March 5, 2008

Full Employment Theory of Value

Filed under: Economics — duncan @ 8:47 pm

Let’s say we read Marx’s labour theory of value not as attempting to derive ‘value’ from ‘labour’, but as analysing capitalist society’s idea of value as a means to produce and maintain the social category of labour. (Thanks, N. Pepperell!) This reading sheds an interesting light on the Keynesian revolution. Classical economics, Keynes informs us, took full employment as a given; it simply assumed full employment, without attempting to understand the economic mechanisms that produced it. When Keynes says this, he doesn’t mean classical economics; he means neo-classical economics – Marshallian equilibrium analysis. The classical economists of course assumed no such thing (Marx (and Sismondi…) placed unemployment close to the centre of their theorising.) But Keynes is right in his critique of his immediate predecessors. The innovation of Keynesianism was to reverse the terms in which neo-classical economics had understood the labour-production relation. Neoclassical economics sees labour as the means to the end of production. Keynes’s general theory sees production as a means to the end of labour. Faced with the great depression, and massive unemployment, Keynes proposed deficit-financed government expenditure as a means to ‘produce’ employment. The actual commodities labour produced were incidental – as Keynes vividly illustrates with his great example of burying bank-notes down coal mines, and then digging them up again. Keynesianism – ‘rescuing’ capitalism from itself, and from the looming threat of socialism – can be seen as bringing into the open something that was implicit in earlier mainstream economic theorising: the extent to which economic activity works to produce not commodities, but wage-labour. And – as the social unrest that the great depression brought to the surface suggests – the production of employment is essential if capitalist society is to survive. This is, of course, because people need food to eat. But it’s also because the social system of wage labour serves as an incredibly potent mechanism of discipline and control. When the Keynesian revolution brought ‘full’ employment explicitly to the forefront of policy-making, capitalism, one might say, showed its hand. (I say ‘full’ employment because – again as Marx tells us – ‘full’ employment requires a reserve army of the unemployed.)

This sense that capitalism’s ostensible justification is in conflict with its actual achievements is a constant in Keynes’s work – it’s there in the first pages of his first masterpiece, ‘The Economic Consequences of the Peace’. There Keynes is at his most acerbic, writing more as social critic than policy-maker. In this famous passage, he describes the “psychology” of the pre-war capitalist society he thought likely gone forever.

“Europe was so organized socially and economically as to secure the maximum accumulation of capital. While there was some continuous improvement in the daily conditions of life of the mass of the population, Society was so framed as to throw a great part of the increased income into the control of the class least likely to consume it…. In fact, it was precisely the inequality of the distribution of wealth which made possible those vast accumulations of fixed wealth and of capital improvements which distinguished that age from all others…. The railways of the world, which that age built as a monument to posterity, were, not less than the Pyramids of Egypt, the work of labour which was not free to consume in immediate enjoyment the full equivalent of its efforts.

Thus this remarkable system depended for its growth on a double bluff or deception. On the one hand the labouring classes accepted from ignorance or powerlessness, or were compelled, persuaded, or cajoled by custom, convention, authority, and the well-established order of Society into accepting, a situation in which they could call their own very little of the cake that they and Nature and the capitalists were co-operating to produce. And on the other hand the capitalist classes were allowed to call the best part of the cake theirs and were theoretically free to consume it, on the tacit understanding that they consumed very little of it in practice… And so the cake increased; but to what end was not clearly contemplated…. [T]he virtue of the cake was that it was never to be consumed, neither by you nor by your children after you.”

Capitalism is based on a double bluff or deception; but this deception needs to be maintained. The purpose of the General Theory, one might say, is to re-establish this deception, after the catastrophic social collapse of the depression. What is deficit-financed government expenditure if not a form of bluff?

More importantly: there is, I think, a tension between the insight that drives Keynes’s General Theory, and the economic language with which that insight is developed. What could be further from the view of society expressed in ‘The Economic Consequences of the Peace’ (a view of society operative throughout Keynes’s work) than the following line from the General Theory: “Consumption – to repeat the obvious – is the sole end and object of all economic activity”?


  1. Again I’m meant to be reading Hegel, and not procrastinating here, but this is excellent – I often teach from that section of The Economic Consequences of the Peace, to open discussions around this problematic. And, of course, Marx’s question is: given that we have shown ourselves the potential for production to be the end of labour, why – in circumstances where material wealth would not be threatened – is this a crisis?

    Jumping to your final comment: An enormous amount of commentary treats consumption as what drives the process (and then, if critical, criticises consumption, treating capitalism as a sort of out of control hedonism) – I’ve always been more Weberian in my perception: that the puzzle is the asceticism of the system – an asceticism admittedly well-disguised, but structurally central. So, again, I think you’re right to talk about the tension here…

    But right now I need to be reading Hegel’s opinion of 5+7=12… *sigh*

    Comment by N Pepperell — March 5, 2008 @ 11:45 pm

  2. […] are consistently worth the read, but I wanted to post a specific pointer today to a nice post up on Keynes, written partially in dialogue to some of the things I’ve put up over here on Marx’s […]

    Pingback by » The Production of Labour — March 6, 2008 @ 12:01 am

  3. hey there,

    Nice post. If you haven’t read it, you might be interested in Harry Cleaver’s book Reading Capital Politically. Cleaver’s basic point is that capitalism ought to be understood as a society where social control occurs largely via the imposition of work with the aim of greater ability to impose work in the future. Cleaver draws in part on Antonio Negri, who wrote a lot on Keynes in his early work (I believe he has one essay on this in the collection Labor of Dionysius and another in Revolution Retrieved).

    There’s a passage in the Grundrisse where Marx writes something to the effect that capitalist production rests on a prior distribution of class positions and people into those class positions, the imposition of work I think means either putting people into a slot or making them do what’s required of them in that slot (ie, work as ordered).

    All of that said, I don’t think your second to last paragraph follows from the rest (I know this isn’t a paper, it’s a blog post) – I don’t see why there _has_ to be any deception about all this. Deception about all of this could certainly be useful, but I don’t know that capitalism requires deception or is necessarily deceptive about all of this. Part your point – Keynes rescuing capitalism from itself – and Negri’s – Keynes as teaching capitalists (or collective capital in the form of the state) that all of this is the case – is precisely a point about the utility for capitalists of understanding all of this.

    take care,

    Comment by Nate — March 18, 2008 @ 7:50 pm

  4. Nate – thanks for the comment, and the reading tips. I’m massively ignorant of the Marxist and leftist literature – scrambling desperately to catch up – so this is enormously helpful. I’ll certainly try to read Negri on Keynes as soon as I can. (I.e. some time before the death of our sun.)

    I agree with what you say about deception – that paragraph in my post is shoddy. Nonetheless, there probably still is a deception of some kind in Keynes; he never seems to fully accept the consequences of his social critique (or – doesn’t express those consequences at his work’s manifest level, at any rate.)

    I should say more, but am altogether too drunk to think straight. Thanks for the comment, though. Love your blog.

    Comment by praxisblog — March 18, 2008 @ 9:46 pm

  5. hey Praxis,
    Thanks for the kind words. I love that you blog drunk. I do too, though it’s been a minute since I’ve been a frequent blogger, compared to how I used to be anyway.
    take care,

    Comment by Nate — March 19, 2008 @ 2:21 am

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