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Marx's Wage Labour and Capital

The Socialist Party can be described as a Marxist party, in that it recognises the immense contribution made by Karl Marx and Frederick Engels in the 19th century in developing a scientific understanding of capitalism as a distinct and transient society, one which was historically progressive in its time, but which is now outdated and needing to be replaced.

This is not to say that we think Marx and Engels were correct on every subject then, still less now. The whole point of a scientific approach to politics and economics is that it is based on facts, evidence and objective testing and reassessment. Marxism itself has been defined as the distillation of all the lessons and understandings gained from working class struggles against capitalism, expressed in a scientific manner.

Nonetheless, there is enormous value to be gained from studying the classical works of Marx and Engels. Writing during the earlier phases of capitalism’s development and working to get a handle on the whole phenomenon, their writings provide a clarity and a perspective on capitalism and the need for workers to replace it by socialism, rarely achieved since. In fact, some hold that the development of capitalism has accorded even more closely with their basic analysis than was perhaps the case at the time.

Their works may not be particularly easy reading - but newcomers may be pleasantly surprised how easy they can get into them - but they were written by people who were active participants - as well as commentators - in 19th century working class struggle and who were passionate and eloquent in their commitment and analysis. Their power to slice through the fog of mystique, confusion and distortion which passes for contemporary news and commentary can be both astonishing and inspiring.

Wage Labour and Capital is one excellent example of just such a classic. Written by Marx towards the end of 1847, it was aimed to be a popular exposition of the basics of how capitalism functioned and the subjugation of wage labour. Engels re-issued it in 1891 but with certain changes to take into account Marx’s advances in economic theory after 1847, in particular the distinction between “labour” and “labour-power” which was not made in the original version. Engels, however, did not point out - and change - the different sense in which Marx employed the term “cost of production” in 1847 compared with later. In Capital Marx used the term to mean what it costs the capitalist to produce a commodity, i.e. what they have to pay for raw materials, labour-power, energy, wear and tear, etc. In other words, not including profit. In Wage-Labour and Capital Marx uses it to mean cost in terms of the total amount of labour required to produce it, including the part the capitalist did not need to pay for, i.e. including profit. It was thus the same as he later meant by value.

Marx starts by making a few things clear. Workers sell the capitalist their labour power for an amount of money. That money could have been used to buy a certain amount of commodities. So labour power is as much a commodity as (say) sugar. The workers’ labour power has been exchanged for an amount of commodities measured by money. The exchange value of labour power as measured by money is its price. Wages are just a special name “for the price of this peculiar commodity which has no other repository than human flesh and blood.”

But why does the worker sell labour power to the capitalist? In order to live of course! Marx then exposes the reality of work under capitalism in a way which has great resonance today:

“The exercise of labour [should be] the worker’s own life activity, manifestation of their own life. But they have to sell it to another person to obtain means of subsistence. Life activity is just a means to enable existence. They work in order to live. Labour is not even reckoned as part of normal life, it is rather a sacrifice of their life. Work has no meaning other than as earnings.

“What he produces for himself is not the silk he weaves, not the gold he draws from the mine, not the palace he builds. What he produces for himself is wages, and silk, gold, palace resolve themselves for him into a definite quantity of means of subsistence, perhaps a cotton jacket, some copper coins and a lodging in a cellar.”

Marx points out labour was not always a commodity and that under capitalism labour takes the form of wage labour, or “free” labour. That is workers are free to sell their labour-power to any capitalist who wishes to buy it and the capitalist is free to get rid of the worker as soon as there is no profit to be made. But there is a limit to such “freedom”:

“The worker whose sole source of livelihood is the sale of his labour power cannot leave the whole class of purchasers (the capitalist class) without renouncing his existence. He belongs not to this or that capitalist, but to the capitalist class.”

Marx then carefully explores how prices of commodities are determined. Slicing through the metaphysics of supply and demand and free competition, Marx identifies that the benchmark is the labour cost of production. This is also the centre of gravity for a price, around which prices will fluctuate. If a particular branch of industry is profitable, capital is put in to that industry until the price of that product falls below the labour cost of production, and vice versa.

“We see how capital continually migrates in and out, out of one domain of industry into another. High prices bring too great an immigration and low prices too great an emigration. The fluctuations of supply and demand continually bring the price of a commodity back to the cost of production.”

The corollary is that “the current price of a commodity is always either below or above its cost of production.”

One of Marx’s specific contributions to political economy was to regard these continual fluctuations in prices not as chance but as fundamental to how the capitalist economy ensures that prices are determined by the cost of production. That is: “These fluctuations which bring with them the most fearful devastations and like earthquakes shake bourgeois society to tremble at its foundations - this industrial anarchy” is fundamental and basic to capitalism, rather than something which can be smoothed or ironed out.

The same general laws determine the price of labour power, or wages. Whilst wages do fluctuate through supply and demand, in essence:

“The cost of production of labour power is the cost required for maintaining the worker as a worker and developing him into a worker. The price of his labour is therefore determined by the price of the necessary means of subsistence.”

Just as the cost of replacing machines needs to be factored into prices:

“The cost of reproduction must also be included, whereby the race of workers is enabled to multiply and replace worn out workers by new ones. Wages, the cost of production of labour power for the working class as a whole - as opposed to individual workers - amounts to the costs of existence and reproduction of the whole working class.”

Marx then dissects the reality and truth of capital. Yes, capital consists of “raw materials, instruments of labour and means of subsistence which are utilised to produce new raw materials, new instruments of labour and new means of subsistence”. They are also nothing more than:

“Creations of labour, products of labour, accumulated labour. Accumulated labour which serves as a means of new production is capital.”

These products of labour are however no longer owned by the working class. They have been appropriated by the capitalist class. The existence of the capitalist class and its wealth is based on robbery. But capital is a product and part of capitalism. As well as being all these different components of production, “all the products of which it consists are commodities, sums of exchange values, as well as material products.”

But how do certain sets of commodities become capital? The following evocative description tells us:

“By maintaining and multiplying itself as an independent social power, that is, as the power of a portion of society, by means of its exchange for direct, living labour power. “

This is the reality of the god worshipped by modern society. Entirely made by labour. Old, past, historic, parasitical, but because we accept the rules of capitalism, we allow this god to subvert and rule modern society in its own peculiar and reactionary interests. Living labour subordinate to dead labour. The reality of the exchange between wage worker and capitalist is that:

“The worker receives means of subsistence, but the capitalist receives the productive activity of the worker, the creative power which not only replaces that which is consumed (through wages) but gives to the accumulated labour a greater value than it previously possessed. The worker surrenders to the capitalist this noble reproductive power in return for subsistence which is consumed for ever.”

The relationship and dependency is that:

“Capital presupposes wage labour; wage labour presupposes capital. They reciprocally condition the existence of each other; they reciprocally bring forth each other.”

So wage labour and capital have a common interest? Well, yes and no. Yes, in that capital only thrives by exchanging itself for wage labour. The more capital increases, so does wage labour. No, in that the increase and profitability of capital is simply to increase the power of the master over the slave, the increased domination of the capitalist class over the working class.

The most tolerable situation for workers under capitalism may well be for the fastest growth in productive forces, of capital. But the respective gains for the capitalist class and the working class are hardly equal. The capitalist class already has power over the working class. The strengthening of capital increases further the power of the capitalist class to appropriate an even greater relative share of wealth than before. Whilst money or even real wages may grow in times of prosperity of capital, the stupendous growth in the wealth appropriated by capital may mean that in society as a whole, the position of wage labour is relatively worse off than before.

And why should the capitalist class be entitled to any of the wealth created by the working class? All the wealth is created by workers using means of production which were created by previous workers. The capitalist class adds precisely nothing to the process. Any wealth appropriated by the capitalists is at the direct expense of the working class. Profit and wages are shares in the same product of the worker. One gains, one loses.

In the final section, Marx sets out the basic futility and effect of the competition between the capitalists. Capitalists try and drive each other out of business by raising the productivity of labour and cheapening their products. But all that happens is that other capitalists adopt the same mechanisms and processes, resulting in the prices in the once profitable line falling below the labour cost of production. They are all in exactly the same position as before.

“The same game begins again. More division of labour, more machinery, enlarged scale of exploitation of machinery and division of labour. And again competition brings the same counteraction against this result. This is the law which again and again throws bourgeois production out of its old course and which compels capital to intensify the productive forces of labour, the law which gives capital no rest and continually whispers in its ear: ‘Go on! Go on!’ Whatever the power of the means of production employed, competition seeks to rob capital of the golden fruits of this power by bringing the price of commodities back to the cost of production.

If we now picture to ourselves this feverish simultaneous agitation on the whole world market, it will be comprehensible how the growth, accumulation and concentration of capital results in an uninterrupted division of labour, and in the application of new and the perfecting of old machinery precipitately and on an ever greater scale.

Finally, as the capitalists are compelled to exploit the already gigantic means of production on a larger scale, there is a corresponding increase in industrial earthquakes, in which the trading world can only maintain itself by sacrificing a part of wealth, or products and even of productive forces to the gods of the nether world - in a word, crises increase. The world market becomes more and more contracted, fewer and fewer new markets remain available for exploitation, since every preceding crisis has subjected to world trade a market hitherto unconquered or only superficially exploited.”

This is still the crazy system we live and work in. Destructive of wealth, people and the planet we occupy. Is it not time for the producers of wealth - the world working class - to cast aside the capitalist class and their crippling, destructive, distorting system, and replace it by a more sensible and satisfying approach whereby we produce wealth to meet people’s needs and we work because we enjoy it and want to contribute to the good and well-being of world humanity?

Andrew Northall