The Marxian thought has at least an economic component and one ontological. In these few lines, I intend to address the exploitation topic in Marxian economics. As well as the following topics of Marxian ontology: the driving role of contradiction in human cultural evolution; the emerging forms of matter; and the reification within commodities.
The Marxian theory of exploitation: an assessment of the Austrian response
The Marxian conception of exploitation in capitalism conceives of the latter as the appropriation—within entrepreneurial profit—of a non-remunerated portion of the wage earner’s daily working time. The Austrian response to the Marxian conception notably consisted of highlighting the complementarity of the respective temporal preferences on the part of workers (preferring a smaller but quicker remuneration over a more tardy but greater one) and entrepreneurial capitalists (preferring the latter over the former). It also consisted of underlining the adjustment role which freely determined equilibrium prices operate (via the occasioned losses and profits), Friedrich A. von Hayek thus speaking of Karl Marx’s alleged inability to apprehend “the signal-function of prices through which people [including entrepreneurs] are informed what they ought to do” by reason of “his labor theory of value.” Namely his theory that selling prices, at least in the long run, are fixed by production costs—and the alleged objective value of goods by the incorporated quantity of abstract labor. It turns out that neither the complementarity of temporal preferences nor the adjustment role of equilibrium prices (in the direction of the long-run equilibrium, in which each factor finds itself to be optimally allocated) are actually inconsistent with the Marxian conception of exploitation.
The Marxian argument can be put as follows. Like any commodity, labor power is sold (at least in the context of the long-term equilibrium, i.e., the equilibrium in the presence of a completed, henceforth optimal allocation of capital) at its cost of production, therefore the employee’s living cost. In the long-run equilibrium, the entrepreneurial profit strictly appropriates the remuneration of the margin between the employee’s total working time and the working time strictly required to cover the employee’s living costs; that said, when economy does not find itself in the long-run equilibrium, salary and entrepreneurial profit will both oscillate around a level strictly equal to the production cost. Hans Hermann Hoppe’s answer (inspired by Eugen Böhm Ritter von Bawerk) can be put as follows. According to Hoppe, Marx’s analysis observes the selling price of any produced good is (at least when demand is properly anticipated) greater than the wages paid to the workers involved in the production of that good; therefore the paid wages only cover the purchase of goods requiring fewer hours of work than those goods the wage earners help to manufacture. Yet there is a complementarity of time preferences between the employee (who prefers a lower and faster remuneration to one more delayed and higher) and the entrepreneur (who prefers the latter to the former); it follows the selling price’s superiority, besides allowing for entrepreneurial remuneration higher than wage bill, supposes convergent interests in the wage earner and the entrepreneur.
Actually Marx’s argument turns out to be misunderstood by Hoppe—and rigorously unaffected by the complementary of time preferences. The exploitation phenomenon Marx describes does not lie in the difference between immediate salaries and postponed entrepreneurial remunerations, what is only a symptom of the aforesaid exploitation. Instead it lies in the furnishing of a salary which, instead of covering the whole daily working time (as it formally seems to do), strictly remunerates the working hours needed to cover the workforce’s subsistence costs. Marx believes that incomplete remuneration to be at the origin of the subsistence—in the long-run equilibrium—of the margin between the selling price of goods and the remuneration of production factors, that margin allowing entrepreneurs to grant themselves a remuneration greater than the distributed wages.
As for the coordination of production factors, Marx utterly recognizes the adjustment to be spurred by short-run fluctuations in the rate of entrepreneurial profit (above and below its long-run level strictly corresponding to unpaid, surplus labor time); and by the concomitant gradual equalization between production costs and the selling price of commodities—including the labor power, whose remuneration is thus rendered equal to its subsistence costs in the long run. Not only does the labor theory of value (such as understood by Marx and before him David Ricardo) claim the fixation of selling prices by production costs to occur only in the long-run equilibrium’s context; but the labor theory of value itself does not occupy the center of Marx’s political economy. The latter is really articulated around the notion of commodity fetishism: as pointed out by Soviet Marxian economist Isaak Illich Rubin.
The flaws of the Marxian theory of exploitation
Despite the flaws of the Austrian criticism, Marx’s approach to exploitation remains wrong. Let us start with recalling the sense of the notion of “abstract working time” in Marxian economics: abstract working time boils down to working time conceived independently of the physical or mental effort associated with the considered task. Even assuming the alleged correspondence between abstract working time and (the long-term level of) exchange value, i.e., selling price, the Marxian elucidation of entrepreneurial profit as the margin (between the exchange value of a given good and the remuneration of the involved production factors) allowed by the payment to the workforce of a wage limited to strictly covering the aforesaid workforce’s subsistence costs is quite unsatisfactory.
The invoked argument is the exchange value of all goods (including labor power) revolves around a long-term level strictly equivalent to the exchange value of the incorporated abstract working time—and therefore strictly equivalent to the production costs of the aforesaid goods, what means the workforce’s subsistence costs in the case of labor power. Hence—according to Marx—the granted wages in the long-run equilibrium actually leave unpaid a whole part of the daily working time by wage earners. The equalization (in the long-run equilibrium) between the workforce’s subsistence costs and the workforce’s remuneration does not imply that the actual working time on the part of a wage earner is partially remunerated. Instead it implies that in the long-term equilibrium, the one established once the allocation of capital in the various branches of industry—given a certain state of economic conditions, from preferences on the part of consumers and investors to technology and demography—has reached its completion, the correct, total remuneration for a wage earner’s complete performance is then fixed at a subsistence level.
It also implies entrepreneurial income is nullified at the long-term equilibrium, in which there is nothing left for the entrepreneur once the factors of production have been wholly remunerated. Therefore entrepreneurial profit can only exist within the framework of the process of capital allocation—with the aforesaid profit remunerating the speed (and the accuracy) of the allocation of production factors in anticipation of jointly mobile and uncertain demand. Austrian economics, especially Mises and Kirzner, extensively deals with the process through which the entrepreneur—when earning its profit—adjusts the daily-generated equilibrium prices in the direction of the long-run equilibrium: in which the allocation of production factors is henceforth achieved and optimized; and in which each selling price is henceforth equal to the production costs.
The Austrian approach to equilibrium prices (and therefore the law of supply and demand) and their gradual entrepreneurial adjustment is sometimes praised for its purported realism. Yet the law of supply and demand such as understood in Austrian economics (but also in neoclassicism) is hardly realist. It claims, indeed, that any subjectively homogeneous good is sold at a unique price which happens to coincide with the intersection of supply and demand curves; but such claims makes sense only in the framework of an auction market in which, indeed, an auctioneer may gather the different supply and demand propositions and determine the equilibrium price. Besides, the Austrian conception of entrepreneurship applies only in the case of those of profit opportunities which are preexisting (and more or less manifested), while a number of entrepreneurs in the real world do not earn a profit through adjusting (towards the long-run equilibrium) the allocation of capital on the basis of preexistent profit opportunities, but through inventing new profit opportunities. What results into the apparition of a new long-run direction for the economy, i.e., the breaking of the previously scheduled long-run equilibrium for the benefit of the economy’s re-direction towards a new long-run equilibrium.
A word about the partnership of opposites in cosmic evolution
The Marxian thought is also one ontological (besides its economic, political considerations). Marxian ontology stresses the driving role of contradiction in human cultural evolution—more precisely, the evolution of the emergent forms of matter in the successive human cultures. Before looking more closely at the Marxian approach to contradiction in human evolution, let us turn to an example of the partnership between opposites in the cosmos. In addition to his unfortunate exclusively determinist view of human history, Marx precisely failed to notice the harmonic, collaborative character of opposites in the course of human cultural evolution—a harmonic character that, indeed, a tearing, conflictual character can accompany sometimes.
The concept of communication, generally defined in terms of consciousness, is an eminent example of a notion whose definition must be updated in view of a sharper distinction between those qualities of its object—the particular genre of things it subsumes—which are necessary and those which are contingent. Conscious communication only comes as a modality of communication, so that the conscious character of a given conscious communication in the cosmos comes as a contingent (rather than necessary, constitutive) character of the genre of things called communication. Communication should be redefined, consequently, as the interaction between two signals: the first acting as a stimulus; and the second providing a response which depends on its interpretation of the aforesaid stimulus. It is really the prerogative neither of humans nor even of animals endowed with conscience; like war, love, hierarchy, and sociability, communication preceded consciousness and a fortiori homo sapiens in the order of the universe. It was even prior to the point where the behavior of the big bang’s daughters, the elementary particles, was already (and has remained to this day) the behavior of communication.
Throughout the cosmos, individual and collective entities are communicating with each other by means of words, chemical signals, or gravitational force—and communicating according to patterns of opposition (integration and differentiation, fusion and fission, or attraction and repulsion) whose iteration pursues itself at each level of emergence. Let us take the very first entrepreneurs of the cosmos—namely the quarks (of which there happens to be six varieties): the communication—via the phenomenon known as “strong force” or “strong interaction”—between two quarks-entrepreneurs which are of the same variety will be a communication of their mutual repulsion. Nevertheless the one between two quarks which are exactly different in the right way will be a communication of their mutual attraction—and one of their attraction towards an additional quark which is of the type suitable for mounting the proton start-up (composed of two quarks “up” and one quark “down”), or the neutron start-up (composed of two quarks “down” and one quark “up”).
The flaws of Marxian ontology—the approach to contradiction and matter
Heraclitus understood the collaborative character of opposites. He nonetheless failed to grasp the perpetually declined (as well as complexified) character of their partnership—and the evolving character of the cosmos (including human societies). Marxian ontology certainly has the merit of stressing the role of contradiction in the becoming of the forms which matter acquires in the world of humans: especially the industrial organization of the mineral or human material, as well as the ideology and the law structuring a human society. Nevertheless it erroneously deals with the evolutionary process in question—and with the driving role of contradiction in the latter.
Starting with its denying the informing action (and the existence) of the archetypal, supra-sensible forms to only retain the passive ideological and legal “superstructures” of the sort of matter which happens to reside in the “relations of production,” themselves serving as the passive organization happening to emerge from the other sort of matter that are the technological resources available at a given time. What is more, Marxian ontology, thus delivering an incomplete understanding of the material foundations for law and ideology, reduces the aforesaid foundations to technology and to the “relations of production.” What renders it, for instance, wholly ignorant of the properly biological compartment of the material backing of ideologies and law systems—the set of genetic dispositions shaped and selected over the course of human biological evolution in groups and individuals.
As for contradiction in the process of human evolution, Marxian ontology exclusively conceives of it as a tearing whose each particular version (characteristic of a particular time of human history) calls for its resolution through the “leap” (to quote Lenin) to a superior bearing of human history, the course of which is, besides, seen as rigorously determined. And seen as spurred—through the successive resolution of the different encountered cases of contradiction—towards a prefixed final stage of human history. Instead contradiction should be envisioned as a harmonious (though sometimes it can be simultaneously tearing) partnership between opposites which perpetually declines itself in various modes over the course of the wholly improvised process of human (and even cosmic) evolution. Such misunderstanding in Marxian ontology is all the more devastating as the aforesaid ontology envisages the interindividual or intergroup conflict as rooted in economic life alone—and as doomed to disappear through a purportedly inevitable return to primitive communism nonetheless conserving the advanced technology.
No more than interclass struggle can be reduced to a struggle engaging properly economic classes, technology and the relations of production cannot be envisioned as the sole and necessary origin of ideologies. Thus a given ideology does not necessarily accompany a given economic system—so that, for instance, capitalism of the globalized and digitized type is not necessarily accompanied by a cosmopolitan ideology (in the sense of moral relativism and universal leveling). What is more, their perceived economic interests—instead of idealistic considerations or their perceived ethnic interests—do not serve as the only and necessary motives on the part of the dominant economic classes for promoting the particular ideologies whose standard bearers they make themselves.
The fact the class struggle does not necessarily occur between economic classes and for economic motives—instead coming as a derived form of the “struggle for life” likely to engage all kinds of classes and motives—was remarkably raised in Vilfredo Pareto’s The Socialist Systems. “The class struggle is only one form of the struggle for life, and what is called “the conflict between labor and capital” is only one form of the class struggle. In the Middle Ages, one could have thought that if religious conflicts disappeared, society would have been pacified. Those religious conflicts were only one form of the class struggle; they have disappeared, at least in part, and have been replaced by socialist conflicts. Suppose that collectivism is established, suppose that “capitalism” no longer exists, it is clear that then it will no longer be in conflict with labor; but it will be only one form of the class struggle which will have disappeared, others will replace them. Conflicts will arise between the different kinds of workers in the socialist state, between “intellectuals” and “non-intellectuals,” between different kinds of politicians, between them and their citizens, between innovators and conservatives.”
The flaws of Marxian ontology—the approach to commodity
In addition to excessive Marxian emphasis on economy when it comes to the backing of superstructures and the background of conflict, a word deserves to be said on the Marxian definition of merchandise. The latter retains (as necessary, constitutive characteristics of the merchandise genre) the use value and the exchange value, as well as the above-mentioned “fetish” character. What amounts to retaining the outlet for the purpose of which the goods are put up for sale; the matter within the aforesaid merchandise—which, in the Marxian approach, sees itself notably assimilated to the “concrete” and “abstract” work incorporated in the fabrication of the aforesaid merchandise—; and finally its form, which is exclusively perceived as the reification of the relations of production.
Such conception notably commits the error of omitting the commodity’s efficient, external cause: namely the entrepreneurial expectations on the course of the demand for consumption or investment. Those expectations turning to be the only effective, rational visage of economic calculation, which means economic calculation is simply impracticable in the absence of the private ownership of capital—and the central planning Marx praises and prophesizes is necessary dysfunctional, irrational. It also commits the error of developing a simplistic approach to the form of merchandises, which really consists of a reification above all of the immaterial capital of fantasy—the stock of dreams and legends which inspires the economic not less than cognitive development in humans.
Conclusion—and a word on Herbert Spencer
The Marxian approach to exploitation in capitalism is flawed in that it misunderstands the alleged equalization (in the long-term equilibrium) between subsistence cost and earned wage as leaving unpaid a whole portion of the working time; instead such equalization implies the working time’s properly correct, total remuneration strictly equates a subsistence level in the long-run equilibrium. Thus entrepreneurial profit does not exist outside the allocation of capital goods; it is not rooted into exploitation, but into the speed (and the accuracy) of anticipations before an uncertain, mobile demand.
As for the Marxian approach to the emerging forms of matter in human evolution, it neglects, for instance, the biological compartment of the involved matter—and restricts the material foundations for ideology and law to the economic, technological compartment. Thus it believes ideologies to come only and necessarily as the “superstructure” of the “relations of production,” themselves the superstructure only and necessarily of technology. The truth is that a certain ideology or law system is not necessarily indissociable of a certain economic system (just like a certain economic system is not necessarily indissociable of a certain ideology or law system). By the way, Marxian ontology fails to notice—among the merchandise’s reified components—the presence of the infrastructure of fantasy, thus neglecting the reification of human dreams and restricting itself to the one of the relations of production.
As for the Marxian approach to contradiction in human evolution, it commits the double mistake of restricting intergroup conflict to the struggle between economic classes for economic motives—and restricting contradiction to disharmony and tearing. It also commits the mistake of believing human evolution to be rigorously predetermined—and scheduled to gradually reach its predefined finish line through gradually solving, dissipating the different successive encountered cases of contradiction. The Spencerian vision of cosmic and human history is materialist (in the sense of denying the ideational, archetypal field) like the Marxian vision of human history. It also has this characteristic in common with its great rival that it underlines the driving role of contradiction—although it conceives of the aforesaid contradiction as a harmonious tension declining itself perpetually. Nonetheless the Spencerian approach remains flawed.
Herbert Spencer rightly believed the partnership between differentiation and integration discerned by Karl Ernst von Baer in the growth of the embryo to be transposable to the evolution of the cosmos and the one of humanity; nevertheless he made the mistake of considering that collaboration exclusively in the mode of the increase in the division of labor. As if, as the division of labor progressed on the scale of the world, individuals became more and more differentiated in their professions; but also more and more integrated in a humanitarian embryo leveling the nations and dissipating the borders. That faith in the advent of a division of labor supplanting the nations (and the war between the nations) to let subsist the sole individuals producing and exchanging on the scale of the world fits very well with Spencer’s anarcho-capitalism; it fits less with anthropological and historical reality. Namely that, as the economic, military interaction between nations increases, those, far from disappearing (for the benefit of a humanity integrating increasingly uprooted, denationalized individuals), only further differentiate—and only further oppose each other. So that the executed integration comes down to an intensification of the intergroup “struggle for life;” and applies as much to the individuals engaged in the global division of labor as to the nations engaged in the increasingly integrated military and economic competition.
That article was initially published in The Postil Magazine‘s January 2021 issue