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Red Reviews: “Wages, Price, and Profit”

Originally published: Fight Back News on April 18, 2024 by J. Sykes (more by Fight Back News) (Posted Jun 21, 2024)

Karl Marx is best known in the realm of political economy for his great work, Capital. Marx is the original theorist, together with his associate Friedrich Engels, of scientific socialism. Marx wrote Capital in order to expose the inner workings of capitalism, so that workers could understand the system behind their exploitation, how this system arose historically, and the laws of motion inherent within it.

While Marx was writing Capital, he gave a lecture over two separate meetings to the General Council of the International Workingmen’s Association, the First International. This was in June of 1865. This important lecture was published after Marx’s death in the form of a small pamphlet titled Wages, Price, and Profit, edited by Marx’s daughter, Eleanor Marx. It has also been published under the title Value, Price, and Profit. This important text summarizes some of the key ideas of Capital that he was engaged with writing at the time.

The purpose of the lecture was to respond to John Weston, a follower of the utopian socialist Robert Owen. In a letter to Engels from May 20, 1865, Marx explains Weston’s position: “(1) that a general rise in the rate of wages would be of no use to the workers; (2) that therefore, etc., the trade unions have a harmful effect.” He goes on to elaborate that Weston’s “two main points are: (1) That the wages of labor determine the value of commodities, (2) that if the capitalists pay five instead of four shillings today, they will sell their commodities for five instead of four shillings tomorrow (being enabled to do so by the increased demand).” Marx ridicules these points, but notes that refuting them will be no simple task. “You can’t compress a course of political economy into one hour,” he writes, “But we shall have to do our best.”

So here we will further compress Marx’s already very concise argument, doing our best to draw out the main threads of his response to Weston and show why it is important to study this important work.

Marx’s argument

Marx summarizes Weston’s views like this: “If the working class forces the capitalist class to pay five shillings instead of four shillings in the shape of money wages, the capitalist will return in the shape of commodities four shillings’ worth instead of five shillings’ worth. The working class would have to pay five shillings for what, before the rise of wages, they bought with four shillings.” Put another way, Marx writes that, “reduced to their simplest theoretical expression,” Weston’s arguments are simply expressed as follows: “’The prices of commodities are determined or regulated by wages.’”

How so? Basically, according to Weston’s view, an increase in wages for the working class will increase its purchasing power, which will, in turn, increase demand relative to supply, thereby raising the price of commodities alongside the raise in wages. We’ve all heard this argument before. If the working class wins an increase in wages, then capitalists will simply raise prices to make up the difference, and nothing will have been accomplished.

Ultimately, Marx notes, Weston’s argument goes nowhere.

“First he told us that wages regulate the price of commodities and that consequently when wages rise prices must rise. Then he turned round to show us that a rise of wages will be no good because the prices of commodities had risen, and because wages were indeed measured by the prices of the commodities upon which they are spent. Thus we begin by saying that the value of labor determines the value of commodities, and we wind up by saying that the value of commodities determines the value of labor. Thus we move to and fro in the most vicious circle, and arrive at no conclusion at all.”

In other words, Marx writes, we are left with “value determined by value,” which really tells us nothing at all about value, but rather, only obscures what is really going on. Marx stresses that the will of all capitalists is everywhere the same: to achieve the highest rate of profit. He says, “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.”

To push beyond this impasse, Marx explains the labor theory of value, that is, the creation of value by labor. Marx here points out that we must understand commodities as “crystallized social labor.” He goes on to explain it like this. “A commodity has a value, because it is a crystallization of social labor. The greatness of its value, or its relative value, depends upon the greater or less amount of that social substance contained in it; that is to say, on the relative mass of labor necessary for its production. The relative values of commodities are, therefore, determined by the respective quantities or amounts of labor, worked up, realized, fixed in them.” Marx then says that “As a general law we may, therefore, set it down that: — The values of commodities are directly as the times of labor employed in their production, and are inversely as the productive powers of the labor employed.

But what does this tell us about the value of labor, which is the crux of this debate? To Marx, this misstates the question. Why? “What the working man sells is not directly his labor, but his laboring power, the temporary disposal of which he makes over to the capitalist.” The real question, then, concerns the value of labor power. Marx tells us that “Like that of every other commodity, its value is determined by the quantity of labor necessary to produce it.” In other words, the value of labor power is determined by the labor that goes into the production of the basic needs of the workers, which allows them to go on living and working. If the basic necessities of the worker aren’t met, then, obviously, the worker can’t work. Marx sums it up by stating that “the value of laboring power is determined by the value of the necessaries required to produce, develop, maintain, and perpetuate the laboring power.”

By understanding the value of labor power in this way, Marx is able to uncover the key of capitalist exploitation: the production of surplus value. Marx notes, “The daily or weekly value of the laboring power is quite distinct from the daily or weekly exercise of that power.” It is worthwhile to quote Marx at length here as he explains the theory of surplus-value:

“The quantity of labor by which the value of the workman’s laboring power is limited forms by no means a limit to the quantity of labor which his laboring power is apt to perform. Take the example of our spinner. We have seen that, to daily reproduce his laboring power, he must daily reproduce a value of three shillings, which he will do by working six hours daily. But this does not disable him from working ten or twelve or more hours a day. But by paying the daily or weekly value of the spinner’s laboring power the capitalist has acquired the right of using that laboring power during the whole day or week. He will, therefore, make him work say, daily, twelve hours. Over and above the six hours required to replace his wages, or the value of his laboring power, he will, therefore, have to work six other hours, which I shall call hours of surplus labor, which surplus labor will realize itself in a surplus value and a surplus produce. If our spinner, for example, by his daily labor of six hours, added three shillings’ value to the cotton, a value forming an exact equivalent to his wages, he will, in twelve hours, add six shillings’ worth to the cotton, and produce a proportional surplus of yarn. As he has sold his laboring power to the capitalist, the whole value of produce created by him belongs to the capitalist, the owner pro tem. of his laboring power. By advancing three shillings, the capitalist will, therefore, realize a value of six shillings, because, advancing a value in which six hours of labor are crystallized, he will receive in return a value in which twelve hours of labor are crystallized. By repeating this same process daily, the capitalist will daily advance three shillings and daily pocket six shillings, one half of which will go to pay wages anew, and the other half of which will form surplus value, for which the capitalist pays no equivalent. It is this sort of exchange between capital and labor upon which capitalistic production, or the wages system, is founded, and which must constantly result in reproducing the working man as a working man, and the capitalist as a capitalist.”

Marx then makes a crucial point. He writes that “although one part only of the workman’s daily labor is paid, while the other part is unpaid, and while that unpaid or surplus labor constitutes exactly the fund out of which surplus value or profit is formed, it seems as if the aggregate labor was paid labor.” In other words, by means of this shell game, the capitalist makes it look like the worker was paid fairly. “This false appearance distinguishes wages labor from other historical forms of labor,” writes Marx. “On the basis of the wages system even the unpaid labor seems to be paid labor.”

By increasing the amount of labor power expended beyond that which is necessary to cover the cost of the worker’s wages, the capitalist can increase the rate of surplus-value, that is, the rate of exploitation. And competition among the capitalists demands that they always strive to increase this rate of exploitation, becoming more and more efficient in their machinery and techniques, or else be devoured by those who do.

It isn’t possible in this short article to get into all of the important distinctions and clarifications that Marx makes in regard to how this functions, but it is important to understand. In this regard, it is essential to study the text of Wages, Price, and Profit itself. But it is necessary to highlight a final point.

Marx emphasizes that the development of more advanced machinery and techniques, that is, more advanced productive forces, makes it possible to produce more with less labor. While this is essential to the capitalist’s survival within the system, it also has the long-term tendency of driving down the value of human labor power. This is at the root of declining wages under capitalism, and contributes to the cyclical crises that plague capitalism. Marx explains, “These few hints will suffice to show that the very development of modern industry must progressively turn the scale in favor of the capitalist against the working man, and that consequently the general tendency of capitalistic production is not to raise, but to sink the average standard of wages, or to push the value of labor more or less to its minimum limit.”

Because of this, and contrary to Weston’s view, it is all the more essential for workers to organize. Marx writes, “Trades Unions work well as centers of resistance against the encroachments of capital.” But, he notes, they fail over the long term against this encroachment because they limit themselves to addressing the symptoms, rather than the causes, of capitalist exploitation. The working class, Marx says, “ought not to forget that they are fighting with effects, but not with the causes of those effects; that they are retarding the downward movement, but not changing its direction; that they are applying palliatives, not curing the malady.”

Therefore, Marx stresses that while these resistance struggles are unavoidable and necessary, the working class cannot stop there. “They ought to understand that, with all the miseries it imposes upon them, the present system simultaneously engenders the material conditions and the social forms necessary for an economical reconstruction of society. 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!

Wages, Price, and Profit today

Today we always hear the same arguments from those who would preserve the current class structure: the capitalists will simply raise prices to offset workers’ wages. This argument is trotted out whenever workers start to organize to fight back. But Marx explains that capitalism is governed by laws, not simply by the whims of even the most powerful and greedy capitalists. To say, as Weston did, that commodity prices are determined by wages, is a naive, superficial view that obscures what is really happening and is intended to make working class struggle for better wages look pointless. This argument does the ideological work of the bourgeoisie and helps to preserve the status quo of capitalist exploitation.

Marx stresses a point driven home later by Lenin in his struggle against the Economists in Russia: if the working class limits itself to this economic struggle alone it will always be on the defensive, fighting a valiant but losing battle as real wages continue to be driven down in a crisis-ridden system. In order to turn the tide, it is also necessary to go on the offensive, to wage a revolutionary, political struggle for working class state power and the abolition of the capitalist system as such.

Wages, Price, and Profit is essential reading for all working people. It is an important weapon in the ideological arsenal of the working class. It is a theoretical weapon against those who say the economic struggle against capital is fruitless and in vain. And it is also a weapon against those who say that such an economic struggle alone is enough.

J. Sykes is the author of the book “The Revolutionary Science of Marxism-Leninism”. The book can be purchased by visiting tinyurl.com/revsciMLbook

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