Capitalism in the 21st Century: Through the Prism of Value

Introduction

The purpose of this book is to bring to the reader a Marxist interpretation of some of the major issues in contemporary capitalism in the 21st century. We rely on the tool of Marx’s value theory to deliver scientific explanations of the laws of motion in 21st century capitalism. Marx’s theory of value in capitalism is the red thread running through the book.

What is value? Marx starts from the view that value is the result of the exertion of human labour. Without any exertion by humans nothing is produced that keeps human beings alive and well. So that means value is not some metaphysical abstraction, but actually physical – it exists in objective reality. Think of it this way: electricity is real; it is the movement of electrons through atoms of usually copper. We cannot always see it (although we can experience its results: light, heat and shocks). And it can be measured in volts, watts and amps. Similarly, the exertion of human labour (both objective and mental) is material and so can be measured in labour time (hours, minutes etc.).

Nature also has value (to us) in that, without air, the planet, trees, forests, water etc., there would be no human life. So it has (use) value to humanity. But it requires the exertion of human labour to turn this intrinsic use value of nature into other use values for humanity: from forests to timber to houses involves the exertion of human energy (and thus labour).

Marx calls this aspect of human labour, its use value. But it is only under capitalism that the use values required and generated by human labour turn into commodities for sale on a vmarket for private profit. The results of human labour are converted into commodities which then have value with dual aspects: use value for the purchasers of those commodities and value, also called exchange value because it becomes manifest as money through exchange. These two aspects of value within the commodity reveal the basic contradiction of capitalist production ie between production for social need (use value) and for profit and the accumulation of capital (exchange value). That’s why Marx starts with the commodity in Capital.

Under capitalism the only objective way of valuing a product of human labour (a commodity) is by measuring the labour time involved, not by each consumer’s subjective opinion of its value. Commodities have two aspects, a use value and a value because they are the products of both a specific (concrete) type of labour (which produces its use value) and of abstract labour, which produces its value. Abstract labour is the expenditure of human energy irrespective of the specific type of activity.

The alternative theory to Marx’s labour theory of value is utility theory, which argues that each individual’s personal estimate of use value or utility should be somehow aggregated to get the total utility of the products of human labour. This is impossible. How can the use value of a product that is estimated by one person be measured against another’s?

It is the transformation of abstract human labour into the value of the commodities which is the focus of the law of value. Marx holds that there is a law-like relation between the labour expended under the capitalist production and value: the quantity of labour (measured in time) determines both the quantity of value produced, since value is labour, and the quantity realised through redistribution. This is the kernel of the law.

But value does not emerge from abstract labour immediately, only after some intermediate processes. The generation of value goes through different stages.1 If the capitalist production process has been started but is not yet finished, the labourers are performing abstract labour and are in the process of creating the commodity’s value. At this stage, the value is potential, that is, not yet realised because the commodity itself, not being finished, is still being created and thus it exists only potentially. When the production process is completed and the commodity is finished (but not yet sold), the abstract labour which has gone into it becomes the value produced, or contained or embodied in the commodity. The material substance of this value is abstract labour.2 Since a commodity must be sold in order to realise its value, the value contained in the commodity is also its potentially realised value. When the commodity is sold, the value contained in it becomes realised value. This realised value is represented by money, the universally accepted form of value.

In a capitalist economy, due to competition among the many producers of the same commodity, a commodity sold on the market may not realise the value contained in it and so not all the labour which has been needed for its production. Competition on the market decides the socially necessary labour time required to produce and realise the value of a commodity. Profitability varies for different producers, but through competition there is a tendency towards an average profitability. So the price of a commodity will tend to be set by the cost of production plus the average rate of profit across the economy. The value contained in a commodity is thus modified into a price of production.

The major factor influencing profitability is technology. New technologies replace workers with means of production. They produce less value and surplus value but realise more value at the cost of the technological laggards. The latter, in their turn, will shift to more efficient technologies. It is this continual process of modification driven by changes in technology and competition that tells you that Marx’s law of value is not a static equilibrium theory, instead, that the process of commodity production is in continual motion. When a production process (P1) terminates, another one (P2) begins, that is, the outputs of P1 become the inputs of P2. The value of the inputs of P2 is then their value contained as output of P1. This is the basis of the temporalist theory of the transformation of (1) labour into value and of (2) value contained into value realised, which is usually referred to as the transformation of value into price.

There are three other aspects that are essential to the law of value and crucial to explaining developments in 21st century capitalism. Marx’s great discovery in his law of value is surplus value. In capitalist production, there are owners of the means of production (factories, land, finance etc.) and there are the rest of us who own only their own labour power. The owners of the means of production employ human labour power to produce value contained in the commodities which are owned and sold by the owners/controllers of the means of production. But the owners do not pay the full value contained in the commodities to those selling their labour power to produce them. The owners of the means of production pay for the use of the machines and raw materials and the wages of the workers employed. But they receive in the value contained in the commodities and realised on the market a greater value than their costs. So there is a surplus value that is appropriated by the owners. This can be broken down into profits to the producer capitalists, interest to the finance capitalists and rent to the landlords.

As mentioned above, individual capitalists are continually striving to increase their surplus value in competition with other capitalists. They can do so by increasing the workforce and/or by increasing the intensity and hours of work by labour. But there are physical and social limits in doing this. Moreover, other capitalists may introduce new technologies that speed up the productivity of their workforce and so reduce the hours of work (or cost in value) necessary to make a commodity below the average. Such capitalists can then undercut those with less advanced technology. This forces all capitalists to invest more and more in technology/machinery to raise the productivity of labour and reduce relatively the use and cost of labour power. So the ratio of investment in constant capital (machinery and raw materials) will tend to rise relative to investment in labour power (variable capital). This ratio is called the organic composition of capital and in this book, we continually show its importance in our prism of value.

The law of value says that only human labour can create value. Machines can produce more units of commodities per worker, but without the exertion of human labour, machines cannot make commodities. (We have not yet reached a world of total automation where all use value is produced by robots and if we ever do that will not be capitalism.) As the rise in the organic composition of capital can only come about by capitalists investing more surplus value in machines relative to investing in human labour power, there is a tendency in capitalist production for the subsequent increase in new value to be less than the increase in investment employed. In other words, the rate of profit in a capitalist economy tends to fall over time. There are many counter-tendencies to this tendency, in particular, increased exploitation of the human labour force, that is, a higher rate of surplus value; and in the case of national economies, increased trade and investment by technologically advanced capitalists in foreign markets with less efficient means of production in order to appropriate surplus value. Again, this counteracting factor is a key feature of our analysis of modern imperialism in this book.

Thus, the law of value leads to surplus value, the organic composition of capital and the rate of profit on capital. With these categories, we have the basis of a Marxist theory of 21st century capitalism.

However, our analysis is not only on theory but also based on empirical evidence. This is not a book full of quotes from Marx and Engels, although they are there. And it is not filled with lengthy theoretical arguments. More, it is a narrative backed by the best data we have to expound our explanations.

We start in Chapter 1, not with a discussion of the nature of value in modern capitalism, but with the value of nature. This is literally a burning issue. The planet and all its living species are increasingly being degraded by the capitalist mode of production, where the accumulation of capital for the few overrides the interests of the many, and not just humanity. Environmental degradation has always been a feature of capitalist production for profit, but in the 21st century this has reached an existential point with global warming and climate change which threaten to sacrifice nature and humanity on the altar of profit: the ultimate insanity of an irrational system. In this chapter, we attempt to show that market forces cannot reverse the disaster ahead and only ending the domination of the law of value can do so.

In Chapter 2, we consider the basic relationship between value and money in modern capitalism. Money is the universal expression of value in motion. And with the rise of finance, the sector of capitalism where money supposedly makes more money without the intervention of human labour, we analyse the allegedly new theories of the role of money in the 21st century, modern monetary theory (MMT) and the new digital and cryptocurrencies and their role. And we offer an original Marxist theory of inflation in modern economies against the flawed mainstream alternatives.

In Chapter 3, we turn to the major fault-lines of capitalism since its emergence as the dominant mode of production some 200 years ago. We cover the various theories offered in the past to explain regular and recurring crises of production and investment under capitalism over the last 150 years. But we base our approach on Marx’s laws of value and profitability to explain the causes of crises and why the macroeconomic policies of government and monetary authorities won’t work in ending regular and recurring slumps.

In Chapter 4, we move onto the international arena to analyse the economic foundations of imperialism in the 21st century with new empirical evidence. We show that modern imperialism, which emerged towards the end of the 19th century, is still with us (with the same usual suspects). The appropriation of value by the imperialist countries continues on an even grander scale than 100 years ago. There is no prospect of any so-called ‘emerging economy’ catching up to join the imperialist elite.

Modern capitalism is increasingly no longer dominated by the production of things for profit. Capital now needs to appropriate knowledge or mental labour and commodify the product of that labour. Mental labour is just as material as objective labour; and as available for exploitation by capital in the 21st century as the production of tangible things was in the 19th and 20th centuries. In Chapter 5 we present an analysis that shows the conditions under which knowledge has value for capital and human mental labour is exploited and commodified. And we consider the impact of the rise of the robots and artificial intelligence in the 21st century, and even quantum computers, designed to replace human labour. We argue that machines do not think like humans and so can never fully replace human activity.

In our final chapter, we pose the alternative to capitalism in the 21st century: socialism. In particular, we apply value theory to understanding the features of the transition from capitalism to socialism and from a system of value creation to one of meeting social need. To do that, we look at the ‘case studies’ in the 20th century of such transitions as in Soviet Russia and China, to draw lessons for the 21st century. We review the old debate on the feasibility of democratic planning over value in the light of new studies in the age of quantum computers and algorithms.

Time is running out for capitalism and for the planet. To paraphrase Gramsci, ‘the old is dying, but the new is not yet born’. The 21st century will decide whether the new will replace the old before it is too late.

1

Value and Nature

1.1 MARX AND ENGELS ON NATURE

Marx and Engels are often accused of what has been called a Promethean vision of human social organisation, namely, that human beings, using their superior brains, knowledge and technical prowess, can and should impose their will on the rest of the planet or what is called ‘nature’ – for better or worse. The charge is that other living species are merely playthings for the use of human beings. There are humans and there is nature – in contradiction. This charge is particularly aimed at Friedrich Engels who, it is claimed, took a bourgeois ‘positivist’ view of science: scientific knowledge was always progressive and neutral in ideology; and so was the relationship between man and nature. Indeed, the ‘green’ critique of Marx and Engels is that they supposedly were unaware that Homo sapiens were destroying the planet and thus themselves. Instead, Marx and Engels had a touching Promethean faith in science and capitalism’s ability to develop the productive forces and technology to overcome any risks to the planet and nature. This critique runs contrary to the writings of Marx and Engels. Marx wrote:

Nature is man’s inorganic body, that is to say, nature in so far as it is not the human body. Man lives from nature … and he must maintain a continuing dialogue with it if he is not to die. To say that man’s physical and mental life is linked to nature simply means that nature is linked to itself, for man is a part of nature.1

This conception of humans and nature as parts of a single totality can be found throughout Marx and Engels’ work. That Marx and Engels paid no attention to the impact on nature of human social activity has been debunked recently in particular by the groundbreaking work of Marxist authors like John Bellamy Foster and Paul Burkett.2 They have reminded us that throughout Marx’s Capital, Marx was very aware of capitalism’s degrading impact on nature and the resources of the planet. Marx wrote that

the capitalist mode of production collects the population together in great centres and causes the urban population to achieve an ever-growing preponderance … [It] disturbs the metabolic interaction between man and the earth, i.e., it prevents the return to the soil of its constituent elements consumed by man in the form of food and clothing; hence it hinders the operation of the eternal natural condition for the lasting fertility of the soil. Thus, it destroys at the same time the physical health of the urban worker, and the intellectual life of the rural worker.

As Paul Burkett says: ‘it is difficult to argue that there is something fundamentally anti-ecological about Marx’s analysis of capitalism and his projections of communism’.

Far from promoting an instrumentalist approach to animals, what Marx emphasised is the material relation that governs the existence of humans and all species. Marx’s classical historical-materialist analysis argues that human beings share a close kinship with other animals biologically and psychologically. Marx was a strong critic of Cartesian metaphysics, for its removal of the mind/soul from the realm of the animal and the reduction of the latter to mere mechanical motions. In Marx’s words, ‘Descartes in defining animals as mere machines, saw with the eyes of the period of manufacture. The medieval view, on the other hand, was that animals were assistants to man.’ Marx’s analysis of the historical development of capitalism highlighted this transition in animal relations. For him, Descartes’ depiction of animals as machines represented the status that animals were accorded in capitalist commodity production. Marx took note of the ongoing changes, such as the reduction of non-human animals to a source of power and the altering of their very existence in order to further the accumulation of capital. He specifically focused on how the historical development of capitalism, including the division of town and country that accompanied it, shaped these conditions, reducing animals simply to instruments and raw materials, as reflected in the general logic of the system.

But he suggests that the human species is distinctive in its capacity to produce more ‘universally’ and self-consciously, and thus is less one-sidedly limited by specific drives than other animals. Humanity is therefore able to transform nature in a seemingly endless number of ways, constantly creating new human needs, capacities and powers.

Engels too must be saved from the same Promethean charge. Actually, Engels was well ahead of Marx (yet again) in connecting the destruction and damage to the environment that industrialisation was causing. In his first major work, Outlines of a Critique of Political Economy, again well before Marx looked at political economy, Engels notes how the private ownership of the land, the drive for profit and the degradation of nature go hand in hand.3

To make earth an object of huckstering – the earth which is our one and all, the first condition of our existence – was the last step towards making oneself an object of huckstering. It was and is to this very day an immorality surpassed only by the immorality of self-alienation. And the original appropriation – the monopolization of the earth by a few, the exclusion of the rest from that which is the condition of their life – yields nothing in immorality to the subsequent huckstering of the earth.

Once the earth becomes commodified by capital, it is subject to just as much exploitation as labour.

Engels’ major work (written with Marx’s help), The Dialectics of Nature, written in the years up to 1883, is often subject to attack as extending Marx’s materialist conception of history as applied to humans into nature in a non-Marxist way.4 And yet, in his book, Engels could not be clearer on the dialectical relation between humans and nature. In a famous chapter ‘The Role of Work in Transforming Ape into Man’, he writes:

Let us not, however, flatter ourselves overmuch on account of our human conquest over nature. For each such conquest takes its revenge on us. Each of them, it is true, has in the first place the consequences on which we counted, but in the second and third places it has quite different, unforeseen effects which only too often cancel out the first. The people who, in Mesopotamia, Greece, Asia Minor, and elsewhere, destroyed the forests to obtain cultivable land, never dreamed that they were laying the basis for the present devastated condition of these countries, by removing along with the forests the collecting centres and reservoirs of moisture. When, on the southern slopes of the mountains, the Italians of the Alps used up the pine forests so carefully cherished on the northern slopes, they had no inkling that by doing so they were … thereby depriving their mountain springs of water for the greater part of the year, with the effect that these would be able to pour still more furious flood torrents on the plains during the rainy seasons. Those who spread the potato in Europe were not aware that they were at the same time spreading the disease of scrofula. Thus at every step we are reminded that we by no means rule over nature like a conqueror over a foreign people, like someone standing outside nature – but that we, with flesh, blood, and brain, belong to nature, and exist in its midst, and that all our mastery of it consists in the fact that we have the advantage over all other beings of being able to know and correctly apply its laws.

Engels goes on:

in fact, with every day that passes we are learning to understand these laws more correctly and getting to know both the more immediate and the more remote consequences of our interference with the traditional course of nature. … But the more this happens, the more will men not only feel, but also know, their unity with nature, and thus the more impossible will become the senseless and antinatural idea of a contradiction between mind and matter, man and nature, soul and body.

Engels explains the social consequences of the drive to expand the productive forces.

But if it has already required the labour of thousands of years for us to learn to some extent to calculate the more remote natural consequences of our actions aiming at production, it has been still more difficult in regard to the more remote social consequences of these actions. … When afterwards Columbus discovered America, he did not know that by doing so he was giving new life to slavery, which in Europe had long ago been done away with and laying the basis for the Negro slave traffic.

The people of the Americas were driven into slavery, but also nature was enslaved. As Engels put it:

What cared the Spanish planters in Cuba, who burned down forests on the slopes of the mountains and obtained from the ashes sufficient fertilizer for one generation of very highly profitable coffee trees – what cared they that the heavy tropical rainfall afterwards washed away the unprotected upper stratum of the soil, leaving behind only bare rock!

Now we know that it was not just slavery that the Europeans brought to the Americas, but also disease, which in its many forms exterminated 90 per cent of Native Americans and was the main reason for their subjugation by colonialism.5

Humans can work in harmony with and as part of nature. It requires greater knowledge of the consequences of human action. Engels said in his Dialectics:

But even in this sphere, by long and often cruel experience and by collecting and analyzing the historical material, we are gradually learning to get a clear view of the indirect, more remote, social effects of our productive activity, and so the possibility is afforded us of mastering and controlling these effects as well.

But better knowledge and scientific progress is not enough. For Marx and Engels, the possibility of ending the dialectical contradiction between man and nature and bringing about some level of harmony and ecological balance would only be possible with the abolition of the capitalist mode of production. As Engels said: ‘To carry out this control requires something more than mere knowledge … it requires a complete revolution in our hitherto existing mode of production, and with it of our whole contemporary social order.’

1.2 LABOUR AND NATURE: THE SOURCE OF WEALTH

‘Labour is not the source of all wealth. Nature is just as much a source of use values (and it is surely of such that material wealth consists!) as labour, which is itself only the manifestation of a force of nature, human labour power’,6 so says Marx. ‘The use values … of commodities, are combinations of two elements – matter and labour. If we take away the useful labour expended upon them, a material substratum is always left, which is furnished by Nature without the help of man … We see, then, that labour is not the only source of material wealth, of use values produced by labour.’

Marx writes in Capital of labour as a process ‘by which man, through his own actions, mediates, regulates, and controls the metabolism between himself and nature. He confronts the materials of nature as a force of nature.7 There has been much academic discussion among Marxists and ‘green ecologists’ recently on the relation of humans to nature. The argument is around whether capitalism has caused a ‘metabolic rift’ between Homo sapiens and the planet, that is, disrupting the precious balance among species and the planet, and thus generating dangerous viruses and, of course, potentially uncontrollable global warming and climate change that could destroy the planet.

The debate is around whether using the term ‘metabolic rift’ is useful because it suggests that at some time in the past before capitalism there was some metabolic balance or harmony between humans, on the one hand, and ‘nature’, on the other. According to Saito, with The German Ideology, written in 1845, there was a turning point in Marx’s travel towards an ‘ecological dimension’ in his critique of capitalism. Saito reckons this is when he begins to use the term ‘metabolism’ and refines his understanding of the concept as the general metabolic tendency of capital. Saito argues that Marx progressively realises that Capital’s continuous expansion exploits not just labour, but also nature in the search for profit, leading to the destruction of the soil, deforestation and other such forms of the degradation of natural resources. Capital wants more and more value and, in particular, surplus value. That becomes the purpose of production and the metabolic harmony that existed between humans and nature before capitalism is broken. There is now a metabolic rift caused by capitalism.

However, any emphasis on rifts or ruptures has the risk of assuming that nature is in harmony or in balance until capitalism disturbs it. But nature is never in balance, even without humans. It is always changing, evolving, but with ‘punctuated equilibriums’, such as the Cambrian explosion, with many species evolving as others go extinct.8 The rule of the dinosaurs and their eventual extinction had nothing to do with humans (despite what the movies may depict). And humans have never been in a position to dictate conditions on the planet or with other species without repercussions. ‘Nature’ lays down the environment for humans and humans act on nature. To quote Marx: ‘Men make their own history, but they do not make it just as they please; they do not make it under circumstances chosen by themselves, but under circumstances directly encountered and inherited from the past.’9

It’s true that Marx refers to the robbing of the soil by capitalist production. In Capital, Volume I, Chapter 15 on machinery Marx says:

Moreover, all progress in capitalist agriculture is a progress in the art, not only of robbing the worker, but of robbing the soil; all progress in increasingly the fertility of the soil for a given time is a progress towards ruining the more long-lasting sources of that fertility. The more a country proceeds from large-scale industry as the background of its development … the more rapid is this process of destruction. Capitalist production, therefore, only develops the techniques and the degree of combination of the social process of production by simultaneously undermining the original sources of all wealth – the soil and the worker. (Marx, 1995 [1887])

But does Marx reckon, as Saito claims, that he saw the main contradiction of capitalist production in the ‘metabolic rift’ between humans and nature? Contrary to Saito’s conclusion, Marx rejected Liebig’s soil exhaustion theory of the limits of capitalism and rejected its implied Malthusianism that population would outrun the availability of food and the necessities for human life.

For Marx, capitalism was a system of ‘brutal exploitation’ of labour power in production for profit, not one of robbery or dispossession. Capitalism is not only subject to regular and recurring crises in production and employment. It fails to use effectively the scientific and technological discoveries that could end toil and disease globally. It is indeed degrading nature, exterminating species, and threatening to destroy the atmosphere of the planet, but these outcomes are the result of the contradictions to be found in the capitalist mode of production itself, not in some existential threat from outside the system.

1.3 MEASURING THE DAMAGE

Can we quantify the damage to nature imposed by capitalism? We cannot, if damage is defined as destruction of value. Nature, inasmuch as it is unaffected by human action, that is, inasmuch as it does not incorporate human labour carried out by labour for capital, has no value (for capital). Therefore, no value is destroyed and no quantification of damage is necessary for capital. A tropical forest, inasmuch as it is not privatised and left uncultivated, has no value for capital. However, if it is privatised, it is attributed a price (not value) on the basis of the price of other similar pieces of land. It enters the market without having a value, only a price. This is one of the examples to be found in Marx of a commodity having a price without a value. If an element of nature enters a market where no equivalent element exists that can serve as an indication of its price, then that element’s price is determined simply by the relative strength of demand and supply.

Yet neoclassical economics insists in attributing value (in its distorted view is its money price) to nature. Given that nature, if isolated from human action, is a use value, the question is: how does neoclassical economics attribute a price to use values and therefore how does it calculate the loss (in terms of prices) when nature is destroyed?

If I buy a piece of virgin land whose price is determined either by a similar piece or, lacking this, by the interchange of supply and demand, that price is a title to participating in the redistribution of value produced elsewhere. If I sell that land, I give up my right to that redistribution, which is acquired by the purchaser. But if by accident a fire destroys that land before I commodify it, there is no loss of value; only a loss for me personally due to the impossibility to participate in the redistribution of societal value. But from the perspective of the economy, there is a destruction of use values, of wealth. The value has not changed (it is only differently redistributed), but wealth has decreased. It follows that the damage inflicted on the Amazon rainforest can only by computed in terms of how many square kilometres have been destroyed by capital in a given period and thus in terms of use values, but it is wealth that has been destroyed. Logging transforms one type of use value (trees) into a different use value (logs). If performed by labour for capital, it is productive labour. The capital invested in logging is circulating capital. The problem is that logging transforms a renewable form of wealth into a non-renewable one. Neoclassical economics attempts to measure a country’s wealth – obtained through a methodology called ‘wealth accounting’ – that includes all assets that contribute to our economic wellbeing, from buildings and factory machines, to infrastructure, human and social ‘capital’ and ‘natural capital’. This method is deeply flawed so that computations are meaningless. More specifically, natural capital accounts (NCA) are sets of data for material natural resources, such as forests, energy and water. While national accounts are limited to the production boundary of the economy, natural capital accounts go beyond that, to account for natural goods and services that aren’t subject to market transactions and don’t necessarily have well-established market prices. In this methodology, nature is turned into ‘natural capital’. Recently, the World Bank has made attempts to calculate wealth including fixed assets (produced capital), wages (human capital) and natural resources (natural capital).10 Produced capital includes the value of machinery, buildings, equipment, and residential and non-residential urban land. Human capital is computed as the present value of future earnings for the working population over their lifetimes. Natural capital includes the valuation of fossil fuel energy (oil, gas, hard and soft coal) and minerals (bauxite, copper, gold, iron ore, lead, nickel, phosphate, silver, tin and zinc), agricultural land (cropland and pastureland), forests (timber and some non-timber forest products) and protected areas.11 But if the method is faulty, the estimates are meaningless in measuring value or wealth.

The basic approach is the one recommended by the System of National Accounts, namely: ‘to value the quantity of ecosystem services at market prices that would have occurred if the services had been freely traded and exchanged’. This ensures that the value of such services to their consumers is equal to the value provided by the owner of the assets that supplied such services, since it represents the point at which the supply and demand curves cross. When such services are traded in a market, the exchange value can be directly observed as the market price.

But many ecosystem services have no such market, in which case the exchange value must be attributed or ‘imputed’. This is not just a problem for natural capital accounts but one which has been faced in national accounting for many years. Most of the goods and services considered in the national accounts are valued based on market prices. But for a sizeable proportion, nearly a third by value, their values must be imputed. These include the value of owner-occupied housing and the value of public services such as hospitals, schools, and public order and safety.

Given this means of valuation, the relevance of the paradox of diamonds and water should be noted. Adam Smith posed the question, but failed to answer to his own satisfaction, of why diamonds should apparently be valued so much more highly than water, given that the intrinsic value of the latter would apparently seem much greater. Marx addressed this issue. In a land where water is abundant and diamonds very rare or non-existent,