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capitalmomentum · 8 years ago

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Value, Price and Profit part 12 (chapter 6)

We begin at last on Marx’s explication of political economy. Marx warns us it will necessarily lack some detail:

Citizens, I have now arrived at a point where I must enter upon the real development of the question. I cannot promise to do this in a very satisfactory way, because to do so I should be obliged to go over the whole field of political economy. I can, as the French would say, but “effleurer la question,” touch upon the main points. The first question we have to put is: What is the value of a commodity? How is it determined?

Marx begins by distinguishing the value from the rate of exchange with another commodity.

Yet, its value remaining always the same, whether expressed in silk, gold, or any other commodity, it must be something distinct from, and independent of, these different rates of exchange with different articles. It must be possible to express, in a very different form, these various equations with various commodities.

He analogises value to the areas of plane figures: area abstracts away the particulars of a triangle, and allows us to compare them. So what is common to all commodities?

The next paragraph seems pretty important:

As the exchangeable values of commodities are only social functions of those things, and have nothing at all to do with the natural qualities, we must first ask: What is the common social substance of all commodities? It is labour. To produce a commodity a certain amount of labour must be bestowed upon it, or worked up in it.

And I say not only labour, but social labour. A man who produces an article for his own immediate use, to consume it himself, creates a product, but not a commodity. As a self-sustaining producer he has nothing to do with society. But to produce a commodity, a man must not only produce an article satisfying some social want, but his labour itself must form part and parcel of the total sum of labour expended by society. It must be subordinate to the division of labour within society. It is nothing without the other divisions of labour, and on its part is required to integrate them.

And to quantify that, Marx says, we should use the amount of social labour time.

A commodity has a value, because it is a crystallization of social labour. The greatness of its value, or its relative value, depends upon the greater or less amount of that social substance contained in it; that is to say, on the relative mass of labour necessary for its production. The relative values of commodities are, therefore, determined by the respective quantities or amounts of labour, worked up, realized, fixed in them. The correlative quantities of commodities which can be produced in the same time of labour are equal.

Marx raises the question of whether this is related to Weston’s idea of wages fixing prices. He says the value of labour, and the reward for labour, are different things. Wages are bounded from above by the value of labour, but that’s the only restriction placed.

Marx adds that it’s not just the immediate labour of turning materials into a product, but also

the quantity of labour previously worked up in the raw material of the commodity, and the labour bestowed on the implements, tools, machinery, and buildings, with which such labour is assisted

though, in the case of machines, the value of the labour used to build the machine is spread out over the machine’s lifetime.

Marx then forestalls the objection that this would imply a lazy worker’s work is more valuable: social labour is the necessary labour, not the actual labour.

You will recollect that I used the word “social labour,” and many points are involved in this qualification of “social.” In saying that the value of a commodity is determined by the quantity of labour worked up or crystallized in it, we mean the quantity of labour necessary for its production in a given state of society, under certain social average conditions of production, with a given social average intensity, and average skill of the labour employed.

To illustrate, Marx says that went power-looms halved the amount of labour needed for a quantity of cloth, hand-loom weavers had to work twice as long to produce the same value. On the other hand, if it became necessary to use worse soil and therefore more time was needed for agriculture, the value of produce would rise.

Marx distinguises two classes of factors to determine the productive powers of labour: natural ones like the fertility of soil or availability of ore in a mine, and social ones to do with concentration of capital and scientific development. He proposes a simple expression:

The values of commodities are directly as the times of labour employed in their production, and are inversely as the productive powers of the labour employed.

At first I thought this could be interpreted as $$\text{value}\propto \frac{\text{labour time}}{\text{productive power}}$$but actually I think ‘productive powers’ is just the inverse of ‘time per unit commidity’ so actually I think he means $$\text{value}\propto\text{labour time per unit}=\frac{1}{\text{productive power}$$and he’s just doing the good old Marx thing of saying everything several times.

Marx goes on to talk about price, which he calls “the monetary expression of value”. At the time he was writing, fiat currencies had not been established, and the UK used a gold standard while continental Europe used a silver standard.

You exchange a certain amount of your national products, in which a certain amount of your national labour is crystallized, for the produce of the gold and silver producing countries, in which a certain quantity of their labour is crystallized. It is in this way, in fact by barter, that you learn to express in gold and silver the values of all commodities, that is the respective quantities of labour bestowed upon them.

This seems straightforward enough, but I’m not entirely sure how to extend this analysis to fiat currencies.

Marx then goes on to talk about the difference between natural price (”the process by which you give to he values of all commodities an independent and homogeneous form”) and market prices. He argues that although they fluctuate, they (as previous economists had argued) fluctuate around the actual value as supply and demand follow fluctations, though he won’t explain this in detail just now.

It suffices to say the if supply and demand equilibrate each other, the market prices of commodities will correspond with their natural prices, that is to say with their values, as determined by the respective quantities of labour required for their production.

But supply and demand must constantly tend to equilibrate each other, although they do so only by compensating one fluctuation by another, a rise by a fall, and vice versa.

If instead of considering only the daily fluctuations you analyze the movement of market prices for longer periods, as Mr. Tooke, for example, has done in his History of Prices, you will find that the fluctuations of market prices, their deviations from values, their ups and downs, paralyze and compensate each other; so that apart from the effect of monopolies and some other modifications I must now pass by, all descriptions of commodities are, on average, sold at their respective values or natural prices.

The average periods during which the fluctuations of market prices compensate each other are different for different kinds of commodities, because with one kind it is easier to adapt supply to demand than with the other.

Marx finishes by dismissing the idea that profits are made by selling products above their actual values.

...it is nonsense to suppose that profit, not in individual cases; but that the constant and usual profits of different trades spring from the prices of commodities, or selling them at a price over and above their value. The absurdity of this notion becomes evident if it is generalized. What a man would constantly win as a seller he would constantly lose as a purchaser.

He dismisses the possibility that some people are only buyers or only sellers.

It would not do to say that there are men who are buyers without being sellers, or consumers without being producers. What these people pay to the producers, they must first get from them for nothing. If a man first takes your money and afterwards returns that money in buying your commodities, you will never enrich yourselves by selling your commodities too dear to that same man. This sort of transaction might diminish a loss, but would never help in realizing a profit.

I think what he means by “they must first get from them for nothing” is that if you are paying for something with other commodities, you first have to obtain commodities somehow. You can’t just magically become a ‘buyer’.

Finally, he expresses the challenge he’s about to take on:

To explain, therefore, the general nature of profits, you must start from the theorem that, on an average, commodities are sold at their real values, and that profits are derived from selling them at their values, that is, in proportion to the quantity of labour realized in them. If you cannot explain profit upon this supposition, you cannot explain it at all.

Marx says this is unintuitive, but many scientific understandings are also unintuitive. (He actually uses the word ‘paradoxical’, but none of the examples he lists are paradoxes in the familiar sense, so I guess that word changes its meaning.)

#edwad academy session 1 #Value Price and Profit

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capitalmomentum · 8 years ago

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Value, Price and Profit part 11 (chapter 5)

This chapter is called Wages and Prices.

Marx isn’t quite finished by Weston. He is here basically saying, ‘the price of goods is not determined by wages’. He illustrates this by pointing out places where, compared to other countries, wages are high but the final prices are low, and vice versa.

Marx says that Weston has not entirely ignored profits and rent, but has assumed that they are in direct proportion to wages, i.e. the price is \begin{align} \text{price}&=\text{wages}+p_\text{rent}\cdot\text{wages}+p_\text{profit}\cdot\text{wages}\\\\ &=(1+p_\text{rent}+p_\text{profit})\cdot\text{wages} \end{align} where Weston is insisting arbitrarily that $p_\text{rent}=\frac{\text{rent}}{\text{wages}}$ and $p_\text{profit}=\frac{\text{profit}}{\text{wages}}$ are fixed values. Marx is like, that’s bullshit, why should they be fixed?

Marx goes on to say that if commodity prices (exchange-values of commodities) are determined by wages (exchange-value of labour), and wages are determined by commodity prices, we end up in a vicious circle where we we’re saying ‘value determines value’.

What do we mean by saying that the prices of the commodities are determined by wages? Wages being but a name for the price of labour, we mean that the prices of commodities are regulated by the price of labour. As “price” is exchangeable value — and in speaking of value I speak always of exchangeable value — is exchangeable value expressed in money, the proposition comes to this, that “the value of commodities is determined by the value of labour,” or that “the value of labour is the general measure of value."

But how, then, is the “value of labour” itself determined? Here we come to a standstill. Of course, we come to a standstill if we try reasoning logically, yet the propounders of that doctrine make short work of logical scruples. Take our friend Weston, for example. First he told us that wages regulate the price of commodities and that consequently when wages rise prices must rise. Then he turned round to show us that a rise of wages will be no good because the prices of commodities had risen, and because wages were indeed measured by the prices of the commodities upon which they are spent. Thus we begin by saying that the value of labour determines the value of commodities, and we wind up by saying that the value of commodities determines the value of labour. Thus we move to and fro in the most vicious circle, and arrive at no conclusion at all.

On the whole, it is evident that by making the value of one commodity, say labour, corn, or any other commodity, the general measure and regulator of value, we only shift the difficulty, since we determine one value by another, which on its side wants to be determined.

Marx finishes with some comments on other economists:

The dogma that “wages determine the price of commodities,” expressed in its most abstract terms, comes to this, that “value is determined by value,” and this tautology means that, in fact, we know nothing at all about value. Accepting this premise, all reasoning about the general laws of political economy turns into mere twaddle. It was, therefore, the great merit of Ricardo that in his work on the principles of political economy, published in 1817, he fundamentally destroyed the old popular, and worn-out fallacy that “wages determine prices,” a fallacy which Adam Smith and his French predecessors had spurned in the really scientific parts of their researches, but which they reproduced in their more exoterical and vulgarizing chapters.

I know Ricardo proposed some kind of labour theory of value, but not much more tbh. Something to read about after VPP.

Anyway, that really does end the first section on demolishing Weston. The study questions for this chapter are actually the same as the ones for the last chapter, so we can now move on from why wrong stuff is wrong to what Marx says is actually right.

#edwad academy session 1 #Value Price and Profit

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capitalmomentum · 8 years ago

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Value, Price and Profit part 10 (chapter 4 study questions)

marxists.org suggests

Speaking in terms of supply and demand, what conditions will cause wages to rise and what conditions will cause wages to fall?

What then determines the level of wages, from which supply and demand are only bringing about variations?

As a union organisers trying to improve wages, what tactics do you think are necessary to bring about wage rises and what tactics would you see the employers adopting?

Seems like relatively easy questions this time around, if only because I’ve read a bit of Marx before.

Speaking in terms of supply and demand, what conditions will cause wages to rise and what conditions will cause wages to fall?

If there is a large supply of qualified people looking for work compared to the positions capitalists are prepared to pay for (the demand), wages will fall. If there aren’t as many qualified people as capitalists need, wages will rise. Depending on this rise and fall of wages, people will train/apply for different professions.

What then determines the level of wages, from which supply and demand are only bringing about variations?

The glib answer is ‘the value of labour-power’, but that’s just a rephrasing of the question. I believe Marx’s answer to this question is going to be dealt with heavily in the next few chapters and in Capital, but my current understanding is that it’s the cost of reproducing labour-power: feeding and housing a worker and their children, training new workers, etc. This in turn connects to other things such as the prices of the means of subsistence, teaching labour, building houses and schools, etc.

This value isn’t just the expense of raising a worker and their child, but also any partner who performs unwaged housework and care work and has their food paid for on the worker’s salary.

As a union organisers trying to improve wages, what tactics do you think are necessary to bring about wage rises and what tactics would you see the employers adopting?

The obvious answer is to hold a strike. An individual worker can’t refuse to work for higher wages because the capitalist can just fire them and hire someone else for the same wage. However, if all the workers refuse to work at once unless they’re paid more, the capitalist can’t make any profits and starts to lose the money they’ve invested, and if the workers can hold the strike for long enough, the work stoppage becomes more costly to the capitalist than an increase in wages, so the capitalist has to accept the wage rise. Marx referred to this in the chapter as ‘testing the demand’ for labour-power.

The immediate limitation is that the workers are not being paid during the strike, so they will somehow have to pool resources, or get support from other workers elsewhere. Or, indeed, a group of lesbians and gay men from London in that movie you might have seen.

Of course, this hurts the capitalist’s profits, so they will resort to any and all tactics to break the unity of the workers and get some workers to work during the strike (scabbing). If work can continue, the capitalists are no longer losing so much money, and the strikers have much less power to force a rise in wages. That means, of course, that scabs are hated by the striking workers.

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As that song describes (a ‘blackleg miner’ was a miner who scabs at night), the strikers might need to violently prevent scabs from working and cost the capitalist more. This could amount to other such dramatic direct action such as breaking machines, chaining people across gates, etc.

A second option for the capitalists is to undermine support for the strike, by writing in the media to portray the workers as greedy, blame them for inconvenience etc. Every time public transport workers strike, you’ll see articles all over the papers criticising them for disrupting peoples’ journeys, which is the entire point. Since a strike depends on workers being supported by others for the duration of the strike so they can, y’know, eat, undermining that support might force the workers to end it without their demands being met.

If the capitalists can’t get workers to scab, and the workers are well enough supplied to wait it out, the remaining tactic capitalists have to break a strike is sheer brutal force. Send in the cops, beat people up, kettle them, make striking so violent and horrible an experience that the workers can no longer refuse to work. That often backfires, of course, if the violence and the workers causes more people to stand up for the workers so they can continue to resist.

Labour history sure is exciting!

#edwad academy session 1 #Value Price and Profit

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capitalmomentum · 8 years ago

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Value, Price and Profit part 9 (chapter 4)

Now we’re moving onto chapter 4, Supply and Demand.

Check out this sick burn:

Our friend Weston accepts the Latin proverb that “repetitio est mater studiorum,” that is to say, that repetition is the mother of study, and consequently he repeated his original dogma again under the new form

Anyway Marx’s main point, which he alluded to before, is to address the underlying problem with all of Weston’s arguments:

Now, I ask him: What are high wages and what are low wages? Why constitute, for example, five shillings weekly low, and twenty shillings weekly high wages? If five is low as compared with twenty, twenty is still lower as compared with two hundred.

Weston, says Marx, did not even try to determine what is meant by ‘low’ and ‘high’ wages, but

satisfied himself with the acceptance of the popular slang terms of low and high as something having a fixed meaning, although it is self-evident that wages can only be said to be high or low as compared with a standard by which to measure their magnitudes.

Marx gets onto a major point, as far as I can tell, of his economics:

He will be unable to tell me why a certain amount of money is given for a certain amount of labour. If he should answer me, “This was settled by the law of supply and demand,” I should ask him, in the first instance, by what law supply and demand are themselves regulated. And such an answer would at once put him out of court.

Marx briefly points out that this doesn’t provide any argument against wages rising, because they would be expected to rise and fall as supply and demand fluctuate, but his main point is...

Supply and demand regulate nothing but the temporary fluctuations of market prices. They will explain to you why the market price of a commodity rises above or sinks below its value, but they can never account for the value itself.

Suppose supply and demand to equilibrate, or, as the economists call it, to cover each other. Why, the very moment these opposite forces become equal they paralyze each other, and cease to work in the one or other direction. At the moment when supply and demand equilibrate each other, and therefore cease to act, the market price of a commodity coincides with its real value, with the standard price round which its market prices oscillate.

In inquiring into the nature of that VALUE, we have therefore nothing at all to do with the temporary effects on market prices of supply and demand. The same holds true of wages and of the prices of all other commodities.

In short, ‘supply and demand’ is the mechanism by which prices adjust to oscillate around the value of goods, but it doesn’t tell us what those values are. This is, I think, where Marx is going to move on from destroying Weston to teaching us his understanding of political economy.

Not much to say about this chapter because it’s really just a segue into the next section.

#edwad academy session 1 #Value Price and Profit

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capitalmomentum · 8 years ago

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Value, Price and Profit part 8 (chapter 3 study questions)

Study questions for this chapter:

What would be the effect of a shortage in the means of payment in an economy?

What factors influence the rate of circulation of money?

What measures and factors do you know that would overcome a shortage in the means of payment other than printing more banknotes?

What would be the effect of a shortage in the means of payment in an economy?

Marx’s answer seems to be that a shortage of means of payment in one part of the economy could be addressed by moving money out of another part, but supposing that didn’t happen?

I mean for the whole economy, I guess this goes back to the question of the ‘money supply’ and inflation that later economists make a big deal out of. If there really was a shortage of money, and there wasn’t any way to add more money by e.g. minting more coins, taking money out of reserve, pushing money out of a different ‘department’, then presumably the money that’s left would be worth more, so the prices of commodities would go up?

What factors influence the rate of circulation of money?

I guess this has to do with like, how much the people who have money want/need to spend it. Like, if the workers are getting paid more, then they have more money to spend, so they can buy more from the capitalists; if the capitalists are selling lots of stuff they’ll want to spend more on raw materials etc.? (Isn’t that vaguely what Keynesianism talks about or something?)

I’m not really sure what sort of answer they’re looking for here. It’s a very broad question isn’t it?

Apparently the ‘rate of circulation of money’ is also called the velocity of money. This is odd to me because ‘velocity’ in physics is a quantity with a direction, not just a magnitude, but I guess ‘speed of money’ didn’t sound posh enough.

Wikipedia relates it to some other factors like interest on ‘alternative financial assets’:

The velocity of money provides another perspective on money demand. Given the nominal flow of transactions using money, if the interest rate on alternative financial assets is high, people will not want to hold much money relative to the quantity of their transactions—they try to exchange it fast for goods or other financial assets, and money is said to "burn a hole in their pocket" and velocity is high. This situation is precisely one of money demand being low. Conversely, with a low opportunity cost velocity is low and money demand is high. In money market equilibrium, some economic variables (interest rates, income, or the price level) have adjusted to equate money demand and money supply.[citation needed]

So the tl;dr seems to be if people would make a lot more money by owning investments than having money on hand, they’ll try to invest asap, and that means greater 'velocity’.

Digging further gets into something about the difference between ‘M1′, ‘M2′ and ‘M3′ which I don’t really understand, but I think we’re getting sidetracked.

What measures and factors do you know that would overcome a shortage in the means of payment other than printing more banknotes?

So I guess one is that the prices of everything goes down (deflation) so people can still pay for stuff with the money that’s still there. I think that’s generally considered bad news because it makes it preferable to hold onto your money rather than spend it.

Marx mentioned one in the chapter for a shortage of coins:

The same effect might be produced, without one additional bank-note, by an additional bill circulation, as was the case in Lancashire for a very considerable time.

Not sure what caused the ‘extra bill circulation’ though.

I guess like, the other possibility is that people are sitting on money and they stop doing that. So whatever makes capitalists think it’s more worth their time to invest their money than hold onto it will put money back into circulation?

#edwad academy session 1 #Value Price and Profit

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capitalmomentum · 8 years ago

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Value, Price and Profit part 7 (chapter 3 redux)

To resume this blog, I’m going to go over Wages and Currency again, because I think I interpreted it wrong last time.

Marx is explaining how a rise in wages, paid in coins, would not necessarily require the minting of additional coins. The relevant sub-paragraph (split for legibility):

All of you know that the currency of this country is divided into two great departments. One sort, supplied by bank-notes of different descriptions, is used in the transactions between dealers and dealers, and the larger payments from consumers to dealers, while another sort of currency, metallic coin, circulates in the retail trade.

Although distinct, these two sorts of currency intermix with each other. Thus gold coin, to a very great extent, circulates even in larger payments for all the odd sums under 5 Pounds.

If tomorrow 4 Pound notes, or 3 Pound notes, or 2 Pound notes were issued, the gold filling these channels of circulation would at once be driven out of them, and flow into those channels where they would be needed from the increase of money wages. Thus the additional million required by an advance of wages by fifty per cent would be supplied without the addition of one single Sovereign.

The same effect might be produced, without one additional bank-note, by an additional bill circulation, as was the case in Lancashire for a very considerable time.

I think I misread some key sentences last time. In particular, I misread “Thus gold coin, to a very great extent, circulates even in larger payments for all the odd sums under 5 Pounds.”

Marx has distinguished two kinds of payment: large payments (e.g. between dealers), which usually use notes, and small payments (e.g. buying stuff at a shop), which usually use coins. But he’s saying the small end of these ‘large payments’ also use coins sometimes, not just notes. If smaller-denomination banknotes were issued, these ‘smaller large payments’ would no longer need to use coins, so more coins would be available for the ‘small payments’.

Here’s a minor quibble with the historical case in the next paragraph:

The American crisis came, and those aggregate wages were suddenly reduced to about one-fourth of their former amount. This would have been in the opposite direction a rise of 400 per cent. If wages rise from five to twenty, we say that they rise by 400 per cent; if they fall from twenty to five, we say that they fall by seventy-five per cent; but the amount of rise in the one and the amount of fall in the other case would be the same, namely, fifteen shillings.

Marx is being inconsistent in how he uses percentages. I would usually consider a ‘rise of n percent’ to mean ‘an increase to (100+n) percent of the original value’, consistent with the ‘fall by seventy five percent’, but in that case Marx should say ‘rise of 300 percent’. Whatever, though, the point is clear (if somewhat laboured, but that’s Marx for you lol)

The point, in any case, is that the amount of currency in circulation doesn’t really have anything to do with the rate of wages.

Nowadays, of course, rather than notes for large payments and coins for small ones, both notes and coins are used for small payments, and large payments are usually done electronically. I’m sure you could construct an analogous argument.

Marx finishes the chapter was a massive burn:

From our friend Weston's standpoint this is an unsolvable riddle. Looking somewhat deeper into this matter, he would have found that, quite apart from wages, and supposing them to be fixed, the value and mass of the commodities to be circulated, and generally the amount of monetary transactions to be settled, vary daily; that the amount of bank-notes issued varies daily; that the amount of payments realized without the intervention of any money, by the instrumentality of bills, cheques, book-credits, clearing houses, varies daily; that, as far as actual metallic currency is required, the proportion between the coin in circulation and the coin and bullion in reserve or sleeping in the cellars of banks varies daily; that the amount of bullion absorbed by the national circulation and the amount being sent abroad for international circulation vary daily. He would have found that this dogma of a fixed currency is a monstrous error, incompatible with our everyday movement. He would have inquired into the laws which enable a currency to adapt itself to circumstances so continually changing, instead of turning his misconception of the laws of currency into an argument against a rise of wages.

The bills, cheques, book-credits and clearing houses Marx mentions are probably the past analogue of today’s wire transfers.

Honestly I don’t know why Weston would appeal to something so obviously baseless as ‘the amount of currency is fixed’ but he got totally rekt for it so let’s move on.

#edwad academy session 1 #Value Price and Profit

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capitalmomentum · 8 years ago

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So XKit says it’s been a full six months since I updated this blog. I’ve been distracted a lot, and I’m really sorry to anyone who was enjoying following along.

@edwad just started an edwadacademy discord, which seems like a splendid impetus to get back to it. So coming soon, hopefully: VP&P chapter 4. But first I should reread the bits I’ve done already so I can remember what’s even going on lol.

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capitalmomentum · 9 years ago

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Value, Price and Profit part 6 (chapter 3)

This one’s called Wages and Currency. So I guess maybe Marx is going to demolish the ‘wage increases cause inflation’ argument alluded to earlier in the study questions?

Apparently poor old Weston went for a variant argument.

He said: Consequent upon a general rise in money wages, more currency will be wanted to pay the same wages. The currency being fixed, how can you pay with this fixed currency increased money wages? First the difficulty arose from the fixed amount of commodities accruing to the working man despite his increase of money wages; now it arises from the increased money wages, despite the fixed amount of commodities. Of course, if you reject his original dogma, his secondary grievance will disappear. However, I shall show that this currency question has nothing at all to do with the subject before us.

So previously it was: wages go up, prices go up, real wages stay the same.

Now it’s: wages go up, so um... I’m not sure I actually follow Weston’s argument, but Marx's discussion seems to be broader anyway.

Marx makes the point that the amount of currency in circulation can be much less than the actual yearly wages, since the same currency goes back to the capitalists through shopkeepers banks; the total amount of currency in circulation varies between countries independent of the wage rate.

Marx says a wage increase might require there to be more money in circulation, but this wouldn’t actually matter. He says there are two major kinds of currency: banknotes are used for large transactions mainly between ‘dealers and dealers’ while coins are used ‘in the retail trade’.

I find the next paragraph quite hard to follow so I’m going to try and break it down:

Although distinct, these two sorts of currency intermix with each other. Thus gold coin, to a very great extent, circulates even in larger payments for all the odd sums under 5 Pounds. If tomorrow 4 Pound notes, or 3 Pound notes, or 2 Pound notes were issued, the gold filling these channels of circulation would at once be driven out of them, and flow into those channels where they would be needed from the increase of money wages. Thus the additional million required by an advance of wages by fifty per cent would be supplied without the addition of one single Sovereign. The same effect might be produced, without one additional bank-note, by an additional bill circulation, as was the case in Lancashire for a very considerable time.

First, “Thus gold coin, to a very great extent, circulates even in larger payments for all the odd sums under 5 Pounds.”

I think this sentence is saying that while payments under £5 would not involve notes (£5 was the smallest note at the time), it would still cause payments involving notes. Point being: most economic activity causes circulation involving these large notes? (nb. England was at this time on the gold standard, so that’s why Marx keeps referring to gold)

Then, “If tomorrow 4 Pound notes, or 3 Pound notes, or 2 Pound notes were issued, the gold filling these channels of circulation would at once be driven out of them, and flow into those channels where they would be needed from the increase of money wages.”

I’m having a hard time understanding this bit, especially. What are ‘these channels of circulation’?

Thinking about it, the meaning is probably that the supply of money for the increased wages would come from all the banknotes being circulated in larger sums. But I’m not sure what that has to do with the issuing of smaller-denomination banknotes.

Like if I’m following it right, Marx is saying “hey these capitalists are constantly exchanging massive amounts of money in banknotes, if they need more money to pay workers they can use those banknotes, so they don’t have to put a greater value of money into circulation”?

The rest of the chapter is spent on historical cases. Probably the most notable bit is this one:

Got to admit this chapter is a bit of a headache compared to the last few. I don’t feel like I fully understand it. The study questions may help.

#edwad academy session 1 #Value Price and Profit

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capitalmomentum · 9 years ago

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“Value, Price and Profit” part 5 (chapter 2 study questions)

Big apologies for putting this off for an entire month. A number of other things came up, and a lot of time I was very low on energy, but honestly, I could have found time. Hopefully getting back on track now.

Picking up from where we left off last time, I was going to attempt some study questions about Value, Price and Profit’s second chapter.

1. By what line of argument does Marx prove that a rise in wages will bring about an increase in the mass of commodities which the workers will be able to purchase with their now increased wages?

So: Marx uses a simplified illustrative case where there are two major branches of industry, termed ‘necessities’ and ‘luxuries’. The difference is that in the initial equilibrium, the proletariat can buy only ‘necessities’ with their wages, while the bourgeoisie can afford to buy ‘luxuries’ as well.

Now, the proletariat manage to secure a general rise in wages in all branches of industry. This means they have more money to spend, and the bourgeoisie are making less profit.

The bourgeoisie who own the means of production of necessities can now raise the prices of necessities, in order to compensate for the loss of profit. (If they don’t do this, the proletariat have money to spend after the purchase of necessities, allowing them to purchase more necessities or luxuries previously only available to the bourgeoisie: they can buy more commodities, QED.)

So immediately after the raise in prices, the proletariat haven’t yet gotten any more commodities for their increased wages. But the producers of luxuries are now facing much smaller profits, due to the general increase in wages. They can’t raise prices to compensate because their customers don’t have any more money to spend, there’s no increased demand.

If there’s a difference in the rate of profit between two different branches of industry, Marx says, the capitalists will move capital and labour to the more profitable industry. The result is that the supply of necessities will increase, and through competition, the price of necessities will lower again, until the capitalists are making the same profit in both luxuries and necessities (and this will be a smaller profit, since wages went up). Now, the proletariat can once again afford to buy more necessities or some luxuries they couldn’t before.

So either way, the proletariat have access to more stuff.

Marx says the aggregate demand hasn’t changed - the proletariat have more purchasing power but by the same token the bourgeoisie have less - so overall the prices will stay basically the same.

This is Marx’s own summary of his argument:

The aggregate demand for commodities would, therefore, not increase, but the constituent parts of that demand would change. The increasing demand on the one side would be counterbalanced by the decreasing demand on the other side. Thus the aggregate demand remaining stationary, no change whatever could take place in the market prices of commodities.

You arrive, therefore, at this dilemma: Either the surplus wages are equally spent upon all articles of consumption — then the expansion of demand on the part of the working class must be compensated by the contraction of demand on the part of the capitalist class — or the surplus wages are only spent upon some articles whose market prices will temporarily rise. The consequent rise in the rate of profit in some, and the consequent fall in the rate of profit in other branches of industry will produce a change in the distribution of capital and labour, going on until the supply is brought up to the increased demand in the one department of industry, and brought down to the diminished demand in the other departments of industry.

On the one supposition there will occur no change in the prices of commodities. On the other supposition, after some fluctuations of market prices, the exchangeable values of commodities will subside to the former level. On both suppositions the general rise in the rate of wages will ultimately result in nothing else but a general fall in the rate of profit.

I kind of want to write a computer program to simulate this actually. But that can wait for another post.

2. Why does not Marx accept the idea that the price at which a commodity is sold is determined by the total cost of production, from which it follows that if the wage costs rise then the total price must rise?

The short answer is that the profit the capitalists want to make is not fixed, but determined by various other factors as outlined above. The increase in wages results eventually in the capitalists making less profit at the same prices.

3. What do you think explains the fall in prices that Marx alleges resulted from the overall increase in agricultural wages and shortening of the working day?

Marx’s description of this situation:

Having premised so much, I proceed to state that from 1849 to 1859 there took place a rise of about 40 percent in the average rate of the agricultural wages of Great Britain. I could give you ample details in proof of my assertion, but for the present purpose think it sufficient to refer you to the conscientious and critical paper read in 1860 by the late Mr. John C. Morton at the London Society of Arts on “The Forces used in Agriculture.” Mr. Morton gives the returns, from bills and other authentic documents, which he had collected from about one hundred farmers, residing in twelve Scotch and thirty-five English counties.

According to our friend Weston's opinion, and taken together with the simultaneous rise in the wages of the factory operatives, there ought to have occurred a tremendous rise in the prices of agricultural produce during the period 1849 to 1859. But what is the fact? Despite the Russian war, and the consecutive unfavourable harvests from 1854 to 1856, the average price of wheat, which is the leading agricultural produce of England, fell from about 3 Pounds per quarter for the years 1838 to 1848 to about 2 Pounds 10 Shillings per quarter for the years 1849 to 1859. This constitutes a fall in the price of wheat of more than 16 percent simultaneously with an average rise of agricultural wages of 40 percent. During the same period, if we compare its end with its beginning, 1859 with 1849, there was a decrease of official pauperism from 934,419 to 860,470, the difference being 73,949; a very small decrease, I grant, and which in the following years was again lost, but still a decrease.

It might be said that, consequent upon the abolition of the Corn Laws, the import of foreign corn was more than doubled during the period from 1849 to 1859, as compared with the period from 1838 to 1848. And what of that? From Citizen Weston's standpoint one would have expected that this sudden, immense, and continuously increasing demand upon foreign markets must have sent up the prices of agricultural produce there to a frightful height, the effect of increased demand remaining the same, whether it comes from without or from within. What was the fact? Apart from some years of failing harvests, during all that period the ruinous fall in the price of corn formed a standing theme of declamation in France; the Americans were again and again compelled to burn their surplus produce; and Russia, if we are to believe Mr. Urquhart, prompted the Civil War in the United States because her agricultural exports were crippled by the Yankee competition in the markets of Europe.

[I’m kinda skeptical that the American Civil War was triggered by Russia? Like... wasn’t slavery something of a bigger deal there? Still, it’s interesting to hear that apparently that theory was big enough when Marx gave this speech that he could casually refer to a Mr. Urquhart claiming it and expect people to know who he was talking about. I suspect based on a quick googling that this is referring to David Urquhart, an English diplomat who, at another time, Engels wrote about in connection to Russia here. It’s probably not relevant anymore though.]

I admit I’m struggling to see what the explanation of this one is. Per the above arguments, we’d suspect that the rise in wages led to capitalists moving labour and capital into agriculture, at least in the UK, leading to an increase in supply. That may have been happening. I’m not sure what would lead to prices falling abroad though, unless they had similar wage increases in other industries. I’m also not sure why the prices would fall rather than settle at their previous level.

I’m going to finish this post now so I can close my browser, and revisit this later if I come up with something. In the meantime, let’s press on to chapter 3.

#edwad academy session 1 #Value Price and Profit

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“Value, Price and Profit” part 4

Now, the next chapter. Marx summarises Weston’s argument (not sure why this wasn’t done in the first chapter, but OK) as follows:

All his reasoning amounted to this: If the working class forces the capitalist class to pay five shillings instead of four shillings in the shape of money wages, the capitalist will return in the shape of commodities four shillings' worth instead of five shillings' worth. The working class would have to pay five shillings for what, before the rise of wages, they bought with four shillings.

Marx then points out that this would make real wages totally arbitrary:

By why is it fixed at four shillings' worth of commodities? Why not at three, or two, or any other sum? If the limit of the amount of wages is settled by an economical law, independent alike of the will of the capitalist and the will of the working man, the first thing Citizen Weston had to do was to state that law and prove it.

We get this line:

Citizen Weston illustrated his theory by telling you that a bowl contains a certain quantity of soup, to be eaten by a certain number of persons, an increase in the broadness of the spoons would produce no increase in the amount of soup. He must allow me to find this illustration rather spoony.

so... I guess ‘spoony’ as a term of dismissal predates the translation of Final Fantasy IV. that’s definitely not something I expected to learn from Marx. anyway, Marx has some fun taking the piss with a classical reference before saying:

Citizen Weston, on his part, has forgotten that the bowl from which the workmen eat is filled with the whole produce of national labour, and that what prevents them fetching more out of it is neither the narrowness of the bowl nor the scantiness of its contents, but only the smallness of their spoons.

To make this case, Marx distinguishes between two groups of capitalist: those who produce ‘necessaries’, who would raise their prices, and those who produce luxuries, which he says is a pretty large group. Of the first group:

It is perfectly true that, considered as a whole, the working class spends, and must spend, its income upon necessaries. A general rise in the rate of wages would, therefore, produce a rise in the demand for, and consequently in the market prices of necessaries. The capitalists who produce these necessaries would be compensated for the risen wages by the rising market prices of their commodities.

But, Marx says, for the luxury-producing capitalists, not only would they have a lower rate of profit from the increased wages and no way to increase it due to lack of increased demand, but they’d have less to spend on each others’ luxuries, so the price of luxuries would fall and compound their loss.

This imbalance between the different rates of profit in ‘luxuries’ and ‘necessaries’ would in turn result in capitalists moving from producing luxuries to producing necessaries (or trading from them).

Capital and labour would be transferred from the less remunerative to the more remunerative branches; and this process of transfer would go on until the supply in the one department of industry would have risen proportionately to the increased demand, and would have sunk in the other departments according to the decreased demand. This change effected, the general rate of profit would again be equalized in the different branches. As the whole derangement originally arose from a mere change in the proportion of the demand for, and supply of, different commodities, the cause ceasing, the effect would cease, and PRICES would return to their former level and equilibrium.

The result: more necessaries, more for the working class, real wages are indeed greater.

The obvious objection seems to be that the working class wouldn’t necessarily put their money towards necessaries only, but this serves Marx’s overall point:

If I am told that in the previous argument I assume the whole surplus wages to be spent upon necessaries, I answer that I have made the supposition most advantageous to the opinion of Citizen Weston. If the surplus wages were spent upon articles formerly not entering into the consumption of the working men, the real increase of their purchasing power would need no proof.

So either way, a greater share of production goes to the working class, and a smaller share to the capitalists:

Marx spends the rest of the chapter using historical cases to comprehensively demolish a hypothetical scenario of an agricitural wage rise that was presented by Weston.

I don’t have a lot to say about this chapter, since it all seems very persuasive. But then I do need to address the study questions, but I need to put that off until tomorrow or later since it’s gotten late.

#Value Price and Profit #edwad academy session 1

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capitalmomentum · 9 years ago

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“Value, Price and Profit” part 3

So in the first chapter, Marx has been tearing into John Weston’s arguments that workers should not seek to raise wages, by taking on what he presents as Weston’s two premises: constant production and constant real wages. And he finished by saying

The will of the capitalist is certainly to take as much as possible. What we have to do is not to talk about his will, but to enquire into his power, the limits of that power, and the character of those limits.

Before I get into the next chapter, though, I want to have another go at the discussion question offered on marxists.org:

1. Marx refers to Weston's argument that the total portion of the national product accruing to wages must remain constant. The modern expression of this theory is “that wage rises cause inflation”, and that therefore any increase in wages will cause inflation and reduce real wages back to where they started. How would you respond to this version of Weston's argument in terms of inflation?

Last time my immediate thoughts were:

OK like as I understand it, inflation is determined by the amount of money in circulation increasing faster than the amount of things you can buy with that money (and with fiat currencies, money is issued faster than the amount of stuff in the economy grows, to try and maintain a certain small level of inflation to encourage people to keep spending instead of holding onto their money)? (And I guess with gold standards or whatever, inflation would be driven by people digging up more gold?)

My understanding might be way off (I read the Wikipedia article on inflation months ago), but like. I can’t actually see how increasing wages would lead to inflation? It would just mean workers get a larger share of that circulating money? Like whether capitalists have it or workers have it, it’s the same (slowly growing) amount of money?

This time I’m going to try and read what capitalist economists actually say, starting with (where else) the Wikipedia page on inflation (no, not the most rigorous of academic sources, but I’m just some nerd with an internet connection and no idea where else to begin and ‘inflation’ is probably a significant enough topic to have been wrestled into a mainstream view). A couple of things stood out:

In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time[1] resulting in a loss of value of currency.[2]

(...)

Economists generally believe that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.[7] However, money supply growth does not necessarily cause inflation. Some economists maintain that under the conditions of a liquidity trap, large monetary injections are like "pushing on a string".[8][9] Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities.[10] However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.[11][12]

So contrary to what I thought, the increase in the money supply faster than economic growth isn’t the definition of inflation, just a major cause. But with the above definition of inflation, this is just the same argument that Marx is criticising in the chapter. I guess an answer is that increasing wages increases the share of production that ends up going to the proletariat or something? Like, spending money doesn’t seem to be more capable of causing inflation if it’s workers buying shit rather than bosses. There’s probably more to it than that though? The discussion question doesn’t really explain what’s different about the ‘wages cause inflation’ version of the argument.

Anyway, nobody has yet informed me of why I’m hopelessly muddled, so I guess I’ll press on.

#Value Price and Profit #edwad academy session 1

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capitalmomentum · 9 years ago

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“Value, Price and Profit” part 2

So, we have context. Somebody is wrong on the internet in the First International, and Karl Marx is going to comprehensively demolish his argument, and then tell us a bit about political economy.

(I feel kind of sorry for this John Weston, who will forever be remembered as “that guy who was so wrong he inspired Marx to write VP&P”)

Also marxists.org has a study guide to go with this, so at the end of each section I’ll take a stab at the questions.

Preliminary

First, Marx says: there’s a load of strikes going on right now, it’s kind of important we know where we stand, and a little to soften the blow for ‘Citizen Weston’ (i.e., I respect that you’re willing to stand up with an up with an unpopular opinion, but you’re still wrong). Not sure if this was a passive-agressive dig or a genuine appeal to Weston to change his mind.

Production and Wages

This bit focuses on tearing down Weston’s argument.

Marx says Weston’s premises are:

national production is constant

real wages are constant

(1) is blatantly false, says Marx: productive power’s constantly going up, and it would remain variable if wages went up. He continues by pointing out that (2) isn’t implied by (1) either: even if (1) was true, the split of production between wages and profit could be different. He then says Weston didn’t give any proof of (2), just straight-up asserted it. That all makes perfect sense.

(I’m not quite sure how sarcastic all the “our friend Weston”s are. They feel pretty sarcastic though.)

Unfortunately, I found the next paragraph quite hard to follow, and I’ve split it into slightly smaller paragraphs. (Marx really does seem to like saying something, then saying it again a slightly different way in the next sentence or clause...)

But even conceding him his assertion, it would cut both ways, while he presses it only in one direction. If the amount of wages is a constant magnitude, then it can be neither increased nor diminished. If then, in enforcing a temporary rise of wages, the working men act foolishly, the capitalists, in enforcing a temporary fall of wages, would act not less foolishly.

This bit I can follow. Capitalists wouldn’t want to keep wages low any more than workers would want them to be higher; I guess like you’d say Weston believes the ‘real profit’ as well as the ‘real wages’ is fixed.

Our friend Weston does not deny that, under certain circumstances, the working men can enforce a rise of wages, but their amount being naturally fixed, there must follow a reaction. On the other hand, he knows also that the capitalists can enforce a fall of wages, and, indeed, continuously try to enforce it. According to the principle of the constancy of wages, a reaction ought to follow in this case not less than in the former. The working men, therefore, reacting against the attempt at, or the act of, lowering wages, would act rightly. They would, therefore, act rightly in enforcing a rise of wages, because every reaction against the lowering of wages is an action for raising wages.

According to Citizen Weston's own principle of the constancy of wages, the working men ought, therefore, under certain circumstances, to combine and struggle for a rise of wages. If he denies this conclusion, he must give up the premise from which it flows. He must not say that the amount of wages is a constant quantity, but that, although it cannot and must not rise, it can and must fall, whenever capital pleases to lower it. If the capitalist pleases to feed you upon potatoes instead of upon meat, and upon oats instead of upon wheat, you must accept his will as a law of political economy, and submit to it.

I’m not sure what Marx means by ‘a reaction’ here, and maybe I'd need to read Weston’s report to see what he’s getting at?

Is the ‘reaction’ the process described before, where if wages went up capitalists would raise the prices of commodities, making real wages go back where they were before?

I’m also not following the ‘should’ vs. ‘would’ aspect here? This is the description of Weston’s argument from Marx’s letter to Engels before he wrote VP&P:

Of course I know beforehand what the two main points are: (1) That the wages of labour determine the value of commodities, (2) that if the capitalists pay five instead of four shillings today, they will sell their commodities for five instead of four shillings tomorrow (being enabled to do so by the increased demand)

So I thought Weston’s argument is supposed to be

if wages change, the price of commodities would also change in the same way, so real wages would be the same

therefore, pushing for a change in wages would not actually change workers’ lives

therefore, workers should not waste their time doing that

Not trying to say Weston was right, because the premise here seems to be completely baseless. But if I’ve understood what Weston’s argument is, I’m not seeing how Weston’s premise implies workers should push back against a fall in wages if capitalists decided to lower wages? Like wouldn’t imply the workers shouldn’t care, because eventually the capitalists would have to lower the prices of commodities too and they can trust their real wages would stay the same?

...unless you can say capitalists would not lower the price of commodities when they lowered wages (unless the workers forced them to)? So like, if the workers secured a rise in nominal wages, capitalists would counter it by charging them more for commodities, but on the other hand if capitalists decided to cut nominal wages, they’d have no reason to lower the price of commodities and real wages would fall?

In that case, for “real wages are constant” to remain true, I can see how it would require that the workers would have to resist a fall in real wages? But couldn’t Weston frame something like “if they lowered wages, the capitalists wouldn’t be able to sell their commodities anymore unless they also lowered prices, and therefore real wages would remain the same” as a different mechanism for real wages remaining constant without conceding to Marx that the workers would have to act in that situation to maintain the 'rule’?

I guess Marx is saying the capitalists very well could lower real wages in this scenario, by lowering nominal wages but not prices and forcing the workers to buy cheaper commodities (potatoes and oats)?

so I’ve tried to imagine different possibilities, but I don’t think I really understand Marx’s line of argument here. Still, let’s move on.

If in one country the rate of wages is higher than in another, in the United States, for example, than in England, you must explain this difference in the rate of wages by a difference between the will of the American capitalist and the will of the English capitalist, a method which would certainly very much simplify, not only the study of economic phenomena, but of all other phenomena.

It took me a bit to interpret this, but OK, I can see this follows from the scenario he was describing where workers can’t do anything to raise their wages, but capitalists could lower it however they liked. In that case, there wouldn’t be any reason for wages to be any particular level except “that’s what the capitalists want I guess”. Comparing this with religion, Marx basically says he can’t imagine Weston would be going for such a “throw up your hands and say I dunno” approach.

Marx finishes the chapter with:

I can definitely get behind that.

To finish, here’s marxists.org’s discussion question from the study guide:

Marx refers to Weston's argument that the total portion of the national product accruing to wages must remain constant. The modern expression of this theory is “that wage rises cause inflation”, and that therefore any increase in wages will cause inflation and reduce real wages back to where they started. How would you respond to this version of Weston's argument in terms of inflation?

#edwad academy session 1 #value price and profit

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capitalmomentum · 9 years ago

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“Value, Price and Profit” part 1

Hey, time for the next text by Marx!

Incidentally I’ve been in a leftist discord chat and edwad (the person who wrote the course we’re following) said the thing we just read, Wage Labour and Capital is like, really early Marx and wrong in a lot of ways lol. Once we’ve got stuck into Capital, maybe we’ll find out why. (Maybe you already know why! I don’t.)

Anyway, edwad is revising the course a bit, but apparently the next one, Value, Price and Profit is pretty good so I imagine that will stay on.

Introduction

So, background: this was originally a speech given by Marx in 1865 to the First International. The story told in the introduction is that some guy called John Weston argued that wage increases don’t help the “social and material prospects of the working class be in general” and that unions cause harm to “other branches of industry” when they fight for them. Marx summarises his argument:

Marx was not impressed, and said he was busy writing Capital but still going to improvise a response:

Inane though this is, only attaching itself to the most superficial external appearance, it is nevertheless not easy to explain to ignorant people all the economic questions which compete with one another here. You can’t compress a course of political economy into one hour. But we shall have to do our best.

He ended up giving a ‘counter-report’. He was hesitant to publish it at the time, because arguing with Weston was “none too flattering” and it included a bunch of stuff from Capital that he wasn’t sure it was appropriate to put out early. In the end, it was only published after his death by his daughter Eleanor Marx Aveling.

The first part is apparently why Weston (and the theory he and also apparently John Stuart Mill supported) is so badly wrong, the second is basically an introduction to the ideas in Capital.

Then there’s a short preface by Edward Aveling (Eleanor’s husband) which more or less amounts to “Marx was a pretty cool guy” (refusing the temptation to put a decades old 4chan meme here because, ew 4chan).

OK, next up, the Preliminary chapter.

#edwad academy session 1 #value price and profit

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session 1: “Wage Labour and Capital” part 10

Effect of Capitalist Competition on the Capitalist Class, the Middle Class, and the Working Class

I find it interesting to see the use of the phrase “middle class”? I thought that was a term mostly used by non-Marxists, since it’s (as I understand it) about income rather than relationship to the means of production; in Marxist terms, you’d be talking about “middle-class” people as either proletarian, petit-bourgeois or bourgeois. I guess we’ll see what Marx means by it in this chapter.

Marx sums up the end of the last chapter by saying it shows how capitalist competition leads to more and bigger capitalism:

We thus see how the method of production and the means of production are constantly enlarged, revolutionized, how division of labour necessarily draws after it greater division of labour, the employment of machinery greater employment of machinery, work upon a large scale work upon a still greater scale.

In short, as the price of a commodity keeps falling to follow the cost of production, the capitalist ends up having to produce more stuff just to keep up

a more extensive sale is necessary not only to gain a greater profit, but also in order to replace the cost of production (the instrument of production itself grows always more costly, as we have seen)

the capitalist will have gained nothing more by his efforts than the obligation to furnish a greater product in the same labour-time; in a word, more difficult conditions for the profitable employment of his capital

and this leads to cyclic innovation to drive down the cost of production so capitalists can get ahead, at least for a bit.

While competition ... turns against himself every weapon that he forges against his rivals, the capitalist continually seeks to get the best of competition by restlessly introducing further subdivision of labour and new machines, which, though more expensive, enable him to produce more cheaply, instead of waiting until the new machines shall have been rendered obsolete by competition.

So after stating that point about three times (not that it’s not fun to read the rhetoric), Marx comes back around to the question raised in the last chapter:

But what effect do these conditions, which are inseparable from the growth of productive capital, have upon the determination of wages?

The answer? Bad news, again through competition.

The greater division of labour enables one labourer to accomplish the work of five, 10, or 20 labourers; it therefore increases competition among the labourers fivefold, tenfold, or twentyfold. The labourers compete not only by selling themselves one cheaper than the other, but also by one doing the work of five, 10, or 20; and they are forced to compete in this manner by the division of labour, which is introduced and steadily improved by capital.

And division of labour also simplifies the work, leading to more people being able to compete for it and the cost of (re)production of labour being less since the work is easier to learn. Result:

Therefore, in the same manner in which labour becomes more unsatisfactory, more repulsive, do competition increase and wages decrease.

To try and maintain their total wages, the workers can try to do more work, but this just exacerbates the problem:

The labourer seeks to maintain the total of his wages for a given time by performing more labour ... Thus, urged on by want, he himself multiplies the disastrous effects of division of labour. The result is: the more he works, the less wages he receives. And for this simple reason: the more he works, the more he competes against his fellow workmen, the more he compels them to compete against him, and to offer themselves on the same wretched conditions as he does; so that, in the last analysis, he competes against himself as a member of the working class.

We get a kind of weird paragraph after that:

Machinery produces the same effects, but upon a much larger scale. It supplants skilled labourers by unskilled, men by women, adults by children; where newly introduced, it throws workers upon the streets in great masses; and as it becomes more highly developed and more productive it discards them in additional though smaller numbers.

I’m going to be annoying and seize on three words, but I don’t really understand why ‘men by women’ is in there? OK, acknowledging that women (for complicated and not wholly ‘biological’ reasons) tend on average to have less upper body strength than men, when something used to be done by manual labour and is now done by a machine, I can see that the introduction of machines might lead to women being able to do work that was previously done only by men (though some women could probably do the work before if they were allowed). But the way it’s placed and the framing of this paragraph, though, seems to suggest that replacing men with women in wage labour would be a negative effect rather than like, neutral?

Like, replacing skilled labourers with unskilled, and adults with children, in both cases drives down the cost of reproducing labour (it’s cheaper to raise an unskilled child than a skilled adult) and therefore wages, but how does that apply to replacing men with women? It’s no cheaper to raise a woman than a man for the same job, all else being equal?

I suppose that with the wage gaps that exist, a capitalist would be able to get away with paying women less, and so overall that would mean wages would fall if more women are employed? But I feel like there’s a lot missing from that and I’d like to find Marxist discussions of why the wage gap persists?

(like, naively, why wouldn’t capitalists looking for a relative leg up preferentially hire women, because our labour is right now cheaper? and why wouldn’t that lead to our labour increasing in value until it can be bought for the same value as mens’? I guess it’s more in the interests of capital to maintain gender and therefore have women doing not-directly-paid domestic and reproductive labour, and somehow that leads to the wage gap persisting? anyway I should put this off until I’ve finished Capital)

So to sum up:

We have hastily sketched in broad outlines the industrial war of capitalists among themselves. This war has the peculiarity that the battles in it are won less by recruiting than by discharging the army of workers.

Marx then talks about what happens when a bunch of people are made unemployed by new machines. He argues against “the economists” who say “those labourers who have been rendered superfluous by machinery find new venues of employment”, a view which he’s dreadfully unimpressed by.

Strictly speaking, they only maintain that new means of employment will be found for other sections of the working class ... Of course, this is a great satisfaction to the disabled labourers. There will be no lack of fresh exploitable blood and muscle for the Messrs. Capitalists – the dead may bury their dead. This consolation seems to be intended more for the comfort of the capitalists themselves than their labourers. If the whole class of the wage-labourer were to be annihilated by machinery, how terrible that would be for capital, which, without wage-labour, ceases to be capital!

He then says that whatever new empoyment the workers (new workers or newly unemployed workers) end up in, it will have lower wages than their previous work, due to the fact that “modern industry always tends to the substitution of the simpler and more subordinate employments for the higher and more complex ones”. I’m not sure I feel fully clear on this point?

I guess the point might be that all sections of industry are undergoing the same process, and are probably discarding labour of their own, so the ex-workers from one industry are unlikely to find another industry that can employ them for the same price. At the very least, they’ll add a lot of competition wherever they go en masse, driving down wages? And if there was an industry they could work in that would pay them better than the old one, they would probably have already gone to work for that industry?

Those seem like compelling arguments, but I’m not sure they reach the force of “the laws of political economy”, so while I can believe the conclusion it’s not obvious to me how Marx got there.

Moving on, Marx repudiates a possible exception: the idea that the workers would go from working in an industry to making machines that did what they used to do. But, he says, the same process is at work in machine-making “since 1840″, with machines making machines.

OK, here’s a paragraph that answers some of my questions from earlier:

But in place of the man who has been dismissed by the machine, the factory may employ, perhaps, three children and one woman! And must not the wages of the man have previously sufficed for the three children and one woman? Must not the minimum wages have sufficed for the preservation and propagation of the race? What, then, do these beloved bourgeois phrases prove? Nothing more than that now four times as many workers' lives are used up as there were previously, in order to obtain the livelihood of one working family.

So one way that employing women in work that used to be exclusive to men would lead to a reduction in wages is that there are now twice as many workers doing labour, but ultimately the capitalists are giving out the same amount (however much is necessary for keeping the same men and women alive and replacing workers who die). Still doesn’t explain the question of how capitalists get away with paying us less than men?

A summary:

To sum up: the more productive capital grows, the more it extends the division of labour and the application of machinery; the more the division of labour and the application of machinery extend, the more does competition extend among the workers, the more do their wages shrink together.

We then get a relatively brief note about how small businesspeople can’t get by living on their capital when “the first condition of success is production upon an ever greater scale” so they end up proletariat too.

a mass of small business men and of people living upon the interest of their capitals is precipitated into the ranks of the working class, and they will have nothing else to do than to stretch out their arms alongside of the arms of the workers. Thus the forest of outstretched arms, begging for work, grows ever thicker, while the arms themselves grow every leaner.

At the very end, there is a paragraph about crises, or “industrial earthquakes” of capital. Marx says without a lot of elaboration that as capital gets more enormous, they get more frequent:

They become more frequent and more violent, if for no other reason, than for this alone, that in the same measure in which the mass of products grows, and therefore the needs for extensive markets, in the same measure does the world market shrink ever more, and ever fewer markets remain to be exploited, since every previous crisis has subjected to the commerce of the world a hitherto unconquered or but superficially exploited market.

Possibly he would have gone on with another chapter to explain this part a bit more, but the next month, in May 1849, the Prussian state finally banned the newspaper Neue Rheinische Zeitung that Marx was writing in and expelled him from Germany. We’ll probably find out what Marx was getting at somewhere in Capital.

The next part of the edwad academy course outline for Session 1 is a paper called Value, Price and Profit. I’ll talk more about it tomorrow, hopefully.

#edwad academy session 1

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capitalmomentum · 9 years ago

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session 1: “Wage Labour and Capital” part 9

We’re getting close to the end of the pamphlet now. (They really didn’t mess around in their pamphlets in Victorian times? OK, when I think pamphlet I think ‘folded piece of A4 paper’, but apparently a pamphlet is just an unbound book.)

The Interests of Capital and Wage-Labour are diametrically opposed: Effect of growth of productive Capital on Wages

We open by restating the point elaborated in the last chapter: if profit rises, relative wages fall unless the real wages rise at least in proportion to profit.

That implies some fantastically firey rhetoric:

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 can be called into existence, the more can the mass of slaves dependent upon capital be increased.

Finally, to say that "the most favorable condition for wage-labour is the fastest possible growth of productive capital", is the same as to say: the quicker the working class multiplies and augments the power inimical to it – the wealth of another which lords over that class – the more favorable will be the conditions under which it will be permitted to toil anew at the multiplication of bourgeois wealth, at the enlargement of the power of capital, content thus to forge for itself the golden chains by which the bourgeoisie drags it in its train.

(I kind of balk at invoking the metaphor of slavery at a point when actual literal slavery had not been abolished? but eh.)

The second part of the chapter goes under the subheading “In what manner does the growth of productive capital affect wages?” and it’s incredibly dramatic. Honestly, this chapter is a really fun read?

It tells a story about capitalists in competition to “drive the other from the field and carry off his capital”, and what happens when one capitalist “by a greater division of labour, by the application and improvement of new machines, by a more advantageous exploitation of the forces of nature on a larger scale” finds a way to produce commodities with less labour than her competitors.

It’s fairly similar to what he’s discussed in earlier chapters, though I think this bit:

But the capitalist will not sell the whole yard so cheaply as his competitors sell the half-yard, although the production of the whole yard costs him no more than does that of the half-yard to the others. Otherwise, he would make no extra profit, and would get back in exchange only the cost of production. He might obtain a greater income from having set in motion a larger capital, but not from having made a greater profit on his capital than the others. Moreover, he attains the object he is aiming at if he prices his goods only a small percentage lower than his competitors. He drives them off the field, he wrests from them at least part of their market, by underselling them.

is maybe a little bit new that’s not covered in the chapter on how prices are determined?

Anyway, ultimately the point is that the capitalist’s advantage doesn’t last forever; the other capitalists adopt the new methods and undercut each other until the exchange value of the commodity has fallen back to the old cost of production.

The capitalists therefore find themselves, in their mutual relations, in the same situation in which they were before the introduction of the new means of production; and if they are by these means enabled to offer double the product at the old price, they are now forced to furnish double the product for less than the old price

Anyway, I guess Marx got a bit carried away, because despite the subheading, this discussion hasn’t yet touched on wages specifically. On to the next and final chapter! Which I seem to have a lot to say about, so let’s kick that to another post.

#edwad academy session 1

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capitalmomentum · 9 years ago

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session 1: “Wage Labour and Capital” part 8

In the last chapter, Marx concluded by explaining the difference between nominal, real, and relative wages, and suggested relative wages were the most important measure.

The next chapter has a pretty grand title:

The General Law that Determines the Rise and Fall of Wages and Profits

The last chapter looked at things from the worker’s POV, talking about how much wages are worth. Now it’s time for the capitalist, and an elaboration on relative wages. Here Marx explains what I was probably groping towards with that ‘is this sustainable’ calculation a few posts back (though that simple model didn’t take into account raw materials and maintenance).

The selling price of the commodities produced by the worker is divided, from the point of view of the capitalist, into three parts:

First, the replacement of the price of the raw materials advanced by him, in addition to the replacement of the wear and tear of the tools, machines, and other instruments of labor likewise advanced by him;

Second, the replacement of the wages advanced; and

Third, the surplus leftover – i.e., the profit of the capitalist.

Marx then points out:

Real wages may remain the same, they may even rise, nevertheless the relative wages may fall.

He illustrates that with an example where the cost of the means of subsistence and nominal wage both fall, but the cost of means of subsistence falls faster, leading to an increase in real wage but a decrease in relative wage (more profit for the capitalist). So even though real wages have gone up...

The distribution of social wealth between capital and labour has become still more unequal. The capitalist commands a greater amount of labour with the same capital. The power of the capitalist class over the working class has grown, the social position of the worker has become worse, has been forced down still another degree below that of the capitalist.

Now for the thing named in the title:

What, then, is the general law that determines the rise and fall of wages and profit in their reciprocal relation?

They stand in inverse proportion to each other. The share of (profit) increases in the same proportion in which the share of labour (wages) falls, and vice versa. Profit rises in the same degree in which wages fall; it falls in the same degree in which wages rise.

So in terms of an equation, let’s say the products of labour have an exchange value $E$, materials and maintenance of the means of production cost $M$, the wages are $W$ and the capitalist’s profit is $P$. So $$E=M+W+P$$thus $$W=(E-M)-P$$Contrary to what Marx wrote, this says wages are in a linear relationship with a negative gradient to profit, not that they’re inversely proportional (which would mean $WP=k$ with $k$ constant, that is $W=\frac{k}{P}$). I’m not sure if that’s because ‘inversely proportional’ has acquired a more precise meaning since Marx was writing, or if there’s a mistake in translation, or what. Anyway, it’s clear from the paragraph that Marx did not mean ‘inverse proportion’, but what that equation says.

I think Marx may prefer to divide through by $E$ to get the relative rather than absolute wages etc., so if we define $m=\frac{M}{E}$, $p=\frac{P}{E}$, $w=\frac{W}{E}$ we could just as easily write this as $$w=1-m=p$$

Marx then goes on to discuss a possible objection, a way $P$ could increase without $W$ going down:

It might perhaps be argued that the capitalist class can gain by an advantageous exchange of his products with other capitalists, by a rise in the demand for his commodities... the profit of the capitalist, therefore, may be multiplied by taking advantage of other capitalists, independently of the rise and fall of wages

In short, various factors might mean $E$ and $P$ could go up while $W$ and $M$ could stay the same.

Marx gives three objections:

$p$ would still go down in these cases (the workers would still get a smaller share of the value they produce)

as discussed earlier, the average exchange value of commodities is determined by the cost of production, so an improvement in technology wouldn’t lead to an increase in exchange-value for the capitalist in the long run, so $E$ wouldn’t go up long-term

however the profit is distributed between the individual capitalists, overall (in one country, or the world) the relation will hold true for the capitalist class.

(Grumbling, but I feel like this chapter could be made much clearer by writing equations and variables instead of long paragraphs. I guess that’s not how you write if you want a pamphlet to be widely read, though.)

#edwad academy session 1

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