Letters: Wages and Prices (1976)

Letters to the Editors from the April 1976 issue of the Socialist Standard

Wages and Prices

In the Socialist Standard (January), you stated in your reply to Derek Clarke: “There is no wages fund” in which one Union dips at the expense of others. If say, the engineers gain a pay rise, that does not obstruct agricultural workers from gaining one; in each case it is obtained from their respective employers, and no one else”.

This is simply not true. If we take miners’ wages as an example it can be seen at once that though the extra “raise” is paid by the employer in the first place, it is recouped through higher charges to the consumer. Try telling the people paying higher prices for their coal, that the extra money the miners got was from their employers and no one else! Of course there isn’t a wages fund as such: but there is a deal of truth in the statement by the late Stafford Cripps: “that the National cake is a certain size, and those who carve themselves a bigger slice, do so at the expense of others.” It is also true of course that extra wages can come out of profits if the profits are big enough, and there is pressure on the employer against raising prices.

The fact that the capitalist system restricts production is accepted in the context of this argument, but the fact that the cake can expand with an expansion of the economy, doesn’t invalidate the point. At any time, the size of this “National cake” is limited. Wages can increase in one or more industries at the expense of other wages! Do you believe that the relatively better placing of miners’ earnings today has come from the pockets of the rich? Is it not also true that a drop in purchasing power caused through higher prices is equivalent to a reduction in wages? You constantly reiterate that the only people who produce wealth are the workers. This is of course an absolute truth. But it follows that the workers’ wages plus the surplus-value the employers take is, in total, the price that the community as a whole has to pay for those goods or services. This is putting the whole interplay of wage rises and prices and the relative changes in the positions of groups of workers in the wages scale too simply, but I think it is sufficient for the point.

May I congratulate you on your open and frank approach in printing the debate “Socialism or Reformism.” I found myself more in agreement with the viewpoint put by LPYS than with that of the SPGB.  I feel that the leaders of the SPGB live in an ivory tower. It is a sad reflection on the policies followed by the SPGB that as L. E. Weidberg remarked in his article “Why I joined the SPGB”:

“And sadly one must confess that the real Socialists in the great working class city of Manchester could still meet in the Atkin’s parlour.” All together in one little room — after nearly forty years or so? 

S. Costin

 Essex 

Reply:

We are pleased to see you agree that the working class is the wealth-producing class in society. Wealth today is represented by vast numbers of commodities and on average these are bought and sold at their values. When a capitalist employs workers, he pays a wage which is again, on average, the value of their particular commodity, i.e. Labour-Power. Their labour is something different, this is what they leave behind them at their places of work in the form of commodities belonging to their employers. The capitalist is able to sell his commodities at a profit by selling them at their value because of the unpaid labour contained in them.

In a given industry — whether privately or State owned — the owners must immediately meet any increase in wages at the expense of profits. But it is wrong to assume that a capitalist can automatically and immediately recover this reduction in profit by increasing his prices. In the first instance he is in competition with other capitalist concerns, and an arbitrary increase would give his competitors the edge in undercutting him. In fact, in normal market conditions, the seller of a commodity will always ask as much as he thinks the market will stand. Even in monopoly conditions, where prices can be kept artificially high, there comes a point when buyers seek alternatives, or will cut down. Look for example at the increase in oil prices after the 1973/4 shortage, followed by a reduction in consumption, and currently, a petrol price war. If, as you assume, an increase in wages can be covered simply by increasing prices, consider why the capitalist did not put up his prices before granting a wage increase. The fact is that capitalists keep a close watch on their markets and try to keep their prices in line with market conditions. Although you direct your comments to price-rises as they affect the “consumer”, it should be borne in mind that the capitalist class themselves are huge consumers of commodities, and the example you give of coal serves to underline this.

Similarly, when workers sell their commodity labour-power, they will seek the highest possible price and in general this will be equal to the value of the labour-power, corresponding to the amount required to feed, clothe, shelter and generally maintain the worker and his family in accordance with traditional standards. Whether individual groups of workers can enforce a rise in wages in order to maintain or improve these standards will depend on the circumstances at the time, but it must be noted that they cannot be depressed very far. In general the most favourable condition for achieving wage increases is when production is expanding and the capitalist is therefore unwilling to risk stoppages. The owners will view wage demands in the light of their increased profits.

Inflation (the excess issue of paper currency) complicates the whole picture by generally pushing up all prices (remember here that wages are prices). Since 1938 prices have risen approximately eight times, while the “national cake” has only doubled. As Socialists we are not impressed by the size of the “national cake” nor the crumbs that the workers are likely to get from it. Rather it is the bakery which we are interested in. We refer you to Value, Price and Profit by Karl Marx where you will find your proposition, and Marx’s reply to it, in much greater detail than we can go into here. Instead of cakes, he deals with a bowl of soup and spoons of various sizes.

We are sorry that you find the LPYS point of view more agreeable than our analysis of society. To us, it is a nonsense to tell people to vote for the Labour Party and then spend most of the time criticizing it. The SPGB has no leaders and the fact that the Party is small does not detract from the accuracy of our case. We maintain that it is better small and Socialist, than large and steeped in reformist nonsense.

Editors

Explaining Wages

Socialists know the Marxian labour theory of value: that wages is the price of labour-power or cost of production of the one commodity that overproduces itself, i.e. the ability to work and create useful things.

But how is the figure of £10,000 and upwards a year for managerial class arrived at? Directors’ fees and in several companies at once, many of them absentees, and golden handshakes on retirement or redundancy?

Is their cost of production so steep or is it that the working class having produced such a vast amount of surplus-value it must be squandered on useless luxury for the few?

Harold Shaw

Tetbury

Reply:

As you point out, labour-power is a commodity and wages are its price. Price is the monetary expression of value, i.e. it indicates the amount of labour-time embodied in a commodity, and this applies to labour-power as to everything else. Wages correspond, in general, with what it takes to produce, maintain and reproduce particular kinds of workers.

Some workers’ labour-power is a relatively cheap commodity. It requires the minimum of education and training, and does not need to be sustained by a high standard of living. Other workers sell a comparatively more expensive product. They have had to acquire special skills or knowledge, perhaps be educated much longer; it is expected that they should live fittingly and that their children be schooled for a similar future. This is the difference between wages of £2,000 and £10,000 a year.

The price of labour-power can be affected, in common with other prices, by supply and demand. Another factor is the strength of trade-union organization in particular industries and professions and its success in getting wage increases under favourable conditions. Higher-paid workers are not a separate class and are as much at the mercy of the wages system as the rest. In recent years executives and managers have been losing their jobs, having to change the life-style they may have thought was divinely ordained for them, and going to the Social Security office.

Directors’ fees are a different matter from wages. Since changes in the taxation laws made “unearned income’’ subject to heavier tax rates, it has become the practice for capitalists to have nominal occupations of which “director” is the most common one.

Editors

Not That Sort of War

I am not a member of the SPGB. Why? I object to Principle 8, line 4. War can prove nothing but who has more money or more brawn.

Winifred Mawson 

Horsham

Reply:

Your objection comes from too literal a reading. The statement that we “wage war against all other political parties” means that we oppose them uncompromisingly and seek to dissuade workers from supporting them, not that we envisage using armed force (or even fisticuffs) against them. War with weapons is not an instrument which Socialists can use. Means have to harmonize with ends. A regime brought into being by force thereafter depends on force: our instrument is understanding.

Editors

Morris and Marx

In the article “The Poverty of Sociology” in the January Socialist Standard you say that William Morris had never read Marx. However, this is not so, and I quote from Morris’s How I Became a Socialist: “Well, having joined a Socialist body I put some conscience in trying to learn the economic side of Socialism, and even tackled Marx (in French) though I must confess that, whereas I thoroughly enjoyed the historical part of ‘Capital’, I suffered agonies of confusion of the brain over reading the pure economics of that great work. Anyhow, I read what I would, and will hope that such information stuck to me from my reading . . .”

So Morris certainly read Marx even though he may not have easily understood the economics.

F. Ansell

Goole

Reply:

We accept the correction with thanks.

Socialism & Religion

It does not necessarily follow that a religious person cannot take an active part in the abolition of the capitalist system of society. The belief in any view of the immortality of the soul does not spring from any particular mode of production. Such beliefs can be used for the good or the ill of man, just as a razor can be used for shaving or cutting one’s throat (or some other one’s). It is sheer super-optimism to believe that in a reasonable given time the majority of the world’s workers will discard their religious beliefs in favour of a materialistic outlook on life and death.

It is in the manner in which religion is used that it becomes the opium of the people. So I cannot see what prevents a religious person advocating and working for the abolition of the exploitation of man by man in the economic field.

Please note: You can cut this short letter if you wish. If you do so, it will be interesting to see which parts you censor.

Ron Smith

Dundee

Reply:

That religion is “the opium of the people” is only part of the Socialist case against it. Underlying all religious belief is idealism — the assumption that ideas have an existence of their own and can be the operative force in changing society “for the good or the ill of man”, as you say.

Scientific materialism rejects this belief. The drive to Socialism is not a pursuit of ideas, but the expression of a class interest. Revolutionary social changes in the past have been brought about (and resisted) by classes seeking the fulfilment of their material interests. People holding religious or otherwise idealist views have, therefore, an obstruction to their understanding of society: contrary to what you say, it does necessarily follow “that a religious person cannot take an active part in the abolition of the capitalist system”.

You tell us it is mistaken to expect that the majority of the world’s workers will reject religion and see things materialistically. Look round. The capitalist system itself requires materialist thinking and is helping to effect the conversion. A poll reported in the Guardian on 14th October 1974 concluded that only 33 per cent, of young people today believe in God or an after-life.

As regards your ending: don’t be childish. Letters are shortened for space reasons, not censorship. If other letters on these pages had not been reduced in length yours might not appear, and vice versa.

Editors