Masters of Money - Marx - Part 1

Last night I watched the last in the BBC's series Masters Of Money which has looked at the lives and ideas of three economists – Keynes, Hayek, and Marx, and how they relate to current conditions. It wasn't as bad as I thought it might have been, but, as was almost inevitable, it failed to actually present us with Marx's ideas, and his explanation of crises. Instead, as is almost equally as inevitable, what we were given was just a Left Keynesian explanation of crisis.

That explanation given a veneer of Marxism by comments from Left Keynesians like Martin Jacques of Marxism Today, hinges upon the notion that crises are caused because of the limited ability of workers to spend and consume. The answer then seems simple. Increase workers wages, so they can spend more. But, the argument then goes, Capitalists will not and cannot do that, because they are forced by competition to reduce workers wages to the bare minimum needed for them to survive. Of course, the attraction of this explanation to Left Keynesians and reformists is fairly obvious. Given their idealisation of the role of the State, it is not a big step from here, to argue that the Capitalist State should do things to redress this situation by introducing things like a Minimum Wage, or redistributive taxation, or that the State should take over the role of Capitalist etc.

Its not just because Marxists do not share this idealisation and faith in the State, particularly the Capitalist State, in resolving either workers problems, or the contradictions of Capitalism, however, that they disagree with this analysis. It is that it is simply wrong. Far from Marx putting forward this idea about the cause of Capitalist Crises, he specifically argued against it. The notion that Marx believed that Capitalism forces wages down to a bare minimum of subsistence is one that has been purveyed by enemies of Marxism for most of the twentieth century. It was put forward by Stalinists, who basing themselves on Lenin's statement that Capitalism was in decay, closed their eyes to all reality, and tried by one convoluted method or another to claim that workers living standards were really falling even during the 1950's and 60's, when it was clear they were rising sharply.

But, it has also been put forward by his opponents on the Right, including some of those in this programme, who point to this claim as proof that Marx was completely wrong in his analysis. Some years ago, when I was debating with a range of supporters of the Misean, Neo-Austrian School I was repeatedly confronted with this claim confidently asserted that Marx's “Iron Law of Wages”, had been massively disproved. The problem is that Marx said no such thing. The Iron Law of Wages, was put forward not by Marx, but by Ferdinand Lassalle, and Marx dismantled it!

In his critique of Lassalleans – whose Statism along with Fabianism is the basis of the reformism of most of the Labour Movement (including most of those that call themselves Marxists) – in the Critique Of The Gotha Programme.

“Since Lassalle's death, there has asserted itself in our party the scientific understanding that wages are not what they appear to be -- namely, the value, or price, of labour—but only a masked form for the value, or price, of labour power. Thereby, the whole bourgeois conception of wages hitherto, as well as all the criticism hitherto directed against this conception, was thrown overboard once and for all. It was made clear that the wage worker has permission to work for his own subsistence—that is, to live, only insofar as he works for a certain time gratis for the capitalist (and hence also for the latter's co-consumers of surplus value); that the whole capitalist system of production turns on the increase of this gratis labour by extending the working day, or by developing the productivity—that is, increasing the intensity or labour power, etc.; that, consequently, the system of wage labour is a system of slavery, and indeed of a slavery which becomes more severe in proportion as the social productive forces of labour develop, whether the worker receives better or worse payment. And after this understanding has gained more and more ground in our party, some return to Lassalle's dogma although they must have known that Lassalle did not know what wages were, but, following in the wake of the bourgeois economists, took the appearance for the essence of the matter.

It is as if, among slaves who have at last got behind the secret of slavery and broken out in rebellion, a slave still in thrall to obsolete notions were to inscribe on the program of the rebellion: Slavery must be abolished because the feeding of slaves in the system of slavery cannot exceed a certain low maximum!”

The important phrase here is “and indeed of a slavery which becomes more severe in proportion as the social productive forces of labour develop, whether the worker receives better or worse payment.”

It is not at all Marx's argument that capital is forced to reduce wages to some bare subsistence minimum. On the contrary, in Capital Volume I, Marx sets out that wages are the price for labour-power as stated above. Labour-power is a commodity like other commodities sold in the market, and as such, Marx's assumption is that it is sold at its Exchange Value, that is its current cost of reproduction. That is comprised of all those things that the particular Labour-power requires such as food, clothing, shelter, education, health provision, entertainment etc. It is clear that all of these things change over time, and Marx says that the Value of Labour-power, necessarily contains within it, therefore, an historical or cultural component. But, more than this. With every commodity, there are two opposing forces at work.

On the one hand, the perpetual increase in productivity means that the labour-time required for production falls, and so the Value of every commodity falls over-time. That may not mean that its Exchange Value or price falls, because Exchange Value reflects how much one commodity exchanges for another. It is a relation of the Value of one commodity to the Value of another. If the labour-time required for the production of apples and oranges falls by the same amount, the Value of both apples and oranges falls, but the Exchange Value of one measured in the other remains constant. The same is true with Labour-power. As productivity rises, the labour-time required to produce all of the wage goods the worker needs for their reproduction falls, and with it the Value of Labour-Power, and, therefore wages also falls.

At the same time, and this is particularly true of modern Capitalism, one of the ways in which Capitalists can persuade consumers to part with their money, especially to buy their commodities rather than someone else's, is to offer something new, something, better, a higher quality. So competition, drives producers to improve the quality of products, and to produce new kinds of commodities. These new commodities, these better versions of existing commodities, may well require more not less labour-time for their production, and so their Exchange Value, their price is increased. The same is true with labour-power. A worker who can produce a more valuable commodity, that a capitalist can sell at a higher price, is worth more to a capitalist than is a run of the mill worker, who can only do unskilled work. The capitalist can both pay the former a higher wage, and at the same time extract more surplus value from their labour than from that of the latter.

As capitalism develops machine industry from handicraft industry, it needs more skilled workers to produce the machines. It may require more educated workers even to be able to use the machines, because they may need at least to be able to read, to understand basic maths etc. So, capital's own needs mean that the kind of labour-power it requires changes, and so the basic things needed to reproduce this labour-power, and consequently the cost of reproducing it, the Value of Labour Power rises. As with every commodity there is a continual battle going on between the rising cost of production due to improvements in quality, and falling costs due to rises in productivity. But, the overall effect is that in terms of real wages, the standard of living of workers rises. On the one hand, the costs of producing the wage goods they need falls, on the other the range and quality of those wage goods available to them, increases.

So, Marx's theory is far from saying that workers have to be immiserated, or that some “Iron Law of Wages” forces them down to some bare subsistence minimum. What Marx actually argues is that, again as with all other commodities, although the market price can vary above or below the Exchange Value (or later Price of Production) of the particular commodity, due to temporary imbalances of Demand and Supply, wages will be equal to the Value of Labour Power. That Value may be high or low, workers might have good conditions or bad conditions, high wages or low wages, depending upon what is required for the reproduction of labour-power, but whatever it is will determine the level of wages. Even if wages are high, and workers conditions good by historical standards, or compared with other countries, if those wages are below the Value of Labour Power i.e. do not meet the level required to produce sufficient workers, of sufficient quality, to meet the needs of Capital, then an insufficient number of workers will be produced, and the basic law of supply and demand will push wages even higher, until they do reach the Value of Labour Power.

That can perhaps be seen in the US at the moment. One of the fastest growing, most profitable sectors has been in high value, high-tech production, in Silicon Valley, for example. But, the US education system is quite poor. It has a range of very expensive, select Universities such as Harvard, which charge exorbitant fees, and pump out a number of students each year who earn huge salaries. But, the rest of its schools and colleges fail to produce enough high quality workers to meet the needs of US capitalism for well educated, highly skilled workers. It was a fact that Alan Greenspan referred to many times in his Congressional testimonies. So, despite high wages for such workers, wages for them, are perhaps still not high enough to create the conditions that bring forward sufficient supply to meet that demand.

Capital has an incentive to introduce machines
like surgical robots to replace, high value,
high wage labour power.

In contrast, if wages rise above the Value of Labour Power, then Supply will exceed demand. Again, this has nothing to do with the actual level of wages, whether they are high or low, but only whether they are above or below the Value of Labour Power. If wages are above the Value of Labour Power, then competition amongst workers for available jobs will push them down again. In addition, Capital will always be able to find ways of reducing wages in such conditions. For example, Capital will look to introduce machines that will replace labour-power. This increases the relative over supply of workers, increasing competition between them, and again forcing wages down. And, in a globalised economy, Capital can simply relocate its production from one country to another where wages are at or below the Value of Labour Power.

In short, Marx does not argue that Capitalism is forced to reduce wages to a subsistence level. He argues the opposite, that the continual growth of productivity, the growth of an increasing range and quality of Use Values, which it seeks to sell to workers, its changing needs for labour-power lead rather to a steady rise over time of workers living standards, what he calls the Civilising Mission Of Capitalism, which he saw as necessary for workers developing sufficiently to become the new ruling class. All of this happens at the same time, however, as the amount of time that workers have to hand over free to Capital, as Surplus Value, grows even more in proportion, thereby enslaving the worker even more.

“that, consequently, the system of wage labour is a system of slavery, and indeed of a slavery which becomes more severe in proportion as the social productive forces of labour develop, whether the worker receives better or worse payment.”

Forward To Part 2