[OPE-L:210] one reply to Foley's questions

James Devine (JDevine@lmumail.lmu.edu)
Fri, 6 Oct 1995 15:29:22 -0700

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(please forward this to Duncan Foley)

Duncan Foley asks for a Marxist explanation of the strong
correlation between the average product of labor and real wages
over time. Here's my take on the issue:

(1) The empirical connection is not strong. In fact, it is my
impression that currently in the US, productivity is growing much
more than real wages are.

(2) As for reasons why there is a connection when it does occur,
I would list two: coincidence and crisis.

a) coincidence:

i) Capitalist accumulation creates new needs, which raises the
cost of reproducing labor-power. It can also concentrate workers
into factories or cities, or create temporary shortages of
labor-power, which give workers more ability to win real wages to
compensate for the higher cost of reproducing labor-power.

ii) Capitalist accumulation also raises the need for unproductive
labor. If we include unproductive labor in the denominator of the
APL and its wages as part of the real wage, this can allow real
wages to rise with the APL.

b) But there is no guarantee that the real wage will
automatically rise in step with the APL. The connection between
real wages and the APL depends not only on the dynamics of
accumulation but also the organization and consciousness of
workers. This means that crises can occur, which move capitalism
into greater balance.

i) if wages rise more than the APL so that profits are squeezed
(or even if such a squeeze is feared by the capitalists),
recessions and/or labor-saving technical change is induced, as in
Marx's K1, ch. 25. Either lowers the demand for labor-power,
restoring profits.

ii) if wages rise less than the APL for significant periods,
workers' consumption stagnates relative to production. This does
not automatically cause "underconsumption crises," since
capitalist consumption and/or investment can substitute for
workers' consumption to allow the realization of profits. As I
argue in my 1983 RRPE article and my 1994 RESEARCH IN POLITICAL
ECONOMY article, this implies that the economy becomes
increasingly unstable, prone to crisis, so that the crisis is not
avoided but is instead delayed.

(3) Foley asks about the situation and trends of the world
economy. It seems to me that we're currently undergoing
competitive austerity (as different companies and states get
leaner and meaner partly because everyone else is doing it) and a
downward harmonization of wages relative to productivity. This
raises the possibility of crises or stagnation due to inadequate
realization of profits as with (2)(b)(ii).

in ope-l solidarity,

Jim Devine jdevine@lmumail.lmu.edu
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (daytime, during workweek); FAX: 310/338-1950
"It takes a busload of faith to get by." -- Lou Reed.