[OPE-L:2447] Re: The employment contract

From: Gil Skillman (gskillman@mail.wesleyan.edu)
Date: Mon Feb 28 2000 - 18:56:46 EST

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First, I apologize for my tardy entry into this very interesting thread
initiated by Ernesto (hello again!). I've been out of town for most of the
past month and it's taken awhile to get back up to speed (and to read the
now-large accumulation of posts on the subject). I'm very interested in
the nature of the capitalist employment relationship and its connection to
capitalist exploitation, and for what it's worth have written a few papers
that speak directly to the issues engaged here. I'll talk details below,
but for anyone interested, they include "Ne Hic Saltaveris: The Marxian
Theory of Exploitation after Roemer," Economics and Philosophy, October
1995, "Marxian Value Theory and the Labor-Labor Power Distinction", Science
& Society, Winter 1996-97 (plus the ensuing exchange with Chattopadhyay)
and an unpublished paper, "The Role of Production Relations in Marx's
Theory of Capitalist Exploitation."

Advertisements aside, I'd like to speak to the following issues arising
from the exchange between Ernesto and his correspondents.

1. The connection between the capitalist employment relationship and
capitalist exploitation

Ernesto writes:

 The basic idea is that the
basic institutional condition for capitalist exploitation in production is
not the private property of the means of production but a contract whereby
the workers take an obbligation to obbey the capitalist in the labour process.
I consider this thesis a deepening and a correction of Marx's theory of

My response:

This depends on what is meant by the phrase "institutional condition for
capitalist exploitation in production." If what is intended is the simple
descriptive claim that the employment contract is for most capitalists the
vehicle by which they go about exploiting workers, there can be little to
disagree with. If a stronger sense is intended, for instance that the
employment contract is somehow a necessary condition for capitalist
exploitation, then a number of issues arise.

First, transhistorically speaking, Marx does not assert even that
capitalist *production relations* (i.e. the subsumption of labor under
capital) are a necessary condition for capitalist exploitation. Beginning
with the Grundrisse and continuing through the Economic Manuscript of
1861-63, the Resultate, and Vol. III of Capital, Marx repeatedly
characterizes usury capital, *when extended to value producers,* as
"capitalist exploitation without the capitalist mode of production" [The
unpublished paper mentioned above traces the development/consistency of his
position on this point.], and notes that via this circuit of capital
capitalist are often able to extract all value beyond the equivalent of
subsistence wages. He treats merchant capital extended to value producers
(as in the putting-out system) in a parallel fashion.

Marx does insist that once the capitalist mode of production is in place
(i.e. the historical conditions under which industrial capital predominates
over interest-bearing and merchant capital), capitalist can't go back to
being just usury capitalists without a dramatic reduction in surplus value:

"If an inappropriately large number of capitalists sought to transform
their capital into money capital, the result would
be a tremendous devaluation of money capital and a tremendous fall in the
rate of interest; many people would immediately find themselves in the
position of being unable to live on their interest and thus compelled to
turn themselves back into industrial capitalists." [Capital V. III, p. 501]

Notice he doesn't say that surplus value would *disappear*, just that it
would fall to too low a level, suggesting that the impact of production
relations on capitalist exploitation is a matter of *degree* rather than

This does raise the question of why, according to Marx, usury and merchant
capital are adequate vehicles for the appropriation of surplus value prior
to the capitalist mode of production, but not after; I address this point
in the two published papers mentioned above. Just as Jerry suggests, I
think the answer has to do with the expropriation of workers: to put it
over-simplistically, when workers owned their own means of production,
capitalists could ensure that they used production loans to create surplus
value by the threat of taking their means of production as collateral in
the case of default. Once workers had no means of production to offer as
collateral, capitalists had to resort to other means to ensure the
performance of surplus labor. This is where the capitalist employment
relationship, governed by the employment contract, comes in.

This reading has a number of implications, but for now I'll focus on just
one, arising early in the exchange between Ernesto and Jerry:

2) The employment relation (and contract) as a power relation

Ernesto writes:

"My view is that the employment contract is not a contract for the sale of
a commodity but a relational contract that *establishes a power relation*.
It *produces the conditions for exploitation* in the production precesses
independently of the way property rights are distributed." [Emphases added.]

I would say to the contrary that the terms of an employment contract are a
*reflection* of a power relationship between capitalists and workers, a
relationship determined in large part by the distribution of property
rights. An individual employment contract of itself cannot "produce" or
"extend" conditions for exploitation beyond those warranted by class
conditions, for the simple reason that employment is not equivalent to
indentured servitude: workers can always quit a given employment
relationship. Thus if a given employer were to attempt to use an
employment contract as a basis for making greater impositions on his
workers than the norm established by labor market conditions, they would
simply quit. And of course, the market "norm" of exploitation is
determined in large part by the distribution of means of production. The
above leaves open the possibility that the existence of employment
contracts increases the power of capitalists *as a class* vis-a-vis workers
*as a class.* This is certainly at least plausible, but is subject to some
nuances mentioned below.

Marx underlines the significance of property distribution for exploitation
emphatically in Capital, V. I, in the chapter on colonization. Speaking of
the problems capitalists face in exploiting workers who own their own means
of production, he writes:

"Today's wage-labourer is tomorrow's independent peasant or artisan,
working for himself. He vanishes from the labour-market--but not into the
workhouse. This constant transformation of wage-labourers into independent
producers, who work for themselves instead of for capital, and enrich
themselves instead of the capitalist gentlemen, reacts in its turn very
adversely on the conditions of the labour market. Not only does the degree
of exploitation of the wage-labourer remain independently low. The
wage-labourer also loses, along with the relation of dependence, the
feeling of dependence on the abstemious capitalist." [I, p. 936]

Note this occurs despite the presumed existence of employment contracts.

Moreover, in an important sense the existence of employment contracts
themselves is an indication of a *reduction* in capitalist class power
relative to the era prior to the capitalist mode of production. Here note
Riccardo's point that overseeing the production process takes work. It's
not easy or costless. Presumably capitalists would avoid it if they could
figure out how to exploit workers to the same degree without going through
the hassle of running production. But as discussed above, something
qualitative happened in the historical progression to the capitalist mode
of production that rendered the usury and merchant circuits of capital as
insufficient vehicles for exploiting labor. The employment relationship is
thus the capitalists' strategic *response* to this diminution in their
effective control over workers.

Where does this leave us? First, if not warranted by class conditions,
capitalists cannot exploit workers simply by imposing employment contracts.
So the "conditions for exploitation" can't be considered *independently* of
the distribution of property rights. Second, the sense in which the
existence of employment increases the power of capitalists *as a class* to
exploit workers is contingent: on one hand, the need to subsume labor
under capital can be read as a strategic class response to a historical
reduction in capitalists' power to exploit workers once the latter were

On the other hand, given the historical conditions of the capitalist mode
of production, whether or not the existence of employment contracts
increases the power of capitalists *as a class* over workers *as a class*
depends on additional considerations, in particular the logic of wage
determination. Suppose that we take the rate of exploitation, s/v, as the
index of class power. Increasing worker effort through the strategic use
of production relations increases worker productivity; other things equal
that would increase surplus value in its relative sense. But are other
things equal? What if wages keep pace with or exceed the rate of
productivity increase? Now of course I know what Marx has to say about
this, and I also know that wages have lagged productivity in the US and
elsewhere for twenty-five years or so. My point is simply that the
connection of employment relations to capitalist class power is
*contingent* rather than *categorical*.

I didn't mean to chunder on for this long. I'll save til next post a
discussion of the connection of supervisory labor to surplus value. Gil

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