Old Conservative Question: Same Classic Socialist Answer
On QUESTION TIME (BBC 1, September 29th 20016) there was this comment made from a member of the audience to the group panellists which included Labour’s Richard Burgeon, Tory, Priti Patel and columnist Rod Liddle:
"How is it possible to increase wages without simultaneously increasing prices and lowering employment?"
There was no valid or sound answer from the panellists. Students of political economy they were not. However, for socialists this is a very old conservative question with a very revolutionary socialist answer.
The question once formed part of a discussion on trade union activity that took place at a meeting of the General Council of the International Working Men’s Association at the end of April and the beginning of June, 1865.
John Weston, a follower of Robert Owen and an advocate of co-operatives as the way forward for the working class, argued that wage increases not only did not benefit the workers immediately concerned but also harmed workers in other sections of industry by causing a rise in prices.
The Philosopher and political economist, John Stuart Mill was among supporters of this so-called “wages fund” theory (see I.I. Rubin, A HISTORY OF ECONOMIC THOUGHT, Ch. 34. The Wages Fund, Pluto Press 1989 edition).
Conservative economists have since added unemployment to rising prices as a consequence of workers struggling for and securing higher wages and salaries.
Marx easily demolishes the arguments of “Citizen Weston” and his argument can be found in a useful pamphlet, VALUE,PRICE AND PROFIT, discovered with Engels’s papers after his death and published in 1898 by Marx’s daughter and Son-in-Law; Eleanor and Edward Aveling-Marx.
Marx showed that Weston’s theory is at variance with the realities of capitalism. Prices and wages are governed by economic laws peculiar to capitalism. Workers and capitalists just cannot do what they want. Neither can governments and economic policy makers.
The price of commodities are not determined at will by either the manufacture or retailer who will always try to sell their commodities at prices art prices determined by market conditions. They will try to sell their commodities as high as the market will bear (Chapter II, Production, Wages, Profits).
Unless market conditions change in their favour, the manufacturers cannot raise prices simply because they have had to pay higher wages. If employers could just recoup wage increases by raising prices, there would be no point in their resisting wages claims. However, employers do resist wage claims, particularly in times of stagnation.
Marx went on to show that the effect of a general wage increase would be a corresponding reduction of profits. Though some prices might rise and others fall, a general wage increase would leave the average price level unchanged.
What about the additional point, added to later by conservative economists, that those workers who strike for higher wages will only increase the numbers of unemployed?
Again this was dealt with by Marx in his lecture but we also have over one hundred and fifty years of empirical evidence to draw upon since Marx’s death which shows that when capitalism is in an economic boom and capitalists are making profits the last thing they want is for profits to be curtailed by strike action. Employers are only too willing to concede higher pay demands to workers to ensure the continual flow of profits.
Marx, in the second part of his lecture went into the matter in more detail.
Marx showed that the value of commodities is determined by the amount of socially necessary labour incorporated in them, not by the wages paid to the working class (Chapter VI, Value and Labour).
Workers sell their labour-power or ability to work in exchange for a wage or salary. Marx showed that the value of labour-power bought by employers is different to the use of labour power to the capitalists in the production process. The difference is between paid and unpaid labour (Chapter VII, Labour Power).
Unpaid labour is the source of what Marx called “surplus value” (Chapter VIII, Production of Surplus Value).
Surplus value is the source of the unearned incomes going as industrial profit, rent and interest to the capitalist class and pays for their State to further their interests by producing, for example, erroneous propaganda from economists claiming workers securing higher pay rises cause unemployment (Chapter X1.The Different Parts into Which Surplus Value is Decomposed)
The struggle between workers and capitalists for higher wages and higher profits: “resolves itself into a question of the respective powers of the combatants” (Chapter XIV, The Struggle between Capital and Labour and its Results).
However, readers of VALUE, PRICE AND PROFIT learn that there is a sting in the tail, for Marx cautions trade unions with this warning:
Trades Unions work well as centres of resistance against the encroachments of capital. They fail partially from an injudicious use of their power. They fail generally from limiting themselves to a guerrilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class that is to say the ultimate abolition of the wages system (https://www.marxists.org/archive/marx/works/.../value-price-profit.pdf).
The QUESTION TIME audience would not have heard this Marxian answer from the panellists. The BBC have long dropped the pretence of informing its audience with serious political discussion. Under political pressure from successive governments, the BBC resigned itself just to entertain with shallow and inane programmes like QUESTION TIME.
Object and Declaration of Principles
Object
The establishment of a system of society based upon the common ownership and democratic control of the means and instruments for producing and distributing wealth by and in the interest of the whole community.
Declaration of Principles
THE SOCIALIST PARTY OF GREAT BRITAIN HOLDS:
1. That society as at present constituted is based upon the ownership of the means of living (ie land, factories, railways, etc.) by the capitalist or master class, and the consequent enslavement of the working class, by whose labour alone wealth is produced.
2. That in society, therefore, there is an antagonism of interests, manifesting itself as a class struggle, between those who possess but do not produce and those who produce but do not possess.
3.That this antagonism can be abolished only by the emancipation of the working class from the domination of the master class, by the conversion into common property of society of the means of production and distribution, and their democratic control by the whole people.
4. That as in the order of social evolution the working class is the last class to achieve its freedom, the emancipation of the working class will involve the emancipation of all mankind without distinction of race or sex.
5. That this emancipation must be the work of the working class itself.
6. That as the machinery of government, including the armed forces of the nation, exists only to conserve the monopoly by the capitalist class of the wealth taken from the workers, the working class must organise consciously and politically for the conquest of the powers of government, national and local, in order that this machinery, including these forces, may be converted from an instrument of oppression into the agent of emancipation and the overthrow of privilege, aristocratic and plutocratic.
7. That as all political parties are but the expression of class interests, and as the interest of the working class is diametrically opposed to the interests of all sections of the master class, the party seeking working class emancipation must be hostile to every other party.
8. The Socialist Party of Great Britain, therefore, enters the field of political action determined to wage war against all other political parties, whether alleged labour or avowedly capitalist, and calls upon the members of the working class of this country to muster under its banner to the end that a speedy termination may be wrought to the system which deprives them of the fruits of their labour, and that poverty may give place to comfort, privilege to equality, and slavery to freedom.