The Industrial Reserve Army and Cyclical

E. The Industrial Reserve Army and Cyclical

Wage Fluctuations

On our reading, Marx’s Industrial Reserve of Unemployed is a consequence of the process of population growth exceeding growth of labor demand described above. And the falling secular wage does not act as a corrective to excess labor supply insofar as the population growth rate is concerned – on the contrary, the popu- lation growth rate may even accelerate as wages fall. On the other hand, workers displaced are to some extent reabsorbed at lower wages into labor-intensive sec- tors (see MECW 37: 235). Yet any stimulation to labor demand could at best act as a partial corrective. For the conversion of variable into constant capital is an ongoing process, proceeding at an ever-faster rate which, always bearing in mind steady and possibly even accelerating population growth, aggravates the excess labor supply and assures continuous downward pressure on the wage; the problem is not defined in the static terms appropriate to a once-and-for-all disturbance.

But while the trend path of wages is certainly downward, allowance must be made for cyclical fluctuations about the trend, and the possibility of periods of constant wages. These short-term plateaux must not be mistaken for the secular trend itself, as by Robinson: “the existence of the reserve army of labour keeps the level of wages more or less constant” (Robinson 1967 [1942]: viii). (See also Morishima 1973: 129f; Samuelson and Wolfson 1986: 77). Rather, the role of the Reserve Army is to provide a pool of available labor to satisfy sudden bursts of activity characterizing expansion phases of the business cycle. The following passage from Capital 1 emphasizes industrial capitalism’s “capacity for sudden extension”: “so soon . . . as the general conditions requisite for production by the modern industrial system have been established, this mode of production acquires an elasticity, a capacity for sudden extension by leaps and bounds that finds no hindrance except in the supply of raw material and in the disposal of the produce” (MECW 35: 453–4; emphasis added). That inadequate labor supply does not constitute a constraint upon the “elasticity” of the system is accounted for precisely in terms of the operation of the Reserve Army:

Independently of the limits of the actual increase of population, [the capitalist mode of production] creates, for the changing needs of the self-expansion of capital, a mass of human material always ready for exploitation. With accumulation, and the development of the productiveness of labour that accompanies it, the power of sudden expansion

E. The Industrial Reserve Army and Cyclical Wage Fluctuations 101 of capital grows also; . . . [T]here must be the possibility of throwing great masses of men

suddenly on the decisive points without injury to the scale of production in other spheres. Overpopulation supplies these masses. The course characteristic of modern industry, viz., a decennial cycle (interrupted by smaller oscillations), of periods of average activity, production at high pressure, crisis and stagnation, depends on the constant formation, the greater or less absorption, and the re-formation of the industrial reserve army or surplus population (626–7; emphasis added).

This pattern stands in sharp contrast to early capitalist experience where net accu- mulation, and the corresponding net increase in labor demand, although of slow growth, “found a check in the natural limits of the exploitable labouring popula- tion” (627). What, in short, was now occurring was “expansion by fits and starts of the scale of production” calling for “an increase in the number of labourers inde- pendently of the absolute growth of the population.” Again: “Capitalist production can by no means content itself with the quantity of disposable labour power which the natural increase of population yields. It requires for its free play an industrial reserve army independent of these natural limits” (629).

The argument to this point implies that cyclical increases in employment can occur without upward pressure on wages. Yet this requires qualification. Wages may yet fluctuate within limits depending upon the extent of periodic excess labor supply:

Taking them as a whole, the general movements of wages are exclusively regulated by the expansion and contraction of the industrial reserve army, and these again correspond to the periodic changes of the industrial cycle. They are, therefore, not determined by the variations of the absolute number of the working population, but by the varying proportions in which the working class is divided into active and reserve army, by the increase or diminution in the relative amount of the surplus population, by the extent to which it is now absorbed, now set free. For modern industry with its decennial cycles and periodic phases, which, moreover, as accumulation advances, are complicated by irregular oscillations following each other more and more quickly, that would indeed

be a beautiful law, which pretends to make the action of capital dependent on the absolute variation of the population, instead of regulating the demand and supply of labour by the alternate expansion and contraction of capital, the labour market now appearing relatively underfull, because capital is expanding, now again overfull, because it is contracting (631). 18

Again: “The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active labour army; during the periods of overproduc- tion and paroxysm, it holds its pretensions in check” (633). And in this manner “the law of supply and demand of labour is kept in the right rut, the oscillation of wages is penned within limits satisfactory to capitalist exploitation” (756). The wage rate may even rise in consequence of cyclical bursts of activity, if the pressure is sharp enough – the case of “absolute overproduction of capital” discussed in Capital 3

18 I return to this discussion, below p. 108.

Economic Growth and the Falling Real-Wage Trend

(MECW 37: 250). Wages may even rise despite the existence of some unemployment where the surplus labor is of low efficiency implying a dual labor force:

It is no contradiction that this overproduction of capital is accompanied by more or less considerable relative overpopulation. The circumstances which increased the produc- tive power of labour [increase in c/v], augmented the mass of produced commodities, expanded markets, accelerated accumulation of capital both in terms of its mass and its value, and lowered the rate of profit – these same circumstances have also created, and continuously create, a relative overpopulation, an overpopulation of labourers not employed by the surplus capital owing to the low degree of exploitation at which alone they could be employed, or at least owing to the low rate of profit which they would yield at the given degree of exploitation (254–5).

There are not too many means of production produced to employ the able-bodied portion of the population. Quite the reverse. In the first place, too large a portion of the produced population is not really capable of working, and is through force of circumstances made dependent on exploiting the labour of others, or on labour which can pass under this name only under a miserable mode of production. In the second place, not enough means of production are produced to permit the employment of the entire able-bodied population under the most productive conditions, so that their absolute working period could be shortened by the mass and effectiveness of the constant capital employed during working hours (256–7).