Front Page Titles (by Subject) CHAPTER VII: The Discoveries of Karl Marx and the Facts - Socialistic Fallacies
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
Also in the Library:
CHAPTER VII: The Discoveries of Karl Marx and the Facts - Yves Guyot, Socialistic Fallacies 
Socialistic Fallacies (London: Cope and Fenwick, 1910).
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The text is in the public domain.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
The Discoveries of Karl Marx and the Facts
Karl Marx' system is so inconsistent that M. Werner Sombart, who has tried to explain it, declares that “the law of value is not an empirical fact, but a mental fact.” It is a “stimulus to our minds,” and consequently far removed from all reality. M. Werner Sombart says that he has tried to reconcile the obviously contradictory parts of Marx' theory of value, and adds, “at this time Engels can still certify that I was very nearly in the right, but that he is unable to subscribe without some qualification to everything that I have imported into Marx' doctrines. Other critics were of opinion that this was not Marx' theory of value at all.” And M. Werner Sombart adds modestly, “perhaps they are right.” Nevertheless, Engels recognises that “even if Marx' law of value cannot be considered incorrect, it was too vague and was capable of being set out with greater precision,” but he has not himself undertaken the task of doing so.
If the foundation of scientific socialism, with which the disciples of Marx claim to revolutionise the world, is merely a “subjective conception,” deprived of all reality, they lay themselves open to the same criticisms which they level at the French Utopians and socialists of 1848.
It is untrue that labour is the measure of value; value is measured by exchange and is based upon two objective elements, the net cost of the commodity, of which labour constitutes merely a variable element, and the purchasing power of him who desires to possess it, and upon one subjective element, the demand for such commodity. The market rate is fixed, not by the net cost, but by the purchase price.
Value is the ratio between the utility possessed by an individual or group of individuals and the demand as well as the purchasing power of one or of several other individuals. Price is the expression in money of this ratio. The vendor in offering a commodity for sale looks upon labour as an element representing 20, 30, 40, or 60 per cent. of the net cost, but he adds to this the cost of raw materials, interest, and the redemption of his capital, all of them objective elements which are no less indispensable than the element of labour. He fixes his price according to the strength of the demand for which he has to provide, and to the purchasing power exhibited by those who furnish that demand. If the price he asks be greater than this purchasing power, the contemplated purchasers abstain from buying, and if the vendor be obliged to sell, he first makes a reduction in that portion of the profit which he had proposed to reserve for himself, and subsequently draws upon his total net cost, in which case he sells at a loss. But this loss falls upon the other elements in the net cost of production as well as upon the element of labour, indeed labour is only affected in the last resort.
There remains Marx' other great discovery, that of “surplus-value” or “surplus-labour,” which Engels calls “the key of capitalist production.” It is not less completely belied by facts than the “iron law of wages.” If all the profits of the employer were derived from surplus-labour, he would have to devote himself to two operations: (1) to increase the hours of labour and lower wages; (2) to increase the number of his workmen and repress all improvements in plant. According to these propositions, if the hours of labour decrease and wages rise, the individual employer must lose his profits and fall into difficulties. Now in England, to take an example, wages have risen and the hours of labour decreased, and yet English industry has made enormous progress and earned enormous profits during the last half century. The same thing has happened in all countries, from which the conclusion follows that Karl Marx' theory of surplus-value is belied by facts.
If the employer's profit be derived from the surplus labour of the workmen, the employer should increase their number, and should decline to employ machinery, the effect of which is to decrease it. How comes it then that employers attempt, on the contrary, to decrease the number of their workmen and to supplant them by machinery? They do not seek to increase their profits by adding to the number of their employees, but by perfecting their plant.
What remains, then, of Marx' theory of surplus-value? What becomes of the sonorous word “surplus-labour” and the denunciations of the exploitation of man by man? Are the socialists who continue to proclaim it entitled to protest against science when the most cursory observation so clearly gives them the lie?
Karl Marx is so complete an adept in the “iron law” as to believe that the rate of wages is regulated by the rate of the means of subsistence, and that, therefore, the dearer the means of subsistence, the smaller the amount of surplus labour of which the capitalist has to dispose. A fall in prices can, therefore, only provide surplus labour for the capitalist.1 This was written by Karl Marx twenty years after the abolition of the Corn Laws in England, and this example alone will suffice to show his contempt for facts. Although he lived in England, he remained an opponent of free trade at a time when he was able to perceive its consequences at first hand. But when the agrarian party in Germany proposed to increase the duties on meat and on cereals, Bebel and other German followers of Marx, who laid claims to orthodoxy and repudiated Bernstein, did not hesitate to abandon their master's doctrine and to oppose it, thereby showing that, if they still professed a belief in surplus value, their faith had become sufficiently attenuated to permit of the heresy of demanding to live cheaply instead of dearly.
As for the assertion of formula C, that “profits decrease in proportion as wages increase,” the facts establish that an employer can raise the rate of wages almost indefinitely if he can increase his market. A committee of the Manchester Chamber of Commerce has compared the net cost of cotton spun in India and in Lancashire; in spite of the high wages and the short hours of labour, the English “hand” is cheaper than the Hindoo.1
“Das Kapital,” vol. i., chap. xii.
Chapman. Report on the Cotton Trade, submitted to the Manchester Chamber of Commerce.