Wage-Labour and Capital, Section IV - Part 5 of 8

The capitalists are in the same position as workers, in so far as they cannot – other than in the short-term – make up for lack of demand by increasing their demand for producer goods, but also they cannot simply compensate by increasing their own personal consumption. Firstly, as Marx describes, in Capital III, Chapter 15, the purpose is not the expansion of their personal consumption, but the accumulation of capital. Secondly, capitalists themselves may not find attractive outlets for expanding their personal consumption.

A fall in the value of luxury commodities, however, may tempt such additional consumption by capitalists. Some commodities previously out of reach of the less affluent capitalists may now become affordable to them, and new commodities may provide an outlet for all capitalists to spend their money. The fall in aeroplane prices made them affordable to some capitalists as personal possessions, as with luxury yachts, and, now, spacecraft.

The solution to all periods of overproduction comes not only from a technological revolution that raises productivity, and so reduces wage share, and raises the rate of profit, but, also, results in the creation of entirely new markets and commodities, expanding the sphere of consumption. In the post-war period, it came in the form of cars, domestic electrical appliances, foreign holidays, and so on. In such a period, capital can respond to short-term crises by increasing demand for capital goods, or via state spending, but only because the underlying conditions mean that such temporary crises are blips in an overall rising trend. Such was the case in the 1950's. But, for the same reason, they cannot be successful when the opposite conditions of crisis exit, such as in the 1920's and 1970's, which is why, in the 1970's the Keynesian policies adopted in the previous 20 years were abandoned.

The fall in wage share, relative to the profit share, is what is seen in periods of stagnation such as the 1930's and 80's, and is the result of this rise in social productivity. The rise in productivity is a consequence of the technological revolution undertaken by capital, faced with rising wage share, and squeezed profits (overproduction of capital) in the previous crisis phase. The labour-saving technology ends the labour shortage and creates a relative surplus population, pushing wages down; it raises the rate of surplus value; it brings a huge moral depreciation of existing fixed capital; it reduces the value of materials, and makes more efficient use of them. The reduction in the value composition of capital, and, thereby, a fall in the organic composition. Together with the rise in the rate of surplus value, it brings about a rise in the rate of profit.

Higher social productivity means that any rise in output requires a smaller amount of additional labour. Employment grows more slowly so that demand for wage goods, and, thereby, aggregate demand, grows more slowly, which results in the period of stagnation. As productivity rises, necessary labour-time falls, and surplus labour rises. Net output grows relative to gross output.

The fall in wage share, as described earlier, is, then, consistent with a rise in real wages, during such a period, particularly for those workers who remain in employment, and who find employment in the new industries. The new industries provide outlets for the investment of capital, usually with higher rates of profit. So, rather than capital being over-accumulated in the existing spheres, leading also to an overproduction of commodities, it accumulates in these new spheres, which also creates new markets, and the potential to valorise that existing production, enabling its profits to be realised. I have set this out in my book – Marx and Engels' Theories of Crisis.

However, the same process of competition drives a further accumulation of capital. As capital continues to accumulate, and the previous technological revolution sinks into history, so productivity growth slows, capital accumulation becomes more extensive, and the relative surplus population is again used up, so that wages, and wage share rises, leading to a new crisis, and so on.

“We see how in this way the mode of production and the means of production are continually transformed, revolutionized, how the division of labour is necessarily followed by greater division of labour, the application of machinery by still greater application of machinery, work on a large scale work on a still larger scale.

That is the law which again and again throws bourgeois production out of its old course and which compels capital to intensify the productive forces of labour because it has intensified them, the law that gives capital no rest, and continually whispers in its ear: “Go on! Go on!”” (p 40)

Back To Part 4

Forward To Part 6