. It remains the same until other producers are able, on the average, to reduce the necessary labor time. Indeed, much of the inspiration for innovation under capitalism derives from entrepreneurs’ temporary opportunity to sell commodities at their (previously determined) exchange value, even though they may be able to produce them for less.
In brief, the value of a commodity is really measured by the labor required for its reproduction. So if production techniques improve during the useful life of a commodity, its value declines, since reproducing it requires less time than did producing it originally with less advanced methods. The value of a commodity is therefore not constant but is constantly changing (normally decreasing), according to the changing techniques of production and the availability of workers, machines and materials.
Further, for commodities to become exchangeable, there must exist a special commodity which represents their value directly as a universal equivalent. That is the function of money, which appears initially in the form of a tangible, value-embodying commodity like gold; it enables society to measure the various concrete forms of embodied labor as portions of the common abstract labor.
People are often surprised to learn that the values of commodities tend to decrease, because the prices of most things they buy are always rising. But that appearance is an illusion brought about by money; it is not a direct reflection of value. At times when currencies are stable, if labor values decline so do exchange values and prices on the whole. But nowadays the operation of capitalism determines that currencies are continually debased, so it takes more money to buy a given commodity than before, even a commodity whose value is falling. Only in special cases of rapidly reducing value, as with some electronic goods today, does the monetary price actually decline despite the general inflation of prices.
This illustrates an essential aspect of Marx’s theory of value. Exchange value (and therefore price as well) reflects a commodity’s underlying value only imprecisely. Not only does the value of the money commodity change (as is true of every commodity); money has to be used not only as a simple value equivalent but also as a medium for rapid and convenient exchange over great distances, and for the storage of value over time. These functions necessitate that money is constantly created artificially through the credit system. As well, money has to be represented by paper and other symbolic tokens – which opens up relatively simple opportunities for misrepresentation of its value (both legal and illegal). Inherent in the nature of exchange value, therefore, is the possibility of fictitious value: forms of value not based on actual labor in production. The crude equivalence of exchange value to value worsens as capitalism decays in its epoch of imperialism, as we will see in the next chapter.
In contrast, in a pre-capitalist society of simple commodity production where craftspeople obtained tools and materials from familiar sources, values could be easily measured if not scientifically compared. But as capitalism extended commodity production, incorporated all other historical modes of labor into its realm and created a world economy, the complexities of value widened. The exchange of commodities cannot be fully regulated by labor time until labor power is treated as a commodity. As well, capital itself becomes a commodity, and this distorts the exchange value of all commodities in various ways, as we shall see. When we refer to the labor theory of value (or law of value), we mean the general point that the value of commodities is determined by their embodied labor time – without specifying distortions or complexities.
It is unfortunately quite common for theorists to accept Marx’s categories but fill them with an entirely different content. The main source of illusions about capitalism is the “common-sense” idea that value is determined by the market rather than by production. This fallacy is nurtured by the fact that commodities are defined as such by the act of exchange. Bourgeois theory holds that the market forces of supply and demand govern the price at which a commodity can be sold and are therefore the basis of its value. Marx noted in response that even when supply and demand are in equilibrium, the value of the commodity still remains to be determined, and this depends on the amount of abstract labor embodied in it; when not in balance, supply and demand affect the price only within limits set by the conditions of production.
The bourgeois view is echoed by middle-class Marxists. For example:
An economy governed by the law of value is an economy in which production, and therefore investment, is guided by effective demand. What operates here primarily is not so much the difference in the intensity of different needs of different individuals; what is decisive is the difference in incomes. Thus production is directed toward satisfying the needs of the privileged layers first. Production of luxury items is stimulated before the elementary needs of the mass of the population are met.(10)
This is the essence of a petty-bourgeois muckraker’s notion of capitalism, denouncing the system for the privileges it grants to “malefactors of great wealth.” Aping academic sociologists, Mandel chooses income differentials as capitalism’s motive force, not even the difference in class interests that a Marxist looks for. It is a standard myth of petty-bourgeois economics that capitalism is propelled by consumer sovereignty; Mandel only adds that the motivating desires are really those of the ruling capitalists. This argument can only mesh with a populist and not a working-class political challenge to capitalism.
Marx answered Mandel personally, a century ahead of time:
It must never be forgotten that the production of this surplus value ... is the immediate purpose and compelling motive of capitalist production. It will never do, therefore, to represent capitalist production as something which it is not, namely as production whose immediate purpose is enjoyment of the manufacture of the means of enjoyment for the capitalist. This would be overlooking its specific character, which is revealed in all its inner essence.(11)
What “must never be forgotten” has long been erased from the memories of the Marxist pretenders.
Another common confusion over the “law of value” is whether it is the basis of capitalism’s laws of motion as they actually operate, or the guiding rule for a rational social system that capitalism can never attain. Taking the second point of view, the prominent left bourgeois economist Joan Robinson wrote:
Marx believed that, under socialism, the labor theory of value would come into its own. “Only when production will be under the conscious and prearranged control of society, will society establish a direct relation between the quantity of social labor-time employed in the production of definite articles and the quantity of the demand of society for them. ... The exchange, or sale, of commodities at their value is the rational way, the natural law of their equilibrium.”(12)
Robinson here distorts Marx in order to argue that, for him, the labor theory of value is the rational regulator of socialism. But that is in fact a total misunderstanding of Marx’s intention.
The first sentence she quoted from Marx offers a glimpse of socialist society: conscious control of production establishing a scientific connection between the supply of goods and the demand for them. Even though Marx speaks of the quantity of social labor time, however, we can be sure he is not referring to value, because the law of value has nothing to do with the “conscious and prearranged control of society.” It is a blind law operating behind the backs of individuals who cannot control it. (What does happen under socialism, as we will show in Chapter 3, is that the form of value – the transfer of equal quantities of labor time – is retained, while its content based on exploitation is abolished.)
This sentence about socialism is a parenthetical remark inserted into a discussion of capitalism in order to emphasize that under capitalism the amount of labor time embodied in a commodity need not correspond to the social demand. The second sentence quoted, torn out of its original context, is part of this discussion of value under capitalism; it simply asserts that the capitalist goal is to exchange according to (exchange) value. But the intervening part of Marx’s argument (which Robinson chooses not to quote) shows that this goal, rational though it is, is only achieved accidentally under capitalism.(13)
That is because capitalism cannot regulate the supply of commodities in advance: supply and demand inevitably move in and out of their rational relation. The law of value as the system’s “natural law of equilibrium” governs not the day-to-day relations among people but only the average behavior of prices, supply and demand. Price constantly fluctuates around value, which in turn always changes.
As Marx concluded the passage which Robinson cites: “It is this law that explains the deviations, and not vice versa, the deviations that explain the law.” The law of value regulates a class-ridden, anarchic system by indicating the rational goals that individual exchangers under capitalism can only achieve temporarily, if at all, and by chance. It does not eliminate the system’s anarchy but only accounts for it.
The fact that capitalist economy inevitably diverges from its rational pretenses reflects what Marx called the contradictions of the form of value. These are tensions between two inherent aspects of value – concrete and abstract labor, for example, or use value and exchange value – that propel capitalism to change and develop. They also drive the system to the periodic crises as well as long-term decay which have shaped its turbulent history.
The primary contradiction of capitalist society is between social production and private appropriation. Given the universal interchange of commodities generated by production for value, economic relations become thoroughly socialized. No worker, no community, no country can possibly be self-sufficient. Every commodity contains embodied labor contributed to it, directly and indirectly, by workers throughout the globe. Yet even at the highest stages of socialization under capitalism, the organization of production and the appropriation of life’s goods remain private, separated from social control.
Closely related is the contradiction between use value and exchange value. This exists because the value and use value of a commodity are ratified by “the market” only after the act of production, as we have already seen in part. Production is in the hands of separate capitals, but the goods produced are destined for social use: consumption or further stages of production by other agents. The individual capitalist’s production of value and use value does not guarantee their acceptance by capital as a whole. A commodity may have been produced through the expenditure of labor (and therefore may seem to be a bearer of value), yet if it has no use, or has been produced in quantities beyond what can be used, its value is wasted and becomes null. Alternatively, a commodity may have use value, but if the value and therefore the profit it yields is insufficient, its production will cease.
These contradictions reflect the fact that the two fundamental classes of capitalist society are locked in a struggle over the allocation of value. On the one hand, the drive for value makes capitalist production social and compels the contending classes to become national and then international. On the other, capitalist relations not only separate society into rival classes; they also divide each class into individual, local and national competitors. That the working class’s struggle against capital impels it toward unity indicates that the system’s laws drive the proletariat to overcome capitalist relations.
Marx introduced a useful distinction to analyze value more precisely. The labor time embodied in a commodity can be divided into two parts: the living labor expended by the workers who produce it directly, and the dead labor previously embodied in the means of production (materials, tools, factories, etc.), used by the immediate producers but produced in the past. The value contained in such means of production is transferred to the commodities being produced without creating any additional value. New value can be created only as living labor brought into production by the proletariat.
To illustrate the distinction, making a productive improvement generally means introducing a technique that produces commodities at a faster rate, so that the living labor required for each commodity declines. If the value of the living labor saved is less than the additional dead labor that the new technique costs, then the overall value of the commodity has decreased.
One essential commodity under capitalism is not produced in the usual way. Since capitalism assigns an exchange value to every commodity, it does so with labor too. Labor – or more accurately labor power, the workers’ capacity to labor – becomes a commodity owned by workers which they sell to capitalists in return for payment: their wage. Underlying the wage, which is precisely the exchange value of labor power, is the value of labor power. This is based on the value of the commodities (food, clothing, shelter, training, etc.) needed by the workers and their families to reproduce the working class. The fact that wages are normally paid per hour or day – that is, according to the duration of time worked – illustrates the reality of the labor theory of value: the value of commodities produced depends on the labor time they contain.
As with all commodities, the value of labor power is constantly changing. It decreases because of advances in the techniques of producing the workers’ necessities. But it also tends to increase because it contains what Marx called a “historical and moral element,” the degree of training, education and civilization that society requires of its workers. This element is largely determined through class struggle, even when improvements in the workers’ conditions benefit the capitalists as well by making higher productivity possible.
The commodity labor power has a unique use value: it creates new value. Moreover, the value that the laborer creates must be greater than the value of his or her labor power. In the process of capitalist production, therefore, the value of the workers’ living labor divides into two categories. One portion, paid labor, corresponds to the value of labor power and is taken by the workers in the form of wages. The remaining portion, unpaid labor or surplus value, goes to the capitalists; it is the source of their profit, interest and rent. The extraction of surplus value is the uniquely capitalist form of exploitation.
Unlike in pre-capitalist societies, capitalism’s surplus is disguised by the equal exchange of value: labor power for wages. Exploitation of slaves by their masters was naked: what the slaves produced was owned by the master who chose what to give back, normally just enough for the slaves to subsist. Under feudalism, the serf had some rights against the lord, but here too exploitative class relations were transparent. But under capitalism the relations between people are hidden beneath objects and forms and appear to be between things – commodities.
Marx wrote Capital to reveal the system’s inner essence behind its outer trappings. The commodity is the necessary form of appearance of capitalist exploitation. Nevertheless, we have seen how middle-class Marxists believe that the commodity form rather than the class struggle is the key to the system (and therefore that Stalinist societies, where commodity markets are suppressed, cannot be capitalist). As Marx polemicized against their ancestors:
It is a definite social relation between men that assumes in their eyes the fantastic form of a relations between things. In order, therefore, to find an analogy, we must have recourse to the mist-enveloped regions of the religious world. In that world the productions of the human brain appear as independent beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities with the products of men’s hands. This I call the fetishism which attaches itself to the products of labor, as soon as they are produced as commodities, and which is therefore inseparable from the production of commodities.(14)
The commodity is not simply a thing exchanged between separate owners. It is the product of wage labor, the outcome of a particular form of exploitation. That is what defines the nature of capitalism.
As capitalism developed out of feudal society, it forcibly separated the direct producers from their means of production. Eventually the buying and selling of labor power came to govern the labor of the majority of producers. Industrial capital depends on creating a class of proletarians who possess no means of production; the materials, machines and factories are owned by a separate class, the bourgeoisie.
Marx noted ironically that the bourgeois ideal of freedom applies to the proletarians as well. The workers are “free” in a dual sense. On the one side, they are no longer part of the means of production owned by their masters; the capitalists buy labor power, not labor. On the other side, they are dispossessed of any means of production and are therefore free to sell their labor power to whomever they like. Obviously they are obliged by the threat of starvation to sell themselves to some boss on the market. The petty-bourgeois dream of a capitalist society made up of equal, independent and self-sufficient property owners is a fantasy concealing the exploitation and frequent mass misery of the workers.
In addition to the class-based inequality inherent in capitalism, the system has developed other forms of oppression – based on sex, race, nationality, etc.; some of these it inherited from previous class societies and turned them to its own ends. They serve not only to preserve social structures useful to capitalism – for example, the nation and the family – but also to institutionalize divisions within the working class and thereby weaken its resistance to exploitation.
The “free” character of wage labor makes exploitation collective. No longer are the producers of society’s surplus product tied to individual owners, as were slaves; nor to specific landed property, like serfs; nor to their own property and specialized trade, like the petty-bourgeoisie descended from guildsmen and artisans. The proletarians are exploited as a class, by the exploiters as a class. Despite the evident competition between capitals, the labor market creates social classes which represent as a whole the opposite sides of the exploitation relation.
With the creation of the modern proletariat by industrial capitalism, wage labor underwent a transformation. Individual craftsmen were replaced by laborers forced to sell themselves to the highest bidder in whatever trade. Workers’ labor power became increasingly interchangeable and uniform. As well, technological advances robbed the workers of their traditional skills. These processes helped create the actual category of abstract labor.
Thus the law of value first came to genuine fruition under industrial capitalism; it could only be prefigured in a partial sense under earlier forms of commodity production. As Marx wrote:
The secret of the expression of value, namely, that all kinds of labor are equal and equivalent, because and so far as they are human labor in general, cannot be deciphered until the notion of human equality has already acquired the fixity of a popular prejudice. This, however, is possible only in a society in which the great mass of the produce of labor takes the form of commodities, in which, consequently, the dominant relation between man and man is that of owners of commodities.(15)
Hence the fundamental link between wage labor and the law of value. On the one hand, capitalist production – the operation of the law of value – makes labor power a commodity; labor is necessarily wage labor. On the other hand, under pre-capitalist commodity production, exchange value existed but could only be based on concrete labor, not on a true underlying value. Only capitalist production, which employs labor measured according to time, creates the genuine value category of embodied abstract labor. Thus the existence of a proletariat and the validity of the law of value are equivalent conditions. Marxists who deny that the law of value applies to Stalinism but nevertheless acknowledge the existence of a Soviet proletariat make a fundamental error. To deny one is to deny the other.
Marx transformed the labor theory of value in two ways: he distinguished labor from the commodity labor power; and he uncovered the extraction of surplus value through wage labor. His analysis revealed the class nature of the law. Since ownership of capital dominates the possession of mere labor power, dead labor dominates living. Capitalists assume the right to appropriate not only a value equivalent to the workers’ wages (and to the dead labor they supply) but also the surplus value produced. Thus the laws of capital
become by their own inner and inexorable dialectic changed into their very opposite. The exchange of equivalents, the original operation with which we started, has now become turned around in such a way that there is only an apparent exchange.(16)
As the gulf between bourgeoisie and proletariat evolved and expanded, the law of value was transformed from a principle of equality to the embodiment of inequality. We will show in Chapter 4 that a similar process of intensification of inequality took place during the Stalinist counterrevolution in the USSR. Far from overcoming the law of value, Stalinism enforced it.