Saving Marxism from the Labor Theory of Value: It Is Still Bad Theory

Capitalism—Its Nature and Its Replacement: Buddhist and Marxist Insights
by Graham Priest
Routledge, 2021; 312 pp.

The title of this book seems at first sight puzzling: what has Buddhism to do with Marxism? When we learn that the author accepts Karl Marx’s analysis of capitalism and also wishes to replace capitalism with a type of socialism, we might be tempted to toss the book aside. It would be a mistake to do so. The author is a distinguished logician and the book contains an interesting account of Marxist economics. In this week’s column, I’ll discuss one of Priest’s main arguments. I won’t have anything to say about Buddhism.

Priest tries to rescue Marxist economics from a familiar criticism. His attempt is interesting, but I do not think it succeeds. In the standard Marxist account, workers sell their labor power to capitalist employers but are paid only for their labor. According to the labor theory of value, which Marx accepted, the value of labor, which determines money wages, is determined by the labor costs of the commodities that enable a worker to subsist and to reproduce. These labor costs will add up to a certain number of hours.

But the worker has sold to the employer his labor power, his ability to labor at the employer’s direction, during the hours of the working day, and these hours will be greater than the number of hours needed to cover the labor cost of the worker’s labor. If they weren’t, it would not be profitable for the employer to offer the worker a job. That may sound confusing, but an example will, I hope, make things clearer.

Suppose the worker is hired to work ten hours per day but the value of his labor is only eight hours. The extra two hours are “surplus value,” which is divided between the capitalist employer and the landlord who owns the land where production takes place. Since the worker labors for two hours for which he doesn’t get paid, he is exploited. Thus, according to Marx, capitalism rests on the exploitation of labor.

A major problem with Marx’s analysis is obvious. It rests on the labor theory of value, which after the “marginalist revolution” of the 1870s was rejected by the vast majority of economists. Priest thinks he can get around this problem. He doesn’t say whether he accepts the labor theory of value, but he tries to prove that capitalism is exploitative without using this theory. He writes:

Those who know their Marx will note that I have said nothing about the labour theory of value, which has been taken to be central to Marxian economics, but has been the target of much criticism. This is because nothing I have said depends on this. . . . [The labor theory of value] is an account of quantity. However, it is not necessary to subscribe to the labour theory of value to understand that labour produces surplus value—in other words to understand the quality of the relationship between labour and value. (emphasis in original)

If Priest is right, he has made a major contribution to Marxism, but his argument, though very interesting, is mistaken. He contends that in a capitalist economy, there is a constant pursuit of growth by the owners of capital, driven by competition with other owners. Competition leads them to squeeze workers as much as they can, so long as doing so will expand production. (Squeezing workers to the point that they can’t work would be self-defeating.) Thus there is an increasing tendency for workers to be exploited, and this argument does not rely on the labor theory of value.

Priest’s argument is vulnerable on two counts. First, Priest gives no account of how wages are determined under capitalism. Why, without the labor theory of value, is he entitled to assume that in a competitive market, employers would be able to exploit workers, meaning pay them below the value they add to the product? His defense of this assumption, if I have understood it, is this: “Marx held that labour power was the sole commodity that has the ability to produce surplus value” (emphasis in original).

Suppose that a farmer works a longer number of hours on his farm than needed to feed himself and his family. That is the only way he can expand production beyond subsistence and thus create surplus value. The flaw in Priest’s argument is that once the farmer has worked more hours than subsistence requires, he can create tools that enable him to produce more efficiently than before. In that case, he will be able to feed himself and his family with fewer hours of labor. If he nevertheless continues to work more hours, the “surplus value” is imputable for the most part to the better tools, not to the labor hours beyond subsistence—unless one gratuitously assumes the labor theory of value. Priest is aware of the possibility of mechanization but seems interested only in cases where people lose their jobs because of it. He fails to see mechanization’s consequences for his argument that labor power is the only source of surplus value. His fundamental mistake is to fail to distinguish surplus hours, meaning laboring more than you need to for subsistence, from surplus value.

There is another problem with Priest’s argument, and this problem arises from a correct insight about Marxist economics. Marx argued that in a capitalist economy, “capital is wealth in search of more wealth.” Owners of capital who refused to seek more wealth would be displaced by their competitors and the process would keep going until a crisis was reached. What this overlooks is that the growth of capital responds to the time preference of consumers. If the consumers do not want a growing economy (i.e., they have a high time preference rate), a lengthening of the structure of production won’t happen. Capital growth is not a quasi-automatic process, as Marx thought it was.

Priest’s response to the claim that the owners of capital who expand production are reacting to the time preference of consumers is that consumers don’t “really” want more production. Capitalists manipulate them by advertising to get them to demand products that won’t make them happier. Priest has definite ideas about happiness, and here is where Buddhism comes in. As I mentioned earlier, I will avoid entering this morass. Suffice it to say that his account of manipulation rests on a dogmatic account of what people “should” want. I don’t trust his judgment.