The translation of "alienate" and one quote from TSV: a follow-up to Chapter 23 & 24

# The translation of “alienate”

In the chapter 21, Marx states:

The money-capitalist, in fact, alienates a use-value, and thus whatever he gives away is given as a commodity. (Capital, Vol.3, p.472, Penguin version)

Does the term, alienate, here means the social philosophy sense alienation, or simply the synonyms of transfer or deliver? (There are also many "alienate" used in other sentences within the chapter 21)

In the original German version of Das Kapital, the word used here is “veräuβert”, which can be directly translated into English as “alienate”. However, the word “alienate” in English can refer to different meanings. In the legal literature about the property right, the same “alienate” means transfer or deliver.

According to the context, Marx here is trying to describe that the use-value of capital is gave or lent to the industrial capital as a commodity, so I think that the meaning of the word “alienate” in the chapter 21 is more close to “transfer” or “deliver” rather than the social philosophy sense alienation.

In other chapters and sections, where Marx explicitly refers to the social philosophy sense alienation, Marx usually uses the word, entfremdete, rather than "veräuβert." Such as in the chapter 23:

Due to the alienated character of capital, its antithesis to labour, being relegated to a place outside the actual process of exploitation, namely to the interest-bearing capital… (Capital, Vol. 3, p.382, International version)

Since the estranged  character  of capital,  its  antithesis  to  labour,  is  shifted 
outside the actual process of exploitation, i.e. into interest-bearing 
capital... (Capital, Vol. 3, p.506, Penguin version. *Here seems that the translator of this version was aware of the problem, so he chose a different word)

“alienate” or “estrange”here are translated from “entfremdete”.

Unfortunately, this word “entfremdete” is also translated into English as “alienate”, which is easy to get confused. (Please see the juxtaposed English-German pages here: https://docs.google.com/open?id=0B010WoFiY04MeUk4Qmo3Q3Exdzg)

I have consulted one of my friends who had studied the legal German. She says that this word “veräuβert” means “transfer” and “deliver” in German, and it is a legal term. “Entfremdete” means “separate” or “estrange”, which is more close to the social philosophy sense alienation. 

Besides, I have check two version of Chinese translations of Marx’s Capital, and I all find the word “讓渡” here, which means “transfer” or “deliver”.

(I just found by chance that there is a paper which pointed out similar problems: Cowling (2006) "Alienation in the Older Marx." Contemporary Political Theory, 5(3): 319–339.)

# about master-slave dialectics

In a section called [4. The Process of Ossification of the Converted Forms of Surplus-Value and Their Ever Greater Separation from Their Inner Substance—Surplus Labour. Industrial Profit as “Wages for the Capitalist”], in Theories of Surplus Value, Vol.3, there is an interesting passage which seems relate to the master-slave dialectics:

Industrial profit does indeed include some part of wages—in those cases where the manager does not draw them. Capital appears in the production process as the director of labour, as its commander (captain of industry) and thus plays an active role in the labour process. But insofar as these functions arise out of the specific form of capitalist production—that is, out of the domination of capital over labour as its labour and, therefore, over the workers as its instruments, out of the nature of capital, which appears as the social entity, the subject of the social form of labour personified in it [capital] as power over labour—this work (it may be entrusted to a manager) which is linked with exploitation is, of course, labour which, in the same way as that of the wage-worker, enters into the value of the product; just as in the case of slavery, the labour of the overseer has to be paid for like that of a worker. If man attributes an independent existence, clothed in a religious form, to his relationship to his own nature, to external nature and to other men so that he is dominated by these notions, then he requires priests and their labour. With the disappearance of the religious form of consciousness and of these relationships, the labour of the priests will likewise cease to enter into the social process of production. The labour of priests will end with the existence of the priests themselves and, in the same way, the labour which the capitalist performs qua capitalist, or causes to be performed by someone else, will end together with the existence of the capitalists. (The example of slavery has to be amplified by quotations.)

Chapter 23 & 24, Capital Vol.3

MarxReadingGroup Ch 23 & 24                              5 October 2012

#Ch 23

[Basing on the analysis in the previous chapters, the interest and the profit of enterprise (owner’s income) appear originally merely as portions of the profit (surplus value). The difference between these two things is originally quantitative. But they in reality are viewed as something qualitatively different, and fetishised. In these two chapters, Marx explains why and how was this formed. ]

[This may be considered as an exercise of “the advance from the abstract to the concrete”, while Marx’s method is definitely more complex than this formula. ]

Qualitatively difference:

---The ossification and individualisation of the two parts of the gross profit in respect to one another, as though they originated from two essentially different sources.

---The capitalist operating on his own capital, like the one operating on borrowed capital, divides the gross profit into interest due to himself as owner, as his own lender, and into profit of enterprise due to him as to an active capitalist performing his function.

Fetishism:

---The moneyed capitalist does not appear to have any relations with the wage-worker, but only with other capitalists, while these other capitalists, instead of appearing to be in opposition to the wage-workers, appear rather as workers, in opposition to themselves or to other [capitalists] considered as mere owners of capital, representing the mere existence of capital. (Theories of Surplus Value, vol.3)

---He creates surplus-value not because he works as a capitalist, but because he also works, regardless of his capacity of capitalist. This portion of surplus-value is thus no longer surplus-value, but its opposite, an equivalent for labour performed.

---The social form of capital falls to interest, but expressed in a neutral and indifferent form. The economic function of capital falls to profit of enterprise, but abstracted from the specific capitalist character of this function.

Marx asks: Why and how is this so?

Marx’s method: Analysis; From the abstract to the concrete; Fetishism criticism

--- It is not only a matter of different quotas of profit assigned to different persons, but two different categories of profit which are differently related to the capital, hence related to different aspects of the capital. >>>> What’s the relationship between the aspects?

--- The simple empirical circumstance that the majority of industrial capitalists…work with their own and with borrowed capital.

--- as soon as a portion of profit universally assumes the form of interest, the difference between average profit and interest, or the portion of profit over and above the interest, assumes a form opposite to interest – the form of profit of enterprise. These two forms, interest and profit of enterprise, exist only as opposites. Hence, they are not related to surplus-value, of which they are but parts placed under different categories, heads or names, but rather to one another. It is because one portion of profit turns into interest, that the other appears as profit of enterprise. >>>> logical antitheism or real conflict (competition)?

--- Yet historically interest-bearing capital existed as a completed traditional form, and hence interest as a completed sub-division of surplus-value produced by capital, long before the capitalist mode of production and its attendant conceptions of capital and profit. Thus it is that to the popular mind money-capital, or interest-bearing capital, is still capital as such, as capital par excellence. >>>> The historical becomes the fetishised. (The process of capital becoming capital or its development before the capitalist production process exists, and its realisation in the capitalist process of production itself belong to two historically different periods. In the second, capital is taken for granted, and its existence and automatic functioning is presupposed. In the first period, capital is the sediment resulting from the process of dissolution of a different social formation. It is the product of a different [formation], not the product of its own reproduction, as is the case later.(Theories of Surplus Value, vol.3))

--- There is a real reason at the root of this. Money (as an expression of the value of commodities in general) in the [production] process appropriates surplus-value, no matter what name it bears or whatever parts it is split into, because it is already presupposed as capital before the production process. (Theories of Surplus Value, vol.3)

--- Just as the conversion of money, and of value in general, into capital is the constant result of capitalist production, so is its existence as capital its constant precondition. >>>> The Reality as the fetish

--- the class of money-capitalists confronts him as a special kind of capitalists, money-capital as an independent kind of capital, and interest as an independent form of surplus-value peculiar to this specific capital.

--- however the gross profit,…the portion belonging to the functioning capitalist is determined by the interest, since this is fixed by the general rate of interest (leaving aside any special legal stipulations) and assumed to be given beforehand, before the process of production begins, hence before its result, the gross profit, is achieved.

--- [The notion that the capital would yield a surplus-value even if not applied productively]… is correct in the practical sense for the individual capitalist. He has the choice of making use of his capital by lending it out as interest-bearing capital, or of expanding its value on his own by using it as productive capital, regardless of whether it exists as money-capital from the very first, or whether it still has to be converted into money-capital. But to apply it to the total capital of society, as some vulgar economists do, and to go so far as to define it as the cause of profit, is, of course, preposterous. >>>> Fallacy of composition. Opportunity cost. Fisherian theory of the rate of interest and profit?

--- interest falls to the share of the capitalist even when he does not perform the function of a capitalist and is merely the owner of capital; and that, on the other hand, profit of enterprise does fall to the share of the functioning capitalist even when he is not the owner of the capital on which he operates. >>>> beyond the legal form of property

--- Interest...represents the ownership of capital as a means of appropriating the products of the labour of others. …Interest represents this characteristic not as directly counterposed to labour, but rather as unrelated to labour, and simply as a relationship of one capitalist to another. …Interest is a relationship between two capitalists, not between capitalist and labourer.

--- On the other hand, this form of interest lends the other portion of profit the qualitative form of profit of enterprise, and further of wages of superintendence. …He creates surplus-value not because he works as a capitalist, but because he also works, regardless of his capacity of capitalist. This portion of surplus-value is thus no longer surplus-value, but its opposite, an equivalent for labour performed. >>>> “entrepreneurship”

--- It is just as if a king, who, as king, has nominal command of the army, were to be assumed to command the army not because he, as the owner of the kingship, commands, plays the role of commander-in-chief, but on the contrary that he is king because he commands, exercises the function of commander-in-chief. (Theories of Value, vol.3) >>>> Lacan’s quote, Marx’s Capital vol.1 note.21, and here, to be a king by pretending otherwise

--- Thus the nature of surplus-value, the essence of capital and the character of capitalist production are not only completely obliterated in these two forms of surplus-value, they are turned into their opposites. But even insofar as the character and form of capital are complete [it is] nonsensical [if] presented without any intermediate links and expressed as the subjectification of objects, the objectification of subjects, as the reversal of cause and effect, the religious quid pro quo, the pure form of capital expressed in the formula M—M'. The ossification of relations, their presentation as the relation of men to things having a definite social character is here likewise brought out in quite a different manner from that of the simple mystification of commodities and the more complicated mystification of money. The transubstantiation, the fetishism, is complete. >>>> mystification and fragmentization (anti-financial but pro-industrial capital)

Question1: Basically, Marx employs the consistent method of analysis here to define the distinct economic and class forms of interest and enterprise profit (owner’s income). It’s very similar with the twofold character of the commodity. Interest appears as a general, pure form of the exchange value of capital, basing on the mere ownership of capital, and the enterprise appears as coming from some specific forms of the use value, basing on the functioning “labor” of capital. As in the case of commodity, which has use-value and exchange-value, these two aspects are just twofold character of capital, and indicate to no antagonism or conflict between them.

But Marx also said right after the beginning of chapter 23 that it is only the competition (appears only once) between these two kinds of capitalists which creates the rate of interest. And he mentioned also the contradiction (appears only once too) between the function of capital in the reproduction process and the mere ownership of capital outside of the reproduction process. These two are terms containing at least potential antagonism or conflicts.

What are the meanings of the competition and contradiction here? What’s the relation between these two kinds of capital?

Question 2: What’s the base and distinct character for the interest in pre-capitalist society?

#Ch 24

--- In M – M' we have the meaningless form of capital, the perversion and objectification of production relations in their highest degree, the interest-bearing form, the simple form of capital, in which it antecedes its own process of reproduction. It is the capacity of money, or of a commodity, to expand its own value independently of reproduction – which is a mystification of capital in its most flagrant form.

Chapter 16, 17, Capital Vol.3

* The circuit of industrial capital covers both production and circulation spheres. Within the latter, the industrial capital assumes the form of commodity capital and money capital. When the function of the latter two is taken over by independent capitalists they become commercial capital and money-dealing capital, respectively. Marx calls the two merchant capital. Part IV of Capital Vol.3 is about merchant capital.

Chapter 16. Commercial Capital

1. Distinction between commodity capital & commercial capital
 1) Commodity capital:
   - 'A mere form of existence of industrial capital'
   - Pertains to a more abstract analysis about 'capital in general' in Vol.2
 2) Commercial capital:
   - Commodity capital becomes commercial capital when the function of metamorphosis between money and commodity acquires independent life as a special function of a special capital being fixed by the division of labour.
   - Pertains to a more concrete analysis about 'capital in competition' in Vol.3
 
2. Turnover
  - 'The velocity of circulation of commercial capital' depends on:
    i) The speed with which the production is repeated & the way various production processes are interconnected
    ii) The speed of consumption
    iii) The development of the function of money as means of payment, i.e. the credit system
  - The faster the turnover, the smaller is the part of total money capital that figures as commercial capital, and vice versa.
  - As no value, and thus no surplus-value, is produced in the circulation process, the length of circulation time is in inverse relation to the rate of profit.
  - Commercial capital indirectly contribute to value production; namely, by shortening the circulation time and realizing the already produced value.
 (Dialectical nature of the relation commercial capital has with industrial capital)



Chapter 17. Commercial Profit

1. Scientific analysis vs. historical development:
   - "In the course of scientific analysis, the formation of the general rate of profit appears to proceed from industrial capitals and the competition between them, being only later rectified, supplemented and modified by the intervention of commercial capital. In the course of historical development, the situation is exactly the reverse. It is commercial capital which first fixes the prices of commodities more or less according to their values, and it is the sphere of circulation that mediates the reproduction process in which a general rate of profit is first formed. Commercial profit originally determines industrial profit" (400).
   - "Concentration historically appears in commerce earlier than in the industrial workshop" (409).
   - How should we understand this contradiction? Is Marx's emphasis of industrial capital over commercial capital compatible with some historical observation, say by Sweezy, that commercial capital played a vital role in the transition from feudalism to capitalism and in the advent of capitalism? Marx's answer could be found in chapter 20 "Historical Materials on Merchant Capital".

2. Commercial labour & the source of commercial profit
   - "Whereas industrial capital appropriates the unpaid labour of others, commercial capital appropriates a portion of this surplus-value by getting it transferred from industrial capital to itself. It is only by way of its function in the realization of values that commercial capital functions as capital in the reproduction process, and therefore draws, as functioning capital, on the surplus-value that the total capital produces" (407). 
   - "Commercial employees' unpaid labour, even though it does not create surplus-value, does create his ability to appropriate surplus-value. They are the source of the profit for commercial capitalists. Just as the unpaid labour of the worker creates surplus-value for productive capital directly, so also does the unpaid labour of the commercial employee create a share in that surplus-value for commercial capital" (407).

3. General rate of profit:
   - Commercial capital contributes to the formation of the general rate of profit. Therefore, it must yield the average profit as industrial capital does according to the proportion it forms in the total capital even though it is not involved in the production of surplus-value.

   - Commercial profit is not an excess over the value of commodities (in case of social capital as a whole); it emerges since commodities are sold to a merchant at the price below their value and sold by her/him at their value. 

4. Two theoretical questions Marx raises:

   1) Do we add money capital the merchant advanced to purchase commodities from the producer into the final sale price? No, but only profit on the commercial capital is added. "Commercial capital is similar to fixed capital in the sense that in so far as it is not consumed, its value does not constitute an element of the commodity’s value."

     - I think Marx's numerical example in p.398 is strange; in his calculation, the merchant buys C from the producer at 1,062. But here we are assuming a commercial capital of 100 at the start. With what money then does the merchant pay the producer 1,062? If she/he has to advance 1,062 of initial money capital to purchase C as Marx is explicit in his example in p.410-11, all the calculations that follow, i.e. the general rate of profit, commercial profit, price of production, etc. should be revised, it seems.
    Marx raises this question in p.412, but his answer given in the following pages does not seem to directly address the issue.

   2) Do we add variable capital of a commercial capitalist into the final sale price? No, as wage for commercial labourers is not an origin, but a result, of surplus-value production. "Wages of commercial labourers employed in the circulation sphere derive solely from the commercial profit as their labour is not value-creating one."   

   

On Marx's Method 2

One more comment on Hegel before we move on to Marx:

There is a section titled "With What to Begin?" right after Introduction in Science of Logic - a.k.a Larger Logic - and there you can find Hegel's long discussion of the issue of 'starting point' in logic. I think one of the main lessons there is that 'the point of departure in reality' is for Phenomenology, and 'the logical starting point' is for Logic. (Patrick Murray (2000) understands the difference between Phenomenology and Logic in relation to the starting point in this way.)

Now turning to Marx:

As we already know so well, in Grundrisse Marx mentions two conceptual journeys, a descending one from the chaotic concrete to the abstract and a ascending one from the abstract to the concrete with many determinations; and he dubs the latter as an "obviously scientifically correct method," i.e. the abstract as an obviously scientifically correct starting point.

And as we remember, Nicolaus argues in his Preface that Marx changed his mind in Capital. In Grundrisse, the argument goes, Marx begins with an abstract category of 'production', but in Capital he abandons this method and starts with commodity. That is, for Nicolaus the category of commodity is something concrete. Of course, opposing view followed of Marquit (1977) and Carver (1980).

The controversy here is how to understand the nature of commodity as a theoretical category. On this respect, I think Chris Arthur's explanation is very interesting. He gives three criteria for the starting point: it should be i) simple, ii) historically specific, and iii) immediate. And he says that commodity satisfies the latter two but not the first; it is not simple enough since it can be further analyzed into use-value and value. What about 'value'? According to Arthur it satisfies the first two but not the third; it is not something that can be immediately grasped. Then what is the true starting point in Marx? Commodity or value?

Here we have Jairus Banaji (1979)'s wonderful solution to this puzzle: a concept of 'double starting-point' which Arthur accepts. According to Banaji, “the beginning is a movement between two points of departure.” The idea is that the commodity forms the analytic point of departure to arrive at the concept of value; and value as the ground of all further conceptual determinations (money, capital) forms the synthetic point of departure of Capital. I think this solution is also in line with Hegel's method having two distinctive starting-points.

Understood in this way, I think both of the two conceptual journeys described in Grundrisse constitute Marx's method.

Finally, returning to our initial concern with the above discussions in mind, I think Marx's distinction between 'method of inquiry' and 'method of presentation' can be mapped into as follows:

*method of inquiry (Marx of Capital) = descending journey from the concrete to the abstract (Marx of Grundrisse) = analytical method (Hegel) = analytical shift from commodity to value (Banaji & Arthur)

-> commodity as a starting point

*method of presentation (Marx of Capital) = ascending journey from the abstract to the concrete (Marx of Grundrisse) = synthetic method (Hegel) = synthetic shift from value to commodity, money, and capital (Banaji & Arthur)

-> value as a starting point

Sorry for lingering on this topic which concerns only the initial chapters. Let's move on and talk more about later chapters! (But please feel free to raise comments, different ideas, or objections to what I have noted so far.)

On Marx's Method 1

'The starting point' and 'method of inquiry & presentation' theme raised by Hasan and Bilge seem to be ones of the most important methodological issues in the initial chapters of Capital Vol.1 which have troubled Marxian scholarship so long. We could easily agree that questions of 'where to start' and 'how to proceed' are the two most grounding issues when we analyze something scientifically. So was the case with Marx whose object of analysis is capitalism.

I think there are two primary references in dealing with this subject; Hegel's Logic and the chapter on the method of political economy in Grundrisse. I think Marx either consciously borrowed or was heavily influenced by Hegel's method in Logic, and used the example of analyzing a given country starting with its population in showing how to apply Hegel's method in doing social science. (In this respect, I totally agree with Lenin in insisting that without reading Hegel's Logic one barely understands Marx's Capital, and that the latter is the best application of the former.)

Notice that the conceptual proceed of 'Being - Essence -Notion' in Hegel's Logic corresponds that of 'chaotic concrete - thin abstract - concrete with many determinations' in Grundrisse. We could also compare logical developments in Capital such as 'commodity - money - capital' or 'exchange value (immediately perceived) - value (as underlying essence) - exchange value (conceived in thought as form of appearance of value)' ('homology thesis', an argument that there is an one-to-one correspondence between Hegel's system and Marx's system. Of course the concrete correspondence is different from scholars to scholars. For example some argue that the category of 'capital' in Marx corresponds to that of Essence, not of Notion, in Hegel, excluding Notion from homology.)

First on Hegel's Logic: Hegel starts his Shorter Logic with mentioning how difficult it is to begin in doing philosophy. Here's what he says.

"But with the rise of this thinking study of things [i.e. philosophy], it soon becomes evident that thought will be satisfied with nothing short of showing the necessity of its facts, of demonstrating the existence of its objects, as well as their nature and qualities. Our original acquaintance with them is thus discovered to be inadequate. We can assume nothing and assert nothing dogmatically; nor can we accept the assertions and assumptions of others. And yet we must make a beginning: and a beginning, as primary and underived, makes an assumption, or rather is an assumption. It seems as if it were impossible to make a beginning at all." (Hegel's Shorter Logic §1)

Yet, we have to start anyway and the first mode of knowledge we form in our mind is concrete and empirical image established through empirical observation. However, Hegel criticizes empirical science, empirical knowledge for its shallowness and being contained in sense-perception, and argues that knowledge should be pursued beyond. But, he does not reject it all together but incorporates it within the totality of history of philosophy as an element constituting the latter. (This is a superior aspect of Hegel's 'wholistic' systematic philosophy.)

On the other hand, however, Hegel's system of Logic starts not with something empirical, i.e. something concrete-complex but with the category of Being, which is something abstract-simple, and which can be obtained (from the initial empirical perception) through some sort of thought process, i.e. reflection, and proceeds towards more concrete-complex categories, Essence and Notion. Then what is Hegel's true starting point; the concrete-complex empirically given or the abstract-simple?

Before answering this question, notice that there are two movements working in Hegel's system: First from the empirical concrete-complex to abstract-simple, and the second from the abstract-simple to the concrete-complex. Hegel calls the first movement the Analytical Method and the second the Synthetic Method (for definition of each refer to Hegel's Shorter Logic §227and §228).

From this we could easily figure out that there should be two different starting points in Hegelian logic for two different Methods; 'the point of departure in reality' for the Analytical Method and 'logical starting point' for the Synthetic Method.

(will be back with 'On Marx's Method 2'....)

Following Hasan's comments on Marx's money theory

Hasan, thanks for your insightful comments. I largely agree with you. Yes, as you said, "given the development of capitalism, commodity money can be (actually it is!) only burden to capitalist development", when, I want to add, money has emerged as commodity money in its origin. And yes, "fiat system is the most developed and sophisticated system which is in line with the thrust of capitalism for expansion", fiat system which is vulnerable to fluctuation, instability, and even collapse due to the huge departure it, as money, made from its origin i.e. commodity base. I think these observations constitute one of the fatal contradictions inherent in capitalism and specifically in its monetary system. The question I wanted to raise was not whether or not money is commodity only; we know this is not true from our everyday life. Rather my underlying question was whether this, i.e. non-commodity money system which we see everywhere can be sustained indefinitely. I think the apparent inconsistency between Marx's derivation of money as commodity in chapter one and the contemporary capitalism with non-commodity money does not undermine Marx's theory of money, but rather points to the instable and collapse-prone nature of capitalist dynamic.

(will be back with 'commodity as a starting point' soon....)

On the Charechteristics of Commodites and Its Implications

On this note, I would like to play devil’s advocate. The point I made below has been haunting me for a while. I have not reached a conclusion yet. It would be great to hear your ideas.

It is obvious that the treatment of commodities is very crucial for whole Marxian theory. So, Marx spends a lot of time in explaining it. While he investigates the secrets of commodities he also begins laying down the concepts of his grand theory. At the beginning, when he investigates the nature of commodities, he makes an interesting move. He put great emphasize on exchange value and abstract from use value although he brings use-value to the picture later. I feel that this would be more problematic than is seems to be.

He argues that “if then we leave out of consideration the use value of commodities they have only one common property left, that of being products of labour”.
He iterates this position later in the same page:
He goes on saying: “We have seen that when commodities are exchanged, their exchange value manifests itself as something totally independent of their use value”p.46

Indeed, this move seems to be necessary to argue that:
“There is nothing left but what is common to them all are reduced to one and the same sort of labour, human labour in the abstract” which is the foundation of labour theory of value.

But, at the end of the section 1 of Chapter 1 Marx reaches the conclusion that “to become a commodity a product must be transferred to another, whom it will serve as a use value, by means of an exchange.) Lastly nothing can have value, without being an object of utility. If the thing is useless, so is the labor contained in it; the labour does not count as labour , and creates no value.”

In this sense, he closes the circle and argues that “being the object of utility” is the necessary condition for defining commodity. This means that, as he clearly accepts, commodities have two common characteristics: i) they are products of labor and ii) they are subject of utility. Therefore, his earlier move (abstraction) which puts all the emphasis on the fact that a commodity is a product of labour, seems to be a choice rather than a necessity. I feel that this opens a possibility of discussion that the value of a commodity cannot be defined independent of the fact that it is a subject of utility. If one introduces this (utility) at an earlier stage, the theory of value may have different form.

Comment on Inquiry vs. Exposition

I think Marx is consistent on his views in this passage and his method of presentation in Volume 1. In the passage, he seems to argue that one has to inquire in concrete level in great detail how the material exists, develops in historical forms, and how its dialectical inner contradiction manifests itself. I think this is the reason why Marx’s analysis is always so rich in history, institutions, real life examples, etc. Then, he says in the passage, only after one inquires at that level, then one can begin presenting, i.e. exposing, the material to the reader. I think this is the reason why he wrote drafts of volume 2 and 3 earlier than volume 1 (correct me if I am wrong).

Why did he begin with his conception of commodity? Well, after reading Aristotle, Aquinas, Petty, Smith, Ricardo, Malthus, Mill, and so on in the past three weeks, and seeing the development of labor theory of value in the minds of these great thinkers, it seems only logical to me to start with a discussion of what commodity is, how the contradiction between use-value and exchange-value exists, and how this contradiction reaches its highest level under capitalist mode of production.

Aristotle clearly recognized this contradiction, but did not ground it in labor theory of value. Smith achieved this, but his conception was dual: labor commanded vs. labor embodied. It was Ricardo who elaborated on the latter conception, which was then taken by Marx to show how surplus-value was created in the “hidden abodes of production” (which was not there in Ricardo’s labor theory of value). I think by beginning his presentation with the concept of commodity, Marx achieves (at least) two objectives: (1) Distinguish between simple commodity production (C-M-C’) and capitalist production (M-C-M’) since the latter requires the product to be a commodity and therefore express itself as money, and through this expression must go through the process of metamorphosis. (2) Labor-power as a commodity: The consumption of labor power creates more value than its purchase resulting in surplus value.

These two ideas seem simple to the regular Marx reader, but very hard to conceive by those who have very little exposition to Marx. And I have experienced that it is indeed a challenge to try to explain these ideas to people who are used to seeing things in a C-M-C world. When the central function of money is seen as enabling the exchange of one commodity for another and not as a means for exploitation of labor power, “there alone rule Freedom, Equality, Property and Bentham” as Marx famously wrote in Volume 1.

On Preface: Inquiry Versus Exposition

The famous passage from the preface of the German Edition is as follows:
"Of course the method of presentation must differ in form from that of inquiry. The latter has to appropriate the material in detail, to analyse its different forms of development, to trace out their inner connexion. Only after this work is done, can the actual movement be adequately described. If this is done successfully, if the life of the subject-matter is ideally reflected as in a mirror, then it may appear as if we had before us a mere a priori construction." p.28
In light with this passage how can we interpret the way Marx began its exposition in Volume 1. He seems to strangely starts with the discussion about commodity after years of years of reshuffling of Volume 1. Why? Could have been better if he had began the discussion in a different way?

Comment on Park's comment on commodity Money and Gold Standard

Park,
This is an interesting observation. As far as I remember, we had a similar discussion in one of our Grundrisse discussion. Although I partially agree with the idea that during the crisis, demand for commodity money increases, which means that fiat money system may have problems, these may not strongly support some Marxist's position that commodity money is necessary to anchor capitalism or fiat money may not survive. This is a huge topic. I guess, we can discuss this issue further at our face to face meeting.
For now, I would like rise a few points.
1-From a Marxian perspective, the commodity money's value (as a commodity) should come from the socially necessary time embodied in it. However, how can we explain the current price of gold in terms of labor theory of value? I feel that the gold prices are mainly driven by speculative purposes as in the case of the price of any other financial assets. So, for me, it would be better to treat gold as another form of financial asset (though it has a tangible character) due to the fact that there is no relation whatsoever between the price of gold and its underlying fundamental value.
2-Furthermore, during the crisis, the demand for treasury bills and bonds went hand in hand with very high demand for gold . That’s why, although all other interest rates were rising during the crisis, the treasury bills and bond interest rates were at their historical low levels. They are still very low. Under current system, treasury bills or/ bonds can be considered a form of claim in terms of paper money (fiat money). It is not linked to gold or any other commodity money. So, how can this be explained in relation to commodity money? I do not have an exact answer. But, I think, It shows that high gold prices may not always an indication of decrease in appetite for fiat money.
3-Capitalism, to be able to function in a worldwide scale ,needs several different institutional structures. In a Polanyian sense, one of the key institutions is a well established monetary system either based on gold standard or Bretton woods type of mixture, or current fiat money. However, as we know from history, pure gold system restricts the trade and exchanges in a way that total quantity of gold restricts the expansion . That’s why capitalism needs much more flexible worldwide monetary system which is suitable to its main tendency of “nestling everywhere and settling everywhere”. Bretton Wood system partially meets this. However, under strain, it works exactly as a gold standard due to the fact that dollar (main currency) is supported by gold reserves. I can argue that fiat system is the most developed and sophisticated system which is in line with the thrust of capitalism for expansio. However, it is also prone to several other problems. There is no anchor within the system and those countries who have world currency privileges (due to their hegemonic or semi-hegemonic position) have enormous amount of power. And, Fiat money system is much more prone to fluctuations etc.

In this sense, for me, commodity money system, mixed system, fiat money system should be discussed as historical and institutional episodes. So, it is not clear to me, a current developments can support the idea that money can be only in commodity money form. Indeed, I can even argue that given the development of capitalism, commodity money can be only burden to capitalist development. It does not have fluidity to support the functioning of current capitalism though fiat money has all sorts of its own problems..In short, Capitalism cannot return to commodity money.

What other people think….?

Rise in the price of gold and Marx's commodity money theory

Last week all news media were crazy about the gold price skyrocketing over $1,250 per ounce, the highest price ever. Since the collapse of the Bretton Woods system, the connection between money and gold has officially disappeared. However, the demand for gold as a storage of value continued to exist; especially so at the time of crisis. And we have observed the price of gold soaring during the last couple of years marked by consecutive blows of financial crisis and sovereign crisis with tumbling of euro and stagnating dollar. Does this lend support to Marx's commodity money theory, as presented in the first three chapters, to any meaningful extent?

As we know, there are largely two responses to Schumpeterian critique of Marx's money theory as metallist: 1) Entirely reject Marx's money theory as being outdated in the contemporary capitalism where gold does not function as money anymore. 2) Explain that within Marx's theory non-commodity - e.g. fiat money anchored on government credibility not on material, metalic ground - can also function as money.

In this debate of 'commodity vs. non-commodity money theory,' the core controversy would be whether money itself necessarily has to have an intrinsic value or not within Marx's theoretical system. And some implications from the recent soaring of gold price seem to be the following: First, an artificial situation, where valueless non-commodity is assigned an essential function of money such as measure of value and storage of value, cannot be sustained especially during the time of (sovereign) crisis. Second, as commodity money theorists argue, if the circulation of non-commodity money is a transitory and unusual phenomenon relying upon the government credibility, which can possibly be subject to question and finally collapse, then something like the recent rise in the demand for gold at the expense of government-printed money or government bond may be repeated in a much more violent way anytime in the future.

Capital reading group

This blog is home to the online Capital Volume 1 reading group, running through August 2010. More soon!

Circulation labour is both necessary and unproductive

My thoughts on the question Iren posed in her notes below, i.e. "If circulation is socially necessary, a necessary condition for capital’s reproduction, on what grounds does Marx argue that it does not create value? Can his argument about specificity of use-value of commodity labour power be such a criterion? What is the difference between being socially necessary and value positing? Is his argument convincing?" (And at the last meeting we spent most of time on this issue.)

To rephrase the question, why does Marx treat production and circulation asymmetrically, i.e. one adds value while the other doesn't, when he admits that both are necessary for the reproduction of the economy?

I think we already know that Marx is implying 'necessary' in a different sense for production and circulation. As for production, it is necessary in the sense that it creates value through affecting use value; as for circulation, it is necessary in that it changes form of value, or realizes value already produced in production.

(Footnote: When Marx contrasts production and circulation, I think he is referring to circulation in a restricted sense of the word in that it involves only formal changes of value between money and commodity without affecting use-value at all. Thus when I say circulation I mean pure circulation as buying and selling excluding storage and transportation which, as Marx writes, are part of the production process disguised in circulation process, and therefore do add value.)

So, as Marx argues in Volume 2 of Capital, workers employed in circulation process is necessary and at the same time unproductive.

Marx has an interesting analogy in Volume 2:

Labour employed in the circulation process "behaves somewhat like the 'work of combustion' involved in setting light to a material that is used to produce heat. This work does not itself produce any heat, although it is a necessary moment of the combustion process." (208)

Now if our question is one of more fundamental type, i.e. "but still, why production, not circulation, as a site where labour is productive?" then I think the fact that value and use-value constitute dual nature of commodity, that thus there is no value creation without adding or conserving (in case of storage and transportation) use-value, and that (pure) circulation does not add or conserve use-value is enough to ground Marx's argument.

Grundrisse, p. 602-635

Here is my outline of the reading

1. Critique of Malthus, on three grounds (p. 605-607).
- First, an analysis should be historical, i.e. phenomena that can seem ahistorical (overpopulation, in case of Malthus) do have a specificity given to them by a particular mode of production of which they are an element. They are “historically determined relations”.
- Second, the role of social mediations: population needs to be analyzed in its relationship to employment, not agricultural products.
- Third, theory of rent (not discussed).
He also seems to argue (as a part of the 1st argument), that human phenomena are socially determined, hence, have only immanent, inner barriers, whereas natural phenomena have a social, i.e. outer, determination (p. 607).
Q: Is it convincing?

2. Smith’s concept of “work as sacrifice” (p. 610-614).
- Smith correctly captures only a specific historical form of the relationship (that of wage labour, slavery, etc.), but not the property of labour in general. For Marx, the latter is “self-realization, objectification of the subject, hence real freedom”, although at the same time “the most damned seriousness, the most intense exertion” (p. 611).
- He also correctly captures worker’s subjective attitude to work, in this sense, it is a psychological theory.
- For Marx, Smith’s concept of labour is negative, whereas it is indeed “a positive, creative activity”. To create value, labour should be more than just a sacrifice – it requires social mediation (subject-subject relationship) and worker’s relationship to his product (subject-object relationship). Determination of value by labour time can be done only based on the second approach.

3. Role of additional demand (from J. St. Mill): it increases output by 1) realizing the value of inventories that can be reinvested; 2) creating conditions for reconversion of financial assets into productive capital, hence, raising profit mass by the difference between the profit rate and the interest rate, times the volume of capital invested; 3) expanded accumulation by means of borrowing, with the same additional profit (p. 618). Notice, expanded reproduction based on rechanneling own funds and borrowing results in the same increase of profit, i.e. Mill is aware of the cost of capital idea.
Q: Mill implicitly assumes that the return on production is higher than the interest rate, otherwise his second argument would not hold. Does it always have to be the case though?

4. Circulation (p. 624-635).
- Does not create value, hence, circulation costs – costs of realization of value – are a deduction from the created value. Hence, costs of circulation are faux frais.
- Costs of circulation arise not from division of labour and necessity of exchange in general, but from their capitalist form. They stem from a necessary change in form of capital.
- In socialism, communal consumption replaces exchange.
- Circulation is a limit of production, in that sense, “circulation time becomes a determinant moment for labour time, for the creation of value. The independence of labour time is thereby negated, and the production process is itself posited as determined by exchange” (p. 628).
- “Magnitude of the capital can be replaced by the velocity of turnover” (p. 630). An n-time increase in the volume of capital generates the same mass of profit as capital turning over n times faster during the same time period. Nevertheless, if one accounts for a possibility of reinvestment after each turnover period, the smaller capital with higher turnover rate will produce more profit.
- Q1: If circulation is socially necessary, a necessary condition for capital’s reproduction, on what grounds does Marx argue that it does not create value? Can his argument about specificity of use-value of commodity labour power be such a criterion? What is the difference between being socially necessary and value positing? Is his argument convincing?
- Q2: Marx’s criterion of value creation is not whether activity is performed in the sphere of production or exchange, but whether it affects use-value of commodity (e.g., transportation, storage, etc.). Where is the boundary between activities affecting use-value in circulation (hence, productive of value) and those not affecting it? Is there such a boundary?

A few smaller points.

1. One of the reasons making the emergence of credit necessary is a difference in reproduction time of different individual capitals (p. 603). Hodgskin mistakenly takes this condition as a prerequisite for money. But it should be credit, not money.
2. Marx seems to argue that any theory is always written from a class perspective, consciously or not (p. 605).
3. An interesting observation that a mode of suspension of some barriers is their generalization (e.g., money, credit) (p. 623).

Malthus, surplus population, etc.

On reading pages 602-635 of Grundrisse, I found the following points worth emphasizing:

(1) Critique of Malthus' theory of population (which even Ricardo had used): the two main points of Marx's critique being (1) theory of population is not ahistorical as Malthus thinks, every mode of production has its own theory of population, and (2) Malthus' theory implicitly assumes full employment of labour, an assumption that is now ubiquitous in neoclassical economics (here again, the point is to realize that the relationship between the means of subsistence and population is mediated through the relations of production; it is not direct as Malthus assumes). Interesting aside: Malthus's theory is not his own! He borrowed a lot from James Steuart, I think.

(2) Surplus population or the industrial reserve army of labour: the mains idea here, to my mind, which Marx developed more fully in Chapter 25, Vol 1 of Capital, is that capitalism, as a mode of production always needs a substantial body of surplus population of workers (the industrial reserve army of labour) for its stability and continued existence; the process of capital accumulation, in fact, produces this surplus population over and over again through the displacement of labour by machinery. Since the unemployed are only a small part of the reserve army of labour, the study of the latter should replace the more restricted study of unemployment; this is one of the differences, to my mind, between a Keynesian and a Marxian approach to the study of labour underutilization.

(3) Critique of Smith?s theory of "labour as sacrifice": I found this point absolutely fascinating; when one grasps the positive, liberating aspect of labour, as Marx emphasizes, one is immediately able to see the idiocy of all of modern neoclassical macroeconomics that is based on the so-called labour/leisure choice.

(4) There is a nice discussion pertaining to the turnover time of capital (as the sum of production time and circulation time); the example where the annual rate of profit increases because of the increase in the turnover time of capital is illuminating.

(5) Cost of circulation as deductions from surplus value: the important point here is that exchange does not create value and hence the part of total social (labour) time that is devoted to circulation is a cost from the point of view of society, is a deduction from social surplus value. (Important exception: Transportation of goods from one location to another is not to be considered as circulation; it is a part of production and adds value. This has a nice contemporary ring: state contingent commodity markets!)