Its unworthy of Mill, Marx says, to continue to present the appearance of the relation between capital and labour as being really an exchange between commodity owners. It is the kind of thing that might be expected of a “McCulloch, Say, or Bastiat.”
What the capitalist actually advances to the worker is not money or commodities, as wages, but only other people's labour, the product of which, first as commodities, and then as money, the capitalist has appropriated. But, the fact that what the capitalist possesses, as hoarded labour, congealed labour as commodities or money, is exchanged with immediate labour, does not help Mill to resolve his dilemma as to why this immediate labour does not exchange at its value. So, Mill writes,
““What determines the share of the labourer, or the portion in which the commodity, or commodity’s worth, is divided between him and the capitalist. Whatever the share of the labourer, such is the rate of wages… It is very evident, that the share of the two parties is the subject of a bargain between them […] All bargains, when left in freedom, are determined by competition, and the terms alter according to the state of supply and demand” ([Mill, Elements, pp. 41-42; Parisot,] pp. 34-35).” (p 93)
Mill's way out of this problem is to resort to supply and demand, as this quote indicates. And, of course, superficially, this is undeniably the case. Wages are the phenomenal form of the value of labour-power, in the same way that the market price of any commodity is the phenomenal form of its exchange-value. And, market prices are formed as a consequence of the interaction of demand and supply. As Engels says about it, in respect of wages.
“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 in England p 243)
But, fluctuations in demand and supply beg the question of fluctuations from what? It implies the existence of some equilibrium point, which thereby begs the question of what determines this equilibrium? For reformists and syndicalists, with a subjective view, the question is simply resolved on the basis of the will of the contending forces. For syndicalists, the question of wages, for example, comes down to the workers needing to be more militant, so as to force greedy bosses to pay higher wages.
But, as Marx demonstrates, the ability of workers to be “more militant” and to demand higher wages, or a shorter working day, is not simply a subjective matter of their willpower. It is much easier for workers, in periods of high demand for labour-power, when the supply of labour-power is relatively scarce, to be “more militant”, and to demand higher wages, etc. than when unemployment is high. It is harder for capital to resist paying higher wages, when each capital is competing with others for relatively scarce labour-power.
What Mill cannot escape is what determines the price of labour at the equilibrium point? All he has done by introducing the question of demand and supply is to push the question back one step, because, even if we assumed a situation where the demand and supply were in stable equilibrium, we would then have an equilibrium price of labour that was below its exchange-value, i.e. what it was paid for its product would still be lower than the value of that product, as determined by the law of value. In effect, what Mill does is to fall back on Adam Smith's view that labour creates new value embodied in products, but does not get paid this value in wages, because labour is in excess supply, whilst capital is in short supply.
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