[OPE-L:4822] Re: determination of real wages

Duncan K. Foley (dkf2@columbia.edu)
Sat, 19 Apr 1997 21:05:05 -0700 (PDT)

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Some (belated) comments on Ajit's discussion (OPE-L:4470) of real wages.

In general:

1. The problem of the evolution of real wages in relation to labor
productivity seems to me to be an immensely important issue to understand
the long-run development of capitalist economies. The tendency for real
wages to rise roughly in line with labor productivity over long periods is
a striking empirical feature of capital accumulation, drives the processes
of technical change that lead to the falling rate of profit and relative
surplus value in Marx's account, and gives rise to the type of capitalist
society we live in. If real wages had remained stagnant, societies would be
unimaginably different.

2. There seem to me to be at least three broad theories of the real wage in

a) the idea that real wages and the value of labor-power adjust to the
reproduction requirements of workers (for example in ch 4-6 of Volume I of

b) the idea that wages and the value of labor-power are regulated by
reserve armies of labor in the latter half of Volume I of Capital;

c) the idea that real wages and the value of labor-power are the outcome of
class struggle (especially in works like Wage Labor and Capital).

There are perhaps some ways to see these three as aspects of the same
theory: for example, the reproduction requirements of workers could be
linked to the state of the latent reserve army in some way, and both
workers' reproduction and the reserve army phenomenon might be regarded as
moments of class struggle. Still, these different points of view, each
developed at some length, need reconciliation.

3. Much of Marx's discourse implies a rise in the standard of living of
workers through the mechanism of the cheapening of wage goods with a
constant or slowly falling value of labor-power. This issue is most acute
in his discussion of the falling rate of profit, which makes perfect sense
if one assumes a constant or moderately falling value of labor-power and
doesn't work if one assumes a constant real wage in use-value terms. In
fact, there's a strong case to be made that the technical progressiveness
of capitalism depends crucially on high and rising real wages, which is the
most powerful incentive to labor-saving innovation. On the other hand, Marx
seems reluctant to admit openly that capitalist development might raise the
standard of living of the proletariat, despite the fact that it did do so
in England during the latter part of Marx's life (the situation up to 1850
is a good deal more controversial.)

4. Sticking with the absolute immiserisation thesis, even if it is truly
Marx's consistent and considerate opinion, raises many problems for the
understanding of historical capitalist development, which has led to a rise
in the standard of living of proletariats in at least the highly
industrialized and urbanized parts of the capitalist system. There's no
doubt that capital accumulation creates "wealth at one pole and misery at
the other" on a world scale by destroying precapitalist modes of production
and appropriating the conditions of existence of peasants. But that doesn't
seem to be the dialectic Marx is talking about in discussing the falling
rate of profit and relative surplus value.

Some more specific points below:


Ajit says:

>This statement occurs close to the end of the subsection 'Compound Interest:
>Fall in the Rate of Profit Based on This' within the section on 'Opposition
>to the Economists'. Here Marx is mainly discussing Hodgskin, whom Marx is
>quite sympathetic towards. The section mainly deals with the accumulation of
>capital and the rate of profit. Hodgskin seems to be arguing that the profit
>is accumulated at a compound rate, and given the number of workers employed,
>it necessarily amounts to more capital per worker implying increase in the
>rate of surplus value on the one hand and a fall in the rate of profit on
>the other since the rise in capital would be larger than the rise in rate of
>surplus value. Some such argument is being made by Hodgskin: "Hodgskin's
>proposition, therefore, has meaning only if, as a result of the process of
>accumulation, MORE CAPITAL is set in motion by the same workers, or if the
>capital grows in relation to labour". (TSV III, p. 307).

This basic pattern (rise in the rate of surplus value and fall in the rate
of profit due to a rise in the ratio of constant to variable capital) is
exactly what Marx put forward as the explanation of the falling rate of
profit in chapter 10 of Volume III.

>Marx mainly adds one qualification to this by suggesting that a technical
>change that acompanies accumulation could also reduce the value of
>labor-power and so, given the length of the working day, increase the rate
>of exploitation. Would this be able to offset the tendency of the rate of
>profit to fall? Now, this is the point were Marx could have helped Mike
>Lebowitz by suggesting that no, the workers will win a share in the
>increased productivity and counter the rise in rate of surplus value. Though
>Marx's answer to the general question is no, he gives no support to Mike
>Lebowitz at all. Let's hear what Marx has to say:
>"The value of labour-power does not fall in the same degree as the
>productivity of labour or of capital increases. This increase in productive
>power likewise increases the ratio between constant and variable capital in
>all branches of industry which do not produce necessaries (either directly
>or indirectly) without giving rise to any kind of alteration in the value of
>labour. The development of productive power is not even. It is in the nature
>of capitalist production that it develops industry more rapidly than
>agriculture. ...". (Ibid. pp. 300-1).

But this bias toward industrial development is only a contingent fact. In
the U.S. labor productivity in agriculture for long periods grew much more
rapidly than the average, for example.


Ajit again:

>Let me make one point about the tendency of both wages and profit to fall in
>Marx. These are not the tendencies that only Marx talks about, but most of
>the classical economists. Classical economists were of the opinion that the
>dynamics of capitalism would eventually lead to stationary state when both
>the rate of growth of population and the rate of profit would become zero.
>Real wages would be at subsistence minimum....

I think Ajit is right about Ricardo on the stationary state, but wrong
about Adam Smith and Marx. Marx structures his discussion of the falling
rate of profit as a critique of Ricardo, and sets up the challenge of
explaining the falling rate of profit together with a rising rate of
surplus value due to the technically revolutionary nature of capitalism. He
finds this explanation in the movement of the constant capital, which
Ricardo abstracts from. I don't think Marx foresaw a Ricardian stationary
state due to diminishing returns and rising rents for capitalism, but its
transformation into the socialist mode of production.

>I think it is dangerous to feddle with Marx's theory here and there to make
>him look 'contemporary'. Now a days Marxian economics is being swept by the
>'money mania'. Money is everything in Marx. Wages are given in money terms
>etc. etc. I suspect, all these 'developments' are mistakes. The word suspect
>should be imphasised, and not mistake at this time.

I never argued that wages were given in money terms, only that the value of
labor power is ex post equal to the money wage divided by the monetary
expression of labor time.

I don't think money is "everything" in Marx, but certainly one of his major
achievements is the integration of the theory of money with the theory of
the commodity and value in the first three chapters of Volume I of Capital.


Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu