Making The Workers Pay? - Part 1

Whenever Capitalism goes into one of its periodic crises, the stock response of the Left is to declare that the solution for Capital will be to “make the workers pay”. This post seeks to examine what that means. It is, of course, a catchy piece of propaganda, but is it true? If it is true, then in what context is it true? Does it mean, for example, that its the same as workers handing over a sum of money or value to Capital, to compensate them in some way? In other words, is it the same as saying, if I want to buy a car I have to pay for it, but in this case it is Capital buying the car, and workers paying for it? Or, is it like, my neighbour is burgled, but I have to compensate him for his loss? In fact, on the basis of a Marxist economic analysis, none of these things are true in any meaningful sense, and cannot be true given the Marxist understanding of the nature of Exchange Value, Surplus Value, Wages and the Value of Labour Power.

Is it true that during a recession workers suffer? Yes, of course that is true. In that sense workers pay a price for the fact that Capitalism is a chaotic system, which proceeds via contradiction, and the resolution of those contradictions via crises. But, what does that mean? If a member of my family unwisely goes to a Party, where a lot of people have the early symptoms of flu, then they are likely to pass it on to me. If I then catch the flu, the misery I suffer means that I am paying a price not for my own actions, but for theirs. But, it can't be said that in any way my suffering represents some kind of payment to them!!! My suffering the flu, is in no way a compensation for the fact that they caught the flu in the first place, and passed it on to me. In fact, it could be the other way around. If they depend upon me in some way, to provide for their needs, then the fact that I too am now laid up with the flu, may mean that I am no longer able to fulfil that function, and so, rather than my illness representing some kind of payment to them, it represents a further cost to them.

The Reserve Army of Labour

This is indeed a good analogy of a Capitalist crisis leading to large scale unemployment. Capitalism, as Marx demonstrated, always needs a Reserve Army of Labour for its efficient functioning. This Reserve Army, in fact comprises, three different types - floating, latent, stagnant - whose importance and function change depending upon the conditions. For example, in economies which are newly industrialising, the Peasantry constitute a latent reserve army. In other words, they are a potential source of workers, should Capital require them. When Britain went through, the Industrial Revolution, it was the revolution in Agriculture, combined with the Enclosure Acts, which forced peasants off their land, which turned this latent reserve army, into an actual reserve army, as those peasants then flooded into the towns and cities, with nothing to sell other than their labour-power. The same has been true, of the industrialisation of China in the last 30 years, which has been made possible by the movement of millions of peasants from the countryside into the towns and cities. As part of answering this question let's look at these three types of Reserve Army, beginning with the Latent Reserve.

i. The Latent Reserve

This kind of Reserve Army is crucial where an economy is industrialising, and where, therefore, what is important is the availability of massive reserves of low paid, labour power, that can be exploited via the extraction of Absolute Surplus Value. That means that this Labour Power can be paid low wages, and worked intensively for long periods of time. But this, as Marx explains, has a cost for Capital. Workers, who receive low wages, eat poorly, are badly clothed, housed and educated themselves, produce low value labour power, labour power whose Use Value is extremely limited. The low value of their Labour Power represented by these low wages, is also reflected in the low value of their output. That in turn means that the only way that Capital can extract maximum profits from this labour is by making it work long hours, and more intensely. But, the more it is worked both extensively and intensively, the more its Use Value is used, or put another way, the more the worker becomes worn out, the shorter the workers' life span. It is only because during this period of industrialisation, there are these vast latent reserves of Labour, that Capital can continue on this basis.

In Capital, Marx goes into great detail to explain this, by quoting from the reports of the Government Inspectorate, and having taken a lot of his information from Engels', “The Condition of the Working Class In England”. He sets out, how in the Potteries, the conditions of the workers were so bad, that it was only by intermarrying with people from the neighbouring rural areas, that the working population were not completely wiped out. The average lifespan for a worker was cut in half compared to prior to the Industrial Revolution. In many of the Northern manufacturing towns, it was only because manufacturers were able to literally buy workers, off workhouse managers, elsewhere in the country, that they could replenish their needs for labour-power.

In Capital, Marx quotes the MP Thomas Ferrand from his speech in the House of Commons.

“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.

We see something similar in China today. So long as the requirement is only for masses of unskilled labour, the Capitalists have no need for workers to be particularly well fed, clothed, housed, educated or maintained via adequate healthcare. They can simply be replaced by new supplies drawn from the countryside. But, as a strategy for growth this is extremely limited, as China has found. Sooner or later, as growth continues to accelerate, this latent reserve is effectively used up. In China, wages are now rising rapidly, with demands for 50% wage increases, as the Supply and Demand balance for Labour Power shifts towards Labour. And the Chinese authorities are responding by supporting those wage demands.

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.”

And rather like Britain at this stage of its Industrial Revolution, the limited requirements of Capital in relation to the nature of that Labour Power is reflected in other ways. For example, Capital having no need for workers to be particularly healthy or educated, does not see why it should pay for such things as part of the Value of Labour Power. So wages are not set at a level that enable such things to be bought, because these commodities, as components of the wage bundle required for the reproduction of Labour Power, do not constitute, a necessary expenditure of Social Labour Time. It is only as this Latent Reserve becomes used up, that Capital is forced to look to other ways of maximising the Labour-Power available to it, for exploitation. This takes a number of forms.

Forward To Part 2