[PEN-L:30669] an equal exchange about unequal exchange

["Devine, James" <jdevine@xxxxxxx>]

Title: an equal exchange about unequal exchange

pen-l folks may be interested in the following exchange with Juriann Bendien about the Marxian concept of "unequal exchange." For those who don't know, unequal exchange refers to transfers of value and surplus-value. Marx's main story in the parts of CAPITAL he finished were about the production of value and, through the exploitation of labor, surplus-value. But there has been a long discussion of the redistribution of the value and surplus-value after it is produced, starting with Emmanuel's book UNEQUAL EXCHANGE (1972 Engl. Transl., MR Press). 

I have edited it to get rid of personal stuff and to improve readability:

He wrote: >>I still would like - if you have time, which you may not -  a brief thought from you about unequal exchange, whether you think the concept is valid... <<

I wrote:> yes. I even have an article on the subject ("The Utility of Value: the 'New Solution," Unequal Exchange, and Crisis" in RESEARCH IN POLITICAL ECONOMY, 1990: 21-39). One of the innovations of that article is that I differentiate between activities that allow the production of value and surplus-value and those that allow individuals to claim value and surplus-value. The distinction is basic to the idea of unequal exchange. [Charlie Andrews' book FROM CAPITALISM TO EQUALITY clarifies this distinction: value is produced by labor, whereas exchange-value refers to claims on the products of labor.]<

>>For Marx, the challenge was to explain the exploitation of wage labour under conditions of free competition, of balance between demand and supply and the exchange of all commodities against their market values (for marginal utility theory, exploitation is of course impossible under the ideal conditions of free (perfect) competition; exploitation would only occur due to an incidental disturbance of that situation). <<

>right. <

>>In this sense, Marx argues in Cap vol. 1 (contradictions in the formula of capital) that "the conversion of money into capital has to be explained on the basis of the laws that regulate the exchange of commodities, in such a way that the starting-point is the exchange of equivalents. Our friend, Moneybags, who is as yet only an embryo capitalist, must buy his commodities at their value, must sell them at their value, and yet at the end of the process must withdraw more value from circulation than he threw into it at starting... These are the conditions of the problem."

>>But I have always thought that this theoretical concern of Marx has distorted Marxist discussion, sometimes grotesquely, in that the modalities of exploitation are far more variegated than that in the real world, i.e. exploitation in a structural sense doesn't simply occur at the "point of production" on the basis of exchange of equivalents. <<

>He was interested in the essential origins of surplus-value (i.e., people working more than is needed to reproduce their labor-power) much more than with the redistribution of surplus-value due to price/value deviations (unequal exchange). Unfortunately, he never finished volume III, where the latter is central. <

>>Unequal exchange seems to be a clear case of this, where sellers of goods and services can fix (institutionalise) prices longterm above market values, or where buyers of goods and services can fix their purchase prices longterm below market values, with the overall effect of a transfer of surplus-labour taking place. <<

>right. <

>>.... Okay, you could argue for a longterm trend towards the formation of world production prices, global market values if you like, insofar as international competition would at least "tend" historically to cancel out productivity differentials, so that the same good sells for roughly the same price everywhere. But that still would not cancel out unequal exchange altogether, it would be only a tendency. What do e.g. longterm disparities in terms of trade mean, if not some sort of unequal exchange ?<<

>I think it does. <

>>Mandel takes a very different route, and I will just translate a bit from his article on primitive accumulation [written in about 1967] ...:

>>"The first phase of the original accumulation of capital (the original accumulation of money capital [as distinct from productive capital]) which as far as Europe is concerned took place in the early middle ages, means that capital appropriates surplusvalue, which originates in the expropriation of other social classes. The feudal lords and kings exchange rents in natura against usury capital, backward areas or foreign peoples exchange commodities for less money than those commodities fetch on European markets.<<

>I beg to differ. Marx's "primitive or original accumulation" was not the creation of "productive capital" but the production of the social relations of capital (the proletarianization of the direct producers). I like Marx's treatment better: he sees the accumulation of money capital as creating a bunch of proto-capitalists who are able to appropriate a piece of the surplus-labor done under pre-capitalist relations. <

>> The origin of capital resides in this unequal exchange, which with the expansion of money circulation gets more and more social strata into its grip, until ultimately the whole population is dependent on money capital.<<

> it's only because of the influence of the money capitalists on the old (feudal) ruling class -- and the fact that parts of the old ruling class converted themselves into capitalists -- that allowed this transition. It involved not simply the expansion of money capital but the use of force against the agricultural population that led to the separation of the direct producers from direct access to the means of subsistence. Marx emphasizes the role of force in CAPITAL. <

>> Within the capitalist mode of production this process is however turned around. Then the exchange of equal values becomes the rule; extortion [shortchanging] becomes the exceptional case and takes place only in the periphery of economic life. The acquisition of surplus value (m-c-m') no longer occurs in simple circulation, but encompasses the whole production and reproduction process.  <<

>right. <

>>In the circulation process money is converted into capital only through expenditure on the purchase of machines, raw materials, energy etc. (constant capital) and for the acquisition of labour power (variable capital). After the production process has been completed, it is converted into produced goods, after which it finally, when the goods are sold, once again gets the form of money-capital, now enlarged by the newly acquired surplus-value. While the productive capital in the capitalist production process is made productive on the basis of equal exchange and thus generates surplusvalue, this doesn't imply equal exchange. the exchange of capital and labour - purchase of labour by capital - is one of unequal exchange of equal values; labour power has the special use-value for capital of creating more value than its own cost. <<

>Unequal exchange doesn't refer to use-values at all. Marx's point was that under capitalism, workers were exploited _despite_ the absence of unequal exchange (as with those arising from monopoly or monopsony). However, unequal exchange can be added on top of "normal" exploitation...<

>>Moreover in the capitalist world economie a process of exchange of unequal values occurs, which is determined by the various productivity differentials in different countries which trade with each other. Seen from Marxist economic theory the historical process of the emergence and the appropriation of surplusvalue thus forms a dialectical unity of three different moments: unequal exchange, based on unequal values; equal exchange, based on equal values; and unequal exchange, based on equal values. Only if one takes these three moments into account, can one answer the question of how in the Western world capital emerged, how it expanded and how it spread."

>>Well I think I would modify Mandel's story a bit, but the basic thought is clear - unequal exchange is vital to the explanation of the very origin of capitalism, and also occurs in world trade. Given the increase of world trade which globalisation implies, unequal exchange under conditions of imperialism (essentially blocking productivity advances in part of the world) would also become more important, not less important. <<

> in addition to unequal exchange under today's type of imperialism, there's the direct application of force against Iraq and other places in the "Third World." <

>>In fact, I would suggest that (unlike Mandel argues) there is no theoretical reason to assume that unequal exchange would not also be a regular feature of trade within countries, not just between countries.

>>You could spin this out and consider the growth of monopolies and oligopolies which involve a lot of price setting etc. <<

>>It is one thing to argue theoretically with Marx that the formation of capital in production has to be explained first of all purely on the basis of exchange of equivalents, before bringing in all sorts of price differentials that might occur for other reasons, it is another thing to say that this is how it actually happens in the real world. Can you see what I mean ? <<

>I agree totally.<

>>This is another reason why I feel iffy about the classical idea that aggregate profits = aggregate surplus-value and why I feel iffy about the transformation problem as such, assuming as it does a "uniform profit rate" which as far as I know doesn't exist in the real world anyway. These are only theoretical models, as I argued before, in the real world things are more "messy". In the real world we have to deal with debt-servicing, protectionism, government price fixing, various taxes, tarriffs, straightout extortion and so forth. <<

>right. <

>>... It is a theoretical problem I didn't really get round to since the 1980s, but I think it is important for socialist economists to solve . <<

>In my article [cited above], I developed a very simple (accounting) model of unequal exchange between two economies (equation 27 on page 31). It assumes that total profits in society equals total surplus-value.

>The equation adds up four different terms.

>1. "unequal trade" due to monopoly power [e.g., tariffs] or technological rents (Mandel), where prices are above prices of production.

>2. transfer of value due to differences in "capital intensity" ("tranformation problem" unequal exchange).

>3. Emmanuel's unequal exchange, due to differences in the rate of surplus-value.

>4. a new form, similar to #2: those countries employing the most unproductive labor-power (which can claim surplus-value but can't produce it) can gain from unequal exchange. <

I should add that sometimes these types of unequal exchange (transfer of value between countries -- or within countries) can cancel out. For example, a firm that gains because its organic composition is higher than average may lose because it must sell its product below the price of production. (It gains as part of #2, but loses as part of #1.) But in general, these work together: a rich "core" country has more monopoly power in markets (#1), has more capital-intensive production (#2), has a lower rate of surplus-value (#3), and uses more unproductive labor (#4).

In response to my original comments (marked with > signs), Juriann says:
Mandel would not disagree with you at all about primitive accumulation in the sense of (forcibly) altering social relations (expropriation and proletarianisation, as Michael Perelman describes in one of his books). If you read what Mandel says, you will see that he is just talking about an initial phase of primitive accumulation through unequal exchange, resulting in the accumulation of money capital, in the bit I translated. Furtheron in the article, he deals more with the role of force, social relations and robbing.

 
Part of Mandel's  explanation for imperialism and underdevelopment, hinges on the distinction between money capital and productive capital. The latter presupposes the prior existence of the former. There is, he argues, plenty money capital in the third world, it is just not so easily converted into productive capital, even when there are masses of propertyless proletarians - this is what has to be explained, why, in spite of the available resources, does industrialisation fail to take place, or occurs only in an uneven way.

 
Agreed, the principle of unequal exchange as such has nothing to do with use-value. Mandel only talks about an "equal exchange of unequal values" in the sense that the capitalist buys "the goose that lays the golden egg". He buys the goose at its value or thereabouts, but then the goose lays the golden egg, it creates more value than it was bought for, that is its special use-value.

However concretely unequal exchange does have a lot to do with use-value, since the goods which are unequally exhanged are goods of a specific type, they are not just any old commodity. For example, in New Zealand where I lived once you had an only weakly developed capital goods sector (Dept I). To buy the same amount of plant and equipment overseas, you had effectively to export more and more farm product almost continuously, and this could not be done adequately, resulting in declining terms of trade.

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Jim Devine jdevine@xxxxxxx http://bellarmine.lmu.edu/~jdevine
"...[W]hat is called globalisation is really another name for the dominant role of the United States." -- Henry Kissinger.