This sociological principle pervades the whole of Socialist economics. It appears in every economic definition, practically, and the terminology of the orthodox political economists is thereby often given a new meaning, radically different from that originally given to it and commonly understood. The student of Socialism who fails to appreciate this fact will most frequently land in a morass of confusion and difficulty, but the careful student who fully understands it will find it of great assistance. Take, as an illustration, the phrase "the abolition of capital" which frequently occurs in Socialist literature. The reader who thinks of capital as consisting of things, such as machinery, materials of production, money, and so on, finds the phrase bewildering. He wonders how it is conceivable that production should go on if these things were done away with. But the student who fully understands the sociological principle outlined above comprehends at once that it is not proposed to do away with the things, but with certain social relations expressed through them. He understands that the "abolition of capital" no more involves the destruction of the physical things than the abolition of slavery involved the destruction of the slave himself. What is aimed at is the social relation which is established through the medium of the things commonly called capital.
II
In common with all the great economists, Socialists hold that wealth is produced by human labor applied to appropriate natural objects. This, as we have seen, does not mean that labor is the sole source of wealth. Still less does it mean that the mere expenditure of labor upon natural objects must inevitably result in the production of wealth. If a man spends his time digging holes in the ground and filling them up again, or dipping water from the ocean in a bucket and pouring it back again, the labor so expended upon natural objects would not produce wealth of any kind. Nor is the productivity of mental labor denied. In the term "labor" is implied the totality of human energies expended in production, regardless of whether those energies be physical or mental. In modern society wealth consists of social use-values, commodities.
We must, therefore, begin our analysis of capitalist society with an analysis of a commodity. "A commodity," says Marx, "is, in the first place, an object outside us, a thing that by its properties satisfies human wants of some sort or another. The nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference. Neither are we here concerned to know how the object satisfies these wants, whether directly as means of subsistence, or indirectly as means of production."[164] But a commodity must be something more than an object satisfying human wants. Such objects are simple use-values, but commodities are something else in addition to simple use-values. The manna upon which the pilgrim exiles of the Bible story were fed, for instance, was not a commodity, though it fulfilled the conditions of this first part of our definition by satisfying human wants. We must carry our definition further, therefore. In addition to use-value, then, a commodity must possess exchange-value. In other words, it must have a social use-value, a use-value to others, and not merely to the producer.
Thus, things may have the quality of satisfying human wants without being commodities. To state the matter in the language of the economists, use-values may, and often do, exist without economic value, value, that is to say, in exchange. Air, for example, is absolutely indispensable to life, yet it is not—except in special, abnormal conditions—subject to sale or exchange. With a use-value that is beyond computation, it has no exchange-value. Similarly, water is ordinarily plentiful and has no economic value; it is not a commodity. A seeming contradiction exists in the case of the water supply of cities where water for domestic use is commercially supplied, but a moment's reflection will show that it is not the water, but the social service of bringing it to a desired location for the consumer's convenience that represents economic value. Over and above that there is, however, the element of monopoly-price which enters into the matter. With that we have not, at this point, anything to do. Under ordinary circumstances, water, like light, is plentiful; its utility to man is not due to man's labor, and it has, therefore, no economic value. But in exceptional circumstances, as in an arid desert or in a besieged fortress, a millionaire might be willing to give all his wealth for a little water, thus making the value of what is ordinarily valueless almost infinite. What may be called natural use-values have no economic value. And even use-values that are the result of human labor may be equally without economic value. If I make something to satisfy some want of my own, it will have no economic value unless it will satisfy the want of some one else. So, unless a use-value is social, unless the object produced is of use to some other person than the producer, it will have no value in the economic sense: it will not be exchangeable.
A commodity must therefore possess two fundamental qualities. It must have a use-value, must satisfy some human want or desire; it must also have an exchange-value arising from the fact that the use-value contained in it is social in its nature and exchangeable for other exchange-values. With the unit of wealth thus defined, the subsequent study of economics is immensely simplified.[165]
The trade of capitalist societies is the exchange of commodities against each other, through the medium of money. Commodities utterly unlike each other in all apparent physical properties, such as color, weight, size, shape, substance, and so on, and utterly unlike each other in respect to the purposes for which intended and the nature of the wants they satisfy, are exchanged for one another, sometimes equally, sometimes in unequal ratio. The question immediately arises: what is it that determines the relative value of commodities so exchanged? A dress suit and a kitchen stove, for example, are very different commodities, possessing no outward semblance to each other, and satisfying very different human wants, yet they may, and actually do, exchange upon an equality in the market. To understand the reason for this similarity of value of dissimilar commodities, and the principle which governs the exchange of commodities in general, is to understand an important part of the mechanism of modern capitalist society.
This is the problem of value which all the great economists have tried to solve. Sir William Petty, Adam Smith, David Ricardo, John Stuart Mill, and Karl Marx developed what is known as the labor-value theory as the solution of the problem. This theory, as developed by Marx, not in its cruder forms, is one of the cardinal principles in Socialist economic theory. The Ricardian statement of the theory is that the relative value of commodities to one another is determined by the relative amounts of human labor embodied in them; that the quantity of labor embodied in them is the determinant of the value of all commodities. When all their differences have been carefully noted, all commodities have at least one quality in common. The dress suit and the kitchen range, toothpicks and snowshoes, pink parasols and sewing-machines, are unlike each other in every other particular save one—they are all products of human labor, crystallizations of human labor-power. Here, then, say the Socialists, as did the great classical economists, we have a hint of the secret of the mechanism of exchange in capitalist society. The amount of labor-power embodied in their production is in some way connected with the measure of the exchangeable value of the commodities.
Stated in the simple, crude form, that the quantity of human labor crystallized in them is the basis and measure of the value of commodities when exchanged against one another, the labor theory of value is beautifully simple. At least, the formula is simplicity itself. At the same time, it is open to certain very obvious criticisms. It would be absurd to contend that the day's labor of a coolie laborer is equal in productivity to the day's labor of a highly skilled mechanic, or that the day's labor of an incompetent workman is of equal value to that of the most proficient. To refute such a theory is as beautifully simple as the theory itself. In all seriousness, arguments such as these are constantly used against the Marxian theory of value, notwithstanding that they do not possess the slightest relation to it. Marxism is very frequently "refuted" by those who do not trouble themselves to understand it.