The Falling Real-Wage Trend

G. The Falling Real-Wage Trend

In his discussion of Proudhon in 1847, Marx accepted and attempted to rationalize the “decay” (“d´ep´erissement”) of the working class as the condition of a growing surplus and development of productive forces (MECW 6: 159; below Chapter 13, pp. 387–8). But though the term “decay” certainly implies absolute impoverish- ment, it is not definitive, and in fact in this specific context Marx seems satisfied to argue for constancy of the secular real wage in opposing received doctrine. Thus, he accepted the view of the “optimistic economists” that “in the existing relations of production, the wealth of the bourgeoisie has grown and must grow still further” (159–60), but only in brief periods could it be claimed that wages in Britain had positively increased: “As for the working classes, it still remains a very debatable question whether their condition has improved as a result of the increase in so- called public wealth” (160). Workers in the cotton industry had benefited but “only in the rare moments of trade prosperity [which] are to the periods of crisis and stagnation in the ‘correct proportion’ [Proudhon’s term] of 3 to 10.” And even this could be accounted for by the exploitation “of the millions of workers who had to perish in the East Indies so as to procure for the million and a half workers employed in the same industry in England three years’ prosperity out of ten.”

A downward secular path of real wages certainly emerges in “Wage Labour and Capital.” The context involves a commentary on the assertion by “the bourgeois and their economists” that “[t]he interests of the capitalist and those of the worker are . . . one and the same,” in the sense that “[t]he indispensable condition for

a tolerable situation of the worker is . . . the fastest possible growth of productive capital ” (MECW 9: 214–15). Now Marx accepted that capital accumulation implies

30 Rubel cites Cherbuliez 1841 and Schulz 1843 as source for “la relativit´e des besoins” (Rubel 1963: 1593–4).

31 The paradoxical relation between labor and capital also reflects expansion of the subordinate work force in consequence of accumulation: “To say that the most favourable condition for

wage labour is the most rapid possible growth of productive capital is only to say that the more rapidly the working class increases and enlarges the power that is hostile to it, the wealth that does not belong to it and that rules over it, the more favourable will be the conditions under which it is allowed to labour anew at increasing bourgeois wealth, at enlarging the power of capital, content with forging for itself the golden chains by which the bourgeoise drags it in its train” (MECW 9: 221). On this passage Rubel comments: “C’est la conception, d´ej`a d´evelopp´ee par F. Bray et A. E. Cherbuliez, de l’appauvrissement moral . . . ” (Rubel 1963: 1594–5).

G. The Falling Real-Wage Trend 215 expansion of the work force: “Capital can only increase by exchanging itself for

labour [1891: labour power], by calling wage labour to life. . . . Hence, increase of capital is increase of the proletariat, that is, of the working class” (214). And he allowed also that “in the most favourable case . . . the price of labour, wages, goes up” (216). But such was not the norm: “Are growth of productive capital and rise of wages really so inseparably connected as the bourgeois economists maintain? We must not take their word for it” (222).

Marx intended here the counteracting effects of increased “competition between capitalists” – drawing silently upon Adam Smith – taking the form of cost cut- ting by means of extended division of labour and the adoption and improvement of machinery. Unfortunately, the account is unclear regarding causal sequence by confusing firm and industry size, a problem already encountered in the Wealth of Nations in precisely the same context (Hollander 1973: 142–3). Thus “[t]he numer- ical increase of the capitals increases the competition between the capitalists. . . . The greater the labour army among whom labour is divided, the more gigantic the scale on which machinery is introduced, the more does the cost of production propor- tionately decrease, the more fruitful is labour. Hence a general rivalry arises among the capitalists to increase the division of labour and machinery . . . ” (MECW 9: 222–3). More specifically: “The more powerful and costly means of production that [the capitalist] has called into life enable him, indeed, to sell his commodities more cheaply, they compel him, however, at the same time to sell more commodi- ties, to conquer a much larger market for his commodities” (223). And this end

he achieves “if he puts the price of his goods only a small percentage lower than that of his competitors. He drives them from the field, he wrests from them at least part of their sales by underselling them.” Any success is, however, only tem- porary, as others follow suit − and here emerges again (see above, p. 202) the notion of over-adjustment: “However, the privileged position of our capitalist is not of long duration; other competing capitalists introduce the same machines, the same division of labour, introduce them on the same or on a larger scale, and this introduction will become so general that the price of linen is reduced not only below its old, but below its new cost of production” (223–4).

Such over-adjustment is temporary, Marx referring to a repetition of the pro- cess starting from the new cost level: “The capitalists find themselves, therefore, in the same position relative to one another as before the introduction of the new means of production. . . . On the basis of this new cost of production, the same game begins again. More division of labour, more machinery, enlarged scale of exploitation of division of labour and machinery. And again competition brings the same counteraction against this result” (224). Thus “the mode of production and the means of production are continually transformed, revolutionised . . . the division of labour is necessarily followed by greater division of labour, the applica- tion of machinery by still greater application of machinery, work on a large scale by work on a still larger scale.” Indeed, Marx represents the compulsion “to inten- sify the productive forces of labour” as a “law . . . which within the fluctuations

A “First Draft” of Capital 1847–1849 of trade periods, necessarily levels out the price of a commodity to its cost of

production” − presumably to successively lower levels. The compulsion is said to

be explosive: “the old struggle begins again all the more violently the more fruitful the already discovered means of production are. The division of labour and the application of machinery, therefore, will go on anew on an incomparably greater scale.”

We return to the main issue: “how do these circumstances, which are inseparable from the growth of productive capital, affect the determination of wages?” Marx’s response is that the real wage rate is forced downwards by intensified competi- tion between laborers: “The greater division of labour enables one worker to do the work of five, ten or twenty; it therefore multiples competition among the workers fivefold, tenfold and twentyfold.” Beyond this, “as the division of labour increases, labour is simplified. The special skill of the worker becomes worthless,” Marx reminding readers “that the more simple and easily learned the labour is, the lower the cost of production needed to master it, the lower do wages sink, for, like the price of every other commodity, they are determined by the cost of production.” And to all this must be added the adoption of machinery, which “brings about the same results on a much greater scale, by replacing skilled work- ers by unskilled, men by women, adults by children. It brings about the same results, where it is newly introduced, by throwing the hand workers onto the streets in masses, and, where it is developed, improved and replaced by more pro- ductive machinery, by discharging workers in smaller batches” (226). All in all, “the industrial war of the capitalists among themselves . . . has the peculiarity that its battles are won less by recruiting than by discharging the army of labour.” Now the discharged adult male might be replaced by, say, three children and a woman; but in this case, whereas originally the man’s wages necessarily sufficed for these dependents in order “to maintain and to propagate the race . . . now four times as many workers’ lives are used up in order to gain a livelihood for one worker’s family” (227).

What can be deduced from all this regarding the course of the aggregate demand for labor? That the “industrial war” between capitalists is “won less by recruiting than by discharging the army of labour” seems to imply absolute reduction in the aggregate demand for labor – at least for adult males – and it is this that is responsible for downward pressure on the real wage. But what follows suggests a more complex outcome. For Marx also rejects the orthodox contention that new branches of industry will reabsorb those actually displaced, on the grounds that they will at best only absorb the new entrants into the work force: “The economists . . . dare not assert directly that the same workers who are discharged find places in the new branches of labour. The facts cry out too loudly against this lie. They really only assert that new means of employment will open up for other component sections of the working class, for instance, for the portion of the young generation of workers that was ready to enter the branch of industry which has gone under” (226). Conceivably, Marx intended here net population growth, but it is not safe

G. The Falling Real-Wage Trend 217 to take this for granted. 32 Rather the “young generation” seems to refer to what

is later termed the replacements of those displaced. And his point is that aggregate employment will be unchanged – those actually displaced remaining unemployed. But this was Marx’s gloss on the orthodox reabsorption position. For his own part, even were those displaced by machinery and the “new generation” to find employment − implying net expansion of labor demand − the wage nonetheless, and necessarily, falls: “Let us suppose, however, that those directly driven out of their jobs by machinery, and the entire section of the new generation that was already on the watch for this employment, find a new occupation. Does any one imagine that it will be as highly paid as that which has been lost? That would contradict all the laws of economics.” And this because of deskilling: “ . . . modern industry always brings with it the substitution of a more simple, subordinate occupation for the more complex and higher one” (226–7). But total reabsorption of the displaced together with the “new generation” is considered unlikely; wage reduction is a fortiori the outcome.

An inflow into the labor market from the “higher strata of society” – already a major theme in 1844 (see Chapter 6, p. 173) – aggravates the downward pressure on the wage. Here what is entailed is the consequence of increasing concentration of capital implied by the process of capital accumulation described above: “That the small industrialist cannot survive in a war [1891: contest], one of the first conditions of which is to produce on an ever greater scale, that is, precisely to be

a large and not a small industrialist, is self-evident” (227). Moreover, since “the interest on capital decreases in the same measure as the mass and number of capitals increase, as capital grows . . . the small rentier can no longer live on his interest but must throw himself into industry, and consequently, help to swell the ranks of the

small industrialists and thereby of candidates for the proletariat” (228).” 33 As for an orthodox assurance of the expanded employment of high-skilled labor in the machine-making industries, Marx points to the empirical circumstance that those industries were experiencing precisely the same labor-displacing and skill-debasing phenomena as the cotton industry: “Since the year 1840 this assertion, which even before was only half true, has lost all semblance of truth because ever more versatile machines have been employed in the manufacture of machinery, no more and no less than in the manufacture of cotton yarn . . . ” (227).

“Wage Labour and Capital” closes with a repetition of the theme that has come to be known as “absolute immizeration”: “Thus we see: if capital grows rapidly, competition among the workers grows incomparably more rapidly, that is, the means of employment, the means of subsistence, of the working class decrease proportionately

32 Net population growth figures in other texts of the same period, as we shall see in the next section. See also Chapters 3.D, 8.D, 12.D.

33 For the increasing “competition of capitals” alluded to here as cause of a falling return on capital, see below, section I.

A “First Draft” of Capital 1847–1849 so much the more, and, nevertheless, the rapid growth of capital is the most favourable

condition for wage labour” (228). 34