Tuesday, 29 January 2013

Capital I, Chapter 22

National Differences of Wages

The analysis so far has demonstrated the basis of the value of labour power, and how this can rise or fall as a consequence of numerous combinations. It can rise or fall in absolute terms and in relative terms as against surplus value. This provides the underlying basis upon which arises the market price of labour, in the form of wages.

As has been already said, the simple translation of the value, or respectively of the price, of labour-power into the esoteric form of wages transforms all these laws into laws of the fluctuations of wages. That which appears in these fluctuations of wages within a single country as a series of varying combinations, may appear in different countries as contemporaneous difference of national wages. In the comparison of the wages in different nations, we must therefore take into account all the factors that determine changes in the amount of the value of labour-power; the price and the extent of the prime necessaries of life as naturally and historically developed, the cost of training the labourers, the part played by the labour of women and children, the productiveness of labour, its extensive and intensive magnitude. Even the most superficial comparison requires the reduction first of the average day-wage for the same trades, in different countries, to a uniform working-day. After this reduction to the same terms of the day-wages, time-wage must again be translated into piece-wage, as the latter only can be a measure both of the productivity and the intensity of labour.” (p 524)

In any national economy there is an average intensity of labour that determines how much labour-time is socially necessary. But, at an international level, there will be a series of these average intensities, because each country will be different.

These national averages form a scale, whose unit of measure is the average unit of universal labour. The more intense national labour, therefore, as compared with the less intense, produces in the same time more value, which expresses itself in more money.” (p 525)

The more productive country's labour will also be counted as more intense because its greater productivity will appear as a greater amount of labour performed in a given time, compared with a less productive economy. At least, that is the case so long as competition does not drive this economy to reduce the price of its output down to its value.

The more capitalist production develops in a particular country, the more productivity and intensity of labour there rises compared to those economies that are less developed. The consequence is a modification of the Law of Value. Now, two identical commodities, that absorb the same amount of labour-time, have different values, because the labour-time of the more productive country, A, counts as a multiple of that of country B.

The different quantities of commodities of the same kind, produced in different countries in the same working-time, have, therefore, unequal international values, which are expressed in different prices, i.e., in sums of money varying according to international values. The relative value of money will, therefore, be less in the nation with more developed capitalist mode of production than in the nation with less developed. It follows, then, that the nominal wages, the equivalent of labour-power expressed in money, will also be higher in the first nation than in the second; which does not at all prove that this holds also for the real wages, i.e., for the means of subsistence placed at the disposal of the labourer.” (p 525)

But, these differences in productivity between different countries, mean that other variations in wages, besides those caused by different relative values of money arise.

But even apart from these relative differences of the value of money in different countries, it will be found, frequently, that the daily or weekly, &tc., wage in the first nation is higher than in the second, whilst the relative price of labour, i.e., the price of labour as compared both with surplus-value and with the value of the product, stands higher in the second than in the first.” (p 525)

Marx cites James Anderson,
James Anderson remarks in his polemic against Adam Smith: “It deserves, likewise, to be remarked, that although the apparent price of Labour is usually lower in poor countries, where the produce of the soil, and grain in general, is cheap; yet it is in fact for the most part really higher than in other countries. For it is not the wages that is given to the labourer per day that constitutes the real price of labour, although it is its apparent price. The real price is that which a certain quantity of work performed actually costs the employer; and considered in this light, labour is in almost all cases cheaper in rich countries than in those that are poorer, although the price of grain and other provisions is usually much lower in the last than in the first.... Labour estimated by the day is much lower in Scotland than in England.... Labour by the piece is generally cheaper in England.” (James Anderson, “Observations on the Means of Exciting a Spirit of National Industry,” &tc., Edin. 1777, pp. 350, 351.) On the contrary, lowness of wages produces, in its turn, dearness of labour. “Labour being dearer in Ireland than it is in England ... because the wages are so much lower.” (N. 2079 in “Royal Commission on Railways, Minutes,” 1867.)” (Note 2, p 525)

He also cites Ure, who referred to the findings of J. W. Cowell's investigation into the spinning trade,

...in England wages are virtually lower to the capitalist, though higher to the operative than on the Continent of Europe.” (p 526)

The same conclusion was arrived at by the Factory Inspector, Alexander Redgrave, in his Report of October 1866. He,

...proves by comparative statistics with continental states, that in spite of lower wages and much longer working-time, continental labour is, in proportion to the product, dearer than English.” (p 526)

Marx provides a number of further examples of the way the less developed capitalist economies across Europe displayed all of the horrors of the early capitalist development in Britain, and yet with all that, and with wages often only 50% of those in Britain, the same industries in Germany, Russia, etc. were unable to compete with their British equivalents.

The reason was quite clearly the relative differences in productivity between countries. Marx highlights that by presenting the comparative tables produced by Redgrave, showing the average number of spindles per factory, and average number of spindles per person across across a number of European economies.

England, average of spindles per factory 12,600
France, average of spindles per factory 1,500
Prussia, average of spindles per factory 1,500
Belgium, average of spindles per factory 4,000
Saxony, average of spindles per factory 4,500
Austria, average of spindles per factory 7,000
Switzerland, average of spindles per factory 8,000
France one person to 14 spindles
Russia one person to 28 spindles
Prussia one person to 37 spindles
Bavaria one person to 46 spindles
Austria one person to 49 spindles
Belgium one person to 50 spindles
Saxony one person to 50 spindles
Switzerland one person to 55 spindles
Smaller States of Germany one person to 55 spindles
Great Britain one person to 74 spindles

But, it should not be assumed from this that wages rise or fall in each country in proportion to the different levels of productivity. As the discussion in previous chapters has shown, as productivity rises, this cheapens the necessaries needed by workers, so that real wages might rise, whilst nominal wages fall, and certainly fall relative to surplus value. This mistake was made by the US economist Henry Carey.

In an “Essay on the Rate of Wages,” one of his first economic writings, H. Carey tries to prove that the wages of the different nations are directly proportional to the degree of productiveness of the national working-days, in order to draw from this international relation the conclusion that wages everywhere rise and fall in proportion to the productiveness of labour. The whole of our analysis of the production of surplus-value shows the absurdity of this conclusion, even if Carey himself had proved his premises instead of, after his usual uncritical and superficial fashion, shuffling to and fro a confused mass of statistical materials.” (p 527-8)

Half a century later, it was the understanding of this principle that laid the basis of Fordism. Ford realised that he could afford to raise the wages of his workers, if by doing so he could raise productivity. Ford raised wages and introduced a corporate welfare system. It led to workers staying with the company, and as a result their productivity rose. Provided productivity continued to rise proportionately more than wages, it led to a proportionately greater increase in profits. That in turn, meant that more was available for additional accumulation of capital, which made possible even greater increases in productivity. At the same time, the steadily rising wages of Ford's workers, and the workers of the other companies, adopting similar Fordist methods, meant that a steadily rising market was created for Ford's cars, and the products of the other companies producing a range of mass produced consumer goods.

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