Commentary on Political Economy

Friday 28 February 2014

Capitalist Metaphysics - Part Two - Labour, Capital and Value

Let us re-read carefully that lengthy quotation from Schumpeter with which we ended Part One of this study:

In 1884 there appeared Böhm-Bawerk's critical work which established not only the untenable but also the superficial character of the existing explanations of interest and opened a new era for the theory of interest. This book and the one entitled Positive Theorie, which followed four years later, trained numerous theorists of interest and hardly a single one remained unaffected by them. Of all the works on the theory of marginal utility these two volumes had the deepest and widest effect. We find the traces of their influence in the way in which almost all theorists of interest phrased their questions and proceeded to answer them.

There are signs of this influence even in those writers who rejected the concrete solution of the problem of interest as offered by Böhm-Bawerk. This solution is based on the fundamental idea that the phenomenon of interest can be explained by a discrepancy between the values of present and future consumer goods. This discrepancy rests on three facts: first, on the difference between the present and the future level of supplies available for the members of the economy, secondly, on the fact that a future satisfaction of wants stands much less vividly before people's eyes than an equal but present satisfaction. In consequence, economic activity reacts less strongly to the prospect of future satisfaction than to that of present enjoyment and the individual members of the economy are in certain circumstances willing to buy present enjoyment with one that is greater in itself but lies in the future. The discrepancy between present and future values is, thirdly, based on the fact that the possession of goods ready to be enjoyed makes it unnecessary for the economic individuals to provide for their subsistence by


producing for the moment, e.g. by a primitive search for food.

The possession of such goods enables them to choose some

methods of production which are more profitable but are more

time-consuming: the possession of goods ready to be enjoyed in

the present guarantees, as it were, the possession of more such

goods in the future.

In this 'third reason' for the phenomenon of interest there are

contained two elements: First, the establishment of a technical fact

which so far had been unknown to the theorists, namely that the

prolongation of the period of production, the adoption of 'detours'

of production, makes it possible to obtain a greater return which

is more than proportionate to the time employed. Secondly, the

thesis that this technical fact is also an independent cause of an

increase in value of consumption goods which are in existence at

any given time.

Interest as form of income then originates in the price struggle

between the capitalists on the one side, who must be considered

as merchants who offer goods which are ready for consumption,

and landlords and workers on the other. Because the latter value

present goods more highly and because the possible use of present

stocks of consumer goods for a more profitable extension of the

period of production is practically unlimited, the price struggle is

always decided in favour of the capitalists. In consequence, landlords

and workers receive their future product only with a deduction,

as it were, with a discount for the present.

The achievement which this formulation contains was epoch-making

and a great deal of the theoretical work of the last twenty

years has been devoted to a discussion of it and to its criticism.

(Schumpeter, Economic Doctrines and Methodology.)


Bohm-Bawerk’s theory of the greater “productivity” of “more roundabout” methods of production is yet another version of the Schopenhauerian “renunciation” (Entsagung), the “refusal” of the “pain” (Leid) that the Will to Life imposes on the human body (which is the objectification of the Will) in its abulic, incessant and insatiable search for “pleasure” (Lust) that can never be satis-fied, least of all at the moment of its ful-filment because, paradoxically as Schopenhauer took pains (!) to point out, a desire is extinguished in the very moment of its fulfilment! In Schumpeter’s masterly exegesis of his mentor’s economic theory, Bohm-Bawerk is clearly intimating that the capitalist is “rewarded” with higher productivity of the “tools” (capital) he possesses by virtue of his “ascetic renunciation” or “deferral” of “immediate consumption” in order to devote his labor and existing capital to the construction of more “roundabout” methods of production that will yield higher productivity and therefore “profit” when they are utilized:


“The prolongation of the period of production [necessitated by the need to renounce immediate consumption in favour of producing “tools”], the adoption of 'detours' of production, makes it possible to obtain a greater return [gains in productivity obtained thanks to the “labour-saving” nature of tools] which

is more than proportionate to the time employed.”



Labour therefore is mere want, mere operari; it is poverty by definition or at least it is the simplest form of subsistence living. Consequently, labour can have only “dis-utility” because it is mere “effort” or “toil”, mere “labour-power” or “abstract labour”. (Marx will later object that the unique use value of “the commodity labour-power”, of abstract labour – or rather, of labour made abstract by capitalist command -, is precisely to produce “surplus value” for capitalists under their violent command. This vital Marxian distinction of the Doppelcharakter of the commodity labour-power - that is, its being a mere exchange value for capitalists but in fact being “the source of all exchange value” - is what re-connects the appearance of “market capitalism” as a scientistic eternal human condition to its actual reality as a historically specific exploitative social system.)


Here, as Schumpeter reminds us with characteristic acuity, every “detour” undertaken by an individual allows him to exchange the new products obtained by the use of “tools” either for the consumption goods obtained by other workers or else for the purchase of their own “labour-power”. We can see now how the entire concept of “interest or profit” in Neoclassical Theory is evidently founded on the idea of a “price struggle between capitalists and workers” that, given the premises of this theory, “is always decided in favour of the capitalists”. And this “price struggle” is absolutely – metaphysically, we could say – inevitable because of the innate drive (Trieb) of the human Will to Life toward the conquest of greater pleasure or “utility”. But in order to produce “labour-saving tools”, the individual must first “renounce” the consumption (and production) of goods for immediate consumption that are coveted by other individuals.


Clearly therefore, only individuals with the greater ability to renounce the Will to Life are able to produce “labour-saving tools” that enable them to produce more efficiently fresh consumption goods that are intended for exchange with the labour-power of other individuals who are less capable of renouncing the Will to Life. It is therefore those individuals with greater self-mastery who turn themselves into capitalists (producers of labour-saving tools or “capital”) at the expense of those individuals who are less capable to renounce the Will to Life, and are therefore condemned to a life as “workers”. We must note that, in renouncing goods for immediate consumption in favour of “labour-saving tools”, the capitalist must aim at the production of values in exchange or “Objective Value” - because otherwise the goods produced by the renouncing individual would still be used either in direct consumption or else in exchange for other goods for consumption, not in pursuing renunciation as a means of dominating more labour-power, which is what turns him into a “capitalist”! The production of values in exchange through the adoption of labour-saving tools (capital) allows the owner of these tools, the capitalist, to exchange these values for the individual labours of other individuals whose “wants” are too pressing for them to delay consumption, in such a way that their “provision for want” (Bedarf) becomes dependent on their being employed by the owner of capital, who now becomes a capitalist employer (a “giver of labour”, Arbeit -geber) to the dependent employee ( a “taker of labour”, Arbeit-nehmer).


Thus, it is Capital, not Labor, that allows human labor to be “productive”; it is “labour-saving tools” that allow some workers to produce more wealth and value than other workers and thereby turn themselves into “capitalists”. It follows that capitalists produce more consumption goods not in the positive substantive and objective sense of universal human endowments, but only in the negative subjective sense of providing for the wants of individuals by saving “labor” for them individually, reducing their subjective “pain” (Leid) of and “effort” of work, of the operari, its “strife” (Kampf) in a “world” in which “pleasure” (Lust) is only the “Provision [Bedarf] for Want”, the “satis-faction” of “unlimited wants”, their “partial extinction” – their ful-filment and com-pletion only in a negative sense of the appeasement or extinguishment of a want or desire, never in the positive sense of its full gratification, for that is impossible!


Indeed, we can finally state that the aim of the capitalist is the extinguishment of labour as desire intended as “appetite”, as “want” or “need” or “poverty”. We can see that for the negatives Denken and Neoclassical Theory it is not “labour” as such that occasions wealth for the capitalist but rather it is the delay in the consumption of consumption goods through the diversion of labour to the production of production goods. Labour here remains at all times a mere operari, a mere mechanical consumption of wealth. Furthermore, human wants are seen as insatiable and inextinguishable. Therefore, the decision to divert labour to production goods and to delay the consumption of consumption goods represents for the negatives Denken a Schopenhauerian ascetic “renunciation” and sublimation not just of “ephemeral worldly pleasures” but also a transcendental refusal of the Arbeit, of Labour, and of the Will to Life that motivates it – in short, a renunciation of labour as consumption of the world in favour of labour-saving tools or capital as rational domination over and extinguishment of the Arbeit, of labour and of “the world” – of Nature - through the rational sublimation of the Will to Life. In the words of Lionel Robbins, “Nirvana is the satisfaction of every desire”. As we will see, this renunciation turns the Schopenhauerian Will to Life into a Nietzschean Will to Power or, in Schumpeter’s version, a capitalist entrepreneurial “will to conquer” – the Unternehmersgeist.


Without the intervention of capital, individual labours can only either consume or transform existing wealth (“nature”) to ensure “provision for their insatiable wants”, but they cannot, as labour (!), produce greater wealth. (Similarly, Adam Smith completely ignores the possibility of social labour in his analysis of exchange as the basis of specialization and higher productivity – something that Rousseau did instead – see L. Colletti in Ideologia e Societa’.) Labour by itself is a “negative” factor of production in the sense that it can only satisfy the most immediate wants in terms of the duration of the goods it can obtain for the satisfaction of individual wants if unaided by tools. Only through the use of capital can labour produce wealth in a form that can be accumulated. But the use of capital does not change the essential quality of labour which is that of being sheer operari, mere mechanical exertion. Capital becomes therefore the only “positive” factor of production – hence “the positive theory of capital”.


For the negatives Denken, labour has no “utility” in and of itself because in and of itself, by itself, without the intervention of capital, labour is mere immediate consumption of “nature” and cannot be the cause for the accumulation of wealth or goods with utility – remembering that “nature” alone is a source of “utility” or “Subjective Value”. All values-in-exchange are also part of “nature” except that they have been trans-formed by labour with the aid of capital. Labour therefore is “want”, or rather, it is the only means of “providing for want” through the consumption of “nature”. But this consumption cannot produce greater wealth or utility unless it is mediated by capital, because capital alone – as labour-saving tools, as means of production – can yield to labour the “productivity” that can free it from its status as provision for want (hand-to-mouth existence or mere subsistence).


From this radically altered perspective, it is no longer the worker who “gives wealth or value-creating labour” to the employer to increase his wealth or capital, but rather the other way around: – it is the employer who allows the labourer “to consume capital” so as to earn a wage (“life-means” or “provisions”, Lebens-mitteln). It is capital, not labour, that creates wealth or utility.




Once the possibility of “social labour” is denied, it is obvious that the only sources of social co-ordination for individual labours are “capital” at the point of production (supply) and “the market” at the point of distribution (demand). In any case, this social co-ordination takes place only as the expression of the capitalist’s desire to accumulate “wealth” not for its own sake but for the sake of accumulation – in other words, “wealth” as “self-mastery” aimed at assuring the capitalist’s mastery over labourers.


For the negatives Denken and then for Neoclassical Theory, wealth quite simply cannot be “pro-duced” by labour without the intervention of capital. “Capital” here is not seen as an inert pile of labour-saving goods but rather as the pro-duct of the capitalist’s wilful “renunciation” of consumption represented by labour through the production of labour-saving tools! Quite simply, capital is the capitalist’s will to employ labor and to dominate or command labor, that is, the worker!  It follows that for the negatives Denken and for Neoclassical Theory – just as for Karl Marx! – “capital” is not a “thing” but is rather a “will” opposed to “labour”. (One of the major Marxist objections to Neoclassical Theory is that it treats capital as a “thing” and not as a “social relation of production”. We can see how erroneous this objection is – and indeed the Marxist notion of “Value” is itself tainted with the reification of “socially necessary labour-power” where this “necessity” seeks to turn the Marxian critique of capitalist social relations of production into a reified quantitative “science”, as we are about to show.)


As we saw in Part One, Weber argues in the Ethik that it is the Protestant “calling” (Beruf) of “labor as an end in itself” that makes up “the spirit of capitalism” and constitutes “a specifically bourgeois economic ethic”. We can see already from the discussion above that in fact it is Neoclassical Theory that provides such “a specifically bourgeois economic ethic” because it lays emphasis on the “renunciation of immediate consumption” as the source of Value for the capitalist through the preference of “more roundabout” means of production (capital) rather than Weber’s “devotion” to or “calling” for “labor as an end in itself” – which, of course, is indeed identical with the Labor Theory of Value of Classical Political Economy. Contrary to the Protestant Ethic, the negative view of labour and indeed of human agency expounded by the negatives Denken contends that labour is not ascetic deliverance from the world and from wealth; it is not “renunciation” but “resignation”, mere operari or passive acceptance of the world. The negatives Denken contends that labour is mere consumption of existing wealth or of “Nature” through its transformation (see the first part of Bohm-Bawerk’s PTC on this). For the negatives Denken, labour cannot produce and create greater wealth as value-in-exchange unless capital intervenes to aid labour in its interaction with “nature”. Indeed, the very notion of “labour as the positive creation and accumulation of wealth” (as “input” in productive “output”) is meaningful only within the perspective of the Labour Theory of Value first outlined in Classical Political Economy.


In the Protestant Ethic and even in Socialist movements, labour is seen as “renunciation” also; but this renunciation is purely the substitution of time for the consumption of goods with more time devoted to labour and not necessarily to production of production goods to produce Objective Value. As such, the renunciation of the Protestant Ethic may be seen as expiation or penance or self-flagellation or even as “parsimony” and as a form of “saving”: but it is not necessarily “saving for production intended as accumulation”! The negatives Denken and neoclassical theory insist that only this specific type of “saving” constitutes “capital”. Capital therefore is not just any “saving” of consumption: rather, capital is the delay of consumption in favour of production of Objective Value.


Unlike the Protestant Ethic for which devotion to labour is a necessary and sufficient condition for the accumulation of wealth, for neoclassical theory such “devotion to labour” is still a form of “consumption” – if the labourer is paid more in consumption goods (wages) to compensate for such devotion. The devotion to labour can be a sufficient condition for the creation of wealth only if direct consumption is replaced with direct production of production goods. Only in such a case, only when devotion to labour is also a postponement of consumption as its renunciation in favour of production, can such devotion to labour become the production of capital. In effect, it is diversion of labour from consumption to production goods, and therefore the deferral of consumption in favour of production, rather than devotion to labour as expiation or parsimony, that constitutes the true “renunciation” for neoclassical theory.


The ultimate purpose of this diversion of labour and delay of consumption is at once the negation of labour as consumption, the sublimation of one’s selfish wants, and the exaltation of capital as labour-saving production. The aim of the “capitalist” here is not devotion to labour as parsimony for its own sake or for religious reasons – and such devotion to labour certainly does not necessarily lead to the accumulation of wealth. The aim of the capitalist is self-mastery as delayed consumption that allows him to exchange consumption goods (“a previous saving”) for command over the living labour of other individuals that is used in turn for the “production” of labour-saving or labour-cancelling tools (capital) that enable the capitalist to command even more living labour. As Bohm-Bawerk puts it,


Adam Smith's celebrated proposition therefore—"Parsimony and not industry is

the immediate cause of the increase of capital"—is, strictly speaking, to be turned

just the other way about. The immediate cause of the origin of capital is production;

the mediate cause is a previous saving. (PTC, II.4, fn.30)


In other words, the “previous saving” is not just any saving (parsimony) but rather a specific kind of saving that mediates production, one that is intended to increase production by means of labor-saving tools. Here then is the inversion of Max Weber’s proposition in the Ethik that saw the ascetic devotion to labor as the “specifically bourgeois economic ethic”. No! It is not “devotion to labor”, it is rather the “saving of labor devoted to present consumption” that allows its diversion to the construction of “tools” or productive capital that will permit labor to be more productive! “Labour” is seen here as an abstract quantity, as labour-power that is made more or less productive by the “capital” or means of production that it uses. In the words of Bohm-Bawerk, Classical Political Economy has been “turned just the other way about”!

It is “industry” and not “parsimony” that is “the immediate cause of the increase of capital”. But “industry” here does not mean “Labor”! To be sure, both labor and capital are needed for production, yet capital alone is already wealth – and wealth alone, not labor (which is need) can produce other wealth. The capitalist alone can wait until production is complete, whereas the labourer cannot because it is labour (as need) that requires tools to realize itself.   “Capital” therefore can be defined deontologically as “the renunciation of consumption goods in favour of labor-saving devices”, as “self-mastery” by the capitalist that leads to the extinguishment of labour to ensure the mastery of the capitalist over the labourer! “Labor” is not and cannot be the source of Value – because Value is “the saving of Labor as Want”! So here – finally! – we have what Max Weber was looking for but could not find with his definitions and approach in the Ethik: - “A specifically bourgeois economic ethic” in which “labour” and “capital” are antithetical and capital is mastery over the labourer by means of labour-saving tools in the form of renunciation and sublimation of labour as want, as poverty, as appetitus! The Neoclassical Counter-revolution against the Socialist ideology of the industrial proletariat had finally arrived to found an “economic science”.


Hence, it is not “more labour” that produces wealth as “objective value” or “value in exchange”. Instead it is the diversion of labour to labour-saving production as a deferral of consumption that leads to greater value. Here the “sacrifice”, the “toil” or “effort”, the true “parsimony” is not that of “labour” – which is in any case condemned to being “present consumption”, the immediate provision for want – but much rather that of “the capitalist” – the labourer who defers consumption to produce labour-saving tools.


Weber’s Askesis – ascetic ideal – is not relevant to “the spirit of capitalism” because it understands “devotion to labor” as an ascetic end in itself! Similarly, Smith’s labour theory of value is also not relevant because it mistakes “parsimony” and “frugality” as sufficient conditions for “industry” (that is, capitalist production) when in fact they are only a renunciation of consumption! On the contrary, for the Neoclassics, what creates wealth and value (or rather, “makes it possible through the diversion of the powers of nature”) is not “labor” as an end in itself, even for ascetic goals; nor is it “frugality” as the “renunciation of consumption”. This “moralistic” sense of “frugality” is absent in the Neoclassical “scientific and positivist” theories. Quite to the contrary, what occasions wealth or value is the diversion of labour from present consumption to production of tools for production, that is, of means of production as “labor-saving tools”! It is not “labor” that is the source of wealth or value, as Adam Smith and Weber had it. Instead, it is the deferral of consumption that comes from the diversion of labour to the production of “labor-saving tools” or “capital” - or the sacrifice or deferral of present consumption in favour of production goods that can then pro-duce those consumption goods with less labor and therefore be relatively more “valuable”! If labour were the true source of value, then more labour would produce more value; yet in reality it is labour-saving tools or capital that allow labour to produce more wealth as goods for immediate consumption that can “purchase” fresh labour through labor-saving tools. From which it follows that it is these tools or capital, not labour by itself, that produce greater wealth and potentially value-in-exchange. Here time becomes the essential scientific element of Value. All capitalist economy is economy of time. Thus, “time is money” means “labor-time-saving tools” or capital – not “labor”! - is “money” or “generic social wealth” or “claim on social resources” – remembering that “labor” means “labor-power” or “productivity” in terms of “output per unit of time” - that is, not a “quantity” but a “rate”. The saving of labour time permitted by capital allows its owner to control more “labour as want”. The capitalist “can wait” (B-B, Schumpeter).




The severance of labour from wealth - now defined as “subjective value”, that becomes  “objective” only as value in exchange -, the strict denial of “social labour” and the postulation of “individual labours”, and the interposition of capital between labour and its imprescindible “object”, that is, “nature”, as the sole means by which individual labours can do more than satisfy individual wants – all these elements are absolutely vital to the development of “a specifically capitalist ethic” freed from the “moral theology” of Judaeo-Christian eschatology and of mediaeval Natural Law or jusnaturalism that atavistically clings to the pillars of universal human values, of inter esse, and of commutative and distributive justice much to the detriment of bourgeois self-interest.

The Askesis, Weber’s ascetic “renunciation of the world” or Entsagung, is emphatically not attained through the pursuit of “labor as an end in itself”, but rather through the “deferral of consumption” and the application of the Arbeit to the construction of “tools” (means of production, or “capital”) that are “more roundabout” and therefore increase the productivity of “labor” by “saving” it, effectively by suppressing or extinguishing it. Like fire, labour does not pro-duce wealth but rather consumes or trans-forms the means and materials of production that it “utilizes”. And the higher Value derived from producing with “more roundabout methods of production” can be calculated not just in an instantaneous or timeless analytical dimension but even in a temporal one, in terms of “time preference”, that is a “projection” toward, a mortgage over “the future”. The notion of “fructiferous capital”, of interest-bearing capital, is all here.

Capital is therefore “stored-up labor” at a given time of exchange in the sense that capital increases the productivity of labor by permitting the production of Objective Value that can then be used to command more labor: not “labor” understood absolutely or positively as “utility”, but rather negatively as “dis-utility” at a given time, given that labor too is subject to time preference. Capital is “saved or suppressed or extinguished labour”. In other words, capital is the very antithesis of labour: capital is command over labour.

Thus, Benjamin Franklin’s formula, “time is money”, is to be preferred to Smith’s “parsimony is the source of wealth” because parsimony in and of itself is neither a necessary nor a sufficient condition for the creation of wealth unless it is exercised in the sphere of production, whereas the saving of labour-time in production (which is what Franklin meant by “time”) is a necessary condition for the making of “money” or, more precisely, profit. Franklin’s slogan must be read as “money is saving of labor-time for provision of goods for immediate consumption [therefore not exchange values but only use values] and diversion of it to production of labor-saving goods for the future production of goods [values-in-exchange] for consumption” (cf. Keynes, “money is a bridge between present and future”).

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