Opposition to the Economists (Based on the Ricardian Theory)
In this chapter, Marx examines the theories that developed reflecting the growth of the working-class, which start from the ideas developed by Ricardo and his followers. The basic premises of social-democracy, which starts from an acceptance of the capitalist mode of production, and to bargain within it, in such a way as to best ameliorate the condition of workers, flow directly from the ideas of Ricardo.
Ricardo, though he did not analyse the source of surplus value, as Smith had done, did recognise that the fate of the worker was to produce wealth for someone else. Where Smith romanticised labour, and believed that the natural process of capital accumulation would cause the price of capital to fall, and wages to rise, so that profit disappeared, Ricardo had no such illusion. Ricardo believed that the working-class would increase in size absolutely. Nominal wages would rise, squeezing profits, because the cost of food would rise. But, rising nominal wages would not keep pace with the rise in food prices, so real wages would fall. The position of the workers would deteriorate. The smaller the proportion of the population placed in this unfortunate position of the labourer, therefore, Ricardo believed, the better. That is also why Ricardo argues the importance of the Net Product/Revenue, i.e. surplus value, as against Smith, who was fixated upon the Gross Product/Revenue. Ricardo's theory is founded upon the idea that it is the growth in the absolute size of the working-class that is the basic cause of both the falling rate of profit, and the fall in worker's living standards.
It is the increase in the absolute number of workers which creates the demand for additional food production. With diminishing returns in agriculture, as less fertile land is introduced, to meet this higher demand, food prices rise, rents rise, nominal wages rise, profits are squeezed, but real wages fall. But, Ricardo argues, the real purpose of production is not to maximise the gross output, but to maximise the net output, i.e. the surplus product or surplus value. The smaller the number of workers required to produce a given quantity of output, therefore, the better. Firstly, fewer workers means that a smaller proportion of the total output has to go to reproduce their labour-power, leaving a larger proportion – if not a larger total amount – of output as a surplus product. So, a larger proportion of society can be supported in non-productive activity, and generally more congenial lifestyle, and cultural activity, by a smaller proportion of workers.
In terms of a Benthamite, utilitarian philosophy, this is maximising the welfare of the greatest number. Simultaneously, by minimising the absolute number of workers required for this production, the demands of population, on food production, are minimised, so that the need to bring in less fertile land is reduced. Food prices then do not rise so much, and, consequently, nominal wages do not need to rise, profits do not get squeezed, and workers real wages do not fall. There is then a shared interest between capital and labour, in raising productivity. Fewer workers are placed in the unfortunate position of having to create the wealth that is enjoyed by the rest of society. Those who are placed in that position do not face such a fall in living standards, because the value of manufactured commodities fall, whilst agricultural prices do not rise by as much as if the working population expands more rapidly. But, Ricardo recognises that increases in productivity are a function of the expansion of capital, i.e. accumulation. What facilitates capital accumulation? It is higher profits. What facilitates higher profits? For Ricardo, who equates the rate of profit with the rate of surplus value, it is lower wages.
So, a basic contradiction arises within Ricardian theory, which is also at the heart of social-democracy. The interest of workers is higher living standards, which requires higher wages. But, the actual basis of higher living standards for workers is higher levels of social productivity, and the requirement for higher productivity is capital accumulation, which requires higher profits, which requires lower wages! This is the fundamental logic that underpins social-democracy. It means that workers longer-term interests must be continually subordinated to the short term interests of capital. It is always a question of jam tomorrow, as workers are required to accept lower wages, and living standards, today, so that capital makes bigger profits, so that it invests, raises productivity, and raises wages and living standards. Marx discusses these concepts more extensively in Wage Labour and Capital.
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