Wages, Prices And Profits - Part 3

Of course, a central tenet of Marx's analysis is that capital always produces a Reserve Army of Labour, a pool of unemployed from which it can draw during such periods of expansion. By taking this into consideration, we can then relax the constraint of full-employment. Examining this mechanism, the RAL clearly plays a crucial role. How crucial can perhaps be gauged by looking at the opposite case. In Capital, Marx quotes several sources speaking about the situation even in the 18th Century where capital found it difficult to obtain labour-power, because the majority of people remained employed as peasants on their own small plots of land. Those landless labourers who did sell their labour-power, still retained a connection to the countryside, and many were able to provide for many of their needs, simply through use of the common land. As a result, they only offered to sell their labour-power for such an amount of time, frequently just 3 days a week, as was enough to provide the money to meet their additional needs. This lack of supply kept wages high to the extent of making profits hard to come by, and capital accumulation slow. Marx says that during this phase, the industrial capitalists, who were forced to work themselves, were barely distinguishable from their workers, and often looked more down at heel.

The anonymous author of “An Essay on Trade and Commerce, containing Observations on Taxes etc.” 1770, comments,

”That mankind in general are naturally inclined to ease and indolence, we fatally experience to be true, from the conduct of our manufacturing populace, who do not labour, upon an average, above four days in a week, unless provisions happen to be very dear.”

He goes on demonstrating the link between this ability of the worker to work only that time he finds necessary to his liberty.

“But our populace have adopted a notion, that as Englishmen they enjoy a birthright privilege of being more free and independent than in any country in Europe. (Such notions he can never support amongst the workers in practice) …The labouring people should never think themselves independent of their superiors… It is extremely dangerous to encourage mobs in a commercial state like ours, where perhaps seven parts out of 8 of the whole, are people of little or no property. The cure will not be perfect, till our manufacturing poor are contented to labour six days for the same sum which they now earn in four days.”

This was what the 1801 General Enclosure Act achieved. It threw millions off the land, and took away use of most of the common land, so that workers had no choice but to sell their labour-power for whatever they could get for it. In the initial period of industrialisation proper, at the beginning of the nineteenth century, capital required a vast number of unskilled workers. It found them ready at hand.

The extent to which real wages were reduced can be seen in the fact that average life expectancy halved. Marx quotes one source in relation to diet,

J. Wade in his “History of the Middle and Working Classes" remarks,

“From the statement above (i.e. in relation to the Statute) it appears that in 1496 the diet was considered equivalent to one third of the income of an artificer and one half the income of a labourer, which indicates a greater degree of independence among the working classes than prevails at present; for the board both of labourers and artificers, would now be reckoned at a much higher proportion of their wages.” (Pp 24,25, and 577)

Minimising the wage bundle they consumed, was no problem, because they did not need educated workers, and as it killed off one supply of workers through under-nourishment and over work, it simply replaced them from the vast reserve army, which the land clearances had created. Marx quotes the speech by Ferrand in Parliament,

“This system had grown up unto a regular trade. This House will hardly believe it, but I tell them, that this traffic in human flesh was as well kept up, they were in effect as regularly sold to the (Manchester) manufacturers as slaves are sold to the cotton grower in the United States…. In 1860, the cotton trade was at its zenith…. The manufacturers again found that they were short of hands…. They applied to the ‘flesh agents’ as they are called. Those agents sent to the Southern downs of England, to the pastures of Dorsetshire, to the glades of Devonshire, to the people tending kine in Wiltshire, but they sought in vain. The surplus population was ‘absorbed’.” (Ferrand’s speech in the House of Commons 27th April 1863.)

This last reference to “absorbed” relates to comments made by the cotton manufacturers in 1834. Ferrand in his speech gives details of the way in which the intolerable conditions of the workers was affecting their life expectancy. He commented,

“The cotton trade has existed for ninety years…It has existed for three generations of the English race, and I believe I may safely say that during that period it has destroyed nine generations of factory operatives.” (ibid.)

Faced with this shortage of labour the manufacturers had applied to the Poor Law Commissioners that they should send the “surplus population” to them with the explanation that they would “absorb and use it up” to use their own words. Hence Ferrand’s reference.

So, during the first part of the 19th century, the huge RAL means that capital accumulation can carry on apace. The increasing demand for labour-power can be met by simply “absorbing” the surplus population released from the land. The value of this labour-power falls, as a result of the cheapening of wage goods, meaning that capital not only extracts absolute surplus value through the prolonged working day, but increasingly relative surplus value. There is no need for wages to rise, because labour supply continues to exceed demand. There is no major shift in society's production function towards wage goods, and consequently it is in capital goods and luxury goods that production is driven towards. It is only when accumulation has proceeded to such a degree, and this massive RAL has been “used up”, that relative shortages of labour-power arise, and the kind of mechanism described above can begin to operate effectively.

A similar sequence can be seen in most processes of industrialisation. Certainly, the recent history of China, of drawing in vast numbers of peasants to the towns fits that pattern, and the current move towards much higher wages fits that pattern.

As David Pilling put it in the FT, the authorities are reflecting in their statements a basic reality. He says,

“The years of an endless supply of cheap labour, on which the first three decades of China's economic lift-off was built, are coming to an end. That is partly demographic. Because of China's one child policy, the supply of workers under 40 has dwindled by as much as a fifth. Fewer workers means more bargaining power.”

But, the RAL is not the end of the story. In 19th century Britain, when what was required was a mass of unskilled workers, or similarly in China today, the existence of a RAL is significant. But, as Marx points out, not all Labour is the same. Increasingly, as capital develops a process of combined and uneven development arises. More mechanised production means that formerly skilled jobs, become unskilled and also less labour intensive. But, that same process means that the demand for new types of skilled worker arise, developing the machines and techniques that facilitate that mechanisation, or else in maintenance and repair, in supervision and so on. One consequence of the specialisation of the division of labour is that workers have to be increasingly educated and trained to do specific tasks, to create specific use values. The fact, that a RAL exists, therefore, does not mean that the individual workers within it, are either of the right kind, or in the right place.

An accumulation of capital might then result in a rise in wages of specific workers even under conditions of significant unemployment. That appears to be the case in the 1930's when the development of new industries in the Midlands and South-East, led to a demand for particular types of labour-power, and saw relatively high wages, and rising living standards, including a demand for housing, and newly available consumer goods from those workers.

In short the conditions under which the RAL can affect this mechanism are limited. The kinds of size of RAL that existed in the early 19th century in Britain, or existed in China 20-30 years ago are effectively limited to the commencement of a period of rapid industrialisation, and one of the conditions of it. But, the very process of rapid industrialisation quickly “uses up” the majority of that RAL, and a situation of equilibrium is established. Once established, although capital can increase the size of the RAL, by all the methods Marx illustrates, particularly in response to rising wages, that process is drawn out, and really only capable of preventing wages from rising at the expense of capital accumulation, not of preventing real wages rising as a result of capital accumulation. Moreover, the more technological capitalism becomes, it is only where there is an excess of the required labour-power that the RAL can affect this process.  This is one reason that all developed capitalist economies developed welfare states starting towards the end of the 19th century, and why China is moving to do so today.

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