International Journal of Political Economy

ISSN: 0891-1916 (Print) 1558-0970 (Online) Journal homepage: http://www.tandfonline.com/loi/mijp20

Lets Rehabilitate the Theory of Value

Augusto Graziani
To cite this article: Augusto Graziani (1997) Lets Rehabilitate the Theory of Value, International
Journal of Political Economy, 27:2, 21-25, DOI: 10.1080/08911916.1997.11643945
To link to this article: http://dx.doi.org/10.1080/08911916.1997.11643945

Published online: 28 Jan 2016.

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Int. Journal o/Political Economy, vol. 27, no. 2, Summer 1997, pp. 21-25.
1998 M.E. Sharpe, Inc. All rights reserved.
0891-1916 / 1998 $9.50 + 0.00.

AUGUSTO GRAZIANI

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Let's Rehabilitate the Theory of Value

No small proportion of Marx's economic teachings has been tacitly
absorbed by economists traditionally unconnected with Marxism. It is
not difficult to discover within the bourgeois economic tradition the
presence of a vast underground current of Marxist origin, sometimes
buried deep, sometimes percolating to the surface, but in any case
ever-present and vital.
Marx's analysis can be said to be couched in macroscopic terms, to
use the modern parlance. Marx's definition of capitalism as a system
based on the separation between labor and means o(production, and
on the consequent opposition between a class of capitalist owners and
a class of workers vyho own nothing, is expressed directly in tenns of
social structure. This defmition of capitalism as a system composed of
classes in conflict is-it is almost superfluous to mention it--finnly
rejected by bourgeois econ9mic theory which remains solidly attached
to the idea of the market as the free exercise of transactions in which
individuals affinn their own preferences and defend their own interests.
The individualist approach takes as its point of departure the behavior of the individual and, from an analysis of the behavior of this
individual, deduces the overall context of the economic system. To this
procedure, Marx, with his macroeconomic fonnulation, opposes a procedure based on historical and concrete content. Reduced to its essentials, its logic may be expressed as follows: Since historical experience
Translation 1998 M.E. Sharpe, Inc., from the original Italian text: Augusto Graziani,
''Riabilitiamo la teoria del valore," Unita, February 27, 1983. Translated by Michel
Vale.

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INIERNATIONAL JOURNAL OF POLITICAL ECONOMY

shows that a social system such as capitalism, based on the separation

between labor and means of production, has established itself and persists, this means that the subjects of which it is composed behave in
such a way as to ensure its survival. The task of economic analysis is
precisely that of discovering the rules of survival. To get to the bottom
of the matter, one must discover the true conditions of equilibrium of
the economic system, which are the conditions of its reproduction.
This is the task that Marx assigns to economics as a science. For an
economist, the rule is to "acknowledge the priority and autonomy of
macroeconomic analysis, leaving the nature of what is left to microeconomic analysis" (i.e., to the study of individual behavior).
A class analysis of capitalist society leads Marx directly to a description of the economic process understood as a monetary circuit.
Workers, by definition deprived of means of production, cannot initiate
any productive activity. Enterprises, in tum, can do so only after they
have acquired labor power. The economic process thus gets underway
only when enterprises, after obtaining fmancing from the bank sector,
purchase labor power and set the productive process in motion. The
same process is consummated when enterprises, after having sold the
commodities produced, regain possession of the money expended and
reimburse the banks for the loan they received at the start. This idea of
the economic process as a money circuit, which has been discovered
and forgotten many times over, lies at the base of many theoretical
achievements. We shall mention only three.
In the analysis of the economic process as a money circuit, money
appears as an initial loan granted to enterprises for the payment of
wages and the purchase of labor power. When money enters the circuit, it therefore represents capital invested by the entrepreneur and
used in the productive process for the purpose of profit Money is
therefore not, as individualist theory would have it, a simple intermediary of exchange introduced as a technical refinement, for the purpose
of overcoming the inconveniences of barter. In the capitalist system,
money is the initial capital of which the entrepreneur avails himself to
acquire labor power. The circulation of money therefore does not
solely exercise the function of permitting easier commercial relations,
but also serves the much more relevant function of putting the class of
capitalists in relation to the class of workers.
The definition of the economic process as a money circuit is also the
key to an analysis of the phenomenon of crisis. This phenomenon

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seems to be an arrest of the circuit. Nothing in fact guarantees that, in

the course of the economic process, the money income received will be
spent entirely. But as long as it is, the continuity of the economic
process is assured. However, if, for reasons connected to the relatively
pessimistic prospects of entrepreneurs or speculators, it becomes more
prudent to maintain wealth in liquid form, the circuit stops and a phase
of crisis intervenes. The problem of crisis, in turn, is closely linked
with the problem of unemployment and the functioning of the labor
market. At fIrst the crisis is manifest through the presence of commodities produced and not sold, but, if the crisis persists, the volume of
production ultimately adapts to the level of demand and the phenomenon of unsold commodities disappears. At this point, the crisis reveals
itself solely in the labor market in the form of unemployment. According to traditional theory, on the labor market as well, thanks to the
workings of supply and demand, a state of equilibrium must set in
sooner or later. The theory of the economic process as a money circuit
helps us understand why, on the contrary, this does not happen and
how unemployment disappears only when entrepreneurs, on the basis
of their predictions and in accordance with their own strategies, decide
to put an end to it, reinitiating the productive process.
A fInal teaching flows from this analysis of unemployment, itself
also more or less tacitly absorbed by vast sectors of non-Marxist economics. It will be noted that, according to the traditional theory of
supply and demand, the worker, by the mere fact that he is able to
work and is able to offer his own labor, "is the possessor of a wealth
directly convertible into other goods." The theory that sees the economic process as a circuit teaches, on the contrary, that supplying labor
does not in itself confer upon the worker any direct command over
goods; that happens only after his labor has been converted into
money, which occurs only to the extent that capitalist entrepreneurs,
based on their own calculations, decide that this should happen. Labor
in itself is therefore not wealth: It becomes wealth consequent to a
decision by the entrepreneur.
When the capitalist initiates the money circuit, he is motivated by
his intention to earn a profIt or, in Marxist terminology, to add to the
value of the capital invested. The confrontation between Marxist theory and bourgeois theory on the problem of value and valorization has
been long and fervid. The common opinion, shared these days by both
right and left, is that on this question Marx loses. Without pronouncing

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on this verdict, let us try to identify the teachings that Marxist theory is
able to provide on this aspect as well.
The first point to establish in dealing with the topic of value is that
the entire problem is explored in a perspective that we have called
macroeconomic: in other words, not from the point of view of an
individual capitalist struggling against his competitors but in a general
perspective that sets the entire class of capitalists against the class of
workers. In this class perspective, valorization signifies not the production of individual profit for the individual capitalist, or even the creation of value for the collectivity, but an accrual of wealth to the
capitalist class. If we look at things from this standpoint, the first
significant result that emerges is that no exchange that remains purely
internal to the system of enterprises can contribute to the valorization
of the invested capital. In fact, any advantage that the individual capitalist might eventually derive from exchange with other capitalists
would be offset by an identical loss suffered by his counterpart, and the
two items would cancel each other out. The transmission of raw materials, machinery, or semifinished goods from one capitalist to another
cannot therefore produce any value added for the capitalist class taken
in its entirety. Production goods can at most pass on their own value
unchanged, from one capitalist to the other (hence the tenn "constant
capital" which Marx uses to denote the material means of production).
The valorization of capital for capitalists as a class can come only from
exchanges that capitalists effect outside their own class, and hence in
the only external exchange possible, which is acquisition of labor
power. Only.to the extent that capitalists use labor and take for themselves a part of the product obtained can they realize a surplus and
convert it into profit (hence Marx's insistence that surplus and profit
come into being solely in the phase of production).
Thus we arrive at another conclusion, also a product of the way the
argument itself is fonnulated: namely, that the profit of capitalists as a
class is born solely from the relation established between capitalists
and workers and that, as a consequence, it can only come into being as
a product of the difference between the total sum of labor employed
and the sum of labor that returns to the worker in the fonn of the real
wage.
One point remains to be examined. If, as we have seen, only the use
of labor produces a valorization of the capital invested, the implication
would seem to be that only labor gives value to commodities, and that

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consequently commodities must also be exchanged on the market at

prices relatively proportional to the labor contained in each of them.
This is the vulgar version of the labor theory of value, a version that as
a matter of fact Marx himself never held and that one can say served
the adversaries of Marx's doctrine principally as a pretext for challenging.its general tenability. Marx never held that commodities had to be
exchanged on the market in proportion to the labor contained in each
of them for the simple reason that this proposition in no way follows
from the premises of his argument. We have said that the problem of
valorization comes upon the class of capitalists in its relations with
workers; the exchange of commodities as a phenomenon within the
capitalist class is a quite different problem. Surplus value and profit
can only derive from a relation between the two classes, but the exchange of commodities is quite a different thing inasmuch as it is a
phenomenon within the class of capitalists. The relative prices of commodities are in fact fonned in exchanges among capitalists, governed
by the rules of competition, a phenomenon that is relevant exclusively
to capitalists in their reciprocal relations.
This area is governed by the rules of competitive equilibrium (analyzed a thousand and one times from the general equilibrium ofWalras
to Sraffa's theory of prices). These rules indeed explain the determination of relative prices in the exchange of commodities. Such exchanges
do not shape relations between classes and have nothing to do with the
phenomenon of valorization. It is therefore wrong to say, as is often
done, that the Marxist theory of value founders on the attempt to
explain prices. In fact, Marx's theory of value has nothing to say
directly about the phenomenon of prices, since there is no problem of
valorization to analyze in it. The theory of value explains that the
surplus value obtained from the utilization of labor power is the only
wealth capitalists taken in their entirety can divide up among themselves and convert into profit; for capitalists as a whole, the element of
profit contained in market prices originates in the way class relations
are shaped. But this relation aside, the fact remains that analysis of the
relations between the classes, or social macroeconomic analysis on the
one hand, and analysis of relations within a class or competitive microeconomic analysis on the other, are disparate phenomena that for
that reason are governed each by its own logic.