The Price of Everything and the Value of Nothing

It was Oscar Wilde at the end of the nineteenth century who gave us the definition of a cynic as someone who knows the price of everything and the value of nothing. It’s also a good description of 21st Century capitalism. Under capitalism, human activity is increasingly commodified and traded in markets. The market is held out to be the supreme arbiter, providing the price of everything from a loaf of bread to knowledge. Markets are assumed to be ‘perfect’ in the sense that they don’t reflect the interests of individual buyers or sellers and both have perfect knowledge about the commodity being traded. Any exceptions to these conditions are considered to be infrequent, relatively trivial and capable of being remedied by regulation. To the extent to which ‘value’ has any meaning under capitalism, it is the price indicated by a ‘perfect’ market and corresponds to the sum of future benefits from owning the commodity discounted to a present value, the discount rate being the so-called cost of capital, i.e. the average return on capital.

Marxists have a different view. Under capitalism, value derives from the labour, past and present, used to create a commodity. The function of markets is simply to re-distribute this labour value according to the current demand for the commodity. Furthermore, we don’t share the idealised view of markets held by neo-classical economists, the priesthood and apologist for capitalism. Many markets are far from ‘perfect’ and one in particular, the labour market, does not begin the approach this idealised fiction. The tendency in labour markets is to drive prices down to the minimum required for labour to replicate itself. When capitalism, riven by its own contradictions, is eventually overturned and the work to build a communist society begins, the role of markets will be reduced and the economy will be run to meet the needs of those who work, including future generations, not the needs of the 1% who currently own capital.

The difference between these two world views has been brought into sharp focus this week by the reports that, according to Professor Vladimir Romanovsky of the University of Alaska, permafrost in parts of Alaska would start to thaw by 2070, resulting in the release of huge quantities of methane into the atmosphere. Methane is a powerful greenhouse gas and its release could trigger a huge climatic and economic catastrophe 55 years from now. For Marxists, action must be taken now to avoid this catastrophe and protect future generations of workers. Our government should therefore be pressing at the UN Framework Convention on Climate Change in November for solid agreement on the policies needed to keep global warming under 2 degrees centigrade by 2050 and to make our contribution to achieving this. From the capitalist perspective, however, an event 55 years in the future has little impact on current market prices. Assuming a long run average annual return on capital of 6% real, the price of such a catastrophe, the price reflected in the market, is only 4% of its eventual cost. When we factor in the market ‘imperfection’ that the 1% who trade in capital markets expect to protect themselves and their families from the coming catastrophe which will disproportionately affect the poorest and we can begin to understand why our government, and other governments across the world, won’t be too concerned if they fail to reach the required agreement in Paris in November.

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