The Value of Everything

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Mariana Mazzucato has emerged as a sharp critic of right wing efforts to “shrink the state” and reduce government spending on public services and welfare. She is a key voice for what is sometimes termed the “post-Keynesian” critique of neoliberalism.

Mazzucato’s central concept is that there are those who create value, the “makers”, and those who extract value, the “takers”. Chief among the latter is the financial services sector, which since the 1970s has been included in national accounts as somehow productive of value. She shows, via Marx and his labour theory of value, that this is mistaken and financial services merely extract wealth from value-creating areas. The finance sector’s dominance also encourages a short-term approach to investment through a focus on “shareholder value” rather than long term productive projects that are valuable to society as a whole.

This is linked to the other main plank of her argument, that the state, far from being a drain on the economy and somehow “crowding out” commercial and scientific endeavour, itself creates value. States are not just important in creating the conditions for value creation, they have also played a key part in developing innovations that have gone on to be commercially and socially significant.

Mazzucato’s book is welcome for a number of reasons. She is correct that financial services do not create value, and her scathing critique of their pre-eminence (and the social costs of their bailout after the 2008 crash) as having myriad negative consequences is important. Her use of Marx here is significant, in a field where his ideas are often ignored. Her rejection of price as a determinant of value makes her an ally in the argument with “mainstream”, that is neoliberal, economists.

Political adoption of her prescriptions for more controls on the finance sector and increased taxation on firms that have benefitted from publicly-funded technological developments would be a nice change from seemingly endless austerity.

But that doesn’t mean the book is without problems. In particular, the idea that states really create value — as opposed to simply helping shape the conditions for its creation — is questionable. Here the issue of how we define “value” becomes important. Marx showed that the exploitation of living human labour is the real source of “surplus value” or profit, the form of value central to capitalism. Capitalists employ productive labour to create commodities that embody surplus value, which is realised through their sale.

Seen in this way, states don’t create value. Why is this important? It matters because Mazzucato is at pains to claim that they do. As a post-Keynesian, she wants to reform capitalism — albeit “radically” — rather than replace it. In her view, states can be an ally in a process of transformation of capitalism into a more “sustainable” version.

She can say this in part because, despite her use of Marx, she doesn’t have a preferred definition of value, something she acknowledges early on.

And despite indications that she is aware of Marx’s theory of surplus value and the conclusions that flow from this, particularly in respect of the tendency of the rate of profit to fall as an explanation for economic crisis, she sees financialisation as the cause of the most recent crash, rather than the root being profitability itself.

Mazzucato’s book is worth reading for a detailed sense of contemporary criticisms of the current economic system. However the implication of an explanation of capitalism’s flaws that is rooted in how the system itself works is that our efforts should not go into reforming capitalism, as she suggests, but into finding a way to replace it.

That will require new forms of political organisation, ones that are very different from the state she thinks can be used as a partner.