Marxism, p.12
Marxism, page 12
How, then, would allocation and distribution take place under socialism? Marx and Engels provided only the sketchiest suggestions, in keeping with their aversion to utopia-building for the future. There would, however, be some sort of "plan" which would in some unspecified way determine what is "really" needed. According to Marx:
Only when production will be under the conscious and prearranged control of society, will society establish a direct relation between the quantity of social labor time employed in the production of definite articles and the quantity of the demand of society for them.[562]
It will take a long time to reach this point, but the socialist mode of operation remained unclear. Marx said:
The life-process of society, which is based on the process of material production, does not strip off its mystical veil until it is treated as production by freely associated men, and is consciously regulated by them in accordance with a settled plan. This, however, demands for society of a certain material groundwork or set of conditions of existence which in their turn are the spontaneous product of a long and painful process of development.[563]
Engels was somewhat clearer than Marx, though no more detailed:
The useful effects of the various articles of consumption, compared with each other and with the quantity of labour required for the production, will in the last analysis determine the plan. People will be able to manage everything very simply without the intervention of the famous "value."[564]
This is in contrast to a well-known interpretation which claims that "Marx believed that, under socialism, the labour theory of value would come into its own."[565] The vast amount of attention devoted to the "transformation problem" might make sense if Marx had expected labor values to become the basis of a socialist economy, but in fact he and Engels repeatedly repudiated any such approach.
"Tendencies" of Wages and Profits
The term "tendency" had a long and ambiguous history in classical economics,[566] well before Marx wrote Capital. In classical economics, tendency sometimes referred to an empirical generalization about the observable course of events, and sometimes referred to a cause which—if unimpeded—would produce a given effect.[567] Marx used tendency in this second sense, as an analytical rather than an empirical concept. For example: "To appropriate labour during all 24 hours of the day is, therefore, the inherent tendency of capitalist production."[568] But a "normal working day" emerges empirically from a struggle between "two opposed tendencies"[569]—namely capitalists and workers pulling in opposite directions. Similarly, there was a "constant tendency of capital" to force the wages of labor to zero,[570] though it was obviously impossible to do so.
Two major tendencies in Marxian economics are more readily understandable when (1) the analytic nature of his tendencies is understood, and (2) both are interpreted in the light of Marx's conception of value. These two tendencies are the falling rate of profit and the increasing exploitation of the proletariat. Both are long-run tendencies, expressed in value terms. Both also depend upon Marx's assumption that growing mechanization of production would cause a rising ratio of capital to labor over time.
The Rate of Profit
Marx's chapter on the tendency of the falling rate of profit in Volume III of Capital was followed immediately by a chapter entitled "Counteracting Causes."[571] These counteracting causes leave "merely the character of a tendency"[572]—by which he means "a law whose absolute enforcement is checked, retarded, weakened, by counteracting causes."[573] In short, there is no determinate observable outcome. It had been assumed and reiterated, at least as far back as Adam Smith, that profit rates declined over time, so Marx was not establishing a new proposition but exploring the implications of an existing proposition.
According to Marx, "it is one of the laws of capitalist production" that the ratio of capital to labor—of "constant capital" to "variable capital"—increases over time. He said:
This is only another way of saying that the same number of laborers, the same quantity of labor-power set in motion by a variable capital of a given value, consume in production an ever increasing quantity of means of production, such as machinery and all sorts of fixed capital, raw and auxiliary materials, and consequently a constant capital of ever increasing value and volume, during the same period of time, owing to the peculiar methods of production developing within the capitalist system.[574]
If there is an increasing ratio of capital to labor over time, then we can now choose to view the numbers in Table 1 as showing a changing organic composition (c/v) of capital over time, rather than simultaneous differences among contemporary producers. If the first time period is A, the second time period B, etc., then the numbers illustrate the Marxian proposition that "the same rate of surplus—value, with the same degree of exploitation, would express itself in a falling rate of profit."[575] This referred to a long-run fall in the profit rate, though Marx also noted that profit rates may fall "temporarily for other reasons."[576]
In Ricardian economics, a falling rate of profit led toward the stationary state, in which the return on investment was just sufficient to induce replacement of capital as it wore out, but not sufficient to induce net additions to capital. Some interpreters have suggested that something similar happened in Marx, that a "breakdown" or permanent stagnation of the capitalist economy is reached via this route.[577] But the only causal link between crises and the falling rate of profit ran the other way: the cheapening of capital as a result of depression was an offsetting factor retarding the long-run decline of profit rates.[578] The economic consequences of secular falls in the rate of profit were much milder in Marx than in Ricardo. Where the profit rate fell, it hastened the concentration of capital as smaller capitalists found themselves unable to survive;[579] it encouraged speculation in a desperate search for higher rates of return,[580] and increased foreign investment for the same reason.[581]
The crucial role of the long-run profit rate, however, is precisely as a tendency, not as a materialized actuality. The tendency calls forth numerous reactions, such as lengthening the working day or speeding up the work pace, which amount to raising the rate of surplus value—the rate of exploitation of labor—which in turn hastens revolution. Whether the profit rate still falls despite these efforts is a secondary question in this context. The tendency provides incentives to increase the exploitation of labor, and that, in Marx's system, means hastening the day of revolution.
"Increasing Misery" of the Proletariat
When the wages of labor are expressed in Marxian value terms, that is more than a matter of innocuous nomenclature. It means that wages are being expressed in terms radically different from those of virtually every other economist except Marx and Ricardo. In both the Marxian and Ricardian systems of economics, the value of wages meant the quantity of labor expended on production of the wage-earner's livelihood. With rising productivity over time, less and less labor time is required to produce a given output, so that the livelihood of workers, capitalists, landlords, etc., may all rise simultaneously with a given number of hours in the working day. But this rise in the quantity of output does not mean a rise in the value of output, which both Ricardo and Marx measured in units of labor unit.
To use an example from Ricardo, if capitalists received half the output initially, and workers and landlords one quarter each, then a doubling of output might cause everyone to receive more. But if the workers and landlords now receive only 22 percent each from this doubled output, then according to Ricardo, "I should say, that wages and rent had fallen and profits had risen; though in consequence of the abundance of commodities the quantity paid to the labourer and land lord would have increased in the proportion of 25 to 44."[582] This fall in the worker's wages—measured in Ricardian value terms—"will not the less be a real fall, because they might furnish him with a greater quantity of cheap commodities than his former wages."[583] In short, in the words of John Stuart Mill, "Mr. Ricardo did not use the word value in the sense of exchangeable value" but rather "in a sense peculiar to himself, to denote cost of production."[584] So did Marx, and the consequence was the same in one sense. As Mill explained:
Mr. Ricardo therefore, would not have said that wages had rsen, because a labourer could obtain two pecks of flour instead of one, for a day's labour; but if last year he received, for a day's labour, something which required eight hours' labour to produce it, and this year something which requires nine hours, then Mr. Ricardo would say that wages had risen. A rise in wages, with Mr. Ricardo, meant an increase in the cost of production of wages; an increase in the number of hours' labour which go to produce the wages of a day's labour; an increase in the proportion of the fruits of labour which the labourer receives for his own share, an increase in the ratio between the wages of his labour and the produce of it.[585]
We need not speculate as to whether Marx accepted the Ricardian conception of wages and the peculiar sense in which wages were said to "rise" or "fall." In his giant history of economics, Theories of Surplus Value, Marx explicitly endorsed the Ricardian approach.
The value of wages has to be reckoned not on the basis of the quantity of necessaries which the worker receives, but on the basis of the quantity of labour which these necessaries cost—actually the proportion of the working day which he appropriates for himself; the proportionate share of the total product, which the worker receives. It is possible that, reckoned in use values (quantities of commodities or money), his wages may rise as productivity increases, and yet reckoned in value they may fall, and vice versa. It is one of Ricardo's greatest merits that he made an examination of relative wages and established them as a definite category. Previously wages had always been looked upon as a simple element, and consequently the worker had been regarded as an animal. In Ricardo, however, he is considered in his social relationship. The position of the classes in relation to each other depends to a greater extent on the proportion which the wage forms than on the absolute amount of the wage.[586]
Despite Marx's attempt to read his own social philosophy into Ricardo, in reality Ricardo treated the absolute standard of living of the workers as socially central. The special meaning of the value of wages in the Ricardian system was simply a corollary of his conception of value. But, as Ricardo said:
Does my view prevent an examination into the real condition of the labourer? It is true that I saw the labourers wages are high if he receives a high value for his work, that is to say if he receives the produce of a great deal of labour. To know his real condition we must still enquire what this produce is in quantity... I should first enquire what the labourers money wages were, and should estimate his condition by the abundance of necessaries which those money wages would procure him.[587]
With Marx, however, the concept of rises and falls in the value of wages reflected not only economic definitions but also social philosophy:
A noticeable rise in wages presupposes a rapid growth of productive capital. The rapid growth of productive capital brings about an equally rapid growth of health, luxury, social wants, social employments. Thus, although the enjoyments. Thus, although the enjoyments of the worker have risen, the social satisfaction that they give has fallen in comparison with the increased enjoyments of the capitalist, which are inaccessible to the worker, in comparison with the state of development of society in general. Our desires and pleasures spring from society; we measure them, therefore, by society and not by the objects which serve for their satisfaction. Because they are of a social nature, they are of a relative nature.[588]
Marx declared: "Real wages may remain the same, they may even rise, and yet relative wages may fall."[589] This has social as well as economic implications:
If capital is growing rapidly, wages may rise: the profit of capital rises incomparably more rapidly. The material position of the worker has improved, but at the cost of his social position. The social gulf that divides him from the capitalist has widened.[590]
While the Marxian system defined rises or falls in wages in relative terms throughout his career, Marx's ad hoc assessments of trends in real wages (measured in quantities of goods)[591] varied somewhat between his earlier and later writings. During the depressed economic conditions of the 1840s, christened by economic historians "the hungry forties," Marx seemed to expect that an absolute decline in real wages would accompany a relative decline in wages measured in "value" terms.[592] In an 1847 article, Marx said:
In the course of development, there is a double fall in wages:
Firstly: relative, in proportion to the development of general wealth.
Secondly: absolute, since the quantity of commodities which the worker receives in exchange becomes less and less.[593]
In 1848, the Communist Manifesto flatly declared: "the modern labourer... instead of rising with the progress of industry, sinks deeper and deeper below the conditions of existence of his own class."[594] Marx's The Poverty of Philosophy (1847) declared: "The natural price of labour is no other than the wage minimum."[595] But nearly four decades later, Engels appended a footnote to this statement, indicating how he and Marx had changed their views on this over time:
The thesis that the "natural", i.e., normal, price of labour power coincides with the wage minimum, i.e., with the equivlent in value of the means of subsistence absolutely indespensable for the life and procreation of the worker, was first put forward by me... Marx at that time accepted the thesis. Lassalle took it over from both of us.[596]
Lassalle's "iron law of wages" was excoriated, both publicly and privately, by Marx and Engels in their later years. Engels called it "a quite antiquated economic view, namely that the worker only receives on the average the minimum of the labour wage."[597] Marx wrote to Engels in the 1860s that Lassalle "collects in his manure factory the party excrements we dropped twenty years ago."[598] Publicly, in 1875, Marx called Lassalle's theory of fixed wages an "outrageous retrogression" in the light of recent and "more scientific" understanding of the subject.[599] What Marx did not point out was that he was the source both of the views to which Lassalle was "retrogressing" and of the new and "scientific" correction. Engels, however, later specified that it was in Capital that the new view was to be found, that "the laws regulating wages are very complicated" and that "they are in no sense iron but on the contrary very elastic."[600]
What made wages flexible in Capital was the Marxian conception of "subsistence" was whatever consumptions had become part of the worker's expected livelihood. The worker's subsistence included both his "natural wants" (food, shelter, fuel, clothing) and his "so-called necessary wants" which are "the product of historical development."[601] The value of labor-power was that value or labor-cost "required for the conservation and reproduction of his labor-power, regardless of whether the conditions of this conservation and reproduction are scanty or bountiful, favorable or unfavorable."[602] Contrary to Samuelson's interpretation, for example, Capital does not show wages falling to subsistence over time;[603] wages tend to be at subsistence over time, with the specific contents of that subsistence tending to increase. According to Marx, "it is possible with an increase in productiveness of labour, for the price of labour-power to keep on falling, and yet this fall to be accompanied by a constant growth in the mass of the labourer's means of subsistence."[604]
The subsistence level of goods, as it exists at a given moment provides a floor below which wages cannot fall or at least remain very long. According to Marx, "the value of labour-power cannot fall, and consequently surplus value cannot rise, without a rise in the productiveness of labour."[605] The fruits of growing productivity need to be equally shared between workers and capitalists, and when in fact the capitalists appropriate more of the growing output (both as profit and as replacement of depreciation on the growing mass of capital), then the "value" of labor-power falls, even though "the lowest possible point consistent with its new value" still represents "an increased mass of necessaries."[606]
During the advance of a capitalist economy, particular groups of workers may suffer not only relative but absolute impoverishment, and passages in Capital describing their plight have been seized upon by some interpreters as showing the face of the entire working class as an absolute decline in real living standards.[607] Marx spared no effort to paint he fate of these unfortunate groups of workers in the most vivid—not to say lurid—colors, but that still did not amount to an analysis of the value of labor-power in the economy as a whole—an analysis that pointed in the opposite direction. Ignoring the context of Marx's statements and collecting quotations at random, without regard to the period of his long career from which they came, interpreters can "prove" remarkable conclusions and inconsistencies—and not only on this subject. What validity this has is another question. As the late Marxist scholar Ronald L. Meek observed, as regards the doctrine of increasing misery of the proletariat, "the significant point here, surely, is not that Marx made such statements as this in 1844, but that he did not repeat them in 1867, when Volume I of Capital appeared."[608]
As revolutionaries, Marx and Engels tried in every way to minimize the improvement in the worker's standard of living that had taken place under capitalism in their lifetime, but even so they did not deny it. Capital, for example, acknowledged that from 1849 to 1859 a rise of agricultural wages took place in Britain, but called it "practically insignificant."[609] Yet when Marx specified the amount of this rise at a public lecture, it was "about 40 percent."[610] Engels in his later years likewise noted that factory workers in England "are undoubtedly better off than before 1848."[611]
The fundamental objection of Marx and Engels was to the whole capitalist-worker relationship, which they saw as exploitation—an exploitation that must increase over time, since growing masses of capital required growing amounts of surplus value for replacement of depreciation, as well as to maintain the profit rate on a growing investment. To miss this was to miss the whole point of capitalism according to Marx, by being distracted by questions of living standards:
