One of the most frequent objections to Marx’s value theory is that there are many commodities which are not produced by labour, yet can be given a price and sold. Marx writes that:
Since money is the transformed shape of the commodity, it does not reveal what has been transformed into it: whether conscience or virginity or horse dung (Capital Vol. 1, p.1073).
Or, as he says at the very beginning of Capital:
A thing can be a use-value without being a value. This is the case whenever its utility to man is not mediated through labour. Air, virgin soil, natural meadows, unplanted forests, etc. fall into this category (Capital Vol. 1, p.131).
And, in a later formulation,
Labour is not the source of all wealth. Nature is just as much the source of use values (and it is surely of such that material wealth consists!) as labour, which itself is only the manifestation of a force of nature, human labour power.[i]
Marx distinguishes between the use-value of commodities as underlying what he calls wealth [Reichtum] – and value [Wert] whose substance is labour and whose measure is socially necessary labour-time.
For commodities produced by labour, labour-time determines value, but the selling price of such a commodity will usually differ from its value. Among the reasons why exchange-value (i.e. price) differs from value, one of the most important is the operation of supply and demand. If there is a greater demand than supply of a given commodity, its price will rise above its value. If supply is greater than demand then price will be below value. Marx spells out this argument in detail in Capital Vol. 3, pp.278-96.
In the case of commodities which are not produced by labour, yet are sold for a price, it is the balance of supply and demand which determines what that price will be. Air has no value because not produced by labour, and no price because its supply is, for most practical purposes, without limit.
When talking about prices Marx often stresses the role of rent. If someone can establish control of the supply of a commodity for which there is a demand, then a higher price can be charged. Thus the price of commodities is affected by property relations. These in turn are underpinned by the power of law, and/or violence.
Marx brings great care to the analysis of means of production which have not been produced by labour-power. One notable example he uses is – the waterfall.
Marx’s analysis runs as follows. Access to a waterfall increases the productivity of labour employed by the firm which uses the water as a source of power. Higher productivity allows a surplus profit to be achieved. But for a firm to get such surplus profits depends on: (1) the fact that there is a limited supply of locations which have a waterfall, and (2) that the owner of any given waterfall has monopoly control of its use a source of power in production. Marx writes:
Those manufacturers who possess waterfalls exclude those who do not possess them from employing this natural force, because land is limited, and still more so land endowed with water-power…. Possession of this natural force forms a monopoly in the hands of its owner, a condition of higher productivity for the capital invested, which cannot be produced by capital’s own production process. The natural force that can be monopolized in this way is always chained to the earth. A natural force of this kind does not belong to the general conditions of the sphere of production in question nor to those of its conditions that are generally reproducible… a capital cannot create a waterfall from its own resources (Capital Vol. 3, p.784).
There is however another way in which a waterfall may be used to increase productivity and so get surplus profits. Technical modifications can be made to increase the efficiency of its operation.
Although the number of natural waterfalls in a country is limited, the amount of water-power that industry can use may still be increased. A waterfall can be artificially channelled to make its motive power fully useable; a water-wheel can be improved in order to use as much of this water-power as possible; where the ordinary type of wheel is not suited to the supply of water, turbines can be used, etc. (Capital Vol. 3, p.784).
Thus use of the natural power of a waterfall to increase productivity can be enhanced if technical improvements have been made to it. This higher productivity will tend to increase profits.
But who gets those profits? Marx argues that the surplus profits which derive from the natural existence of the waterfall are realised in the particular form of rent.
Here Marx defines rent as the extraction of a flow of profit based on property ownership and monopoly control of a means of production. This is because the profitability advantage is then based on the fact that competitors can’t get access to the waterfall and use their capital to get a share in its operation.
What is impressive is the precision with which Marx analyses the difference between these two different sources of surplus profit: natural location and technical efficiency. In turn this leads him to distinguish between two sorts of rent – he calls them Differential Rent 1 and 2. [DR1, DR2].
DR1 is based on the higher productivity and profit achieved through the use of the natural power of the waterfall. Marx refers to, the use by capital of a monopolizable and monopolized natural force. Under these conditions, the surplus profit is transformed into ground-rent, i.e. it accrues to the owner of the waterfall (Capital Vol. 3, p.785).
DR2 arises from the investment of capital to enhance the efficiency of a natural means of production. In the case of the waterfall, the extra profit is shared between the owner of the waterfall and the capitalist whose technical improvements increase the productivity of the labour making use of it as a power source.
If the industrial capitalist happens also to be the owner of the waterfall then he or she gets both sorts of rent.
Marx says that the natural location and power of the waterfall is only one instance of a much broader category of what he calls free gifts of nature. When these are generally available for capital to exploit they add use-value – but no value — to the commodities being produced.
Again and again, Marx stresses that where private ownership and monopoly control has been established over a freely available force of production, the rent extracted is not derived from value added to commodities produced by its use. Rather, rent is money captured by landowners from the capitalists who use the land in productive operations which extract surplus-value from the workers they employ. Rent is a transfer from the class of industrialists to the class of landowners.
The same argument about the waterfall is used by Marx when discussing agricultural land. If a particular piece of land has a higher natural fertility, there is more use-value, but not more value, to be generated from its cultivation. However labour employed on relatively more fertile land has higher productivity. This allows a higher rate of surplus-value to be extracted from those workers, and it is Marx’s argument that monopoly enables the owner of the land to appropriate the extra surplus-value in the form of rent.
A similar case can be made about oil and other mineral resources. There can be huge differences in costs of extraction or in the quality of available reserves. The labour employed in the processes of extraction is correspondingly more or less productive. Where higher productivity generates an extra profit this is captured by the owner of the land and its mineral rights.
Why does it matter to Marx to make such an elaborate and precise distinction between the labour productivity which derives from: (1) a force of production which is a free gift of nature, as opposed to, (2) technological improvements? Often, in practice, they are combined. Marx discusses for example how industrialisation increases the scale of the natural forces which can be deployed in production.
It is cooperation on a large scale with the employment of machines that first subjugates the forces of nature on a large scale – wind water steam electricity – to the direct production process, convert them into agents of social labour… Since these natural agents cost nothing, they enter into the labour process without entering into the valorisation process. They make labour more productive without raising the value of the product, without adding to the value of the commodity.[ii]
What is crucial for Marx, is maximum clarity that living labour is the only source of surplus-value. We have always to distinguish clearly between the extraction of surplus-value as commodities are produced, and its subsequent redistribution in the circulation process. As, for example, in the rent which industrial capitalists are compelled to pay to the owners of land and its resources.
As I emphasised in my last post – for Marx, a rise in labour productivity does not, in itself, increase the quantity of value produced. But a firm is able to capture more profit at the expense of its competitors if it can improve the productivity of its labour force. However, to the extent that higher productivity is due to use of a monopolised natural force, then it’s owner of this who captures the increment in profit in the form of rent.
In the above I have spelled out an argument in rather abstract terms. To finish I will look briefly at two examples of research which build on Marx’s analysis of the use of natural forces as means of production.
1] Andreas Malm, in his deeply researched and vividly written book, Fossil Capital, (2016) explores the switch from water to coal power in the English textile industry in the first half of the 19th century. Water power was cheap compared with the cost of extracting and transporting coal. But to stabilise the supply of water via systems of reservoirs etc. would have required collaborative and collective organization which was impossible given the competitive capitalism of the period. Coal and steam won out because their use gave higher profits to individual capitalists. After Watt’s invention of the double-rotating engine in the 1770s, it required decades of technical innovation before coal-driven steam became clearly more efficient than water power. Malm shows that what was decisive was that the portability of coal allowed capitalists to build factories in urban centres where a larger supply of labour was available, than in the upland valleys with waterfalls. Control of labour by capital was the crucial factor in the transition from water to coal.
2] In recent article called Value, Nature and Labor: A Defense of Marx, Matthew Huber[iii] has analysed the production of nitrogen fertiliser – a major input into the global agro-food complex:
Take a nitrogen fertilizer factory for example…the nitrogen that these factories depend upon is freely appropriated air. The atmosphere is 79 percent nitrogen, but this nitrogen is “non-reactive” in forms that could be taken up by plants. The Haber–Bosch process of “synthesizing” reactive nitrogen takes “free” nitrogen from the atmosphere and combines it with hydrogen (along with tremendous levels of heat and pressure) to produce ammonia. Since there was no labor involved in producing the nitrogenous “air,” it bears no value. Yet the pernicious aspect of this “free appropriation” of the atmosphere is that capital also treats it as a “free” sink for its pollution. One of the main by-products of ammonia synthesis is carbon dioxide. The fertilizer industry is one of the major industrial emitters of carbon (p.43).
Because capital has yet found a way of enclosing the atmosphere and establishing private property rights, its use as a source of nitrogen in fertiliser production (and its abuse as a pollution sink) costs the industry nothing, but is not, in itself, a source of value, profit or rent. However in this industry, the main economic cost is also a natural resource, but one which is monopolizable, namely natural gas.
Most estimates suggest the price of natural gas forms 70–90 percent of the operating cost of nitrogen fertilizer facilities…Thus, it should be no surprise that chemical capital has substantially increased its efficiency in the use of natural gas over the last 5 decades … This is what Marx calls “economy in the use of constant capital” (Capital Vol. 3 Ch. 5.).
Natural gas is a cheap—and not easily replaceable—source of hydrogen to combine with free atmospheric nitrogen to form ammonia. The hydrogen is extracted from natural gas through the material-energy-water intensive process of “steam reforming” and carbon dioxide is the primary waste product. With this cheap yet pollution-generating and finite source of hydrogen, natural gas forms the material basis of cheap fertilizer, and with it cheap grain, cheap meat and our processed food culture (p. 48).
The shale gas boom based on hydro-fracking has created a renaissance of cheap natural gas-based fertilizer. The plant I visited was in the middle of a $2.1-billion dollar expansion, and the company had made investments in new fertilizer plants throughout the United States. All this expansion is made possible by the fracking that has produced cheap natural gas. A Marxian value perspective should seek to understand how the technical transformations of hydraulic fracturing have reshaped the socially necessary labor time it takes to produce natural gas across the industry—and how those value shifts have also reshaped geographies of the chemical industry, electric utilities, and household heating fuel (p. 49).
The fertiliser industry is pollution-intensive and reliant on two natural resources, nitrogen and hydrogen. However, the hydrogen is not a free gift of nature like the nitrogen, but is produced by industrial processes from natural gas. As Huber explains, It is the huge advance in labour productivity in the production of natural gas – most recently via fracking – which has underpinned the drop in fertiliser prices, kept costs of production down, and supported profitability right across the world-wide agro-food industrial complex.
[i] Critique of the Gotha Programme, in, Marx and Engels Collected Works, Lawrence and Wishart, Vol. 24, p.81.
[ii] Marx and Engels Collected Works, Lawrence and Wishart, Vol. 34, p.32.
[iii] Published in, Capitalism Nature Socialism, Vol. 28, 1, pp. 39-52. Huber is also the author of an excellent Marxist analysis of the linkages between cheap oil, the politics of neoliberalism, and the construction of a certain ‘American way of life’ based on suburbanisation, and mass availability of cars, roads and retail petrol stations. See Huber 2013, Lifeblood: Oil, Freedom, and the Forces of Capital, Minneapolis: University of Minnesota Press.