[OPE-L:4843] Re: determination of real wages

Ajit Sinha (ecas@cc.newcastle.edu.au)
Wed, 23 Apr 1997 03:37:02 -0700 (PDT)

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Some comments on Duncan's comments on real wages:


>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.

I mostly agree with you on this. I do think that in the 20th century the
real wages in the first world countries have increased, and in a long-run
framework are corelated to the improvement in labor productivity. I'm,
however, not sure to what extent the rise in real wages "drives the
processes of technical change that lead to the falling rate of profit and
relative surplus value in Marx's account." My general impression is that
Marx expects technical change to mostly take place during the slump period
rather than the boom period, and , of course, wages would be expected to
rise during the boom rather than the slump periods. For example, Marx
writes: "The fall in prices and the competitive struggle, on the otherhand,
impel each capitalist to reduce the individual value of his total product
below its general value by employing new machinery, new and improved methods
of labour and new forms of combinations. ... The stagnation in production
that has intervened prepares the ground for a later expansion of
production-- within the capitalist limits." (Capital III, ch. 15, p. 363,
Penguin). And I don't think that it is empirically an implausable hypothesis
either. It appears that the major recent technical change in the US auto
industry and introduction of computer driven technology in other industries
in the US and Canada took place during the last recession when wages were
anything but rising.

However, there is one place where Marx says: "A momentary excess of surplus
capital over the working population it commands has a double effect. On the
one hand it will gradually increase the working population by raising wages,
hence attenuating the destructive influences that decimate the offspring of
the workers and making marriage easier, while on the other hand, by using
methods that create relative surplus-value (introduction and improvement of
machinery), it produces far more quickly an artificial and relative over
population, ..." (Ibid, p. 325). This discussion, however, is in relation to
Marx's basic argument about the production of a relative over population,
where the argument is to suggest that a case of excess capital can only be
"momentary", and therefore cannot be taken as his main thrust or the
explanatory variable for a theory of technical change.

>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).

Of course, Wage Labor & Capital is a much earlier work. At this time Marx
had not even worked out his distinction between labor and labor-power. I do
think that a serious shift takes place in Marx's theoretical organization
after 1861. So I don't know how seriously we should treat Wage Labor & 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.

Indeed they would need reconciliation. One question would be: how to link
'class-struggle' with reserve army of labor. One could say that the state of
reserve army of labor conditions the class struggle. But it would be
difficult to put it other way around. My point has been that the two
tendencies of falling rate of profit and a rising real wages are in some
sense contradictory. They don't seem to go together.

>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.)

I don't find this in Marx's writings. The senario that real wages might be
rising due to increasing productivity is vertually absent in his discussion
on the falling rate of profit. On the other hand, you come across statements
like: "The tendential fall in the rate of profit is linked with a tendential
rise in the rate of surplus value, i.e. in the level of exploitation of
OF PROFIT IN TERMS OF A RISE IN WAGE RATES, even though this too may be an
exceptional case." (Ibid, p. 347, emphasis added).

As I argued above, I don't think the case you have presented is the case
found in marx's writings. His case seems to be that technical change comes
about due to pressures of intra industry competition, that's why more
pressure for technical improvement during recession as a survival mechanism.
Moreover, technical change is also brought about to stream line and control
work process more and more, an aspect of continuous class struggle. Labor
saving technical change turns out to be a structural requirement of the
system. Otherwise, the reserve army of labor may dry up and the cyclical
path of accumulation may break down.

If your senario is the empirical case, then that may be so. I can't take
issue with you on that since I don't know the relevant facts. I can only
speak for what I read in Marx's book. On empirical trend in England:
According to the facts available to Marx, he thought that there was a
general declining trend in real wages up till 1865.


>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.

I agree.


>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 didn't mean to say that all of them had the same explanation for the two
trends. What I suggested was that the two tendencies were accepted by most
of the classical economists as well as Marx. Smith tried to explain the
falling rate of profit on the basis of an increase in competition due to
accumulation--obviously a flawed argument. He also had a theory of
population similar to Malthus (if my memory serves me right, Malthus
acknowledges Smith in his first essay on population) that could explain the
falling trend in wages. Marx, of course, did not believe that capitalism
would come down to the actual stationary state. Much before that the system
would be overthrown. I agree that Marx's explanation for both the trends are
quite different from Ricardo's. Ricardo roots both the trends in
nature/human nature; whereas Marx tries to explain them from within the
dynamics of the capitalist system. However, we should also note that Marx
believed in diminishing returns in the mining industry, which provides the
basic raw materials for all industries.


>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 understand. Your case is more definitional at the aggregative level.


>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.

I have not explored the question of the 'theory of money' in Marx, so can't
agree or disagree at this time.

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