Introduction: The Heart of Socialism
Although there are additional areas to Marxism, there is a central primary element to the whole theory, and that is, the idea that exploitation exists via the Labour Theory of Value (LTV).
Marx believes that socially necessary labour time (SNLT) determines the value of commodities. This belief provides the mathematical and logical foundation for the claim that surplus value (essentially profit), is the equivalent to unpaid labour. Therefore profit is unpaid labour. Therefore profit is stolen value.
However, although the LTV may hold true for specific industries and in certain circumstances, this doesn’t mean that it holds true in all instances, especially for modern industries with very advanced economics. The theory struggles most in sectors where factors like branding, entrepreneurship, and innovation play a significant role in value creation.
This is of highly significant consequence because it impacts the core of Marxism.
Below is a thought experiment design to be trap-like in nature, and expose the core issues with the LTV. To play along, please answer the questions in Part 1 first, then move on to Part 2.
Part 1
A capitalist sells a chair for £100 and pays a worker £40 for two hours of labour to produce it.
Ignoring cost of goods sold, please define the:
Price = ?
Exchange Value = ?
Surplus Value = ?
Your answers should have been:
Price = £100
Exchange Value = £100
Surplus Value = (£100 - £40) = £60
Part 2
Now, imagine the capitalist owns two companies: a discount brand and a premium brand. They use the exact same chairs for both brands. The chairs sit next to each other in a warehouse and the next chair along is picked regardless of which brand makes the sale.
But… the discount brand sells the chair for £100, while the premium brand sells the exact same chair for £300. The only difference is branding.
Let’s revisit the key terms in this new context:
Price = Either £100 or £300
Exchange Value = This should be the same for both items, as they sit next to each other in the warehouse and are the same commodity. The Exchange Value is the long-term average price. But these prices never converge into an average. And also, we already looked at the physical object of the chair and defined the Exchange Value, as £100, and since no extra SNLT has gone into it, it must still be £100.
Surplus Value = Similarly, the Surplus Value is the difference between the Exchange Value and the workers wage, which we already define as £60.
Notice the big problem? There’s an extra £200 in value from somewhere!
Perishable vs. Non-Perishable Labour
This brings me to the crux of my argument. I would like to create the terms Perishable Labour and Non-Perishable Labour.
Perishable Labour: Is labour that directly applies to a single item. In our earlier example, the carpenter’s labour is perishable—once the chair is made, the value is embedded in that specific item. If the chair is destroyed, the labour (and value) is lost.
Non-Perishable Labour: Is labour that adds value across multiple items over time. Branding, innovation, and entrepreneurial activities, these types of activities can increase the value of all future products in that line.
This leads to the fundamental issue in Marx’s theory: non-perishable labour is disconnected to time. Ten minutes of non-perishable labour can add value into chair manufacturing, theoretically, for billions of years into the future. Because it’s disconnected to time.
Conclusion
To summarise, Marx’s Labour Theory of Value holds up in industries where perishable labour—labour tied directly to production—dominates. However, non-perishable labour (such as branding, innovation, and entrepreneurship) is not connected to time. Therefore in industries and economies where non-perishable labour plays a major role, SNLT is not the major determinate of value.
This is not just a niche critique but a fundamental challenge to the labour theory of value, and therefore all of Marxism.
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