What, then, is value in exchange? It is the ratio in which one kind of useful commodity exchanges against another kind of useful commodity. This ratio, says Marx, does not in the least depend on the usefulness of the respective commodities, or their capacity of gratifying any particular want. For, first, that is a matter of quality, whereas value is a ratio between quantities; and second, two different kinds of utility cannot be compared, for they have no common measure; but value, being a ratio, implies comparison, and comparison implies a common measure. A fiddle charms the musical taste, a loaf satisfies hunger, but who can calculate how much musical gratification is equivalent to so much satisfaction of hunger. The loaf and the fiddle may be compared in value, but not by means of their several uses. Third, there are many commodities which are useful and yet have no value in exchange: air, for example, water, and, he adds, virgin soil. In seeking what in the exchange the value depends on, we must therefore leave the utility of the commodities exchanged entirely out of account; and if we do so, there is only one other attribute they all possess in common, and it must be on that attribute that their value rests. That attribute is that they are all products of labour. While we looked to the utility of commodities, they were infinite in their variety, but now they are all reduced to one sober characteristic they are so many different quantities of the same material, labour. Diversity vanishes; there are no longer tables and chairs and houses, there is only this much and that much and the next amount of preserved human labour. And this labour itself is not discriminated. It is not joiner work, mason work, or weaver work; it is merely human labour in the abstract, incorporated, absorbed, congealed in exchangeable commodities. In an exchange commodities are quantities of labour jelly, and they exchange in the ratio of the amount of labour they have taken in.
Value, then, is quantity of abstract labour, and now what is quantity of labour? How is it to be ascertained? Labour is the exertion or use of man's natural powers of labour, and the quantity of labour is measured by the duration of the exertion. Quantity of labour is thus reduced to time of labour, and is measured by hours and days and weeks. Marx accordingly defines value to be an immanent relation of a commodity to time of labour, and the secret of exchange is that "a day's labour of given length always turns out a product of the same value." Value is thus something inherent in commodities before they are brought to market, and is independent of the circumstances of the market.
Marx has no sooner reduced value to the single uniform element of time of labour, and excluded from its constitution all considerations of utility and the state of the market, than he reintroduces those considerations under a disguised form. In the first place, if a day's labour of given length always produces the same value, it is obvious to ask whether then an indolent and unskilful tailor who takes a week to make a coat has produced as much value as the more expert hand who turns out six in this time, or, with the help of a machine, perhaps twenty? Marx answers, Certainly not, for the time of labour which determines value is not the time actually taken, but the time required in existing social conditions to produce that particular kind of commodity—the time taken by labour of average efficiency, using the means which the age affords—in short, what he calls the socially necessary time of labour. Value is an immanent relation to socially necessary time of labour. Marx's standard is thus, after all, not one of quantity of labour pure and simple; it takes into account, besides, the average productive power of labour in different branches of industry. "The value of a commodity," says he, "changes directly as the quantity, and inversely as the productive power, of the labour which realizes itself in that commodity." Before we know the value of a commodity we must therefore know not only the quantity of labour that has gone into it, but the productive power of that labour. We gather the quantity from the duration of exertion, but how is average productive power to be ascertained? By simply ascertaining the total product of all the labour engaged in a particular trade, and then striking the average for each labourer. Diamonds occur rarely in the crust of the earth, and therefore many seekers spend days and weeks without finding one. Hits and misses must be taken together; the productive power of the diamond seeker is low; or, in other words, the time of labour socially necessary to procure a diamond is high, and its value corresponds. In a good year the same labour will produce twice as much wheat as in a bad; its productive power is greater; the time socially necessary to produce wheat is less, and the price of the bushel falls. The value of a commodity is therefore influenced by its comparative abundance, whether that be due to nature, or to machinery, or to personal skill.
But, in the next place, if value is simply so much labour, it would seem to follow, on the one hand, that nothing could have value which cost no labour, and, on the other, that nothing could be devoid of value which cost labour. Marx's method of dealing with these two objections deserves close attention, because it is here that the fundamental fallacy of his argument is brought most clearly out. He answers the first of them by drawing a distinction between value and price, which he and his followers count of the highest consequence. Things which cost no labour may have a price, but they have no value, and, as we have seen, he mentions among such things conscience and virgin soil. No labour has touched those things; they have no immanent relation to socially necessary time of labour; they have not, and cannot have, any value, as Marx understands value. But then, he says, they command a price. Virgin soil is actually sold in the market; it may procure things that have value though it has none itself. Now, this distinction between value and price has no bearing on the matter at all, for the simple reason that, as Marx himself admits, price is only a particular form of value. Price, he says, is "the money form of value"; it is value expressed in money; it is the exchange value of a commodity for money. To say that uncultivated land may have a price but not a value is, on Marx's own showing, to say that it has an exchange value which can be definitely measured in money, and has yet no value. But he has started from the phenomena of exchange; he has told us that exchange value is the only form in which we experience value now; and he thus arrives at a theory of value which will not explain the facts. If he argued that a thing had value, but no exchange value, his position might be false, but he says that a thing may have exchange value but no value, and so his position is contradictory. Moreover, he describes money accurately enough as a measure of value, and says that it could not serve this function except it were itself valuable, i.e., unless it possessed the quality that makes all objects commensurable, the quality of being a product of labour. Yet here we find him admitting that virgin soil, which, ex hypothesi, does not possess that quality, and ought therefore to be incommensurable with anything that possesses it, is yet measured with money every day. Such are some of the absurdities to which Marx is reduced by refusing to admit that utility can confer value independently of labour.
Let us see now how he deals with the other objection. If labour is just value-forming substance, and if value is just preserved labour, then nothing which has cost labour should be destitute of value. But Marx frankly admits that there are such things which have yet got no value; and they have no value, he explains, because they have no utility. "Nothing can have value without being useful. If it is useless, the work contained in it is useless, and therefore has no value." He goes further; he says that a thing may be both useful and the product of labour and yet have no value. "He who by the produce of his labour satisfies wants of his own produces utility but not value. To produce a ware, i.e., a thing which has not merely value in use, but value in exchange, he must produce something which is not only useful to himself, but useful to others," i.e., socially useful. A product of labour which is useless to the producer and everybody else has no value of any sort; a product of labour which, while useful to the producer, is useless to any one else, has no exchange value. It satisfies no want of others. This would seem to cover the case of over-production, when commodities lose their value for a time because nobody wants them. Lassalle explained this depreciation of value by saying that the time of labour socially necessary to produce the articles in question had diminished. Marx explains it by saying that the labour is less socially useful or not socially useful at all. And why is the labour not socially useful? Simply because the product is not so. The social utility or inutility of the labour is a mere inference from the social utility or inutility of the product, and it is therefore the latter consideration that influences value. Marx tries in vain to exclude the influence of that consideration, or to explain it as a mere subsidiary qualification of labour. Labour and social utility both enter equally into the constitution of value, and Marx's radical error lies in defining value in terms of labour only, ignoring utility.
For what, after all, is value? Is Marx's definition of it in the least correct? No. Value is not an inherent relation (whatever that may mean) of a commodity to labour; it is essentially a social estimate of the relative importance of commodities to the society that forms the estimate. It is not an immanent property of an object at all; it is a social opinion expressed upon an object in comparison with others. This social opinion is at present collected in an informal but effective way, through a certain subtle tact acquired in the market, by dealers representing groups of customers on the one hand, and manufacturers representing groups of producers on the other; and it may be said to be pronounced in the verdict of exchange, i.e., according to Mill's definition of value, in the quantity of one commodity given in exchange for a given quantity of another. Now, on what does this social estimate of the relative importance of commodities turn? In other words, by what is value and difference in value determined? Value is constituted in every object by its possession of two characteristics: 1st, that it is socially useful; 2nd, that it costs some labour or trouble to procure it. No commodity lacks value which possesses both of these characteristics; and no commodity has value which lacks either of them. Now there are two kinds of commodities. Some may be produced to an indefinite amount by means of labour, and since all who desire them can obtain them at any time for the labour they cost, their social desirableness, their social utility, has no influence on their value, which, therefore, always stands in the ratio of their cost of production alone. Other classes of commodities cannot be in this way indefinitely multiplied by labour; their quantity is strictly limited by natural or other causes; those who desire them cannot get them for the mere labour of producing them; and the value of commodities of this sort will consequently always stand in excess of their relative cost of production, and will be really determined by their relative social utility. In fact, so far from the labour required for their production being any guide to their value, it is their value that will determine the amount of labour which will be ventured in their production. A single word may be added in explanation of the conception of social utility. Of course a commodity which is of no use to any one but its owner has no economic value, unless it happens to get lost, and, in any case, it is of no consequence in the present question. The social utility of a commodity is its capacity to satisfy the wants of others than the possessor, and it turns on two considerations: 1st, the importance of the want the commodity satisfies, and, 2nd, the number of persons who share the want. All commodities which derive a value from their rarity or their special excellence belong to this latter class, and the vice of Marx's theory of value is simply this, that he takes a law which is true of the first class of commodities only to be true of all classes of them.
2. Wages. Having concluded by the vicious argument now explained that all value is the creation of the personal labour of the workman—is but the registered duration of exertion of his labouring powers—Marx next proceeds to show that, as things at present exist, the value of these labouring powers themselves is fixed not by what they create but by what is necessary to create or at least renovate them. The rate of wages, economists have taught, is determined by the cost of the production of labouring powers, and that is identical with the cost of maintaining the labourer in working vigour. Marx accepts the usual explanations of the elasticity of this standard of cost of subsistence. It includes, of course, the maintenance of the labourer's family as well as his own, because he will die some day, and the permanent reproduction of powers of labour requires the birth of fresh hands to succeed him. It must also cover the expenses of training and apprenticeship, and Marx would probably agree to add, though he does not actually do so, a superannuation allowance for old age. It contains, too, a variable historical element, differs with climate and country, and is, in fact, just the customary standard of living among free labourers of the time and place. The value of a commodity is the time of labour required to deliver it in normal goodness, and to preserve the powers of labour in normal goodness a definite quantity of provisions and comforts is necessary according to time, country, and customs. The part of the labouring day required to produce this definite quantity of provisions and comforts for the use of the day may be called the necessary time of labour—the time during which the workman produces what is necessary for keeping him in existence—and the value created in this season may be called necessary value. But the workman's physical powers may hold on labouring longer than this, and the rest of his working day may accordingly be called surplus time of labour, and the value created in it surplus value. This surplus value may be created or increased in two ways: either by reducing or cheapening the labourer's subsistence, i.e., by shortening the term of necessary labour; or by prolonging the length of the working day, i.e., by increasing the term of surplus labour. There are limits indeed within which this kind of action must stop. The quantity of means of life cannot be reduced below the minimum that is physically indispensable to sustain the labourer for the day, and the term of labour cannot be stretched beyond the labourer's capacity of physical endurance. But within these limits may be played an important rôle, and the secret of surplus value lies in the simple plan of giving the labourer as little as he is able to live on, and working him as long as he is able to stand. A labourer works 12 hours a day because he cannot work longer and work permanently and well, and he gets three shillings a day of wages, because three shillings will buy him the necessities he requires. In six hours' labour he will create three shillings' worth of value, and he works the other six hours for nothing, creating three shillings' worth of surplus value for the master who advances him his wages. It is from these causes that we come on the present system of things to the singular result that powers of labour which create six shillings a day are themselves worth only three shillings a day. This absurd conclusion, says Marx, could never have held ground for an hour, had it not been hid and disguised by the practice of paying wages in money. This makes it seem as if the labourer were paid for the whole day when he is only paid for the half. Under the old system of feudal servitude there were no such disguises. The labourer wrought for his master one day, and for himself the other five, and there was no make-believe as if he were working for himself all the time. But the wages system gives to surplus labour that is really unpaid the false appearance of being paid. That is the mystery of iniquity of the whole system, the source of all prevailing legal conceptions of the relation of employer and employed, and of all the illusions about industrial freedom. The wages system is the lever of the labourer's exploitation, because it enables the capitalist to appropriate the entire surplus value created by the labourer—i.e., the value he creates over and above what is necessary to recruit his labouring powers withal.
Now surplus value, as we have seen, is of two kinds, absolute and relative. Absolute surplus value is got by lengthening the term of surplus labour; relative surplus value by shortening the term of necessary labour, which is chiefly done by inventions that cheapen the necessaries of life. The consideration of the first of these points leads Marx into a discussion of the normal length of the day of labour; and the consideration of the second into a discussion of the effects of inventions and machinery on the condition of the working classes. We shall follow him on these points in their order.
3. Normal day of labour. There is a normal length of the day of labour, and it ought to be ascertained and fixed by law. Some bounds are set to it by nature. There is a minimum length, for example, beneath which it cannot fall; that minimal limit is the time required to create an equivalent to the labourer's living; but as under the capitalistic system the capitalist has also to be supported out of it, it can never be actually shortened to this minimum. There is also a maximum length above which it cannot rise, and this upper limit is fixed by two sorts of considerations, one physical, the other moral. 1st. Physical limits. These are set by the physical endurance of the labourer. The day of labour cannot be protracted beyond the term within which the labourer can go on from day to day in normal working condition to the end of his normal labouring career. This is always looked to with respect to a horse. He cannot be wrought more than eight hours a day regularly without injury. 2nd. Moral limits. The labourer needs time (which the horse does not, or he would perhaps get it) for political, intellectual, and social wants, according to the degree required by society at the time. Between the maximum and minimum limit there is, however, considerable play-room, and therefore we find labouring days prevailing of very different length, 8 hours, 10, 12, 14, 16, and even 18 hours. There is no principle in the existing industrial economy which fixes the length of the day; it must be fixed by law on a sound view of the requirements of the case. Marx pitches upon 8 hours as the best limit, because it affords a security for the permanent physical efficiency of the labourer, and gives him leisure for satisfying those intellectual and social wants which are becoming every day more largely imperative. He makes no use of the reason often urged for the 8 hours day, that the increased intelligence it would tend to cultivate in the working class would in many ways conduce to such an increase of production as would justify the shorter term of work. But he is very strong for the necessity of having it fixed by law, and points out that even then employers will need to be carefully watched or they will find ways and means of extending the day in spite of the law. When the day was fixed in England at 10 hours in some branches of industry, some masters gained an extra quarter or half-hour by taking five minutes off each meal time, and the profit made in these five minutes was often very considerable. He mentions a manufacturer who said to him, "If you allow me ten minutes extra time every day, you put £1,000 a year into my pocket," and he says that is a good demonstration of the origin of surplus value, for how much of this £1,000 would be given to the man whose extra ten minutes' labour had made it? Marx enters very fully into the history of English factory legislation, acknowledges the great benefit it has conferred both upon the labouring class and the manufacturers, and says that since the Act of 1850 the cotton industry has become the model industry of the country. As might be expected, he thinks the gradual course taken by English legislation on the subject much inferior, as a matter of principle, to the more revolutionary method taken by France in 1848, when a twelve hours Act was introduced simultaneously as a matter of principle for every trade in the whole country; but he admits that the results were more permanent in England.
4. Effects of machinery, and the growth of fixed capital on the working classes. The whole progress of industrial improvements is a history of fresh creations of relative surplus value, and always for the benefit of the capitalist who advances the money. Everything that economizes labour or that adds positively to its productivity, contracts the labourer's own part of the working day and prolongs the master's. Division and subdivision of labour, combination, co-operation, organization, inventions, machinery, are all "on the one hand elements of historical progress and development in the economic civilization of society, but on the other are all means of civilized and refined exploitation of the labourer." They not only increase social wealth at his expense, but in many cases they do him positive injury. These improvements have cost capitalists nothing, though capitalists derive the whole advantage from them. Subdivision, combination, organization, are simply natural resources of social labour, and natural resources of any kind are not produced by the capitalist. Inventions, again, are the work of science, and science costs the capitalist nothing. Labour, association, science—these are the sources of the increase; capital is nowhere, yet it sits and seizes the whole. Machinery, of course, is capital, but then Marx will not admit that it creates any value, and contends that it merely transfers to the product the value it loses by tear and wear in the process of production. The general effect of industrial improvements, according to Marx, is—1st, to reduce wages; 2nd, to prolong the day of labour; 3rd, to overwork one-half of the working class; 4th, to throw the rest out of employ; and, 5th, to concentrate the whole surplus return in the hands of a few capitalists who make their gains by exploiting the labourers, and increase them by exploiting one another. This last point we need not further explain, and the third and fourth we shall unfold under the separate heads of Piecework and Relative Over-population. The remaining two I shall take up now, and state Marx's views about a little more fully.