In a society where little was required of unskilled workers, as machine minders, and where almost limitless supplies of such labour seemed available, as it left the countryside for the towns, multiplied rapidly due to its predominantly young demographic, such a view was understandable. However, Marx sets out, in Capital I, that, quickly, these conditions killed off three generations of workers in the space of one generation, and the health of workers deteriorated to an extent that it risked the destruction of the labour-power itself upon which the system was based.
As Engels pointed out, in the note cited earlier, this view, expressed here, reflects that earlier concept of immiseration they both subsequently dropped. As Marx sets out in The Grundrisse, the basic means by which capital minimises the costs of reproducing labour-power is by revolutionising production, raising productivity, and so cheapening wage goods, but, also, as set out in The Civilising Mission of Capital, must also continually expand the consumption horizons of workers. By doing so, it creates a market for ever wider ranges of commodities, without which it cannot realise the surplus value created in production.
Moreover, the nature of the worker in production and society is changed. The worker must become educated, as a worker, consumer and citizen, and resources spent on producing such labour-power requires that it continue to function for as long as possible, both in terms of lifespan and days available for work. That required them to be maintained in good condition, as with an expensive machine, which requires not only healthcare, and reasonable living conditions, but, more importantly, wholesome food. That creates a contradiction in the interests of capital in general, and capital at the level of the firm, i.e. of many capitals, as set out in The Grundrisse.
“To return to M. Proudhon's thesis: the moment the labour time necessary for the production of an article ceases to be the expression of its degree of utility, the exchange value of this same article, determined beforehand by the labour time embodied in it, becomes quite usable to regulate the true relation of supply to demand, that is, the proportional relation in the sense M. Proudhon attributes to it at the moment.” (p 61)
Marx explains that in Theories of Surplus Value, Chapter 20. He gives the example of knives. Their value may fall to a sixth of what it was, as a result of a rise in productivity, manifest in a six-fold rise in their output. However, just because the price of six knives is now only that previously of one, it does not mean I will buy six rather than one. My demand for knives depends on whether I have a need for more of them.
Conversely, if the demand for knives rises, suppliers will seek to increase their supply to match it, because, in doing so, they will make more profit. However, it may be that, to increase supply involves increased costs/diminishing returns. If the costs rise to such an extent as to wipe out the profit, then capital would not increase production/supply. Market prices would then rise, as demand exceeds supply. Some of the more efficient producers might, then, be able to increase production, and still make profits, increasing their market share.
“It is not the sale of a given product at the price of its cost of production that constitutes the “proportional relation” of supply to demand, or the proportional quota of this product relatively to the sum total of production; it is the variations in supply and demand that show the producer what amount of a given commodity he must produce in order to receive in exchange at least the cost of production. And as these variations are continually occurring, there is also a continual movement of withdrawal and application of capital in the different branches of industry.” (p 61)
There is no fixed, constituted proportion, Marx says, only a continual movement, in which demand and supply fluctuate. He gives Ricardo's account of that movement.
“It is only in consequence of such variations that capital is apportioned precisely, in the requisite abundance and no more, to the production of the different commodities which happen to be in demand. With the rise or fall of price, profits are elevated above, or depressed below their general level, and capital is either encouraged to enter into, or is warned to depart from, the particular employment in which the variation has taken place.”
“When we look at the markets of a large town, and observe how regularly they are supplied both with home and foreign commodities, in the quantity in which they are required, under all the circumstances of varying demand, arising from the caprice of taste, or a change in the amount of population, without often producing either the effects of a glut from a too abundant supply, or an enormously high price from the supply being unequal to the demand, we must confess that the principle which apportions capital to each trade in the precise amount that is required, is more active than is generally supposed.” (p 61-2)
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