More on the Real-Wage Trend: Increasing Organic Composition,

H. More on the Real-Wage Trend: Increasing Organic Composition,

Demographic Patterns, and the Reserve Army

Lectures given in December 1847, originally designed for “Wage Labour and Cap- ital” and commonly known as “Wages,” add considerably to our appreciation of Marx’s early position on labor-market trends. The document contains an excel- lent formulation of secularly rising organic composition of capital and the down- ward real-wage trend. Here the term “Reserve Army of Unemployed Workers” is used by Marx possibly for the first time. There is also an important cyclical component.

As a preliminary, not only does Marx predict a falling real-wage trend, but he extends this vision to a declining wage share, in contrast with the “canonical” growth model: “The position of the worker relative to that of the capitalist worsens” adding – as in 1849 (above, p. 214) – Cherbuliez’ theme that “the value of the things enjoyed is relative. The enjoyments themselves are indeed nothing but social

enjoyments, relations, connections” (MECW 6: 422; emphasis added). 35 All the more important it is to emphasize the “absolute” fall in the real wage, that “the quantity of commodities which the worker receives in exchange becomes less and less” (426).

The downward real-wage trend is much emphasized. Thus what Marx refers to as

a “general law . . . that there cannot be two market prices, and that the lower market price prevails (given equal quality),” is applied to labor: “Take 1,000 workers of equal skill; 50 are without work; the price is then determined not by the 950 who are employed but by the 50 who are unemployed” (419); and this “law” “weighs more heavily on the commodity labour than on other commodities,” considering labor’s “evanescent nature . . . the impossibility of accumulating it, and . . . the fact that the supply cannot be increased or reduced with the same facility as with other products” (419; cf. 423–4). The document also alludes to a sort of ratchet effect:

“Once wages have fallen, they never rise to their previous height” (422). 36 In fact, the “minimum” wage itself is subject to depression: “The daily wage the worker takes home is the profit which his machine, his body, yields to its owner. Included in it is the sum necessary to replace the wear and tear of the machine, or, what is the

34 See also Rubel for recognition of the absolute immizeration theme in 1849 (1963: 1595). 35 The falling quality of wage goods is emphasized, Marx citing Carlyle 1840 (MECW 6: 416). The contemporary “truck system” whereby “the employer cheats the worker by raising the price of goods while leaving the nominal wage the same” also makes an appearance (424), Marx drawing on Babbage 1833 (see MECW 6: 693). 36 There is a brief reference to “[c]ompetition between workers from villages and farms” (MECW

6: 424), that may refer to inflows from the countryside. The “[a]dvantages of the unmarried over the married worker” is also mentioned.

H. More on the Real-Wage Trend 219 same thing, to replace old, worn-out workers by new ones . . . ; 37 and “[a]lthough

the minimum wage is determined on average by the price of the most indispensable provisions . . . [it] sinks always further towards the absolutely lowest level” (425).

A summary of the main theme in “Wage Labour and Capital” – with mention of increasing scale of operation, adoption of machinery, and concentration of capital reflecting “the law of competition [whereby] more must be produced” – contains

a strong reiteration of the falling secular trend of “the minimum itself”: “This producing in more and more difficult conditions also extends to the worker as part of capital. He must produce more, in more and more difficult conditions, i.e., for less and less wages and more work, at constantly decreasing production costs. So the minimum itself is constantly being reduced to greater exertions with minimum enjoyment. The disproportion rises geometrically, not arithmetically ” (430; emphasis added).

Some attention is also accorded the international dimension in considering labor’s condition. Thus the minimum real wage “tends to become the same in different countries” (426). This might relate to an observation that “[w]ages become more and more dependent on the world market and the position of the worker increasingly subject to chance” (422), or to the aide-m´emoire: “Influence of the Irish on the position of the English workers and of the Germans on the position of the Alsatian workers” (424).

We turn now to a more detailed rationalization of the downward wage trend, attending first to the forces playing upon labor demand. Productive capital is classed into three input categories: raw material; machines, and materials such as coal to drive the machines, and buildings; and wage-goods (430). The first two, or constant capital in later parlance, tend to rise relative to the third, or variable capital. For “[t]he growth of productive capital is linked with its concentration, and with that the fact that it can only be profitable if it is exploited on an ever larger scale”; and “the more the productive forces grow, the larger will be [the] part of capital which is directly transformed into machinery,” while “the part of capital transformed into raw materials necessarily increases” along with the expansion of output due to expanded use of machinery and specialization (430–1). On the other hand, similar growth of wage-goods capital would thwart the purpose of the use of machinery and the increased division of labour (431). It was in fact “a general law which necessarily arises from the nature of the relation between capital and labour that in the course of the growth of the productive forces the part of productive capital which is transformed into machinery and raw material . . . increases in disproportion to the part which is intended for wages. . . . ” (432).

37 Marx cites McCulloch: “The wages earned by the labourer . . . yield only the common and ordinary rate of profit to the proprietors of the machine called man, exclusive of a sum to

replace the wear and tear of the machines, or, which is the same thing, to supply the place of the old and decayed labourers with new ones [McCulloch 1825: 319]” (MECW 6: 416).

A “First Draft” of Capital 1847–1849 Now, since “the share of machinery and raw materials grows much faster than that

of approvisionnement,” it followed that the increase in capital is “not accompanied by a similar increase of the demand for labour” (422). 38 But a lag in the rate of growth of variable capital behind that of total capital as distinct from an absolute decline implies that the consequential fall in the wage rate – such as Marx goes on to describe – entails a labor supply expanding faster than variable capital: “[T]he more productive capital grows, the more, in proportion, the means of employment and the means of subsistence for the workers are reduced, and the more rapidly, in other words, the working population grows in proportion to its means of employment” (432; emphasis added). In brief, “the increase of the proletariat must proceed relatively even faster” than aggregate wage-fund capital (433).

To appreciate why this is so, we are again directed to the inflow into the work force reflecting “the ruin of the small industrialists which is fatally linked with the growth of productive capital” (429), their “ruin” reflecting the fall in the profit rate due to accumulation: “at the same time as the rate of interest falls, small capitalists formerly not participating in industry directly are forced to become industrial, i.e., to supply big industry with further victims. From this side, too, the working class

is enlarged and competition among the workers increased.” 39 All this reiterates what was said in the publication of 1849, indeed in 1844 (above, p. 217). There is too what is termed – in notes on Ure 1836 – a “[g]eneral principle of modern industry: to replace adults by children, skilled workers by unskilled, men by women” (420).

But to these tendencies endogenous to capital accumulation, there is added demographic pressure, similarly endogenous, “a positive premium being placed on the production of people . . . ” (430; emphasis added). A discussion of the effects of cyclical instability may suggest that short-term real-wage increase is intended in addition to the living conditions characterizing modern industry: “While the growth of the productive forces leads to work on a larger scale, momentary over- production becomes more and more necessary, the world market more and more extensive, and competition more universal. The crises, therefore, become more and more violent. So the workers are given a sudden encouragement to marry and multiply, they are agglomerated and concentrated in large masses, and their wages fluctu- ate more and more” (429–30; emphasis added). The matter of living condition is weighed heavily, in the course of a rejection of the Malthusian recommendation to control labor supply “by making as few children as possible” as “utter stupid- ity, baseness and hypocrisy” (428). For “the nonsense that the entire working class

38 Marx (MECW 6: 421) again cites Cherbuliez (1841: 103). But Cherbuliez in fact refers to an absolute reduction in the wage-fund rather than a lag in its growth rate behind that of capital.

39 Simplification of tasks in consequence of more refined division of labour also acts as a depressant: “in the measure in which productive capital grows, there grows the competi-

tion among the workers because the division of labour is simplified, and every branch of labour is open to everybody . . . ” (MECW 6: 429).

H. More on the Real-Wage Trend 221 [can] possibly take the decision not to make any children,” 40 was irreconcilable with

the fact that “their condition, on the contrary, makes the sexual instinct their chief pleasure and develops it one-sidedly” (433). Beyond these forces at play, we also find a reference in this context to the use of child labour: “By replacing adults with children, modern industry places a veritable premium on the making of children;” and Marx objected to proposals for the solution to poverty by way of “industrial education” on the grounds “that modern industry replaces compound labour more and more with simple labour which requires no education . . . ” and “throws more and more children from the age of seven upwards behind the machine and turns them into a source of income not only for the bourgeois class but for their own proletarian parents” (427; emphasis added).

This key demographic dimension to Marx’s secular real-wage decline had to

be seen as part of the broader picture of capital accumulation, and not as an independent “law of nature” in Malthus’s fashion: “This law” – excess labor supply generated by capital accumulation – “the bourgeois have changed from a social law into a law of nature by saying that by a law of nature the population grows more rapidly than the means of employment or the means of subsistence. They fail to understand that the growth of this contradiction is inherent in the growth of productive capital” (432). The growing “disproportion between the supply of labour and the demand for it . . . depends neither on the increase of means of subsistence nor on the increase of the population regarded by itself. It follows necessarily from the nature of large-scale industry and the relationship of labour and capital” (432–3). 41

Marx, we have seen, found the Malthusian solution of population control to be hypocritical since it was patently impossible to achieve for the reasons given above, including the “premium” placed on children. An elaboration of this charge contains reference to the Reserve Army of Unemployed: “Big industry constantly requires a reserve army of unemployed workers for times of overproduction. . . . Overpopulation is therefore in the interest of the bourgeoisie, and it gives the workers good advice which it knows to be impossible to carry out” (433; emphasis added). That the

40 This is garbled in the English translation where can is rendered cannot. (See the French version in Rubel 1968: 165 for a proper rendition.) The text probably alludes to the “free rider” problem.

Carlyle may be Marx’s source. In a section containing brief observations on Carlyle’s Chartism 1840, Marx notes: “The entire theory of Malthus and the economists amount to saying that it lies with the workers to reduce the demand [sic] by not making children” (MECW 6: 416). 41 Marx likes to see the worst of all worlds. The problem had been said to reflect the damaging consequences for labor, both from the demand and supply side, of positive accumulation. But Marx discerns a problem even in the absence of growth: “If the growth of productive capital progresses only slowly, however, if it remains stationary or even decreases, the number of workers is always too large in proportion to the demand for labour. In both cases, the most favourable and the most unfavourable, it follows from the relationship of labour to capital, from the nature of capital itself, that the supply of labour will always be too great for the demand for labour” (MECW 6: 433).

A “First Draft” of Capital 1847–1849 “constant” requirement for a reserve of unemployed refers specifically to “times of

overproduction” points to a labor reserve available to accommodate high activity at cyclical peaks rather than as a source to support secular growth. We have here features of a dual labor market.

As for periods of “stagnation,” those remaining in employment undergo either reduced wages or reduction in the working week (420). Wage fluctuations reflect − apart from changes in fashion or season − “fluctuations in trade” due to market fluctuations; and here a “circular” relation is emphasized, in that the reduced market opportunities reflect reduced working-class spending: “In all crises the following circular movement relates to the workers: The employer cannot employ the workers because he cannot sell his product. He cannot sell his product because he has no buyers. He has no buyers because the workers have nothing to offer in exchange but their labour, and precisely for this reason they cannot exchange their labour” (424–5). 42

Apart from the Malthusian proposal, Marx takes up Trade Unions as a means of improving labor’s situation. He agrees with “the economists” that “in the long run” union activity generates substitution against labor and thus reduces wages: “The economists are right when they remark that “[i]n the long run [workers’ associations] cannot withstand the laws of competition. These combinations bring about new machines, a new division of labour, removal from one place of pro- duction to another. In consequence of all this a reduction of wages” (435; also

420). 43 And should unions be successful, the resultant reduction in the profit rate (relative to that available abroad) would check domestic accumulation, again with damaging consequences for labor.

The case was different from the point of view of training in revolutionary activity designed to overturn “the entire old society with its class contradictions.” But it is unclear whether Marx was entirely decided on the purely economic effects, since we also find more positive references to union-induced wage increases: “the fluc- tuations of wages not only revolutionise the worker, but . . . without the temporary rise of wages above the minimum he would remain excluded from all advances of production, from public wealth, from civilisation, hence from all possibility of emancipation” (426). The wage increases referred to here are temporary, such as occur during cyclical upturns; yet, at least for the “best-paid workers,” we also read – in the context of union activity – of apparently more permanent gains: “And if in

42 Marx draws on Wade 1833 (MECW 6: 419). There is a resemblance to Keynes’s concern that labor in the aggregate may not be able to reduce its real wage by making revised money bargains,

because money-wage reductions engender reduction in consumption (Keynes 1936: 269). 43 This is in line with the position in Poverty of Philosophy: “In England, strikes have regularly

given rise to the invention and application of new machines. . . . If combinations and strikes had no other effect than that of making the efforts of mechanical genius react against them, they would still exercise an immense influence on the development of industry” (MECW 6: 207).

I. Profit-Rate Determination: “Competition of Capitals” 223 their moments of philanthropy Messrs the bourgeois and their economists are so

gracious as to allow in the minimum wage, that is, in the minimum life, a little tea, or rum, or sugar and meat, it must by contrast appear to them as shameful as incomprehensible that . . . out of their revolutionary activity they even make the maximum of their enjoyment of life” (436).

Proposals for Industrial Education are opposed on the strange grounds − entirely at odds with Adam Smith of course − that increased mobility must be to labor’s detriment: “All improvements in the means of communication, for example, facil- itate the competition of workers in different localities and turn local competition into national, etc.” (423). As for the proposal by the “philanthropic economists” that “every worker should be trained in as many industries as possible,” Marx objected that “[t]he consequence would be that if there were a surplus of hands in one industry, this surplus would at once spread to all other industries, and even more than before the reduction of wages in one business would lead directly to a general reduction in wages” (427). In any event, “since modern industry simplifies work everywhere and makes it easy to learn, the rise of wages in one industry at once causes an influx of workers into this industry and the reduction of wages will more or less directly assume a general character” (428). 44