Monday, March 21, 2016

Marx’s Capital, Volume 1, Chapter 17: A Critical Summary

Chapter 17 of volume 1 of Capital is called “Changes of Magnitude in the Price of Labour-Power and in Surplus Value” and discusses how capitalists extract surplus value in relation to wages.

Marx divides the chapter into four sections:
(1) Length of the Working Day and Intensity of Labour Constant. Productiveness of Labour Variable.

(2) Working-Day Constant. Productiveness of Labour Constant. Intensity of Labour Variable.

(3) Productiveness and Intensity of Labour Constant. Length of the Working-Day Variable.

(4) Simultaneous Variations in the Duration, Productiveness, and Intensity of Labour.
For Marx, the value of labour-power is the value of the maintenance and reproduction of labour, a type of subsistence wage. There can, however, be some variance in the cost of reproducing labour (Marx 1990: 655). Another point is that, for Marx, surplus value takes various forms such as profit, interest and ground rent (Marx 1990: 660).

Marx states this theory clearly:
“The value of labour-power is determined by the value of the necessaries of life habitually required by the average labourer. The quantity of these necessaries is known at any given epoch of a given society, and can therefore be treated as a constant magnitude. What changes, is the value of this quantity. There are, besides, two other factors that enter into the determination of the value of labour-power. One, the expenses of developing that power, which expenses vary with the mode of production; the other, its natural diversity, the difference between the labour-power of men and women, of children and adults. The employment of these different sorts of labour-power, an employment which is, in its turn, made necessary by the mode of production, makes a great difference in the cost of maintaining the family of the labourer, and in the value of the labour-power of the adult male. Both these factors, however, are excluded in the following investigation.” (Marx 1906: 568–569).
So (1) the cost of reproducing certain skilled types of adult labour is greater than that for reproducing unskilled labour and (2) the value of labour-power is different for adults and children, and therefore the subsistence wage can vary between different workers because of this. But Marx ignores the latter variables in this chapter.

Instead, Marx’s assumptions are that
“(1) that commodities are sold at their value; (2) that the price of labour-power rises occasionally above its value, but never sinks below it” (Marx 1906: 569).
In such a scenario,
“… we have seen that the relative magnitudes of surplus-value and of price of labour-power are determined by three circumstances; (1) the length of the working day, or the extensive magnitude of labour; (2) the normal intensity of labour, its intensive magnitude, whereby a given quantity of labour is expended in a given time; (3) the productiveness of labour, whereby the same quantum of labour yields, in a given time, a greater or less quantum of product, dependent on the degree of development in the conditions of production. Very different combinations are clearly possible, according as one of the three factors is constant and two variable, or two constant and one variable, or lastly, all three simultaneously variable. And the number of these combinations is augmented by the fact that, when these factors simultaneously vary, the amount and direction of their respective variations may differ.” (Marx 1906: 569).
So capitalism sees changes in the magnitude of surplus value by these different factors.

To sum up how surplus value is extracted, we can list the three methods:
(1) by increasing the length of the working day while holding down the real wage to a subsistence level and using the same intensity of labour (that is, increasing absolute surplus value);

(2) decreasing the price of the basic commodities making up the value of the maintenance and reproduction of labour (through use of machines and greater productivity), which reduces the value of the real subsistence wage when the working day and the intensity of labour are held constant (that is, increasing relative surplus value);

(3) given a stable working day, increasing the intensity and speed of work by labourers (often by using machines to speed up work) and so increasing the socially necessary labour time worked per hour, while holding down the real wage to a subsistence level (that is, increasing relative surplus value).
But of course the three factors might sometimes change at the same time. Marx reviews the various scenarios.

(1) Length of the Working Day and Intensity of Labour Constant. Productiveness of Labour Variable.
Marx sets out three laws under these conditions:
(1) “A working day of given length always creates the same amount of value, no matter how the productiveness of labour, and, with it, the mass of the product, and the price of each single commodity produced, may vary” (Marx 1906: 569–570). This means that when productivity increases while the length of the working day and intensity of labour are constant, the output per hour rises, but the total amount of labour value produced in one day remains the same, and it is simply divided between more units of the same output product (and this requires that the unit price falls).

(2) “Surplus-value and the value of labour-power vary in opposite directions. A variation in the productiveness of labour, its increase or diminution, causes a variation in the opposite direction in the value of labour-power, and in the same direction in surplus-value” (Marx 1906: 570).

(3) “Increase or diminution in surplus-value is always consequent on, and never the cause of, the corresponding diminution or increase in the value of labour-power” (Marx 1906: 571–572).
We must remember that there is an absolutely fundamental assumption underlying all these laws: that commodities tend to exchange at their true labour values. Marx has told us that this is his assumption at the beginning of the chapter: “that commodities are sold at their value” (Marx 1906: 569). Without this assumption, as we will see below, the whole analysis falls apart.

The second law means that “no change can take place in the absolute magnitude, either of the surplus-value, or of the value of labour-power, without a simultaneous change in their relative magnitudes, i.e., relatively to each other. It is impossible for them to rise or fall simultaneously” (Marx 1906: 570). Furthermore, when production involves the means of subsistence, “[i]t follows from this, that an increase in the productiveness of labour causes a fall in the value of labour-power and a consequent rise in surplus-value, while, on the other hand, a decrease in such productiveness causes a rise in the value of labour-power, and a fall in surplus-value” (Marx 1906: 571).

The third law concerns the magnitude of surplus value or labour-power, or as Marx says “[a]ccording to the third law, a change in the magnitude of surplus-value, presupposes a movement in the value of labour-power, which movement is brought about by a variation in the productiveness of labour. The limit of this change is given by the altered value of labour-power” (Marx 1906: 572).

The third law is affected by the struggles between workers and capitalists, and so when the value of the subsistence wage falls, the money wage may not always fall all the way to its new level (Marx 1906: 569). That is, the real wage may temporarily rise above subsistence level.

Marx’s final example of the third law is interesting:
“The value of labour-power is determined by the value of a given quantity of necessaries. It is the value and not the mass of these necessaries that varies with the productiveness of labour. It is, however, possible that, owing to an increase of productiveness, both the labourer, and the capitalist may simultaneously be able to appropriate a greater quantity of these necessaries, without any change in the price of labour-power or in surplus-value. If the value of labour-power be 3 shillings, and the necessary labour-time amount to 6 hours, if the surplus-value likewise be 3 shillings, and the surplus-labour 6 hours, then if the productiveness of labour were doubled without altering the ratio of necessary labour to surplus-labour, there would be no change of magnitude in surplus-value and price of labour-power. The only result would be that each of them would represent twice as many use-values as before; these use-values being twice as cheap as before. Although labour-power would be unchanged in price, it would be above its value. If, however, the prices of labour-power had fallen, not to 1s. 6d., the lowest possible point consistent with its new value, but to 2s. 10d. or 2s. 6d., still this lower price would represent an increased mass of necessaries. In this way it is possible with an increasing productiveness of labour, for the price of labour-power to keep on falling, and yet this fall to be accompanied by a constant growth in the mass of the labourer’s means of subsistence. But even in such case, the fall in the value of labour-power would cause a corresponding rise of surplus-value, and thus the abyss between the labourer’s position and that of the capitalist would keep widening.” (Marx 1906: 573).
Here production of output doubles per hour (and hence per day) with the same total value spread out over more units, but the unit price of the output commodity falls by half (in accordance with the halving of its embodied social necessary labour per unit). Marx seems to think that the commodity produced is a subsistence good, so that even though the money wage of 3 shillings is unchanged it buys twice as much of that good. So here the real wage or value of the labour-power in this industry has risen above subsistence level, even though the rate of exploitation is the same.

In his second example, the money wage falls towards the true subsistence wage, but remains slightly or somewhat above it. Here it is possible for the real wage to rise even though the money wage would tend to fall as subsistence commodities are cheapened. As Marx says:
“In this way it is possible with an increasing productiveness of labour, for the price of labour-power to keep on falling, and yet this fall to be accompanied by a constant growth in the mass of the labourer’s means of subsistence. But even in such case, the fall in the value of labour-power would cause a corresponding rise of surplus-value, and thus the abyss between the labourer’s position and that of the capitalist would keep widening.” (Marx 1906: 573).
But Marx doesn’t say how prevalent such a phenomenon is. And, moreover, if it were really the case that a constantly increasing real wage were a feature of real world capitalism, Marx’s theory would fall apart, because the real wage would not tend to subsistence wages.

To understand Marx’s second scenario properly, let us examine it in depth, because there is a profound problem with Marx’s analysis.

So, in scenario 2 involving time 1 and time 2 with different productivity of labour, we assume the following conditions:
(1) total working day = 12 hours;
(2) same intensity of labour in both periods of time;
(3) value of labour-power in time 1 (T1) = 3 shillings (or abbreviated as 3s.), and necessary labour-time is 6 hours;
(4) surplus-value in T1 = 3 shillings (or 3s.), and surplus labour-time is 6 hours.
In time 1 (T1), the rate of surplus value s/v (with variables measured in money terms) is 3/3 = 1 or 100%.

We can represent the working day and the various quantities in the table below:


Each hour of the day in the table is marked from 1 to 12. Here the value of labour-power is equal to 6 hours, and has a value of 3 shillings (or 36 pence). This represents the necessary labour-time equal to the subsistence wage. We can see that with a total labour value of 6 shillings, if the workers were paid the full value of their labour, then they would be paid 6 shillings, or 6 pence per hour.

But if productivity doubled per hour with the same intensity of labour and constant working day, and the business was producing the subsistence good, what would happen?

The value of the subsistence wage of labour-power would fall to 1 shilling 6 pence (or 18 pence), because the total amount the workers can produce per hour has doubled. So now necessary labour-time has fallen to 3 hours.

We can represent the working day in this case and the various quantities in the table below:


The rate of surplus value s/v (measured in labour time) is 9/3 or 3, which is 300%. The money wage has fallen but the subsistence wage is the same as measured in the quantity of subsistence goods. The workers are no better off in terms of the real wage.

But now let us come to time 2 in Marx’s example where the money wage is 2 shillings 10 pence (34 pence). While the true subsistence wage would be 1 shilling 6 pence, the actual wage is above this.

We can represent time 2 in the table below:


Since the value of the new wage is now 2 shillings 10 pence (or 34 pence), the workers are now being paid for 5 hours and 39.6 minutes of their labour-time: they are being paid over and above their new necessary labour-time of 3 hours (and the value of labour-power is normally the value of that necessary labour-time or subsistence wage, which in this case should be 1 shilling 6 pence).

The blue box with the value of the wage measures the number of hours for which the workers are being paid: as we can see, this is above the necessary labour-time (represented by the first three boxes in grey shading).

So there is clearly a sense in which the workers are being less exploited because
(1) the real value of their wage is above subsistence level: their real wage has risen and

(2) they are being paid for some of their surplus labour time as compared with time 1 where they were being paid for none of it.
If the original output per hour was 1 subsistence good, the original real wage was 6 subsistence goods. With doubled output per hour, the new real wage in goods is about 11 goods and 1 third of a good.

But there is a paradoxical result: if we calculate the rate of surplus value, it has risen against time 1. So s/v (measured in values in pence) is 38 pence/34 pence = 1.117 or 111.7%. The original rate of surplus value was 100%.

So, fundamentally, there are serious problems with Marx’s whole concept of surplus value: even as workers can be less exploited in the sense in which their real wage is rising and they are being paid for more than their necessary labour time and some of their surplus labour time as against an earlier period, the Marxist rate of exploitation based on the rate of surplus value can rise in some instances.

But, as I pointed out above, Marx does not inform us how prevalent he thinks such a phenomenon is. This is actually a profoundly devastating point: for if such a phenomenon was very common and prevalent, then workers would be seeing their real wage rise and rise over time and their living standards soar, and they would not feel exploited because, as Marx himself admits, nobody really is interested in the concept of surplus labour time. With a real wage that does not tend towards the subsistence level but can keep rising over time, Marx’s theory falls apart.

And, of course, there are ridiculous and unrealistic assumptions in Marx’s whole theory as follows:
(1) that commodities tend to exchange at their true labour values, and

(2) the real wage tends towards the value of the maintenance and reproduction of labour, the subsistence level.
Even Marx abandoned assumption 1 in volume 3 of Capital.

And once we throw aside both these assumptions, we can see that, generally speaking, in the long run in capitalism the workers are liable to be less exploited in two senses:
(1) they tend to earn a rising real wage over time above subsistence level, as more and more of their subsistence goods are cheapened along with other goods, and they tend to be paid more and more of their surplus labour time, and

(2) the rate of exploitation falls as the rate of surplus value falls, since real wages rise and commodity prices do not tend to equal labour values, and so the laws of this chapter fall apart.
But to return to Marx’s analysis in Chapter 17.

Marx charges Ricardo with certain errors (Marx 1990: 660), and Marx notes that since the profit rate requires the value of constant capital to be added, the rate of surplus value and rate of profit can diverge (Marx 1990: 660).

Marx ends this section with a comment that raises the transformation problem:
“It is, besides, obvious that the rate of profit may depend on circumstances that in no way affect the rate of surplus-value. I shall show in Book III. that, with a given rate of surplus-value, we may have any number of rates of profit, and that various rates of surplus-value may, under given conditions, express themselves in a single rate of profit.” (Marx 1906: 574).
This is a reference to the Classical theory of the tendency of capitalism to converge to an average uniform rate of profit.

(2) Working-Day Constant. Productiveness of Labour Constant. Intensity of Labour Variable
Under these conditions, the total socially necessary labour time performed in a given time is increased to increase the quantity of output, but the unit price of the output product remains the same as the unit value embodied remains the same (Marx 1990: 661).

Marx states:
“Hence the length of the working-day being constant, a day's labour of increased intensity will be incorporated in an increased value, and, the value of money remaining unchanged, in more money. The value created varies with the extent to which the intensity of labour deviates from its normal intensity in the society. A given working-day, therefore, no longer creates a constant, but a variable value; in a day of 12 hours of ordinary intensity, the value created is, say 6 shillings, but with increased intensity, the value created may be 7, 8, or more shillings. It is clear that, if the value created by a day's labour increases from, say, 6 to 8 shillings, then the two parts into which this value is divided, viz., price of labour-power and surplus-value, may both of them increase simultaneously, and either equally or unequally. They may both simultaneously increase from 3 shillings to 4. Here, the rise in the price of labour-power does not necessarily imply that the price has risen above the value of labour-power. On the contrary, the rise in price may be accompanied by a fall in value. This occurs whenever the rise in the price of labour-power does not compensate for its increased wear and tear.

We know that, with transitory exceptions, a change in the productiveness of labour does not cause any change in the value of labour-power, nor consequently in the magnitude of surplus-value, unless the products of the industries affected are articles habitually consumed by the laborers. In the present case this condition no longer applies. For when the variation is either in the duration or in the intensity of labour, there is always a corresponding change in the magnitude of the value created, independently of the nature of the article in which that value is embodied.” (Marx 1906: 575).
So here as the intensity of labour per hours in a given fixed working day rises, it is likely that the value of the subsistence wage must rise given the increased labour of the worker.

The average intensity of labour in a given working day might also vary between nations (Marx 1990: 661–662):
“If the intensity of labour were to increase simultaneously and equally in every branch of industry, then the new and higher degree of intensity would become the normal degree for the society, and would therefore cease to be taken account of. But still, even then, the intensity of labour would be different in different countries, and would modify the international application of the law of value. The more intense working day of one nation would be represented by a greater sum of money than would the less intense day of another nation.” (Marx 1906: 575–576).
(3) Productiveness and Intensity of Labour Constant. Length of the Working-Day Variable
The total working day may be shortened or lengthened, and Marx identifies three laws as follows:
(1) The working-day creates a greater or less amount of value in proportion to its length—thus, a variable and not a constant quantity of value.

(2) Every change in the relation between the magnitudes of surplus value and of the value of labour-power arises from a change in the absolute magnitude of the surplus-labour, and consequently of the surplus-value.

(3) The absolute value of labour-power can change only in consequence of the reaction exercised by the prolongation of surplus-value upon the wear and tear of labour-power. Every change in this absolute value is therefore the effect, but never the cause, of a change in the magnitude of surplus-value.” (Marx 1906: 576).
If the working day is shortened, this reduces the surplus labour and surplus value (Marx 1990: 663).

If the working day is lengthened, this increases the surplus labour and hence surplus value (Marx 1990: 663).

Although the price of labour-power might rise in such a situation, given the increased energy and more hours of labour expended each day, the daily value of labour-power will rise, and likely the price of labour will drop below its actual value:
“When the working-day is prolonged, the price of labour-power may fall below its value, although that price be nominally unchanged or even rise. The value of a day's labour-power, is, as will be remembered, estimated from its normal average duration, or from the normal duration of life among the labourers, and from corresponding normal transformations of organised bodily matter into motion, in conformity with the nature of man. Up to a certain point the increased wear and tear of labour-power, inseparable from a lengthened working-day, may be compensated by higher wages. But beyond this point the wear and tear increases in geometrical progression, and every condition suitable for the normal reproduction and functioning of labour-power is suppressed. The price of labour-power and the degree of its exploitation cease to be commensurable quantities.” (Marx 1906: 577–578).
This is why there arose limits to the length of the working day.

(4) Simultaneous Variations in the Duration, Productiveness, and Intensity of Labour.
Here there are many different combinations but Marx limits himself to two instances.

(4.a) Diminishing Productiveness of Labour with a Simultaneous Lengthening of the Working-Day.
If the price of those commodities which determine the value of labour-power rise, then that value rises, and this requires a rise in necessary labour time per day. But this might be compensated by an increase in the length of the working day so that surplus value can be maintained:
“Therefore, with diminishing productiveness of labour and a simultaneous lengthening of the working-day, the absolute magnitude of surplus-value may continue unaltered, at the same time that its relative magnitude diminishes; its relative magnitude may continue unchanged, at the same time that its absolute magnitude increases; and, provided the lengthening of the day be sufficient, both may increase.” (Marx 1906: 579).
Marx makes an interesting point about the pessimism of Classical economists on the basis of the Napoleonic wars:
“In the period between 1799 and 1815 the increasing price of provisions led in England to a nominal rise in wages, although the real wages, expressed in the necessaries of life, fell. From this fact West and Ricardo drew the conclusion, that the diminution in the productiveness of agricultural labour had brought about a fall in the rate of surplus-value, and they made this assumption of a fact that existed only in their imaginations, the starting-point of important investigations into the relative magnitudes of wages, profits, and rent.” (Marx 1906: 579).
Marx argues that both intensity of labour and prolongation of the working-day increased in the 1799 to 1815 period, so that surplus value increased.

(4.b) Increasing Intensity and Productiveness of Labour with Simultaneous Shortening of the Working-Day
This process reduces the necessary labour time of the working day.

Marx ends with an interesting analysis:
“If the whole working-day were to shrink to the length of this portion, surplus-labour would vanish, a consummation utterly impossible under the regime of capital. Only by suppressing the capitalist form of production could the length of the working-day be reduced to the necessary labour-time. But, even in that case, the latter would extend its limits. On the one hand, because the notion of ‘means of subsistence’ would considerably expand, and the labourer would lay claim to an altogether different standard of life. On the other hand, because a part of what is now surplus-labour, would then count as necessary labour; I mean the labour of forming a fund for reserve and accumulation.

The more the productiveness of labour increases, the more can the working-day be shortened; and the more the working-day is shortened, the more can the intensity of labour increase. From a social point of view, the productiveness increases in the same ratio as the economy of labour, which, in its turn, includes not only economy of the means of production, but also the avoidance of all useless labour. The capitalist mode of production, while on the one hand, enforcing economy in each individual business, on the other hand, begets, by its anarchical system of competition, the most outrageous squandering of labour-power and of the social means of production, not to mention the creation of a vast number of employments, at present indispensable, but in themselves superfluous.

The intensity and productiveness of labour being given, the time which society is bound to devote to material production is shorter, and as a consequence, the time at its disposal for the free development, intellectual and social, of the individual is greater, in proportion as the work is more and more evenly divided among all the able-bodied members of society, and as a particular class is more and more deprived of the power to shift the natural burden of labour from its own shoulders to those of another layer of society. In this direction, the shortening of the working-day finds at last a limit in the generalisation of labour. In capitalist society spare time is acquired for one class by converting the whole life-time of the masses into labour-time.” (Marx 1906: 581).
BIBLIOGRAPHY
Brewer, Anthony. 1984. A Guide to Marx’s Capital. Cambridge University Press, Cambridge.

Harvey, David. 2010. A Companion to Marx’s Capital. Verso, London and New York.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Marx, Karl. 1990. Capital. A Critique of Political Economy. Volume One (trans. Ben Fowkes). Penguin Books, London.

39 comments:

  1. "So there is clearly a sense in which workers are being less exploited"

    In the Marxian sense of exploitation, the rate of exploitation has increased, as workers are now doing more surplus unpaid labour for the capitalist.

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    Replies
    1. In the primary sense, the rate of surplus value has risen, yes, and I was wrong on this technical issue in the example in question.

      However, this is only one **highly artificial abstract scenario** all dependent on the untrue assumption that commodities exchange at true labour values.

      Also, as I have said, even in this hypothetical scenario, there is a clear and serious paradox, which reflects badly on Marx's theory: for there is a very obvious sense in which exploitation has also fallen:

      (1) the real value of their wage is above subsistence level

      (2) they are being paid for **some** of their surplus labour time as compared with time 1 where they were being paid for none of it.
      ----

      However, as I told you before, commodities do not exchange at true labour values. Real world capitalism isn't governed by the laws Marx lists above, and there are a vast number of more realistic scenarios where both real wages and profits rise and the rate of exploitation falls.

      In real capitalism, the real wage has absolutely soared above subsistence levels as prices have also risen and profits aren't held in check by commodity prices equalling labour values.

      The technical issue you raise here is like arguing about how many angels can fit on the head of a pin.

      Delete
  2. Great post, as always. Sorry to go off topic but I wanted to let you know I linked a post of yours, on the recession of 1920-21, in a blog post of mine and just wanted to inform you, credit has been cited but still. https://theworldatlargeecon.wordpress.com/2016/03/21/the-depression-of-1920-government-spending-enabled-swift-recovery/

    If there's any issue with this I will remove the link. I love this blog, keep up the good work LK.

    ReplyDelete
    Replies
    1. I don't mind people linking to my posts at all. That is great.

      regards

      Delete
  3. "this is only one **highly artificial abstract scenario*"

    It's not one 'highly artificial abstract scenario'. It's no more 'highly artificial' or abstract than anything else in marxist theory. Basic marxist theory entails that it is entirely possible for real wages to increase whilst the rate of exploitation (rate of surplus value) increases, or stays the same.

    It is entirely possible, within the marxist theoretical framework, for real wages to rise continuously over an extended period of time, whilst the rate of exploitation increases or stays the same. As the Harry Cleaver text I posted explained, the 'Keynesian' period was marked by a continuous increase in real wages along with increases in productivity, keeping the rate of exploitation/surplus value constant as output increased.

    However, since the 1980s, real wages have stagnated or even gone down, whilst productivity has continued to increase as before. Interpreted through marxist theory this indicates that the rate of exploitation has increased whilst the real wage has stayed the same or decreased.

    This is something which many people have commented on and complained about - the increasing divergence between productivity and real wages indicates for most people that there is something deeply wrong or unjust going on - as all the gains from increased productivity are being appropriated by capitalists whilst the workers are getting nothing.

    Regarding the issue of real wages being above the equilibrium subsistence level, the question is why this would happen, and how sustainable it might be. You've noted in some of your previous posts that unrestrained imigration would have the effect of pushing down wages, possibly (ultimately) to the subsistence level. So you seem to be acknowledging that 'artificial' constraints on the supply of workers, via border controls and the like, are part of the reason for why wages have not been pushed down to the minimum level.

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    1. (1) "It is entirely possible, within the marxist theoretical framework, for real wages to rise continuously over an extended period of time, whilst the rate of exploitation increases or stays the same. "

      Marx lists only one example where real wages rise and the rate of exploitation increases. He doesn't say how prevalent this might be -- and above all the idea that this would be normal or widely prevalent would smash up and destroy his theory of wage determination.

      It is absurd to try and argue that this trend could be anything but a rare exception in Marxist theory without the theory falling apart.

      (2) "As the Harry Cleaver text I posted explained, the 'Keynesian' period was marked by a continuous increase in real wages along with increases in productivity, keeping the rate of exploitation/surplus value constant as output increased.
      "


      Cleaver doesn't prove that the the rate of exploitation/surplus value was constant. The very idea is absurd. Why? Because **commodities do NOT exchange at true labour values.** There was an inflationary environment but real wages absolutely soared. It's more likely the rate of exploitation fell as intensity of work decreased and workers were paid more and more for their surplus labour time.

      (3) "Interpreted through marxist theory this indicates that the rate of exploitation has increased whilst the real wage has stayed the same or decreased. "

      No, that doesn't follow. First because intensity of work probably decreased owing to increased use of machines and real wage had already become so high by 1973 that it probably covered much more than the worker's surplus labour time.

      (4) real wages already absolutely soared in the 19th century. The idea that capitalism cannot increase real wages by its sheer physical productiveness is absurd. The issue here is distribution. This has to be with power of organised labour and government policies in relation to labour market regulation.

      Delete
    2. "It's more likely the rate of exploitation fell as intensity of work decreased and workers were paid more and more for their surplus labour time."

      But wages were on average rising in line with productivity, not rising faster than productivity. For the rate of exploitation to fall, real wages would have to rise faster than productivity.

      Delete
    3. http://ftalphaville.ft.com/files/2013/11/Wages-vs-productivity.png

      Delete
    4. "In Marxian economics, the rate of exploitation is the divergence between labor productivity and the wage rate."

      https://en.wikipedia.org/wiki/Rate_of_exploitation

      Delete
    5. "In Marxian economics, the rate of exploitation is the divergence between labor productivity and the wage rate."

      No, that Wikipedia article is dead wrong.

      Why don't you actually read Marx's Capital?

      The rate of exploitation is the rate of surplus value:

      “The rate of surplus-value is therefore an exact expression for the degree of exploitation of labour-power by capital, or of the labourer by the capitalist” (Marx 1906: 241).

      And the rate of surplus-value is:

      (Surplus value)/(Value of labour power) or

      (Surplus labour)/(Necessary labour)

      Note carefully: the rate of exploitation is *not* the divergence between labour productivity and the wage rate.

      Delete
    6. http://ftalphaville.ft.com/files/2013/11/Wages-vs-productivity.png

      Yes, that graph shows real wage falls from 1977 to about c. 1995, but then the real wage rises again.

      The real wage in the 2000s was still above the real wage in c.1977.

      In any case, as I just showed you above in Marx's theory the rate of exploitation is *not* the divergence between labour productivity and the wage rate.

      Delete
    7. "For the rate of exploitation to fall, real wages would have to rise faster than productivity. "

      No. You don't understand Marx's theory.

      Delete
    8. This comment has been removed by the author.

      Delete
    9. The rate of surplus value is s/v.

      s = surplus value

      v = variable capital

      variable capital is the amount spent by the capitalist on wages.

      So the rate of surplus value = (surplus value)/(wages)

      It’s possible for the real wage to be above the value of labour power. It’s also possible for the value of labour power to rise.

      So the rate of surplus value will only be equal to (Surplus value)/(Value of labour power) when the real wage is equal to the value of labour power.

      “the ratio of surplus value to wages, (s/v), Marx called the rate of surplus value, or the rate of exploitation of labour”

      https://www.marxists.org/glossary/terms/v/a.htm

      Delete
    10. Yes, that is what I just told you, even though the real wage as variable capital v can sometimes diverge from the subsistence wage that is the value of maintenance and reproduction of labour power, this doesn't change the fact that the value of labour power in Marx's theory generally tends towards the subsistence wage.

      Aren't you capable of just admitting you were wrong to say that "In Marxian economics, the rate of exploitation is the divergence between labor productivity and the wage rate"?

      Delete
    11. (1)

      The rate of exploitation = (unpaid labour)/(paid labour)

      or

      The rate of exploitation = (surplus value)/wages


      (2)

      Labour productivity is the amount that a worker produces per unit of time.

      The wage rate is the amount that a worker is paid per unit of time.


      (3)

      Say a worker works 8 hours a day.

      He produces 8 goods, worth £8, in 8 hours.

      And the worker is paid a wage of £4 per day.

      In this case the surplus value produced by the worker is equal to £4 per day.

      In other words, the worker does 4 hours paid labour and 4 hours unpaid surplus labour per day.

      So the rate of exploitation = 4/4 = 1, or 100%.

      i.e. the amount of exploitation, or the amount of unpaid labour, is equal to 100% of the amount of paid labour.

      Another way of putting this is that the rate of exploitation = 4 hours per 8 hours of work, or £4 worth of goods per $8 worth of goods produced.


      (4)

      In this case labour productivity = 8 goods, worth £8, per 8 hours of work.

      And the wage rate = £4 per 8 hours of work.

      So the divergence between labour productivity and the wage rate is identical to the rate of exploitation.

      Delete
    12. First of all, let's settle another issue.

      You posted a link here:

      http://ftalphaville.ft.com/files/2013/11/Wages-vs-productivity.png

      That link shows that the real wage did fall from 1977 to about c. 1995, but then the real wage rises again after that.

      The real wage in the 2000s was still above the real wage in c.1977.

      If we assume:

      (1) the intensity of work fell, and
      (2) the working day remained constant and
      (3) commodities prices do not exchange for labour value, and
      (4) we take industries where the real wage is well above subsistence level

      then with rising wages from 1995 it follows that the rate of exploitation fell?

      Yes or no?

      Delete
    13. In my previous comment there’s a dollar sign in the place of pound sign - a typo (my keyboard doesn’t have a pound sign). it should be a £, obviously.

      “(1) the intensity of work fell”

      The rate of exploitation is (unpaid labour)/(paid labour), or (surplus value)/wages. As such, the rate of exploitation can rise even if intensity of labour falls. In order to know whether the rate of exploitation has risen, look at whether productivity has increased faster than the real wage rate. If it has, this means workers are doing more unpaid surplus labour. It makes no difference whether intensity of labour has fallen - the rate of exploitation has still increased.

      “commodities prices do not exchange for labour value”

      (In Marx's theory) you can have exploitation even if the labour power commodity exchanges for more than its value, as exploitation is the relation of unpaid to paid labour. So it makes no difference whether the price of labour power is above the value of labour power.

      “we take industries where the real wage is well above subsistence level”

      The rate of exploitation is the ratio between surplus value and variable capital, or wages. So you can have exploitation even if the real wage is well above subsistence level.

      Delete
    14. that should have been: "this means workers are doing more unpaid surplus labour relative to paid labour"

      Delete
    15. No, Philippe, it is clear now you are being irrational and unreasonable:

      (1) you can't just evade my hypothetical by changing its terms. Deal with it on its own terms and answer the question with a clear "yes" or "no."

      (2) you continue to incorrectly define the rate of exploitation as
      "whether productivity has increased faster than the real wage rate."

      No, that is not Marx's definition of the rate of exploitation, because exploitation is based on unpaid labour in relation to paid labour, not output of the worker per hour.

      Until you can give an honest answer to (1) and understand (2), there is little point in debating you.

      Delete
    16. I'm not being irrational or unreasonable at all. The poblem is you don't understand this issue. As before, you're wrong, not me.

      "answer the question with a clear "yes" or "no."

      The answer to your question is no, it does not follow that the rate of exploitation fell.

      Delete
    17. "According to the pro-capitalist economists, real wages can only rise when the productivity of labor rises. In reality, if real wages rise in line with the growth in the productivity of labor—assuming that the rise in the productivity of labor in the wage-goods industries exactly matches the average rise in the productivity of labor—this means the rate of surplus value, or what comes to exactly the same thing, the rate of exploitation, remains unchanged. However, real wages can rise faster than productivity. In that case, the rate of surplus value will fall and so will the rate of profit, all else remaining equal. It is equally possible—which in fact tends to be the case—for labor productivity to grow faster than the rise—if any—in real wages. In this case, the rate of surplus value will rise."

      https://critiqueofcrisistheory.wordpress.com/crisis-theories-falling-rate-of-profit/#fn6

      Delete
    18. "According to the pro-capitalist economists, real wages can only rise when the etc."

      (1) no, this is just another case of dishonest Marxists distorting Marx's theory. If Marx defined "the rate of exploitation" as "the divergence between labor productivity and the wage rate" then cite me a passage where he does this.

      (2) also, that quote seems to assume that commodity prices exchange at true labour values -- another worthless assumption.

      Delete
    19. The following is from Joan Robinson discussing Marx and the falling rate of profit. She explains that if real wages are constant, and productivity rises, the rate of exploitation rises. Similarly, if real wages rise in line with productivity, the rate of exploitation is constant:

      “if the rate of exploitation tends to be constant, real wages tend to rise as productivity increases. Labour receives a constant proportion of an increasing total.” (p.74)

      “the rise in the rate of exploitation which comes about through a rise in productivity, with constant hours and intensity of work, and constant real wages, is not limited in the same way. Productivity may rise without limit, and, if real wages are constant, the rate of exploitation rises with it,” (p.76)

      “With given labour-time, of given intensity, the rate of value created is constant. Thus v + s is constant. It might seem, at the first glance, that s/v can rise only if wages fall. But this is an illusion. An increase in productivity reduces the value of commodities, and the value of labour-power, with constant real wages. Thus v falls towards zero, and s/v rises towards infinity, and all the time real wages are constant.” (p.76)

      (Joan Robinson: ‘Ideology and Logic’, in ‘Keynes’s Relevance Today’, pages 74 - 76.

      https://books.google.co.uk/books?id=9YCwCwAAQBAJ&printsec=frontcover&dq=keynes'+relevance+today&hl=en&sa=X&ved=0ahUKEwjL78qputrLAhWLVRoKHRP2DZsQ6AEIHTAA#v=onepage&q=keynes'%20relevance%20today&f=false

      Delete
    20. Joan Robinson discussing Marx on unemployment. Again, she explains that if productivity rises and real wages remain constant, the rate of exploitation rises. And if real wages rise in line with increases in productivity, the rate of exploitation remains constant.

      “the whole argument turns upon assuming a constant rate of exploitation. But what reason is there to suppose that “the nature of the capitalist process of production” tends to maintain a constant rate of exploitation? The assumption that it does come into violent conflict with Marx’s usual view that the rate of real wages tend to be constant round about subsistence level. For if the rate of exploitation is given, labour receives a constant relative share in net output, and as productivity increases, real wages rise.

      Marx suggests that the rate of exploitation may be raised, for instance, by lengthening the working day, or by depressing wages below a subsistence level. He makes only a passing reference to the possibility that money wages may fall as productivity increases and the prices of wage goods fall. Yet it would seem the most natural assumption for him to make that real wages are constant. And if real wages are constant, the rate of exploitation is rising.”

      “If real wages are constant (and if the problem of effective demand does not arise), profits in terms of product increase with productivity. If wages in real terms are constant and profits in real terms are rising continuously s/v is rising continuously. Unless there is a limit to the increase in productivity there can be no limit to the rate of exploitation.”

      Joan Robinson: ‘Marx on Unemployment’, in ‘Karl Marx’s Economics: Critical Assessments’, page 45

      https://books.google.co.uk/books?id=lis6Gn9lYfEC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false

      Delete
    21. David Harvey:

      “Suppose workers live on bread alone, and the cost of bread is cut in half because of increases in productivity. Suppose that capitalists cut wages by a quarter. They gain the collective form of relative
      surplus-value, thus increasing the general rate of exploitation. But at the same time, the workers can buy more bread and raise their physical standard of living. The general question this poses is, how are gains from increasing productivity shared between the classes? One possible result, which Marx unfortunately neglects to emphasize, is that the physical standard of living of workers can rise, as measured by the material goods (use-values) they can afford, at the same time as the rate of exploitation, s/v, increases. This is an important point, because one of the criticisms frequently heard about Marx is that he believes in a rising rate of exploitation. How can that be, ask the critics? Workers (at least in the advanced capitalist countries) now have cars and all these consumer goods, so obviously the rate of exploitation cannot be increasing! Are not the workers so much better off? One part of the answer is that it is perfectly feasible, in the terms postulated in Marx’s theory, for steady increases to occur in the standard of living of labor at the same time as the rate of exploitation either increases or remains constant. (The other part might be to point to the benefits that accrue to one portion of the global working class as a return on imperialist practices of exploitation of the other portion, but that cannot be appealed to here.)

      I say it was unfortunate that Marx did not emphasize this point in part because it would have easily forestalled an erroneous, spurious line of theoretical and historical criticism. But it would have also made us focus more clearly on the question of how benefits from gains in productivity get shared as a crucial aspect of the history of class struggle. In the case of the United States, some share of the gains from higher productivity went to the the workers from the Civil War period onward. A typical union bargaining strategy is to agree to collaborate with increasing productivity in return for higher wages. If the benefits from technological dynamism are spread around, then opposition to that technological dynamism becomes muted even as capitalists are cheerfully raising the rate of exploitation. Political opposition to capitalism in general may also become less strident, even if the rate of exploitation is increasing, because workers are at least gaining a higher physical standard of living. The odd thing about the United States is that it is only in the past thirty years or so that workers have failed to gain from rising productivity. The capitalist class has appropriated almost all the benefits. This lies at the core of what the neoliberal counterrevolution has been about and what distinguishes it from the Keynesian welfare-state period, when gains from productivity tended to be shared more evenly between capital and labor. The result has been, as is well documented, a tremendous increase in levels of social inequality in all those countries that have moved down neoliberal lines. In part this has to do with the balance of class forces and the dynamics of class struggle in different places, while in the United States, cheaper imports (and imperialist practices) have also helped workers maintain an illusion that perhaps they may be benefiting from capitalist imperialism.”

      David Harvey, ‘A Companion to Marx’s Capital, Volume 1’, p.169 - 171

      https://books.google.co.uk/books?id=u5N-Rrlz8FcC&printsec=frontcover&dq=a+companion+to+marx's+capital+volume+1&hl=en&sa=X&ved=0ahUKEwiViaDr1trLAhVLthQKHW3ADzAQ6AEIHTAA#v=onepage&q&f=false

      Delete
    22. (1) quite simply, you can cite me no passage in Marx where he defines the rate of exploitation as “the divergence between labour productivity and the wage rate.” This is because Marx never does this. He has a different definition, as anyone who reads Chapter 18 can see.

      (2) on your first set of Robinson passages: the rate of exploitation rises only if the money wage falls and the real subsistence wage is held constant. That doesn’t refute anything I’ve said and does not show me any evidence of Marx defining the rate of exploitation as “the divergence between labour productivity and the wage rate.”

      (3) your second Robinson passage does even help your case. She is talking about the rate of exploitation increasing when the real subsistence wage remains constant even if money wages fall, NOT real wages rising and the rate of rate of exploitation simultaneously increasing.

      (4) Harvey’s comments do not show any passage of Marx where Marx defines “the rate of exploitation as “the divergence between labour productivity and the wage rate.”

      Furthermore, Harvey is referring to the passage in Chapter 17 that I have already fully dealt with here.

      Yes, in Marx’s thinking, if the price of the subsistence good falls by productivity gains, then capitalists can reduce wages but not all the way to the new subsistence wage, while technically increasing the rate of exploitation but increasing the real wage of workers.

      As for his apologetic Marxist nonsense:

      “This is an important point, because one of the criticisms frequently heard about Marx is that he believes in a rising rate of exploitation. How can that be, ask the critics? Workers (at least in the advanced capitalist countries) now have cars and all these consumer goods, so obviously the rate of exploitation cannot be increasing! Are not the workers so much better off? One part of the answer is that it is perfectly feasible, in the terms postulated in Marx’s theory, for steady increases to occur in the standard of living of labor at the same time as the rate of exploitation either increases or remains constant.”

      Yes, but ONLY if you assume that commodities tend to exchange at true labour values. But they do not. The critics are correct, and Harvey is just another Marxist hack.

      Delete
    23. Labour productivity is the amount a worker produces per unit of time, and the wage rate is the amount a worker is paid per unit of time. The difference between the two is the amount the worker produces per unit of time that he's not paid for. As such this is equivalent to the rate of surplus value, or exploitation.

      “From a Marxist point of view, the ratio of y [productivity] to rwp [real wages] is an index of the rate of exploitation of workers.”

      Anwar Shaikh, ‘The Falling rate of Profit and the Economic Crisis in the U.S.’, p.120

      http://www.anwarshaikhecon.org/sortable/images/docs/publications/political_economy/1987/2-The%20Falling%20Rate%20of%20Profit%20and%20the%20Economic%20Crisis%20in%20the%20US.pdf

      Delete
    24. "“From a Marxist point of view, the ratio of y [productivity] to rwp [real wages] is an index of the rate of exploitation of workers.”"

      NO. Shaikh is wrong, if he is attributing this view to Marx.

      Once again: I don't care what some modern Marxist cultist says. They are wrong.

      Most of them don't even understand Marx's theory, and are involved in esoteric ridiculous reinterpretations of it, plainly contrary to what Marx said and wrote, and that is the plain truth.

      Delete
  4. "You've noted in some of your previous posts that unrestrained immigration would have the effect of pushing down wages, possibly (ultimately) to the subsistence level."

    Did you really note that, LK? The idea is utterly ridiculous. Whatever "subsistence level" wages are, they are clearly a small fraction of the average wage in any developed economy. There is no realistic scenario in which immigration would push down wages that far. All this Marxist nonsense could quickly be refuted by estimating what the "subsistence level" wage is and showing it is lower than the minimum wage mandated by law.

    ReplyDelete
    Replies
    1. For example, LK writes:

      "To his credit, Rothbard understands that national borders and controlled immigration impose labour market protectionism and so tend to raise and sustain real wages. Rothbard hates that with a passion, owing to his free market theology. Left-wing people have no such excuse – and indeed they should appreciate the advantages of labour market regulation, protectionism and controlled immigration.

      In a Rothbardian anarcho-capitalist world, there is literally a race to the bottom as open borders allow endless mass immigration from the Third World to the First, a process which impoverishes workers in the First World and reduces their wages to those of the Third World, and in the process massively reduces living standards and working conditions (e.g., Third World labour may very well accept brutal working conditions). People thrown out of work will be left with private debts they cannot pay, a process which, where private debt is at a very high level, will only lead to further macroeconomic instability. Since there is no effective, reliable tendency to full employment equilibrium in market economies, when private sector aggregate demand is weak or fails, mass immigration would also tend to cause much greater and rising unemployment."

      http://socialdemocracy21stcentury.blogspot.co.uk/2016/02/murray-rothbard-loved-open-borders-and.html

      Delete
    2. Ah I see. He was describing a Rothbardian dystopia. Nothing to do with the real world then.

      Delete
    3. And yet the UK had no strong immigration controls for much of the 19th century, nor did the US, and yet the real wage soared.

      Delete
    4. "Ah I see. He was describing a Rothbardian dystopia. Nothing to do with the real world then."

      No, LK says very clearly that:

      ""To his credit, Rothbard understands that national borders and controlled immigration impose labour market protectionism and so tend to raise and sustain real wages. Rothbard hates that with a passion, owing to his free market theology. Left-wing people have no such excuse – and indeed they should appreciate the advantages of labour market regulation, protectionism and controlled immigration."

      It's not logically possible to read what I quoted and think 'he's not talking about the real world'.

      Delete
    5. The passage you quote indicates that national borders prevent unlimited immigration the real world. Only in Rothbard's fantasy anarcho-capitalist world would unlimited immigration be possible. Whether wages would fall to subsistence level in this fantasy world is an entirely hypothetical question.

      Delete
  5. Without this assumption [commodities exchange at value], as we will see below, the whole analysis falls apart.

    Once again, you've never adequately explained how removing this assumption adversely affects the theory. My hopes soared when I saw "as we will see below," thinking you'd finally elaborate. But when it comes back up again, it's bare assertion (e.g., "commodity prices do not tend to equal labour values, and so the laws of this chapter fall apart").

    So, I put it to you again: Please give an example of how the absence of this assumption spells ruin for the theory.

    If it helps, I'll start: *poof*, now the offending assumption is gone. You're free to suppose a commodity's price rises above or falls below its corresponding value. With this newfound freedom, it should be no trouble at all for you to demonstrate how the entire value theory is undermined, yes?

    if it were really the case that a constantly increasing real wage were a feature of real world capitalism, Marx’s theory would fall apart, because the real wage would not tend to subsistence wages.

    Yes, that straw, unicausal version of Marx's theory would indeed fall apart. The real one, on the other hand, admits a multiplicity of causal factors and therefore a far more nuanced understanding of wages. At core, the source of downward pressure that you've mistaken for the whole theory is capital, and if you've ever worked as a laborer, you know that wages are a constant source of struggle; owners aren't happy about paying them, and generally want them to be lower. Unless you can illustrate that this is false, that capitalists have in fact been a consistent advocate for higher wages at the expense of profits, you're not going to make any headway against Marx. And chances are, you won't make too many friends among Post Keynesians doing so, since PK theorists on the whole are quite sensitive to class struggle.

    Further food for thought: Average living standards rise under literally every mode of production; it's what makes the transitions to more advanced modes possible. As new modes successively predominate, those standards rise more quickly commensurate with the level of development. Simply pointing to absolute development is not sufficient to judge a system's success; by this metric, you'd be forced to admit the unthinkable -- that socialism should be preferred to capitalism (see, e.g., Robert C. Allen's "Farm to Factory" on this, though I can recommend others).

    Somehow, I doubt you'll cotton to that. So, by your own priors, your argument won't float.

    as Marx himself admits, nobody really is interested in the concept of surplus labour time

    How do you mean? Of course owners want unpaid labor; I have yet to work a job where my boss has not tried to get me to work off the clock.

    You may be thinking of the fact that businesses prioritize p rather than s. That's true. But don't confuse the issue.

    And, of course, there are ridiculous and unrealistic assumptions in Marx’s whole theory as follows:

    The pedagogical or instrumental use of unrealistic assumptions is not a strike against a theory; this is common in virtually all sciences.

    And once we throw aside both these assumptions, we can see that, generally speaking, in the long run in capitalism the workers are liable to be less exploited in two senses:

    Neither sense you name is relevant. As I've intimated, the extent to which one is exploited is not a question of one's proximity to subsistence in absolute terms, but relative terms. If someone makes a wage twice as high as his coworker for ten times that coworker's productivity, then he's much more exploited, despite being better off materially. Similarly, in a sufficiently technologically backwards society, even a commune/co-op free of exploitation altogether may barely live above subsistence.

    ReplyDelete
    Replies
    1. " You're free to suppose a commodity's price rises above or falls below its corresponding value. With this newfound freedom, it should be no trouble at all for you to demonstrate how the entire value theory is undermined, yes?
      "


      I said:

      Marx has told us that this is his assumption at the beginning of the chapter: “that commodities are sold at their value” (Marx 1906: 569). Without this assumption, as we will see below, the whole analysis falls apart.

      That is, the laws he cites **in this chapter.**

      The laws of movements of S and V depend on prices equalling true labour values, for the laws are essentially mathematical relationships.

      If the price of a commodity rises above trey labour values, then the value of S and V can rise simultaneously, contrary to law 2 ("Surplus-value and the value of labour-power vary in opposite directions"). If you can't see you are wasting my time.

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    2. "As I've intimated, the extent to which one is exploited is not a question of one's proximity to subsistence in absolute terms, but relative terms. "

      The whole theory of capitalism increasing its surplus value extracted depends on the real wage tending toward subsistence level, you bloody idiot, so of course if it is rising that is a fundamental way in which they are no longer exploited.

      Also, if real wage rise and rise and living standards soar, then it cannot be that "the mass of misery, oppression, slavery, degradation, exploitation" is constantly growing. Nor would "revolt of the working-class" necessarily grow if real wages soar.

      Delete
  6. "The real one, on the other hand, admits a multiplicity of causal factors and therefore a far more nuanced understanding of wages"

    False. His theory is that wages tend to subsistence levels:

    http://socialdemocracy21stcentury.blogspot.com/2016/03/marx-on-wage-determination-and.html

    ReplyDelete