Reply to Graham's Letter of December 26, 2005

Although we do come to similar conclusions regarding the value of software,I disagree with Graham on some points, namely the value of R and D and services. On the main point, I think that anybody who understands Marx's value theory knows that the law of value tends to pull down the value of a commodity to the value of its reproduction cost and that therefore, if that cost is zero,the value of the commodity must be too.

I do not think however that the labor spent on R and D is not value-creating. Graham doesn't really explain why he thinks that it isn't. His basic argument is that Marx thought so, which will impress only dogmatics. Besides, I don't think it's true. As Graham noted, Marx used, where convenient, simplifying assumptions and he never analyzed the question of the value of 'sunken costs'. He also understood how capitalism was changing, how the real domination of capital exploded many categories in its unifying movement. The production process thus reorganized is manned by the collective worker, of which the blue collar worker, the white coat worker, the programmer as well as the cleaning lady are all part. (1) They all work part of their time unpaid in function of the creation of capital. Meanwhile, the market is pulling the value of that capital down to the value of the real social cost of reproducing it. But there is no reason why the market, which is what executes the law of value, would not recognize immaterial labor as much as the actual material creation of the product, if it's an indispensable ingredient of its creation.

But that is only true, in the case of the invention of a new machine, or of a new application of an existing machine, of the prototype. Since no new R and D cost must be incurred to copy it, the value of the copy will be no higher than the value of the labor time needed to copy it. This is what others in IP found 'counter-intuitive'. It's true though. That can be seen in the fact that there is no relationship between the amount of value spent on the development of the prototype and the actual price of the copies; the latter is rather determined by how strong the seller's monopolistic position is. The purpose of the creation of a commodity of so much value is not to realize that value in a one time-sale. The purpose is to obtain a monopoly and to rake in surplus profit. The Marxist concept of surplus profit means the realization of surplus value that is not extracted from one's 'own' workers, but that is obtained on the market. The key to that surplus profit is lowering the individual value of one's product below the market value at which it is sold and then to prevent as much as possible that the market catches up and your individual value becomes the market value. But while that game of the market catching up and the capitalist escaping from it never ends, the general trend is towards valueless production, of which the IT is the most pronounced expression.

From the above it follows that I also disagree with Graham on the value of services. First, I reject his view that only labor that is creating commodities that are productively consumed is value-creating. He shares that view with Loren Goldner, but not with Marx. For Marx, the only question is whether that labor is constituant to the creation of capital, i.e, does the labor lead to the creation of a commodity through whose sale the buyer of that labor realizes surplus value? It doesn't matter, in regard to the question whether that labor is productive, whether its product has a value, if the worker is blue collar or in a lab-coat or naked. "A singer who sings like a bird is an unproductive worker. If she sells her song for money, she is to that extent a wage-labourer or merchant. But if the same singer is engaged by an enterpreneur who makes her sing to make money, then she becomes a productive worker, since she produces capital directly." (2) It's as simple as that. Any commodity, material or immaterial, useful or stupid,that is created by wage labor and recognized by the market as having use value, has (exchange) value.

That doesn't mean that it is unimportant whether that commodity is productively or unproductively consumed. Obviously that makes a huge difference but not on the question wether that commodity has value or not. It is clear that the limits to productive consumption, imposed by capitalism's immanent market contradiction, and by the fact that the capitalist himself couldn't care less wether his commodity is consumed productively or not, and often can obtain higher profits in the latter case, put the system increasingly out of whack and burdens the relatively shrinking sector of the economy whose products do assure the reproduction of capital, ever more. But I discussed this elsewhere (see my polemic with L.Goldner and Aufheben in IP#41 ).

So the distinction matters very much. But Graham is mistaken when he assumes that most services are not productively consumed. His arguments on health care services in his reply to you are unconvincing. I think you are right, there is no difference between bread and health care in this regard. The problem with services is that it is a catch-all nomer that compromises both commodities and forms of taxation, both productive and unproductive labor. Also, as I stated earlier, the transformation of the working class in a global collective worker, explodes distinctions that were valid in earlier times. It is true that capitalism invents services for artificially created needs, for instance by making them uniquely desirable through marketing or by designing software so that it will be service-dependent. But that doesn't mean that these services have no value from the Marxist point of view. And as said, many other services are indispensable for the reproduction of capital.

December 28, 2005


(1) Marx emphasized that it is their combined activity which results materially in a collective product. "And here it is quite immaterial whether the job of a particular worker, which is merely a limb of the collective worker, is at a greater or smaller distance from the actual manual labor"( Capital I, Appendix, 'Results...', p. 1039-1040, Penguin Ed). He even included the managers in the collective worker! It would depend what they do and how much these managers are paid though, I would think that most of them share in the loot more than they contribute to it. Still, even CEO's who make millions are sometimes worth every penny of it to their companies, not because they create surplus value but because they rake in huge surplus profits.

(2) Capital I, Appendix (Results.),p.1044..

P.S. On domestic servants (not creating capital and therefore not productive workers from Marx's point of view.) Cameron writes that in the UK, "as late as 1921, agriculture was the single largest employer of labor, followed by domestic service". (A concise economic history of the world, p.226)

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