Monday, 10 February 2014


Wages are the phenomenal form of the value of labour-power. In other words, they are a superficial appearance of the underlying reality, that is not discernible without further analysis. To make an analogy with physics, when we see something red, this is merely an appearance that hides the underlying reality. “Redness” is not a quality of the object we see. The object appears red, only because its physical make-up reflects light in that part of the spectrum, which our brain interprets as red. For example, we see a red sky at night, because at that time of day, sunlight has to pass through more atmosphere, and particles in the atmosphere filter out more of the light in the violet end of the spectrum, leaving us to see more red light. In the same way, when we look at pictures on a TV or computer screen, all of the range of colours we see are in fact nothing more than the combination of pixels of red, blue and green light combined in such proportions as to convince our brain that it is seeing these other colours.

What capitalists actually buy from workers is not labour, or the product of labour, but a commodity, labour-power – the power to perform labour. Its value, like that of any other commodity is determined by the labour-time required for its production. In this case, the labour-time required to reproduce the worker themselves, as labour-power cannot be separated from the physical being of the worker. That is the labour-time then to produce the food, clothing, shelter, education and other requirements of producing the worker. But, the form that the payment for the purchase of this commodity takes is wages, which appears to be not a payment for this commodity, but a payment rather for the labour that the worker undertakes. Particularly because, under Capitalism, as opposed to pre-capitalist, commodity production, commodities are sold at market prices, rather than at exchange values, and these prices appear to result from the interaction of supply and demand, the wages paid to the worker appear to be determined by nothing more than the demand and supply for labour. In a sense, as with the market price of any other commodity, this is true, but it is impossible to understand the real situation simply on the basis of this interaction of supply and demand, precisely because both of these are also simply a superficial reflection of the underlying reality. Supply is determined by value, whilst demand is determined by use value.  

As with the market price of any other commodity, then wages can fall below the value of labour-power when the demand for it is low, and can rise above it when the demand for it is high.  As Engels puts it in setting out the limited role that trades unions can play,

The history of these Unions is a long series of defeats of the working-men, interrupted by a few isolated victories. All these efforts naturally cannot alter the economic law according to which wages are determined by the relation between supply and demand in the labour market. Hence the Unions remain powerless against all great forces which influence this relation. In a commercial crisis the Union itself must reduce wages or dissolve wholly; and in a time of considerable increase in the demand for labour, it cannot fix the rate of wages higher than would be reached spontaneously by the competition of the capitalists among themselves.”

Even though some workers wages are very
high, the demand for their labour-power is
very high, because it can produce even larger
amounts of surplus value for the capital that
employs it.
The value of labour-power, as with any other commodity, at any moment in time, is an objectively determined quantum equal to the labour-time required for its production. As with any other commodity, what the buyer of this commodity does with it, after purchase is entirely their business. If I buy an apple, the seller of the apple is not bothered whether I eat it, use it as a model to paint a picture of it, or just forget about it, and leave it to rot. Whatever the purpose, the seller will expect me to pay the same price for it, according to its value. If any commodity cannot be sold at a price at least equal to its value (or under Capitalism its price of production) then its supply will be reduced. 

The same is true with labour-power. If the value of labour-power is equal to 5 hours, that remains the case whether the worker is employed for 2 hours, 4 hours, 6 hours, or 10 hours. Obviously, it makes a difference to the capitalist, however, because they only buy labour-power in order to produce a surplus value. Although, different types of concrete labour produce commodities with different use values, it is only the consumer of those commodities for whom that constitutes a use value. The producer of furniture is not interested in its use value, but only in being able to make a profit from selling it, i.e. in its exchange value. They are equally not interested in the use value of the concrete labour of the carpenter, but only in the use value of labour-power to be able to produce new value and, therefore, surplus value. Their demand for that labour is then a function of the extent to which that labour-power can produce such surplus value for them.

If they buy labour-power at its value of 5 hours, they need to employ it producing new value for more than 5 hours, in order to produce that surplus value. The longer it can be employed, the greater the surplus value produced. However, this is true only within limits. If workers have to work for too long, or too intensively, then just as happens with a machine, they will suffer additional wear and tear. A car driven at high speed for prolonged periods, at the very least will require more fuel than one driven at cruising speed, and at worst damage will be done to its engine, so the cost of running the car will be higher than normal. The same is true with the worker. There is a “normal working day” rather like a cruising speed for a car, which represents the length and intensity of work that the average worker can perform without it affecting their normal lifespan, or requirements. Whilst, working for less than this normal working day, does not change the value of labour-power, therefore, working above it does. Above this normal working-day, workers at least need more food to replace the additional energy they exert, they may need additional healthcare to deal with any damage to their health caused by the additional exertion, and so on. In addition, because the value of labour-power is calculated over the average life of the worker, but recompensed over the working-life, the shorter that working life, the higher the value of labour-power for every hour worked.

At the start of the process of industrialisation, because large supplies of labour-power are available, capital tends to use it wastefully, because it can be had cheaply, and even if it is used up, there is plenty more to simply replace it. Marx quotes the British MP, William Ferrand, who cited in a speech in the House of Commons, that at the start of the 19th century, British textile capitalists had used up 9 generations of workers in the lifetime of just 3. Where prior to industrialisation, the average worker had a lifespan of around 50, at the start of the 19th century it fell to just over 20! So, a struggle between workers and capitalists takes place to determine the length of this normal working day, and in the end, capital itself recognises that its in its own interests not to go beyond it – though this tends to be a recognition at the level of “capital in general”, i.e. of its “Executive Committee”, the state bureaucracy, rather than at the level of “many capitals”, as each firm tries to obtain its own advantage. Its only in the second half of the 19th century, when big industrial capital, as Engels describes, turns to the extraction of relative surplus value, and sees these “penny-pinching measures” of earlier times, as counter-productive, that individual capitals adopt this view.  In times of stagnation, when labour-power is once more abundant, even these big capitals are not averse to reverting to these earlier methods of extraction of absolute surplus value.

As a result of this process, as Marx sets out, a normal working day is established, and additional payments are made for any labour performed in addition to it. So, for example, where work is done on the basis of piece-rates, any work undertaken that is more intensive than the average is compensated in a higher piece-wage, and sometimes in various forms of bonus. Where work is paid as time-wages, then any work done above the normal working-day is considered over-time, and an additional overtime payment is made. But, as Marx points out even where such overtime payments are made at premium rates – for example, at double time – this can still represent a fall in real wages, if the wear and tear on the worker, as a result of this additional work, increases the value of labour-power by a greater proportion.

But, the fact that these wages are really simply a price for the purchase of the commodity labour-power, is hidden by a number of factors that make it appear that what is being bought is a certain quantity of labour. In the process, this hides the fact that in buying labour-power, and then using it to produce a greater amount of new value than was expended for its purchase, this labour-power produces surplus value appropriated by capital. In reality, therefore, although it appears that capital buys labour for a certain number of hours, and pays for it for all of this time, the labour performed is made up of two components – a number of hours of labour equal to the value of the labour-power bought, and a number of hours of labour equal to the surplus value produced. Although, capital buys the commodity labour-power at its full value, looked at in terms of the labour performed it pays for one part of the working day, and receives the other part of the working day as a free gift from the worker. 

The recognition of this fact was implicit in the arguments put forward by manufacturers against the Ten Hours Act, and theorised by the economist Nassau Senior – Capital I, Chapter 9. It suggested that during 10 hours of the day, workers simply reproduced the value of the costs of production, and that, therefore, it was only in the last hour of the day that profits were made. But, in fact, as presented this argument is nonsense, and remains so in its modern variants. Its nonsense in part, precisely because of the fact that workers are paid for their labour-power in the form of wages. In other words, if the value of labour-power is £1,000,000 over the average life of a worker, capital does not buy this labour-power by handing over £1 million to the worker in advance. It does not even hand over £25,000 in advance to cover those costs for a year. The wages paid to the worker are usually paid in arrears, and are broken down into an hourly, daily, weekly or monthly wages in the case of time-wages, or an amount per piece in the case of piece wages. This indeed, is one reason that it appears that wages are a price for labour for a particular period or a particular quantity of labour provided.

If it were the case that workers were paid for their labour-power, and the value of this was equal to 10 hours of labour-time, then its true that if they continued to be paid that amount of money, but worked only 10 hours, there could be no surplus value produced. But, workers were paid hourly wages, so that if they were paid £0.05 per hour, their daily wage for a 12 hour day was £0.60. If the working day was reduced to 10 hours, their wage would fall to £0.50. But, in each hour, this would still be divided into a portion of the hour that was new value that replaced the workers wages, and another portion that was surplus value. Moreover, as Marx pointed out the argument was also false because, a portion of the costs of production was comprised of the costs of means of production. If the working-day were shorter, less of these would also be used, so the cost of production would fall. The proportion of each day, hour etc. that was made up of simply reproducing the value of wages, was then grossly overstated.

But, the fact that wages are paid by the hour or by the piece suggests that what capital is buying is labour for that duration, and that wages are then a price for labour for that period or amount of work. This impression is enhanced by the fact that if workers work part-time, therefore, their wages fall proportionately. But, the appearance is undermined in relation to piece wages, when productivity rises. The impression is given that workers are paid a wage for a particular quantity of work performed. For example, they may receive a piece wage of £0.01 for every 1000 pieces produced. If on average they produce 5000 pieces per hour then their wage will work out at £0.05 per hour, the same as with time wages. But, if productivity doubles because of some new machine, they will produce 10,000 pieces in an hour and their wage will rise to £0.10 per hour. So, wages would double whilst the value of labour-power has remained constant. Capital then seeks to reduce the price paid per piece, which undermines the notion that this price is for a particular amount of labour provided.

In fact, although wages are described as the price of labour, this statement is meaningless. Value is labour, and labour-time is the measure of value. So it cannot be a measure of itself. The value of anything is expressed as so many hours of labour. It is a meaningless tautology to say then that the value of 10 hours of labour is 10 hours of labour! It was because Adam Smith and his successors confused labour and labour-power that they became embroiled in an irreconcilable dilemma as to where surplus value came from, because if workers work for 10 hours and are paid in exchange the equivalent of 10 hours of labour, the value they receive in wages is equal to the new value they create, leaving no possibility of any surplus value.

But, its clear why a contradiction arises between this payment of wages, and the value of labour-power. Because capital pays wages on the basis of the purchase of labour-power for a particular duration, workers can only reproduce their labour-power, if they work for the duration of the normal working-day, and indeed if they are employed for the normal working-week, year etc. If the normal working-day is 10 hours, which ensures that the wages paid for that time equal the value of labour-power for a day, then if the worker is only provided with 8 hours work, their wages are insufficient to ensure the reproduction of their labour-power. We see that today with workers who are under-employed, on zero hours contracts etc., and who therefore are dependent upon welfare to make up the difference. Without that, the consequence is that the reproduction of labour-power does not take place. Ultimately the supply of labour-power (either in quantity, quality or both) falls, until eventually the reduced supply forces wages up.

Of course, wages are only forced up under such conditions if the supply of labour-power is not sufficient to meet the demand, and the demand depends upon the extent to which the labour-power can produce surplus value for capital i.e. to the extent that it provides use value to capital. If it is not great, demand will be low. This creates a contradiction. The excess supply of labour-power reduces wages, possibly even below the value of labour-power. In order to raise their wages, workers with jobs are prepared to work additional hours, which has the effect of raising the supply of labour-power relative to the demand even further. Unemployment then rises, because with each worker working more hours, to compensate for their low hourly rate, any given amount of labour-power is provided by fewer workers, leaving more workers without jobs.  So, the contradictory situation arises that with low wages, rather than it reducing unemployment as neo-classical economists argue, it has the effect both of increasing overwork, and of increasing unemployment at the same time! A similar situation arises where the supply of labour-power is increased by raising the retirement age, so that elderly workers have to keep supplying their labour-power for several more years than previously. Not only are workers then expected to work more hours, but to work more years, at the very time when there is record levels of youth unemployment.  It results in a fall in wages, and rise in profits.

There is then a clear difference between wages, which are the phenomenal form of the value of labour-power, which is the case with wage labour, and the exchange of the products of labour, which is typical of pre-capitalist production. The wage labourer sells their labour-power at its value, but then creates new value by working for a specified length of time. A condition of their employment is that the new value they create is in excess of the value of their labour-power. The excess constitutes the surplus value appropriated by the capitalist. By contrast, the individual producer, does not sell their labour-power, but the product of their labour - that is true also when that product is some kind of service. By definition, the value of that product is equal to the labour-time expended. All of the labour-time expended by the individual producer, therefore, obtains an equivalent amount of value in return, but only a portion of the labour-time expended by the wage worker is returned to them, in exchange, another part of the labour-time they expend is unpaid.

It might be wondered why then the individual producer would provide this unpaid labour. The initial reason is that where these producers are separated from ownership of the means of production, the only way they can survive is by becoming wage workers. The capitalist can continue to live off their capital, but the wage worker can only survive by working. Capital then always has the whip hand. A condition of allowing the wage worker to work is that they work for part of the day unpaid. But, once capitalism becomes established, a further reason exists, as can be seen in many modern, industrialising economies. Capitalism is thousands of times more efficient than peasant production. As a consequence, the standard of living it can offer to peasants, even as they work for a large part of the day unpaid, and providing large profits for capital, is far in excess of the standard of living they could provide for themselves. Leaving the poverty of the countryside, to become an exploited wage worker in the town, therefore, is a rational economic choice for millions of peasant producers to make.  (See Lenin's many examples of this in his articles on Economic Romanticism.)


Elijah said...

Thank you Boffy, I really enjoyed this article and the way you went in depth to explain "wages." Having read your previous posts on exchange value, (market) price, etc., the only thing that still makes me confused is when it's said that wages, as the "market-price" of labor-power, can be above or below the "value" of labor-power. but value is measured by labor-time (days, hours, etc.) while price is express in money terms. so how is it possible to compare two different metrics?

Boffy said...

Its correct that value is measured in labour-time, and exchange value is measured in a quantity of some other use value. For example the value of 1 metre of linen may be 10 hours labour, and the value of 1 litre of wine equal to 5 hours. So, then the exchange value of 1 metre of linen is 2 litres of wine. As Marx puts it, the wine price of linen is 2 litres. When we measure he exchange value of commodities against a money commodity, i.e. a commodity such as cattle, or gold that has been singled out from all others to act as the universal equivalent form of value, we drop the adjective "wine", "cattle", or "gold", and simply call it the price of linen. For example, 1 gram of gold, this gram of gold then being given a name such as Pound, etc. We then say, the price of 1 metre of linen is £1.

The value of labour-power, as described, is indeed measured in labour-time, i.e. the labour-time required to produce all of those commodities required to reproduce labour-power, i.e. to reproduce the worker. It is also the measure then of necessary labour. But, as with any other commodity, this value of labour-power can then be expressed as an exchange value, i.e. the quantity of all these "wage goods" required for its production, and, again, this exchange value can then be expressed as a money price, i.e. the money price of all these wage goods required for its reproduction.

Its this fact, that the value of labour-power is equal to necessary labour-time (say 4 hours), i.e. equal to the value of the commodities required for its reproduction, and yet that the labourer can work for, say 8 hours (whether they work for themselves as an independent commodity producer, or for a capitalist as a wage-worker) that makes possible the production of surplus value, i.e. in this case, 4 hours of surplus value.

And, its also because the worker produces surplus value, say of 4 hours, appropriated by the capitalist, that gives the capitalist reason to employ their labour-power, so as to acquire that surplus value. But, similarly, when the demand for labour-power is high, it means that although the value of labour-power might remain 4 hours (say, £4 expressed as price) the capitalist may be prepared to pay the equivalent of 5 or 6 hours of value, £6 expressed as price/wages, because, they still make £2 of surplus value/profit from doing so, which is better than nothing were they to sit on their money - not an option when you have millions already tied up in buildings machines, materials and so on - and which they have to do so as not to be supplanted by their competitors.

Its when this results in wages rising to a point whereby no additional surplus value can be obtained by employing additional labour that it can be said that capital has been overproduced, leading to a crisis of overproduction, as described in Cap III, Ch 15. At that point reproduction breaks down, workers are laid off, and capital seeks innovation to replace labour reduce wages, raise profits, and also leads to the value of labour-power falling, relative surplus value rising etc, so as to end the crisis.

As labour is replaced by machines, in this process, creating a relative surplus population, and as higher productivity means that any increase in output also requires proportionately fewer workers, the excess supply of labour-power, relative to demand, means that wages may now fall, below the value of labour-power, in the same way that the price of ice-cream might fall, on a cold day, in the Summer, when sellers need to get rid of their stocks in the van.

Elijah said...

Thank you for you detailed explanation. Under a simple commodity production, your Linen-Wine example would be totally understandable to me.
But when it comes to capitalism, where commodities- including those required to reproduce the worker- exchange at their market prices/prices of production, and where there is no money-commodity (gold or cattle) playing the role of general equivalent, the issue gets complicated.
Your proposition is that the exchange-value of labor-power as money price= the money price of all the wage goods required for its reproduction. The problem I do have lies exactly in the concept "money price" under capitalism.
In the past, under petty commodity production, commodities were exchanged at their values. so a money-commodity (say gold) which embodied a certain quantity of socially-necessary labor-time, could act as the universal equivalent form of value. but this is not the case today. so in a nutshell, what is the "money price" of the "wage goods" in question? is it simply equal with the "price of production"?

Boffy said...

Absolutely, and Marx makes precisely this point in Capital III, Ch.12(?), which also illustrates why the proponents of the TSSI are wrong. I set out a simplified explanation in my response to you, in the way that Marx does, i.e. on the basis that commodities, including labour-power exchange at their exchange values not prices of production. Whether money takes the form of a money commodity, such as gold, or the form of money tokens (coins, notes) is irrelevant, here. The latter too can only, in practice represent a given amount of social-labour-time, i.e. the amount they represent as equivalent form. If more of them are put in circulation, the amount of labour-time, which each token represents is reduced, so that money prices then rise - inflation.

But, you are quite right that assume we have gold as a money commodity. Under capitalism, it no longer exchanges against other commodities at its exchange-value, but at its price of production, because the gold producing capitalist must also make the average profit. The price of gold, which can only be measured in terms of its exchange relation to every other commodity, then revolves around this price of production, and consequently the gold/money price of every other commodity is equally influenced by this relation, just as the price of these commodities revolves around their price of production.

Now, as Marx sets out in the Chapter above, besides this fact, those commodities that appear to be produced under average conditions, in terms of the organic composition of capital, may, in fact not do so, in value terms, because the prices of their inputs are now prices of production, not exchange-values. And, so these two things will be different. That is why, as he says, its necessary to transform input prices simultaneously with output prices, because outputs are simultaneously inputs, e.g. cotton as output, is simultaneously raw material input for the yarn producer.

And, indeed, as he says, this is true of labour-power itself, which is why the average rate of profit must be different under price of production than under exchange-values, because if the price of production of wage goods is higher than their exchange value, that means the amount of necessary labour must be greater, the value of labour-power is higher, and so the amount fo surplus labour is lower, resulting in a lower average rate of profit, and vice versa. I will give Marx's quote on that separately.

Boffy said...

Marx's quote from Capital III, Chapter 12.

"We have seen how a deviation in prices of production from values arises from: 1) adding the average profit instead of the surplus-value contained in a commodity to is cost-price; 2) the price of production, which so deviates from the value of a commodity, entering into the cost-price of other commodities as one of its elements, so that the cost-price of a commodity may already contain a deviation from value in those means of production consumed by it, quite aside from a deviation of its own which may arise through a difference between the average profit and the surplus-value.

It is therefore possible that even the cost-price of commodities produced by capitals of average composition may differ from the sum of the values of the elements which make up this component of their price of production. Suppose, the average composition is 80c + 20v. Now, it is possible that in the actual capitals of this composition 80c may be greater or smaller than the value of c, i.e., the constant capital, because this c may be made up of commodities whose price of production differs from their value. In the same way, 20v might diverge from its value if the consumption of the wage includes commodities whose price of production diverges from their value; in which case the labourer would work a longer, or shorter, time to buy them back (to replace them) and would thus perform more, or less, necessary labour than would be required if the price of production of such necessities of life coincided with their value."

Boffy said...

But, none of that changes anything as far as the measurement of the value of labour-power, or of wages, in terms of a money commodity, or money tokens is concerned. It only means that this "value" is now determined on the basis of these prices of production, rather than exchange-values. Underlying it all remains the Law of Value, and the determination of value by labour-time, and as far as the system as a whole is concerned, the total of prices equals the total of exchange-values, or the total value measured in money. Where a money commodity has been replaced by money tokens (fiat money), this also does not change anything, substantively.

Suppose we started with gold as money commodity, and 1 gram of gold equals 1 hour of labour-time, and this 1 gram of gold is given the name £1. Gold coins are replaced by paper notes of £1 denomination, each one claiming to represent 1 gram of gold, which really means it, in turn now represents 1 hour of labour-time, for which it now acts as the universal equivalent form. Now, gold is phased out, and the link between each note and 1 gram of gold disappears. The total value of production for everything in the economy is not changed by this, the total labour-time expressed in £'s, is also then not changed, unless the value of £'s is changed, i.e. the total amount of labour-time they purport to represent as equivalent form. They act just as much as a proxy for social-labour-time as gold once did. The only difference is that the "value" of each individual note, now depends upon how many of them are printed, relative to the amount of value they purport to represent. If an excess is printed and circulated, then the value of each note decreases accordingly.

And, nothing is changed for the total system, other than the above noted changes in necessary and surplus labour-time, and consequent effect on the rate of profit either, precisely because the Law of value continues to operate at a system wide level, as the determinant.

"this possibility does not detract in the least from the correctness of the theorems demonstrated which hold for commodities of average composition. The quantity of profit falling to these commodities is equal to the quantity of surplus-value contained in them. For instance, in a capital of the given composition 80c + 20v, the most important thing in determining surplus-value is not whether these figures are expressions of actual values, but how they are related to one another, i.e., whether v = l/5 of the total capital, and c = 4/5. Whenever this is the case, the surplus-value produced by v is, as was assumed, equal to the average profit. On the other hand, since it equals the average profit, the price of production = cost-price plus profit = k + p = k + s; i.e., in practice it is equal to the value of the commodity. This implies that a rise or fall in wages would not change the price of production, k + p, any more than it would change the value of the commodities, and would merely effect a corresponding opposite movement, a fall or a rise, in the rate of profit. For if a rise or fall of wages were here to bring about a change in the price of commodities, the rate of profit in these spheres of average composition would rise above, or fall below, the level prevailing in other spheres. The sphere of average composition maintains the same level of profit as the other spheres only so long as the price remains unchanged. The practical result is therefore the same as it would be if its products were sold at their real value. For if commodities are sold at their actual values, it is evident that, other conditions being equal, a rise, or fall, in wages will cause a corresponding fall or rise in profit, but no change in the value of commodities, and that under all circumstances a rise or fall in wages can never affect the value of commodities, but only the magnitude of the surplus-value."


Elijah said...

I carefully read and re-read your response and it could really help me get closer and finally reach the answer. If I summarize your points, it will go as follows:

1) wage is the market price of labor-power.
2) This market price can fall above or below the value of labor-power.
3) The value of labor-power is determined by the social labor-time required to reproduce it (or wage goods).
4) Given that each money token represents or purports to represent a definite social labor-time, so proportionally we can measure the (exchange) value of labor-time in money terms.
5) But under capitalism, commodities (including the labor-power and wage goods) do not exchange at their exchange values, but at their prices of production. So the value of labor-power is now determined based on its price of production.
6) Here appears a divergence between value and price of production.
7) The law of value still exists and works, but in a different form.
8) When the economy as a whole is concerned, the total of prices equals the total value measured in money.

Elijah said...

As for No. 8, it sounds logical to me. but it'll be better if you give me a numeric example please.

Boffy said...

1) Correct, 2) Correct, 3) Correct, 4) We can measure the value of labour-power in these money terms, as we can measure any other commodity, 5) labour-power does not have a price of production as other commodities do. Let me explain.

The price of production of a commodity is its cost of production (c + v, or k) - itself now measured in money terms on the basis of the prices of production of all of the commodities (inputs) required for its production, which now as Marx describes diverge also from their exchange-value - plus average profit. Look up the definition of average profit in the glossary as its not the same as the average rate of profit. The latter is the average annual rate of profit, and is calculated on the advanced capital - which again is not the same as the laid out capital(c + v). That provides an amount of profit, which is then added to the cost of production, meaning the rate of profit, or profit margin (p/k) diverges also from the annual rate of profit.

Unless capitalists make the average annual rate of profit, they do not make additional investments in these spheres, and move capital to spheres where the annual rate of profit is high. Supply declines in the former, and rises in the latter, so that market prices rise in the former, and decline in the latter, thereby restoring an average annual rate of profit in both spheres. This is true of all of the wage goods production, which is why the value of labour-power, then becomes determined by all of these prices of production of wage goods. Incidentally, this is true of all non-capitalist production too, as non-capitalist producers must also buy their inputs at these prices rather than at their exchange-values.

However, there is no price of production of labour-power in the same way, for the simple reason that the worker does not add an average profit to the cost of production of their labour-power. It is sold at its cost of production, end of story, but its cost of production is no longer equal to its exchange-value.

That deals also with 6). 7) is correct, see Engels conformation of that in his Supplement to Capital III. 8) Correct, but only as further defined by Marx in the closing chapters of Capital III. In other words, its not possible to fully realise the value of all production, because of distribution costs and so on.

The numeric example is given by Marx in his initial outline of the transformation of exchange-values into prices of production in Capital III, Chapter 10, and also in his further refinements in Chapter 17, and Chapter 50.

Elijah said...

Thank you Boffy for correcting me by your supplemental explanation. As for wages, I have another question. We know that wage is determined not only by supply and demand in the “labor market,” but at the same time by the ongoing class struggle, i.e., the level of organization, unionization, labor militancy, strike, etc. and minimum wage, as a historic achievement of such struggles, among many others, has come to existence in order to ensure workers’ reproduction. But what about “maximum wage” when it comes to some highly-skilled workers in strategic industries (e.g. oil industry) or some high-paying public servants, supervisors, middle managers and so on? There has appeared a layer of bureaucratic, affluent laborers, whose wages are well above their fellow workers’. Is there any concrete benchmark against which we can put forward and set a “maximum wage” for them from a Marxist point of view? If so, what factors should we consider in determining that, for instance, their wages should be at most 3 or 5 times the minimum wage of their fellow workers.

Boffy said...

On the first point - its industrial/economic/sectional/distributional struggle not class struggle that is involved here, as Marx, Engels and Lenin describe (see Marx, "Value, Price and Profit", and Lenin "On Strikes", for example) - there is flexibility, as Marx describes in the above, and in Wage-labour and Capital, within which such struggles can raise wages, or reduce the working-day, for example. But, the idea that these struggles can determine the relations on their own, is idealism and subjectivism, not materialism, as Marx and Engels set out, and as Lenin and Trotsky also later describe. As I wrote recently, its high wages resulting from improved economic conditions that enables workers to rebuild organisations, and engage in militant actions not vice versa. As Engels put it,

“The history of these Unions is a long series of defeats of the working-men, interrupted by a few isolated victories. All these efforts naturally cannot alter the economic law according to which wages are determined by the relation between supply and demand in the labour market. Hence the Unions remain powerless against all great forces which influence this relation. In a commercial crisis the Union itself must reduce wages or dissolve wholly; and in a time of considerable increase in the demand for labour, it cannot fix the rate of wages higher than would be reached spontaneously by the competition of the capitalists among themselves.”

(Condition of the Working Class, Ch. 10)

On the second point, why would a Marxist want to do so, even if it were possible. For one thing, though it has to be analysed in each specific case, these higher wages reflect the fact of complex as against simple labour, i.e. the labour provided, produces more value per hour than an hour of simple labour, and so also produces more surplus value per hour, as discussed by Marx in Capital I. Furthermore, it was historically amongst these higher paid, skilled workers that socialist ideas were first developed. The first trades unions were craft unions, the members of the Communist League, as Engels describes were invariably petty-bourgeois, skilled craft workers, such as printers etc.

The idea of embourgeoisement of affluent workers, was put forward by bourgeois writers in the 1960's, and was linked to various theories of Postcapitalism. Those ideas were comprehensively rebutted by Marxist writers, and by the Affluent Worker studies of Goldthorpe et al, looking at the activities and ideas of affluent car workers in Oxford etc.

Marxists have no interest in tinkering with such elements of the market, especially as any such maximum wage, even were if feasible, would simply result in larger profits, not any benefit for other workers. The answer is not a maximum wage, but workers ownership and control of the means of production. As Marx and Engels describe in Capital III, when failed Lancashire textile firms were turned into worker owned coops, the former owners were often taken on as paid managers, and the salaries the workers paid them an accordingly much lower amount than they previously paid themselves.

Elijah said...

You are quite right that the question I raised has to be analyzed in each specific case, and I have presupposed the workers’ control of production as a necessity. So let me make myself clear by an example: There are some skilled workers, working for a natural-resources exporting company in the public section, not for a private capital. Here, as with many other cases, a hierarchical structure has been stratified, with the state-owners on the top, followed by a layer of high-paying managers, supervisors and foremen. The latter, due to its economic interests, has become totally bureaucratic, conservative and somehow lackeys of the owners to the extent that openly denounce their fellow worker’s strike and get involved in union busting. The wage gap between this layer and the rest is really high (roughly 7 times or more) and therefore unacceptable and illogical, in the sense that they are doing no more complex labor than the rest does. So a committee is formed to wage a struggle, around a transitional program, to impose worker’s control on (the means of) production (preventing layoffs, dismissing some managers, choosing elected representatives, controlling financial books and so on). This situation, as described, requires the program to put a cap on manager’s salaries, under worker’s control- something resonating the “maximum des salaires,” published by the Paris Commune. But that how and based on to what benchmark, is an open question.

Boffy said...

The premises underlying your example are false. Let's look at the situation you describe. We have a society where capital is still the dominant form of property. It doesn't matter whether this is state or non-state capital, for the reasons Marx and Engels set out in Anti-Duhring. State capital is merely a more developed, monopoly form, and as Kautsky described, the state capital is far more powerful than non-state capital in oppressing its workers.

So we have a capitalist system, and a capitalist state. Now, you presuppose workers' control of production as a necessity, but that is impossible. As Trotsky describes - - within a capitalist context, it requires at least a revolutionary situation, and dual power, because otherwise there is no way that workers could impose such a regime. Its why the demands of the Lassallean statists for nationalisation under workers control are so much utopian hot air, that under current conditions can only dupe the workers and mislead them, and so which are in reality reactionary. The demand for Workers Control can only be raised at a societal level, as part of a class struggle for control of capital as a whole, and so, also for a workers state.

The only instances where workers control can exist, within capitalism, as a stable form is in the worker-owned cooperatives, which is why they form such an important educational tool within that struggle. As Marx described in relation to the Lancashire Co-ops, and as Connolly describes in relation to Ralahine etc. its only there that such workers control can also determine the wages paid to managers, but that also requires that, in society at large there are sufficient of such people available that competition between them, enables the workers to pick and choose which to employ at the given wages. Its why Engels wrote about the need for such layers to be drawn into the Workers Party at the point that they are large enough to absorb them, because they would play a vital role in the process of transition.

What is more, in a global capitalist economy, its always possible for such managers etc., to seek employment in other countries. So, without the required material conditions of developed means of production, a developed free education system that makes available a large supply of administrative and supervisory workers, and so on, any program demanding a maximum wage, is itself utopian, and consequently reactionary. Without these conditions, and a consequent development of class consciousness, resulting in a revolutionary situation/dual power, a demand for workers control is also utopian and reactionary. An, in such conditions, you can demand no layoffs and so on as much as you like, but if the firms private or state go bust, what you gonna do? Who ya gonna call?

Elijah said...

I’d previously read Trotsky’s article and found myself in total agreement with his brilliant analysis. I should add some additional points to the above example, which is a real, live one we are facing with, to illustrate the situation better. A kind of dual power has appeared in the above-mentioned company based on struggles from below, and there are some discussions by workers on founding a cooperative. So your premises are not yet, but being fulfilled (however I see such a cooperative not as an end in itself but just as a transitional, progressive demand, for the simple reason that it can be crushed, suffocated or absorbed by Capital easily at last). But let’s skip over the question of workers’ control. The more important point I left out to say is that the government has already defined a maximum wage legally for his managerial layer, which is between 7 to 21 times (!) the minimum wage of their skilled fellow workers (on what basis? Nobody knows!). so lowering this cap and appropriating the surplus resources left over by this “wage-cut” is part of workers’ main demands. The extent of such reduction was the core of my question. Here you come to the correct conclusion that:
“it’s only there that such workers’ control can also determine the wages paid to managers, but that also requires that, in society at large there are sufficient of such people available that competition between them, enables the workers to pick and choose which to employ at the given wages.”

Boffy said...

Firstly, as Trotsky says in his brilliant analysis, its not possible to have any kind of dual power in a single company.

"The closer it is to production, to the factory, to the shop, the less possible such a regime is, for here it is a matter of the immediate, vital interests of the workers, and the whole process unfolds under their very eyes. workers’ control through factory councils is conceivable only on the basis of sharp class struggle, not collaboration. But this really means dual power in the enterprises, in the trusts, in all the branches of industry, in the whole economy...

...a bourgeoisie that feels it is firmly in the saddle will never tolerate dual power in its enterprises. workers’ control consequently, can be carried out only under the condition of an abrupt change in the relationship of forces unfavourable to the bourgeoisie and its state. Control can be imposed only by force upon the bourgeoisie, by a proletariat on the road to the moment of taking power from them, and then also ownership of the means of production. Thus the regime of workers’ control, a provisional transitional regime by its very essence, can correspond only to the period of the convulsing of the bourgeois state, the proletarian offensive, and the failing back of the bourgeoisie, that is, to the period of the proletarian revolution in the fullest sense of the word."

And, even then, a condition of dual power at the level of the state cannot last long, as state power must quickly be assumed by one or the other of the contending classes. Further, as Trotsky describes in opposing the concept of Socialism In One Country even that is not tenable for any length of time, because other capitalist states would intervene, requiring the revolution being made permanent so as to become international.

The only condition for workers control at the individual enterprise level is via workers co-ops, but if Socialism In One Country is not possible socialism in one enterprise certainly is not. It means as Marx describes that in the enterprise capital still constitutes the form of property, even though now capital owned and controlled by workers. It implies continued commodity production for the market, and everything that goes with it. It means that capital and its state will continue to put obstacles in its way, and to reabsorb it. It also requires a concept of permanent revolution to draw in other workers and enterprises into a wider cooperative federation, and class struggle.

The idea of a government imposing a maximum wage in such conditions is meaningless and utopian, because the managers can simply move elsewhere, to other enterprises, or abroad. There is no benefit to workers as the additional surplus value is appropriated by the enterprise, which in the conditions described means the capitalist state.

The only condition for any real control in an enterprise

Elijah said...

In regard to workers’ control, I see no contradiction between my position and that of Trotsky. Of course “The closer it is to production, to the factory, to the shop, the less possible such a regime is” but it is not “impossible”, both theoretically and empirically, only in the short run. So can be tactically demanded under specific conditions. There are dozens of cases that struggle at an individual enterprise gets sharp, workers occupy the company, the owners run away, top managers are purged, but production is not interrupted and goes on very well by workers themselves. This can even lead to forming cooperatives, rising the level of self-confidence and radicalism among other parts of the working class. But I do know and emphasize again that such cases are short-living, not stable and long-lasting ones. If social and political conditions are not ripe enough for these experiences to expand and breathe, if they are confined within capitalism, they will be doomed to failure in the final analysis (as many examples in Latin America show and as did the destiny of Utopian Socialism in Marx time). The point is that such rare, exceptional cases can actually happen here or there, whether we like it or not, but when this happens, fait acompli, the rest depends on how socialists react to that, seize on this opportunity and take the lead. And, in some other cases, I for one think that a program for workers’ control can be tactically put forward for an individual enterprise, as a transitional demand, if and only if it fits the situation of its workers, can act as a trigger and set in motion other parts of the labor movement.
Your argument is like saying that it is wrong to demand increasing taxes on corporations, for they can move part of their profits to safe havens abroad.
You have every right not to be convinced by my argument, for I have not spelled out the whole scenario. But let’s get back to my question. As I said, it’s been for several years that the government has in fact imposed a maximum wage on its insatiable managers and this has never led to a situation that “the managers can simply move elsewhere, to other enterprises, or abroad”. No, they are instead alive and well, reluctant to move elsewhere, parasitically fattening themselves up, at the expense of others. These managers are mostly government cronies, with even no special management skill. Moreover, we are talking about a giant natural resources exporting company, and these resources do belong to the public, not just to a tiny managerial layer and even to the company’s employees alone. That is why the reduction of managers’ astronomical wage cap is here essentially a demand of the whole working class, of those making a living. But how much reduction? This was partly answered by you or better to say I got some ideas from your arguments. How to allocate this additional surplus value? It is something to be democratically decided by workers.

Boffy said...

You are quite right that in some cases, workers' control becomes possible. You cite some instances. In Britain, in the 1970's, workers at Upper Clyde Shipbuilders (UCS) occupied the workplace that was threatened with closure. Having occupied they restarted production under workers control. But, this raises all sorts of questions about financing, credit and so on, as also the workers at Zanon in Argentina discovered. At UCS, where the Stalinists were influential through a leading union steward, Jimmy Reid, they argued for the occupation to be a tactic merely to have the government nationalise it. That resolved the question of financing etc., but the cost was inevitably that the workers control ended - as also happened when cooperative coal mines were nationalised by a Labour government in 1945, alongside the privately owned mines.

Another example, where a demand for Workers' Control can be raised has been seen recently in relation to COVID. It was quite possible - though few did because thy were all more concerned to try to embarrass right-wing governments, or for some wanted to encourage economic chaos - for socialists to raise the demand that workers should be at work, but only on the basis of Workers Control and/or Workers Inspection to ensure that workplaces were safe. In fact, given furlough schemes, and the fact that capital is strong and workers are weak, there was little chance that employers would have conceded such demands, however.

But, this illustrates, why such demands raised outside a revolutionary situation, as Trotsky describes, are NOT transitional in nature. Read the Transitional programme again, and you will see that the actual transitional demands are not some magic bullett applicable at all times, but only become transitional themselves, BECAUSE of the revolutionary situation in which they are raised. Otherwise, as he says, they are either simply revolutionary phrasemongering, as Marx criticised Guesde, or else they amount really to reformist demands for class collaboration by the trades union tops and the employer.

As Marx says, in conditions where the capitalists remain firmly in charge - and that applies doubly when the capitalist state is in charge - such demands are not possible. Again that is not an absolute, because there are some cases, where benevolent owners of capital have voluntarily turned it over to workers to form a coop, or worker owned enterprise. That is what the Utopians hoped for, and is what made their ideas Utopian, as against the ideas for, example, of Robert Owen, who recognised the requirement for also class struggle.

On taxation of corporations I don't favour it, for the reasons Marx described. Corporations are socialised capital the same as cooperatives. Would you favour higher taxes on large cooperatives, thereby depriving them of the resources to accumulate capital? Would you favour higher taxes on a large corporation that was actually under workers control? I think not. What instead I favour is high taxes on unearned incomes, i.e. on the interest received by shareholders and bondholders in those corporations, but that is another discussion.

Boffy said...

In the actual example you give, just because the managers have not moved does not mean they could not, unless, of course, you are going to impose restrictions on freedom of movement, as the Stalinists did in Eastern Europe, and again, that then raises a whole host of questions about the path that takes you down by giving what would be an authoritarian state such powers, which could then (and would) be used not just against parasitic managers and other social layers, but against workers themselves. Again, this illustrates the point about actual workers control at the level of society itself, not just the enterprise, i..e of the need for a Workers State itself.

The reality is that in the conditions you describe, the resources only belong to "the public" in the abstract - just as the socialised capital of any corporation only belongs to the associated producers in the abstract. In practical terms, so long as control is exercised by the bourgeoisie, and its agents, be they government officials, or top ranking executives, it is used on behalf of the ruling class, and at its disposal. That is why reducing those wages would not benefit the workers in the enterprise or at large, but only state capital, and so capital as a whole. For the reasons Trotsky describes, and indeed Marx in COGP, or Kautsky Erfurt Programme, or Pannakoek, the chance of workers in such an enterprise successfully demanding workers' control, outside a revolutionary situation are near zero. It can be raised propagandistically, in the same way as for example, I can say, that, the NHS in Britain ought to be under workers control, provided that, in doing so, you say, as I do, that the state will in fact never allow any such thing!

If we take your description of the managers, they continue to "fatten themselves up" meaning that the reason they are mot moving to other enterprises or abroad is that even the maximum wage imposed provides them with a more lucrative wage than were they to move! What do you think they would do if that were not the case! In Russia in 1918, Lenin found that they had to bring back Tsarist state officials, as well as former bosses, because they lacked the actual expertise themselves. It imposed huge costs in terms of having to establish commissars to watch over them. Its also why Lenin after the Civil War, appealed to western corporations to invest in Russia - though he only succeeded with Armand Hammer of Occidental - in order that they could get, not just the latest technology, but also the managerial, and technical skills they lacked.

The fact remains, as Lenin describes, the class struggle is not an economic, distributional or sectional struggle over higher wages, or how the surplus value is distributed. That is the position of the reformists/liberals/social-democrats, and of the Economists, syndicalists and Luxemburgist spontaneists. The class struggle is a political struggle that is fought out over the dominance of different forms of property, and as such can only be fought at a class against class level at the level, at least, of society.