“According to the Marxist theory surplus value is, as we have seen, the pivot of the economy of a capitalist society. But in order to understand surplus value one must first know what value is. The Marxist representation of history and of the course of development of capitalist society begins therefore with the analysis of value.As we can see, Bernstein rejected Engels’ apologetics in the “Supplement and Addendum to Volume 3 of Capital” (Engels 1895).
In modern society, according to Marx, the value of commodities consists in the socially necessary labour spent on them measured according to time. But with the analysis of this measure of value quite a series of abstractions and reductions is necessary. First, the pure exchange value must be found; that is, we must leave aside the special use values of the particular commodities. Then—in forming the concept of general or abstract human labour—we must allow for the peculiarities of particular kinds of labour (reducing higher or complex labour to simple or abstract labour). Then, in order to attain to the socially necessary time of work as a measure of the value of labour, we must allow for the differences in diligence, activity, equipment of the individual workers; and, further (as soon as we are concerned with the transformation of value into market value, or price), for the socially necessary labour time required for the particular commodities separately. But the value of labour thus gained demands a new reduction. In a capitalistic developed society commodities, as has already been mentioned, are sold not according to their individual value but according to their price of production—that is, the actual cost price plus an average proportional rate of profit whose degree is determined by the ratio of the total value of the whole social production to the total wage of human labour power expended in producing, exchanging, etc. At the same time the ground rent must be deducted from the total value, and the division of the capital into industrial, commercial, and bank capital must be taken into the calculation.
In this way, as far as single commodities or a category of commodities comes into consideration, value loses every concrete quality and becomes a pure abstract concept. But what becomes of the surplus value under these circumstances? This consists, according to the Marxist theory, of the difference between the labour value of the products and the payment for the labour force spent in their production by the workers. It is therefore evident that at the moment when labour value can claim acceptance only as a speculative formula or scientific hypothesis, surplus value would all the more become a pure formula—a formula which rests on an hypothesis.
As is known, Friedrich Engels in an essay left behind him which was published in the Neue Zeit of the year 1895–96, pointed out a solution of the problem through the historical consideration of the process. Accordingly the law of value was of a directly determining power, it directly governed the exchange of commodities in the period of exchange and barter of commodities preceding the capitalist order of society.
Engels seeks to prove this in connection with a passage in the third volume of Capital by a short description of the historic evolution of economics. But although he presents the rise and development of the rate of profit so brilliantly, the essay fails in convincing strength of proof just where it deals with the question of value. According to Engels’ representation the Marxist law of value ruled generally as an economic law from five to seven thousand years, from the beginning of exchanging products as commodities (in Babylon, Egypt, etc.) up to the beginning of the era of capitalist production. Parvus, in a number of Neue Zeit of the same year, made good some conclusive objections to this view by pointing to a series of facts (feudal relations, undifferentiated agriculture, monopolies of guilds, etc.) which hindered the conception of a general exchange value founded on the labour time of the producers. It is quite clear that exchange on the basis of labour value cannot be a general rule so long as production for exchange is only an auxiliary branch of the industrial units, viz., the utilisation of surplus labour, etc., and as long as the conditions under which the exchanging producers take part in the act of exchange are fundamentally different. The problem of Labour forming exchange value and the connected problems of value and surplus value is no clearer at that stage of industry than it is to-day.” (Bernstein 1909: 29–31).
For Bernstein the law of value in volume 1 of Capital – that commodities tend to exchange at true labour values – was a “pure abstract concept.”
This apologetic Marxist tactic – in contrast to Engels’ defence of the law of value as a real empirical and historical phenomenon confined to the pre-capitalist world of commodity exchange – was adopted early on after the publication of volume 3 of Capital by Werner Sombart, Conrad Schmidt, and Wilhelm Lexis.
Let’s review their views:
(1) Werner Sombart argued in 1894 that the law of value was not empirical fact but an “ideal” or “logical” one (Sombart 1894).Benedetto Croce later argued something similar, that labour value was a mere ideal concept from which reality departs (Croce 1915: 52–57).
(2) Conrad Schmidt argued in 1895 that the law of value is just a “necessary theoretical point of departure” but not something empirically present in the “phenomena of prices under competition” (Schmidt 1895: 258).
(3) Wilhelm Lexis in 1895 argued the following:“Value, as conceived by Marx, is thus a purely theoretical conception. The thing is never to be found in reality, neither in the normal exchanges of commodities nor in the consciousness of the individuals who take part in these exchanges.” (Lexis 1895: 11–12).
But Engels vehemently rejected the view that the law of value was totally abstract or non-empirical.
For Engels, the law of value in volume 1 was a real empirical and historical phenomenon, to be applied to the pre-modern world of commodity exchange (Engels 1991 [1895).
But, as we see, many Marxists rejected even this, and went for the apologetics of Conrad Schmidt and Werner Sombart.
Bernstein, Eduard. 1909. Evolutionary Socialism: A Criticism and Affirmation (trans. Edith C. Harvey). B. W. Huebsch, New York.
Croce, Benedetto. 1915. Historical Materialism and the Economics of Karl Marx (trans. C. M. Meredith). Allen & Unwin, London.
Engels, F. 1991 . “Supplement and Addendum to Volume 3 of Capital,” in Karl Marx, Capital. A Critique of Political Economy. Volume Three (trans. David Fernbach). Penguin Books, London. 1027–1047.
Lexis, W. 1895. “The Concluding Volume of Marx’s Capital,” Quarterly Journal of Economics 10 (October): 1–33.
Schmidt, Conrad. 1895. “Der dritte Band des Kapital,” Sozialpolitisches Zentralblatt 22 (25th February): 254–258
Sombart, Werner. 1894. “Zur Kritik des ökonomischen Systems von Karl Marx” [Toward a Critique of the Economic System of Karl Marx], Archiv für soziale Gesetzgebung und Statistik 7: 555–594.