Marx's objection to the focus on trades union struggle for higher wages was not that it leads to higher prices, and so is futile, but that it confines the working-class within this bourgeois, trades union consciousness of simply bargaining within the system for a bigger share of the pie, a struggle they can never win, in the end, because of the very mechanics and laws of capitalist production. As Marx showed, in Capital and Theories of Surplus Value, there are times when labour is in relative short supply, and so where relative wages rise, but capital only employs labour on condition of making profit from it. If relative wages rise beyond a certain point, those profits are squeezed to a level where a crisis of overproduction of capital arises.
In these conditions, the least profitable firms go out of business, workers are thrown on the dole. But, also, during such periods, firms engage in a search for new technological solutions to the problem of labour shortages and high wages. As these new technologies are introduced, they can raise output without employing more labour – productivity rises. A relative surplus population is created, which presses down on the workforce, depressing wages. The cycle proceeds once more.
But, in the twentieth century, with the creation of central banks like the US Federal Reserve, and use of fiat currencies, during periods of labour shortages and rising wages, the state has been able to cushion capital against the effects of rising nominal wages being carried through into rising relative wages, and a squeeze on profits. As wages rise, firms already have some ability to raise prices rather than reduce their profits. They can do that simply as a result of an automatic increase in the amount of commercial credit they provide to each other, which has the effect of an increase in currency, and fall in the value of the standard of prices. But central banks can, also, add to that by themselves increasing the amount of currency in circulation.
These kinds of price-wage spirals, however, are destabilising for capital itself, and do not address the fundamental issue of the relative strength of capital and labour. So long as labour is in relative short supply, relative wages will rise, reducing relative profits. This inevitability leads to crisis, as occurred in the 1920's, and, again, in the 1970's. Its solution, within capitalism, comes from a new technological revolution that displaces labour.
A similar thing happened in the period prior to Marx's address contained in this pamphlet. The period from 1843 had been one of a long wave uptrend. That phase came to an end around 1865, as relative wages had risen on the back of the expansion of capital, and size of the working-class. A new crisis of overproduction of capital arose, requiring a new technological revolution to resolve it. As described above, capital always has the capacity to accommodate higher prices, simply by an expansion of commercial credit. As Engels points out, in Capital III, for the central bank to counter that requires them to act very severely to restrict liquidity and raise their policy rates.
If A sells to B, who sells to C, who sells to A, on the basis of such credit, it does not matter whether the IOU that B gives to A, that A hands on to C, and that C hands on to B, who then scraps it, is for £100 or £200. The effect is the same. So long as trade is booming, they are happy to extend such credit to each other, and full employment ensures such booming trade until it suddenly stops. As Marx sets out, in Capital III, the crisis of overproduction of capital always arises at the point of high levels of employment and consequent booming demand, and high level of prices.
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