Wage Labor and Capital by Karl Marx
Started:
Finished:
A basic introduction to Marxist economic analysis which comes highly recommended. Written by Marx and translated by Engels. It's short, so I'm not bothering to organize these notes into sections.
First, Marx distinguishes between "labor" and "labor-power." Labor seems to be the act of actually working, while labor-power is a commodity which can be purchased by a capitalist. The capitalist buys labor-power, and converts it into actual labor. I'm not yet sure what purpose this distinction serves, it seems like unnecessary term-juggling.
Ahh, no he goes on to explain the distinction in more detail. Productive labor requires many inputs; to weave cloth, you need yarn, a loom, and a weaver. These are all, by this definition, components of the labor of weaving, and the weaver provides the labor-power, which converts the other inputs to the labor into its outputs.
Marx then observes that a worker does not work for the productive results of their labor, but for the wages they sell their labor-power for. They thus don't consider labor to be part of their life, but rather the part of their life they have sold, in exchange for the ability to live at all. In this way, the worker essentially belongs to the capitalist class. Not to any particular capitalist, since they can quit their job and find another, but to the class as a whole, because without selling their life away like this, they die.
He then provides a brief explanation of how pricing functions (or is meant to function) in a market economy. Sellers compete to obtain buyers, buyers obtain to obtain sellers, and buyers and sellers compete over whether the price should be cheaper or more expensive. Supply and demand adjust the parameters of this competition, which adjusts the prices, which changes where capitalists invest their capital, which changes the supply and demand, until the price is approximately equal to the cost of production. He also concludes that the price of production is more or less a function of the cost of the labor-power necessary to produce the commodity.
These same laws, he explains, govern wages, which is just another name for the price of labor-power. The cost of production, for labor-power, is the cost of maintaining and training the laborer. Thus, labor-power which does not require much training is less expensive to produce, and thus cannot be sold for as much. And the cost of producing labor-power cannot fall below the cost of keeping the laborer alive. The cost of child-rearing can also be modeled as a maintenance cost, producing new workers to replace the old ones as they go out of service.
Of course, in practice wages very often fall below the cost of production for labor-power, below the level needed to keep a worker and their family alive. This happens to the price for all commodities as they fluctuate due to the constant competition. But, on average, they are supposed to settle somewhere around the cost of production.
Marx then turns to the subject of capital. Capital, he explains, is not just the "raw materials, instruments of labour, and means of subsistence of all kinds, which are employed in producing new raw materials, new instruments, and new means of subsistence." Rather, these things are only "capital" when they are held in a particular manner, as part of a particular social relationship. In a web of social relationships (that is, a society) like these, capital is not just this kind of stuff, but also its exchange value. A set amount of capital, say 100 bushels of corn, can be exchanged for anything of equal exchange value, say 20 skeins of cotton, without changing the amount of capital being held.
But having exchange value isn't the thing that makes commodities "capital." These things only become capital when they are held by one social class, which preserves itself by buying labor-power from a class which can only preserve itself by selling labor-power. This class thus accumulates the benefits of labor, while providing none of the labor-power themselves. Conversely, the class which sells labor-power provides all of the labor-power, but keeps none of the benefits.
The laborer thus sells labor-power, and in exchange receives the stuff they need to stay alive. The capitalist receives, in exchange for that stuff, the labor itself. This is the exact distinction, then. Marx is defining labor as the benefits of productive work, and labor-power as a commitment to do productive work for a specific amount of time. The laborer has to consume their wages, in order to not die. The worker could then use their continued existence to do work and produce new means of subsistence—but they don't have any of the stuff they would need to do that productive work, because it's exclusively held by the capitalist. "Capital therefore presupposes wage-labour; wage-labour presupposes capital. They condition each other; each brings the other into existence."
Furthermore, this is an unequal relationship. The capitalist keeps more than what they pay in wages. With some made-up numbers here: If a capitalist buys eight hours of labor-power from a worker, at $8/hr, they spend $64. In exchange, however, they get the value of the labor itself, the products of the work, which has an exchange value of $128. Now, the capitalist can afford to buy sixteen hours of labor-power. They've become richer! Meanwhile, the worker will use that $64 to buy food, and eat it, and have nothing left over. They haven't gained anything except another day on the planet.
However, since the classes need one another to exist, other economist at the time claimed that their interests are aligned. When capital grows and accumulates, the capitalists can (and do) buy more labor-power, and employ more workers. And when demand for labor-power increases, competition drives up the price, like any other commodity, which means workers experience better standards of living.
Marx observes that this increase in standards of living doesn't necessarily imply an increase in happiness, though "Our wants and pleasures have their origin in society; we therefore measure them in relation to society; we do not measure them in relation to the objects which serve for their gratification. Since they are of a social nature, they are of a relative nature." If we observe the possible standard of living (for example, that enjoyed by the very rich) rising out of our reach, we will feel dissatisfied. Furthermore, inflation serves to reduce the real value of wages, as the purchasing power of a fixed amount of money falls. Thus, simply by waiting for inflation to raise the buying power of money, without changing the actual number of dollars they pay, a capitalist can reduce wages. The money price of labor-power are "nominal wages" and the means which can be bought at that price are "real wages."
Marx then lays out a simple law: profit (the share of capital) and wages (the share of labor) are inversely proportional. The capitalist cannot get more profit without reducing wages. The laborer cannot get more wages without reducing profit. This is a consequence of external factors as well as direct effects. Even if the capitalist increases profit without directly lowering the price paid for labor-power, the overall effect on the economy is to allocate the worker a smaller share of the productive value of their work—to reduce wages. Therefore, workers and capitalists do not share the same interests; their interests are diametrically opposed. What helps one must hurt the other. This creates increasing wealth inequality over time.
To say that "the worker has an interest in the rapid growth of capital", means only this: that the more speedily the worker augments the wealth of the capitalist, the larger will be the crumbs which fall to him, the greater will be the number of workers than [sic] can be called into existence, the more can the mass of slaves dependent on capital be increased. …. The material position of the worker has improved, but at the cost of his social position.
Marx then draws on Smith's observation that productivity is improved chiefly by greater divison of labor. Since capitalists are in competition to achieve the lowest cost of production, they are also in competition to divide labor further and further. However, even if the capitalist achieves a significantly higher efficiency (say, twice as efficient), there is no incentive to price things accordingly; reducing the cost just slightly still succeeds in winning the pricing competition, while giving greater profits than slashing prices fully in half. This doesn't last long, however, because other capitalists will soon achieve the same improvement in efficiency, introducing competition, and driving prices down to match costs.
The effect here is that capitalism can quickly drive up the efficiency of productive industry, but in doing so requires capitalists to also obtain a larger market for their cheaper goods, in order to maintain profits. Competition is thus the enemy of profitability.
The effect on the working class is, of course, awful. Greater efficiency via improved machinery means one laborer can do the work of many, which increases competition between workers, which compels them to sell their labor power for less and less. Wages fall. Simultaneously, greater division of labor makes the labor itself simpler and more repetitive. This not only makes the work mind-numbingly boring, but easier to train for, and the easier the worker is replaced. This reduces wages even further. A worker competes to work harder, better, faster, in order to avoid being replaced. This makes the work harder. The overall effect: working conditions get worse, and the wage-crumbs get smaller.
Marx also observes that capitalists are in a constant race to fire as much of their workforce as possible. He furthermore counters the common reply that new jobs are created in other industries; sure, some members of the working class find jobs, and the class itself survives. But the old workers, whose jobs were made obsolete, aren't the ones moving into those jobs. But this is of no concern to bourgeois economists; as long as wage-laborers continue to exist as a class, why should they care what happens to any individual worker? Furthermore, Marx observes that these new jobs will inevitably pay worse wages than the old obsolete ones, at least in terms of real or relative wages.
Marx concludes the book there. Capital grows and grows, and the working class grows larger and larger, but conditions get worse and wages get smaller and smaller capitalists get outcompeted and converted into workers and so on and so on. A vicious, self-reinforcing cycle of suffering for most and growing opulence for the shrinking minority. He doesn't proceed to say it, but I will: this system must be destroyed.