The solution to this paradox is that the way to be more competitive is to lower the labor cost of production which lowers value -- which in turn transaltes into lower prices. This is one GREAT example of why you simply can't look at price and use it as a tracker of value. Even looking at net profits gets pretty damn tricky (for reasons that Marx covers much later involving how capitalist society divides up its surplus value on the macro level)
Macro and micro are some of my biggest problems in understanding...
Is this illustrated by the "value" of a Rolls Royce, which is made by hand in a very inefficient manner; and the "value" of a Huyndae, which is made by the most efficient methods obtainable? I understand that materials going into each type of car has an impact, as well (maybe on the same kind of scale?). The more efficient the labor the more items can be made, but the less "value" each item contains. So the "value" of the yacht in comparison to the rowboat is not just one of sumptuousness, luxury, and materials, but also (mainly?) one of efficiency?1. "In general, the greater the productiveness of labour, the less is the labour time required for the production of an article, the less is the amount of labour crystallised in that article, and the less is its value; and vice versâ, the less the productiveness of labour, the greater is the labour time required for the production of an article, and the greater is its value. The value of a commodity, therefore, varies directly as the quantity, and inversely as the productiveness, of the labour incorporated in it."
The Rolls Royce is built at the same prevailing rate of labor just as the Hyundae is, thats what matters.
But there is another point to be made: if it is ONLY about getting labor as cheaply as possible then why hasn't EVERY job been outsourced other than service work?
It turns out that countless other factors countervail the quest for lower wage costs. Infrastructure, "stability", international relations such as currency, the organic composition (since you can more easily pay relatively more in wages if most of your cost is from fixed capital). Marx emphasized this in Capital Vol III and elsewhere.
There is quite a bit to say on the matter but its probably best to start directly with Marx
EDIT: here is another link that might help
http://www.isreview.org/issues/52/postindustrial.shtmlThe unevenness of global production
What, then, is often described as deindustrialization represents the displacement of industries in one place and their relocation elsewhere. Moving production is not a one-way street but a constant movement in dozens of directions. German, Japanese, and Korean auto firms have all increasingly located production in the U.S. South. Honda, Hyundai, Mercedes-Benz, and Toyota all added jobs and production capacity in Alabama in 2005.55 That same year the state produced 479,000 vehicles and is estimated to have employed around 50,000 autoworkers.56 Meanwhile the Bureau of Labor Statistics reported a 26 percent decline in the number of autoworkers in Michigan over the past ten years—a total loss of 80,000 jobs.57 So while it may be the case that Detroit is increasingly deindustrialized, Alabama has become increasingly industrialized.
This is not, nor could it be, a one-way progression down the “post-industrial” highway. Instead, it is the ongoing moving back and forth of production among different firms in search of profit. Asian and German auto companies are locating plants in Alabama for the same reasons Ford once located plants in the United Kingdom and Volkswagen located plants in Mexico: to produce closer to the market and get around protectionist measures. This helps explain why, along with productivity increases—despite the thousands of lost jobs among U.S. manufacturers and their decline in market share—the number of cars and light trucks produced in the United States increased from around eleven million in 1985 to twelve million in 1999—and the number of autoworkers declined by only a small amount.58
Rather than globalization “smoothing” the economic surface of the globe—or in free market booster Thomas Friedman’s words, “flattening” out the global economy—it has reproduced over and over the unevenness of capitalism. For example, low wages in China have undermined the development of industry in other developing countries. According to the Mexican government, this has helped lead to the loss of more than 200,000 jobs and the closure of more than 500 plants between 2001 and 2003.59 Substantial numbers of Mexican immigrants to the U.S. come from urban areas hit by deindustrialization.60 When China recently dropped “voluntary” quotas on textile exports millions of jobs were expected to be lost in countries such as Bangladesh, Mexico, and the Dominican Republic. International Monetary Fund (IMF) mandated Structural Adjustment Programs (SAPS) have wrecked industries in some developing nations—such as Zimbabwe and the Ivory Coast.61
This process is conjuring up a massive global reserve army of labor—in the hundreds of millions—which can be used to pressure the wages of the formal working class. From this reserve army comes migrant labor and workers to be employed in the special enterprise zones of tomorrow. This is exactly what global justice activists in the 1990s warned of—a race to the bottom. Before the racist hue and cry about outsourcing some U.S. port management to Dubai Ports World there had been talk about outsourcing some port operations to Mexico bypassing the relatively well-paid and organized dockworkers at the ports of Los Angeles and Long Beach.62 In the dizzying race it should be noted that even China has its own rust belt of closed state-owned factories. Between 1996 and 2001, thirty-six million workers were handed their hats and shown the door.63
Capitalism will exploit both the high productivity and proximity to the market in the United States, and try to leverage the low wages it finds abroad. It will try in the process to have the best of both worlds—whether it is through the creation of regional production networks—or in slashing to the bone the wages and expectations of workers in the United States. What is called corporate globalization has industrialized and deindustrialized parts of the economically less advanced nations in addition to deindustrializing pockets of the more economically advanced nations. Certainly, Hurricane Katrina gave the world a window on the barbaric economic terrain of life in the United States. Some urban neighborhoods like Chicago’s Bronzeville have suffered double-digit unemployment for more than a generation.64 But even in the industrial heartland of the U.S., the expectations, combativeness, and conditions of workers’ lives have been sufficiently decimated that it is now possible to reopen the hiring halls.
Decatur, Illinois, which lost nearly half its manufacturing base over the past twenty-five years, became famous for its “war zone” labor battles of the mid-1990s at Caterpillar, Bridgestone-Firestone, and Staley. Caterpillar and the UAW entered a years-long battle over the company’s plans for a multi-tiered wage system. Eventually the company won and the UAW left local militants out to dry. With this new stage firmly set, Caterpillar actually hired 1,400 workers in Decatur last year. Starting wages for these new hires is just $10 an hour—down from a one-time high—twenty years ago—of $20 an hour. Such concessions are not being demanded because Caterpillar wants to outsource all production abroad. These demands are being made to allow for production in Illinois—but with conditions and wages more like those firms have found in Mexico—or that Hyundai has found in Alabama.
I need to read that Marx link later, very good and clear but too early. It did immediately bring to mind the reason for volume trumping margin(to put it in retail terms).
The other link a good one too, and I am reminded that the bigger the sample the better the analysis.
I was reading the Marx link, the part on foreign trade and colonies, and was reminded of something written by Alfred Russel Wallace in The Malay Archipelago, back before he went sideways. Showing the sensibilities of a petit bourgeois Scot he complained that the cheapness of English manufactured goods promoted laziness, moral turpitude, in the native population. He showed some understanding of how capitalism worked, understood that English capitalists had to exploit English workers in order to compete in the capitalist system and deplored this. His solution showed where his understanding ended. He would have English manufactured goods sold at higher prices in these colonies in order that the locals should adopt the ethic of hard work and that these excess profits be distributed to English workers to better their condition. Yeah, right.
The moral of this story might be that biologists might not understand economics too well.
In the interests of good houskeeping, here are the whole of the footnotes to Section 1. Of those we haven't discussed, two bear mentioning:1. Karl Marx, “Zur Kritik der Politischen Oekonomie.” Berlin, 1859, p. 3.
2. “Desire implies want, it is the appetite of the mind, and as natural as hunger to the body... The greatest number (of things) have their value from supplying the wants of the mind.” Nicholas Barbon: “A Discourse Concerning Coining the New Money Lighter. In Answer to Mr. Locke’s Considerations”, London, 1696.
3.“Things have an intrinsick vertue” (this is Barbon’s special term for value in use) “which in all places have the same vertue; as the loadstone to attract iron” (l.c., p. 6). The property which the magnet possesses of attracting iron, became of use only after by means of that property the polarity of the magnet had been discovered.
4. “The natural worth of anything consists in its fitness to supply the necessities, or serve the conveniencies of human life.” (John Locke, “Some Considerations on the Consequences of the Lowering of Interest, 1691,” in Works Edit. Lond., 1777, Vol. II., p. 28.) In English writers of the 17th century we frequently find “worth” in the sense of value in use, and “value” in the sense of exchange value. This is quite in accordance with the spirit of a language that likes to use a Teutonic word for the actual thing, and a Romance word for its reflexion.
5. In bourgeois societies the economic fictio juris prevails, that every one, as a buyer, possesses an encyclopedic knowledge of commodities.
6. “La valeur consiste dans le rapport d’échange qui se trouve entre telle chose et telle autre entre telle mesure d’une production et telle mesure d’une autre.” [“Value consists in the exchange relation between one thing and another, between a given amount of one product and a given amount of another”] (Le Trosne: “De l’Intérêt Social.” Physiocrates, Ed. Daire. Paris, 1846. p. 889.)
7. “Nothing can have an intrinsick value.” (N. Barbon, t. c., p. 6); or as Butler says – “The value of a thing is just as much as it will bring.”
8. N. Barbon, l.c., p. 53 and 7.
9. “The value of them (the necessaries of life), when they are exchanged the one for another, is regulated by the quantity of labour necessarily required, and commonly taken in producing them.” (“Some Thoughts on the Interest of Money in General, and Particularly in the Publick Funds, &.” Lond., p. 36) This remarkable anonymous work written in the last century, bears no date. It is clear, however, from internal evidence that it appeared in the reign of George II, about 1739 or 1740.
10. “Toutes les productions d’un même genre ne forment proprement qu’une masse, dont le prix se détermine en général et sans égard aux circonstances particulières.” [“Properly speaking, all products of the same kind form a single mass, and their price is determined in general and without regard to particular circumstances”] (Le Trosne, l.c., p. 893.)
11. K. Marx. l.c., p.6.
A.The following passage occurred only in the first edition:
Now we know the substance of value. It is labour. We know the measure of its magnitude. It is labour time. The form, which stamps value as exchange-value, remains to be analysed. But before this we need to develop the characteristics we have already found somewhat more fully.
Taken from the Penguin edition of Capital, translated by Ben Fowkes.
12. I am inserting the parenthesis because its omission has often given rise to the misunderstanding that every product that is consumed by some one other than its producer is considered in Marx a commodity. [Engels, 4th German Edition]
From Note 9: "...the quantity of labour necessarily required, and commonly taken in producing them..." What is this idea of "necessary and common" except human labor in the abstract?
From Note 10: "Properly speaking, all products of the same kind form a single mass, and their price is determined in general and without regard to particular circumstances." All products of the same kind? We are describing a mass of things having the same qualities.... or the same use value, because as use values, commodities are simply qualities.
There is a really good discussion (reiteration mostly) of most of what we've covered so far at
Despite a few reservations, I really really like this guy
The linked entry is a slow starter but stick with it because by the end he's throwing haymakers
Wherever the capitalist mode of production prevails, virtually all wealth - the sum total of human production - takes the form of "an immense accumulation of commodities". Virtually all of human production is bought and sold and is from the outset intended for exchange.
This is in sharp contrast to all previous historical epochs. For the remainder of human existence, people produce what is necessary and useful without submitting those items to exchange. Products - use values - are produced and consumed directly, without ever entering into exchange. Even where human society has evolved into class society, the expropriation of others still takes place directly, with exchange playing only a minor or incidental role.
Conversely, exchange itself dates back all the way to the Stone Age. Throughout this long history, however, exchange remains at the margins of human societies. It applies to a handful of commodities and never are the other use values which constitute the overwhelming bulk of human endeavor... never are these tempted to take on the commodity form.
Capitalism, therefore, is synonymous with the era of the dominance of the commodity form. The triumph of exchange and the triumph of capitalism are one and the the same thing, and the germinal form of this is the single commodity.
As commodities, the results of human production present themselves, for the first time, as having a dual nature. In addition to their character as use values, they also acquire an exchange value, specific to each exchange into which they enter. No sooner does this duality appear, then the contradiction inherent in it also presents itself.
As use values, commodities appear above all as different qualities. As such, they are difficult to reconcile with one another except in the most subjective and momentary of considerations. As use values, commodities share nothing in common.
Exchange values, on the other hand, are pure quantities. They appear as a precise reconciliation ("to the penny") of any two items from the world of commodities and, moreover, as a reconciliation of something intrinsic to each commodity.
Something which appears intrinsic to each commodity but which is actually acquired historically; something which exactly reconciles two things which, by definition, are entirely irreconcilable - this is the fundamental contradiction at the beginning of our analysis of commodities and thus of capitalist production.
In truth, exchange values are the expression of another trait shared by all commodities but having nothing to do with their physical makeup or their qualities as use values. If this new trait has no physical existence, it cannot be anything other than a social stamp (a calculation; a social attachment; a historical "crystallization") which use values acquire specifically to allow their entry into exchange. Though over time, this crystallization may become so common as to appear as intrinsic as any physical characteristic, it is in fact something entirely different and is rooted, not in the products produced by human beings, but in the social mode in which they produce them.
This social acquisition, on which all exchange values are based, we call value. The two fold nature of commodities consists of their existence as use values and values.
What is the substance of this value? If the products of human labor which enter into exchange differ entirely in their physical makeup (as two commodities with the same use value never enter into exchange with one another), then the only thing they have in common is that they are all products of human labor. Value is the social calculation of the amount of human labor (measured in time) necessary to create each use value and extrinsically (historically) attached to each in order to allow them to enter into exchange with one another. Exchange values are nothing more than the singular expression of this social substance which congeals in each commodity.
Finally, it is not sufficient to talk about human labor without more. Labor itself evolves alongside commodities. The evolution of the division of labor, the differing levels of skill and intensity which appear within it, and the differing characteristics of individual labor must all be reconciled. The labor we speak of here is labor of the most general type, what is "common and necessary" to the production of all commodities having the same use value, or the labor "socially necessary" to produce each commodity.
Each of these points will be elaborated in turn as we move through our analysis.
(In a couple of weeks, I will start a new thread and continue with Section 2)
Its very, very important to realize that the contradiction is between use value and value. Probably the biggest misunderstanding for your average wananbe Marxist is conflating value and exchange value and/or failing to grasp the concept of value at all beyond simply "price"
Also worth noting that the discovery that Engels counted as Marx's most important contribution -- even above and beyond the materialist conception of history -- is still to come. When we hit that we finally see Marx's genuine contribution to political economy as opposed to simply a more rigorous development of what had come before (A Smith, D Ricardo in particular)
The confusion of value and exchange value leads directly to a ton of inane crapola, such as the "value price transformation problem".