[OPE-L:247] Duncan Foley responds -- Part 1

glevy@acnet.pratt.edu (glevy@acnet.pratt.edu)
Thu, 12 Oct 1995 11:50:27 -0700

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I forwarded a number of ope-l posts to Duncan. This is the first of
several responses that I will be forwarding. -- Jerry

---------- Forwarded message ----------
Date: Thu, 12 Oct 1995 14:38:10 -0400 (EDT)
From: Duncan K Foley <dkf2@columbia.edu>
To: glevy@acnet.pratt.edu
Cc: JDevine@lmumail.lmu.edu
Subject: Re: [OPE-L:210] one reply to Foley's questions (fwd)

On Sun, 8 Oct 1995 glevy@acnet.pratt.edu wrote:

> ---------- Forwarded message ----------
> Date: Fri, 6 Oct 1995 15:29:22 -0700
> From: James Devine <JDevine@lmumail.lmu.edu>
> To: Multiple recipients of list <ope-l@anthrax.ecst.csuchico.edu>
> Subject: [OPE-L:210] one reply to Foley's questions
> (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.

The correlation is not tight in the short run, but historically has been,
if not perfect, at least substantial. What's puzzling is that the
Marxist/Classical point of view doesn't immediately suggest any
correlation at all.

> (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.

I think this is an important idea. Do we have any way of quantifying it?
Couldn't it be regarded as a systematic tendency of capital accumulation?

> 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.

This is also important, but doesn't explain why wages of productive labor
per employee or per hour have risen so much with capital accumulation.

> 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'm not sure what you mean by "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.

This could explain why the labor share does not rise indefinitely.

> 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).

I guess I was thinking more along the lines of an understanding of the
competitive structure and world organization of contemporary capitalism.

Thanks for your response.
Duncan Foley

> 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.