Use value, exchange value, and the carbon tax

There are a number of climate related stories unfolding now around the world: a heatwave in Europe that, to take one example, broke France’s national heat record 13 times in a single day, with the new record being 45.9 degrees celsius; arctic sea ice having a terrible year; the floods in the Midwest USA continuing to impede both the planting and growing of crops…

But rather than focusing on these events, we should spend some time thinking through the idea of value and how it relates to money, in order that we can think clearly about the policy of the carbon tax. I apologize in advance for all of the platitudes in this article, but the basics are often skipped over in discussions on the topic.

The carbon tax (or the carbon fee and dividend as it is sometimes called) is a very controversial policy, which is often disagreed on even amongst climate change activists. Those who oppose it usually do so, because they see it as unduly putting a burden on the working class.

If we think about money as a (sometimes physical, but almost always virtual) sign of value, we can also think of our economy as a system of social credit. Put very simply, money is credit awarded for work done that is valued; money paid for work that is valued is then used to purchase goods and services that are valued, thereby redistributing the social credit. The more credit — or money — that you have, the greater the demands (and requests) that you can make on the rest of society.

There are other forms of social credit; the first episode of season 3 of the TV show “Black Mirror” considered how rankings on social media could be used as a form of social credit, and China has a formal system for ranking citizens trustworthiness based on financial, legal and political credit. But in Canada, the most prevalent, and — for most people — the most important is money, because unless you can monetize other forms of credit, they do not give you access to the market, where most goods and services needed for survival, and desired for comfort are available.

We all know money is king, because almost every aspect of our life is tied into the market, most notably our very survival. As a result, the values of the market overwhelm all other valuations; this has made capitalism the most revolutionary force in our history. It has spread across the world toppling social orders that are unable to adapt their values with those of the market. In many ways this has been a good thing, resulting in improvements in quality of life, and the destruction of superstitions and tyrannical hierarchies.

But capitalism poses a serious challenge for life on a finite planet, because it is fuelled by growth. How is this growth made possible? In the 19th century, the notorious economist Karl Marx offered a critique of capitalism that still has a lot of influence today. We can use a very simplified version of Marx’s critique of capitalism to understand our situation; not because Marx was right, but because by considering how Marx was wrong we can gain insight into our current situation as regards to climate change but specifically to the carbon tax.

Following on the early capitalist economists Adam Smith and David Ricardo, Marx distinguished between ‘use value’ and ‘exchange value.’ In the context of labour, labourers are said to have a use value (how much value their work adds to the product that they work on), as well as an exchange value (how much they are paid in wages for their labour). The difference between these two is what Marx called the exploitation of the worker, which he understood as absolutely necessary for capitalism, since capitalism must end up with a commodity that has more exchange value than it cost to produce. This fundamental requirement of capitalism (the “logic” of capitalism), is written by Marx as the formula M-C-M’: money spent on production (M) results in the production of a commodity (C), which then sells for more money than M (M’).

Marx identified this difference between the value of the work done by the working class and their wages (the exploitation of the worker) as an inherent tension within capitalism, which he believed would lead to class struggle, and the eventual triumph of communism over capitalism.

While this tension depended on Marx’s observation that use value and exchange value were never identical, in the case of machinery contributing to production he took a contradictory position. Machinery used in production, he said, cannot contribute more value than is lost through depreciation. In other words, whatever cost was paid for the machinery gets recouped over the course of the life of the machinery by being transferred to the commodity produced, but no more value can be added by the machinery. In the case of machinery, then, use value and exchange value are identical.

This is clearly wrong. Corporations and small business owners often increase their profits by replacing workers with machinery, precisely because the value added by machinery in the process of production is much more than the cost of the machinery. This should be very familiar to people in Wawa, where employment in the iron mines peaked in the 1960s, even as the industry continued to do well for decades after. Workers were increasingly replaced by automation. Another way this is seen is the loss of people pumping gas – we now have self-serve gas stations; and the self-checkout at many stores – replacing your friendly cashier.

So how does this relate to climate change and the extinction crisis? All of this machinery — just as with human labour — must be kept running. That requires energy. Humans eat food, and machines must eat too. The industrial revolution was made possible by the exploitation of fossil fuels, which can be used to power machinery and drive up productivity, and profits. (The work that can be done by a single barrel of oil is equivalent to almost three years of human labour; last year worldwide oil production passed 100 million barrels of oil per day). These profits can then be put back into production, or research and development (or, in our “finance capitalism,” used to inflate asset prices), leading to new products and still greater profit.

In other words, it’s not only the machinery, but the fuel that does work for us, and which, for two centuries, has steadily driven down the cost of living, and allowed for the world’s population to grow to 7.7 billion people. In fact, the fuel, and the materials which the machinery is built out of, as well as organic and other earth systems which create these materials, and allow for their stable extraction and use, such as soil, hydrology, and climate all do work that contributes to our productive activities (as well as sometimes working against us). But the exchange value of the work done by the “earth’s systems” is usually zero, even when the use value may be so high as to be priceless to our lives. In summary, the M-C-M’ growth logic of capitalism depends on the exploitation of the work done by the earth’s systems; exploitation that benefits (at least in the short term) all classes of people.

The extinction and climate crises we are now in are largely due to an economic system that does not properly account for the work done, or the services provided by the earth’s systems, or the negative externalities imposed onto those systems by our processes of production.

How does this relate to the carbon tax, or carbon fee and dividend?

Unlike the working classes, which often did/do organize and fight for better working conditions and higher wages, the earth’s systems do not organize to fight for the value of their labour to be fully recognized. Systems simply change, at which point it is often too late to rectify the damage done. That means it falls upon human beings to make the case for why the accounting should be different than it is; that rather than continuing to profit off of the exploitation of the earth’s systems, some industries need to be made to adjust for how they account for the work done by the earth’s systems and the value added by them. The market must be modified by the efforts of human beings.

Historically, the act of modifying the way that the market accounts for the work and services provided by the earth’s systems (or to pay for the negative effects it externalizes onto them) has almost exclusively fallen to government. Government sets up rules that force corporations to pay for pollution, and mitigate other environmental impacts. Usually they only do this after pressure from the general public as well as academics.

You might ask, “But can’t taxation as a form of regulation end up being like extortion, used to keep a managerial class paid, rather than actually changing things?” Yes, that is possible, but the carbon fee and dividend is designed specifically to avoid this.

The carbon tax is an attempt to change the accounting of the market. The idea is that by forcing the cost of production for fossil fuels higher, it will encourage corporations to begin investing in other forms of energy production, and thereby shift us off of fossil fuels. The challenge is how to prevent the increased cost being transferred from the major polluters to the minor polluters (i.e. from corporations to consumers and small businesses). This is theoretically accomplished with a rebate. While consumers pay more in up front costs (as a fee), the money collected is then redistributed in the form of a dividend.

A carbon tax will not be enough on its own, but it is a tool that could be used to force the market to begin transitioning faster than it would if left to its own form of accounting. Again, the devil is in the details: does the tax have an effective rebate built into it, and are the biggest polluters actually forced to pay, or are they provided with loopholes? Is the tax one part of a larger “war effort” to rapidly transition our economy away from the use of greenhouse gas generating fuels, or is it used as an attempt to greenwash?

These are important questions to ask as we approach a federal election. Maybe it is also time to consider whether we should be able to purchase gas for as low a price as we do. Does it make sense that gasoline, produced from oil deposits that took tens of millions of years to form, should cost less per litre than flavoured sugar water?

The earth’s systems were not designed for us. We are under threat from below (earthquakes, volcanoes, etc), on the surface (hurricanes, storms, poisonous animals, etc), not to mention from above. Nevertheless we have adapted to the way these systems currently function.

Rivers have always flooded. In ancient Mesopotamia the two rivers which were the “cradle of civilization” flooded regularly. This lead to advancements in astronomy, as people recorded the movement of the stars so that they could tell time and know when to safely plant their crops.

If our economic system is our dominant system of valuation, if we use money as a token for what we value, then maybe we need to rethink how we are collectively (as well as individually) spending our money. Do we really value the results that our expenditures produce, that we attach social credit to? Do we really value, for example, cheap products destined for the landfill shortly after purchase more than we value a stable climate?

If we do value stability and predictability in the earth’s systems, and the abundance that they sometimes produce, then maybe it’s time to force corporations to internalize more of the costs that they have been externalizing. Maybe no board of directors should have so much social credit that they are able to push whole countries of people around. Maybe — if it’s true — it’s time to remember that we really do value somethings more than shareholder value, and immediate return on investment. The alternative is not without its consequences.

Leo Lepiano

Leo Lepiano, resides in Wawa. He has been deeply involved in the efforts to preserve the woodland caribou who lived on Michipicoten Island. He was the Lands and Resources Coordinator for Michipicoten FIrst Nation, and has his masters in forest conservation from University in Toronto.
Leo is a former editor of the JargOnline (Student Newspaper of Jarvis Collegiate).
Leo Lepiano