Marx cites two further propositions from Barton.
““Fixed capital […] when once formed, ceases to affect the demand for labour,” (incorrect, since it necessitates reproduction, even if only at intervals and gradually) “but during its formation it gives employment to just as many hands as an equal amount would employ, either of circulating capital, or of revenue” (l.c., p. 56).” (p 577)
““The demand for labour […] depends absolutely on the joint amount of revenue and circulating capital” (l.c., pp. 34–35).” (p 577)
Marx comments that “Indisputably, Barton has very great merit.” (p 577)
Marx cites Smith's view that the demand for labour grows in direct proportion to capital accumulation. In contrast to Smith, Malthus puts forward the idea that the surplus population arises due to capital not accumulating as fast as population growth.
“Barton was the first to point out that the different organic component parts of capital do not grow evenly with accumulation and development of the productive forces, that on the contrary in the process of this growth, that part of capital which resolves into wages decreases in proportion to that part (he calls it fixed capital) which in relation to its size, alters the demand for labour only to a very small degree. He is therefore the first to put forward the important proposition “that the number of labourers employed is” not “in proportion to the wealth of the state”, that relatively more workers are employed in an industrially undeveloped country than in one which is industrially developed.” (p 577)
This relative difference, however, is reversed when it comes to the absolute number of employed workers. The developed economy, because it has higher levels of productivity, and a greater existing fixed capital stock, is able to produce a larger net product, and to grow at a faster pace. This also gives the lie to the Keynesian and neo-Keynesian view that capital is able to grow faster as a result of, or even requires, periodic physical destruction of capital. In Chapter 17, Marx demonstrated that it is the destruction of capital value, not the physical destruction of capital that facilitates the resolution of crises, and renewed periods of accumulation.
In the third edition of his “Principles”, Ricardo adopts Barton's position, but,
“he not only says that the demand for labour does not grow proportionally with the development of machinery, but that the machines themselves “render the population redundant” [l.c., p. 469], i.e., create surplus population. But he wrongly limits this effect to the case in which the net produce is increased at the cost of the gross produce.” (p 578)
As Marx has already shown, both the gross revenue and the net revenue can rise, whilst the number of workers employed falls relatively. It simply requires that the wage share of total output falls relative to the profit share.
“Essentially’ however, the whole of the absurd theory of population was thus overthrown, in particular also the claptrap of the vulgar economists, that the workers must strive to keep their multiplication below the standard of the accumulation of capital. The opposite follows from Barton’s and Ricardo’s presentation, namely that to keep down the labouring population, thus diminishing the supply of labour, and, consequently, raising its price, would only accelerate the application of machinery, the conversion of circulating into fixed capital, and, hence, make the population artificially “redundant”; redundancy exists, generally, not in regard to the quantity of the means of subsistence, but the means of employment, the actual demand for labour.” (p 578)
Here is given the lie to the idea that by restricting immigration, the labour supply can be reduced, so as to raise wages. It simply means that in addition to the possibility that capital would simply move overseas to where it could find available labour supplies, it will simply be encouraged to replace labour with machines, thereby increasing unemployment, and pushing down on all wages. This also contradicts those subjectivist theories of the reformists and syndicalists that the wage share, or wages generally, can be increased simply as a result of “more militancy” by workers. Workers in periods of high employment, may thereby find it easier to win pay rises, and better conditions, which raise their confidence and facilitates their organisation, so that they appear to derive these higher wages from this “more militancy”, but the higher wages of workers, during such periods of high demand for labour, simply encourages capital to develop and introduce new forms of labour-saving technology, which replaces labour, creates a relative surplus population, so that this unemployed population presses down on wages, even sending them below the value of labour-power.
“Barton’s error or deficiency lies in his conceiving the organic differentiation or composition of capital only in the form in which it appears in the circulation process—as fixed and circulating capital—a difference which the Physiocrats had already discovered, which Adam Smith had developed further and which became a prepossession among the economists who succeeded him; a prepossession in so far as they see only this difference—which was handed ‘down to them—in the organic composition of capital. This difference, which arises out of the process of circulation, has a considerable effect on the reproduction of wealth in general, and therefore also on that part of it which forms the wages fund. But that is not decisive here. The difference between fixed capital such as machinery, buildings, breeding cattle etc. and circulating capital, does not directly lie in their relation to wages, but in their mode of circulation and reproduction.” (p 578)
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