Value and exploitation: Marx's problem and Skillman's solution

Chattopadhyay's discussion of problems in Marx's theorisation of value and exploitation and a solution posed by the academic Gilbert Skillman.

Following his unusual method Marx rigorously demonstrates that the assumption of equivalent commodity exchange has to be the starting point for explaining the formation of capital, hence capitalist exploitation. The latter corresponds to "real capital" understood as a historically specific mode of production based on the laborers' separation from the conditions of production implying the commodity character of labor power. On the other hand, exploitation occurring under usury and merchant capital is capitalist exploitation "only formally" inasmuch as these two forms exist under different modes of production and hence are "capital only formally." The two types of capitalist exploitation thus belong to two totally different universes of discourse and are in no way mutually contradictory.

READ WITH CONSIDERABLE INTEREST Gilbert L. Skillman's paper on "Marxian Value Theory and the Labor-Labor Power Distinction" (Science & Society, Vol. 60, No. 4, Winter 1996-97). The paper is stimulating and provocative. Its basic aim is to show that the Marxian labor-labor power distinction toward explaining capitalist exploitation based on equivalent exchange is misconceived. Marx's argument is not only unproven; it is also disproven by Marx's own work, which explains capitalist exploitation independently of the value-theoretic framework. Skillman, of course, does not dismiss what he calls "historical materialist argument," but wants to use it, once liberated from Marx's "inconsistencies," to develop "historically contingent strategic analysis of class conflict under capitalism." The paper is rich in references to "modern literature" on history and economics, some of which have clearly inspired his work. Given space limitations I shall, in what follows, strictly confine myself to those parts of his paper - and only the main points in those parts -- which concern exclusively the arguments raised against Marx's formulations.

1. The Significance of the Labor-Labor Power Distinction
Contrary to Skillman's assertion, it is not Marx who first "codified" the distinction between labor and labor power. Hegel, for example, had already clearly spelled out this distinction in one of his last major works, and in this regard Marx cites his "master" who speaks of the "physical and mental capacities and possibilities" of an individual who could be "alienated" only for a "limited time" but not for the whole time, in which case the individual would be somebody else's property (Marx, 1962a,182). In the same place (this part Marx does not cite) Hegel significantly speaks of the "use of (labor) power" and adds that this explains the distinction between "today's day laborer and the (Athenian) slave who alienated the whole domain of his activity to his master" (Hegel,1972, 74). On the other hand, by its very nature this distinction as such cannot be unique to capitalism. It is inherent in the labor process itself. "Labor is simply the use of labor power, only the function, realization, activity of labor power" (Marx, 1953, 487-88; 1976, 42, 139; 1962a, 192). Thus Marx speaks of the "use or expenditure of labor power" of the serf for the lord (1962a, 91). However, under capitalism this distinction takes on a totally new significance which Marx was the first to emphasize. It is only in capitalist production, Marx underlined, that labor power is separated as a commodity from the laborer, and its uniqueness in relation to any other commodity lies in that its use value contributes a greater value than what it costs to produce and reproduce it.

Marx's main purpose in emphasizing this characteristic of capitalism was not, as such, to find fault with Ricardo's failure to account for the origin of profit. Ricardo's formal logical fallacy - the circularity of reasoning --implied by his theory of labor value as applied to labor itself was already pointed out very accurately by Bailey, whom Marx cites approvingly (1959, 397-98; 1962a, 557; 1976, 42). For Marx this distinction concerned a fundamental question: the very concept of capital as a relation of separation between laborers and their conditions of production, implying immediately the sale of labor power as a commodity to the masters of the conditions of production. It is only in this connection that Marx shows how even the greatest of the bourgeois economists failed to grasp this distinction and thereby failed to understand capital as a specific social relation to production.

Instead of laborhe [Ricardo] should have spoken of labor power. In that case capital would have equally presented itself as the material conditions of labor confronting the laborer as an autonomous power. And capital would have immediately presented itself as a definite social relation. (Marx, 1959, 397, emphasis in text.)

Failure to make this distinction led to Ricardo's inability to demonstrate the inequality between the quantum of labor that the capitalist gives to the laborer as wage and the quantity of living labor which the capitalist buys for this quantity of objectified labor (Marx, 1976, 42) - the "insoluble antinomy" arising from the fact that, on the one hand, a definite quantity of living labor is not equal to the commodity in which it is objectified while, on the other hand, the value of the commodity is equal to the labor contained in it (Marx, 1953, 456).1 This failure prevented Ricardo from understanding the difference between commodity and capital, between exchange of commodity against commodity and exchange of capital against commodity -- corresponding to the law of exchange of commodities (Marx, 1959, 401).

2. Logic of the Value-Price Non-Disparity Premise
Concerning Marx's setting of capitalist exploitation within the value-theoretic framework, Skillman argues that ( 1 ) Marx's assertion that exchange "expresses something equal" is invalid, and confuses "equality" with "equivalence"; (2) Marx does not demonstrate how price-value equivalence constitutes the "pure" case of exchange; (3) Marx fails to establish his claim that capital formation has to be explained on the basis of value-price non-disparity; and (4) Marx's initial stipulation of value-price equivalence as the basis of capitalist exploitation contradicts his own subsequent analysis of capitalist exploitation independently of the value-theoretic framework. A formidable indictment of Marx indeed! In this section I examine Skillman's first three arguments, not necessarily in the order presented here. My treatment of his fourth argument is reserved for the following section.

Regarding the first argument I submit that Skillman's (undemonstrated) statement that Marx's particular assertion is "invalid" itself seems to lack validity. If there is nothing in common between two products, if they do not "express something equal," any exchange of one against the other (in the literal sense of interchange of the two products) 2 is hardly conceivable.3 Aristotle, whom Marx cites, had already clearly formulated this: "there can be no exchange without equality, but there can be no equality without commensurability" (Marx, 1962a, 74).

Exchange of equivalents only signifies that the commodities are bought and sold at their values. Equivalence is in fact the exchange value of a commodity expressed in the use value of another commodity. But to the extent the exchange value develops as the form of circulation, a commodity presents in price its exchange value expressed in money. Thus its sale against an equivalent in money only signifies that it is sold at its price, that is, at an equal sum of money. Presupposing that commodities exchange against equivalents simply amounts to saying that they are bought and sold at their value (Marx, 1976, 19-21).

The supposition of equality in exchange of commodities has a deeper side. The necessity of distribution of social labor in certain proportions exists in all societies, but the forms of distribution vary, following the forms of social production. In a society that is neither under a communal or associative system excluding private exchange, nor under slavery or serfdom characterized by personal dependence and authoritarian social division of labor, but rather one whose premise is private individuals "grouped like atoms, independent, acting according to their free will," having no other relation in production but those which are born out of reciprocal needs, the distribution of social labor can only take the form of exchange of products of individual labors following individual needs, and, with no violence on either side and no difference between subjects of exchange - "each one considering oneself as sovereign (ubergreifendes) subject" - the transactions, entirely voluntary, are necessarily based on equivalent exchange. "This is the kingdom of freedom, equality and property based on labo#' (Marx, 1953, 912, 928; 1962a, 377; 1972, 91, 185; emphasis in text). "It is under the form of exchange and commerce that political economy conceives the community of human beings and their reciprocal integration (Erg*nzung)" (Marx, 1932, 536).4

Now, why should value-price non-disparity be the point of departure for explaining the formation of capital? First of all, value, which as such produces value, can only be a product of exchange inasmuch as it is only in exchange that it can act as exchange value. Indeed, given the assumption that civil society is a "commercial society" (Smith) where individuals can relate to one another only as independent possessors of commodities, that is, where the circulation is the ensemble of all commodity possessors in their reciprocal relations, the self-valorizing value cannot arise outside the process of circulation (Marx, 1962a, 179; 1976, 23) . The necessity of taking valueprice non-disparity as the starting point for explaining the formation of capital should be clear once we understand what Marx is trying to do in the opening chapters of Capital I.

The fundamental problem that Marx, unpreceded by any earlier thinker, tackles in these chapters is how the elementary commodity - the material medium of the value relation -- gives rise to capital, a sum of self-valorizing value, out of its inner contradictions; how, indeed, the commodity constitutes the "cell-form" of capital. Of course capital is capital only in relation to labor. Labor is the real non-capital. However, as Marx observes in an important methodological note, identically appearing in two pre-Capital texts:

In order to develop the concept of capital it is necessary to start not from labor but from value and particularly from exchange value already developed in circulation. It is as impossible to pass directly from labor to capital as it is to pass from different human races to the banker or from nature to the steam engine. (1953,170;1976, 28.)

Hence the starting point for the development of the concept of capital is the commodity, the material medium of the value relation, whose substance is (abstract) labor, and which, appearing as exchange value, is measured by the magnitude of labor contained in the commodity, with the consequence that commodities are exchanged in proportion to the magnitude of labor contained in them. The double contradiction inherent in commodities - the contradiction between use value and exchange value and the contradiction that the private labor of the individual has to appear as social labor -- gives rise to a value form different from and existing independently of use values: the money form. However, money serves simply as a measure of value and instrument of circulation and is merely the fugitive mediation facilitating exchange in the first form of commodity circulation in which the commodity is both the starting point and the terminus in the process ending in the consumption of use value. The value form here appears only to disappear. Here is a contradiction. In simple circulation exchange value is not realized as exchange value. Exchange value - money - is realized only in its disappearance, in a "negative determination" in relation to circulation; that is, it finds its absolute mode of existence by going out of exchange. However, money's self-realization is also its self-negation inasmuch as, disconnected with commodities, prices and the process of circulation, money ceases to be money (Marx, 1976, 2, 9, 31).

Naturally the first form of commodity circulation, which is really only a mediated form of barter in which money acts only as a measure of value and instrument of exchange, cannot be the general form of commodity exchange when all or most products are commodities. Corresponding to a society where the general form of commodity exchange in this sense prevails and where, consequently, exchange value and not use value is the principal aim of production, we encounter a different kind of circuit in which exchange value does not disappear in the consumption of commodities, the vanishing character of exchange value itself vanishes, and exchange value becomes simply the means of producing and reproducing exchange value (Marx, 1953, 932, 933). Here money re-enters the circulation process not, however, as a simple measure of value or medium of exchange, but in its "third determination," as money as such and, as such, means of payment. Here the two extremes, constituted by money, are not qualitatively different, unlike in the first exchange circuit where the two extremes are constituted by qualitatively different commodities. On the other hand, to imagine that the two extremes constituted by money are quantitatively equal makes no sense. The operation would be rational only if the two extremes were unequal quantitatively, the second having a greater magnitude than the first. Here money as autonomous, adequate exchange value must conserve itself in circulation and in this new positing cease to be money, which as such does not go beyond negative determination, and become money in process, value in process, in which function alone exchange value could be multiplied to make any sense of the second form of the commodity circuit.

However, under the assumption of equivalent exchange, this additional value cannot be generated in circulation. On the other hand, if commodities are exchanged as non-equivalents, this is possible under the assumption of exchange among autonomous, free willing commodity producers, with equal individual rights - only if one party succeeds in cheating the other, in which case the sum of value (bought and sold) remains the same, with the consequence that the formation of capital as the "universal form of wealth" would be impossible again. If more value has to come out of exchange, then, in the circulation process itself based on equivalent exchange, money has to buy a commodity whose use value has the unique property of producing more value than it costs to reproduce it This commodity is living labor power, whose possessor is obliged to sell it, being unable to exchange labor in the form of labor objectified in another use value. The consumption of labor power, like the consumption of any other commodity, takes place outside the circulation process.5 In the exchange process the second type of circuit, that of the possessors of money, necessarily implies its opposite, the first type of circuit, that of the possessors of living labor power, and where, as in any such transaction, the commodity that the laborers sell is use value to the buyer, and exchange value to the seller. It is only the specificity of the use value of the commodity acquired by exchange which tends to transgress the bounds of simple circulation (Marx, 1953, 202; 1956, 285-86).

The existence of labor power as a commodity would necessarily imply that the possessors of living labor power have already been separated from the conditions of labor where the separation has been brought about by the transformation of the law of appropriation corresponding to simple commodity circulation based on equivalent exchange into its direct opposite through a "dialectical reversal" (dialektische Umschlag). "The separation between ownership and labor becomes the necessary consequence of a law which apparently started out from their identity." It is simple commodity production itself that "brings about the material means of its own destruction" (Marx,1953, 362, 413-14; 1962a, 699-10, 789). In other words, the second commodity circuit implies the transformation of money into money in process, value in process, that is, capital The necessary trajectory of the simple commodity, the material medium of the equivalent exchange relation, into money and of money into capital - in other words, the formation of capital with equivalent exchange as the necessary starting point -- should now be clear. As Marx observes in a letter to Engels (June 22, 1867): "The simple commodity form contains the whole secret of the money form and, thereby, in germ, the whole secret of all the bourgeois forms of the product of labor," adding that "the economists have overlooked this simplest thing."

Skillman detects a "critical lacuna" in Marx's argument, in that "Marx fails to define what he means when considering price-value equivalence as the 'pure' case." In fact, following Skillman's argument, Marx seems to have committed the elementary logical fallacy of argumentum ad verecundiam by simply citing some "obscure authorities" as the "only basis of his claim." I submit that Skillman has completely misunderstood the method of Marx's critique of political economy. One may recall Marx's warning to Lachatre: "The method of analysis which I have employed and which has not yet been applied to economic subjects makes reading of the first chapters fairly arduous" (1965, 543). Marx is here referring to his scientific method which he announces in a "Preface" to Capital:

For the analysis of economic forms neither the microscope nor the chemical reagents can be of use. They must be replaced by the power of abstraction.... The physicist observes the natural process either where it appears in its most meaningful form, least obscured by disturbing influences or, wherever possible, makes the experiment under the conditions which assure the pure operation of the process [reinen Vorgang des Prozesses]. (1962a, 12, emphasis added.)

Following this method Marx abstracts from the deviations of (market) prices from values in order to "observe the formation of capital in its pure form on the basis of commodity exchange" and not to let "the observation be obscured by the accessory circumstances that are foreign to the process itself" and which "do not arise from the immanent laws of circulation" (1962a,172,180; 1965, 704, 713) . Throughout his critique of political economy Marx follows this "power of abstracting from perceptible singularity and contingency" (1976, 210). Thus in the first chapter of Capital I Marx expressly abstracts from wage labor, though he opens the chapter speaking of the "capitalist mode of production," because "at this stage" of his "presentation" (Darstellung) of the commodity as such the "category of wage does not yet exist" (1962a, 59) . As a matter of fact wage as a category appears only in the sixth chapter, and even the category of labor power as a commodity appears only in the fourth chapter (sixth in the French version), after Marx has analyzed money's "third determination." Similarly, at the beginning of the section on the accumulation process of capital, Marx writes:

We suppose here on the one hand that the capitalist who produces the commodity sells it at its value, and shall not stay on [venx)eilen] for its return to the market whether it is a question of the new forms that capital assumes in the circular process or it is a question of the concrete conditions of production which are hidden therein.... We shall consider accumulation as abstract, that is, as a simple moment of the immediate process of production.... a pure analysis [reine Analyse] demands that all phenomena which hide the inner play of its mechanism shall be left aside provisionally. ( 1962a, 690, emphasis added.)

Again, in the course of discussing Ricardo's accumulation theory, Marx underlines that while "observing the pure forms of capital" (bloss die Formen zu betrachten) in its different movements the real relations within which the actual production process goes on will not be developed.

It will always be supposed that commodities are sold at their values. The competition of capitals will not be studied, as little as credit, or the constitution of society which in no way simply consists of the working class and the industrial capitalist class and where consumers and producers are not identical....' (1959, 509, emphasis added.) In the same way,. referring to the different forms that capital takes in the course of the cycle, Marx emphasizes that "in order to observe the forms in their purity" (rein aufzufassen) it is necessary to "abstract from all the moments which have nothing to do with the change of forms and form-construction as such." Therefore not only is the assumption made that "commodities are sold at their value," but also abstraction is made of the changes in value that could intervene "in the cyclical process" ( 1973a, 32) . Examples could easily be multiplied. Let us add that, while abstracting from value-price disparities in the context of the formation of capital, Marx also observes that this "reduction" is not simply a "scientific procedure." It is also the way the secular tendency of "average price" operates through the continuous upward and downward movement of market prices.6

The exchange of commodities at their values, which served as Marx's point of departure for explaining the formation of capital, was of course the central assumption of classical political economy in its exploration of the "anatomy of the civil society." Thus Adam Smith assumed that the "prices of commodities constantly tend toward their natural price" through "different accidents" which might keep them sometimes above, sometimes below it (1937, 58). Similarly, Ricardo left "entirely out of consideration" the "temporary effects" on the prices of commodities occasioned by "accidental causes," and observed that "in speaking, then, of the exchangeable value of commodities, or the power of purchasing possessed by any one commodity, I mean always that power which it would possess if not disturbed by any temporary or accidental cause, and which is its natural price" (1962, 92). It should be pointed out that while the assumption of the absence of "disturbing factors" in order to observe the circulation of commodities in its "pure form" is the only scientific method, Marx at the same time wanted to show the demonstrability of capitalist exploitation without violating the assumptions of the bourgeois economists themselves, that is, "even if [auch wenn] the commodity's price is equal to its value" (1962a, 180). "The economists," Marx observed, "could never harmonize the surplus value with the law of value which they themselves had established" (1976, 79). Marx does not, of course, forget for a moment that "in reality things happen less than purely," being "modified thousandfold" (1962a,174; 1964,193). Let us stress that, in general, Marx, while abstracting from value-price disparity in order to study the value relation in its "pure form" as a basis for explaining the formation of capital, does not at all ignore the "phenomenal forms" of different economic relations -- including value but takes full account of them in their proper places. This is what he does, for example, in Capital III, where he returns to the forms of economic relations that "appear on the surface" of bourgeois society which he had earlier abstracted from (1964, 33, 219).7 Marx's abstraction is neither the "violent abstraction" by which the classics sought to save the law of value from contradictory phenomena (Marx, 1962a, 325), nor what Hegel calls "pure abstraction" which is "poorest" (diXtigste) and is simply "nothingness" (Nichts) (Hegel, 1991, 106, 107). Regarding his "scientific method" (Marx observes: "It is the task of science to develop how the law of value operates. If one wanted to start with 'explaining' all the phenomena which apparently contradicted the law, one would have to give the science before the science" (1972, 185).8

After pronouncing what he calls his "verdict" on Marx's "fundamental inconsistency," Skillman points to a "seeming exception" to this "verdict" in Marx's "canonical case" in which "capitalists hire the commodity labor power at its value but extract a quantity of labor in excess of that value." However, even here Marx cannot be saved. First, this "exception" is "arbitrary"; second, Marx's argument is wholly dependent on the "tautological definition" of the value of labor power as being "whatever workers receive as wages." I, in contrast, submit that Marx's proposition - the "seeming exception" - far from being "arbitrary" is profoundly dialectical. Labor power, reduced to a commodity by laborers' separation from the conditions of labor, has its value determined like the value of any other commodity, that is, by the quantity of labor time necessary to produce and reproduce it, and is bought and sold at its value, its only difference, at this stage, from other commodities being that it contains a "historical and moral element" (Marx, 1962a, 184-85, 333).9 However, labor power is, at the same time, not like any other commodity as regards the result that its use value produces, that is, more value than what it costs to reproduce it - this uniqueness being related to the general case of labor itself being the "universal element of value creation" unlike other commodities, a fact that "falls outside the domain of ordinary consciousness" ( 1962a, 563) .lo As regards Skillman's second point, Marx does not "define" the value of labor power as "whatever the workers receive in wages." Marx "defines" it in the same way as he "defines" the value of any other commodity (strictly speaking the substance of value). It is Ricardo's position, not Marx's, which seems, if at all, to correspond to Skillman's attributed "definition." To the contrary, regarding Ricardo's explanation of the "natural price of labor," Marx observes that here - "in one of the bases of the whole system" - Ricardo, "without any reference to the law of values of commodities, and escaping to the law of supply and demand, determines the value of labor not through the quantity of labor bestowed upon the force of labor, but upon wages allotted to the laborer" (1959, 397, 400; the phrases "law of supply and demand," and "bestowed. . . labor" appear in English in the text).

3. Exploitation by Pre-Capitalist Capital
In the light of Skillman's argument it appears that Marx violated Aristotle's famous Second Law of Thought - the law of (non) contradiction - when he posited capitalist exploitation both within the value-theoretic framework (mainly in Capital I) and outside of it (in Capital III and elsewhere). This is Bohm-Bawerk revisited. Of course, Skillman's charge of a "fundamental inconsistency" in Marx's analysis of "capitalist exploitation" would be perfectlyjustified if Marx had used the category in question -- particularly, the category of "capital" - in an identical sense in the two situations. To find out whether this was indeed the case we need to know what Marx calls the "exact concept of capital" (1953, 237).

The concept of capital is unique in Marx, completely at odds with this concept in the whole of bourgeois political economy - "vulgar" as well as "classical" - where capital is considered simply as "stock," "accumulated labor," (produced) means of production or a sum of money begetting more money. That is, for bourgeois political economy, capital is a "thing" and capitalist production is natural and transhistorical. For Marx, by contrast, "capital is not a thing but a definite social relation of production, belonging to a definite historical social formation, which is represented in a thing and gives to this thing a specific social character"; in other words "capital [is] the separation of the conditions of production from the laborer" (1962b, 419; 1964, 822; emphasis in text). As the "productive mode of existence of capital" these two are "united in the hands of the capitalist" (1973, 42). This separation determines capital as a historically specific social relation of production. "What imprints the character of capitalon money or the commodity is not their nature as money or commodity, nor the material use value of the commodity as subsistence and means of production, but the circumstance that this money and this commodity, these means of production and subsistence, confront labor power, denuded of all material wealth, as autonomous powers, personified in their possessors" (Marx, 1969, 30; emphasis in text). This "absolute divorce [Scheidung] of objective wealth from living labor power" appears as the product of labor itself. Labor appears in the capitalist production process in such a manner that "its realization [Verwirklichung] is equally its derealization [Entwirklichung]. It posits itself objectively, but it posits its objectivity as its own nonbeing, or the being of its own non-being - of capital" (Marx, 1932, 83; 1982, 2238-39; emphasis added). An immediate consequence of this separation is the inversion of the producer-product relation, the domination of objectified labor over living labor. Laborers do not employ the means of production; means of production employ laborers. Capital extracts (unpaid) surplus labor from the laborer (as wage laborer) precisely because "capital employs labor" (Marx,1956, 354; 1969, 16; 1982, 2161; emphasis in text). This surplus labor appears in value form -as self-expanding value - as "money begetting more money." This is the capitalist mode of exploitation, a mode that is - to use a well-known Marxian (Hegelian) expression - "adequate to the concept" of capital

How does Marx view the two "antediluvian forms of capital," merchant capital and interest-bearing capital, in their existence preceding the capitalist mode of production? Marx underlines that these are "capital only formally" (nur formell); they are not "real capital," not capital "in the eminent sense of the term" (in eminenten Sinn des Worts), not capital "in its fundamental form" (1953, 363, 737; 1965, 712; 1976, 27; 1980, 1546). At the same time Marx emphasizes the transhistorical character of these forms "existing in the most diverse economic social formations" in different historical epochs, however backward society's mode of production is and however underdeveloped its economic structure is (1964, 607; 1976, 26; 1980, 1555). These two forms also correspond to how people originally perceived capital as money positing money. As Marx observes, these forms correspond to the "habitual representation" (gewohnliche Vorstellung) or "popular perception" (Volksthimliche Anschauung) of capital (1976, 24, 26).11

It should be immediately clear that these "most popular forms of capital" have nothing to do with (scientifically conceived) "real capital," that is, capital in its existence as a historically specific social relation of production corresponding to a definite mode of production, as we saw earlier. This is the meaning of capital, considered "in its fundamental form determining the organization of modern society," that underlies Marx's famous statement that the "ultimate aim" of his work is to "reveal the law of motion of modern society" (1962a, 15-16; 1965, 712). At the same time we should observe that these "antediluvian forms" of capital -- merchant capital in particular - do indeed correspond formally to the general movement of capital (thus creating confusion with "real capital") as the value that comes out of circulation, goes into it, conserves itself within it and valorizes itself (Marx, 1976, 14) . "This value itself is capital" inasmuch as "capital manifests itself as capital through its valorization [Verwertung]" (Marx, 1964, 367; 1976, 14). Hence Marx calls the formula showing the generation of surplus value the "general formula of capital" (1962a, 170).

Indeed, the circulation process underlying the "general formula" covers all three types of capital: industrial (that is, productive) capital, merchant capital and - in a terribly abbreviated form where the middle term disappears -- interest-bearing capital. In other words, this movement - the only form in which capital appears phenomenally - not only corresponds to what Marx calls the "real capitalist mode of exploitation" (wirkliche kapitalistischeExploitationsweise) (1964, 795), conforming to the case of "real capital"; it also describes the "capitalist mode of exploitation" conforming to the case where capital is "only formal," satisfying both the formal definition of surplus value as the initial value positing new value in circulation and the concept of the originally advanced sum of money becoming a bigger sum through self-valorization (Marx, 1962a, 165; 1976, 14). In fact the "first interpreters of capital," the mercantilists, in the first study of the capitalist mode of production necessarily started from the "superficial phenomena" of the circulation process - "money begetting money" - thereby grasping only the "appearance" of things. The "real science of modern economy begins only when the theoretical reflection passes from the circulation process to the production process" (Marx, 1962a, 170; 1964, 349), which, indeed, was the great contribution of classical political economy.l2 In the light of the above discussion the meaning of Marx's statement about a "capitalist mode of exploitation without the capitalist mode of production" (1953, 737; 1964, 611; 1980,1546; 1982, 2155) should be clear. Just as the two "oldest forms of capital" are "capital only formally," in the same way the mode of exploitation corresponding to these two forms of capital could only be formally, and not really, capitalist. A close reading of Marx's texts on laborers' exploitation under these "hybrid forms" of capital makes clear their fundamental difference from the "real capitalist mode of exploitation." As regards usury, this form of capital can "devour" from the immediate producer the "entire excess above the strictest means of subsistence" and thereby "degrade" the income of the producer to "simple wage, and appropriate conditions of labor" (1964,609; 1980,1547; 1982, 2155). Similarly, mercantile capital can, particularly during the period of transition from the feudal to the capitalist mode of production, worsen the situation of the immediate producers, "transform them into simple wage laborers and proletarians . . . and appropriate their surplus labor" ( 1964, 347) . At first sight the mode of exploitation under what is "only formally capital" is strikingly similar to the mode of exploitation under "real capital." Not only are the immediate producers reduced to the situation of "wage laborers"; the surplus labor "devoured" or appropriated from them also takes the form of surplus value inasmuch as it appears in money form. However, this surface similarity between the two modes masks a profound difference between them. The immediate producers in the first type of exploitation start from their position as independent producers possessing their own conditions of labor. It is only in the process of interaction with the usurer and the mercantile capitalist that they are reduced to the proletarian situation and - particularly in the case of usury capital -- deprived of their conditions of labor, without of course there being any change in the mode of production. In contrast with this type of exploitation, under the second type - that is, exploitation under "real capital" - this total expropriation of the immediate producers from their conditions of labor is not the result of exploitation, but is its necessary presupposition. Usury capital renders the immediate producer a debtor, not a seller of labor (power). The producer becomes a "debt slave," not a "wage slave," the fundamental difference between them being that the former is personally dependent on the individual capitalist, whereas the latter - in Marx's famous phrase "voge frei" (free as a bird) - is completely independent in relation to the individual capitalist though remaining a "slave" in relation to capital as a totality, capital as class (Marx, 1964, 609; 1982, 2155).13 Even in the case of merchant capital as a form transitional between pre-capitalist and capitalist modes of production, it appears from Marx's discussion of the situation in England and France of the epoch that the small producers dealing with the merchant remained "independent" (selbstandig), based on their "splintered mode of production" (1964, 347; 1982, 2156), that is, were not wholly propertyless like the proletariat (under "real capital"), though controlled overall by mercantile capital and gradually reduced to the situation of the proletariat. "The merchant could buy all commodities, but not labor as a commodity" (1962a, 380).

Some important methodological remarks made by Marx may be relevant here. In his magisterial text on method (1857), Marx, after posing the question whether the "simple categories" have an independent historical or natural existence prior to the "concrete categories," goes on to observe that the "simple categories are the expression of relations in which the undeveloped concrete may have been realized without having posited the many-sided relation or many-sided connection which is expressed in the more concrete category theoretically (geistig), whereas the more developed concrete retains this same category as a subordinate relation" (1953, 22-23). In the same text Marx points out that certain economic relations like wage labor, machinery, etc. were developed in the army "before they were within bourgeois society," and in a remarkable letter to Engels, composed in the same year (1857), Marx observes: "Wage first fully developed in the ancient army. So was the large scale application of machinery. The special worth of metal and its use as money appear originally to have arisen from its significance for war. Similarly the division of labor within a branch was first introduced in the army. The whole history of bourgeois societies was very strikingly condensed there" (1970, 188; the terms "use" and "branch" appear in English). However, these relations, developed in the ancient army, have nothing to do with capital "in the eminent sense of the term." Thus even though the Roman soldiers sold their whole labor time, that is, "labor power," freely to the state against the "wage" necessary for their sustenance "as does the laborer with the capitalist," this system of payment is "essentially different from wage labor" inasmuch as the state does not buy their labor power for producing values (Marx, 1953, 428) . In fact, for Marx, wage labor "in the strict economic sense of the term" is only the "labor that posits and produces capital (Kapital setzende, Kapital produzierende)" (1953, 367). Naturally, there is no "real capitalist mode of exploitation" in the absence of "real" wage labor, wage labor "in the strict economic sense of the term."

It follows that the mode of exploitation of labor under what is "only formally capital" is in fact a pre-capitalist mode of exploitation, and, as such, independent of the law of value, like any pre-capitalist mode of exploitation,l4 while the "real capitalist mode of exploitation" under "real capital" cannot be explained independently of the law of value (for reasons developed in the second section above). Contrary to "real capital," the two "antediluvian forms" of capital are, as Marx repeatedly emphasizes, independent of any specific (social) relation of production; whereas merchant capital, fully conforming to the "general formula of capital," still appears as a social relation - through circulation -- while not really "adequate to the concept" of capital, interest-bearing capital is completely unmediated by production and the circulation process, and thus is a completely "nonconceptual" (begriffslose) form. Here the social relation is perfected as the relation of a thing - money - to itself. "Instead of real transformation of money into (real) capital" what we see here is its "form without content (inhaltloseForm) (Marx, 1962b, 460; 1964, 405). As a matter of fact the "capitalist mode of exploitation" corresponding to these two forms of capital does not conform to the way the materialist conception of history views (class) exploitation, seeking its historical specificity. Extraction of surplus labor appears in all class societies. However, "the specific economic form in which unpaid surplus labor is pumped out from the immediate producers distinguishes one economic social formation from another, for example, slave society from the society of wage labor" (Marx, 1962a, 231; 1964, 799). Exploitation under the two "antediluvian forms" of capital does not tell us which society we are dealing with - slave society or serf society, for example. Thus exploitation under "real capital" and exploitation under what is "capital only formally" are two entirely different categories belonging to two entirely different universes of discourse. There is, therefore, absolutely no "inconsistency" between Marx's two positions: positing the "real capitalist mode of exploitation" within the value-theoretic framework, and positing a (formal) capitalist mode of exploitation outside this framework. This is the reason why the two most "popular forms" of capital "do not at all enter" into Marx's "consideration" (gar nicht in Betracht kommen) while he analyzes "capital as such," that is, "real capital" (1962a, 178; 1976, 24).

Some profound methodological observations by Marx further clarify his position. Saying that merchant capital and interest-bearing capital form the "antediluvian conditions of capital" handed down by the Middle Ages, Marx observes that

the conditions and presuppositions of the genesis of capital precisely imply that it not yet is, but that it only becomes; they disappear, therefore, with real capital (wirklichen Kapital) which posits itself the conditions of its realization out of itself... As soon as capital becomes capital as such, it creates its own presuppositions, that is, the possession of the real conditions for the creation of new values without exchange, through its own process of production. These presuppositions, while originally appearing as conditions of its becoming and, therefore, not yet being able to arise from its action as capital, now appear as the result of its own realization, its own reality posited by itself-not as the conditions of its genesis but as the result of its existence (Daseins).... [The original presuppositions] remain behind it as preliminary historical stages of its becoming. (1953, 363-64; emphasis added.)

Referring to the importance of his method ("unsre Methode"), Marx emphasizes its revolutionary implications: that it shows the points where historical considerations intervene or where the bourgeois economy as the simple historical form of the process of production "refers back [hinausweist] to the earlier modes of production" while this "correct perspective" leads also to the points which indicate the "overcoming and going beyond [Aufhebung] of the present-day form of production relations" and so "foreshadowing the future." If on the one hand - Marx adds - the "pre-bourgeois phases" appear as only historical, that is, "transgressed [aufgehobne] presuppositions," the present-day conditions of production (on the other hand) appear as "transgressing themselves and positing thereby the historical preconditions of a new state of society [ Gesellschaftszustand]" ( 1953, 364-65; the term "foreshadowing" appears in English in the text).

4. Conclusion
I conclude that contrary to Skillman's contention Marx, following his "method of analysis which had not yet been applied to economic subjects," rigorously demonstrates his proposition that the assumption of equivalent exchange of commodities has to be the start ing point for explaining the formation of capital. Marx clearly shows how the commodity is the "cell-form" of capital, how the law of appropriation corresponding to simple commodity production --based necessarily on equivalent exchange where commodity owners with equal rights confront one another - is transformed into its opposite through its own contradictions and creates the conditions for the genesis of capital.

The accusation of inconsistency against Marx in regard to his treatment of capitalist exploitation is totally misconceived. The capitalist mode of exploitation, based on "no exchange, strictly speaking" (Marx, 1976, 146), arising out of a "dialectical reversal" of equivalent exchange, is, according to Marx, the "real capitalist mode of exploitation" corresponding to "real capital," which is a historically determined specific relation of production based on the laborer's separation from the conditions of labor. By contrast, the "capitalist mode of exploitation without the capitalist mode of production" is not the "real capitalist mode of exploitation"; it does not correspond to "real capital." Here we have "capital only formally." Money begetting money, representing the "popular notion of capital," is not a (specific) relation of production and is a transhistorical category appearing in all sorts of social formations. These two forms of capital belong to two completely different universes of discourse in Marx. Thus he "completely leaves aside" what is "only formally capital" while investigating the law of motion of "real capital."

Skillman does not make precise his concept of capital and in fact never rigorously posits capital as a historically determined specific relation of production. On the contrary, by holding that surplus value (exploitation) arises mainly from the process of (unequal) exchange and not from the process of production, he seems to have gone back to the pre-classical stage of political economy, ignoring the great scientific progress made by the classics in focusing on the process of production and away from the process of circulation. Treating "capital" as a transhistorical category and insisting on the primacy of the process of circulation over the process of production may be good "historical materialism" as Skillman conceives it, but this "historical materialism" has nothing to do with the Marxian materialist conception of history, which "comprehends every finished form in the flow of its movement, and thereby its transitory character . . . and is essentially critical and revolutionary" (1962a, 28).15 What Marx wrote in 1873 has proved remarkably prophetic: "The method employed in Capital has been little understood."

Before I conclude let me clarify a couple of points. First, this essay should not be construed as constituting an attempt to evaluate Marx by resorting to his own methodology. Marx's methodology is evoked here in order to help understand what Marx was doing in regard to the problems under consideration. Marx's contribution, I hold, cannot be properly understood nor its logic properly appreciated without a clear understanding of his specific -- rather unusual -- method and his specific world view underlying it. Of course one may or may not agree with either the contribution or the method.

Second, my purpose in this paper has been to argue the perfect (internal) consistency of the Marxian notion of capitalist exploitation, given Marx's method, his concepts and his world view underlying them. There could of course be alternative notions of capitalist exploitation -- completely different from Marxian -- which could be evaluated in terms of alternative criteria, for example, Pigovian "exploitation" conceived as the positive difference between the value of the marginal product of a productive factor and its unit price. Skillman's notion of capitalist exploitation (based on "modern literature") as arising in unequal exchange between the asset rich and asset poor traders founded on differential asset ownership-which could correspond to more than one type of class society - is quite consistent with a standpoint that views capital not as a historically specific social relation of production but simply as "means of production" or "assets," that is, as a transhistorical category. As my stated aim in this paper is uniquely limited to a discussion of Skillman's (main) arguments against Marx, I have left aside any consideration of this very interesting "modern" notion of exploitation.


* I am grateful to the two anonymous referees for their thoughtful comments.


I Marx's use of the term "antinomy" is significant. "Antinomy" here refers to the fact that the solution to the problem cannot be found within the framework of exchange and has to be found outside exchange, in the production process, where there is "no exchange strictly speaking" (1956, 361).


This is the sense in which Marx speaks of exchange as "being replaced one by the other (sich einander ersetzen) (1976: 19).

Skillman's counterposing of "relation of equality" against "relation of equivalence," faulting Marx for confusing one with the other, is surprising inasmuch as an equality relation satisfying three axioms -- reflexive, symmetric and transitive - is an equivalence relation (Miller, Heeren and Hornsby, 1990, 316).


Marx cites Adam Smith: "Society is a commercial society. Each member is a merchant.' It may be of interest to note that with respect to the system of needs" in "civil society Hegel had earlier spoken of its members "behaving as mutually independent, united only by the connection of reciprocal needs" which brings about their association bound by a legal system. In this connection he referred to the "new science of political economy" and, in particular, to Smith, Say and Ricardo as having this "point of view" as the "starting point" (Hegel, 1972, 49,151,174).


5 Marx reminds us that the circulation of commodities does not contain within itself the elements of its own renewal. "Commodities," he writes in the Urtext, "have to be continuously thrown from outside into circulation in order that it continues like fire which could be extinguished unless continuously fed by combustibles from outside" (1953, 920; see also 166).


Marx refers to Tooke's classic History of Prices for an empirical verification of his position (Marx, 1968,191, 206).


7 In the early 1850s Marx had observed critically: "Ricardo abstracts from what he considers accidental. It is a different thing to present the real process where both - what he calls accidental movement which, however, is durable and real, as well as its law which is an average relation -- equally appear essential" (1953, 803, emphasis added). 8 Cf. Hegel: "Wishing to know before knowing is as absurd [ungereint] as the wise precept of the scholastic that one must learn swimming before going into the water* (1991, 43).


9 Here, again, following his method of abstraction, Marx supposes the "pure" case, that is, he assumes that the labor power is "bought and sold" at its "full value," leaving aside the capitalist's attempt at lowering the laborer's wage below the value of labor power, even though *this practice plays one of the most important roles in the real movement of the wage" (1962a, 333;1965, 851).

10 Marx writes: "The capitalist pays labor power according to its equivalent, and the valorization of the labor power over and above its value does not contradict the operation which accomplishes it, conforming to the law of value, but results, rather from the specific nature of the use value of the commodity which is sold here (1976, 159).


1 Marx refers to the ancient Greek term Keftlaia/on, which is "etymologically capital" ( 1976, 26).


12 Let me stress that Marx's contention that only productive capital is "real capital" follows from his materialist conception of history according to which it is the production (and reproduction) of material life which constitutes the basis of all societies and it is the specificity of the social relations of production corresponding to a specific mode of production that distinguishes one economic-social formation from another. The unique characteristic that distinguishes capitalism from any other economic-social formation is its mode of production based on the complete separation of the immediate producers from their conditions of production. Naturally, the "fundamental form of capital" could only be productive capital -- equivalently "industrial capital" in the "categoric sense" - in which alone capital confronts wage labor, in which alone there is "not only the appropriation but also, simultaneously, the production of surplus value," and in which alone "capital's power in all its functions are fully developed" (Marx, 1962a, 777;1962b, 424; 1973, 61; the phrase "power in all its functions" appears in English in the text). By contrast, the two "antediluvian forms" of capital which remain independent of any specific mode of production, are incapable of marking capitalism as a historically specific economic social formation. Hence these could be capital "only formally."


13 In his notebook 21 of the 1861-63 manuscripts, Marx inserts in English the phrase *Debt slavery in distinction to Wages slavery" (1982, 2155; emphasis in the text).


Its one important difference with the other pre-capitalist modes being that, while surplus labor appears in the latter mainly as a product, surplus labor appears in the former in value form.


15 The inappropriate category "historical materialism" is not Marx's, but is of later vintage.




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Author Affiliation:

Universite du Quebec ti Montreal Case Postale 8888, succursale Centre-Ville Montreal, Quibec H3C 3P8 Canada