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Chapter II. Exchange Value

The boss and the worker, the one as buyer and the other as seller, do not set the exchange value of labor power—wages. The market dictates to both. The interest of the boss inclines him to obtain it at the very lowest figure, while the worker, just as naturally, seeks the highest possible price. But the market rules that labor power shall exchange upon the same basis as all other commodities—the socially necessary labor time required to produce the things that are needed to maintain the laborer at the prevailing living standard. This is the measure of the exchange value of all commodities. Socially necessary, of course, meaning the amount of average time according to the machinery and efficiency of the prevailing method. This average of labor time determines the relation of all commodities to one another in the market and governs the exchange of labor power as well as of all other commodities. Says Marx, "If we consider commodities as values, we consider them exclusively under the single aspect of realized, fixed, or, if you like, crystallized social labor. In this respect they can differ only by representing greater or smaller quantities of labor, as, for example, a greater amount of labor may be worked up in a silken handkerchief than in a brick. But, how does one measure quantities of labor? By the time the labor lasts, in measuring the labor by the hour, the day, etc."

For illustration, if we take one day's labor power, a cap, a book, and a piece of bacon. All of these sell for $3.00. These articles have nothing in common that is apparent to the eye. They neither look alike nor serve the same purpose, yet there is in all of them some common quality, and in all of them to the same degree, which makes them equal to one another and to $3.00 in gold. What is it? The amount of social labor time necessary to produce them (and the $3.00 worth of gold as well) is of equal duration.

It is not just the amount of time that a commodity may have taken to produce with obsolete tools and antiquated methods, but the socially necessary labor time that determines its exchange value.

Value and Technology.

Karl Marx says, (Value, Price and Profit, page 61) "It might seem that if the value of a commodity is determined by the quantity of labor bestowed upon its production, the lazier a man, or the clumsier a man, the more valuable his commodity, because the greater the time of labor required for finishing the commodity. This, however, would be a sad mistake. You will recollect that I used the word social labor, and many points are involved in this qualification of 'Social.' In saying that the value of a commodity is determined by the quantity of labor worked up or crystallized in it, we mean the quantity of labor necessary for its production in a given state of society, under certain social average conditions of production, with a given average intensity, and average skill of the labor employed."

Mary Marcy, (Shop Talks on Economics) uses this illustration :

"If you spend three months cutting up a log with a penknife into a kitchen chair, it will be no more valuable in the end than the kitchen chair made in the big factories where many men working at large machines produce hundreds of chairs in a single day."

The exchange value of the chair is not determined by the wasteful expenditure of time spent in whittling it out with a penknife, but by the average time necessary to produce it with modern machinery and efficient methods. It is not the amount of labor time but the amount of socially necessary labor time that determines its exchange value.

Every new machine installed in industry, and every improvement in the machines already installed, reduces the amount of labor time necessary for the production of commodities in the industries where these machines are used. But as individual machines only affect some processes the average of labor time is not now greatly reduced by them. The average of time is determined by the average of machine efficiency throughout industry, for production is social in scope and character.

The time saving effect of the installment of a new machine, or the improvement of machinery already installed, depends upon the stage of industrial development at the time of installment, or improvement. In the earlier stages of capitalist development, when the machine snatched the tool from the hand of the craftsman, the effect was greater than at present when machinery is so for advanced and so generally used. While a decrease in the necessary labor time is still reflected in the exchange value of a commodity, there are now factors operating which were absent in the earlier stages of capitalism that tend to obscure this fact.

We shall now borrow another illustration from Mary Marcy (Shop Talks on Economics, Page 12), "Suppose every shoe factory in the country were working full time in order to supply the demand for shoes. The factories using the very old-fashioned machinery would require more labor to the shoe than the factories using newer machines, while the great, up-to-date factories using the most modern machinery would need comparatively little human labor power in producing shoes."

Socially Necessary Labor Time.

We see here how fewer workers with more highly developed machinery are capable of greatly increased output less labor power, or time, producing greater results. The illustration shows not only how the average of labor time is lessened, but shows as well a lowering of the average of skill. Machinery affects the workers in two ways: (1) by displacing workers and (2) by dispensing with their skill. It makes for a preponderance of unskilled and little skilled workers in industry.

The sum of the time required to produce all the shoes by all the factories, with allowance for the social helpfulness of other workers, determines their exchange-value and the exchange-value of every pair. The exchange-value of gold, silver, copper, beans, bacon, clothes—any commodity—is determined in the same way, by the social labor time needed to produce them. Values of commodities rise or fall as the necessary time is increased or lessened. Labor power is no exception to this rule. The labor time necessary to produce labor power determines its exchange value. We quote Marx: "Like every other commodity its (labor power) value is determined by the quantity of labor necessary to produce it. The laboring power of a man exists only in his living individuality. A certain mass of necessaries must be consumed by a man to grow up and maintain his life. But the man, like the machine, will wear out and must be replaced by another man. Beside the mass of necessaries required for his own maintenance he wants another amount of necessaries to bring up a certain quota of children that are to replace him on the labor market and to perpetuate the race of laborers."

Food, clothing and shelter necessary to keep the workman fit and which will provide for his family—the labor time necessary to produce these—is what determines the exchange-value of labor power. Not the time needed to produce necessaries for the individual laborer, but the average for the class of laborers. The laborer must be replaced constantly and the source of the supply of labor power must be maintained. So the workers must receive, on the average, enough to maintain them as workers and to reproduce other workers to take their places. That is the value of labor power; this is what, on the average, the capitalist will pay his wage workers.

But as these necessaries are determined in turn by the standard of living prevailing among the workers, the living standard of the workers is and must be understood as governing the amount of labor time necessary to produce labor power.

QUESTIONS.

  • 1.(a) What is exchange-value, and (b) use value.
  • 2. What is "socially necessary labor time"?
  • 3. How is it determined?
  • 4. What is the effect of new machines?
  • 5. Can you explain Mary Marcy's illustration of the chair?
  • 6. Apply Mary Marcy's illustration of the shoe factory to a single pair.
  • 7. Why does a skilled worker (mechanic) get more pay than an unskilled workmen?
  • 8. Why does the workman, ordinarily, require more than his own necessaries?
  • 9. What is meant by "living standard"?
  • 10. Does the living standard of the workman play an important part in our economic life? Explain.

Next page: Chapter III. Surplus Value