The Profit-Sharing Snare. Co-partnership Schemes Exposed. (1930)

From the October 1930 issue of the Socialist Standard

The economics of cheapness.

Great Britain is losing her hold over the world market. That means producing firms are finding it harder to compete successfully against producers abroad. Every scheme is being tried to regain lost trade and to increase the quantity of goods sold. Industry to-day is carried on for the profit of the owners, and more trade, therefore, means more profit.

The most effective way to capture markets is to sell cheaper than your rivals. How can goods be sold at a lower price? Modern industry answers—”Reduce the time taken to produce them.” That is how the modern cry of Rationalisation pays tribute to the economics of Karl Marx.

Marx showed that the average amount of time taken under prevailing conditions to produce an article determined its value. So in order to sell cheaper, the manufacturers to-day use every possible method to lessen the time necessary to produce their wares.

Piece-work rates, bonus systems and other profit-sharing-schemes are adopted to arouse the worker to greater effort; to produce quicker; and to save waste. This enables the employer to produce more cheaply, whilst the workers are told they will share in the increased profits.

The “Pace-maker” and his function.

The cotton trade to-day is in decline, and these speeding-up methods are being pushed in Lancashire to enable the employers to ensure their profits. The Manchester Guardian recently had an article suggesting piece-work and bonus systems as a remedy. The fixing of piece-work rates, however, we are told by the writer, is difficult, as it means getting “pace-makers,” or sloggers who can lead the rest by turning out more goods. The standards of price per piece can be fixed more profitably for the employers if really rapid workers are employed as “time setters” to cut down the time required to turn out each job. Thus the Taylor system in all its variations of efficiency is offered as a cure for “Lancashire ills.” Its adoption will certainly raise the employers’ profits, but will simply mean in practice that fewer workers are required to do the same amount of work. Any apparent increase in wages by sharing in the profits is only in actual practice a reduction of wages in relation to the increased amount of work performed. The employer’s share is that his profits are increased vastly. The worker is paid a fraction more than before for turning out a much larger product. The sole result is that the increased efforts of the workers reduce the “share” of the total product given back to the workers as wages. That is why prominent employers are so much in favour of these piece-work and profit sharing systems.

One feature of all these piece price and premium bonus ideas was noted by the Manchester Guardian writer; that is the policy of firms cutting down the piece rate once they find efficiency going up and adding to the workers’ wage. So almost as fast as the workers’ output is increased by slogging, the unit price comes down and the workers are back again to subsistence wages. Once the workers raise output it becomes the average standard for all to comply with in order to get the basic wage.

The Co-partnership fraud. 

Many leading employers have recently boomed another artful dodge to ensnare the workers into working in harmony with the employers. Co-partnership or shareholding by employees is the stale device which is being revived. The Economic League—that body of employers’ friends—issue many leaflets praising co-partnership as the way to social peace and workers’ prosperity.

One of the great examples of this scheme is the South Metropolitan Gas Works, who smashed their employees’ strike on the profit-sharing issue, and afterwards raised hours from 8 to 12 per day. This firm boasts that since “allowing” employees to own shares the efficiency has increased, the price of gas has fallen, and better still— profits have risen considerably. In this firm the profit-sharing scheme was made compulsory, so that all workers would take a “greater interest in their work.” It worked out in practice that fewer men were required to do the same amount of work and the tiny “share” of the workers in dividend at the end of the year proved that the owners had really shared in the added wages due to the workers for their increased efforts and output.

The workers get the "leavings."

Lord Leverhulme, of the Soap Trust, was a great believer in co-partnership. But on his death we found from the published will that he owned the entire two millions of ordinary shares himself. Not much co-partnership there ! And by “allowing” some workers to have special “employees’ shares,” receiving interest after the ordinary shareholders, Lord Leverhulme was able to pile up millions in profit. In his book on the “Six Hour Day,” he points out that he always insisted that the co-partner workers must share in the losses as well as profits. This policy was calculated to teach the workers the importance of helping the firm to make profits.

All co-partnership and similar schemes are put forward to kill any organised efforts by the workers to increase their share of the wealth produced. Under the spell of the “divi.” or bonus, the worker is to be enticed away from the struggle to push up his wages or in any way reduce the employers’ surplus.

The Co-partners get the sack.

Cadbury’s and Rowntree’s are examples of “good” firms with profit-sharing policies. Recent efforts on the part of these companies to hold or increase their trade led them to use more machinery to reduce the labour costs. A reduction of workers employed resulted, and Rowntree appealed through the press for employers to give his superseded men a job. After all the work and efforts of the employees in these firms working hard to produce profits they were replaced by machines ! The co-partners were out of work ! Do you need more evidence of the function of bonus systems and co-partnership ?

The fruits of profit sharing.

In the Ministry of Labour Gazette (July, 1930) appears a complete survey of all profit-sharing and co-partnership schemes operating during 1929. These schemes numbered 495, and were participated in by 260,000 employees out of 531,000 employed in these firms. The report tells us that “in all industries taken together nearly one half of the schemes started have come to an end.” We are also informed that “a considerable number of the schemes admit employees to participation in the profits only to the extent that they are able and willing to deposit savings with the firm or purchase shares.”

A famous firm practising co-partnership is the Eastman Kodak Co. Listen to Mr. George Eastman’s testimony of the profit­ able results to the firm :—

“In 1919 several thousand pounds’ worth of shares were distributed to our employees. One result was that after handing over to the workers one-third of my shares, the value of the remaining holdings soon climbed a third higher than the previous total. That was not the purpose in distributing the shares, but the result shows the business value of the act. Since the shares were distributed the market value has gone up over 150 per cent. Part of this increase in value unquestionably has been due to the wide distribution among workers and officials.”—(Co-partnership, Dec., 1927.)

The Chemical combine.

Sir Alfred Mond (now Lord Melchett) is one of the chief apostles of the co-partnership device. He boasted at the annual meeting of the Imperial Chemical Industries, 1929, that 53,000 employees held shares, totalling about 850,000 shares. (This is about 17 shares each.) They are allowed to buy ordinary shares at market prices less 2/6 per share, and preference shares at the fixed price of 21/6 each. He “trusts” his employees not to sell their shares. Why so many employees put their savings into “their firm’s” shares is easily understood, as it is thought to be a means of being kept on or possibly useful in promotion. How little the workers own in the mighty Imperial Chemical Industries can be seen when it is found that the capital of this combine is over 76 millions. The co-partners have no control over “their” jobs nor any control over the business. What are a few shares owned by each worker against the huge amount owned by such Directors of the firm as Lord Melchett, Lord Birkenhead, Lord Colwyn, Sir Max Muspratt, Henry Mond, Marquess of Reading, Lord Weir, etc. ?

Longer hours for co-partners.

How little Lord Melchett is interested in workers’ conditions can be seen by his efforts in Parliament to get a longer working day for miners. The Amalgamated Anthracite Collieries (owned by Imperial Chemicals) controls 12 coal concerns, and has paid huge dividends in recent years.

Who really owns most of the capital can be seen by its share-list, where dozens of shareholders own 10,000 shares and upwards each, and prominent holders like Guest, Keen & Nettlefolds own £395,000 in shares. Lady Buckland, the well-known miner, owns £395,000 in shares in company with two other aristocrats.

Is this an example of the widespread diffusion of capital that the Economic League and Mond refer to ?

How co-partnership rivets the employees to the firm which holds their “savings” can be seen from Mond’s speech at a co­ partnership luncheon :—

“What is the effect of making them shareholders? We saw some of it in the last General Strike. Not one workman in Brunner, Mond’s left his job ! while many were heard to observe that they did not intend to jeopardise their dividends at the dictates of any outside person. In the business with which I am connected we have been free from Labour disputes for fifty years.”

Lord Melchett is very reticent about the wages paid by his alkali works, mines and every other of the 50 concerns amalgamated into his trust. But the Chemical Workers’ Union are continually protesting’ against the “low” wages paid in that industry practically controlled by the combine.

The workmen co-partners have no control of the share market. Should they want to sell their shares just now what will they get? £1 ordinary shares have fallen from 45/- last year to 19/- to-day. And the 10/- deferred shares have fallen to 5/- each. (Observer, August 3rd, 1930).

The right "spirit" for slaves.

Perhaps there is no better indication of Lord Melchett’s policy than the following- :

“After all, there is no more competitive spirit than that displayed by the British people. If you put them into a football match they will kill themselves every Saturday afternoon for nothing. Why not introduce the same spirit into industry?”—(Co-partnership, Dec., 1927.)

This is from his speech at the same co-partnership luncheon. How tragically true ! that is the spirit of industry—killing themselves for nothing !

Some of the conditions of the Imperial Chemical’s co-partners’ scheme are interesting :

“The scheme is an investment one, and while no absolute restriction is placed upon the workers, they will not be expected to speculate with their shares. The directors reserve the right to refuse to allot further shares to a worker who does not enter into the right spirit of the scheme.

The maximum individual allotment will be such number of shares as can he purchased by an expenditure of a sum not exceeding 20 per cent. of the annual wages or salary of the employee. To this 20 per cent. an additional 1 per cent, for each year of service above five may be added.”—(Co-partnership, Dec., 1927.)

The conditions are, of course, laid down by the firm ! The worker must enter into “the right spirit,” and he must not buy (even if he could afford it) too many shares. Perhaps he might then give up working and, like the real “partners,” live upon profits !

The purpose behind Imperial Chemicals “profit sharing” can be gleaned from the following paragraph : —

“This departure from the normal method of dealing with manual workers is described in the current issue of the Imperial Chemical Industries Magazine as an “experiment,” the continuance of which must depend on its economic result. The creation of the Staff Grade will involve a heavy initial cost which must be balanced by compensating increase of efficiency.—(Co-partnership, Sept., 1928.)

Lion and lamb shall unite!

Another well-known “Co-partnership” firm is the Brush Electrical Engineering Co. The Chairman of that concern, speaking of the results of co-partnership in his firm, says : —

“The scheme also gives us confidence of being able to maintain a fairly satisfactory dividend on the share capital, and it enables us to satisfy our customers that good service deserves a fair and adequate, though not excessive, reward for the shareholders and the staff of workers, both mental and manual.”—(Co-partnership, Sep., 1928.)

The same employer, speaking at the annual meeting of his firm this year, explained some of his principles thus : —

1. Greater economy by elimination of waste.
2. Higher efficiency by elimination of inefficient machinery and methods.
3. Larger output to neutralise low prices by removal of Trade Union restrictions.”—(Co-partnership, June, 1930.)

The last principle is striking, in view of the fact that the supporters of the movement, as the above magazine shows, are prominent Labour leaders, like Citrine, Ben Turner, E. F. Wise, E. L. Poulton (General Secretary of Boot and Shoe Workers). This last leader spoke at the Co-partnership Conference, May 10th, this year, and he served up this slop :—

“If the co-partnership principles are properly adopted, we shall soon get out of the slough in which we find ourselves at the present time.”

The financial steam roller.

One prominent co-partner advocate is Angus Watson, of the Newcastle firm selling Skipper Sardines. His firm was recently bought out by the monster international trust, Unilever, Ltd. Angus Watson resigned as Director, and commented very bitterly on the effects of combination of firms and rationalisation. The worker who had played his part building up the firm’s assets was ruthlessly pushed out by machinery and the power of capital. What can copartnership do in face of the modern International Trust?

Edward Cadbury, the cocoa manufacturer, admits our indictment. Speaking at the Quaker Employers’ Conference :—

“He said they would all agree that the workman ought to have some voice in the management, but at present there was no way in which he could be given any effective control in large scale industry; stressing the words ‘effective control’.”—(Co-partnership, Sept., 1928.)

Reviewing the Life of Lord Leverhulme, by his son, the same paper says :—

“Lord Leverhulme’s ideas did not extend to giving any share of the control to the workers. In his particular case he did not see the reason, and perhaps there was not the demand.”

All the evidence we have produced shows that copartnership and profit-sharing schemes are merely another method of inducing the workers to continue a system in which the real control and ownership is in the hands of the employers and in which all the work must be carried on by the workers.

C.

Editorial: Lessons from the German elections. (1930)

Editorial from the October 1930 issue of the Socialist Standard

Germany has just had a general election, the results of which call for some comment.

One of the most striking lessons of German politics since the war has been the steady fall in the voting for the German Social Democratic Party. In 1919 they had the vote of 45 per cent. of the electorate ; since then the vote has steadily declined until in this election they have secured only about 25 per cent. of the votes cast. Yet in 1919 German Social Democracy had control of Governmental power, and one of its leading members, Ebert, was German President until his death in 1925 !

What is the explanation of the fall in the Social Democratic vote? The answer is simple.

In the years before the war our “labour” opponents, who opposed our revolutionary attitude, brought forward the alleged progress of the movement in Germany as evidence to support their reformist policy, and pestered us with “the growth of the Socialist vote in Germany.” The war destroyed a good deal of this sand castle and made plain what little progress Socialism had actually made among the people who made up the German Social Democracy. The post-war years have made the position still more plain, and have gradually disillusioned and discouraged a large number of the blind followers of the one-time worshipped “leaders.”

The millions who voted “Socialist” in Germany were like the millions who voted “labour” in England—they did not understand or desire Socialism as they did not know what it involved. At the most what they wanted and expected was an amelioration of the worst of the evils that they suffered, and they relied on the promises of the German Social Democratic Party and the English Labour Party to obtain this result. But Socialism is the only means by which the workers’ position can be materially improved; while capitalism remains in existence it must necessarily go on producing the evils of capitalism. Therefore, as neither of the Parties had a Socialist electorate behind them, conditions have got worse instead of improving—to the disappointment of the electorate.

The failure of the Gorman Social Democratic Party to live up to its promises, although it has been easily the largest Party in Germany since the war, and also the fact that it has in various ways assisted the German capitalists in their exploitation of the workers, is the explanation of the disappointment and disgust of increasing numbers of its former supporters.

It will be noticed that the Communist vote is higher this election than in the last, but they have obtained a lower percentage of the votes cast this time than they did in 1924. They have temporarily gained owing to the political ignorance and hopelessness of part of the electorate. However, the life of a Communist Party is one of ups and downs—mainly downs of late years.

The Fascist Party (or German National Socialist Party, as it calls itself) represents in the main the groups of officers, small investors and small proprietors that have suffered economically during the post-war period, but its main actions are determined by German heavy industry, from which it draws a considerable part of its funds. It suits the large German capitalists to use this body as strike breakers and bogey men to keep down wages and frighten any drastic reforms out of the minds of the Social Democrats.

The irony of the situation is that the German Social Democrats are largely responsible for the existence of this body, as they directly and indirectly assisted in its formation. When in power in 1919, they welcomed the returning soldier back “to his own country,” but decreed that the private soldier should lay down his arms whilst the officers could retain theirs. The S.D.P. also assisted in the formation of armed bodies that were afterwards used against them.

The German Fascist Party came into being as the result of the dissolution of groups which originated from the “Orgesch,” a group formed in Bavaria by a state official named Escherich. The elements composing it were in the main the same then as now. Its aims were similar to those of the Italian Fascisti, to whom it gave, assistance in 1921-22.

Anyone who reads, in the “18th Brumaire,” Marx’s description of the “Society of December,” the hirelings of Napoleon III in the middle of the last century, will recognise the similarity in constitution and methods between it and the German and Italian Fascisti, and also how large capital uses such bodies for its own ends.

The German election was fought on the question of increased taxation to meet the growing unemployment problem. The issue was one that admirably suited the Fascists, who put forward airy phrases about better management of funds and the reduction of expenses ; and also endeavoured to play upon patriotic feeling aroused by the heaviness of the war indemnity.

As the German S.D.P. have not advocated anything beyond ordinary capitalist measures to meet Germany’s difficulties, their answer to the opposition is weak, and they suffer from the swing of the pendulum.

The leaders of German Social Democracy who took over power with quaking knees after the war were afraid to stand or fall by their former protestations. Now, after devoting themselves during these years to the salvation of German capitalism, they are losing support among the workers. Some of their members, such as Noske, have acquired reputations for blood-thirstiness and treachery to the working-class that will be remembered and will help the German workers to realise that they must rely upon their own knowledge and their own efforts to free themselves from capitalist bondage, and cast off the outworn and slavish idea of leadership.

Jesus and Economics. Dean Inge on Marx. (1930)

From the October 1930 issue of the Socialist Standard

The spiritual message. 

Dean Inge is the holy incumbent of St. Paul’s Cathedral, the central palace of His Most High God. The divine and duly anointed Dean treated Leeds on July 18th to a lecture, “Christianity and Socialism.” The special body of mutually hostile but loving Christians he addressed was the Wesleyan Methodists. Not the Primitive ones, but those who follow the meek and lowly “Suffer not a witch to live” Wesley. The Dean’s address not only smote those “Christian Socialists,” I.L.P.-ers, etc., who find their “Socialism” in the New Testament, but warmed the heart of the rich who frequent St. Paul’s, by showing that Christ had no economic gospel and had no evil designs on their treasure.

“The Gospel had a message of moral and spiritual regeneration, not of social reform.”

The moral and spiritual regeneration message, however, must have been lost in transit. Neither by the wording of Christ nor by the conduct of his countless millions of disciples can we decipher it. The message seems to have missed the sacred Dean himself, for it was not long since that he advised that agitators should be taken (in a brotherly spirit) and put up against a wall—and shot.

Let us, however, get to the cream of the lecture, if there can be any cream in such a spiritual message.

Why they couldn't follow Christ. 

“Christ was not in the ordinary sense an ascetic. There was no doubt He used hyperbolical language which could hardly be continued in popular preaching. He did not shun the society of the rich or repel them in any way. His counsel of perfection to the young man who thought that he had kept to the Commandments was not addressed to everybody. In those days perhaps a man could hardly follow Christ in His journeys without giving up or endangering his hoarded wealth. There was no regular investment of capital in those days. It was hardly necessary to say that even if He had wished to lay down a scheme of socialism—and such an idea never occurred to Him—the conditions of Palestine under Pontius Pilate and Herod would have put it out of the question. His travelling missionaries were to live on alms like begging friars, but this proved nothing. His own little band seemed to have carried a bag with money in it and to have bought food when they needed it.

Christ was a prophet, not a legislator. He gives us principles, not rules, and we are meant to use common-sense in interpreting them. Some people reject Christianity because they do not understand it; others, because they do understand it. To the latter class unquestionably belong the disciples of Karl Marx. For what excites their passionate hatred to Christianity is precisely that idealistic standard of values which cuts the ground from under the feet of their savage and vindictive materialism.”

“Where your treasure is——”

Christianity is an idealistic gospel opposed to the materialism of the Socialist. The Dean has made that plain. But the reason why you could not expect a man to follow Christ in those days was a base, sordid, material one. The spiritual Dean says that it would endanger a man’s hoarded wealth. There were no Selfridge’s safety deposits then. Amongst such a religious people it would, perhaps, be too much to expect that those who remained behind would not lay hands on “the stuff.” The plundering generations of Christians since then are evidence on that point ! And with what feelings of pain and regret the Dean must have told the audience that “there was no regular investment of capital in those days.” No shares, no Stock Exchange, no dividends, not even an opportunity for eminent clerics to promote peace by buying gun companies’ shares, war loans, or brewery shares for a change. So the sad listeners to Christ must have felt cut up that they could not go and leave their shekels behind safely among the brethren and sistren, nor change it into scrip. Hence this spiritual and by no means material reason prevented them journeying with Christ to snatch souls from outer darkness. These reasons, mind you, are not mine, but those of the immaterial, idealistic Dean Inge.

More materialism.

Another very worldly, material fact that prevented Christ from advocating Socialism was “that the conditions of Palestine under Pontius Pilate and Herod would have put it out of the question.” So, again, the explanation of this opponent of materialism is just an ordinary material one—conditions were unsuitable !

Perhaps the light of St. Paul’s picked up the wrong notes for his lecture. An idealistic standard of values which could not be carried out because of conditions ! A gospel “which wasn’t addressed to everybody,” eminently spiritual, but which had to be modified because of economic facts !

“Special taxation of large incomes might be desirable on public grounds, but it was no substitute for Christian love or charity, and could not claim to be in accordance with Christian economics.”

We were beginning to think that Dean Inge knew the Gospels. He started out by saying Christ dealt with spiritual things, not social ones, and, lo and behold, he discovers Christian economics !

The soothing’ syrup is offered to the rich, that Christ did not mean them to pay high taxes for running their system.

Hearts and economics.

Karl Marx and his followers understood Christianity ! What an admission for one so gloomv as the learned parson. But what the idealistic standard of values of Christianity are, or the nature of savage materialism, we were not informed. How, otherwise than by material alterations, can we deal with the poverty and slavery today? “A new heart and a new spirit,” or “Love and charity,” these phrases that come so easily from the Dean ! The followers of Christ have had two thousand years to display the meaning of these things. From 1914 to 1918 love and charity was quite absent from the language of “the faith” at St. Paul’s, etc.

Challenged for an economic policy to deal with the condition of the workers, these savage idealists can only talk about hearts and spirits, even after admitting that even in Christ’s time the conditions dominated tlhe situation.

It is quite true that Christ had no economic gospel and no Socialism. It is equally true that Christ had no plan of emancipation for the slavery of his time or ours. So we remain materialists with a policy based upon the conditions and lessons of to-day.

The leading Conservative organ of Scotland, The Scotsman, commenting the same day on Dean Inge’s speech, was compelled to adopt much of the materialists’ attitude :

“To some extent social organisation was of little importance to the early Christians, for they lived in the daily expectation of witnessing the end of the world. As Christ refused to interfere in questions of politics—”render unto Caesar the things which are Caesar’s”—so there is no type of economics prescribed for Christians. And in the course of centuries the Churches have in fact changed their ground in relation to certain of the manifestations of economic activity. For example, usury was once condemned by the Church and its existence was disguised by legal subterfuge. The Reformation supplied an ethical basis for the development of capitalism. It was Puritan doctrine that waste of time was a deadly sin, and that everyone must work at his calling. Baxter, indeed, argued that ‘if you refuse a less gainful way you cross one of the ends of your calling.’ Without over-emphasising the connection between Puritanism and capitalism—and it has been over-emphasised by some writers—it is significant that men who appealed for their standards to the Christian religion have extracted from it authority for fundamentally different economic doctrines. There are many sayings in the New Testament which, if put into practice literally, would bring chaos into the legal and economic system of the modern world.”

Dean Inge as long ago as 1888, in his first book—”Society in Rome under the Caesars”—pointed out the material conditions of Rome in its decline promoted the acceptance of Christianity by the slaves whose earthly miseries were so heavy. All that this pillar of the Church can now say in answer to the Socialist case is, “Look at Russia” ! Russia, he claims, is an example of Marx’s ideas in practice, and should be a paradise if Marx’s ideas were sound. Russia, however, is not Socialism in practice, neither is it the result of applying Marx’s theories. Any ordinary mind studying Marx and studying Russia would know that. Lofty and intellectual lights of the Church either don’t know it, or, like Dean Inge, prefer to misrepresent the facts in order to serve his God and Mammon.

Adolph Kohn

Studies in Economic Fallacy (1930)

From the October 1930 issue of the Socialist Standard

Invest your savings—Don't "save” them.

Mr. Robert McLaurin has been writing in the Labour press, advocating that money should be turned into productive fields. The way to do it, he says, is to stop the banks paying interest on deposit accounts, and so compel the depositors to invest their “savings” in industry. The fact that we are suffering from over-production of goods is ignored by this finance reformer. If more goods were produced by more concerns being started, the situation would simply grow worse. Goods are produced for sale to-day, and as the market is already glutted in almost every trade, the suggested reform would not touch the situation. This writer savs “the system worked with comparative smoothness” until 1914 ! Poverty, insecurity, and unemployment of wage-slaves is apparently a post-war condition to this reformer !

Proudhon and his modern followers who advocate “Free Banking,” the currency cranks like Arthur Kitson, and the Labour crowd who want money reform, are all Utopians who seek a commercial competitive system without the laws of commerce or of competition. Most of them imagine that goods should be money and that banks should allow every owner of goods credit for the amount of his wealth. If the goods cannot find a market in exchange for the universal means of circulation—money—how can they find a market any easier by being put in pawn—if such a childish notion ever was adopted?

* * *

Will reduced wages mean more work?

Another “short cut to more jobs” is being advocated by some employers in the press. The simple scheme suggests that the money paid to “out of works” by the Government should be handed to employers instead, to enable them to capture orders from abroad. Every unemployed man engaged by the employers will get the difference between the so-called “dole” and his usual wage, made up by the employer. Present wages prevent contracts being obtained against foreign competition—so runs the cry! The profits, of course, are quite in order! Such a pass has capitalism come to, that the competition employers adore prevents them being able to pay a subsistence wage ! Does it? They don’t suggest that capitalism should be abolished, but that the ruling-class as a whole should subsidise those employers who cannot pay wages and profits out of their business.

Seeing that these same people complain that foreign countries subsidise industries and pay “low” wages, where will the process of cutting wages end ? The miners and many other workers in recent years have had such low wages that poor law relief has had lo make them up to subsistence level. Did that prevent unemployment growing amongst them? And when the rationalisation and electrification of foreign industries is copied here more and more, the unemployed will increase. The countries of “low wages” abroad have a growing unemployed army. “Low wages” hasn’t saved them.

The general adoption of the policy of supplementing part wages with so-called “doles” simply means that wages will be pushed down throughout the country. The employers who have not the capital to modernise their plants cry out for more wage reductions, and in the meantime the larger concern crushes or absorbs them.

* * *

The economic trend.

It is a plausible catch-cry to shout “wages determine prices,” but economic facts dispel that moonshine. Ford’s Motors in their last annual report showed that where they paid the highest wage in Europe (in Denmark) output was greatest, and where they paid the lowest (Belgium) the output was least. The real basis of world competitive prices is the amount of labour that it takes on the average to produce articles with modern methods. Where manufacturers, like Ford, have the capital to buy the latest and biggest quantity of machinery, they can reduce the time taken to produce goods, and so sell for less.

The manufacturers who cry out for subsidies to help them pay wages, won’t face the issue that production for the world market is wiping out many competitors and producing the combine or trust in every field. The successful firms have won by reducing costs, which means reducing the numbers of workers required to produce a given quantity of articles. Therefore, the chronic unemployment of to-day becomes a fixed feature of capitalism. Every country and every manufacturer is out for trade, and therefore profit, and in the wild scramble the workers do not count. They just produce the wealth and under the best conditions get just about enough of it back to keep them alive.

* * *

Shall we demand "lower prices”?

Labourites and “short-cut Socialists” are demanding cheaper goods. Consumers’ Bills and anti-profiteering campaigns are on the road to cut prices. These people are chasing a Will-of-the-wisp. “Reduce the cost of living” may be a good battle-cry for those who are consumers only, but the working class is a producing class. It does all the producing, but only a part of the consuming. How much the workers consume is determined by their wages. And what determines their wages? The basis of wages is the money needed on the average to keep a worker and his family. The number demanding work and the number of jobs available decides the daily fluctuations in wages, but the average level of wages is the cost of living of the worker. When the official index figures of the cost of living show a reduction, wages are reduced accordingly. In the daily Press of July 23rd we read that the Civil Servants have just been notified that their salaries are to be reduced, as the cost of living has fallen. Therefore, the campaign for cheaper goods will simply result, if successful, in reducing the worker’s wage. The money wages are only nominal—the buying power is the real wage. If the necessaries of life are “high,” wages may be raised to cover the increase, but the purchasing power of wages is always related to the cost of living of the workers. However cheap goods are, wages will always represent but a fraction of the wealth made by the workers.

The cry for cheapness to-day overlooks the economic tendencies of the system.

* * *

The march to monopoly. 

On the one side mass production serves to produce cheaply, but alongside of that is the rising power of monopoly, rings, and trusts to corner the supply and exact monopoly prices. Many manufacturers are against the prices of necessaries being raised and so driving them to pay higher wages. The general tendency of modern capitalism, however, is to concentrate the great sources of wealth and the products into fewer and fewer hands. If nature and man are very productive, and the supply grows quicker than the demand, the owners scheme to restrict production and actually to destroy products, in order to keep prices high enough to ensure their growing’ profits.

Centralised production on a large scale certainly works towards reducing costs, but the great combine owners are not interested in usefulness or cheapness as such—they are interested in profits. Once they have cut out the competitors, they plan “to get all the market will bear” by controlling the market. There is, of course, a limit which they cannot go beyond without reducing the amount they can sell.

The Consumers’ Leagues and similar bodies are powerless to effect their wishes, whatever Bills are passed to stem the economic tide. The concentration of wealth and the combine are the natural outgrowth of commercial competition, and can only be dealt with effectively by abolishing private and class ownership.

One other factor in “high” prices is the falling value of gold due to modern improvements in working gold-bearing ore. Thus economic development and economic laws of capitalism cannot be dodged by reform legislation. They must be understood—and then we’ll fight for Socialism.

* * *

The economics of "Labour.”

David Kirkwood, of the Clyde, Labour M.P. and I.L.P. chieftain, has a mental upsurge. He has discovered how to stop the downward march of workers’ conditions. He has brought in a Bill to make it illegal for employers to reduce wages. A Government in charge of the capitalist system of profit and exploitation is asked simply to decide “No more reductions in wages.” Employers must not cut the workers’ pay. Wages will then automatically stay put. Wages will fluctuate no longer downwards—but only upwards. Thus poverty will be grappled with.

A little economic knowledge would be dangerous to a Labour M.P. We will, however, try a small quantity.

Under this system an employer is not compelled to employ the workers seeking work. The number of men and women seeking work being greater than the number of jobs, wages tend downwards. The market—the labour market—is the place where competition for work causes men to accept the master’s terms. Having no wealth, the workers cannot hold out. Does Kirkwood’s Bill abolish that market and its competition? Does it wipe out unemployment? Does it abolish the lack of property—the force that drives men to work for others for a fodder wage? Does it alter the fodder basis of wrages ?

No. Kirkwood, playing with effects, would like to abolish the effects of capitalist system whilst leaving the system running. It is more sensational, vote-catching, and sounds drastic; it is easier than explaining capitalism and advocating Socialism.

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Economic laws override statues.

A law to stop wages going down ! A war might do it for a time, whilst the demand exceeded the supply of workers, but a law under capitalism cannot stop the employer buying better and more effective machinery whenever wages tend to rise, and thus pushing numbers out. The rationalisation which Kirkwood criticises (New Leader, July 18th) would play havoc with his “law.” Centuries ago, laws were passed making it criminal to pay more or less than the wage fixed by statute. The plague had swept huge numbers of workers away, and wages rose rapidly. Conditions made the statute a dead letter. The cry of employers for labourers and the favourable situation for the men made reductions of wages impossible. Too many employers were willing to pay more than the legal wage.

When hunger drives hard, men and women go back to work even at terms (fixed with Labour Government’s assistance) involving ten per cent. reduction, as in the woollen trade. What has happened to the Minimum Wage Laws “won” by miners from Lloyd George? Where are the miners’ work and wages to-day? David Kirkwood, like his fellow Labour Members, should stick to “Pleasant Sunday Afternoon” meetings at the kirk.

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Is shorter hours the remedy?

Mr. Geo. Hicks, of the General Council of the Trade Union Congress, has been telling his Building Trade Union of the effects of rationalisation on the building-trade. One hundred and fifty thousand are out of work in this industry, but more machinery and efficiency schemes are being used every week to get the work done “cheaper.” “A shorter working day,” he told them, would absorb some of the unemployed, and those pushed out by machinery should be given alternative employment or fully maintained.

Hours have been continually shortened in the builders’ craft, but has that absorbed the unemployed? The Union that can’t win a strike over some detail of their conditions is not in a position to win full maintenance. Mr. Hicks, like most Labour leaders, is busy supporting the Labour Government, which carries on capitalism and advocates the wholesale rationalisation which he complains about to his members.

Labour leaders do not tell their members the truth that the only way out is to abolish this system by winning political power for Socialism. It’s a much easier and more profitable way for leaders to keep the workers ignorant. Then they can be led.

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A lesson for trade unionists.

Whilst the Trade Union leaders are busy as Labour M.P.’s supporting rationalisation, which will add to unemployment, the Unions beg the members not to add to the financial burden of the Unions by temporary stoppages, etc. The Boot and Shoe Union used to boast that by a “no strike” policy of conciliation they had won the best conditions. Now they complain that unemployment of their members in this machine industry is draining all their funds. The Cardroom Amalgamation of Lancashire has issued a circular to its members, warning them that the scales of contributions and benefits will not stand the chronic unemployment to-day.

The eight looms per weaver scheme, however, is being put through in Lancashire, where more than one-third of the operatives are already out of work. The Labour Government’s Committee of Enquiry, headed by J. R. Clynes, the Labour Minister, advised the greater rationalisation of the industry with the latest wages-saving automatic looms.

The workers in the Unions are still supporting the leaders who mislead them. Not by changing leaders, but by completely changing’ their ideas about society, is the only way the members can cure the situation.

Let the working class own the machines, etc., in common. Stop improving the machinery for the masters. Organise politically to end this system of profit-making.

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Another "sheltered trade" gone.

The Railway Unions have benefited so much by brilliant leadership that since they got back their 2½ per cent. reduction in wages, short time or dismissal has been the rule in the railway shops. A greater speeding up of the work is the owners’ reply to the cancelled reduction of wages. Now we learn from the Daily Herald of June 17th that owing to the drop in the official cost of living figures, thousands of railwaymen have lost two shillings a week. Seventy-five per cent. of the railwaymen, according to the same authority, are down to the minimum rates of wages. They give the figures of £2 6s. for porters, and lamp-men and permanent way men £2 8s. In the meantime the railway companies have been buying up their ‘bus competitors, the money for which, I suppose, comes out of their losses. The Transport Unions and the Railway Union are now busy squabbling over which Union the members must join. Mr. Thomas, we expect, will add to the railway workers’ prestige by finding a place in the House of Lords. Such are the fruits of conciliation in industrv.

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“The Iron Law of Wages." 

"The corner-stone of Marx’s theory, as expounded in ‘Das Kapital,’ is that labour is the creator of all wealth, but that under Capitalism labour is not paid by the value it produces, but by the price of labour power as a commodity on the market. This price, according to Karl Marx, is fixed by the economic laws under which we live at a point which just secures an adequate supply of labour for industry. This he called the ‘Iron Law of Wages’.”—(H. H. Tiltman in his Life of Ramsay MacDonald.)

The above is an example of the ignorance of Marx’s economics by the brainy bourgeoisie who write about him.

Marx did not call his law of wages the “Iron Law of Wages.” In fact he exposed the “Iron Law” theory, which was taught, not by Marx, but by Lassalle. In his criticism of the Gotha programme of the German Labour Party of 1875, Marx pointed out that the so-called Iron Law of Wages was a mixture of Malthus’ over-population theory with economic facts. The “iron law of wages” presupposes that wages cannot rise owing to an increase of population taking place if the subsistence level is increased. More workers born would crowd the labour market and bring wages down. Too few workers would raise wages, which, in turn, would induce larger families, and thus, through competition for work, wages would again fall to their former level.

Marx, on the other hand, showed that the cost of subsistence was the basis of wages. The level of wages, however, was not fixed and was not like iron. The union of workers and their struggle played a part in the raising of wages. The standard of living, too, was not fixed, but fluctuated, due to the changing social conditions; the efforts of workers to adapt their way of living to the period they lived in; and the need of employers to adapt the living standards of the workers to enable the speed and efficiency of industry to be maintained or increased.

The really vital factor in overcrowding the labour market was not the birth-rate, but the use of machinery by the employers. The critics of Marx seem to get their knowledge of him from his opponents.

Adolph Kohn

Answers to Correspondents. (1930)

From the October 1930 issue of the Socialist Standard

J. P. Bassindale (Doncaster). The Socialist Party of Great Britain is not affiliated to the Labour Party or to any other party. See our Declaration of Principles and reply to J. Clifford below.

J. Clifford (Larne). The reasons why Socialists are opposed to the Labour Party are frequently given in these columns. See the issues April, May, June and August, 1929, and subsequent months.

SPGB Meetings (1930)

Party News from the October 1930 issue of the Socialist Standard