[OPE-L:2456] Re: Re: The employment contract

From: Ernesto Screpanti (screpanti@unisi.it)
Date: Wed Mar 01 2000 - 10:27:26 EST

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Hi Gil, welcome aboard.

At 18.56 28/02/00 -0500, you wrote:
>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and an unpublished paper, "The Role of Production Relations in Marx's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."

Thanks for the information. I'll try to make good use of it.
>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
>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:

My understanding of Marx's theory of exploitation and distribution is as
follows. Exploitation and the extraction of surplus value occurs in
production. Then, in the circulation process, the division of the surplus
value among various kinds of capitalists is determined. An increse in the
rate of interest does not in itself imply an increase in the rate of
exploitation, but just an increase of the share of surplus value accruing
to monetary capitalists.
If Marx says something different samewhere in the ca 70 volumes of his
works does not prove too much. Somewhere esle he might say the contrary.
Please, avoid, as far as possible, discussing by means of the ipse dixit

>"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]

This is clearly wrong (even Marx can be wrong sometimes). An increase in
liquidity preference and the demand for money, coeteris paribus, lowers the
rate of interest.

>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;

We are discussing what happens in capitalism, not what happened prior to it.

>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.

This is very interesting in explaining what happens in present day
capitalism. A condition of exploitation is class biased credit rationing.
Workers have a more difficult and costly access to credit. This compels
most of them to "choose" between the employment contract end unemployment.

>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.

All right.

>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

I do not agree. What you are saying is that power relations in the "labour
market" are affected by the distribution of *wealth*, not by the
distribution of "property rights". In principle it could happen that the
workers are very rich (even if they do not possess a share in any company),
and therefore they can refuse to sign an emplyment contract to earn their
living. It could also happen that the workers are formally the owners of
all the means of production (for instance in a state capitalist system) and
yet are compelled to accept the employment relation to earn thir living.

>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.

This is not the point in question. The point is: what warrants the
capitalists' command in the labour process?
>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]

That's very interesting. I interpret it as implying that to the extent
workers are able to work for themeselves instead of for the capitalist, the
latter loose power. If the socialist sector in a mixed economy grows the
capitalist sector shrinks. So far so good.
>Note this occurs despite the presumed existence of employment contracts.

Of course.

>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.

That's it!

>Where does this leave us? First, if not warranted by class conditions,
>capitalists cannot exploit workers simply by imposing employment contracts.

Of course. If the workers were capitalists, the capitalists could not
exploit them. What's the relevance of this?

>So the "conditions for exploitation" can't be considered *independently* of
>the distribution of property rights.

No. They cannot be considered independent of the distribution of *wealth*,
political power, class organisation, cultural hegemony, credit rationing
etc etc. As I explained above, in principle the property rights can be
distributed in a perfectly equalitarian way, yet the general conditions for
the workers autonomy could be such as they would be compelled to accept the
employment relationship.

>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

This is true and very importnat. The "logic of wage determination" is a
question of bargaining power, among other things.

>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.

I Agree. This means that bargaining power affects the rate of exploitation.
It does not mean that
>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
In solidarity

Ernesto Screpanti
Dipartimento di Economia Politica
Piazza S. Francesco 1
53100 Siena
tel: 0577 232784
fax: 0577 232661

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