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.

Where Labor is Robbed. (1909)

From the January 1909 issue of the Socialist Standard

Labor is robbed where labor is employed, and, directly, nowhere else. Labor is robbed in the pay envelope, and the hand that reaches the pay envelope to him and no other, directly, is in his pocket.

Labor cannot be robbed in the prices it is compelled to pay for the commodities which it consumes. For the good and sufficient reason that the cost of living determines wages. Wages always hover about the cost of subsistence. If provisions and clothing are dear, wages must go up to meet the increased cost of living, since the laborer must live before he can work. If the employer gets his profits, he must see to it somehow that his wage-slave is in working condition, just as the farmer must see to it that his horses must have hay and stabling if he is to have the benefit of their labor. The cost of hay is of no particular concern to the horses.

In an accommodated sense, labor can be “robbed” in the quality of the goods consumed, by means of fraud and adulteration but not in price.

A Battle Creek contributor to last week’s “Wage Slave,” for example, says that ”the hand of the rich man is externally in the poor man’s pocket for taxes or for the price of meat.” This is not correct. The hand of the rich man, i.e., the employer, is in the employee’s pocket in one manner only, and that is in withholding from him, in the pay envelope, four-fifths of the value he has created. They can’t make the wage-earner pay one penny of the taxes, Municipal, State, or National; and if meat sold at a dollar a pound, that wouldn’t affect him in the slightest degree, either, so long as other commodities advanced correspondingly. If the price of meat advances out of proportion to the cost of other food-stuffs containing the same dynamic energy, the result will be simply to change the form of his diet, but it can’t possibly affect his income or make it easier or harder for him to save anything.

The only workingmen in whose pockets the Beef Trust has its hands are its own employees, whom it robs, as other employers do, in their pay envelopes, and the farmer who is robbed in his pay envelope too, in an arbitrary depression of prices.

That the wage-earners do not pay the taxes is directly evident with the great majority of them who have nothing to tax. But it is none the less certainly true of those, also, who possess a small property and are rated as taxpayers. In their case, such taxes as are levied upon them enter into the cost of living, and, again, the necessary cost of living determines the wages.

Tax reform, “trust-bustin’,” cheapened transit—or if they made it free, it would be all the same—municipal lighting, lowering of rents—all these and similar measures are seen to be purely Middle-Class measures, designed either to make the big robbers divide up a little more evenly with the little robbers, or to enable the employing class to house and feed their wage-slaves more cheaply and, consequently, get them for less wages.

The one thing needful for the working-class, without which all efforts to better their condition are vanity and vexation of spirit, is the capture for collective ownership of the land and the machinery of production. When we have this, we have it all. Without we are nothing. All efforts or attempts to benefit the working-man by lowering the cost of his living will only play into the hands of the employing class.

From The Wage-Slave.

Election Special: Where We Stand (1964)

From the October 1964 issue of the Socialist Standard

Wages and Prices

Our capitalist world is topsy-turvy and generally unpredictable. Bold indeed is the man who dares to say what things will be like in twelve months, or even twelve days time. Nevertheless, there are some things on which we can speak with some certainty. We do not know which party is going to win this election, but whichever it is will have the question of wages and prices as one of its major preoccupations.

Wages are always a headache to employers and governments, and we do not have to look far to find the reason. If the manufacturer is to sell the goods which his workers have produced, he has to offer them at competitive prices, as high as the market will bear, but not so high as to leave the market to cheaper competitors. If wages increase too much his profit suffers, so he needs something to act as a brake on wage claims. Before the war the brake was there in the form of large unemployment, but this generally has been missing in the post-war years. As the purpose of capitalism is profit making, our rulers find themselves in a quandary.

Should they fight the unions over every wage claim? But that would mean bringing factories and transport to a standstill, at enormous cost in lost production and profits. So they have to try other methods, such as “wage freezing” under Labour and “wage restraint” under the Tories, both meaning the same thing. They will try to persuade the workers to forgo, or at least reduce, wage increases "in the national interest.” All sorts of arguments will be used in support of this line, all boiling down to the same theme. The less we have, the better off we shall be, even at a time when generally prices are rising.

But didn’t they all say how much they deplored the rise in prices and promise to put a stop to it? Yet the Labour Government went out on a tide of rising prices, for all its controls. Who will forget the garish Tory posters up and down the country, telling us that they would succeed where their opponents had failed? We can see how little their promises were really worth. In fact, just like the Labour Party before them, they have given the nod to price rises by currency inflation, in attempts to offset wage increases.

As far as workers are concerned, the struggle for improved wages and conditions must be pressed at all times, regardless of price movements and government propaganda. The alternative under capitalism is a worsening of conditions—there is no such thing as “stability.” But the only real solution is to replace capitalism with Socialism, which will mean the ending of both wages and prices and instead the production of goods solely for the use and enjoyment of all.

Housing

Our politicians are constantly talking about it. The newspapers print loads of articles on it. The telly shows us heartrending pictures of it. All as though it is something new, something that will soon be over and dealt with, given the right political party—Tory, Labour, Liberal.

They call it the housing problem.

But a hundred years ago and more they were talking about a housing problem. Far from being new, it's as old as capitalism, as old as the working class itself.

Let us go back a hundred years—to 1864. Hardly believable though it is, many of the houses that had already been standing for twenty or thirty years then are still with us now. Everybody has heard of Coronation Street—after whose coronation was it named? Not after George VI in 1937, nor after George V in 1910, nor even after Edward VII in 1901, but after Queen Victoria’s in 1837. And in Salford they have only just got round to pulling down Waterloo Place, built in 1815 and named after the victory over Napoleon!

Today in this country there are more than one million houses—many probably worse than those in Coronation Streets—reckoned to be unfit for human habitation. So low are the standards, anyway, that one million is certainly an underestimate.

In Glasgow, tens of thousands of people live three to a room.

In Liverpool there are 88,000 houses beyond any prospect of repair; in Birmingham 50,000 families are on the waiting list; whilst in Oldham it is estimated that no less than one house in four is unfit to live in. And in London, perhaps the worst area of all, many families of the homeless are reduced to walking the streets.

Our capitalist politicians all tell us, of course, how upset they are over the problem. The same as they were telling us years and years ago. Now the Labour Party reproaches the Tories for building only 300,000 houses a year: the Tories answer back and remind the Labourites that they have nothing to shout about because when they were in office they only once managed to get above 200,000!

But this does not stop them telling us what fine things they’re going to do if they are elected. What truly wonderful promises they have given us over the years! And still they have not even got to the stage of building enough houses to keep pace with those rotting away into slums, let alone starting to fulfil those high ideals they treat us to every time an election comes around.

Yes, there’s a housing problem alright, the same one that has been with us for the past hundred and fifty years. And the capitalist political parties are just as far from getting rid of it today as they were then. Promises, we shall get promises galore. If words were bricks we’d all be living in palaces by now!

But they’re not, and we shall still be hearing about the housing problems—the overcrowding, the million slums, the long waiting lists, the wandering homeless—when the next General Election comes round!

Education

In this election all other parties are making grandiose promises to improve education.

But anybody who wants the best education, for themselves or for their children, can get it now. There is, of course, a snag. It will cost about £370 a year, which is the price of sending a pupil to a typical public school.

The public schools give youngsters the sort of education which develops their abilities to the full. Only a minority, however, can afford to go to them. What about the rest?

For them, a state school where, as both the Newsome and the Robbins Reports have shown, the educational environment is unfavourable.

Why are there so many promises to improve education?

The Times Educational Supplement, commenting on the Newsom Report, said:

The need is not only for more skilled workers to fit existing jobs, but also for a generally better and intelligently adaptable labour force to meet new demands.

What these “new demands” are was indicated by the same periodical in their discussion of the Robbins Report:

The committee was impressed by the fact that plans for expansion (in Europe and America) often far surpassed present British plans.

In other words, education is being improved and expanded to provide workers with different skills from those of their fathers, so that British capitalism can compete more successfully with its foreign rivals. On this the Labour, Conservative, Liberal and other capitalist parties are agreed.

Workers are misled into believing that a better education will basically improve their condition. In fact, it will leave them relying upon their wage for their living, even if their job is a “technical” one for which they need a university degree.

The restrictions and insecurity of working class life will continue to afflict them. Just like their fathers before, they will have been educated for a job.

Education under Socialism will be free of the shackles which capitalism’s profit motive imposes upon it. We shall all learn about the world we live in, our abilities will be developed to the full. Then we shall be able to offer the best to, and receive the best from, life.

Technology

A great driving force in capitalism is competition. This often leads to the growing productivity that is a feature of the system. The fiercer competition becomes, the quicker is the pace of technological innovation and the more acute the need for scientific research. This is precisely the position today.

The growing competition which British firms are meeting in the world market has highlighted the need for various reforms if they are to remain competitive. These reforms are needed primarily in education and scientific research. The era of automation demands a higher level of skill and education among the population than at present. Thus education and technical training must be improved and expanded.

But this is not enough. To be efficient and remain competitive a firm must invest in research. At present, however, few firms can afford the large outlay that this demands. In other spheres overlapping of research takes place. Here the capitalists’ need is for some national organization to finance and co-ordinate research. This is why the “scientific revolution” has become an election issue. This is why both the Conservative Party and the Labour Party are emphasising the need for more universities, more science students, for better technical education in secondary schools, more research and other similar reforms. These reforms will come whichever party wins, for modernization is the order of the day.

But what will this modernization mean for the majority of workers? Technical progress under capitalism always presents a threat to some jobs. The measure of a firm’s efficiency at such times is the number of workers it can lay off. For the wages bill is a cost and costs must be reduced to a minimum if a firm is to remain competitive.

Many of the inventions which will result from this scientific revolution will be labour-saving, that is, job-killing. This means an increase, even temporarily, in redundancy. Old skills will be useless. The faster pace of machines will mean an increase in shift-working. It should not be thought that this threat is confined to factory workers. Computers and automation represent a threat to the jobs of thousands of managers, bank clerks and other white collar workers. All in all the total result will be the same old insecurity for all sections of the working class. This is the experience of American workers. It represents our future during the much-vaunted scientific revolution.

A trade union struggle against this threat will not be enough. Such a struggle, though necessary, can only be a rearguard action as everything favours capitalism. Something more than trade union struggle is required, namely, a political struggle to end capitalism. The Socialist Party offers a constructive alternative in Socialism. Only then will the fruits of scientific progress be used to satisfy the needs of humanity instead of, as at present, the greed of capital.

Correspondence: Wages and Prices (1933)

Letter to the Editors from the October 1933 issue of the Socialist Standard

Wages and Prices

Are wage increases an illusion? 

A correspondent asks the following question : —

Would the workers be better off if they had higher wages? As far as I can see, if there is an appreciable rise in wages, the price of goods must be higher. Am I right or wrong?

Reply.

This question is one of which little has been heard during the past ten years, but during the years 1914 to 1921, when prices were rising, it was in the forefront of every discussion at trade union and political meetings. If prices rise again this old bogey will be trotted out once more. How old it is can be seen from the fact that the question was put to Marx nearly seventy years ago, and was answered by him in the lecture which is republished in the pamphlet, “Value, Price and Profit.” That answer has stood the test of time, and has never been bettered. Our correspondent and others who are interested are strongly advised to read it in order to supplement the brief explanation given below, and the somewhat fuller treatment in our pamphlet, Socialism.

The first thing to notice is that the prices at which articles sell are not fixed at whatever amount the capitalist chooses to select. Competition between capitalists, each trying to realise a profit by selling his goods, prevents the individual capitalist charging a price far above the average market price for that article. The determining factor in all prices is the value of the article, that is, the amount of labour required in its production, including, of course, the amount of labour required in the production of machinery, fuel, buildings, etc., with the aid of which the process of production is carried out. When we say that a bicycle is worth £5, what we are really saying is that the amount of labour required to produce the bicycle is the same as the amount of labour required to produce the weight of gold represented by five £1 notes.

“Labour-power,” which is the commodity sold by the workers to the capitalists, has its value determined in a similar way. The value of labour-power is determined by the amount of labour required for the upkeep of the worker and his family. The price at which the worker sells his labour-power is his wages.

We see, therefore, that prices and wages, under a given set of conditions, are alike determined by factors outside the control of the capitalists.

The next point to realise is that the values of the goods produced by the workers are not determined by the amount of the workers’ wages. The values of the goods are determined by the average amount of labour (number of hours of labour) required in their production.

For example, in a 48-hour week, a worker might produce goods whose value is £5, but the amount of labour required for the upkeep of the worker is only 24 hours, which would mean that his wage is about £2 10s. The capitalist keeps the difference between the worker’s product and the worker’s wages.

If wages fall and the product remains the same, the employer’s profits are increased. If wages rise the employer’s profits are decreased.

Therefore, it is not true that higher wages are of no good to the worker. Nor is it true that higher wages lead to higher prices.

The truth of this can be tested by observation. If the capitalists could raise prices just how they like they would never object to higher wages or to higher taxes. Yet we see in practice that the capitalists will go to enormous trouble and expense to defeat a demand for higher wages or higher taxes. They know very well indeed that higher wages mean smaller profits.

The truth of the position outlined above is easily seen at times when the general level of prices remains unchanged. It is, however, not so clear when prices are rising or falling. Owing to changes in the amount of labour required in the production of articles of all kinds, or in the production of gold (due, for example, to new machinery and new methods), it is possible for all prices to rise or fall. When prices rise it costs more to provide for the upkeep of the worker, and consequently wages rise also, although in practice we generally find wages rising more slowly than the workers’ cost of living.

When prices fall it costs the worker less to provide for himself and family, and wages then come down along with prices. Sometimes, as in Great Britain, during recent years, wages fall rather more slowly than prices.

At times of rising prices, the capitalists and their agents and also many muddleheaded labour leaders, put forward this false theory that wage increases lead to higher prices, and are useless. The capitalists do this because they hope thereby to dissuade the workers from striking for higher wages, and hope to get them to accept permanently a lower standard of living. The workers should resist such attempts and should never miss a real opportunity of struggling for higher wages.

At a superficial view it may look inconsistent to struggle to raise the standard of living if the workers’ wages are based on what it costs to keep him and his family. It is, however, not inconsistent because the workers’ cost of living is not merely the cost of bare necessities. It can, and usually does, include other factors depending on tradition and the needs and customs of the trade in which the worker is employed and of the country in which he lives. If the workers are able at a particular time to resist wage reductions during a period of falling prices, or are able to gain and hold wage increases at a time of stable prices, they can to that extent better their position and improve their standard of living. As, however, this can only be done at the immediate expense of the employers, the latter will always strive to prevent it, and if the employers find it expedient to give way at the time, they will always endeavour to recoup themselves later on by speeding-up the work, introducing “labour-saving” machinery, employing a cheaper type of labour, employing women and juveniles in place of men, etc.

Therefore, while the wage struggle is necessary and it would be disastrous to give it up, it can never solve the real problem which faces the workers. That cannot be done by the day-to-day struggle against the capitalists. It can only be done by gaining control of the machinery of government and abolishing capitalist ownership and control of the land, factories, railways, etc.

Ed. Comm.

Cooking the Books: A fuss about NICs (2025)

The Cooking the Books column from the January 2025 issue of the Socialist Standard

In the week before the budget last October the i paper carried an article headlined ‘Reeves warned NI business tax will hit workers’ pay’ with the subheading ‘Experts say the comments by the Office for Budget Responsibility show increasing employer NI is a tax on “working people”’.

In the event Chancellor Rachel Reeves did increase employer National Insurance Contributions (NICs), which led the media and opposition parties to claim that the government had reneged on its promise not to increase taxes on ‘working people’ (defined, in the end, as those in employment). We are far — very far — from holding a brief for the government, but the claim that the increase in employer NICs will push down wages doesn’t hold water.

In its comments for Reeves’s budget, the OBR repeated:

‘The specific changes to employer NICs increase the costs of employment for firms which is mainly assumed to be passed on to employees through lower real wages, and which also reduces employment.’

So, they weren’t actually saying that the increase would lead to this but that, in their calculations, they had assumed that it would. However, they didn’t explain why they assumed this.

As a measure that increases labour costs, it could be expected to have some effect on employment, but the assumption that it would lower ‘real wages’ (the amount wages can buy in relation to prices) is unwarranted. The OBR seems to have meant that it would result in employers increasing the price of what they are selling, resulting in workers being able to buy less with their wages. But this assumes that, faced with an increase in costs, employers can simply pass this on to consumers through increasing the price of their product, which is not the case.

The TUC understood the situation better. Employers, they pointed out, will:

‘have a range of options on how they can cover these increases. They can absorb the costs and many will choose this option. They could also raise productivity by investing in their business, raise the prices they charge customers, or seek to suppress wage growth in their organisation. It can be difficult to predict what balance of these approaches employers will opt for and it will vary greatly between firms and industries.

‘Workers will be particularly interested in the extent to which employers seek to shift the burden onto them by holding down wages. One thing is for certain – there is no automatic link between business tax and worker wages (…) how the costs are shared will depend on the growth trajectory of the business and economy and on the bargaining power of workers.’

This is substantially correct, although they could have also pointed out that the price increase option would only be open if any increase was ‘what the market will bear’.

It’s not true that a tax that increases employer labour costs would inevitably lead to lower pay. You can see this where labour costs are increased through workers obtaining a wage increase.

The employer would have the same options that the TUC mentions. If, as the OBR assumes, an increase in labour costs leads to ‘lower real wages’, then so should such an increase due to higher wages. It amounts to the old fallacy that an increase in wages is pointless as it merely leads to an increase in prices which nullifies it, a fallacy exposed by Marx in 1865 in his lecture to British trade unionists, later published as Value, Price and Profit.

Cheaper food—less wages (1948)

From the December 1948 issue of the Socialist Standard

From the firm of Harry Ferguson, Ltd., of Coventry, producers of the Ferguson Tractor, comes a booklet containing an alleged solution to the rising cost of living. By reducing the cost of food and thereby preventing demands for higher wages, the farmer, so he is assured, can prevent the “vicious, mounting spiral of inflation.” But let Harry Ferguson, Ltd., speak for themselves:

A paragraph headed : “Industry’s Prime Cost’’ proceeds:

“The prime cost of all industry is the cost of maintaining human beings. Human beings cannot he maintained unless they are paid enough to ensure that they get sufficient food to keep them fit to do their jobs; and they must also have, at the very least, a reasonable margin left over to enjoy other things.

“If, therefore, food prices can be stabilised, wages can be stabilised too.”

The writer delicately refrains from carrying his argument to the next logical step—that if food prices can be reduced, wages can be reduced too.

This booklet has not, as you may guess, been produced for the purpose of introducing the employees of Harry Ferguson, Ltd., to Marx’s theory of Value. It has as its object the sale of tractors and carries the popular two fold appeal to the potential customer—the assurance that “costs” will be cut, backed by the patriotic appeal to assist the “National effort.”

Nevertheless, although the composer of this stirring appeal may never have read a line of Marx, no Marxist could quarrel with his analysis of the prime cost of industry. (The additional margin to “enjoy other things” is a novel, if somewhat vague touch and should merit close attention if some economist can be persuaded to come forward with the formula by means of which this margin is calculated!)

How often have the workers refused to accent this analysis from the Socialist platform? Will they accept it now, from the pen of their masters’ hirelings?

Let the worker consider carefully the implications. The farmer is urged to buy agricultural implements to enable the worker to enjoy a more substantial or varied diet. but, in reality, to facilitate a general reduction in wages. Nor is this stupid and vicious economy confined to the land. Everywhere that so-called “labour-saving” machinery is installed, whether in mills, mines or factories, whether in warehouses, offices or hotels, the object is never to save labour hut always to save wages.

This is inevitable under capitalism. The capitalist class is forever striving to reduce wages, whether by direct action in the workshops where labour-saving machinery enables production to be maintained or increased with fewer workers, or indirectly where the cheaper production of the necessities of life enables a reduction to be made in the basic wage.

The solution? A social system wherein the use of machinery on the farm as in every other sphere of production, has as its two-fold object the genuine saving of labour (with its accompanying increase of leisure and energy to enjoy that leisure) and the production of articles solely, simply and sensibly for—need. In a word—Socialism.

H.J.G.

Blogger's Note:

There's a strong chance that 'H.J.G.' was Howard J. Grew. My reasoning is twofold: Howard was a member of the Birmingham Branch of the SPGB, and the article refers to a firm in the West Midlands; and, secondly, he joined the Party in 1947, so his membership and this article overlap.

Howard's obituary appeared in  the September 1984 issue of the Socialist Standard.

How society works (2024)

From the August 2024 issue of the Socialist Standard

Do wage increases lead automatically to price increases? If they do, there would presumably be no point in fighting for a wage rise, as it would just mean that prices of goods would go up too, and people would be no better off. Looking further into this issue reveals a great deal about how society works.

In fact, higher wages need not mean higher prices, because prices aren’t determined by wages. In many industries, wages are relatively high but prices low, and in others wages are low but prices high.

To see what’s behind this, we should step back a bit and look at what constitutes a wage and how prices are determined. Prices are of course influenced by supply and demand, but there has to be more to it than that, since what happens when supply and demand cancel each other out? What really matters is the value or exchange value of some good, and that depends on the amount of labour that was needed to produce it. Not just the last stage of production, but all the labour that went into obtaining the raw materials, the buildings, the machinery and so on. Why do TVs cost a lot more than electric kettles? Because far more labour goes into producing the TVs. The price of something is essentially based on its exchange value, but supply and demand can affect it as well.

As for wages, these are in fact also a price: the price of the worker’s labour power, or ability to work. Labour power has its own value, that of the value of what is needed to produce, maintain and train the worker: the cost of rent, food, heating, transport, clothing, entertainment etc. So a worker produces enough value to get paid sufficient to live on and bring up a family. But – and here is the big revelation – the worker will be forced to work for longer than that. In four hours’ work, you may produce enough to keep you going, and that is what you’ll get in wages. However, your employer has bought your labour power and can make you work for longer than that, say for seven hours. In those three extra hours, the value of what you produce goes to the employer: this is known as surplus value, and is what constitutes profit for the boss.

In that example, you work four hours for yourself and three hours for your employer. That is exploitation, and it lies at the heart of the current economic system. By all means struggle for higher wages, and against wage cuts and longer hours and harder work. But you should also be aware that, however hard you fight within the present system, you will always be in a subordinate and precarious position. The real solution is to combine with fellow workers and fight for the abolition of the wages system!

Paul Bennett

Cooking the Books: Wages, prices and profits (2024)

The Cooking the Books column from the June 2024 issue of the Socialist Standard

‘Greggs faces profit margin pressure amid rising wage costs’ reported Business Matters (15 May). Roisin Currie, the company’s chief executive, was reported as saying she expected that the company’s costs would rise by between 4 and 5 percent this year and that ‘the majority of cost inflation pressure that we face this year is wages’. This, the magazine said, underscores ‘that labour costs remain the biggest financial burden on the company.’ Wages a burden on profits? We thought it was the other way round.

Politicians and the media often lecture us that inflation, as a rise in prices generally, is caused by wage increases. Workers get a wage increase which employers, to maintain profit margins, pass on to their customers by increasing the price of what they are selling. The logic of this position is that workers should not ask for a wage increase or strike to try to get one as this won’t make them any better off.

Marx met a similar argument in his day. He countered it by pointing out that, faced with a wage increase, capitalists might want to compensate by increasing the price of what they sell, but the point was whether they could:

‘The will of the capitalist is certainly to take as much as possible. What we have to do is not to talk about his will, but to enquire into his power, the limits of that power, and the character of those limits’ (Value, Price and Profit, section 1).

In theory Greggs could increase its prices by 4 to 5 percent to compensate for the ‘financial burden’ of having to pay out more wages but this would not necessarily have the effect of protecting its profit margins. It could well do the opposite since its sales might fall as its customers bought their sausage rolls from one of its competitors.

The board of Greggs has evidently reached the conclusion that this is in fact what would happen. As Business Matters put it:

‘Greggs continues to navigate the challenges posed by rising wages while leveraging its expansion plans and affordable pricing to maintain its market position and drive growth’ (emphasis added).

Currie was reported as saying:

‘Greggs would continue to monitor and review price increases regularly. While the company does not have a fixed plan for pricing, she emphasized the need to remain flexible and responsive to ongoing economic conditions, reviewing their stance on a week-to-week and month-to-month basis’.

In other words, to keep testing to find out what price the market will bear without losing sales.

Greggs is in competition with others to sell take-away breakfasts and lunches. It claims to have overtaken McDonalds in the market for breakfasts and is planning to increase the number of its shops this year. In this competitive situation it would be counter-productive to try to pass on increased wage costs to customers. So Greggs has to accept the reduction in profits that follows from not raising prices. It might have the will but it doesn’t have the power to protect its profits.

Capitalist enterprises have to submit to the economic laws of capitalism just as much as workers and governments do.

(Attention Len Murray) (1978)

From the March 1978 issue of the Socialist Standard

"If it were in the power of the capitalist producers to raise prices of their commodities at will; they could (and would) do so, without waiting for a rise in wages. 

The capitalist class would never resist the Trade Unions, since the capitalists could always avail themselves of every rise in wages to raise their prices, and thus pocket greater profit."

Capital, Vol. II, p. 392

The myth of trade union power (1978)

From the October 1978 issue of the Socialist Standard

One of the current hobby-horses of the Tories which they hope will help them win the coming general election is to attack the trade unions as too powerful. The power of the unions has increased, is increasing and ought to be diminished, is how their argument might be summarised. The Labour Party, not to be outdone before that section of the electorate which is anti-union, counters by claiming that, because of its links and traditions, it is better able to control the unions than are the Tories.

In actual fact, however, it is a complete myth that the unions have any great power. The only power they have is that of ensuring that their members are paid on average the value of their labour power (not the same of course as the value of what they produce), and not less as would tend to happen if wages were fixed unilaterally by employers as was the general rule in the 19th century when most industries were not unionised. The unions do this by exerting pressure for higher wages when the labour-market is favourable and by putting a brake on wage reductions when it is not, as today when unemployment is fairly widespread. Trade unions are essentially only defensive with a limited power to resist the inevitable downward pressures—"the never-ceasing encroachments of Capital” as Marx called them—exerted on their members’ living standards by the workings of the capitalist system.

The fact that unions only have the power to defend wages against downward pressures has been obscured by the rise in the general price level caused by the inflation of the currency which has gone on continuously since the beginning of the last war. The over-issuing of inconvertible paper money inevitably means a rise in the general price level, that all prices rise, including wages, the price of labour power.

Thus, in a period of inflation, unions appear to be negotiating wage increases rather than simply maintaining and defending established standards. They are in fact negotiating increases in money-wages, but this is not the same as negotiating an increase in real wages (= wages in relation to the prices of what workers buy). In a period of inflation a rise in money-wages is necessary in order to defend real living standards. In a sense such rises are inevitable since, with an inflated paper currency, all prices, including wages, must sooner or later rise—and one of the limited powers the unions do possess is precisely to see that in these circumstances wages rise sooner rather than later.

Downward pressures are exerted on wages whether or not there is inflation and would continue even if inflation were to stop tomorrow. But inflation provides employers and governments (who are obliged, whatever their political colour, to abide by and apply the economic laws of capitalism) with a wonderful means of disguising the "never-ceasing encroachments of Capital” on wages: they can present the workers’ resistance to these pressures, their demands for higher money-wages, as the cause of inflation. So instead of appearing as the victims of inflation the workers and their unions are made out to be responsible for it!

The politicians, in the Tory and Labour parties, who act on behalf of the capitalist class, have an interest in perpetuating this confusion as it helps to weaken working class resistance to downward pressures on their living standards. Occasionally however a maverick politician steps out of line and blurts out the truth, as did Enoch Powell in a speech in Eastbourne on 2 June when he stated :

In the last thirty years governments in Britain—and not only in Britain—have deliberately caused the depreciation of the currency by increasing its quantity to meet their own expenditures. Simultaneously they have attempted, first by persuasion, then by compulsion, and finally by persuasion again, to prevent the inevitable consequences of inflation following in terms of rising money wages. When this proved impossible, they invited the public to deduce that the unions were more powerful than the State. More subtly, the present government, having partially desisted from financing its expenditure by the creation of new money, has attributed this result to their own special ability to manage and persuade the all-powerful trade unions.

We hold no brief for Powell—quite apart from his general support for capitalism, his racialist views are naturally anathema to Socialists — but on this issue he does have a more or less correct understanding: the unions have no geat power; they can’t do much beyond raising money-wages in line with rising prices generally. As Powell declared some years ago, the workers are the victims, not the cause, of inflation:

Wage claims, wage awards, strikes do not cause rising prices, inflation, for one simple but sufficient reason —they cannot. There was never a strike yet which caused inflation, and there never will be. The most powerful unions, or group of unions, which was ever invented is powerless to cause prices generally to rise . . . In the matter of inflation, the unions and their members are sinned against, not sinning, in the matter of inflation, the unions and their members are as innocent as lambs, pure white as the driven snow (speech in Scotland, 20 November, 1970, quoted in Socialist Standard, February 1971).

Capitalism is a profit-making system which can only run in one way: in the interest of those who live off profits, and there is nothing the working class can do, and it’s not much at that (though it must be can do, and its not much at that (though it must be done), is to unite in unions to exert pressure to ensure that they do actually get paid the value of the labour power they have to sell. But even to do this they have to keep running all the time as the “encroachments of Capital” are “never-ceasing”.

As Marx went on to say: “Instead of the conservative motto ‘a fair day’s wage for a fair day’s work!’ they ought to inscribe on their banner the revolutionary watchword ’ABOLITION OF THE WAGES SYSTEM!’ ”. But this requires that they organise politically with this as their conscious aim. It requires over and above trade union activity political action based on majority socialist understanding to convert the means of production into the common property of the whole community under democratic control.

Adam Buick

The ABC of Inflation (1972)

From the October 1972 issue of the Socialist Standard

The Labour Party and the Tory Party accuse each other of being responsible for the continuing rise of prices, but there is absolutely nothing to choose between the records of the two parties. Measured by the government’s own Retail Price Indexes, the Labour government 1945-51 scored a 28 per cent rise and the Labour government 1964-70 another 30 per cent (of the 1964 level); while the Tories marked up 50 per cent between 1951 and 1964 and another 17 per cent (of the 1970 level) between 1970 and June 1972. Added to the 32 per cent rise recorded between 1939 and 1945 under the National government (admitted to be an understatement), the present price level is at least four times what it was before the war.

In 1944 the three parties—Tory, Labour and Liberal—in the National government committed themselves to do what they could after the war “to stabilise prices”, and at each of the eight general elections Labour and Tories both repeated the promise —and it hasn’t meant a thing.

Individual prices can rise (or fall) for several different reasons. Good harvests will reduce prices and bad harvests will raise them. Booming trade increases demand and sends prices up, bad trade will send them down again. Even against the present trend of rising prices metal prices fell heavily last year as demand slackened off—the price of copper fell by 40 per cent. Improved methods of production, by reducing the amount of labour required, will operate to lower prices, while the exhaustion of easily accessible seams of mineral ores (coal and metals) will operate the other way because mining at greater depths or in less rich seams requires more labour to produce each ton.

During the nineteenth century when all of these price factors operated the general price levels in Britain went up in some periods and down in others, or remained nearly stationary, but the extent of the movement up and down was always within a range of about 25 per cent either way—nothing like the 300 per cent added since September 1939. Wages also rose and fell during the nineteenth century; sometimes in line with the movement of prices, sometimes by more or less, and occasionally wages moved in the opposite direction to prices.

Fallacies         

All sorts of explanations have been offered for the abnormal rise of prices since 1939 as compared with the up-and-down movements of prices in the nineteenth century. Most of the so-called explanations take the form of blaming some group or other for being “greedy”; bankers, or manufacturers, or retailers or trade unionists. It is an explanation that a glance at certain facts will show to be nonsense. Did the copper companies reduce their prices by 40 per cent in 1971 because they had suddenly become less greedy? Between 1948 and 1968 prices rose by 100 per cent in Britain, but only by half that amount in America and Switzerland: are the British twice as greedy? In the nineteenth century did the whole population go through alternating phases of being more greedy and less greedy? Between the end of 1920 and the middle of 1933 prices fell by over 50 per cent. The fall was continuous for thirteen years. What had happened to greed?

The fact is that sellers always try to get as big a price as they can, “as much as the market will bear”, and if they can get more or are forced to take less it is because external circumstances over which they have little or no control determine that it shall be so.

Two popular beliefs are that prices go up because wages go up, or vice versa. It does not occur to those who hold one or the other view that wages are prices—the price the worker gets for the sale of his labour-power, his mental and physical energies, to the employer. So, properly stated, their two propositions become the single useless assertion that prices go up because prices go up.

If they re-stated it in the form that one group of prices (wages) go up because the other group of prices go up—or vice versa—they overlook the truth that both groups of prices go up because of common external factors which affect both of them, more or less to the same extent. To illustrate this we can note that in summers when more Londoners visit the country the harvests are good. Nobody asks whether it is the London visitors who make the corn ripen, or whether it is the ripened corn which attracts the visitors. It just happens that a long hot summer both produces the good harvest and attracts visitors to the country — the sun is the common cause of both.

Paper & Prices

The new factor which has operated to push up prices abnormally since the war—the “sun” in relation to prices and wages—has been the continuous and accelerating “depreciation of the currency”. In the nineteenth century the amount of notes and coin in circulation was controlled by the device, enforced by law, that the pound sterling was a fixed weight (about a quarter of an ounce) of gold, and Bank of England notes were always convertible on demand into the corresponding weight of gold. Nowadays the pound is an inconvertible paper currency and enormous additional amounts have been printed and put into circulation. In 1939 the total of notes and coin in the hands of the public was £454 million. It is now over £3,500 million and rising steadily, an amount far in excess of whatever increase would have been necessary in line with the actual increase in production and sales of goods.

Karl Marx, whose study of the subject has never been rivalled, enunciated the economic law in the form that if the amount of inconvertible paper currency exceeds the amount of gold that would be needed if gold coins circulated, the excess simply operates to push up prices. Before Keynesian doctrines were swallowed by most of the modern economists and politicians, this relationship between excess issues of inconvertible notes and the price level was generally accepted by economists (including Keynes). In 1919 the government deliberately put a stop to the issue of additional notes and this played a large part in the subsequent fall of prices. Now the political parties and the trade unions have deceived themselves, against all past experience, into the belief that what they call increasing “money supply” leads to greater production and the maintenance of “full employment”.

Facing Facts

Not quite all of the economists and financial authorities have swallowed the “new economics”. One exception is the First National City Bank of New York which, in its Monthly Bulletin for January 1970, ridiculed the notion that rising prices are due to greed or to the wage demands of trade unions :

“Most of the blame for inflation is misplaced. For although inflation has a hundred faces, it has but one essential cause : overly expansive and erratic monetary policy that has pushed up the quantity of money more swiftly than the quantity of goods and services.”        

Governments, even if they perceived the truth of this, are afraid to repeat the restrictive policy applied in 1919 because they think it might lead to a big depression and much heavier unemployment. The economist Lord Robbins, speaking in the House of Lords on 5th July, said:

“I know of no case in history where inflation of the order of magnitude of that from which we are now suffering has been stopped by measures of this sort without that sort of effect.”

The government’s view, according to Patrick Jenkin, Chief Secretary of the Treasury, is that while curbing the money supply would affect prices it would do so only after a considerable time lag: –  “The immediate effect would be increased unemployment and reduced output. As a solution, it was politically, wholly unacceptable”. (Financial Times 17 July)

They, Lord Robbins and Jenkin, are equally afraid that continued and accelerating depreciation of the currency may end with the kind of monetary collapse that Germany experienced between the wars.

Most workers believe that if only prices came down or were at least stabilised their chief troubles would be over. They should remember that while it is true that at present hundreds of thousands of workers cannot afford to buy a house on mortgage, exactly the same was true between the wars when prices of houses and prices in general (and wages) were only a fraction of what they are now. For the workers capitalism means hardship whether prices are high or low or falling or rising.

Edgar Hardcastle

Are the workers cheated? (1973)

From the October 1973 issue of the Socialist Standard

The short answer to this question is “No”. We are not discussing the “clip-joints” of Soho who cater for visiting football fans on a Saturday evening. Nor the usurious second mortgage and hire-purchase rates charged to some workers. There are instances where individual workers are overcharged, particularly when they are on holiday or in a holiday mood. These, and similar instances, are not typical of the experience of the majority of workers and the working class as a whole.

During the last century, cheating of workers was common—they received most of their wages in the form of tokens which could only be exchanged at certain shops owned by their masters—the Tommy-shops as they were nicknamed. They had no choice but to purchase the low-quality food, usually at exorbitant prices. As a result, many workers starved; it became a national scandal, so much so that the government acting in the interests of all capitalists, introduced the Truck Acts, 1831, which forbade the payment of wages in token or kind.

From time to time, and certainly during a general election, the subject of high prices becomes a major issue. This is good election stuff, and both Tory and Labour Parties fought the last election on it. Some MPs parade themselves as public watchdogs, making sure that the housewife is not overcharged in the High Street while her husband is exploited in the factory.

It is not because the capitalists have a moral objection to cheating the worker, or for that matter, to cheating each other. It is simply that they cannot get away with it. When Sir Denys Lowson, former Lord Mayor of London, performed a series of share transactions involving the National Group of Unit Trusts Ltd, which effectively made him £5 million better off, there was an uproar in the City because he hadn’t played the game according to the rules. He later offered to repay the £5 m., saying that he had made an error of judgement. (Daily Telegraph, 12/7/73). No doubt the City and Stock Exchange will derive much amusement discussing this “error of judgement”.

Prices and Exploitation

Support for campaigns to lower or stabilize prices is a waste of time. One, because they are reformist and distract the workers’ attention from the issue of Socialism, and two, because lower prices make no difference to the position of the working class. Such campaigns to lower prices invariably have had the effect of lowering wages also. High prices or low prices cannot materially alter the position of the worker under capitalism. Since 1939 the price level in this country has increased by about 400 per cent.; wages have increased slightly beyond this. The reason why the capitalist cannot exploit the worker twice is due to the economic nature of capitalism over which he has a very limited control.

All workers are exploited under capitalism by their immediate employers: some directly at the point of production and distribution — factories, agriculture, mines, transport, etc. — others indirectly during the process of circulation and administration — banking, insurance, civil servants, advertizing and commerce generally, the “white-collar” workers. The productive workers are engaged directly in the production of wealth, and broadly speaking, the white-collar workers are concerned in appropriating a certain part of that wealth for those capitalists, or capitalist institutions, which employ them. Exploitation means that the workers produce, or realize, more value than they receive back in the form of wages. Surplus-value (the source of profit), is socially produced by all workers for the benefit of all capitalists. Wages or salaries are not determined by the amount a worker produces, but by what he sells —his commodity labour-power, his capacity to work. The value of that labour-power, whether the worker works with his hands or his brain, is determined by the amount the worker requires from time to time, to sustain himself and his family. The rent or mortgage interest he pays, the food he buys, clothes, holidays, bringing up and educating his children. These are the major elements of the worker’s existence, and not unnaturally they dominate his entire thinking.

Capitalists Divided

There is no automatic right of any group of workers to receive the value of their labour-power. In times of boom, where there is a demand for labour-power, the workers will be able to take advantage of this by pressing wage demands, mainly through trade-union action. During a slump, when there is unemployment, and the supply of labour-power is greater than the demand, employers can force wage levels below the value of labour-power (though this cannot go beyond a certain limit).

Increases in the cost of living will compel workers to seek higher wages: in most cases to compensate themselves for the loss in purchasing power, but in other cases, to go further and gain an increase in the standard of living. One thing is clear, high wages mean lower profits.

For this reason the capitalist employer looks very carefully at any increases in the cost of the goods or services supplied to the worker by other sections of the capitalist class, e.g. landlords, clothing manufacturers. The capitalists are not one happy band of brothers, in a class society they themselves are divided. Much of their time and energy, outside of exploiting their own workers, is taken up with trying to take the money from each others’ pockets. They do not respect the right of each to his profit; the State has to arbitrate on endless disputes between them. The Law Courts exist principally to deal with property questions. Any section of the capitalist class will always try and gain an advantage at the others’ expense, and of course, at the expense of the worker, provided they can get away with it.

For example, were landlords, during the present housing shortage, able to raise rents or evict tenants they would do so without regard to any national capitalist interest. The dominant section of the capitalist class are alive to this, and introduced the Rent Acts to protect their own interests first and the workers’ second. No government can afford to relinquish control over certain prices. They seek it either by a direct price freeze, as at present, by a system of subsidies, as in Agriculture and Fisheries, or by legislation and selective taxation.

Two Kinds of Struggle

There is no doubt that were the food manufacturers and clothing manufacturers, together with other suppliers, able to form monopolies in order to increase prices then their profits would increase, but the worker, who would have to pay higher prices for their goods, would immediately press for higher wages. Those higher wages would have to be paid by the industrial and other sections of the capitalist class—in effect they would suffer lower profits. In essence therefore the gains of the food and clothing monopolies, landlord and retailer, would be the losses of the industrial capitalist. He would have to bear the real cost of higher food prices, rents, etc. The industrial capitalist obviously would not met the workers’ demands, however justified, without a struggle, but this is a class struggle in which he has nothing to gain and stands to lose either profit or production, or both. We can well understand the industrial capitalist’s lack of enthusiasm for such a struggle when the prize goes to the food monopolist or the landlord, and not to him.

In any case, if the workers have successfully managed once to demand a certain standard of living, they will continue to do this in similar circumstances. The dominant section of the capitalist class, who have political power, will then have to concentrate their energy against food profiteers, and others who try to overcharge the workers. Legislation is introduced forbidding price increases and wage increases above a certain level: anti-monopoly laws and laws restricting the activities of hire-purchase companies are introduced, with subsidies for keeping down mortgage rates, etc. These, incidentally, instead of being a hand-out to the workers, are really a money-saver to the capitalists. They have found from experience that it is sometimes better to give a subsidy to a minority of workers rather than allow a general increase in wages which would benefit all workers.

The theory that the workers are exploited twice — once at the point of production, and a second time in the market — is fallacious. It is also fallacious to imagine that the workers can have high wages and low prices. Wages are prices — if one is high the other is high, and vice versa. The worker must earn enough on average to live and re-produce his labour-power; below this his labouring capacity would be impaired. Cheating the worker would have this effect, and this would be detrimental to the interests of the capitalist class as a whole. The struggle against higher prices is not an aspect of the class struggle. This is a reformist struggle, which can only be resolved, if it can be resolved at all, on the political field by governmental action. The struggle for higher wages against the capitalist class, involving the proper use of the strike weapon, is a class struggle. Higher wages are the only answer to higher prices within capitalism. Workers should not dissipate their time and energy by supporting or initiating campaigns to establish lower prices. The much more simple proposition which would finally resolve this perpetual controversy over wages and prices is the abolition of the wages system. That is what Socialism is all about.

Jim D'Arcy

So They Say: Nearest and Dearest (1973)

The So They Say Column from the October 1973 issue of the Socialist Standard

Nearest and Dearest

The case last month in which an Englishman married a Malawi-born woman to prevent her deportation, the couple intending to divorce immediately, was treated by the press as unique. It is not. Five years ago the celebrated small-ads pages of International Times were regularly carrying advertisements from seekers and offerers of nationality-by-marriage. They are currently to be found in the Personal column of Private Eye:

Englishman (26) offers citizenship by marriage. Best offer.

Englishman offers British citizenship £800.

Englishman offers British citizenship. Best offer over £1,000.

Socialist Standard readers are invited to think of a new answer to the question: Would you let your daughter marry a black man? As Byron wrote, “ready money is Aladdin's lamp”. In its light can be seen the fatuousness of legal marriage vows as well as the stupidity of national boundaries and immigration laws.

Growing Stunts Your Growth

The classic definition of inflation is “too much money chasing too few goods”. The aim of western governments wrestling with it has been to try to hold back wages and prices on one hand, and promote productive growth on the other. More goods, less currency: it seems logical. “Growth” is not only the answer to the inflation problem, but the source of the ecological one. With growth, pollution comes; without it, we are in the economic mire.

That is what they say, at any rate. But a report from Japan (Guardian, 1st September) turns the economic picture another way up. There, to try to stop inflation the Cabinet has framed measures “aimed at moderating the growth rate of Japan’s economy”. The programme has familiar features like cuts in bank lending, hire-purchase restrictions, etc., but goes on to a series of limitations on development. They include the postponement of public works and the reduction of outlays on new plant and equipment in the motor industry. The Ministry of International Trade and Industry will also

ask six industries to reduce capital spending plans in fiscal 1973 by 102 billion yen, centring on long-lead-time projects. These include the steel, petrochemical, electronic and electrical machinery, aluminium smelting and rolling, electric power and retail sectors.

Pay Attention, There !

In fact, capitalists in Japan, like their counterparts everywhere else, recognize that they must follow not the theories of government but the market. On 10th September the “City Comment” columnist of the Guardian asked an industrialist if his company was affected “by the thought that the Government was committed to the expansion of the economy and running immense economic and social risks apparently on industry’s behalf”.

The blunt answer was no. The company was paying no attention whatsoever to Mr. Heath’s obstinate growth policy in forming its new investment plans. It was working on the assumption that by 1975 demand for its products would be slowing down markedly, for other industries the deceleration would come earlier. As for Mr. Heath’s expansionist propaganda, it was dismissed as ‘politicians’ talk’, for public consumption.

Making A Crow Grow

One company whose “profit growth record” has been checked is Acrow Engineering group. Due to the losses of a newly-acquired subsidiary, Steel Group of Sunderland, Acrow's pre-tax profits for 1972-73 rose by only 3 per cent., from £2,617,000 to £2,697,000, instead of the 10-13 per cent, shown in the last five years. According to the annual report (1st September) the difficulties at Sunderland are now being resolved; and “the original Acrow companies had performed well”.

“Performed” is an appropriate word. Students approaching an Acrow works in south-east England for vacation work this summer were offered employment as labourers for 20p. an hour. A 44-hour week in factory conditions at that rate brings a wage of £8.80p. before deductions. Perhaps it is a scheme for teaching economics students the meaning of “surplus-value”, first hand.

Rising Tally

Another interesting report is that of the Provident Clothing company. Its profits have been rising for some time, and in the six months to 30th June this year they jumped 35 per cent. Provident Clothing’s figures have to be given in an unusual way. The leap in the current year is from £71.2 millions to £127.6 millions in amounts due from customers and from £12.5 millions to £25.6 millions in deferred revenue.

Financial-page comment has put this surge down to “buoyant consumer sales”. However, Provident is the best-known name in the check and voucher business — hence the statement of incomes “due” and “deferred”: like the weekly payments for clothes and household goods. Nothing “buoyant” about that. Provident Clothing prospers through poverty and working people trying to make ends meet. No doubt employees of Acrow Enginering are among its regular customers.

Liberal Sentiments

The recent Liberal Party gains have produced euphoric visions of capitalism humanized by Liberals’ “concern for the individual”. It is more to the point to know what economic policy the Liberal Party would try if in power. On 11th September it published a document which proposes “a prices and incomes policy enforced by fiscal penalties”.

The penalties envisaged are for exceeding laid-down rates of increase in prices and wages. For companies they would be additions to Corporation Tax; for workers, surcharges on graduated National Insurance contributions. John Pardoe, MP, defending this policy in a letter to the Guardian, called it “foolproof” and asserted:

It needs no policemen and no prisons, and it removes the Government from day to day interference in wage and price settlements.

Oh, marvellous: away with all this cumbersome machinery, and let us return to straightforward pay cuts.

It would be interesting to learn how the obviously large addition to Inland Revenue work is to be accomplished. Tax officials have complained continually of understaffing and overwork. Is the solution to raise wages to recruit more clerks, and then cut the wages to defeat inflation ?

A Freudian Misprint

“No doubt it is possible for a well led, well educated, well housed individual ... to come to the conclusions reached by your correspondent.” (Letter from a clergyman to The Guardian, 7th September; our emphasis. If he did not mean it, he should have.)

Robert Barltrop

Editorial: The Crisis and prices and incomes (1966)

Editorial from the September 1966 issue of the Socialist Standard

It was clear at the time that many Labour supporters, in their jubilation at the victory last March, were overlooking an inconvenient fact. Coming back to power with a decisive majority meant that they had to carry the can; there could be no more excuses.

But of course excuses have been made; they have been falling' thick and fast in the latest financial crisis which British capitalism finds itself in.

Harold Wilson has blamed the panic on to the seamen’s strike; the increase in the price of copper; the Vietnam war; the activities of foreign financiers. He summarised all his excuses in the most famous of them all—the government, he said, had been “blown off course”.

This must have reminded many people of the excuse used by the lamentable Labour government of 1929/31— that they had been struck by an economic blizzard. It is true that capitalism is like a treacherous sea where sudden tempests sweep from over the horizon. But no one should forget Labour’s persistent claim that they could control the economic weather and navigate the ship into blue skies and calm waters.

The facts stand clear. The Labour Party won power in 1964 on the slogan Let’s Go; now they stand for stagnation and recession. They said they would organise a “planned growth of incomes”; now they are imposing a wage freeze. They are the successors of the Labour Representation Committee, which was formed to promote the interests of trade unions in Parliament; now they are pushing through the first openly anti-union legislation in over forty years.

Many union leaders have expressed angry astonishment at the Prices and Incomes Bill, as if this was something the Labour Party had only just thought of. But they had the experience of the Attlee government to guide them, as well as the speeches of Labour leaders when they were out of power:

No one can afford to dodge the issue. Some people prefer to call it wage restraint . . . Labour wants to be able to prevent the total money income rising faster than the total production . . . (James Callaghan, Labour Party Conference, 1962).

We in the Labour Party have the right to ask for this (incomes) policy because we are willing to create conditions in which it can be established . . .We can make the national appeal that is needed because, for us, an incomes policy is the condition of sustained growth . . . (Harold Wilson. Birmingham 19/1/64.)

It is now up to the union leaders to ponder on their continued support for the Labour government—and for their, members to judge them on it.

What of the future?

Whether the unions accept the provisions of the Bill, or whether they try to lake advantage of the same sort of market forces which the government say will be allowed to work unhindered on prices, it is clear that more storms lie ahead.

Perhaps the officials of some of the big unions which have declared that they will ignore, or oppose, the Bill will find themselves in prison for contempt of court after refusing to pay fines imposed under the Bill’s provisions.

It would be fitting if a Labour government, with a long history of anti-trade union activity behind it—including the prosecution of strikers—should end up by making a martyr out of Frank Cousins.

We can look forward, in the days ahead, to the similarity between the Labour and Conservative parties becoming more and more obvious. In the current crisis, this similarity has already impressed almost every political commentator; perhaps it will also get through to some of their readers, and encourage them to grasp some important facts.

Both Labour and Tory parties stand for capitalism. The differences between them are superficial: both aim at running the capitalist social system.

One difference between them is that the Labour Party have claimed to be a Socialist organisation. Events have exposed this notion for all time.

Socialism will be a society of co-operation and freedom, where men will control their environment and really be able to plan their affairs. This is a world away from the sordid turmoil of class interests and economic anarchy in which the Labour Party are enmeshed.

Cooking the Books: Sinned against not sinners (2008)

The Cooking the Books column from the August 2008 issue of the Socialist Standard

“PAY RISES DON’T CAUSE INFLATION – AN INCONVENIENT TRUTH FOR DARLING” was the headline in the Daily Telegraph of a recent article by the unspeakable Simon Heffer (25 June) . He was criticising the increasingly strident calls by the Chancellor of the Exchequer for pay restraint so as not to fuel inflation. Heffer’s argument was that as rising prices have been caused by the government allowing too much money to get into circulation they can’t be stopped by holding back wages.

We have to admit that he is basically right. Insofar as rising prices in Britain are not due to other factors such as rising world oil and food prices (since rising prices and inflation are not the same), if the government overissues the currency, i.e. puts more into circulation than enough to make payments, pay taxes, settle debts, etc, then all prices will tend to rise. As wages are a price – the price of a person’s ability to work, or what Marx called their labour power – they too will rise. So to blame inflation on wage increases is wrong.

So, sometimes a nasty person can be right. Heffer reminds us that another obnoxious character, Enoch Powell, was saying this about inflation in the 1960s. He quotes something Powell said about the wage restraint policy of the Wilson Labour government. Powell was even clearer in a speech he made on 20 November 1970 about the similar policy of the Heath Tory government:

“Wage claims, wage awards, strikes, do not cause rising prices, inflation, for one simple but sufficient reason – they cannot. There never was a strike yet which caused inflation, and there never will be. The most powerful unions, or groups of unions, which was ever invented is powerless to cause prices generally to rise … in the matter of inflation, the unions and their members are sinned against, not sinning. In the matter of inflation, the unions and their members are as innocent as lambs, pure white as the driven snow”.

We couldn’t agree more and said so at the time. There is, however, a point of difference. Heffer (and Powell himself sometimes) suggests that it is government spending as such that causes inflation (Heffer is a mad marketeer who wants to reduce government spending and interference so as to let the market rip). But this is not necessarily the case. If it is financed by overissuing the currency, government spending will have this effect, but inflation is not due to the particular way the excess money is spent (in this case by the government to finance its spending) but to the fact that it has been issued in excess.

Darling may be cleverer than Heffer gives him credit for. The job of all governments is to preside over the operation of the profit system and to try to ensure that profits are protected and maximised. So they are always against pay increases, irrespective of whether or not prices are increasing. Darling may just be using the current spurt in prices as a pretext to reiterate what is a permanent policy of all governments.