The “Wages Fund” Doctrine Rejected: Synchronized
B. The “Wages Fund” Doctrine Rejected: Synchronized
Activity vs. Advances
Thomas Hodgskin rejected the notion of wage “advances” on the grounds that the adoption of time-consuming processes does not require the actual provision of stocks of accumulated wage goods; he emphasized rather synchronized activity involving circular flow: “It is this assurance, this knowledge, this confidence of obtain- ing subsistence and reward, which enables and induces men to undertake long and complicated operations. . . . [T]he success and productive power of every differ- ent species of labour is at all times more dependent on the co-existing productive labour of other men than on any accumulation of circulating capital” (Hodgskin
1861–1863 III: The Labor Market
1922 [1825]: 37, 51). As Marx phrased it: “Hodgskin is concerned . . . with demon- strating the dependence of the worker on the co-existing labour of other workers as against his dependence on previous labour,” in the sense of capital, “an alienated and independent form of labour which is hostile to labour itself ” (MECW 32: 426–7). In elaborating this line of thought Marx considered the role of invento- ries taking a position similar to J. S. Mill’s, namely (in Hicks’s terms) that though “lapses from Full Performance are associated with accumulation of stocks . . . the carrying of normal stocks is no sign of a lapse” (Hicks 1973: 59; see Hollander 1985: 498f). This context confirms final consumption as king-pin of the entire production process – in the sense of its “justification” or raison d’ˆetre.
Inventories at the retail stage are thus represented evocatively in terms of a “reser- voir” rather than a “hoard”: “ . . . shopkeepers who sell means of subsistence . . . must naturally always have a full stock in trade. Their stores, shops, etc., are simply reservoirs in which the various commodities are stored once they are ready for cir- culation. This kind of storing is merely an interim period in which the commodity remains until it leaves the sphere of circulation and enters that of consumption” (MECW 32: 414). (This kind of “storing” was to be contrasted with “treasure- hoarding, the aim of which is to retain commodities permanently in the form in which they are capable of entering into circulation, and it achieves this only by withdrawing commodities in the form of money from circulation”; 415.) More generally, “storing on a large scale . . . means nothing more than production and consumption on a large scale. . . . The same commodities (commodities of the same kind) are constantly produced anew in the sphere of production, available on the market and absorbed in consumption. Not the identical commodities, but com- modities of the same type, can always be found in these three stages simultaneously.”
By contrast, periods of “overproduction” entail unintended accumulations or “storing up,” the “interval” between production and final purchase extended beyond that technically required: “If the interval is prolonged so that the com- modities which emerge anew from the sphere of production find the market still occupied by the old ones, then it becomes overcrowded, a stoppage occurs, the market is surcharged, the commodities decline in value, there is overproduction. Where, therefore, the existence of the commodities in the circulation phase appears as storing up, then this is not brought about by a free act on the part of the producer, it is not an aim or an immanent aspect of production, any more than the flow of blood to the head leading to apoplexy is an immanent aspect of the circulation of the blood.” This Adam Smith had glimpsed when he represented “wealth” as “ ‘annual ’ reproduction. It is not, that is to say, something out of the dim past. It is always something which emerges from yesterday” (416). 1
1 Marx adds that an extended stoppage of production would “soon” lead to an exhaustion of stocks: “If, on the other hand, reproduction were to stagnate due to some disturbances or
others, then the stores, etc., would soon empty, there would be shortages and it would soon be evident that the permanency which the existing wealth appears to possess, is only the
B. The “Wages Fund” Doctrine Rejected 355 The principles apply to accumulations at all stages of activity, production proper
included. But it is specifically at the retail stage – the shopkeeper “represent[ing] the consumer in his dealings with the producer and the producer in his dealings with the consumer” – where the character of consumption as “a condition of the reproduction process,” in the sense that the commodity “must reach the sphere of consumption in order that it can be reproduced,” is manifest; in fact “[t]he reproduction process, since it is a unity of circulation and production, includes consumption, which is itself an aspect of circulation. Consumption is itself both an aspect and a condition of the reproduction process” (416). Again, we encounter yet another physical analogy with respect to “the constant passing over of commodities into consumption, for the vacuum left by the commodity reaching the sphere of consumption must be filled by the commodity emerging from the production process and now entering this stage” (417). It is when we find Marx treating laborers’ consumption on a par with consumption by any other class that the full import of this perspective becomes apparent (see below, p. 358).
The significance for normal inventory holdings of the production period strictly defined is further explored, Marx drawing on the annual “reproduction time” char- acterizing corn: “The corn harvested in the autumn, for example, of 1862 (in so far as it is not used again for seed) must suffice for the whole coming year – until autumn 1863. It is thrown all at once into circulation (it is already in circulation when it is placed in the farmers’ granaries) and absorbed in the various reser- voirs of circulation storehouse, corn merchants, millers, etc.” But commodities are withdrawn only piecemeal, in small quantities, by the annual consumption. The replacement, the stream of new commodities which are to displace them, arrives only in the following year.” It is the function of the price mechanism to adjust con- sumption to rates of production which exceed or fall short of the “average.” In the first case, “a stoppage takes place. The space which these particular commodities were to have occupied in the market is overstocked. In order to permit the whole quantity to find a place on the market, the price of the commodities is reduced, and this causes them to move again. . . . If the quantity is too small, it is expanded by an increase of their prices” (417–18). An interesting supplementary consideration involves the character of the commodity as use value: “On the other hand, com- modities which quickly deteriorate as use values remain only for a very short time in the reservoirs of circulation. The period of time during which they have to be converted into money and reproduced, is prescribed by the nature of their use value which, if it is not consumed daily or almost daily, is spoilt and consequently ceases to be a commodity” (418). Here Marx emphasizes that “exchange value along with its basis, use value, disappears provided the disappearance of use value is not itself an act of production,” referring to intermediate products.
permanency of its being replaced, of its reproduction, that it is a continuous objectification of social labour” (MECW 32: 416). Marx does not say whether this plays a role in recovery from depression, but it may be implied.
1861–1863 III: The Labor Market
Industrial development tends to reduce the relative size of normal inventory holdings: “In general, it is clear that although in absolute terms the quantity of the commodities which have been stored up in the reservoirs of circulation increases as a result of the development of industry, because production and consumption increase, this same quantity represents a decrease in comparison with the total annual production and consumption. The transition of commodities from circu- lation to consumption takes place more rapidly.” The phenomenon – Marx again extends his vision to inventory holdings at all stages, not only retail – reflects partly the shortening of the various phases of the production process resulting from tech- nical and organizational progress, namely increase in the “speed of reproduction” resulting from “the fact that the labour time necessary to produce the commodity in each one of its forms is reduced,” due in turn to “the development of the division
of labour, use of machinery, application of chemical processes, etc.” 2 Similar effects result from reductions in the transition periods between “phases” of production: “Partly as a result of the combination of various branches of industry, that is, the establishment of centres of production for particular industrial branches, [partly] through the development of means of communication, the commodity proceeds rapidly from one phase to another.” Thus “the interim period, the interval during which the commodity remains in the intermediate station between one production phase and another is reduced. . . . ”
Now both developments – shortening of production phases and the intervals between them – presuppose the continuous production on a mass scale, “with no deliberate breaks,” required by technology entailing heavy use of fixed capital
(419). 3 This continuity of output flow at a rapid rate and on a mass scale enhances the risk of overproduction, while it reduces the requirement for inventories: “Thus if the commodities remain in the circulation reservoirs for a long time – if they accumulate there–then they will soon glut them as a result of the speed with which the waves of production follow one another and the huge amount of goods which they deposit continuously in the reservoirs,” a phenomenon recognized by Corbet (1841: 115–17); but “the same circumstances which produce this speed and
2 Advances in chemistry illustrate the phenomenon: “The development of chemistry makes it possible to artificially speed up the transition of commodities from one state of aggregation
to another, their combination with other material which, for instance, occurs in dyeing, their separation from [other] substances as in bleaching; in short, both [modifications in] the form of the same substance (its state of aggregation) as well as changes to be brought about in the substance, are artificially accelerated . . . ” (MECW 32: 418). Moreover, “vegetative and organic reproduction, plants, animals, etc., are supplied with cheaper substances, that is, substances which cost less labour time.” 3 Marx distinguished the continuous flow he had in mind by the absence of “deliberate breaks” from a related feature, namely “the closing and overlapping of the separate production phases” or “the close succession of the production phases”(MECW 32: 419). Deliberate breaks “occur as long as work is done to order, as in the handicrafts, and continue even in manufacture properly so called (in so far as this has not been reshaped by large-scale industry).”
B. The “Wages Fund” Doctrine Rejected 357 mass scale of reproduction likewise reduce the necessity for the accumulation of
commodities in these reservoirs.” As mentioned, these implications extend to inventory holdings at all stages of the production process including retail: “the shopkeeper likewise enjoys the benefits of the speed of communications first of all, and secondly, the certainty of a con- tinuous and rapid renewal and delivery. Although his stock of commodities may grow in size, each element of it will remain in his reservoir, in a state of transition, for a shorter period of time. In relation to the total amount of commodities which
he sells, that is, in relation to the scale of both production and consumption, the stock of commodities which he accumulates and keeps in store, will be small” (420). Marx again points to the greater threat of “overstocking”; and he adds a remark on speculative periods: “Special filling of the reservoirs – in so far as this is not due to the overstocking of the market, which can happen much more easily in these circumstances than under archaically slow conditions – occurs only for specula- tive reasons and merely in exceptional cases because of a real or suspected fall or rise of prices.” He refers inter alia to Lalor (1852: 42–4) on the general phenomenon – the “relative decline in stock, that is, the commodities which are in circulation, compared with the amount of production and consumption” – and takes Sismondi (1837–38 1: 49f) to task for representing it as “something lamentable” (420–1). 4
We have referred to Marx’s observation that the nature of its particular “use value,” with reference to a product’s durability, partly dictates the period a commodity remains “in the reservoirs of circulation” (above, p. 355). This matter is treated more broadly in terms involving a general principle of relevance to the issue of synchronized activity contrasting with advances. In particular, the use of capital- intensive processes – their effect in increasing the flow of production on a con- tinuous, rapid, and mass scale – has its counterpart on the side of consumption which proceeds “almost simultaneously” with production: “To an increasing extent consumption – even of articles where this is not demanded by the nature of their use value – takes place almost simultaneously with production and becomes there- fore more and more dependent on the present, co-existing labour (since it is, in fact, exchange of co-existing labour). This takes place in the same degree in which past labour becomes an ever more important factor of production, even though this past itself” – referring to capital goods – “is after all a very recent and only relative one” (421). This simultaneity, which applies even to durable con- sumer goods, reflects the dependence of current consumption on a flow of output
4 An additional effect of the increased “speed of reproduction” is geographical: “there is . . . a continuous extension of the market and in the degree that the interval of time decreases in which
the commodity remains on the market, its flow in space increases, that is, the market expands spatially, and the periphery in relation to the centre, the production sphere of the commodity, is circumscribed by a constantly extending radius” (MECW 32: 421).
1861–1863 III: The Labor Market
proceding from current labor (working with “recently produced” capital goods) not labor undertaken in a past period.
As mentioned, in all of this Marx was following Hodgskin whose perspective undermined the wages-fund notion in any of its primitive versions. There is no advance to labor involving the “storing up” of means of subsistence “for the work- ers by the capitalists”; for “[t]his would mean that the products circulate for the benefit of the worker and become commodities for his sake; and that in general, the production of products as commodities is undertaken for his sake” (423). 5 Rather, consumption by workers derives from the current flow of output in exactly the same fashion as consumption by any other category: “The worker shares with every other [commodity owner] the need to transform the commodity he sells – which in actual fact, though not in form, is his labour – at first into money in order
to convert the money back again into commodities which he can consume.” 6 And like all other consumers he buys his commodities at retail from the “circulation agent,” the capital-labor relation as such losing its direct relevance: “The worker, moreover, does not confront the shopkeeper as a worker confronts a capitalist, but as money confronts the commodity, as a buyer faces the seller. There is no relation-
ship of wage labour to capital here. . . . ” 7 That the laborer purchases only “part of his own product” – the sense of exploitation – does not affect the actual process at play: “Thus the ‘accumulation’ of means of subsistence by the capitalist for the worker means merely that he must possess enough money in order to pay wages with which the worker withdraws the articles of consumption he needs from the circulation reservoirs (and, if we consider the class as a whole, with which he buys back part of his own product). This money, however, is simply the transformed form of the commodity which the worker has sold and handed over” (424). Thus “the means of subsistence are ‘stored up’ for him in the same way as they are stored up for his capitalist, who likewise buys consumption goods, etc., with money (the transformed form of the same commodity).”
Marx makes much of Hodgskin’s notion that laborers’ current consumption is largely satisfied by the current flow of production – that is by current (or con- temporaneous) labor rather than past labor: “A great part, [or] the greatest part of the products consumed daily by the worker – which he must consume whether his own product is finished or not – represents . . . to a great degree products of labour performed the same day or during the same week in which the worker produces his own commodity. For example, bread, meat, beer, milk, newspapers, etc.” (425). But Hodgskin had not seen that “they are partly the products of future
5 Formally, the “commodity” is the form that products or “use values” takes when production is organized through capitalist exchange rather than for personal use (MECW 30: 38–9).
6 The “commodity” which the worker sells is, of course, his labor power. 7 Marx adds: “except, of course, where the shopkeeper is dealing with his own workers. But even they, in so far as they buy things from him, do not confront him as workers. They confront him as workers only in so far as he buys from them” (MECW 32: 423), alluding here to his purchase of labor power.
B. The “Wages Fund” Doctrine Rejected 359 labour, for the worker who buys an overcoat with what he has saved out of six
months’ wages buys one which has only been made at the end of the six months, etc.” And more generally “we have seen that . . . consumption becomes more and more contemporaneous with production, and therefore, if one considers society as
a whole, consumption depends more and more on simultaneous production, or rather on the products of simultaneous production” (425–6). And “when opera- tions extend over several years, the worker must ‘depend’ on the simultaneous and future producers of other commodities” (426).
Marx’s refutation of a “dependency” by labor on “stored-up capital,” does not imply rejection of all notion of storage. He allows – with Hodgskin – that the worker “cannot work without finding [wage goods] ready for consumption” (414). But what is envisaged here are precisely the “circulation reservoirs” from which laborers’ consumption goods (like all others) are drawn and which must be appropriately filled: “no capitalist production can take place without commodities – whether they be means of consumption or means of production – being available on the market . . . [without] the commodities spending a period of time in the circulation reservoirs. For the product is a commodity [by that fact] only within the framework of circulation. It is as true for the worker as for anybody else that he must find his means of subsistence in the form of commodities” (423). Again: “The worker always has to find his means of subsistence in the form of commodities on the market”; and they are “the produce of antecedent labour, that is of labour which is antecedent to their existence as produce but which is by no means antecedent to his own labour with whose price he buys this produce. They can be contemporaneous products, and are so most of all for those who live from hand to mouth” (426). Indeed, “[t]he majority of the commodities consumed by the worker in the final form in which they confront him as commodities, are in fact products of simultaneous labour (they are therefore by no means stored up by the capitalist).” 8
Marx also spells out the essentials of the money relationship in his discussion of labor’s consumption. We recall that “the means of subsistence are ‘stored up’ for [the worker] in the same way as they are stored up for his capitalist, who likewise buys consumption goods, etc., with money (the transformed form of the same commodity)” (above, p. 358). Now the category “circulating capital” could
be interpreted in a manner recognizing the essentials of the money dimension to the labor-capital relationship; thus, the worker, instead of “buying [means of subsistence] direct or paying for them with the value either of his past or of his
8 As for the availability on the market of durable consumer goods – “use values which, by their nature, only wear out slowly” – it was not “due to any action specially devised for the benefit of
the workers that these products of previous labour are available on the ‘market.’ The worker also used to have a ‘dwelling’ before the capitalist ‘piled up’ deadly stinkholes for him” (see Laing on this [1844: 149–54]” (MECW 32: 425).
The industrial capitalist’s stocks of capital goods proper also had to be taken into account. Here too we find the broader Marxian concern to deny that the laborer is in any way indebted to the capitalist (424).
1861–1863 III: The Labor Market
future product, must first of all receive a draft (money) on it; a draft moreover which the capitalist is entitled to issue only thanks to the worker’s past, present or future product.”
Despite his admiration for Hodgskin, particularly for recognizing that what is truly “stored up” or advanced period by period is “the skill of the worker, the level of development of labour,” Marx found that he had not sufficiently taken account of capital-goods proper (427). For “the stage of the development of the productive power of labour which exist at any particular time and serves as the starting-point, comprises not only the skill and capacity of the worker, but like- wise the material means which this labour has created for itself and which it daily renews. . . . Accumulation in this context means assimilation, continual preserva- tion and at the same time transformation of what has already been handed over and realised” (427–8). Nor for that matter had Hodgskin properly recognized the significance of the money form for the capital-labor relation (428–9). 9
There remains to note the heavy weight placed on the final demand dimension in discussing inventory expansion: “The capitalist may consider it necessary to produce an increasing reserve fund of commodities to cover increasing demand (this can naturally only happen with commodities which can be preserved for some time, such as clothing materials and the raw material for them, etc., cattle, machines, etc., metals, etc.), and so far (this may also be case for the shopkeeper) all accumulation amounts to annual overproduction, an overproduction which is the law of expanding production, not stagnant production” (MECW 33: 178). And it is primarily expansion of working-class consumption that provides the key to successful accumulation at the retail stages (179–80).