Should we produce more? An economic fallacy exposed
“As an example of an error which is very wide¬spread, let us take a resolution just passed by a conference of the International Federation of Boot and Shoe Operatives. After urging the different Governments to ratify the Eight Hours’ Day Convention, it declared that “in view of the widespread unemployment in the shoe and leather trades, the constant improvement in manufacture leading to increased output, and the decreased purchasing power of the working classes, a further shortening of hours to 44 per week is necessary.” This was moved by a French delegate, approved by the British delegation, and agreed.
Now, in principle, of course, we support the Eight Hours’ Day. And we should welcome a reduction of the working week to 44 hours or any lower figure, provided it was consistent with maintaining production. But that proviso is vital; for less production means less wealth—in other words, more poverty; and we want no increase of poverty to-day. What the world suffers from, is not that it has too many commodities, but too few. There are not enough good things to go round ; and in proportion as production is diminished, there will be still fewer.
The right remedy for a congested market is to lower prices and so bring in more purchasers.”
The above is from the leading article in the Daily Chronicle of August 20th last. The Daily Chronicle and other newspapers, concerned at the growing tendency of the workers to attempt to mitigate the evil of unemployment by restricting the output of those who are producing, iterates, and re-iterates the statement that such a policy is an “error.” Undoubtedly many workers believe their tale ; for it certainly is a very plausible yarn that cheaper goods mean greater consumption, greater demand, less unemployment and higher wages. Plausible as the argument is, its shallowness is revealed by a little thoughtful examination; and invariably the hirelings of the Press undermine their case by the very clumsiness of their attempts to bolster it up.
Take, for instance, the statement that “less production means less wealth—in other words, more poverty” : less wealth does not necessarily mean more poverty—that depends more upon the distribution of the wealth than its amount. Again, note the assertion that “there is not enough good things to go round,” and the contradictory implication contained in the claim that “The right remedy for a congested market is to lower prices.” Not enough good things to go round, but enough to congest the market ! What absurdity !
However, the purpose of this article is not to deal with the quality of the arguments which are thought good enough (and often are good enough) for working-class beguiling, but to expose the fallacy of the statement that the solution to the poverty “problem” is greater output by the workers, resulting in cheaper commodities, increased consumption, less unemployment, and finally higher wages. All these have been dealt with time and time again in THE SOCIALIST STANDARD during the last twenty-three years by scientific argument; the writer now proposes to try the effect of a little simple arithmetic.
Let us take the employed workers in a community as one thousand ; let us reduce their varied products to a common form, which we will call “Wares,” and finally let us suppose that the price of each of those wares is £1, and it is the product of one man’s labour for a day. We have the following condition of affairs as the result of the day’s effort :—
Workers: 1,000; Wares: 1,000; Price: £1,000.
Now suppose that from some cause each worker doubles his day’s output, the figures then would be :—
Workers: 1,000; Wares: 2,000; Price: £2,000.
The number of the wares had doubled, and the price of the total output has doubled; but the price of each commodity remains the same ! Some puzzle? No. The simple explanation is that gold is included in the products of labour, and being in common with other commodities, produced in half the time formerly necessary, the old ratio is maintained; that is to say, prices are unchanged. The more intense production has not made things cheaper ; the pound wages will not buy more; therefore, there is no increased demand, no greater employment, and no higher wages. So far, the theory of greater production fails at every point. In order to make wares cheaper, our missionaries of harder work for other people must make an exception of those workers engaged in producing gold. The ca’canny, the limitation of output, the antiquated methods, which are crimes in every other field of industry, must become virtues in the goldfields ! What economists !
But assuming, like the obliging people we are, that the speeding-up applied to all wares except gold, then the figures would run :—
Workers: 1,000; Wares: 2,000; Price: £1,000.
So, by juggling gold out we, succeed in halving prices for our Capitalist apologists. Now let us see how this affects the “congested market.”
If, previously, each worker received 10s. for his day’s work, that would be £500 for all the workers. We have, then :—
Wares Produced : 1,000; Wares bought by Wages : 500; Wares left : 500.
Five hundred wares left over to congest the market.
Those who know the pleasures of getting drunk, and the miseries of getting sober again, swear by the old, old remedy, “a hair of the tail of the dog that bit me.” The argument holds good in economics it seems, so the remedy for a congested market is more commodities, in other words, more congestion. Well, let us chuck in the other commodities, and halve their price. Figures follow :—
Wares produced : 2,000; Wares bought by Wages: 1,000; Wares left: 1,000.
The result of doubling production and giving the workers twice as many commodities is that the wares left in excess are also doubled, in other words, there is congestion now in both lungs instead of only in one.
Actually, however, this is giving a too favourable report of the patients’ progress. The workers’ wages as a whole have never had any relation to the amount of wealth they produced. Instead, they have beer, pretty closely ruled by the cost of living. Even Capitalist henchmen now can hardly deny this, in face of the trouble the Government is at to issue a periodical return of the cost of living, in order that so many employers may regulate the wages of their workers accordingly, if it were true that, as the Capitalist Press claims, lower prices meant higher wages, then every time the returns of lower living costs were published there would be a rise of wages, not a fall. But we know that as the cost of living falls wages fall also. Competition for jobs brings that result about, and with twice the amount of excess wares congesting the market, competition for jobs would not be less keen. So our sum must now be set out thus:—
Wares produced: 2,000; Wares bought by workers: 500; Wares left: 1,500.
You see, the fact that the workers have produced more wares does not mean that they require more of them to enable them to live. As 500 wares sufficed to enable them to reproduce their labour-power when they only produced 1,000 wares, no more would be needed now that they produce 2,000, and they would get no more. Evidence? Every day’s history since the industrial revolution is evidence. The fertility of labour-power has increased hundreds-fold—possibly a thousand-fold; but do the workers get more than enough to live on now?
So the result of the workers doubling their output has been that there are three times the number of wares left over on the market. If the way to remedy congestion on the market is by means of further congestion, then we must suppose that the cure is complete.
Of course, we know that a certain amount of the wealth the workers do not consume is consumed by the Capitalist class, but this does not make the matter any better for their theory, as we shall proceed to show.
How many of the 500 wares left over in our first example shall we assume the Capitalist class will consume? If we say 100, then there are 400 left on the market. Now with prices halved, one could hardly look for them to buy more than twice the number of wares, that is, instead of 100 out of 500, they could at most be expected to consume 200 out of 1,500. So instead of 400 excess wares, there would now be 1,300, an increase of 3¼ times. The more we assume that the Capitalists consume the worse the case appears. If they consume 400 out of the 500 in the first case, then 100 only are left on the market. With prices down to half, they might use 800, leaving 700, which shows an increase of 7 times. So the matter gets worse and worse.
Well, it’s no use prolonging the agony. The workers will find no cure for their poverty in increased production, or, for that matter, in restriction. Their troubles arise from the difference between what they produce and what they are able to consume. Increased production only makes still greater that difference, and hence can only add to their troubles. When the workers are producing for themselves, that is, when they are producing under Socialism, then the greater fertility of labour-power will be an unmixed blessing.
A. E. JACOMB.
(Socialist Standard, October 1927)