Value-form

Value relation

What something is economically "worth" can be expressed only relatively, by relating, weighing, comparing and equating it to amounts of other tradeable objects (or to the labour effort, resources or sum of money those objects represent).^[9] The value of products is expressed by their "exchange-value": what they can trade for, but that exchange-value can be expressed in many different ways. Since exchange-value is most often expressed by a "money-price", it then seems that "exchange value", "value", "price" and "money" are really all the same thing. But Marx argues they are not the same things at all.^[10]

This point becomes very important, if we want to understand economic value and how markets work. Precisely because the political economists kept conflating and confusing the most basic economic categories, Marx argued, they were unable to provide a fully consistent theory of the economy. One might be able to quantify and measure economic phenomena, but that does not necessarily mean that they are measured in a way that they are fully understood.

In a preface to the first edition of Capital, Volume I, Marx stated:

"I have popularised the passages concerning the substance of value and the magnitude of value as much as possible. The value-form, whose fully developed shape is the money-form, is very simple and slight in content. Nevertheless, the human mind has sought in vain for more than 2,000 years to get to the bottom of it..."^[11]

Marx gives various reasons for this ancient puzzle. The main obstacle seems to be that trading relations refer to social relations which are not directly observable. What these social relations are, has to be conceptualized with abstract ideas. The trading ratios between commodities and money are certainly observable, via prices and transaction data. Yet how exactly the things being traded get the value they have, is not observable. It seems like "the market" does that, but what the market is, and how that happens, remains rather vague. This story does not get much further than the idea, that things have value, because people want to have them, and are prepared to pay money for them.

Marx's comment clarifies, that according to Marx the value-form of commodities is not simply a feature of industrial capitalism. It is associated with the whole history of commodity trade ("more than 2,000 years").^[12] Marx claimed that the origin of the money-form of value had never before been explained by bourgeois economics, and that "the mystery of money will immediately disappear" once the evolution of value-relations has been traced out from its simplest beginnings.^[13] This was probably a vain hope, since, as discussed below, even today economists and economic historians cannot agree about what is the correct theory of money. Wolfgang Streeck states that "money is easily the most unpredictable and least governable human institution we have ever known".^[14]

Only when market production and its corresponding legal system are highly developed, does it becomes possible to understand what "economic value" actually means in a comprehensive and theoretically consistent way, separate from other sorts of value (like aesthetic value or moral value). The reason is that, to a large extent, the different kinds of value have become practically separated in reality and become increasingly universal in their applications. When Marx considers "value" as such or in itself, as a general social form in the economic history of humans, i.e. "the form of value as such", he is abstracting from all the particular expressions it might have.

Marx admitted that the form of value was a somewhat difficult notion, but he assumed "a reader who is willing to learn something new and therefore to think for himself."^[15] In a preface to the second edition of Capital, Volume I, Marx claimed that he had "completely revised" his treatment, because his friend Dr. Louis Kugelmann had convinced him that a "more didactic exposition of the form of value" was needed.^[16]

Commodity form

Marx calls the commodity form, as a basic form of value, "the economic cell-form of bourgeois society", meaning it is the simplest economic unit out of which the "body" of West European capitalist civilization was developed and built up, across six centuries.^[17] Wares trade for money, money trades for wares, more and more money is made from this trade, and the markets reach more and more areas - transforming society into the world of business.

The capitalist mode of production is viewed as "generalized" (or universalized) commodity production, i.e. the production of commodities by means of commodities, in a circular self-reproducing flow of actions and transactions (money is exchanged for commodities, used to produce new commodities exchanged for more money, financing more production and consumption).^[18]

The "forms of value" of commodities are only the first of a series of social forms which Marx analyzes in Das Kapital, such as the forms of money, the forms of capital, the forms of wages, and the forms of profit.^[19] These are all forms of value, normally expressed by prices, but they all presuppose the exchange of tradeable wares. In Marx's dialectical story,^[20] each of these forms is shown to grow out of (or "transform" into)^[21] other forms, and so all the forms are connected with each other, step by step, logically and historically.^[22]

Each form is expressed with categories, the content of which evolves or mutates to some degree in response to new distinctions or circumstances.^[23] At the end of the story, all the forms appear seamlessly integrated with each other in a self-reproducing, constantly expanding capitalist system, of which the distant historical origin has become hidden and obscure; the fully developed system appears other than it really is, and does not transparently disclose its real nature.

If the workings of the capitalist system were perfectly obvious and transparent, Marx argues, then there would be no need for any special economic "science"; one would just be stating platitudes.^[24] They prompt further inquiry, because they turn out to be not as obvious as they seem, and indeed become rather puzzling or even mindboggling, on further reflection. Economists are constantly trying to "second-guess" what the market will do, and what the overall effects might be of transaction patterns, but in truth they often don't succeed any better than astrologers.^[25] A critical re-examination is then called for, of precisely those ordinary phenomena which were previously taken for granted.

After his first cryptic attempt at telling the story (in 168 pages) flopped when he published it in Germany,^[26] he resolved to tell it another time, in a much more interesting, intriguing and elaborate way, so that people would really grasp the significance of it—beginning from exactly the same starting point. That became Das Kapital (1867-1894), which is still being read and discussed today.^[27]

Marx initially defines a product of human labour that has become a commodity (in German: Kaufware, i.e., merchandise, ware for sale) as being simultaneously:

• A useful object that can satisfy a want or need (a use value); this is the object valued from the point of view of consuming or using it, referring to its observable material form, i.e., the tangible, observable characteristics it has that make it useful, and therefore valued by people, even if the use is only symbolic.
• An object of economic value generally; this is the value of the object considered from the point of view of its supply cost, commercial value, or "what you can get for it". The reference here is to the social form of the product, which is not directly observable.

The "form of value" (also a reference to phenomenology in the classical philosophical sense used by Hegel)^[28] then refers to the specific ways of relating through which "what a commodity is worth" happens to be socially expressed in trading processes, when different products and assets are compared with each other.

Practically speaking, Marx argues that the product values cannot be directly observed and can become observably manifest only as exchange-values, i.e., as relative expressions, by comparing their worth to other goods they can be traded for (usually via money prices). This causes people to think value and exchange-value are the same thing, but Marx argues they are not; the content, magnitude and form of value must be distinguished, and according to the law of value, the exchange value of products being traded is determined and regulated by their value. His argument is, that the market prices of a commodity will oscillate around its value, and its value is the outcome of the average, normal labour requirements to produce it.

Metamorphosis

Marx argues that the forms of value are not "static" or "fixed once and for all", but rather, that they develop logically and historically^[29] in trading processes from very simple, primitive expressions to very complicated or sophisticated expressions. Subsequently, he also examines the various forms taken by capital, the forms of wages, the forms of profit and so forth. In each case, the form denotes how a specific social or economic relationship among people is expressed or symbolized.^[30]

In the process of circulation, production, distribution, and consumption, value metamorphoses from one form to another. Different forms of value – currencies, commodities and capitals – all trade for each other, where buyers and sellers convert money into goods, and goods into money, or convert one type of capital asset into another type of capital asset, in markets where prices fluctuate all the time.

According to Marx, the individual acts of exchange in themselves cannot alter the underlying value of goods and assets, at least not in the ordinary situation.^[31] Put differently, value is ordinarily conserved through successive acts of exchange (a “conservation principle”) even although the forms that value takes can change. If goods and assets did not at least hold their value upon exchange, then warehousing, freighting and commercial trade itself would very likely break down. That insight existed already in ancient times.^[32] In speculative activity, the conservation principle is, however, not always true.

Primitive exchange

Initially, in primitive exchange, the form that economic value takes does not involve any prices, since what something is "worth" is very simply expressed in (a quantity of) some other good (an occasional barter relationship).^[33] Some scholars, such as Hans-Georg Backhaus, argue that for this reason value simply did not exist in societies where money was not used, or where it played only a marginal role.^[34] The old Friedrich Engels claimed that "in primitive communism value was unknown", because there was no regular commodity trade.^[35]

Marx, though, argues that product-values "of a sort" did exist in primitive economies, but that establishing "how much products were worth", often followed customary practices, rather than purely a comparison with other products, or reckoning with money; thus, product-value was merely expressed in a different form. An "economy of labour-time" existed, although no supremely exact measures were available for work effort, time, storage and energy.^[36] All the time, that is, people knew quite well that their products had value, because it cost work-effort to replace them, and, consequently, they also valued their products. They could hardly afford to trade products on very unfavourable terms, because that would take them beyond the limits of their own available work-time; that mattered, because average labour productivity was low - it took a lot of time to produce food, clothing, shelter, tools and weapons. Whatever the trading custom was, it had to be at least compatible with survival requirements. If not, the custom would die out.

• In the most primitive (simplest) situation, people acquire objects for which they have a use by borrowing, trading or bartering, in exchange for other goods that they don't particularly have a need for themselves. They value things directly because of their useful qualities and because it takes work-time to get them (their own work and/or the work of others). In the process, customary norms develop for what counts as a normal, balanced exchange. There isn't just one way to trade a good, goods could be traded on all kinds of terms, but to pick the appropriate method, all kinds of factors might have to be taken in consideration.^[37] If a good was traded in the wrong way, for example because cultural conventions were not respected, it might have consequences that the traders were not really looking for.
• At the most abstract, developed level though, the value form is only a purely monetary relationship between objects, or an abstract earnings potential or credit provision, based on some assumptions, which may not even refer to any tangible object of trade anymore at all. There is, for example, only a number on a computer screen. At that point, it appears that the value of an asset is simply determined by the amount of income that could be obtained if the asset were traded under certain conditions, and within a given time interval.

Social relations

By analyzing the forms of value, Marx aims to show that when people bring their products into relation with each other in market trade, they are also socially related in specific ways (whether they like it or not, and whether they are aware of it or not), and that this fact very strongly influences the very way in which they think about how they are related.^[38] It influences how they will view the whole human interactive process of giving and receiving, taking and procuring, sharing and relinquishing, accepting and rejecting—and how to balance all that.^[39]

Some social relations we choose and make ourselves, but we are also socially related simply by being part of a community (or part of a family, an organization etc.), whether we like that or not. In trading roles, people have to deal with both of these kinds of social relations - simultaneously competing to get the best deal, and co-operating to obtain what they want.^[40] The trading process has both a voluntary aspect (freedoms, things to choose) and an involuntary aspect (constraints, things that have to be worked with to make a deal). To make the trade, buyers and sellers must respect each other's right to their own property, and their right to do with their own property what they want, within the framework of laws, customs and norms (Marx discusses the notion of the formal equality of market actors more in the Grundrisse).^[41] If the market actors simply grabbed stuff from others, that would not be trade, but robbery (which would not qualify as civilized conduct, and carries a reputational risk as well as being subject to legal sanctions).

The forms of value of products do not merely refer to a "trading valuation of objects"; it refers also to a certain way of relating or interacting, and a mentality,^[42] among human subjects who internalize the forms of value, so that the manifestations of economic value become regarded as completely normal, natural and self-evident in human interactions (a "market culture," which is also reflected in language use).^[43] Marx himself refers surrealistically to "the language of commodities",^[44] the talk and signals they send and receive in the topsy-turvy world (verkehrte Welt)^[45] of trading processes, and he adds satirically in a footnote that “in a certain sense, people are in the same situation as commodities…”.^[46] The suggestion is that, by analogy, the recognition of a person's identity occurs only through contact with other people, and that one person becomes the species-model for another, just as commodities need to relate to each other and to money to establish what the magnitude of their value is.

Marx's description of what goes on in commodity exchanges highlights not only that value relationships appear to exist between commodities quite independently of the valuers, but also that people accept that these relationships exist, even although they do not understand exactly what they are, or why they exist at all.^[47] We know that a particular market exists, if there are buyers and sellers. With experience, we can identify them, and estimate a normal turnover. However, the totality of interactions and transactions in all markets combined simultaneously, can easily appear as an unfathomable abstraction.^[48]

Simple form of value

The value relationship in Marx's economic sense begins to emerge, when we are able to state that one bundle of use-values is worth the same as another bundle of (different) use-values. That happens when the bundles of products are regularly traded for each other, and thus are regarded as instruments of trade. It is a quantitative relationship between quantities, implicitly expressed in the same unit of measurement. The simplest expression of the form of value can be stated as the following equation:

X quantity of commodity A is worth Y quantity of commodity B

where the value of X{A} is expressed relatively, as being equal to a certain quantity of B, meaning that X{A} is the relative form of value and Y{B} the equivalent form of value, so that B is effectively the value-form of (expresses the value of) A. If we ask "how much is X quantity of commodity A worth?" the answer is "Y quantity of commodity B".

This simple equation, expressing a simple value proportion between products, however permits several possibilities of differences in valuation emerging within the circulation of products:

• the absolute value of X{A} changes, but the absolute value of Y{B} stays constant; in this case, the change in the relative value of X{A} depends only on a change in the absolute value of A (The absolute value, Marx argues, is the total labour cost on average implicated in making a commodity).
• the absolute value of X{A} stays constant, but the absolute value of Y{B} changes; in this case, the relative value of X{A} fluctuates in inverse relation to changes in the absolute value of B, meaning that if Y{B} goes down then X{A} goes up, while if Y{B} goes up then X{A} goes down.
• the values of X{A} and Y{B} both change in the same direction and in the same proportion. In this case, the equation still holds, but the change in absolute value is noticeable only if X{A} and Y{B} are compared with a commodity C, where C's value stays constant. If all commodities increase or decrease in value by the same amount, then their relative values all remain exactly the same.
• the values of X{A} and Y{B} change in the same direction, but not by the same amount, or vary in opposite directions.

These possible changes in valuation enable us to understand already that what any particular product will trade for is delimited by what other products will trade for, quite independently of how much the buyer would like to pay, or how much the seller would like to get in return.

Value should not be confused with price here, however, because products can be traded at prices above or below what they are worth (implying value-price deviations; this complicates the picture and is elaborated only in the third volume of Das Kapital). There are value-structures and price-structures. For simplicity's sake, Marx assumes initially that the money-price of a commodity will be equal to its value (ordinarily, price-value deviations would not be very great); but in Capital, Volume III it becomes clear that the sale of goods above or below their value has a crucial effect on aggregate profits.

The main implications of the simple relative form of value are that:

• The value of an individual commodity can change relative to other commodities, although the real cost in labour of that particular commodity stays constant, and vice versa, the real labour cost of that particular commodity can vary, although its relative value remains the same; this means that goods can be devalued or revalued depending on what happens elsewhere in the trading system and on changes in the conditions of producing them elsewhere. It would therefore be wrong to claim, as some Marxists (Mandel, Ollman, Carchedi)^[49] argue, that for Marx "economic value is labour"; rather, the economic value of products really refers to the current social valuation of average labour effort implicated in products.
• That the absolute and relative values of commodities can change constantly, in proportions which do not exactly compensate each other, or cancel each other out, via haphazard adjustments to new production and demand conditions.^[50]

Marx also argues that, at the same time, such an economic equation accomplishes two other things:

• the value of specific labour activities is implicitly related in proportion to the value of labour in general, and
• private labour activities, carried out independently of each other, are socially recognized as being a fraction of society's total labour.

Effectively, a social nexus (a societal connection or bond) is established and affirmed via the value-comparisons in the marketplace, which makes relative labour costs (the expenditures of human work energy) the real substance of value. Obviously, some assets are not produced by human labour at all, but how they are valued commercially will nevertheless refer, explicitly or implicitly, directly or indirectly, to the comparative cost structure of related assets that are labour-products.

A tree in the middle of the Amazon Rain Forest has no commercial value where it stands. We can estimate its value only by estimating what it would cost to cut it down, what it would sell for in markets, or what income we could currently get from it — or how much we could charge people to look at it. Imputing an "acceptable price" to the tree, assumes that there already exists a market in timber, or in forests, that tells us what the tree would normally be worth.^[51]

Expanded form of value

In the expanded form of value, the equation process between quantities of different commodities is simply continued serially, so that their values relative to each other are established, and they can all be expressed in some or other commodity-equivalent. The expanded value-form expression really represents only an extension of the simple value form, where products alternate as relative and equivalent forms in order to be equated to each other.

Marx argues that, as such, the expanded form of value is practically inadequate, because to express what any commodity is worth might now require the calculation of a whole "chain" of comparisons, i.e.

X amount of commodity A is worth Y commodity B, is worth Z commodity C ... etc.

What this means is, that if A is normally traded for B, and B is normally traded for C, then to find out how much A is worth in terms of C, we first have to convert the amounts into B (and maybe many more intermediate steps). This is obviously inefficient if many goods are traded at the same time.

General form of value

The practical solution in trade is therefore the emergence of a general form of value, in which the values of all kinds of bundles of commodities can be expressed in amounts of one standard commodity (or just a few standards) which function as a general equivalent. The general equivalent has itself no relative form of value in common with other commodities; instead its value is expressed only in a myriad of other commodities.

=

In ancient civilizations where considerable market trade occurred, there were usually a few types of goods that could function as a general standard of value. This standard served for value comparisons; it did not necessarily mean that goods were actually traded for the standard commodity.^[52] This rather cumbersome approach is solved with the introduction of money—the owner of a product can sell it for money, and buy another product he wants with money, without worrying anymore about whether the thing offered in exchange for his own product is indeed the product that he wants himself. Now, the only limit to trade is the development and growth rate of the market.

Money-form of value

Just because quantities of goods can be expressed in amounts of a general equivalent, which acts as a referent, this does not mean that they can necessarily all be traded for that equivalent. The general equivalent may only be a sort of yardstick used to compare what goods are worth. Hence, the general equivalent form in practice gives way to the money-commodity, which is a universal equivalent, meaning that (provided people are willing to trade) it possesses the characteristic of direct and universal exchangeability in precisely measured quantities.

=

But for most of the history of human civilization, money was not actually universally used, partly because the prevailing systems of property rights and cultural custom did not allow many goods to be sold for money, and partly because many products were distributed and traded without using money. Also, several different "currencies" were often used side by side. Marx himself believed that nomadic peoples were the first to develop the money-form of value (in the sense of a universal equivalent in trade) because all their possessions were mobile, and because they were regularly in contact with different communities, which encouraged the exchange of products.^[53]

When money is generally used in trade, money becomes the general expression of the form of value of goods being traded; usually this is associated with the emergence of a state authority issuing legal currency. At that point the form of value appears to have acquired a fully independent, separate existence from any particular traded object (behind this autonomy, however, is the power of state authorities or private agencies to enforce financial claims).

Once the money-commodity (e.g., gold, silver, bronze) is securely established as a stable medium of exchange, symbolic money-tokens (e.g., bank notes and debt claims) issued by the state, trading houses or corporations can in principle substitute paper money or debt obligations for the "real thing" on a regular basis.

At first, these "paper claims" (legal tender) are by law convertible on demand into quantities of gold, silver etc., and they circulate alongside precious metals. But gradually currencies come into use that are not so convertible, i.e., "fiduciary money" or fiat money which relies on social trust that people will honor their transactional obligations. These kinds of fiduciary money rely not on the value of money-tokens themselves (as in commodity money), but on the ability to enforce financial claims and contracts, principally by means of the power and laws of the state, but also by other institutional methods. Eventually, as Marx anticipated in 1844, precious metals play very little role anymore in the monetary system.^[54]

Alongside fiat money, credit money also develops more and more. Credit money, although expressed in currency units, does not consist of money tokens. It consists rather of financial claims, including of all kinds of debt certificates (promissory notes) which entitle the holder to future income under contractually specified conditions. These claims can themselves be traded for profit. Credit arrangements existed already in the ancient world,^[55] but there was no very large-scale trade in debt obligations. In the modern world, the majority of money no longer consists of money tokens, but of credit money.^[56] Marx was quite aware of the role of credit money, but he did not analyze it in depth. His concern was only with how the credit system directly impacted on the capitalist production process.

The ultimate universal equivalent according to Marx is "world money", i.e., financial instruments that are accepted and usable for trading purposes everywhere, such as bullion.^[57] In the world market, the value of commodities is expressed by a universal standard, so that their "independent value-form" appears to traders as "universal money".^[58] Nowadays the US dollar,^[59] the Euro, and the Japanese Yen are widely used as "world currencies" providing a near-universal standard and measure of value. They are used as a means of exchange worldwide, and consequently most governments have significant reserves or claims to these currencies.

Implications

Marx's four steps in the development of the form of value are mainly an analytical or logical progression, which may not always conform to the actual historical processes by which objects begin to acquire a relatively stable value and are traded as commodities.^[60] Three reasons are:

• Various different methods of trade (including counter-trade) may always exist and persist side by side. Thus, simpler and more developed expressions of value may be used in trade at the same time, or combined (for example, in order to fix a rate of exchange, traders may have to reckon how much of commodity B can be acquired, if commodity A is traded).
• Market and non-market methods of allocating resources may combine, and they can combine in rather unusual ways. The act of sale, for example, may not only give the new owner of a good possession of it, but also grant or deny access to other goods. The actual distinction between selling and barter may not be so easy to draw, and all kinds of "deals" can be done in which the trade of one thing has consequences for the possession of other things.
• Objects that previously had no socially accepted value at all, may acquire it in a situation where money is already used, simply by imputing or attaching a money-price to them. In this way, objects can acquire the form of value "all at once"—they are suddenly integrated in an already existing market (the only prerequisite is, that somebody owns the trading rights for those objects).

It is just that, typically, what the socially accepted value of a wholly new kind of object will be, requires the practical "test" of a regular trading process, assuming a regular supply by producers and a regular demand for it, which establishes a trading "norm" consistent with production costs. A new object that wasn't traded previously may be traded far above or below its real value, until the supply and demand for it stabilizes, and its exchange-value fluctuates only within relatively narrow margins (in orthodox economics, this process is acknowledged as a form of price discovery).^[61]

Bertram Schefold notes that in medieval Japan, the Empress Genmei simply decreed the introduction of minted coinage one day in 708 CE (the so-called wadōkaichin), to "lighten the burden of carrying around commodity equivalents" such as arrowheads, rice and gold.^[62]

The development of the form of value through the growth of trading processes involves a continuous dual equalization & relativization process (this is sometimes referred to as a type of "market adjustment"):

• the worth of products and assets relative to each other is established with increasingly precise equations, creating a structure of relative values;
• the comparative labour efforts required to make the products are also valued in an increasingly standardized way at the same time. For almost any particular type of labour, it can then be specified, fairly accurately, how much money it would take, on average, to employ that labour and get the use out of that labour. To get any type of job done, there is then a normal price tag for the labour involved.

Six main effects of this are:

• The process of market-expansion, involving the circulation of more and more goods, services and money, leads to the development of the form of value of products, which includes and transforms more and more aspects of human life, until almost everything is structured by the forms of value;
• That it increasingly seems as though economic value ("what things are worth") is a natural, intrinsic characteristic of products and assets (just like the characteristics that make them useful) rather than a social effect created by labour-cooperation and human effort;
• what any particular kind of labour is worth, becomes largely determined by the value of the tradeable product of the labour, and labour becomes organized according to the value it produces.
• The development of markets leads to the capitalization of money, products and services: the trade of money for goods, and goods for money, leads directly to the use of the trading process purely to "make money" from it (a practice known in classical Greece as "chrematistics"). This is what Marx regards as the true origin of capital, long before capital's conquest of the whole of production.
• Labour power that creates no commodity value or does not have the potential to do so, has no value for commercial purposes, and is therefore usually not highly valued economically, except insofar as it reduces costs that would otherwise be incurred.
• The diffusion of value relations eradicates traditional social relations and corrodes all social relations not compatible with commerce; the valuation that becomes of prime importance is what something will trade for. The end result is the emergence of the trading circuit M-C...P...C'-M', which indicates that production has become a means for the process of making money (that is, Money [=M] buys commodities [=C] which are transformed through production [=P] into new commodities [=C'], and, upon sale, result in more money [=M'] than existed at the start).

Generalized commodity production

Capital existed in the form of trading capital already thousands of years before capitalist factories emerged in the towns;^[63] its owners (whether rentiers, merchants or state functionaries) often functioned as intermediaries between commodity producers. They facilitated exchange, for a price—they made money from trade.^[64] Marx defines the capitalist mode of production as "generalized (or universalized) commodity production", meaning that most goods and services are produced primarily for commercial purposes, for profitable market sale in a universal market.^[65]

This has the consequence, that both the inputs and the outputs of production (including labour power) become tradeable objects with prices, and that the whole of production is reorganized according to commercial principles. Whereas originally commercial trade occurred episodically at the boundaries of different communities, Marx argues,^[66] eventually commerce engulfs and reshapes the whole production process of those communities. This involves the transformation of a large part of the labour force into wage-labour (the sale of labour power as a commodity), and the capitalization of labour employed (surplus labour creates surplus value).

In turn, this means what whether or not a product will be produced, and how it will be produced, depends not simply on whether it is physically possible to produce it or on whether people need it, but on its financial cost of production, whether a sufficient amount can be sold, and whether its production yields sufficient profit income. That is also why Marx regarded the individual commodity, which simultaneously represents value and use-value as the "cell" (or the "cell-form") in the "body" of capitalism. The seller primarily wants money for his product and is not really concerned with its consumption or use (other than from the point of view of making sales); the buyer wants to use or consume the product, and money is the means to acquire it from any convenient source.

Thus the seller does not aim directly to satisfy the need of the buyer, nor does the buyer aim to enrich the seller. Rather, the buyer and the seller are the means for each other to acquire money or goods.^[67] As a corollary, production may become less and less a creative activity to satisfy human needs, but simply a means to make money or acquire access to goods and services. Richard Sennett provides a eulogy for the vanishing art of craftsmanship in capitalist society. ^[68] As against that, products obviously could not be sold unless people need them, and unless that need is practically acknowledged. The social effect is that the motives for trading may be hidden to some or other extent, or appear somewhat differently from what they really are (in this sense, Marx uses the concept of "character masks").

Reification

The concept of the form of value shows how, with the development of commodity trade, anything with a utility for people can be transformed into an abstract value, objectively expressible as a sum of money; but, also, how this transformation changes the organization of labour to maximize its value-creating capacity, how it changes social interactions and the very way people are aware of their interactions.

However, the quantification of objects and the manipulation of quantities ineluctably leads to distortions (reifications) of their qualitative properties. For the sake of obtaining a measure of magnitude, it is frequently assumed that objects are quantifiable, but in the process of quantification, various qualitative aspects are conveniently ignored or abstracted away from.^[69] Obviously the expression of everything in money prices is not the only valuation that can, or should, be made.^[70]

Essentially, Marx argues that if the values of things are to express social relations, then, in trading activity, people necessarily have to "act" symbolically in a way that inverts the relations among objects and subjects, whether they are aware of that or not. They have to treat a relationship as if it is a thing in its own right. In an advertisement, a financial institution might for example say "with us, your money works for you", but money does not "work", people do. A relationship gets treated as a thing, and a relationship between people is expressed as a relationship between things.

Marketisation

The total implications of the development of the forms of value are much more farreaching than can be described in this article, since (1) the processes by which the things people use are transformed into objects of trade (often called commodification, commercialization or marketization) and (2) the social effects of these processes, are both extremely diverse.^[71] A very large literature exists about the growth of business relationships in all sorts of areas, highlighting both progress, and destruction of traditional ways.

For capitalism to exist, markets must grow, but market growth requires changes in the way people relate socially, and changes in property rights. This is often a problem-fraught and conflict-ridden process, as Marx describes in his story about primitive accumulation. During the 20th century, there was hardly a year without wars occurring somewhere in the world.^[72] As the global expansion of business competition broke up the traditional social structures and traditional property rights everywhere, it caused political instability and continual conflicts between social classes, ethnic groups, religions and nations, in different places, as well as a series of revolutions and coups d'état (analyzed e.g. by sociologists like Theda Skocpol and Charles Tilly). Almost all socialist countries that appeared in the 20th century arose out of wars.

Wars are generally bad for business (except for the military industry and its suppliers), nobody likes them,^[73] and governments try to prevent them,^[74] but in reality the marketisation of the world has often been a very aggressive, violent process. Typically, therefore, the advocates of peaceful market trade blame "everything but the market" for the explosions of mass violence that occur, with the promise that, if people would just sit down and negotiate a deal, they wouldn't have to use force to get what they want. This assumes that market trade is something quite separate from political power, because it is market-trade, i.e. a free negotiation between trading partners who are equals in the marketplace.^[75]

Price-form

Consistent with this, Marx explicitly introduced a distinction between the form of value and the price-form early on in Capital, Volume I.^[84] Simply put, the price-form is a mediator of trade that is separate and distinct from the forms of value that products have.^[85] Prices express exchange-value in units of money.^[86] A price is a "sign" that conveys information about either a possible or a realized transaction (or both at the same time). The information may be true or false; it may refer to observables or unobservables; it may be estimated, assumed or probable. However, because prices are also numbers, it is easy to treat them as manipulable "things" in their own right, in abstraction from their appropriate context. As Viktor Mayer-Schönberger puts it, "...in the process of distilling information down to price, many details get lost."^[87]

Real prices and ideal prices

In discussing the form of prices in various draft manuscripts and in Das Kapital, Marx drew an essential distinction between actual prices charged and paid, i.e., prices that express how much money really changed hands, and various "ideal prices" (imaginary or notional prices).^[93]

Because prices are symbols or indicators in more or less the same way as traffic lights are, they can symbolize something that really exists (e.g., hard cash) but they can also symbolize something that doesn't exist, or symbolize other symbols. The concept of price is often used in a very loose sense to refer to all kinds of transactional possibilities. That can make the forms of prices highly variegated, flexible and complex to understand, but also potentially very deceptive, disguising the real relationships involved.

Modern economics is largely a "price science" (a science of "price behaviour"), in which economists attempt to analyze, explain and predict the relationships between different kinds of prices—using the laws of supply and demand as a guiding principle. These prices are mostly just numbers, where the numbers are believed to represent real prices, in some way, as an idealization. Mathematics then provides a logical language, to talk about what these prices might do, and to calculate pricing effects. This however was not Marx's primary concern; he focused rather on the structure and dynamics of the capitalism as a social system. His concern was with the overall results that market activity would lead to in human society.

In what Marx called "vulgar economics", the complexity of the concept of prices is ignored however, because, Marx claimed in Theories of Surplus Value and other writings, the vulgar economists assumed that:

• Since they all express a quantity of money, all prices belong to the same object class (they are qualitatively the same, and differ only quantitatively, irrespective of the type of transaction with which they are associated, or the valuation principles used).
• For theoretical purposes, there is no substantive difference between price idealizations and prices which are actually charged.
• "Price" is just another word for "value", i.e., value and price are identical expressions, since the value relationship simply expresses a relationship between a quantity of money and a quantity of some other economic good.
• Prices are always exact, in the same way that numbers are exact (disregarding price estimation, valuation changes and accounting error).
• Price information is always objective (i.e., it is never influenced by how people regard that information).
• People always have equal access to information about prices (in which case swindles are merely an aberration from the normal functioning of markets, rather than an integral feature of them, which requires continual policing).
• The price for any particular type of good is always determined in exactly the same way everywhere, according to the same economic laws, regardless of the given social set-up.

In his critique of political economy, Marx denied that any of these assumptions were scientifically true (see further real prices and ideal prices). He distinguished carefully between the values, exchange values, market values, market prices and prices of production of commodities.^[94]

However, he did not analyze all the different forms that prices can take (for example, market-driven prices, administered prices, accounting prices, negotiated and fixed prices, estimated prices, nominal prices, or inflation-adjusted prices) focusing mainly on the value proportions he thought to be central to the functioning of the capitalist mode of production as a social system. The effect of this omission was that debates about the relevance of Marx's value theory became confused, and that Marxists repeated the same ideas Marx himself had rejected as "vulgar economics". In other words, they accepted a vulgar concept of price.^[95] Koray Çalışkan comments: "A mysterious certainty dominates our lives in late capitalist modernity: the price. Not a single day passes without learning, making, and taking it. Yet despite prices’ widespread presence around us, we do not know much about them."^[96]

Fluctuating price signals serve to adjust product-values and labour efforts to each other, in an approximate way; prices are mediators in this sense. But that which mediates should not be confused with what is mediated. Thus, if the observable price-relationships are simply taken at face value, they might at best create a distorted picture, and at worst a totally false picture of the economic activity to which they refer. At the surface, price aggregations might quantitatively express an economic relationship in the simplest way, but in the process they might abstract away from other features of the economic relationship that are also very essential to know.^[97] Indeed, that is another important reason why Marx's analysis of economic value largely disregards the intricacies of price fluctuations; it seeks to discover the real economic movement behind the price fluctuations.

Aristotle and Samuel Bailey

Marx borrowed the idea of the form of value from the Greek philosopher Aristotle (circa 384-322 BC), who pondered the nature of exchange value in chapter 5 of Book 5 in his Nicomachean Ethics.^[98] Aristotle distinguished clearly between the concepts of use-value and exchange-value (a distinction taken over by Adam Smith). Aristotle developed a fairly sophisticated theory of money, and in chapter 9 of Book 1 of his Politics, he describes the circuits of commodity trade C-M-C' (oekonomia) and M-C-M' (chrematistikon).^[99] However, Marx criticized and developed Aristotle's ideas in an original way.^[100]

In so doing, Marx was also influenced by, and responding to, the "classical" political economy discourse about the economic laws governing commodity values and money,^[101] in Europe beginning (in Marx's view) with William Petty's Quantulumcunque Concerning Money (1682),^[102] reaching a high point in Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations (1776) and culminating with David Ricardo's Principles of Political Economy and Taxation (1817).^[103]

In particular, Marx's ideas about the forms of value were influenced by Samuel Bailey's criticism of Ricardo's theory of value.^[104] In Capital, Volume I, Marx stated that Bailey was one of the few political economists who had concerned themselves with the analysis of the form of value.^[105] Yet, Marx said, none of the political economists had understood its meaning, because they confused "the form of value" with "value itself", and because they only paid attention to the quantitative side of the phenomenon, not to the qualitative side.^[106] In Capital, Volume II, Marx criticizes Bailey again for "his general misunderstanding, according to which exchange-value equals value, the form of value is value itself", leading to the mistaken belief that "commodity values cease to be comparable once they no longer actively function as exchange-values, and cannot actually be exchanged for one another".^[107]

According to Marx, Aristotle already described the basics of the form of value when he argued^[108] that an expression such as "5 beds = 1 house" does not differ from "5 beds = such and such an amount of money", but according to Marx, Aristotle's analysis "suffered shipwreck" because he lacked a clear concept of value. By this Marx meant that Aristotle was unable to clarify the substance of value, i.e., what exactly was being equated in the value-comparisons when the relative worth of different goods is valued, or what was the common denominator commensurating a plethora of different goods for trading purposes.^[109] Aristotle thought the common factor must simply be the demand or need for goods, since without demand for goods that could satisfy some need or want, they would not be exchanged.

According to Marx, the substance of product-value is human labour-time in general, labour-in-the-abstract or "abstract labour". This value (an average current replacement cost in labour-time, based on the normal productivity of producers existing at the time) exists as an attribute of the products of human labour quite independently of the particular forms that exchange may take, though obviously value is always expressed in some form or other.

Preparatory writings

Marx's value-form idea can be traced back to his 1857 Grundrisse manuscript,^[110] where he contrasted communal production with production for exchange.^[111] Some humanist Marxists think the origin of the idea really goes further back in time, to Marx's 1844 Paris manuscripts, specifically the section on "the power of money"^[112] where Marx analyzes excerpts on money in Goethe's play Faust and Shakespeare's play Timon of Athens.^[113]

Marx felt that the playwrights had expressed the social meaning of money very well, and he discusses the magical power of money: why money can create a "topsy-turvy world" (verkehrte Welt) which unites opposites, fools people, or turns things into their contrary. However this textual interpretation is rejected by Althusserian Marxists, because of their separation of the stage of the "unscientific Young Marx" (1818-1845, from birth to age 27) from the stage of the "scientific Mature Marx" (1846-1883, from age 28 to age 65).

The form of value is also mentioned in Marx's 1859 book A Contribution to the Critique of Political Economy. It is clearly evident in his manuscript of Theories of Surplus Value (1861–63). In correspondence with Friedrich Engels in June 1867, Marx provided a first outline of his text on the form of value.^[114] Marx first explicitly described the concept in an appendix to the first (1867) edition of Capital, Volume I,^[115] but this appendix was dropped in a second edition, where the first chapter was rewritten (rather hurriedly) to include a special section on the form of value at the end.

Engels and Dühring

The first "value-form theorist" who interpreted the significance of Marx's idea was his friend Friedrich Engels, who argued in his Anti-Dühring polemic of 1878 (when Marx was still alive) that "The value form of products... already contains in embryo the whole capitalist form of production, the antagonism between capitalists and wage-workers, the industrial reserve army, crises..."^[116] Discussing the concept, origin and development of the form of value, Engels intended to demonstrate that real socialism involved the abolition of commodity production and the law of value, rather than their conscious integration in the economic system of a socialist commune, as Eugen Dühring proposed.^[117]

As discussed in this article below, in the first few years of the Russian revolution, the Bolsheviks and their theoreticians took that idea very literally.^[118] It was shelved during Lenin's New Economic Policy, but subsequently the CPSU set about eliminating almost all private enterprise and bringing almost all trade under state control. In a moral sense, commercial activity came to be seen as intrinsically bad, alienating, exploitative and oppressive, because it enabled some people to get rich from other people's work.

State-directed production seemed efficient and effective to the communist modernizers, especially in backward Russia. If infrastructure needed to be built, the state ordered it to be built, whether it made a profit or not. Business would never have built it, unless it made a sufficient profit at the end of a year. The central problem for the communists then was, that they had to get workers to cooperate and make sacrifices, to get things built, with promises of a better life in the future. The Party conceptualized this primarily as a matter of authority, education, ideological staunchness,^[119] incentives, and penalities.

If workers did not cooperate, because they thought it was against their self-interest (for whatever reason), they were forced to do so, in peace-time as well as in war-time.^[120] Since workers resented this, producing things often became much less efficient, and output quality suffered. This caused endless management problems, and massive "policing" was required to ensure that things got done (as documented by Western historians like R. W. Davies and Donald A. Filtzer). Despite never-ending reforms and policy changes, the cooperation problem was never truly solved. There was a lot of cynicism about that in Soviet society,^[121] even when life gradually got better and living standards improved.^[122] On 30 October 2007, Russian President Vladimir Putin paid his respects to all the people killed under Stalin's dictatorship in the days of the Great Terror. Putin stated: “Hundreds of thousands, millions of people were killed and sent to camps, shot and tortured. These were people with their own ideas, which they were unafraid to speak out about. They were the cream of the nation.”^[123]

The theoretical conflict between Engels and Dühring about the role of value in socialism resurfaced in the Soviet Union in the 1940s and 1950s. Until the 1930s, the Russian communists had generally expected that the categories of value and the law of value would disappear under socialism. Given that Joseph Stalin declared in 1936 that, with full state control over the whole economy, socialism had been achieved,^[124] it was logical to think that commodity production and the law of value no longer existed either. However, from 1941 this idea was in dispute.^[125]

Some Russian economists denied the existence of the law of value in the Soviet socialist republics, others affirmed its existence, and yet others said that the law existed in a "transformed" way. In 1951, Stalin settled the matter by affirming officially that commodity production and the law of value did exist under socialism, with the implication, that the planning authorities should account properly for true labour costs, as the basis for correct pricing of products, assets and salaries.^[126] In that sense, Stalin in the end sided with Dühring against Engels.

Common difficulties

The difficulties Marxist academics often had with Marx's own texts about the concept of value is because, abstractly, "economic value" can refer at the same time to many different things:

• 1. The concept of value, like the concept of money prices, can be applied or linked to anything and everything, from the most abstract to the most specific phenomena, and so the talk about "value" can go anywhere, with an unlimited range, depending on what one has in mind. What Marx had in mind, was the political economists he was arguing with, but the 21st century reader is often not familiar with those.
• 2. Value has both quantitative and qualitative dimensions, which can be discussed separately, or combined in a measure.^[127] It often happens, that one knows definitely that something has a value, without being able to verify how much value it is.
• 3. The dimensions of value can be stated according to both absolute criteria ("the quantity of units of a quality X") and relative criteria ("the quantity of X which is equal to a quantity of Y").
• 4. Value itself can be expressed as (a) a subjective orientation, (b) a relationship, ratio or proportional magnitude (c) an attribute of an object or subject, (4) an object or subject in its own right, or (5) a movement in a temporal sequence or in a space.
• 5. The concept of value assumes principles which define or explain how we know that there exists (i) comparable value, (ii) value equivalence, (iii) value decrease, (iv) value increase, (v) conserved value, (vi) transferred value, (vii) negative value, (viii) positive value, (ix) value destroyed, and (x) newly created value. For economists all this may be "self-evident", but for statisticians, accountants, valuers and auditors it certainly is not.
• 6. Value can refer to an actual value manifested in a real transaction, property right or transfer, or it can refer to an ideal value (a derived measure or a theoretical construct which is perhaps extrapolated from observations about the actual values of assets and transactions).
• 7. Values and prices, as actual or theoretical magnitudes, may not be so easy to distinguish from each other. For example, an ordinary accounting category such as "value-added" in actual fact consists of a sum of prices calculated according to assumed standard conditions (a uniform valuation).
• 8. If goods are said to be “overvalued” or “undervalued”, this assumes that one can reliably and accurately identify what the “true value” is. Yet the true value may only be hypothetical, since its definition depends on market conditions, and on the particular vantage point adopted.
• 9. The concept of value, like the concept of prices, is often used in a rather "loose" sense - referring to a cost or expense, a compensation, a yield or return, an asset valuation etc. The language of trade often does not make the social, legal and economic relations involved in trade very explicit.
• 10. In the course of Marx's dialectical story, the meaning of the category of value itself evolves and develops, with increasingly finer distinctions, and the concept is used in somewhat different senses in different places. Since Marx did not finish a large part of his manuscript for publication, it is not always exactly clear from the text what he intends.

So from the use of the expression "value" it may therefore not be immediately obvious what kind of valuation or expression is being referred to, it depends on the theoretical context.^[128] Ladislaus von Bortkiewicz, the originator of the famous "transformation problem" controversy, claimed confidently that in Marx's text, "the context always reveals clearly which value is meant".^[129] Nevertheless, there have been very lengthy academic debates about what Marx really did mean in particular passages. Rigorously investigated, the concept of "value" turns out not to be a "neat-and-tidy accounting concept" that can be manipulated with mathematical precision; it can be manipulated with mathematical precision only if a series of definitions are already fixed and assumed (it is a fuzzy concept).

At the end of his life, David Ricardo had to "conclude, rather sadly, that 'there is no such thing in nature as a perfect measure of value'... there is no such thing as an invariable standard of value".^[130] In Marx's Capital, it is understood from the start that there cannot be an invariable standard of value even in principle (this logically follows from the analysis of the form of value). Although there are absolute limits to the formation of value, value is in essence a relative magnitude, which has no absolute constant in time and space. If a standard of value such as gold is adopted (which Marx does), this is done only for the sake of argument, and for the sake of simplicity of exposition or reckoning (in the era in which Marx lived, there was very little price inflation).

Orthodox economics typically takes it for granted, that the exchange processes on which markets are based already exist and will occur, and that prices already exist, or can be imputed. This is often called the "gross substitution axiom" by economists: all products are, in principle, supposed to be mutually interchangeable with all other products, and therefore the "price mechanism" can allocate resources in such a way, that market equilibria are assured by the laws of supply and demand.^[131] This assumption is overturned only in special cases, where markets still must be brought into being and a process of "price discovery" takes place. In modern economics, the "value" of something is defined either as a money-price, or as a personal (subjective) valuation, and the exchangeability of products as such presents no special problem; it normally does not merit any special inquiry since exchangeability as such is taken for granted.

In conventional economics, money serves as a medium of exchange to minimize the transaction costs of barter among utility-maximizing individuals. Such an approach is very different from Marx's historical interpretation of the formation of value. In Marx's theory, the "value" of a product is something separate and distinct from the "price" it happens to fetch (goods can sell for more or less than they are worth, i.e., they are not necessarily worth what they happen to sell for).^[132]

Problematic

Marx's value-form analysis intends to answer the question of how the value-relationships of products are expressed in ways that acquire an objective existence in their own right (ultimately as relationships between quantities of money, or money-prices),^[133] what the modalities of these relationships are, and how these product-values can change, independently of the valuers who trade in them.^[134] Marx argued that neither the classical political economists nor the vulgar economists who succeeded them were able to explain satisfactorily how that worked, resulting in serious theoretical errors.^[135]

The political economists sought in vain for an invariable standard of value, and proposed theories of money which were hardly plausible. The reason behind the errors was — according to Marx — that, as market trade developed, the economic relationship between commodity-values and money increasingly appeared in an inverted, reified way. In reality, economic value symbolizes a social relationship between human subjects, as reflected by a thing or expressed by the relationship between things. Yet it often seems more like value is the thing which creates the social relationship.^[136] To understand the real causal relationships, not just economic calculation, but also an historical and sociological understanding of the subject was needed.^[137]

In vulgar Marxist economics, the commodity is simply a combination of use-value and exchange-value. That is not Marx's own argument.^[138] As he explains in Capital, Volume III, in an overall sense business competition among producers centres precisely on the discrepancies between the socially established values of commodities in production and their particular exchange-values manifested in the marketplace.^[139] Marx believed that correctly distinguishing between the form and content of value was essential for the logical coherence of a labour theory of product-value,^[140] and he criticized Adam Smith specifically because Smith:

confuses the measure of value as the immanent measure which at the same time forms the substance of value [i.e., labour-time], with the measure of value in the sense that money is called a measure of value.^[141]

Smith had affirmed that labour is "the real measure of the exchangeable value of all commodities", but, as David Ricardo subsequently argued, Smith's definition confused the labour embodied in a commodity when it was produced, with the labour commanded by the commodity when it was exchanged.^[142] Marx believed that Smith and Ricardo were certainly right to identify labour as the substance of commodity value, but Marx realized early on that the definitions of both these political economists could not be correct. The fundamental reason for that was, that both economists mixed up "value" with "exchange value" and with "price" (and also mixed up actual prices with theoretical prices). That is, they mixed up the forms and substance of value, because they failed to distinguish correctly between them as qualitatively different things.

The labour theory of product-value could, Marx argued, be made coherent and consistent, only when it was understood that product-values, prices of production and the market prices of commodities could vary independently of each other.^[143] Product-values did not necessarily have anything to do in a direct way with the relationship between cost-prices and sale-prices determining the actual profitability of enterprises, because both inputs and outputs could be profitably traded at prices above or below their value, depending on the amount of sales turnover and the state of the market in a given time interval.

Althusserian interpretation

The form of value is often regarded as a difficult, obscure or even esoteric idea by scholars (the "holy grail" of Marxism^[144]). Simon Clarke commented in 1989 that "the value debates of the last few years have become ever-more esoteric."^[145] John Weeks referred in 2010 to the "essentially esoteric nature of Marx's scientific investigation of value", meaning talk about unobservables.^[146] There has been considerable debate about the real theoretical significance of the value-form concept.^[147]

Marx himself started off the controversy when he emphasized that Capital, Volume I was not difficult to understand, "with the exception of the section on the form of value."^[148] In his "Preface to Capital Vol. 1," the French philosopher Louis Althusser mimicked Marx, and pronounced that:

The greatest difficulties, theoretical or otherwise, which are obstacles to an easy reading of Capital Volume One are unfortunately (or fortunately) concentrated at the very beginning of Volume One, to be precise, in its first Part, which deals with 'Commodities and Money'. I therefore give the following advice: put the whole of Part One aside for the time being and begin your reading with Part Two...^[149]

Althusser's suggestions were taken up by many New Left Marxists, which meant that Marx's theory of the form of value and its significance was rarely taught.^[150] However, Marx very deliberately and explicitly made an effort to state his interpretation of commodity trade with absolute clarity in his first chapters. Marx aims to demonstrate that the "labour theory of value" that guided the classical political economists in interpreting the economy cannot be correct, because the concept of economic value itself is misconstrued.

Marx never referred to his own theory of value as a "labour theory of value" even once,^[151] knowing very well (as indicated by his analysis of bank credit) that the value of many assets is not determined by labour-time. The ideas of the political economists had to be modified very considerably, before the theory of value could truly make sense. However, when the modifications were carried out, the previous understanding of capitalist economic life was also overturned. Hence Marx's own theory showed at the same time both continuities with the classical tradition, and radical discontinuities. This has been the cause of numerous controversies about the extent to which Marx broke with, or accepted, the previous theories of the political economists about economic value.^[152]

Fetishism

The theory of the forms of value is the basis for Marx's concept of commercial fetishism or economic reification.^[153] This is about how the independent powers acquired by the value of tradeable objects (and by market relationships) are reflected back into human thought, and more specifically into the theories of the political economists about the market economy.^[154] Marx himself never used the expression "commodity fetishism", rather he referred to the fetish of commodities, money and capital.^[155] All kinds of objects of value could be "fetishized".

In Althusserian theory, however, this meaning is unknown, because Althusserian theory detaches the concept of "fetishism" from the concept of the form of value.^[156] In the Marxist-Leninist tradition of positivist science, Althusser regarded Marx's dramatic, theatrical and theological metaphors as "unscientific" coquetry, lacking objectivity. Almost none of the New Left discussions of commodity fetishism refer to Marx's value-form analysis in any analytical depth.^[157]

In the reified perception of the political economists and the vulgar Marxists, products have value because they are expressible in money-prices, but Marx argues that in reality it is just the other way round: because commodities have value, i.e. because they are all products of social labour,^[158] their values can be expressed by generally accepted money-prices, accurately or not.

The true relationship can, according to Marx, be traced out only when the historical evolution of economic exchange is considered from its most simple beginnings to its most developed forms. The end-result of market development is a fully monetized economy (a "cash economy", although bankcards nowadays replace banknotes and coins), but how its workings appear to the individual at the micro-level, is often different or the inverse of its causal dynamic at the macro-level. According to Marx, this creates a lot of confusions in economic theorizing.^[159]

One aim of Marx's theory is to explain how the nature of the market economy itself shapes the way that people will perceive it. The secret of the form of value is, that the form in which the value of products is expressed (as a relationship between traded objects), simultaneously obscures and hides the substance of the value of products. It obscures how the value of products is formed, and the social relations between people that exist behind the relationship between things.

Knowing what the social substance of value is, in fact, completely unnecessary for the purpose of trade. All that is required to navigate the market, is knowledge of cost prices, sale prices, price averages and whether prices are going up or down. The conflation of value with exchange value, with price and with money grows spontaneously out of the relations of commodity trade themselves.

Obscurantism

The criticism most often heard from the critics of Marx, such as Friedrich von Hayek, Karl Popper, Francis Wheen and Ian Steedman and is that, even if Marx himself meant well, Marx's value-form idea is simply an esoteric obscurantism, "dialectical hocus pocus", "sophistry", or "mumbo jumbo". Francis Wheen refers to "a shaggy-dog story, a picaresque journey through the realms of higher nonsense."^[160] This type of criticism was already being made while Marx was still alive, as Marx himself reports in a postface to the second German edition of Capital, Volume I in 1873.^[161]

Often, Marxists have replied to this type of criticism by restating Marx's arguments in clearer language, or by showing that Marx's theory of economic value at the very least fares no worse than the subjective theory of value (the theory of the util as the measuring unit of utility).^[162]

Even so, when he published his very clear restatement Karl Marx's Theory of History: A Defence,^[163] the Marxist philosopher Gerald Cohen explicitly dissociated himself from Marx's value theory. Cohen argued that it is possible to have an historical materialism without a labour theory of value, because the one does not logically entail the other as well.^[164] Marcel van der Linden accepted Cohen's approach, noting that "whether Marx's theory is exactly right or not, it remains a fact that the working class produces a surplus product about which it has no say."^[165] Marx himself never referred to his own theory of value as a "labour theory of value" even once.^[166]

This interpretation contrasts with Lenin's opinion in 1894 — repeated by Johann Witt-Hansen^[167]—that with the appearance of Das Kapital, "the materialist conception of history is no longer a hypothesis, but a scientifically proven proposition".^[168] Earlier on, in 1880, Engels had written (at the end of Part 2 of his pamphlet Socialism: Utopian and Scientific) that "two great discoveries, the materialistic conception of history and the revelation of the secret of capitalistic production through surplus-value, we owe to Marx. With these discoveries, Socialism became a science."^[169]

Substance of value

Marx's argument is that the exchangeability of commodities with recognition of their value is enabled by the common factor that all of them are products of social labour (co-operative human labour producing things for others).^[170] Critics however have argued ever since Capital, Volume I was published, that Marx's argument is simply not logically compelling. The critics suggest that Marx's observations fail to provide any logically decisive proof that human labour-time (work effort) is the substance of the economic value of all products.

Neo-Ricardian critique

This criticism (made primarily by neo-Ricardians and post-Keynesians) is basically that all the problems Marx tries to solve with his theory of the forms of value can be solved much better and more plausibly with modern price theory.

Chartalist critique

An implicit technical and historical criticism of Marx's value-form theory is made by some Post Keynesian^{[290][291][292]} and heterodox Marxian economists^[293] as well as anarchists like David Graeber,^[294] who are inspired by the chartalist theory of money. These economists interpret Marx's narrative about how money originates in the exchange process as a theory of commodity money, or the "commodity theory of money". That is, they believe that Marx's theory is more or less the same as the "barter theory of money".

Libertarian critique

A fifth line of criticism, articulated especially by libertarians such as Friedrich von Hayek and the Austrian School, concerns the role of value in human freedom and progress. Marx and Engels tended to present "value" and "value relations" as negative, alienating and reifying phenomena that cause people to get used by others, for ends they can no longer fathom. Therefore, markets appear to be evil things, and the conclusion then follows that people are better off without them. Yet market value can also be viewed as a very positive thing. Hayek stated that:

"My whole concept of economics is based on the idea that we have to explain how prices operate as signals, telling people what they ought to do in particular circumstances. (...) In a system in which the knowledge of relevant data is dispersed among millions of agents, prices can act to coordinate the separate actions of different individuals."^[323]

According to Marxists, value phenomena belong to the prehistory of humanity that closes with the abolition of capitalism.^[324] Thus, for example, Iring Fetscher claims: "Marx's criticism is directed against value as such, not merely against its consequence, capital."^[325] In other words, the negative, dehumanizing features of market valuations for workers' lives have had prominence for Marxists,^[326] even although Marx also acknowledges here and there that markets have some progressive, developmental and "civilizing" features.^[327] Marx and Engels seem to depict the forms of value as an alien, impersonal and corruptive force that gradually subordinates anything and everything to "making money" — and it leads to the reification of human life (and to wars).^[328] This opens up a far-reaching and complex theme of criticism.

Scientific approach

There is, however, also another approach possible, not philosophical, but scientific: to test out the validity of the value-form idea empirically against observable experience, to understand how things work out in reality.^[409] What actually happens, when money suddenly almost disappears in a modern society, because its purchasing power falls sharply to a very low level, money tokens become very scarce, and financial institutions malfunction so that monetary transactions cannot be operated? Does the value of commodities in that case largely vanish, because most of them can no longer be traded for money? Does the commodity form itself disappear, because of rapid demonetization, and the failure of financial institutions to facilitate transactions?

The empirical answer is clearly that commodities and the value of commodities do not go away, when money disappears. The products of human labour continue to have value, and ordinary people know this very well,^[410] but they are not traded and paid for anymore in money tokens. Instead, they are bartered on a grand scale (in some cases, up to 50% or 70% of the real gross product),^[411] according to variable exchange-ratios or according to fairly stable exchange-ratios.

Examples

Effectively, the simple form, the expanded form, the general form, and the money form of value then occur side by side in the trading process, while credits and debits are often reckoned in quantities of goods and services, not in money.

Some examples in recent history are:

• In 1979-1981, the US Federal Reserve raised interest rates very high, to squeeze out price inflation. At the same time, oil prices spiked, and terms of trade worsened for developing "third world" countries. This created a massive public and private debt crisis in those countries.^[412] They could no longer pay their bills with money, and so, they engaged in large-scale counter-trade and barter deals, to obtain the resources they needed.^[413]
• During the Oil-for-Food Programme in Iraq from 1995 to 2010, Iraqis received food from other countries in exchange for oil products.
• In the 1990s, Eastern Europe and Russia engaged in large-scale barter trade.^[414] The Soviet Union had engaged in bartering and countertrade throughout its history,^[415] but when in the 1990s the rouble lost much of its buying power, the practice of bartering and countertrade increased gigantically.
• When the Argentinian slump was at its worst in mid-2002, it was reported that up to one in five citizens were involved in the so-called "barter clubs".^[416]
• The global credit crunch went along with global food-price crises in 2007-2008 and 2010-2012, causing food riots in many countries.^[417] Many countries started to do large-scale barter deals to get food for distribution at an affordable price.^[418] According to the WFP/FAO Global Report on Food Crises 2018, the data showed that nearly 124 million people across 51 countries and territories faced "crisis levels of acute food insecurity or worse".^[419]
• By 2018, hyperinflation of the bolívar in Venezuela prompted widespread barter and work-for-food deals because it became difficult to buy food and other goods in the normal way.^[420] Venezuela’s health minister Luis López offered several pharmaceutical companies quantities of gold, diamonds and coltan as an alternative payment for medicines.^[421]
• In March 2018, Ghana's president Nana Addo Dankwa Akufo-Addo announced that his country was going to barter refined bauxite in exchange for infrastructure construction work, including bridges, roads, railways, refineries and hospitals.^[422] In September 2018, a $2 billion barter deal was signed, with Sinohydro Group Limited, providing $2 billion worth of infrastructure construction in Ghana, in exchange for large quantities of refined bauxite that will be exported to China.^[423]

Puzzle

For conventional economic theory, this kind of phenomenon is "puzzling".^[424] After all, barter—bilateral and multilateral—is something that supposedly occurs only in primitive societies, featuring a simple division of labour, and not in modern societies with a complex division of labour. Some leftwing theorists, such as the post-Keynesian economist Michael Beggs and the anarchist anthropologist David Graeber, even deny that barter has ever existed on any large scale.^[425]

In modern societies, countertrade is supposed to be only a marginal phenomenon, occurring on the periphery of monetized trade. If barter nevertheless does happen on a huge scale,^[426] it contradicts the theory of the transaction costs of barter, and the theory of comparative advantage in trade. Why would people choose barter, instead of payment in money, when money is more efficient than barter?^[427] How is it possible for this to occur, for a prolonged time, on such a grand scale? And how is a return to monetization accomplished?

All the known theories of trade, value and money are tested in such situations - a rich data source for economic science. However, so far only a few scholars in the Western Marxist tradition (such as Simon Clarke and Michael Burawoy) have grappled with the theoretical implications.^[428]

Crisis of Marxism

In the conclusion of his 1944 polemic against bureaucracy, Ludwig von Mises (an arch-enemy of socialism) conceded that socialism had been:

"...the most powerful reform movement that history has ever known, the first ideological trend not limited to a section of mankind but supported by people of all races, nations, religions, and civilizations"".^[431]

When, however, the socialist movement became bureaucratized, killing off democratic freedoms in order to maintain power and force through its socialist policies, it also killed off the further development of socialist thought. Marxism degenerated into a stale repetition of abstract metaphysical dogma, where anything can mean anything - a quasi-religious justifying ideology, that was useless as a guide to the future. After World War 2, the movement unsurprisingly began to break up and splinter. The crucial turning point in the West was the invasion of Hungary in 1956, when most Marxist intellectuals in the West left the official communist parties, in protest. A few years later, there was the Sino-Soviet Split, and after that, a proliferation of further political splits and divisions (this is documented in the Yearbook on International Communist Affairs by the Hoover Institution).

In 1977, at an Il Manifesto conference in Venice, Louis Althusser (the recognized "pope" of Marxism-Leninism in the West at that time) officially announced a new "crisis of Marxism", by which he meant primarily the political fragmentation of the communist movement.^[432] According to Althusser, the problem had been, that the communist party had fused with the state, while it should've remained separate from the state.^[433]

However, another speaker at the conference, Rossana Rossanda, went much further than that, arguing that the experience of actually existing socialism had put into question "the very idea of socialism, not as generic aspiration, but as a theory of society, a different mode of organisation of human existence."^[434]

Moishe Postone added to this idea that "The Marxian categories, as traditionally interpreted, are of little use in formulating a social critique of a society that is regulated and dominated by the state" and therefore they "cannot grasp the grounds for continued or increased unfreedom in "actually existing socialism".^[435] If socialism is the answer, people have to be able to think the problems for which socialism is supposed to be the solution. If they cannot even think the problems, then there really is no socialist solution.

In the early 1980s, Margaret Thatcher announced the apparent new consensus that there is no alternative to market capitalism.^[436] In response, the World Social Forum adopted the slogan "Another world is possible". According to the economist Gary Dymski, it should be TAVA (There Are Various Alternatives).^[437]

Millennials

Some think the crisis of Marxism cannot easily be overcome anymore, because the millennial generation was born after the collapse of socialist countries. They have been educated to think that socialism was a failure, and they mostly have no knowledge and experience about socialist societies. Or, they think that real socialism never existed anyway.

Universities and libraries have eradicated much of the knowledge about socialist societies and Marxism. The old texts were dumped into their bargain bins. Courses were closed down. Lecturers lost their jobs, or shifted to safer and more attractive topics. In 1998, the US Left journal Against the Current complained that "an extreme pessimism of the spirit is weakening our participation in the centuries-old battle of ideas".^[438]

Others^[439] think, that the "crisis of Marxism" is a good and refreshing thing, because it frees the new discussions from dreary dogmatism, from appeals to "sacred" leaders or texts that can't be wrong, and from turgid doctrinairism. They point out that socialism is more popular than ever among young American adults,^[440] who are faced with steep housing and education bills, the burden of debt repayments for up to thirty years into the future,^[441] and low job and earnings opportunities—a situation regarded as unfair.^[442]

Varieties of socialism

The problems which the old socialism was supposed to solve are still there, but the old socialism is not enough to solve them now, which is the problem of the new generation.^[443] However few Western Marxist academics feel able to admit theoretically that real socialism may not be heaven on earth, or that some forms of capitalism may be vastly preferable to some forms of socialism (and vice versa). The "counterfactual" arguments are inconclusive - what would have happened, if there had not been socialist revolutions? Nobody really knows for sure, among other things because the geopolitical balance of power in the world would have been very different.^[444]

The Western Left academics are nowadays very happy to talk about "varieties of capitalism",^[445] but talking about "varieties of socialism" remains almost an absolute "no-no".^[446] Most Marxists continue to believe in only one (Marxian) socialism: either that, or nothing at all. Either a society or movement conforms to the true concept of socialism, or it does not; and if it does not, it cannot be socialism. However, precisely because there are many different Marxist beliefs about socialism, Marxists cannot agree among themselves whether Soviet-type societies were socialist, capitalist, or something else. Some countries meet with the moral expectations which Marxists have, and others do not.

• Already long before they wrote the Communist Manifesto, Marx and Engels were very aware that there was not only "one kind of socialism", but many possible varieties of socialisms — some more desirable than others.^[447] They often defended their own socialism against competitors, though sometimes in obscure and little-known polemics.

• Marx and Engels envisaged socialism as a democratic society of "freely associated producers" organized in councils, communes and cooperatives, without social classes or commercial huckstering, and with a state that would continuously shrink in size - because people would increasingly be self-regulating and self-managing their lives without needing supervision.^[448] This perspective largely disappeared for half a century, when, in state socialist societies, the state did not shrink, but became much larger and powerful - controlling people's lives much more, instead of less.

Originally Marx and Engels themselves had heckled the advocates of "true socialism",^[449] but later Friedrich Engels and Karl Kautsky promoted Marxist socialism as the one and true "scientific socialism" within the Socialist International. When he was 43 years old, Lenin stated: "The Marxist doctrine is omnipotent because it is true".^[450] Lenin's Communist International (a deliberate split with the social democrats) adopted Marxist socialism as its official political doctrine.^[451]

This created the doctrinal problematic of orthodoxy and deviations from orthodoxy, fiercely contested in the 1920s and 1930s (when all remaining political opposition to the CPSU leadership was wiped out in the Soviet Union). When Stalin introduced the policy of "socialism in one land", he did not mean "socialism in only one country", but that it was necessary and feasible to build one unified socialist system for all the Soviet Republics (for military, planning and resource reasons). This required one unified socialist ideology and conceptual language.^[452]

If there exists only one socialism, the advantage is, that it keeps things simple. The system is the same, wherever you go. If there are many socialisms, a lot more work is necessary, to understand the specifics of what they are really about, what they have in common, and how they differ.

Pluralism

For much of the 20th century, the official communist parties aimed very consciously to discredit or eradicate any socialism that wasn't Marxist-Leninist as deviant, fake and wrong. The Manichean logic of the monolithic party was simple: the leadership of the Party is the supreme authority on Marxist truth, and therefore, anybody who disagrees, is necessarily in error. This became a kind of political habit in Marxist circles, and therefore, the whole idea of a legitimate socialist pluralism, still common in the time of Marx and Engels, was lost. It began to re-emerge slowly only from the 1960s, with the growth of the Western New Left alongside the decline and fragmentation of the official communist movement and social democracy.^[453]

Thus, for example, Albert Szymanski explicitly acknowledged in his 1979 pro-Soviet appraisal Is the red flag flying? that "there are many different types of socialism."^[454] In this approach, the primary question is not whether a particular socialism corresponds, or does not correspond, to a preconceived ideal type of socialism, but what kind of socialism it empirically is, how it works and how progressive it really is (or not).^[455] It is an approach which coheres better with the new "programming mentality"^[456] pervading modern academia, because in programming it is acknowledged that the same problem can be solved with various different procedures which can all be valid and workable (even if some probably work better than others).

Method

The Serbian philosopher Svetozar Stojanović wrote in 1973 that:

"The main prospects for essential innovations in Marxism lie in the critical confrontation of Marxism with that society which calls itself socialist. This approach holds the greatest prospects for the verification, enrichment and concretization of the Marxist program."^[457]

Logically, if the successive attempts to create socialism are merely dismissed as "not socialist" in any way, then nothing at all can be learned from them at all, about socialism - except that 20th century socialists suffered from a giant hallucination or a "red dream" (that was also exactly what the "Austrians" argued in the socialist calculation debate). People in the East thought they were building socialism, with gigantic personal and collective effort, but they were apparently building the contrary.

Subsequently, the "Western Marxist" ultra-leftists said "nah, it wasn't any kind of socialism", because it did not conform to their own favourite flavour of socialism.

• It did not occur much to the Western Marxist ultra-leftists, to take seriously the idea that there might exist possible socialisms that were not "sugar and spice and all things nice". Hal Draper did refer to the "two souls of socialism" (socialism from below versus socialism from above), but that was not a scientific theory, but a spiritual and moral one.^[458]
• It did not occur to the Western Marxist ultra-leftists, that their own moral horror at what was happening in slavic societies was not the same as a scientific analysis of the practical application of socialist ideas. Socialism was supposed to be everything good, and capitalism everything bad. If socialism wasn't everything good, it wasn't socialism, on this view.
• If all attempts to realize a socialist society are defined as "state capitalist", then they were not even any kind of alternative to capitalism. In that case, the socialist project has to start from scratch.

Whether it is possible to reboot socialism out of nothing, remains in dispute; some would argue this is like reinventing the wheel, and that one cannot simply pretend that what happened, never happened - a scientist cannot very well make progress, by dismissing relevant scientific evidence ("those who do not learn from history, are doomed to repeat it"). If innovation is wanted, it is necessary to know the real history, to understand what would count as a genuine innovation, in contrast to a recycler.^[459]

Re-unifying socialists

Nowadays many socialist tendencies exist in the world that are longing to merge and unite the Left in one party. Some initiatives (e.g. the Party of the European Left, the Fourth International, the European Anti-Capitalist Left, the International Socialists, the Initiative of Communist and Workers' Parties, etc.) have gained a significant following (see further List of left-wing internationals). Often though it remains rather vague^[460] what it actually is, that has to be united, or how it could be done. It might be more a kind of clustering together, than a full unity based on shared views of a programme and action. The reason is, that there are many different socialisms.

As soon as it is declared, that there is only "one true socialism", then that logically implies, that any other socialisms are denied. Yet, when it is acknowledged that there exists a diversity of socialisms, then there is the challenge of uniting those socialisms and finding something in common. If, for example, there are Marxists in East Germany who think that East Germany used to be socialist, and there are other East German Marxists who think that East Germany has always been (state-)capitalist, then it is difficult for them to unite, because they have very different concepts of capitalism and socialism.

Market corrosion

The British post-Marxist journalist Paul Mason claimed in The Guardian that “Without us noticing, we are entering the postcapitalist era”.^[479] Part of that shift, he claimed, is that “information is corroding the market’s ability to form prices correctly… because markets are based on scarcity while information is abundant. (…) whole swaths of economic life are beginning to move to a different rhythm.”^[480] Dave Elder-Vass states that "...vast swathes of the economy, including the gift, collaborative and hybrid forms... coexist with more conventional capitalism in the new digital economy."^[481] Jeremy Rifkin states that the internet of things can facilitate an economic shift from markets to a collaborative commons, with near-zero marginal costs of production.^[482]

There is a lot of “free stuff” available these days that people can get hold of very fast – if they know their way around information. They can often share it very quickly too, all around the world – bypassing markets, money and laws. When information is shared, givers and receivers both have the information, unlike the ownership transfer of an alienable commodity. If people can get a lot of goods for free, it is going to be more difficult to sell things to them. In turn, that disturbs ordinary commercial trading, pricing and market functioning, so that “information corrodes value.”^[483]

By contrast, however, the Hayekian Viktor Mayer-Schönberger is optimistic about the potential for "information-rich" markets.^[484] Not only can the internet of things link people and commodities very accurately and quickly.^[485] The new technology can also police people's property rights, and their market behaviour, creating the possibility of responding to it in real time.^[486] New rules, such as the Directive on Copyright in the Digital Single Market in the European Union, could block the "free stuff".

Harvard philosopher Michael Sandel stated that "“Without being fully aware of the shift, Americans have drifted from having a market economy to becoming a market society ... where almost everything is up for sale ... a way of life where market values seep into almost every sphere of life and sometimes crowd out or corrode important values, nonmarket values.”^[487] In this case, market values are not corroded by non-market values, but non-market values are corroded by market values.

Loss of value

Since the 2007-2009 global financial crisis, there is growing concern about whether there are any types of assets left in the world, which can reliably hold their value. A gold standard for currencies is gone. Global indebtedness continues to grow at a much faster rate than global value-added, accompanied by a sequence of financial bubbles that cause economic havoc and devalue assets when they burst. For the period 1970-2011, IMF researchers identified 147 systemic banking crises, 211 currency crises and 55 sovereign debt crises.^[488] Very low interest rates hurt bank profits; but at interest rates below the rate of price inflation, bank clients lose money just by keeping it in the bank.^[489] Although people become reluctant to do anything with their savings, from a financial point of view they should keep trading, to maintain value, or increase it.

In mid-2016, Fitch Ratings estimated that, although the global economy had recovered, there were now $11.7 trillion worth of investments in bonds carrying negative interest rates in real terms, representing almost half of all sovereign bonds issued in developed countries.^[490]

Michel Hudson noted that in mid-2018 US Treasury bonds were approaching an inverted yield curve - the yields for short-term US Treasury bills almost outstripped long-term ones. Hudson said, that investors increasingly had no confidence in the economy, and just wanted “to park their money safely”. The real economy wasn’t growing, the only thing that was growing was debts.^[491] Others argued that the yield curve was not yet inverted, just flat.^[492]

In the crash of 2007-2009, the property values of US homes dropped by about 30% on average, and around one in every five mortgaged homes was suddenly "under water" (where the loaned amount was at least 25% higher, than the estimated market value of the home - in the "normal" situation, at most 1 out of 50 mortgaged homes would be "underwater"). Between 2007 and 2016 there were 7.8 million foreclosures of mortgaged homes in the US, where households under financial pressure were forced out.^[493] This represented about 28% of all mortgaged homes. Subsequently the housing market recovered. Yet ten years later, more than 5 million American mortgaged homes (around one in ten owner-occupied mortgaged homes) were still seriously "underwater".^[494]

New School researchers found that, between the spring of 2009 and the fall of 2011, about 45 percent of the US workers they studied saw their retirement account-balances decrease by thousands of dollars. For many workers, renewed gains in pension funds after the financial crash of 2008 could only partly offset the losses.^[495] In the old capitalism, working people were rewarded for saving money, but in the new financialized capitalism, they are often punished for saving. There is no certainty anymore what exactly their savings will be worth, when they retire. What is certain is that the current generation of US pensioners is the first one since World War 2 which is financially worse off than the preceding generation.^[496] The situation in Europe and Japan is much the same.^[497]

Price volatility

Much of global production is now subject to intellectual property rights (IPRs), but the commercial value of knowledge, data and information can be volatile. IPRs are often difficult to defend against raiders, when people's privacy is destroyed. Knowledge and information can not only spike in value, but also quickly become worthless. Many financial products now exist, such as level 3 assets^[498] and cryptocurrencies, of which the exact value is unknown or highly variable. Global market volatility can rapidly wipe out trillions of dollars of value.^[499]

After 28 January 2018, about $4 trillion worth of stock value in stock markets disappeared in little more than a week, although the stock markets subsequently recovered.^[500]

At the beginning of 2018, global cryptocurrency holdings were estimated at about $650 billion.^[501] According to CoinDesk, the total market capitalization of cryptocurrencies fell from a peak of $830 billion in January 2018 to $276 billion at the beginning of February 2018.^[502]

For rich people, it may not be so devastating if they lose part of their capital (they can often recover it within a few years, using the capital they still have), but the worry is what sudden, very large losses can do to the world economy.

Unreliable valuations

To defeat competitors, dodge taxes and please investors, businesses increasingly fiddle their accounts and hide parts of their operations. Aided by multiple subsidiary or associated companies - often sited in different countries - company holdings, earnings and operations can be “tweaked”: liabilities can be turned into assets, assets into liabilities; incomes can be turned into costs, and costs into incomes; and operating cash flows can be altered – according to the kind of accounting method that is most favourable for the business group (see also creative accounting). In 2004, Trevor S. Harris, a chief accounting analyst at Morgan Stanley stated that "The financial reporting system is completely broken." ^[503]

If the value of a company to investors is defined as the present value of future cash flows, it is not primarily what the company has achieved financially in the present that is important, but what that achievement is "likely" to be worth in the future. This motivates companies to present attractive numbers to investors. In Australia, the Financial Review reported in 2016 that 40% of ASX top-500 companies use "non-standard" financial measures such as "underlying profit" and "underlying earnings", calling into question the very purpose of having uniform accounting standards.^[504] KPMG researchers found that many ASX200 companies were not fully complying with government guidelines for reporting financial data to investors.^[505] Similar stories can be found in most other countries. The Financial Times quoted a boardmember of an auditing firm as saying that “The problem with fair value accounting is that it’s very hard to differentiate between mark-to-market, mark-to-model and mark-to-myth.”^[506]

Through stock buybacks a company can drive up its share price, and deliver earnings to shareholders without any change in company performance - if corporate officers get paid in stocks and stock options, they get a pay rise every time the stock's value rises.^[507] In February 2018, the US Senate Democrats released a special report which stated that a sample of just 33 corporations were planning $209 billion worth of buybacks in 2018, while at the same time laying off large numbers of workers.^[508] According to Goldman Sachs, US companies authorized $1 trillion worth of stock buybacks in 2018,^[509] while Europe, Canada, Japan and industrialized East Asian countries also got into the act with a combined $248 billion of buyouts in the first half of 2018.^[510] The global equity market was "shrinking at the fastest pace in at least two decades" although its total value was still increasing, partly due to buybacks pushing up stock prices.^[511] The Financial Times raised the spectre of the "slow death of public stock markets"':

"The basic agreement around public markets for most of the 20th century was this: owners had to open the books, quarter after quarter, and in return they got access to the private savings of ordinary citizens. What we're seeing now is that corporations have access to enough private savings of wealthy citizens that they're walking away from the deal... We know less about what companies are doing."^[512]

The general effect is, that the true economic value or benefit of what business does, becomes more difficult to know; transparency is lacking. Shareholders are encouraged to have faith in a company, although there may in truth exist no reliable valuation of company operations. In October 2010, the EU dropped the idea of a financial transactions tax (a Tobin tax or Robin Hood tax), citing among its reasons the bewildering complexity of international transactions, which makes implementing and enforcing the tax far too difficult and costly.^[513]

The commons

The ordinary capitalist logic fails to provide any agreed standard valuation, or property right, for new kinds of “semi-public” goods that are considered to have a lot of economic value, such as social networks, collective intellectual and cultural assets, eco-systems, and stocks of non-renewable natural resources. These resources are often called "the commons" (nobody owns them, or everybody owns them, so therefore somebody can take them).^[514]

Realistic pricing by business presumes that things can be privately owned and sold (or leased, rented, hired etc). If resources can be obtained and used without cost (because they are “free goods”) or accessible at near-zero cost, they are more likely to be plundered or wasted.^[515] For example, in the Pacific Ocean, there are a lot of fish in the open sea, nobody owns them, and they are harvested using industrial fishing techniques with giant dragnets. The result is, that fish stocks are decreasing very fast (see also Fishing down the food web).^[516] The feasibility of generating new fish populations depends on whether the food chain on which the fish depend is still there.

The invention of an ingenious system of global carbon emissions trading, which priced carbon emissions, and promoted trade in pollution allowances to reduce pollution in the air that we breathe, failed to reach its goal.^[517]

Network sites such as Facebook and Linkedin do not make their money directly from having access to other people's friendships, but from selling information, advertising, broadcasting, games, sponsorships and access privileges. The Facebook–Cambridge Analytica data scandal indicated that the for-profit, legalized robbery and exploitation of information about people's known personal networks - amongst other things to dupe them into voting for rightwing politicians - has become a big business internationally. Gigantic data thefts nowadays occur every year, but the victims may never know that their data and work was stolen, or who stole it.^[518]

Misvaluation of work

The rewards and valuations for work effort, trade unionists complain, have gone way out of proportion, so that many people work extremely hard for long hours, just to earn a few dollars, while others get paid gigantic sums of money just to have a chat, to be present, or to give a bit of attention.^[519]

• A US study published in May 2018 by Minnesota’s Democratic US congressman Keith Ellison found that the average CEO-to-worker pay ratio had reached 339 to 1, with the highest pay gap approaching 5,000 to 1 (for every dollar an ordinary worker earns, a CEO gets between $339 and $5,000).^[520]
• According to Martin A. Sullivan, chief economist with Tax Analysts, “The way you get rich in this world is not by working hard. It’s by owning large amounts of assets and having those things appreciate in value.”^[521] The argument is here not that CEO's "do not work hard", but that they and other wealthy people could never accumulate all the wealth that they do, simply from their own salary. The wealth accumulates faster, through wealth managers leveraging and trading personal assets for profit and capital gain. "Little of Jeff Bezos’ and Bill Gates’s wealth, for instance, came from wages, salaries, and benefits... It came from owning stock".^[522] Martin Wolf stated in 2018 that "If the natural tendency of our economies is towards ever-rising rent extraction and inequality, with all its dire social and political results, we need to respond in a thoughtful and determined way. That is the great challenge."^[523]
• Kevin Bales reports that "for the first time in human history, there is an absolute glut of potential slaves... with so many possible slaves, their value has plummeted. Slaves are now so cheap, that they have become cost-effective in many new kinds of work. (...) Slaveholders get all the work they can out of their slaves, and then throw them away."^[524] In 2017, the ILO estimated conservatively that across 2011-2016, 89 million people were enslaved worldwide for shorter or longer intervals of time, 25 million were permanently subject to forced labour, 15 million females were enslaved in a forced marriage, and 152 million children aged between 5 and 17 were subjected to child labour. There are estimated to be about 400,000 slaves in the United States. Of all slaves, two out of three are female (see also Global Slavery Index).^[525]
• James Crotty argues that top executives in the financial world nowadays get richly rewarded regardless of whether there is a crash or a boom. Since they just keep getting huge bonus payments, even when their own company suffers very large losses, they are "perversely incentivized" to continue the high-risk and high-leverage investment strategies which destabilize the financial system as a whole.^[526] Yet even if CEO's would take a drastic pay cut, the fact remains that total debt levels are escalating regardless, and require more and more earnings from any source, to pay more and more interest on loans - which pits private investors against central banks when the banks try to raise rates.

The argument then is, that if the financial incentives and disincentives for work effort have gone totally out of kilter, markets cannot deliver a fair and efficient allocation of resources anymore.

Market failure

Governments are involved more and more in sorting out market failure (and pick up the tab for it).^[527] An editor of the Financial Times, Martin Wolf, remarked famously about the financial sector that "No [other] industry has a comparable talent for privatising gains and socialising losses."^[528] Some years later, he explained that "Today’s banks represent the incarnation of profit-seeking behaviour taken to its logical limits, in which the only question asked by senior staff is not what is their duty or their responsibility, but what can they get away with."^[529] Yet the role of bank services is crucial to operate gigantic transaction volumes, and governments have fewer and fewer resources available to repair business damage, because of privatization, state corruption, and the looting of state funds or tax-dodging by private interests (kickbacks, privatization, pork barrel politics, lobby group power, corporatization, securitization, rent-seeking, arbitrary budget cuts, financial bailouts, regressive tax, tax evasion etc.).^[530]

People across the world are now literally being priced out of markets, not just in poor countries,^[531] but also in rich countries.^[532]

• In San Francisco, well-paid teachers are living in dorms, because they cannot afford to buy a home in the city anymore - house prices have gone beyond their reach.^[533] This is the reverse situation of what happened in the property boom up to 2007. At that time, quite a few Californian teachers found they could make more money from rising property values, than from their job. In 2017, only half of the households in California owned their homes, but one out of every three renters - roughly six million people - paid more than half of their total income to their landlord.^[534]
• Richard Florida reported in 2017 that "An acre of central land in New York City is worth approximately 72 times more than an acre of central Atlanta or Pittsburgh, and almost 1,400 times more than the same in many small Rust Belt and Sunbelt metros.^[535]
• On behalf of many of the world's large cities, the mayor of Barcelona called on the United Nations to do something to help stop real estate speculators from driving up the cost of housing.^[536] The Cities for Adequate Housing statement signed by mayors of eight big cities calls for more powers for local authorities, to better regulate the real estate market; more funds to improve public housing stock; more tools to co-produce alternative public-private and community-driven housing solutions; urban planning schemes that combine adequate housing and quality neighborhoods that are both inclusive and sustainable; and city council cooperation in residential strategies.^[537]
• Although on average people are now living longer than they did before, the 2017 Global Medical Trends Survey Report by Willis Towers Watson states that "The cost of medical care continues to rise across the globe with no light at the end of the tunnel."^[538] Americans like to see themselves as the most advanced nation on earth, but to get the same medical care and cover as Europeans, Americans spend 2.5 times more money; Americans have the highest medical bills on earth.^[539]
• In 2016, New Zealand researchers reported that during 2013, at least one in every 100 New Zealanders was de facto homeless, compared with 1 in 120 in 2006, and 1 in 130 in 2001.^[540] They sleep at a friend's place or with relatives, in motels, garages, sheds, cars, stations etc. At that time, in 2016, the country was at the top of Knight Frank's global ranking of countries for property price-rises, and for the first time, the average house price in Auckland hit NZ$1 million (=US$715,000, €585,000, £513,000).^[541] The median NZ salary was at US$35,000, meaning that the average Auckland house price was around 20x the median annual salary or around 10x median household income.^[542] Average Auckland house prices are expected to increase 300% in twenty years, and reach NZ$3 million by 2036.^[543]

The warped price structures of financialized capitalism increasingly cause large social dislocations and technical change across the world, because it is no longer economically possible for large masses of people to live and work in the normal way, within large geographic areas. They have to change their lifestyle drastically, or are forced out.^[544] The rich buy up the beautiful areas, and the poor have to live in the ugly, derelict and polluted areas.^[545] As rich people cause the largest amount of pollution,^[546] many poor people take a dim view of bourgeois environmentalism aiming to protect nature.^[547]

Yet great poverty can also be destructive for the environment. Suffering hyperinflation of the Zimbabwean dollar and absolute poverty, masses of people in Zimbabwe took to cutting down forest, wildlife poaching^[548] and gold or diamond mining on own initiative, to make a living and survive (See also Marange diamond fields). It is estimated that between 1990 and 2005, Zimbabwe lost 21 percent (one-fifth) of its forest cover (i.e. 4.7 million hectares), and currently 313,000 hectares of forest disappear every year.^[549] In 2013, 15% of the deforestation concerned land-clearing for tobacco-farming, and getting firewood for tobacco-curing.^[550] According to a Zimbabwe Conservation Task Force report in June 2007, more than half of all Zimbabwe's wildlife had died since 2000, due to poaching and deforestation.^[551] Land degradation is expected to cause major soil erosion, plus flooding and groundwater-pollution problems, significantly reducing the habitable farmland area.^[552]

Rich people are increasingly on the move too, trying to escape from high taxes, unsafe conditions, environmental hazards and socio-political instability. According to the Global Wealth Migration Review 2018, some 95,000 millionaires (HNWIs) migrated in 2017, top destinations being North America, Australasia, United Arab Emirates, Israel, Switzerland and Singapore. The exit of wealthy people affected mainly China, India, Turkey, United Kingdom, France, Russia, Brazil, Indonesia, Saudi Arabia, Nigeria and Venezuela.^[553]

Organizational instability

The management of both business and government organizations has become permanently unstable, and restructuring is nowadays a never-ending process,^[554] so that staff is constantly being replaced or shifted around, while work systems are being redesigned all the time – giving rise to complaints that nothing works anymore like it should and that there is no job security anymore.^[555]

According to the Dutch central bank, half the fall of the Dutch wage-share in the country's net value-added across 1996-2015 is attributable to "labour market flexibilization".^[556]

Throwing more money at the problems however may not solve very much organizationally, although employees are grateful for extra cash. Repeatedly the money just disappears down a hole.^[557] When some of America's most powerful and well-resourced corporations were paid billions of dollars to rebuild Iraq, it turned out that they couldn't even organize basic things properly, like getting the power, water and gas connected again.^[558]

There is much uncertainty and unease about what the future might bring, because nobody really knows for sure what will happen, except that new crises are likely. The Global Risks Report 2018 of the elite World Economic Forum group envisages the scenario of "the death of trade", or "the end of trade as we know it".^[559] This would involve escalating trade wars, currency wars, and geopolitical turmoil that spread quickly around the globe, with weak regulatory bodies powerless to resolve anything. International laws, agreements and conventions would no longer be heeded; commercial trade would be governed by the law of the jungle and military power.

Similarly, in April 2018, IMF managing director Christine Lagarde referred to anxieties about global trade and tariff wars, a few years into the future. She said that national protectionist policies could tear apart the institutional and legal frameworks governing global trade.^[560]

The grey circuit

Globally, the shadow economy, the informal sector, the scope of criminal activity, corruption and the unemployed surplus population all remain very large.^[561] A lot of petty crime is no longer reported or recorded, since the police does not have the resources to cope with it, and victims do not bother to report it anymore.^[562] Kiki Seokhee Yoon states that "To the best of our knowledge, the probability that a crime will be reported is about 50 percent or less."^[563] Buonanno et al. say that "measuring crime is a challenging issue for social scientists".^[564]

According to CNN Money, "Top executives at the so-called "too big to fail" banks have avoided any criminal charges, even as their banks paid tens of billions of dollars in fines to settle charges of wrong doing leading up to the financial crisis."^[565]

Friedrich Schneider however claims the shadow economy is decreasing in the long run.^[566]

The Corruption Perceptions Index is only an indicator of corruption in the public sector of the economy, and not of corruption in the private sector, even although the private sector is much larger than the public sector. This index cannot show whether the total amount of corruption globally is increasing, constant, or decreasing. A more comprehensive measure is the Global Corruption Barometer.

Alternatives

More and more alternatives are developing to the capitalist mode of production, for the purpose of making a life, for allocating resources, for work and for organizing production (see also Sharing economy).^[567]

Prospects

The overall economic importance of these ten trends for capitalist value relations is disputed, among other things because they have always existed to some or other extent. It isn't clear, in what sense quantitative changes also imply qualitative changes in the functioning of capitalist society, or to what extent qualitative changes are quantitatively significant.

• Critics of capitalism argue that there are problems for capitalism today that cannot be solved at all, within the framework of capitalist value relations.^[568]
• Supporters of capitalism argue that ways will be found to get round the problems, and that capitalism is flexible or resilient enough to overcome all crises.^[569]
• The supporters of Henryk Grossman are firmly focused on the collapse of capitalism, when total surplus value shrinks and class struggle intensifies.^[570]
• Another position says that the problems can be solved within capitalism in some piecemeal or ad hoc way, but that this occurs at the expense of a gradual degeneration of capitalism.^[571]
• Some argue that capitalism is evolving or mutating into a post-capitalism, managerial capitalism, hypercapitalism, cybercapitalism or semiocapitalism - with different kinds of property rights and work organization.^[572]

So there is no agreement about the future of capitalism, the prognoses are difficult to prove, and all kinds of things could contingently happen.^[573] All the different perspectives may have part of the truth. Hillel Ticktin, the editor of the socialist journal Critique, describes the global situation as "an intermediate period in a transitional world."^[574] Mark Blaug argued that "the central weakness of modern economics" is "the reluctance to produce the theories that yield unambiguously refutable implications, followed by a general unwillingness to confront those implications with the facts." ^[575] These days accurate and comprehensive forecasts are worth gigantic amounts of money, and so, such forecasts often become a well-guarded secret.

In the wake of each big capitalist crisis, both Marxists^[576] and non-Marxists^[577] have prophesied the end of capitalism.^[578] Critics of breakdown theories, by contrast, argue that systemic crises, though hardly pleasant, are precisely the way through which the developmental problems and growing pains of capitalist business are resolved.^[579] Each crisis can also be approached not as a cause of misery, but as an opportunity to do things differently, or to realize the things that powerful people wanted to get done for a long time already.^[580] Things “get to the crunch” and when they do, business leaders and politicians have to do something about them.^[581] Through terrible ordeals, new techniques for managing, controlling and exploiting people are developed, which later go mainstream.^[582] And, after a fierce competition (or a war) involving capitalists, workers, states and nations, a new era of economic growth usually opens up. In the new era, typically a completely new group of capitalists takes the driving seat.^[583]

So although it might “seem like” the end of capitalism is nigh, it could also be merely a transition to a new kind of capitalism – a new capitalist regime, which evolved out of what was there before, but which few people had thought of, before it emerged.^[584] As an allocation principle, the forms of value could possibly be much more persistent and longlasting than Marxists and socialists think, even if they mutate into new configurations.

It is also possible that a new scientific understanding of socialism and communism will still emerge in the future, that sheds new light on the role of value in human society.^[585] So far, this understanding is actively blocked and suppressed by the super-radical Marxist academics, among other things because they believe that socialism never existed and/or cannot exist, and that value, markets and money are basically the same things. Some argue, that socialism should not exist, only full communism should exist - with lots of nice clothes, houses, Ferraris, yachts etc. Ernest Mandel states that, for the top communist functionaries in the Stalinist era, there was a sense in which communism already existed. Firstly, whenever these communist leaders withdrew funds from their Gosbank account to buy things, their debit was automatically cancelled out with a new credit to the same amount. Secondly, they could go to special shops not accessible to the general public, where they could buy almost anything they wanted.^[586]

Thermodynamics

Since 2016, the post-Keynesian economist Steve Keen has argued that any credible theory of value, whether classical, neo-classical or heterodox, must be consistent with the physical laws of thermodynamics. He claims that “every school of thought from the Neoclassicals to the Marxists” had been wrong on this issue, and all previous theories of economic value are flawed for that reason.

This is not a new idea (it was raised by Elmar Altvater in 1991,^[587] Nicholas Georgescu-Roegen in 1971,^[588] and Frederick Soddy in 1921)^[589] but Keen proposes a new type of production function, in which energy plays an essential role.^[590] The economist Anwar Shaikh however rejects the neo-classical concept of the production function as kind of sudoku game,^[591] preferring a reconstructed classical economics solidly based on empirical facts and econometric evidence.^[592]