Tuesday, 22 January 2013

Capital I, Chapter 20 - Part 2

In much of what has gone before, Marx has described the dire consequences for workers from overwork. Now he describes the dire consequences of not enough work. We have set out that the annual cost of reproducing the workers is £10,000, which on the basis of a 50 week year, 40 hour week, and 8 hour day amounts to £5 per hour. But, this cost is the cost of reproducing the workers' labour power during this period, not the value created by that labour in the same period. For example, in a year, with a 100% rate of surplus value, the worker will create £20,000 of new value. Deducting the £10,000 cost of reproducing their labour-power leaves a surplus value of £10,000. By the same token, in a week they will produce £400 of new value, £200 as wages, £200 surplus value. In a day, £80 of new value, £40 wages, £40 surplus value. Finally, in an hour, £10 of new value, £5 wages, £5 surplus value.

If the worker is paid by the hour, then if the number of hours worked in the day is reduced, the amount of wages, and of surplus value will fall equally. For example, if the day is cut from 8 hours to 6 hours, only £60 of new value will be created, £30 as wages, and £30 as surplus value. But, whether the worker is working these 8 hours or not the cost of reproducing their labour-power does not fall. The worker does not stop living during these 2 hours.

The £10,000 cost for the year, was the minimum amount required for their reproduction from one year to the next. But, if the worker now only works 6 hours a day, receiving £30 in wages, that amounts to only £7,500 for the year, which means they are unable to reproduce their labour-power.

If the hour’s wage is fixed so that the capitalist does not bind himself to pay a day’s or a week’s wage, but only to pay wages for the hours during which he chooses to employ the labourer, he can employ him for a shorter time than that which is originally the basis of the calculation of the hour-wage, or the unit-measure of the price of labour. Since this unit is determined by the ratio

 daily value of labour-power working-day of a given number of hours’

it, of course, loses all meaning as soon as the working-day ceases to contain a definite number of hours. The connection between the paid and the unpaid labour is destroyed. The capitalist can now wring from the labour a certain quantity of surplus-labour without allowing him the labour-time necessary for his own subsistence. He can annihilate all regularity of employment, and according to his own convenience, caprice, and the interest of the moment, make the most enormous overwork alternate with relative or absolute cessation of work. He can, under the pretense of paying “the normal price of labour,” abnormally lengthen the working-day without any corresponding compensation to the labourer.” (p 510-11)

Marx then turns to overtime. He then shows that even where the price of labour i.e. the hourly wage, rises, this can be consistent with falling real wages. If the daily rate remains constant, but the number of hours in the day rises, then the hourly rate clearly falls. But, it also falls if the increase in hours is proportionately more than the rise in the daily wage. For example, £10 per day with a 5 hour day = £2 per hour. But, £12 per day, with an 8 hour day is only £1.50 per hour.
But, even where the hourly rate itself increases this can still represent a fall in real wages. As described previously, the value of labour power is calculated on the cost of reproducing labour-power over a given period, and part of that cost is to cover the average wear and tear of the worker. But, that assumes that the worker works for the normal working day, at the normal level of intensity. If the worker works, for any consistent period of time, for longer than the normal working day, or at a higher than normal level of intensity, they will suffer greater wear and tear, and this wear and tear rises by a proportionately greater amount than the additional work.

As a consequence, the value of labour-power rises proportionately more, the more the worker is over worked. This is not only manifest in the need for more food etc. but also in a shorter life, greater medical costs, and so on. Suppose then that the worker goes from working an 8 hour day to a 12 hour day. But, this 50% increase in hours worked causes the value of their labour-power to rise from £5 per hour to £10 per hour. Their hourly rate rises from £5 to say £8. Their wages for the year rise to £24,000, and yet their real wage has fallen because the value of their labour-power is now £30,000, required to meet the now much higher cost of reproducing their labour power.

In many branches of industry where time-wage is the general rule without legal limits to the working-time, the habit has, therefore, spontaneously grown up of regarding the working day as normal only up to a certain point, e.g., up to the expiration of the tenth hour (“normal working-day,” “the day’s work,” “the regular hours of work”). Beyond this limit the working-time is over-time, and is, taking the hour as unit-measure, paid better (“extra pay”), although often in a proportion ridiculously small. The normal working-day exists here as a fraction of the actual working-day, and the latter, often during the whole year, lasts longer than the former. The increase in the price of labour with the extension of the working-day beyond a certain normal limit, takes such a shape in various British industries that the low price of labour during the so-called normal time compels the labourer to work during the better paid over-time, if he wishes to obtain a sufficient wage at all. Legal limitation of the working-day puts an end to these amenities.” (p 512-3)

A low price of labour begets longer working hours, because the worker is forced to work longer to obtain enough wages to live on.

On the other hand, the extension of the working-time produces, in its turn, a fall in the price of labour, and with this a fall in the day’s or week’s wages.” (p 513)

 Competition between large numbers of small firms led them to cut prices by things such as using low wages, but also adulterating food etc.  When workers created their own co-ops in the 19th Century, it meant they could provide themselves with quality products, as well as better working conditions.  The Co-op Consumer Research Department also did valuable work in identifying substandard products being sold by private companies.
If one man does the work of 1½ or 2 men, the supply of labour increases, although the supply of labour-power on the market remains constant. The competition thus created between the labourers allows the capitalist to beat down the price of labour, whilst the falling price of labour allows him, on the other hand, to screw up still further the working-time. Soon, however, this command over abnormal quantities of unpaid labour, i.e., quantities in excess of the average social amount, becomes a source of competition amongst the capitalists themselves. A part of the price of the commodity consists of the price of labour. The unpaid part of the labour-price need not be reckoned in the price of the commodity. It may be presented to the buyer. This is the first step to which competition leads. The second step to which it drives is to exclude also from the selling price of the commodity at least a part of the abnormal surplus-value created by the extension of the working-day. In this way, an abnormally low selling price of the commodity arises, at first sporadically, and becomes fixed by degrees; a lower selling price which henceforward becomes the constant basis of a miserable wage for an excessive working-time, as originally it was the product of these very circumstances.” (p 513-4)

Marx does not expand on this further here, because he says it would require an analysis of competition, which he intended to deal with later. However, as is the case later with his analysis of the Falling Rate of Profit, and as was the case with the establishment of the normal working day, its possible to identify countervailing tendencies. For example, for so long as the abnormal surplus value is accumulated it creates an abnormal demand for labour, which will tend to push the price of labour higher. When it is discounted from selling prices, it will cause an abnormal increase in demand for this commodity (because its price does not fully reflect the value of the labour-power consumed), which again will cause an increase in demand for labour-power raising the price of labour. Finally, if this particular labour is paid a price, which does not cover the value of the labour-power, for any considerable period, the supply of labour power of the appropriate quality will fall, thereby again raising its price. However, the periods involved could be considerable.

Marx again cites the example of the competition between the “full priced” and “under priced” bakers, when the latter reduced the price of bread not only by gross adulteration of the product, but by the overwork and underpaying of their workers. Such competition and consequences between small capitalists continues today, but capital today is dominated by Big Capital, which long ago, as Engels described, found these penny-pinching measures to be counter-productive.

Marx quotes the Reports of the Children's Employment Commission.

““In Birmingham there is so much competition of masters one against another that many are obliged to do things as employers that they would otherwise be ashamed of; and yet no more money is made, but only the public gets the benefit.”” (p 514)

That is certainly a lesson that oligopolies have learned. As Paul Sweezy demonstrated, an oligopoly that reduces its prices, will be followed by others, creating a price war that is destructive of profits. One that raises prices, is not likely to be followed by others. This is why oligopolies try to avoid reducing prices (as Kliman points out they will cut output rather than prices when demand falls) and why central banks were introduced to increase money supply to prevent falls in nominal price levels. Its why oligopolies began to compete not on lower prices, but on better quality, and sought to increase profits, via increased market share from higher quality, new products, and via continual innovation to raise productivity and reduce costs.

 For much of the 20th. Century the Tory Party was just as much an element of  Social Democracy as the Labour Party. It was reflected in "Buttskillism" reflecting the similarity of position of Tory R.A. Butler, and  Hugh Gaitskill.  That Social Democracy was the form of Bourgeois Democracy applicable to a period of Fordist Regulation, which met the needs of Big Capital. It broke down in the 1970's, and led to the rise of Thatcher who personified the small capitalist, shopkeeper mentality, that has dominated the Tories since.
As Marx points out elsewhere, what the capitalists demand above all else is a level playing field, which requires regulation. The more Big Capital dominates, the more those regulations meet its needs and undermine those of the small capitalists. Where regulations have been introduced by social democracy (meaning the modern form of bourgeois democracy, and therefore including the ideas that have dominated most bourgeois parties be they of the Right or the Left) that has been to meet the needs of Big Capital. The fact that governments, like that of Cameron, talk about removing such regulation is an indication of how much these parties are beholden to small capital, and its attendant social layers.

So, for example, Marx cites the testimony of the “full priced” bakers.

The “full-priced” denounced their rivals before the Parliamentary Committee of Inquiry: “They only exist now by first defrauding the public, and next getting 18 hours’ work out of their men for 12 hours’ wages.... The unpaid labour of the men was made ... the source whereby the competition was carried on, and continues so to this day.... The competition among the master bakers is the cause of the difficulty in getting rid of night-work. An underseller, who sells his bread below the cost-price according to the price of flour, must make it up by getting more out of the labour of the men.... If I got only 12 hours’ work out of my men, and my neighbour got 18 or 20, he must beat me in the selling price. If the men could insist on payment for over-work, this would be set right.... A large number of those employed by the undersellers are foreigners and youths, who are obliged to accept almost any wages they can obtain.” (p 514)

A hundred and fifty years later, Cameron's Government represents the interests of the “under priced” producers of goods, not the “full priced” producers. In so doing, it is a far cry from the position of the Liberal Winston Churchill, who more than 100 years ago introduced the first Minimum Wage, precisely to undermine the kind of race to the bottom that the policies of today's Liberal-Tories lead to. As President of the Board of Trade in 1909, Churchill introduced the Minimum Wage, saying,

It is a national evil that any class of Her Majesty’s subjects should receive less than a living wage in return for their utmost exertions… where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad and the bad by the worst; the worker, whose whole livelihood depends upon the industry, is undersold by the worker who only takes up the trade as a second string… where these conditions prevail you have not a condition of progress, but a condition of progressive degeneration.”

 Thatcherism typified a period of support for the "undersellers", the "bad employers" as Churchill had described them.  It set  the course for the de-industrialisation of the UK economy, reliant on inefficient firms that could only survive on the back of  low wages and poor conditions.  They are today's "zombie" firms that survive by those means, and on unsustainably low interest rates.
But, today in Britain, a large minority of workers are in jobs that do not pay a living wage. As a consequence, the State has to make up the wages of these workers with various Welfarist measures, such as Housing Benefit, Child Benefit, Tax Credits and so on, which subsidise these low-paying, “under-selling” employers that often also provide poor conditions of employment. These “bad” employers are subsidised as a result of taxes taken from better paid workers, used as benefits for worse paid workers.

One of the main influences on undermining this, of course, was the development by workers themselves of the co-operatives. Their own shops were able to provide quality produce at reasonable prices without the kind of exploitation of workers producing those goods, that occurred amongst capitalist producers. The co-ops were able to introduce decent pay and working conditions, as well as introducing welfare benefits for their employees and members. Yet, they were still able to out compete the private producers and retailers, and to grow until by the end of the 19th Century, the Co-op dominated the retail and wholesale sector. The extension of the Co-op into Consumer Research, also meant it was able to highlight poor and injurious products being produced and sold by other retailers. The Co-op was also able to work with the rest of the Labour Movement to highlight things like profiteering. For example, after WWI, the London Co-ops worked with the London Trades Councils in the Food Vigilance Committee.

Back To Part 1

Forward To Chapter 21

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