Monetary expression of labor time, or MELT

Kliman measures capitalist wealth through what he among other Marxists call the monetary expression of labor time, or MELT. This seems reasonable. But exactly what is the relationship between value—embodied labor time—and its monetary expression?

If prices directly equaled value, things would be quite simple. If a factory is worth $10 million, this would be just another way of saying that this type of factory on average takes x number of hours of abstract human labor to construct. Using dollars rather than hours would be simply a convenience.

Indeed, this this is exactly what Marx himself did when he explained surplus value on the basis of the exchange of commodities with other commodities of equal value in Volume I of “Capital.” Indeed, Marx insisted that surplus value cannot be explained without this assumption. So, for certain problems, including the most important question in all economics, the origins and nature of surplus value, the concept of MELT is quite useful.

But Kliman knows that real-world market prices are constantly deviating from values. The real problem is exactly how we relate the world of prices to the world of human beings engaged in production and exchange. In other words, what is the relationship—if any—between wealth measured in money and wealth measured in labor value?

Since the end of the Ricardian era, the (bourgeois) economists, whether they are Austrians, neo-classicals or neo-Ricardians, deny that wealth measured in terms of (labor) value and wealth measured in terms of money have any meaningful relationship to one another. Therefore, these “physicalist” economists claim that the concept of MELT is meaningless. They instead make a kind of shortcut, directly connecting wealth in terms of utilities, or use values, with wealth measured in terms of money.

MELT, in contrast to the physicalist theories of the neo-Ricardians—and other bourgeois economists—attempts to connect monetary value and value based on abstract human labor directly. The idea behind MELT without a money commodity is that a dollar, a euro and so on represents a definite quantum of value—abstract human labor—that is not embodied in any particular commodity but rather reflects the value embodied in commodities as a whole. While the supporters of MELT agree that individual prices can and indeed do deviate from values, the sum of prices will equal the sum of values.

As we saw when we examined Kliman’s earlier book “Reclaiming Marx’s Capital,” to the supporters of MELT the sum of the prices of production equals the sum of direct prices, and the rate of profit calculated in terms of values will exactly equal the rate of profit in terms of both direct prices and values. Marx himself made these assumptions, though he noted as we will see below that these equalities were only approximate, not exact.

These equalities, if they are treated as exact as opposed to approximate, will inevitably lead to contradictions that open the door to the neo-Ricardians. The neo-Ricardians have no difficulty showing that except under unrealistically restrictive assumptions, the rate of profit in terms of value and in terms of money will never be exactly equal.

The neo-Ricardians then jump to the conclusion that the rate of profit in terms of value is meaningless. The neo-Ricardians profoundly “explain” that the decisions made by real-world capitalists have nothing to do with the value rate of profit. After all, real world capitalists neither care about the value rate of profit nor know what the value rate of profit is. This is certainly true as far as it goes.

Faced with what appears to them to be contradictions in Marx’s theory of value, the neo-Ricardians give up and retreat from value theory altogether to the “commonsense view” that profit simply consists of the growing mass of material use values produced by capitalist industry minus the means of consumption the workers get to consume in exchange for their labor. The neo-classicals and Austrians reply to the neo-Ricardians: We told you so all along.

If you accept these arguments of the neo-Ricardians, you naturally will tend to agree that it is more meaningful to measure profits in terms of current prices—taking into consideration the effects of either inflation or deflation, as the case may be—as opposed to historical prices. After all, just as the workers are ultimately more concerned with real wages—what their wages actually buy—aren’t the capitalists also more concerned with their real profits—what their profits buy in terms of material use values as opposed to their purely nominal money profits? (3)