~700 words, ~ 4 min reading time
Summary
Since workers create surplus value, it makes sense for capitalists to minimize how much they spend, relatively, on non-labor. (That is “constant capital” in Marx’s terminology.) In general, they can do this by increasing working hours. Since the same building can operate for 8 hours or 24 hours, a greater profit margin will be attained if work happens for more hours. In addition, capitalists look for ways to use the “excretions of production” – that is, by-products or “waste”.
Marx goes a bit deeper on a couple of examples. He discusses savings on labor conditions – pointing out that capitalists can decrease their expenses by tolerating unsafe or uncomfortable working conditions, and presents data showing that disease and mortality are more common among workers in industries where conditions are particularly bad. Marx also observes that large-scale production is encouraged, in part, by the way that power works in industrial machinery. It is often more economical to operate one large plant than multiple smaller ones. These economies of scale (to use the modern phrase) allow capitalists to economize on constant capital. Marx goes a bit deeper into the “excretions of production”. Strangely, he criticizes capitalism for not putting human feces on fields to use as manure. Finally, Marx observes that new inventions are often not economical – so that the first to buy a new product end up paying far more than when the product gets more developed.
Why It Matters
Here we’re getting much more to the practical criticism of the capitalist system that Marx provides. The most important part here is the criticism regarding requiring long working hours and the one about unsafe and unhealthy working conditions. These are the two activities that look the most like “exploitation”, and, I would suggest, are often at the heart of criticisms of a market system.
Where Marx Goes Wrong
Here, Marx’s wage theory is what creates the biggest problems. Since Marx buys into the classicals’ iron law of wages – that is that wages will stay at the level of subsistence – Marx misses the actual dynamics of what is happening. For example, people will trade off wages against other features of a job. So, for example, people may be willing to accept worse conditions – but they only do so if they are compensated for it financially. Conversely, it can sometimes be cost-saving for a company to offer more benefits but pay less – in fact, Marx himself points out a case where a business ended up saving money by installing safety equipment. Marx’s argument then, in this section, relies on the existence of two “irrationalities” – one of which Marx is explicit about, the other of which is missing from the explicit argument, as it is ruled out by Marx’s wage theory. The first irrationality: that capitalists habitually seek to avoid certain kinds of costs – specifically for safety devices. Marx reported one case where a group of manufacturers spent more paying lawyers to fight the imposition of safety regulations than it would have cost to simply implement the regulations themselves. A second is that workers care only about wages and pay no attention to the conditions of production. But these are unlikely to be true. There are systematic differences in certain wages which are explained by differences in job characteristics – sometimes explicitly. This makes perfect sense – people would be willing to be paid less for safe, comfortable jobs, other things equal – but doesn’t fit the iron law of wages which suggests that wages will fall to subsistence levels. In addition, employers take this fact into account when making decisions about safety procedures and the like. Do they get things wrong sometimes? Of course. But, it hardly seems accurate to suggest that employers regularly, irrationally avoid measures that are actually cost-saving – in a competitive world, such decisions put you at a disadvantage compared to your competitors. Which brings us back to a central issue with Marx – for Marx, competition between competitors seems to exist sometimes, but is not worked into the logic consistently. So, competition keeps prices of products in check – but doesn’t let wages rise above subsistence. Competition leads to capitalists being cost-minimizers – but they do so very poorly.
Professor Engelhardt,
I listened to your talk “Monetary Policy: Discretion, Rules, or Markets?” today: it was very good. I think you will enjoy the rest of Vol. 3 as Marx will spend many chapters lambasting the Central Bank of England.
I just wanted to make a few comments. I don’t know if I would put it that surplus
From chapter 1 of Vol 3, this text:
” As for the capital consumed in production, the surplus-value seems to spring equally from all its different elements of value consisting of means of production and labour. For all these elements contribute equally to the formation of the cost-price. All of them add their values, obtaining as advanced capital, to the value of the product, and are not differentiated as constant and variable magnitudes of value…
We know in both cases that surplus-value is derived from a given value, because this value was advanced in the form of productive capital, be it in the form of labour or of means of production. On the other hand, this advanced capital-value cannot form surplus-value for the reason that it has been expended and therefore constitutes the cost-price of the commodity. Precisely because it forms the cost-price of the commodity, it does not form any surplus-value, but merely an equivalent, a value replacing the expended capital. So far, therefore, as it forms surplus-value, it does so not in its specific capacity as expended, but rather as advanced, and hence utilised, capital. For this reason, the surplus-value arises as much out of the portion of the advanced capital which goes into the cost-price of the commodity, as out of the portion which does not. In short, it arises equally out of the fixed and the circulating components of the utilised capital…
The aggregate capital serves materially as the creator of products, the means of labour as well as the materials of production, and the labour. The total capital materially enters into the actual labour-process, even though only a portion of it enters the process of self-expansion. This is, perhaps, the very reason why it contributes only in part to the formation of the cost-price, but totally to the formation of surplus-value. However that may be, the outcome is that surplus-value springs simultaneously from all portions of the invested capital”
You cannot separate capital and wage-labor from each other, so it is not as simple as reducing the non-labor component. Otherwise, this would just imply that all capitalists should have a labor-intensive process, whereas there is a tendency towards capital-intensive processes (this is sort of what the organic composition of capital means but we will get there when we get there). Surplus-value equally springs from all the different parts of the production process – including the entrepreneur (as Marx will mention in this text!) – because they are all conditions for each other (i.e. the “aggregate laborer” gives a condition for the entrepreneur and the entrepreneurs gives a condition for production to the worker, etc, etc). I think the Austrian focus on the heterogeneity of production inputs is related here. Marx’s focus on quantity is actually a focus on quality, where Quantity *is a Quality.* It is the quality for Marx of the levelling down and rationalization in the production process that is actually prevented from realizing its emancipatory potential by the workers (hence why the proletariat for Marx was contradictory).
Marx likes to paraphrase Thomas Hodgskin, the Ricardian Socialist, who described surplus-value as something that the road-builder could share but the road could not, together with James Lauderdale, who describes capital as the source of profit (and in that case, it would be something road shares). What is the meaning of this? They are antinomical – they are equally valid. It expresses a contradiction in *labor-time,* that the claims on the product can be made equally by living and dead labor, both of which count as “labor-time” – this is by the way what is meant by contradiction – it is not fights over wages and profit, which are revenues – if the only issue is fights over wages and profit, then not only is socialism unnecessary but the answer is the most free market possible.
But the contradiction is rather an internal one of Bourgeois Right with itself – constant capital counts as the property of somebody (I know no machines that have human rights! Rather, if I break a machine, I am infringing upon someone *else’s* right) but in the production process counts as a laborer (this gets detailed in the transition from Manufacturing to Large-Scale Machinery). This is also why the contradiction is not the capitalist with the workers but literally the workers with their own conditions that they produce!
In one sense, I think it is at least related to Von Wieser’s concept of economic value- that is, if the value of a means is related to the ends it serves and if higher-order goods get their values imputed from consumer goods, then this could be translated into Marx’s language: in Marx’s case, he mentions that labor-power allows capital to preserve its value in the commodity (he is a little bit more explicit about this in the Grundrisse). That means that without the Means of Production being utilized for an end, there would be no way of such imputing such value to the higher order good.
Furthermore, for Marx, the capitalists learn of the value “post-festum,” – on the market.
When Marx uses the seemingly innocuous phrase, “social laborer,” it literally means that based on Bourgeois Right, Society has a claim on the social product. Literally capital for Marx is Social property. This isn’t one of these Elizabeth Warren “you didn’t build that by yourself” thing, which is just moralizing, but literally expresses a new social power. One way to think of all this is that we relate in exchange on bourgeois social relations and then we explode them outside of exchange. To the workers, this was misrecognized as “theft” – whereas really, it them expressing a discontent with the fact that their property is undermined in the production process i.e. inequality is the effect for Marx, not the cause.
What most people think of Marx is ***actually*** what Thomas Hodgskin and various Ricardian socialists and Proudhonian anarchists held. They rule in favor of Labor contra Capital. For Marx that is Labor telling Labor that it is not Labor (!) – reification!
The question of surplus-value rather is an expression of the crisis of the social relations – it is a phenomenonal (appearance) of potential, of a kind of “ought,” an open-endedness, the freedom to transform humanity, our “perfectability” (in the Rousseauian sense of our infinite potential to develop and transform ourselves), that gets squandered because it is “overproduced” according to what be captured by bourgeois social relations.
Secondly, Marx does describe as well different ways in which surplus-value could be increased besides just the increase in the working day (the increase in absolute surplus value); there is also relative surplus-value. There is an inner contradiction between both, as absolute surplus value finds its limits in the struggle over the working day and so literally produces *relative* surplus value (i.e. Marx completely recognizes the contradiction in Factory legislation produces new immiseration for the workers).
The other point I would make in terms of working conditions is for Marx the legislation is that for Marx, the formation of labor legislation is just as much a part of Capitalism
From Vol 1, Chapter 15, section 9:
“Factory legislation, that first conscious and methodical reaction of society against the spontaneously developed form of the process of production, is, as we have seen, just as much the necessary product of modern industry as cotton yarn, self-actors, and the electric telegraph.”
Really, for Marx and the best Marxists following him, Capitalism is not a *system* so much as it is a crisis. One of the unfortunate things that happens in contemporary debates regarding “capitalism vs socialism” is that they are treated as different systems. That would make zero sense to Karl Marx. Rather, there was an emerging Bourgeois Society and the *crisis* of that society was called “Capital-ism,” not “Capitalists-ism.” And really, that is not a word Marx used.
What most “pro-capitalists” actually defend is Bourgeois Society, which is not the issue for Marx. But then the so-called “Marxists” attack Bourgeois Society *per se* (i.e. profit is bad, private property is bad, markets are bad, etc).
Rather, it is the crisis of those relations. Really, “Capitalism vs Socialism” would not only make no sense to Marx but he would point out that Socialism ***is Capitalism.***
Its also not a question of Markets – Marx from the Grundrisse
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Just an edit:
“I just wanted to make a few comments. I don
One more thing – Marx actually had a criticism of the “iron law of wages.” This was a Lassallean formulation that Lassalle sort of haphazardly picked up from Malthus. I append below Marx’s specific criticism out of the Critique of the Gotha Program but let me make a more general comment.
Capitalism will continue and has to produce a rising standard of living. Products will become cheaper, and living standards will rise. People will be lifted out of poverty – Marx agrees.
If this was not the case, then socialism would really be impossible, even in the vulgar sense peddled by “Marxists” who are really just Democrats.
The real issue is that the same process that lowers the price of commodities and therefore, increases our standard of living, also overproduces labor-power and in its superfluity, lowers the *value* of labor-power. This is the opposite of what Adam Smith expected to happen (as he puts at the end of Chapter 2, Book 1); its a crisis of productivity (rather than some romantic anti-productivity which is like completely through the Green New Deal).
[Marx]:
“It is well known that nothing of the “iron law of wages” is Lassalle’s except the word “iron” borrowed from Goethe’s “great, eternal iron laws”. The word “iron” is a label by which the true believers recognize one another. But if I take the law with Lassalle’s stamp on it, and consequently in his sense, then I must also take it with his substantiation for it. And what is that? As Lange already showed, shortly after Lassalle’s death, it is the Malthusian theory of population (preached by Lange himself). But if this theory is correct, then again I cannot abolish the law even if I abolish wage labor a hundred times over, because the law then governs not only the system of wage labor but every social system. Basing themselves directly on this, the economists have been proving for 50 years and more that socialism cannot abolish poverty, which has its basis in nature, but can only make it general, distribute it simultaneously over the whole surface of society!
But all this is not the main thing. Quite apart from the false Lassallean formulation of the law, the truly outrageous retrogression consists in the following:
Since Lassalle’s death, there has asserted itself in our party the scientific understanding that wages are not what they appear to be — namely, the value, or price, of labor