COVID-19 and basic facts of Marxist economics

By Deirdre
, Workers World, 24 April 2020. The stock market crashed in March but partly recovered
after the Federal Reserve Bank lowered the interest rate for borrowing. Then it
crashed again. Companies are going bankrupt. The price of oil has dropped to
its lowest level in decades.

All are signs of drastically decreased economic
activity right now.
But what does that really mean?
It isn’t just that people aren’t buying as much stuff
when they’re forced to stay home in this pandemic. Much more importantly, it
means that far fewer workers are producing new value.
And that’s the key to what is happening to the
capitalist economy now. When workers aren’t working, no new value is being
created. The way the capitalist markets work, however, is that they anticipate
more and more growth as workers go to work every day and create new value while
being exploited by the bosses. When that’s not happening, there’s a big crisis.
Marxist economics is crucial to understanding what is
behind the economic catastrophe accompanying the COVID-19 crisis. So here’s a
very brief summary of some of the basics of Marxism.
Everything that is exchanged (usually for money),
which we can’t just get for free, like plucking a dandelion, has to have two
kinds of value. One is use value. The other is exchange value.

Use value vs. exchange value
The water we drink is probably one of the most
valuable things we consume every day. Without it we would die. So the use value
of water is enormous.
But it is also very cheap, meaning it has a very low
exchange value. As vital as water is for life, it will never cost as much as
champagne, for example — which is nice, but we can survive without it!
So why is water cheap?
In simplified terms, its price is low in relation to
other things we buy (called commodities) because little labor is involved in
making it available. That’s why it has a low exchange value.
Way back when the reservoirs in this country were
first built, along with the aqueducts leading from them, quite a bit of labor
went into providing water. But now oceans of water are flowing to cities and
towns in many sections of the country with little human labor expended in the
process. So water, in most areas, is a minor expense.
What’s not so cheap, of course, are the bottles of
specialty waters from Fiji or some other distant source that are sold in stores
all over. This water costs money, not because it might be better, but because
of the labor it takes to locate sources, transport the water, bottle and market
You can probably think of lots of other commodities
that have a high use value but a low exchange value. Flour, for example, the
main ingredient in bread–called the staff of life. Pencils. Writing paper.
Other commodities may have limited use value, like
binoculars you keep in your closet and barely use, but a much higher exchange
value. They’re very costly compared to water.
So what is exchange value and how is it measured?

Human labor is the key
Exchange value is how much a commodity costs in
relation to other commodities. And that is the key to measuring it: The
exchange value of a commodity comes from how much human labor is incorporated
into it. Let’s say it again: It is human labor — workers working — that creates
all exchange value.
This is basic to Marxism, but is either ignored or
downplayed by most bourgeois economists.
The more labor it takes to produce something, the more
exchange value it will have. Exchange value isn’t the only factor determining
price, of course. Prices can fluctuate according to supply and demand. But they
fluctuate around a basic ingredient: how much labor it took to produce the
commodity. No matter how much the market may be glutted with cars, for example,
even an old, battered car will never sell for the same price as a loaf of

Unemployment and the economic crisis
So, to come back to the current and growing economic
crisis, Fortune magazine wrote on April 16: “Another 5.2 million Americans
filed initial unemployment claims in the week ending April 11. That brings the
total unemployment claims over the past four weeks to 22 million.”
These millions of workers have either lost their jobs
or are housebound because of the virus — and therefore are not creating new
It’s the obvious explanation for the growing crisis of
the economy — but not one you’re likely to read about in the newspapers or hear
about on radio and television. The corporate media will report on unemployment
as the result of the economic crisis, not the cause. But that is putting the cart
before the horse.
To repeat, human labor — workers working — is the
creator of all exchange value.
And right now, tens of millions of workers are
quarantined or staying home under shelter-in-place orders. They are “essential
workers” needed for the creation of new values, but are unable to do their
As a result, the capitalist economy is going into
crisis mode.