- Capitalism and Alternatives -

Barry vs. Everybody

Posted by: Barry Stoller on November 25, 1999 at 12:23:29:

Sorry for the teaser. The actual title of this post is:

Monopoly's Influence on the LTV

Despite the fact that the Fantasy Theory of Value recently went splat, some folks here are still resisting the consistent logic of the Labor Theory of Value. Some resist because the instance of monopoly seems to contradict the simple idea that labor---being the one sure thing that exists in ALL commodities---is the metric that compares all commodities. After all, if monopolies can jack up prices at will, then labor is either being increased---or the LTV is horsefeathers.

Let us start at the beginning with a quick (and simple) exposition on the difference between use-value and exchange-value:

A use-value is anything which 'satisfies human wants,' 'whether from the stomach or from fancy...[it] makes no difference.'(1)

An exchange-value, on the other hand, 'presupposes a tertium comparationis [standard of comparison] by which it is measured: labor, the common social substance of exchange-values, namely the socially necessary labor-time materialized in them.'(2)

Socially necessary labor-time is the labor 'required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time.'(3) This varies from place of production to place of production, from region to region, and from country to country (see my brief description of how varying socially necessary labor-time distorts international trade relations here). Higher degrees of productivity lower the average time required to make any commodity---and 'advanced' companies or nations set the expectations for average productivity around the world.

Now, for the sake of argument, let's assume that value is indeed determined by the labor present and past (materials + machinery [which are the product of labor]) embodied in them.

If values are exchanged for equal (socially necessary) values (labor-time compared with labor-time)---as Marx posited---why would monopoly result in higher prices?

Monopolies are expensive things to create and maintain.

To monopolize a market, a business must either: 1) possess all available land, resources, skill, etc. that is required to produce a particular commodity; 2) under-price (thus bankrupting) all relevant competition; OR 3) have enjoyed cheaper entry-costs into its line of business (such as government subsidies) than exists for others .

This does not mean that it is IMPOSSIBLE for a competitor to enter the market of a monopolist. It simply means that entry-costs into that market are EXCESSIVELY HIGH.

To enter a monopolist's market, a business will have to: 1) develop land, resources, skill that was previously considered sub-par or non-existent; 2) withstand price wars in which the new-comer will sell at a loss for an unspecified period; OR 3) pay higher entry-costs into its line of business than the monopolist did.

All of the above conditions will require more LABOR.

To develop unfertile land, to locate previously unknown resources, or to train employees with less education than the norm will require additional labor over the norm. In a bidding war, socially necessary labor-time will be artificially reduced by the monopolist (over a period of time in which the monopolist has calculated the final recoupment of its only initially 'underpriced' commodities). To pay higher entry costs (such as possessing various vertically- or horizontally-integrated companies [which encompass various machinery, resources, and skill]) is to purchase more labor (past and present).

This is essentially the same concept as differential rent (summarized here)---which is also predicated upon monopoly.

Differential rent (to review very briefly) is determined by the worst possible land, or by the worst possible conditions in which to make a commodity. Newly developed (worst) land or conditions increase the price of production of the better land or conditions. It does so not because the better land or conditions have acquired 'more' use-value, but because the exchange-value necessary to develop the worse land or conditions have INCREASED the expectation of WHAT IS REQUIRED to develop land or conditions.

The monopolist gains from the discrepancy between the socially necessary labor-time embodied in land or conditions that he / she owns and the socially necessary labor-time embodied in land or conditions that confronts those who attempt to enter the monopolist's market.

To sum:

Monopoly prices do NOT add one iota to use-value.

Monopoly prices, however, do INCREASE exchange-value.

And THAT, as we have seen, is labor.


1. Marx, Capital volume one, International 1967, p. 35.
2. Engels, 'Synopsis of Capital,' Engels on Capital, International 1937, p. 43.
3. Marx, op. cit., p. 39.

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