Socialism: A Summary and Interpretation of Socialist Principles Part 14

Labor, the source and determinant of value, has, _per se_, no value.

Only when it is embodied in certain forms has it any value. If a man labors hard digging holes and refilling them, his labor has no value.

What the capitalist buys is not labor, but labor-power. Wages in general is a form of payment for a given amount of labor-power, measured by duration and skill. The laborer sells brain and muscle power, which is thus placed at the temporary disposal of the capitalist to be used up like any other commodity that he buys. The philosopher Hobbes, in his "Leviathan," clearly antic.i.p.ated Marx in thus distinguis.h.i.+ng between labor and laboring power in the saying, "_The value or worth of a man is ... so much as would be given for the Use of his Power_." The power to labor a.s.sumes the commodity form, being at once a use-value and an exchange-value. At first sight it appears that piecework is an exception to the general rule that the capitalist buys labor-power and not labor itself. It seems that when piece-wages are paid it is not the machine, the living labor-power, but the product of the machine, labor actually performed, that is bought. Superficially, this is so, of course, but it does not affect the principle laid down, because, as a matter of fact, the piecework system is only one of the means used to secure a maximum of labor-power. The average output of pieceworkers in a trade always tends to become the standard output for the time-workers, and, on the other hand, the average wage of pieceworkers tends to keep very near the standard of time-wages.

Now, as a commodity, labor-power is subject to the same laws as all other commodities. Its price, wages, fluctuates just as the price of all other commodities does, and bears the same relation to its value. It may be temporarily affected by the preponderance of supply over demand, or of demand over supply; it may be made the subject of monopoly in certain cases. There is, therefore, no such thing as an "iron law" of wages, any more than there is an "iron law" of prices for other commodities.

La.s.salle took the Ricardian law of wages and, by means of his characteristic exaggeration, distorted it out of all semblance to truth.

Says Ricardo: "The natural price of labor, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the laborer and his family. With a rise in the price of food and necessaries, the natural price of labor will rise; with the fall in their price, the natural price of labor will fall."[175] This La.s.salle made the basis of his famous "iron law," according to which 96 per cent of the wage-workers were precluded from improving their economic position. La.s.salle's chief fault lay in that he made no allowance whatever for either state interference, or the organized influence of the workers themselves. He also attaches too little importance to what Marx calls the traditional standards of living.[176] It is nevertheless true that the price of labor-power, wages, tends to approximate its value, just as the price of all other commodities tends, under normal conditions, to approximate their value.

And just as the value of other commodities is determined by the amount of social labor necessary on an average for their reproduction, so the value of labor-power is likewise determined. Wages tend to a point at which they will cover the average cost of the necessary means of subsistence for the workers and their families, in any given time and place, under the conditions and according to the standards of living generally prevailing. Trade union action, for example, may force wages above that point, or undue stress in the compet.i.tive labor market may force wages below it. While, however, a trade union may bring about what is virtually a monopoly-price for the labor-power of its members, there is always a counter tendency in the other direction, sometimes even to the lowering of the standard of subsistence itself to the minimum of things required for physical existence.

To cla.s.s human labor-power with pig iron as a commodity, subject to the same laws, may at first seem fantastic to the reader, but a careful survey of the facts will fully justify the cla.s.sification. The capacity of the worker to labor depends upon his securing certain things; his labor-power has to be reproduced from day to day, for which a certain supply of food, clothing, and other necessities of life is essential.

Even with these supplied constantly, the worker sooner or later wears out and dies. If the race is not to be extinguished, a certain supply of the necessities of life must be provided for the children during the years of their development to the point where their labor-power becomes marketable. The average cost of production in the case of labor-power includes, therefore, the necessities for a wife and family as well as for the individual worker. Far from being the iron law La.s.salle imagined, this law of wages is one of considerable elasticity. The standard of living itself, far from being a fixed thing, determined only by the necessities of physical existence, varies according to occupational groups; to localities sometimes, as a result of historical development; to nationality and race, as a result of tradition; to the general standard of intelligence, and the degree in which the workers are organized for the promotion of their economic interests. The advance in the culture of the people as a whole, expressing itself in legislation for compulsory education, the abolition of child labor, improvement of housing and general sanitary conditions, and so on, tends to raise the standard of living. Finally, the fluctuations in the price of labor-power due to the operation of the law of supply and demand are much more important than La.s.salle imagined.

This living commodity, labor-power, differs in one remarkable way from all other commodities, in that when it is used up in the process of the production of other commodities in which it is embodied, it creates new value in the process of being used up, and embodies that new value in the commodity it a.s.sists to produce. In the case of raw materials and machinery this is not so. In the manufacture of tables, for example, the wood used up is transformed into tables, embodied in them, but the wood has added nothing to its own value. The same is true of machinery. But with human labor-power it is otherwise. The capitalist buys from the laborer his labor-power at its full value as a commodity. But the laborer, in embodying that labor-power in some concrete form, creates more value than his wages represents. For the commodity he sells, his _power_ to labor, he has been paid its full value, namely, the social labor-cost of its production; but that power may be capable of producing the equivalent of twice its own cost of production. This is the central idea of the famous and much-misunderstood Marxian theory of surplus-value, by which the method of capitalism, the exploitation of the wage-workers, and the resulting cla.s.s antagonisms of the system are explained. This theory becomes the groundwork of all the social theories and movements protesting against and seeking to end the exploitation of the laboring ma.s.ses. To understand it is, therefore, of paramount importance.

VI

As we have seen in an earlier chapter, Marx was not the first to recognize that the secret of capitalism, the object of capitalist industry, is the extraction of surplus-value from the labor-power of the worker. Nor was he the first to use the term. By no means a happy term, since it adds to the difficulty of comprehending the meaning and nature of _value_, Marx took it from the current economic discussion of his time as a term already fairly well understood. What we owe to the genius of Marx is an explanation of the manner in which surplus-value is extracted by the capitalist from the labor-power of the worker, and the part it plays in capitalist society.

The essence of the theory can be very briefly stated, but its demonstration involves, naturally, a more extensive study. Under normal conditions, the worker will produce a value equivalent to his means of subsistence, or to the wages actually paid to him, in a very small number of hours. If he owned and controlled the means of production,--land, machinery, raw materials, and so on,--he would, therefore, need to work only so many hours as the production of the necessities of life for himself and his family required. But the laborer in capitalist society does not own the means of production, that condition being quite incompatible with machine production upon a large scale. A separation of the worker from the owners.h.i.+p of the means of production has taken place as one of the inevitable results of industrial evolution. So the laborer must sell the only commodity he has to sell, namely, his labor-power. He sells the utility of that commodity to the capitalist for its exchange-value, or market price. Like any other commodity, the utility of labor-power, its use-value, belongs to the purchaser, the capitalist. It is his to use as he sees fit. He has it used to produce other commodities which he in turn hopes to sell--has the labor-power used up in the manufacture of other commodities, just as he has the raw materials used up. He buys, for example, the labor-power of the workers for a day of ten hours. In five hours, say, the worker creates value equivalent to his wages, but he does not cease at that point. He goes on working for another five hours, thus producing in a day double the amount of his wages, the exchange-value of the labor-power he sold the capitalist. Thus the capitalist, having paid wages equivalent to the product of five hours, receives the product of ten hours. This balance represents the surplus-value (_Mehrwerth_).

This takes place all through industry. If the capitalist employs a thousand workers under these conditions, each day he receives the product of five thousand hours over and above the product actually paid for. This const.i.tutes his income. If the capitalist owned the land, machinery, and raw materials, absolutely, without inc.u.mbrances of any kind, the whole of that surplus-value would, naturally, belong to him.

But as a general rule this is not the case. He rents the land and must pay rent to the landlord, or he works upon borrowed capital and must pay interest upon loans, so that the surplus-value extracted from the laborer must be divided into rent, interest, and profit. But how the surplus-value is divided among landlords, moneylenders, creditors, speculators, and actual employers is a matter of absolutely no moment to the workers as a cla.s.s. That is why such movements as that represented by the followers of Henry George fail to vitally interest the working cla.s.s.[177] The division of the surplus-value wrung from the toil of the workers gives rise to much quarrel and strife within the ranks of the exploiting cla.s.s, but the working cla.s.s recognizes, and vaguely and instinctively feels where it does not clearly recognize, that it has no interest in these quarrels. All that interests it vitally is how to lessen the extent of the exploitation to which it is subjected, and how ultimately to end that exploitation altogether. That is the objective of the movement for the socialization of the means of life.

Such, briefly stated, is the theory. We may ill.u.s.trate it by the following example: Let us say the average cost of a day's subsistence is the product of five hours' social labor, which is represented by a wage of $1 per day. In a factory there are 1000 workers. Their labor-power they have sold at its exchange value, $1 per day per man, a total of $1000. They use up $1000 worth of labor-power, then. They also use up $1000 worth of raw material and wear out the plant to the extent of $100 in the course of their work. Now, instead of working five hours each, that being the amount of time necessary to reproduce the value of their wages, as above described, they all work ten hours. Thus, in place of the $1000 they received as wages for the labor-_power_ they sold, they create labor _products_, valued at just twice that sum, $2000. According to our suppositions, therefore, the gross value of the day's product will be $3100, the whole of it belonging to the capitalist, for the simple and sufficient reason that he bought and paid for, at their full value as commodities, all the elements entering into its production, the machinery, materials, and labor-power. The capitalist pays,--

For labor-power $1000 For materials 1000 For repairs and replacement of machinery 100 ----- He receives, for the gross product 3100 $2100 The surplus-value is, therefore 1000

and this sum is the fund from which rent, interests, and profits must be paid.

It will be observed that there is no moral condemnation of the capitalist involved in this ill.u.s.tration. He simply buys the commodity, labor-power, at its full market price, as in the case of all other commodities. No ethical argument enters into it at all. It is very evident, however, that the interest of the capitalist will be to get as much surplus-value as possible, by buying labor-power at the lowest price possible, prolonging the working day, and intensifying the productivity of the labor-power he buys, while the interest of the workman will be equally against these things. Here we have the cause of cla.s.s antagonism--not in the speeches of agitators, but in the facts of industrial life.

This is the Marxian theory of surplus-value in a nutsh.e.l.l. Rent, interest, and profit, the three great divisions of capitalist income into which this surplus-value is divided, are thus traced to the exploitation of labor, resting fundamentally upon the owners.h.i.+p by the exploiting cla.s.s of the means of production. Other economists, both before and since Marx, have tried to explain the source of capitalist income in very different ways. An early theory was that profit originates in exchange, through "buying cheap and selling dear." That this is so in the case of individual traders is obvious. If A sells to B commodities above their value, or buys commodities from him below their value, it is plain that he gains by it. But it is equally plain that B loses. If one group of capitalists gains what another group loses, the gains and losses balance each other; there is no gain to the capitalist cla.s.s as a whole. Yet that is precisely what occurs--the capitalist cla.s.s as a whole does gain, and gain enormously, despite the losses of individual members of that cla.s.s. It is that gain to the great body of capitalists, that general increase in their wealth, which must be accounted for, and which exchange cannot explain. Only when we think of the capitalist cla.s.s buying labor-power from outside its own ranks, generally at its natural value, and using it, is the problem solved. The commodity which the capitalist buys creates a value greater than its own in being used up.

The theory that profit is the wages of risk is answerable in substantially the same way. It does not in any way explain the increase in the aggregate wealth of the capitalist cla.s.s to say that the individual capitalist must have a chance to receive interest upon his money in order to induce him to turn it into capital, to hazard losing it wholly or in part. While the theory of risk helps to explain some features of capitalism, the changes in the flow of capital into certain forms of investment, and, to some small extent, the commercial crises incidental thereto, it does not explain the vital problem, the source of capitalist income. The chances of gain, as a premium for the risks involved, explain satisfactorily enough the action of the gambler when he enters into a game of roulette or faro. It cannot be said, however, that the aggregate wealth of the gamblers is increased by playing roulette or faro. Then, too, the risks of the laborers are vastly more vital than those of the capitalist. Yet the premium for their risks of health and life itself does not appear, unless, indeed, it be in their wages, in which case the most superficial glance at our industrial statistics will show that wages are by no means highest in those occupations where the risks are greatest and most numerous. Further, the wages of the risks for capitalists and laborers alike are drawn from the same source, the product of the laborers' toil.

To consider, even briefly, all the varied theories of surplus-value other than these would be a prolonged, dull, and profitless task. The theory of abstinence, that profit is the just reward of the capitalist for saving part of his wealth and using it as a means of production, is answerable by _a priori_ arguments and by a vast volume of facts.

Abstinence obviously produces nothing; it can only save the wealth already produced by labor, and no automatic increase of that saved-up wealth is possible. If it is to increase without the labor of its owner, it can only be through the exploitation of the labor of others, so that the abstinence theory in no manner controverts the Marxian position. On the other hand, we see that those whose wealth increases most rapidly are not given to frugality or abstinence by any means. It may, certainly, be possible for an individual to save enough by practicing frugality and abstinence to enable him to invest in some profitable enterprise, but the source of his profit is not his abstinence. That must be sought elsewhere. Abstinence may provide him with the means for taking the profit, but the profit itself must come from the value created by human labor-power over and above its cost of production.

Still less satisfactory is the idea that surplus-value is nothing more than the "wages of superintendence," or the "rent of ability." This theory has been advocated with much specious argument. Essentially it involves the contention that there is no distinction between wages and profits, or between capitalists and laborers; that the capitalist is a worker, and his profits simply wages for his useful and highly important work of directing industry. It is a bold theory with a very small basis of fact. Whoever honestly considers it, must, one would think, see that it is both absurd and untrue. Not only is the larger part of industry to-day managed by salaried employees who have no part, or only a very insignificant part, in the owners.h.i.+p of the concerns they manage, but the profits are distributed among shareholders who, as shareholders, have never contributed service of any kind to the industries in which they are shareholders. Whatever services are performed, even by the figure-head "dummy" directors of companies, are paid for before profits are considered at all. This is the invincible answer to such criticisms as that of Mr. Mallock, that Marx and his followers have not recognized "the functions of the directive ability of the few." When all the salaries of the directing "few" have been paid, as well as the wages of the many, and the cost of all materials and maintenance of machinery, there remains a surplus to be distributed among those who belong neither to the "laboring many" nor the "directing few." That profit Mr. Mallock cannot explain away. Marx himself, in "Capital," called attention to the "directing ability of the few," quite as clearly as Mr. Mallock has done. He first shows how the "collective power of ma.s.ses" is really a new creation; that it involves a special kind of leaders.h.i.+p, or directing authority, just as an orchestra does; then he proceeds to point out the development of a special cla.s.s of supervisors and directors of industry, "a special kind of wage laborer.... The _work of supervision becomes their established and exclusive function_."[178]

Socialists, contrary to Mr. Mallock, have not overlooked the function exercised by the directing few, but they have pointed out that when these have been paid, their salaries being sometimes almost fabulous, there is still a surplus-value to be distributed among those who have not shared in the production, either as mental or manual workers. As Mr.

Algernon Lee says:--

"The profits produced in many American mills, factories, mines, and railway systems go in part to Englishmen or Belgians or Germans who never set foot in America, and who obviously can have no share in even the mental labor of direction. A certificate of stock may belong to a child, to a maniac, to an imbecile, to a prisoner behind the bars, and it draws profit for its owner just the same. Stocks and bonds may lie for months or years in a safe-deposit vault, while an estate is being disputed, before their owners.h.i.+p is determined; but whoever is declared to be the owner gets the dividends and interest "earned" during all that time."[179]

It is an easy task to set up imaginary figures labeled "Marxism," and then to demolish them by learned argument--but the occupation is as fruitless as it is easy. It remains the one central fact of capitalism, however, that a surplus-value is created by the working cla.s.s and taken by the exploiting cla.s.s, from which develops the cla.s.s struggle of our time.

FOOTNOTES:

[163] _The People's Marx_, by Gabriel Deville, page 288.

[164] _Capital_, Vol. I, Kerr edition, page 41.

[165] Professor J. S. Nicholson, a rather pretentious critic of Marx, has called suns.h.i.+ne a commodity because of its utility, _Elements of Political Economy_, page 24. Upon the same ground, the song of the skylark and the sound of ocean waves might be called commodities. Such use of language serves for nothing but the obscuring of thought.

[166] William Petty, _A Treatise on Taxes and Const.i.tutions_ (1662), pages 31-32.

[167] _The Wealth of Nations_, Vol. I, Chapters V-VI.

[168] Benjamin Franklin, _Remarks and Facts Relative to the American Paper Money_ (1764), page 267.

Marx thus speaks of Franklin as an economist: "The first sensible a.n.a.lysis of exchange-value as labor-time, made so clear as to seem almost commonplace, is to be found in the work of a man of the New World, where the bourgeois relations of production, imported together with their representatives, sprouted rapidly in a soil which made up its lack of historical traditions with a surplus of _humus_. That man was Benjamin Franklin, who formulated the fundamental law of modern political economy in his first work, which he wrote when a mere youth (_A Modest Inquiry into the Nature and Necessity of a Paper Currency_), and published in 1721." _A Contribution to the Critique of Political Economy_, by Karl Marx, English translation by N. I. Stone, 1894, page 62.

[169] David Ricardo, _Principles of Political Economy and Taxation_, Chapter I, -- III.

[170] _Wealth of Nations_, Book I, Chapter X.

[171] _Principles of Political Economy and Taxation_, Chapter I, Sec. 1, -- 4.

[172] See "The Final Futility of Final Utility," in H. M. Hyndman's _Economics of Socialism_, for a remarkable criticism of the "final utility" theory, showing its ident.i.ty with the doctrine of supply and demand as the basis of value.

I refer to the theory of final or marginal utility as the "so-called Austrian theory" for the purpose, mainly, or calling attention to the fact that, as Professor Seligman has ably and clearly demonstrated, it was conceived and excellently stated by W. F. Lloyd, Professor of Political Economy at Oxford, in 1833. (See the paper, _On Some Neglected British Economists_, in the _Economic Journal_, V, xiii, pages 357-363.) This was two decades before Gossen and a generation earlier than Menger and Jevons. In view of this fact, the criticism of Marx for his lack of originality by members of the "Austrian" school is rather amusing.

[173] _Principles of Economics_, by Edwin R. A. Seligman (1905), page 198.

[174] Cf., for instance, my little volume, in the _Standard Socialist Series_ (Kerr), ent.i.tled _Capitalist and Laborer_; Part II, _Modern Socialism_, page 112.

[175] _Principles of Political Economy and Taxation_, Chapter V, -- 35.

[176] _Value, Price, and Profit_, by Karl Marx, Chapter XIV.

[177] It is worthy of note that the taxation of land values, commonly a.s.sociated with the name of Henry George, was advocated as a palliative in the _Communist Manifesto_ of Marx and Engels.

[178] _Capital_, by Karl Marx, Vol. I, Chapter XIII, of Part IV.

[179] _The Worker_ (New York), February 5, 1905.

CHAPTER IX

OUTLINES OF THE SOCIALIST STATE

I