Tuesday, April 01, 2014

Exchange and Trade -- Book

How can we measure Marx's notions of trade and exchange and how has it evolved since? Examination of this question is important for understanding how Marx's perception of exploitation evolved through his disciples. Marx saw trade beginning with the exchange of things where through capitalist corruption it gets extended to other spheres of human relationships, exchange of non-material.

For Marx the exchange of material things, e.g. certain length of linen for a bushel of grain, was the corner stone of social differentiation. The beginning of the trade was the dawn of the class society. Marx in his attempt to demystify capitalism anchored the trade solely in material things as part of his materialist view of the history. In his view the essence of trade, the "exchange value", could only reside in the altered material as product of labor. His attempt was only a crude materialist view of the history and instead of clarifying it shrouded the whole question of exchange and trade in the mystery of the root of the "exchange value".

Adam Smith and other pioneers of the political economy had observed that humans have a natural propensity toward trade. This is a very simple and direct observation. Contrary to this view Marx saw trade as something entirely man made, incidental. For Marx if there was ever any propensity toward anything it was the communal living of the early tribal life. He believed that communism is the nature of the man. Trade and exchange was something external which began incidentally and later tore up the tribal cooperative life and ended the early communism. For Marx the return to communism, the essence of human nature, is inevitable and with the abolition of capital humanity will return to a higher level of communism. Marx foresaw that with communism trade and exchange will cease. Material necessities of life will be abundant and available for use by everyone and thus no need for any trade by humans.

The experience of communism beginning with the Russian revolution proved that Adam Smith was correct and humans have a propensity for trade. Confiscation of capital by the state can only hamper and criminalize this propensity of the humans. Otherwise trade and exchange between individuals will continue in their homes, the alleys and wherever they can hide this activity from the reach of the "communist" state.

Adam Smith could not trace the origin of this propensity and guessed a couple of possibilities. Today we can trace his correct prognosis more clearly. It is human psyche. Trade and exchange is pleasing to us and this propensity predates the "conscious" exchange, trading of material things.

Research in human psyche indicates that the realization of all social relationship is in our brain. It is the level of hormones and chemicals in our brain that prompts us for a particular action and subsequently particular emotions are satisfied with rebalancing of those hormones and chemicals. Exchange between a parent and a child are controlled by the same hormones and chemicals. A baby looks and behaves in certain way and our brains are hardwired to respond positively to the gestures of the baby and have a sense of pleasure. Lack of these hormones and chemicals or disruption of our brain neurons, wirings, will produce neglected children. In that exchange between a parent and a child, the child receives the basic necessities for its survival and the parent gets the "high", the satisfaction that the hard wired brain provides.

Similar brain activity is involved in all of our social activity, social interactions or exchanges. Exchange for food, clothes, shelter or even music follows the same brain pattern of activity. Therefore exchange is something innate in us and humans have always exchanged and one can even say that this exchange has its roots in the non-things, purely social activity. In these activities there are exchanges but no exchange of "things" between hands, no material things outside of our bodies.

The extension of this drive, exchange, into more and more material things has been at least one indicator, the compass, of our progress. Monetization of this process, which its unprecedented expansion is the background of our modern society, is the main ingredient for the economic efficiency. More of our social activities are entering into marketplace and we look for the possibility of finding a market solution for them. Monetization is penetrating all aspects of our lives freeing the individual to be most creative and productive. For example today it is more and more normal to expect childcare beyond the care that parents provide for their children at home. We demand childcare centers, places that we acquire childcare for our children by paying money, whether directly or indirectly through our taxes. As these changes take place we have to find ways of learning to control primitive drives which were developed with our old ways of doing things. These changes create lots of anxiety for us, as it is for parents when they have to leave their children in a child care center.

In our modern societies we are finding once again a new trend, that more and more of the trades, monetary exchanges,  in the marketplace is in non-things, in non-materials, what we call services. We are in the age of information technology, an immense increase in the dematerialization of trade. One of the complaints often heard during the recent economic crisis at the beginning of the 21st century is that the U.S. is not producing things. The complaint is that productions of things are more and more outsourced and this process needs to be reversed. We need to produce more of "our own things."

We are living in a different world a more integrated world, we do not necessarily have to produce our things, if we are better in producing non-things such as computer codes or other services they are as much valuable if not more and will strengthen the democratic societies at all levels. The problem of our present crisis is somewhere else. We need a different kind of re-organization of our social relationships and a different perception about the evolution of these relationships. We are seeing some rudimentary forms of these changes.

If we want to stick to the idea that we have to force the production of things back into the western countries then this forced process might prove to be regressive. Even if it would have a semblance of success, it will require pushing down the "standard" of life in the advanced countries. This is and will be repressive on the creative and productive forces. Rejuvenation of the productive forces does not lie in legal remedies to revive the past. I am touching on a different topic, which I will come back to it later.

Let's get back to the question of exchange and Trade specifically. Marx in his analysis of capitalism discerned an inherent equivalency in exchange and trade. He tried to extract an equivalency from the process of exchange and what he ends up with is to imagine one. He reasoned that since things or commodities can be exchanged with each other then there must be something in these things or commodities that are equal to each other. Marx called this something the "exchange value" which for him is different than the monetary value or price of the commodity. For him "exchange value" is the essence of the commodity. The exchange value is what turns a thing into a commodity and the monetary price is only a distortion of this essence. He contended that when "a quarter of wheat is exchanged for x blacking, y silk, or z gold", what makes this exchange possible is the equal exchange values embedded in these four commodities. Marx is aware that right around the corner from where his example is taking place the same quarter of wheat could be exchanged and very often are exchanged for different amounts of blacking, silk and gold. The question is then what happens to this assumed "exchange value" which cannot maintain any consistency in the market place. His response was that this inconsistency is because of the capitalist money which distorts everything even his essence of the commodity.

Even if you wanted to pursue Marx in his theory of "exchange value" you cannot go much beyond his logic that since commodities are exchanged with each other then all these commodities must be equal to something else and this thing is "exchange value". He cannot explain where in the historical processes this "exchange value" emerged and what it emerged from and at what point it embedded itself in the commodities. Throughout history his perceived "exchange value" never shows itself explicitly. In reading of Marx one can see that he was aware of this fact, but why did he think that he was capable of suddenly defining the "exchange value" so explicitly. He did not address this question because he could not trace his "exchange value" in history. He tried to extrapolate the development of exchange and the development of money but his "exchange value" is shrouded in mystery.

Serious students of Marx's "Capital" generally get stuck in the discussion of his "exchange value". I have seen hours of debates on the very first few chapters of "Capital" which only ends in the exhaustion of the participants and the ones who go beyond it either distort Marx's notion of exchange value or adopt it by faith.

Marx after kicking his concept of "exchange value" around he locates this "exchange value" inside the commodity by finding a mathematical parallel. He uses an example from geometry, in how the area of a triangle is expressed in something different than the shape of the triangle, half of the base multiplied by the altitude. It is sort of soothing to see that things might not be obvious to us but they are there. The relationship of that multiplication to the area of triangle is not obvious, but there it is that is the measure of the area. He sort of pats the back of his readers to move along, his measurements will clarify this mysterious "exchange value".

But even here his example is false. Multiplication of half of the base by the altitude of a triangle is the route memorization as the "definition" of the area of the triangle which were common in the old method of schooling. That multiplication is a clever method of measuring the area but it is not the same as the concept of the area. By first understanding what an area means then that clever way would make sense and would be useful. Marx keeps going around and around with false examples and reversing the order of things to find some definition for his "exchange value". His concept is obscure, and his obfuscated mathematical examples is a venue to assume the explicit existence of an "exchange value" which he subsequently tries to measure mathematically. And surprise, his measure comes out as the amount of time, expenditure of the labor of the worker on the assembly line. In earlier sections I wrote about Marx's measure of his "exchange value" and explained how it leads to absurd conclusions.

Marx cannot explicitly explain his "exchange value" and he cannot show the existence of any equivalency between his bits of "exchange value" in any part of our history. The "exchange value" that supposedly was embedded in the manufacture of labor. He cannot find it maybe because no such intrinsic "exchange value" exists and it is entirely a manufacture of his moralistic view of the history wrapped in his class theories.

Propensity for this activity, exchange, with its root being in our psyche might tell us about the values that we attach to this activity. Consider the satisfaction derived from an act of exchange both in our psychology at a higher level and the amount of chemical secretion in the brain at a lower level. Could this activity by itself tell us that this exchange is unequal. It is different for each individual at the physical level and at the level of psyche, where we sense a satisfaction. That is to say that exchange is inherently unequal and maybe that is why we find this lack of equality explicitly everywhere in the market place.

The exchange of things does not begin from an inherent equivalency of "exchange value" that later gets distorted by money. There is no inherent "exchange value". The expansion of the market and the monetization of trade tends to create an equivalency among things and bring stability to the market through the mechanism of supply and demand. The mechanism that Marxists have been coughing at for decades.

Marx's view is completely an upside down view of the reality and because of that he had to go through all kinds of gyrations to explain his model.
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The above piece is part of a book that I am developing. If you would like to follow, please read the blogs titled "Perspective..." and then read all the blogs which the title name ends with " -- Book". As you might have guessed, you have to read from the earlier posts moving to the present.

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