International Journal of Advanced Research in Islamic and Humanities

e-ISSN: 2682-8332 | Vol. 1, No.3, 1-8, 2019

http://myjms.moe.gov.my/index.php/ijarih

A COMPARATIVE STUDY OF KHALDUN, SMITH, AND

MARX THINKING ABOUT THE LABOR THEORY OF
VALUE
Muhammad Yusuf Ibrahim1, Nurizal Ismail1, Arif Sumandar1
1
Tazkia Institute, Indonesia

*Corresponding Author: yi2846486@gmail.com

Accepted: 15 December 2019 | Published: 30 December 2019

_________________________________________________________________________________________

Abstract: The value of the goods or commodities depends on the worker's performance,
according to the labor theory of value. Therefore, every worker must have a clear calculation
of receiving wages. But how to determine the right calculation for the wages of a worker? In
this case, Islam, capitalism and socialism have their respective views. So, this study aims to
determine the views of the three schools about the labor theory of value. The method used by
researcher in conducting this research is to use the method of literature study and
comparative analysis. And to compare the thoughts of the three schools of economics, the
researcher refers to the figure of the school's experts as representatives. Researcher chose
Ibn Khaldun from the Islamic side, Adam Smith as a representative of capitalism, and Karl
Marx as a reference figure for socialism.

Keywords: Labor Theory of Value,Ibnu Khaldun,Adam Smith,Karl Marx, Comparative

Study
___________________________________________________________________________
1. Introduction

Trade activities have become an economic element in human life. And these activities have
become scientific disciplines in this modern era. And that was initiated by Adam Smith (1723
C - 1790 C). But regarding to Backhouse (2004), Adam Smith has revealed errors in the
doctrine of trade that occurred during his time, especially critics of the thought of
mercantilism and imperialism. Even so, economics which is based on Adam Smith's thinking
is still applied today.

This criticism is reinforced by the opinion of Karl Marx (1818 C - 1883 C). Marx stated that
the doctrines of classical economic thought suffered, especially from ideological bias. This
happens in the process of clarifying the law of capitalist mode of production which gives
false character to workers. As if they present lasting validity. Though this is only a
fundamental historical construction and is temporary. He said that this event was "one of the
biggest puzzles in the history of economic thought” (Gillig, 2014).

In every economic thought at any time, moral degradation has always been the trigger. Both
in Adam Smith's classic thinking criticized the thoughts of mercantilism. Smith stated in
Samuels, Biddle, & Davis (2003), that the mercantilism system implies a giant conspiracy on
behalf of producers (royal aristocracy or government). So in the capitalists view this system
as an economic system that is not good and tarnishes the good name of business competition
that should run naturally.

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On the other hand, Muslim economists also have moral demands in economic activities. On
the other hand, Muslim economists also have moral demands in economic activities. As
written in Bukhari's hadith number 273 in Al Bukhari (2003) that the Messenger of Allah.
said: "Indeed, I am only sent to perfect the noble character". So the goal of Islam itself is to
improve morals and behave.

But when it comes to labor, the community of life almost all is the same (has the same
rights). The point is that exchange is a natural thing. Likewise with the division of sub-
workers. But the reciprocal relationship that is obtained will determine the value of justice for
the individual (Cicero & De Officiis, 1584).

That is caused by thinking about profit production, the extraction of surplus value was born.
But in reality, the value of labor and the value of the valoser labor during the working day has
a different value. And all the surplus value only flows into the hands of the capitalists
(Melendez, 2013).

From the figure of Muslim economists, Ibn Khaldun also expressed his opinion about values
and labor. He says that labor is part of the calculation of capital. And the profits derived from
the sale of these products are values that originate or are realized from the workforce (Syed &
Ali, 2010).

Therefore, in this case studies of economic thought both in the study of critical analysis and
comparative analysis, even studies in the field of practical analysis must be carried out. This
is intended to find a clear picture of the position of Islamic economics as an alternative
system that is expected to be a solution to economic problems at this time. Therefore, on this
occasion, analysis will be carried out in the form of critical and comparative analysis on these
three thoughts, namely Islam, capitalism and socialism. Which at this time will be devoted to
discussing the theory of labor value.

2. Ibnu Khaldun
2.1 About Ibnu Khaldun
Ibn Khaldun is an expert on thought and philosophy who lived during the heyday of Islam.
Ibnu Khaldun mastered various disciplines inccluding tthe economic. Even an amazing
comment addressed to him is that Ibn Khaldun is the most important and most respected
creature in the universe (Zainudin, 1992).

The real name of this great character is Abdurrahman Abu Zaid. He was born in Tunisia, in
1332 C. Or in the Islamic calendar1 recorded on 732 H. His lifetime ended in 1406 C or 808
H. He made history as a science and gave evidence to that history that history ever happened
(Jamil, 1996).

2.2 LTV in Ibnu Khaldun Prespective

Khaldun has found most of the economic ideas that became the basis of the economy at this
time. As well as Khaldun found the idea of the principle of work value before Ricardo. This
conception is used by him to build a dynamic system. So that the economic mechanism is
directed towards fluctuating economic activity in the long run (Boulakia, 1971).

1
Hijriyah Calendar

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Discussing the value theory of workers, Khaldun says the workers were human as well. He
said that the purpose of production activities is to meet needs. And work is the process of
that. Then Khaldun argued that the division of labor is very necessary. All of these are key to
the creation of surplus value which will ultimately bring economic prosperity (Karim, 2004).

Khaldun argues in Ulum (2016) that prices on a product are created from three combinations
of elements; salary, profit, tax. Khaldun classifies salary as the value of a product. Khaldun
said that the value of a product is equal to the amount of labor. The price of labor is the basis
of the price of an item. But the selling price of goods is determined by legal demand and
supply.

From some of the above explanations, it can be concluded that the value of workers in Ibn
Khaldun's view is something that complements the accumulation of costs incurred by
production. And the selling price of goods born from legal and supply law has a reciprocal
relationship with the value of workers (Mujahidin, 2018).

3. Adam Smith
3.1 About Adam Smith
Adam Smith was born in Kickaldy, Scotland in 1723 C. precisely on June 5. His father's
name was Adam Smith too. His father was a signet writer, an advocate judge in Scotland, and
a customs supervisor at Kickaldy. In addition, the Smith family is a large landowner in the
Kickaldy area. Smith was an orphan since birth. This is because his father died before he was
born. Smith's father died in 1723 C (Rae, 1895).

3.2 Adam Smith Thinking about Labor

In Smith's view, this division in employment can increase productivity. Because some skills
are directed anywhere. So each person can do something according to his expertise and
accelerate his performance (Smith, 2000).

Smith (2000) explains that the division of labor would increase output quantity on a large
scale because of three things, namely an increase in dexterity for each particular worker, time
saving, and the invention of a machine that facilitates while reducing labor. So with that
machine, one person can do the work of several people (Smith, 2000).

Then with regard to labor theory of value, Smith explained, in a primitive society the amount
of labor determines the exchange rate on an item. But in a more advanced society, labor no
longer has a large impact on determining the value of an item because it is paid for by
compensation for the machinery used. Although Smith agrees if labor affects the real value of
an item, but not with the value of the goods in full (Albert C. Whitaker, 2001).

Smith's understanding of labor theory of value is very different. Smith explained the value of
work with contrast values as subjective values. So Smith clearly states that the value of an
item is not determined by the workforce. But that value arises due to the level of satisfaction
with the owner coupled with the scarcity of the item.

Whereas Smith, on the contrary. Smith considers the smaller the capital is the better in selling
goods. Smith's thoughts reaped a lot of criticism both from the normative capitalist group and
even the workers. The theorizing of the value of work is still debated in defining its definition
to date (Gordon, 1959).

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So for Smith the value of a worker is in accordance with his hard work and skills. Someone
gets value according to what he achieved. And the appreciation is given by the capital owner
in accordance with the agreement. The price of a worker is determined by the output that can
be produced on the market.

4. Karl Marx

4.1 About Karl Marx

Karl Heinrich Marx. Born in Trier, Grand Duchy of the lower Rhine, Kingdom of Prussia
(now Trier, Germany). A socialist revolutionary who lived in 1818 C to 1883 C. Marx was a
Jewish believer. He is a descendant of the rabbis of the maternal bloodline. And his father
was a lawyer who was quite wealthy before the removal of the Jewish emancipation in the
Rhineland (Nicolaievsky & Maenchen-Helfen, 1976/1936)

Nicolaievsky & Maenchen-Helfen (1976/1936) continued his explanation that Marx was an
admirer of Voltaire (1694 C - 1778 C) and Immanuel Kant (1724 C - 1804 C). Recorded in
1815 C - 1819 C Marx worked as a lawyer. Then Marx married a Jewish woman from the
Netherlands, Johanna Baerta Julie Jenny von Westphalen, otherwise known as Jenny Marx
(1814 C - 1881 C). It was this family of women who founded the Philips Electronics
company. In the course of his life, when Marx moved to London, his life had been supported
by Lion Philips (Wheen, 2011).

4.2 Karl Marx and Labour Theory of Value

Marx is someone who cares about workers, and he tried to defend the rights of workers by
making approaches, ranging from academic approaches to revolutionary movements. This
issue of alienation is discussed by Marx specifically with the term Alienation. Marx wrote
extensively about this (Mészáros, 2006).

Marx described value theory as a continuation and completion of classical labor value theory.
Marx's contribution which is considered most important for labor theory is his analysis of the
exploitation of the working class with capital through the introduction of the idea of labor and
exposure which makes it have a different value from workers (Milios, 2009).

For Marx, labor is not the source of wealth. The source of use is not created by humans, but
by humans themselves. Labor is a manifestation of the forces of nature or natural products.
So who really has the value and the determinant is not nominal.

Marx distinguished labor value (LTV) and use value using the concept of socially needed
labor time. This value theory is the subject of capitalism. Therefore, the value must be
determined by abstract work. But in the calculation, the abstract work value cannot be
calculated precisely either with a calculating device. That is the abstract value of the value of
workers that occurs in the process of converting values to labor values (Milios, 2009).

But something called false consciousness has influenced human ideology. This is only good
for certain groups of people. But because it has been common, it was seen as common by
many people at that time. In other words, even the right to ideas can only be managed by one
party, namely the upper class (Thompson, 1990). Marx said that naturally the conditions of

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the workers were always disarmed, money was made a box in their mapping, and
commodities as points in the grid (Dunlap, 1979).

So basically the LTV in Marx's view is calculated through the total working time in
accordance with commodity production which should be adjusted to social demand. Although
in its continuation, many things were criticized again by Marx. But in points in this
discussion. Marx gave such an assessment in his presentation of LTV.

5. Methodology

5.1 Literature Study Method

Literature study or also called narrative study is a method that uses how to review a data in
substantive form, as well as theoretical and methodological contributions to a particular topic.
This method is closely related to academic oriented literature. Usually this can be found in
academic journals and books (Hart, 1998).

5.2 Comparative Analysis Approach

In simple terms, comparative analysis can be defined as an act of comparing two or more
things whose purpose is to find something or all things about being compared (Heidenheimer,
Heclo, & Adams, 1983). The placement of comparative methods as a basic method in its own
right, in addition to experimental methods, statistics, and case studies (Sartori, 1991).
Comparative research also can take many forms. With the equivalent of two main factors in
the form of space and time (Dierkes Meinolf, Weiler , & Antal, 1987).

5.3 Description of Data and Resource

In the use of data, researchers need to consider the ratio of accuracy and efficiency in
determining the method of data retrieval. For this reason, the use of multiple sources is also
very necessary to make information on the data have a higher level of reliability in secondary
sources. (Azwar, 2004).

The sources and data in this study come from general references in the form of reference
books. Then the primary data sources that come from article journals are guaranteed sources.
These journals come from International Journal of Social Economics, Review of Islamic
Economics, The Europian Journal of Economic Thought, Journal of Australian Political
Economy, Journal of Political, Review of Social Economy, The European Journal of the
History of Economics Thought, American Economic Review, Munich Personal Research
Paper, Argumentation and Advocacy, Islamic Literature, The American Economic Review,
Contradictions: Finance, Greed, and Labor Unpaid Research in Political Economy,
Rethinking Marxism: A Journal of Economics, Working Paper Series II, Employee Relations,
Euro. J. History of Economic Thought, Iqtishoduna Journal and others.

6. Discussion
Theoretically, the meaning of LTV refers to the amount of labor that is used as an object in
creating an output on the commodity to be marketed. But, the value has two different
meaning. sometimes it expresses the usefulness of certain objects or even strength in the
purchasing power of the object. That is, if there is a greater value, there must be a smaller

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value. Nothing is more valuable than water. But value can buy anything called rare. Then
that's the value (Smith, 2000).

The value of workers is assumed by the example of a capitalist who buys labor. Then the
workforce uses its energy to create a marketable product. Then the capitalist takes the product
created by the laborer because he has bought his energy. After that the capitalist resells the
product. And the one who buys the product is the worker back (Marx, 1887).

The capitalist views that the value of labor does not require quantification. And labor does
not have a relationship with tools (capital) that can be used in producing tools in
commodities. More precisely, Smith's style of labor value theory is closer to utility theory.
That commodity will still be worth whatever happens. And a worker will keep following
orders because he has to defend his life. So this value will still be subject to supply and
demand from capitalists.

Smith clearly states something that is bought with money is actually bought with hard work
or labor. The value of hard work can be converted into money according to the level of hard
work and desire to be achieved (Smith, 2000).

Hagendorf (2009) stated his opinion which was quoted from Marx (1887) that capitalistic
producers are responsible for determining the workforce needed socially for the production of
a commodity. Then Smith stated that the value of any commodity, for the person who owns it
and does not consume it himself, but exchanges it with other commodities, the same as the
labor that allows him to buy it. Then labor is defined as the real value of the exchange rate of
all commodities. (Smith, 2000).

But in islamic views, labor is defined as the source of life. The first and last stride toward
development, the key to wealth, the luck of nation. And being a worker can be a way to get
closer to God. They call it the way of jihad to Allah (Azid, 2005). So the value for workers is
useful for the life around and other humans as a way to worship God (Tabakoglu, 1983).

From some explanations regarding the definition of labor theory of value the authors
conclude that the value of work is the value of the results of hard work originating from the
laborers that can be converted into something quantitative both in the perspective of values
that are believed by each individual worker.

7. Conclusion

Based on the data collected, the researcher concludes about the comparison of Islamic
thought, capitalism, and socialism regarding the Labor Theory of Value represented by Ibn
Khaldun, Adam Smith, and Karl Marx.

In Karl Marx's view, the assessment of workers (determining acceptance) is determined by

several things, namely the time spent by workers in producing an item, and the impact of the
goods produced. That is, if the price of the product is high, then the surplus value (profit)
obtained from the sale of the goods is the right of the worker. That is, the worker must get a
higher wage according to the price of the item. So Labor Theory of Value in Marx's view is
calculated through the total working time in accordance with commodity production which
should be adjusted to social demand.

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Unlike Marx, Smith declares that the value of workers is not determined based on labor time
or the price of the goods produced. But based on the ability of individual workers. Smith
emphasizes the value of labors based on the skills they have. The better and rarer the skill a
person has, the more expensive the value is for that person, according to the demand for the
job. At a glance, Smith equates the value of workers with goods that follow the supply and
demand of the industry.

While in the Islamic view represented by Ibn Khaldun. Workers are not the main determinant
of the value of goods produced. But only part of the accumulation that determines the price of
an item. So the determination of wages for a worker in Islam is the result of an agreement
between the two parties without anyone being oppressed by each other. So, workers can get
their rights as workers and sellers get profits profitably after selling their products. Khaldun
has this view because the price rise in commodities is determined naturally by supply and
demand without human intervention.

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