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Explaining Economics Part 2- Labour Theory of Value and Commodities

The labour theory of value

The labour theory of value is the very basis and foundation upon which economics can be understood. It is the key that Marx and Engels found through their studies and is the basis of understanding exploitation in capitalist society.

The scientific method of studying economics begins with the manner in which all things are created. Marx and Engels continued the study of classical economists by starting their analysis at the beginning, how we produce everything.
What creates everything around us? What gives value to otherwise useless matter? Labour, work, creates all value. The apple on the tree comes from nature but as a valuable object it is useless until picked from the tree by someone’s labour. Labour alone creates value. It is the application of our strength, tools, know how to material that creates food, objects, art, culture, etc. etc.

What is the common social substance of all commodities? It is labour. To produce a commodity a certain amount of labour must be bestowed upon it, or worked upon on it.    —Karl Marx, “Value, Price and Profit” (1865)                                                                                             
If labour produces all value, then it is only those who labour that create worth. It is those who work that create what we need. It is workers who grow the food we eat, it is bus drivers who provide the service we need, etc. Those bosses, capitalists, who employ us, who pay for our labour through wages, don’t actually create value themselves. They just own us who do.
. . . The working class alone produce all values.    -F. Engels, “Introduction to Wage-Labour and Capital” (1891)

Commodities and labour

We have said above that labour creates all value. It is only through labour that we can create commodities. What, then, are commodities? Commodities are anything that can be bought and sold to create more wealth, more capital. Commodities, as such, have not always existed, just as capital as we know it has not always existed. It is the capitalist method of ownership, production and exchange that creates commodities, and the production and sale of commodities expands the system.

The labour theory of value not only says that labour creates value, it also shows how labour is the measure of value. That is when we ask the question, how much does something cost, we could be asking how much labour went into the production. The more labour that goes into creating something the more it costs.

The value of a commodity is determined by the total quantity of labour contained in it.-K. Marx, “Value, Price and Profit” (1865)

Compare that of an apple and gold. Which one is more expensive, which one requires more labour? In forthcoming editions we will have to look at “prices” of commodities, because other factors of course play a role too. But labour is the dominant determining factor in the cost of commodities. It is the comparison of labour time spent in the creation of commodities that is reflected in their differing prices.

A commodity has a value, because it is a crystallisation of social labour. The greatness of its value, or its relative value, depends upon the greater or less amount of that social substance contained in it . . . The relative values of commodities are, therefore, determined by their respective quantities or amounts of labour, worked up, realised, fixed in them. –K. Marx, “Value, Price and Profit” (1865)

Labour too, however, is a commodity. It is the vital ingredient in the production of goods and services, and ultimately capital. Labour is the vital commodity.

Labour-power, then, is a commodity, no more, no less so than is the sugar. The first is measured by the clock, the other by the scales.-K. Marx, “Wage-Labour and Capital” (1847)

Labour is used by those who own capital to create more capital. Those who do not have the resources to buy and pay for the factory or office, the material resources, the training and education and most importantly the labour have only their labour to sell. They are forced by circumstances to sell their labour-power to the boss.

What they [workers] actually sell to the capitalist for money is their labour-power.-K. Marx, “Wage-Labour and Capital” (1847) …Precisely from the fact that labour depends on nature it follows that the man who possesses no other property than his labour power must, in all conditions of society and culture, be the slave of other men who have made themselves the owners of the objective conditions of labour. He can work only with their permission, hence live only with their permission.-K. Marx, “Critique of the Gotha Programme” (1875)

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