Engels and his Eternal Law of Value


I’ve promised a lengthy post on the so-called ‘transformation problem’, and it will come—eventually. There’s a lot to compile, because I think that the history of the transformation problem debate is as interesting as the theoretical content of each turn of the debate, and it seems to me that examining its various snaking pathways goes a lot in untangling this particularly knotty web. But in the meantime, I’d like to look at a curious episode in the debate before it was formalized as such: an extremely puzzling—and totally erroneous—interpretation of Marx advanced by Engels, of all people, in his Supplement to Capital Volume III.

The Supplement arose in the context of the debates that immediately followed the release of the third volume of Capital, and is intended primarily to deal with the arguments put forward by three interlocutors: Werner Sombart, Conrad Schmidt, and Achille Loria. All three had been involved with Engels’ “prize essay competition” that he had conducted in the decade running up the book’s publication, which seems to have been intended to help him parse the difficulties in managing the implications of value theory present in the new work. Sombart and Schmidt were regarded fondly by Engels: he applauds the former as being the first “German university person” to properly see “in Marx’s writings what Marx really says”, and the latter for penning an “excellent article” providing proof for how the average rate of profit is derived from and determined by the rate of surplus value. Loria, on the other hand, was a longtime object of Engels derision. Here he includes him merely “as an amusing vulgar-economist foil” to Sombart and Schmidt.

But Engels had his problems too with Sombart and Schmidt, for each regarded the law of value as a “purely logical process”, a “scientific hypothesis… set up to explain the actual exchange process”. Such an interpretation rejects the fundamental argument that Marx was trying to make: that the law of value was not merely a logical figment, a loose model through which we can interpret forces that, empirically, cannot be contained within this frame, and that is was instead a historical process with real, material implications.

The groundwork was already being laid at this stage for what would become the transformation problem. Many critics of Marx’s theory, often associated with burgeoning economic school of marginalism, took umbrage at an apparent breakdown that occurred when one attempted to move from the theory of value, as outlined in Volume 1, to that of prices of production in Volume 3. The concept of the ‘prices of production’, briefly, is Marx’s restaging of what Smith and Ricardo called the “natural price”, which is the equalized rate of profit that actual economies tend towards, but do not necessarily reach (except until exception conditions, i.e. a situation of perfect competition). The natural price is the ‘center of gravity’ around which prices fluctuate. In Marx’s argument—which remains very close to Smith and Ricardo—the price of production is the cost-price (here distinct from value, the two being conflated by Ricardo) plus average profit.

Leaving aside the much bigger questions around the transition from value to the prices of production, it is interesting to note that it was a transformation of this sort that Engels zeroed in on to explain the status of Marx’s theory as being about a historical, as opposed to a merely logical, process. The history he has in mind, however, is utterly baffling from a Marxist perspective. He describes the moment that “metallic money” entered onto the scene, which comes to obstruct “the determination of value by labor-time”. If the suggestion that value, understood as magnitudes of labor time, existed deep within the past, seems odd at first, hold onto your hat:

In a word: the Marxian law of value holds generally, as far as economic laws are valid at all, for the whole period of simple commodity production — that is, up to the time when the latter suffers a modification through the appearance of the capitalist form of production. Up to that time, prices gravitate towards the values fixed according to the Marxian law and oscillate around those values, so that the more fully simple commodity production develops, the more the average prices over long periods uninterrupted by external violent disturbances coincide with values within a negligible margin. Thus, the Marxian law of value has general economic validity for a period lasting from the beginning of exchange, which transforms products into commodities, down to the 15th century of the present era. But the exchange of commodities dates from a time before all written history — which in Egypt goes back to at least 2500 B.C., and perhaps 5000 B.C., and in Babylon to 4000 B.C., perhaps to 6000 B.C.; thus, the law of value has prevailed during a period of from five to seven thousand years. And now, let us admire the thoroughness of Mr. Loria, who calls the value generally and directly valid during this period a value at which commodities are never sold nor can ever be sold, and with which no economist having a spark of common sense would ever occupy himself!

“The law of value has prevailed during a period of from five to seven thousand years”. In one fell swoop, Engels transhistoricizes value, and then reduces its character as the determining factor in the capitalist mode of production—in other words, as that which makes capitalism a historically specific world force—by subordinating it to the long-run equilibria of the prices of production.

There are immediate problems with this. The way that both time and labor are concretized in value is specific to capitalism, though by no means is the relationship between time and labor unique to this mode of production—a point that can be tricky, and one wonders if Engels might have fallen prey to this slippage. In the first chapter of Capital Volume I, for example, Marx writes that

Men made clothes for thousands of year, under the compulsion of the need for clothing, without a single man ever becoming a tailor. But the existence of coats, of linen, of every element of material wealth not provided in advance by nature, had always to be mediated through a specific productive activity appropriate to its purpose, a productive society that assimilated particular natural materials to particular human requirements. Labour, then, as the creator of use-values, as useful labour, is a condition of human existence which is independent of all forms of society; it is an eternal natural necessity which mediates the metabolism between man and nature, and therefore human life itself.

Thus labor appears as a constant, existing across a variety of social formations both capitalist and pre-capitalist. The similar holds true for the connection between labor and time, as evidenced by the following from the Grundrisse (a text that Engels seems to have not had access to):

On the basis of communal production, the determination of time remains, of course, essential. The less time the society requires to produce wheat, cattle etc., the more time it wins for the other production, material or mental. Just as in the case of an individual, the multiplicity of its development, its enjoyment and its activity depends on economization of time. Economy of time, to this all economy ultimately reduces itself. Society likewise has to distribute its time in a purposeful way, in order to achieve a production adequate  to its overall needs; just as the individual has to distribute his time correctly in order to satisfy the various demands on his activity.

The key passage here—”Economy of time, to this all economy ultimately reduces itself”—is rendered as the less-clunky “every economy is an economy of time” by Stavros Tombazos in his book Time in Marx. This is a good shift, and Tombazos notes that we’re not to take ‘economy’ here in the reductive sense of bourgeois economists (merely as goods trading for goods, sometimes with a monetary intermediary) but in the broader sense, as forms of social organization with differing determinants in different places and times. This shifting nature of economy is the vital point, which Tombazos drives home with a quote from Marx’s Letters on Capital: “No natural laws can be done away with. What can change, in changing historical circumstances, is the form in which these laws operate”.

This is the manner in which historical processes unfold, from Marx’s point of view. It does not follow from this that the logical presentation of capitalism that is set up in the first volume of capital—which, it most be pointed out, takes places at level of abstraction of ‘capital in general’, the totality of the capitalist system—follows a distinctly historical arc. Yet this is what Engels seems to have been doing in his Supplement. It’s a method that Marx directly critiqued in the Grundrisse:

Capital is the all-dominating economic power of bourgeois society. It must form the starting-point as well as the finishing-point, and must be dealt with before landed property… It would therefore be unfeasible and wrong to let the economic categories follow one another in the same sequence as that in which they were historically decisive. Their sequence is determined, rather, by their relation to one another in modern bourgeois society, which is precisely the opposite of that which seems to be their natural order or which corresponds to historical development. The point is not the historic position of the economic relations in the succession of different forms of society. Even less is it their sequence ‘in the idea’ (Proudhon) (a muddy notion of historic movement). Rather, their order within modern bourgeois society.

Postone drives home this point repeatedly in Time, Labor, and Social Domination. Early on in the work he takes to task Ronald Meeks for assuming “that Marx’s initial formulation of the theory of value entails postulating a model of a precapitalist society in which ‘although commodity production and free competition were assumed to reign more or less supreme, the labourers still owned the whole produce of their labour'”. Postone briefly mentions is that the source of Meeks’ reading isn’t to be found in Marx, but in Engels, yet what he doesn’t point out that this source is in fact the Supplement. 

Postone notes that for Meeks, Marx’s law of value can be equated with the earlier theory of value offered by Adam Smith—despite the fact that “Marx criticizes Smith precisely for relegating the validity of the law of value to precapitalist society”. To support this, Postone offers the following quote from Marx’s Theories of Surplus Value:

Torrens … reverts to Adam Smith … according to whom the value of commodities was determined by the labor-time embodied in them ‘in that early period’ when people confronted one another only as owners and exchangers of commodities, but not when capital and property in land have been evolved. This would mean … that the law which is valid for commodities qua commodities, no longer is valid for them once they are regarded as capital, or as products of capital. … On the other hand, the product wholly assumes the form of the commodity … only with the development and on the basis of capital production. Thus the law of the commodity is supposed to be valid for a type of production which produces no commodities (or produces them only to a limited extent), and not to be valid for a type of production which is based on the existence of the product as a commodity

Marx elsewhere took to task this very notion of a period in which “people confronted one another only as owners and exchanges of commodities”, which after all is the idealized sort of social formation that was advanced by the classical liberals and Ricardian strains of utopian socialism. Meeks, following the Capital-as-history model put in motion by Engels, in fact recourses to the vision of Smith. There’s an irony here, given that the entire assault on Proudhon, cosigned by Engels, operated through the unveiling of Proudhon’s project as being something contained entirely within classical political economy—an aspect of which entailed the transhistorization of value of this very sort.

In pre- or noncapitalist societies, “laboring activities are social by virtue of the matrix of overt social relations in which they are embedded”, a case in point being the communal production mentioned in the Marx quote above. In capitalism, by contrast, labor comes to ‘mediate itself’—it replaces this social matrix with an interdependence of a very different sort, one grounded in abstract labor. This is category of labor exists independently of specific characteristics, as something homogeneous and equalized at the level of the social totality (or, in a more straightforward manner, labor in general). Contrary to Ricardian interpretations of value, which are grounded in labor’s physiological expenditure, it is from abstract labor that value is derived . Marx, in the first chapter of Volume 1, writes that the

labour… that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour power. The total labour power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour power of society, and takes effect as such; that is, so far as it requires for producing a commodity, no more time than is needed on an average, no more than is socially necessary.

The historical distinction of abstract labor had already been developed by Marx by this point, having described it, in the pages of The German Ideology as being the determining factor only in advanced capitalist societies:

Labour, not only as a category but in reality, has become a means to create wealth in general, and has ceased to be tied as an attribute to a particular individual. This state of affairs is most pronounced in the United States, the most modern form of bourgeois society. This abstract category “labour”, “labour as such”, labour sans phrase, thus becomes a practical fact only there. The simple abstraction, which plays a decisive role in modern political economy, an abstraction which expresses an ancient relation existing in all social formations, nevertheless appears to be actually true in this abstract form only as a category of the most modern society.

If abstract labor is what helps lend to the capitalist epoch its historical specificity, through the transformation of the relationship between labor and social relations (as well as its utterly modern instantiation as labor emptied of all qualities, existing a mere quantity), and this abstract labor is the “substance” of value, then the proposition that the whole of human history prior to capitalism existed under the sway of the law of value is untenable.

This isn’t to say, of course, that capitalism and the law of value came of this world fully formed, like Nietzsche’s primordial state erupting into history in a single, great flash of lightening. The emergence of capitalism unfolded diachronically, ruptures taking place at different tempos, with a host of contingent factors whose collisions catalyzed grand processes (another important point: transhistoricizing the law of value and displacing it in the capitalist era with the the supremacy of the prices of production portrays capitalism as having been lying in wait for all time—one hardly needs the expropriations, driven by contingent circumstance as much as by historical necessity, “written in the annals of mankind in letters of blood and fire” that Marx places at the dawn of capitalism). Earlier social formations incubated nascent forms of capital. In the Grundrisse, for example, Marx alludes to how in the Middle Ages “capital itself—apart from pure money-capital—in the form of the traditional artisans’ tools etc., had [a] landed-proprietary character”. Later, when discussing the ‘Genesis of the Industrial Capitalist’ in Volume 1: “the middle ages had handed down two distinct forms of capital, which mature in the most different economic social formations, and which before the era of the capitalist mode of production, are considered as capital quand même [all the same] — usurer’s capital and merchant’s capital”

This rise of merchant’s capital is the shift that Engels uses in the Supplement to mark the shift from societies dominated by the law of value to ones dominated by the prices of production. The merchants were a “revolutionary element in this society where everything else as stable”, and it was through their arrival that the rate of profit first emerged as a world-historical force. In Engels’ schema, the experience of the merchant capital was split between two directions: on the one hand, it sought an equalization of the rate of profit (held in place by the domination of trade by various nations, leagues and associations), but on the other, with the blossoming of the world market, the ‘individual merchant’ was rising. No longer could the rate of profit be split equally between a series of institutional merchant ‘blocs’—competition for the first time truly bared its teeth, as individual merchants sought to claim as much of the profit as possible.

But abstract labor doesn’t arise in the context of merchant’s capital. The ranks of the merchants were themselves leveled, with their capital eventually becoming a functionary of industrial capital, as one of the faces of commercial capital. It is industrial capital that marks the most modern of societies—and it is only there that the law of value truly begins to make its mark.

4 thoughts on “Engels and his Eternal Law of Value

    1. Hey Jehu! It’s good to hear from you again, the twittersphere (and the blogosphere) has been missing you.

      I’m definitely wary of the popular tendency of Engels-bashing and largely refrain from it, so I’d be interested to hear your counterpoints.


  1. There is also an extended discussion (and criticism) of Engels’ position in M. Morishima and G. Catephores’ 1975 article: ‘Is There an “Historical Transformation Problem”?’ (The Economic Journal)

    More recently I recall that it was touched in Samuel Hollander’s 2011 book on Engels; Friedrich Engels and Marxian Political Economy.

    For a defense of Engels (and eg specifically the interpretation of that Marx quote on Torrens), see my translation on libcom of Dunaevsky’s 1929 article: The law of value under capitalism in the Essays of Isaak Rubin (hopefully a proof-read version will be included in a future volume about Rubin).

    Liked by 1 person

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