Market Socialism and Value-Form: “The Impossible Socialism” Revisited

Introduction

Could there be such a thing as a “socialist market economy”? Proponents of “market socialism” have answered this question in the affirmative: the various issues associated with capitalist market societies (e.g. inequality, workplace hierarchy, environmental degradation) are not to be blamed on the market institution as such, but rather on the structures of ownership and/or control of enterprises. For market socialists, the experience of centrally planned socialist economies have shown that an economy that does not make use of market mechanisms to allocate resources on the basis of price signals will suffer massive inefficiencies, innovation problems, corruption, etc. On the other hand, leftist critics of market socialism have argued that market socialist models inadequately deal with some of those features that make capitalism unjust. They argue that these failures are not an incidental fact about this or that model of market socialism, but rather that the market institution is necessarily exploitative. Market socialism, therefore, cannot serve as a model for a non-exploitative, socialist economic system.

Many different specifications of market socialism have been debated throughout the years. In a recent issue of Science & Society, Maxi Nieto has taken on all of them. He argues that market socialism is an “impossible” form of socialism. This modal claim is not simple rhetorical flourish. His thesis is ambitious precisely because he attempts to show that market socialism is impossible as a matter of conceptual necessity. The central claim of his argument is that “the organic relationship between commodity circulation and capital” (Nieto 2022, 66) means that markets have an inherent tendency to engender allocative inefficiencies and social polarization, prevent citizen self-government and the development of human capacities, and prevent the establishment of “a social metabolism that is sustainable with nature” (ibid.).

In his comment to Nieto’s paper, Arthur DiQuattro argues that Nieto’s argument fails because all of the consequences of markets that are supposed to be incompatible with socialism only follow if one believes that markets must play a distributive, rather than allocative, function, that is, that markets determine how profits from the sale of goods and services are shared among individuals or groups rather than guide resources to their most efficient uses by reflecting supply and demand. But it is precisely the allocative function that markets are meant to play in market socialism, not the distributive one. By eliding this distinction, Nieto fails to show that the consequences he highlights also hold when markets only play an allocative function. Therefore, Nieto has failed to show the impossibility of market socialism.

In this paper, I will argue in support of Nieto’s thesis: that market socialism is, indeed, an “impossible” form of socialism. The distinction between allocative and distributive functions of markets is a red herring. The primary issue is about the continued existence and functioning of capital and, eo ipso, capitalist social relations. Capital is a structure that functions through the progressive subjugation of all aspects of social life to its imperatives, thereby constraining individual purposiveness to the purposiveness of an alien power. ¹ It is the functioning of capital that dominates life in capitalism. Since market socialism only proposes to deal with the exclusivity of the functionaries of capital (i.e. the capitalist class), but does not propose to do away with capital, it cannot properly be said to be a form of socialism.

My plan is to proceed as follows: In Part 1, I introduce the idea of market socialism and reconstruct Nieto’s argument against its possibility. In Part 2, I consider DiQuattro’s defense of market socialism against Nieto’s objections. In Part 3, I start laying the groundwork for my own argument. Specifically, I argue that capital should be thought of as a dominating power. I attempt to explicate this notion further by way of relating the notion of dominating power to Amie Thomasson’s conception of “opaque social kinds”. In addition, I attempt to show that this way of thinking of capital is consistent with passages in Marx’s own writings. In Part 4, I connect the social-ontological reflections of Part 3 to Marx’s analysis of the distinctive form that value takes in capitalist social production. The significant argumentative step here lies in the attempt to relate the general features of capital as a dominating structure to the ways in which the commodity serves as an embodiment of capitalist domination. In Part 5, I turn to consider how the analysis of the value-form relates to the ways in which capital “subsumes” labor in market socialism. I argue that on a functionalist definition of capitalist relations of production, it can be shown that capital dominates labor through mere exchange of commodities. If the argument is successful, I take it to show that competitive markets are, indeed, incompatible with socialist values. In Part 6, I summarize some of the main points of the argument and briefly consider some objections.

Market Socialism and Its Logic

Market socialism as an idea has a long history, with versions of it appearing in various socialist writers preceding Marx. The term, however, has its origins in the “socialist calculation debates” of the 1920s and 30s, with Oscar Lange, Fred Taylor, and Maurice Dobb as notable proponents. In the following exposition, I am going to briefly outline the model of market socialism that is commonly thought to represent the most radical break with a capitalist market economy—David Schweickart’s “Economic Democracy” (hereafter “ED”). There are two reasons for this selection. First, this is the model that Nieto chooses as his generic textual reference for market socialism. Second, if it can be shown that even the “most radical” form of market socialism represents an insufficient break with capitalism, due to features of markets as such, there are good reasons to believe that the issues generalize to more “moderate” models.

To start us off: what institutions are characteristic of capitalism? For our purposes, the following answer will do:

It is a market economy, featuring private ownership of the means of production and wage labor. That is to say, most of the economic transactions of society are governed by […] supply and demand; most of the productive assets of society belong to private individuals either directly or by virtue of individual ownership of shares in private corporations; most people work for salaries or wages paid directly or indirectly by the owners of the enterprises for which they work. (Schweickart 1998, 17)

Market socialism, on the other hand, is a hybrid economic system that seeks to combine socialist normative commitments with the efficiency and innovation typically associated with capitalist markets. It envisions a society where the means of production are socially owned (either by workers, communities, or states), but where supply and demand still play a role in determining prices, production, and distribution of goods, although markets are usually restricted in excess of what is common in capitalism. In some forms of market socialism (e.g. ED) wage-labor is replaced with workplace democracy, where workers get shares of the enterprises’ profits, rather than a wage. Such market socialist models are called “worker self-managed” market socialism.

ED emphasizes worker self-management and social ownership of means of production: workers control the organization of the workplace and productive process, use capital assets under their control as they see fit, and distribute the enterprise’s net profits among themselves. Firms pay a tax on their capital assets, which go towards society’s public investment fund, which in effect means that worker co-ops lease their capital assets from the state. Capital markets are replaced by a system of public banks that allocate investment funds based on social priorities and profitability. Since investment is controlled through a public mechanism, there is no need for financial markets. Markets for goods and services, where firms compete for consumers, exist. However, there is no traditional labor market: workers are not hired and fired in a manner familiar in capitalism. There is a policy of full employment, and the state acts as an employer of last resort. In short, in ED there are consumer markets, but no labor-, capital-, or financial markets.

Earlier, I briefly mentioned “socialist normative commitments”. A question that has animated much of the debate around market socialism is: to what extent, if any, is Marx’s critique of capitalism compatible with the existence of markets? Thus, the variety of socialism that concerns us here is Marxian socialism. Although Marx, in the three volumes of the Capital, intended to give a “non-moralizing” (or “scientific”) critique of capitalism ² and as such avoided explicit moral condemnation of capitalism, it is uncontroversial to suggest that Marx was committed to a vision of socialist society as a society in which “the full and free development of every individual forms the ruling principle” (Marx 1976, 739) and in which “the free development of each is the condition for the free development of all” (Marx and Engels 2002, 244). Indeed, an important part of his project was precisely to show that capitalist society is not, and cannot be, a society in which these principles are realized. The discussion that concerns us here does not touch on the normative commitments but rather on the question of what critique of markets is implied in the critique of capitalism.

As we’ve seen, Schweickart thinks that capitalism is defined by private ownership in the means of production, the existence of competitive markets in which goods and services are exchanged, and wage-labor. He thinks that all three of these “defining structures must be present for a society to be capitalist” (Schweickart 2011, 25). Even though “market economy” and “capitalism” are often used interchangeably, this, he tells us, is a “serious conceptual mistake” (ibid.) In other words, the institutions that together constitute capitalism as a socio-economic system are externally related: “it is perfectly possible—and indeed desirable—to have a market economy that is socialist. Competition is not the antithesis of socialism” (ibid.). The idea that the market, as an institution, is an insufficient but necessary feature of capitalism is a central tenet of market socialism. I will call it the externality thesis.

Nieto’s argument against market socialism pivots around his rejection of the externality thesis. Indeed, he thinks that Marx himself rejected the externality thesis because the latter

[U]nderstood the capitalist mode of production as an “organic system” … in which the different elements that compose [the system] implicate and presuppose each other, forming a whole that is not simply the sum of its own parts, but an articulated totality with a specific operating logic that establishes the necessary conditions for its continuous self-reproduction and development. (Nieto 2022, 73)

Another way of putting this is to say that Marx subscribed to what Bert Ollman (1976) has called a “philosophy of internal relations” (ibid., 26ff.). In relation to the study of capitalism, this means that Marx viewed capitalism as a dynamic, interconnected whole, where the elements that constitute the system do not exist independently of it but are internally related and defined by their connections to all the other parts. This is especially important to note in relation to Nieto’s claim that he is offering a “logical critique of market socialism [that demonstrates] its inconsistency” (Nieto 2022, 92). DiQuattro, in his reply to Nieto, appears to be puzzled by the nature of this claim to logicality, and proceeds to give a syllogistic reconstruction of Nieto’s argument where the latter is supposedly arguing that

[P1]: Socialist economies are always planned.

This leads DiQuattro to conclude that Nieto’s argument is question-begging, because the first premise, by definition, rules out that “the use of market allocation is compatible with a socialist economy” (ibid.). The fact is that the claim that “socialist economies are always planned” never occurs explicitly in Nieto’s text, and it is only towards the end of his critique of market socialism that he discusses the justification for planning in a socialist economy. Even then, there is no empirical claim about socialist economies always being planned. Nieto never clarifies what he means by “logic”, but it is clear from the structure of his argument that the “logic” he has in mind is “dialectical” rather than “propositional”.

The term “dialectics” and its cognates is often used in a very careless manner, simply denoting that “everything is dependent upon everything else and is in a state of interaction and it’s all rather complicated” (Heinrich 2012, 36f.). In general terms, a dialectical exposition consists in the presentation of a process in which “a concrete totality reveals itself to contain its own negation as one of its moments” (Mau 2023, 106). Marx’s ambition was to give a theoretical reconstruction of the actual dynamics of the capitalist mode of production. This is significant, because the relationship between the categories of the theory are not meant to be externally related to observed phenomena in the manner that ideal types are often thought to be (Smith 1998, 463). The categories that together constitute a system are posited on different levels of abstraction, where some articulate simpler and more abstract social structures than others. Together, however, they articulate the constitutive relations of a totality: capitalism (Marx 1973, 100f.). In a dialectical theory, no category stands alone, and every category receives its meaning from its systematic place within the theory. For our purposes, this characterization of “dialectical logic” will do:

a) categories that articulate simple and abstract social structures are ordered prior to categories that define more complex and concrete structures; and b) each category fixes a structure that incorporates the structures presented in the prior categories, and is in turn incorporated in the structures fixed by subsequent categories. (Smith 1989, 324)

Marx was explicitly committed to a dialectical method of exposition in Capital (Marx 1976, 17ff.). For him, a dialectical contradiction is a matter of “extra-discursive oppositions, e.g. supply and demand … involving forces or tendencies of (relatively) independent origins which interact in such a way that their effects tend to cancel each other out—in momentary or semi-permanent equilibria” (Bhaskar 1983, 93f.). In other words, the relevant notion of contradiction is exactly not propositional.

The core of Nieto’s exposition is supposed to present how “Marx shows that the market and capital are two organically connected instances that presuppose one another, so that they cannot exist separately” (Nieto 2022, 74). His presentation of Marx’s argument is highly condensed. I will take a couple of paragraphs to unpack Nieto’s basic argument.

Simplifying somewhat, the essential idea is that in capitalism, social production is not undertaken with the purpose that individuals produce the goods that they need in order to reproduce themselves and their dependents; it is set up to produce goods that will go to the market and exchange for a sum of money which is greater than the value (measured in money) of the capital (labor power and means of production) that initiated the process of production.

In Marx’s view, the process of seeking to produce a commodity that will exchange for a greater sum of money than the capitalist advanced at the beginning of the process, is the entire purpose of capitalist production. In order for raw materials, money, machines, etc. to be capital, they must form part of such a circuit where they go into production in order to generate a product that will net a higher money-value than the capitalist started with. This is why Marx defines capital as “value in motion” and “self-valorizing value”. Capital is an incessant process where commodities (labor power and means of production) are purchased in order to produce a net product (a commodity) which can be sold for more than the workers receive in wages (the cost of their reproduction) and the purchasing-price of the means of production. In other words, capital is the process of seeking to extract surplus-value from the production process, and this surplus-value takes the form of profit. In order for the capital-owner to remain a capitalist, they must seek to valorize capital.

For Nieto, there is a significant exegetical point to be made here: in the early parts of Volume 1 of Capital, Marx discusses the “simple circulation of commodities”, where commodities exchange for commodities. According to an influential reading of these sections of Capital, Marx is here talking about a form of commodity exchange which existed prior to capitalism (cf. Starosta 2008, 298f.). According to the interpretation that Nieto favours, this is wide of the mark. What Marx is doing is simply building up to an explanation of the intimate relation between commodities and markets in capitalism. Capital is about the capitalist mode of production from the very first page, when Marx introduces the commodity. That social production takes the form of production of commodities for exchange is a historically specific fact, the differentia specifica of the capitalist mode of production. Marx’s talk of simple circulation has to be understood in relation to this beginning level of the analysis (Banaji 1979). So, rather than it being about a pre-capitalist mode of exchange, it is rather a category at a high level of abstraction, to which Marx gradually adds further determinations until he has reached the concretion of the universal circulation of commodities which characterizes markets in capitalism.

The significance of this, for Nieto, is that it supposedly shows that the market and capital are inseparable. After having made the point, Nieto goes on to consider how this necessary interrelation between capital and markets plays out in the domains of economics, politics, and ecology. The point is that as long as the imperatives of capital—to constantly seek surplus-value—have not been put out of play, any attempt to impose a regulatory framework on capital will be no more than papering over cracks that will continually break open. The idea that we can have markets without capital is a chimera, because markets are necessarily related to capital. Market socialism is therefore an impossible form of socialism, because it is wedded to the idea that we keep the “good” parts of capitalism (innovation, efficiency, dynamism, etc.) while doing away with the “bad” parts (inequality, influence of capital over politics, environmental degradation, etc.). This is the nature of the (supposed) “impossibility”.

It is not obvious that Marx, in fact, thought that markets as such are inherently capitalist. In Grundrisse, Marx notes that exchange of commodities occurred in pre-capitalist social formations (Marx 1973, 256ff.). These were societies with markets. These have to be distinguished from capitalist market societies. What distinguishes the two is that in the latter, there is a “society-wide compulsion to place the accumulation of surplus value above all other ends” (Smith 2017, 346). Nieto is right to emphasize that Capital is about capitalism from the very first page, and that Marx’s discussion of “simple” forms of production and exchange should not be understood as observations about non-capitalist social formations. Conversely, it is important to keep in mind the distinction between trans-historical categories and the concrete determinations of social phenomena and categories within the context of particular configurations of the mediation between humans and nature (or social metabolism). ³ Every society is constrained by generic limitations on the metabolic relationship with nature (e.g. technology, environment, resource availability etc.), but within these constraints every society has to give a particular form to the metabolism. Capital is about the form that this social metabolism takes in capitalism, and what Marx has to say about markets in Capital has to read in relation to that context. Therefore, it is plausible to think that problems that Nieto identifies do not stem simply from the existence of markets, but rather have to do with the functional role that the market plays as a mediator between production and consumption, when embedded in the dynamics of capitalist competition. In other words, it is an open question—as far as the argument so far goes—whether the issues we’re dealing with here have to do with markets as such or markets as they function in capitalism. Even though the market plausibly functions as a mechanism of domination in capitalism, Nieto’s argument doesn’t establish whether the market simply mediates domination or if it is essentially dominating, and if it is the latter, then what grounds this essence? In part 3 and onwards, I will argue that the essence of capitalist domination lies in the form that value assumes in capitalism.

Allocation to the Rescue?

As we saw earlier, the conclusion that Nieto draws is that market socialism is, inter alia, inefficient, alienating, and unjust. For DiQuattro, this is another way of saying that market socialism is distributively unjust (DiQuattro 2024, 423): it gives rise to an unjust distribution of wealth, income, and opportunities. If this is true, then it would indeed appear that market socialism is incompatible with socialist normative commitments. DiQuattro, however, thinks this is false.

To see this, DiQuattro invites us to consider the distinction between the allocative and distributive functions of markets: prices signal what to produce and in what quantities; they help consumers decide how to allocate spending and producers to determine the most profitable uses of resources, etc. Their function is not, however, to distribute revenue over “factors of production”—rent for land, wages for labor, profit to capital. Market competition in capitalism compels capitalists to minimize costs (including labor costs) and maximize surplus-value, which often results in downward pressure on wages, worsening working conditions, and the expansion of precarious forms of employment. But in market socialism, there is no exclusive capitalist class that can accumulate distributive shares by virtue of owning means of production. In ED—where capital has been socialized—worker self-managed firms lease means of production from the state, which in turn charges a capital tax which then gets distributed to the citizenry.

However, redistribution of profit income is not adequate to deal with unjust distributions of wealth, income, and opportunities in a market society: the lion’s share of income inequality is not primarily due to the distribution of capital income but rather labor income (Piketty 2014). Therefore, a model of market socialism that takes socialist values seriously will have to support generous government taxing and spending policies. There are different ways of doing this, but the main point, for DiQuattro, is that, contra Nieto, it is logically possible to have market efficiency and a just distribution of income, wealth and opportunities. Moreover, he thinks that it is not only logically possible but “actually the case that market allocation and distributive equality can coexist” (ibid., 427), as countries such as Sweden (supposedly) showed during several decades of social democracy. ⁴

Since I am defending Nieto’s thesis in this paper, I want to highlight what I take to be significant in this exchange between Nieto and DiQuattro. A problem with the former’s criticism of market socialism is not only that it elides the distinction between the allocative and distributive function of markets. It is also that it isn’t precise in saying why the dialectical contradictions that he speaks of arise in particular markets. As we’ve seen, ED is a very sparse form of market socialism, in that the only markets that exist are markets for consumer goods. A convincing critique of market socialism needs to show that even a market for consumer goods is sufficient to engender the contradictions Nieto speaks of. This is what I’ll try to do in the rest of this paper.

Capital as Dominating Structural Power

The issue that I believe Nieto is pointing to when he speaks of a socialist society as “a society freed from its subjection to blind market power” (Nieto 2022, 85) is that capital must be understood as a form of economic power, “the ability to reconfigure the material conditions of social reproduction” (Mau 2023, 5). There isn’t enough space in this paper to give so much as a partial (comprehensible) exposition of this claim as it occurs in Marx’s works. ⁵ What follows is a simplified (but hopefully not simplistic) reconstruction that I take to be consistent with Marx’s more Hegelian presentation. ⁶

The first observation to make in this context is that “Herrschaft – usually translated as domination or rule … - is, together with power, the concept used most frequently by Marx to refer to the way in which capital shapes social life” (ibid., 25, emphasis in original). Capital, moreover, is “a social relation between men which appears as a relation between things or between men and things” (Marx 1976, 54, emphasis in original). Capital can thus be understood as a power relation. But unlike many other forms of social power, which are commonly assumed to be normatively constituted (i.e. mediated through reasons for action or recognition of social status (Andersson 2007, 147ff.)), in domination, the reasons that mediate the social form are independent of recognition of one’s social position or status. Amie Thomasson has called social kinds and facts whose existence is not dependent on whether and how they are conceptualized “opaque” social kinds (Thomasson 2003, 275). Her examples include various “higher-level” features of societies (“power structures”, “class systems”, etc.) that are usually taken to obtain as a result of many agents interacting in accordance with some pattern of regularity. A general term for various more or less robust patterns of regularity is “social structure”. ⁷ Capital, I propose, can be understood as an opaque social structure. The reasons for thinking of capital in such terms will become clearer in due course.

However, capital is not only an opaque social structure; it is also a dominating structure. Domination is commonly conceptualized in relation to circumstances of (actual or potential) conflict (Ledyaev 2021, 73), where some agent can extract something of perceived value as long as another agent remains subordinated, or denied the same opportunities; it is an asymmetrical relation where power is distributed in a manner that is not beneficial to, or in the interests of, the subordinate. It is not a “power to” effect a particular outcome through direct influence over someone else but rather a “power over”, that is, “the ability of a power-holder to achieve a subject’s submission with respect to some particular scope of [their behavior] and/or consciousness” (Andersson 2007, 142).

In Pettit’s (1997) influential formulation, domination is a relation between at least two agents, where an agent A has the ability to arbitrarily interfere with the wishes, preferences, and desires of an agent B without taking B’s wishes, preferences, or desires into consideration. An agent is dominated when she is vulnerable to such arbitrary interference (even if only potentially). A simpler way of putting this is that “domination obtains when a powerful agent A, leads another agent B, to act for reasons that are not independent of A’s power” (Vrousalis 2018, 415). Domination in the sense that concerns us here should not be thought of as necessarily involving the intentional subjection of an agent to the will or benefit of another party (or even a direct relation between agents). The power of capital is a capacity to subjugate, and it therefore “always a ‘power over’” (Mau 2023, 47). Capital, as a form of domination, is constitutively dependent on the existence of opaque social structures, but this domination is not dependent on anyone having beliefs about the power relations in question—the domination of capital is not dependent on whether and how it is conceptualized.

What makes a social structure “real” is that “the specific properties of the [the structure] bring about differences in the world on the behavior of other things [e.g. individuals]” (Little 2016, 91). In other words, social structures are difference-makers, and they make a difference by engendering constraints that get expressed in systems of enablements and disablements. More specifically, constraints are distributed over individuals in virtue of their membership in certain social groups; individuals in these groups get more or fewer social opportunities in accordance with the group’s position in a social hierarchy that distributes access to various “goods” (including, e.g. autonomy and free time). The occupancy of a social position systematically restricts or enhances the opportunities of individuals who occupy the position in question without regard to individual distinction (Andersson 2007, 153).

The plausibility of believing that Marx thought of capital as a structure that exercises domination over workers, even in the absence of capitalists’ intentions can be substantiated by looking at his conception of exploitation. Many theorists (e.g. Holmstrom 1977; Peffer 1990; Reiman 1987) have pointed out that it is plausible to think that Marx held a “force-inclusive” definition of exploitation. There are numerous instances in all three volumes of Capital where such formulations occur. To take just one (from Volume 3):

[Capital] […] pumps out a certain specific quantum of surplus labour from the direct producers or workers, surplus labour that it receives without an equivalent and which by its very nature always remains forced labor, however much it might appear as the result of free contractual agreement. (Marx 1981, 958)

One might accept the claim that a portion of one’s labor is unpaid yet deny that workers in capitalism are forced to work. But in order to understand the nature of the force-claim, it is important to distinguish between (1) coercion and force, and also between (2) “standard” and structural force. Whereas both coercion and force imply a limitation of alternatives, the former implies that someone is doing the coercing (i.e. has an intention) while the latter “need not imply more than the presence of constraints that leave no room for choice” (Peffer 1990, 149): If I don’t own a car, and the only way of getting to work is by taking the subway, then I am forced to take the subway. But if I own a car, but will be arrested if I drive it then I am coerced to take the subway. Workers in capitalism are normally not coerced to sell their labor power, but the vast majority have to sell their labor power in order to survive. But what does it mean to say that the force is “structural”?

Jeffrey Reiman explains that “structural” force differs from “standard” cases of force where “the target of force has no real choice over his fate, either because all his alternatives save one are unacceptable, or because he has no alternative at all” (Reiman 1987, 12) in that

[Structural] force works on people by virtue of their location in the social structure (that is, for example qua members of some class), and it affects individuals more or less “statistically”. By this I mean that such force affects individuals by imposing an array of fates on some group while leaving it open how particular individuals in that group get sorted, or sort themselves, into those fates. (Ibid., emphasis in original)

There is, Reiman adds, “some play” (ibid., 14) between individuals so constrained in what fates they will come to enjoy (some better some worse), but the members of the class are forced into their particular situations insofar as they “must end up distributed among all the situations in the array determined by the structure” (ibid., 15). Unlike “standard” cases of force, structural force is compatible with free choice.

I suggest that, for Marx, capital is the set of social relations that constitutes this structural force. This is still too general. In order to understand these constituting relations further, we need to look closer at three of Marx’s categories that receive scant attention in Nieto’s presentation: value, abstract labor, and modes of subsumption. We turn to these next.

The Form of Value

Earlier in the paper, I briefly discussed the centrality of the commodity to Marx’s analysis of capitalism. Societies, for Marx, are individuated by their mode of social metabolism, and the social metabolism that characterizes capitalist society is that production is undertaken for the purpose of creating exchange-value, not the satisfaction of human needs through the production of use-value. A commodity is anything produced for the purpose of exchange, and thus commodities have exchange-value, defined as the quantitative proportion in which use-values of one kind exchange for use-values of another kind. One might think to conclude that a commodity is therefore both a use-value and an exchange-value, but this is only a step in the derivation of the category value.

Any commodity can relate to any other commodity by virtue of both being exchange-values. Commodities can enter into such relationships only insofar as there is some feature by which they can be rendered equivalent. That is, exchange-value is the form in which something which is distinguishable from a particular commodity appears. Since commodities that enter into exchange-relations are heterogeneous, the element which they have in common as exchange-values cannot be reduced to any “natural” properties of commodities. In exchange, something homogeneous is expressed. The only property that all commodities have in common is simply that they are products of labor. Use-values are produced through the expenditure of energy in order to produce some particular useful thing. This is concrete labor. Exchange, on the other hand, is the process through which all the different types of commodity-producing concrete labors become homogenized. Commodities, as products of a common labor process, are products of abstract labor. Thus, abstract labor is the homogeneous property that all commodities have in common. Value, on the other hand, is the objectification (external realization or manifestation) of abstract labor and the form of appearance of value is the exchange-value of a commodity. Thus, a commodity is the unity of use value and value. ⁸

If abstract labor is the substance of (capitalist) value, then socially necessary labor time is the measure of value. This is measured by considering how much abstract labor, measured in units of time, is on average necessary to produce a given commodity. The magnitude of value, necessarily expressed as exchange-value, is expressed in sums of money. Therefore, the money-form is entailed by the value-form. The money-form is the only form in which value can appear, that is, in terms of the money-commodity (e.g. bills of payment) and its quantitative measure. Only in exchange does the concrete labor that has gone into a product come up against everyone else’s concrete labor. But one cannot take one’s product to the market and sell it for the equivalent of the labor time that went into the production of my particular commodity: the price that my commodity can command is dependent on the time that is “socially necessary” for the production of that type of commodity, that is, the social practices and expenditures (temporal and material) that are normal for its production.

In order to produce a commodity, producers must “not only produce use-values, but use-values for others, social use values … nothing can be a value without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value” (Marx 1976, 131). Thus, the value of a commodity is only revealed when the commodity is brought to market and manages to sell. What follows from this is that abstract labor and value presuppose socialization through exchange. While it is possible to measure the concrete labor time expended in the production of a commodity, this is not the case for abstract labor. Its constitution lies in the unity of production and circulation.

Before delving further into Marx’s concept of value, a brief note on the kind of conceptual language involved may be helpful. Marx often draws on a mode of presentation inherited from Hegel, which involves thinking in terms of how abstract ideas become real or concrete through social processes. In this framework, concepts aren’t static or merely mental—they unfold in the world, taking on material form through human activity.

One important notion that Marx takes over from Hegel is that of a “concrete universal”. Unlike an abstract category that stays detached from the world, a concrete universal is a general entity (e.g. “a people”) that becomes real only through its many specific expressions. For Marx, value is such a concrete universal in that it is the property that all commodities in capitalism have in common; it is not reducible to the specific, concrete qualities of any individual commodity but exists as a general equivalence that allows for exchange, that is, it is the axis along which things are measured. Value becomes concrete through its expression in the exchange process.

Commodities, as particular entities, embody value and represent it in a concrete form (e.g. through prices). Thus, value realizes itself as a concrete universal: an abstract entity (value) made real and operative through the web of commodity exchange. Value is a social relation between people which assumes a particular material form under capitalism (i.e. as commodities), and hence appears as a property of that form. Moreover, it is not just a concept with an “ideal” existence; it has material existence, with money and commodities functioning as different modes of it. Ultimately, however, these forms of value are the objectifications of the form that labor takes in capitalism, that is, abstract labor.

The reason why Marx’s exposition in Volume 1 of Capital begins with the commodity is precisely because it is a prism through which the abstractions that characterize capitalist social relations can simultaneously appear in their universality, particularity, and individuality: the commodity is the concrete unity of its universal (value) and particular (use-value). It is a specific, tangible thing that embodies both its unique utility and its role as a bearer of value in the process of exchange. The individual commodity, when exchanged, mediates the relationship between universal value and particular use-values, reflecting the totality of capitalist social relations.

The derivation of the various categories that populate Capital is a progression towards more complex (determinate) categorization of capital (value in motion; self-valorizing value). This progression simultaneously gives us “more comprehensive accounts of value as a concrete universal, subjecting ever more dimensions of social life to its imperatives” (Smith 1998, 468). The account that results is an explanation of how value—an alien power; a power that has been separated from human agency—comes to subsume progressively more facets of everyday life. A crucial link in this explanation is to show how the concrete acts of human social reproduction are internally linked to money (value in its concrete form) through generalized commodity production. The juxtaposition of concrete labors isn’t transparent to the individuals who are mediated through exchange; it is an opaque structure—a process of abstraction that “goes on behind the backs” (Marx 1976, 135) of individual producers whose concrete labor only becomes social in the process of exchange, and thus in abstraction.

Concrete labor is undertaken by private individual units of production that “produce with the hope, rather than the assurance, that the labour they perform will turn out to be socially required” (Smith 1990, 69), that is, form part of “total social labor”. In other words, concrete labor only proves its social necessity in exchange and “the social worth of [labor] can only be measured in something external to both [labor] and its product: money” (Smith 1998, 469). That money plays such a dominating role in human social relations is unique to capitalism. In conditions where the vast majority of individuals have no access to the means for their own reproduction, and the only commodity that they can put up for sale is their labor power, individual purposiveness becomes subsumed to the imperatives of an alien power: the self-valorization of value, or capital.

Value-Form, Subsumption, and Market Socialism

I now want to bring the discussion of the value-form back to the question of market socialism. Earlier, we saw DiQuattro argue that the supposed incompatibility between markets and socialism arises only if we ignore the distinction between allocative and distributive functions of markets. In market socialism, distributive inequalities will have been dealt with through the socialization of capital. Moreover, in ED there is no traditional labor market, which (on the face of it) entails that labor power has been de-commodified. I am now going to argue that this is a mirage: labor can be subsumed to capital even in the absence of capitalist property relations.

In the last paragraph of the previous section, it was briefly mentioned that in capitalism, the vast majority of individuals (the working class) are deprived of access to the means for their own reproduction. In classical Marxist parlance, this is to say that the working class is defined as the set of individuals who own their labor power but no means of production. The capital class, on the other hand, owns means of production but needs labor power. The individuation of capitalist social relations in terms of property relations gives us a structural definition of capitalist relations of production (Vrousalis 2018, 411). Capitalist relations of production can be defined as “relations of effective power over persons and productive forces, not relations of legal ownership” (Cohen 2000, 63). To give a structural definition of such relations is to specify the concept of effective power in terms of control over labor power and means of production, where an effective power (for Cohen) is—in the terminology used earlier in the paper—a “power to” achieve an outcome in the absence of recognition of reasons (ibid., 220ff.). On such a definition, workers in capitalism are not subject to coercion or “standard” force, and this distinguishes the worker in capitalism from the laborer in any other mode of production (e.g. slavery & feudalism). ⁹

Significantly, for the purposes of this paper, capitalist relations of production can be defined in a manner that undermines the emphasis on the distinction between allocative and distributive functions, and is consistent with considerations of the value-form analysis of capital. On a functionalist definition of capitalist relations of production “A relation R is a capitalist relation of production [iff] R involves relations of effective control over labour power and means of production that serve the subsumption of labour by capital”. (Vrousalis 2018, 413). What is significant about such a definition is that it is compatible with any set of property relations, because capitalist relations of production are now “constituted by that subset of reproducible economic relations in which the extraction of surplus labour is subjected to the maximization of exchange value—or what Marx calls the ‘law of value’” ¹⁰ (ibid.).

Earlier in the paper, I argued that Marx’s conception of capital entails domination. Our foray into the analysis of the value-form allows us to say that the domination of capital is the power by which workers are (structurally) forced to subject their own ends to the ends of capital: production of surplus-value. Surplus-value extraction is possible in virtue of capital’s power over labor. Traditionally, it has been assumed that this extraction is possible only as a consequence of wage-labor. However, on a functionalist conception of capitalist relations of production, wage-labor is only one of the forms in which capital dominates labor. Two of these—both associated with wage-labor—are discussed in the first volume of Capital. According to Vrousalis (2018) there are two more modes of subsumption implicit in Marx’s writings. We turn to these now.

First off, subsumption refers to the processes by which capital integrates and transforms social relations and labor processes to serve the ends of producing value, that is, the ways that capitalist production organizes and controls labor to extract surplus-value. The idea of capital subsuming labor is that over time, capital comes to not merely dominate production but reorganizes social life, institutions, and even individual subjectivities to conform to its imperatives. Marx discussed two forms of capitalist subsumption at length in the appendix to the first volume of Capital: formal and real subsumption.

Formal subsumption denotes the processes by which the capitalist mode of production initially encompasses pre-existing (non-capitalist) modes of production to the end of producing commodities for exchange. Marx identified the manufacturing system as a stage in capitalism’s development where this occurs. In the manufacturing period, production is still based on skilled, artisanal labor or manual techniques that predate capitalism. The labor process has yet not been transformed through the large-scale introduction of machinery or industrial processes, and production is largely carried out in small workshops. The form of surplus-value extraction that characterizes formally subsumed production is absolute surplus-value extraction: the surplus is generated by making the workers work longer or harder.

Real subsumption refers to the processes of fundamentally transforming and restructuring production to better suit the requirements of producing value. At this stage, machinery and technology is introduced, production processes are optimized through the integration of scientific knowledge, and the labor process is fundamentally re-organized (e.g. the assembly line). The introduction of these various rationalizing measures means that surplus-value can be produced by reducing the socially necessary labor time that goes into the production of commodities, which increases the proportion of surplus labor (and value) within a given working day. This is relative surplus-value extraction.

Both these forms of subsumption are characterized by the separation of the worker from the means of production. But Marx also believed that there were “transitional” and “hybrid” forms of subsumption of labor to capital before characteristically capitalist property relations were effective (ibid., 422). This means that wage-labor (and a labor market) is not a necessary condition for subsumption to occur.

The transitional forms to capitalism that Marx noted are characterized by “usurer’s capital” and “merchant capital”. In the former case money is advanced (lent) to a producer who buys commodities which are then used to produce a commodity that sells for an amount in excess of the money borrowed. Part of the profit is paid back to the lender in the form of interest. This is non-capitalist production, because the producer has some control over production (including typically owning some means of production) and exchange processes. Merchant capital is characterized by merchants buying raw materials which are given to producers who valorize the capital by producing a commodity which the merchant takes and sells for a sum of money higher than the cost of raw materials and labor power . In both cases, the direct producer carries out labor in surplus to what is necessary for her own reproduction, that is, she produces surplus-value. Moreover, the surplus is appropriated by someone other than the direct producer, that is, she is exploited. What these transitional forms of subsumption have in common is that they’re subjected to the law of value, that is, surplus labor is produced and appropriated by an exploiter in the value-form. In both cases, this happens in the absence of a labor market.

Vrousalis argues that in the third volume of Capital, Marx implicitly recognized a fourth kind of subsumption: abstract subsumption. ¹¹ This is also a “transitional” form, but unlike the other two, abstract subsumption is a form that exists in the transition from capitalism rather than to it. In abstract subsumption labor is subsumed by capital “through mere exchange” (ibid., 428).

As was mentioned earlier in the paper, competition in capitalism compels capitalists to minimize costs (including labor costs) and maximize surplus-value. But in ED there is no labor market, so how does subsumption occur? A clue is given by DiQuattro when he writes that even in a market socialist system where labor income is “politically determined”, “it is important that workers seek to maximize the [pre-tax income]” in order to ensure that “justice holds sway in the sphere of distribution while efficiency reigns in the sphere of production” (DiQuattro 2024, 425). Even apart from concerns with distributive justice, a firm in ED will only be an economically viable enterprise for as long as it is able to make profit. It will only be able to make profit for as long as it can keep up with competition. Some firms will fail at this, some will be highly successful. Some might barely survive while others accumulate a lot. This inequality between producers is enough for there to be exploitation. To see how, consider the following situation:

There are two producers, Friday and Robinson. Friday is wealth-poor, Robinson is rich. If they do not trade, Robinson will work 8 hours and Friday will work 16, so that each can satisfy his needs (assuming they’re both rational, the fact that they decide to trade shows that they both benefit from trading). They only trade in final goods, and there are no labour or credit markets. In equilibrium under free trade, Friday works 12 hours, Robinson works 4, and both attain subsistence. (Vrousalis 2018, 431)

If one understands exploitation as a situation where “some agents must work more time than is socially necessary […] to earn their consumption bundles and others work less time than is socially necessary to earn their bundles” (Roemer 1988, 20), then one can infer that there is “horizontal” (non-hierarchical) exploitation here. There is also exploitation in a less technical sense present, in that “Robinson benefits from Friday’s presence, and is able to use his wealth as leverage, through the market, to get Friday to work for him, which Friday would not have to do if he had access to his per capita share of the produced capital” (Roemer 1996, 52). Friday’s labor becomes indirectly controlled by Robinson’s capital, as the unequal exchange forces Friday to conform to the demands of capital accumulation. Friday is dominated because Robinson possesses unilateral control over Friday’s labor, that is, the individual purposiveness of the latter is subjected to the effective control of the former. Robinson’s control over more resources allows him to dictate the terms of exchange, leading Friday to work longer hours to obtain the goods he needs. This dynamic results in Friday effectively laboring under conditions set by Robinson, despite not being his direct employee.

Friday’s reasons to trade with Robinson are not independent of Robinson’s control over the allocation of capital. Since exchange, production, and labor is here determined by socially necessary labor time, there is surplus-value extraction subject to the law of value. Moreover, the surplus-value extraction is power-induced: if Friday had access to his “per capita share” of the total surplus produced—if, for example, he had non-labor access to consumption goods—it would no longer be rational for Friday to trade with Robinson. Robinson has effective control over capital allocation. When generalized from our toy example, and suitably adjusted for cases with multiple agents, Robinson–Friday type situations will count as examples of structural force, and by extension, the subsumption of individual purposiveness to the production of value. Hence, the domination of capital is still in effect.

In a cooperative economy where asymmetries of power such as those described above exist, there will be a handful of firms that can dominate the conditions under which all production occurs in the economy. If it was rather the case that power over individual purposiveness did not go by way of how much of the total capital one can mobilize through trade, that is, that everyone had equal control over the allocation of capital, then that would mean that no-one could dominate productive decisions. Allocation would be politically controlled and not subject to the “blind logic” of the market. But this is exactly the alternative that market socialists like DiQuattro, who emphasize the allocative functions of markets, are opposed to. In ED, labor power isn’t sold. But all co-ops need means of production, and these can only be obtained from other co-ops. As the process of accumulation proceeds, more successful co-ops will accumulate wealth, which will eventually manifest itself in unequal exchanges of the variety we saw above. These exchanges contribute to the reproduction, expansion, and perpetuation of capital as a social relation, and thus the law of value and the logic of surplus-value extraction is still in operation. This is the same as saying that exchange relations in a market socialist economy involve abstract subsumption. This is why allocative functions of markets cannot save the market socialist, and the real reason why market socialism is an “impossible” form of socialism.

Concluding Remarks

To recapitulate the argument of the last three sub-sections: Capital is a set of social relations that structurally forces individual actors to produce surplus-value. This set of relations is opaque in the sense that the structural force that individuals are subjected to in capitalism (i.e. that forces them to act in certain ways) is capable of existing independently of people’s beliefs about the existence of the relations, or even them having a concept of it (i.e. the relations are epistemically and conceptually independent of propositional attitudes). ¹² Moreover, it is dominating in that it forces individuals to act for ends that are not their own (and might even be hostile to the realization of their own ends).

This relation gets established through the subsumption of labor (and eo ipso individual actors) to surplus-value production. Market socialism, insofar as it is thought of as a kind of society where capitalist exploitation has been transcended, does not deal with abstract subsumption. This is because market socialism is still a society where surplus-value production subject to the law of value occurs. On the functionalist definition of capitalist relations of production, surplus-value production subject to the law of value is a sufficient condition for the existence of capitalism. Since market socialism does not represent a break with the dynamics that are definitional of capitalism, it cannot be a form of Marxian socialism—insofar as a Marxian socialist society would be a post-capitalist society where the capitalist form of value has been transcended.

Now the objections. First: Why couldn’t the proponent of market socialism just bite the bullet? If markets bring capital, which in turn brings subsumption, and Marxian socialism is incompatible with any subsumption, then so much the worse for Marxian socialism! Such an objection would, I think, overlook that the normative issue that subsumption points towards is that capitalist relations systematically undermine the realization of self-determination, insofar as this is understood as the ability to set and act towards the realization of ends that one chooses without coercion. Capitalism is at odds with the value of autonomous agency. Many non-Marxists also recognize this, but what some of these deny (including some egalitarians) but Marxists affirm, is the fundamental incompatibility of the two. ¹³

None of this is to say that market socialism is a politically useless idea. It might well represent a normative improvement on actually existing capitalism. However, the point of the argument in this paper is to show where some of its structural limitations lie.

Second: Couldn’t Robison-Friday type inequalities be solved by taxing Robinson? Plausibly, this would require taxation to be set at a level where surplus-value extraction is nullified. If not, Robinson would still be extracting surplus labor from Friday. However, if strict equality were to be implemented, what incentives would there be for Robinson to maximize profits? Perhaps one would like to think that there could be moral incentives, but this is a controversial premise to rest the argument on and would have to be defended. If moral incentives sound implausible, then it is likely that a generous tax-and-transfer policy would result in reduced efficiency, but the efficiency of markets was one of the main motivating reasons for market socialism in the first place. Thus, it is far from clear that strict equality, efficiency, and profit-maximization could co-exist.