Tuesday, 4 August 2015

Capital III, Chapter 11 - Part 3

Looked at another way, if we take the total social capital C + V + S, then the rise in wages increases V. But, the total amount of new value created by the total social labour has not changed. Consequently, the rise in V is cancelled out by a fall in S. This is why, contrary to the claims of some bourgeois economists, wage increases do not cause inflation. By the same token, a general fall in wages does not result in deflation, or a general fall in prices. Just as a general rise in wages results in a fall in surplus value, so a fall in wages leads to an increase in the amount of surplus value, and rate of profit.

Similarly, just as a rise in the price of production of commodities produced by capital with a lower than average composition, causes their prices to rise, which results in a curtailment of demand, which in turn results in a reduction in supply, brought about by a migration of capital, so a general fall in wages has the opposite effect. A general fall in wages results in a relative increase in demand for commodities produced by capital with a lower than average composition, because their prices fall, which results from capital moving to this sphere, and away from those areas with a higher than average composition.

This is the objective material basis for the observed phenomenon that economies with low wages tend to have lower organic compositions of capital, and those with higher wages have higher organic compositions of capital. The former, therefore, tend to be more backward economies, with lower levels of productivity, whereas the latter are more advanced economies. As many Asian economies have found, an important means of moving towards a more advanced economy is to gradually move towards being higher-wage economies, for this reason.

As Marx pointed out, in Volume I, where wages are low, the price of labour is usually high, and vice versa. The example he gives in relation to the earthenware producers demonstrates why this is. They had objected that being brought under the limitations of the Ten Hours Act would destroy them.

“In 1864, however, they were brought under the Act, and within sixteen months every “impossibility” had vanished.

'The improved method,” called forth by the Act, “of making slip by pressure instead of by evaporation, the newly-constructed stoves for drying the ware in its green state, &c., are each events of great importance in the pottery art, and mark an advance which the preceding century could not rival.... It has even considerably reduced the temperature of the stoves themselves with a considerable saving of fuel, and with a readier effect on the ware.'

In spite of every prophecy, the cost-price of earthenware did not rise, but the quantity produced did, and to such an extent that the export for the twelve months, ending December, 1865, exceeded in value by £138,628 the average of the preceding three years.” (Capital I, Chapter 15 p 447) 

This kind of drive towards greater efficiency, wherever capital is faced with higher labour costs, is common. Often, as with the pottery industry here, the increased efficiency is such that surplus value rises sufficiently to bring about an absolute increase in the quantity of labour employed at the higher wages, even if the amount of labour employed falls relatively. Even if more labour-power is not employed in the industry in question, because for example, the potential to expand the market for its commodities is limited, the increased volume of surplus value, facilitates the creation of new capitals in other industries, which then absorb additional labour-power. That is why, taken over the long-run, the massive increase in productivity brought about by mechanisation, has not only not resulted in increasing levels of unemployment, but, on the contrary, has led to higher and higher levels of employment.

It doesn't matter whether the rise or fall in wages is because of a change in the value of labour-power. Wages might move higher if they were previously below the value of labour-power, or may move temporarily above the value of labour-power, if the demand for labour-power is particularly high compared to the supply. Similarly, wages may be forced below the value of labour-power, where the demand for labour-power is particularly low compared to the supply. Where previously high wages have allowed workers to accumulate savings, wages can be forced below the value of labour-power so that workers have to exhaust these savings.

Similarly, wages can be forced below the value of labour-power if workers can be persuaded to make up the difference with borrowing. But, this can only borrow from the future. At some point, the workers must not only have sufficient income to buy their necessities, but sufficient also to cover the cost of borrowing to meet their past need for necessities. Either wages must rise to cover that, or else the debt must be written off by one means or another.

The extent of attempts to avoid that inevitability is, in fact, demonstrated by the growth of the pay day lenders. Their existence merely demonstrates that increasing numbers of people, driven into debt to compensate for their inadequate wages, are then driven into even worse debt, to cover the cost of servicing their existing debt. The inevitable next stage is a default on that debt, when there is nowhere else to go.

If the change in wages is due to a change in the value of labour-power, the only variation would be if the change in the value of commodities that determine the value of labour-power also affected the value of the constant capital. For example, if the price of petrol rises, this affects the value of labour-power, because it increases workers' living costs. But, an increase in the price of petrol also affects the cost of constant capital, because it increases the cost of transporting materials from one place to another etc.

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