Letter: Workers and wages (1974)

Letter to the Editors from the October 1974 issue of the Socialist Standard

Workers and wages

"We . . .  do not . . . exhort workers to try to attain 4y wages where before they only had 3y wages. An above average wage in one industry necessarily implies a below-average wage in another”.

This seems to suggest that the Socialist Party of Great Britain does not urge workers to struggle for higher wages on the grounds that a wage increase for one group of workers necessarily involves a wage decrease for another.

The Socialist Party has always urged workers to try to get the highest possible price for the sale of their labour-power. And Marx long ago exposed, in Value Price and Profit, the "wages fund” theory accepted by the Owenite Weston that, as the amount that could be paid out in wages was limited, one group of workers could only obtain a wage increase at the expense of the rest of the working class, and that therefore trade union action was to be opposed. As Marx showed, it was sometimes possible for workers to take advantage of favourable labour market conditions to obtain a real wage increase, even if only a temporary one, at the expense of the profits of the capitalists and without harming other workers. For Marx Socialists had not to oppose the struggle for higher wages, but rather to point out its severe limitations and to urge the adoption of the revolutionary, socialist slogan “Abolish the wages system”. Marx also made the point that workers have to struggle for higher wages, even if they don’t obtain them, just in order to realise the value of their labour-power. Workers should struggle to get 4y wages in place of 3y because if they don’t they won’t even get paid 3y.

A. Buick

Brussels

Reply:

The interpretation placed on this extract by A. Buick appears to have been an over-reaction to what was stated. The term “above average wages” derives from the IPC statement itself and it should be remembered that this is a statistical concept. It should also be remembered that the statement relates to a specific company and those workers within it. This is not meant to imply that because it is a specific company, that we take no interest in the workers concerned, but more to mean that we do not approach these workers and their part both in the class struggle, and in their understanding of Socialism, exclusive of all others.

As was pointed out in the article, Mr. Roberts (the Managing Director of IPC Newspapers Ltd.) refers his employees to their high standing in the “Pay relativities League Table.” The graph (re-printed from the Financial Times) represents the average rates of pay throughout many industries, and Roberts is telling IPC employees: Look how much higher up this scale are your wages compared to those of other workers. This is a blatant appeal to his men to be thankful, for what are in the end, extremely small mercies. It is relevant however, to draw the reader’s attention to the fact that if Roberts pays his workers wages which are above a norm, then those of other workers must be below it. Clearly not all workers can obtain “above average wages,” for an average is necessarily the mean between high and low.

This reference was made to point out the limitations of Robert’s own emphasis on above-average wages as an indication of “success” and to remind IPC workers that they should not consider being “above-average” as a satisfactory position. In short, “above average” as a class view. It was certainly not intended to endorse the theory that there is a given pool from which wages are drawn, and consequently one man’s wage increase, is another’s decrease. The clause A. Buick has omitted from the extract quoted in fact points to the source from which an increase in wages would come i.e. the capitalist’s profit.

As A. Buick says, it is quite possible for a group of workers to achieve a wage increase without affecting the amount of wages received by other workers Their relative positions on a statistical graph will of course change, but as was pointed out, these relative differences will not change the basic class position of workers, or their problems. It is worth bearing in mind that there have been a considerable number of strikes in post-war years over wage relativities. As such we cannot be expected to approve a claim by any group of workers that at all times they must have more than some other group of workers.

A. Buick’s letter states “For Marx Socialists had not to oppose the struggle for higher wages . . ." and so on. However it seems a somewhat large (and inaccurate) mental leap to conclude from the passage quoted, or the article as a whole, that we were advocating opposition to workers struggling for higher wages. The class struggle between worker and employer results from the capitalist system, and wage claims are manifestations of this struggle. It would indeed be contradictory to claim that the SPGB represents the political interests of the working class on one hand, while actually advocating opposition to intelligent efforts aimed at improving or maintaining standards under Capitalism by struggles in the industrial field. The article did not put forward this point of view, and Marx explains fully why this would be a contradictory position:

(Writing about the tendency for the average standard of wages to fall)

. . . is this saying that the working class ought to renounce their resistance against the encroachments of capital, and abandon their attempts at making the best of the occasional chances for their temporary improvement? If they did, they would be degraded to one level mass of broken wretches past salvation . . .  they would certainly disqualify themselves for the initiation of any larger movement.

(Wages, Price & Profit. Chapter 14).

In practise, where gains are made by workers in industries, generally it is due to these “occasional chances” and not to the number of strikes they engage in.

Regarding A. Buick’s opinion of how our case should be expressed in relation to the struggle for higher wages, it would not be true to claim that the SPGB is better placed than the workers, or Trade Unions involved, to identify such "occasional chances” for improvement, or to usurp their particular functions in this respect. It would be a considerable and alien extension of our own function to assume that we should act either as some form of Advice Bureau, or Clearing House for various wage claims. Such a conclusion would be hard to avoid were we to blandly assert that all those IPC workers receiving (in the article’s terms) 3y wages, should be taking action to attain 4y wages.

Apart from elementary considerations such as the likelihood of such a claim being met or not, or to what extent and duration of industrial action can be taken, it should be remembered that workers (not the SPGB) advance wage claims in terms of £’s and pence. Apart from these other considerations it would be unrealistic to prescribe the numerical formula put forward by A. Buick to the IPC workers, and even more so, to all workers at all times. The extract complained about was expressly inserted to make clear to the reader that we are not able to give specific advice on the formation of particular wage claims. We certainly do not exhort workers to act in such a way, we exhort workers to achieve Socialism.

Although Mr. Roberts might view such a formula as an attempt to be “realistic”, if a little immoderately, the SPGB would take a view which he, and millions of workers at present regard as “un-realistic,” namely, if we are to talk in terms of figures, why just struggle for 4y, why not 5 or 6 or 10y ?

It is possible that A. Buick means his formula to be interpreted in a more general way to read that workers should continue to struggle for higher wages. If this is so, he is acknowledging what is occurring daily under capitalism. The SPGB has frequently put forward the view that workers generally (not just Trade Unions) should recognise the need to achieve not only the best wages, but also the best conditions that they can, although we have not always seen as beneficial some of the methods employed in this respect: For example, the use of industrial action to preserve the “Closed-shop,” inter-unions disputes, or racially motivated strikes etc., because their result has been to further divide and embitter sections of the working class. If A. Buick is concerned lest the IPC workers, or other workers, become unaware of increasing costs of daily necessaries, or of greater exploitation by the capitalist class, his reminder is timely.

While recognising that the capitalist class will constantly seek to lower wages to the minimum level required to ensure the maintenance and reproduction of a work force, and pointing out to the working class that this is a most undesirable tendency, which, if not resisted, will result in a fall of their standards, the SPGB’s task is to urge workers (employed or not) to recognise their class position, and, as Marx points out in his following paragraph from Wages, Price & Profit (Chap. 14).

not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the cause of those effects.

Our exhortation must be therefore for workers to adopt a class view and establish a system of society in which high, low or average wages will only be sought and found in history books.

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

Are You Satisfied with Your Pay? (1956)

From the March 1956 issue of the Socialist Standard

Ask any body of workers if they think they are getting enough pay, the pay they think they are worth, and it is safe to say that nine out of every ten would answer No! They nearly all think they ought to get more, and would get more if things were run properly. They nearly all have a vague feeling that things aren’t run properly. They are annoyed that nobody—this includes the trade unions, the employers, the political parties and the Government—does anything about it and they all have some notion about what ought to be done. Some point to the impossibility of keeping themselves and their families “decently” in face of the cost of living—in their view it ought to be the duty of the employers or the Government to see that everybody has enough to maintain this “decent” standard of living.

Some think that things would be all right if wages were raised and their employers' profits lowered. But if they happen to work in a firm or an industry where sales are falling and profits are small or non-existent they look to the Government to give subsidies or do something to improve the sales of the article they produce. Lots of workers blame or envy other workers. The labourers envy the craftsmen, while the craftsmen and foremen complain that they do not receive wages sufficiently above the labourer’s rate to compensate for their skill and responsibility. Many teachers have a special resentment because, as they allege, they receive no more than do dustmen. University graduates think that a proper wages policy would recognise more the importance of having a degree, and scientific workers think that the scales are unjustly weighted in favour of administrative workers. Feminists clamour for the male “rate for the job” and provoke some of their male colleagues into demanding “justice” for the married man with dependents. The queue of the disgruntled stretches indefinitely and encircles the globe.

They are all there, the bank clerks and postal clerks, the parsons, the lawyers, the doctors, the dentists and nurses. The shopkeepers, too, have their grievances against the manufacturers and are looking with envy now at the furore created in France by the shopkeepers' dingy saint M. Poujade. Then there are the pensioners, the police the soldiers, the prison warders—and the Red Dean’s revolting choristers at Canterbury. At the end of the line are the non-workers the small unhappy band of surtax payers and millionaires who swear that high taxation compels them, if they are to live the lives of conspicuous wastefulness fitting to their station, to overspend their incomes and eat up their capital; a practice as loathsome to a Capitalist as is cannibalism to a missionary.

And for every group of complainants there is an aspiring trade union official, politician, or economist with a glib solution. The solutions are too numerous to list here. They are seemingly as varied as the occupational groups from which they spring but they all have one thing in common. They all assume that there is, or could be, in the world of Capitalism a defensible social principle by which wages could be fixed at a “proper” level. They all ignore the facts of Capitalist life. As practical solutions they are all so much trash.

The Law of the Jungle

Capitalism knows no social principle of distribution according to need, or responsibility, or skill, or training, or risk, or so-called “value of work,” or “usefulness to the community.” If Capitalism has anything that' approaches a principle it is that income shall be in inverse proportion to work. If you own capital in sufficient amount you never need work at all, and the more you avoid work in order to enjoy luxurious living the greater the esteem and attention you will have bestowed upon you.

The Socialist knows why this is and how the system works. Society’s means of living are owned by the propertied class, the Capitalists who are in business to provide themselves with their kind of income, profits. They employ the working class in order to make profit out of them, a proceeding the working-class are forced to accept because they are propertyless. The Capitalist pays as little as he can for the kind of worker he needs. All the worker can do is to bargain and struggle to get as much out of the employer as circumstances permit and what circumstances permit depends on whether the Capitalist needs the kind of skill the worker has to offer. If the employer needs a certain kind of skill and if the number of workers having that skill is limited the employer will1 have to pay accordingly for it, he will have to pay more to the skilled than to the unskilled worker. But if owing to the decline of a given trade, or the invention of a machine, which replaces craftsmanship, skilled operatives are not in demand their wages will fall.

In the depression of the nineteen thirties apprenticed engineering craftsmen, skilled coal miners, university graduates, and agricultural labourers, were a drag on the market. Capitalism had no need for all there were of them and their wages fell. During the war Capitalism had need of coal and food, of engineering and chemical products, and all these groups had their chance to push up wages beyond the rise of the cost of living. “Merit” and “human needs” and “usefulness to the community” and all the other fine-sounding phrases, have nothing to do with it. What counts is whether the worker is useful to the Capitalist, and the only usefulness the Capitalist knows is usefulness in making profit. The only argument he has to listen to is the fact of inability to get sufficient of the workers he needs, and the amount of strike pressure trade union organisation can bring to bear to prevent him getting enough workers at the wage he offers.

Is it crude, callous and inhuman? Of course it is. It is the law of the jungle, the only law Capitalism knows.

And has Socialism any alternative to offer? Indeed it has, but by Socialism we mean the Socialism of Socialists, not the spurious State Capitalist nostrums offered by the Attlees and Bevans and the clique who run Capitalism in Russia.

All over the world the cut throat Capitalist wages system operates and only Socialists have as their aim the replacement of Capitalism by a Socialist system of society in which there will be no wages system, no propertied class and working class, the one living on income from property and the other on wages. Under Socialism people will work cooperatively to produce what all need and all will freely take what they need out of the products and services cooperative effort achieves.

Of course the pseudo-Socialists named above all pay lip-service to the ideal of abolishing Capitalism and the wages system but whether or not they understand what they are talking about they show by their actions and programmes that they do not intend to seek that solution. They all in their time bleat about the need for bold, far-reaching action but all with one accord recoil from the Socialist objective they profess to desire.

For the working class of the world the choice is simple, either to take the organised political action necessary to introduce Socialism or to continue with Capitalism. The one thing that cannot be had is to impose on the Capitalist jungle some socially acceptable and satisfying wages policy.

Edgar Hardcastle

Editorial: Boom-Time (1956)

Editorial from the August 1956 issue of the Socialist Standard

Under the conditions of accumulation supposed thus far, which conditions are those most favourable to the labourers, their relation of dependence upon capital takes on a form endurable, or as Eden says, “ easy and liberal." Instead of becoming more intensive with the growth of capital, this relation of dependence only becomes more extensive, i.e., the sphere of Capital’s Exploitation and rule merely extends with its own dimensions and the number of its subjects.

A larger part of their own surplus-product, always increasing and continually transformed into additional capital, comes back to them in the shape of means of payment, so that they can extend the circle of their enjoyments, can make some addition to their consumption fund of clothes, furniture, etc., and can lay by small reserve funds of money.

But just as little as better-clothing, food, and treatment and a larger pecullium (Pecullium: pocket-money given to slave by master), do away with the exploitation of the slaves, so little do they set aside that of the wage-worker.

A rise in the price of labour, as a consequence of accumulation of capital, only means, in fact, that the length and weight of the golden chain the wage-worker has already forged for himself, allow of a relaxation of the tension of it. (Karl Marx,“ Capital,” Vol. 1, page 676. Kerr edition, 1921).

Wages. (1925)

From the November 1925 issue of the Socialist Standard

WHAT IS THE WORKING CLASS?

The great majority of the population have no property. They have no means of living except by working for others. They must seek out a master. They must find owners of factories, mines, farms, etc., willing to employ them.

The working class is that body of the population which does not possess wealth, and are therefore forced to work for employers in order to live.

They must get permission from the owners of raw materials, machines, etc., to enter the factories and begin work.

The working class can offer for sale only one thing—their ability to labour. They have no other possession to sell except the energy in their bodies. That force of muscle, nerve and brain is their power to labour.

When a member of the working class goes out to seek a job he finds others like himself equally anxious for work.

WHO ARE THE PRODUCERS?

The employers need workers to produce things which can be sold. There is only one way to make these things and that is to apply the energy of the workers to the raw-materials of nature. By altering the size, shape and place of raw materials, wealth is produced in its many forms, such as we see around us. Only one class does this work, and so we know that the wealth of the modern world is the product of working-class labour.

The employers, therefore, must hire workers. They may be hired by the day, week, month, etc. They will receive a certain sum of money called a wage. This is the price of the power of mind and body they sell to the employer.

THE WORKERS’ COMMODITY.

The perishable nature of the workers’ power to labour drives them to accept the terms of some employer or other. This labour force of the worker is like any other article of merchandise. It is offered for sale on the market. The labour market is like the meat market or wheat or egg market. The articles offered for sale have a price, which changes from day to day. Labour power varies in price according to the supply available and the demand for it from the buyers—the employers. If there are more wage workers seeking jobs than are needed by the masters, the price of labour power—wages—will fall. If there are few workers and many jobs, the price of labour power will tend to rise.

But, unlike most other articles for sale, labour power cannot be put on the shelf until a buyer is willing to pay the price asked. A chair can be stored, but labour power will suffer loss of vigour if the necessary nourishment is not obtained, and will cease entirely if the body receives no food or warmth.

REAL WAGES AND NOMINAL WAGES.

The wage is the money name for the working power of the individual. It may be 5 dollars per day in Winnipeg or three pounds per week in London. It may be 10s. a day at one time in London and 15s. a day at another time. This price or money name for the use of the flesh and blood of the worker is just the nominal wage. The real wage is what the money wage will buy. The worker may find that his 10s. daily wage to-day will buy less than his 5s. formerly did. How much of the necessaries of life the wage will purchase is, therefore, the real test that decides what the money wage is worth.

WHAT IS LABOUR POWER?

The wage worker does not sell the work he performs. He is not in a position to sell that. He does not own the work or labour he puts into the raw materials supplied by the employer. Immediately the worker begins to work in the shop he gives up to the employer his labour. He cannot claim any of his work. His labour no longer belongs to him. The wage, therefore, is not the price of the labour or work performed by the wage earner. The wage is the price of his capacity or ability to work. This is properly called labour power. For a certain wage he places this labour power at the employer’s disposal for a certain time. He uses his muscle, brain, and nerves to make raw materials more valuable by fashioning them to the useful forms required.

WHAT DETERMINES WAGES?

How are these wages regulated? What decides the price of labour power? The competition in the labour market only decides the changes in the price. These ups and downs in a worker’s wage centre round a certain figure. This real wage or price of labour power is decided just as the price of all commodities are determined—by the cost of production. The labour power of the worker is the power to use the body and mind, and is therefore inseparable from him. The cost of production of the worker’s labour power is the cost of producing the things necessary to his existence and with which he maintains himself.

The cost of production of labour power is the cost of the food, clothing, shelter, fuel, etc., upon which the worker depends for his life. It also covers the cost of bringing up his children to replace him in the labour market and secure a new generation of wage workers. It includes also the cost of the training of the “skilled” worker to cover the expense involved in the greater time needed to produce the skilled ability.

THE COST OF LIVING BASIS.

The money wages are different in different countries and cities and differ in one place from time to time. But all over the world the real wage of the worker, the buying power of the money wages, is based upon the cost of living. What it costs the worker to live, according to the accepted standard of living, will be the average wage. That is true of the workers whose standard of living is based upon a rice diet and is equally true of the workers here whose activity demands other food. That is why leading employers are pointing out to the workers of Britain that they must lower their standard of living in order to compete with France and Germany. This artful plea is an attempt on “patriotic” grounds to get the workers to accept less wages.

PAID AND UNPAID LABOUR.

The worker generally receives the value of his labour power. Its value being the time necessary to produce the necessaries of life to live upon while he works. But the worker produces a greater value than that represented by his wages. If he works eight hours per day, part of the time he will be replacing for the employer the wages he receives and most part of the time he will be performing labour for which he receives nothing. This unpaid labour is the surplus taken by the employer and is commonly called profit.

Whether you work in a private concern or for a nationally owned enterprise you will find the above to be the position of the wage workers.

THE RELATIVE WAGE.

Wages, therefore, represent only a portion of the wealth produced by the worker. If you compare the part paid in wages and the surplus taken by the employers, you can see the relation between the worker’s “share” and the total product. The proportion between them shows what the relative wage is, that is to say, what relation the wages of the working class bears to the total wealth produced by them.

Due to the introduction of machinery, the application of science to industry, more scientific shop management, speeding up, piece-work, and other methods, the “share” of the worker gets less and his relative wage falls. These same causes result in rendering “skilled” workers more and more unnecessary. The war showed how quickly “mechanics” could be made, and so the worker tends to become a machine-minder and no longer does his wage include the cost of the training of the skilled worker.

HOW THE WORKERS “SHARE” IS REDUCED.

Women and even children are continually used to displace men, and along with the greater use of machinery and weeding out of the less efficient, the competition for jobs grows greater and wage cutting becomes easy. The army of unemployed outside is used by the employer to reduce the wages of those inside, and so fear of being workless causes the workers to submit to wage reductions and to sign agreements. The workers have little choice. They do not enter into a free contract, for the menace of starvation for themselves and others prevents free bargaining. The wage contract is not an agreement between equals. It is a penalty enforced upon a propertyless worker by a propertied employer.

THE CEASELESS STRUGGLE.

Combination amongst workers is necessary and useful in the constant struggles of the workers. But most of these fights are attempts to make the worker’s wage cover the increased cost of living.

A wage is a badge of servitude and while the wage system remains the employers will act as they do to-day. They will use their wealth and political power to ensure the subjection of the worker and the smallness, of his “share.” The unions are trying to effect changes in wages, but not the abolition of the wages system. Even higher wages and shorter hours result in speeding up the workers more and the use of more and better machinery and the careful selection of the most efficient workers, so that the employers are compensated for the increased wages by greater output. The wage is the price of a commodity possessed by the worker, and in selling his labour power to the master the worker is really selling himself piecemeal.

His great trouble just now is that many employers won’t buy the workers’ “one ewe lamb “—his ability to work.

Adolph Kohn

Is the crisis over? (2011)

From the July 2011 issue of the Socialist Standard

“Once a crisis is in full swing, then the argument starts about who is to blame for it. The businessmen blame the abrupt credit refusals by the banks, the speculative mania of the stockbrokers; the stockbrokers blame the industrialists; the industrialists blame the shortage of money, etc. And when business finally picks up again, then the stock exchange and the newspapers note the first signs of improvement with relief, until, at last, hope, peace, and security stop over for a short stay once more. Modern society notes the approach of crisis with horror; it bows its head trembling under the blows coming down as thick as hail; it waits for the end of the ordeal, then lifts its head once more—at first timidly and skeptically; only much later is society almost reassured again.”

These words could have been written yesterday, but are in fact the (slightly edited and paraphrased) words of Rosa Luxemburg, written a century ago, shortly after the crisis of 1907 (What Is Economics by Rosa Luxemburg. See ‘Is The Economic Crisis Over?’ here). The question is, what stage are we at in the crisis that arrived 100 years later? Is society beginning to ‘lift its head once more’ and look toward a future of hope, peace and security? Or should we bow our heads and expect more blows?

Regular readers will have noticed that, in the pages of this journal, we are still talking about crisis as if we’re in the midst of one (and we will be discussing the issue again at our annual summer school in July). Followers of the official story might be confused by this. According to the mainstream account, the crisis, which began with a financial blow-up in America in 2007 and threatened a cataclysm as serious as the Great Depression of the 1930s, was over by the middle of 2010 thanks to the government policy of providing ‘stimulus’ (printed money). As if to consign the experience to the historical memory once and for all before moving on to business as usual, the crisis has even been given a name. It was the ‘Great Recession’. And now, it’s over.

The good news

But is it? The official story says yes. But then, the authors of that story, mainstream economists and representatives of the capitalist class, hardly ever expect crises and are shocked by them when they appear out of the blue. This is despite the fact that there have been major downturns in every decade since the 1820s, and regular financial panics since the 17th century. Given this failure to notice still less predict what is obvious to anyone with the briefest acquaintance with history, we can be forgiven for treating their pronouncements with extreme caution.

Still, the question is a tricky one. Commentators still can’t decide when the Great Depression of the 1930s ended, for example. Was the upturn of 1933 the conclusion of the crisis, and the recession in 1937-8 a separate event, as some argue? Or was the 1933-7 recovery merely an artifact of government spending (‘stimulus’), with the depression ending proper with the start of war production in 1939? Or should even the war production period be seen as a kind of government stimulus, with true, capitalist-based recovery delayed till 1946? To consider this problem is to see that, to some extent, history may be repeating itself.

At the present time, followers of the mainstream press will find confident pronouncements of recovery and positive (or, at least, not too badly negative) news from various economic indicators sitting side by side with accounts of deepening state debt crises, stockmarket slides, soaring inflation, falling wages and standards of living, and battles to impose austerity on the working class (including vast swathes of those who tend to think of themselves as ‘middle class’).

America, for example, the world’s biggest and most important economy, is officially out of recession. Yet manufacturing surveys show that global growth is stuttering and stagnating once again. US growth slowed to an annualised 1.8 percent in the first quarter of the year, down from 3.1 percent in the previous quarter. The housing market is already in ‘double dip’ territory, inflation is on the rise (it could already be as high as 7.4 percent, according to a new index from professors at the Massachusetts Institute of Technology) and wages remain stagnant – average hourly earnings of production and non-supervisory employees, who make up 80 percent of non-government workers, are lower than they were in the depths of the recession, adjusted for inflation, according to Robert Reich, a professor of public policy at the University of California at Berkeley (Robertreich.org). Relative wages have, anyway, been stagnant or falling since the 1970s.

Initial confidence in the rising number of new jobs was squashed by the start of June when it was reported that the rise in the number of jobs was far lower than predicted: just 54,000 jobs were added to the total in May against an expected 165,000, according to the Financial Times, and the unemployment rate ticked up to 9.1 per cent. State debt continues to rise to historically unprecedented levels, which has prompted the credit-ratings agencies Standard & Poors and Moody’s to threaten to downgrade it. At the same time as we hear the crisis blamed on banks’ reluctance to loan businesses money, businesses themselves are hoarding cash – almost $1 trillion of it, according to a report in the Wall Street Journal published at the end of last year. This cash pile is the highest for half a century and “shows the deep caution many companies feel about investing in expansion while the economic recovery remains painfully slow and high unemployment and battered household finances continue to limit consumers’ ability to spend”.

The story is much the same around the world. Certain economies in Asia, particularly China, provide the most obvious apparent exceptions, but the health of these are still, for now at least, partly reliant on the health of the US and other Western economies. Commentators are currently watching China’s booming real-estate sector with particular concern – it is another debt-fuelled ‘success’ story, and a key driver of demand for commodities from other economies. But it is inevitably heading for a big crash, according to Nouriel Roubini, a bourgeois economics professor at New York University whose star rose when he correctly predicted the current crisis.   

Of more immediate concern the eurozone – most particularly Greece, Portugal, Spain and Italy – also remains in deep trouble. For now, all eyes are on Greece. Despite already having agreed a €10bn bail-out package last year, it is now obvious that that was not enough, and the EU, European Central Bank and IMF are having to bail out the bail-out, as The Economist put it. By 2012, Greece was supposed to be well on the road to recovery, but in reality, as austerity reforms stalled and the economy shrank (by 4 percent last year), state debt continued to soar. It’s now near 160 percent of GDP. The consequences of default are currently deemed too dangerous, so other options are being considered, such as lending Greece yet more money, and extending the repayment dates on the debt. But some commentators, including Lex in the Financial Times, think that default is, sooner or later, ‘inevitable’. The European debt crisis, says economics analysts Capital Economics, “may be entering a new and more dangerous phase”. Meanwhile, as in the US, the biggest companies in Europe, not including the major banks, are sitting on £445bn in cash, according to a Bloomberg report at the end of last year.

Britain has been spared some of the worst of the troubles afflicting Europe because it is still in control of its own currency and can therefore engineer some fiscal wriggle-room with low interest rates and money-printing and so on. It has also recently elected a government committed to radical reforms that will impoverish sections of the working class but also, capitalists are hoping, reduce the deficit and restore profitability. But the picture is far from rosy for the capitalists. The British economy grew by only 0.5 percent in the first quarter of this year following a contraction of the same amount in the last quarter of 2010. Household disposable incomes are predicted to fall by 2 percent in real terms this year, and the TUC trade union body has warned that wages – already stagnant over the past 30 years while the economy doubled in size – are likely to trail behind inflation for years to come, putting low and middle-income earners into a “livelihood crisis”. Growth has fallen off in the services sector, house prices continue to slide, retail sales are down, and the Bank of England has been forced to cut its growth forecasts and up its inflation outlook. And with interest rate rises mooted and surely inevitable sooner or later, things can only get worse in the near term. At the same time, as in Europe and America, British companies sit on vast cash hoards as the prospects of profitable investment remain small and risky.

The bad news

There are really two questions here. The first is, is the crisis over in the narrow, technical sense, i.e, is the economy officially out of recession according to conventional definitions and measures? Here the answer is yes, though the shakiness of the recovery is signalled even in the mainstream press by the constant reference to the fear of a ‘double dip’, the return of recession, especially if or when stimulus measures end and austerity measures kick in (dampening effective demand), or both. Luxemburg’s ‘first signs of improvement’ are certainly there, but it’s still way too early to say that society is ‘reassured again’.

The second is whether the crisis is over in a broader sense, and here the answer is, almost certainly not. Take a historical and Marxist view, and it seems clear that we are merely at the start of a major global restructuring.

Apart from a socialist transformation of society, the only solution to the problems of a depression is the depression itself. If capitalism is to return to profitability, unprofitable concerns must be closed, workers laid off, wages suppressed, and capital devalued. This restores profitability and lays the basis for a new round of capitalist prosperity. The trouble is, despite a number of serious recessions and wobbles, capitalism has not had a proper and necessary clearing of the decks since the 1930s.

As the Marxist economist Paul Mattick points out, that depression, and the war that followed it, laid the basis for the ‘Golden Age’ of 1950 to 1973, an ‘economic miracle’ built on the destruction of the war and the corpses of 50 to 60 million people. This period of capitalist prosperity ran into serious trouble in the 1970s, and the result was the stagnation and inflation (‘stagflation’) of that period, a reliance on unprecedented levels of state involvement in the economy, an excess of printed money and soaring debt. The idea was that this debt would be paid back in the good times as depression was averted and capitalist prosperity returned. The reality was that the debt and spending had to continue to rise to subsidise capitalist industry and buy social peace.

Despite the rhetoric and ideological determination, and some major attacks on working class living standards through the 1980s, it has proved impossible to roll back the state and cut spending and debt while keeping capitalism buoyant. The working class seemed to be boosted for a while with the credit card explosion and rising house prices. That prosperity, too, was obviously unsustainable for capitalism, and it ended in 2007.

But could the full force of a depression be delayed with a combination of yet more debt and spending? Governments around the world are betting that it can. But they are also hedging their bets by preparing and implementing austerity measures as it must be obvious, even to them, that the historically unprecedented expansion of state spending and debt cannot go on for ever if capitalism is to survive. Keynes himself famously ignored this problem. “In the long run, we’re all dead,” he said. Over the next decade, we’ll discover what happens in the ‘long run’.

The probability is that previously taken-for-granted entitlements (to education, jobs, retirement, health care, an income during periods of illness, joblessness or disability, and so on) and standards of living will end. There will be continuing struggles both within the capitalist class and between the capitalist and working classes over who is to bear the brunt of the losses. The hegemony of the United States may be challenged in the not too distant future, with potentially catastrophic consequences: bear in mind that it took a world war to completely end the last truly major depression. And the depression, if not rescued by a major war, could be deeply exacerbated by the falling off of cheap and easy oil and energy supplies and the possibility of ecological catastrophe.

Yes, in the long run we’re all dead. But in the short run things are not looking too great either. At an underlying level, this economic crisis is not over. And neither is the increasingly desperate urgency and need for the socialist alternative.

Stuart Watkins

Aspect: Relative Wages (1971)

The Aspect column from the February 1971 issue of the Socialist Standard

Last month we refuted the suggestion that Marx held that under capitalism the amount of goods received by the working class would gradually fall below the poverty line. We showed that by “misery” Marx could not have meant absolute poverty of destitution because he stated on a number of occasions that working class misery would grow, even if wages were high. Finally, we promised to examine in this issue the concept of “relative wages”.

Marx first introduces this concept of  in Wage Labour and Capital, one of his early lectures on economics dating from 1847.

In section IV Marx distinguishes three relations involving wages:

First, the actual sum of money the worker receives from his employer which he calls “nominal wages” and which we would now call “money wages”.

Second, the actual amount of goods and services which at any time this sum of money will buy, or “real wages”.

(In this age of inflation workers are all too familiar with this distinction.)

Third, says Marx, “wages are, above all, also determined by their relation to the gain, to the profit of the capitalist – comparative, relative wages”. Relative wages, he goes on, “express the share of direct labour in the new value it has created to the share which falls to accumulated labour, to capital”.

Marx himself had not invented this idea; it was originally put forward by David Ricardo. Indeed at this time before he had fully worked out his theories Marx could properly be described as a “Ricardian socialist”, as the followers of Ricardo who gave his theories an anti-capitalist aspect were called.

Relative wages (i.e., the workers share in the product of their labour) can fall even though real wages (i.e., the amount of goods they receive) have risen, as a simple example will show.

Because value is measured by the amount of labour expended over time, the total amount of new value produced in a given time will always be the same (provided the skills of the workers remain unchanged). Thus if productivity increases and more wealth is produced in the same period, then the prices of each individual commodity will fall but the total value of all of them together will remain the same. Assume that, as a result of an increase in productivity, prices fall by 5 per cent. If wages remained unchanged, then real wages would rise by nearly 5 per cent. Relative wages, however, would be unchanged. But say money wages were to fall but not by as much as prices. The workers would still be better off in terms of the goods they received but their relative wages would have fallen.

As Marx put it:

  The share of capital relative to the share of labour has risen. The division of social wealth between capital and labour has become still more unequal. With the same capital, the capitalist commands a greater quantity of labour. The power of the capitalist over the working class has grown, the social position of the worker has deteriorated, has been depressed one step further below that of the capitalist. (Wage Labour and Capital, section IV)

Nearly twenty years later in 1865 Marx returned to this theme in another popular lecture on economics. Here he assumes that wages fall by as much as prices, which would mean that the workers would be no better off materially, and comments:

   Although the labourer’s absolute standard of life would have remained the same, his relative wages, and therewith his relative social position, as compared with that of the capitalist, would have been lowered. If the working man should resist that reduction of  relative wages, he would only try to get some share in the increased productive powers of his own labour, and to maintain his former relative position in the social scale. (Value, Price and Profit, Chapter XIII)

We are now in a position to say in what sense Socialists think the working class tends to become worse off as capitalism develops. They tend to become worse off in terms of the value of the amount of goods they receive compared with the value of what they produce. Saying that under capitalism the share of the working class in the wealth they produce will tend to fall is quite a different proposition to saying that the amount of goods and services they receive will fall. Most of those who accuse Marx of having believed that capitalism would reduce the working class to starvation have failed to understand this key distinction, which he took over from Ricardo, between relative wages and real wages. Relative, rather than real, wages is what tends to decline.

Capitalism is not to be justified by comparing the standard of living of most workers today with the lower standard of their grandfathers’ yesterday. The valid comparison is between what people get today and what they would get if modern industry were commonly owned and geared to producing for use not profit.

In any event, the case for Socialism does not rest on capitalism producing a poverty-stricken and down-trodden working class. Indeed, if capitalism were to do this Socialism would be impossible because it could not be  established by what Marx called “one level mass of broken wretches past salvation” (Value, Price and Profit). Socialism, both for its establishment and for its functioning, demands people who have learned the technical and social skills needed to live in a modern technological society. It is by training the working class in this rather than by completely impoverishing them that capitalism undermines itself and produces its own grave-diggers.

The case for Socialism rests on the fact that a society based on the common ownership and democratic control of the means of production can provide a better life for people who are now members of the working class, in terms of quality as well as in terms of satisfying material needs, than can capitalism.

Cooking the Books: Labour’s Share Goes Down (2012)

The Cooking the Books column from the December 2012 issue of the Socialist Standard

In July, the OECD, an organisation grouping the developed capitalist countries of Europe, North America, Japan and Australasia, published its Employment Outlook 2012. Chapter 3 noted that ‘during the past three decades, the share of national income represented by wages, salaries and benefits – the labour share – has declined in nearly all OECD countries’. The Times (11 July) summarised the report:

  "Automation and computerisation are responsible for as much as 80 per cent of the decline in so-called “labour share”, which measures wages as a proportion of total income generated by the economy … The research … shows that the average labour share dropped from 66.1 per cent in the early 1990s to less than 62 per cent in the late 2000s. In all but four of the 26 OECD nations analysed, workers’ slice of their country’s income declined between 1990 and 2009.”

What the OECD was trying to measure, at national level, is what Marx would have called ‘relative wages’, i.e., the workers’ share in what they produce. This does not necessarily mean a decline too in ‘real wages’ (what wages can buy). In fact, according to the OECD, ‘in essentially all OECD countries, while the fraction of national income accruing to labour decreased, economic growth was still sufficiently rapid so that real labour compensation increased and workers were on average better off.

Since the income of the self-employed was divided between labour and capital, a decline in labour’s share meant a rise in capital’s, with the result, as the Times pointed out, that:

  ‘Corporate investors have been the big winners, as businesses save on salaries and their profits increase.’

Further, as workers became on average better off, the shift meant that ‘corporate investors’ had to have become even more better off.

The OECD’s figures have some bearing on the arguments amongst students of Marxian economics about what has caused the present economic downturn. Some say that is due to a fall in the average rate of profit; others, that it is due to the decline in labour’s share of national income. One passage in the OECD report seems to give some credence to the latter view:

  ‘… the shift of income away from labour (and, in particular, from low-wage workers) towards capital (and top earners) may have a negative impact on aggregate demand to the extent that workers with below average pay tend to have a higher consumption propensity than do top earners and capitalists.’

On the other hand, it may not, as long as the capitalists use their increased profits to increase their luxury spending and, more importantly, to re-invest in production; which in fact they did until 2008.

The OECD figures say nothing about the rate of profit since they concerned only the division of new income corresponding to new wealth and value produced in a year. The rate of profit measures total profits in relation to the total amount of capital invested. No doubt, due to ‘automation and computerisation’ that went on during the period in question, the stock of capital would also have increased. Whether it would have increased more than the increase in the amount of profits – which it would have to have done for the rate of profit to fall – is not something the OECD went into.

While capitalist firms do calculate an expected rate of return to decide when, where and whether to invest, and check whether or not this is being achieved, they will not take into account the rate of profit of the whole economy, if only because this is something they have no means of knowing.