THE CONTEMPORARY RELEVANCE OF EXPLOITATION THEORY

PAUL COCKSHOTT & HEINZ DIETERICH

paul.cockshot@gla.ac.uk

1. Introduction New Lanark is one of the big tourist attractions in the south of Scotland. Designated a world heritage site by the UN it is an almost perfectly preserved model industrial village run by Robert Owen two hundred years ago. It has a large and elegant school building, an Institute for the Formation of Character, workers houses and the original mills. An exhibition and theme ride puts accross some of the basic facts about Owen, the pioneer of Socialism, Trades Unionism and the Co-operative movement. The shop sells his Millenium address, dedicated 200 years ago to our generation. Posters around the site display his humanist philosophy, and explain how he established the rst nursery school for worker's children and set up the rst system of sickness benets. Owen, an idealistic employer, at rst thought that he could persuade other capitalists to reform society and abolish poverty, but was ridiculed by his class. The New Lanark exhibition is rather coy about what Owen did next. It does not explain how he went on to become a socialist revolutionary -organising the Grand National Consolidated Union, the objective of which was to hold a general strike then sieze the factories and mills for the workers. Harmony in America. He is remembered as the founder of co-ops and of industrial Trades Unionism. His plans for socialism have been largely ignored. He proposed to abolish money and replace it with labour vouchers. Every worker would be paid an hour's worth of labour tokens for each hour they worked. Shops would sell goods at prices marked in labour so that if you worked an hour you could buy goods that had taken an hour to make. Contrast this to today's society. With an hour's wages, the average British worker can buy goods that took about 35mins to make. The rest goes as prots to the rich. In this very little has changed since Owen's day. His idea would have abolished exploitation and poverty at a stroke. But at the same time it would have abolished prot and the incomes of the rich. Owen's ideas were later taken up and systematised by Karl Marx, whose book Capital[15] expalined just how labour was exploited. Marx's ideas for socialism were similar to Owen's. Marx put forward the labour theory of value, showed that labour was the source of all value, and like Owen, Marx was adamant that socialism required the abolition of money: The union was suppressed by the government and Owen eventually went into exile to form the commune of New

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At this point I will only say that Owen's Labour money, for instance is no more money than a theatre ticket is. Owen presupposes directly socialised labour, a form of production diametrically opposed to the production of commodities. The certicate of labour is merely evidence of the part taken by the individual in the common labour and of his claim to a certain portion of the common product which has been set aside for consumption. But Owen never made the mistake of proposing the production of commodities, while, at the same time, by juggling with money, trying to circumvent the necessary conditions of that form of production. (Capital 1 p 188, Penguin edition)

In his pamphlet Critique of the Gotha Program, Marx advocated exactly the same system as Owen. The rst step of socialism was to be to get rid of money and replace it with labour vouchers. Taxes on peoples labour incomes would be used to pay for the sick, the disabled, social insurance. the individual producer receives back from society  after the deductions have been made  exactly what he gives to it. What he has given to it is his individual quantum of labor. For example, the social working day consists of the sum of the individual hours of work; the individual labor time of the individual producer is the part of the social working day contributed by him, his share in it. He receives a certicate from society that he has furnished such-and-such an amount of labor (after deducting his labor for the common funds); and with this certicate, he draws from the social stock of means of consumption as much as the same amount of labor cost. The same amount of labor which he has given to society in one form, he receives back in another. ( Critique of the Gotha Program[13]). The labour theory of value thus enters into two key areas of controversy: that

over exploitation under capitalism, and the debate on the feasiblity of a socialist alternative to capitalism. When Marx based his analysis of capitalist exploitation on the labour theory of value he claimed to provide a scientic explanation for prot and disclose the latters exploitative roots. Because the labour theory of value touches on such hot issues it has, not surprisingly, been controversial. These controversies have come on two fronts. On the one hand, opponents argued that the theory was not a scientic account of contemporary society, on the other they disputed the feasibility of using it to reshape the social order.

2. Its scientific status The principle thrust of criticism of the labour theory of value within orthodox economics has been from the dominant subjectivist theory of value which locates the origin of prices in the relative subjective utility of commodities to the consumer. This is what is taught in all elementary economics textbooks, and the rise of this school of value theory can be seen as a late 19th or early 20th century response to the political inuence of Marxian socialism[11]. A subsequent round of criticisms [29, 23, 22] claimed that the labour theory was not so much wrong as redundant, since the work of Sraa [27] apparently showed

THE CONTEMPORARY RELEVANCE OF EXPLOITATION THEORY

that a non-subjectivist theory of price could be formulated without recourse to labour value. If a theory purports to be scientic rather than a dogma, it must produce testable predictions. It must be possible to make observations or carry out procedures that would either conrm or undermine it. In this sense the labour theory of value starts out from a much stronger position than the subjectivist theory. Whilst there may be some questions of how one measures labour input, these pale to insignicance compared to the problem of providing an objective measure of subjective utility. One can propose mechanisms for the labour theory to be confronted with evidence which might refute it. It is much harder to see how the same might be done with the utility theory of value, whose scientic status is thus questionable. The alleged discrediting of the labour theory of value in orthodox economics has entirely been based on a-priori theoretical arguments. It has not been discredited by the the discovery of empirical evidence that was inconsistent with the theory. In science competing theories are supposed to be evaluated on the basis of their ability to explain observed data. Economics does not proceed in this way. The practical political implications of dierent economic theories are so great that it is very dicult for scientic objectivity to take hold. Whilst people build political parties on the basis of dierent economic theories, they dont ght in the same way over alternative theories of galactic evolution. It was not until the 1980s that a serious scientic eort was made to test whether or not the labour theory of value actually held in practice. The pioneering work was done by Anwar Shaikh [24, 25] and his collaborators[21, 18] at the New School in New York. Following this, there is now a considerable body of econometric evidence in favour of the proposition that relative prices and relative labour values are highly correlated, or in other words, in favour of the law of value. Even prior to this empirical work, the ground breaking theoretical investigations of Farjoun and Machover [10, 9] had undermined the assumptions which underlay deterministic approaches to value theory . Their work, employing the formalisms of statistical mechanics, was a response to the impasse reached by the input-output method of representing an economy, in particular when applied to the theory of economic value. Farjoun and Machover's innovations include the systematic introduction of probabilistic modelling, statistical mechanics, and probabilistic laws to the eld of political economy. They rejected the adequacy of deterministic models to capture essential features of a dynamic and distributed market economy, which they viewed as a complex system characterised by a huge number of degrees of freedom. Employing probabilistic arguments, Farjoun and Machover developed a broad model of the capitalist economy that, in contrast to deterministic approaches, had a more immediate connection to empirical reality and yielded important and theoretically distinct, macroeconomic conclusions, including probabilistic laws governing the relationship between price and labour-content and the distribution of the prot rate. The conclusions in their book have, by subsequent econometric work, been found to be broadly correct. 2.1.

Method of calculation.

The key to testing the labour theory of value, and

in particular to testing the predictions of Farjoun and Machover, has been the use

(2003) was quite independent of that subsequently developed by Ruccio and Amariglio, or Garnett (1995). Both critique determinism, but from dierent starting points.

1It should be noted that the critique of economic determinism given by Farjoun and Machover

THE CONTEMPORARY RELEVANCE OF EXPLOITATION THEORY

Table 1. Example input output table

industry A B C D Wages Prots Sales

B 100

C 100

D 10

nal consumption 100 100 280

100 20 10 100 100 310 45 35 200 20 85 95 300 14 16 40

10

Table 2. How to calculate labour values of an industy's output

using an I/O table A 100.000 0.322 126.000 0.406 145.768 0.470 151.480 0.488 155.161 0.500 156.355 0.504 B 45.000 0.225 82.924 0.414 93.929 0.469 100.972 0.504 103.268 0.516 104.599 0.522 C 85.000 0.283 124.258 0.414 134.258 0.447 141.054 0.470 143.215 0.477 144.495 0.481 D 14.000 0.350 17.225 0.430 18.064 0.451 18.702 0.467 18.886 0.472 19.005 0.475 Description direct labour labour/$ estimate 1 total labour estimate 1 labour/$ estimate 2 total labour estimate 2 labour/$ estimate 3 total labour estimate 3 labour/$ estimate 4 total labour estimate 4 labour/$ estimate 5 total labour estimate 5 labour/$ estimate 6

of input-output tables. An input-output table is a way of showing the structural interaction of dierent industries. These tables are periodically constructed by The government statistical departments for the leading economies of the world.

idea behind them can be grasped by looking at the example in Table 1. This shows in a very aggregate fashion the structure of an economy with 4 main industries labeled A,B, C, D. The columns corresponding to the industries show how much of the output of each other industry is used up by a given industry. Thus industry A uses 100 from B and 10 from D. The numbers would refer to quantities of money, for now we can think of them as being billions of dollars. At the bottom we have rows showing the total amount of wages and prots earned in each industry and the total nal sales of the industry. The nal sales row is the sum of the wages, prots, and indirect inputs above. It is possible to use input output tables to work out how many hours of labour went into producing the total output of each industry. We start up by simply adding up the number of units of labour that were directly employed in each industry. This is shown in row 5 of our initial Table 1, and in the rst row of Table 2. If we divide the directly utilised labour by the dollar value of the industry's output, we get an initial gure for the amount of labour in each dollar of the output. We show this in the row of Table 2 called labour/$ estimate 1. For

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Table 3. Average percentage deviations between market prices

and labour values for the USA over selected years. tracted from (Shaikh 1998). Year Deviation 1947 10.5% 1958 9.0% 1962 9.2% 1967 10.2% 1972 7.1%

Figures ex-

Average 9.2%

industry A we see that 0.32 hours of labour go directly into each dollar of output. Since we already know the number of dollars worth of A's output used by every other industry, we can use this to work out the amount of labour indirectly used by every other industry when it spends a dollar on the output of industry A. This gives a second estimate for the labour used in each industry: total labour estimate 1, which in turn gives us a better estimate for the number of units of labour per dollar output of all industries. We can repeat this process several times and as we do so, our estimates will converge on the true value. illustrated in Table 2. If the labour theory of value is empirically correct, then if you spend a dollar on any product you get back roughly the same quantity of labour. In other words, the gures for labour/$ for each industry would be very similar, as shown in the nal line of Table 2. Our example is very small and uses completely fabricated data. What happens when you look at a real economy? Well for a start the tables are much larger, typically with around a hundred industries listed. But the same method can be applied, it just requires more computational eort. The work of calculation would have been daunting prior to the ready availability of computers for economic research. This may be why nobody seriously investigated the matter until the 1980s. But when Shaikh and others tried, they obtained results very similar to our toy example. The general procedure in these studies has been to use data from national input output tables to calculate the total labour content of the output of each industrial sector, and then to see how closely the aggregate money value of sales from each industry match their total labour content. Various dierent ways have been devised to measure the correspondence between the prices and the values. Shaikh (1984) explains the details of the process, and also oers a theoretical argument in favour of a logarithmic specication of the pricevalue regressions. Table 3 shows some results from Shaikh and his collaborators. This process is

2.2.

Results.

As you can see, the average error you get when predicting United

States prices using the labour theory of value is only about 9%. This has proven to be the case accross many industries and several decades. An alternative way of measuring the similarity of prices to labour values is to draw a scatter plot relating the two and then try to t a straight line to the data. If the labour theory of value is true, then the observations will tend to fall close to this line, and the line will pass through the origin. How close the observations are to the line is measured by what is termed the

R2

value of the data. If the

R2 = 1
If the

then all points fall on the line and the line perfectly predicts the results.

R2 = 0

then the line is of no use at all in predicting the observations.

THE CONTEMPORARY RELEVANCE OF EXPLOITATION THEORY

Table 4. Comparing the correlation of prices to labour values in

dierent countries Country United States United Kingdom Greece Sweden

R2
0.974 0.955 0.942 0.971

Source (Ochoa 1989) (Cockshott, Cottrell and Michaelson 1995) (Tsouldis and Maniatis 2002) (Zachariah 2004)

Studies utilizing data from the United States, Sweden, Greece, Italy, Yugoslavia, Mexico and the UK have produced remarkably consistent results, with strong correlations observed:

R2

s of well over .90.

It also seems to be the case from the

literature that the larger the population of the country, the closer is the t between observed prices and labour values, (Table 4). This may be an example of the way that statistical regularities become more apparent the larger the population on which the observations are performed. 2.3.

Production prices.

One group of critics of the labour theory of value [29,

28, 23] have avered that it is redundant since : 1. Production prices [14] provide a better estimate of real prices. 2. Production prices can themselves be derived without recourse to labour values[27]. Whatever the validity of the second point, the rst is an empirical claim, and one which has now been refuted. A series of studies [21, 18, 25, 5, 4, 31, 32, 30] have shown that the labour theory of value is as good a predictor of real prices as price of production theory. Table 5 shows some of the results given by Zachariah. He found 28 country/year combinations for which labour values gave better, or equally good, predictions of market prices when compared to the predictions given by production prices, out of a total of 52 combinations of country and year that he studied. One of the key theses of price of production theory was that the rate of prot would be equalised accross industries. This has turned out to be false, and indeed it turns out that rates of prot are higher in industries with a low organic composition of capital[5, 6, 32]. This empirical observation completely undercuts the critique of the labour theory of value put forward by Steedman and Samuelson, since their criticisms all rest on what we now know to be a false hypothesis. They had assumed that the rate of prot was independent of capital/labour ratios in dierent industries. In fact it is not. Industries which employ more labour per unit of capital have higher prot rates. But this is exactly what one would expect if the exploitation of workers was the source of prot. 3.
Labour value and Socialism

I have argued so far that recent theoretical and econometric research has revalidated the labour theory of value as a conjecture about capitalist economies. I will now look at its relevance to socialist economics. The collapse of hithertooexisting socialism 20 years ago led to a considerable uncertainty as to what could be proposed as a future version of socialist economy. In what follows I want to give a brief outline of how the reintegration of the theory of exploitation and the labour theory of value is seen, by advocates of 21st century socialism, as the key. The views I summarise here are drawn from the

THE CONTEMPORARY RELEVANCE OF EXPLOITATION THEORY

Table 5. Sample of results comparing correlations of prices of

production with market prices and correlation of labour value with market prices. Source [32]. Country Year Correlation Market Price to Labour Value Japan Sweden USA Greece Australia Canada Germany 1995 1995 1987 1970 1989 1997 1995 0.986 0.956 0.971 0.942 0.948 0.967 0.965 Correlation Market Price to Price of Production 0.984 0.984 0.968 0.939 0.971 0.957 0.949

work of a number of writers who, working independently, have arrived at similar conclusions[3, 8, 7, 19, 20]. In all cases the proposals involve a return to Marx's proposals to replace the money economy with one based on labour accounts with some sort of computerised allocation of resources. Marx had discussed this not only in the privately letter posthumously published under the title Critique of the Gotha Programme. points in published works: He and Engels made similar In in Capital as cited above, he and Engels also speak

positively of Owen's labour certicates both in Capital and in Anti Dhuring. exchange value and instead do explicit calculations in terms of labour time.

the latter Engels is explicit that a communist economy will do without monetary 20th century socialists generally expressed scepticism about labour certicates. The mainstream social democratic tradition has always held to the notion that a socialist economy will be a monetary one. Kautsky was explicit that money would be required in a socialist economy, and this position was retained by the European CPs where they came to power. I speak here of the wages of labor. What, it will be said, will there be wages in the new society? Shall we not have abolished wage labor and money? How then can one speak of the wages of labor? These objections would be sound if the social revolution proposed to immediately abolish money. I maintain that this would be impossible. Money is the simplest means known up to the present time which makes it possible in as complicated a mechanism as that of the modern productive process, with its tremendous far-reaching division of labor, to secure the circulation of products and their distribution to the individual members of society. It is the means which makes it possible for each one to satisfy his necessities according to his individual inclination (to be sure within the bounds of his economic power). As a means to such circulation money will be found indispensable until something better is discovered. ( [12] vol 2 part 1) In my view, this idea that the socialist economy should be a monetary economy is one of the key distinctions between social democracy and soviet orthodoxy on the one hand, and the economic conceptions of Marx and Engels on the other. As far

THE CONTEMPORARY RELEVANCE OF EXPLOITATION THEORY

as I know the only communist party to take Marx's positions on labour vouchers even half seriously was the Chinese one during the late 60s and early 70s when they introduced the workpoint sytem on the communes. Under this members of the communes were credited with work points and these were then used to divide the product up at harvest time. This concrete, if rather primitive example, shows the dierence between labour credits and money rather nicely. (1) The credits do not circulate . (2) They denote a claim on the collective product. (3) They are not wages paid to buy labour power. (4) Economic relations are made transparent and unfetishised by them. (5) They prevent the extraction of surplus value. If you read Marx's economic writings you can see that all these issues were very important to him. He tried to show that a capitalist economy fetishises relationships between people as relationships between things, that it obscures the process of exploitation by presenting it as an exchange of equivalents : the purchase of labour power at a fair price; and that this form of extraction of surplus labour was the inner secret from which the whole structure of modern society derived. Given the great lengths to which he went in Capital, to analyse the whole economy on the basis of labour value, it would be passing strange were this concept to be discarded in his approach to communist economics. It may validly be said that Marx gave no more than hints as to how it could be applied in a communist economy. But the labour theory of value he developed is a scientic theory with an internal logic and rigour to it, and by understanding the theory one can fairly readily deduce how it should be applied to the sort of economy he described as the rst stage of communism. This logical deduction was what Cottrell and Cockshott attempted in Towards a New Socialism. Very similar conclusions had been reached by others[1]in the 1930s. We owe several breakthroughs in the development of the scientic paradigm of 21st Century Socialism to the late German scholar Arno Peters[19, 20], among them, the importance of the equivalence principle in converting a planned economy into a socialist economy and its relationship to value theory, and the denition of the new socialist Mode of Production, with its characteristic three institutions. A planned economy is not necessarily socialist, since it can satisfy the rst part of Marxs famous socialism-denition ( each according to his abilities ), without implementing its second part ( each according to his achievements (Leistungen)). The privileged and those who govern may receive a larger part of the nations produce, than what they contribute with their labour. Thus, in order to accomplish the second determination of Marxs denition, the distribution of goods and services must be organized according to the principle of equivalence. Following the example of the German physicist Robert Mayer, who dened the equivalence (interchangeability) of heat and work[16, 17], Peters established that in an economy based on the division of labour, equivalence means that the exchange of products and services is an exchange of equal values, of contribution and retribution (Leistung und Gegenleistung), of value and price. The precondition for the exchange of equivalents however is the existence of an objective unit of value. It is the great merit of Classic Economics, to have found that value-unit, as expressed in the rst pages of Adam Smiths historic oeuvre

2Owen's "labour-money", for instance, is no more "money" than a ticket for the theatre (Marx)

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of 1776:  . . . the only source. . .  Smith, however, mistakenly identied the value of labour with its price, which represents the living costs of a worker, dened by Smith as his  natural price . ( Peters writes,  natuerlicher Lohn instead of natural price). Thus, Smith converts the labour hours embedded in a product via the workers salary into a certain monetary amount. In consequence, if two products are exchanged on the basis of that calculus (natural prices), then the exchange is not equivalent (equal in value), but equipriced (equipretiar). Consequently, only in relationship with the equivalence principle (exchange of goods and services according to their value) does the theory of labour value become an instrument of transforming a market economy into an economy for the satisfaction of the needs of the people (Bedarfsdeckungswirtschaft). More than two centuries after Smith, this necessary step to overcome market economic chrematistics has not been implemented. One of the major reasons is that it has been extremely dicult to calculate the amount of labour embedded in each individual good and production factor, involved in the economic process. But without that calculus, the equivalence principle can not be implemented and the market economy can not be overcome. It is only through the invention of the computer and the internet that mankind now has the technological and knowledge-base to put an end to 5000 years of chrematistics. As far as Arno Peters second important contribution is concerned, he dened the Mode of Production of 21st Century Socialism through three essential institutions: (1) democratic planning of the economy, (2) the rule of the equivalence principle and (3) labour value as the basic operating principle that substitutes the role of market prices. In particular, it is relatively easy to deal with the question of the payment for skilled labour. The key is to distinguish between the cost to the individual in performing ah hour's work, and the cost to society of that individual performing an hour's work. Compare the expenditure of an hour by a bus driver and a rocket scientist. In doing their job each gives an hour from their nite life for the benet of society. That is the cost to them. The cost to society is, in the rst instance, the alternative use to which that labour could have been put. Labour is the great universal resource of society. What distinguishes human social labour from the social labour of termites is that people are adaptable. We can learn dierent skills. We are not born into genetically determined castes with xed roles. The dierence of natural talents in dierent men is, in reality, much less than we are aware of; and the very dierent genius which appears to distinguish men of dierent professions, when grown up to maturity, is not upon many occasions so much the cause as the eect of the division of labour. The dierence between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature as from habit, custom, and education. When they came into the world, and for the rst six or eight years of their existence, they were perhaps very much alike, and neither their parents nor playfellows could perceive any remarkable dierence. About that age, or soon after, they come to be employed in very dierent occupations. The

THE CONTEMPORARY RELEVANCE OF EXPLOITATION THEORY

dierence of talents comes then to be taken notice of, and widens by degrees, till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. ( [26] , book 1 chapter 2)

10

This adaptability is at once the material reason why labour is the source of value, and also the unfullled promise of human social equality. The formation of members of a society as skilled workers itself demands labour time. The students or apprentices must work and practice, and so with their instructors. Education and training presuppose a particular allocation of society's man and woman power: a certain number of people being current students and instructors. That is a matter of population accounting that has to be considered if a society decides to develop a new industry. So if you want a space programme you have to educate and train rocket scientists. If you want an urban bus network you have to train drivers. Doubtless it costs society more to train a rocket scientist, but it does not follow that the rocket scientist should be paid more than a bus driver for each hour on the job. The cost of training is a cost born by society. So provided that trainee rocket scientists and trainee bus drivers are paid whilst they train for the time spent training, there is no reason why either needs to be eventually credited with more than an hour for an hour on the job. The labour value of a bus ride or of a telephone call placed via a satellite phone is just a name for the labour that society had to allocate to produce that ride, or phone call. It includes the labour expended producing rocket fuel, and also the labour expended in the All Union Institute for the Training of Rocket Technicians or in the municiple driver training school. So there is no need to 'deduct these from the distributable fund'. These costs fall under the rubric of what each individual gives to society in time, they get back in equivalent form. If the total social cost of bus ride, including drivers labour, fuel, training, wear and trear is 3 mins, then the passenger is charged 3 mins on the labour credit card. There would thus be a distinction between what a person is paid for an hour's work, and the cost of that hour's work when entered into the labour accounts of the producers collective. When the South Star Rocket Launching Collective proposed to the All Union Planning Collective that a new GlobeStar network of satellites be constructed, they would have to budget for both the direct labour and the training costs of that labour. Some objections to our proposal that the key objective of a socialist minimum programme should be to abolish exploitation by instituting the right of workers to the full value added[2] are: (1) That doing this would lead to asset stripping and capital ight. (2) That it would be a right to inequality because some worker cooperatives would be earning more per hour than others. (3) That it would tend to generate unemployment as workers cooperatives would be reluctant to take on more workers. (4) That the whole process of establishig the right to the full value created via cooperatives is a detour from the key task of taking production into social ownership. These are reasonable objections and point to real diculties and I should try to answer them.

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11

Asset Stripping and Capital Flight.

let us say Airbus Industrie react?

Suppose that a European Democratic

Union is established and that the rst act of the citizen's assembly is the abolition of wage slavery and the right of labour to full value added. How will the owners of Doubtless the individual owners would try to sell their shares as fast as they can. Well there need be no prohibition on their so doing, but would they suceed in pulling their capital out? No. The prices of the shares would, overnight, have fallen to mere pence. With the abolition of wage labour as a social relation, their property would have ceased to be capital. When the expected future returns on the shares became zero the certicates would be practically worthless. They would not be able to pull their capital out because capital as a social relation no longer existed. Compare their situation to that of a rich urban resident of Savanah in 1861 who owned shares in slaves over a number of plantations. So long as the slave system continued, he could trade in these shares. After the emancipation proclamation abolished the social relation of slavery, and more particularly after the victory of the North became imminent, his shares would have become worthless. There remains the risk of physical asset stripping - selling Airbus machine tools to Boeing for example. To guard against this we wrote: If unions won court actions giving employees the full value that they created, then there is a danger that some rms would attempt to close down and re workers rather than continue in business. Thus legislation aimed at protecting the rights of labour would have to include the right, after a suitable ballot of employees, for employees to elect the majority of the board of any company. ([2])

Deciencies of Cooperatives.

Cooperatives have the disadvantage of freezing

in inequalities due to the random operation of the market, and may lead to one cooperative trying to exploit other workers. Market socialism is an unstable formation. It either evolves towards a fully planned communist economy or reverts to capitalism. Despite this there are, I think, reasons to believe that it could be a more successfull transitional form than the social democratic model of general nationalisation. If we look back at the social democratic experiments in countries like Czechoslovakia and Russia last century we see that the general nationalisation of the economy actually froze monetary relations in. Money wages were still paid. Money prices were charged in the shops. Notes and coins circulated. The prices were administered and the movement of raw materials and capital goods was regulated by a politically determined plan rather than a market, and there was no class of private owners so it would be unrealistic to call these capitalist economies. But nevertheless, state rms did make a prot. They sold their output at more than they paid in wages. The surplus they made was largely transfered to the state budget. In the USSR this was called the turnover tax. We might call it VAT. The Germans call it mehrwertsteur - which perhaps shows its close relation to the extraction of surplus value. The Czech and Russian socialist experiments got rid of unemployment and the anarchy of the market but retained money and surplus value. The Jugoslav co-operative experiment got rid of surplus value, but retained money, unemployment and the market.

THE CONTEMPORARY RELEVANCE OF EXPLOITATION THEORY

12

21st century socialists want to formulate a combination of policies that would get rid of unemployment and market anarchy along with money and surplus value. Let me sketch a possible strategy.
First Stage. Constitutional provision to prohibit wage slavery and give workers the

right to the full value they collectively produce, and an attendant right to elect a majority of company boards. This moves the economy to a Jugoslav co-operative model in which rms are run for the benet of their employees. It is important to note that this measure would mean an immediate and very substantial rise in incomes for almost all workers. It thus accords with their immediate interests in a way that nationalisation does not. It should go without saying that successful political movement has to appeal to the direct interests of a large mass of the population.
Second Stage. There is a process of industrial merger across the continent so that

there is a Europischebahn-Verein, a merged Air-Europe, an Association des constructeurs automobiles europens etc. An Association des Travailleurs Laitire Europenne would be running what was Farmelat, Campina, Dannone etc. This stage removes the objection that some yoghurt producers would be more ecient and protable than others and would thus benet preferentially. When all dairys are run by a common continental syndicat there can be a move to common rates of remuneration and a common technological level accross all of them. Workers in the more advanced ones could give techical advice and support to their brothers and sisters in less advanced plants. This, I think, is the sort of 'free association of producers', that old marx was on about. It gives employees collectively the experience of industrial planning before moving on to a more general socialisation. The continental industrial unions would colletively establish a planning council equiped with computing facilities to allow cybernetic regulation of the economy. The European trades union movement would obviously have a key interest in promoting this sort of continental merger to advance the values of fraternity equality and co-operation.
Third Stage. Assume that from stage 1 the Euro is tied to the labour hour ( cur-

rently it is worth about 2 mins) and the time value of the Euro notes printed on them. This would have acted as propaganda against the system of wage labour. Now a proposal is put to popular referendum to abolish the existing monetary system and with it all debts and interest on debts. This would polarise the population between a majority who would benet from the cancellation of debts and the residual capitalist rentier class who no longer had any productive role. Assuming support can be won for the proposal, a continent wide system of labour credits would be brought into place. These would be non transferable to prevent the re-emergence of speculation and money-lending etc and could only be used to get goods produced by the great workers industrial associations.

Conclusion.

My feeling is that socialist economists have a duty to put forward

detailed and practical socialist transition measures that we can put forward to the European trades union movement. These have to be an integrated set of steps that can be seen to be economically practical provided political obstacles are overcome. Only in this way can the labour movement have an international political voice

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and directly challenge the policies being advanced by the Commission and the governments nation states. The dispute over the labour theory of value relates both to the Marxian critique of capitalist exploitation, and the socialist vision of a non-market economy of the future. Over the last 20 years, empirical research enables us to state with ever increasing condence that the labour theory of value is a well supported hypothesis for the working of the price system under capitalism, and that, in consequence, Marx's claim to have a scientic explanation of capitalist exploitation was well grounded. By relying on the results of information theory and computational complexity theory one can also demonstrate that claims relating to the impossibility of using labour values in a socialist economy are unjustied. .

References

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University of Glasgow & Universidad Autnoma Metropolitana Mexico