Exodus and Counter-Economics, Part 3.2: From Class Theory to Hegemony


Bellum omnium contra omnes

In many models of the body politic, a threefold division of ‘domains’ often suggested as a means of parsing out the distinctive way that power operates in accordance with the different functions that mark post-Enlightenment society. These are, of course, the public sector (the apparatuses and agencies of government), the private sector (business), and civil society (the portions of society outside the public and private sector, consisting of organizations, associations, churches, unions, so on and so forth). In liberalism’s managerial discourse the social itself is approached in a manner akin to a ‘three-legged stool’, where each leg is one of these divisions; for liberals, equal strength in each form a sound and stable structure.

The process of stabilization pursued by the agents of power must push back constantly at a foaming sea of conflicts that rip through each of these domains. Tension is constant: we can tensions between elements in the public sector (examples ranging from the clash of political parties to the competition between agencies for funding), tensions between elements in the private sector (the ruthless competition between capitalists within and outside their given industries), and tensions between elements in civil society. The tensions, more often than not, cut across all through: we see alignments and alliances form between certain elements in the public and private sectors (such as Domhoff’s classic schema of different capitalist interests propping up different divisions within the state). Similarly, we see alignments and alliances between elements in the public sector and civil society (a Koch brother at the Cato Institute or a Soros at the Center for American Progress, for examples) and alliances between civil society and the public sector (the close-knit relationship between, say, a religious organization or a labor union between one party or another). Quite often even those mutual tensions will cut deeper across another still.

In other words, we’re left with a complex picture in which the public and private sectors and civil society descend into a battlefield of competing interests. This messes with the Rothbardian image of the state, which positions that state, encompassing both formal governance and special interests on one side, and free capitalism on the other. If we take the unfolding of relations to be operating in such a way and extrapolate Rothbard’s treatment, then the entity of the “state” encompasses a multitude of vectors, frequently with elements that are operating in contradiction to one another. Thus Rothbard’s state comes to merely mirror that of Marx: a plateau on which tension-wrecked relationships play themselves out. The durability of a Rothbardian analysis needs to equip itself with the real complexity that comes quickly into focus when analyzing the dynamics of power.

A more interesting thing to do would be to look at what promotes stability within what at first glance appears as a Hobbesian war of all against all. How does stability insert itself, despite the cascading factionless tearing through the corridors of power? More importantly, how does such a fragmented system maintain, despite its embattled nature, its basic form, and maintain the veneer of legitimacy over “truths” such as the sanctity of the state’s territorial claim, the ontological doctrine of capitalism, and the legal frameworks of private property rights? In other words, if the state is the tableau on which these relations play out, how does this tableau not simply disintegrate? To answer this, we can turn to the theory of hegemony, as posed by the Marxist thinker Antonio Gramsci.


The term “hegemony” was commonly understood as the domination of one group by another – most specifically, the colonial domination of one state or region by an external power. Through Gramsci’s analysis, however, that common understanding shifted to the one with which we are more familiar with today: the pervasive and often imperceptible way in which consent is organized. The power of hegemony, writes Rebecca Fisher,

results from the ability to limit or repress the imagination of the possible or even conceivable, thereby facilitating the implementation of policies and systems which may otherwise be deeply unpopular, and the incorporation, recuperation, and neutralisation of forms of politics which might otherwise have remained fundamentally oppositional… collective internalisation of the ‘truth’ of the ‘democratic’ nature of capitalism and its destiny to engender the best possible life for all, can limit [anti-capitalist] struggles, and heavily circumscribe their political intent, when they do emerge. (Fisher, Managing Democracy, Managing Dissent: Capitalism, Democracy, and the Organisation of Consent, pgs. 4-5)

This articulation of “hegemony” first appeared in Gramsci’s so-called Prison Notebooks, written during an imprisonment by fascist forces in the 1920s. From his cell he looked out across the Atlantic, to America, where radical transformations were taking place inside the walls of the factory. During the 1910s Fordism had become the defining characteristic of production. The younger cousin of Taylorist ‘scientific management’, Fordism relied on a stark division of labor between intrusive shop-floor managers and radically de-skilled workers, whose labor was no longer one of interaction within general purpose tools ala craft production; it was now specialized tools to be wielded in a site-specific context – the context, of course, being a fixed point on the assembly line. Under Fordism production expanded rapidly, necessitating wider transformations in society itself: higher wages, advertising, certain regimes dedicated to the management of sexuality, indulgences and leisure by way of moralizing, psychoanalysis, so on and so forth.

On one hand, Fordism appears a new form of control and domination by the capitalist class. On the other hand, it aims to ‘manipulate and rationalize’ society itself (Gramsci, Selections from Prison Notebooks, pg. 561). Fordism engenders a whole new approach to the world, seeking to collapse together the orientation of civil society with that of the dominant class, and by way of this veritable world-building secure consent for their activities.

Fordism is but one example of hegemony in action. The relations that produce hegemony are organic – for example, “Industrial technicians and managers are ‘organically’ bound to capitalist entrepreneurs.” (Peter Ives, Language and Hegemony in Gramsci, pg. 76) By want of the way production is organized in a certain stage of development, the existence of industrial technicians, managers, technocrats, whatever, is unavoidable. These figures in turn play the role of intellectuals, not in the sense they are bookish and inclined to philosophy, but because “they all organize ideas and present ways of understanding the world that are adopted by others.” Hegemony, thus, can take on the character of a sort of ‘common sense’, even if it is malleable, plastic, and the result of certain relations of power.

In Gramsci’s extrapolation, hegemony is what links the state and civil society through the web of tensions. Like Rothbard, Gramsci’s notion of the state extends past the mere structures of government itself – yet the theory is precisely the opposite of the libertarian, who as recounted earlier located the state in the junction of the state and certain private interests. The Gramscian state is the overlapping unity of two spheres: civil society and political society. We can relegate Rothbard’s understanding of the state to the Gramscian notion of political society, and in doing so open up “libertarian class theory” to a wider set of concerns and functions.

It is also clear that hegemonic shifts occur periodically, following in the wake of economic restructuring and with an implicit shifting of intellectual attitudes towards the system itself. The sort of managerial class that formed in the core of industrial production, for example, found its external compliment in the greater drive to manage society, particularly under the guise of “progressivism”. The so-called ‘New Class’ of progressive technocrats took on many forms, ranging from Thorstein Veblen’s “soviet of engineers” to President Herbert Hoover’s own emphasis on engineering to various intertwined social crusades that occurred throughout early 1900s, such as the “social hygiene”, “efficiency” and Taylorist movements. In the wake of World War 2, the archetype of the engineer morphed into that of the technician and was complimented by the social scientist and the policy scientist. During the Kennedy administration these aspects came together to fully shape the contours of domestic and international governing structures; everything from welfare programs to budgetary planning to the Vietnam War itself came dressed in the language of “systems analysis”, developed in the halls of the RAND Corporation and other think-tanks. (For an exploration of this turn in managerialism, S.M. Amadae’s Rationalizing Capitalist Democracy: The Cold War Origins of Rational Choice Liberalism and Paul Edward’s The Closed World: Computers and the Politics of Discourse in Cold War America are both excellent and complimentary reads)

The hegemonic function engineer, the technician, the social scientist, and the policy scientist all underwent a transformation as the ‘developed world’ moved from the mass production paradigm to one of post-industrialization and (partial) de-industrialization. Daniel Bell, himself one of the most esteemed social scientists of the 1950s and 60s, was among the first to identify the changing identity of the New Class by looking towards the way that technological changes in the field of occupations led a transformation in the field of education. Writing as the radically left-wing students movements exploded across not only the United States but the world, Bell suggested that the university itself would come to take the position formerly occupied by the factory as the center of social relations. Taking their cue from theorists like Bell, later thinkers and actors operating in the Autonomist tradition would turn their focus to the university the same way that they had earlier approached the factory (see, for example, Gerald Raunig’s Factories of Knowledge, Industries of Creativity).

Hegemony and the Cycles of Struggle

The Autonomist’s presentation of the “cycle of struggles” fits quite snuggly into the Gramscian theory of hegemony, and can provide a good perspective on how hegemony is reconfigured as sweeping transformations in the productive sectors (and by extension, the social) take place from time to time. In their analysis, the workerists and Autonomists began to dissect the nuances of worker’s struggles. When organizing into a collectivity, the autonomous workers carry out a composition of class that was capable of challenging capitalism’s organizations of production and labor. Capitalism, in turn, must re-act by carrying out a process of decomposition: since it requires labor, the system “cannot entirely destroy its antagonist” and so it must put into play new organizational forms, new technologies, and new techniques that disrupt the possibilities of this composition. At the same time, these new organizations, technologies, and techniques open up new ‘possibility spaces’ for struggle, leading the worker’s movement to undergo recomposition and thus restart the process. This movement of composition to decomposition to recomposition and back again is the cycle of worker’s struggles – an ever-shifting borderland of autonomy and control.

A brilliant example of this is that stage of capitalist development already identified by Gramsci as embodying a certain hegemonic formation – Fordism. Prior to Fordism was the era of what the Autonomists referred to as the “professional worker”, that is, the era of craftsmen who generally controlled their means of production (even though this reality was shrinking away). In the United States the radical nature of the professional worker’s struggle through institutions like the Knights of Labor and later the Industrial Workers of the World led to a close relationship between labor unions and the Socialist Party, with the purpose of this unity being “built around the concept of the worker’s management of industrial production.” (Nick Dyer-Witherford Cyber-Marx: Cycles and Circuits of Struggle in High Technology Capitalism, pg. 147) Fordism, with its partial automation and the enclosing of the worker’s agency by a rote process overseen by Taylorist-style technocrats, amounted to a profound blockage to the organized strength of that particular class composition.

The “Early Fordist” decomposition, of course, led directly to a recomposition – that of the “mass worker”, capable of disrupting the mass production process and organizing in large-scale unions such as the American Federation of Labor and the Congress of Industrial Organizations (AFL-CIO) and the United Auto Workers (UAW). This new composition revealed its power with events like the Flint, Michigan sit-down strikes of 1936-1937 – but the resultant forces of restructuring ushered in the “Late Fordist” hegemon, exemplified by the New Deal “class compact” between labor and management. This is the form that would persist until the crises of the late 60s and the polymorphous forms of revolt and insurrection they engendered, themselves setting the stage for the global restructuring under the neoliberal paradigm.

Processes similar to the cycle of struggles can be traced through ideological lens that blur the division between the state and the university. Take “modernization theory”, that framework for global development that appeared in the 1950s and 60s as the mirror-image of the preoccupations of Late Fordism. Modernization theory posed that if one was to set into motion certain variables in a given society, that society would experience a ‘take-off’ resulting in an evolution towards a Westernized affluent society. Developed by the technocratic social and political scientists in the halls of the universities and think-tanks linked to the Cold War establishment, modernization theory became the justification for neo-colonialism spanning the globe, from interventions in Latin and South America and the military excursions in Southeast Asia.

As the New Left pushed back against the Cold War establishment in the 1960s and 70s, modernization theory came under fire from radicals in the universities. Inspired by elements in Marxism and anti-colonial struggles, this assault came under the guise of “dependency theory”, which itself can be divided into two strands:

The first is the American-Marxist tradition developed by Paul Baran, Paul Sweezy, and André Gunder Frank, with important ramifications in the works of Theotônio Dos Santos, Marini, Anibal Quijano, and Bambirra. The second dependency tradition is the Latin American structuralist school that builds on the work of Raúl Prebisch, Celso Furtado, and Anibal Pinto at the Economic Commission for Latin America and the Caribbean (ECLAC,or CEPAL), and also on Marxist historian ssuch as Sergio Bagú and Caio Prado Júnior; this structuralist approach is best represented by Fernando Henrique Cardoso and Enzo Faletto, Maria da Conceição Tavares, José Serra,J. M. Cardoso de Mello, Osvaldo Sunkel, and Francisco Oliveira. One should note that the American-Marxist and Latin-American-structuralist dichotomy does not mean that only American Marxists contributed to the former because, as it is clear, Latin Americans did as well, or that only Latin American structuralists contributed to the latter because Marxists also participated. (Matias Vernegro “Technology, Finance, and Dependency Theory: Latin American Radical Political Economy in Retrospect”)

Unpacking the differences between each strand is beyond our focus here, but it is important to note that each set emphasized the “core” and “periphery” relationship in the world system, highlighting in tow the way that the developed world systematically exploits the underdeveloped world. This exploitation can be traced out in movements of elements in this system: technology and capitalist developmental paradigms flow from the developed world to the underdeveloped, for example, while capital (or in the more Marxian register, surplus value) flows back to developed world. Under colonial, neo-colonial, and modernization-based practices and discourses, the core and periphery relationship becomes a permanently uneven playing field; if development occurs, it is simply ‘the development of underdevelopment’.

Nicholas Guilhot has demonstrated how dependency theory, during the great period of global restructuring that was the 1970s, came to be recuperated by former adherents to modernization theory. A picture-perfect example of this capture was the Ford Foundation administrator who insisted that by funding and working with scholars who are “socialist in their political orientation”, Washington bureaucrats might be able to “diagnose what went wrong with reforms grounded in the liberal worldview, a perspective that by definition avoids recognition of power and conflict and is thus unable to explain its failure.” (Quoted in Guilhot The Democracy Makers: Human Rights and the Politics of Global Order, pg. 126) The result was the study of ‘democratic transitions’ and a corollary ‘democratic peace theory’, which unlike modernization theory, opened up a way towards political and economic intervention that appeared as egalitarian and humanitarian.

For scholars like William Robinson, this transition from modernization to democracy marks a shift in how control operates on the transnational stage. Just as how Gramsci’s theory of hegemony emphasized how linkages would be formed between actors in different positions of power to provide a ‘concrete’ model for consent, Robinson has suggested that the foreign policy of “democracy promotion” is, in fact, the promotion of “polyarchy” – the fostering of elite rule by way of democratic mechanisms in the targeted country. Linkages between these domestic elites and those on the international stage would, in turn, produce a harmonious set of relations equitable to the expansion of capital. To quote Robinson:

In the past, the US state promoted authoritarianism as the political system judged most appropriate for the free operation of international capital, and in this way functioned as what sociologists James Petras and Morris Morley refer to as the “imperial state”, promoting and protecting the expansion of capital across state boundaries by the multi-national corporate community. Under globalization the “imperial state” still plays the same role of promoting and protecting the activity of transnational capital, but globalizing pressures have inverted the positive correlation between the investment climate and authoritarianism. Now, a country’s investment climate is positively related to the maintenance of a “democratic” order, and the “imperial state” promotes polyarchy in place of authoritarianism. But this shift required a corresponding reconceptualization of the principle target in intervened countries, from political to civil society, as the site of social control. (Robinson, Promoting Polyarchy: Globalization, US Intervention, and Hegemony, pg. 68)

Exodus and Counter-Economics, Part 3.1: Libertarian Class Theory


The Roots of Libertarian Class Theory

“The theory of class conflict as a key to political history did not begin with Karl Marx,” wrote Rothbard in “James Mill and Libertarian Class Analysis”. “It began… with two leading French libertarians inspired by J.B. Say, Charles Comte and Charles Dunoyer, in the 1810s after the restoration of the Bourbon monarchy.” How was it that Comte and Dunoyer, the former a journalist and the latter an economist, came to hold the title of originator of class conflict?

Both Comte and Dunoyer were radicals of their time and place. Le Censur, the journal they founded together in 1814, was an organ of pro-liberal, anti-Bourbon and anti-Bonaparist rabble-rousing. The influence of this time of uprising and turmoil, the era of revolutions, is the foundation upon which their class theory is built. Like the dialectical opposition between the bourgeoisie and proletariat offered by Marx (who indeed took turns praising – and criticizing – both Comte and Dunoyer), there are two classes locked into political struggle:

  • The rulers, the group that has seized state power
  • The ruled, the group subordinated by the rulers, “taxed and regulated by those in command”

It’s easy to see how this would dovetail precisely the sort of political line that Rothbard held for the majority of his life: that the state was a vehicle of domination that did little than oppress others. At the same time, it allowed him to create a juxtaposition: on one side, the class struggle, and on others, the free market. In Comte and Dunoyer, “class interest… is defined in relation to the state” – itself a foreshadow of Marxist conceptions of the state that present it as a battleground for class conflict between the proletariat and the bourgeoisie. Drawing on J.B. Say, Comte and Dunoyer, by contrast, pose an opposition between the ‘natural state’ of relations between producers (encompassing both employers and workers), and the “conflict between interest [that emerges] between producers and non-producers, including those members of the producing class when they choose to exploite government-granted privilege.” (Ralph Raico Classical Liberalism and the Austrian School, pgs. 192-193)

Thus for Rothbard, the elimination of the state would entail the obliteration of class conflict – precisely the reverse of the Marxist (in particular the Marxist-Lenisit) suggestion that the elimination of class conflict would entail the “withering away of the state”.

Another vital piece of Rothbard’s class theory was pulled from the writings of political economist and sociologist Franz Oppenheimer. Despite being a self-described “liberal socialist” (that is, a free market anti-capitalist, in today’s parlance), Oppenheimer’s writings bestowed a large influence not only on Rothbard, but two of the major Old Right luminaries discussed in the last post: Albert Jay Nock and Frank Chodorov. Key was his book The State: Its History and Development Viewed Sociologically (published in German in 1908, but not translated until 1922), which was a resounding rejection of the “social contract” theories of the state; the state, Oppenheimer countered to Rousseau and his fellow thinkers, was founded in the first instance by one group defeating and subordinating another. In this respect, Oppenheimer’s theory hews closer to that of Comte and Dunoyer.

Oppenheimer drew a contradistinction between two different forms of obtaining wealth: on one hand, we have the “economic means”, which is achieved by way production and trade, and on the other the “political means”, which entails coercive action and the “forcible appropriation of the labor of others.” (Oppenheimer, The State, pg. 24) If the state has a distinct form, it is “an organization of the[se] political means. No state, therefore, can come into being until the economic means has created a definite number of objects for the satisfaction of needs, which objects may be taken or appropriated by warlike robbery.” (Oppenheimer, The State, pg. 27)

Taken together, a unified picture emerges: the state as a parasitic entity, founded upon violence, and shaped by its sole intention of appropriating the wealth generated by the relationship between owners and workers. Thus for libertarians like Rothbard, the state and capitalist were forces fundamentally opposed to one another. This would also entail a shifting of focus on what the state is structurally (i.e., the juridical order upon which it is founded) to what it does systematically, a move that effectively broadens the definition of the state beyond what most people would define it as. To quote Chris Sciabarra,

In his class theory, Rothbard operates with an expansive concept of the state. The state is not merely the governmental apparatuses and its fulltime bureaucracy. It is also constituted by the groups that have gained privilege through state action. The excluded groups constitute the ruled. The state provides legal, legitimized, systematic channels for the violent appropriation of the ruled to the benefit of a parasitic class. (Sciabarra Total Freedom: Toward a Dialectical Libertarianism, pg. 270)

Radical Libertarian Class Theory

Across the 1950s and 1960s, the intertwined sociological study of the relations between the economic and political elite and the “revisionist” school of American history emerged in syncopation with the burgeoning New Left. In 1956, C. Wright Mills published The Power Elite, a powerful exploration of the way that the top layer of American society, consisting of the corporate, political, and military elite, was not only detached from the everyday conditions of the rest of society, but in fact served as the actual basis of power in the country. As he wrote in the opening of the work,

As the means of information and of power are centralized, some men come to occupy positions in American society from which they can look down upon, so to speak, and by their decisions mightily affect, the everyday worlds of ordinary men and women… Whether they do or do not make such decisions is less important than the fact that they do occupy such pivotal positions: their failure to act, their failure to make decisions, is itself an act that is often of greater consequence than the decisions they do make. For they are in command of the major hierarchies and organizations of modern society. They rule the big corporations. They run the machinery of the state and claim its prerogatives. They direct the military establishment. They occupy the strategic command posts of the social structure, in which are now centered the effective means of the power and the wealth and the celebrity which they enjoy. (C. Wright Mills, The Power Elite pg. 4)

Amongst the historical revisionists we can count William Appleman Williams, who identified the rise of what he dubbed “corporate liberalism” – an approach to the population by those who power that saw individuals not only as passive actors, but groups who could be steered towards certain ends. A similar mode of analysis was offered by Gabriel Kolko; as was touched on in the previous post, Kolko had identified the Progressive Era not as some period of egalitarian reformism, but a period in which corporations utilized reformism as a means to protect their monopoly status from the threat of competition. This had ushered in, Kolko argued, a regime of what he called “political capitalism”, which would be exemplified by structures like Woodrow Wilson’s merger of state and economic power during World War I (as identified by Williams as the exemplar of his corporate liberalism) and the later New Deal. In the specific instance of the World War I, relations between classes had to be harmonized and variables eliminated so planning for production could continue as smoothly as possible, but this was also the more general condition of a society steered by industrialized mass production:

Political capitalism is the utilization of political outlets to attain conditions of stability, predictability, and security—to attain rationaIization –in the economy. Stability is the elimination of internecine competition and erratic fluctuations in the economy. Predictability is the ability, on the basis of politically stabilized and secured means, to plan future economic action on the basis of fairly calculable expectations. By security I mean protection from the political attacks latent in any formally democratic political structure… not that all of these objectives were attained by World War I, but that important and significant legislative steps in these directions were taken, and that these steps include most of the distinctive legislative measures of what has commonly been called the Progressive Period. (Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916, pg. 3; emphasis in original)

The approaches of Mills, Williams, and Kolko were synthesized by G. William Domhoff, who posed the study of elites as not a cohesive group, but as a disparate class with factions who regularly compete with one another. This competition, in turn, could be traced through the way that philanthropic foundations, think-tanks, academia, inter-governmental commissions and non-governmental organizations operate with regards to the population and towards one another. One key conflict identified by Domhoff, for example was between international-minded capitalists, more traditionally aligned with finance interests, and economic nationalists, who generally came from manufacturing (keep in mind that this was prior to the era of globalization). Cohesive political legislation often emerged, in this pre-global era, when one sided one out against the other and concessions had to be made.

During his overtures towards the New Left, Rothbard readily adopted these various theories and integrated them into his libertarian class theory, which he in turn propagated throughout the pages of Left and Right. Often it became impossible to differentiate from the words written by Rothbard and, say, the neo-Marxist analyses offered by people like Paul Baran and Paul Sweezy in the pages of Monthly Review  – or indeed, in the journals of the original Italian Autonomists. Consider the following words, for example, used to describe the Fordist era:

[It was] a new order marked by strong government, and extensive and pervasive government intervention and planning, for the purpose of providing a network of subsidies and monopolistic privileges to business, and especially to large business, interests. In particular, the economy could be cartelized under the aegis of government, with prices raised and production fixed and restricted, in the classic pattern of monopoly; and military and other government contracts could be channeled into the hands of favored corporate producers. Labor, which had been becoming increasingly rambunctious, could be tamed and bridled into the service of this new, state monopoly-capitalist order, through the device of promoting a suitably cooperative trade unionism, and by bringing the willing union leaders into the planning system as junior partners. (Murray Rothbard and Ronald Radosh New History of Leviathan: Essays on the Rise of the American Corporate State, pgs. 66-67)

and again:

For their part, the liberal intellectuals acquired not only prestige and a modicum of power in the new order, they also achieved the satisfaction of believing that this new system of government intervention was able to transcend the weaknesses and the social conflicts that they saw in the two major alternatives: laissez-faire capitalism or proletarian, Marxian socialism. The intellectuals saw the new order as bringing harmony and cooperation to all classes on behalf of the general welfare, under the aegis of big government. In the liberal view, the new order provided a middle way, a “vital center” for the nation, as contrasted to the divisive “extremes” of left and right. (Rothbard and Radosh New History of Leviathan, pg. 68)

Rothbard would carry these ideas with him as he drifted towards the right (unsurprising, given his tussles with the Koch brothers), and by the 80s and 90s attacked economic globalization on the same grounds as the paleoconservatives and Buchananites he was now acquainted with, finger ‘left-leaning’ institutions such as the United Nations, the Council on Foreign Relations, and the Trilateral Commission. SEK3 would note this by observing that “only rightist kooks and commies talk about ruling classes and class structures” – an observation that seems all too pertinent when we consider that with a decade there would be an unspoken – and very unfortunate – alliance between the far-left and the far-right when it came to the issue of globalization. But as Wally Conger later retorted,

Konkin was neither a rightist kook nor a commie. But his theory of ruling classes and class structures remains today a brilliant libertarian alternative to tired Marxist theories of class struggle. And that theory may serve as the foundation upon which to build a strong, revitalized libertarian movement.

It’s hard to say how much Konkin’s class theory truly deviated or enhanced Rothbard’s own bricolage of classical liberalism, Oppenheimer’s state theory, and the “elite theory” and historical revisionism of the New Left intellectuals. Nonetheless, libertarian class theory forms the center of SEK3’s agorist revolutionary practice by striking a distinctive parallel with leftist critiques of cooptation and recuperation: if the state is an organ of institutionalized violence and appropriation, how, then, could libertarians seek to utilize the state to their own ends? If philanthropic foundations, think-tanks and commissions were the functionaries of this order, how could libertarians receive funding from them, or enter into strategic alliances, while maintaining an ostensibly revolutionary position?

Next post, libertarian class theory will be compared with theories of hegemony and the Autonomist concept of the “cycle of struggles” to adapt and augment certain drawbacks of Rothbard’s problematic juxtaposition of capitalism and the state.

Exodus and Counter-Economics, Part 2: The Rise and Fall of the Left-Right Alliance


The Proto-Libertarian Networks

SEK3’s agorist philosophy emerges from the left-libertarian tendency that has snaked through the conventional history of American libertarianism, often just outside of view. American libertarianism, of course, brings to mind instantly the Tea Party, the Koch Brothers, John Stossel, Reason Magazine, the Cato Institute – that tangled network of big business apologists and their corporate backers. From this perspective, the notion of a “left-libertarianism” might seem to be a contradictory, or even possible one – especially when one considers that many people affiliated with ‘right-libertarian’ (and its leaner and meaner cousin, anarcho-capitalism) have cycled through the left-libertarian camp.

In his own history of left-libertarianism, SEK3 traces it back to four figures and the institutions with which they intertwined. The first of these individuals was Albert Jay Nock, the noted anti-war activist, Georgist, and editor of The Freeman between 1920 and 1924. A “philosophical anarchist”, Nock would become a staunch critic of the New Deal in the 1930s and a figurehead in the Old Right coalition. He also was the mentor to the second figure, Frank Chodorov; like Nock, Chodorov was a Georgist, and an anti-war and anti-New Deal Old Right icon. Also like Nock, he became the editor of a magazine called The Freeman, though this second one was not a direct descendent of the first. Chodorov’s The Freeman became the fertile soil from which a proto-libertarianism had begun to emerge, one that was tentatively linked to the Old Right coalition but increasingly seen as separate. In 1953 Chodorov launched the Intercollegiate Society of Individualists (ISI), an education and outright organization. William F. Buckley Jr., who within two years would launch the infamous conservative journal National Review, was tapped as ISI’s first president. If the line running from Nock to Chodorov would be the thread linking the Old Right to American libertarianism, it was Buckley who would be the thread running outward to the New Right.

The third figure is Murray Rothbard, who at the time these networks were being developed was an economics student at Columbia University. Across the 1940s he was closely aligned with the proto-libertarians, blending their leanings towards ‘philosophical anarchism’, their anti-war perspectives and general anti-government rhetoric with the Austrian School approach to economics. Existing only on the fringe margins of academia, Rothbard attracted the attention of the William Volker Fund (which was subsidizing the ISI and the Foundation for Economic Education, a New York-based educational organization that employed Ludwig von Mises and published Chodorov’s The Freeman); the organization would become one of his primary benefactors until its controversy-induced collapse in 1964. During this time period Rothbard would develop his own close-knit intellectual community, dubbed the “Cercle Bastiat”, the name a reference to the French economist and classical liberal Claude-Frédéric Bastiat.

The fourth and final figure in SEK3’s pantheon is Robert Lefebvre, a businessman and early proponent of what the more contemporary understanding of American libertarianism. Like Rothbard, he embraced the Austrian School’s economic doctrines, and like Nock he considered himself something of an anarchist. Anarchism, however, did not fully sit well with Lefebvre, as he felt that there was a tension between anarchism and Austrian-inspired individualism. His synthesis of the two became known as “autarchism”, Greek for “belief in self-rule”. In 1957 he established the Freedom School in Colorado to help propagate autarchism; in 1963, this would be followed with the Rampart Institute.

Towards the Left

The turn from the Old Right to the New Right came with the arrival on the political stage of Barry Goldwater. Like the Old Right, Goldwater espoused an anti-New Deal platform, but unlike his predecessors he supported an interventionist politics aimed at rolling back the influence of communism worldwide. This hardline stance on the Soviet system of government and communism as a philosophical system attracted post-Old Left proto-libertarians like William Buckley, who in 1960 organized a youth-oriented grassroots movements for Goldwater – the Young Americans for Freedom (YAF). The creation of the organization would be a watershed moment in American political history, as evidenced by the organization’s famed 1962 Madison Square Gardens rally that has become subsequently known as the “birthplace of the conservative movement.”

Others were less inclined to follow the drive towards the New Right. Notably, Rothbard himself was amongst these ranks, and he subsequently began drifting towards the burgeoning New Left Movement, the Students for a Democratic Society (SDS) in particular. SDS has its origin in the youth-wing of the League for Industrial Democracy (LID), a notable Old Left institution closely intertwined with the big labor bureaucracies that had come to domination the New Deal coalition (in this case, the AFL-CIO, an alliance that would lay much of the foundation for modern neoconservativism, as I have laid out elsewhere). In 1960 the SDS broke from the LID and repudiated the Old Left as whole. The bureaucracy of organized labor itself came under fire, with SDSers drawing heavily on the ‘revisionist histories’ presented by C. Wright Mills and Gabriel Kolko, both of whom had presented sociological and historical analyses of how class power operated in the United States. Kolko was of particular interest to the SDS: his 1963 book The Triumph of Conservatism, for example, provided a detailed tracing of the way corporate moderates had shaped the allegedly left-leaning social policies of the “Progressive Era”. Rothbard began to assimilate these works into his own projects, giving rise to the “libertarian class analysis” that I’ll cover shortly. Much of this new trajectory was fleshed out in Left and Right: A Journal of Libertarian thought, launched in 1965 with the explicit intent of bringing together the anti-New Right libertarians with the New Left.

Joining Rothbard in launching Left and Right was Karl Hess, who at the outset of the 1960s been a rising star in the New Right, a firm believer in the integration of Old Right concerns with anti-communist militarism. He had even become Goldwater’s chief speechwriter, but an encounter with the writings of the SDS sent him down a different path, as he would later recount in a 1976 interview:

I’m still holding out for the same old values I always supported. The only difference is that I’ve changed my mind about the identity of the good guys and the bad guys. The New Left now seems to me to be espousing the causes that the Old Right once stood up for: individual responsibility and self-determination.

Hess would join the SDS and the Industrial Workers of the World, and later in the 1960s could be found associating with far-left icons like Murray Bookchin, one of the earliest proponents of ecological anarchism, the Black Panthers, and those associated with the Whole Earth Catalog.

Hess was not the only figure to circulate between Goldwater-style republicanism and the New Left. In the early part of the 1960s, students at Robert Lefebvre’s Freedom School had founded a journal called The Innovator with one Kerry Thornley serving as editor; Thornley, later known for his travels on the wilder-and-woollier end of the countercultural spectrum, pushed for a libertarian-New Left alliances. Recruiting took place within the Goldwater camp and the YAF, leading to an internal left-wing inside the New Right. There was movement between the subaltern movement and the libertarian tendency that was forming in the New Left across the 1960s, but the two paths would ultimately cross at the dawn of the 1970s when the YAF carried out a membership purge. This, in turn, had been precipated by an encounter with the “Anarchist Caucus” (AC) in 1969, which had resulted in a physical altercation between the leftists who sided with the AC and the rights who attacked them.

The AC itself had emerged from the Radical Libertarian Alliance (RLA), an organization set-up by Rothbard and Hess with the goal of bringing together the left-libertarians with the New Left. As John L. Kelly recounts, the RLA arrived on the scene just in time to observe the breakdown of the SDS:

RLA members from New York and Virginia attended the June 1969 SDS national convention in Chicago, hoping to attract allies from the left. Unfortunately, they arrived just when the SDS was imploding into fratricidal combat between its Revolutionary Youth Movement and the Progressive Labor Party elements. In the chaos of that climactic the RLA did, however, manage to attract several SDS chapters, including [the] Lysander Spooner SDS chapter. These groups joined with dissident Young Americans for Freedom (YAF) chapters to form an Anarchist Caucus. (Kelly, Bringing the Market Back In, pgs. 99-100)

Janet Biehl’s biography of Murray Bookchin paints the anarchist as front and center to the formation of the caucus, writing that as the Revolutionary Youth Movement and the Progressive Labor Party traded blows and fought for control of the SDS, “Bookchin had found enough sympathizers, alienated by posturing, to form an anarchist caucus. About 250 met in the old IWW hall nearby and voted to endorse ‘The Radical Decentralist Project’ as their program.” (Biehl, Ecology or Catastrophe, pg. 124)

As the 60s faded into the 1970s, attempts to organize a revolutionary force from these myriad of interwoven strands abounded. In February of 1970, Lefebvre’s Rampart Institute hosted the California Libertarian Alliance conference, organized by former members of the YAF who had been purged and aimed at networking together the left and right. Amongst the attendees was SEK3, who at this point enters into the story as someone who took up the cumbersome task of trying to organize a left-libertarian – or, more explicitly, a left-Rothbardian – alliance.

Up through the 1980s SEK3 produced a slew of interrelated organizations, all furnished with similar names and acronyms. These included the New Libertarian Alliance (NLA), founded in 1974 as an underground society committed to spreading the use of agorism, and the Movement of the Libertarian Left in 1978. This latter organization was, as Kevin Carson describes, “as an above-ground counterpart to the NLA.” Through both groups and through a slew of journals, the theory of agorism and SEK3’s Rothbard-inspired “radical libertarian class analysis” trickled through the libertarian sphere. In 1974, the Libertarian Party, led by Edward H. Crane, had conducted a purge of its left-libertarian “radical caucus”; many of these individuals, in turn, became the foundation of the left-libertarian network.

Not all affiliated with the broader libertarian movement were impressed, much less Rothbard himself. SEK3’s style of left-libertarian resolutely rejected interacting with the levers of state power, while Rothbard was firmly committed to furthering the goals of the libertarian movement through electoral politics. In his response to SEK3’s New Libertarian Manifesto, Rothbard slashed out at his colleague-turned-opponent:

It is good to have the New Libertarian Manifesto in more or less systematic form for assessment and criticism.  Until now, the Konkinian vision has only been expressed in scattered pot-shots at his opponents, often me…  In this particular case, Konkin is trying to cope with the challenge I laid down years ago to the anti-party libertarians: O.K., what is your strategy for the victory of liberty?  I believe Konkin’s agorism to be a total failure, but at least he has tried, which is to his credit, and puts him in a class ahead of his anti-party confreres, who usually fall back on fasting, prayer, or each one finding ways to become a better and more peaceful person, none of which even begins to answer the problem of State power, and what to do about it.

Back to the Right

The networks established by SEK3’s network have persisted right into the modern era. Carson writes that

In 1999, Konkin founded the LeftLibertarian yahoogroup, the venue through which I first came into contact with him, his ideas, and his wide circle of friends. I had several years of stiulating discussion there that influenced my development to no end. In 2007, three years after Konkin’s death, the list imploded over a political dispute between J. Neil Schulman and just about everybody else, and most of the important figures in Konkin’s circle migrated to the Left-Libertarian2 group. Konkin’s old yahoogroup is pretty much an empty shell, although Neil Schulman and Kent Hastings stayed with it (and the archives are well worth digging into). Because of a similar dispute with Neil over the rights to the name “Movement of the Libertarian Left”, several members of LeftLibertarian2 collaborated to form a successor organization, the Alliance of the Libertarian Left. Again, just about all the leading figures in the old MLL migrated to the ALL and left the old body as an empty shell owned by Schulman…. Just by looking at the links on the Alliance of the Libertarian Left site, or clicking the movement’s associated blog ring, the Blogosphere of the Libertarian Left, you can find a wide range of sites hosted by Konkin’s old fightin’ comrades from the St. Louis days, more recent disciples of left-Rothbardianism and Counter-economics, and some even newer left-wing friends like me, who–despite never having considered ourselves followers of Rothbard or Konkin–have been strongly influenced by their thought.

While always a minor tendency in the wider libertarian movement, the detailed history of this strand has remained largely unknown, even after the term “libertarian” became once again everyday language in the wake of the Tea Party. In a time when libertarian pundits pointed fingers at people with ties to former 60s radicals as some sort of way to discredit opponents, the idea that a movement emerging from the Old Right moved in the same waters of the Old Left seems incomprehensible. It has been in the Libertarian Party’s best interest to relegate these parts of its heritage to the dustbins of history.

One might note that Crane’s purge of the radical caucus corresponds, in time, roughly to the rise of neoliberalism as a figure binding together the New Right. Crane’s goal was to ‘legitimize’ the Libertarian Party, to craft it into a potent political force for his own ambitions. When these fail through, Crane turned to some very familiar figures and landed himself a position as the Cato Institute’s first president:

After the Libertarian Party candidate was predictably crushed in his 1976 presidential quest, Crane, who had been instrumental in the campaign, was ready to go back to the private sector. Instead, Charles [Koch], whom he’d met during the campaign, took him aside and asked him what it would take to keep him in the libertarian movement. “I said my bank account is empty,” Crane later recalled. “He said ‘how much do you need?’” “A libertarian think-tank might be nice,” Crane answered… Crane became Cato’s president, but early employees at Cato describe Charles as single-handedly exerting iron control.” (Jane Mayer, Dark Money)

On hand to assist the setting up of the Cato Institute was Rothbard. Whatever misgivings the he had had with SEK3 and the left-libertarians, they were exacerbated in this time period. SEK3 would recall that

Relations between [Murray Rothbard] and SEK3 were maximally strained during 1977 when Rothbard joined the Kochtopus and moved to San Francisco. Rothbard was described as the “Darth Vader” of the Movement (Star Wars had just been released). Rothbard lashed back with his attack on the “space cadets” of science-fiction oriented libertarians, and was attacked himself within the [Libertarian Party] by “space cadets” who labeled his faction “grubeaters.” But Rothbard had a falling out during the 1980 Clark for President campaign with Crane who controlled the campaign, and his “shares” in Cato were confiscated by the other Board members. NL promptly supported Rothbard in his cry, “They stole my shares” and relations were largely repaired.

As Jane Mayer has noted “Some suspected Rothbard… was fired for criticizing [Charles] Koch… Rothbard accused Charles of dictating everything from the office décor to the design of Cato’s stationary… Rothbard also accused Charles of using nonprofit organizations to ‘acquire access to, and respect from, influential people in the government.’” (Mayer, Dark Money) By this time, however, Rothbard would be drifting toward a very non-neoliberal position on the right: that of the paleoconservatives (for more on paleoconservativism, see my essay here). In 1982, alongside Llewellyn Rockwell, Rothbard launched the Ludwig von Mises Institute, and within a few years they sought a political alliance with right-wing populism, labeling their own position as that of “paleolibertarianism”. Self-described “bleeding-heart libertarian” Steve Horowitz has given a succinct run-down of this transformation:

By the mid-80s though, conservatism was hot, thanks to Reagan, and the internal strife of the movement pitted Murray Rothbard against the Koch Brothers, with the accusation by Rothbard that the liberal libertarians were undermining the movement’s ability to appeal to a broader audience thanks to their supposed libertinism.  Murray wanted the hippies out… This led to the paleolibertarian strategy by the end of the decade after Rothbard broke with the Kochs and helped Lew Rockwell found the Mises Institute… It was about appealing to the worst instincts of working/middle class conservative whites by creating the only anti-left fusion possible with the demise of socialism:  one built on cultural issues… The paleo strategy was a horrific mistake, both strategically and theoretically, though it apparently made some folks (such as Rockwell and Paul) pretty rich selling newsletters predicting the collapse of Western civilization at the hands of the blacks, gays, and multiculturalists.

Thus the cleavage was complete. Between the two poles of the Koch-driven libertarian variant of neoliberalism and the paleolibertarianism promoted by the Rothbard and Rockwell, the synthesis was set for the conditions of libertarian discourse across the 1990s and 2000s. This synthesis itself would come to pass in the Tea Party, which saw the Koch interests attempting to appeal to the populist grassroots that the paleolibertarian movement had galvanized – and also saw the ultimate failure of this strategy. With mainstream libertarianism becoming increasing indistinguishable from neoliberalism itself, and the eclipsing of paleolibertarianism by the alt-right, it seems more pertinent than ever that the broader, fractured left rekindle its dialogue with the libertarian-left, itself now witnessing growth.

In the next post, I’ll take up the “libertarian class analysis” as it was developed by Rothbard and SEK3, and compare and contrast it with more traditionally socialist and anarchist modes of class analysis.

Exodus and Counter-Economics, Part 1: Escape Routes


“Capital’s continual restructuration is its response to working class sabotage,” wrote Antonio Negri in Capitalist Domination and Working Class Sabotage (1977). This is the clearest elucidation of the autonomist proposition: that capitalism’s development, from the introduction of new technologies that shape production to the dynamics of the core-periphery relationship, emerges from the ability of the working class to successfully confound – up to a certain degree, at least – the operations that restrain them. He continues:

…restructuration of the system is a precondition – the stabilisation of the regime, and vice-versa. The tactical problems arise within the relative rigidity of this relationship, and not outside it – at least, ever since capitalist development has rendered undesirable the option of operating force and duress (in the sense of mere physical force against the working class and the proletariat.) For capital the solution of the crisis consists in a restructuring of the system that will defeat and reintegrate the antagonistic components of the proletariat within the project of political stabilisation.

As Negri notes, the question then becomes one of strategy and tactics – which itself becomes yet another confounding proposition. All attempts to forge new tactics and strategies are reflected, albeit in a neutered way, in the following deployment of a new stage of development. When the neoliberal regime began to speak of militarized interventionism and expansion of markets in the terms of “democratic peace theory”, were they not responding to the demands for a ‘real democracy’ that emerged towards the tail-end of the global Keynesian order? That the intellectuals tangled up in the state’s bureaucracies, once so committed to modernization theory, turned to the anti-colonialist and post-colonialist theorists emerging from the New Left, speaks to this, just as the shifting of interest from top-down management of social relations to the shaping of civil society by way of the grassroots does as well.

On a less esoteric level, we can see the simultaneous dual “horizontalization” of the modern corporation by way of post-industrialization and the “precariatization” of the working class by way of deindustrialization as both part of a singular program that transforms the entire conditions of class power, a restructuring that unleashes both certain progressive dynamics (horizontalism, though for only members of select classes) and restraining dynamics (the hollowing out of the means to subsistence, setting off a race towards the bottom for many).

Antonio Negri, in his post-autonomist collaborations with Michael Hardt, introduces the concept of exodus, which while operating as a productive concept, also has certain drawbacks (namely, that it remains more metaphysical than concrete – a charge that can be levelled against much of post-autonomist discourse). To understand what is meant by exodus, we have to unpack what Hardt and Negri mean when they write that capitalism is “not simply… a social relationship but… an open social relation.” That capital operates as a social relationship is the core of Marxian theory, which looks at the way socially-necessary labor time is transformed into variable capital in order to ensure the extraction of surplus value. Thus, in the capitalism diagnosed by Marx, capital framed social relations in a sort of closed system, determined only by the value of the commodity itself. Hardt and Negri’s capital-as-open social relation, by contrast, speaks to the capitalism of now, and more specifically, to the forms of capital that prevail in post-industrialization – the so-called “creative industries” and things of that nature.

Hardt and Negri suggest that variable capital (human labor) is becoming detached from constant capital (machines) and is beginning to achieve autonomy of its own. The question stands why they believe this detachment is taking place, and they see the answer as twofold. The first is due to the “newly central or intensified role of the common in economic production”; and because “productivity of labor-power increasingly exceeds the bounds set in its employment by capital.” (Hardt and Negri, Commonwealth, pg. 151). By commons they mean the increased role of teamwork, cooperation, shared language, and communication that is necessitated by post-industrialization. By “exceeding the bounds”, on the other hand, they refer to the way in which skills learned on the job-site can be easily transferred outside of the workplace. Their example of in-bound productivity is the “auto worker” whose “extraordinary mechanical and technological skills… can be actualized only in the factory and thus in the relation with capital” (Hardt and Negri, Commonwealth, pgs. 151-152). The bound-exceeding productivity, by contrast, would be the interpersonal and communicative skills learned in the so-called ‘new economy’.

Obviously there are incredible problems with these sets of assumptions. Hardt and Negri’s discourse can only be articulated in a narrow field of visions, one that is clearly focused on white collar labor – or as they call it, “immaterial labor”. In other words, they look to post-industrialization, and appear as neglecting the reality of de-industrialization, and the spatial restructuring of production that took place on a global level. As such, the reality of the special economic zone doesn’t appear readily in their discourse. How are we to take seriously the idea that labor is becoming immaterial when it rests entirely upon the uneven development between the core and periphery, both at home and abroad? How can we take it seriously when even in the immediate environment of ‘immaterial labor’ itself entails a vast and global material network, one larger than the world has ever seen? And finally, it is clear that the biases explode through on Hardt and Negri’s rather offensive posing of the auto workers, whose skills have little applicability outside of the factory. Anyone who has ever worked with tools in the workplace one knows the vast applicability of the skills that have been learned. This is not some privileged status of the white collar laborer.

Viewed from this angle, Hardt and Negri’s post-autonomism is something wholly detached from its workerist roots. Nonethless, their idea of “exodus”, regardless of the defaults of its foundational propositions, is a concept with potency:

Class struggle… takes the form of exodus. By exodus here we mean, at least initially, a process of subtraction from the relationship with capital by means of actualizing the potential autonomy of labor-power. Exodus is thus not a refusal of productivity of biopolitical labor-power but rather a refusal of the increasingly restrictive fetters placed on its productive capacities by capital. (Hardt and Negri, Commonwealth, pg. 152)

The notion of “biopolitics” was first introduced by Foucault, who in the first volume of his The History of Sexuality detailed the emergence of a new form of “power over life”, one focused on the whole of society and inflected through “an entire series of interventions and regulatory controls: a biopolitics of the population.” (Foucault, The History of Sexuality, Vol. 1, pg. 139, emphasis in the original) Hardt and Negri pursue biopolitics through a slightly different register, as itself a terrain of struggle in which the population (or as they configure it, the “multitude”) can strike back against the organizations of power. Because it is a social phenomenon, they suggest, immaterial labor is itself a biopolitical plateau – thus producing a rather confusing image. Proponents of the ‘biopolitical turn’ would do well, perhaps to analyze Hardt and Negri’s depiction of post-industrial labor from the vantage point of Foucault’s own analysis in The Birth of Biopolitics, which articulates the rise of neoliberalism (from which post-industrial labor is indistinguishable) as a biopolitical program initially developed as a program to guide the state’s approach to its internal population. Indeed, can one even talk about a “population” before a state is there to make such an abstraction legible?

If we remove the questionable reference to “biopolitical labor-power” and open it to the explosive productivity of labor-power in general, we get a much more dynamic picture, one in which the capacity to do, to build (or rebuild) outside the purview of capital becomes a possibility. It also allows us to re-connect the post-autonomist discourse with the workerist tendency from which it springs. But the question still remains: what would exodus, in terms of a strategical move to deflect away from recuperation and cooptation by capitalism and the state, look like? How can the productivity of labor-power be put to use in a way that confounds the system?

I would like to bring into play here an important concept from the market anarchist tendency – that of agorism. Developed by the left-libertarian thinker Samuel Edward Konkin III (known as SEK3), agorism is a practice of engaging in counter-economics. As SEK3 defines it:

The Counter-Economy is the sum of all non-aggressive Human Action which is forbidden by the State. Counter-economics is the study of the Counter-Economy and its practices. The Counter-Economy includes the free market, the Black Market, the “underground economy,” all acts of civil and social disobedience, all acts of forbidden association (sexual, racial, cross-religious), and anything else the State, at any place or time, chooses to prohibit, control, regulate, tax, or tariff. The Counter-Economy excludes all State-approved action (the “White Market”) and the Red Market (violence and theft not approved by the State).

There are a number of ways in which the notions of agorism and counter-economics can shed light on forms that exodus could take or ways in which an exodus could be carried out. A series of posts will examine this more in depth, but first, a little background information on left-libertarianism and SEK3 is required.


Introducing the Autonomist-Market Anarchist Encounter


The Market and the State

Few things are as repugnant to the socialist and the anarchist as that most flummoxing of movement – the anarcho-capitalists. What the socialists and the anarchists have always been against, they proudly wear of a badge of honor. Whereas the socialist and the anarchist attack privilege and power in all of its forms, the anarcho-capitalist seeks to disengage privilege and power from one another, and wield that privilege against power, somehow without attention paid to the contradiction. While the socialist and the anarchist struggle to ground their theory and practice in the real world, the anarcho-capitalist proceed from abstractions such as those offered by the Austrian School. Where socialism and anarchism eschew the impulse to nationalism, fascism, and other insidious power relation, certain contingencies of the anarcho-capitalists through their lot in with the alt-right, the ‘race realists’, the so-called aristocratic anarchists, the Neo-Reactionaries, so on and so forth. Everywhere the socialist or the anarchist turns, the anarcho-capitalist emerges as its inverse, its shadow.

There is another function that the anarcho-capitalist has served to fulfill, which is the ongoing isolation of that most contentious of systems: the market.

It is over the market itself that those of us on the left must struggle – and I’m not referring to the defense of Keynesianism or social democratic market economies by some hyper laissez-faire anarcho-capitalist discourse. I’m referring to the free market itself, or, as William Gillis calls it, the “freed market”, a scenario in which exchange takes place beyond the purview of state command or corporate control. The concept of the freed market, despite drawing on laissez-faire doctrines and at times on the writings of the proto-neoliberals, is a distinctively anti-capitalist concept, and rejects at every turn the sort of codifications that lead to the current crisis.

Deferring material analyses of the divergence between markets and capitalism and related issues to future posts, I would ask the reader familiar with the ravages of neoliberalism to answer the following questions:

  • When a food riot breaks out against the IMF-imposed corporate looting of a society, who wields the baton against the unruly population so expropriation can continue?
  • Who negotiates the trade deals that gives rise to these sorts of conditions, and the conditions that give rise to sweatshop labor, uneven development, and exploitation of the periphery by the core?
  • When malinvestment crumbles the ground beneath the feet of the top-heavy financial firm, who provides the cash so business can continue as usual?
  • Who enforces the law that locks the academic article behind a $30 pay wall, that gets you penalized for torrenting a movie or video game, or that insulates a piece of genetic code as intellectual property?

The answer, of course, is the state. “Hold on a second,” one might be saying now. “The neoliberal era is marked by the state being seized by the corporations”, and on this they would be right – up to an extent. Substandard discourses on neoliberalism like that of Naomi Klein treats neoliberalism as the deconstruction of state power, while paradoxically emphasizing the role of contractors and militarized intervention in the same breath. David Harvey’s popular account, on which Klein’s approach is based, makes it appear as if states were duped by smooth-talking policy wonks and their big business backers. While smooth-talking policy wonts and big business backers undoubtedly played a role in furthering the neoliberal agenda, we should recall Foucault’s treatment of early neoliberalism in The Birth of Biopolitics as a philosophical discourse surrounding the management of the population by way of the state. In many respects this precisely mirrors the formation of capitalism’s required industrial working class, which proceeded by ways of laws that regimented, standardized, and managed people and their power.

That’s well and good, the reader is probably saying – but would a freed market not simply lead to the concentrations of wealth we have today? Would it not lead to a multiplication of inequalities and forms of exploitation? Would there not be the usual case of owners of property and capital running roughshod over the workers, and would not the same asymmetrical periphery-core develop? I’ll be dedicating future posts to these topics, but for now let’s consider Roderick Long’s reflections on the relationship between consumers and producers in this scenario, discarding along the way the focus on the concept of the “free nation”:

In a free nation, will consumers be at the mercy of producers? With no government agencies to monitor quality control, prohibit price gouging, and the like, won’t it be easier for businesses to exploit their customers?

On the contrary, I think it will be less easy. The greatest threat to such exploitation is competition. The more businesses there are competing for customers, the more difficult it will be for any one business to get away with mistreating its customers.

Consider: The easier it is to start up a new business, the more new businesses there will be. So what determines how easy or difficult it is to start up a new business? Two factors: inherent transactions costs, and government regulations.

Government regulation has the same effect on the economy that molasses has on an engine: it slows everything down. The more hoops one has to jump through in order to start a new venture — permits, licenses, taxes, fees, mandates, building codes, zoning restrictions, you name it— the fewer new ventures will be started. And the least affluent will be hurt the most…

In a free nation, by contrast, new businesses would be sprouting up at a rate we can barely conceive, and would be run primarily by the poor and the middle class. No company could afford to treat its customers like dirt, as so many companies do today, because it would be so much easier to start up a rival company that treated its customers better.

or his reflections on labor relations:

Employers will be legally free to demand anything they want of their employees. They will be permitted to sexually harass them, to make them perform hazardous work under risky conditions, to fire them without notice, and so forth. But bargaining power will have shifted to favor the employee. Since prosperous economies generally see an increase in the number of new ventures but a decrease in the birth rate, jobs will be chasing workers rather than vice versa. Employees will not feel coerced into accepting mistreatment because it will be so much easier to find a new job. And workers will have more clout, when initially hired, to demand a contract which rules out certain treatment, mandates reasonable notice for layoffs, stipulates parental leave, or whatever. And the kind of horizontal coordination made possible by telecommunications networking opens up the prospect that unions could become effective at collective bargaining without having to surrender authority to a union boss.

In this latter quote, Long suggests that in a freed market scenario, the working class would operate far more autonomously, be able to exert its real power over the employer, and to play a larger role in shaping its destiny. This might smack of idealism, and perhaps there are elements of that in play. What interests me is the possibility of an alignment between a market anarchism that uses the agency of the laborer as its foundation (as opposed to the “anarcho”-capitalist perspective, which uses the viewpoint of the businessman as its starting point) and autonomist and workerist approaches to socialism and anarchism. While these two forms may seem at odds with one another, and in many respects are odds with one another, the thread the links them is the notion that the workers have a certain power that can be leveraged against those that exploit them.

Let’s look at this further.

Within Capital

…there are always two perspectives, capital’s versus the workers’s! The analysis of every category and phenomenon must be two-sided…

So wrote Harry Cleaver in Reading Capital Politically (pg. 75). While itself a rather strong reduction from the wider array of relationships that cut across the capital-worker dichotomy, it is nonetheless a useful guidepost for examining how certain relationships do play themselves out. Consider, for example, the wage itself, that for which the worker trades his or her labor-power. We can identify at least three two-fold relationships revolving around this element:

1.A) For the worker, the wage is revenue

1.B) For the capitalist, the wage is a cost

2.A) The wage hides the exploitation that takes place – i.e. the difference between wages-as-variable capital and surplus value

2.B) The wage provides a space of struggle in which the worker pushes back against exploitation – i.e. the struggle for higher wages

3.A) The wage divides the working class and forces the workers to compete amongst each other

3.B) The wage unites the working class and pushes them towards a common goal

Dichotomous spaces of tension such as these derive their existence from within the historical circumstances that propel capitalism into being a world system, and by their nature compose the spaces through which class struggle manifests itself. As Cleaver writes, “the class struggle is over the way the capitalist class imposes the commodity-form on the bulk of the population, by forcing people to sell part of their lives as the commodity labor-power in order to survive and gain some access to social wealth.” (Cleaver, Reading Capital Politically, pg. 82). Under such a system, the capitalist sits, parasite-like, atop the unfolding of capital. The working class produces the commodity, and that commodity is sold to the working class who buy it back with the wages they obtain by producing the commodities in the first place. Kevin Carson captures this scenario perfectly in his humorous depiction of a satirical cartoon from early 1900s America:

Oscar Ameringer illustrated the real-world situation in a humorous socialist pamphlet, “Social for the Farmer Who Farms the Farm”, written in 1912. A river divided the nation of Slamerica into two parts, one inhabited by farmers and the other by makers of other clothing. The bridge between them was occupied by a fat man named Ploot, who charged the farmers four pigs for a suit of clothes and the tailors four suits for a pig. The difference was that compensation for the service he provided in letting them across the bridge and providing them with work. When a radical crank proposed the farmers and tailors build their own bridge, Ploot warned that by depriving him of his share of their production they would drive capital out of the land and put themselves out of work three-quarters of time (while getting the same number of suits and pigs, of course. (Carson, The Homebrew Industrial Revolution, pg. 277)

Ameringer’s cartoon, on one hand, can elucidate Long’s argument that as one moves towards freer market forms, the more flexibility the working class has a whole has towards its own position. One the other hand, it embodies the autonomist argument for the working class’s self-organizing capabilities. Between the two, it easily illustrates how the position of the capitalist is not nearly sacrosanct as he determines it to be. It follows, then, that the wage itself – over which so many battles are fought – is not so sacrosanct either.

The only scenario in which Ploot could enforce his will is in the scenario that he holds the power of monopoly. Something must make it so that his is the only bridge capable of being built; something must prevent the workers from build new bridges.

The ardent capitalist, be it a liberal (in the contemporary American sense of the word) or even the more vulgar of the anarcho-capitalists, may protest at this point and argue that there are no real monopolies exist today. One side might suggest the ability of the Justice Department to break apart would-be monopolies through anti-trust laws (and argue for their strengthening), and the other might suggest that as we’re approaching what they might consider a relatively free market, the tendency towards cartelization that flourished in earlier, more protectionist eras is breaking down. At best we’ll get the concession that certain firms hold a ‘near-monopoly’ status. This will usually be followed a series of caveats about successful entrepreneurs, usually in the tech sector, who struck out with a pile of capital from angle investors and made a killing. If the majority of the working class isn’t pursuing this path, then it is always an issue of time preference and risk.

These are the perspectives of the would-be bureaucrat and the temporarily embarrassed millionaire. From the perspective of the working class, the evidence of monopoly and the exploitation it engenders is splayed across their bodies and their psyches. How many more reports about increasing rates of anxiety, depression, self-harm, illness, whatever, all linked to increasing workloads, less time, and less pay before those inclined to managerialism, on both the left and the right, recognize that individuals are not where they want to be, and more importantly, cannot escape from that place? Why do individuals, like those described in Barbara Ehrenreich’s Nickle and Dimed: On (Not) Getting By in America, remain trapped in employment that leads to downward cycles of poverty (despite their entire horizon of time filled by another shift that was picked up or a second or third job to go to), instead of – as the anarcho-capitalists would suggest – ‘bettering themselves’. The reason is that they cannot – and it is monopoly that does not let them. To quote from the individual anarchist Dyer Lum’s essay “Industrial Economics”, from 1890:

Monopoly hedging in a portion of human activity at the expense of the rest; and at the same time, as zealously protecting the very restrictions of which labor complains. The opposite school, having a partial view of the truth that the law of supply and demand can only have full course under liberty, and that all interference but hampers their natural adaptation to each other, still believed that they were contending under that standard while limiting their demands for freedom of trade to the manufactured product, an error which even Herbert Spencer has not escaped. In asserting theoretical liberty for labor and capital, they are blind to the fact that labor was handicapped, inasmuch as the capital employed was the offspring of monopoly. Thus their freedom only enters in after monopolized production has thrown the product on the market, and is never conceived as entering into relations prior to production.

Without monopoly privileges, the body that Marx and Engels described as the “industrial reserve army” – or perhaps more properly for our world of uneven post-industrialization and industrialization, the “reserve army of labor” – would dissipate. This is the large group of the unemployed and the underemployed, and the people we would describe as “precarious laborers”. In the first volume of Capital, Marx described the reserve army, here in the guise of the “Relative surplus population”, as the “pivot upon which the law of demand and supply of labour works”, and as the figure “absolutely convenient to the activity of exploitation and to the domination of capital.” (Marx, Capital, Volume 1, Chapter 25, Section 3) How so? For starters, it is the function that divides the working class. With only a limited number of available employment opportunities, the workers are compelled to compete with one another – and because the number of would-be workers in the reserve army outstrips the number of available jobs, the owners of capital themselves are the ones who set the wage rates. The workers that compose the working class are thus not only competing against one another, but they are trying to outbid one another for the lowest wage possible.

Thus it becomes the monopoly privilege, itself irreducible to 1) the bloody genesis of capitalism but maintained by 2) the activities of the state (who assisted so much in putting into play capitalism’s genesis as well) which sets the conditions for the dialectical struggles surrounding the wage itself that were identified above. In this sense the struggle against capitalism is always emergent within capitalism, even if the ultimate goal of this struggle is to move beyond capitalism.

This sets up the fundamental conundrum posed in autonomist theory: that while the working class struggles within and against capitalism, this struggle between the two plays itself out within capitalism’s drive to development. In other words, the struggles of a certain stage of capitalist development will come to bear on the following stage in a way that transforms the nature of the struggle. The introduction of Taylorism in the 1880s and Fordism in the 1900s both served to limit the ability of the workers to leverage their power on the shop-floor, while the introduction of Keynesian stimulus programs, expansive welfare nets and the consumer-driven “affluent society” served as a counter-point to the new cycle of struggles that Taylorism-Fordism unleashed. The more contemporary intersection of stringent anti-labor action and the discourses surrounding ‘lifestyle capitalism’, ‘creative capitalism’ and the like serves to combat the more multiplicitious forms of resistance that exploded across the 1960s.

This sets up both positive and negative dynamics that the class struggle must be wary of. Positively speaking, it shows can resistance can enact change that reverberates the social body – and also shows how to escape some of the traps to found in Marx’s writings. Negatively speaking, it shows how the most earnest revolutionary action can be rebounded back into service of the state and capitalism in ways similar to how Deleuze and Guattari, for example, described the ‘addition and substraction of axioms’ by the system to uphold it, or the processes of co-optation that I have analyzed elsewhere. Liberatory action, at least in the truncated from that power ultimately allows, becomes an iron cage, albeit one with bars wider enough that wiggling through might be a possibility.

Next we’ll start looking at some ways that left-wing market anarchism might offer some possibilities of shifting this scenario.

A BRIEF PRIMER ON VALUE THEORY, PART 2.2: The Transformation Problem


Two Critiques

Of Equilibrium and Inconsistency

In von Helmholtz’s explication of the first law of thermodynamics, delivered at the Physical Society of Berlin in July of 1847, it is suggested that all energy in the universe is held at a constant level. Energy may change forms, moving from one state to another, with more energy accumulating in one state at time and more in another state at another – but the aggregate amount remains. The introduction of entropy, of course, altered this picture, leading to the scenario we described at the end of the previous post.

Marx’s value theory follows closely in these footsteps. Just as energy, in the framework of the first law of thermodynamics, remains at a cosmological constant, so does the amount of value in the economy. It might asymmetrically exist in different forms, Marx says, but there is an overall consistency when the system is viewed as a totality. This leads Marx to three suppositions concerning the capitalist system:

  • The total amount of value is equal to the total amount of prices
  • The total amount of profit is equal to the total amount of surplus value
  • The total amount of rate of profit in money is equal to the total rate of profit in value

It has been argued that Marx failed in properly demonstrating these conclusions, which arises we look the way the ““the transformation of values into prices of production” is handled. This itself requires just a bit of unpacking, so let us return to the example of our two table-making firms from the previous section. When we left off, Firm 1 had decided to follow in Firm 2’s steps by adopting labor-saving technology. Assuming that these firms are the two major ‘sinks’ for the production of value in this economy, the rate of profit would understandably fall. This falling rate of profit is an example of the average rate of profit. If a series of firms were to multiply (some chair-making firms, perhaps) and employ a large number of out-of-work laborers, we would almost certainly see a reverse on the rate of profit’s fall, and the average rate of profit would be one that is rising. As we’ve seen, this amounts to the moving around of the value in the system, locked into what Gilles Deleuze and Felix Guattari might describe as a “process of becoming”.

So what is the problem?

Within several years of the publishing of the third volume of Capital, Eugen Böhm von Bawerk, a marginalist economist who would bestow much influence on the nascent Austrian School, would attack Marx on the grounds of an inconsistency that arises from this very issue. While remarking that Marx was correct in that “it is quite true that the total price paid for the entire national produce coincides exactly with the total amount of value or labor incorporated in it”, he argued between the first and third volume of Capital two contradictory propositions arose:

  • That commodities sell at their value,
  • That commodities sell at their prices of production

This supposition, however, is not at all reflected in Marx’s own writings:

If prices actually differ from values, we must, first of all, reduce the former to the latter, in other words, treat the difference as accidental in order that the phenomena may be observed in their purity, and our observations not interfered with by disturbing circumstances that have nothing to do with the process in question. We know, moreover, that this reduction is no mere scientific process. The continual oscillations in prices, their rising and falling, compensate each other, and reduce themselves to an average price, which is their hidden regulator. It forms the guiding star of the merchant or the manufacturer in every undertaking that requires time. He knows that when a long period of time is taken, commodities are sold neither over nor under, but at their average price. If therefore he thought about the matter at all, he would formulate the problem of the formation of capital as follows: How can we account for the origin of capital on the supposition that prices are regulated by the average price, i. e., ultimately by the value of the commodities? I say “ultimately,” because average prices do not directly coincide with the values of commodities, as Adam Smith, Ricardo, and others believe. (Marx, Capital, Vol. 1, Chapter 5, note 24; emphasis mine)

In other words, we are back on the terrain of Marx’s attempts to go beyond the Ricardian LTV, which might very well have been the true target of von Bawerk’s attack (for an extensive examination – and rebuttal – on Ricardo, see Carson’s Studies in a Mutualist Political Economy). Otherwise, how could von Bawerk not have reconciled his understanding that ‘total produce’ was equal to ‘total value’ in the economy with the dynamic and evolutionary model that Marx had drawn from the popular sciences of their day? Andrew Kliman deals with von Bawerk’s flawed argument quite quickly, writing that

Although it is “quite true” that total price equals total value, it is also irrelevant, because it has nothing to do with “the exchange relations,” the rates at which goods exchange. Böhm-Bawerk’s point was that Marx tells us that goods A and B together sell for $3, while the question here is instead whether A sells for $2 and B sells for $1, or whether A sells for $1 and B for $2. (Kliman, Reclaiming Marx’s Capital: A Refutation of the Myth of Inconsistency, pg. 145)

Internal Inconsistency, Round 2: Ladislaus Bortkiewicz

The charge of internal inconsistency would be furthered in the early 1900s by the Russian economist and statistician Ladislaus Bortkiewicz, a neoclassicalist with Ricardian leanings. His treatment of the transformation problem would be largely overlooked for some forty years, finally getting recognition when it was released in 1949 in a single volume containing von Bawerk’s Karl Marx and the Close of His System (1896) and Rudolf Hilferding’s response (1904). For Paul Sweezy, a Marxist economist of the Monthly Review School (and the editor of the 1949 compilation), Bortkiewicz’s critique of Marx was not an attempt to shatter the foundations of Marxism (as was von Bawerk’s motiviation), but was actually a bid to rescue Marx by reconciling the reconcilable elements. As he wrote in his introduction to the volume, Bortkiewicz’s analytic starting point was

the flaw in Marx’s method of transforming values into prices of production… Most previous (and, for that matter, subsequent) critics consider the theory of value and surplus value to be the the Achilles’ heel of the Marxian system. Bortkiewcz almost alone regarded it as Marx’s most important contribution. By eliminating relatively superficial errors he hoped to be able to show that the core of the system was sound. (Paul Sweezy, “Editor’s Introduction” in von Bawerk Karl Marx and the Close of His System, pgs. xxix-xxx)

Bortkiewcz argued that when one applied Marx’s arguments to a standard neoclassical input-output table, the mathematical outcome was one that did not reflect the arguments made by Marx in Volume 3 of Capital. In Bortkiewicz’s model, constant and variable capital (measured in their value) flow into the input, and emerge from the output as commodities at the price of production – leading Bortkiewcz to suggest, in good Ricardian fashion, that prices for inputs are bought at the price of production. Yet when he plugged the price of production into the input side, the mathematics fell apart, and the three suppositions about the equalization of value, price, and profit falls apart.

This might strike the reader as odd, as it treats inputs and outputs as something whose prices are determined simultaneously. In other words, Bortkiewicz is suggesting that when the farmer utilizes $100 worth of corn seed, he or she is simultaneously determining $100 worth of corn. But this is not at all how it works in the real world. The farmer enacts labor on the seed corn, and must wait for it to grow; at the same time, the swirling miasmas of market forces and exogenous factors. Two hundred pounds of corn seed might be $150 at the beginning of the planting season, but be $130 or $175 the next. New prices of production are what determine input-costs, not the prices of production in the previous cycle.

This seems logical and sound, but the question remains: does it reflect Marx’s theory?

The Temporal Single System Solution

After Sweezy popularized Bortkiewicz’s essays, the critique became the dominant approach to Marxian economics. While its proponents hailed it as the solution that would save Marxism from the quagmire that marginalism, Austrian school, and neoclassicalism had relegated it to, it also critically undermined Marxism in multiple ways. On one hand, it effectively separated the question of price from the question of value; without the two being tied together, labor lost its centrality in the socialist debate. On the other hand, it also pushed back against notions such as the tendency of the rate of profit to fall: if price and value were separated, so was the binding together of value and rates of accumulation. It was for some of these reasons, perhaps, that the mainstays of Marxian thought – Sweezy’s Monthly Review School, for example – turned towards Keynesianism as a solution to the other problems Marx had identified.

In the 1980s a pushback against the Bortkiewiczian perspective arose in the form of the temporal single system solution (TSSI), led by people like Andrew Kliman and Ted McGone. The goal of the TSSI was to illustrate that there was, in fact, no internal inconsistency between Marx’s propositions, that a solution could be found that allowed the cohesiveness of the profit, value, and price equalization with the relationship between labor, vale, and price. Put most simply, the TSSI solution is precisely what I alluded to above – keeping in mind that the cost of production would play a role in the price of production, while understanding that one cannot determine the price of input and output simultaneously.

The TSSI followed in the wake of what was called the simultaneous single system solution (SSSI), which posed to solve the Bortkiewczian conundrum by treating value and price as separate things that would none-the-less be determined interdependently. Variable capital is treated as the sum value received in the form of wages; constant capital is treated, as Kliman writes, “as the sum of value needed to acquire the means of production.” He continues:

The constant-capital value therefore depends on the prices of the means of production, not their values. Thus the SSSIs do away entirely with the notion of a distinct value system in which the constant and variablecapital value depend on the values of inputs (means of production and subsistence). As in Marx’s own solution, there is only a single set of constant and variable capital figures. For this reason, all three of his value-price equalities are preserved by the SSSIs, at least in a formal sense. (Kliman, Reclaiming Marx’s Capital, pg. 163)

Kliman illustrates this with the following chart (found in Kliman, Reclaiming Marx’s Capital, pg. 163), which depicts the Marxian schema of Department I (labeled here as Branch 1), which produces the means of production, and Department II, (here Branch 2), which produces the commodity.  Note that in this chart, the value of labor is measured at $3 a unit. In regards to the symbols and formulas, PPU is price per unit of each good produced by one branch or another; C is constant capital; V is variable capital; S is surplus value; W is the value of the output, or C + V + S; π is the average rate of profit; P is the output’s price of production, or C + V + π; S/(C+V) is the value rate of profit; and π/(C+V) is the price rate of profit.



We see that all three of Marx’s aggregate equalities are preserved. Total price and total value both equal 288, total profit and total surplus-value both equal 48, and the general price and value rates of profit both equal 20%. These are extremely important results, since they disprove a longstanding claim of dual-system theorists [i.e., the Bortkiewiczians] that it is impossible to preserve all of these equalities at once. (Kliman, Reclaiming Marx’s Capital, pg. 164)

Yet at the same time, proponents of the TSSI solution like Kliman find the SSSI solution to be untenable, for it serves to solve one charge internal inconsistency while opening up another. This new inconsistency is based on the continued notion the Marx held that inputs and outputs would be priced simultaneously: by doing so, the “causal relationships” within the equalizations deviated from Marx’s theory. For Marx, the value rate of profit – S/(C+V) determines the price rate of value – π/(C+V). In the SSSI, it is determined by the “physical rate of profit”, which is “physical surplus divided by physical output” (Kliman, “Physical quantities, value and dynamics”). In doing so, the value rate of profit and the price rate of profit are locked into an eternal alignment. This undermines a different argument put forth by Marx: that capitalism exhibits a tendency of the rate of profit to fall. If the value rate of profit and the price rate of profit march in lockstep, then the disequilibrium which triggers this tendency cannot take place.

Kliman’s argument is that under the TSSI solution, the casual relationships with the aggregate equalization are retained in a way that allows both the mathematics to emerge in a way that reflects Marx’s theory and the tendency of the rate of profit to fall. The formulation of the TSSI is almost identical to the SSSI model, the only difference being the price and value are not determined simultaneously. The results, however, are quite different. Compare the following chart (drawn from Kliman, Reclaiming Marx’s Capital, pg. 166) with the previous chart:


Both branches’ constant capital investments are the same as before, because the input price of Good 1 and the amounts of means of production they use are unchanged. Owing to the 50% reduction in employment, however, the variable capital investments and the surplus-values produced are 50% smaller than before. Thus the value of each branch’s output falls. Since aggregate surplus-value declines by 50% while the aggregate capital value advanced declines by only 5%, the aggregate rate of profit falls sharply. All three aggregate equalities hold true, and in a substantive sense. Because less living labor is performed, there is a fall in the amounts of value and surplus value produced, which in turn causes a decline in total price and profit. And because less living labor is performed, the value rate of profit falls, which causes the price rate to fall as well (Kliman, Reclaiming Marx’s Capital, pg. 165)

A Brief Primer on Value Theory, Part 2: Unpacking the Marxian Theory of Value


From Ricardo to Marx

We now arrive at Marx and his own take on the labor theory of value. This section will be longer and more detail that the cursory treatment of the Phsyiocrats, Smith and Ricardo, which was perhaps unjustly short and taking in depth. But this, after all, is only a brief primer intended to illustrate the broad differences, and not a detailed study. If more time is spent on Marx, it is because Marx’s treatment of capitalism is far more systematic than the Classicalists, and it is difficult to talk about, say, value, without dipping into other various, such as the so-called “transformation problem”.

Given the dialectic nature of Marx’s approach to political economy, it’s interesting to see how a sort of play of contradictions is what drives the various transformations in the LTV. The Ricardian approach, which correlated value-as-labor with a price-as-production cost theory was an attempt to carry out a synthesis of the contradictory perspectives offered by Smith (value-as-labor and labor-as-stock). It would be this correlation that would, in fact, give rise to a particular school of pro-market socialists. This school of “Ricardian socialism” would include in its numbers individuals like Thomas Hodgskin, Charles Hall, John Francois Bray, and Percy Ravenstone, had ties to various working class movements and co-operative movements such as the Chartists, the Owenites, the Knights of Labor, and would greatly influence Proudhon’s development of mutualism. In their schema, the capitalist system was inherently exploitative because of the operations of value: if price and value are the same, then the laborer should be receiving the full proceeds of that value in the form of profit. As the capitalist is taking a portion of these proceeds, the laborer is being systematically robbed. To quote Engels, “Insofar as modern socialism, no matter of what tendency, starts out from bourgeois political economy, it almost without exception takes up the Ricardian theory of value.” (quoted in Carson, Studies in Mutualist Political Economy, pg. 15)

Indeed, Marx himself drew heavily on the Ricardian socialists, and throughout the 1840s he committed himself to a deep study of Ricardian economists (this was also the decade in which he was close to Proudhon, before his largely fallacious attack on mutualism in 1847’s The Poverty of Philosophy). True to his dialectical process, he came to the conclusion that Ricardo’s solution to Smith contained contradictions of its own, and was unable to properly resolve the proposition of labor-value with price. Put simply, if price and value were aligned, there would be no way for profit to be realized. Marx might have overstated this divergence (as we saw in the last post, with the juxtaposition of the “natural price” with the “market price”), but the question of the relationship between value and price, and what it meant for labor, preoccupied the revolutionary thinkers of this time. As Proudhon wrote in 1851,

The price of things is not proportionate to their value: it is larger or smaller according to an influence which justice condemns, but the existing economic chaos excuses – Usury. Usury is the arbitrary factor in commerce. Inasmuch as, under the present system, the producer has no guarantee that he can exchange his product, nor the merchant any certainty of reselling, each one endeavors to pass off his merchandise at the highest possible price, in order to obtain by the excess of profit the security of which labor and exchange fail sufficiently to assure him. The profit thus obtained in excess of the cost, including the wages of the seller, is called Increase. Increase – theft – is therefore compensation for insecurity. Everybody being given to Increase, there is reciprocal falsehood in all relations, and universal deceit, by common consent, as to the value of things. (Proudhon, “The General Idea of Revolution in the Nineteenth Century”)

In order to solve this perceived problem, Marx made a critical distinction that not only transformed the labor theory of value, but the overarching structure of the critique of capitalism.


To draw out Marx’s new take on value theory, we can return to the “energeticist model” touched on in the previous post. As noted before, the Industrial Revolution had generated a cultural fixation of machines, begetting not only a host of metaphors to approach labor and industry, but the growing study of thermodynamic processes. The realization of these processes, in turn, deepened the emergent understand of the human, labor, production, and the cosmos. Much of this can attributed, as Anson Rabinbach argues, to the arguments set forth by the German physician Hermann von Helmholtz, who had approached the study of the conservation of energy through his work on muscle metabolism. In lectures and essays beginning the late 1840s, Helmhotz defined the functions of nature in terms of kraft, which would later be translated into English as the more conventional “energy” – though for Helmhotz, the term denoted force, and more specifically, work in a distinctively humanist way:

In a cycle of lectures on the conservation of energy delivered in 1862-63, Helmholtz acknowledged that his original model for the concept of work as the universal measure of Kraft was human labor: “The concept of work for machines or natural processes is taken from the comparison with the work performance of human beings, and is … comprehensible through a comparison with human labor.” Helmholtz thus established the equivalence of human, animal, and inorganic mechanical work, applicable to all motion, irrespective of intelligence, skill, design, or any other extraneous circumstance. Work was the transcendental principle of nature and society-the pure productive power of Kraft. For Helmholtz the value of human labor was determined more by the force expended than by the skill involved, which is a product of “time and trouble.” (Rabinbach, The Human Motor, pg. 59)

These concerns were taken up by a host of other scientists, philosophers, and scholars, most notably for our purposes here the German physiologist Ludwig Büchner. While pursuing a methodology different from Helmholtz’s own (for a comparison of Büchner’s overlaps and divergences with Helmholtz, see Scott Edgar’s “The Physiology of Sense Organs and Neo-Kantian Conceptions of Objectivity: Helmholtz, Lange, Liebman” in the edited volume Objectivity in Science: New Perspectives from Science and Technology Studies, pgs. 101-122), a common emphasis on kraft was shared. For Büchner, kraft was not only a notion that could unify the sciences into a common framework, but was something with far-reaching philosophical, social, and ultimately political implications in that it embodied a scientific foundation for materialism. It would provide “’an indestructible foundation’ for a view of nature that would ‘decisively ban every kind of supernaturalism and idealism from the explanation of natural events.’” (Rabinbach, The Human Motor, pg. 50) This view of nature would be one of constant exchange of energy, moving back and forth form the body to the environment.

Though Marx would criticize Büchner, he would begin adopting the thinker’s language and sets of metaphors, and further them with his own metaphors drawn from heavy industry. Büchner, in 1855’s Staff und Kraft, would describe the skeleton as the immobile frame that support a host of transformations passing through the body; two years later, in the Grundrisse, Marx would redeploy this notion and add that while all sorts of metabolic exchanges were taking place in the body at different paces, it was bone which “may be regarded as the fixed capital of the human body.” Fixed capital, of course, is a concept adopted from Ricardo to describe assets that are not used up in the production process – land, buildings, factories, equipment, so on and so forth. Elsewhere, the famous Marxian “general formula of capital” – C-M-C and M-C-M’ – gets described as an eternal “process of production, as a real metabolism.” (Marx, Grundrisse, pg. 217) So here we have a return to some themes introduced first by the Physiocrats: economic circulation being likened to bodily processes, and the nature of circulation being bound to transformations. The major differences are two-fold: the understanding of bodily processes has been shifted from simple flow of blood to wider metabolic processes connected to Nature itself, and industrialization has been introduced into the picture, in the form of the skeleton. In other words, we are back to a familiar terrain: value theory.


Alongside Kraft, Helmholtz came to identify another force: Arbeitskraft, or “labor-power”, which he defines as Kraft being converted into mechanical labor. In the Grundrisse, Marx explicitly uses the term Arbeitskraft, though the concept remains remarkably underdeveloped. But, as he would later elaborate upon in Capital, it is Arbeitskraft, or labor-power, that holds the key to solving the problem of value and price:

Classical Political Economy borrowed from every-day life the category “price of labour” without further criticism, and then simply asked the question, how is this price determined? It soon recognized that the change in the relations of demand and supply explained in regard to the price of labour, as of all other commodities, nothing except its changes i.e., the oscillations of the market-price above or below a certain mean. If demand and supply balance, the oscillation of prices ceases, all other conditions remaining the same. But then demand and supply also cease to explain anything. The price of labour, at the moment when demand and supply are in equilibrium, is its natural price, determined independently of the relation of demand and supply. And how this price is determined is just the question… As with other commodities, this value was then further determined by the cost of production. But what is the cost of production-of the labourer, i.e., the cost of producing or reproducing the labourer himself? This question unconsciously substituted itself in Political Economy for the original one; for the search after the cost of production of labour as such turned in a circle and never left the spot. What economists therefore call value of labour, is in fact the value of labour-power, as it exists in the personality of the labourer, which is as different from its function, labour, as a machine is from the work it performs. (Marx, Capital, Vol. 1, Chapter 19, emphasis mine)

In shifting the focus from labor, as an act unto itself, to labor-power, as the source of value, Marx effectively shifts the focus from the pre-industrial economy to the industrial economy, thus building into his theory the transition itself. While this might sound abstract, look at it like this: in the pre-industrial economy, a craftsman was able to produce a good, and proceed to sale it on the market for an agreed upon price. As the craftsman received the full return, he was able to receive the full value of his labor – the movement of value playing out in full accordance here with the Ricardian perspective. But this is not how it operates in the industrialized, capitalist economy. The craftsman is the exception, the wage laborer is the rule. This is precisely what Marx took Proudhon to task for, for desiring an economy more reflective of a pre-capitalist age – though it must be pointed out that this is little more than a strawman, and does not reflect Proudhon’s perspective in the slightest (see Proudhon’s “The General Idea of Revolution in the Nineteenth Century”).

The transition from the pre-industrial economy to the industrial economy fundamentally transformed the way that relations through society operated (this, of course, is the foundation of any socialist critique). To be a wage-laborer, a member of the industrial working class, brings with it a host of social relations different from the social relations connected to an economy based on craftsmen or one based on feudalism. It could be said that the economy was even more social in nature, with on one hand the growth of mass markets, and on the other hand higher concentrations of labor in a single firm. This is why Marx approaches labor not simply as labor, but socially-necessary labor.

How does one approach assessing value in labor-power? To return to a line in Marx’s quote above, we see a concern with “the cost of production-of the labourer, i.e., the cost of producing or reproducing the labourer himself”. This is a question that directly concerns the ability of the laborer to labor (i.e., what drives labor-power), which is the wage itself. Following the earlier classicalists, Marx positions the wage as labor-power’s value, as it is precisely what the laborer agrees to in exchange for the labor-power. The wage, being traded for labor-power and not labor, does corresponds directly to the production process itself, but to the unit of time that each unit of wage denotes (for example: $8 dollars pay for 1 hour of work). Thus Marx arrives at the formulation of socially-necessary labor time (SNLT), which is the value being discussed in the Marxian LTV. Or, more properly, value corresponds to the amount of SNLT that flows into a given commodity. To identify this amount we can speak of two different forms of labor that are present in a commodity:

  • Living labor, which is the labor that goes into production of a commodity by working with tools, equipment and raw materials.
  • Embodied labor, which is the past labor that went into the tools, equipment, and raw materials that living labor uses to produce.

So taken most basically, if a hammer, some nails, lacquer, and treated wood had a total of 3 hours of embodied labor, and it took 1 hour of living labor to assemble this into a table, the end product would have a value of 4. Now, for the capitalist to realize a profit, they have to sell it on the market at a level higher than the amount of value contained within it. Let us say that the capitalist sells the table for a price equivalent to a value of 7. This difference between market value and SNLT yields, for the capitalist, a profit of 3 – what Marx calls surplus value. Taken over a period of time, this post-SNLT excess becomes the rate of profit (ROP). The formula for the ROP is this:

s/(c + v)

where S is surplus value, C is fixed capital (or constant capital, as Marx calls it here), and V is the worker’s wages.

The Rate of Profit

There are several “circuits” going on in this model of the capitalist economy. We have the transformation of money, shifted by labor into the form of the commodity, and then being realized as a higher sum of money if surplus value is realized through consumption (M–C–M’); the transformation of commodity into money through consumption, which then flows back into the commodity in the form of re-investment (C–M–C); money into value through the wages exchanged for labor-power; value into money through labor and sale, on and on. The most important aspect of this is that it is value that emerges as the central driver of the capitalism economy. It enables production in two ways: by setting the stage for production by providing the laborer with a wage, and establishing the possibility for consumption – and thus future production – through stored wages being exchanged on the market. At the same time, profit too is essential, for it is from profit that both constant capital and variable capital derive. Thus, from a birds eye view, the capitalist economy runs out the cycles of value and profit co-producing one another.

Introducing another critical factor complicates this dynamic system: that of competition. For all of this to run smoothly, the capitalist must not only be realizing surplus value, but realizing it against competitors not only once, but for the entire duration that the capitalist is actively engaged with the economy. As competition drives prices towards actual value – that is, the equilibrium price – it becomes more and more difficult for M-C-M’ to actualize. The capitalist, if they are business-savy in the slightest, will do what all business-savy capitalists do: lower the cost of production. This means producing the same amount of commodities or even more commodities with laborers who are either accepting lower wagers or by simply eliminating the number of laborers through labor-saving technology (or most both). In this scenario we arrive at another important concept: the organic composition of capital (OCC), which is ratio of laborers to machines in the production process (or from the point of view of the capitalist, the ratio of variable capital to constant capital). In attempts to drive down prices to raise profits, so often the OCC shifts, with the ratio moving machines/constant capital above labor/variable capital.

What does this have to do with value theory? Just about everything. Let’s say we have two table-producing firms who are competing with one another. For the sake of the experiment, let us say that both produce a certain number of tables that manage to clear the market with each passing day. Firm 1 has six employees making tables and two machines that aid them, while Firm 2 has two employees and six machines. Undoubtedly Firm 2 would produce more tables, and assuming they all clear each day, would realize higher profits at the end of the week by having 1) lower costs and 2) more units moved. Following Marx’s formulations, however, it would be Firm 1 that is producing more value. If we stretch the credibility of this thought experiment and imagine that we are in a town where Firm 1 and Firm 2 are the only sources of employment, it would be the sum of laborers at Firm who carry out more economic behavior outside out work.

It’s obvious that in time Firm 1, feeling the pressure exerted by the efficiency of Firm 2, would eventually alter the ratios within its OCC, and replace some workers with machines. While the firm might make a higher profit, it is suddenly adding less value. If the rate of value declines, so then does the rate of surplus value, a situation that exacerbates, Marx tells us, as technological advancements spread and transform production processes on a total level (an example today would be the rising role of automation). Falling realization of surplus value, of course, leads to a falling rate of profit. This is what Marx described as the tendency of the rate of profit to fall (TRPF).  Marx:

[The capitalist] mode of production produces a progressive relative decrease of the variable capital as compared to the constant capital, and consequently a continuously rising organic composition of the total capital. The immediate result of this is that the rate of surplus-value, at the same, or even a rising, degree of labour exploitation, is represented by a continually falling general rate of profit… The progressive tendency of the general rate of profit to fall is, therefore, just an expression peculiar to the capitalist mode of production of the progressive development of the social productivity of labour. This does not mean to say that the rate of profit may not fall temporarily for other reasons. But proceeding from the nature of the capitalist mode of production, it is thereby proved logical necessity that in its development the general average rate of surplus-value must express itself in a falling general rate of profit. Since the mass of the employed living labour is continually on the decline as compared to the mass of materialised labour set in motion by it, i.e., to the productively consumed means of production, it follows that the portion of living labour, unpaid and congealed in surplus-value, must also be continually on the decrease compared to the amount of value represented by the invested total capital. Since the ratio of the mass of surplus-value to the value of the invested total capital forms the rate of profit, this rate must constantly fall. (Marx, Capital, Vol. 3, Part 3, Chapter 13)

We won’t concern ourselves here on the question of whether or not that the TRPF to fall is a real-world phenomenon (or if it is a terminal situation, more properly). I will refer the interested reader to Michael Robert’s work on the subject. Hopefully this topic will be taken up at a later date.

What I do ant to draw attention to is that way in which Marx’s TRPF serves as a continuation of the thermodynamic basis of his value theory. In the 1840s and 1850s the discovery of the second law of thermodynamics became recognized, positing that as something changes from one state to the next, a portion of it is lost. In the conversion of heat in the heat engine, some heat would also escape; in any system, transformation would entail that across time, elements in the system would break down. This is the realization of entropy, which like all things energetic captured the popular imagination of the Victorian era – the Fin de siècle in particular – and beyond. Everything from the explosion of studies into ‘exhaustion and fatigue’ or all types to the managerial society obsessed with curing social ills to Oswald Spengler’s two-volume Decline of the West bore the stamp of entropy’s influence. As Rabinbach describes,

For Nietzsche, as for many nineteenth-century thinkers, fatigue was identified with modernity itself: “Disintegration characterizes this time, and thus uncertainty: nothing stands firmly on its feet or on a hard faith in itself: one lives for tomorrow as the day after tomorrow is dubious. Everything on our way is slippery and dangerous, and the ice that still supports us has become thin: all of us feel the warm, uncanny breath of the thawing wind; where we still walk, soon no one will be able to walk… The discovery of entropy attested to a pessimistic view of nature in which the available amount of energy or heat was continuously diminishing, conjuring up the specter of an apocalyptic “state of unchanging death. As the historian Saul Friedlander has pointed out, the fin-de- siècle loss of faith in progress brought about a “wholly new vision: that of the total end of man.” (Rabinbach, The Human Motor, pgs. 19-20)

In the Communist Manifesto (written in 1848), Marx and Engels had praised modernity (and by extension, capitalism) for its recreation of the world, penning the now-famous reflections on the “Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty…” But by Volume 3 of Capital (written between 1863 and 1883), the ecstatic language and vision of the manifesto gave way to something else entirely. Modernity-as-rebirth had transitioned to modernity-as-decay.

As we may recall, it was labor-power than Marx positioned as the source of value, and itself was drawn from the depiction of energy conceived by scientists like Helmholtz. Just as energy was capable of transforming form, so too did value, moving from money to commodity and back to money, commodity to money to commodity again, wage to profit, value to surplus value, on and on. Just as energy exhibits dissipation as it undergoes transformation and moves forward through time, so too does value diminish in the march of time, vanishing at human labor itself disappears into the machine. And just as the dissipation of energy, as entropy, leads (from the perspective of the scientists of the 1800s, of course) to the inevitable breakdown of all systems, so too does the decrease in value ultimately lead to crisis in the economic system through the tendency of the rate of profit to fall. Thus Marx’s vision of capitalism, from the perspective of his value theory, comes to see capitalism as an immense machine for the transformation of things, a heat engine even, that is wearing itself down.

There are problems, however, that arise at this point and potentially undermine not only Marx’s suggestion that the rate of profit will fall, but his value theory as a whole. This set of concerns, which is known as the “transformation problem”, will be taken up in the next post.

A Brief Primer on Value Theory, Part I: From the Physiocrats to Ricardo


I would like to write a little clarification on the differences between various schools of thought where “value” is concerned, which I’ve noticed has become a major point of contention in debates between advocates of capitalism (specifically anarcho-capitalism) and socialism. One the major problems (besides theoretical differences, of course) is that we’re dealing with a semantic swamp, where the same word is being used by three or four groups in three or four different ways. Debate today tends to conflate these different meanings into two primary forms: on one hand, the subjective theory of value suggested by the marginalists, and a unified labor theory of value which is more a by-product of critics, and not really a reflection of much of anything. I want to identify (at the very least) four different forms of value in economic thought:

  • The Physiocrat approach to value
  • The Classical approach to value
  • The Marxist approach to value
  • The Marginalist approach to value

In this schema, there is more or less a direction line running from the Physiocrat to Classical schools, but the classical school itself can be (for our purposes here) divided into two sub-sections:

  • Smithian
  • Ricardian

Now, Marxian value theories, while emerging from the Classical lineage, serves as a repudiation of its predecessors, specifically the Ricardian sub-section. The marginalists constitute another break, but what is important to consider is that one of the major elements in this break is a complete and total methodology. In other words, what we are dealing with are several different “apparatuses” through which economics can be approached. Differences in apparatuses, of course, will always yield different outcomes concerning the object or system in question, but the divergence where value theory is concerned is operating at the semantic, discursive level. One can argue the merits of one school vs. the other school and seek to disprove them through various means – but using the marginalist definition of value to discredit early value theories cannot happen, for the terms are not in any alignment. Regardless of which side one is one, one is forced to shift their arguments elsewhere.

So what is value? For the marginalists, value is individualized, the worth applied by the individual to a commodity on the market. Do I want/need this commodity, and does that justify X cost? Price emerges, in their theory, as the average of these valuation. Neat, simple, straightforward, and by the time we get to Debreu’s 1959 The Theory of Value, value and price had become synonymous with one another. This very recent conflation of two terms has only served to confuse matters more, as things get a little more complicated as we go back in time.

To understand what economists before the marginalists were talking about when they say “value”, we have to understand that it is an intermingling of three things: a metaphor, a unit of measure, and a force that empowers movement. Taken broadly, value is understood as a substance that is represented, but not irreducible to, money. The Physiocrats, the classicalists, and the Marxists shared a common framework for approach economic life, which they defined as three spheres:

  • Production
  • Circulation
  • Consumption

Value as metaphor allowed a vantage point from which to observe the transformation of things between each sphere. Value as measure emerged from the need to study the laws governing the these transformations. Value as force was developed to explore the momentum and movement flowing through these spheres. It is this last one that is most important for the Physiocrats and Classicals: most of these economists were developing their theories in close relation with many of the scientific developments taking place at their time, and mutual influence radiates through both. As Philip Mirowski in More Heat Than Light illustrates, economics was conceived as following the same sets of rules as the emerging field of studies that would later be described as physics. So at this point we have the substance of value being roughly equated to energy itself, transforming from form to form.

The Physiocrats

The Physiocrats used the term ble to describe value, which roughly translates as wheat; their model, thus, is one in which all momentum and transformation in the economy emerges from agriculture. To quote Francois Quesnay, the father of the Physiocrats,

[Agriculture] gives rise to settled laws, weights, measures, and everything which is concerned with determining and guaranteeing possessions.

It’s kind of understandable why they would think this, given that at the time the society was largely organized around agriculture itself. But there is more to this picture. As any person familiar with the history or philosophy of science knows, slippages between metaphors have cascading effects that often mold or shape the apparatus being used. This is what happens in Quesnay’s work: it was common in this time to associate the functions of Nature (as a concept) with that of the human body. Quesnay, in addition to being an economist, was a court physician, and specialized specifically in the study of blood flow. As blood is in movement throughout the body, he came to draw a parallel between this and the movement of ble/wheat/value through the body of society. This was the foundation of his famous Tableau économique, which charts the movement of ble/wheat/value through society based on the flow of blood through the human body. As Mirowksi writes:

The parallels between Quesnay’s medical theories and his political economy are extensive. Quesnay’s understanding of the configuration of the cardiovascular and economic systems are identical; health in both instances means the unobstructed flow of a conserved substance through the system. More profoundly, just as the major vital processes had been supposedly reduced to the motion of a single substance, so, too, were the motley of economic activities reduced to the motion of a unique value substance across some class boundaries… Far from merely operating on the plane of broad analogy, Quesnay’s Tableau reflects his physical theories down to small details. For instance, the Tableau reproduces the tubes of tin, with all flows eventually returning to the pump/landlords. As the aim of bloodletting was to free up circulation in order to restore health, the physiocratic advocacy of freer trade was to free up the circulation of value to restore national wealth. Indeed, the physiocratic doctrine of a single tax was a projection of Quesnay’s surgical doctrine that a single incision during bloodletting was the most efficient and efficacious regimen. (Mirowski, More Heat Than Light, pgs. 157-158)

In other words, the healthy body requires blood to flow unimpeded, Quesnay reasoned that ble/wheat/value must also move unimpeded through society if the social body is to be healthy. Thus, we arrive as a laissez-faire understanding of economics.

The Classicalists

The transition from the Physiocrats to the Classicals must be contextualized in two developments:

  1. The transition form an agricultural economy to an industrial economy, with the subordination of the former by the latter.
  2. The discovery of the laws of thermodynamics

It’s worth pointing out that in many respects, the discovery of the laws of thermodynamics emerged from the Industrial Revolution itself. Many of those involved in unraveling the nuances of this new science, such as Sadie Carnot, developed their theories based on observations of steam pumps and heat engines. An obsession with machines reigned supreme in this time, with everything from the cosmos to the human body being defined in terms of the machine. This is what Amy Wendling has described as the

“energeticist model” of the interaction between humans and nature. In this model, human and natural forces are not distinct in kind. The human is not a spiritual or vital force at work in the natural, material world, transforming the latter in a form-giving way. Instead, concepts like “spiritual” and “vital” are progressively eliminated from scientific usage. Matter and form come to be seen as two expressions of a single kind of force: energy. Humans, nature, and machines all operate according to a single model—the model of energetic flow. Energy can be converted from a static material, to heat, to a mechanical activity, and back again. Such conversions subtend phenomena that were formerly portrayed as diverse and as operating according to different rules. In the energeticist model, the work of the steam engine, human labor, human intellection, natural events, animal actions, and even human political life are all portrayed in the same way, and they follow the same basic rule: the rule of energy transforming itself. (Wendling, Karl Marx on Technology and Alienation, pg. 62)

Or as Anson Rabinbach has put it: “The human body and the industrial machine were both motors that converted energy into mechanical work… The laboring body was thus interpreted as the site of conversion, or exchange, between nature and society-the medium through which the forces of nature are transformed into the forces that propel society.” (Rabinbach, The Human Motor, pg. 2) We can see from this perspective how the metaphors would begin to shift: from a constellation bringing together the transformation of ble/wheat/value through the movement from Nature to Society via agriculture with the healthy flow of blood through the body, to one on which value becomes akin to energy, transferred from Nature to Society via the labor of the human body. Interestingly, there are suggestions that Sadie Carnot’s diagram of the heat engine, which from the notion of the Carnot cycle sprung, was itself inspired by Quesnay’s Tableau économique.

Value in Smithian Classicalism

To continue with our exploration of value we’ll have to back up a little, and return to Adam Smith. Taken most broadly, Smith’s work was a transposition of Physiocratic frameworks into the newfound economic context. The Physiocratic system, he wrote “with all its imperfections is, perhaps, the nearest approximation to the truth that has yet been published upon the subject of political œconomy”. (Smith, The Wealth of Nations, Book IV, Chapter IX). By the same token, by “representing the labour which is employed upon land as the only productive labour” Quesnay and his intellectual kin had erred, as “the notions which it inculcates are perhaps too narrow and confined.”

That’s not to say that it is a perfect fit. In his transposition, Smith offers several contradictory positions on the question of value. In the first instance, he shifts the locus from agriculture to industry while retaining labor as the source of value, corresponding to a sort of measure of a given commodity’s pre-market price. “But Adam Smith,” as Benjamin Tucker would later write, “immediately abandoned all further consideration of it to devote himself to showing what actually does measure price, and how, therefore, wealth is at present distributed.” (Tucker, “State Socialism and Anarchism”) Thus later in The Wealth of Nations, a new perspective on value arises, one in which value is not based on labor, but on stocks. Yet while most approach stocks as composed the sum total of given firm’s commodities available for sale on the market,

Smith only compounds the problem by suggesting that stock is comprised of physical goods and education, talents, and abilities. Without hesitation over the enormity of the task of reduction, he then proceeded to treat this agglomeration as a coherent and homogeneous aggregate for the individual, much as an early merchant would lump together all of his assets (including even his household silverware) in a single stock book… stock will be analyzed independent of relative price changes, a formless incompressable jelly, effortlessly rendered suitable for either consumption of investment. In a manne r of speaking, Smith avoided the value conundrum that had so engrossed his predecessors by essentially bypassing it save for some early comments on labor, which are dropped in the subsequent analysis. The primary function of those comments were to keep open a few tenuous lines to the metaphor of body, which only later in classical political economy grows in significance. (Mirowksi, More Heat Than Light, pgs. 166-167)

Value in Ricardian Classicalism

It was precisely this tension running through Smith – value emerging from labor on one side, and value equating to the total stock of a nation, writ large – that gave rise to the much-maligned Ricardian perspective. In his brief adoption of labor as the source of value, Smith had inherited value-as-force from the Physiocrats, but ultimately abandoned this by making value into a synonym for aggregate wealth. Ricardo, however, sought to synthesize this perspectives (while perhaps narrowing stocks down to physical commodities), and in doing so turned to value-as-measure. Ricardo:

All measures of length are measures of absolute as well as relative length. Suppose linen and cloth to be liable to contract and expand, by measuring them at different times with a foot rule, which was itself neither liable to expand or contract, we should be able to determine what alteration had taken place in their length… There can be no unerring measure either of length, of weight, of time or of value unless there be some object in nature to which the standard itself can be referred and by which we are enabled to ascertain whether it preserves the character of invariability. (Quoted in Mirowski, More Heat Than Light, pgs. 173-174)

Ricardo had been associated with the Philosophical Radicals, a group of intellectuals who followed the utilitarianism of Jeremy Bentham and James Mill. The utilitarians had sought to measure the value of pleasure in terms of how much pain or toil had to be expended to ascertain that pleasure; this itself mirrored certain observations concerning labor to written by Smith in The Wealth of Nations: “The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it”. (Smith The Wealth of Nations Book 1, Chapter 5) Thus labor emerges through this selective line of reasoning, quite naturally, as the “object in nature” which things can be measured against. Ricardo reasons, for example, if two different commodities both took one laborer four hours of work to produce, then both commodities would have the same value.

Smith had argued that the actions of the market, be it the whip or competition and the ebbs and flow of demand, would drive the price of a given commodity down towards toward its “natural price”, that is, the costs that were incurred in the production process. As labor is a major component of these costs, and had previously played a role in the costs of the raw materials that labor works with, Ricardo assimilated this perspective with his treatment of value. His labor theory of value, then, is also a cost-of-production theory of value and a labor theory of price.

It is precisely here at this point here that I suggest we treat as the origins of the semantic confusion concerning value, price, and the ultimate difference between the Physiocrat-Classicalist and marginalist approaches to value theory and price theory. Indeed, whereas the Physiocrats and Smith (up to a point) treated value and price as separate forces, Ricardo appears to be collapsing them together through his reflections on costs. The marginalists did themselves no favors in untangling the ambiguities, as their own very different interpretation of what value was also a theory of price. When Stanley Jevons suggested “that value depends entirely upon utility”, this notion of value was detached from the preoccupations and interests that had fueled value theory (i.e., the metaphorical slippages and the borrowings from science – even though the marginalists did indeed import these elements in their own idiosyncratic way).

What Ricardo was describing as “value” was separated from market price, despite obfuscations that say otherwise. In his “Notes on Malthus”, he does argue that market prices “depend on supply and demand”, though in time they would “be finally determined by… the cost of production.” (Carson Studies in a Mutualist Political Economy, pg. 39) Furthermore, he took care to compile lists of the exception to his theory: scarce goods and luxury items and other non-reproducible goods. This caused several problems in the marginalist critique of Ricardo, such as the case of Eugen Böhm von Bawerk recounted by Kevin Carson:

Böhm-Bawerk was at his best in systematically analyzing the exceptions to the labor-theory and the cost-principle. In so doing, however, he was forced to admit a rough statistical correlation between cost and price in cases of reproducible goods; and in so admitting, he was forced to reduce his argument to quibbling over the required level of generality of a theory of value… (Carson, Studies in a Mutualist Political Economy, pg. 22)

This is not to say that there aren’t critiques to be had in the Ricardian approach to value, but to elucidate those is to jump into the next stage in the history of the labor theory of value: the Marxist stage. I’ll take this up in the next post, which it will also serve to elucidate the “energeticist model” that emerged in the wake of thermodynamics.