21st Centuary Socialism

Help.

I'm struggling and need guidance from any serious Socialist economists out there!!!

I am re-reading classic economic texts and studying new ones and have yet to find a theoretical economist who makes a meaningful distinction between markets for commodities and markets for intangibles. Since how intangibles are produced and consumed are radically different, this seems to be an oversight.

Marxist economics is based on studying the production of commodities (which actually means products, like cars etc). I have yet to come across a Marxist economist who is examining the theoretical challenge thrown up when the labour force produces intangibles.

More than 85 per cent of the British workforce does not produce commodities, or even anything you can touch. They are services (education, healthy, banking, insurance etc).

So what do Socialist/Marxist economists say: that 85 per cent of the labour force is being paid wages based on the exploitation of productive workers in other countries (teachers, nurses, home helps)?

Or do they say that wage/salary earners who produce services are producing value, are being paid less than the value they create and therefore should be viewed exactly the same as those who produce commodities (products)?

If it is the latter, how can anyone analyse the balance between wages and profits in a service product when you can't measure its material content (since there is none)? How can you determine the real value of a labour input (and hence it's proper reward) when its critical oomponent is not labour time (power), but intellect and learning acquired over many years or decades? And how then can you work out the extent of the exploitation of a service worker? You can't. It's impossible. At best, you can only argue what you think is morally right.

In short, am I wrong in concluding that no economist (classical, neo-classical, Keynesian, post-Keynesian, Marxist etc) has seriously analysed the major distinctions between an economy based on the production of commodities and one based on the production of services? If I am not, does this not open up a new area of serious study by Socialists, since their ideology is based upon understanding how value is created and distributed?

The conceptual issueI am wrestling with is that all economic activity involves two sets of activities: production of commodities that involves processes (machines, institutions and technology which are governed by markets or controls) and relationships, where value is actually created, which is principally driven by human attitudes.

It follows from this that the increase in living standards in advanced (and mainly service) economies is because of the falling cost of processes (due to technology) which makes things cheaper and allows human beings more time to concentrate on developing relationships.

The policy conclusion is that you maximise human welfare by accelerating the adoption of cost-saving techniques and by promoting constructive human relationships (something that markets which are deaf, dumb and blind simply cannot do). This may explain why hi-tech service economies get richer at an accelerating rate and why Singapore (one of the world's most technologically advanced and coherent societies) is the envy of the developing world.

The private versus public ownership argument should properly deal with questions about the best method of reducing process costs. An example is that every study of power privatisation shows it raises unit costs because it involves delivering a profit to investors in compensation for a risk they are not taking since no society can let the power system or a part of it go bankrupt. Privatisation of power, water and other elements crucial to the constructive functioning of society should only happen if it unambiguously delivers real (rather than notional) cost reductions. This should not be an ideological argument, but a technical one among accountants.

This appears to be a far more productive line to pursue than attempting to demonstrate that Marx's economic model was in fact right.

Marx's economic model cannot be disproved since he argues that the sum of all values in an economy equals the sum of all prices times the volume of production. And since value is only created by labour, then profit must by definition equal the difference between the sum of wages and the sum of final prices times production volumes.

This is a wholly pointless debate which will do nothing to revive Marxism, which appears to be the real purpose of this blog rather than seeking a programme of action that Socialists can practically pursue with at least some hope of seeing it achieved.

And yet the master was close, very close. Pick up a copy of the Communist Manifesto, which will be 160 years old in January, in German. All debate about Marxist ideas flow from this seminal document.

Marx in January 1848 (then aged 29) wrote in the sixth sentence (and the first substantial one) of the Communist Manifesto:

Die Geschichte aller bisherigen Gesellschaft ist die Geschichte von Klassenkämpfen

This is a beautifully symmetrical 10-word sentence, as you would expect from a lover of poetry and a newspaper editor. It is also probably the most powerful political statement ever written since it says that everything that has happened in society (and Gesellschaft has an even broader meaning than that) is essentially, if not exclusively, due to class conflict (Kampf is also a category rather than a word. It relates very closely to the Arabic word Jihad which can mean war, struggle, conflict etc).

Marx produced thousands of other sentences, but never -- in the remaining 35 years of his life -- resiled from that one. In fact, everything he subsequently attempted (from Critique to Capital III) was a defence of the amazing 10 words he wrote in 1848.

To get to the heart of Marxism, you have to get to the heart of the man himself. And you can tell most of the most important things about him from that seminal sentence. It's categorical, ít's concise and it's something he never in his whole life backed away from. He thought he was right for ever. And he was stubborn about that belief to the very end.

But Marx, I can now see, was so nearly totally right. He was just one word off. See if you agree more with tbe following revised sentence.

Die Geschichte aller bisherigen Gesellschaft ist die Geschichte von Mensche Zusammenarbeit.

"The history of all previous society is the history of human co-operation."

This corresponds much more closely to most people's every day lives. They don't get up in the morning and fight class struggle with their cornflakes. They kiss their partners and say hello to their work colleagues. In short, they try to get on with people. That's what most people do most of the time. That is why most Socialists have become exhausted by the constant exhortation to go out there and find a struggle (in fact, any one will do).

The most recent manifestation of this passion for struggle is in the behaviour of radical environmentalists who have concluded the right fight to pick to stop all attempts to harness the natural environment, even if it is good for human society. What they should be prioritising is an approach that involves freely transferring good technologies that have made life bearable in advanced economies to poor ones.

Kampf (struggle) of course exists. It is a fact of human existence. But the real struggle is between humanity and the natural environment. Once we manage to produce enough food to eat, to control the diseases that prematurely kill, to build homes that are warm in winter and cool in the heat, to make constructive human interaction possible regardless of distance and to control tides and floods (not quite there yet), then the struggle can end and co-operation can start (not least to ensure the technologies that liberate people from poverty, harsh labour, discomfort and disease are shared by all).

It is at that point that socialism becomes not just possible but, perhaps, inevitable because high-tech service economies require increasing human interaction to function and the joint stock company then becomes redundant as the only capital needed for production is human, the indispensable maker and destroyer of relationships.

Combining the idea that economic value is created solely through human interaction with the observable truth that people everywhere are almost always actively seeking constructive co-operation with others provides a consistent overarching economic model that neatly connects with the unquenchable desire among individuals to work together positively if they possibly can.

In this manner, you preserve the Socialist ethic, lay the foundations for rewarding (rather than sterile and divise) Socialist action and provide an unbeatable argument that Socialism is not only the noblest of all political ideologies but that it can work in practice too.

Hi servicesocialist- you make some excellent points and ask some extremely important questions.

Unfortunately, there isn't an established body of ideas and knowledge which provides ready-made answers to the issues you raise. My view is that Marx's theory contains some very useful tools which could be applied & developed to help us understand present-day economic conditions.

But as you note, there's not much of that going on, or at least, not much which is well-known, accessible, & generally available.

The editors of this site are painfully aware of this problem and are working on it. Hopefully, there will be a couple of articles fairly soon which will address some of the issues.

Meanwhile, to take up one of your most pertinent questions, ie:

"So what do Socialist/Marxist economists say: that 85 per cent of the labour force is being paid wages based on the exploitation of productive workers in other countries (teachers, nurses, home helps)?

"Or do they say that wage/salary earners who produce services are producing value, are being paid less than the value they create and therefore should be viewed exactly the same as those who produce commodities (products)?"

It helps to try to untangle some of the different kinds of products. Here's four categories - not an exhaustive list & obviously there are many grey areas- which I think would be useful:-

0) (Our baseline) Material goods made in factories owned by capitalists, for the purpose of sale on the market, by workers paid less than the amount of the new value which they have created. The capitalist pockets the difference. There you go- I have just summed up Capital volume 1 (if only!) In 21st Century Britain, only about 10% of the working population are directly involved in producing goods of this category. Most of the actual, palpable 'stuff' we buy is made elsewhere, a lot of it under the supervision of the Chinese Communist Party!

But anyway, now it gets a bit more complicated.

1) Products which are not actual material objects & are regarded as services, but which are produced in the private sector by people employed by capitalists, are sold on the market, and which people buy for their direct use-value. For instance a haircut or an operation in a private hospital. These products are straightforward commodities and their production, sale, and the realisation of the surplus value as profits, can be analysed fairly simply using the concepts in Marx's Capital vol. 1.

2) Products produced in the public sector and allocated on a non-market basis; eg, most of health & education. Obviously, the distinction between the private & the public sectors is much more blurry than it was in the 1970s; nevertheless, although they are consumed because of their direct use-value, these products are not commodities- they are not created to be sold in any meaningful sense. However, they often contribute to the production & maintenance of labour-power in the overall capitalist economy, and therefore, in the end, to surplus value & profit.

I should point out here that both services & material objects created and distributed in this way can be considered similarly. For example, an occupational therapist working in the NHS manually produces hand splints - material objects - which are given - not sold - to patients recovering from tendon injuries. As with an immaterial NHS product, let's say an advice session with the physiotherapist, you can't directly apply the paradigm in Capital vol. 1 because the product is not a commodity.

3) Financial services; these 'products' are created in the private sector and traded on the market, and indeed the dear old UK is a market leader in this category, which accounts for I think about 20% or more of our GDP. These services are 'made' to be sold for a profit, so they are commodities. People buy these financial 'products' for their use-value. But what is their use-value?

I would argue that the use-value of a financial product (getting tired of the scare-quotes!) is that it gives an entitlement, after a certain time period or on condition that a certain event occurs or does not occur, to a sum of money. Eg- an insurance policy might give you the entitlement to collect about £10,000 in the event that you crash your car; and some kind of hedge-fund derivative whatnot that you can buy in the City might entitle you to £1,000,000 if the price of Zinc is however much, or if the Euro is worth this or that much more than the dollar, on a certain date.

Now, what is the ultimate source of the stacks of cash you get in your salary + bonus if you are are one of the City types who 'make' these products, or if you are a winner on your hedge-fund stake? I would suggest that you are getting a slice of the surplus value created by the workers in category 0 and category 1, assisted somewhat in their labours by the workers in category 3.

The theoretical analysis & technical details of how this is accomplished need to be thoroughly researched and ought to be published in a book (which will be printed by the workers in category 0 ;-). And whoever writes this book will be the mini-Marx of the 21st Century.

Servicesocialist, the state of 'Marxist economics' at the moment is, as you have noted, absolutely dismal. But I am quite confident that, in the next couple of years or so, somebody will write this book. Four reasons why.

i) Truth will out.

ii) In the end, the City traders and speculators who 'earn' their money in category 3 can only spend it in categories 0 and 1.

NB- and if they pay any taxes (less & less necessary for these characters in Brown's Britain!) a lot of the money goes into category 2.

So I reckon that when someone does the research, tracking the trail of the surplus value, they will find that it leads back to the much-maligned proletariat.

iii) Marx's theory was that the surplus value created in one industry could be realised as profit in another sector of the economy, on the basis of his analyses of commercial profit and the law of the average rate of profit. I predict that these parts of Marx's work will be a treasure-trove for the people who eventually get on with the business of analysing & explaining the current workings of financial capitalism.

iv) The editors of this website will try & find our potential 21st Century mini-Marx, or put together a group of mini-mini-Marxes, to crack the problem.

Perhaps you would like to be involved in this project. If so, please post again, or email the website at csoc21@btinternet.com

PS- you are so right about Karl Marx's brilliant use of poetry in his prose. "A spectre is haunting Europe - the spectre of Communism." The Communist Manifesto was musical as well as analytical. With a bit of help from our current and future friends, that spectre will rise again.

Thanks for the reply, but I think you have missed my point. And calling a service commodity as Marx defined it does not make it a commodity in a meaningful sense.

There must be fundamental differences between a tangible (car, shoes) and an intangible (teaching, nursing, advice).

The first one is you can't see an intangible so you can't work out the elements that have contributed to its production and therefore how much (in a single round of production) is due to labour or due to capital. You can do this with a car or shoes by analysing the input costs and volumes. It's impossible with a service. If you think you can, give me an example to prove it.

The second is a tangible is consumed by a consumer alone and its value is enjoyed in the process of consumption. For example, I buy a cake and I eat that cake. I may feel guilty about the exploitation in its creation or calorie content. But the enjoyment is mine and cannot be compared with the enjoyment someone else eating the same cake might have. Use value, in my view is an analogue of the Benthamite concept of utility, which, since it can only be evaluated by a single individual is necessarily inimical to a collective idea of value creation and use.

With a service, value is created through interaction, it is truly a social process: teachers can't teach unless they have students. They need receptive students to teach well. There is a value difference between a situation where there is a teacher and unreceptive students and one with receptive students. This demonstrates that the value created in a value transaction is always both socially produced and socially shared. This completely contradicts the process in a tangible, which does not produce a value but the means by which human beings can more effectively create value (because they have a home, a kitchen, a car to make journey times shorter, a phone so they can keep in touch with friends and family).

You can store most tangibles (in a warehouse, in deep freeze). Most services can't be stored without a serious loss of value. They have to be used when and where they are produced. This distinction alone must make you pause for a moment and recognise this was not something that Marx or any Socialist economist has tackled.

There can be no circulation of services as there can be of commodities (using the Marxist concept of commodity here). Someone gives me excellent advice about min-Marxism. This advice is going to be pretty useless to practically everyone else. I couldn't even give it away, let alone sell it like a second car Tangibles by definition can be used by more than one customer, including third parties not involved in the original transaction.

Marxist economic theory simply cannot deal with the process of value creation in a service transaction. Inevitably, it sees payments for a service transaction as being a derivative from the production of tangibles, which is due to farming or manufacturing (here or somewhere else). Apart from leading to the conclusion that everyone is to blame (and therefore no one is to blame), it is built on the assertion that no real value is created in a process leading to an intangible service. The implication is that parenting a child has no inherent value and is made possible by the transfer of value from the production of tangibles somewhere else. This makes no intuitive sense, conflicts with reality as is commonly experienced and diminishes the economic role of child-rearing, caring for the sick , teaching, advising and all the other things that every parent does.

Recognising that value is created in service transactions (in my view the only place where value is actually created) solves the old problem of where additional value comes from in an economy. The original Marxist idea is that there is, in reality, only a transfer of value from workers to capitalists which is then commodified.

This suggests there can be no economic growth, just intensifying exploitation.

The fact that this was contradicted in Marx's life by the steady increase in the living standards of the working class demanded a further explanation. That was technology. But what is technology but a service? And what does technology do: it reduces the costs of a process. It does not increase total value, just the net value, which is different.

The idea of value being created as a result of human interaction is intuitively obvious. It happens because people working constructively together encourage each other to think more and do more than if they don't. For example, my conversations involving another interesting person are more useful and valuable than conversations with myself. People playing football in teams play better than when they play alone. There is no magic in the value creation process: it happens when, and only when, people work together.

This conception, which explains why living standards are invariably higher in societies where people get on with each and why advanced service economies can continue growing even without manufacturing and farming, also presents an inarguable case for greater equality and connects neatly with the socialist principle that people should co-operate and collaborate rather than fight.

The sub-text to this is that one of the reasons why Socialism failed in the 20th century is that it was often conditioned by the view that human history was driven by conflict/struggle and not just by Marx. This often led to the conclusion that if you wanted Socialism you had to get into a fight (sometimes anyone would do). The lesson of the last century was that class struggle (or struggle against any other group of human beings) is waste of energy and was a battle that Socialists lost every single time (with no exceptions).

The right approach is to forget about class and focus on the individual and promote human co-operation and collaboration not conflict and struggle.

servicesocialist

Your post implies either that there is no ruling class with its own interests and ability to enforce them, or that there is, but it will wither away of its own accord if we were more gentle in our dealings with it. The evidential basis for this view is not convincing.

The most prolonged period of human co-operation and (class) collaboration in Western Europe was in was in the post-war period (1945 - 1970s). Yet the post-war settlement (social democracy at home, anti-communism abroad) was itself the negotiated outcome of conflict and struggle between labour and capital. The weakening and then the collapse of the USSR (together with changes in the composition of the working class which reduced its negotiating strength) ushered in the neo-liberal era which, although never fully implemented in Western Europe, is still with us today.

Hi again, Servicesocialist.

No, I didn't miss your point. And I hope you won't miss mine.

Marx's analysis in Capital volume 1 is based on the paradigm of the production, by workers in a factory owned by a capitalist, of material goods. The workers' labour-power is bought at its value, which is the workers' wages. The value of the workers' labour-power is less than the amount of the new value which they have added, by their labours, to the finished product. The product is sold at its value. The capitalist pockets the difference- the profit.

Which is all very clean and straightforward. It's a paradigm. It is an abstraction from reality, is greatly simplified, and is based on the example of the production in the private sector of material goods to be sold on the market.

Real life is much more dirty and complicated, but Marx argued that this paradigm was the key to understanding the real world, and in particular that the source of capitalist profit is the labour of the workers.

On this particular point, ie that capitalist profit is gained from the surplus value created by the workers- I suspect that Marx's analysis will prove to be very useful in explaining our 21st Century world also.

But Marx didn't write the last word, nor were all his words necessarily correct. The task of interpreting our present conditions is the task of our generation, if we are up to it.

To the issue of tangible and intangible products. The distinction between tangibles and intangibles is very important; but I put to you that this distinction is not so straightforward, and that the advance of technology is raising new complexities.

You say:

"There must be fundamental differences between a tangible (car, shoes) and an intangible (teaching, nursing, advice).

"The first one is you can't see an intangible so you can't work out the elements that have contributed to its production and therefore how much (in a single round of production) is due to labour or due to capital. You can do this with a car or shoes by analysing the input costs and volumes. It's impossible with a service. If you think you can, give me an example to prove it.

"The second is a tangible is consumed by a consumer alone and its value is enjoyed in the process of consumption."

I think it's more complicated. If you look at the use-value of 'tangibles': many of them are consumed for social reasons. A silver necklace, or the latest fashionable piece of clothing, or a hi-fi system. Perhaps I have bought these to impress my friends, or, more generously, to give my friends a better time when they are with me.

And some 'intangibles' may be enjoyed by the consumer alone. I could buy a ticket and take a journey to the Lake District, courtesy of the service workers- signallers, train drivers, safety inspectors etc, employed by Virgin Trains; I could enjoy the hills, vales and daffodils, come home, not tell a soul, and I could even resist the temptation to perform the poems I write about this experience at a poetry slam.

However, the 'elements' which contributed to the production of my train journey could, if anyone wanted to do the research and if Richard Branson would release the information, be subject to analysis in terms of the labour and capital involved.

Anyway, I must go to bed now, because the service workers for Metronet are on strike and therefore I will have to get up very early in the morning, in order to be able to contribute to the products of category 2 of the economy tomorrow.

Thanks for the comments.

They cover value creation and class.

First value. All economists everywhere say value is created in one of two ways.

One is in the value-added process (ie capital and labour is combined in a process to produce something)
The other is where value is treated as an abstraction and price, the result of the interplay of supply and demand, is the only thing that matters.

My first point is that neither approach works when dealing with services for the reasons I have previously explained.

My second point is that Marx and Marxist economists only deal with the production of tangibles through farming or manufacturing. Service production is never explicitly dealt with. When it is, it is treated as if it were a tangible, which is wrong for the reasons I have previously explained.

In summary, I argue that economic activity involves two elements: processes (machines, houses, computers and other tangibles) and human interaction. The processes do not produce value, human interaction does. This is actually an adapted form of labour theory, upon which Marxist economics is based.

Your train journey is an example of how value is created by the interaction between you and the people working on the railway who use processes (railway lines, carriages) to deliver you to the Lake District. There you consume (enjoy the personal psychological pleasure of using) a view bequeathed by nature. Value has been created however if the landscape has been altered by people to improve it, which is absolutely true of the whole Lake District since it is Britain's most unnaturally natural region. You may not think humans have had a hand, but by God they have!!!!!

The conclusions of this analysis are (potentially) radically egalitarian. Since you can't analyse the contribution made by the parties involved in producing value, there is no sound intellectual case for rewarding them in any particular way. Value-added theory, in contrast, is very clear: there should be specific returns to capital and labour. Market theory, which is also clear, says it's all about supply and demand for capital and labour.

Understanding that value is created through human interaction means you can say a teacher should be paid 100,000 pounds a year and a banker 10,000 pounds a year and, unless this affects the cost of the processes, it will have no impact on the sum of value created.

Socialist economic policy therefore should aim to do two things at the same time: reduce the cost of processes (houses, roads, clothes) and facilitate constructive human interaction, since this is where value is actually produced. From this perspective, some processes (roads, schools, hospitals and many others) should never be privately owned since this restricts their availability to poorer people who are as capable as generating value as anyone else. By the same token, if public ownership does not reduce process costs, it is acceptable for it to be privately owned. The debate about public ownership consequently stops being ideologically and becomes technical. It's an accounting issue.

On class, no one has ever managed to define who belongs to which one. How can you come up with an ideology with any scientific substance when you can't define the basic analytical tool? This is just the beginning of the problems class politics caused Socialism in the past century and a half.

Class politics was at the heart of failed 20th century Socialism. It led to the massacre of Russian farmers on the grounds they were Kulaks and millions of Chinese peasants for the same reason. It was used by Stalin to justify the murder of hundreds of thousands of Socialists in the Soviet Union and elsewhere. It also fatally divided the Socialist movement which was debilitated by the quest for precision in a category that that doesn't actually exist and has no real meaning.

You can trace the origins of the problem to Karl Marx, the father of scientific Socialism, who wrote in January 1848 the Communist Manifesto. Its sixth sentence, and the first of any substance said (and it should be read in the language it was written in).

Die Geschichte aller bisherigen Gesellschaft ist die Geschichte von Klassenkämpfen (The history of all previously existing society is the history of class struggle.)

Even allowing for the narrowness of the German vocabulary and the artistic licence granted to a journalist, as Marx then was, this is a breathtaking generalization.

Apologists will say: Ah, that was an abbreviation, a headline. But in the remaining 35 years of his life, Marx never resiled from that sentence which he wrote when he was 29. At no point did he say: "I have matured and I know more and what I really meant to say is: "Much of the history of previous society can be often seen as a class struggle."

He was categorical until the end. In fact, he boiled it down even further. In 1880, in an interview with an American journalist in Ramsgate he said it all came down to struggle.

Marx was a genius, but he was not to know that this struggle would lead to the deaths of about 100 million poor people or to Adolph Hitler stealing the word Kampf to use in his own account of the history of human existence.

He was not to know that Socialism's rivals could neutralize its appeal by making workers a bit better off and raising questions in people's minds whether they were really working class or perhaps a bit or a lot bourgeois. And by doing this they turned workers into Socialism's enemy. This approach has worked every time without exception.

Please admit the context the poor man worked in and the fact he was not ominiscient. Please admit class politics destroyed Socialism in the 20th century.

There is of course exploitation in a service economy. But it is in fact harder to conceal and easier to combat, once you understand the economics of the system. It is time for Socialists, and not just them, to recognise that the service firms that dominate the British economy have balance sheets entirely dominated by intangible assets. This in reality is the present value of the future income generated by their employees. Once they recognise that, the employees should press for a greater share of that item. In fact, the best way to organize a service firm is as a partnership among its employees. This is an adapted form of workers' control.

Curiously, the section of the British economy where this is best understood is in banking and finance The workers there have a much higher share of total income than any other industry because they are smart enough to recognise where the value generated by their firms is really produced: by them, not by capital.

Unfortunately, their concrete analysis of their concrete situation is based on exploiting everyone else and is leading to the greatest degree of inequality in British history.

This website is about defining Socialism in the 21st century. The starting point should be an honest critique of why Socialism failed in the 20th. It was not because it was all unfair. It was because Socialists did it to themselves by getting the basic ideas seriously wrong.

But Socialism remains the most noble of all political philosophies.

It is our obligation to try and get it back on its feet.

My thinking is a small contribution to that goal. It lays down three foundations:
An economic theory that is essentially egalitarian
An overarching political philosophy of co-operation which is ethically Socialist
A guide to personal action that bridges the gap between what Socialists believe and what they actually do that has a chance of succeeding.

Surely the biggest difference between Socialism in the 20th century and Socialism this century is that this time it should win?????

Hello once more, Servicesocialist. Firstly, my response to your two requests:-

"Please admit the context the poor man worked in and the fact he was not ominiscient."

Absolutely- except that it isn't an admission.

I would say of the legacy of Marx, and indeed of other writers and leaders of the 19th and 20th Century communist & socialist movements, is that some of it is contingent on the circumstances of the time, some of it is no doubt wrong, and some of it stands the test of time and will- if understood, developed, added to etc- become extremely useful for the people of this generation and the next who want to understand the world and change it for the better.

"Please admit class politics destroyed Socialism in the 20th century."

Again, absolutely. Only not in the way you think. Due partly to the Metronet workers whose participation in a bit of economic class struggle has reduced my wonderful city, if not to a standstill, at least to a walkstill, I got home very late & don't have much time to respond.

However, please consider this: the class solidarity of the capitalists and in particular the solidarity, under US leadership / domination, of the rich capitalist countries (NATO + Japan) was a key factor in the weakening and eventual destruction of the USSR & with it the 20th Century socialist movement.

If you haven't read them, I do recommend the Marcus Mulholland articles, 'The Soviet Model and the economic cold war' and 'The dynamic dinosaurs' which give info + analysis which is very relevant.

OK, returning to the issue of tangible and intangible products. You have not yet engaged with my very rough breakdown of products into four categories, with intangibles being divided into three groups; these have very different economic attributes and cannot be shoved into the same intellectual box if we want to understand modern capitalism.

Have another look at my first post to you, and consider. I am by no means saying that Marx had the last word to say on political economy. Far from it.

Let me go further and add another category of products: technology.

This category is of enormous importance, and, defined as 'production-related knowledge', is another intangible- though it has material existence in the plans on paper, the chemical composition of newly-invented drugs, the composition of the plastics and metals in the latest aircraft wing, the electrons buzzing around in new computer programmes, etc.

But, as I am sure you are aware, the knowledge which is embodied in these material things can be analysed, reverse-engineered, copied, learned from, re-cycled into the design & manufacture of other products, etc etc.

Under capitalism, knowledge is a commodity- but its commodity status is challenged and subverted.

I am with you 1,000% when you cite the importance of human interaction. But in my view you are incorrect when you counterpose this to processes. All processes in our society, including material processes, involve human interaction.

Eg, the Lake District. Thank you for your reminder about the role of us humans in creating this 'natural' beauty- by God indeed! And more, though we humans cannot take credit for erecting Blencathra, my favourite mountain; the view when you precariously walk the Saddleback on a bright Spring day is, in my opinion, made much more complex and exciting by the spectacle of the infrastructure and industrial architecture among the greenery in the 50 mile view.

You are over complicating things. Just think of tangibles and intangibles.

Tangibles is everything you can see. The rest are intangibles.

You lso said the class solidarity of the capitalists and in particular the solidarity, under US leadership / domination, of the rich capitalist countries (NATO + Japan) was a key factor in the weakening and eventual destruction of the USSR & with it the 20th Century socialist movement.

I could ask the meaning of the following words;

capitalist? rich? leadership/domination?

These are really slogans. And slogans that are simply not working and wil never work again.

You have to go back to first principles which are how value is really created and the meaning of class (or lack of it).

On why Socialism failed in the 20th century. You blame evil doers. But didn't the people voting in election after election in the UK also have a hand in this? Didn't the Russian, the Czech, the Polish, the Hungarian and the other nationalities oppressed in the name of the "working class" also have a hand?

If there was possibility that the "Socialist" case as defined by 20th Century Socialism was popular I am certain David Cameron would be arguing in favour of it. He is not because the overwhelming majority of the people think Socialism is old hat and can't work. Just talk to a neighbour or two.

You are saying "It's not fair" instead of recognising that Socialists did it to themselves by failing to win over the people.

You have to start with an honest appraisal of where Socialism went wrong rather than looking for culprits other than ourselves.

No, I don't blame 'evil-doers'. Those are your words. Nor did I say "It's not fair". Without necessarily rejecting the concepts of evil and fairness, they did not feature in my explanations.

On the question of products made by human beings in our capitalist system, you say:

"Just think of tangibles and intangibles.
Tangibles is everything you can see. The rest are intangibles."

Why should I (or anyone else) 'just' think of tangibles and intangibles?

Let's take a (sadly) topical example. You can buy a DVD of Aida, starring among others Luciano Pavarotti, for £20.19 on the internet.

Is this product a tangible or an intangible? If you have spent all that cash (no doubt you can get it cheaper somewhere else!- but anyway) you will not be satisfied by merely picking the DVD up and looking at the cover. You will want to stick it in your DVD player and press the 'play' button. Then you can hear the opera and watch it on your screen. So, you can 'see' this product, in not just one, but two different ways. So it definitely is a tangible, by your definition.

But Verdi's score, Pavarotti's voice, the director's interpretation? Are these tangibles? Without these, your DVD would not have its use-value. And what of the the skills of the lighting and sound engineers..?

And then, what if you paid £x amount to download the DVD via your broadband connection- are you buying a tangible or an intangible product?

Either way, it has circulated as a commodity within the capitalist economy.

You say that I am "over complicating things". We have brains, and these organs are quite good enough to enable us to understand such complications.

And here's a further complication for you. 'Manual' labour can contribute to the production of 'intangible' things (the caretaker helps produce a lesson at school) and 'intellectual' labour contributes to producing 'tangible' things (ie, the design engineers who help to produce a space satellite).

And either a lesson or a satellite can be a commodity, or not, depending on whether it is created in order to be sold on the market at a profit, or for some other purpose.

Anyway, now I have to go & take part in some other kinds of human interaction.

I'll take you up on your claim: that 'rich', 'domination' etc are only slogans; in due course.

David Zachariah and I attempted to deal with this ambiguity in a paper in Science and Society last year, 'Hunting Productive Labour'
To cut a long argument short, we basically refine the definitions of productive labour used by Smith and Marx to show that productive labour is that labour whose output directly or indirectly goes into the reproduction of the working class.

Labour which meets the needs of the exploiting classes or millitary needs of the state is unproductive.

In this context one has to distinguish between productive and unproductive services.
Financial services are in the main unproductive, since they meet the needs of the propertyowning classes, whereas, educational and health services are in the main productive.

Hi Paul- I found a version of the paper by David Zachariah & yourself at [www.dcs.gla.ac.uk] and I agree that it helps shed light on these issues. Perhaps I was wrong to write off 'Marxist economics' at the moment as being absolutely dismal- there are sparks of light here and there!

The proposition put forward here by Servicesocialist, that the fundamental distinction is that between tangible and intangible products, is quite similar to that advanced by Adam Smith as quoted in your paper:

"His [the menial servant's] services generally perish in the very instant of their performance, and seldom leave any trace or value behind them for which an equal quantity of service could afterwards be procured."

And Servicesocialist says: "You can store most tangibles (in a warehouse, in deep freeze). Most services can't be stored without a serious loss of value. They have to be used when and where they are produced."

You note in your paper that "Marx criticised [Adam Smith's] definition for abstracting from the social form in which the labour is performed and betraying a physiocratic heritage."

Eg, I presume, Marx's critique of the physiocrats in 'Theories of Surplus Value':

"The confusion of value with material substance, or rather the equating of value with it..." (instead of seeing value, and capital, as social relationships)

[www.marxists.org]

I think we may have a similar problem here. Servicesocialist thinks that a product has to have 'material substance', otherwise you cant use Marx's theories to help analyse its creation and circulation in terms of the social relations involved. But so far, he/she has neither come up with any convincing explanation of this, nor has he/she critiqued any of my various examples (from OT in the NHS to downloading Aida!)

I don't think that Servicesocialist's claim that "You can store most tangibles (in a warehouse, in deep freeze). Most services can't be stored without a serious loss of value." amounts to any kind of challenge to the idea that service commodities (ie, 'intangibles' created in order to be sold at a profit) can be analysed in a similar way to material goods.

What has storage time got to do with it?

Would Servicesocialist argue that a Sushi box (shelf life of one day) is less amenable to the application of the concepts in Capital vol. 1 than a jar of anchovy fillets (shelf life one year) on the next shelf in Waitrose?

Anyway, from deciding that Marx's political economy was wrong or irrelevant, Servicsocialist has arrived at the conclusion that the idea of 'class struggle', as adopted by socialists, is a dreadful mistake & should be abandoned. The problem with this is that the political representatives of the people who materially benefit most from the current order are most unlikely to abandon the class struggle; either economically (to create conditions for maximum profits) or politically (to prevent a socialist society from emerging).

Take Venezuela for example!

Thank you Paul for the comment about the issue. You say that you basically refine the definitions of productive labour used by Smith and Marx to show that productive labour is that labour whose output directly or indirectly goes into the reproduction of the working class.

Can you illustrate how this categorisation works? The merit of my approach, distinguishing tangible from intangible, is very simple. What can be measured quantitatively is a tangible. Everything else is intangible.

In the DVD example, the tangible (or what I would prefer to call the process) is everything you touch and see. What you are experiencing, however, is the interaction between you (the consumer of the service) and the supplier of the service (the composer, the orchestra, the vocalists, the production team and all the people involved in putting this together). They are using the processes (the musical instruments, the recording system, the DVD production unit) to enable the service (which is the interaction between you and the sound) to delivered. This is where the value is. Without this, all the equipment has no value whatsoever, but it does uses resources and therefore has a cost.

On the question of exploitation: it of course still occurs when services are produced. Someone working for a joint stock service firm is paid in cash or kind (tangibles) less than the total amount paid for the service provided (which is absorbed by profits and costs). This is comprehensible within the Marxist model. The point is that the only effective way to counter such exploitation is for the provider of the service to co-operate with his or her co-workers and with the user of the service to avoid having to pay a premium to the owners of the joint stock company unless the owners of that company are in fact the suppliers and users of that service themselves.

This analysis clearly classifies service workers (including brain workers of all kinds: yes folks, even bankers) as the service economy equivalent of the proletariat in the manufacturing/farming model.

The service proletariat definitely has an interest in ending exploitation in service production, but this will be best done through co-operation among service workers and the consumers of services, not through class war.

The distinction between tangibles and intangibles is basically the one that Smith was making. He said that productive labour had to be embodied in a vendible product. One has to consider this in the context of his key aim, the encouragement of the accumulation of capital in order to develop the productivity of labour.

This could only occur if the labour produces in the end a matrial product that can be accumulated leading to a greater future stock of means of production.

For Marx productive labour was that labour which produces surplus value.

But one can on closer examination see that both philosophers were aiming at
a similar point.

In Marx theory of relative surplus value, profit arises from technological advances that reduce the labour necessary to reproduce the working population. Thus only those labours for which technical change could increase the mass of surplus value can count as productive.

Now this means that certain forms of activity - we give the manufacture of H bombs as an example - although they produce a tangible product, and although they may be conducted ( in the US for example ) by capitalist firms, do not contribute the growing the mass of surplus value. If there are economies in the manufacture of H bombs, this neither increases the capital stock of a country, not the mass of surplus value, it only changes the material form in which is appears - large numbers of H bombs, rather than just a few.

On the other hand a service - medical treatment given to workers - can contribute to the production of surplus value even if these workers provide a service free at the point of use as in the NHS, as their activity increases the surplus labour available to society ( by making people fit to work ).

On the other hand intangible activities like banking, do not contribute to increasing the mass of surplus value since banks, as an inspection of their accounts will show, depend on transfers of already existing surplus value in the form of interest payments.

One must distinguish between different servant classes - the servant class who serve the general working class population, and the servant class who serve the wealthy property owners. The former could expect their role to expand in a socialist economy, the latters role will vanish.

There are ways in which Paul Cockshott and Servicesocialist can both be right. But, as seems to be my role here, I have to point out that there are complications.

Take two examples of 'unproductive labour' (as per Paul's paper, sourced above)- one which creates material, and the other, intangible commodities: the weapons industry and the financial services industry.

If Paul's analysis is correct, neither sector of the economy contributes to the welfare of the working class globally, and could be abolished with no loss to overall welfare under a future world-wide socialist system. I would agree.

However. At present, not only do we live under capitalism, but we have nations and international capitalist structures. Within which, both our arms industry and the City's financial services pull in huge amounts of money from abroad. Some of this cash (via taxation) goes to fund the manufacture of things which are productive, by Paul's definition: eg, in London, bendy-buses and the new UCH hospital.

Further-

Paul states that, "activities like banking, do not contribute to increasing the mass of surplus value since banks, as an inspection of their accounts will show, depend on transfers of already existing surplus value in the form of interest payments."

I am sure this is true. More work on this would be very useful.

But, as Servicesocialist reminds us, the 'workers' in the financial sector create products which are bought and sold; within this sector there are owners and employees (some of the latter are very rich, but not all- the secretaries and cleaners for example). If you isolate this sector of the economy, you can use Marx's theorems to analyse the social / economic processes in terms of surplus value and profit.

Which does not at all mean that we cannot regard the financial services industry as parasitic on the surplus-value produced globally.

Let me make a biological analogy. The bilhartsia organism is a parasite: it infects the human body, sucks its nutrients from the blood of the victim and gradually destroys the liver.

If you are infected by this vile organism, it contributes nothing to your welfare- in fact, your life is degraded and shortened.

However, the bilhartsia organism can be analysed using exactly the same scientific methods which are applied to the cells of non-parasitic beasts. It has a nucleus, mitochondria; the laws of diffusion and osmosis work when it is inspected, etc.

Shakespeare in the 'Merchant of Venice' had something to say on this matter. Though coloured by the racial politics of his time, which identified usury with Judaism, he gave these wise words to Shylock:

"Hath not a Jew eyes? hath not a Jew hands, organs, dimensions, senses, affections, passions? fed with the same food, hurt with the same weapons, subject to the same diseases, healed by the same means, warmed and cooled by the same winter and summer as a Christian is? If you prick us, do we not bleed?"

We all bleed. But some of us give more blood than others.

My points are about value and class. In Marx value and class are connected because Marx implies that in the manufacturing process, the working class (proletariat) is the sole source of value. The only other class in the system is the bourgeoisie, which uses the surplus value created by the workers. This is the scientific and ethical foundation for his entire system.

I invite you first to think about value. What is it? and how is it created?

Marx was unclear about what value is. Is it use value or is it exchange value? Having created a dichotomy (by arguing there are two values) he then says there is only a single surplus value which is measurable. His later works suggest that the system is made coherent by implying the aggregate use values in an economy plus the aggregate surplus values equals aggregate exchange values which in turn equal aggregate prices (which can be translated in contemporary terms to be equal to GDP/GNP)

He axiomatically states that value is solely created by labour. But he does not explain how labour creates value. He just says it does and that's that.

My argument addresses how value is created first It says that value is solely created by human interaction: between teachers and the taught, between parent and child; between financial adviser and the recipient of the financial advice (not all bankers live off exploitative lending activity). It is created because human beings when they interact encourage each other to think more and do more than they would if they were on their own. Like a football team.

My definition of value, therefore, is that it is the addition to welfare as perceived and enjoyed by the participants in a human interaction.

Tangibles comprise only other tangibles that have been adapted through human involvement to enable humans to interact and thereby create more value. The value is in the interaction not in the tangibles themselves.

The conclusions are radical:
1 Value is solely created by human beings
2 It is solely the result of constructive human interaction (co-operation/Socialism)

I have previously argued that each service transaction is unique and cannot be commodified or ordered. That means there is no market for services, only a mass of service transactions in which human beings create value by working with each other directly or indirectly through embodied technology, the fruit of previous human endeavour and co-operation that reduces the cost (tangible consumption) of tangible production.

That means there is no such thing as a market price or prices in a service market. That consequently means there can be no determinate distribution of value and/or income among those involved in a service transaction (in other words, there is no reason why anyone should be paid any particular wage). The conclusion is that a teacher could be paid 1 million a year and a banker 10,000 a year, and there would be no change in the total value created in an economy so long as the constructive interactions are maintained.

This view of the way value is created eliminates the concept of class as Marx defined it. A bourgeois can create value if that person constructively interacts with others. More powerfully, however, it supports the argument that the poor and the weak are as able to produce as much value as a rich person.

The capacity to work constructively with others is the key to economic welfare, not the possession of capital or market knowledge.

This approach provides clues about how Socialists should deal with contemporary British society which is dominated by service production.

And it doesn't involve having to go to Venezuela. Socialism, like charity, starts at home.

Service socialist writes:
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Marx was unclear about what value is. Is it use value or is it exchange value? Having created a dichotomy (by arguing there are two values) he then says there is only a single surplus value which is measurable. His later works suggest that the system is made coherent by implying the aggregate use values in an economy plus the aggregate surplus values equals aggregate exchange values which in turn equal aggregate prices (which can be translated in contemporary terms to be equal to GDP/GNP)
----------

I am not sure where you get these ideas from. There is nowhere in Capital or any of his other economic writings where he makes the suggestion you attribute to him in the second paragraph.

By value Marx means the generalisation of exchange value. A commodity, in a barter system has multiple different exchange values, a bolt of cloth has exchange values in corn, grapes, wine, shoes etc. But underlying all of these, and determining there quantitative magnitudes is a common scalar magnitude - their value. In a monetary economy the common scalar magnitude of value comes to be expressed in money - but this is just a representation of value not value itself since over time the value of money itself changes.

Marx follows Aristotle in arguing that use values are non-commensurable and as such can not be treated as a single scale: wine, cloth, shoes etc, in terms of their physical properties and the uses to which they can be put, have no common scale. Aristotle argued that exchange value with its assumption of a common scale was thus irrational. Marx concludes that it is irrational because it is a projection of the general conditions of social reproduction onto pairs of products, a social property not a physical property.

Late 19th century economists, starting with Jevons tried to say that it was not the physical qualities of shoes etc that constituted their use value, but their subjective appreciation by the users. This subjective theory of value

a) does not contradict the labour theory of value, as Jevons was forced to admit, actual prices will be broadly proportional to labour inputs
b) it scientifically vacuous as it leads to no testable hypotheses

This is unlike the labour theory of value which does lead to testable hypotheses, namely that prices will be highly correlated with labour inputs. Socialist economist have, in the last 20 years done studies of the price systems of many countries comparing market prices with labour required to produce goods, and find that the correlations are in general over 95%.

Some studies showing this are:

[reality.gn.apc.org]

[cje.oxfordjournals.org]

[cje.oxfordjournals.org]

Ahab writes
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However. At present, not only do we live under capitalism, but we have nations and international capitalist structures. Within which, both our arms industry and the City's financial services pull in huge amounts of money from abroad. Some of this cash (via taxation) goes to fund the manufacture of things which are productive, by Paul's definition: eg, in London, bendy-buses and the new UCH hospital.
----------

We live in a global economy, and the analysis of value creation has to reflect this.

One has to ask how was the money that is paid to the City of London for financial services originally acquired?

It comes from the surplus value, the proceeds of exploitation, in other countries. Millionaires abroad, who have made a packet exploiting workers in their own country, invest some of the proceeds via the City of London, a cut from which then goes to the City institutions.

The case is the same as the hypothetical one in my paper where I discussed what would happen if the Duke of Sutherland hired out his private regiment for guard duties on the estates of the Dukes of Cornwall or Lancaster. His unproductive lackies, whose unproductive character was quite evident when he employed them himself, might superficially appear to have become productive to him. But from the standpoint of the economy as a whole nothing would have changed except the distribution of wealth within the aristocracy.

Paul,

But what does Marx say value is? Generalisation of exchange value is meaningless. You seem to suggest that value in Marxst theory is approximately equal to the price paid (or when all production and exchange is added up in an economy). Is this correct?

On the labour theory, I am on your wavelength which is that there is a close correlation between labour value and prices. But that labour theory does not explain how value is created. It says that labour is an input into value creation, but how precisely does labour create value?

On the first point, Marxist economists usually say surplus value equals use value minus exchange value paid by the user of the commodity bought before its use in production. My formulation (whic was inverted but still consistent) was that use values in an economy plus the aggregate surplus values equals aggregate exchange values for the commodity sold after it has been produced.

Which goes to show you how incredibly incomprehensible Marxist value theory can be.

You ask:
But what does Marx say value is? Generalisation of exchange value is meaningless. You seem to suggest that value in Marxst theory is approximately equal to the price paid (or when all production and exchange is added up in an economy). Is this correct?
---------
First things first, what does he say value is? To understand this there is no real alternative but to read through the first chapter of volume I of capital. I give here a short summary citation from 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. But even the product of labour itself has undergone a change in our hands. If we make abstraction from its use value, we make abstraction at the same time from the material elements and shapes that make the product a use value; we see in it no longer a table, a house, yarn, or any other useful thing. Its existence as a material thing is put out of sight. Neither can it any longer be regarded as the product of the labour of the joiner, the mason, the spinner, or of any other definite kind of productive labour. Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract.

Let us now consider the residue of each of these products; it consists of the same unsubstantial reality in each, a mere congelation of homogeneous human labour, of labour power expended without regard to the mode of its expenditure. All that these things now tell us is, that human labour power has been expended in their production, that human labour is embodied in them. When looked at as crystals of this social substance, common to them all, they are – Values.

We have seen that when commodities are exchanged, their exchange value manifests itself as something totally independent of their use value. But if we abstract from their use value, there remains their Value as defined above. Therefore, the common substance that manifests itself in the exchange value of commodities, whenever they are exchanged, is their value"( online at [www.marxists.org] )

You ask is this approximately equal to the price paid?

It depends what you mean by being equal. In an exact sense the price paid is not equal to the value, since the price is measured in money but the value is measured in time, but in a looser sense, the prices will be closely proportional to the values. Price is a particular historically determined form in which human social labour can be expressed. According to Engels, once a communist economy is established the labour content of goods will no longer be hidden behind money
prices, instead economic calculation will proceed directly in labour time.

"From the moment when society enters into possession of the means of production and uses them in direct association for production, the labour of each individual, however varied its specifically useful character may be, becomes at the start and directly social labour. The quantity of social labour contained in a product need not then be established in a roundabout way; daily experience shows in a direct way how much of it is required on the average. Society can simply calculate how many hours of labour are contained in a steam-engine, a bushel of wheat of the last harvest, or a hundred square yards of cloth of a certain quality. It could therefore never occur to it still to express the quantities of labour put into the products, quantities which it will then know directly and in their absolute amounts, in a third product, in a measure which, besides, is only relative, fluctuating, inadequate, though formerly unavoidable for lack of a better one, rather than express them in their natural, adequate and absolute measure, time." (online at [www.marxists.org] )


You say <<On the first point, Marxist economists usually say surplus value equals use value minus exchange value paid by the user of the commodity bought before its use in production.>>

I have never read that in the writing of any Marxist economist. I suspect that you are confusing it with the quite different notion of Consumer Surplus in bourgeois economics (see wikipedia article [en.wikipedia.org] )

The Wikipedia article on Surplus Value is also quite clear and will help you sort out the difference between the two concepts.

Sorry, the equality between surplus value and use value less exchange value is invariably accepted by economic students of Marx (see Marx's revenge by Meghnad Desai, Verso 2002 page 57.

The passages you quote imply that Marx believed value always expressed itself economically in commodities (ie visibles or tangibles). He does not seem to say value is also embodied in a service like teaching, parenting, writing etc.

The passages also suggest that value is labour power embodied in a commodity and this is measurable by working out the amount of time used (under a particular set of technical conditions) in producing it.

There are two problems with this. The first is that the value of the labour time is calculable based on the worker's wages. But what are the worker's wages? These are determined by demand for wage labour which is in turn determined by the surplus value process. So there is a circularity in this analysis (chicken or egg; wage or surplus value as the starting point for the system).

The second problem is that in services, the output cannot be measured since it is intangible and therefore has no physical qualities. You cannot analyse its composition as you can with the computer I am using (plastics, plus copper plus silicon plus capital costs plus labour plus profit margin).

If you use the time measure to assess the value of a service (how much time have I spent producing this note for example?), there is no determinate answer. You might say five minutes, since this is the amount of time I am sitting here. Therefore, the value of this is 1/12th of my hourly salary/wage. I would argue that the time spent on this letter should also encompass my thinking time, my reading time and, in fact, all the elements of my mental formation since birth that have contributed to me doing this. That's going to be quite a lot more than 1/12th of my hourly salary/wage.

The practical example of the issue is the amount that a management consultant (perhaps working for the NHS) charges for the advice provided to the NHS to help it work more efficiently. They charge for time (usually 1,000-2,000 pounds a day). This is based on the consultant's target salary. But what determines their target salary? Normally. it is a figure that is plucked out of the air subject to the ceiling charged by the most expensive consultant supplying services to the NHS. The most expensive consultant's fee, however, is itself the result of an entirely subjective decision made by him or her. McKinsey and Ernst & Young simply charge what they think they can get away with and work the daily/hourly rate backwards.

All the foregoing is about trying to understand the economic process (which is entirely about how value is created and distributed) in a service economy. My thesis is that conventional economics (including Marxist economics) doesn't work and that a different model is needed for understanding that process.

Thanks for your time and interest.....