A fair day’s pay for a fair day’s work?

The expectation, within an exchange economy like capitalism, is that products and services are exchanged in a like-for-like measure of value. The money you pay for anything is a contract of exchange based on the promise of equal value. Your money is a universal commodity that legally ensures this and, for the most part, it will be a reality of economic activity. Although universally accepted this description of a transaction makes a rather naive assumption about the nature and definition of ‘value’.

Economists have long pondered on this phenomenon and continue to disagree as to its nature and even its efficacy in describing financial activity. There are deep ideological reasons for the attempt to divide the disciplines of politics and economics but anyone genuinely seeking to understand the history of this most basic, and important, social activity will quickly discover the impossibility of doing so.

The defenders of capitalism will go to great lengths to try and prove that the system has coherence, equality and fairness built into its transactional process so that any hint of irrational and exploitative elements will be described as originating in ‘ideological extremism’ or be completely ignored. Such is the grip of this economic propaganda that very few are willing to concede the possibility of the establishment of a non-exchange economy called socialism.

Consider the meaning and implications of the title of this article in the light of what socialists believe to be the most glaring example of an irrational and unequal economic exchange within the capitalist system – the exchange of labour for wages. We have all heard the phrase: ‘He knows the price of everything and the value of nothing’. This hints at both an economic suspicion and a moral criticism of the system based on a notion that price and value are not the same thing. As described above we usually experience an assumed parity of value when we buy anything and, despite the vagaries of supply and demand, this is indeed the case. But if we describe wages/salaries as the price of labour power we see immediately a disparity of value that this represents in terms of the value produced and the profits enjoyed by non-producers.

The only possible conclusion is that wages do not represent the full value of what a worker produces – if it did there would be no profit and no capitalism. Labour power is the only commodity that can produce more value than is represented by its price (wages). If this is a correct analysis it condemns the capitalist system as one of exploitation and theft which is why, as mentioned above, those who defend the system could never acknowledge this obvious truth and go to such great lengths to obfuscate it in their tortuous economic theories.

This doesn’t imply a massive conspiracy theory against the truth but merely a profound ignorance of the reality of economic activity. How has this come about? Socialists contend that it is because of the confusion and misunderstanding of the relationship between price and use-value. To try and untangle this we have to go back and understand the concept of value.

It is a fascinating study to understand what different societies in different times have considered valuable. Other than human qualities like intelligence, courage, moral integrity and compassion we have attributed value to objects of our and nature’s creation such as gold, silver, gem stones, art, music, antiques, etc. Phenomena of great utility like oil, gas, water, metals and wood have enjoyed varied levels of prestige through the ages but one thing above all others has been valued the most – social status through the accumulation of wealth together with the political power it generates.

To overcome the impracticalities of direct exchange via barter one item of wealth ultimately evolved into currency (money), something that could be exchanged for anything else. As trade expanded it became necessary to produce such coins in a universally acknowledged medium of value such as gold or silver which was in turn superseded by a legal attachment to these material incarnations of value and then merely to the prestige and power of the state (fiat money). But at the root of all of these commodities is human labour. Gold and oil are not valuable because they are rare but because of the labour-time needed in finding and extracting them (due to their rarity).

The price of the labour power expended to do this is determined by the amount of labour needed to create (training, etc) and maintain it (means of life/standard of living). But the price paid for labour power is always much less than the price paid for the results of labour like gold and so on. Those who produce wealth only get in return the value incarnated in the price of their labour power (wages) and not the price incarnated in the value of what they produce.

Surplus value is the difference between the wealth represented by the wages of producers and the wealth generated by their labour. When the products of this labour are exchanged (sold) this magnitude of difference becomes profit – part of which can be resurrected as capital which is used to expand this whole cycle of exploitation over again and again. Capitalism depends on the fact that a day’s wages do not represent the value of a day’s work. No ‘redistribution’ of wealth can overcome this essential fact of capitalism. Exploitation occurs at the point of production and is immoral, irrational and a relic of the past. No form of exchange economy within an advanced technological culture is needed – indeed capitalism represents a fetter on production. It is a remnant of class inequality and has no shred of economic coherence or relevance for the 21st century.


Next article: Your home as ‘fictitious’ capital ⮞

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