 So I've been reading Eugen von Bümbawerk and have some thoughts about the relationship between his theories and those of Karl Marx. So here's a picture of the man himself and is particularly known for being a critic of Karl Marx. So it was very surprising to me that when I read the Positive Theory of Capital, a book of his, that I immediately noticed a number of respects that he agrees with Marx. So I'm going to present here my rapprochement, if you like, between Bümbawerk and Marx. So first, evidence that Bümbawerk supports the labor theory of value. Second, evidence that Bümbawerk supports the exploitation theory of profit. Next, I'll look at his comments, his explicit comments on socialism in the Positive Theory of Capital. And then I'll look at his criticisms of the labor theory of value and of exploitation in capital and interest, which is the place where he goes into more lengths. So in the Positive Theory of Capital, he just refers to his earlier book, Capital and Interest. First, evidence that Bümbawerk supports the labor theory of value. So he says quite clearly that capital is not a factor of production and that the contribution of nature is free and labor time is the units that he uses to measure capital. He also says that exchange value regulates the proportional division of labor. So I think these are all features of the labor theory of value for Marx. So here we get capital is not an independent factor of production. He says thus, all that we get in production is the result of two and only two elementary productive forces, nature and labor. Man finds ready to hand an abundance of natural processes and allies his powers with them. What nature by herself does and what man does along with her, these form the double sources from which all our goods come and the only source from which they can come. There is no place for any third primary source. He also says, lastly, we can now answer easily and categorically the much disputed question whether an independent productive power is inherent in capital or to put the question in its usual form whether capital is a third and independent factor in production alongside labor and nature. The answer must be a most distinct negative. So next evidence that he thinks the contribution of nature is free. He says the cooperation of the free natural powers which technically is also indispensable is given without question and without cost. And then in another place in many essential respects land and capital take different ways. The former is a gift of nature, the latter a result of labor. I do need to add a caveat here. Bumbaverk's statements on nature's contribution to price are not always clear. All his statements appear to be compatible with nature either providing only use value or by raising socially necessary labor time, for instance in the case of raw materials. But I could imagine someone saying that that he thinks that in the case of rare things nature is contributing to price. But to someone who voiced the the opinion that Bumbaverk thought that nature's contribution was not free, I would want them to give some account of the passages that I've already pointed you to. So now for an intermediate conclusion. I invoke just by way of terminology Ricardo's distinction between wealth and value. So Bumbaverk says that nature plus labor gives us wealth and he says that nature is free and that means that labor must account for value. So this is how I see him as proposing the labor theory of value. Now in chapter five, Bumbaverk consistently uses labor years as the units of capital investment and capital accumulation, specifically with respect to a nation or society's capital investments in capital accumulation. Now if he thinks that the units with which capital is measured is labor time, that seems just straightforwardly to point to him believing in the labor there of value. Later in the work, Bumbaverk proposes that it's exchange value that regulates the proportional division of labor. He says, production may be compared to a giant pump. Every branch of want has its separate pipe sunk down to the great reservoir of the original productive powers and competes with all the other branches of want in trying to draw its supply by suction from that reservoir. Every branch has a different power of suction, the power increasing with the number and remunerativeness that is to say in the case of organized exchange, the money value of the employment it embraces. In the nature of the suction pipes too, there is a difference. Many are quite simple. Others have independent intermediate lengths that convey the pressure that comes from the want as it were by stages and in correspondence with that the productive powers which supply the want are raised by stages. Whether there are many or few intermediate members may hasten or hinder the result but it cannot weaken or strengthen it. In the end every want according to the power expressed by its money valuation draws to itself immediately or immediately the productive powers required for its supply. To supply the wants of the rich innumerable productive powers are always active even if simultaneously at other points of the economy there is want both of men and goods. The reason of this is that the high figures which the rich are able to offer for the satisfaction of their wants never fail to exert and continue their attractive force through all the stages of production right down to the reservoir of the original productive powers. I just want to point out how similar this idea that exchange value regulates the proportional division of labor in society is to what Marx writes in his letter to Kugelmann. Marx says and the form in which this proportional division of labor asserts itself in the state of society where the interconnection of social labor is manifested in the private exchange of the individual products of labor is precisely the exchange value of these products. So now I'll present an overview of agreements between Bumperwerk and Marx and this comes from a reading of all of Bumperwerk's book and not just the passages I've given above. Effective demand decides what should be supplied and at what level and long run equilibrium prices are cost price plus ordinary profits which decline as capital accumulates. Using Marx's terminology social labor time is the substance of value and money is the necessary form of appearance of value. Now I think what Marx means by these terms is precisely the two sides that Bumperwerk has captured by on the one hand using labor time as the units for accounting for capital investments in capital accumulation and on the other side saying that money prices are what decides how the social division of labor is proportioned to different activities. That function of money deciding how to regulate the economy that makes money the necessary form of appearance of value in a capitalist society. So now I move on to evidence that Bumperwerk supports the exploitation theory of profit. Here's a quote. It is only because the laborers cannot wait till the roundabout process which begins with the obtaining of raw materials and making of tools delivers up its products ready for consumption that they become economically dependent on the capitalists who already hold in their possession what we have called intermediate products. Now just prima facie when you read this it seems to say that that the reason why laborers work is because they have been divorced from control of the means of production. It's not a particularly non-Marxist thing to say. It's revealing that in a paraphrase of Sismondi in Capital and Interest which comes in the context of a historical survey of people who have subscribed to the exploitation theory of profit. Bumperwerk says almost exactly the same thing that in the later book he says in his own words. So here's this quote. The laborer by whose activity all goods are produced has not been able in our stage of civilization to obtain possession of the means necessary to production. The productive laborer does not as a rule possess a sufficient stock of the means of subsistence upon which to live during the course of his labor. Nor does he possess the raw materials necessary to production or the often expensive tools and machines. The rich man who has all these things thus obtains a certain command over the labor of the poor man and without himself taking part in that labor he takes away its compensation for the advantages which he places at the disposal of the poor man the better part of the fruits of his labor. This share is the profit on capital. Yeah so just to reiterate the point this is Bumperwerk summarizing Sismondi in laying out the exploitation theory of profit and here is Bumperwerk just saying what he thinks and it seems to me that they are the same. So now in the third part I turn to Bumperwerk's comments on socialism in the positive theory of capital. Socialism comes up three times. First in his own argument that is against the socialist the capital is labor plus nature and not just labor. The second is a remark on socialist economic planning and the third is on Marx's theory of capital. So here's the first place that he mentions socialism. He says we may confidently then strike capital out of the list of independent productive powers as a portion of the English school did long ago and as the socialists have done more recently. I may say however that the manner in which they have done so is not quite appropriate. In the instrumentality of capital they see only the instrumentality of the labor expended in producing it. They explain it as previously stored up labor. This is not correct capital to keep the same form of expression is stored up labor but it is something more. It is also stored up valuable natural power. It is the medium through which the two original productive powers exert their instrumentality to the instrumentality of gold which is employed as capital in gilding the lightning rod. The labor of the miner who finds the ore and refines it is not the only contributor. Nature also has contributed her share in depositing the valuable vein or placer. Now it may be that some socialists have said that capital is only labor stored up labor and not stored up natural power but this is not what Marx thinks. Marx says in the critique of the Gotha program labor is not the source of all wealth. Nature is just as much the source of use values and it is surely of such material that wealth consists as labor which itself is only the manifestation of a force of nature human labor power. So either Bumbaverk does not intend to include Marx among the socialists or he is making a mistake in doing so. Okay so here is his comment about socialist economic planning. In a socialist state from which private capital and private undertaking were banished and where the entire national production was organized by the state the formation of capital and the previous saving of productive powers necessary there too would be controlled officially. The method would simply be to put a considerable proportion of the national workers to very lengthy processes whereby the making of capital in the form of intermediate products would be very great and the amount of matured products in the future would be much increased. Many workers relatively speaking would be put to mining railway building regulation of rivers machine making and the like and few to wine growing silk spinning lace making beer brewing cloth making and the like. The people would thus be compelled to save by pressure from above in as much as of the national production thus conducted by the state in each year relatively few goods would be put at their disposal for immediate consumption less that is to say than might be annually produced and consumed if the existing stock were merely to be maintained. The productive powers left free would be invested in lengthy capitalist processes of production. Now I think this is a good description of the rapid industrialization that was overseen by Stalin so it's a good description of actually existing socialism but not of communism because in communism there is no state so clearly his conception of socialist economic planning is not relevant for the future that Marx envisions. Now next is Bumbaverk's explicit comments on Marx's theory of capital. He says of Marx that he conceives of capital as only those productive instruments which in the hands of the capitalists serve as instruments for exploitation and enslaving of the laborer. The same things in the possession of laborer on the other hand are not capital. Now it's true that means of production in the hands of capitalists are capital and in the hands of worker are called the consumption fund by Marx but there are many kinds of capital in Marx other than means of production. So basically Bumbaverk is somehow allowing his own conception of capital which for him is just another word for means of production basically to influence his reading of Marx and for Marx the important thing is that capital is the cycle and C to M prime money that becomes more money that's capital and it can take the form of finished products raw materials labor power it can take many forms and so he is mischaracterizing Marx's theory of capital and in this presentation if you think the MCM prime cycle is what capital is well means of production in the control of workers are not part of that cycle so Marx is entirely correct to not see them as capital so having convinced myself that Bumbaverk endorses the labor theory of value and the exploitation theory of profit I was of course curious in what terms he argued against these in his book Capital and Interest so now we look at those criticisms of the labor theory of value and the exploitation theory of profit in capital and interest so his criticisms are mostly aimed at Rod Bertus and not at Marx he fails to distinguish labor and labor power even though he does Marx is making the distinction and has a nice discussion of the complications of turnover time and profit rate equalization that is to say the transformation problem that I would recommend reading it's a very nice treatment of those questions but he seems unaware of the fact that Marx handles these issues in volumes two and three of capital only quoting volume one his criticism seems to boil down to the objection that embodied labor times do not predict market prices and this objection seems a little bit strange because of course the labor theory of value was never intended to predict market prices as is true of Austrians in general Bumbaverk seems to confuse a positive description of something from a normative endorsement of it I would say that he endorses the exploitation theory of profit for example he gives this nice discussion of a steam engine built by workers cooperative of five workers versus five workers and a capitalist where he makes it makes it clear that the capitalists profits are deducted from what otherwise would go to the workers but he confuses the exploitation theory of profit with the proposal that workers should be paid the full value of their labor which he rejects so he he I'm suggesting he endorses the positive side of the exploitation theory but he rejects the normative side of it the normative side of that would be put forward by for example Proudhon but Marx also rejects the latter he does so quite explicitly in the poverty of philosophy and I think he does so more implicitly in the German ideology Marx wants to get rid of the wage system altogether so that proposal that that we get rid of the wage system altogether just doesn't cross Bumbaverk's mind as far as I can tell so instead he understands the exploitation theory of profit as this Proudhonian idea that the worker should be paid the full full value of his work and I think he quite rightly rejects that just as Marx does now just a word about Bumbaverk as a vulgar economist I will quote again Marx's letter to Kugelmann the essence of bourgeois society consists precisely in this that a priori there is no conscious social regulation of production the rational and the naturally necessary asserts itself only as a blind working average and then the vulgar economist thinks he has made a great discovery when as against the revelation of the inner interconnection he proudly claims that in appearance things look different in fact he boasts that he holds fast to appearance and takes it for the ultimate why then have any science at all Anwar Sheikh has this very nice metaphor which is that you know Newton says that a feather and iron ball will fall at the same speed were it not for the activity of friction and the vulgar economist would then say but when I drop a feather and an iron ball they don't fall at the same speed and that proves that Newton's laws of physics are wrong both Marx and Bumbaverk would agree that if you want to predict short-term market prices you have to look at supply and demand to point out with Bumbaverk that embedded labor times does not predict actual short-term market prices is exactly to hold fast to appearance and take it for the ultimate and and so I don't find personally his rejection of the labor theory of value very convincing because he clearly has not understood the scientific purpose of the labor theory value and has not embraced the explanation of it across the three volumes of capital which include an account of turnover times and the effect of the equalization of profit rates now just as a coda I'll point out that there's a very nice video on youtube by Victor Magariño where he points out in a different context the overlap between the Marxist theory of exploitation and the Austrian theory of interest