Why Marx’s critique of capitalism still matters (2026)

From the September 2026 issue of the Socialist Standard

Marx’s Capital is subtitled A critique of Political Economy. ‘Political Economy’ was an attempt to explain how capitalism works and how it might develop over time, Two of its main representatives were Adam Smith and David Ricardo and much of Capital is shaped by and addresses the works of those two thinkers. They shared a fundamental idea that we know as the Labour Theory of Value (LTV), but it had a major flaw: the inability to explain the source of capitalist profit. This flaw was only solved in Marx’s Capital. Below, we discuss issues around the theory.

Part I: The Ricardo problem

To understand Marx’s contribution, you first need to understand the problem he inherited from classical political economy.

The classical labour theory of value

Adam Smith and David Ricardo both worked with versions of the labour theory of value. The basic idea: the value of a commodity is determined by the amount of labour required to produce it. The greater the labour-time required, the greater the value of the commodity.

This made intuitive sense and seemed to explain a lot about how markets worked. But it had a fatal flaw that Ricardo acknowledged but couldn’t resolve. By the way, both of them treated ‘labour’ as the only commodity that the worker brings to market.

What Ricardo understood

Labour Theory of Value: Commodities exchange based on the labour time required for their production; labour is the source of value.

Class conflict: He recognised that capitalists, landlords, and workers have opposing interests; rising wages reduce profits and vice versa.

Where Ricardo stopped (and Marx went further)

1. Naturalisation of capitalism

Ricardo: ‘This is how economies function. Labour creates value, always has, always will.’

Marx: ‘Value is specific to capitalism. In other systems like feudalism, labour does not take the form of value.’

Value can be defined as the socially necessary labour-time spent reproducing commodities within the capitalist mode of production.

2. Inability to explain profit’s source

Ricardo’s dilemma: If labour creates all value and workers are paid for for their labour, where does profit arise? He couldn’t resolve this contradiction.

Marx’s solution: Workers are not paid for their labour; they are paid for their labour-power. Labour-power possesses a value, say 10,, reflecting the cost of reproducing the worker (food, shelter, etc.), but normally generates more value, say 12, when consumed. It is the only commodity which can do this, This extra value is the source of profit.

Historical context: Franklin, Smith, and Aristotle

Benjamin Franklin contributed to this discourse by asserting that the value of a commodity derives from the labour hours needed for its production from start to finish. Franklin never developed it into a theory. He was writing about legitimising paper currency.

Adam Smith maintained a contradictory attitude to value, shifting between LTV and a cumulative theory whereby value was determined by wages + profit + rent. He noted that commodities exchanged at equal ratios (one beaver = two deer) but couldn’t explain why this was so.

Aristotle was able to observe the LTV in action – he saw that commodities exchanged at stable ratios (5 beds = one house) but couldn’t explain why this should be so. Marx paid him a compliment writing: ‘Aristotle’s genius is shown by [the fact] that he discovered, in the expression of the value of commodities, a relation of equality’ (Capital volume 1 chapter 1) but the inequality inherent in a slave society blinded him to the source of that equality.

The profit paradox:

Here’s Ricardo’s problem: if, as he argued, commodities exchange at their value (determined by labour-time), and if labour itself is a commodity that exchanges at its value, then ‘where does profit come from?’

Let’s walk through it:

1. A capitalist buys raw materials at their value (say, $50 worth of cotton yarn).

2. The capitalist buys labour from the worker at its value (say, $50 for a day’s work).

3. The worker transforms the yarn into cloth.

4. The capitalist sells the cloth at its value (the combined labour-time of producing the yarn + weaving it into cloth).

Total cost: $100 (materials + labour)

Total revenue: $100 (value of the cloth)

Profit: $0

But capitalists do make profit. So either:

1. Capitalists are systematically cheating (buying below value, selling above value), or

2. There’s something wrong with the theory.

Ricardo couldn’t solve this. He acknowledged the problem but left it as an unresolved contradiction in his system. He died not being able to resolve it. He had his hand on the doorknob, but didn’t turn it and walk through the door. This wasn’t just an academic puzzle – it was the central question of political economy. Without solving it, you couldn’t explain how capitalism actually worked.

The moralistic detour

Some socialist thinkers – particularly Pierre-Joseph Proudhon – seized on this contradiction and concluded: ‘Capitalism is theft’. Workers are being cheated. The solution is to create fair systems of exchange where workers receive the full value of their labour.

Proudhon’s famous declaration – ‘Property is theft!’ – captured this moral outrage. His solution was mutualism: worker cooperatives, mutual credit banks, and systems of direct exchange that would eliminate the middleman capitalist.

But this was a dead end. Why? Because it misdiagnosed the problem. It assumed exploitation happened because of cheating – bad actors violating the principle of equal exchange. Marx would show that exploitation happens within equal exchange, as a structural feature of the system itself. This is the difference between scientific socialism and utopian reformism. Capitalists aren’t villains – they’re playing by the rules. The problem is the rules themselves. But on we go…

Part II: Marx’s breakthrough – Labour vs. Labour-Power

Marx’s genius was in recognising that Ricardo and Proudhon were asking the wrong question. The problem wasn’t that capitalists were cheating. The problem was that labour itself isn’t what workers sell.

The distinction

Marx distinguished between two concepts that everyone before him had conflated:

1. Labour-power: The capacity to work. This is what the worker sells to the capitalist – their ability to perform labour for a certain period of time.

2. Labour: The actual activity of working, which produces value when labour-power is consumed in the production process.

This distinction is subtle but revolutionary. Here’s why it matters:

Labour-power as a commodity

Like any commodity, labour-power has a value – determined by the labour-time required to reproduce it. But what does it mean to ‘reproduce’ labour-power?

It means: ‘the cost of reproducing the worker’.

To show up to work tomorrow, the worker needs: food, shelter, clothing, rest, healthcare, education or training.

The ‘value of labour-power’ is the socially necessary labour-time embodied in these necessities. In other words, it’s roughly the cost of keeping the worker alive, healthy and able to work. There is an additional component too that covers the cost of raising the next generation of workers

Let’s say all this costs $100 per day. That’s what the capitalist pays in wages.

Labour as value-creating activity

But here’s the key: when the capitalist consumes labour-power – when the workers actually work – they produce more value than the cost of their labour-power (Marx lays this out explicitly in Chapter 6 of Capital Volume I).

Let’s say the worker works an 8-hour day and produces commodities worth $200.

The capitalist pays: $100 (the value of labour-power).

The worker produces: $200 (the value created by labour).

The difference: $100 (surplus value, appropriated by the capitalist. It will then be split up into profit, interest and rent, but that is immaterial to the present discussion).

Why this solves the Ricardo problem

Notice what just happened: Exchange occurred at value. The capitalist paid the worker exactly what their labour-power is worth. No cheating. No violation of market principles.

And yet, the capitalist extracted surplus value. This doesn’t come from cheating – it comes from the unique nature of labour-power as a commodity.

Labour-power is the only commodity whose consumption produces more value than it costs.

This is the secret of capitalist accumulation. And it’s why Marx’s critique is fundamentally different from the moralistic critiques that came before. This is why socialists assert that class war originates in the employment process – the less a worker is paid, the more a capitalist accumulates in profit. It’s not about being greedy or evil, or being good or generous. It’s simply necessary to compete in the effort not to go out of business. The capitalist who refuses to extract maximum surplus value doesn’t stay a capitalist for long – they get driven out by competitors who do. The system selects for exploitation.

Part III: Why a moralistic critique is dangerous

Marx didn’t just disagree with Proudhon’s analysis – he considered it dangerous to the working-class movement. Why?

1. It misdiagnoses the problem

If you believe exploitation happens because capitalists are ‘cheating,’ your solution becomes: ‘Make capitalism fairer.’

This leads to reformist dead-ends:

1. Worker cooperatives that still must compete in capitalist markets

2. Ethical consumption campaigns

3. Appeals to capitalist conscience

4. Labour laws that tinker at the margins

These strategies don’t challenge the fundamental structure. Even the nicest, most ethical capitalist must extract surplus value to survive in competition. If they don’t, they go bankrupt.

Bad diagnosis = bad cure.

2. It lets capitalists off the hook

A moralistic critique says: ‘Capitalists are bad people doing bad things.’ This can lead to people organising to use violence and fantasising about using guillotines to get this or that capitalist, which will not solve any problems. The problem isn’t the capitalists themselves, it’s the system’s rules that require the capitalist to behave in a certain way.

A moralistic critique is easy to deflect:

1. ‘I pay above minimum wage!’

2. ‘I offer great benefits!’

3. ‘If you don’t like the wage, don’t take the job!’

Marx’s structural critique is much harder to escape: ‘Even if you’re the most generous capitalist in the world, you are still extracting surplus value. If you didn’t, you wouldn’t be a capitalist. The system requires exploitation to function, regardless of your personal morality.’

3. It divides the working class

If exploitation is about bad bosses, workers start thinking:

1. ‘My boss is actually pretty nice. Maybe I’m not exploited.’

2. ‘We just need to replace the greedy CEOs with ethical ones.’

This fractures class consciousness. Workers waste energy trying to find good employers instead of recognising that all wage labour involves surplus extraction.

3. It obscures the source of power

A moralistic critique makes exploitation seem psychological – a matter of individual greed.

Marx showed that it’s structural. Even a worker-owned co-op, operating in a capitalist market, must increase productivity and accumulate capital to survive. The system itself enforces exploitation.

Part IV: Conclusion: Why this still matters

Marx’s labour/labour-power distinction isn’t just an abstract theoretical point. It has profound implications for how we understand the economy and our place in it.

It explains profit without cheating

You don’t need to believe in conspiracy theories about greedy capitalists. The system works exactly as advertised – and still produces exploitation.

It reveals the structural nature of exploitation

This isn’t about bad individuals. It’s about a mode of production that requires the extraction of surplus value to function.

It clarifies strategy

If exploitation is structural, you can’t reform it away. You can’t create ‘ethical capitalism’ or ‘fair trade’ your way out of it. You need to change the fundamental relations of production. In other words, capitalism can’t be made nice – maybe nicer at the margins, but never nice. The extraction is baked into the structure.

It cuts through ideological mystification

When someone tells you ‘the market is fair’ or ‘you’re paid what you’re worth,’ you can ask: ‘Then where does profit come from?’

The labour/labour-power distinction gives you the tools to see through the illusion of equal exchange and recognise the hidden extraction at the heart of the system.

Dan Mullens

Dr. Sweezy on Marx’s theories (1947)

Book Review from the September 1947 issue of the Socialist Standard

When the late Lord Keynes wrote his General Theory of Employment Interest and Money it was hailed in certain quarters as a step towards Marx in its method of analysis in respect of the problems of present day society. His conclusions revealed, however, that so far as any realistic evaluation of the nature of contemporary Capitalism was concerned, he had taken two steps away from Marxism. Undoubtedly a renewed interest in Marx’s economic teachings has been stimulated by the recent development of Capitalism and certain economists going further than Keynes have attempted to reconcile their own academic teachings with the objective analysis of Capitalist Society carried out by Marx in the middle of the last century. The results we need hardly say have been barren and, at times, ludicrous. To students of Marx, therefore, any book which sets out to present his doctrines in the light of modern capitalist evolution is of interest. Dr. Sweezy, a Harvard economist, attempts this and in some respects succeeds in his book The Theory of Capitalist Development, although in others he overwhelmingly fails.

His opening chapter on the methodology of Marx is interesting; methodology being another name for scientific method or the mode of investigation by which systematised knowledge is acquired. This involves the great importance of the process of “abstraction” which is essential to scientific method. A process which, as Sweezy says, “constitutes the method of successive approximation, or moving from the more abstract to the more concrete in a step by step fashion.” To put it another way, it is a question of going from the simple to the complex. When analysing a complex situation one must at the outset eliminate anything that is extraneous and likely to complicate the issue. To use a scientific axiom: to understand is to omit. Thus to understand the essential it is necessary to exclude what is non-essential for the purpose of the immediate investigation. A single example will illustrate our meaning. By the process of abstraction we can recognise the identical elements denoted by the objects, man, horse, bird, fish, etc., and combine them into a general concept—”vertebrate.” Thus we have the perception of a common property or identity of structure, which exists independently of their differences. To use scientific terminology, in order to arrive at this underlying relationship which exists between these different forms of life, they must be treated as an isolated process. In passing to a more detailed account, however, of the actual physical structures peculiar to their kind, factors which were arbitrarily eliminated as non-essential for the purpose of the crucial investigation, must now enter into consideration. The broad classification, vertebrate, now comes to acquire a more qualified and limited connotation the more it is brought into conformity with the totality of the various species, concretely considered. The validity of the use of abstraction is then: does it assist in helping to discover the essential relationship connecting the phenomena under investigation? That is its ultimate justification.

The same scientific principle holds good in Marxism. Marx began his analysis of capitalism by treating it as an isolated process of simple commodity relationships between capitalist and worker in which complicating factors like differences in the organic composition of capital, foreign trade, export of capital, non-capitalist regions, were deliberately excluded. Volume I of Capital can then be said to be the first stage of abstraction. Of course in capitalist society, considered from its concrete totality, commodities do not sell at their value. That socially necessary labour —the basis of value—is not a constant but ever-changing quantity. That monopolistic practices and imperfect competition distort the pattern of exchange relations, and so on. All this might seem to imply that Marx was going away from the actual conditions prevailing in capitalism but as every scientific thinker knows, scientific analysis rigorously demands such a procedure if the set of events under analysis is to be provided with an efficient cause for their happening. When ignoramuses like Schumpeter and Alexander Gray, whose books on Marxism have been recently reviewed in these columns, scream with the rest of their academic brethren about the so-called contradictions between the various volumes of Marx, they fail to see that such apparent contradictions are an integral part of the scientific method. They imply no more than various stages of abstraction for the purpose of analysing more clearly the problems of the present social system and so arriving at a thorough and comprehensive knowledge of the social forces underlying it. This is our interpretation of the guts of Sweezy’s opening chapter. There is nothing original in this explanation of Marx’s economic methodology but the author elucidates it clearly and lucidly.

Chapter 2 on Value is also instructive, the author dealing with the more abstract side of Marx’s value principle the qualitative aspect. Undoubtedly the opening chapter of Marx’s Capital volume I, has been the least understood by his critics. It was here that Marx sought to demonstrate that any theory of value to be scientifically valid must discover a homogeneous quantity which although itself no? value was nevertheless able to provide the terms by which the exchange value of commodities could be expressed. It was here that Marx’s abstract undifferentiated labour or the expenditure under socially determined conditions of production provided the clue. Thus although labour is not value itself, it constitutes nevertheless the substance of value and so enables the different kinds of concrete labour—use values—to be reduced to this element common to them all. By being made qualitatively equal they can thus be rendered quantitatively comparable as exchange values. It was Marx’s separation of labour-power and labour—his major contribution to political economy—that enabled him to elucidate his theory of value much more cogently and comprehensively than his classical predecessors, Smith and Ricardo. Marx showed that labour-power was a commodity whose value was determined like all other commodities by the amount of social labour necessary for its production and reproduction. Labour, on the other hand, was a definite expenditure of human productive activity and thus capable of objective quantitative measurement and so as a value principle is independent of mere price fluctuations. The fact that abstract materialised labour takes a commodity form is the outcome of historically conditioned social relationship of commodity owners (including, of course, buyers and sellers of labour-power). Value itself is then a social quality, quantitatively expressed in exchange value. It can be seen then, the decisive and revolutionary break Marx made from the classical economists, Adam Smith and Ricardo, who merely treated value from its quantitative side—Exchange Value.

Sweezy also discusses Marx’s Law of the tendency of the falling rate of profit. The rate of profit must not be confused with the rate of surplus value. Thus if the organic composition of capital is £9,000 constant and £1,000 variable and the rate of exploitation of the workers employed by the variable capital is 100 per cent, then the surplus value produced by the workers will be £1,000. The capitalist, however, computes his profit on the total outlay of his capital, thus the rate of profit is “surplus” divided by “constant” plus “variable” which is 10 per cent. With every increase in the ratio of constant to variable capital the rate of profit falls even if the rate of exploitation remains the same. The author does not, it seems, accept the tendency of the rate of profit to fall due to the rising organic composition of capital but seeks to show that accumulation of capital with its increasing demand for labour-power tends to raise wages, and by so reducing the amount of surplus value bring about a fall in the rate of profit. Only when the capitalists strive through the introduction of labour-saving machinery to maintain the rate of profit or to raise its former level does the rising organic composition of capital come into the picture (page 105). It is true that as accumulation expands the supply of available labour power in the market will approach exhaustion point and the price of labour power will tend to rise, at least in certain industries and among certain workers. Fresh capital, meeting less and less reserves of cheap labour power will also tend to go increasingly into constant capital (labour saving machinery, etc.), and the organic composition of capital will be raised. Nevertheless this change is dictated by the relative scarcity of labour power and it does not follow that alteration in the organic composition of capital is necessarily offset by a proportional increase in the rate of exploitation. In this case a rising organic composition of capital is associated with a fall in the rate of profit. Moreover, as Marx points out,

“Two labourers, each working 12 hours daily, cannot produce the same mass of surplus-value as 24 labourers working only 2 hours even if they could live on air and did not have to work for themselves at all. In this respect the compensation of the reduction in the number of labourers by means of an intensification of exploitation has certain impassable limits. It may, for this reason, check the fall of the rate of profit but cannot prevent it entirely.” (Capital, Vol. 3, page 290, Kerr edition)

It is true that cheapening of the elements of constant capital, increase of relative surplus value and relative overpopulation are counteracting tendencies against the decline in the rate of profit. It has been often said that Marx’s analysis gives no clear indication of which set of tendencies would prevail (although Marx himself appeared inclined to the view that a fall in the rate of profit would be associated with continued capitalist expansion and increased technical changes.) Marx, however, was the last person to deduce a falling rate of profit in a vacuum. That would have been foreign to his own scientific and historical approach. For him the dynamics of capitalist society and the interaction of the totality of class relations and interests was the dominant feature in shaping economic trends. And there the matter must rest.

The author renders a good account of the general nature of capitalist crises although his own treatment on certain aspects of the matter must be read with circumspection. Sweezy enumerates two types of crises, one associated with the falling rate of profit and the other that he terms realisation crises, i.e., the inability of the capitalist to sell commodities at profitable prices. This last type of crisis emphasises what Sweezy calls the underconsumptionist tendencies inherent in capitalism. This “underconsumptionist ” approach seems, however, an unsatisfactory formulation of the treatment of crises. It is true that under the stimulus of capitalist accumulation the productive forces will expand and this will tend to higher wages. Nevertheless wage levels are always in the final analysis regulated by the desire of the capitalist class to maintain the customary rate of profit on their capital outlay. Moreover, as the result of the increased productivity of the worker arising out of the expansion of the productive forces, the ratio between the value of his labour power and the value of the wealth he produces is further increased, higher wages notwithstanding. His own share of the total product suffers then a relative decline. With a greater amount of surplus value in the hands of the capitalists there is a tendency for increasing investments in the means of production. Thus the expanding forces of production come into conflict with the limited consuming power based on the antagonistic character of class income distribution inherent in capitalism. To call this underconsumption is, however, to strain the meaning of the term in popular economic usage. Again this underconsumptionist aspect is merely an inevitable corollary of a more fundamental feature that is the basic conflict between the powers of production and the productive relations of capitalist society. As Marx points out,

“It is not a fact that too much wealth is produced. But it is true that there is periodical over-production of wealth in its capitalist and self-contradictory form. . . The capitalist mode of production, for this reason, meets with barriers at a certain scale of production which would be inadequate under different conditions. It comes to a standstill at a point determined by the production and realisation of profit not by the satisfaction of social needs.” (Capital, Vol. 3, page 303, Kerr edition).

Or, again, “the real barrier of capitalist production is capital itself.” (Page 293, same work).

Again Sweezy’s view that crises arise due to a shortage of labour-power which forces wages up and consequently causes the rate of profit to decline is hardly Marx’s view of the matter. In Vol. I of Capital on The General Law of Capitalist Accumulation Marx repeatedly stresses the fact that demand for labour-power does not keep step with the expansion of capital. In other words owing to the rising organic composition of capital the variable portion does not, as a means of the employment of wage-labour, keep pace with increases in the working population. Marx, of course, does not deny that the possibility of crises can arise from “labour shortage,” especially in early capitalism (page 700, Capital, Vol. I, Modern Library edition). Just as the present shortage of workers today carries distinct crisis implications. Nevertheless the appearance and growth of a surplus industrial army he held was the chief feature in the general law of capitalist accumulation. To sum up, Marx’s writings do not indicate two separate features of crises but rather that the possibilities of crises and crises themselves are indissolubly linked with the basic contradictions inherent in present day class society It is these contradictions which give to crisis under capitalism its familiar periodic character.

The chapter which criticises breakdown theories is excellent. The author shows that no such theory of final capitalist catastrophe can be logically deduced from Marx’s writings. Rosa Luxemburg, Otto Bauer and Grossman are all acutely criticised for their formulation of breakdown theories. Our own pamphlet, Why Capitalism Will Not Collapse (written during the last crisis) was a valuable contribution in showing why crises as such do not bring an end to capitalism, in answer to the spokesmen of various political parties, Communist Party included, who were noisily proclaiming the 1931 slump as the beginning of the end of the present economy.

For reasons of space we cannot adequately deal with Sweezy’s mathematical treatment of the transformation of value into prices of production for the purpose of maintaining equilibrium conditions between industries that produce means of production and those that produce means of consumption.

But surely the essence of the matter lies in the historical treatment of the development from simple commodity production to a developed capitalist economy. In simple commodity production constant capital plays little part and is, therefore, relatively unimportant. Here the law of value is directly controlling the exchange relationships. In modern capitalism different organic compositions of capitals bulk large. Seeing, however, that only the variable portion (the part employing wage labour) produces surplus value then different units of capital according to their organic composition will produce different quantities of surplus value and consequently different rates of profit. The capitalist, however, is indifferent to the ratio of means of production to variable capital and seeks the customary rate of profit on his total capital outlay. How this is brought about is due to the competition for spheres of investment in different industries, capital leaving those industries whose rate of profit is low and invading and expanding those industries where the rate of profit is high and where, as the result of this expansion, prices fall and with them the rate of profit. By this incessant competition for various spheres of profitable investment an equalisation of profit or an average rate of profit is brought about. Thus the price at which capitalists sell their goods oscillates not round their value but the price of production, i.e., the cost of production plus the average rate of profit. Nevertheless the sum of the prices of production at which commodities are produced equals their total values. Again this process does not alter the sum total of surplus value produced b the workers, the only point is its distribution according to the requirements of a profit motive economy which necessitates an equal share on a given expenditure of capital. Under developed capitalism the law of value is indirectly controlling exchange relationships, nevertheless, it must constitute the starting point of investigation for elucidating the phenomena of production prices peculiar to capitalism. This modification of value into production prices is then the result of a long drawn-out historical process and a mathematical treatment of it from the unhistorical point of view of equilibrium conditions has little significance, as Sweezy admits (page 128), “the law of value can he discovered and analysed in principle by the use of either value calculation or price calculation.”

His last chapter, “The Decline of World Capitalism” is unadulterated rubbish. He mistakenly holds the view that the world is split into two separate social systems, i.e., Socialism in Russia and Capitalism elsewhere whose fount is the U.S.A. He further holds that the social system of Russia coupled with its growth elsewhere will exercise a disintegrating effect on capitalism. Great Britain and Western Europe — presumably on the Soviet model—might go socialist at the end of the war (this book being first published in America in 1942). Bit by bit Socialism would undermine the stability and structure of Capitalism in perhaps a peaceful fashion. Thus the Fabian principle of peaceful permeation is elevated to international status. Apart from the theoretical falsification of the real issue Sweezy’s idea of “a peaceful era” following the war has been hopelessly falsified by the inter-imperialist rivalries of the great capitalist powers, U.S.A., Britain, France and Russia.

Nevertheless sections of the book provide a useful source for the better understanding of the theoretical foundations of Marxism and its application to the social problems of our time.

Ted Wilmott

Mud slinging (2026)

From the August 2026 issue of the Socialist Standard

If you ever go on social media sites that discuss Marx, it’s likely that you’ll come across a post that claims to refute/debunk his ideas. One of the common charges against Marx is that his theory of value, based on labour-time, is untenable because not all labour produces value. The evidence for this? The mud pie.

Now it’s true that, however many mud pies you make, however much labour-time you expend on that task, you won’t create any value. So surely, Marx got it wrong…. And if his theory of value falls, so does the entire edifice of Marx’s economics.

But here’s why the mud pie argument doesn’t work. References below are to Capital Volume 1.

First, we ought to remind ourselves that, at root, Marx is dealing with an issue that is key to human existence: the labour process, by which ‘Nature’s material [is] adapted by a change of form to the wants of man’ (chapter 7 section 1), a process which creates useful things, otherwise known as use-values. At a certain time in human history the results of this process take the form of the commodity.

To drive home the point, a commodity is ‘an object outside us, a thing that by its properties satisfies human wants of some sort or another’ (chapter 1, section 1).

When the commodity appears in history, so too does value and ‘Value is independent of the particular use-value by which it is borne, but it must be embodied in a use value of some kind’ (chapter 7 section 2).

Lastly, from chapter 8 ‘Value exists only in articles of utility, in objects’.

The takeaway message: Marx’s theory applies to human beings carrying out productive activity to satisfy real needs and wants, not to a child making mud pies (or sandcastles).

By the way, the people who put forwards the mud pie argument have plainly never even opened a copy of Capital, let alone read or understood it. The only reason for dealing with this infantile guff in the Socialist Standard is that the argument re-appears regularly online, presumably on the assumption that if you keep throwing mud, some of it will stick.

Budgie.

Cooking the Books: Human capital (2026)

The Cooking The Books column from the July 2026 issue of the Socialist Standard

Announcing plans to cut nearly 8,000 jobs by using AI instead, Bill Winters, the CEO of Standard Bank, told reporters:

‘It’s not cost-cutting. It’s replacing in some cases lower-value human capital with the financial capital and the investment capital we’re putting in’.

He seemed to have forgotten that he was not addressing a board meeting but the general public. The resulting outrage at him calling his employees ‘lower-value human capital’ forced him to apologise. But he was actually accurately describing a fact.

What a capitalist firm has to set aside to pay its workers is part of its capital. You could call it ‘human’ capital as opposed to the capital invested in plant, equipment, machines, materials and power.  Or, expressed another way, it is the difference between ‘living’ labour and ‘dead’ labour, useful as it brings out that the other factors that capital is invested in have been produced by people working.

The terms Marx used to make this distinction were ‘variable’ capital and ‘constant’ capital, as set out in chapter 8 of Volume I of Capital:

‘The means of production on the one hand, labour-power on the other, are merely the different modes of existence which the value of the original capital assumed when from being money it was transformed into the various factors of the labour-process. That part of capital then, which is represented by the means of production, by the raw material, auxiliary material and the instruments of labour does not, in the process of production, undergo any quantitative alteration of value. I therefore call it the constant part of capital, or, more shortly, constant capital. On the other hand, that part of capital, represented by labour-power, does, in the process of production, undergo an alteration of value. It both reproduces the equivalent of its own value, and also produces an excess, a surplus-value, which may itself vary, may be more or less according to circumstances. This part of capital is continually being transformed from a constant into a variable magnitude. I therefore call it the variable part of capital, or, shortly, variable capital’.

So the money invested in buying the ability to work of employees is indeed a part of capital. Economically speaking, that’s what workers are and that’s what they are treated as.

Winters claimed that it wasn’t about cost-cutting. Of course it was. What would be the point of investing in AI if it wasn’t cheaper than having the work done by humans? What he was probably trying to say was that the board had decided to use a larger proportion of its capital as non-human capital than as human capital and that some of the latter was of ‘lower value’ to his business because it was costing more and so reducing profits.

He would be really ignorant if he thought that human capital in general was of ‘lower value’ to a capitalist business than non-human capital. The source of profits is precisely the extra value over and above its own value that living labour produces, the amount by which such capital ‘varies’ compared to its original value. But perhaps he was misled because he is running a bank and banks don’t actually produce anything but siphon off a part of the surplus value produced in industry.

The indignation of workers at being called ‘human capital’ brings out a key difference between the two types of capital. Humans can think and act and so can get together to end their economic status as a part of a capitalist business’s capital — by ending the whole economic system where production is in the hands of money-investing, profit-seeking businesses.

Wage-labour v. Capital (1952)

From the April 1952 issue of the Socialist Standard

There was once a story in circulation of Siamese twin brothers who hated one another from birth. Inseparably joined together, their hatred became deeper and more bitter with each inconvenience they caused one another. Either could have willingly killed his brother, but they were joined in such a manner that the death of one would mean the death of both. One could not exist without the other.

Thus it is with wage-labour and capital. Born together, they are inseparable yet they are antagonistic. They are complementary yet they are perpetually in opposition to one another. They strive strenuously against one another but the abolition of one means the end of both. Neither can exist without the other.

Capital is wealth that is invested for the purpose of producing further wealth with a view to profit. The process requires the bringing together of raw material, machinery and human effort. The capitalist owns the raw material and the machinery but the human effort he must obtain from the workers. He needs to obtain and use it in a particular manner—a manner known as wage-labour.

There have been other forms of labour in the past. There was once free labour, then slave labour and serf labour. These different forms served certain conditions but are useless to capital.

In very distant times men lived under social conditions now known as Primitive Communism. Under those conditions they worked with their very primitive tools to produce things in order that the whole community might use them. There was no question of profit, no question of some working to produce for the benefit of an idle section of the community. All who were capable assisted in the tasks of obtaining and preparing the things that were necessary to feed, clothe, house and maintain them all. They thought not of things as “Mine” or “Yours” but as “Ours—the property of us all.” Those conditions of labour were free. They are obviously useless to the capitalist who seeks only profit and relies on others to produce it.

Slave labour followed. This was a system where one section of the community owned, body and soul; lock, stock and barrel, a number of others—owned them and worked them as slaves. They had to feed them, clothe them and shelter them, whether they were working or not. Such conditions required, for the slave owners, that as far as possible there should be regular and constant work to be done so that they did not have to maintain slaves who were idle and temporarily useless to them. Their main problem was whether it was better to get slaves and work them to death and then get others, or whether it was cheaper to treat their slaves with some little consideration so that they had a long working life.

To the capitalist this form of labour is equally useless. He requires to be able to employ his labourers and dismiss them just when he has need. The wealth that his workers produce for him must go to a market and the condition of that market is unpredictable. The capitalist may have orders to fulfil to-day that may be doubled or may cease altogether to-morrow. He needs to get his labourers to suit his orders, some to-day, maybe more to-morrow and perhaps sack the lot the next day. He wants his labour power in the same way that he wants his electricity, switch it on when required and off when not required. He does not want the expense of wasted electricity, neither does he want the expense of maintaining labourers for whom he cannot find work.

The capitalist does not want the initial expense of buying his labourers, as slaves were bought. It would enormously increase his capital outlay, and replacement would be a costly business. This point is adequately illustrated by the story of a man who paid £100 for a negro slave and sent him to work painting a roof. The slave turned to his master and said, “ Massa, if you send me on to that roof and I fall and break my neck you will be £100 out of pocket, but if you go to the city and get some of that white trash for sixpence an hour and he falls and kills himself, all you have to do is go and get another one without losing a penny.”

The capitalist does not want to be bothered with the carcasses of his employees, all he wants is the energy that they contain and he only wants that when there is profit to be made.

Serf labour is of a different order. The serf is not bound to his master but to the soil that his master owns. The serf has his piece of land, no matter how small or poor, and he produces things for use, a little for himself and family, and the rest for his overlord. He may also give his overlord some of his working time to till the lord's crops or to defend his domain. The serf owns some of the tools that are needed to produce his food, clothing and shelter, and he owns a little raw material—the land on which he works. But he is chained to the soil. A change of overlords leaves him on the same ground working on behalf of the new lord. To the overlord the land is useless without the serf and he assumes certain obligations to his serfs, as they assume certain others to him. The lord, of course, gets the fatter living whilst the serf struggles in poverty.

This, likewise, is useless to the capitalist. He does not want his workers chained to any particular place. They must come to the work, he cannot take the work to them. The factory, the mine, the workshop, the garage, the depot, the dock, the warehouse or whatever sort of place the capitalist owns is the spot to which the worker must be free to come.

Neither does the capitalist want his workers to have the slight amount of independence that a piece of land, such as the serf had, would give them. The capitalist cannot afford to have his machinery held up because some of his workers have taken time off to get in their hay or their potato crop or to thatch a roof. The worker must be entirely dependant on the capitalist for his livelihood so that he can be disciplined into punctuality, regular attendance at the place of work when required, and respect for his employer’s wishes. He must be conditioned by the job without outside interference. Absenteeism and insubordination that might flow from a little independence are a curse to the capitalist. So serfdom does not suit capital.

The capitalist needs wage-labour. He wants not the worker’s body but his energy, mental and physical. Mental and physical energies are inseparable. There is no physical work that does not call for thinking and no mental work that does not entail some physical effort even if it is only pushing pen over paper. The capitalist wants this energy on tap and he wants it to be completely at his disposal. Wage-labour offers him all that. The worker seeks employment, he offers for sale his bodily and mental energies for a price. That price is the wage. It may be called a salary, an income, a fee, a stipend or what you will, it is the same thing. The capitalist can employ the wage-labourer or not, employ him today and put him on part time or sack him tomorrow; tell him what time to come to work and what time to go; tell him how the work shall be done and take from him the wealth that he produces.

The capitalist also likes to have a reserve of labour power from which he can draw when his business requires it. If there is no such reserve and he needs extra wage-labourers he must compete with his fellow capitalists for workers by offering higher wages, a process that is distasteful to the capitalist class. Efforts are made to create a larger army of wage workers or build a reserve in some way.

When capitalism first appears in any part of the world wage-labour appears with it. One of the capitalists’ first worries is the creation of a reserve of wage-labour. In most countries this problem was originally solved by taking away from the serf, or the peasant, the land that he owned. This made him propertyless—-a proletarian, and drove him into the ranks of the wage-labourers to seek employment from those who did own property. The hundreds of enclosure acts on the statute book of this country are evidence of the ruthless process of dispossessing the English serfs and peasants. Their land was taken and enclosed by fences to be used largely as sheep grazing land, large hunting parks or for large scale agriculture. The poor landless families wandered to the towns where the factories were, there to operate machines that made woollen goods from the sheep that now wandered over the site of their late homesteads. The reserve army of wage labour, in those days, included small children, the aged and the infirm, as well as women.

The reserve army now-a-days is maintained by drawing more and more women into the wage-labour category. Labour saving machinery is introduced to enable one man to do the work that was previously done by two. The redundant men help to fill the ranks of the reserve of wage-labour, to be drawn on when occasion may demand.

If capitalists have to compete with one another for a limited supply of wage-labour and the price tends to rise, they howl “blue murder.” They will use their political power to freeze wages, bind the worker to his job or direct him to another. They have even conscripted women to the wage-labour ranks. The competition between capitalists for the limited markets wherein to sell the goods that the workers make, results in the accumulation of capital into fewer and fewer hands and the bankruptcy of the weaker capitalists, who then go to join the swelling ranks of the wage-labourers.

If capital needs wage-labour, so does wage-labour need capital. Whilst there are men and women who own nothing but the energy contained in their bodies, they must, in order to live, have access to the tools of production and the raw materials to work on. Whilst these things are in the hands of capitalists the workers must go to them for permission to use them. Unless the capitalist is prepared to invest these things in some profit making enterprise, the workers can starve.

Yet, despite needing one another so desperately, wage-labour and capital fight tooth and nail. The capitalist seeks always to increase his profit which means that, out of the total wealth that the workers produce, he seeks to increase his share. The larger the capitalists’ share, the smaller the workers portion.

To increase his profit the capitalist tries to cheapen the price of wage-labour, increase the price of goods to be sold or reduce the amount of wage-labour used. All three of these methods are detrimental to the wage worker. In the first instance he gets lower wages, in the second his wages will buy less because the price of commodities will be higher and in the third case, the introduction of labour saving machinery or the reorganisation of an industry will cause some workers to have their work intensified whilst others can be idle if they cannot find another employer. So the wage-labourers resist the capitalist’s attempts to increase his profit.

The wage-labourer also seeks to increase his part of the total wealth produced. He strives for higher wages. Things that were originally luxuries become comforts and finally necessities. To be able to read and write was once an accomplishment for the wealthy only, now it is a necessity for the humblest wage-worker. A Sunday suit of clothes, holidays, passenger transport were once luxuries and are now very essential needs. Radio has passed the luxury stage and can be considered a comfort, in time to be a necessity. These things become essential for the workers who seek to increase their wages to enable them to acquire these new needs. Variations in the price of things that have long been established as essential needs—food, houses and clothing, cause the worker to seek to adjust his wages whenever the variation is upward. The capitalist will put on the pressure to cheapen the price of labour-power when the variation is downwards.

So the two, wage-labour and capital, are continuously locked in a ding-dong struggle. The worker will find the capitalist’s discipline irksome and he will organise in a Trade Union in an endeavour to have a say in the conditions under which he is to work. The capitalist will have to resist again. The capitalist will jealously guard his trump card, the political weapon, and use it when the workers become a little too audacious.

The worker sells his labour power either by time or by amount. When he sells it by time he receives a wage rate calculated by the hour, day or week. He strives to reduce the amount of time over which he sells it by struggling for a shorter working day or shorter working week, whilst maintaining his total wage at the previous level. The capitalist, on the other hand, endeavours to increase the working time without a wage increase, thus gaining for himself a larger share in the total wealth. When labour power is scarce he will increase the total time by demanding overtime work and he will pay for such time at special rates, still ensuring himself a profit.

When the worker sells his labour power by the amount it is known as piece work. Here he is paid, not by the measure of time but by the quantity of wealth produced in a given time. This urges him to intensify his work by working as hard and as fast as he can in order to increase his total wage. Now-a-days piece work is referred to as "payment by results" or "incentive bonus.” The effect is to squeeze the maximum amount of energy out of the worker in the minimum amount of time. This is most useful to the capitalist when the market is good and orders are flowing in rapidly, when he is competing with other capitalists to get goods to the market in the shortest possible time. Piece work is often a prelude to a re-adjustment of time rates. Having enticed the worker to betray just how fast he can work he is then called upon to work at that pace for a time measured wage.

All these points are the issues which keep wage-labour and capital perpetually at war with one another.

There are some features of wage-labour which resemble slave-labour. So much so, in fact, that it is often referred to as wage-slavery. Although the capitalist only requires the workers energies he cannot have them separate from the body which generates them. The worker cannot rise in the morning, extract a quantity of labour power from himself, wrap it and send it to his employer with a stamped addressed envelope, then return his body back to bed with a pipe and a book. The worker must, himself, go to his place of employment and have his labour power extracted by the day, hour or contract. So, during his periods of work, the wage-labourer appears to be owned by the capitalist.

In this relationship of wage-labour and capital the advantages are all with the capitalist. He gets the wealth and the privileges whilst the worker's lot is one of continual work in order to live, coupled with which are his poverty and the insecurity of livelihood. Capital is his enemy. If he destroys capital he destroys wage-labour also, but he does not destroy himself or his ability to labour.

The problem has a simple solution. Having no property the worker must work for a wage in order to live. The capitalist has the property and can employ the worker. Take away the capitalist's property and place it in the possession of the whole of the people and there will be neither propertyless wage workers nor property owning people who can command the labour power of others. Labour remains; so do the raw materials and the machines, but the labour becomes free—free to produce wealth in order that everyone may enjoy it. No wage-labour, no capital, no profits, no markets, no wars to capture markets, no class domination, no classes. Instead, a classless society working to produce the needs, comforts and luxuries of life and having all things available when produced.—Socialism.

One thing is clear. Where there is wage-labour there is capital, and where there is capital there is capitalism. Some would have us believe that capitalism has been abolished in some parts of the world. To test the truth of this is easy. Do the people work for wages? If so, there is capital, and capitalism is the same all the world over. Society will be well rid of both wage-labour and capital.

W. Waters

Letter: Workers and wages (1977)

Letter to the Editors from the April 1977 issue of the Socialist Standard

Workers and wages

In the January issue of the Socialist Standard appeared an advertisement for a meeting at the Roebuck pub on "Marx and the Abolition of the Wages System”. When I saw it I was eager to go along and hear what was to be said. But instantly I was deterred. Not because as is the usual case where visitors are sneered upon and used as chopping blocks, but just simply the title of that meeting.

The title is a 100 per cent. give-away. What one should be concerned is what does one do now, once they have a Marxist understanding of economics. If we say to ourselves:—I am a worker. I’ve been told by the SPGB that the wages system denies me the full fruits of my labour (sorry! labour-power!). So what shall I do? Pack up my job, rob banks, start up a stall in Portobello market, go burgling, start militant trade union activity. What? What?

The most vital point and question is “What do I do with my Socialist understanding of economics in relation to my economic struggle now? How can I use such knowledge? But will actions following from the same make a gap between me and my fellow Socialists?" These sort of aspects could be described for the want of a better word as psychological (Marx and Engels made use of the word).

While on the question of the wages system, what is the attitude of Socialists to the wage-price mechanism, where if the cost of living goes up 10 per cent then instantly wages go up 10 per cent, either above the trade union rate or the non-trade union rate, without cutting down the numbers of the work force? If the employer (capitalist) decides or has to put his price of goods up, surely he will think twice as he would immediately have to increase the rate of wages; this he wants to avoid. Surely this would greatly narrow the gap between price of consumer goods and rate of wages? Remember one must deal with things comparatively as well as relatively and fundamentally.

D. Brooks

London W9.

Reply:

A pity you did not attend that meeting. Apart from discovering that visitors are not “sneered upon and used as chopping blocks” (we want to make members, not drive them away), you would have heard your first question answered.

It does happen that workers half-grasp that they are exploited and react in the ways you mention: “dropping out”, attempting crime, engaging in futile militancy. As individuals there is nothing workers can do to escape from the wages system and exploitation. If there were, the working-class problem would obviously not exist. But full understanding of it opens the way to the only effective activity, participation in the conscious movement to get rid of capitalism. There is then no gap between you and others of like mind—on the contrary, a strong bond is found; and from the psychological viewpoint you mention there is great personal satisfaction in working for the only worthwhile cause.

Your second question, if we have understood it correctly, is on the following lines. Capitalist A raises his prices, causing the workers employed by capitalists B, C and D to apply for wage increases which contribute to higher costs for their employers’ products, hence higher prices; and capitalist A’s workers in turn making wage demands . . . surely, you ask, it would be better if a kept his prices down to start with?

This might have some validity if capitalists thought in such a comprehensive fashion. They do not because they cannot—each has to pursue his, or his company’s interests and let the others look after their own. Moreover, each proprietor of the means of production and distribution wants the others’ workers to have money. They are his customers; it is only his own workers whose wages he wants to keep down. Marx remarked on the idea of thrift in this light:

Incidentally . . . each capitalist does demand that his workers should save, but only his own, because they stand towards him as workers; but by no means the remaining world of workers, for these stand towards him as consumers. In spite of all ‘pious’ speeches he therefore searches for means to spur them on to consumption, to give his wares new charms, to inspire them with new needs by constant chatter etc.

(Grundrisse, p. 287)

By the way, you are mistaken in saying that a ten per cent. rise in the cost of living is instantly followed by 10 per cent. wage increases. At the present time, prices are rising at 15-20 per cent a year while wages are restricted to about half that figure.

Editors.

Letter: Explaining Wages (1976)

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

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

The Town and Country Planning Bill (1947)

From the March 1947 issue of the Socialist Standard

“A man will no longer be able to buy farmland at £200 an acre in the hope of reselling it as a factory site at £600 an acre. True, it will be worth more as a factory site—but the State, through a Central Land Board, will collect all or most of the difference” (Daily Herald, 8/1/47).

Thus the Labour Government carries out a longstanding demand made in the interests of the industrial capitalist. H. M. Hyndman, in his “Economics of Socialism,” dealt with this. After reviewing the Ricardian theory of rent and the many objections which present themselves to that theory, he wrote: —

“It seems, therefore, that a wider definition of the rent of land under Capitalism is needed than that, given by Ricardo, and the following is suggested: Rent of land is that portion of the total net revenue which is paid to the landlord for the use of plots of land after the average profit on the capital embarked in developing such land has been deducted.”

On the question of confiscating rent he pointed out that it “would not affect the position of the working portion of the community unless the money so obtained were devoted to giving them more amusement, to providing them with better surroundings and the like. . . . In fact, the attack upon competitive rents is merely a capitalist attack. That class sees a considerable income going off to a set of people who take no part in the direct exploitation of labour; and its representatives are naturally anxious to stop this leakage, as they consider it, and to reduce their own taxation for public purposes by appropriating rent to the service of the State. That is all very well for them.”

On this point Marx says: —

“We can understand such economists as Mill, Cherbulliez, Hilditch, and others, demanding that rent should be used for the remission of taxation. That is only the frank expression of the hate which the industrial capitalist feels for the landed proprietor, who appears to him as a useless incumbrance, a superfluity in the otherwise harmonious whole of bourgeois production.” (“Poverty of Philosophy,” Kerr edition, 1920. Page 176.)

“Rent,” says Marx, “results from the social relations in which exploitation is carried on. It cannot result from the nature, more or less fixed, more or less durable, of land. Rent proceeds from society and not from the soil.” (P. 180.)

(The above quotations are used by H. Quelch in his Introduction to Marx’s “Poverty of Philosophy,” Kerr edition, 1920.)

Horatio.

Revolution’s Reply to Reform. (Part 3) (1910)

From the February 1910 issue of the Socialist Standard

The answer to “Arms for the Workers: A Defence of the Programme of the Social-Democratic Party.” (E. C. Fairchild, Lon. Organiser, S.D.P.)

(Continued from previous issue)

Those who talk so glibly of Minimum Wage enactments cannot, surely, have paid due attention to the manifold ramifications of the competitive mainspring of capitalist production. Even if such an act could, in spite of all the powers against it, be carried into effect, still the be all and end all of capitalist production—profit—would not consent to defeat.

Stronger than Parliaments and the laws of Parliaments, than the colossal armed forces of nations in the hands of Parliaments, are the economic laws. So, if political law affects to limit the degradation of wages, the economic law of machinery under capitalism comes into operation and restores the degree of exploitation.

The law may be stated thus: Every increase in the cost of labour-power tends to the increase and development of machinery.

Many who are not ignorant of this law refuse to accept it because they do not thoroughly grasp its meaning. They argue that Necessity is not so much the mother of Invention that every need of the capitalist class is at once productive of the inventive genius to satisfy it. But such an argument shows a wrong interpretation of the law.

Machinery exists and plays its part in every productive field. But it is in no trade or industry of even perfection throughout. Its development at any given date is a matter of innumerable gradations and degrees. To take an example—the newspaper printing trade. Not every newspaper is printed on the latest “Hoe” machine flashing off 40,000 copies folded and counted in an hour. From this the means in use tail away, through numberless shades of backwardness, into comparative antiquity. But everywhere the means are being used which the individual proprietor judges are most profitable to him, in his circumstances. Thus though the latest “Hoe” marvel is of undoubted value, the machine of fifty years ago still clanks on its way to the scrap-heap.

Each improvement in machinery may be likened to the effect of a stone thrown into a lake. Its circle of profitableness gradually enlarges with time while the degree of its profitableness decreases until it has become too obsolete to yield profit to anyone. In one circle the invention of the hour is eagerly seized upon, in another circle the means of yesterday are most profitable, while yet a third circle of exploiters are limited to the machinery of five years ago, and so on. And everywhere there are owners debating with themselves the question, of whether it would pay them to throw out certain machinery and replace it with something more up-to-date.

Now—to revert to our example—what will be the result of an increase in the cost of labour-power in the case of the newspaper printing trade ? Wages having advanced, the arguments in favour of the further adoption of wage-saving machinery are at once increased. The waverers become decided and the fringe of doubt takes a larger circumference. Each stage of perfection in machinery experiences a rapid extension of its sphere of profitable exploitation, and throughout the whole industry, without the aid of a single new invention, machine development takes a step forward. At the same time at the top of the tree the capitalists are more receptive of new inventions, while at the bottom those who have been struggling to hold their own with antiquated means, are plunged into ruin by the fresh handicap of dearer labour-power, their machines find their way to the scrap-heap, and the work which those machines had been doing with extravagant expenditure of labour-power is transferred to more economic machinery, to the enhancement of the army of out-of-works.

Thus together with the introduction of improved machinery we get displacement of workers and an increased army of unemployed to struggle against any artificial restriction of wages, to defy every penalty with which the most sincere advocates can hedge about the Minimum Wage or any other limitation of the starving multitude’s liberty to compete for work at any price.

It is a fruitless argument to say that the advance of wages demanded by such a “palliative” as the Minimum Wage would be too small to have this general effect. Such a claim cuts against its user, for a reform does not become more worthy on account of insignificance. Moreover, the measure of its extent is the measure of its effect.

And in those trades in which such an Act would most apply—the so-called sweated industries (as if there are any industries which are not sweated) ; the industries which lend themselves to being carried on in the homes of the workers—the law of machine development would operate with two-fold force. In such fields machinery and the factory system are only kept at bay because labour-power is so terribly cheap. Yet, awful as it appears to say it, any legislative attempt to raise the wages of these poor creatures can only, as far as it is effective at all, result in handicapping them against their merciless competitor, machinery.

In a later section Mr. Fairchild talks of initiating measures to deal with the consequences of the “initial proposals.” The consequences of the “introduction of a law of minimum wage,” supposing that it could be effectually enforced, will be the extension of machinery and increased unemployment. When our reformer convinces us that he has a measure capable of dealing with this obliterating “consequence” it will be time enough to agree with him that the share of the total wealth production taken by the working class can be caused to rise by wage legislation.

The Position of the Working Class.

In the next four sections our author abandons all serious effort to deal with his subject, and indulges in a little quiet fun at the expense of his readers. He tells us, for instance, that “we do not know the things we cannot see.” The blind man, then, doesn’t know when he is hungry. Can it be also, that our reformer knows nothing of economic laws because he cannot see them ? Then an exuberance of spirits leads our opponent to have a fling at those who argue that the enactment of the palliative proposals retards the realisation of Socialism. And this is how he proves his case:

“The outcast may complain in whining minor tones while he stands shivering on the wind-swept Embankment, but a basin of soup, shared with cabinet ministers in court dress, is enough to make him suspend criticism of the social system.”

He gets a good hold and swings his opponent clean off his feet, yet when the fall is consummated our S.D.P. champion is underneath. For the starving wretch at least complained until they shut his mouth with the palliative basin of soup, after which the social system was above criticism and, presumably, Socialism was retarded.

But the greatest joke of all is that Mr. Fairchild deludes his readers with the section heading ,”The Position of the Working Class,” and then, fails to give them any information upon the subject. As a proper understanding of the position of the working class is essential to the intelligent consideration of the “palliative” question, the omission must be rectified.

The working class is the class which works for wages. Wages represent food, clothing and shelter, therefore, it may be said that the working class is the class which works for food, clothing and shelter. To give this definition is to imply that there is a class which does not work for these things. Now as a man may not always be able to work, while he must always have the necessaries of life or he must die, it is obviously of advantage to him that work, and food, clothing and shelter should not hang together, in other words that his living should not depend upon his working.

While it is true that man, as a natural order, cannot live without labour, that very truth tells us that if one class does not work for its living, it must subsist upon the product of the class which does work. So we get the first two conditions of the working-class position—it is the class which works for its own living in the first place ; it is the class which works for the living of the non-working class in the second place. What is the reason of this double disadvantage ?

If it is disadvantageous for a man’s livelihood to depend upon his working it is doubly so for him to have to labour to support others. Why does the worker do it, then ? Why, in the first place, does he not do as the non-worker does—live without labour? Why, in the second place, does he not produce food, clothing and shelter for himself alone ? Why, in the third place, does not the non-worker do the same as the member of the working class—work for his living ?

Those things which we indicate by the term livelihood, all come in the category “economic wealth.” Wealth (we must be understood to use the term in the economic sense) is natural objects which have been changed in form or rendered accessible to man by the expenditure of human labour-power. The fish of the sea is not wealth until it is caught—it is not caught without labour. Therefore the two essentials in wealth production are the natural objects and human labour-power.

No man or class, then, can produce wealth without command of or access to these two factors. Have the workers this access to the means of wealth production ? We know that (save through permission) they have not, for though they have one essential—labour-power—the source of the other essential—the natural object—is the land (or water) and the land belongs to others. We find the answer to our second question first. The working class cannot produce wealth except upon terms, because the land and—what are quite as necessary to the process in these days—the machinery of production and distribution, are held by a class.

We now learn concerning the position of the working class, that it is one of subservience to the class which hold the means of life ; and this further—that as the question of the terms upon which the workers can get access to the means of production must be referred to continuous struggle, their position must necessarily be one of opposite interests to that of the possessing class, and therefore of antagonism. In other words, their position is clearly that of one party to a class struggle, which must continue as long as there are opposing class interests, as long as one class stand between another class and their means of living, as long, finally, as private ownership in the land, factories, machinery, mines, railways, and the like shall exist.

Now what are the terms upon which the workers are permitted to use the machinery of production ? Common experience, that fount of all our knowledge, teaches us that the terms are the surrender of their labour-power in return for wages. With the product of their toil they have nothing to do—that remains with the purchaser of their labour-power. So far the worker has obtained his living, but how has the non-worker materially benefitted ? If the value of the product of labour which is left in his hands is no greater than his expenditure upon it has been, it is very clear that he has had no material gain from the fact of his dominance of the means of life, and upon such result he cannot maintain his position as a non-worker. We must therefore look for increased value in the product of the worker’s toil.

Working-class economics teach us that what really happens is this. The master or capitalist purchases labour-power and raw material (natural objects to which labour-power has been applied), and expends the former upon the latter. The labour-power, once expended, has ceased to exist: it has been transformed into labour, stored up in the material upon which it has been expended. To say that its value has entered into the latter is not the whole truth. It has undergone change, and this fact is of vital importance. When the capitalist purchased raw material he really only paid for the stored up labour within it. The actual substance of it did not count. He therefore purchased on the one hand labour (stored up in the raw material) and labour-power (stored up in the body of the labourer). Now that the labourer has expended his strength or labour-power, neither he nor the capitalist longer possesses it, but the latter possesses an increased volume of human labour accumulated in the material of the natural object.

The only difference, then, in the position of the capitalist at the time of purchasing labour and labour-power and now when the power has been expended, is, then he owned two factors—labour and labour-power—while now he owns but one—congealed labour. Yet if he is any better off, any richer or more able to live without working, the why and the wherefore must be sought in this conversion of labour-power into labour.

If a labourer by consuming one loaf of bread could gain therefrom only sufficient labour-power to produce another and equal loaf of bread, there could be no increase of value. It is quite imaginable that given sufficiently primitive means of production, no better result could attend human effort. In that case there could be no non-working class. But if the means of production improve so that the labourer by consuming one loaf generates sufficient power to produce two loaves, then an increase of value becomes possible.

Herein is the whole secret of the source of capitalist wealth. Labour-power is purchased for what it costs to produce. The energy produced by a loaf of bread is bought for wages equalling a loaf of bread (we must take broad averages, of course). It cannot be bought for less, for the labourer must have the cost of production of his labour-power in order to reproduce it and continue in working efficiency. It will not (in the long run) sell for more because machinery provides an unemployed army and the competition of these keeps wages down to this level. But the labour-power created by one loaf produces other loaves in number according to the development of the machinery of production.

If then, the consumption of a loaf by the labourer results in labour-power sufficient to produce two loaves, which the capitalist buys for one loaf, the exploitation of that labour-power leaves the latter with two loaves instead of one. He has succeeded in getting the means of life without working for them—simply by virtue of his power of keeping the worker away from the productive machinery save upon terms. These terms give to the capitalist all the difference between the value of the labour-power and the value of its product—between the one loaf which it cost the labourer to produce his energy and the two or more loaves which that energy in turn produces.

The cost (reckoned in amount of sustenance) of producing labour-power remains pretty constant. A pound of wheat generated very much the same quantity of physical force a century ago as to-day. The value created by labour remains exactly constant, for labour is the measure of value and, notwithstanding the improvement in machinery, the product of an hour’s work a hundred years ago was the same value as the product of an hour’s work to-day—in each case the value is an hour’s labour. The difference, however, between the cost of producing labour-power and the productive capacity of labour-power increases with the development of machinery, and this increase has an important influence upon the position of the working class.

If the wages of the labourer equal one loaf and his product two,, he will be able to buy back one loaf, while his master may presumably consume the other. In such case the services of the former are needed to produce bread the next day. But if by the improvement of machinery the worker is able to add to existing value (raw material) not only the loaf represented by his wages and the loaf consumed by his master, but an additional loaf, then his services can be dispensed with until that loaf is disposed of ; in other words he has produced too much and may become-unemployed. Apply this to the whole field of industry, and it is seen that every advance of the productive machinery heaps up against the workers a greater burden of “surplus” wealth to “slump” the market and throw them out of work ; that the increasing fertility of human labour renders more precarious and more hopeless the position of the working class.

From what has been said it is apparent that the development of the industrial process, ever rendering human labour more productive, ever increasing the difference between the cost of producing the workers’ efficiency and the productive capacity of that efficiency, ever heaping up against the worker a larger share of his own products which wages will not enable him to consume, draws ever clearer and firmer the line between the two classes. The development of productive instruments means increased wealth for their owners and increased poverty for those who, as a class, operate them. Here is antagonism of interests. Here is war to the knife. ]t shows itself in the banding together in trade unions, in myriad strikes and lock-outs, and in the universal endeavour of the workers to-limit output.

The position, then, of the working class is, on the economic field, fundamently one of opposition to the master class. As material interests must be fought for or surrendered, there must necessarily eventuate from these opposing class interests a class struggle. Such a class struggle, we affirm, exists. It cannot remain a struggle on the economic field for terms, for the laws arising from the productive system prescribe those terms and decrees such a struggle hopeless to the workers. Their only hope, then, is in a new system—the Socialist system. Towards this end the class struggle must be directed.

And the recognition of this class struggle is the first essential to its intelligent and successful prosecution.

A. E. Jacomb

(To be Continued.)