Wage Labour and Capital/Value Price and Profit

Introduction by Ken Smith – How Capitalism Rips Off the Working Class

How many times has a boss told a shop steward or union rep that if they ask for too big a wage increase then prices will go up? Former Labour Prime Minister Harold Wilson claimed in the 1960s that: "One man's wage increase is another man's price rise". This is still a common cry from bosses world-wide.


When the national minimum wage was brought in, Britain's bosses again argued that wage rises cause inflation. If the minimum wage was at too high a level, they said, workers would be priced out of jobs, prices would rise and economic meltdown could follow.

Some trade union leaders stressed that a minimum wage had been introduced in other countries - sometimes at a higher level - without this economic Armageddon happening. This was a correct argument but it did not really explain why wage increases do not cause inflation.

If workers want the best arguments to expose the bosses and show that they can demand larger pay rises than are offered without causing economic chaos, then look no further than two pamphlets from Karl Marx written in the 19th century.


Workers Produce Wealth

In Wage Labour and Capital and Value, Price and Profit, Karl Marx anticipated the arguments of today's capitalists and exposed the myth that workers get a "fair day's pay for doing a fair day's work".

Wage Labour and Capital first advances the arguments that Marx would fully develop in his exhaustive economic study, Das Kapital (Capital in English). Here for the first time, Marx unravelled a problem that had bedevilled even the greatest of the 'classical' economists: Adam Smith and David Ricardo.

They could not fully explain how a commodity or good attained a certain value and how in attaining that value the capitalist was able to make a profit.

Both had been on the right lines in different ways, but neither could square their argument that the quantity of labour that goes into any product determines its final value with their mistaken belief that the capitalists also add value in the production process which justifies them collecting their profits.

The capitalist class have always tried to excuse their parasitic existence and mega-profits by arguing that they take the risks in bringing together the factors of production. This has in turn been adopted by orthodox economics as the way capitalists add value in the production process.

If they stopped peddling this lie, the game would be up. They would have to admit that workers' labour, especially the unpaid labour of workers, produced all value (ie, new wealth) in society and their days as parasitic capitalist bosses would soon be over.

Marx argued that it was absurd to say the capitalists used profits to make further profits, as profits were a reflection of the value already created. By transferring money (capital) or charging rent on land the capitalists were not adding value but appropriating it and using if for their own ends.


Labour Power

To do this Marx showed that labour had a double meaning or effect. Labour was used to describe the cost to the capitalist of hiring a worker but it also referred to the actual amount of labour performed by a worker.

Marx pointed out that labour was a commodity and like all commodities it was bought and sold. The crucial difference is that when a capitalist pays a worker he does not pay the worker for the value he puts into the production of another commodity, instead the capitalist pays for labour power.

The capitalist tries to pay as little for this labour power as he reasonably thinks he can get way with – basically enough to provide for the week-by-week upkeep of the workers and their families.

The bosses continually try to increase the pressures on workers to work for as little as possible using their hired media, the arguments of academic economists and using the brutality of unemployment and ever-intensifying contracts.

From this the capitalist then tries to get as much labour power out of the worker as he possibly can. In other words the capitalist exploits the worker by not paying for the full value of his or her work and trying to push the workers to work longer and harder to increase the extraction of surplus value (profits) from the worker.

Marx explained this simply. He showed that, for instance, if a worker worked an eight-hour day then four hours of this was worked to reproduce the value of what the workers was paid in wages. In the other four hours the worker effectively worked for the capitalist for nothing - allowing the boss to extract surplus value.

In general, the total wealth and total profits of the capitalist class grow at a greater rate than workers' living standards. A look at the difference in the proportions of national and international wealth going to the capitalists compared to the workers at any period in history will confirm this.


Trade Union Struggle

Although workers' relative living standards may rise, it is also true that the wealth gap between the workers and the capitalists is ever-widening at most times. There are periods, though, where the working class through their organisations like the trade unions have mounted a militant struggle for an improved share of the wealth and this trend has marginally abated.

That is why Marx supported the struggle of trade unions - even although it was not directly linked at the time to the struggle for a socialist society - to push for better wages and conditions. This little pamphlet shows that workers are the source of all wealth in society and the unpaid labour of the working class is the source of all the capitalists' profit.

The second of the pamphlets Value, Price and Profit is really an expansion of these arguments by Marx against socialists like John Weston, a follower of Robert Owen.

Weston argued that although he believed capitalism was wrong and should be removed, that it was pointless for workers to use trade union action to fight capitalism. He argued this because he accepted the orthodox economic line that it was supply and demand that conditioned the values of things and that any wage increases would be wiped out soon after by price increases.

Trade unionists and socialists facing these arguments today would do well to read both of these little pamphlets.

Although some of the argumentation and language can prove difficult, it is worth persisting and perhaps enlisting the help of someone who has read them