LABOUR AND VALUE

Labour and Value

Rethinking Marx’s Theory of
Exploitation

Ernesto Screpanti
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© 2019 Ernesto Screpanti

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The sphere of circulation or commodity exchange, within whose boundaries the sale and
purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. It
is the exclusive realm of Freedom, Equality, Property and Bentham. Freedom, because
both buyer and seller of a commodity, let us say, of labour-power, are determined only
by their own free will. They contract as free persons, who are equal before the law.
Their contract is the final result in which their joint will finds a common legal
expression. Equality, because each enters into relation with the other as with a simple
owner of commodity, and they exchange equivalent for equivalent. Property, because
each disposes only of what is his own. And Bentham, because each looks only to his
own advantage […]. And precisely for that reason, either in accordance with the pre-
established harmony of things, or under the auspices of the omniscient providence,
they all work together to their mutual advantage, for the common weal, and in the
common interest. When we leave this sphere of simple circulation or the exchange of
commodities, which provides the ‘free-trader vulgaris’ with his views, his concepts and
the standard by which he judges the society of capital and wage-labour, a certain
change takes place, or so it appears, in the physiognomy of our dramatis personae. He
who was previously the money-owner now strides out in front as a capitalist; the
possessor of labour-power follows as his worker. The one smirks self-importantly and
is intent on business; the other is timid and holds back, like someone who has brought
his own hide to market and now has nothing else to expect but a tanning.
(Marx 1976a, 280)
 Contents

Acknowledgments 1
Introduction 3

1. Abstract Labour as a Natural Substance 15

1.1 The Double Abstraction 17
1.2 Labour as a Natural Abstraction 20
1.3 Value Form and Substance 23
1.4 Abstract Labour as a Productive Force 26

2. Abstract Labour as a Historical Reality 31

2.1 The Labour Exchange: From Hegel to Marx 32
2.2 The Subsumption and Subordination of Labour 34
2.3 Abstract Labour as Resulting from a Social Relation 40

3. Labour Subsumption and Exploitation 45

3.1 The Production of Absolute Surplus Value 48
3.2 The Production of Relative Surplus Value 53
3.3 Wage Dynamics 57

4. Values and Prices 63

4.1 Labour Values 65
4.2 Production Prices 67
4.3 The Transformation Problem 70
5. Measures of Exploitation 75
5.1 Two Paradoxes 76
5.2 A Single System Approach 80
5.3 Back to the Real World 85

Conclusions: Rethinking Exploitation 89

Appendix 1. Reproduction Conditions 101

Appendix 2. Advanced or Postponed Wage Payments? 105
References 111
 Acknowledgements

This work summarises and re-elaborates ideas I have been

developing in several publications and throughout a lengthy
research activity. The conciseness and simplicity I have been finally
able to achieve is the result of a process of refinement that would
have been impossible without the contribution of many friends who
provided their encouragement, their suggestions and criticisms. I
wish to thank them all, but in particular: Ash Amin, Rakesh
Bhandari, Sam Bowles, Paul Cocksho , Ma Cole, Richard Cornwall,
Massimo De Angelis, Jim Devine, Emilio Dìaz, Panayotis
Economopoulos, David Ellerman, Duncan K. Foley, Argo Golski,
Geoff Hodgson, Douglas Kori , Gerald Levy, Yahya M. Madra, John
McDermo , Gary Mongiovi, Edward Nell, Ugo Pagano, Fabio Petri,
Angelo Reati, Roberto Renò, Francesco S. Russo, Neri Salvadori,
Gilbert L. Skillman, Ian Steedman, Emma Thorley, Marco P. Tucci,
Andrew Tylecote, Alberto Valli, Andrea Vaona, Roberto Veneziani,
Paul Zarembka and Maurizio Zenezini. I also wish to thank the
Association for Economic and Social Analysis and the journal
Rethinking Marxism for the permission to use materials previously
published as ‘Karl Marx on Wage Labour: From Natural Abstraction
to Formal Subsumption’ (Screpanti 2017).
 Introduction

© Ernesto Screpanti, CC BY 4.0

h ps://doi.org/10.11647/OBP.0182.09

There are two alternative approaches to the theory of capitalist

exploitation: normative or descriptive. The former aims to prove that
capitalism is unjust because it is based on the extraction of surplus
value from labour power; the la er seeks to explain the social
process through which surplus value is produced.
The normative approach postulates some universal principles of
justice so that capitalism may be examined to reveal the illegitimacy
of surplus value. Various socialist thinkers, more or less implicitly,
assume Locke’s axiom of self-ownership. This posits that, by natural
law, a free individual is the owner of herself, her talents and abilities,
and therefore of the fruits of their use. If another person
appropriates these fruits without the consent of the legitimate
owner, unjust exploitation occurs.
The Ricardian socialist, Thomas Hodgskin (1825, 83), uses this
principle to condemn capitalism. He asserts that “the labour of a
man’s body and the work of his hands are to be considered as
exclusively his own. I take it for granted, therefore, […] that the
whole produce of labour ought to belong to the labourer”. In a
natural system, each commodity is exchanged at its “natural or
necessary price”, which is determined by “the whole quantity of
labour nature requires from man [to] produce any commodity”
(1827, 219). Natural prices yield no profits and workers earn the
entire value they produce. But under a regime of capitalist private
property workers are paid a wage and commodities exchanged at
“social prices” granting a profit. “Whatever quantity of labour may
be requisite to produce any commodity, the labourer must always, in
the present state of society, give a great deal more labour to acquire
and possess it than is requisite to buy it from nature. Natural price
thus increased to the labourer, is social price” (1827, 220). Profits are
unjust because social prices violate natural law.
In my opinion, Marxists must reject the self-ownership axiom,
chiefly because it is politically distasteful. In fact, it can be used to
condemn communism as a form of exploitation of the talented by
untalented people and to censure progressive redistribution policies
as a form of mistreatment of the richest individuals. Not by chance,
Nozick (1974) furtively uses it to justify extreme right-wing policies.
Moreover, the axiom is self-contradictory. Among the various
theoretical problems,1 the following is decisive. A full property right
over a thing entails the right to sell it. Therefore, a person entitled to
self-ownership should have the right to sell herself as a slave. In this
way, an ethical principle that seems to imply a condemnation of
slavery can be used to justify it, as done by Nozick (1974, 331).
Although Marx never says that the extraction of surplus value is
unjust on account of any universal principle of justice, there are
some grounds for a normative interpretation of his theory of
exploitation. To start with, the young-Hegelian philosopher believes
that “the criticism of religion ends with the teaching that man is the
highest being for man, hence with the categorical imperative to overthrow
all relations in which man is a debased, enslaved, forsaken,
despicable being” (Marx 1975a, 182). And even the mature
economist exhibits a certain moral indignation when he declares that
exploitation is “robbery”, “embezzlement”, “looting”, “fraud” or
“theft” (Geras 1985).
Moreover, although he does not like natural law philosophies,
sometimes he seems to assume the self-ownership axiom. For
 p
instance, he states that a worker is the “untrammelled owner of his
capacity for labour, i.e. of his person” (Marx 1996, 178). In a capitalist
system, workers sell the use of their labour power. This use
generates flows of abstract labour, a substance with the capacity to
create value. Workers are paid a normal wage, which is lower than
the quantity of abstract labour they supply in the production
process. The difference is surplus value, a form of surplus labour; a
value created by workers but appropriated by capitalists. And this
looks like the moral criticism of exploitation developed by
Hodgskin.
Finally, Marx gives the impression of believing that the allocation
and distribution criterion prevailing in the non-exploitative system
of final communism, “from each according to his ability, to each
according to his needs”, is an utmost principle of justice. Of course,
one can take this criterion as a descriptive proposition, and contend
that Marx argues that it will factually apply in communism, but not
that it ought to apply (Screpanti 2013). Yet a normative reading
seems to be equally defensible, if somewhat embarrassing.2
On the grounds of these and other clues, several philosophers have
interpreted Marx’s theory in normative terms.3 Some of them resort
to a Kantian notion of morality. One exemplar is Graeber (2013, 223–
6), who argues that, according to Marx, capitalism is “perverse”.
This is because the use of labour to create value distorts “human
values”, produces a fetishist deformation of social relations, a
commodification of labour, a mortification of the workers’ creativity
and, ultimately, a breach of the categorical imperative: capitalists try
to use workers only as means. Another interesting example is
provided by Petrucciani (2012), who proposes a moral philosophy of
exploitation by reinterpreting Marx in the light of Rawls’ theory of
justice, which combines Kantian and utilitarian principles of
morality.
Other interpretations of Marx’s theory as a moral critique of the
abuses of capitalism rely on the influences he was subject to during
his young-Hegelian and Feuerbachian period. In this view, some
principles of justice are supposed to be immanent in History, which
is seen as a progression of the species-being toward self-
 p g p g
consciousness. History has a sense because it has a potential moral
subject, humankind. Capitalism is abusive as it alienates the subject,
deforms his natural needs and expropriates the produce of his
labour.
Coming to modern economics, many scholars acquainted with
Marx4 have proposed refined theories of exploitation in terms of
unequal exchange or undue disadvantage. These are defined as
situations in which an economic agent receives something whose
value is lower than what she gives in exchange or what she deserves.
Injustice may spring from improper welfare or income losses,
unreciprocated product flows, or the unequal distribution of asset
endowments. These authors rarely trace the moral principles they
adopt to judge exploitation as unjust, but they seem to assume the
Aristotelian-Thomist axioms of commutative and distributive justice.
Commutative justice requires that in a transaction between two
individuals, neither party obtain any benefit in excess of what they
give in exchange. Distributive justice prescribes the obligation to
reward everyone proportionally according to their own worth. This
notion is rather extensive in its possible applications. The object to be
given may be power, honours, goods and so on. The “worth”
yardstick might also have different facets: nobility of birth, wealth,
citizenship, merit.
The problem with the two axioms is that they are not well founded
as universal principles of justice. Why should workers be rewarded
in accordance with their worth and why should the exchange of
their labour power be an equal exchange? Because they are the
owners of themselves? Or should we believe that the two axioms are
implied by a natural law justification of private property in general
(White 1956, 34, 40)? Marx’s answer is stark: commutative and
distributive justice (although he does not use these terms) are
“bourgeois rights” rather than expressions of a universal moral law.
He comes across the notion of “distributive justice” in the works of
Pierre-Joseph Proudhon, whom he sarcastically scorns, in The Misery
of Philosophy, as a dreamer of “eternal justice”. In the same book,
Marx (1976b, 142–4) scoffs at John F. Bray’s ideal of equal exchange:
“One hour of Peter’s labour exchanges for one hour of Paul’s labour:
 g
That is Mr. Bray’s fundamental axiom […]. Mr. Bray turns the
illusion of the respectable bourgeois into an ideal he would like to
a ain […]. Mr. Bray does not see that this egalitarian relation, this
corrective ideal that he would like to apply to the world, is itself
nothing but the reflection of the actual world.”
Marx is so convinced that commutative and distributive justice are
not universal moral principles, that he thinks they remain bourgeois
rights even when they are implemented in the first phase of
communism:
as far as the distribution of the [means of consumption] among the individual
producers is concerned, the same principle prevails as in the exchange of commodity-
equivalents: a given amount of labour in one form is exchanged for an equal amount of
labour in another form. Hence, equal right here is still in principle bourgeois right […].
This equal right is still constantly encumbered by a bourgeois limitation. The right of the
producers is proportional to the labour they supply, the equality consists in the fact that
measurement is made with an equal standard, labour (1989d, 86).

Then, Marx tries to account for capitalist exploitation by assuming

that equal exchange prevails in a competitive market. He argues that
capitalists extort surplus labour in the production process, while the
circulation process is regulated by a “law of value” ensuring that
“exchange is between equivalents, an equal quantity of labour for an
equal quantity of labour” (Marx 1989a, 213).
If we could ask Marx to take a position on the normative theory of
exploitation, I am sure he would answer that he is not interested in a
moral condemnation of the abuses of capitalism (Weeks 2010). The
moral philosophy he had espoused in his youth is explicitly
criticised by Marx himself. In his Marginal Notes on Wagner (1989c),
he declares that capitalist appropriation of surplus value has to be
considered “just” on the grounds of the legal rules of the capitalist
mode of production. By these rules, which are to be taken into
account to explain capitalist exploitation, “surplus value rightfully
belongs to the capitalist and not to the worker” (558). Marx makes it
clear that his “analytic method” does not start from “man”, a moral
subject, but from a historically determined social system.
Hussain (2015) convincingly criticises the young-Hegelian
interpretation by arguing that the materialist Marx refuses all
humanist doctrines of history as a process ruled by a holistic subject.
He also refuses all doctrines of the universal essence of man, the
naturalness of his needs and of his productive exchange with nature.
This criticism is important because it exposes the naturalism and the
essentialism of some humanist and moralist readings of Marx’s
theory of exploitation (Screpanti 2007; 2011a).
Marx is adamant in declaring that the “just” wage in a capitalist
system is that determined in the labour market. And on many
occasions, he criticises the socialist doctrines based on universal
principles of justice, which–in the Critique of the Gotha Program–he
defines “dogmas”, “verbal rubbish” and “ideological trash”. Marx’s
Hegelian heritage plays a crucial role in justifying his “realist”
approach. He makes the most of Hegel’s notion of Si lichkeit
(customary ethical life) as a negation of Moralität. The la er is based
on abstract and rational principles of justice, as in Kant. Marx’s
opinion is that universal moral norms do not exist, since all moral
axioms are posited by philosophers or “utopian socialists” and
reflect their preferences. Si lichkeit, instead, is the expression of the
conventional rules prevailing in certain cultures.5 Customary ethical
norms do exist, but are historically contingent. They provide
practical justifications for the sentiments determining social action.
Such a vision induces Marx to adopt a descriptive approach to
ethical as well as political and economic problems,6 and in particular,
a descriptive approach to the theory of exploitation. The production
of profits in a capitalist system is a real, objective fact. Its
understanding in term of workers’ exploitation is a subjective
practice, the practice whereby a social subject, an organised group of
revolutionary workers, forms its own class consciousness. Such an
understanding does not follow from an a-priori philosophical
position. It stems from real processes involving the identification of
class interests. It is not univocal, and is affected by class struggle on
the ideological front. And although it is socially shaped, in the sense
that individuals belonging to different classes are predisposed to
accept alternative ethical beliefs, it does not spring deterministically
from class structure. No social position can prevent a labourer from
believing she is a free commodity seller rather than a subjugated and
 g y j g
exploited wageworker, or to think that profits are the just reward of
the capitalists’ contribution to production.
Summing up, there is a fundamental ambivalence in Marx’s theory
of exploitation, as this has both a normative and a descriptive
connotation, although the la er is prevalent. It involves two
approaches that are incompatible with each other, and requires the
interpreter to make an unequivocal choice between them.
My personal choice endorses the descriptive approach, and sees
the above-mentioned moralist propositions as simply expressing
sentiments typical of a worker’s point of view, as interpreted by
Marx. Do not forget that besides being a social scientist, he is also the
General Secretary of the International Workingmen’s Association,
i.e. the leader and spokesman of a revolutionary organization of
workers. He is therefore entitled to construe their sentiments, claims
and goals, and help bring them to fruition.
A descriptive approach to Si lichkeit implies a sort of ethical
relativism, and one could read Marx’s scientific analysis of
capitalism as being based on a method that resembles hermeneutics.7
Science is not socially neutral: it is impregnated with interpretations,
and these are expressions of class interests. As Ricardo develops his
science adopting a bourgeois stance, Marx (1989e, 520) embraces a
proletarian standpoint: the method of “scientific socialism” consists
in “confining its scientific investigations to the knowledge of the
social movement created by the people itself”.
Yet, having established that Marx’s theory proper is descriptive,
not all problems are solved. There are scholars who think that,
skipping any ethical judgment, a descriptive approach to
exploitation should simply aim to demonstrate its existence. The
proposition that surplus value is created by unpaid labour does not
provide proof because it is an axiom. To be precise, it is equivalent to
the axiom that posits that value is created by abstract labour.
Evidence to provide proof would show that behind abstract labour
there is concrete labour, which produces the use values of
commodities; that only a part of commodities is consumed by the
producers; and that another part is consumed by social classes that
did not contribute to production, e.g. rentiers, speculators and
capitalists.
In this demonstration, exploitation emerges from the fact that
workers supply a certain amount of necessary labour to produce the
value of their subsistence goods and a certain amount of surplus
labour to produce the value of the exploiters’ consumer goods.
Workers enjoy the use values of the former goods, whilst exploiters
enjoy the use values of the la er. Notice that, in such reasoning,
commodities must be consumer goods, for exploitation is defined in
terms of welfare distribution. Investments represent a use of current
output that contributes to increasing future consumption. Since we
wish to avoid any ethical judgment, we raise no question about who
is the legitimate owner of surplus value and who has the legitimate
power to decide on investments. We only consider the effects of
income distribution and investment decisions on the goods
consumed by the workers and the exploiters, in both the present and
the future. If all consumption accrues to the workers, there is no
exploitation.
Then, imagine a system of “pure capitalism” in which the workers
consume their entire wages and the capitalists invest their entire
earnings. In this case, necessary labour produces the workers’
current consumption and surplus labour serves to increase their
future consumption. There is no exploitation, because all final
products go to the workers, sooner or later.8
In fact, consider the case of a socialist economy in which the
minister of production, as an agent of the workers, decides to
earmark a part of the current output and invest it. The managers of
socialist enterprises are paid a salary for their organizational activity.
There is no difference from the case of a capitalist system in which
the “functioning capitalists” are paid a “wage of management”
(Marx 1998, chapter 23; Screpanti 1998), and in which all “profit of
enterprise” exceeding this wage is invested.
In the long run, investment activity may further the escalation of
real wages and grant “a constant growth of the mass of the labourers
means of subsistence” (Marx 1996, 523). Actually, “a noticeable
increase in wages presupposes a rapid growth of productive capital.
 g p pp p g p p
The rapid growth of productive capital brings about an equally
rapid growth of wealth, luxury, social wants, social enjoyments”
(1977, 216).
This means that reinvested surplus value is not misuse from the
point of view of the workers’ welfare, and that exploitation boils
down to the consumption capitalists enjoy in excess of their wages of
management. A Saint-Simonian notion of exploitation applies in this
approach: there is exploitation whenever some idle classes enjoy
goods they did not contribute to producing. It is not by chance that
the “working” or “industrial” class, according to Saint-Simon,
includes the entrepreneurs.
Marx’s view is different: all surplus value is a result of exploitation,
independently of how it is spent. In a capitalist system, there is
exploitation even if all profits are spent under the urge to
“accumulate, accumulate!” What really ma ers is the identification
of the social subject who controls surplus labour: “transformation of
profit into capital is no more than employing a portion of excess
labour to form new, additional means of production. That this takes
place in the shape of a transformation of profit into capital signifies
merely that it is the capitalist rather than the labourer who has
surplus labour at his disposal” (Marx 1998, 836–7).9
Those who control the production process take the production
decisions, regulate the exertion of labour activity and decide the
expenditure of surplus value. In a socialist system, a part of the
output can be saved, but its control is assigned to the workers, and
there is no exploitation; in a capitalist system, control of surplus
value pertains to the capitalists and there is exploitation.
In any case, Marx the scientist does not aim to demonstrate the
existence of exploitation. He endeavours to explain it, and does so by
bringing to light its social footing. He seeks to account for how
surplus value is extracted within the legal and ethical system typical
of capitalism and on the grounds of its institutions and social
relations.
The gist of the explanation is as follows. Abstract labour is the
labour time a worker spends in a capitalist production process. The
capitalist dominates this process because the worker has entered into
 p p
a contract of subordinate employment. The worker “freely” accepts
this contract. She is not a slave; she is a legal entity endowed with
freedom of contract. However, normal wages do not enable her to
save the income she could use to earn a living autonomously.
Therefore, the worker’s legal freedom is spoiled by the permanent
state of need that compels her to accept wage labour. In other words,
the worker is not free not to accept the employment relationship
(Laibman 2015, 22; Yoshihara 2017, 633). Subsequently, her real
freedom to choose is cancelled out in the labour process, in which
she is subject to the capitalist’s power (Screpanti 2011b). This is the
core of capitalist exploitation: the employer’s power compels the
worker to produce commodities whose value is greater than her
wage, and that same power grants control of the product of labour
activity.
The problem is that, probably due to the fundamental ambivalence
concerning the descriptive/normative a itude, Marx expounds his
theory without resolving certain ambiguities when dealing with
abstract labour, exchange value and the use of labour power. This
book seeks to disentangle them.
In chapter 1, I present the pars destruens of my interpretation.
Abstract labour is a logical category defined via an intellectual
process of abstraction from the characteristics of concrete labour. On
the other hand, Marx also sees it as a real thing and often treats it as
a natural force that creates value. This is a sort of metaphysics of
value creation, expressed with a metaphor taken from the labour
process: an “expenditure of human brains, nerves, muscles”, which,
however, are aspects of concrete labour. A series of inconsistencies
ensues, that impair the labour theory of value. Besides the vices of
essentialism and naturalism, the thorniest problem is caused by the
fact that labour values are variables of a purely technological nature,
as they only depend on the technical coe cients of production. Not
by chance, Marx defines them as manifestations of a productive force
operating in a system of “commodity production in general” rather
than as expressions of capitalist social relations.
In chapter 2, I develop the pars construens of my interpretation, and
argue that most of such inconsistencies can be disposed of, provided
 g p p
that the concept of abstract labour is interpreted in the light of what
Marx writes in the Economic Manuscript of 1861–63 and in Results of
the Direct Production Process. In these works, he expounds the notions
of “subordination” and “subsumption” and opens a new path to the
theory of the employment relationship. The former notion is defined
as the subjection of the worker to the capitalist, that is, the worker’s
obligation to execute labour activity under the command of the
employer. The la er is meant as the appropriation of labour’s
productive power by capital, that is, the manifestation of labour
capacities as a ributes of capital. Here, Marx considers “irrational”
the idea that a worker is a commodity seller. Instead, he
characterises the employment contract as an agreement establishing
a relationship of subordination. He puts forward, far in advance of
the modern theory of relational contracts, the notion of the
employment contract as an institution that generates an authority
relationship. In this view, abstract labour is indeed a real abstraction,
but one that emerges from a social relation, not from a natural
substance: it is the labour time a wageworker spends in a production
process under the command of a capitalist.
In chapter 3, I focus on exploitation and argue that it is carried out
through the capitalist control of the labour process. Moreover, I
show that labour values do not play any role in determining the
production of surplus value and that a theory of value only serves as
an instrument of measurement. On the one hand, Marx explains the
production of surplus value by investigating the management of the
labour process under formal and real subsumption. On the other
hand, he does so by examining the vicissitudes of class struggle
within and outside the factories. Class struggle plays a decisive role
in determining the dynamics of labour productivity and wages — in
other words, the rate of surplus value.
In chapter 4, I try to bring to light the fundamental reason why the
labour theory of value is problematic. The reason is deeper than
what emerges in the transformation problem. It is not so much that a
uniform profit rate prevails with production prices, but rather that a
profit rate exists. In fact, labour values are determined
independently of profits. They hold in a non-capitalist economy and
 p y p y p y
are therefore unsuitable for measuring surplus value. Fortunately,
the theory of exploitation does not depend on the labour theory of
value and can be expounded by resorting to production prices.
Almost all Marxists have now accepted this truth. Most of them
have been convinced by a “new interpretation” which has been able
to translate the value of net output into an amount of living labour
and the rate of surplus value into a ratio between unpaid and paid
labour. What produced such a result is the use of labour
productivity as a numeraire. Another way to measure exploitation in
labour units is to normalise prices with the wage, thus defining them
as labour commanded. I expound these arguments in chapter 5, but
not before bringing to light two paradoxes that emerge when values
are determined in embodied labour. One concerns the inability of
labour values to account for technical change in a capitalist
economy; the other is caused by Marx’s definition of equal exchange.

1 Arneson (1991) and Cohen (1995) expose all the weaknesses of the self-ownership axiom.
See Philmore (alias David Ellerman) (1982) for an ironic critique. Instead of the self-
ownership axiom, socialist reformers should adopt the rule Arrow (1973, 248) defines
asset egalitarianism: “all the assets of society, including personal skills, are available as a
common pool for whatever distribution justice calls for”.
2 Embarrassing, because it is consistent with a moral justification of communism founded
not on natural law, but on no less than divine law. In fact, the original postulation of the
communist distribution criterion appears in the Bible (Acts 2: 44–5).
3 See Holmstrom (1977), Gould (1978), Husami (1978), Cohen (1979; 1989; 1995), Reiman
(1981; 1983), Elster (1985), Peffer (1990).
4 For instance, Roemer (1982; 1994), Bowles and Gintis (1988; 1990), Roemer and Silvestre
(1993), Wright (2000), Yoshihara and Veneziani (2009), Veneziani and Yoshihara (2015),
Hahnel (2019). One of the first thinkers who developed such a kind of approach was the
Ricardian socialist John Francis Bray (1839).
5 Weirdly, Si lichkeit, according to Hegel, is also a dialectical synthesis of Moralität and
Recht. Hegel reintroduces a normative approach to morality when he interprets History
as a dialectical process ruled and finalised by Rationality.
6 Engels (1987; 1988; 1990) elaborates this approach more systematically than his friend
does. Among the scholars who refuse the interpretation of Marx as a moralist critic of
capitalism, see Tucker (1969), Wood (1972; 1984), McBride (1975), Miller (1984).
7 See Jameson (1981), Dowling (1984), Jervolino (1996).
8 See Samuelson (1971), Von Weizsäcker (1971; 1973), Vicarelli (1981).
9 The italicised words come from David Fernbach’s translation (Marx 1981). The
International Publishers edition uses the words “disposes of excess labour”.
 1. Abstract Labour
as a Natural Substance

© Ernesto Screpanti, CC BY 4.0

h ps://doi.org/10.11647/OBP.0182.01

In the 1857 introduction to the Grundrisse, Marx argues that scientific

investigation starts from the historical and empirical data the
scientist assumes as “effective presuppositions”. These data are a
complex representation of concrete reality and are what has to be
explained. Scientists, by means of abstraction, posit simple
categories that identify the profound essence of the surface
appearance of things. They then use these abstractions to posit and
explain concrete facts, going from the essence back to its
phenomenal manifestations. Explanation works as a theoretical
reconstruction, based on abstract categories, of the many
determinations of effective presuppositions. “But”, Marx asks, “have
not these categories also an independent historical or natural
existence preceding that of the more concrete ones?” (1986a, 39).
His answer is: “Ça dépend”. He thinks that some abstract notions
may correspond to real facts and that in capitalism this possibility is
a ained in the category of “abstract labour”. “Labour”, he claims,
“seems to be a very simple category … Considered economically in
this simplicity, ‘labour’ is just as modern a category as the relations
which give rise to this simple abstraction” (40). He is quite explicit
about the real existence of abstract labour: “In the most modern form
of the bourgeois society … the abstract category ‘labour’, ‘labour as
such’, labour sans phrase, the point of departure of modern
economy, is first seen to be true in practice” (41).
Now, if certain categories have “an independent historical or
natural existence”, then abstract labour could be considered real in a
natural sense. For example, it may be described as a generic material
activity implemented by labour in the transformation of nature
(Kicillof and Starosta 2007a, 23; 2007b, 16). Thence, the physiological
force expended in production is a natural abstraction that becomes
social when commodities are exchanged (Robles-Bàez 2014, 295).
Interpreted like that, the theory of abstract labour seems to give rise
to a sort of a physicalist metaphysics as it postulates that the
category “labour”, posited by a process of logical abstraction, is
incarnated in a natural substance capable of positing its own
presupposition in the real world. Heinrich (2004, 2) stigmatises this
as a “substantialist-naturalist theory of value”.
However, if real abstraction is interpreted as the result of a
historical process (Finelli 1987; 2005; Toscano 2008), it is not such an
arcane thing. Abstract labour here becomes a presupposition of
capitalist production, implying an overcoming of the social
relationships based on personal bonds (slavery, serfdom) and the
establishment of wage labour as a fundamental institution of
capitalism.
In the present chapter, I seek to resolve the “ambivalence” or
“ambiguity”1 of Marx’s characterization of abstract labour. I show
the inconsistencies caused by a ributing natural properties to it, and
criticise what Postone (1978; 1993) defines as a “trans-historical”
account of abstract labour. This is the pars destruens of my
interpretation.2
In section 1, I reconstruct the method Marx uses to identify abstract
labour in the first two parts of Capital, volume 1. In part 1, he defines
abstract labour by distinguishing it from concrete labour and
 y g g
treating it as a productive force, that is, a substance that creates the
value of commodities. However, he determines abstract labour
within a system of “simple commodity production” that abstracts
from capitalism and the wage relationship. In part 2, he introduces
capital and the wage and treats abstract labour as a substance
supplied by workers in a capitalist production process. This
substance is appropriated by capitalists by the purchase of a
commodity, the use value of labour power. The employment
contract, in part 2, is seen as an agreement involving commodity
exchange.
I deal with the notion of labour as a substance in section 2, where I
argue that it can be considered a “natural” substance only when it is
investigated within a model of simple commodity production or
production in general. This substance is often regarded as a flow
emanating from a stock of labour power embodied in the worker’s
organism. Thus, it is characterised as a natural force. I contend that
the very a empt to treat it in this way makes it prisoner of concrete
labour.
Then, in section 3, focusing on the notions of “value substance”
and “value form”, I observe that Marx’s use of the Aristotelian
notions of “substance” and “form” does not aid the understanding
of abstract labour as a concept. Moreover, the idea that labour
creates value sometimes induces Marx to use certain metaphors in
an inaccurate way and to improperly postulate a causal relationship
between the substance and the form of value.
Finally, in section 4, I argue that the treatment of abstract labour as
a productive force is the main reason behind the inconsistencies
which emerge in the transformation of labour values into production
prices. Since labour values are determined by abstracting from
capitalism, they are unable to measure correctly the capitalist
exploitation of wageworkers.

1.1. The Double Abstraction

Marx (1996, 48) develops an analysis of abstract labour as a “value-
creating substance” in part 1 of the first volume of Capital in
particular, where he identifies it on the grounds of two abstraction
procedures: a methodological and a substantive one.
Value is defined at the highest level of generality, that is to say, by
referring it to simple commodity production, a “mode of production
in which the product takes the form of a commodity, or is produced
directly for exchange”. This is supposed to be “the most general and
most embryonic form of bourgeois production” (93). In reality, as
highlighted by Lippi (1979), Marx postulates a hypothetical system
of “production in general”, a production process “common to all
social conditions, that is, without historical character” (Marx 1986a,
245–6). In this system, capital is not yet a social relationship but
“appears to be a mere thing, and entirely to coincide with the ma er
of which it consists” (437) or with its labour content.
Such a notion of “production in general” occurs in various works,
especially the Grundrisse and A Contribution to the Critique of Political
Economy. Sometimes Marx uses it to criticise theories of value that
abstract from capitalism and history. However, he himself resorts to
this abstraction procedure to define value and even to determine the
value of capital as labour embodied in the means of production:
The relation of capital, in accordance with its content, to labour, of objectified labour to
living labour–in this relation where capital appears as passive towards labour, it is its
passive being, as a particular substance, that enters into relation with labour as creative
activity–can in general only be the relation of labour to its objectivity, its physical
ma er–which must be dealt with already in the first chapter which must precede that
on exchange value and must treat of production in general (224–5).

Thus, Marx (1996, 70) builds a model of society in which “the

dominant relation of man with man is that of owners of
commodities”. In other words, a model of society based on the
production and exchange of commodities, but not on capitalist
exploitation: “Commodity production in general” is production
“without capitalist production” (Marx 1987, 159). In a le er to
Engels, Marx (1983, 368) clarifies that, at this level of analysis, he
abstracts from capital as a social relation: the “instalments [of A
Contribution to the Critique of Political Economy] contain nothing as yet
on the subject of capital, but only the two chapters: 1. The
Commodity, 2. Money or Simple Circulation”. Consequently, he also
abstracts from the wage: “Wage is a category that, as yet, has no
existence at the present stage of investigation” (Marx 1996, 54n).
In other words, Marx uses this method to isolate the determination
of value from capitalist social relations. There is an explicit
methodological purpose: to study value and labour at the highest
level of generality. Yet the real motive is another one: to identify
abstract labour as the sole productive force capable of producing
value; as the sole value-creating substance. In fact, Marx believes that
this level of analysis is necessary to ascertain that value is produced
not by exchange but by abstract labour in the production process. In
another section below, I recall the problem in Ricardo’s value theory
that induces Marx to use the methodology of abstraction based on
“commodity production in general”. Meanwhile, note that this
approach defines the real abstraction of labour by reducing social
activity to commodity exchange (Sohn-Rethel 1978, 20, 26; Toscano
2008, 281), and it determines value as a generic variable pertaining to
the reproducibility of commodities (Ahumada 2012, 844).
Within this level of analysis, Marx delves into another procedure of
abstraction; one that is substantive rather than methodological. The
exchange value of commodities does not depend on the concreteness
of their use values. Thus, labour as its substance cannot consist of
concrete labour. Yet it cannot be a merely conceptual abstraction.
Since value is an objective reality, the labour that creates it must also
be a real abstraction. Abstract labour so defined is a value-creating
substance in that it is a productive force. Productive labour in
general (Starosta 2008, 28) is the sole productive force that produces
new value:
If the special productive labour of the workman were not spinning, he could not
convert the co on into yarn, and therefore could not transfer the values of the co on
and spindle to the yarn. Suppose the same workman were to change his occupation to
that of a joiner, he would still by a day’s labour add value to the material he works
upon. Consequently, we see, first, that the addition of new value takes place not by
virtue of his labour being spinning in particular, or joinering in particular, but because
it is labour in the abstract, a portion of the total labour of society; and we see next, that
the value added is of a given definite amount, not because his labour has a special
utility, but because it is exerted for a definite time. On the other hand, then, it is by
 virtue of its general character, as being expenditure of human labour power in the
abstract, that spinning adds new value (Marx 1996, 210–1).

Thus, abstract labour is defined by ignoring the specific qualities of

the workers’ labour activities, their skills, competencies, and
performances. It is seen as a purely quantitative magnitude.
Concrete labours are accordingly characterised in qualitative terms.
They differ in various aspects, which can be reduced to three
dimensions: (1) differences in the kinds of competencies (e. g.,
between those of a carpenter and those of a bricklayer), (2)
differences in the complexity of competencies (e. g., between those of
a bricklayer and those of an architect), and (3) differences in the
degrees of performance e ciency (e. g., between the work a of
carpenter who produces a table in one day and that of a carpenter
who produces one in two days).
Capital and the wage are not introduced until part 2 of Capital,
volume 1. Chapter 6 focuses on the employment contract, defining it
as an agreement for “the sale and purchase of labour power”:
In order that our owner of money may be able to find labour power offered for sale as a
commodity, various conditions must first be fulfilled. The exchange of commodities
itself implies no other relations of dependence than those which result from its own
nature. On this assumption, labour power can appear upon the market as a commodity,
only if, and so far as, its possessor, the individual whose labour power it is, offers it for
sale, or sells it, as a commodity. In order that he may be able to do this, he must have it
at his disposal, must be the untrammelled owner of his capacity for labour, i.e. of his
person (178).

Under this type of contract, the worker receives the value of labour
power as payment. He is the owner of a real asset, “labour power or
capacity for labour”, a thing consisting of “the aggregate of those
mental and physical capabilities existing in the physical form, the
living personality, of a human being” (Marx 1976a, 270).3 He sells the
use value of this asset, which thus acquires a new characterization.
Besides being a substance that creates the value of commodities, now
it is a commodity in itself. As such, it has an exchange value and a
use value. “Its use-value consists in the subsequent exercise of its
force” (Marx 1996, 184). Note, incidentally, that what Marx usually
labels “labour power” (Arbaitskraft) he occasionally calls “labour
capacity” or “capacity for labour” (Arbeitsvermögen,
Arbeitsfähigkeit). Moreover, he sometimes uses “labour” as an
abbreviation for “labour capacity”.

1.2. Labour as a Natural Abstraction

In another definition, the use value of labour power consists of the
capacity of abstract labour to “crystallise” or “congeal” into the
value of a good (50, 55, 61, 200) so that “all surplus value […] is in
substance the materialization of unpaid labour” (Marx 1994, 534).
This use value ensues from an expenditure or use of the labour
power owned by a worker. In fact
productive activity, if we leave out of sight its special form, viz., the useful character of
the labour, is nothing but the expenditure of human labour power […]. The value of a
commodity represents human labour in the abstract, the expenditure of human labour
in general […] It is the expenditure of simple labour power, i.e., of the labour power
which, on average […] exists in the organism of every ordinary individual (Marx 1996,
54).

It is evident that Marx is talking about a flow when he defines this

use value as “human labour power in its fluid state, or human
labour” (Marx 1976a, 142) and when he observes that it “manifests
itself only in the actual usufruct, in the consumption of the labour
power” (1996, 185). In fact, “the purchaser of labour power
consumes it by se ing the seller of it to work. By working, the la er
becomes in actuality what before he only was potentially, labour
power in action” (187). Marx is meticulous in arguing that “the
owner of the labour power […] must constantly look upon his labour
power as his own property, his own commodity, and this he can
only do by placing it at the disposal of the buyer temporarily, for a
definite period of time. By this means alone can he avoid renouncing
his right of ownership over it” (178). Obviously, the worker can
remain the owner of labour power, notwithstanding his sale of it,
only if it is a stock. What is actually sold is the usufruct of a flow.
This flow seems to be endowed with a creative power:
Human labour creates value, but is not itself value. It becomes value only in its
congealed state, when embodied in the form of some object. In order to express the
value of […] linen as a congelation of human labour, that value must be expressed as
 having objective existence, as being a something materially different from the linen
itself, and yet a something common to the linen and all other commodities (Marx 1996,
61).

Thus, considering the various definitions introduced so far, abstract

labour turns out to be: a flow emanating from a labour power that is
a physical thing; a fluid that congeals into an objective form; a power
that creates an objective value. Hence, the flow itself is an objective
magnitude. Is it objective in a physical sense? Alas! Abstract labour
is often characterised as a physical force, and the use value of labour
power as the “exercise of its force” (184). For instance, it is defined as
“a productive expenditure of human brains, nerves, muscles” and an
expenditure of the simple labour power that “exists in the organism
of every ordinary individual” (54); as “an expenditure of human
labour power in a physiological sense” or “the aggregate of those
mental and physical capabilities existing in the physical form, the
living personality, of a human being” or the “labour power which
exists only in his living body” (Marx 1976a, 137, 270, 272).
Understandably, some commentators have used these definitions
to reduce the value-creating substance of abstract labour to the
expenditure of bodily energy (Kicillof and Starosta 2007b, 17). They
are in good company, since Marx (1986a, 393) himself declares that
“what the free worker sells is always only a particular, specific
measure of the application of his energy. Above every specific
application of energy stands labour capacity as a totality”.
According to this view, abstract labour is the supply of human
energy in productive activity (Kicillof and Starosta 2007a, 20). After
all, “muscles burn sugar” (Haug 2005, 108; see also Starosta 2008,
31).
However, the most careful theoreticians of the value form have
stigmatised such interpretations, observing that the definition of
abstract labour as the expenditure of a physiological force leads to a
rough understanding of value and to the loss of the social character
of labour activity (Eldred and Hanlon 1981, 40).4 In plain English,
“muscles do not burn sugar in the abstract” (Bonefeld 2010, 266).
According to Sraffa, the “conception that a ributes to human labour
a special gift of determining value” is “a purely mystical
conception”; the theory of value must do “away with ‘human
energy’ and such metaphysical things”.5
At any rate, an energy theory of abstract labour is incongruous. In
fact, the supply of energy or force–or the expenditure of brains,
nerves and muscles–pertains to concrete labour, exactly the stuff
from which abstraction is done. And it is easy to see that two
workers who carry out different concrete labours of the same degree
of complexity, and who therefore receive the same hourly wage–for
instance, a call centre operator and a mechanical fi er–supply
different kinds and quantities of energy and different forms and
quantities of brain, nerve and muscle expenditure. Yet their abstract
labours must have the same magnitude. To sum up, several
definitions which Marx puts forward in part 1 of Capital, volume 1,
lead to a characterization of abstract labour as a physical reality, a
natural substance. This, however, pertains to properties of concrete
labour.

1.3. Value Form and Substance

In chapter 1 of Capital, Marx refers to Aristotle’s conception of the
relationship between ma er, or substance, and form.6 Abstract
labour is the substance of value and value is a form; the substance
creates something that takes the form of value. He acknowledges the
scientific merits of Aristotle’s analysis of value and his intuition that
money is a development of the simple value form. However, he also
ascribes to the Greek philosopher a shortcoming: Aristotle did not
understand that a common substance underlies the value
equivalence among different commodities. Marx justifies him by
arguing that he could not understand this truth since there was no
abstract labour in the slave economy in which he lived. In fact, the
common substance is none other than the abstract labour that
“materialises” itself into the value form.
According to Engelskirchen (2007a; 2007b), who overtly follows an
Aristotelian approach, the “structural cause” or “material cause” of
the value form is the market system by which the products of labour
are exchanged as commodities. This interpretation, however, only
accounts for the reason why commodities have an exchange value
and does not clarify that value is created by abstract labour. The
la er is an important proposition for Marx, but it raises two
problems, as it seems to postulate: 1) an identity relationship
between value and embodied labour, 2) a causal relationship
between the substance and the form of value.
Regarding the first problem, see chapter 4 below. Here, I limit
myself to a few remarks. According to some interpreters, Marx’s
analysis of the value form aims to prove that abstract labour is the
substance of value. The reasoning seems to go as follows: if two
commodities have the same exchange value, it is because they have a
common substance; this can only be the abstract labour used to
create their value, as would be proved by the fact that the value
magnitude of the two commodities coincides with the quantity of
labour contained in them. In a few words, “products can only be
measured by the measure of labour–by labour time–because by their
nature they are labour” (Marx 1986a, 532).
Now, the fact that 20 kilos of coffee exchange for 10 meters of fabric
does not imply that the two commodities have some substance in
common. It only means that coffee and fabric are exchanged at the
ratio pf /pc=(20 kg coffee)/(10 m fabric), from which pf(10 m
fabric)=pc(20 kg coffee), where pf and pc are the prices of fabric and
coffee. The denomination of value in terms of money does not
change this fact. In theory, money can be an arbitrarily chosen
numeraire: the dollar, the price of gold, of wheat, and so on. It can be
the price of labour, w=1, in which case it might happen that vc(20 kg
coffee)=(40 h labour), where vc=2, is the labour embodied in a kilo of
coffee (with zero profits) or the labour commanded by it (with
positive profits). Here, the identification of the value magnitude as a
quantity of embodied labour is a result of the restrictive hypothesis
of zero profits. Therefore, the proposition that abstract labour is, in
general, the substance of value is not proved. It has to be assumed
axiomatically (Arthur 2001, 34), and Marx assumes it in the first
pages of Capital, in which the zero-profits hypothesis is implied by
the model of simple commodity production.
 With regard to the second problem, can the relationship between
the substance and the form of value be a proper causal relationship?
The answer is no. One could say that the “material cause” of a table
as a concrete object is the timber it is made of, meaning that timber is
the ma er (or the substance) of the table (Reuten 2005, 84). But is it
sensible to argue that timber is the “e cient cause” of the table?
That is, that timber is the cause of a process that produces the table
as an effect?
What one can say is that the concrete labour of a carpenter
produces the table in the labour process. Then, one could wrongly
believe that it is possible to use a metaphor that presents abstract
labour as an action that produces the value form as an effect.
Actually, Marx sometimes expresses the substance-form relationship
in terms of the dynamic movement of a substance from “potency” to
“act” that results in the production of a form. This appears to occur
as the “effect” of a “power” which is its e cient cause: “As an effect,
or as inert being, of the power which produced it” (Marx 1986a, 532).
Thus, it seems that labour creates value, that the value of a table is
created by the abstract labour of the carpenter. Indeed, when he says
that labour creates value, Marx metaphorises the labour process into
the valorisation process. Yet forcing the notion of “e cient cause” in
this way is not correct.
A scientifically valid metaphor must be reducible (Accame 2006). A
metaphor is a linguistic construct that uses a signifier taken from
another construct. It is reducible when it is possible to single out
similitudes between the two constructs that can be decoded in terms
of physical or mental operations. For instance, if I say, “an artist
creates a picture”, and then, “a carpenter creates a table”, in the
second proposition I am using the term “creates” metaphorically. I
can reduce this metaphor to observable and comprehensible
similitudes between the two propositions: “artist” is likened to
“carpenter”, as they have in common the condition of being people
who use instruments to transform ma er; “picture” is likened to
“table” in that they are objects produced by human activity.
Therefore, the term “creates” in the second proposition has a
comprehensible meaning. This meaning adds to knowledge, for
 p g g g
“creates” is not a simple synonym of “produces”: you can say a
carpenter creates a table if you mean that he not only produces a
rough object of use but also puts a surplus of aesthetic worth into it.
According to Vaccarino (1988), many metaphors are irreducible as
they contain a false similitude, that is, a comparison based on the
negation of physical or mental operations or characteristics. So,
“God created the universe” is irreducible, for “God” is defined not
on the ground of characteristics possessed in common with “artist”
or “man” but on the ground of characteristics that negate those of
man (eternity, infinity, omniscience, omnipotence, omnipresence,
etc.). These are not reducible to physical or mental operations. The
proposition “God created the universe” is a metaphor devoid of any
scientifically acceptable meaning.
The metaphor “abstract labour creates value” is irreducible for this
same reason. One can say, “the concrete labour of a carpenter creates
a table as a concrete object”. However, if one says, “the abstract
labour of the carpenter creates the value of the table”, one is using an
irreducible metaphor because abstract labour is defined as a
negation of concrete labour: no characteristics of abstract labour can
be likened to characteristics of concrete labour, and none is reducible
to physical or mental operations. On the other hand, if to avoid a
purely negative definition of abstract labour, one also a empts an
operational definition in terms of energy or physical effort or the
expenditure of brains, nerves and muscles, one falls into
contradiction. In fact, as already observed, the expenditure of these
kinds of effort pertains to concrete labour. Summing up, the
meaning of “creates” in the metaphor of value creation by abstract
labour is obscure and devoid of any scientific merit.7

1.4. Abstract Labour as a Productive Force

Marx says that “value is a relation between persons […] concealed
beneath a material shell” (1976a, 167) and that exchange value
“causes the social relations of individuals to appear in the perverted
form of a social relation between things” (1987, 275). Again, “the
value of commodities is the very opposite of the coarse materiality of
their substance, not an atom of ma er enters into its composition
[…] the value of commodities has a purely social reality” (1996, 57).
These propositions convey the notion of value as a social relation.
Labour value, as an essence that manifests itself in the appearance of
commodity relations, should reveal to scientific investigation the
social relations of production that are concealed by circulation.
However, once determined analytically, labour values are only able
to reveal the structure of “socially necessary labour”. That is, the
simple technical arrangement of production–precisely what is to be
expected if value is determined under a model of production in
general. In fact, as I will detail in chapter 4, knowledge of the
technical coe cients is su cient to determine labour values, while
knowledge of the rate of exploitation is not necessary. This may vary
when the power relations between classes change, but if the
technical coe cients do not change, labour values remain unaltered.
Thus, the labour theory of value–that is, the theory that determines
the value of commodities in terms of the quantity of abstract labour
used to create them–is unable to shed light on the fundamental
social relationship in capitalism: that of exploitation.
The di culty also emerges in the problem of transforming labour
values into production prices. I take a closer look at this problem in
chapters 4 and 5. Here, I only make a few comments. A fundamental
tenet of Marx’s reasoning is that the aggregate substance of
embodied labour cannot be altered by the transformation, which
only modifies the form. After all, the market does not add anything
to the quantity of surplus value arising from the production process,
since this quantity is none other than crystallised labour. Marx
explicitly argues that the market, by determining the profit rate
uniformity, merely redistributes surplus value among industries and
cannot raise it. Otherwise, prices would not be phenomenal
manifestations of the value substance, but value-creating substances
in their own right. Marx maintains that there is no surplus-value
creation in the circulation process. However, this expectation is
frustrated by the solution of the transformation problem. It is
logically possible for the overall surplus value, as calculated in a
price system, to be higher (or lower) than the overall surplus value
p y g p
as calculated in the corresponding labour value system. The rates of
surplus value determined in the two systems do not generally
coincide. The reason for this incongruity is profound and significant
and resides in the two valuation systems’ different capacities to
express the social relations of production.
Labour values are forms that express the technical conditions of
production and only those social facts that affect technical
conditions.8 In contrast, production prices also express social
conditions of production: any variation of class relations in the
production sphere causes an alteration in production prices. Labour
values and production prices exhibit this different capacity to
express social relations because the former are determined in a
system of simple commodity production while the la er are
determined in a system of capitalist production.9
Marx’s acceptance of the labour theory of value has been
stigmatised as a residue of Ricardian naturalism (Lippi 1979). As
also highlighted by some theoreticians of the value form,10 Marx is
unable to fully move on from Ricardo. On the one hand, he argues
that value is a social form, on the other, he sometimes reduces the
value-creating substance to a physical expenditure of labour power.
In such a substantialist-naturalist approach to value, Marx remains
prisoner of the classical economists (Heinrich 2004, 3).
To be sure, he tries to correct the view, entertained by some
classical authors, that a productive contribution is also provided by
land and capital. He argues that land and capital inputs help
produce “riches” or “material wealth”–that is, the physical
quantities of commodities–and that their impact on the production
of new value is nil. The same is true with concrete labour. He holds
that only abstract labour produces value, and believes that, to reveal
this, he must assert that abstract labour is a productive force. Then,
in order to identify labour as the sole value-creating substance, he
determines value within a system of production in general which
abstracts from profits and wages. In this way, abstract labour as a
“productivist motor” (Fracchia 1995, 356) is identified as an
ontological and trans-historical category pertaining to a neutrally
evolving technology (Postone 1993)11 in a non-capitalist production
system.
Now, in Marx’s theory of history, the “productive forces” consist of
the physical means of production, the science incorporated into
them, and the individuals who use them in the labour process, in
other words, the techniques in use. Thus, the workers’ abilities, as
characteristics of concrete labour, should be thought of as part of the
productive forces. The “social relations of production”, on the other
hand, consist of the institutional se ing used to organise production
within a historically determined economic form. An institution
typical of capitalism is the employment contract. Abstract labour is
also typical of capitalism, as it emerges with the wage relationship,
and it should therefore be ascribed to the social relations, not to the
productive forces.
Why does Marx believe it necessary to abstract from wages and
profits to establish that abstract labour is the sole value-creating
substance? The reason is that, in Ricardo’s theory, relative values are
affected by profit rate uniformity in such a way that they do not
coincide with the labour embodied in commodities. This result
seems to impair the very Ricardian view that the value of a
commodity is determined by the labour expended in its production.
To tackle this problem, Marx proposes a thorough rethinking of the
theory of value in terms of an abstraction (Himmelweit and Mohun
1978, 72). He defines value in a non-empiricist way, and takes it as
the causal determinant of empirical phenomena (Milios, Dimoulis
and Economakis 2018, 9). Then he raises the following criticism:
“Though Ricardo is accused of being too abstract, one would be
justified in accusing him of the opposite: lack of the power of
abstraction, inability, when dealing with the value of commodities,
to forget profits” (Marx 1989a, 416). In fact, in the first chapter of
Ricardo’s Principles, “not only commodities are assumed to exist–and
when considering value as such, nothing further is required–but also
wages, capital, profit” (393). The la er assumption is inappropriate,
according to Marx. Value has first to be determined within simple
commodity production. Then–maintaining that “the sum total of
[the] cost prices of all the commodities taken together will be equal
 p g q
to their value [and that] the total profit will be = to the total surplus
value” (415)–the prices of production, or cost prices, can be
determined at a lower level of abstraction.
In another respect, it is well known that Marx (1989b, 36–7)
criticises Ricardo for his inability to understand that capital is a
“definite social relationship”, namely, “a material condition of
labour, confronting the labourer as power that had acquired an
independent existence”. Less well known is the fact that the same
criticism can be raised against Marx’s way of determining value by
assuming commodity production in general.

1 See Heinrich (2004, 8), Bonefeld (2010, 257), Okada (2014, 409) and Robles-Bàez (2014,
292).
2 The pars construens is expounded in the next chapter. These two chapters re-elaborate
arguments already developed in Screpanti (2017).
3 This quotation is from the Penguin edition of Capital, which gives a be er translation
than the International Publishers edition, from which I take most of the other
quotations. The original phrase is: “Unter Arbeitskraft oder Arbeitsvermögen verstehen
wir den Inbegriff der physischen und geistigen Fähigkeiten, die in der Leiblichkeit, der
lebendigen Persönlichkeit eines Menschen existieren”. From here on, when the Penguin
edition provides a be er translation, I quote from it.
4 This assessment is expounded in different ways by Rubin (1972, 132n), Himmelweit and
Mohun (1978, 80) and De Vroey (1982, 44).
5 Unpublished papers (D3/12/9: 89 and D3/12/42: 33). See Kurz and Salvadori (2010) and
Gehrke and Kurz (2018). The former of the above criticisms is raised against Marshall,
the la er against Ricardo and Marx. What is stigmatised, in both cases, is a Ricardian
vestige. In a le er to Tania Schucht for Gramsci, dated 21 June1932, Sraffa (1991, 74)
writes that “Ricardo, contrary to the philosophers of praxis [i.e. the Marxists], never bent
to historically ponder his own thought. In general, he never takes a historical point of
view and, as it has been said, he considers the laws of the society in which he lives as
natural and immutable laws. He was, and ever remained, a stockbroker of mediocre
culture […]. From his writings it is evident, so it seems to me, that their sole cultural
element derives from the natural sciences”.
6 Some confusion may arise because Marx often uses the term “substance” with the
meaning Aristotle gives to “ma er”. But “ma er” is only one aspect of “substance” for
the Greek philosopher; another aspect is “form”, and a third is the union of ma er and
form (see Suppes 1974; Gill 1989; Kincaid 2005).
7 This di culty cannot be avoided by substituting the term “create” with “posit”, as
suggested by Arthur (2001, 40–1). Marx uses different words to convey the idea that
labour produces value. On some occasions he uses se en (posit); more often he uses
scha en (create). In Capital, he also uses bilden, which can be translated with “make”,
 “form”, “shape”, “establish”, “create”. A problem with the term “posit”, if it is not
interpreted as a simple synonym of “create”, is its reference to a logical procedure–like
“postulate” or “hypothesize”–so that it tends to generate idealist hypostatization when
referring to a real process. At any rate, would this term improve understanding? To say
as Arthur does that “the abstract objectivity of value mediates itself in the abstract
activity of value positing”, or that “value posits itself as a quantity of negating activity
fixed as what is posited”, does not render Marx’s metaphor more reducible, let alone,
more comprehensible.
8 Obviously, technical conditions may be influenced by historical and social facts:
productive organization, scientific progress, market structures, etc. However, not all
social facts and relations affect technical conditions.
9 Reuten and Williams (1989, 58). See also Wolff, Callari and Roberts (1984), Amariglio and
Callari (1989), Biewener (1998) and Kristjanson-Gural (2009) as a empts at developing a
socially contingent value approach.
10 For instance, Rubin (1972), Backhaus (1980), Eldred and Hanlon (1981), Reuten and
Williams (1989), Reuten (1993) and Arthur (2001; 2004).
11 Postone (1978; 1993) tries to identify the abstractness of labour as an implication of the
historical specificity of capitalist social relations. However, he remains faithful to the
universality of the commodity form (see also Kurz 2016). Thus, Fracchia (1995, 368) is
right in observing that Postone himself uses some trans-historical categories.
 2. Abstract Labour as
a Historical Reality

© Ernesto Screpanti, CC BY 4.0

h ps://doi.org/10.11647/OBP.0182.02

The present chapter presents the pars construens of my interpretation

of the theory of abstract labour. It begins with an elucidation of the
Hegelian notion of the employment contract as an agreement for the
exchange of a commodity. Hegel’s view, according to which this
kind of contract must be likened to the Roman institution locatio
operis, is wrong. Marx, however, develops an alternative vision that
evokes the locatio operarum, an agreement whereby workers take on
an obligation to obey their employers. These issues are dealt with in
section 1 of the present chapter.
In section 2, I argue that Marx’s alternative vision is based on the
notions of “subordination” and “subsumption”, which are used in
Capital but are be er investigated in Results of the Direct Production
Process and in the Economic Manuscript of 1861–63. With the
employment contract, a worker renounces his decision-making
freedom in the labour process by entering into a relationship of
subordination to the capitalist. This enables capital to subsume
workers’ capacities and use them to secure surplus value.
Then, in section 3, I define abstract labour on the grounds of the
notions of subordination and subsumption. Here, abstract labour is
no longer a natural object. Rather, it emerges from a historically
determined social relationship. By virtue of this characteristic, it
turns out to coincide with the time spent by the wageworker in the
production process.

2.1. The Labour Exchange: From Hegel to Marx

The idea of labour exchange as a commodity exchange is already
present in the contract theory Hegel develops in Elements of the
Philosophy of Right. Section 80 of this work contains a classification of
the different types of contracts used in modern societies, and all
cases–be it sale, donation, renting, or agency–are envisaged as
agreements for the alienation of a thing: to be precise, “a single
external thing” (sec. 75). The internal a ributes of individuals, like
their labour capacities, cannot be alienated. Thus, the exchange of
labour is reduced to the contract for services, with explicit reference to
the Roman institution locatio operis,1 an agreement by which the
worker sells a service produced with her labour ability.
This is a mistake, for the modern employment contract is equated not
to locatio operis but to locatio operarum. The locatio operis is a contract
whereby, for example, I ask a mechanic to sell me a car repair service
and temporarily place the car at his disposal. The locatio operarum has
a completely different meaning: it is the agreement used by the
mechanic, as an employer, to hire an employee. It is a relational
contract by which a worker-lessor (operarius-locator) alienates, not a
good consisting of a labour service, but the authority (potestas) the
worker has over herself. She does so by temporarily placing herself
at the employer’s disposal. In fact, operarum may be interpreted both
as the plural genitive of opera (a day’s work)–so that locatio operarum
implies the hiring of labour time in general and not of specific
services–and as the irregular plural genitive of operarius (labourer),
in which case locatio operarum means the hiring of workers. From the
worker’s point of view, these two meanings are conveyed by the
expressions locatio operarum sui, the le ing out of one’s own labour
time, and locatio sui, the le ing out of oneself (Martini 1958). Both
meanings are present in the modern institution of the employment
contract.
Hegel does not admit the locatio operarum since he postulates the
endowments that constitute a person are inalienable (sec. 66). And
when he provides examples of the “alienation of personality”, he
refers to cases like slavery or serfdom. He does not recognise that the
employment contract is a case of partial alienation of personal
freedom. Nonetheless, he does seem to have grasped the idea when
he observes that I can alienate certain particular bodily and spiritual
a itudes to someone else, and that “I can give him the use of my
abilities for a restricted period” (sec. 67). This is on the right track
because, in the kind of rule of law prevailing in modern capitalism,
the principle of the inalienability of personal freedom implies the
prohibition of slavery but does not rule out the possibility that a
worker signs a contract of subordinate employment. However, Hegel
insists on the idea that what is actually alienated in such a case is
only an array of single products, not a part of one’s personal
freedom. He maintains that wageworkers would not lose their
freedom in the production process since the use of their force is
different from the force itself. But then, why is it necessary to clarify
that the sale of personal abilities is admi ed only for a limited time?
Such a qualification is necessary if the contract is intended as an
agreement by which workers are surrendering their potestas and not
yielding only single services. With the sale of potestas not limited in
time, it would be an enslaving contract.
Hegel’s argument is reproduced almost literally by Marx (1985b,
128) in Value, Price and Profit, where he says that a “maximum time is
fixed for which a man is allowed to sell his labouring power. If
allowed to do so for any indefinite period whatever, slavery would
be immediately restored”. Also, in Capital, Marx (1996, 178) says that
“the continuance of this relation demands that the owner of labour
power should sell it only for a definite period, for if he were to sell it
rump and stump, once and for all, he would be selling himself,
 p p g
converting himself from a free man into a slave”. More explicitly
than Hegel, Marx sometimes argues that a worker is the owner of
labour power and sells a certain quantity of it as a commodity.
However, Marx’s qualification of the temporariness of the sale is
only plausible when the employment contract is understood as
establishing a relationship of subordination.
Marx is certainly not afraid of bringing to light the slave-like
nature of wage labour, nor is he afraid of recognizing that the
worker with the employment contract “sells at auction eight, ten,
twelve, fifteen hours of his life, day after day” (1977, 203). And he
insists on the idea that wageworkers sell themselves. For instance, in
a le er to Abraham Lincoln he says that, compared to the black
slave, who is “mastered and sold without his concurrence”, the
white worker boasts the higher prerogative “to sell himself and
choose his own master” (1985a, 20). This idea grasps the meaning of
the employment contract be er than the theory that reduces it to
commodity sale.
The comparison Marx suggests between slavery and wage labour
reveals the distance he takes from Hegel on a decisive issue. This
paves the way for the development of a theory of the employment
contract as an institution that generates the authority relationship
required to implement capitalist exploitation.

2.2. The Subsumption and Subordination of

Labour
To comprehend abstract labour as resulting from a social relation of
production, it is necessary to understand the way capital
appropriates living labour. In an illuminating passage of the
Grundrisse, Marx (1986a, 205) says that, in the exchange between
capital and labour,
the use-value of what is exchanged for money appears as a particular economic
relationship, and the specific utilization of what is exchanged for money constitutes the
ultimate purpose of both processes [that in which the workers get the money and that
in which the capitalist appropriates labour]. Thus there is already a distinction of form
between the exchange of capital and labour and simple exchange […]. The difference of
the second act from the first–the particular process of appropriation of labour on the part of
 capital is the second act–is EXACTLY the distinction between the exchange of capital
and labour and the exchange of commodities as mediated by money. In the exchange
between capital and labour, the first act is an exchange and falls wholly within ordinary
circulation; the second is a process qualitatively di erent from exchange and it is only BY
MISUSE that it could have been called exchange of any kind at all. It stands directly
opposed to exchange.

The words I have italicised convey three original ideas: 1) in

exchange for the wage paid to the worker, the capitalist obtains the
establishment of a relationship, not a thing; 2) such a relationship
serves to prompt the process of the utilization and appropriation of
labour; 3) this process is qualitatively different from the exchange of
commodities and is its direct opposite. The employment contract
determines an “exchange” that is a “non-exchange” for the capitalist:
The exchange between capital and labour, the result of which is the price of labour,
even though for the worker is a simple exchange, must for the capitalist be non-
exchange. He must receive more value than he has given. From the point of view of
capital, the exchange must be merely apparent, i.e. an economic category other than
exchange, or else capital as capital and labour as labour in antithesis to it would be
impossible (247).

In what sense is this transaction, which appears to the worker as an

exchange, a “non-exchange” for the capitalist, or a “merely
apparent” exchange? Marx (1994, 444) answers this question in
Results of the Direct Production Process, where he says that the worker
as “the owner of labour capacity figures as its seller–irrationally
expressed, as we have seen”. Why irrational? Because that is how the
worker appears, although not how he really is. Instead, the worker is
a “direct seller of living labour, not of a commodity”. Then Marx
explains that “with the development of capitalist production all
services are converted into wage labour, and those who perform
these services are converted into wage labourers”, even
unproductive workers. This fact “gives the apologists [of capitalism]
an opportunity to convert the productive worker, because he is a
wage labourer, into a worker who merely exchanges his services”
(446). In reality, no commodity consisting of a worker’s service is
exchanged in the “labour market”. Rather, a social relationship is
shaped that transforms the producer into a wageworker. Then the
apologists of capitalism present the worker as a seller of services,
and in this way, they make the “non-exchange” of labour appear as
an exchange of commodities.
To my knowledge, Marx is not acquainted with the notion of a
“contract for services”. Yet he is very clear in rejecting the labour
ideology, still entertained by many economists today, that represents
a wageworker as the seller of labour services or, all the same, as the
seller of a commodity resulting from labour activity:
What the capitalist buys is the temporary right to dispose of labour capacity […].
Labour belongs to the capitalist after the transaction, which has been completed before
the actual process of production begins. The commodity which emerges as product from
this process belongs entirely to him. He has produced it with means of production
belonging to him and with labour he has bought and which therefore belongs to him
[…]. The capitalist’s surplus arises precisely from the fact that he buys from the
labourer not a commodity but his labour capacity itself (Marx 1989a, 212–3).

In Results of the Direct Production Process and the Economic Manuscript

of 1861–63, Marx clarifies the notions of “subordination” and
“subsumption”.2 These also appear in the final version of Capital, but
not with the disruptively innovative strength they have in the
Results. Sometimes Marx uses the two words as synonyms,
sometimes as distinct terms. In any case, it is important to keep them
separate and to understand the differences in their meanings. The
term “subordination” denotes a relation between the capitalist3 and
the worker as employer and employee, a “relation of domination”
(Marx 1994, 431) in the production process. The term “subsumption”
refers to the arrangement whereby the productive power of labour
becomes “a productive power of capital” (429). The firm is the legal
embodiment of capital, and the productive forces deployed in the
production process pertain to it, even though labour activities are
executed by the workers. The firm’s ownership of a worker’s
productive capacity originates from the “subordination to capital of
the labour process” (439).4 This ownership gives foundation to the
employer’s undifferentiated property of the product of work
activity.
Marx (1988b 93) defines formal subsumption and subordination as
follows: “This formal subsumption of the labour process, the
assumption of control over it by capital, consists in the worker’s
subjection as worker to the supervision and therefore the command
of capital or the capitalist. Capital becomes command over labour
[…] in the sense that the worker as a worker comes under the
command of the capitalist”. The subsumption is formal, insofar as
the individual worker, instead of working as an independent
commodity owner, now works as a labour capacity belonging to the
capitalist and therefore under his command and supervision (262).5
Here the adjective “formal” evokes the way in which, in Hegel’s
philosophy, a kind of contract determines a relationship only
formally. That is to say, abstracted from its substantial content, from
the specific characteristics of the object of exchange, and from the
personal identities of the parties (Benhabib 1984). In this sense, a
type of contract is an institutional condition that determines the form
of a social relationship. Subsumption and subordination are formal
in that they are based on the form of contract by which wage labour
originates in a capitalist economy: “There is already a distinction of
form between the exchange of capital and labour and simple
exchange”. The employment contract is the institution that enables
two parties endowed with legal personality to establish voluntarily a
relationship of subordinate employment: “If the relation of
domination and subordination replaces those of slavery, serfdom,
vassalage […] there takes place only a change in their form” (Marx
1994, 432–3). The employment contract, i.e. “wage labour and its
employment by capital”, is the “dominant relation” in a capitalist
mode of production (Marx 1988b, 112).
Once capital has taken control of labour, it governs labour activity
in view of its goals, so that subsumption becomes real, involving the
capitalist’s regulation of the labour process. In fact, “The formal
subsumption of labour under capital […] is the condition and
presupposition of its real subsumption”. In other words, formal
subsumption “is the general form of any capitalist production
process” since it establishes the social relation by virtue of which
“the labour process is subsumed under capital (it is capital’s own
process) and the capitalist enters the process as its conductor, its
director” (430, 424). What the capitalist gets in exchange for the wage
is the prerogative to start the second “act” or “process” of the
 p g p
exchange, which takes place in the factory. The employment contract
creates the legal conditions for the utilization of living labour in the
production process, as the contract sanctions “the appropriation of
the ability to dispose over the labour” or “the appropriation of the
title to its use” (Marx 1987, 506). Such title is acquired by the
capitalist by virtue of the obligation to obedience taken on by the
worker through the contract, and this ensures that “there develops
within the production process itself […] an economic relation of
domination and subordination” (Marx 1994, 430).
The function of command in the labour process is necessary to
realizing the exploitation of workers. This is so even in pre-capitalist
economic forms, but there is a specifically capitalist mode of
establishing the subordination of labour. In pre-capitalist economic
forms, command over labour is based on relationships of “personal”
bond, enforced by institutions of an eminently political and policing
nature. In the capitalist mode of production, any kind of personal
bond is overcome, and workers are recognised as citizens endowed
with the freedom of contract. What is it, then, that ensures workers’
subordination to capitalists?
The basic features of formal subsumption are these:
(1) The purely money relation between the person who is appropriating the surplus
value and the person who provides it; to the extent that subordination arises, it arises
from the particular content of the sale, not from a subordination pre-posited to the sale,
which might have placed the producer in a relation other than the money relation (the
relation of one commodity owner to another) towards the exploiter of his labour, as a
consequence of political conditions etc. It is only as owner of the conditions of labour
that the buyer brings the seller into a condition of economic dependency; it is not any
kind of political and socially fixed relation of domination and subordination. (2)
Something implied by the first relation–for otherwise the worker would not have to sell
his labour capacity–namely the fact that the objective conditions of his labour (the
means of production) and the subjective conditions of his labour (the means of
subsistence) confront him as capital (Marx 1994, 430).

In the market, a worker is legally free. The ideology of capital

induces in him “the consciousness (or rather the idea) of free self-
determination, of freedom”, and this renders him a “much be er
worker” (Marx 1994, 435).6 In the Economic Manuscript of 1861–63 and
in Results of the Direct Production Process, Marx tries to deconstruct
such an ideology. He argues that, by virtue of that idea, a worker
believes himself to be free, and hence justifies to himself the
acceptance of the employment contract. But in reality, he is not free;
rather, “he has a choice […] as to whom he sells himself to, and can
change MASTERS” (437). In other words, workers are “free” to
submit to the power of their exploiters. The paradox of the
employment contract is that it sanctions the formally free choice of
workers to surrender their real freedom for a certain number of
hours. The material condition of this paradox resides in the fact that
the workers are “free” of any wealth, that is, they do not own the
means of production and subsistence that would enable them to
choose autonomously how to earn a living.
Once the contract is signed, workers enter the factory, where their
freedom of choice is in principle nil and labour activity is “imposed”
on them (De Angelis 1996, 18–9). The workers cannot decide how to
work, what to produce, how to cooperate with other workers, how
to use the machines, and so on. These prerogatives pertain to the
capitalist, who has used the employment contract to transform the
freedom surrendered by the workers into his own power. In practice,
the employer’s authority can be limited to some extent by laws,
customs, the contract itself, and especially the workers’ resistance. In
fact, not only the wage negotiation but also the labour process is a
field of class conflict, as I will clarify in the next chapter. The struggle
in the labour process is about the use of labour capacities.7 This use
pertains to the capitalist, who utilises labour power by giving
instructions to the workers. The implementation of the instructions
pertains to the workers, who can use collective action and
information asymmetries to reduce their fatigue and exploitation
(Screpanti 2011b).
Summing up, the basic scientific innovation resides in the idea that
formal subsumption and subordination are necessary conditions for
the extraction of surplus value in a capitalist production process.
Subsumption means that the exploiter has a title to use labour
capacities. Such a title is acquired by virtue of subordination, i.e. the
obligation of the exploited worker to obey the exploiter’s commands.
This is the case in all social systems based on exploitation. In slavery,
 y p y
for instance, the workers’ subordination is what enables a master to
compel slaves to overwork. Masters have the power to use the
labour capacities of their slaves to produce a surplus product
because slaves are obliged to obey. What characterises a capitalist
system is that subordination and subsumption are ensured by the
wage relationship, as established via an employment contract.

2.3. Abstract Labour as Resulting

From a Social Relationship
The absence of the expression “abstract labour” in Results of the
Direct Production Process merits particular reflection. Despite the
expression’s omission, Marx deals with this concept extensively in
that work. For instance, when he reconstructs the historical
transformation process of the artisan labour relationship into a
capitalist relationship, he observes that the capital of a master artisan
“is tied to a particular form of use-value”. The capitalist firm, in
contrast, involves “the removal of all these barriers […]. Capital
(money) can be exchanged for any kind of labour” (Marx 1994, 434–
5). Subsequently, he says that “in North America, where the
development of wage labour has least of all been affected by the old
guild system, etc., this variability, this complete indifference to the
specific content of labour […] is shown particularly strongly” (438).
He explains that in a capitalist economy labour is only productive if
it produces surplus value, arguing that it “has absolutely nothing to
do with the particular content of the labour, its particular usefulness
or the specific use-value in which it is expressed” (448).
When talking about “abstract labour” in Results of the Direct
Production Process, Marx never uses this expression. Rather, he
speaks of “undifferentiated, socially necessary, general labour,
entirely indifferent towards any particular content” (401), hence
outlining the phenomenon by specifying its economic and social
properties rather than its physical ones. These expressions refer to
two characteristics of labour that need to be clearly distinguished: on
the one hand, it is socially necessary; and on the other, it is
indifferent or general.
 The notion of “socially necessary labour” refers to a situation of
productive e ciency. Labour with “socially normal” intensity (396)
is employed in the factories in the quantities and qualities required
by the technique in use. This notion shares with that of “abstract
labour”–as a natural abstraction–the characteristic of being a
productive force but not that of being abstract. In fact, the material
base of socially necessary labour consists of concrete labours,
specified in relation to production techniques. For instance, so many
hours of bricklayers’ labour to build houses, so many hours of
engineers’ labour to build cars.
The notion of “indifferent or general labour”, in contrast, must be
interpreted as meaning “indifference towards any particular
content”. It is abstracted from concrete labours and shares with
abstract labour the characteristic of being quantifiable. Marx clarifies
that the fundamental reason why labour becomes a quantifiable
magnitude is that the worker’s activity is carried out under a relation
of subordination. Consequently, his productive forces, being
subsumed under capital, are no longer a ributes of labour. The
labour characteristic of being quantifiable is intimately linked to its
historicity: capitalist subsumption occurs only in a production
system based on wage labour. In this way, the properties of
naturalness and historicity are separated. The former pertains to the
technological structure of socially necessary labour, the la er to the
social structure that ensures exploitation.
In the Grundrisse quote I reported at the beginning of the preceding
section, Marx accounts for the historical appearance of the wage
relationship by arguing that capital is interested in exchanging with
labour, and that the ultimate purpose of this exchange is to obtain
the title to the appropriation and utilization of labour. He later
makes clear that “the social productive powers of labour all present
themselves as productive forces, as properties inherent in capital
[…]. The social combination of the individual labour capacities […]
does not belong to the workers, but rather confronts them as a
capitalist arrangement, it is inflicted upon them” (Marx 1994, 455–6).
The subsumption of labour capacities under capital is the real fact
that engenders the firm’s indifference toward concrete labours from
 g f
the standpoint of accountancy. In the determination of a commodity
value, wage costs are calculated in terms of the quantity of money
paid per labour hour, disregarding the workers’ productive forces.
This is the crucial point, and Marx is fully aware of it: the wage is
determined independently of labour productivity. Capitalists are
very involved in the use of labour skills, as far as the management
and organization of the labour process are concerned. However, in
recording labour costs, they are unconcerned about the specific use
values of labour, not because they are not interested in the workers’
concrete abilities, but because the productive capacities associated
with these abilities belong to capitalists once the employment
contract is signed. What is bought, what is paid for, is not the set of
these abilities and not even a generic labour capacity. It is another
thing, and a truly abstract one indeed: labour time, meaning the time
during which a worker undergoes the capitalist’s control in the
production process.
The close relationship between workers’ subordination to capital
and the independence of the wage from workers’ specific skills and
competencies can also be seen from another angle. With real
subordination, capitalists exert command in the labour process, and
thence the power to determine all its aspects: the method and
organization of labour, the choice of techniques, the investment
decisions, the use of science, and so on. This implies that capitalists
also have the power to reallocate workers among various tasks in
relation to technical change and even the power to reskill workers at
their will. They demand from their employees a certain degree of
malleability, meaning not only a willingness to obey orders but also
pliability toward their exigency to reshape abilities. This is made
possible by the workers’ indifference to the use of their concrete
labour. In fact, the workers’ competences have become the firm’s
competences, so that it is “in the nature of the wage labour
subordinated by capital that it is indifferent to the specific character
of its labour and must submit to being transformed in accordance
with the requirement of capital” (1998, 194).
Now it should be easier to understand why the wage is
commensurate to a purely quantitative magnitude and why it is
 p y q g y
reasonable to use the concept of abstract labour to denote this
magnitude, but only after purging it of any characteristic of
naturalness and productiveness. Precisely this abstraction makes
exploitation possible. Once the price of labour time is fixed, and once
capital has subsumed the workers’ capacities, it is a capitalist
prerogative to manage the production process in such a way as to
obtain commodities whose value added is greater than the wage
paid. Capitalists’ power enables them to extract a higher or lower
surplus value from production; their organizational and managerial
abilities determine labour productivity and therefore the intensity of
exploitation. In fact, the capitalist compels the worker “to ensure that
his labour possesses at least the socially normal average degree of
intensity [and] will try to raise it as much as possible above this
minimum and extract from him over a given period as much labour
as possible, for every [increase in the] intensity of labour over the
average degree creates [a bigger] surplus value for him” (Marx 1994,
396).
Remember that a contract for services involves the exchange of a
labour service, a commodity, whose productivity is supposed to be
known ex-ante, i.e. before the transaction is concluded. On the
ground of this productivity, the market determines the service price
as that which equalises demand and supply. On the contrary, labour
productivity is not known ex-ante in an employment contract, and the
“market” determines only the price of labour time, without any
connection with labour productivity. This is determined ex-post, in
the factory, and is a function of the exercise of the capitalist’s power
within the labour process. It is this power that enables the capitalist
to extract a surplus value from labour activity.
The contract itself and the parties’ bargaining powers set the price
of labour time. By establishing the worker’s obligation to obedience
for a prearranged length of time, the contract fixes a wage that is
commensurate to that time. So, to be precise, the wage is the price of
freedom, a payment for obedience, and not the value of a
commodity. “The more [the workers] wish to earn, the more must
they sacrifice their time and carry out slave-labour, completely
losing all their freedom” (Marx 1975b, 237). In the exchange with
 g g
capital, workers alienate their own freedom. “What [they] receive as
the price is the value of this alienation” (Marx 1986a, 248).
At last, we can understand why abstract labour is “practically true”
in a social and historical sense, but cannot be so in a natural sense.
This is because a historically determined social relationship enables
the capitalist to treat labour as if it were a homogeneous input and to
measure its quantity in time units. Since it is typical of the capitalist
mode of production, abstract labour emerges in all its simplicity only
in the most modern economic form of human evolution:
The simple abstraction which plays the key role in modern economy, and which
expresses an ancient relation existing in all forms of society, appears to be true in
practice in this abstract form only as a category of the most modern society […]. The
example of labour strikingly demonstrates that even the most abstract categories […]
are, in the determinateness of their abstraction, just as much a product of historical
conditions and retain their full validity only for and within these conditions. Bourgeois
society is the most developed and many-faceted historical organization of production.
The categories which express its relations [provide] an understanding of its structure
(Marx 1986a, 42).

1 Hegel (1991, 112) uses the odd expression locatio operae, which he oddly translates as
Lohnvertrag (wages contract). In any case, he defines it as the “Veräußerung meines
Produzierens oder Dienstleistens”, that is, “alienation of my output or service”, which
corresponds to locatio operis.
2 The Economic Manuscript of 1861–63 is the second draft of Capital. The chapter Results of
the Direct Production Process was intended to appear with the third draft, wri en in 1863–
4. The version of Capital finally published comes from a revision of the third draft, from
which, however, the chapter on the Results was deleted. Several scholars have raised the
question of why Marx made this choice. See Murray (2016, chap. 11) for a critical survey.
Skillman (2013) puts forward an appealing answer: Marx must have realised there was
some inconsistency between the “value-theoretic account” of surplus value production,
as expounded in the final version of Capital, and the “historical account”, as developed
in the Economic Manuscript of 1861–63 and the Results. My opinion is that there is indeed
an inconsistency between the explanation of exploitation based on a labour theory of
value holding under “commodity production in general” and the explanation based on
a historically determined social relationship, namely, the capitalist forms of
subsumption and subordination–and this might be the reason why the Results remained
unpublished. Moreover, Marx must have sensed that it is di cult to reconcile the theory
of the employment contract as an agreement establishing an authority relationship with
the theory (expounded in part 2 of Capital, volume 1) presenting it as a transaction for
the sale and purchase of a commodity.
3 Subordination also occurs in pre-capitalist systems. With the passage to a capitalist mode
of production a change of form takes place, as I clarify below.
4 As far as I know, Marx is the first modern economist to think of the employment contract
as an institution establishing an authority relationship. He does so with the theory of the
subordination of wageworkers. See Coase (1937) and Simon (1951) for two important neo-
institutional elaborations of this theory. For a refined juridical treatment, see Kahn-
Freund (1972). Ellerman (1992) expounds a view based on a natural rights theory of
property. Screpanti (2001) develops a Marxist formulation. Marx is also considered a
precursor of the competence-based theory of the firm (Hodgson 1998). Indeed, the
theory of subsumption of labour capacities is crucial in accounting for the prerogative of a
capitalist company to appropriate and mould the workers’ abilities and transform them
into the firm’s competences. In fact, with subsumption, “the social productive powers of
labour all present themselves as productive forces, as properties inherent in capital […].
The social combination of the individual labour capacities […] does not belong to the
workers, but rather confronts them as a capitalist arrangement” (Marx 1994, 455–6). The
capitalist contributes to building organizational competences while governing
individual competences in the labour process, just as a conductor determines the
performance of an orchestra.
5 Murray (2004, 257) notes that Marx tends to use the expression “formal subsumption”
with two different meanings: a general notion defining the constitution of the wage
relationship as a legal presupposition of real subsumption; and a specific notion of
merely formal subsumption, conceived as a historical phase preceding that of real
subsumption. Clearly, the first meaning is the most important from a theoretical point of
view.
6 The word “idea” appears in the Penguin edition (Marx 1976, 1031); in the International
Publishers edition, the word is “notion”.
7 De Angelis (1995; 1996) perceptively accounts for class struggle in the production process
by referring it to the character of abstraction taken by wage labour as subordinate
activity.
 3. Labour Subsumption
and Exploitation

© Ernesto Screpanti, CC BY 4.0

h ps://doi.org/10.11647/OBP.0182.03

A scientific theory of capitalist exploitation aims to causally explain

the production of surplus value. Marx develops this theory in
volume 1 of Capital, especially parts 3–5, which are devoted to
elucidating the effects of capitalist control of the labour process, and
parts 6–7, devoted to explaining the dynamics of wage
determination. In fact, most of the volume deals with the social,
technological and organizational conditions of exploitation.
The theory of labour subordination and subsumption is not yet an
explanation of exploitation. It is a theory of the capitalists’ power. It
becomes the essential part of a proper explanation of exploitation
through reconstruction: firstly, of the way in which that power is
used in managing a factory1 and, secondly, of the way wages are
fixed.
Marx’s reasoning in parts 3–5 reveals that concrete commodities
are the products that workers actually create in the labour process. A
commodity is a thing, an object produced by a subject using concrete
labour. Value, contrarily, is not a thing, and cannot be supposed to
be created by a subject. It is an economic relationship among
commodities, and a result of the social relations prevailing in
productive activity. This analysis can be interpreted as an
instantiation of the idea that the labour process pertains to the
productive forces (e.g. labour skills and technical knowledge), while
the valorisation process pertains to the social relations of production
(e.g. property rights, contract institutions and power systems). A
capitalist’s power (a social relation) is used in the factories to compel
workers to produce commodities (a productive force). Exploitation
occurs when the value added of commodities is higher than wages.
This seems a reasonable interpretation of the analysis developed in
parts 3–5 of Capital, volume 1. Marx justifies it in the Results of the
Direct Production Process when he declares that, by virtue of the
workers’ subordination, the labour process is subsumed under capital.
This means that it becomes an instrument of the valorisation process,
the place where surplus-value is “manufactured”. Actually, it is in
the labour process that the capitalist intervenes as a director; and it is
in the labour process that he carries out the “direct exploitation” of
labour:
The labour process becomes an instrument of the valorisation process, of the process of
capital’s self-valorisation, the process of the manufacture2 of surplus value. The labour
process is subsumed under capital (it is capital’s own process) and the capitalist enters
the process as its conductor, its director; for him it is at the same time directly a process
of exploitation of alien labour (Marx 1994, 424).

True, in parts 3–5 Marx persists in u ering that value is created as a

“materialization” of abstract labour or a “transposition” of labour
power. Yet, such notions do not play any role in accounting for the
production of surplus value. In the analysis developed in these parts,
surplus value is explained as the result of the capitalist’s ability to
compel workers to a ain a labour productivity higher than the
wage. In point of fact, the labour unit only serves as an instrument of
measurement. Thus, one of the implications of the analysis
reconstructed in the present chapter is that the labour theory of
value is not necessary to explain exploitation. To say it with Gordon
(2017, 2), “Marx’s thesis of labour exploitation does not follow from
the labour theory of value”. In this reconstruction, exploitation is
explained with an analysis of the way capitalists control the labour
process and the way in which the bargaining powers of conflicting
classes determine wages, labour intensity and the working day.
In section 1 of the present chapter, I expound Marx’s investigation
of the production of “absolute surplus value” under conditions of
merely formal subsumption. The capitalist uses his power to
lengthen the working day or intensify labour activity. The
production of absolute surplus value is carried out without technical
change and, indeed, without any need to modify the technical
structure of production. The only way in which command is used in
the labour process is to ensure that the workers do their jobs
e ciently.
Then, in section 2, I consider the production of “relative surplus
value”, which is extracted by making subsumption real, i.e. by
restructuring the labour process via the introduction of new
techniques, the activation of increasing returns to scale, the
organization of cooperation and team production, and the
development of automation in large-scale industry. To simplify
analysis, Marx initially assumes that socially necessary labour is
determined just by the technology. Surplus value is defined as
“relative” in that it is compared to a given working day. It may rise
because the amount of necessary labour shrinks in relation to the
number of hours worked, due to improvements in labour
productivity. However, after the notion of “relative surplus value”
has been elucidated, Marx removes that simplifying hypothesis. He
then makes clear that the exercise of the capitalist’s power within a
factory is always a contested terrain, since the workers continually
practice some forms of defiance and shirking behaviour, and the
capitalists are compelled to enact structures of hierarchical control to
quell the workers’ resistance. This means that socially necessary
labour, labour intensity, labour productivity and the actual working
day, and therefore the degree of exploitation, are not simply
determined outside the production process, i.e. by law, customs,
collective agreements, and the available technology. Class struggle
within the factory plays a decisive role in determining the degree of
exploitation.
Finally, in section 3, I illustrate Marx’s theory of wages, which is
one of the most topical of his doctrines. It deals with how class
struggle in the so-called “labour market” contributes to wage
determination. The “labour market” is not a market proper. It is a
ba lefield of class struggle (by the way, this is the reason why I use
inverted commas when dealing with the “labour market”). In
abstract theory, Marx follows the classical economists in maintaining
the “value of labour power” is fixed at a subsistence level in a
competitive market. However, in most of Capital and in other works,
he tries to explain how wages are actually affected by the dynamics
of capital accumulation, the industrial reserve army and trade union
activities–in short, by the bargaining powers of opposing classes. He
investigates the determination of both the “market wages” in various
phases of the business cycle, and the long-run trend of normal
wages. The most effective weapon of the capitalists in this struggle
consists of their investment decisions and the ensuing changes in the
industrial reserve army, whilst the main workers’ weapon consists of
the industrial action they can engage in.

3.1. The Production of Absolute Surplus Value

Marx (1996, 187) begins his analysis of exploitation mechanisms by
using a simple model which, like the concept of “production in
general”, is abstract in nature: “The fact that the production of use
values, or goods, is carried out under the control of a capitalist and
on its behalf, does not alter the general character of that production”.
This is a very abstract model indeed, as it is di cult to envisage a
capitalist system in which capitalists do not really determine the
technical structure of production. Yet such an abstraction might be of
use to isolate some aspects of the control of labour.
Marx reasons as if there had been a historical transformation from
an economy of simple commodity production to an economy in
which capitalists establish formal subsumption by employing some
previously independent worker. In this economy, capitalists have
become owners of the means of production but have not yet
modified the labour process. Imagine a situation in which a number
of self-employed artisans become wageworkers but continue to
produce using the techniques they used in their workshops and with
no improvement in the division of labour. Now their employers
have become the owners not only of the commodities they produce,
but also of the use of their labour power, in other words, of the
workers’ competencies, because they have acquired “a title and a
right to the labour and the surplus labour” (315).
Since the labour process has not changed and no new technique
has been introduced, the capitalists’ control is exerted only to take
“good care that the work is done in a proper manner, and that the
means of production are used with intelligence” (195), in other
words, “that the labourer does his work regularly and with the
proper degree of intensity” (314). Subsumption is merely formal, not
yet real, because “capital subordinates labour on the basis of the
technical conditions in which it historically finds it” (314).
In any case, an important principle is established: that, in modern
industrial capitalism, formal subsumption is a necessary condition
for exploitation in the production process. The capitalist pays the
workers their normal wage, but then he manages them in the
production process to make them produce a higher value (Murray
2004, 246).
Theoretically, the difference between an artisan workshop and a
capitalist factory implies a fundamental social and economic
transformation. Simple value creation takes place in “commodity
production in general”, whilst capital valorisation, i.e. the production
of surplus value, arises in the capitalist mode of production. The
question is: where does surplus value come from, if labour
productivity has not changed? The answer is threefold. A capitalist
can succeed in extracting surplus value by: lengthening the working
day, intensifying labour activity, or lowering the wage.
Assume an artisan produces a subsistence income by working 6
hours a day, from hour a to hour b, let’s say, from 6 o’clock to 12
o’clock. This is his “necessary labour”, the quantity of labour
necessary to reproduce his labour power. A capitalist may be willing
 y p p p y g
to employ a worker in his factory if she is ready to work for more
than b-a=6 hours. Marx provides three examples of working day, in
which its length is c-a=7, or d-a=9, or e-a=12 hours.
Working day I: a------b-c
Working day II: a------b---d
Working day III: a------b------e

If wageworkers are paid for their necessary labour, b-a, they provide
the amounts of surplus labour c-b or d-b or e-b. The quantities of
commodities produced increase and all surplus labour becomes
surplus value.
One could also raise the question of why a wageworker should
accept to work more hours than a self-employed worker could for
the same daily income. Marx’s answer is that in a capitalist system
there is always a certain number of unemployed people who have no
capital to invest in an independent business and are therefore
compelled to accept a contract of subordinate employment in order
to earn a living. And a capitalist would not employ a worker who is
not prepared to work for producing a profit.
Another interesting question is about how the length of the
working day is established. Marx spends many pages arguing that
there is no natural limit to that length, apart from 24 hours, and that
“the inherent tendency” of the “vampire” capitalist is “to
appropriate labour during all 24 hours of the day” (263).
Fortunately, this does not happen because the workers’ tendency is
to work as li le as possible. Therefore, the working day is
determined by class struggle: “In the history of capitalist production
the determination of what is a working day presents itself as the
result of a struggle, a struggle between collective capital, i.e., the
class of capitalists, and collective labour, i.e., the working class”
(243).
Moreover, the State intervenes in social conflict by regulating the
length and the arrangement of the normal working day. In doing so,
it contributes to preserving the workers’ wellbeing and their
economic e ciency in the interests of the bourgeoisie as a class,
against those of the individual vampire capitalists. In any case, it is
forced to do so by the final balance of bargaining powers:
These minutiae, which, with military uniformity, regulate by stroke of the clock the
times, limits, pauses of the work, were not at all the products of Parliamentary fancy.
They developed gradually out of circumstances as natural laws3 of the modern mode of
production. Their formulation, o cial recognition, and proclamation by the State, were
the result of a long struggle of classes (1996, 287–8).

Another method for increasing the production of absolute surplus

value is to intensify labour activity. The most effective modes of
labour intensification occur in the production of relative surplus
value, i.e. through changes in techniques and organization. But there
is a way that seems manageable even under merely formal
subsumption. That is, if the length of the working day cannot be
increased, the length of the actually worked hour can, e.g., by cu ing
the customary or legally sanctioned pauses for eating, rest etc. This
practice is equivalent to a lengthening of the working day.
In the Results of the Direct Production Process Marx observes that the
capitalist compels the worker
to ensure that his labour possesses at least the socially normal average degree of
intensity [and] will try to raise it as much as possible above this minimum and extract
from him over a given period as much labour as possible, for every [increase in the]
intensity of labour over the average degree creates [a bigger] surplus value for him
(Marx 1994, 396).

In other words, capitalists can force the workers to work harder. It is

dubious whether this practice may take place with merely formal
subsumption (Skillman 2013, 495). After all, an increase in labour
productivity implies a drop in the labour coe cients of production,
i.e. a technical change, and yields an increase of surplus value, given
the working day. Hence the production of surplus value through
work intensification shall be dealt with in next section.
As already observed, the theory of absolute surplus value is rather
abstract, as it is based on the postulation that subsumption is only
formal. Yet it is remarkable how, even at this level of analysis, Marx
succeeds in laying down the building blocks of a scientific
explanation of exploitation. He clarifies that exploitation is
perpetrated in the production process by virtue of the workers’
subordination to capitalists, but also that the production process
itself is a field of class struggle and that this struggle is what
ultimately determines the degree of exploitation.4
Besides this, Marx considers some “hybrid forms”5 of exploitation
in which “surplus labour is not extorted by direct compulsion [and]
the producer has not yet become formally subordinate to capital. In
these forms, capital has not yet acquired a direct control over the
labour process” (1976a, 645). He observes that these cases prevail in
traditional handicraft and agricultural sectors, but also that, “as in
the case of modern ‘domestic industry’, certain hybrid forms are
reproduced here and there against the background of large-scale
industry”. Skillman (2019, 10–2) clarifies that, in Marx’s theory, these
forms do not imply subsumption proper. However, some scholars6
interpret them as a kind of hybrid subsumption. Skillman is right, yet
this notion might turn out to be useful in investigating certain
modern labour relations in which capitalist exploitation takes place
through homeworking or subcontracting to formally self-employed
workers. In many of these cases, the main contractor or the
contracting administrator maintains a certain power in determining
the labour process and controlling the contractors. Bene on, a
company that makes wide use of a modern form of the pu ing-out
system, provides a typical example. In other cases, as in the capitalist
exploitation of cooperatives, the workers maintain some freedom of
choice in the labour process. In yet other cases, the workers are
exploited by means of contracts for services in which the service
buyer uses market power to appropriate surplus value. In some such
cases, exploitation takes place through a mix of labour subsumption
and capitalist market power.7
It must be observed that the capitalist control of the labour process
is not a necessary condition for the appropriation of surplus value
(Skillman 2007, 225; 2013, 490–1). In fact, it is possible that the
market power resulting from ownership of financial or mercantile
capital enables a business to appropriate a part of value added
without having organised its production. In any case, subordination,
as established by an employment contract, is a necessary condition
for the production of surplus value in a capitalist system (Skillman
 p p p y
2019, 20–1). And the subsumption of labour capacities is a su cient
condition for the industrial capitalist’s appropriation of this surplus
value, as it implies that the capitalist himself is the owner of the
commodities produced with the firm’s competences.

3.2. The Production of Relative Surplus Value

Subsumption becomes real when the capitalist uses his control of the
labour process to modify its structure, organization and technical
characteristics. The capitalist’s goal is always to increase the
production of surplus value, and he normally tries to achieve this by
raising labour productivity. Marx proposes the following example:
Working day IV: a-----b’-b------e

Now the length of the working day, e-a=12, is the same as that in
example III above, but necessary labour is reduced by the interval b-
b’=1, and surplus labour has increased by the same amount.
Necessary labour is reduced because improvements in labour
productivity have cut the labour content of any single commodity
and therefore have enabled the capitalists to pay a given real wage
with a lower value of labour power. The ensuing increase in surplus
value is called “relative surplus value”.
The production of relative surplus value revolutionizes out and out the technical
process of labour, and the composition of society. It therefore presupposes a specific
mode of production, a mode which, along with its methods, means, and conditions,
arises and develops itself spontaneously on the foundation afforded by the formal
subjection of labour to capital. In the course of this development, the formal subjection
is replaced by the real subjection of labour to capital (1996, 511).

When a capitalist employs many artisans in a factory, he does not

just ask them to do the same jobs they did in their workshops, but
reorganises the labour process to make them produce more than the
summation of their preceding individual activities. Capitalism sets
in motion cooperation: “When numerous labourers work together
side by side, whether in one and the same process, or in different but
connected processes, they are said to cooperate, or to work in
cooperation” (330). Labour activity becomes social labour and, as
such, yields a specific productive force: “the special productive
power of the combined working day is, under all circumstances, the
social productive power of labour, or the productive power of social
labour” (334). The capitalist takes advantage of this new force. He
pays the single workers but, having subsumed their labour
capacities, he is the owner of the outcome of their productive
organization.
Cooperation raises profits because labour activity has become
social, quite independently of any form of technological innovation
proper. Marx singles out several sources of improvement. Let me list
them briefly:

1. The capitalist control over the labour process compels the

workers to work e ciently, thus levelling out the natural
differences in performance of the various artisans. Socially
necessary labour is imposed in the capitalist factory.
2. When the means of production are used in common by
many workers, the average capital-labour ratio may shrink,
and the costs of constant capital per unit of output may
lower. In other words, there may be an economy in using the
means of production. Reductions in the organic composition
of capital enable a capitalist to invest a given amount of
capital in a bigger quantity of labour.
3. It is possible to benefit from increasing returns to scale:
labour productivity rises because the scale of production
expands (329). Thus, the greater the number of workers
employed by a firm, the higher their average productivity
is.
4. Due to cooperation, “mere social contact begets in most
industries an emulation and a stimulation of the animal spirits
that heightens the e ciency of each individual workman”
(331), so that their productivity rises.8
5. A saving in production time may be achieved when different
phases of the labour process are assigned to different
workers, as when many bricklayers form a chain to move
bricks from a place to another.
 6. In addition, a shortening of production time is brought about
when different operations in a labour process are assigned
to different workers. In this way, different parts of a
commodity may be produced at the same time.
7. In certain production processes there are critical moments
that require the use of a consistent mass of workers, as in
the fishing of herrings. The collaboration of many workers
can tackle this problem.
8. Cooperation is also required when the space dilation of work
is relevant, such as in canal building.
9. In other cases, cooperation may be used to achieve a saving
of faux frais by means of a space contraction regarding work
activity, such as in the transformation of extensive
agriculture into intensive.

A more advanced form of cooperation, which Marx calls

manufacture, develops with the introduction of a systematic division
of labour. The labour process is reorganised by reducing it down to
many simple functions, and these are assigned to different workers
who are specialised in them. Even the instruments of labour are
redesigned to serve the specialised labour functions. In manufacture,
no commodity is produced by single workers. The organised group,
the “social collective labourer”, produces the commodity. Within the
factory organization, “each workman becomes exclusively assigned
to a partial function […] his labour power is turned into the organ of
this detail function” (343). Thus, the individual workers become
“partial workers” and lose the ability to understand the overall
labour process. This, however, is clearly understood by the capitalist
who established the production plan: “intelligence in production
expands in one direction, because it vanishes in many others” (366).
Here, Marx shows that he has a clear idea of what is known today
as “team production”. It is impossible to measure individual
productivities in a “group of labourers”, as this constitutes an
indivisible organism, an “organised body of labour”. Only the group
productivity counts. The capitalist pays the individual workers;
therefore, all the value produced by the “social worker” over and
above the summation of individual wages is relative surplus value.
This, of course, belongs to the capitalist, whose “undisputed
authority” is used to organise and manage the organs of the overall
mechanism. And “the productive power resulting from a
combination of labourers appears to be the productive power of
capital” (365).
The capitalist’s authority is also used to cope with the workers’
resistance. Obviously, Marx is not acquainted with the modern
notion of “information asymmetries”. Yet he repeatedly observes
that, given the conflicting and exploitative relationships prevailing in
a capitalist factory, workers continually practice some form of
defiance and insubordination in order to preserve their dignity and
reduce fatigue. Thence the capitalist’s necessity to set up a hierarchy
of controllers. This inflates costs, but is profitable so long as the
productivity gains outweigh control costs.
Besides “simple cooperation” and “manufacture”, an even more
advanced form of the division of labour is set in motion by the use of
machinery in modern large-scale industry, where the assembling of
many complex means of production gives rise to an automatic system
of machines. In this way capital incorporates science in technology,
and labour productivity rises “to an extraordinary degree” (390).
The development of automation is not the result of an objective
and neutral evolution of science and technology; rather, it is one of
the most important consequences of real subsumption. Capital
moulds science and technology in its effort to run the labour process
with a view to increasing surplus value:
The development of machinery takes this course only when large-scale industry
a ained a high level of development and all the sciences have been forced into the
service of capital, and when, on the other hand, the machinery already in existence
itself affords great resources. At this point, invention becomes a business, and the
application of science to immediate production itself becomes a factor determining and
soliciting science (Marx 1987, 89–90).

Marx’s theory of the capitalist use of science has been developed,

among others,9 by Fallot (1966), who clarified some fundamental
ideas: that the evolution of science is not neutral but intrinsically
determined by capital; that technical progress brings about an
ongoing separation of intellectual from manual work; and that it
does not liberate the producers from work, but increasingly
subjugates them to capital.
With large-scale industry, the role workers play in the labour
process is transformed. In “simple cooperation” and in
“manufacture” the individual workers and the organised “social
worker” are still the subjects of labour activity, while the means of
production are the objects. In large-scale industry, instead, “the
automaton itself is the subject, and the workmen are merely
conscious organs, coordinated with the unconscious organs of the
automaton and, together with them, subordinated to the central
moving power” (Marx 1996, 422). The partial worker undergoes
another transformation: she becomes part of a machine system and
is incorporated, like a human appendix, into a dead mechanism.
Since scientific knowledge is now embodied in capital, the worker
loses not only the ability to understand the whole production
process, but also the very meaning of her labour activity and the
control of her body.
Moreover, in this way, the machine becomes a weapon used by the
“autocracy of capital” to smash the insubordination of workers, and
is hence another means of raising relative surplus value. On the one
hand, reducing workers to the condition of “organs of the
automaton” abates their ability to resist the capitalist’s control. On
the other, the increase in the capital-labour ratio provokes a
redundancy of labour, which contributes to lower wages.

3.3. Wage Dynamics

One way to raise the magnitude of surplus value is to cut wages, the
part of output corresponding to necessary labour. Marx considers
three different forms of wage payment: overtime pay, piece-wages
and time-wages.
A pay scheme often used to increase surplus value consists in
offering the workers extra pay for overtime work. Marx observes
that competition between unemployed workers enables capitalists to
cut the normal wages of the employed, thus compelling them to
accept overtime work. Consequently, the actual working day
lengthens beyond the normal one. As long as the ensuing increase in
production outweighs the pay increase, there is a rise in surplus
value.
Piecework pay is another device used by capitalists to raise relative
surplus value. It may be applied to both individuals and groups.
With this form of pay, workers are motivated to intensify their
labour activity. At the same time, they are induced to exert self-
discipline. Thus “the discipline enforced by the capitalist […]
become[s] practically superfluous in piece-work” (Marx 1998, 87),
and companies can save on control costs. Therefore, productivity
improves and costs shrink. Marx insists in observing that piecework
pay modifies the form of wage, but does not alter the social
substance of the employment contract. The worker’s subordination
and the subsumption of his labour capacities are maintained.
Control of the labour process remains in the capitalist’s hands.
The typical form of pay in a capitalist system is time-wages.
Workers’ compensation is not commensurate to any productive
contribution. Since the employment contract establishes the workers’
subordination to the capitalist for a certain number of hours a day,
the capitalist pays for this time.
In his most abstract arguments, Marx, following Ricardo, assumes
that normal wages are fixed at a (physically and historically
determined) subsistence level. The “value of labour power” is
determined by the reproduction costs of labour power. However,
when he follows Adam Smith, and especially when he reflects on
Union activity in Great Britain, Marx repeatedly makes it clear that,
in practice, wages are determined institutionally and politically by
class struggle and that they continually change in both the short and
the long run:
The periodical resistance on the part of the working men against a reduction of wages,
and their periodical a empts at ge ing a rise of wages, are inseparable from the wage
system […]. The value of the labouring power is formed by two elements–the one
merely physical, the other historical or social […]. This historical or social element,
entering into the value of labour, may be expanded, or contracted, or altogether
 extinguished […]. By comparing the standard wages or values of labour in different
countries, and by comparing them in different historical epochs of the same country,
you will find that the value of labour itself is not a fixed but a variable magnitude […].
The fixation [of the rate of profit] is only se led by the continuous struggle between
capital and labour, the capitalist constantly tending to reduce wages to their physical
minimum, and to extend the working day to its physical maximum, while the working
man constantly presses in the opposite direction (1985b, 144–6).

Wages are regulated by the bargaining powers of organised parties,

the capitalists’ associations and the workers’ Trade Unions. The
companies determine the level of employment through investment
decisions and the workers react by carrying out industrial action.10
Since the labour deal does not consist in the exchange of a
commodity, but is a transaction instituting a title to command over a
worker, labour productivity is determined ex-post by the exercise of
the title itself, and depends on both the employer’s managerial
ability and the worker’s resistance. Wages are determined by class
struggle, not by productivity.
The theory of wage determination is expounded especially in
Capital, volume 1, chapter 25, “The General Law of Capitalist
Accumulation”, and in the booklet Value, Price and Profit. It may be
summarised as follows.
A decreasing function links profits to wages (given the technique)
and an increasing function links investments to profits. During a
prosperity phase in the business cycle, employment rises. This
slackens the pressure of the industrial reserve army on labour
supply. The workers’ confidence mounts, and Trade Unions are able
to enact struggles to support claims for wage increases and
reductions in the working day. Prosperity favours the success of
industrial action.
However, when wages increase, profits begin to shrink, thus
weakening the inducement to invest. Eventually, investments
dwindle, production follows suite, and a crisis erupts. “Crises are
always prepared by precisely a period in which wages rise generally
and the working class actually gets a larger share of that part of the
annual product which is intended for consumption” (1997, 409).
During a crisis, companies dismiss workers and the industrial
reserve army begins to bloat. This paves the way for wage cuts.
Moreover, many unprofitable firms go bankrupt or are swallowed
up by bigger companies, while those who survive are induced to
scrap obsolete machines and replace them with more e cient ones.
Productivity rises and wages slow down. Therefore, profits,
investments and production expand and a new phase of prosperity
matures.
In this theory, subsistence consumption does not determine normal
wages, but only their lower limit. The workers are able to gain
higher wages with their struggles both in the business cycle
upswings and in its long run trend (Desai 1974, 19–20).
Marx observes that two general tendencies may characterise the
wage trend in the very long run. Firstly, due to technical progress,
which tends to systematically substitute labour with capital in
response to workers’ struggles, the industrial reserve army has a
tendency to expand, the rate of exploitation to escalate, and the wage
share in the national income to shrink.
Secondly, the level of real wages may tend to rise with labour
productivity, although less than proportionally: “it is possible with
an increasing productiveness of labour, for the price of labour power
to keep on falling, and yet this fall to be accompanied by a constant
growth of the mass of the labourers means of subsistence” (1996,
523). In fact, “a noticeable increase in wages presupposes a rapid
growth of productive capital. The rapid growth of productive capital
brings about an equally rapid growth of wealth, luxury, social
wants, and social enjoyments.” Therefore the enjoyments of the
worker rise (1977, 216). Class struggle, even when it does not
culminate in a revolution, is not useless. It may help the workers to
reap at least a part of the growth of labour productivity, albeit at the
cost of an increasing relative deprivation.
The theory of wage determination is part of Marx’s scientific
explanation of exploitation. It is evident that this is not a normative
theory. As already observed, for Marx the “just” wage in a capitalist
system is that fixed in the “labour market”. It is determined by a
class struggle between the capitalists and the workers, and neither of
the two opposing classes is moved by moral considerations any
more than by their material interests.
 y
Class struggle takes place both inside and outside the factory. In
the factory, the capitalists try to use their power to organise the
labour process in view of raising labour productivity and hours
worked, but they continually have to face the workers’ resistance.
Outside the factory, the workers form their “coalitions” and use
these to compel the employers to grant improvements in pay,
working hours and labour conditions. Class struggle decisively
contributes to determine the degree of exploitation.
The State mainly intervenes in support of the capitalist interests,
although it also undergoes the consequences of the class struggle
itself. When the workers are strong enough to scare the dominant
groups, the State tries to assuage conflict by complying with some of
the workers’ claims, e.g. by legally regulating the working day,
minimum wages and labour conditions.

1 Yoshihara (1998), Veneziani (2013) and Vrousalis (2013) clarify that a theory of power is
necessary to account for exploitation. Following publication of the seminal and
controversial book by Braverman (1974), an important line of research known as “labour
process theory” has developed in contemporary sociology, with the goal of investigating
the capitalist organization of labour activity. See, for instance, Knights and Willmo
(1990), Shalla and Clement (2007), and Thompson and Smith (2010). In my
reconstruction, it is not necessary to enter the infinite debate provoked by Braverman’s
thesis on the tendency of capitalism to deskill labour activity. Su ce it to recall that an
alternative view has been put forward, which holds that a skill-upgrading tendency
exists. See Adler (1990) as one of the most persuasive proponents of this thesis.
2 The word “manufacture”, to translate Fabrikation, appears in the Penguin edition. The
International Publishers’ edition uses “creation”.
3 Marx often uses the expressions “natural laws” and “laws of nature”, mostly with the
meaning of objective laws of functioning of a historically determined social system–for
instance, “the natural laws of capitalist production”, or “the natural laws of a particular
form of production”.
4 See also Fine (1975, 60), Lebowi (2003, 74, 102, 143), Dooley (2005, 178), Okada (2014,
417–20).
5 The word Zwi erformen appears in Capital. Ben Fawkes translates it as “hybrid forms”
(Marx 1976, 645), the International Publishers edition, as “intermediate forms” (Marx
1996, 511). Uebergangsformen (transitional forms) appears in the Economic Manuscript of
1861–63, while Nebensformen (accompanying forms) appears in the Results.
6 For instance, Murray (2000; 2004), Tomba (2009), Das (2012), Vrousalis (2018).
7 See Screpanti (2001) for an investigation of several of these forms.
8 The modern psychology of labour has ascertained that recognition, self-realization and
creativity are part of the fundamental psychological needs of workers. Marx had more
than an intuition about that. What is remarkable is that he thinks a worker might strive
to enjoy his working activity “as something which gives play to his bodily and mental
powers”, not only in a self-managed firm, but also in a capitalist company, where he is
less “a racted by the nature of the work and the mode in which it is carried out” (Marx
1996, 188). On the other hand, we know that modern organizational psychology has led
to the establishment of departments of human relations management in many big
companies precisely with the goal of motivating workers to give their best. Empirical
research based on Job Characteristics Theory has ascertained that labour activity can be
moulded and organised in a capitalist firm to improve both labour productivity and the
workers’ “happiness” on the job (see Oerlemans and Bakker 2018).
9 For example, El Kilombo (2010) and Nayeri (2018). Panzieri (1961) contributed to found
“workerism” (a revolutionary section of the workers’ movement in the 60’s and the 70’s)
with his analysis of the way modern capitalism uses machines and technical progress in
class struggle.
10 See Screpanti (2000) for a reformulation of this theory with a model of e ciency wages.
 4. Values and Prices

© Ernesto Screpanti, CC BY 4.0

h ps://doi.org/10.11647/OBP.0182.04

After part 1, in which Marx develops a philosophy of “labour value”,

he uses this notion as a measure of surplus value and the rate of
exploitation throughout the remainder of Capital, volume 1. Abstract
labour is the substance of value, according to the labour theory of
value. However, the expression “abstract labour” almost disappears
outside part 1 or, rather, it appears mainly in the notion of “labour
time”, as it must when the labour hour is used as a unit of
measurement.1 The real scientific problem addressed by Marx in
Capital is bringing to light the social relations of production through
which surplus value is extracted. The theory of value serves to
provide a measurement tool capable of highlighting those relations,
and Marx believes that embodied labour has this property.
In section 1 of the present chapter, I illustrate the labour theory of
value in the simplest way possible.2 I describe an economy in which
perfect competition and constant returns to scale prevail, and in
which there are no scarce resources, no fixed capital, no joint
production, no luxury goods, no complex labour and no growth.
These simplifying hypotheses are assumed not just to make the text
accessible to a broad readership, but also because my goal is to
disclose the basic limitation of the labour theory of value. If this
limitation is evident in the simplest model, there is no need to
complicate the analysis. I argue that, since labour values are
determined in a model of “commodity production in general”, they
only express the technical conditions of production. This is true even
if surplus value and the value of labour power are introduced into
the equations that determine labour values. In fact, changes in the
distribution of value added between wages and profits do not have
any consequence on the value of commodities, as long as the la er is
determined by the amount of labour contained in them.
In section 2, I elucidate the determination of production prices, and
argue that they provide a correct expression of the technical and
social conditions of production. Moreover, they provide a
transparent account of exploitation when they are reduced to
quantities of labour commanded. I then propose a comparison
between the labour embodied in and the labour commanded by a
commodity, and show that the la er expresses any change in the
degree of exploitation in a way the former is unable to.
In section 3, I tackle the transformation problem: given a double
system approach, with a labour value system and a production price
system, is it possible to transform the former into the la er whilst
keeping the profit and exploitation rates invariant? I show that, even
when some aggregate invariance postulates are validated with
opportune normalization, the basic problem remains unsolved, i.e.
the inability of labour values to correctly express the social relations
of production in a capitalist economy. In fact, no reasonable
normalization can achieve the invariance of the rate of exploitation
and the rate of profit.3

4.1. Labour Values

A use value, or useful article, […] has value only because human labour in the abstract
has been embodied or materialized in it. How, then, is the magnitude of this value to be
measured? Plainly, by the quantity of the value-creating substance, the labour,
contained in the article (Marx 1996, 48).
Not only living labour, living labour employed during the current year, enters into the
exchangeable value of the total annual product, but also past labour, product of the
 labour of past years. Not only labour in living form, but labour in objectified form. The
exchangeable value of the product = the total labour time which it contains, a part of
which consists of living labour and a part of objectified labour (Marx 1989a, 153).

In other words:
v = l + v A(1)
where v is the labour value of the “useful article”, l the quantity of
living labour contained in it, A the quantity of means of production
used to produce it, and vA the labour objectified in it. The solution of
equation (1) is:
v = l(I − A)−1 = l(I + A + … At + …)(2)
Now value has been decomposed into quantities of labour used
directly, l, and indirectly, l(A + … At + …). The two equations may
refer to an economy that produces a single good, in which case all
symbols represent scalars and I=1. They can also be interpreted as
referring to an economy producing n commodities. Just define v as a
vector of labour values, I as the identity matrix, l as a vector of
labour coe cients and A as an indecomposable and productive
matrix of technical coe cients.
Equation (1) applies to a system of “production in general”, or
“simple commodity production”. There are no profits and no wages.
The producers earn the entire value added they produce. Moreover,
this economy is in a state of reproduction equilibrium,4 i.e. markets
clear and market prices coincide with the exchange values
determined by the structure of production.
Marx uses labour values to measure exploitation. He often
provides examples based on a single commodity, and defines value
both in terms of embodied labour and in terms of Pounds, for
instance: £590=£410+£90+£90=C+V+S, where the commodity value
has been decomposed into constant capital, variable capital and
surplus value. He then defines the rate of exploitation as £90/£90=
(surplus labour)/(necessary labour) (1996, 221). He is convinced that
money valuation is not a problem because, at least in his most
abstract theorizations, he maintains that money is a real commodity
(gold), so its value is determined by its labour content (Mohun and
Veneziani 2017, 8). Nor does he consider problematic the fact that his
examples refer to a single commodity rather than an array of them.
At the highest level of abstraction, he assumes that all commodities
exchange at money prices that are proportional to labour values.
What is strange is that he measures exploitation in a capitalist
economy using values prevailing in a non-capitalist economy.
Equation (1) can be converted into the following: C+V+S=vAq+wvL+
(1–wv)L=vq, where q is a vector of gross outputs, L=lq is the labour
force employed, or aggregate living labour, and wv is the unit value
of labour power, or the labour embodied in a worker’s consumption.
Notice that, since V+S=wvL+(1–wv)L=L, the distribution of output
between the capitalists and the workers does not a ect value determination.
Moreover, the relation between surplus value and necessary labour
is linear, S=(1–wv)L. Marx reasons precisely in this way, even in
microeconomic analysis. When, in a working day of 12 hours,
necessary labour is reduced from 6 to 5 hours, surplus value rises
from 6 to 7.
One may ask: how can abstract labour be “embodied or
materialised” in the value of a commodity? As I observed in chapter
1, some metaphors used by Marx convey the idea that abstract
labour is the flow of a natural substance that “congeals” or
“crystallises” into a value form. These metaphors seem to justify an
interpretation according to which abstract labour consists of a
productive activity entailing an expenditure of human energy. So,
what is “materialised” in the value of a commodity seems to be the
energy used in its production, or something akin to that.
However, such an interpretation is pointless, as “the value of
commodities is the very opposite of the coarse materiality of their
substance […] the value of commodities has a purely social reality”
(Marx 1996, 57). Thus, what gives rise to value is a social substance.
And this might be true in two different senses.
First, the market process brings about a “law of value” that
determines the exchange values prevailing in a reproduction
equilibrium. The value relations among commodities are the
fetishistic appearances of the social relations among their producers.
Since such relations consist of the e cient employment of certain
quantities of labour time, value could be considered an expression of
the labour costs incurred in production. This makes sense. If
“commodity production in general” is considered, as in equations (1)
and (2), the higher-valued commodities are those whose production
has required, directly and indirectly, the expenditure of a higher
quantity of labour time.
The second sense in which value may be considered a social
substance emerges as soon as we consider a capitalist economy. In
this case, the social relations reflected in the value of commodities
are those involving the social classes who participate in production,
workers and capitalists. Value could still be considered an
expression of direct and indirect labour costs. Since they pertain to a
capitalist economy, the former are calculated as wage costs, the la er
are reckoned by taking into account a capitalization factor.
Therefore, this second sense in which value is the expression of a
social substance cannot be represented by equations (1) and (2),
where no wages and no capitalization appear.

4.2. Production Prices

It is competition of capitals in different spheres, which first brings out the price of
production equalizing the rates of profit (Marx 1998, 179).
The fundamental law of capitalist competition […], the law which regulates the general
rate of profit and the so-called prices of production determined by it, rests, as we shall
later see, on this difference between the value and the cost price of commodities (42).

In volumes 1 and 2 of Capital, Marx is already well aware that in a

reproduction equilibrium, commodities exchange at production
prices which differ from labour values, but only in volume 3 does he
try to clarify this problem.
Whilst labour values have a natural standard, the labour hour,
production prices depend on an arbitrary choice of numeraire.
Therefore, to make them comparable to labour values, it might be
useful to normalise them with the price of labour time. This is the
approach I shall take in some of the following equations. In this way,
production prices are expressed as labour commanded, a measure
proposed by Adam Smith. Marx appreciates Smith’s notion of
“labour commanded”, but he does not fully grasp his motivation for
preferring it to embodied labour as a measure of value (Marx 1989a,
153), i.e. that value determination based on embodied labour is only
valid in a non-capitalist economy. In fact, he also appreciates
Ricardo’s rejection of the notion of labour commanded.5
The prices of production, p, are determined as
p = l + (1 + r) pA(3)
where r is the rate of profit. Prices are expressed in labour
commanded by posing the nominal wage wp=1. The technical
structure of production is the same as that in the economy
represented by equation (1).
Equation (3) implies that wages are paid post factum, i.e. at the end
of the working day or week or month. Marx is very clear about the
fact that ‘the labourer is not paid until after he has expended his
labour power’ (1996, 567), although, to comply with “the jargon of
political economy”, he “provisionally” adopts a formula, r=S/(C+V),
implying an advanced payment of wages.6
The solution of equation (3) is
p = l(I − (1 + r) A)−1 = l(I + (1 + r) A + … (1 + r)t At + …)(4)
Exchange values have been decomposed into direct labour inputs, l,
and indirect labour inputs, l((1+r)A+…(1+r)tAt+…). The former are
the current wage costs, the la er are the capitalised wage costs
incurred in past investments.
It is evident that there are differences between production prices
and labour values. Marx knows that, but does not understand the
fundamental reason why this is so. He believes that the rate of
surplus value is uniform in the labour value system and that the
value/price differences arise because the profit rate is uniform in the
production price system.
Now, assume the above equations refer to a one-commodity
model. Thus, there is no problem of profit rate uniformity. Yet
equations (2) and (4) reveal that, with 0<r<rmax, it holds p(r)>v. As
shown in figure 1, the labour commanded by one unit of commodity
is greater than the labour embodied in it, and the higher the profit
rate. Labour commanded is a correct expression of value in an
economy in which capitalists exploit wageworkers, since it rises
when exploitation rises. Instead, given the technique, the embodied
labour does not change when the profit rate changes because it does
not depend on the distribution of value added. In other words, a
price-value divergence arises whenever production is production for
profits, i.e. capitalist production. The fundamental reason why labour
values and production prices are di erent is not so much because the profit
rate is uniform, but rather because it exists.

Figure 1

Let us now interpret (1)-(4) as matrix equations. They represent an

economy made up of n industries and n goods. It remains true that,
with 0<r<rmax, it holds p(r)>v.7 In any case, whatever the numeraire,
p(r)≠v holds generically.8 The question arises: which of the two is a
significant theory of value, i.e. a theory that expresses the social
relations of production in a capitalist economy? The answer is
immediate: only prices yield a correct valuation, for they change
when the social relations of exploitation change.
Among all the possible price vectors, those normalised as labour
commanded have a peculiar property: they are increasing functions
of r even in the n-commodity case.9 They are a transparent measure
of value–transparent with respect to social relations–as the labours
commanded by all commodities rise with exploitation, given the
technique.
The rate of exploitation, measured in labour commanded, ec, is:
−1 *
p(I − A)q − L l(I − (1 + r)A) (I − A)q − L L
ec = = =
L L L
 (5)
where L*=p(I–A)q–L is the quantity of labour that can be bought by
surplus value.
Equation (5) measures the rate of exploitation as a ratio between
two quantities of labour: that commanded by surplus value, and that
commanded by the wage. Capitalists have bought power over L
workers, then they have exerted power over them in the production
process so as to make them produce a surplus value, which may buy
power over a further amount of labour, L*. Given the magnitude of
living labour, the higher the rate of exploitation, the greater is L*.
Rather interesting is the factor of exploitation, 1+ec=(L+L*)/L, which
is equal to the inverse of the wage share in net output. It is a ratio
between the labour commanded by the net output and that used to
produce it (Screpanti, 2003). In the presence of exploitation, this
factor is greater than 1 as “the value of the total product can […] buy
more living labour than is contained in it” (Marx 1997, 153).

4.3. The Transformation Problem

As already observed, Marx knows very well that relative prices are
different from relative labour values. Yet he maintains there is no
problem in the aggregate. He thinks that abstract labour is the
substance of value, whilst production prices only express the surface
appearance of market exchanges in reproduction equilibrium, and
the appearance should not alter the substance.
He seems to believe in a sort of a law of value conservation. He is
confident that exchanges at production prices only redistribute value
and surplus value among the different industries without altering
their overall amount. He postulates that the aggregate value of capital
and surplus value are not modified by exchanges at production
prices: “The sum total of [the] cost prices of all the commodities
taken together will be equal to their value [and] the total profit will
be = to the total surplus value” (1989a, 415). Thus, the general rate of
profit is assumed not to change when labour values are transformed
into production prices. Aggregate variable capital is also supposed
to be invariant (Marx 1998, 160), and this implies that not even the
general rate of exploitation should change.
The aggregate invariance assumptions are expressed in various
ways in different parts of Capital. In volume 2, they take an even
stronger form. In that volume, Marx presents a two-sector model
and investigates reproduction conditions in terms of the ability of
the industrial system to produce the capital and consumption
commodities demanded by the system itself. To define the demands
and supplies of the various sectors, Marx uses both labour values
and monetary prices, convinced that “the fact that prices diverge
from values cannot, however, exert any influence on the movement
of the social capital. On the whole, there is the same exchange of the
same quantities of products, although the individual capitalists are
involved in value relations no longer proportional to their respective
advances and to the quantities of surplus value produced singly by
every one of them” (1997, 392). When defining reproduction
conditions, Marx assumes the equality of aggregate labour values
and production prices, not only for the whole economy, but also for
the sectorial components.10
Awkwardly, the aggregate invariance postulates do not hold true
in the way Marx supposes, as I shall show. And this is a decisive
limitation. In fact, only if the law of value conservation were correct
would it be possible to use the general rates of profit and
exploitation, as determined in the labour value system, even when
dealing with the price system.
Now, let ev and ep represent the rates of exploitation in labour
values and production prices respectively; rv and rp the rates of profit
in labour values and production prices respectively; p̂ the price
vector with a new normalization; wv and wp the unit value of labour
power and the wage. And consider the following:
a) Fundamental invariance postulates
1. ev = ep
2. rv = rp
 b) Subordinate invariance postulates
1. v(I − A)q = p̂ (I − A)q
2. wvL = wpL
3. vAq = p̂ Aq
Other invariance postulates can be deduced from these three. The
invariance of gross output results from (b.1) and (b.3). The
invariance of surplus value, from (b.1) and (b.2). I consider them
subordinate in that they are expedient to ensuring postulates (a.1) and
(a.2). These are the fundamental ones because they define the
conditions that make ev a correct measure of exploitation and rv a
correct measure of profitability, in other words, the conditions that
justify Marx’s practice of using ev and rv when dealing with the price
system.
The transformation problem11 boils down to finding a diagonal
matrix D such as vD=p̂. In general, prices are determined up to a
proportionality factor. Therefore, there are many D, one for each
possible numeraire, and the standard can be chosen to obtain one of
the subordinate invariance postulates.
The labour value system is made up of n equations with n
unknowns. Once labour values have been determined, it is su cient
to fix a bundle of wage goods, g, to determine variable capital,
V=wvL=vgL, and the surplus value, S=L–vgL. There are no degrees of
freedom, because labour values are determined without knowing the
distributive variables. The case of the price system, in which prices
depend on labour costs and the rate of profit, is different. Since social
and political forces exogenously determine either wp or rp, the system
is made up of n equations with n+1 unknown. There is one degree of
freedom, and the possibility of introducing a normalization equation
to validate one subordinate invariance postulate, but only one
(Mohun and Veneziani 2017, 15).12
Validation of a subordinate invariance postulate does not imply
validation of the fundamental ones. The rates of exploitation in the
two systems are:
 v(I − A)q − w v L
ev =
wv L

(6)

p̂(I − A)q − w p L
ep =
wp L

(7)
The rates of profits are:
v(I − A)q − w v L
rv =
v Aq

(8)

p̂(I − A)q − w p L
rp =
p̂Aq

(9)
It is easy to see that ev = ep and rv = rp if and only if (b.1), (b.2) and (b.3)
hold, which is not the case.
Summing up, if value is a social relation, as claimed by Marx, then
production prices are meaningful measures of value. This is because
they convey information about both the technical and the
distribution conditions of production, and change when exploitation
changes. Labour values, instead, respond only to changes in
technical conditions. This is the reason why the rate of exploitation
and the profit rate are not invariant in the transformation procedure.
Now, equation 5 shows that the actual rate of profit, rp, is associated with
the actual rate of exploitation, ep, not with ev. Thus, the la er is an improper
measure of exploitation.
1 The expressions “abstract labour” or “labour in the abstract” appear 9 times in part 1 and
only once in the rest of the book. “Labour time” appears 22 times in part 1 and 52 times
in the rest of the book.
2 The reader interested in more complex and complete treatments may find them in
Howard and King (1975), Steedman (1977), Roemer (1982), Flaschel (1983; 2010), Eatwell,
Milgate and Newman (1990), Cogliano, Flaschel, Franke, Fröhlich and Veneziani (2018),
who present different interpretations of Marx’s value and exploitation theories.
3 Starting with a work by Okishio (1963), extensive debate and a wide body of
mathematical literature have developed in a empts to prove the existence of capitalist
exploitation on the ground of labour values. This approach demonstrates various forms
of a Fundamental Marxian Theorem on the correspondence between the production of
surplus value, measured in embodied labour, and the existence of positive profits.
Yoshihara (2017) provides a good survey of the literature. I will not enter into this debate
because the Fundamental Marxian Theorem and its generalizations are not so robust
and, worse, they tend to reduce the theory of exploitation to a trivial tautology
(Samuelson 1974, 64–6; Lippi 1974, 348; Vicarelli 1981, 131–6).
4 This notion is clarified in Appendix 1.
5 In any case, it must be recalled that Marx’s theory of value is influenced more by Smith
than by Ricardo (Foley 2011).
6 See Appendix 2 for an elucidation of this problem.
7 In fact (I–(1+r)A)-1>(I–A)-1.
8 Apart from when r=0, a special case in which the labour theory of value holds strictly
(p=v) is when l is an eigenvector of A (Kurz and Salvadori 1995, 110–3). This case occurs
in an economy in which the organic composition of capital is uniform.
9 The first derivatives of prices are p’(r)=l(I–(1+r)A)-1A(I–(1+r)A)-1>0.
10 This problem is be er elucidated in Appendix 1.
11 See Lopes (2019) for a terse historical reconstruction of the debate on the problem.
12 However, it is possible to force a further invariance postulate. If we assume that both
distributive variables are unknown, i.e. that neither of them is determined exogenously,
we end up with n+2 variables. Thence we can posit two subordinate invariance
postulates and obtain, as a result, a fundamental one, but not both. For instance, by
positing (b.1) and (b.2), (a.1) holds too. Loranger (2004) posits (a.2), which implies the
invariance of aggregate capital and surplus value. Unsurprisingly, these devices have
not met with much success among Marxist economists, as they boil down to an
imaginative theory of exploitation according to which the profit rate and the wage are
determined not by the social and political forces of class struggle, but by the theoretical
requirements of an ingenious thinker.
 5. Measures of Exploitation

© Ernesto Screpanti, CC BY 4.0

h ps://doi.org/10.11647/OBP.0182.05

Marx’s value theory is a complex doctrine in which three different

kinds of speculation coalesce: a philosophy aimed at proving that
value is created by a labour substance; an explanation of the social
relations of production in capitalism; and a method for measuring
exploitation. My opinion is that there is no need for an essentialist
philosophy to determine value, no need for a theory of value to
explain capitalist social relations, and no need for a labour theory of
value to measure the rate of surplus value. All we really need is a
theory of production prices, possibly evaluated in labour units, as an
instrument to measure exploitation. In the present chapter, I firstly
bring to light some conundrums caused by using a wrong standard,
then I show how to express the rate of surplus labour with a correct
standard.
In section 1, I illustrate two paradoxes ensuing from the labour
theory of value. One of them muddles up the explanation of
technical change. In short, the labour theory of value is unable to
account for the process of technical change in a capitalist economy
precisely because it is a purely “technicist” theory of value. The
second paradox deranges the equal exchange doctrine. This seems to
be postulated by Marx to argue that fundamental capitalist
exploitation occurs in the production process and not in the
circulation process. Yet, if equal exchange is defined in labour
values, there may be cases in which a part of surplus value emerges
from the circulation process.
In section 2, I propose giving up the labour theory of value and
sticking with a single system approach. Surplus value and the rate of
exploitation can be measured in labour units by normalizing prices
either with the wage or with labour productivity. These two kinds of
normalization are consistent with each other, in the sense that they
provide identical measures of the rate of exploitation and the rate of
profit. However, they have different properties and can therefore be
used to bring to light different aspects of the social relations of
exploitation.
Finally, in section 3, I list some decisive hypotheses that are more
or less implicitly assumed by Marx and the classical economists.
They are decisive in that they impose severe restrictions to the
theory of production prices. However, if this is only used to provide
a unit of measurement, rather than a philosophy of value, such
restrictions can be avoided. If they are redefined with reference to an
imperfectly competitive economy, production prices can be used in
empirical research to interpret the prices implicit in national account
data and input-output tables as “normal” prices.

5.1. Two Paradoxes

The observation that a measure based on embodied labour gives rise
to a “technicist” theory of value (Elson 1980; De Vroey 1982) is not
undisputed. There are Marxists who think they can rebut it with the
following proposition: the technical coe cients of production
determine labour values that convey information about the way
society allocates socially necessary labour among the various
industries, and therefore these values do represent social relations.
Such a proposition might make sense, but would not endorse the
superiority of labour values. In fact, production prices convey all
“social” information conveyed by them, plus that pertaining to the
social relations of exploitation.
In reality, the proposition makes sense only if a single lone
technique is available. If more than one exists, then the labour value
system may not convey correct information on the evolution of the
very technical conditions of production. This is a big problem
because Marx a ributes a great importance to technical progress in
the theories of exploitation, capital accumulation and class struggle.
Okishio (1961) proves that technical change in a capitalist economy
cannot be understood by using labour values. If there is more than
one technique, the price system correctly reveals which one is chosen
by the capitalists, whilst use of the labour value system could lead to
the wrong technique being chosen. This occurs because the
profitability criterion adopted by capitalists in the choice of
techniques is not based on labour productivity, and not even on the
rate of surplus value or the rate of profit as determined in the labour
value system. It is based on the rate of profit as determined in the
price system.
The case of many techniques brings to light another reason why
labour values do not convey correct information about social
relations: they do not regulate the actual production conditions
when technical change is motivated by profit. And this is
paradoxical. Precisely because labour values only provide
information on the technical conditions of production, they are
unable to account for the process of technical change in a capitalist
economy.
Another paradox emerges with the hypothesis of equal exchange.
Marx uses the labour theory of value, among other things, to argue
that capitalist exploitation takes place under apparent conditions of
commutative justice, although he sometimes seems to criticise the
validity of this postulation when dealing with the labour transaction.
He wishes to point out that value creation is not a consequence of
some asymmetry in market relations:
If commodities, or commodities and money, of equal exchange value, and consequently
equivalent, are exchanged, it is plain that no one abstracts more value from, than he
 throws into, circulation. There is no creation of surplus value. And in its normal form,
the circulation of commodities demands the exchange of equivalents (Marx 1996, 170).

Marx intends to show that exploitation is perpetrated in the

production sphere and not in the market. To this end, he seems to
accept the theory that accounts for the employment relationship as if
this were based on a contract of commodity exchange. Then,
assuming that a worker’s commodity–the use value of labour
power–is traded in a competitive market, he discovers that her
compensation coincides with the reproduction cost of her living
labour, in other words, that the labour exchange appears to be an
equal exchange. In a competitive reproduction equilibrium,
transactions are supposed to be regulated by the “law of value”, and
“according to the law of value, exchange is between equivalents, an
equal quantity of labour for an equal quantity of labour” (Marx
1989a, 213). Embodied labour determines the true value of a
commodity, and transactions at true values fulfil commutative
justice. When the wage coincides with the value of labour power,
commutative justice ensures distributive justice too, because
reproduction costs (let us say, investments in human capital) are
what a worker deserves to be paid for.
Equal exchange in the “labour market”, though, is a strange
phenomenon. It is a real occurrence, in the sense that “production
based on exchange value, on the surface of which that free and equal
exchange of equivalents takes place, is basically the exchange of
objectified labour as exchange value for living labour as use value”
(1986a, 438). Yet, “from the point of view of capital, the exchange
must be merely apparent, i.e. an economic category other than
exchange, or else capital as capital and labour as labour in antithesis
to it would be impossible. They would exchange for each other only
as equal values” (247). They only appear to be equivalent in the
circulation process.
The production sphere is the place where the fundamental
capitalist misdeed is carried out. Capitalists implement production
plans by using their authority. They compel workers to work
e ciently and produce commodities whose value added is higher
than the wage. Labour transmits to commodities a value consisting
in the quantity of living labour bought by the employer. The
capitalist’s authority is a power of command in the production
process, not a form of market power, and is what the employer
actually buys with the employment contract. The acquisition of this
authority implies the subsumption of labour capacities and thence
the ownership of the commodities produced by them. Therefore,
according to a bourgeois right, the surplus value arising from the
production process legitimately belongs to the capitalist. And
nobody who believes labour time is a commodity can say that the
wage is unjust because it is determined in an unequal exchange.
There are two problems with this speculation. Firstly, “an equal
quantity of labour” is exchanged with “an equal quantity of labour”
only in a system of “commodity production in general”, i.e. in a non-
capitalist economy. Thus, when labour values are transformed into
the production prices prevailing in a capitalist economy, a paradox
may arise. In fact, since the rate of exploitation determined in the
labour value system does not coincide with that determined in the
price system, there could be cases in which at least a part of
exploitation appears to take place in the market. To bring this oddity
to light, suppose ev<ep, that is, v((I–A)q–gL)/vgL<p̆((I–A)–gL)/ p̆gL, and
normalise prices, p̆, in such a way as to yield the invariance postulate
(b.2), vgL= p̆gL. Then the wage bill in the price system coincides with
the quantity of labour embodied in the workers’ consumption.
According to Marx (1998, 232), “from the standpoint of the total
variable capital of society, the surplus value it has produced is equal
to the profit it has produced”. Disappointingly, this is not true. In
fact, since the rate of exploitation is not affected by normalization, it
happens that ev<ep whatever the standard. Therefore it is v((I–A)q–gL)
< p̆((I–A)–gL), which means that although the aggregate variable
capital in the labour value system is identical to that prevailing in the
price systems, the surplus value earned in the la er is greater than
that produced in the former. Since production prices diverge from
labour values to ensure market equilibrium, it is as if the surface
appearance of market exchanges had yielded a surplus value over
and above that produced in the labour value system. Remember that
the real rate of exploitation is ep, not ev, and that an equal exchange
postulation, defined as the exchange of “an equal quantity of labour
for an equal quantity of labour”, serves to argue that exploitation
does not take place in the circulation process. Yet, when labour
values are transformed into production prices in such a way as to
ensure the invariance of variable capital, it may happen that the
market generates a part of surplus value. Precisely because value is
determined in the production process as embodied labour, it can be
proved that there are cases in which exploitation emerges from the
circulation process.
Secondly, if what capitalists buy in the “labour market” is the
workers’ subordination, labour time is simply a temporal limit to the
obedience obligation, and cannot be considered a commodity
consisting of a flow of some substance that transmits value to
products. Therefore, the notion of equal exchange as an exchange of
equivalent labour values portrays a situation that, rather than merely
apparent, is merely fictitious.
On the other hand, Marx knows very well that wages are
determined not by the crossing of demand and supply curves, but
by a bargaining process. The “labour market” is not a market proper,
but a ba leground for class struggle. Thus, if the force that
determines the rate of surplus value is not the energy of labour
power, but bargaining power, what need is there of an equal
exchange assumption to explain exploitation, let alone to unmask a
capitalist ideology?1
In any case, the gist of Marx’s reasoning can be upheld in a much
simpler way. If one wishes to make it clear that capitalist firms may
enact fundamental exploitation without resorting to any form of
market power, it is su cient to assume perfect competition in the
price system. This counterfactual assumption is all that is required to
argue that surplus value emerges from the production process and
not from the circulation process.

5.2. A Single System Approach

A way out of the labour value impasse is to give up equation (1), and
stick with equation (3) as the sole correct representation of values.
The double system approach to value determination gives way to a
single system approach: “There is only one economy, one system,
not two. There is no ‘underlying’, hidden economy, which operates
in values” (Duménil and Foley 2008). In other words, the only
solution to the transformation problem is its dissolution.
Many Marxists, however, are unhappy with a value theory that
seems to free the definitions of value and surplus value from their
labour origin. Indeed, this is a serious problem for those who wish to
remain faithful to a notion of abstract labour as a natural substance,
as they can no longer maintain that value and surplus value are
created by the energy supplied by abstract labour in the valorisation
process.
Nonetheless, it is still possible to measure surplus value in labour
units. It can be done in two different ways. One consists of
normalizing prices with the wage and redefining them as labour
commanded, as I did in chapter 4. Then surplus value becomes a
quantity of labour commanded by profits, and the rate of surplus
value, a ratio between two quantities of labour.
The other way consists of using aggregate living labour as a
standard. Sraffa (1960, 10–1) suggests this way by assuming p̆(I–
A)q=1 and L=1, which is tantamount to making the value of net
output equal to living labour.2 He does not mention the
transformation problem. Messori (1978, 115–6), who does, proposes
to normalise prices with the invariance postulate (b.1), i.e. precisely
with assumption p̆(I–A)q=L, and justifies this proposal by arguing
that living labour is the sole macroeconomic variable that does not
change when distribution changes.
You obtain the same result by normalizing prices with labour
productivity, and this is the gist of the so-called “new
interpretation”. It is a ributed to Duménil (1980; 1983–4) and Foley
(1982); but see also Wolff, Roberts and Callari (1982) and Lipie
(1982). Following these contributions, other authors3 have proposed
reinterpretations that adopt labour productivity as a numeraire.
 So, let y represent the average productivity of labour and normalise
prices in this way:

p̂(I − A)q
y = = 1
L

(10)
The net output is equal to the labour force employed, and one could
argue that the approach boils down to a dissolution of the
transformation problem that satisfies the exigency to measure prices
in labour units. This looks like a re-reading, if not a re-writing, of
Marx. It is not a new solution to the transformation problem. Still, it
is an analytically sound solution to a philosophical problem.
With this standard, the wage share in net output becomes a share
of living labour. Then the rate of exploitation can be wri en as

p̂(I − A)q − w p L L − wp L 1 − wp
ep = = =
wp L wp L wp

(11)
Now we can confidently say the rate of surplus value is a ratio
between unpaid labour, L–wpL, and paid labour, wpL. If 1 is a
working day, wp is the part spent to produce the wage, so ep is a ratio
between the number of hours the average worker works for the
capitalist and the number she works for herself. I say average because
the rate of exploitation ep holds in the aggregate, not in individual
companies or industries. In fact, at a microeconomic level of analysis,
value added, profits and wages are determined in terms of
production prices. Microeconomic rates of exploitations, calculated
in “labour time-equivalents of prices”,4 are not uniform.
To tell the truth, the new interpretation interprets itself as a
“monetary” theory of labour value. In fact equation (10) can be
rewri en y=p̆(I-A)q/L=1/ p̆m, where the scalar p̆m is the “value of
money”. So, y is called “the monetary expression of value”, or “the
monetary expression of labour time”, and represents the quantity of
money corresponding to a unit of labour. The value of money, p̆m,
also defined as the “labour expression of money”, is the quantity of
labour time measured by a unit of money. In the new interpretation,
“labour value” is immediately represented by “money”, which
seems consistent with the view that the form of existence of value
postulated by Marx is money, rather than labour (Key 2015).
It must also be said that a single system approach can be
developed without any reference to equation (3), and a labour
productivity standard can be applied to any conceivable price
system (Mohun 1994, 407; Duménil and Foley 2008). Equation (3) is
the one that determines prices at the highest level of abstraction
compatible with that of Marx’s analysis of value. At a different level
of abstraction, the labour productivity standard could be applied to
a fix-price oligopolistic economy with differential profit rates, as
be er argued below. Finally, note that some new interpreters5 define
the wage without specifying the workers’ consumption bundle and
take the money wage as a variable, possibly determined by class
struggle. Marx himself does so in his less abstract investigations into
wage dynamics.
Several Marxists have contested the new interpretation from a
methodological or a philological point of view. To mention just a
few: Roemer (1990) observes that abandoning the dual system
approach opens value determination to arbitrariness; Shaikh and
Tonak (1994), that it turns the whole relationship between surplus
value and profit on its head; Mongiovi (2002), that it redefines value
in a trivial way; Fine, Lapavitsas and Saad-Filho (2004), that it
wrongly assumes value to be immediately represented by money;
and Petri (2015), that it adds nothing to the comprehension of what
determines profits.
In any case, although methodological and philological concerns are
understandable, it must be acknowledged that the new
interpretation is analytically sound. Moreover, it has fostered
Marxists’ commitment to empirical research (Mohun 2004; Foley
2019). Among other things, it has also helped convince many
Marxists that the labour theory of value can be abandoned without
prejudicing the theory of exploitation.6
Finally, it might be interesting to compare the two ways of
measuring surplus value in labour units: “labour commanded” and
“the monetary expression of labour time”. Recall equation (5). Then
notice that, since the rate of exploitation is a pure number, it must be
ec=ep, or L*/L=(1–wp)L/wpL. The ratio between the labour commanded
by surplus value and that commanded by the wage is equal to the
ratio between unpaid and paid labour. Hence, one is free to use
either measure, depending on which aspects of exploitation one
wishes to bring to light.
With the new interpretation, aggregate surplus value can
immediately be expressed as surplus labour. It is also interesting to
note that, by reducing value added to living labour, the wage rate
coincides with the wage share in net output. Amongst other things,
normalization with labour productivity seems to reinstate the linear
relation between surplus value and the wage, S=(1–wp)L, which is
another way of saying that the profit share, π=S/L, and the wage
share, ω=wpL/L, add up to one (Ga ei and Gozzi 2010). However,
some caution is required: it is not possible to re-propose Marx’s
microeconomic argument–that a reduction of paid labour from 6 to 5
hours in a 12-hour working day raises the surplus value of a firm
from 6 to 7. With the new interpretation, the linear relation between
surplus value and the wage only holds in the aggregate, and only by
virtue of a normalization convention.
An advantage of the labour commanded measure, on the other
hand, is its ability to convey the idea that exploitation is based on the
power that capitalists exert in the labour process. Smith’s notion of
“command”, i.e. “power to purchase”, can be easily converted into
Marx’s notion, i.e. “power”. This is because, in the “labour market”,
the capitalist purchases power over his workers. Valorisation can be
accounted for as a process by which the exploitation of living labour
in current production engenders an increase in the quantity of
labour that capitalists can command in future production.7
 Another interesting aspect of this measure is that it can be taken as
expressing a worker’s point of view on capitalism and its overthrow.
The factor of exploitation, 1+ec=(L+L*)/L, is a ratio between the labour
commanded by value added and the labour embodied in it. It could
also represent a comparison between the value of net output in a
capitalist economy and its value in a socialist economy.8 The labour
theory of value turns out to be of some utility after all. It can be seen
as a counterfactual (Screpanti 2003) implicitly used by workers in
collective decision-making; when they struggle to reduce
exploitation, they are fighting against capitalism. A lessening of
exploitation implies a cutback in capitalist power. Exploitation
would be zeroed, L*=0, if commodities were exchanged at labour
values, as would occur in a hypothetical socialist economy.
Finally note that, whilst reduction of the exploitation rate to a ratio
between two quantities of living labour holds true only in the
aggregate, its reduction to a ratio between two quantities of
commanded labour holds true at the microeconomic level too.

5.3. Back to the Real World

Having proved that production prices are be er than labour values
as instruments to measure exploitation, I must now say that not even
the classical theory of prices should be taken at face value. Marx
adopts the Smithian and Ricardian model of market competition (or
“perfect liberty”) with all its implicit assumptions, such as no
oligopoly or monopoly power, no entry and exit barriers, no product
differentiation. Especially important is the assumption of flexible
market prices. These are supposed to vary as increasing functions of
excess demands, with produced quantities varying as increasing
functions of market prices. The market adjustment process is
expected to cause a gravitation around a reproduction equilibrium,
yielding market clearing and profit rate uniformity. This model may
perhaps be appropriate to agriculture and financial markets, but
certainly not to a modern industrial economy.
Indeed, the theory of perfect competition was not even justified in
Smith’s times (remember his invectives against the cabals or
monopolies who fix prices to squeeze the buyers). In The Wealth of
Nations, Smith portrays an ideal state of “perfect liberty”, which
works almost as a normative principle of social organization
(McNulty 1967, 397), rather than as an explanation of the real market
process. Ricardo, instead, believes that the theory describes the
normal functioning of markets. But did it really account for the
market process in the first half of nineteenth century? After all, Marx
himself observes the tendency of company size and market power to
grow in the advanced capitalist countries.9 Thus, by complying with
that theory of competition, he accepts a cliché of the science of his
times, but at the price of an improper level of abstraction.
Farjoun and Machover (1985) suggest that competitive production
prices are precisely ideal prices. In the real world, profit rates have no
tendency to converge to uniformity, and market prices, no tendency
to converge to competitive prices of production.10 This fact can be
explained by the theory of “normal pricing”, as developed by post-
Keynesian economists. Markets are regulated by oligopolistic
competition. Normal prices are fixed by applying a gross mark-up to
direct costs (labour costs plus circulating capital), which are
calculated by firms with a view to normal capacity utilization in the
long run. The mark-up magnitudes differ across firms and
industries, and reflect the diverse “degrees of monopoly”, so that
profit rates are not uniform.11
The classical economists implicitly assume another decisive
hypothesis: that the market adjustment process is stable. If it were
not so, production prices would be irrelevant, as market prices
would not gravitate around them. Marx has more than an intuition
about market instability, especially when dealing with crises
(Screpanti 1984), yet when it comes to value determination, he
reasons as if the gravitation process were stable. The trouble is that
stability has not been proved to hold in general, neither in
neoclassical equilibrium models nor in classical gravitation models.
This problem does not arise with normal prices, which are sticky and
tend to vary with costs rather than with excess demands, and which
are production prices coinciding with market prices.
 Let us now distinguish between competitive production prices and
oligopolistic production prices, the la er yielding uneven rates of
profit. Normal prices are production prices, since they are regulated
by production conditions. From an analytical viewpoint, they are
determined by rewriting equation (3) as p=(l+pA)U, where U is a
diagonal matrix of different mark-ups.12 Notice that restricting input
costs to circulating capital as a basis for price determination is not a
simplifying hypothesis in this case, but the illustration of a usual
practice of firms. Moreover, there is no need to assume constant
returns to scale throughout, as is done in the equations that
determine competitive production prices.13 It is su cient to observe
that, in practice, direct costs are constant in a neighbourhood of
normal capacity utilization.
The fundamental proposition argued in this book is still valid:
oligopolistic production prices yield a correct theory of value, as they
express both the technical and social conditions of production, now
including the market power by which a firm may exploit consumers
and the workers of other firms.
Simply put, the need to adapt Marx’s theory of prices to a modern
industrial economy justifies “a systematic and principled rejection of
the concept of a uniform profit rate” (Farjoun 1984, 12). All Marxists
should learn such a lesson. The assumption of differential profit
rates within a fix-price model is, first of all, more general than the
assumption of uniformity. In fact, the theory of perfect competition
can be considered as a special case: the limit case in which all the
degrees of monopoly are nil.
This is often assumed in order to simplify theoretical problems and
prop up some strong ideological tenets; and therefore, it can be
legitimately assumed with critical intentions. Marx himself assumes
competition with a somewhat critical intention: the “law of value”,
established through the market process, brings about an “equal
exchange” situation that should rule out all the explanations of
exploitation based on some form of asymmetry in market power.
Yet, Marx also follows Ricardo in believing the assumption of
perfect competition to be rather realistic. Wrongly so, for it does not
describe the real market structure and market process in a modern
capitalist economy.
Normal prices do not have this flaw and correctly account for the
actual working of value formation in an economy based on
oligopolistic competition. Therefore, they are not only more general,
but also more realistic than competitive production prices. And
precisely for this reason, they work quite well in empirical research,
where measurement is effected ex post. The conventional prices of
national accounts and input-output tables can be interpreted as
normal prices.14 The rate of surplus value is calculated as a ratio
between the summation of all other incomes and the wage bill. Then,
if one wishes to enlighten empirical findings by measuring
exploitation in labour units, it is su cient to redefine surplus value
and the wage bill by normalizing them with the wage rate or the
productivity of labour.

1 Yet the notion of “unequal exchange”, as put forward by Emmanuel (1969) and
developed by many students of imperialism, has turned out to be rather useful in the
analysis of exploitation in international trade. Obviously, an unequal exchange
situation, as revealed by the terms of trade, must be referred to a price system and not to
a labour value system. See Brolin (2007) for a comprehensive survey.
2 Preti (2002) calls a ention on the implications of such assumptions. On the ground of
Sraffa’s unpublished papers, Ga ei (2018, 249–51) argues that this kind of numeraire is
proposed by Sraffa not as “a curious object”, but as a reminiscence of the Old Moor’s
predilection for a measure of value in labour units (see also Ga ei and Gozzi, 2010, and
Coveri, 2017). Mongiovi (2010) and Kurz and Salvadori (2010) have found some of
Sraffa’s notes that show he was interested in upholding Marx’s theory of exploitation.
3 For instance, Glick and Ehrbar (1987), Bellofiore (1989), Mohun (1994), Campbell (1997),
Perri (1998), Duménil, Foley and Lévy (2009), Moseley (2016; 2017), Foley and Mohun
(2016), Mohun and Veneziani (2017).
4 “Labour time-equivalents of prices” are production prices normalised with y. In the new
interpretation, the prices of capital goods are the “labour time-equivalents of constant
capital” (Moseley 1993; Foley 2000). They consist of dated quantities of capitalised
labour rather than quantities of dead labour.
5 For instance, Duménil (1984), Duménil and Levy (1991), Moseley (1999).
6 However, some new interpreters, like Foley (2016; 2018), preserve the labour theory of
value as an instrument that can be used to account for labour allocation.
7 Normalization in wage units may also be useful in macroeconomic analysis. Not by
chance, it was used by Keynes in The General Theory (1973, chapter 4). Among its
 properties, the following two are worth noticing: first, when the price level varies with
labour costs, the wage standard turns out to be a deflator of monetary variables that
works be er than index numbers; second, it can be used to convert the determination of
national income into the determination of employment. This la er property is also
obtained with the labour productivity standard.
8 The young Croce (2001, 50) had an intuition about this “elliptical comparison”: “Does
Marx offer an explanation connecting ground and consequence, or does he not rather
draw a parallel between two different phenomena, by which the diversities illuminating
the origins of society are set in relief?” Croce thought the labour theory of value was
aimed at criticizing the capitalist extraction of surplus value. Gramsci (2007, 192) found
“a grain of truth” in his notion of “elliptical comparison”, which he interpreted as
implying a comparison between capitalism and a future socialist system.
9 Salvadori and Signorino (2010, 12–7) found some passages in Marx’s works that reveal an
intuition of the notions of buyers’ and sellers’ market and can be interpreted by
resorting to Bertrand’s model of duopoly.
10 See Scharfenaker and Semieniuk (2017) for a counter-argument.
11 On the consistency between Marxian and post-Keynesian economics, see Lichtenstein
(2017). Cogliano, Flaschel, Franke, Fröhlich and Veneziani (2018) develop an original
interpretation of Marx’s theory of value and production prices and extend it to the case
of differential profit rates. Shaikh (2016, 260) rejects the neoclassical notion of perfect
competition and proposes that of “real competition”. He explains that this works
through wage cuts, increases in labour intensity, lengthening of the working day, and
technical change. Then he argues that profit rates tend to roughly equalise. The point is
that real competition, i.e. competition in real capitalism, is never perfect, not even in the
classical sense, because there are entry and exit barriers, unequal market powers of
oligopolistic companies, product differentiation, strategic behaviours, and still other
phenomena that bar any tendency of profits rates to equalise.
12 Now, even if they are postponed, wages are treated as being paid in advance because
this is the way firms fix prices. See Appendix 2.
13 In spite of his observation that cooperation in the labour process may trigger increasing
returns to scale, when he comes to price determination Marx postulates constant returns
to scale: “Assuming all other circumstances to be equal and a certain quantity a of some
commodity to cost b labour time, a quantity na of the same commodity will cost nb
labour time” (Marx 1998, 185).
14 Some researches, for instance, Ochoa (1984), Shaikh and Tonak (1994), Cocksho ,
Co rell and Michaelson (1995), Cocksho and Co rell (1997; 1998), Shaikh (1998),
Tsoulfidis and Maniatis (2002), Zachariah (2006), Fröhlich (2012), have brought to light
an unexpected result, namely that there is a strong correlation in many countries
between the market prices implicit in input-output tables and labour values, as well as
production prices. Farjoun and Machover (1983; 1985) and Schefold (2014; 2016) a empt
two different theoretical accounts of this result by using the theory of stochastic
processes. Several enthusiastic Marxists seized the opportunity to claim that the labour
theory of value is valid as an empirical law. This view has been criticised by Petrovic
(1987), Steedman and Tomkins (1998), Kliman (2002; 2004), Dìaz and Osuna (2005–6;
2007; 2009), Ni an and Bichler (2009), Mariolis and Soklis (2010), Vaona (2014),
Screpanti (2015), Veneziani (2017). A different use of input-output tables is suggested by
Cogliano, Flaschel, Franke, Fröhlich and Veneziani (2018), who are sympathetic to the
“new interpretation” and read the Leontief’s employment multipliers as total labour
costs, obviously, “insofar as input-output coe cients can be interpreted as pure
quantity magnitudes”(16).
 Conclusions:
Rethinking Exploitation

© Ernesto Screpanti, CC BY 4.0

h ps://doi.org/10.11647/OBP.0182.06

The explanation of exploitation constitutes the core of Marx’s

economic theory. It is his most innovative contribution to the science
of capitalism. Be er than any other socialist thinker, Marx helps us
understand the institutions and social relations that form the
mechanisms through which capitalism extracts surplus value from
the labour activity of wageworkers. However, the edifice of his
theory is not devoid of some clumsiness, for example, in his account
of the employment contract, as well as the notions of abstract labour
and labour value.
Marx elaborates two different theories of the employment
relationship. The first describes it as an agreement for the sale of a
commodity, whereby workers cede the use value of labour power,
i.e. a flow of living labour springing from a stock of labour power.
This commodity seems to be a natural abstraction with the properties
of a productive force. Exploitation occurs when the exchange value
of labour power is lower than its value-creating capacity. In the
second theory, the employment relationship is explained as a
transaction establishing workers’ subordination to capitalists and the
subsumption of their productive capacity under capital. While the
former theory is subject to criticisms of moralism, essentialism and
naturalism, the la er is not, and is able to sustain a consistent and
realistic account of capitalist exploitation.
This ambivalence of Marx originates from his Hegelian and
Ricardian heritage, although both Hegel and Ricardo contributed in
a positive way to the formation of his science. On the negative side,
Hegel bequeathed to Marx a doctrine maintaining that all contracts
are agreements for the exchange of “external things”. Accordingly,
Marx argues that the thing exchanged in the labour market is a
commodity owned by workers. Ricardo bequeathed the idea that the
value of a commodity is determined by the quantity of labour used
to produce it. Accordingly, Marx argues that value is a form created
by abstract labour.
Ricardo, however, realises that the different capital structures in
the various industries cause exchange value not to coincide with
embodied labour. To overcome this di culty, Marx envisages a
model of “commodity production in general” that abstracts from
capitalism. In simple commodity production, exchange value
coincides with embodied labour. This cannot be concrete labour, yet
it must be an objective magnitude. Thus, Marx thinks it necessary to
define abstract labour as a natural substance that materialises itself
into the value of commodities. When it comes to capitalist
production, he does not give up this view, but rather maintains that
the capitalist use of labour power is none other than a flow of
abstract labour. As I argued in chapters 1 and 4, this odd blend of
Hegelian and Ricardian beliefs results in an essentialist philosophy
of labour and an inconsistent theory of value.
Fortunately, Marx introduces a ground-breaking innovation when
he theorises that the employment relationship is not based on an
agreement for the exchange of a commodity, but, instead, is a
relational contract. This kind of contract is used to establish capitalist
power in the production process, the power to control the labour
process and compel workers to produce commodities whose value is
p p p
higher than the wage. Now, abstract labour is the labour time spent
by a wageworker in the production process. It is not work in a trans-
historical or mercantile form. Is this definition compatible with that
developed at the beginning of Capital?
Ça dépend. Some of the notions put forward in Capital must be
appropriately interpreted, especially the metaphor about the
substance-form relationship. Abstract labour as labour time could be
considered a “substance”, but a social substance, not a natural one. It
originates from the social relationship that transforms workers into
wageworkers and their labour practices into the realization of the
capitalists’ production plans. Labour time, so defined, is time that
measures what is not (Bensaïd 2002, 82)–what is not a worker’s
action. Yet it is time spanning an interval of the labour process in
which action does take place (Postone 1993, 202)–the capitalist’s
action. If an action is an activity prompted by the intention to
achieve a goal posited by the actor, labour activity is not a worker’s
action, but the implementation of a capitalist’s action. In fact, labour
capacities are subsumed under capital and used as the firm’s
competences. Thus, the labour time multiplied by the hourly wage
measures not a payment for a worker’s productive contribution, but
only the cost undergone by a capitalist to gain the title to command
for that time.
What to do, then, with the idea that abstract labour creates, forms,
or posits the value of commodities? This too has to be reinterpreted.
The social substance is the social relation of production that enables
a capitalist firm to produce commodities whose values yield surplus
value. A change in the power relations between social classes
resulting in a modification of labour productivity, working day or
hourly wages can be the cause of a change in production conditions.
This has, as final effect, a variation in the quantity and value of
produced goods. More simply, a change in the aggregate rate of
exploitation, measured as a ratio between unpaid and paid labour,
causes a change in the rate of surplus value, measured as a ratio
between surplus value and the wage bill. Now there is indeed a
causal relationship between the social substance and value, and it is
an e cient cause, not a material cause. It consists of the chain of
causal links between the social conditions of production and the
value of output. Clearly, one can no longer say that an increase in the
natural substance of abstract labour creates an increase in the
magnitude of the value form. Yet one can u er, for instance, a more
interesting proposition: that an increase in working day or in labour
productivity causes a change in values and an increase in profits.
Note that such a notion of “substance” does not convey the idea of a
transcendent essence of phenomenal appearances. There is no
metaphysics in this interpretation of the substance-form relationship.
There is only an analysis of the causal links that connect the social
conditions of labour activity to the outcome of production.
Most of Marx’s propositions in parts 1 and 2 of Capital, volume 1,
can be reinterpreted in this manner to make them scientifically
sound; most, but not all. There is an abstraction procedure that
cannot be complied with in any way: the assumption that isolates
production from capitalist social relations. The value of capital must
not be determined in a system of “commodity production in
general”. The relationship between the social substance and the
value form, between the social conditions of production and the
value of output, cannot be investigated within a model that abstracts
from history and capitalist social relations.
This interpretation constitutes an alternative to the traditional one
of Hegelian-Ricardian origin and makes it possible to develop an
explanation of exploitation that is exempt from all the vices of the
labour theory of value. Abstract labour is not just a category
resulting from a procedure of logical abstraction, and least of all an
outcome of the hypostatization of such a category into a natural
substance. Instead, it is a concept ensuing from the observation of a
real practice of capitalist firms, namely, the practice of calculating
wage costs in terms of money paid per unit of labour time. Labour,
as a production input, is abstract because it is reckoned
independently of the workers’ concrete abilities, which are used by
the capitalist firm in the production process as its own competences.
A more dauntless reinterpretation is required for the theory of
value. First, the labour theory of value has to be given up, as all
perceptive Marxists have now recognised. To start with, it is
p p g
inconsistent with the theory of production prices. More than that: it
is inapt for the measurement of capitalist exploitation, simply
because it determines value in a non-capitalist system. One cannot
argue that labour values represent the social structure of a capitalist
mode of production, whose superficial manifestations are expressed
in the exchange values of commodities.
Second, even Marx’s theory of production prices has to be taken
with a grain of salt. Since it only holds under perfect competition, it
is subject to strongly restrictive hypotheses that make it rather
unrealistic. However, if it is interpreted as an instrument of
measurement referring to an economy with oligopolistic
competition, it works quite well in providing a snapshot of values.
And it can be used in empirical research by interpreting the
conventional prices appearing in national account data and input-
output tables as normal prices. Nor is it necessary to abandon the
method of measuring the rate of surplus value in labour units.
The interpretation I have been proposing paves the way, among
other things, for a rethinking of the demystification of commodity
fetishism and bourgeois ideology: a rethinking aimed at overcoming
the essentialist vulgate that prevailed over the greatest part of
twentieth-century Marxism. Commodity fetishism is not a simple
surface manifestation of a productive structure consisting of the
labour substance of value. And ideology is not the hiding of an
objective truth the philosopher can a ain by unveiling the abstract
essence of things behind the common knowledge of ostensible
phenomena. Rather, fetishism and ideology are arrays of cultural
constructs that help to constitute social reality by motivating and
justifying human behaviour (Amariglio and Callari 1989).
Marx’s critique of the market as a realm of equality and freedom
works as the deconstruction of a fundamental institution of
exploitation. It calls for rejection of the economists’ conception of the
employment contract as a mercantile transaction:
The sphere of circulation or commodity exchange, within whose boundaries the sale and
purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. It
is the exclusive realm of Freedom, Equality, Property and Bentham. Freedom, because
both buyer and seller of a commodity, let us say, of labour-power, are determined only
 by their own free will. They contract as free persons, who are equal before the law.
Their contract is the final result in which their joint will finds a common legal
expression. Equality, because each enters into relation with the other as with a simple
owner of commodity, and they exchange equivalent for equivalent (Marx 1976a, 280).

The “labour market” is the place where a very mystifying form of

commodity fetishism ravages. An agreement, establishing a social
relation of subjugation and exploitation, is construed as a transaction
of commodity exchange, worse, of “free and equal exchange”. This
view is so pervasive that most philosophers, politicians, and even
union leaders take it as an obvious truth, as both classical and
neoclassical economists do. They reify labour by focusing on the
sphere of circulation, a field in which individuals interact as if they
were exchanging commodities or services.1
In part 2 of Capital, volume 1, where the employment contract is
treated as an agreement regulating a transaction in the commodity
called “labour power”, even Marx seems to succumb to this sort of
commodity fetishism. However, his theory of labour subordination
and subsumption makes it clear, beyond any doubt, that what he is
trying to do is to dismantle such a form of fetishism. In the market,
workers appear as traders who sell their commodity for a wage
(Baronian 2013, 8). They look as if they were exchanging a commodity
or a service. Yet, behind the ideological construal of the circulation
process, a worker turns out to be “like someone who has brought his
own hide to market and now has nothing else to expect but a
tanning” (Marx 1976a, 280). “The tanning of a hide” is a metaphor
hinting at what happens in the production process, where workers
are compelled to work hard under the capitalist’s command. In this
way, the labour exchange is unmasked as the legal and ideological
institution by which capital coaxes workers to accept the
subordination relationship as if it were a commodity exchange.
Such a kind of deconstruction, aimed at overturning bourgeois
hegemony, brings to the fore an alternative class viewpoint,
according to which the employment relationship is founded on
capital’s despotism and the production of surplus value is made
possible by the exercise of this despotism in the labour process.
 Finally, let us come to the question of what to do with the theory of
exploitation. How can we use it, having realised that abstract labour
pertains to the social relations of production, rather than to the
productive forces, and that it is just the labour time spent by workers
in a capitalist production process, rather than a value-creating
natural substance?
Marx’s rejection of any ethical implication of exploitation theory is
confirmed. Marxists need not and cannot use this theory to charge
capitalism with a moral condemnation. Such use would require the
theory to be founded on two kinds of axioms: an ethical one,
establishing that the capitalist appropriation of surplus value is
unjust, and a descriptive one, establishing that surplus value is
created by labour.
Now, the basic problem with ethical axioms–be they Aristotelian,
Lockian, Kantian, Feuerbachian etc.–is that they are all arbitrary. In
spite of their aspirations to universality, they are all dependent upon
the moral preferences of the philosophers who propose them. Marx
and Engels would say that they are all expressions of certain class
viewpoints. And it must be recalled that Marx seeks to account for
capitalist exploitation by assuming equal exchange as a bourgeois
moral norm holding in capitalist markets under reproduction
equilibrium. Even the distribution criterion prevailing in the first
phase of communism, where “the right of the producers is
proportional to the labour they supply” and incomes are
commensurate to the “productive capacities of the workers”, is
characterised by Marx (1989d, 86) as a “bourgeois right” rather than
as a universal principle of justice.
More problematic still, is the descriptive axiom typically assumed
to support a moral condemnation of capitalist exploitation, that is,
value is created by living labour.2 This is intuitively di cult to justify
once it has been clarified that abstract labour is not a value-creating
substance. True, an axiom is an axiom: from a logical point of view,
it requires no other justification than its postulation. Nowadays
many Marxists seem happy with the “new interpretation” and a
normalization whereby the monetary value of aggregate output
coincides with aggregate living labour. It remains true that this is a
 gg g g
measurement convention, and therefore constitutes a rather weak
foundation for a moral condemnation of capitalist exploitation. In
my opinion, the reason why a labour standard should be preferred
to a gold or a dollar standard in Marxist theory is not its ability to
demonstrate the injustice of surplus value. It is its ability to express
the worker’s view of exploitation in terms of a ratio between
overwork and necessary labour.
Marx develops a scientific approach to the study of capitalism with
the intention of using it as a theoretical basis for political praxis. This
approach embraces: (1) a criticism of the bourgeois ideology of the
employment contract as a free agreement of commodity exchange,
(2) an explanation of the wage relationship as a form of labour’s
subordination to the capitalists, (3) an explanation of labour
exploitation as a result of the exercise of capitalist power in the
production process, (4) an account of modern historical evolution as
a process of proletarian liberation from subordination and
exploitation.
Political praxis develops in the organization of struggles. The
workers’ associations thrive in building class consciousness and
ideological autonomy on the grounds of criticism (1) and theories (2)
and (3). Then class struggle is viewed as the political action
determining the process accounted for in point (4), i.e. “communism
[…] the real movement which abolishes the present state of things”
(Marx and Engels 1976a, 49).
Point (4) is based on what could be considered a descriptive axiom
defining the behaviour of the political actors: workers “have clearly,
consciously proclaimed the emancipation of labour, and the transformation
of society, as their goal” (Marx 1986b, 499). The General Secretary of
the International Workingmen’s Association puts this proposition
forward not as a hypothesis, but as the observation of a fact that
occurred in the Paris Commune. In reality, it is an interpretation of
the actors’ intentions in that fact. Let me call it the “axiom of
liberation”. It is the only axiom required by Marx’s theory of history
as a process of social and economic progress determined by class
struggle. This axiom gives foundation to a notion of revolution as a
practice of self-determination.
p
Marx inherited from Hegel and the young Hegelians a theory of
history as a process of liberation. It is true that on some occasions he
remains trapped in an idealist vision of history as a teleological
process ruled by Reason. And especially in his youth, he tends to
speak of liberation as the dialectical process of Humankind’s march
toward self-consciousness. However, when he succeeds in freeing
himself from any idealist notion of freedom and autonomy, he
develops a theory of history as an open process. In this theory, he
sees liberation as a political practice determined by the behaviour of
concrete individuals embedded in a complex set of social, cultural
and institutional influences (Screpanti 2007), i.e. of workers in the
advanced capitalist countries of his time.
Marx is an “organic intellectual” of the working class who takes
part in the process of its emancipation. He is not only an engaged
social scientist; he is also a political revolutionary. The two roles
sustain each other. The politician acts as an agent of the
International’s members. The scientist works to lay down the
theoretical basis for political action. The point in which the two roles
coalesce is in the clarification of the goals of political action as the
expression of the workers’ aspirations. This clarification takes the
form of the “axiom of liberation”, which, in another statement, says:
“the International is an Association of workers having for its goals the
liberation of workers by the workers themselves” (1988d, 642). The
Association’s goals are the workers’ aspirations transformed into a
political program. They are realised in “the Commune, the political
form of the social emancipation […]. The Commune […] represents the
liberation of ‘labour’, that is the fundamental and natural condition
of individual and social life […] It begins the emancipation of labour,
its great goal” (1986b, 491).
Emancipation from what? “From the usurpation of the
(slaveholding) monopolists of the means of labour” (490). Workers
have direct experience of their own subjection to capital, because
within the labour process they are subordinate to the capitalists’
power and have no freedom of choice. When they achieve
ideological autonomy and develop a class consciousness about their
condition of oppression, they struggle for liberation.
 pp y gg
Workers fight to expand their freedom of choice. They do so when
they demand wage increases, working day reductions, extensions of
social rights etc. (Screpanti 2004). And they do so when they finally
struggle for communism, i.e. “to make individual property a truth
by transforming the means of production, land and capital, now
chiefly means of enslaving and exploiting labour, into mere
instruments of free and associated labour” (Marx 1986b, 235) — in
other words, to achieve “the self-government of the producers”
(332).
Note that Marx declares workers to be moved by the goal of
abolishing the conditions, not only of their enslavement, but also of
their exploitation. This gives us a clue in understanding the use of
exploitation theory. In Marx’s approach, such a theory is an
interpretation of the workers’ sentiments, rather than the postulation
of a philosopher’s ethical principles. The workers who feel enslaved
in capitalism aspire to freedom. They express this aspiration in the
form of a goal of political struggle: communism. In communism,
there are no capitalists and therefore no labour subjection. The
sentiment of oppression is expressed by the scientist through a
comparison between the workers’ freedom of choice under
capitalism and under communism.
On the other hand, workers feel exploited when they compare the
income they earn in a capitalist production process with what they
would earn in a system of “free and associated labour”.
Hypothesizing that they produce the same commodities with the
same working hours in the two systems, they understand that their
income would be higher in the la er than in the former.
Alternatively, they gauge that under communism they would earn
the same income they earn under capitalism but would work less.
Thus, they realise that, under capitalism, they work more than is
necessary to produce their income. In order to feel exploited they
have no need to assume that value is created by their energy or any
other natural substance. It is su cient for them to think that profits
would not exist in a communist or socialist society. Revolutionary
workers become aware of the fact that profits emerge from their
subordination to capital when they realise that they do not need to
be subject to the command of a capitalist to produce goods.
For Marx (1989e, 520), the method of “scientific socialism” consists
in “confining its scientific investigations to the knowledge of the
social movement created by the people itself”.3 His theory of
exploitation, as a value judgment, is an interpretation of the workers’
sentiments. As a scientific explanation, it is an instrument for
transforming those sentiments into rational awareness of the social,
institutional, economic and political conditions of surplus value
production.
In a nutshell, the notion of exploitation rests on the idea that
surplus value exists only because the capitalist system prevents
workers to control the whole of output (Garegnani 2018, 24). When
defining exploitation, it is not necessary to ascertain who the
legitimate owner of surplus value is, nor who enjoys the
commodities constituting surplus value. What really ma ers is
clarifying that control of surplus value, of its production and its
expenditure, pertains to the capitalists and not to the workers.
Then, awareness of exploitation can be expressed by a measure of
the rate of surplus value that reduces it to the ratio between unpaid
and paid labour or between the labour commanded by surplus value
and that commanded by the wage bill. It can also be expressed by a
factor of exploitation (the inverse of the wage share in national
income), measured as a ratio between the labour commanded by net
output in a capitalist economy, and that commanded by it (and
contained in it), in a socialist or communist society. This kind of
“elliptical comparison” is an expression of the political stance with
which, on the one hand, workers transform their sense of oppression
and exploitation into class consciousness, and on the other hand,
anticipate the overthrow of capitalism.

1 In contemporary economics, there are various ways of mystifying the employment

contract. One resorts to the notion of a contract for services, and consists in presenting
wageworkers as individuals who provide services to a company on a regular basis. This
form of mystification is not very convincing, because it ignores the fact that the
improbable services bought by a capitalist are not specified ex ante in the contract and,
most importantly, the fact that the workers’ skills are often moulded ex post by the
 employer. Another form of mystification consists in seeing the employment relationship
as being based on a mutually advantageous partnership agreement constituted in the
market by equal individuals. This view is prominent in the human resource
management approach, according to which the employment relationship is a long-term
collaboration of employers and employees who share some basic interests. Finally, a
widespread form of mystification consists in presenting the employment contract as an
agency agreement. In this case, the worker is characterised as an agent who takes on the
duty to pursue a task appointed by a principal. She is allowed to act as she likes,
provided she does it in the principal’s interest. Thus, a wageworker is supposed to be
free to choose working practices, labour organization, work rate etc., on the condition
that she aims to maximise profits. The capitalist has no authority over the worker if this
is his agent. Worse still, the agent has the authority to bind the principal to accept any
agreements she has signed with third parties, so long as she has done it within the
agency scope. A typical example of agency agreement is the mandate relationship
linking a CEO of a company to its shareholders. Hard to believe, but most neoclassical,
and even many heterodox economists, consider this kind of mystification more credible
than that based on the contract for services.
2 Here is how Duménil (1983–4, 432–3) postulates this axiom: “To produce is to bestow a
certain amount of human labour on an ensemble of products […] Only human labour is
productive […] It is necessary to postulate that this identification of value with labour
incorporated holds for any product of any ensemble of productive processes”.
3 The word “knowledge” does not appear in the International Publishers edition. The
original phrase is: “‘wissenschaftlicher Sozialismus’ gebraucht worden nur im
Gegensa zum utopistischen Sozialismus, der neue Hirngespinste dem Volk au eften
will, sta seine Wissenschaft auf der Erkenntnis der vom Volk selbst gemachten sozialen
Bewegung zu beschränken” (Marx 1959, 635–6).
 Appendix 1:
Reproduction Conditions

© Ernesto Screpanti, CC BY 4.0

h ps://doi.org/10.11647/OBP.0182.07

In volume 2 of Capital, Marx presents various schemes aimed at

identifying the conditions of reproduction of a capitalist economy.
Among other things, he provides numerical examples referring to a
two-sector model, which, in the case of “simple reproduction”, can
be typified in the following way (Sweezy 1942, 162):
C1 + V1 + S1 = V1 + S1 + V2 + S2
C2 + V2 + S2 = C1 + C2
where Ci, Vi, Si are the quantities of labour embodied in constant
capital, variable capital and the surplus value of sector i.
To simplify, assume that each sector produces a single commodity,
a consumer good (sector 1) and a capital good (sector 2). The above
equations represent two conditions of equality between demand and
supply. The left-hand sides are the values of supply, the right-hand
sides are the values of demand. There are no net investments, and
the workers’ incomes, V1 and V2, as well as the capitalists’ incomes,
S1 and S2, are entirely spent in buying the consumer good. C1 and C2
are the parts of revenues spent by capitalists to replace the advances
of capital.
Reproduction of the system implies:
C1 = V2 + S2
meaning that the revenue spent by the first sector capitalists to buy
the capital good must be equal to the income spent by the second
sector workers and capitalists to buy the consumer good.
Reproduction conditions pertain to the physical consistency of the
production structure: the two sectors must produce the quantities of
commodities required to replicate production itself. Marx seems to
think that, since equality of the demand and supply of a commodity
can be expressed in physical terms, it does not ma er whether their
magnitudes are defined in labour values or in monetary prices: “the
fact that prices diverge from values cannot, however, exert any
influence on the movement of the social capital. On the whole, there
is the same exchange of the same quantities of products” (Marx 1997,
392).
Yet demand and supply are decided in a market system where
production decisions are motivated by the profit goal, and not by the
aim of satisfying social needs. What is to be determined, therefore, is
the set of exchange values that grant reproduction. In other words,
reproduction conditions are about the prices that ensure the
perpetuation of the technical and social structure of production. This
refers to not only the reproduction of commodities, but also “the
reproduction (i.e. maintenance) of the capitalist class and the
working class, and thus the reproduction of the capitalist character
of the entire process of production” (Marx 1997, 391). Not all values
are appropriate, and certainly not labour values, as I will show in a
moment.
A competitive reproduction equilibrium is the state of a capitalist
economy in which markets clear and profit rates are uniform. It is
achieved through a process in which: a) market prices and profits
change in response to excess demands, b) supplies and demands of
commodities change as consequences of consumption and
investment decisions. The la er are driven by the capitalists’ quest
for high profits:
The competition between capitalists–which is itself this movements towards
equilibrium–consists here of their gradually withdrawing capital from spheres in which
profit is for appreciable length of time below average, and gradually investing capital
into spheres in which profit is above average (Marx 1998, 364).

It goes without saying that equilibrium can only occur by chance. Yet
it represents the state of an economy toward which market prices
and the actual profit rates should tend to gravitate:
The different spheres of production […] constantly tend to an equilibrium: for, on the
one hand, while each producer of a commodity is bound to produce a use value, to
satisfy a particular social want, and while the extent of these wants differs
quantitatively, still there exists an inner relation which se les their proportion into a
regular system […]; and, on the other hand, the law of value of commodities ultimately
determines how much of its disposable working time society can expend on each
particular class of commodities (1996, 361).

The profit rate is brought about by market competition, but not

determined by market forces:
The average rate of profit sets in when there is an equilibrium of forces among the
competing capitalists. Competition may establish this equilibrium but not the rate of
profit which makes its appearance with this equilibrium (852).

The uniform profit rate is determined by production conditions, and

works as an incentive to replace the capital advances that warrant
reproduction of the industrial system. It is a measure of investment
returns that induces capitalists to plan the required proportions of
activity levels.
In reproduction equilibrium, commodities exchange at production
prices. So, let me reshape the above equations in the following way
(Screpanti 1993, 9):
p1q1 = wl1q1 + wl2q2 + p2(a21q1 + a22q2)r(A1)
p2q2 = p2(a21q1 + a22q2)(A2)
In this model, q1 and q2 are the quantities produced of the consumer
and the capital goods, p1 and p2 are their monetary prices, w is the
nominal wage, a21 and a22 are the technical coe cients in sectors 1
and 2, l1 and l2 are the labour coe cients, and r is the rate of profit.
All symbols represent scalars. The left-hand sides of the two
equations are the values of supplies, the right hand sides the values
of demands.
It must be
(p1 − wl1 − p2a21r)q1 = p2(1 − a22)q2(A3)
This means that the value of the consumer good not consumed by
the workers and the capitalists in the consumer good sector has to be
equal to the value of the capital good not consumed by the capitalists
in the capital good sector.
Equations (A1) and (A2) can be rewri en
(p1 − wl1 − p2a21r)q1 = (wl2 + p2a22r)q2
p2(1 − a22)q2 = p2a21q1
which, substituting from (A3), become
p2(1 − a22)q2 = (wl2 + p2a22r)q2(A1’)
(p1 − wl1 − p2a21r)q1 = p2a21q1(A2’)
The two equations entail
p2 − wl2 p1 − wl1
1 + r = =
p2a22 p2a21

These are the conditions of reproduction. Given the wage, they

determine the uniform profit rate and the production prices that
ensure market clearing.
Notice that they could be obtained more directly from equation (3)
of chapter 4, which, under the assumptions of this appendix, can be
restyled as
p1 = wl1 + p2a21 + p2a21r ≡ Vp1 + Cp1 + Sp1
 p2 = wl2 + p2a22 + p2a22r ≡ Vp2 + Cp2 + Sp2
where Vpi, Cpi and Spi are the monetary expressions of variable capital,
constant capital and surplus value in sector i.
Labour values are defined as
v1 = wvl1 + v2a21 + (1 − wv)l1 ≡ V1 + C1 + S1
v2 = wvl2 + v2a22 + (1 − wv)l2 ≡ V2 + C2 + S2
It is evident that, except in the case of a uniform organic composition
of capital, conditions Vpi=Vi, Cpi=Ci, and Spi=Si only occur when r=0,
p1=v1, p2=v2 and w=wv. When r>0, conditions p1/p2≠v1/v2 and w≠wv hold
generically, and therefore Vpi≠Vi, Cpi≠Ci, and Spi≠Si. The law of value
conservation, which is not valid in the overall aggregate, a fortiori
does not apply in the sectorial aggregates. In other words,
reproduction conditions in a capitalist economy cannot be
determined in labour values.
 Appendix 2: Advanced or Postponed
Wage Payments?

© Ernesto Screpanti, CC BY 4.0

h ps://doi.org/10.11647/OBP.0182.08

Marx normally defines the profit rate as r=S/(C+V), which implies

wages are paid in advance. Then, the matrix equation for prices is:
p1 = (1 + r)wl + (1 + r)p1A(A4)
On the other hand, he declares unequivocally that
in every country in which the capitalist mode of production reigns, it is the custom not
to pay for labour power before it has been exercised for the period fixed by the contract,
as for example, the end of the week. In all cases, therefore, the use value of the labour
power is advanced to the capitalist: the labourer allows the buyer to consume it before
he receives payment of the price; he everywhere gives credit to the capitalist (Marx
1996, 184).

In several occasions, Marx insists on the observation that “the

labourer is not paid until after he has expended his labour power”
(567) and that, despite the common view that “the capitalist, using
the jargon of political economy, advances the capital laid down in
wages, […] as a ma er of fact the reverse takes place. It is the
labourer who advances his labour to the capitalist” (1997, 219).
 When wages are postponed, they are not capitalised, and the
correct equation for price determination is the following:
p2 = wl + (1 + r)p2A(A5)
Marx also thinks that a distorted point of view lurks behind equation
(A4): “since [the capitalist] pays after the labour has lasted for days,
weeks, or months, instead of buying it and paying for the time
which it is to last, the whole thing amounts to a capitalist quid pro
quo, and the advance which the labourer gives to the capitalist in
labour is turned into an advance of money given to the labourer by
the capitalist” (219). The “jargon of political economy” is based on
such a quid pro quo: a blunder or misunderstanding resulting from
turning one notion (advanced payment) into another (postponed
payment).
Marx puts forward this criticism because he thinks the opinion that
wages are advanced is an ideological deformation of reality, aimed
at mystifying the social conditions of capitalist exploitation. It makes
the payment of wages appear as the buying of a produced
commodity, whilst, in reality, it is payment for the worker’s
relinquishment of his freedom and his labour capacity to the
capitalist.
What the capitalist buys is the temporary right to dispose of labour capacity, he only
pays for it when this labour capacity has taken effect, objectified itself in a product.
Here, as in all cases where money functions as means of payment, purchase and sale
precede the real handing over of the money by the buyer. But the labour belongs to the
capitalist after the transaction, which has been completed before the actual process of
production begins. The commodity which emerges as product from this process belongs
entirely to him. He has produced it with means of production belonging to him and
with labour he has bought and which therefore belongs to him, even though it has not
yet been paid for […]. The gain that the capitalist makes, the surplus value which he
realises, springs precisely from the fact that the labourer has sold to him not labour
realised in a commodity, but his labour capacity itself as a commodity. If he had
confronted the capitalist in the first form, as a possessor of commodities,1 the capitalist
would not have been able to make any gain, to realise any surplus labour, since
according to the law of value exchange is between equivalents, an equal quantity of
labour for an equal quantity of labour. The capitalist’s surplus arises precisely from the
fact that he buys from the labourer not a commodity but his labour capacity itself, and
this has less value than the product of this labour capacity, or, what is the same thing,
realises itself in more objectified labour than is realised in itself. But now, in order to
 justify profits, its very source is covered up, and the whole transaction from which it
springs is repudiated […]. We are now told that the labourer has sold his share in the
product to the capitalist before it has been converted into money (1989a, 212–3).

Nonetheless, in most of his analyses, Marx defines the rate of profit

as r=S/(C+V). He states that, “for a clear comprehension of the
relation of the parties”, he “provisionally” (1996, 185) assumes the
wage is advanced; and admits that, by doing so, he proceeds
“according to the usual way of reckoning” (227), thus complying
with “the jargon of political economy”. In reality, this assumption is
not so provisional.
What are the reasons for the “usual way of reckoning”? One might
be that equation (A4) represents the common practice of price fixing
followed by firms; normal prices are determined by applying a gross
mark-up to direct costs, C+V. Then, as I argued in chapter 5, equation
(A4) holds independently of whether wages are advanced or
postponed, but simply because it corresponds to the procedure by
which firms fix prices. Price fixing, however, implies that markets
are not perfectly competitive. When competition is assumed–as done
by Marx, following Smith and Ricardo–market prices are not fixed
by firms, but are determined by the forces of demand and supply. If
the market process is stable and wages are postponed, market prices
must gravitate around the production prices represented by
equation (A5), not equation (A4).
Another reason for the “usual way of reckoning” could be that in
many sectors (e. g. agriculture), the length of the production process
(one year) is longer than the length of the sub-period for wage
payment (a day, a week or a month). Therefore, even if paid at the
end of the day, the week or the month, wages are advanced by
capitalists during the production process and thence must be
capitalised at the end of the year. This observation, however, does
not justify equation (A4).
In fact, suppose the annual wage, w, is post-paid in T sub-period
instalments during the production process, the length of the wage
payment sub-period being 1/T of the length of the production
process. The sub-period wage is w/T. The annual factor of profit is
1+r=(1+i)T, where i is the sub-period rate of interest. As shown by
Steedman (1977, 103–4), prices are determined as:

3 T −1
w 3
p = [1 + (1 + i) + … (1 + i) ] l + (1 + r)p A
T

Since
T

T −1
(1 + i) − 1 r
[1 + (1 + i) + … (1 + i) ] ≅ =
i i

,
it is
r
3 3
p ≅ wl + (1 + r)p A
iT

(A6)
which is equal to (A5) when T=1. Now, a real economy involves
production processes of different lengths. Some of them are longer
than the wage payment period, while others are shorter. In abstract
theory, this di culty is overcome by assuming that all production
processes, as well as the wage payment period, have the same
length. Then, the question is whether (A4) or (A5) is more plausible
in this idealised economy. The answer is: the most plausible is the
one that be er approximates equation (A6).
Steedman (1977, 105) proves that (A5) gives a good approximation
for low profit rates. The degree of approximation weakens when r
rises. Steedman’s result can be generalised. It can be proved that
equation (A5) always provides a be er approximation than (A4).
Figure 2 shows the behaviour of 1+r and r/iT for T=12 and i∈[0.001,
0.1]. It is evident that (1+r)–r/iT>r/iT–1, which is the condition under
which the full wage post-payment equation yields a be er
approximation than the full wage pre-payment equation.

Figure 2

More generally, Lonzi, Riccarelli and Screpanti (2017) prove that

r r
[(1 + r) − ] − ( − 1) > 0 , ∀T > 0 , ∀i > 0
iT iT

Whatever the period of wage payments and whatever the interest

rates, the equation with postponed wages approximates (A6) be er
than the equation with advanced wages.

1 According to an ideology I recalled in note 1 of the Conclusions, these commodities could

be conceived as a series of labour services.
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 Index

alienation 5, 32, 33, 44

Aristotle 23
Aristotelian 6, 17, 23, 95
automation 47, 56, 57
bourgeoisie. See class
Bray, John F. 6
Callari, Antonio 28, 81, 93
Capital 16, 17, 20, 23, 24, 26, 31, 33, 36, 37, 41, 45, 46, 48, 51, 59, 63, 67, 71, 90, 91, 94, 101
class. See also alienation
bourgeois class 50, 67, 93, 94, 95, 96, 102
bourgeois rights 6, 7, 78, 95
class consciousness 8, 96, 97, 99
class struggle 8, 13, 40, 47, 48, 50, 51, 57, 58, 59, 60, 61, 73, 76, 79, 83, 96. See also revolution
working class 11, 50, 59, 67, 97, 102
commodity
commodity exchange 3, 7, 17, 18, 19, 20, 31, 32, 34, 35, 59, 77, 90, 93, 94, 96
commodity fetishism 5, 67, 92, 93, 94
commodity production 12, 16, 17, 18, 19, 24, 28, 29, 30, 36, 48, 49, 55, 64, 65, 67, 78, 90, 92,
101
commodity value 21, 29, 42, 44, 66, 78, 90
communism 4, 5, 7, 95, 96, 97, 98, 99
competition
imperfect competition
monopoly 85, 86, 87, 97
oligopoly 82, 85, 86, 87, 88, 92
perfect competition 63, 80, 85, 86, 87, 92
concrete labour 9, 12, 16, 17, 19, 23, 25, 26, 28, 29, 43, 46, 90
Contribution to the Critique of Political Economy, A 18
crisis 59
Critique of the Gotha Program 8
Duménil, Gerard 80, 81, 82, 95
Economic Manuscript of 1861–63 12, 31, 36, 39, 52
Engels, Friedrich 8, 18, 95, 96
Engelskirchen, Howard 23
exploitation
 measuring exploitation 14, 66, 75, 85, 88
theory of exploitation 4, 7, 8, 9, 11, 13, 64, 73, 81, 83, 95, 98, 99
Fallot, Jean 57
Farjoun, Emmanuel 86, 87, 88
Feuerbachian 5, 95
Fine, Ben 51, 83
Foley, Duncan K. 68, 80, 81, 82, 83
form of value. See value: value form
Gordon, David 47
Graeber, David 5
Grundrisse 15, 18, 34, 42
Hegel, Georg 8, 31, 32, 33, 34, 37, 89, 96
Elements of the Philosophy of Right 32
Hegelian 4, 5, 7, 8, 31, 89, 90, 92
Moralität 8
Si lichkeit 8, 9
Heinrich, Michael 16, 28
history 5, 7, 8, 18, 29, 92, 96, 97
Marx’s theory of history 96, 97
Hodgskin, Thomas 3, 5
justice
commutative justice 6, 7, 77, 78
distributive justice 6, 7, 78
Kant, Immanuel 8
Kantian 5, 95
labour theory of value. See value: labour theory of value
Lapavitsas, Costas 83
Lincoln, Abraham 34
Lipie , Alain 81
Lippi, Marco 17, 28
Locke, John 3. See also self-ownership
Lockian 95
Lonzi, Marco 109
Machover, Moshé 86, 88
Marginal Notes on Wagner 7
metaphor 12, 17, 25, 26, 66, 90, 94
irreducible metaphor 25, 26
Misery of Philosophy, The 6
Mongiovi, Gary 81, 83
monopoly. See competition: imperfect competition: monopoly
natural law 3, 4, 5, 6
Nozick, Robert 4
Okishio, Nobuo 64, 76
oligopoly. See competition: imperfect competition: oligopoly
Petri, Fabio 83
Petrucciani, Stefano 5
Proudhon, Pierre-Joseph 6. See also socialism: scientific socialism
Rawls, John 5
Theory of Justice, A 5
real abstraction 13, 16, 19
Results of the Direct Production Process 12, 31, 35, 36, 39, 40, 41, 46, 51, 52
revolution 8, 9, 60, 96, 97, 98. See also class struggle
Ricardian 3, 6, 22, 28, 29, 85, 89, 90, 92
Ricardo, David 9, 18, 22, 28, 29, 30, 58, 68, 85, 87, 89, 90, 107
Principles of Political Economy and Taxation, On The 29
Riccarelli, Samuele 109
Roberts, Bruce 28, 81
Roemer, John 6, 63, 83
Saad-Filho, Alfredo 83
Saint-Simon, Henri de 11
Saint-Simonian 11
Screpanti, Ernesto 5, 8, 10, 12, 16, 37, 40, 52, 59, 70, 84, 86, 88, 97, 103, 109
self-ownership 3, 4
Shaikh, Anwar M. 83, 86, 88
Skillman, Gilbert L. 36, 51, 52
slavery 4, 16, 33, 34, 38, 40
Smith, Adam 45, 58, 68, 107
Smithian 85
Wealth of Nations, The 85
socialism 3, 4, 6, 8, 10, 11, 84, 85, 89, 98, 99
scientific socialism 9, 98
Sraffa, Piero 22, 81
Steedman, Ian 63, 88, 107, 108
subordination 12, 13, 31, 33, 36, 37, 38, 39, 40, 41, 42, 45, 46, 51, 52, 58, 79, 89, 94, 96, 98. See
also subsumption
substance of value. See value: value substance
subsumption 12, 13, 31, 36, 37, 38, 39, 40, 42, 45, 47, 48, 49, 51, 52, 56, 58, 78, 89, 94. See
also subordination
surplus value. See value: surplus value
Thomist 6
Tonak, E. Ahmet 83, 88
transformation problem, the 13, 27, 64, 70, 72, 80, 81
Vaccarino, Giuseppe 25
value. See also commodity: commodity value
labour theory of value 12, 13, 27, 28, 36, 47, 63, 64, 70, 75, 77, 83, 84, 88, 92
surplus value
 absolute surplus value 47, 48, 51
relative surplus value 47, 51, 53, 56, 57, 58
value form 17, 22, 23, 24, 25, 28, 66, 91, 92
value substance 17, 23, 24, 27, 63, 71, 93
Value, Price and Profit 33, 59
wage labour 12, 16, 33, 34, 35, 38, 40, 41, 42, 43
Wolff, Richard D. 28, 81
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