Daniel DeLeon – What Means This Strike - Part 1 of 3

The labour movement has long suffered from ideas being purveyed that appear militant and revolutionary, and which are advocated in all honesty by those who purvey them, with the best of intentions, but which, in reality, are rooted in bourgeois ideology. Indeed, as Marx and Engels describe in The Communist Manifesto, sometimes those ideas are even reactionary relative to bourgeois ideology itself, as with Feudal Socialism, and Moral Socialism. For the early advocates of the interests of labour, the problem lay in having to pick up the tools of the bourgeoisie themselves as the first means of trying to understand the world in which they lived, and so the first critiques utilise the writings of the bourgeois economists such as Smith and Ricardo, whilst then providing a critique of the workers condition, whilst still doing so from within that framework, and utilising its categories. But, time and again, even after Marx had uncovered the real relationships, the labour movement, including that part of it that calls itself Marxist, has abandoned the explanations that Marx provided, and simply repeated those old dogmas and fallacies. 

De Leon's speech is good rebel rousing but bad economics - Marxist or otherwise. His examples fall into the same trap that Marx criticised in Adam Smith - at best. DeLeon's arguments like many of the earlier responses to capital from the standpoint of the workers, rather than of the bourgeois economists, takes as its basis the economic theories, and categories of Ricardo. He fails to account for constant capital, dividing the product up into just wages and profits. Even when he introduces machinery, he continues this as though the machine has no cost in terms of wear and tear and depreciation etc. 

So, for example, De Leon describes the position of a capitalist who produces cloth. 

“In the factory of which my broker bought stock, workmen, thousands of them, were at work; they have woven cloth that has been put upon the market to the value of $7,000; out of the $7,000 that the cloth is worth my wage workers receive $2,000 in wages, and I receive the $5,000 as profits or dividends.” 

Then after a machine is bought, DeLeon writes,

“What is the situation now? No. 1 pays, as before, $2 a day, but to only five men; these, with the aid of the machine, now produce twice as much as the 10 did before; their product is now $80 worth of wealth; as only $10 of this goes in wages, the capitalist has a profit of $70 a day, or 250 per cent more.”

This line of argument is taken directly from Ricardo. Nowhere in the value of $7,000 is any account taken of the raw material required for its production, of the wear and tear of machinery and other fixed capital etc. My recent posts on Theories of Surplus Value, Chapter 15, illustrate Marx's criticism of these weaknesses in Ricardo's arguments, and Marx later, in Chapter 21, addresses the continuation of those same weaknesses when put forward by the early workers' representatives such as Ravenstone and Hodgskin. But, it is even worse than that of Ricardo. If DeLeon was going to ignore the value of constant capital (material and wear and tear) in his calculation here, he should have realised that if 5 workers rather than 10 are employed, only half the amount of new value as previously is created, or at least this is the case if all firms in the industry follow this approach. He seems to have fallen into a sort of commodity fetishism, whereby he sees the value as somehow intrinsic to, and resident in the commodity, and is thereby doubled if twice the quantity of commodities are produced. But, as Marx demonstrates, in such a situation the value of the output would be halved, and the value of each unit of output would fall to 25% of its previous amount.

DeLeon's argument is also fundamentally wrong, in terms of the example he provides, because he confuses dividends, which are a payment of interest to money lending capitalists, in his example a shareholder, with profits, or more particularly profit of enterprise, which, as Marx describes in Capital III, is the return to the advanced productive-capital, after the payments of rent, interest and taxes have been deducted. But, that is not the main issue here. 

The underlying argument that De Leon puts forward, just as with the arguments put forward by those earlier representatives of the workers, that the wealth that the workers get back in wages, is wealth that they have produced by their labour, rather than wealth that has somehow magically appeared in the hands of the capitalist, who hands it over to them, is, of course, correct. But, that is a truth that was known to Adam Smith, and to Ricardo. Adam Smith understood that value is labour, and surplus value is surplus labour. Following on from the Physiocrats, he understood that surplus value is created in production. He understood that the surplus labour was a consequence of the labourer performing more labour than was required for the reproduction of their labour, a reality that predated capitalism, and enabled direct producers themselves to accumulate out of their own surplus production. His understanding of that was, confused, because he failed to distinguish between the value created by labour, and the value of labour-power, and by failing to make this distinction, he prevented himself from presenting the surplus value as simply the difference between these two. 

The question, even for Smith and Ricardo is not the source of value being labour, or, particularly in the case of Smith, the source of surplus value, but providing an objective determination of the extent of that surplus value, i.e. what determines the profit is 10%, rather than, 20%, or 30%. For Smith, it comes down to a question of supply and demand, that labour is in excess supply, and capital in short supply, so that the market price of the former is lower than its value, and the latter above its value. For Ricardo, an average rate of profit is simply assumed to exist as handed down by custom. They end up with an essentially subjectivist determination of profit, and it is one of Marx's greatest achievements that he overcame that inadequacy, and provided an objective determination of surplus value. 

DeLeon also puts forward a very subjectivist view of capitalism. The same subjectivist views can be seen from various left reformists and syndicalists today. Comments such as "Society is shaped by the capitalists relentless drive to increase their wealth”, “Capitalism causes poverty, unemployment and so on." Can be frequently observed. But, these kinds of ideas predate Marx's own explanation of the dynamics of capitalism. They are the ideas put forward by the early representatives of labour, still working with the tools for analysing the capitalist society around them that bourgeois political economy had provided them with, in particular Ricardo. Marx analyses some of these writings in Theories of Surplus Value, Chapter 21. He notes, 

“Whereas the only concern of Ricardo and others is to understand the conditions of capitalist production, and to assert them as the absolute forms of production, the pamphlet and the other works of this kind to be mentioned seize on the mysteries of capitalist production which have been brought to light in order to combat the latter from the standpoint of the industrial proletariat.” 

These arguments were constrained because, whilst they attempted to use these tools for the benefit of the workers, and to expose the contradictions in the arguments of the bourgeois economists, from that perspective, they did so, whilst continuing to accept the categories and framework that bourgeois political economy itself created. DeLeon's arguments, rather like the ideas of the Lassalleans, in relation to the Iron Law of Wages, are themselves limited in the same way. These ideas were criticised by Marx, for example, in his Critique of the Gotha Programme, and also were criticised in the same terms later by Lenin, when they were put forward by the Narodniks. They belong to the pre-Marxist petit-bourgeois socialism of people like Sismondi, whose criticism of capitalism stemmed from an understandable dislike of its more unpleasant features, but, in so doing, reduced everything to the subjective desires of the capitalists rather than the objective dynamics of the system. 

What characterises capitalism, Marx argues, is not this drive for more wealth by capitalists, but the necessity of capital to expand, for more and more profit to go not into consumptive wealth for the capitalists, but into investment in production, into the employment of more machinery, raw materials, and labour. And Marx makes clear that capitalism does not create poverty, other than in a relative sense. The idea that capitalism causes immiseration of the working class is, in fact, an idea put forward by the petit-bourgeois socialists, and later by the Stalinists. Lenin himself argued vehemently against that idea put forward by the Narodniks, and demonstrated clearly in "The Development Of Capitalism In Russia", and other writings precisely how capitalism increased the standard of living of the working class.

Forward To Part 2