Monday, April 23, 2012

Lesson 28: Communist Economics 8: The Interests of Capital and Labor

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Communist Economics

Part 8

Marx’s Wage-Labour and Capital:

The Interests of Capital and Wage-Labour are Diametrically Opposed;
Effect of Growth of Productive Capital on Wages


We thus see that, even if we keep ourselves within the relation of capital and wage-labour, the interests of capitals and the interests of wage-labour are diametrically opposed to each other.”

There are two points here: (1) the relation between capital and labor, (2) the transcendent theorem that the interests of capital and the interests of labor shall never meet, that is, are diametrically opposed.

First, what is the relation between capital and labor? Simply, the capitalist focuses labor by means of self-interest. The laborer is attached to the capitalist mainly by necessity, that is, for subsistence (salary) or for some decidedly brighter future (which includes both economic and social compensation, the details left for honorable contract between capitalist and laborer). In such partnership, profit is hopefully created, which serves as subsistence for the capitalist (at whichever level he chooses or otherwise attains), and as reinvestment for further capitalization (business expansion).

“Labor” here is defined as an organized body of workers acting towards a common purpose, which definition aptly fits economics both capitalist and communist. That is, communism cannot, and in fact does not, change the definition of labor. Communism does, however, change the nature of labor by systemically removing the incentives for self-interest, which are, (1) profit-sharing (mainly, through wages) and (2) accumulation of wealth (or, private property ownership).

Capitalism, on the other hand (even under oligarchy) provides incentives for self-interest, permitting and touting (1) wage inequities of varying levels, and (2) lawful possession. Of lawful possession, this is a simple enough concept to understand, that a man owning a plot of land (property taxes notwithstanding) is more inclined and motivated to maintain and improve that property, thereby increasing both the prosperity of himself and of the populace (collectivism by individual self-interest), while simultaneously broadening the tax base for government (forced but congenial symbiosis). Of the necessity for wage inequity, this is more complicated, for it is nearly a spiritual argument. Wage inequity is a manifestation of the perception of merit, that one man (the capitalist) values another man (the laborer) more highly than yet another man (a different laborer). Thereby, wage inequity acts as a non-coercive catalyst and motivator for both individual and collective (that is, corporate) improvement.

But why is wage the motivator at all? For this, we must plumb down to the difference between pleasure and pain, and understand that no living being wishes to feel pain, and few wish to reject pleasure. Wage, giving access to those things which provide pleasure and remove pain (subsistence and luxury), naturally motivates, and higher wage motivates more. Thus, disregarding distortions of the market (excessive governmental interference or assistance; nepotism; and other undesirable interventions), the wage inequity of capitalism provides the correct and most natural reward for the more meritorious talent or skill (and punishment, if you will, for underperformance).

Communism purports to relieve such strife, that is, the universal struggle to attain pleasure and to avoid pain, by providing “equal for all” (“to each according to his needs”) in exchange for “full employment” (“from each according to his ability”). This is the paradox which is the ultimate failure of communism. For to provide equal for all is to remove need; but without need, invention is stifled, and the spark of motivation (except for the enthusiasm to run towards such provisional handout) is eliminated. Therefore, without motivation, what moves labor to continue production? (1) Is it self-interest, the desire to subsist? Naturally, but here is no difference with capitalism, unless one should claim that communism provides more, better, and/or less unstable subsistence. Of more or better subsistence, the evidence of history denies it, and only propaganda can make it appear true. Of less unstable subsistence, this appeals only to those who desire welfare over self-respect, mediocrity (at best) over the opportunity for superlatives. Thus, any claim of communist superiority in this regard cannot be substantiated. (2) Is it the altruistic urge to harmonize collectively? Perhaps, but such charitable inclinations are limited. Consider that, in a free capitalist society, charitable inclinations may be satisfied in a myriad of ways, and such voluntary contribution is often quite generous, yet charity does not meet all societal needs. Therefore, altruism, being voluntary, is not sufficient. (3) It thus falls to coercion.

How else shall communism, which forbids the opportunities of capitalism (wage inequity, lawful possession), and which crushes the moral backbone of free altruistic charity, motivate labor to work fervently? And how without motivated labor shall communism fulfill its promise to meet at least the subsistence needs of all? It follows that for communism to succeed it must either (1) adopt capitalist structure and/or superstructure (rendering it not truly communist), or else (2) devise a system of “full employment” which is both centrally-controlled (without private profit) and mandatory (“he who does not work, neither shall he eat”). Clearly, Marx believed the latter, for Principles of Communism (see Synopsis 19) specifies the necessity to (1) conscript citizens to both industrial and agricultural work, (2) rip children from their parents early enough to be trained up for the various functions and stations which communist central planning deems necessary, and (3) delete idleness. Likewise, Lenin, in his 1917 The State and Revolution, followed the same template, writing, “The socialist principle, ‘He who does not work shall not eat,’ is already realized; the other socialist principle, ‘An equal amount of products for an equal amount of labor,’ is also already realized. But this is not yet communism, and it does not yet abolish ‘bourgeois law,’ which gives unequal individuals, in return for unequal (really unequal) amounts of labor, equal amounts of products.” Moreover, the 12th Article of the 1936 Soviet Constitution asserts, “In the USSR, work is a duty and a matter of honor for every able-bodied citizen, in accordance with the principle: ‘He who does not work, neither shall he eat.’” The promise of “equal for all” therefore guarantees coerced labor, that is, slavery through threat of starvation.

Welcome to the worker’s paradise!

Capitalism has no need of such coercion, offering natural and ample incentives to motivate labor, mainly by advancement (wage inequity) through merit. Thus, even when labor under capitalism complains of wage inequity between worker (wage) and boss (profit), or between worker (wage) and worker (wage), such complaints are founded upon and satisfied within that potential for capitalist advancement (although Marxist elements within such activist labor desire not capitalist advancement for the individual, but rather, and quite naturally, communist mediocrity for all). If such advancement is not forthcoming, labor under capitalism has liberty to quit their boss, or to strike for better wages and/or conditions, thereby improving their lot.

Labor under communism, on the other hand, does not reward individual merit (except through whim of central planning), and dissent against that communist system (for example, by quitting or striking) is a crime, those enemies of the state summarily punished.

It might be argued that true (utopian) communism regards no “state” per se, that is, no gargantuan central planning. However, this argument is dialectic, having no true basis within either historical (actual) experience or textbook (theoretical) ideology, communism in any form being a clear intervention into the every aspect of human society.

It might also be argued that a “socialist” state mediates between the excesses of both capitalism and communism, preserving individual freedom while administering the proper amount of collectivist compassion. This also is dialectic, for the communist actually defines socialism not as a compromise with capitalism, but as the first economic step after a successful revolution. The “socialist” who therefore clings still to capitalist economics, or to individual liberties, being a reformist rather than a revolutionary, is enemy to the communist. Factually, the only currently-recognized (true) socialist nations are Red China, Cuba, Laos, Vietnam, North Korea, Sri Lanka, India (socialist republic), and Tanzania (plus constitutional references for Bangladesh, Guyana, and Portugal), all other so-called “socialist” nations, such as Sweden or England (even the United States, to some extent), being subject to warfare (economic and social) between the opposing and buffeting forces of capitalism (individuality) and communism (collectivism).

Second, Marx states, “even if we keep ourselves within the relation of capital and wage-labour, the interests of capitals and the interests of wage-labour are diametrically opposed to each other,” implying that capital and labor have no relation of value. However, this is false, for we know that the value of the capital-labor relationship is intrinsic, that is, of self-interest, which provides at least subsistence for both. Such value is inarguable, even if a more aligned version of common interests should exist. Capital and labor are thus not diametrically opposed. Marx’s statement is therefore merely dialectic against reformism, for the goal of Marxism is never the retention of capitalism but rather its destruction.

Accordingly, Marx proposes communism to be the more aligned version of socio-economic common interests. However, as previously examined, the interests of labor and those of communist central planning are ultimately more opposite than are the competing interests of capital and labor. For while the wage inequity inherent to capitalism has its detractions (and detractors), communism is monstrous, creating a societal structure which (1) destroys the family, the Law of God, individuality, and creativity (among other things), (2) exploits the worker unto slavery or death, and (3) suppresses deliberately and actively (that is, with fascism) the natural rights of man to speak, worship, assemble, bear arms, and so forth. Communism is thus the ideology most diametrically opposed to the true interests of labor, and of mankind in general.

“A rapid growth of capital is synonymous with a rapid growth of profits.”

False. Capital may be expanded by investment (external input), not only by profits (internal output).

“Profits can grow rapidly only when the price of labour – the relative wages – decrease just as rapidly.”

False. First, profits may also grow rapidly when the price of commodities, or expenses other than labor, decrease rapidly.

Second, the price of labor is not a “relative wage” from profit, but rather is a “nominal wage” resulting from settled contract (hiring). The counter-argument from Marx contends that the laborer is entitled to a greater share from profit, establishing this upon false accusation that the capitalist provides inconsequent value towards his own product or service. However, this is mere dialectic, for, as we have previously examined, the capitalist places himself at great risk and plows in tremendous effort. Thereby, the intrinsic value of the capitalist cannot be ignored, and this point is proven by the communist goal to seize the valuable and highly-prized capitalist means of production. But if the argument should become that the laborer is entitled to a greater relative wage by virtue of his own risk, whether physical or some other, this is a matter for the honorable contract, that is, for any legal agreement made between capital and labor. Once such legal agreement has been fulfilled, labor thereafter has no honorable claim to any further profit-sharing.

Third, profits do not depend upon relative wages inasmuch as labor costs are prearranged by contract (“nominal wages”). Therefore, the Marxian proposition that profit should be viewed as withheld (or, in the jargon, “stolen”) from laborer wage is but pure envy.

“Relative wages may fall, although real wages rise simultaneously with nominal wages, with the money value of labour, provided only that the real wage does not rise in the same proportion as the profit. If, for instance, in good business years wages rise 5 per cent, while profits rise 30 per cent, the proportional, the relative wage has not increased, but decreased.”

Marx deliberately conflates. First, “nominal wages” indicates the contracted wage, which is paid irrespective of capitalist profit (except in the most dire circumstances of embezzlement and bankruptcy), that is, whether or not there is profit. Here, Marx pleads only for the lot of the laborer, but who pleads for the capitalist that fails? Second, “real wages” indicates the buying power of wages, which has value irrespective of capitalist profit or its own buying power thereof. No relation therefore exists between nominal wages and relative wages, or between real wages and relative wages (which are in any case arbitrary terms), except as a measure of resentment or coveting. This is, of course, the point. For the concept of disproportionate relative wages fuels the envy which serves to motivate warfare between the classes, the Marxist weapon of choice in the overall strategy to “divide and conquer.”

“If, therefore, the income of the worker increased with the rapid growth of capital, there is at the same time a widening of the social chasm that divides the worker from the capitalist, and increase in the power of capital over labour, a greater dependence of labour upon capital.”

According to Marx, the corollary to “relative wages” is the inevitable slavery which capitalism engenders. Thus, if a laborer under capitalism cannot improve his lifestyle, wages not permitting such advancement, he is stuck under the thumb of capitalist economic power and, by extension, capitalist social thought within the community. If, on the other hand, a laborer does improve his lifestyle under capitalism, he ostensibly becomes slavish to that improvement, whether or not he acquires more social power. In other words, Marxism provokes the underperforming laborer, and insults the improved laborer as either a misfit among capitalists or else a sellout.

Communism does eliminate relative wages (and inequity of nominal wages), but it cannot erase status, envy, or human nature. First, concerning status, communism does not equalize all workers, neither economically nor socially. Someone must supervise, and someone must oversee the supervisors. Status and power are thus retained under communism, with attendant unequal distribution of goods and services. Second, envy must inevitably follow. But whereas under capitalism envy may transform into ambition and personal achievement (rather than crime), under communism there is no outlet but resentment and dissent, which communist central planning must by all means suppress. Third, suppression of human nature does not work. Even God would not disallow the free will of Adam and Eve in the Garden of Eden, but instead permitted them restlessness and curiosity, though paradise was undone. In the same manner, utopian communism must unravel by human nature. For when the accumulation of wealth (private property ownership) is forbidden (the primary tenet of communism), self-interest and creativity vanish, and therefore the communist nation is relegated to whichever level of mediocrity it be able to coercively maintain.

“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.”

Since Marx seeks to destroy and not reform capitalism, this diatribe is against reformism, that is, against improved lifestyle for the capitalist laborer. It means to convince that such improved laborer lifestyle is built upon the backs of laborers not so fortunate. Guilt and compassion are thus main weapons used whereby the communist attempts to capture the hearts of underperforming laborers and their sympathizers.

But is the accusation true? This depends on perception, for the underperforming laborer is more likely to believe he is a slave, but the laborer of improved lifestyle is more likely to dismiss such euphemism as envy. Thus, enmity is brewed between them, though through emotion rather than through fact or logic. To the revolutionary Marxist, however, it is the enmity itself which proves the (Hegelian) dialectic true.

“We have thus seen that even the most favorable situation for the working class, namely, the most rapid growth of capital, however much it may improve the material life of the worker, does not abolish the antagonism between his interests and the interests of the capitalist.”

The laborer and capitalist actually have a mutual goal, which is the profitability of the business entity, profit being that which secures improved lifestyle. If there is any “antagonism” between the interests of labor and those of the capitalist, it is entirely of envy (enmity born from perception, that is, from emotion). If such antagonism (envy) is true, Marx exacerbates it; and if not true, he causes it through the revolutionary dialectic (the argument meant to inflame social upheaval). Either way, Marx has chosen to play God, believing that communism must save the world by first setting man against man in civil war, the ends justifying the means. For the force of the revolutionary proletariat is fueled by the power of class envy; and, without the emotion of envy, what is the power of communism?

And what is envy but hatred of God? For to ardently covet is to despise the Tenth Commandment. Communism is therefore evil, and the Tenth Commandment might be paraphrased, “Thou shalt not be communist.”

Interestingly enough, envy is also a form of self-interest. Since the communist criticizes capitalism for being of self-interest, it is hypocrisy that communism steers the negative form of self-interest (envy) against the capitalist, to vanquish the positive form (ambition).

But is the accusation of “antagonism,” though pandering to the baser instincts of the underperforming laborer, true? First, the capitalist is not legally responsible for anything more than fulfilling his side of the contract, that is, for paying wages. Therefore, in this regard, the accusation is not true, but is merely revolutionary dialectic (agitation). Second, such antagonism cannot be accurately measured, but only communicated anecdotally through heart-wrenching tales of human alienation (which the Marxist claims is rooted in wage inequity). In this regard, the accusation can only be “true” through propaganda.

But if antagonism between the classes is real, it must be admitted that certain steps have been taken to relieve it, including (1) enshrinement, within national constitutions, of natural rights to life, liberty, and private property, applying to even the lowest laborer who is also a citizen, (2) credit systems which provide nearly every laborer access to more equal societal status, and (3) organized labor which has forced positive changes to wages, benefits, and standards (safety, health, etc). To not admit these reforms is a deliberate attempt to retain the fuel of envy, to continue the (alleged) antagonism between the classes, for the sake of revolution. The communist is this revolutionary, rejecting all such reformism, accepting only the destruction of capitalism and the sequestration (re-education, gulag, death) of all capitalist participants. Thus, the struggle between capitalism and communism is life-or-death.

“Profit and wages remain as before, in inverse proportion.”

False. As previously detailed, this is a phony formula, useful only to agitate.

“If capital grows rapidly, wages may rise, but the profit of capital rises disproportionately faster. The material position of the worker has improved, but at the cost of his social position. The social chasm that separates him from the capitalist has widened.”

Marx admits that the material position of the worker improves as profit rises. The Marxist economic argument is therefore lost. In fact, there has never been a sound or reasonable Marxist economic theory or system. As previously detailed, nearly every communist claim against capitalist economics is either incorrect or a dialectic (lie). Why then does anyone subscribe to communist economics, or why is wage inequity able to arouse the passions of underperforming labor? Simply, wage inequity is the scapegoat on which to hang envy between the classes. The true target of this envy is, however, inequity of buying power.

If an underperforming laborer covets, it is not the wage, but those things which wage buys, including home, vehicle, country club, and political clout. The communist asks, “Why should the underperforming laborer suffer (pain) while the capitalist boss, or the laborer of improved lifestyle, thrives and enjoys (pleasure)? Why should the ‘fat cat’ live in a mansion, the ‘poor slob’ in an apartment? Why should one be chauffeur-driven, the other ride public transportation or drive a jalopy?” The communist seizes on such grievances against “unfairness,” manipulating and organizing them into power blocs of sympathy and empathy.

The communist strategy in this regard is two-stage: (1) to place pressure in various quadrants, forcing more equitable wages and/or buying power of wages to be set at certain arbitrary standards (for example, to facilitate high-risk mortgages) or ratios (for example, salary caps for corporate executives), and then (2) to dispense altogether with any system of meritorious wage or private property ownership, that is, to cease capitalism. The linchpin of this strategy is to convince the underperforming laborer and those who sympathize that the capitalist does little or nothing to deserve his profit, and that the laborer of improved lifestyle is similarly overvalued (his higher wage perhaps hinged to him being an “Uncle Tom”). Communist strategy therefore comes down to peddling that the “less deserving” are enjoying “more,” a statement of pure envy, the fuel of communist infiltration and revolution.

What is the Marxist aim? For the communist, power. For the underperforming laborer, a “piece of the action.” Marx here develops the “root” (wage inequity) into the “branch” (inequity of buying power) in order to properly focus the envy of the underperforming, and thereby fuel communist momentum. His “carrot on a stick” is that equalization of profit-sharing, through wage equity, which brings to the underperforming a commensurate access to both luxury and political power. However, these are merely promises of thin air, dialectic meant only to agitate the proletariat to (self-interested) action. The underperforming who dream of sharing in capitalist luxury and political power are due to be disappointed, for under communist central planning such things will not exist. Mansions shall not be built but torn down. Golf courses shall not be filled but converted for agriculture or other practical utilization. Representative government shall be a mockery, if at all. Unhappily, the end of class distinction under communism is the beginning of an impossibly strong and coercive central government. Meet the new boss...

It might be argued that if the wage of capitalist labor generally and commonly (1) provides subsistence, and (2) is sufficient to permit credit for private property contract (home, vehicle, boat, and so forth), the economic burden of capitalism has been met, and therefore the communist strategy and aim ought to perennially fail. This argument is strong, and would be true but for the pain of the underperforming, which communism continuously provokes to agitation. And since capitalism, being of free will, can never promise prosperity, nor equity, for every person, communism is able to take root within even the most prosperous capitalist societies and nations.

What is the counter-strategy? The best offense against communist infiltration is to teach a profound respect for the constitutional guarantees of liberty, and the biblical precepts upon which these are built (the bedrock for capitalism). Such trumps wage (or any other) equity. For a man is better off to be hungry and free than to be fed and enslaved.

“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.”

For Marx, it is a given that profit corrupts both the capitalist and the laborer, the former growing in power, the latter in relative wealth, which in totality equates to him as slavery. Thereby, capitalism itself is the problem (Oppressor), all under it either slaves or masters (Victims and Oppressors), and communism the solution (Savior).

The argument Marx gives is, however, not economic, not even social, but is ironically (for a communist) moral, tugging at the heartstrings and/or “good sense” of those who feel exploited, those who live in envy, and those who sympathize. It is dialectic.

“Growth of productive capital and rise of wages, are they really so indissolubly united as the bourgeois economists maintain? We must not believe their mere words.”

Ah, but we must believe the mere words of Marx!

“We dare not believe them even when they claim that the fatter capital is the more will its slave be pampered.”

If under capitalism some laborers are more well-off than others, it stands to reason that the more well-off will feel less like slaves, or, more positively, more like capitalists. Therefore, Marx is merely fighting with perception, or, more keenly, with human nature.

Further, Marx here seems to take on the form of preacher, intimating that happiness under capitalism equates to sale of the soul. It is a form of Buddhism, asking to renounce the things of this world, and therefore pain from them. It is a form of Christianity, telling that you will be “perfect” if you sell what you have and give to the poor. Nevertheless, such aphorisms, if so intended, are cherry-picked, and furthermore incomplete. Marx makes a poor moralist, and a worse savior.

“The bourgeoisie is too much enlightened, it keeps its accounts much too carefully, to share the prejudices of the feudal lord, who makes an ostentatious display of the magnificence of his retinue.”

Marx uses a more flowery eloquence here to make his point, that the laborer shall never truly share in the splendor of the capitalist, for the capitalist is too smart for that, too stingy for that, and too much absorbed into the pomp. Marx attempts to be Jesus Christ, decrying by analogy those Pharisees who make ordinances but fail to follow them (hypocritical capitalist superstructure), and who furthermore take the chief seats at the Temple (class envy) and wear the larger phylacteries (antagonism). But whereas Christ had legal (Torah) basis for his complaints, Marx has only dialectic. And unlike Christ, Marx (1) has no Father in Heaven for he believes not in God, and (2) follows not God’s Law, but instead bases societal behavior upon arbitrary rules of compassion and fairness. Christ never broke the Law of God, and told that anyone who would break and teach the least commandment would be called least in the kingdom of Heaven. Conclusively, Christ was no communist!

“The conditions of existence of the bourgeoisie compel it to attend carefully to its bookkeeping. We must therefore examine more closely into the following question:

In what manner does the growth of productive capital affect wages?”

In other words, the capitalist has covered his tracks, so Marx takes it upon himself to act as whistle-blower. But since he has already attempted to demolish the relation between capital and wages, howbeit that Marx desires us to examine it?

“If as a whole, the productive capital of bourgeois society grows, there takes place a more many-sided accumulation of labour.”

Much dialectic here. Marx defines (1) “wealth” as “accumulation of labor,” that is, as amassed on the backs of exploited labor, (2) “profit” as “productive capital,” that is, as wages stolen from labor, used thereafter to recapitalize business, and (3) “wage inequity” and “lawful possession” as “bourgeois society,” that is, as Oppressor.

“The individual capitals increase in number and in magnitude.”

The expansion of prosperity under capitalism. Since, however, there is always under capitalism some inequity (wage, private property, or social status), Marxism views such expansion negatively, as a means of revolutionary dialectic and to elicit compassionate sympathizers.

“The multiplications of individual capitals increases the competition among capitalists.”

The expansion of prosperity creates a competitive market, a positive for both labor and consumer.

“The increasing magnitude of increasing capitals provides the means of leading more powerful armies of workers with more gigantic instruments of war upon the industrial battlefield.”

Marx describes capitalism in terms of war, a dialectic of fear, under which (1) the laborer is a meaningless cipher, cannon fodder of horrible destiny, and (2) the capitalist is a heartless, faceless goliath with no thought but of conquest, all at the expense of the helpless laborer. Yet, while business may be a form a warfare, the capitalist must nevertheless treat his laborers fairly or lose those workers to competition, or else communism!

“The one capitalist can drive the other from the field and carry off his capital only by selling more cheaply.”

False. Competition thrives not only for cheaper pricing but also for intangibles such as better service, brand loyalty, and niche marketing. Necessarily, this discounts the remainder of Marxian economic logic.

“In order to sell more cheaply without ruining himself, he must produce more cheaply – i.e., increase the productive forces of labour as much as possible.”

Even within the context of competition through cheaper pricing, Marx is on faulty ground. First, there is a contention that if the capitalist sells more cheaply without in advance producing cheaply he will be ruined. This ignores the first rule of capitalism, which is to price according to what the market will bear, not as cheaply as possible. Thereby, even the very competitive capitalist ought to have some measure of price padding within which to negotiate himself. Second, supposing the capitalist has not this wiggle room, there is also the reality of market share, which dictates how much profit may be sacrificed before ruin is inevitable. Such requires more calculation than only the cost of production. Third, the limitations of innovation dictate production costs to remain constant for varying periods, in between such innovation. In other words, the capitalist has not always at his disposal the means to increase production at lower cost. But if such means are available, it soon becomes common knowledge, which again levels pricing between competitors. However, if a capitalist acquires proprietary means to increase production at lower cost, this edge is a boon to his entire business entity, including labor.

Without competition, the keen spirit of self-interest is snuffed, and therefore the prime motivator for innovation is suffocated. Communism replaces competition with central planning, which by definition is without self-interest, and therefore low on innovation. Thus, when crisis strikes, communism has not the sharpened spear of competition to tap for solution. Communism therefore not only cripples its own productive capabilities, but also is permanently at risk for the ravages of famine and drought. It might be argued that Russia and China have been bastions of innovation, in the sciences and in industry, respectively, but the former has flowered, if you will, through coercion, and the latter has boomed for adopting capitalist principles (even if a ruse).

“But the productive forces of labour is increased above all by a greater division of labour and by a more general introduction and constant improvement of machinery. The larger the army of workers among whom the labour is subdivided, the more gigantic the scale upon which machinery is introduced, the more in proportion does the cost of production decrease, the more fruitful is the labour.”

Wages are not mentioned within this dialect, which argumentation works instead against the concepts regarding division of labor and technological progress. There are many errors here. First, the argument against division of labor has proved to be baseless. Division of labor, assembly lines, and so forth have actually resulted in more prosperity rather than less. Second, the argument against technology or automation in the workplace has proved to be an exaggeration, if not an irrational fear. The expected unemployment and dehumanization has been minimal, if at all. Third, that Marx seems to decry full employment under capitalism (“the larger the army of workers”) is a double standard.

“And so there arises among the capitalists a universal rivalry for the increase of the division of labour and of machinery and for their exploitation upon the greatest possible scale.”

This dialectic agitates against capitalists, or, capitalism in general, focusing upon “exploitation.” However, the exploitation of machinery, or of a concept known as “division of labor,” is not a capitalist notion, for the communist goal is to seize and continue these same means of production.

“If, now, 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, a capitalist has found the means of producing with the same amount of labour (whether it be direct or accumulated labour) a larger amount of products of commodities than his competitors – if, for instance, he can produce a whole yard of linen in the same labour-time in which his competitors weave half-a-yard – how will this capitalist act?”

Marx is merely defining good business, but the dialectic is already at work.

“He could keep on selling half-a-yard of linen at old market price; but this would not have the effect of driving his opponents from the field and enlarging his own market.”

The capitalist with an edge in the cost of production may absolutely choose to continue at the old market price, increasing profit even without threatening his competitors (“driving opponents from the field”) or “enlarging his own market.” Such increased profit may be used in a variety of ways which benefit the capitalist, including (1) better marketing and advertising, (2) further recapitalization for expansion, or even (3) higher wage for labor in order to keep things humming smoothly. Marx errs again by limiting the wide scope of capitalism.

But supposing increased market share is desired, does lower pricing guarantee it? No, for many consumers adopt a “you get what you pay for” philosophy, regarding lower pricing as a drop in quality, which stance may cause market share to drop!

“But his need of a market has increased in the same measure in which his productive power has extended. The more powerful and costly means of production that he has called into existence enable him, it is true, to sell his wares more cheaply, but they compel him at the same time to sell more wares, to get control of a very much greater market for his commodities; consequently, this capitalist will sell his half-yard of linen more cheaply than his competitors.”

Whether the goal was cheaper pricing or steady profit, the more costly means of production must include some amortized debt. The capitalist who has not already calculated this is doomed. Therefore, Marx is describing chaos, not good business.

Further, it is not necessarily true that greater market share must mitigate more costly means of production. But if it must, cheaper pricing is not necessarily the vehicle.

“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.”

The communist is not capable to innovate, and therefore Marx sees only the barest business stratagem, disregarding many other capitalist options, including various price points, quality controls, advertising plans, niche markets, and so forth.

“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.”

The capitalist who sells more goods (gross income) but remains constant in profit (net income) is by the judgment of Marx at a standstill, if not a failure. Yet, it sometimes is beneficial to sell more (work harder) even if recapitalization, whether from inside profit or outside investment, is not immediately forthcoming. The main benefit of such strategy is increased market share (which, as previously discussed, does not always come by lower pricing). This not only drives off competition but also establishes brand awareness and/or loyalty, which in business is priceless.

“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.”

Marx ignores that competition may be driven off by an increased market share which does not come by lower pricing, a fatal flaw to his economics.

“And finally, let us remember that the current price always stands either above or below the cost of production, according as the sale of a commodity takes place in the favorable or unfavorable period of the industry. According as the market price of the yard of linen stands above or below its former cost of production, will the percentage vary at which the capitalist who has made use of the new and more faithful means of production sell above his real cost of production.”

Marx is stating the obvious, that price depends not only on cost of production, but also on the predilections of the market.

“But the privilege of our capitalist is not of long duration. Other competing capitalists introduce the same machines, the same division of labour, and introduce them upon the same or even upon a greater scale. And finally this introduction becomes so universal that the price of the linen is lowered not only below its old, but even below its new cost of production.”

While pricing edge due to more efficient methods of production is transient, competitive forces are permanent. Thus, capitalist entities must either (1) to stay ahead of the pack, constantly innovate (whether by production methods, or through intangibles such as customer service, reliability, and so forth), or (2) to at least keep pace, constantly capitalize. Marx finds this natural cycle of competitive business to be imbalanced (through inefficiencies of overproduction and underproduction) and to create inequities (economic, social). These are the meat of communist dialectic. This dialectic is, however, directed not at the capitalist, to reform, but at the laborer, to agitate. For within the aforementioned variances of capitalist (business) competition is (1) the pain of inequity, and (2) the envy which follows that pain, the fuel of Marxist revolution.

“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. Having arrived at the new point, the new cost of production, the battle for supremacy in the market has to be fought out anew. Given more division of labour and more machinery, and there results a greater scale upon which division of labour and machinery are exploited. And competition again brings the same reaction against this result.”

The Marxist dialectic is expanded to its maximum. The Victim, the underperforming laborer, hears, “If circumstances be left to the capitalist, nothing will change for you.” The envious thus view capitalism, the Oppressor, as untenable, both economically and morally. Communism, which communicates this message, is therefore the Savior.

Monday, April 9, 2012

Lesson 27: Communist Economics 7: The General Law of Wages and Profits

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Communist Economics

Part 7

Marx’s Wage-Labour and Capital:

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


We have said: ‘Wages are not a share of the worker in the commodities produced by him. Wages are that part of already existing commodities with which the capitalist buys a certain amount of productive labor-power.’”

Marx is conflating “wages” and “salary.” Wages do have capacity to be paid as a share of commodities produced (or services rendered). Examples of wages paid as a share include (1) commission, that is, a percentage from gross business (capitalist) income, (2) profit-sharing, that is, a percentage from net business (capitalist) income, and (3) stock options, that is, shares in corporate entity which have explosive upside potential. Salary, on the other hand, is a subset of wages, a figure set in advance to purchase labor-power.

This distinction between wages and salary is critical. For once the definition of “wages” is expanded beyond salary, the cry against capitalist “exploitation” becomes thinner and less plausible. The Marxian diatribe thus becomes a mere dialectic, an argumentation made for no reason other than to agitate, in this case to psychologically move a particular segment of the audience towards an untrue paradigm. In other words, Marxian economics is brainwashing.

Marx misleads also by making it that “wages” are paid from a preexistent accumulation of wealth (“part of already existing commodities”), as in a retail transaction. This is, first, not accurate. Most wages are paid after a certain duration, whether that duration be a day, week, or month. Second, but more importantly, the Marxian claim is dialectic. Since commodities and money (that is, recognized tender) generally fluctuate in price, the value or “buying power” of wages likewise fluctuates. The brainwash here is the assumption that such fluctuations in buying power always impact negatively against the laborer. But are there not fluctuations which benefit the laborer?

Suppose for example that a laborer (1) contracts his labor to a capitalist for $500 per week, and (2) pays rent at $700 per month, but thereafter discovers a similar or better rental at $600 per month. The financial condition, even the lifestyle, of that laborer is now improved.

Suppose for a different example that, after a laborer secures a home mortgage for $700 per month, the value of the dollar plummets so that it takes many dollars to buy a loaf of bread. The capitalist, if he wishes to retain laborers and thus stay in business, must increase wages to compensate for that decreased buying power. The mortgage payment, however, being under contract, remains the same at $700 per month. In this scenario, the buying power of the dollar against that mortgage has strengthened markedly.

Suppose for a third example that a gold miner, paid in commodity, that is, gold, rather than in money (exchange paper), finds his wage (gold) to be valued (priced) this week at $1500 per ounce but the following week at $1800 per ounce. All other things (subsistence) being equal, the miner has benefited from fluctuation within capitalism.

It might be argued that such improvements through wage fluctuation are manifestations of a weaker capitalist (local or global) economy. This argument is, however, misleading, attempting to move from the intrinsic value of wages to the extrinsic forces against them. It is concentration upon the overall economy rather than upon the laborer, and this in order to denigrate individual success for the sake of instigating collectivist compassion. Yet, the Marxist finds here a worthy adversary in his own supposed friend, for the laborer who finds himself in a more secure position (even temporarily so) is unlikely to temper his contentment and joy for somber reflection upon the condition of the masses. That is, any laborer (indeed, anyone at all) who happens to be succeeding, and is without guilt for that individual success, undermines through such economic atomism every Marxist goal. We find therefore communist philosophy not to coincide, but to be in conflict, with human nature.

Nevertheless, if this human nature be left to its own devices, it may create the conditions wherein communism incubates. For if labor becomes actual slavery, or if the conditions of labor become dangerous, or unfair in the extreme (all these things being, of course, relative), the organization of labor under such grievances will be infiltrated and manipulated by Marxist elements, so that, even if the grievances be righteous, then duly rectified, communism will have gained ground and momentum. It thus behooves the capitalist to work within a framework of morality, and one which defends capitalism. The framework which accomplishes both worthy goals is Torah, the Law of God, which commands not only the protection of private property against coveting and stealing (whether by individuals, or bodies such as governments), but also codifies the morality of proper weights and measures, of proper coin money, of debt management, of the treatment of labor, and so forth. Ergo, Torah is the proper parameter of capitalist society. It is no wonder then that all Marxist factions seek the destruction of Jewish influence upon society, if not of the Jews themselves.

Without such codified morality, the meritocracy of capitalism, and the security provided thereby, is a promise broken. When so, communism rides in on white horse, purporting to bring about the elimination of comparative poverty (class struggle), and the adjuration of societal guilt (racial, economic, etc) through “full employment” and “fairness.” And though every red revolution has ended in mass starvation, mass genocide, and/or totalitarianism, that heady fragrance of communism still appeals to the envious (Victim) and to the uninitiated (sympathetic dupe), both of whom are easily enticed towards the representative of such utopia (Savior).

It might also be argued that Marx decries not the timing of wage payments, but rather the entire concept of wages. However, since for Marx the synthesis of his dialectic is always the demolition of capitalism, not its reform, any Marxist discussion regarding the timing of wage payments is irrational.

Further, it forces to the surface that Marxist economics is, generally speaking, sophistry, or, more accurately, the dialectic of contradiction, as if argumentation against reality automatically will create a reactive destruction leading to some new evolution of thought. For example, the communist argument, that capitalism jeopardizes every gain of the laborer, is itself specious, for it negates that capitalism is the creator of gain; and the communist threat, to seize the means of capitalist production, proves this, unveiling the argument as only dialectic, not reason.

“But the capitalist must replace these wages out of the price for which he sells the product made by the worker; he must so replace it that, as a rule, there remains to him a surplus above the cost of production expended by him, that is, he must get a profit.”

Profit is actually the mechanism by which the laborer continues. For without profit, his ingenuity reaping nothing, the capitalist quits. The Marxian counter-claim, that production ought and is able to continue in like manner without profit motive, is filled with error. First, self-interest is that which motivates, whether under capitalism or not. Without such self-interest, quality productivity continues only under threat. Second, the state which replaces the capitalist must be helmed by administrators who produce nothing. Thus, a portion of “profit” is inherent even under communism, and such has been amply proved by the gluttonous Politburos of red nations. Third, unless there is totalitarian slavery, the contract between laborer and capitalist is a voluntary one. Profit is therefore not an exploitation but a recognized component within the mechanics of capitalist “work.” Under communism, however, the laborer is not self-directed, and retains less autonomy than under capitalism.

“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.”

Missing from this simplistic model are those “portions” (taxes, licenses, fees) taken coercively by government entities. Since taxes are as old as government itself, Marx must be judged to have intentionally omitted this point, likely to deflect away from the full taxation of central governance, that is, of communism.

The clause “from the point of view of the capitalist” is a dialectic meant to cause the reader to assume that an alternative economic model, namely production without profit, exists. However, such economic model must be under the auspices of a benevolent government. For the man who works not for wages but for distribution of wealth (communism) is neither in control of his destiny nor of his circumstances (but the man who works for wages has both), and therefore is at the mercy of central control. In fact, the man who works for distribution of wealth is little more than a slave working for his daily gruel. It should come as no surprise then that Marxist nations must use extreme coercion (military, peer pressure, etc) to accomplish “production without profit.”

“While the first part merely replaces previously existing values, it is evident that the replacement of the wages and the surplus (the profit of capital) are as a whole taken out of the new value, which is produced by the labor of the worker and added to the raw materials. And in this sense we can view wages as well as profit, for the purpose of comparing them with each other, as shares in the product of the worker.”

Note that Marx agrees with the capitalist model only when he cannot avoid it. Wages and profit are indeed shares in the product. However, Marx sullies his own truth by saying that the product is “of the worker,” as if the capitalist has no involvement in the process other than to slice off profit. This in fact describes government, which, without any personal involvement (unless one counts the common defense), apportions to itself a share called, colloquially, taxes. In stark contrast, the capitalist, having invested his ideas, hopes, credit, savings, sweat, and nerves, deserves every bit of his profit. Consider also that even if the product or service fails, and the capitalist is put to the street, the wage to the laborer, and taxes to the government, must still be paid even if no profit is reaped!

Now, Marx unexpectedly mentions that both profit and wages are dependent on a “new value.” What is this new value? Factually, it is the whim of the marketplace, which commands the ceiling of any price. Profit, therefore, is not an exploitation of the honorably contracted laborer, but an exploitation of the desires of the marketplace. But if prices be reined in by other than the marketplace, what else is it but government coercion (price fixing, the communist norm) or else corruption (failing to regulate against monopoly, that is, crony capitalism)? However, since neither of those is desirable, it is the marketplace, and thus capitalism, even with its dangers and pitfalls, which is the superior economic framework.

“Real wages may remain the same, they may even rise, nevertheless the relative wages may fall. Let us suppose, for instance, that all means of subsistence have fallen 2/3rds in price, while the day's wages have fallen but 1/3rd – for example, from three to two shillings. Although the worker can now get a greater amount of commodities with these two shillings than he formerly did with three shillings, yet his wages have decreased in proportion to the gain of the capitalist.”

First, the example from Marx is itself a dialectic, deliberately ignoring alternatives of a universal nature, as our own examples above. Particularly conspicuous in its absence is any discussion concerning universally lower prices. If “all means of subsistence” have fallen 2/3 in price, and the price of gasoline is $1.33 rather than $4.00, does this not positively affect the capitalist as well as the laborer? Under such conditions, is not the laborer more secure in his position?

Second, concerning wages, Marx enters a dialectic within the dialectic. Consider that if “all means of subsistence” have fallen by 2/3 in price, but wages have fallen by 1/3, the buying power of wages has increased by 100%. Under such scenario, the laborer is able to purchase twice as much as before (denoting the strange dynamics of capitalism, the potential to at any time tip the scales favorably towards the laborer). What then does it matter that the capitalist is still “ahead of” the laborer? But Marx concentrates nearly all upon this difference, which is simply class envy, leading to class warfare.

“The profit of the capitalist – the manufacturer's for instance – has increased one shilling, which means that for a smaller amount of exchange values, which he pays to the worker, the latter must produce a greater amount of exchange values than before.”

First, if all means of subsistence have decreased by 2/3 in price, is this not deflation? If so, is not capitalist profit retained through price decreases in such things as raw materials, and electricity to run machinery? And if deflation, is not capitalist profit fairly the same and not increased due to lower prices commanded by marketplace forces, such as competition?

Second, the laborer in this example does not receive a smaller amount of exchange values, but rather has twice the buying power. Despite the lower cost in shillings (nominal wages), the capitalist has still paid out the equivalent of a 100% raise (real wages). Marx is contradicting himself.

Third, the laborer does not produce a greater amount of exchange values. If the capitalist must lower his price due to overall deflation, both the price of the product or service, and the profit, have moved in kind with the laborer. Ideology notwithstanding, this evens out the marketplace. If the capitalist, however, is able to hold prices high against deflation, even by monopoly or price fixing, this still is of no concern to the laborer, who has in any case doubled his buying power.

“The share of capitals in proportion to the share of labour has risen. 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.”

First, we must acknowledge the existence of class envy. The Tenth Commandment proves that God has decided its existence as long as mankind endures. Marx, eager to point out disparity between social wealth, and utilize it as a lever for upheaval, is thus not a savior from, but a carrier of, this corruption.

Second, we must also acknowledge that wealth equals power. In politics, money often buys the race, and therefore the elected official commonly puts effort towards repaying contributions with favors. Since politics sets the guidelines for our lives, from the taxes we pay to the ordinances we must obey, this is a real power, able to be mishandled and misused. But even in everyday life, there is an arrogance among certain rich which corrodes the relationship between social and economic classes. One might therefore be inclined to agree with Marx, that “the social position of the worker has become worse, has been forced down still another degree below that of the capitalist.” However, money and power are not the only determinants of social propriety. There is also liberty and morality.

In the United States, the Constitution has empowered even its least citizen with certain inalienable rights from God, eclipsing the so-called “rights” awarded by any other nation. When this Constitution is adjudicated with impartiality and fairness, as prescribed by Torah, that is, by Law, and not by men, even the lowliest American laborer enjoys a lifestyle and freedom well above any laborer elsewhere. It might be argued that American liberty is an illusion, administered under oligarchy and corruption. Perhaps, but that “illusion” includes free elections, which, in reality, are the will of the people, reflecting either their great morality or else their overwhelming apathy.

“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.”

This is pure dialectic posing as sage conclusion, rhetoric as mathematical formula. For there is no direct correlation between wages and profit, neither are they at “inverse proportion.” Instead, wages are products also, formed by competition within the labor marketplace.

Wages are also not the only factor to determine capitalist profit. For even if the savvy capitalist is able to procure labor at a windfall, there is still to consider the cost of materials, of hazards, of governmental interventions, and yet other things which affect the bottom line.

“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, whether in consequence of the opening up of new markets, or in consequence of temporarily increased demands in the old market, and so on; that the profit of the capitalist, therefore, may be multiplied by taking advantage of other capitalists, independently of the rise and fall of wages, of the exchange value of labour-power; or that the profit of the capitalist may also rise through improvements in the instruments of labour, new applications of the forces of nature, and so on.”

Marx notes three manners by which profit may be increased without undue burden on labor: (1) increased demand, (2) ruthless business practices, and (3) streamlined production through invention and other means. There is, however, a dialectic afoot, for Marx is not proposing capitalist reform but is setting up false frameworks by which to destroy capitalism.

“But in the first place it must be admitted that the result remains the same, although brought about in an opposite manner. Profit, indeed, has not risen because wages have fallen, but wages have fallen because profit has risen. With the same amount of another man's labour the capitalist has bought a larger amount of exchange values without having paid more for the labour on that account – i.e., the work is paid for less in proportion to the net gain which it yields to the capitalist.”

The curtain is pulled back, revealing communism as naked envy. For, according to Marx, even if the capitalist is able by ingenuity to squeeze out more profit for himself without curtailing or diminishing the wages of labor, it counts as loss for the laborer!

“In the second place, it must be borne in mind that, despite the fluctuations in the prices of commodities, the average price of every commodity, the proportion in which it exchanges for other commodities, is determined by its cost of production.”

Naturally, cost of production is figured into the price of anything. However, this is oversimplification, typical of Marx when he wishes to bridge the gap between fantasy and reality. For the price of anything is not determined only by costs of production, but also by (1) the personal goals (self-valuation) of the capitalist, (2) transient product valuations (seasonal, fad, etc), (3) costs against sales (commissions, taxes, etc), (4) unforeseen losses (theft, for example), and more. While it may be argued that these are “costs of doing business” and therefore “costs of production,” the ramifications are more far-reaching than Marx permits.

“The acts of overreaching and taking advantage of one another within the capitalist ranks necessarily equalize themselves.”

Over what time period? To say that increased demand has a particular half-life is foolhardy, for who can say what will be the future of, say, Apple products? This deliberately pessimistic view of marketplace demand is a communist dialectic meant to dishearten the laborer and to elicit compassion from the sympathizer.

“The improvements of machinery, the new applications of the forces of nature in the service of production, make it possible to produce in a given period of time, with the same amount of labour and capital, a larger amount of products, but in no wise a larger amount of exchange values. If by the use of the spinning-machine I can furnish twice as much yarn in an hour as before its invention – for instance, 100 pounds instead of 50 pounds – in the long run I receive back, in exchange for this 100 pounds no more commodities than I did before for 50; because the cost of production has fallen by 1/2, or because I can furnish double the product at the same cost.”

Marx conceives that more supply equates to lower price, again ignoring the idea of continuous or growing demand. If Marx were applying such analysis towards one particular business entity, we might grant his prognostication to have merit, as one might heed a stock guru, but his broad sweeps against capitalism cannot prevail and are therefore foolish. Moreover, this example negates his previous example, which included the concept of increased buying power. These observations cause Marx to appear flippant and contradictory, which may or may not have been his aim (another dialectic).

“Finally, in whatsoever proportion the capitalist class, whether of one country or of the entire world-market, distribute the net revenue of production among themselves, the total amount of this net revenue always consists exclusively of the amount by which accumulated labour has been increased from the proceeds of direct labour. This whole amount, therefore, grows in the same proportion in which labour augments capital – i.e., in the same proportion in which profit rises as compared with wages.”

First, Marx proposes the dialectic that capitalist profit is laborer loss. This appeals to disgruntled laborers and sympathizers (Victims), directing their baser emotions (anger, envy, hatred) towards the capitalist (Oppressor). However, profit (“net revenue of production”) is not “exclusively” wealth (“accumulated labor”) increased at the expense of wages (“proceeds of direct labor”), but is the capitalist reward for successfully traversing the maze of risks inherent to any business venture. Naturally, Marx does not direct the envy of the laborer towards risk, only reward.

Second, there is an intimation (actually, an agitation) that wealth is a finite revenue pie. However, the international credit markets have undercut this concept, producing an expansion of prosperity hitherto unknown. Even if we say that credit is phony wealth, the results have been actual. Real homes and real businesses have been built with nonexistent assets. The attenuation of credit risk notwithstanding, the laborer has probably benefited most from this phenomenon, notably through mortgages and personal loans for the entrepreneur.

That attenuation, however, has in recent years been exaggerated to such monstrous proportions that the entire system of capitalism appears to be unwieldy at best, exploitative at worst. Yet, this crisis is the result not of capitalism run amok but of deliberate communist plot. The communists, so masterful at organizing grievances, have been successful to lobby the angst of the poor against government officials eager to allay any uncompassionate public image (or who are socialists themselves). This lobbying aimed and delivered unending legislation against banks and other lenders, forcing them to abandon proper procedures and limitations in favor of easy credit for those least able to repay. In the name of fairness and compassion, the credit markets were deliberately overloaded with bad debt, causing subprime mortgage proliferation and student loan overextension. Thus, “good intentions” have at least temporarily ruined the name of capitalism.

This communist infiltration and determination is apparent wherever there is envy or anger. Anywhere a promise is not kept, or an implied right is not attained, the communist is there, foaming up anti-capitalism. Such promises should therefore be kept to a minimum, for capitalism guarantees nothing but the opportunity for free advancement. Further, the promises of politicians ought to be challenged at every chance, keeping down unworthy expectations, spendthrift Congresses, and salivating communists.

Tuesday, March 27, 2012

Lesson 26: Communist Economics 6: Relation of Labor to Capital

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Communist Economics

Part 6

Marx’s Wage-Labour and Capital:

Relation of Wage-Labour to Capital


What is it that takes place in the exchange between the capitalist and the wage-labourer? The labourer receives means of subsistence in exchange for his labour-power; the capitalist receives, in exchange for his means of subsistence, labour, the productive activity of the labourer, the creative force by which the worker not only replaces what he consumes, but also gives to the accumulated labour a greater value than it previously possessed.”

For our study, there are four points of interest: (1) the mechanics of “work,” (2) the transformational power of capitalism, (3) the attitude of the communist towards this capitalist power, and (4) the error of Marxian economics which underpins its fundamental weakness, in fact, corruption.

First, the mechanics of work is in barter. The laborer trades his energy, whether physical or mental (even if menial), for things of subsistence (food, water, shelter, fuel, forms of communication and transportation, clothing, and so forth), or an exchange method thereby (money). This work is necessary, whether one is a laborer, a capitalist, a farmer, a forager, or any other. Contrary to communist belief, the capitalist involves himself in risk, in entrepreneurial skills, in time investment, and in maintaining for the subsistence of his laborers, whether to keep them from malnutrition or from competing employers. It might be argued that some levels of capitalism, such as in banking, are less productive than those of pure labor, but the argument is meaningless. If the banker is extraneous, the marketplace of ideas will out that. It might be further argued that the capitalist system keeps the extraneous banker from marketplace obsolescence, essentially pillaring its own. This argument discounts that such pillaring is successful only if the marketplace accepts the concept of “banking.” Since the marketplace is in reality so disposed, there is little more to say on this but for an overall conspiracy. Now, it might be imagined that a banking consortium which controls the financial system of entire nations (that is, central banking) exists not from marketplace valuation, or perception thereof, but simply from a coerced method by which money is delivered to society. For example, it might be argued that the Federal Reserve of the United States is a beast which provides no benefit and sucks dry all labor, whether working class or capitalist. However, there are two counter-arguments of force: (1) that such central banking has provided through Keynesian capitalism (state capitalism) the means by which so many working class enjoy a relatively high lifestyle, and (2) that the marketplace has neither devised a better system of delivery for relatively high lifestyle nor embraced the antithetical communist lifestyle. Therefore, we know that in terms of work (exchanging labor for subsistence), central banking has expedited that which is both desired and “better.” This does not, however, excuse the excesses of central banking, including that of pilferage, manipulation of markets, exaggeration of boom-bust cycles, and government leverage.

Second, Marx has, wittingly or unwittingly, displayed the positive transformational power of capitalism, that is, “gives to the accumulated labour a greater value than it previously possessed.” When individualism is permitted by government, the creative natures of men are unleashed. When furthermore such creative natures are perpetuated through the legal defense of unique creations (through patents, copyrights, trademarks, etc), the result is the dispensation of invention upon mankind. Where capitalism thrives, these inventions become products, in time, as the cost of recapitalization is duly amortized, inexpensively distributed among the masses. There is, however, an important distinction between invention and product. When a man has an idea, or formulates a concept, but thereafter lets it remain hidden within the mind, or sequestered in secret papers, society partakes not. It is therefore that the acme of value in capitalism is the capitalist. For without the man of risk, of entrepreneurship, of dedication and determination, inventions remain novelties.

Third, Marx views and comments upon this transformational power of capitalism as something sinister, the exchange of labor for subsistence perceived to be and communicated as a form of slavery or ongoing trickery. Indeed, this thought process is essential for the communist, for only organized and national hatred against “exploitation of labor (the proletariat)” has the potential to upend capitalism. Thus, there is always a propaganda machine against capitalism. This does not ignore the favorable value of organized labor in successfully bringing to bear change against, say, unsafe practices, health menaces, or child labor. Nor does it ignore the more neutral aspects of wage and benefits negotiation. Yet, outside these realms for usefulness, organized labor is but an arm of communism, often banging a drum for wealth redistribution, at times provoking the dangerous general strike.

Fourth, Marx spouts an error which defies reason, calling labor “the creative force by which the worker not only replaces what he consumes.” This is incorrect. It is the capitalist who takes the relatively unformed and undirected energies of laborers, transforming these into powerful means of production and societal change. By implanting into the mind of the laborer that his labor is “creative,” Marx intends the capitalist to be expendable. However, without the capitalist, what is labor but a formless void? In fact, we know (clearly explicated in previous synopses) that it is the goal of communism to steal the means of capitalist production, not to create in the least any new type of facility, machinery, or even labor pool. That is, communism shall continue to utilize labor in the same uncreative manner, only with less reward for individual talent. Therefore, it is a false and manipulative flattery which Marx extends to that labor which is not creative.

“The labourer gets from the capitalist a portion of the existing means of subsistence. For what purpose do these means of subsistence serve him? For immediate consumption. But as soon as I consume means of subsistence, they are irrevocably lost to me, unless I employ the time during which these means sustain my life in producing new means of subsistence, in creating by my labour new values in place of the values lost in consumption. But it is just this noble reproductive power that the labourer surrenders to the capitalist in exchange for means of subsistence received. Consequently, he has lost it for himself.”

In locations where there exists no better means of subsistence, such work is by necessity (unless the society is not free, in which case it is slavery). Marx, however, ignores this necessity, focusing instead on an inequality, that the capitalist profits and amasses wealth while his laborers merely subsist.

Yet, the capitalist profits (and therefore subsists) by way of a relative genius in transforming unfocused labor into more valuable focused labor. In other words, it is a power of the brain, to conceive a better mousetrap, or better method to make a mousetrap, which profits. The communist, however, actually bemoans this “unfair” brainpower and profit thereof, labeling it as “exploitation” of the laborers employed. By such moaning, one should think the products and services of capitalism, those better mousetraps, to be without value, only existing to employ (or rather, exploit) laborers and to profit capitalists. This is the point. The communist cannot admit that capitalist goods and services have great value, not even by the perception of the marketplace, else the power to label those laborers as exploited (except under certain ruthless conditions) is lost. Nevertheless, by its written intention to seize the means of production, communism makes it known that capitalist goods and services do have great value.

Marx states also that the laborer, in surrendering himself to a never-ending cycle of labor-for-subsistence barter, “has lost it for himself.” Oddly, this is a statement of entrepreneurship! Yet, howbeit that the laborer should believe communism to endorse autonomy of the self, especially in financial terms, when such is not permitted for the capitalist? It is a lie of massive proportion.

“Let us take an example. For one shilling a labourer works all day long in the fields of a farmer, to whom he thus secures a return of two shillings. The farmer not only receives the replaced value which he has given to the day labourer, he has doubled it. Therefore, he has consumed the one shilling that he gave to the day labourer in a fruitful, productive manner. For the one shilling he has bought the labour-power of the day-labourer, which creates products of the soil of twice the value, and out of one shilling makes two. The day-labourer, on the contrary, receives in the place of his productive force, whose results he has just surrendered to the farmer, one shilling, which he exchanges for means of subsistence, which he consumes more or less quickly. The one shilling has therefore been consumed in a double manner – reproductively for the capitalist, for it has been exchanged for labour-power, which brought forth two shillings; unproductively for the worker, for it has been exchanged for means of subsistence which are lost for ever, and whose value he can obtain again only by repeating the same exchange with the farmer.”

This illustration omits the key point, that the labor of the day-laborer is unfocused energy, having no wage value at all, until the farmer gives it wage value through employment. That is, the day-laborer, sitting idle, collects no wage at all, his energy wasted (as it were). Only when the capitalist (here, the farmer) puts that energy to use is the mechanism of work engaged, labor being exchanged for subsistence. Therefore, it is not that the day-laborer in employment to the farmer has worked for half his value, or that the farmer has collected a full wage (being in this example equal to that of the day-laborer) for no work at all. Instead, both the farmer and day-laborer having needs, make a contract of honor, one to labor, one to pay for labor. The need of the farmer is implicit, in that he ostensibly cannot complete his tasks without the labor of the day-laborer. The need of the day-laborer is intrinsic, for he must subsist. The contract between them, being of necessity and honorable, is therefore no other man’s business.

Further, what shall we say of the money which is paid to the day-laborer? Where did the farmer get this money? Did he earn it? Steal it? Inherit it? Receive it from the central bank for nothing? Irrespective of source, the farmer is putting his own money (arguments of merit or morality notwithstanding) at risk by paying the day-laborer for his labor. What if the farmer decided to forego hiring the day-laborer, instead working himself in exchange for the right to retain his own capital for other times? In such case, the day-laborer is not “exploited” but neither does he subsist.

Thereby, whether the farmer hires or does not hire the day-laborer, the communist does not approve. If the day-laborer is hired, he is exploited. If the day-laborer is not hired, the farmer is heartless and greedy. Under such communist scrutiny, the capitalist farmer cannot win. Again, that is the point. The Hegelian dialectic employed for such argumentation is not designed for reason or compromise, only for dynamic movement to a synthesis. The farmer (capitalist) will always be the Oppressor, the day-laborer (proletariat) always the Victim, and communism always the Savior.

Marx also commits fraud, for he makes it that if the day-laborer had no immediate need for subsistence he might strike out on his own. This is presumptuous, for it not only assumes that the brainpower or gumption of every man is the same, but it also denies the right of the day-laborer to be a day-laborer, making it a derision. Perhaps some wish to be day-laborers!

Supposing, however, that a particular day-laborer does strike out on his own, and thereafter becomes a farmer with need for his own day laborers. Shall the communist then deem it unholy for that day-laborer-cum-farmer (beloved to this point by Marx) to become a hirer of day-laborers? If so, Marx is a liar, creating the fantasy that a day-laborer may become whatever he so desires. If not, Marx is a capitalist.

“Capital therefore presupposes wage-labour; wage-labour presupposes capital. They condition each other; each brings the other into existence.”

These preconditions of Marxian economics are somewhat foolish. First, an accumulation of wealth (capital) presupposes neither wage-labor to amass such wealth nor a waiting body of laborers to employ such wealth. For example, agricultural excess is not necessarily due to the labor of day-laborers, nor is agricultural excess existent based on any future day-labor. Marx here is caressing the strings of communism, serenading the working class with a song of outrage, that wealth exists at the expense of labor, or, more nearly, at the presumption of such expense. That is, capital is arrogant. Second, wage-labor is not predicated on capital. Using again the agricultural example, a day-laborer may work for a portion of that which he harvests, not for any pre-existing capital wealth. It might be argued that such is commission work, not day-labor, but this argument only pretends purity. In fact, day-laborers may work not for either wage or commission but instead for pure barter, such as room and board. Against this, the argument may be that room and board constitutes wage, but – ah! – it is not a redistribution of wealth.

The overarching argument is that commission and barter (such as room and board) comprise but few of the employer-employee relationships. However, this is a function of the marketplace, for the wage-laborer is, bluntly, the least ambitious laborer, the commission worker being of more confidence, the barter worker being of fewer material needs.

In essence, Marx has only administered the communist dialectic, to begin the argument, not to win it.

“Does a worker in a cotton factory produce only cotton? No. He produces capital. He produces values which serve anew to command his work and to create by means of it new values.”

More dialectic concerning unfairness and capitalistic hardheartedness. Again, this neglects that an idle laborer is paid nothing!

“Capital can multiply itself only by exchanging itself for labour-power, by calling wage-labour into life.”

Yes, capital can multiply itself this way, but not only this way. For example, the power of agriculture may cause capital to multiply itself, even without labor-power. The power of investment, whether in real estate or any other vehicle, may do likewise. It might be argued that such exceptions are extensions of labor-power exchange, but this addresses not the so-called exploitation of labor. For if an investment becomes more valuable due to an increase in buyers for that investment, this denotes, if not necessitates, some commensurate increase elsewhere.

But if one asks where this commensurate increase originates, the current state of capitalism must not be excluded for the sake of historical connection with Marx. Specifically, the increase so mentioned may be in credit, such as in the ability to mortgage one’s home in order to fund a start-up business. One might say that mortgages are enslavement to banking, an exchange of future labor-power for current capital, but this ignores the positive aspects of such capitalization, including freedom from wage-labor per se, even the possibility of full “financial freedom.”

“The labour-power of the wage-labourer can exchange itself for capital only by increasing capital, by strengthening that very power whose slave it is. Increase of capital, therefore, is increase of the proletariat, i.e., of the working class.”

True, the wage-laborer is, more than all others, a “slave” to his employer. This is, however, a reflection of both societal needs and innate brainpower. Simply, capitalists desire wage-laborers, and many people are happy enough to be wage-laborers. In this, there is no wrongdoing if both sides are fairly treated, according to their contracts made. The power of the labor union has, in fact, made the wage-laborer at various times quite respected. For many decades, the American auto worker, with his generous wage and benefits package, was the envy of the working class.

That wage-labor creates more capital, and therefore more proletariat, is in many cases an improvement for that proletariat. Where there is corruption, however, the proletariat requires to still organize for basic dignity. But where there is prosperity and, in the main, fairness, this Marxian diatribe only creates envy and class warfare. This is, of course, the point, for communism seeks not to reform capitalism but to destroy it.

“And so, the bourgeoisie and its economists maintain that the interest of the capitalist and of the labourer is the same. And in fact, so they are! The worker perishes if capital does not keep him busy. Capital perishes if it does not exploit labour-power, which, in order to exploit, it must buy. The more quickly the capital destined for production – the productive capital – increases, the more prosperous industry is, the more the bourgeoisie enriches itself, the better business gets, so many more workers does the capitalist need, so much the dearer does the worker sell himself. The fastest possible growth of productive capital is, therefore, the indispensable condition for a tolerable life to the labourer.”

Marx has confessed some truth, that the most expedient factor for successful capitalism is the happy laborer. The more success, the more happy laborers. This seems nearly ideal. Yet as we know, communism does not exist to laud capitalism but to bury it. The happy laborer is not to Marx a positive, but is instead a sign that capitalism has bought the soul of the working class.

“But what is growth of productive capital? Growth of the power of accumulated labour over living labour; growth of the rule of the bourgeoisie over the working class. When wage-labour produces the alien wealth dominating it, the power hostile to it, capital, there flow back to it its means of employment – i.e., its means of subsistence, under the condition that it again become a part of capital, that is become again the lever whereby capital is to be forced into an accelerated expansive movement.”

According to Marx, industrial progress is not the manner by which the proletariat rise but rather are ground down. Under communism, the proletariat are, per Marx, without goals, without brainpower, without heart, without ambition. Marx furthermore excludes any possibility that the wage-laborer might change his circumstances by saving wages for capital, or by jumping to commission work, or by moving to a different location, and so forth. Yet, if the wage-laborer is without such talents or skills, ought not he be content rather than malcontent? Not so for the communist, who heckles the wage-laborer into resenting his employment, encouraging an entire overthrow of the capitalist system, which is to be replaced with... those same means of production, only under communism!

“To say that the interests of capital and the interests of the workers are identical, signifies only this: that capital and wage-labour are two sides of one and the same relation. The one conditions the other in the same way that the usurer and the borrower condition each other.”

Note the bloodsucking relationship Marx draws between capitalist/laborer and usurer/borrower. This is intentional, to stoke the coals of hatred and envy. But there also is a deeper meaning, for the “usurers” were and are, according to European thinking, the Jews. This planted seed from Marx is meant to cause umbrage against the Jews but also, more to the point, against Judaism, specifically against the Law of God (Torah), that protector of Life, Liberty, and Private Property.

“As long as the wage-labourer remains a wage-labourer, his lot is dependent upon capital. That is what the boasted community of interests between worker and capitalists amounts to.”

The wage-laborers, that endless pool of the working class, who refresh daily with youthful recruits, and who maintain by their own limitations, are by Marx poked constantly. Remarkably, many proletariat respond favorably to the communist jabs, seeing such as alarm bells. But what has been achieved by this awakening? For the wage-laborer, it is a net negative, the former bliss becoming resentment towards his employer, or envy against his neighbor’s wealth (capital). One might argue that awake is better than asleep, but to what end? The communist endgame is merely to utilize the laborer under a different guise, promising met needs in exchange for allegiance. Is communism capable to do this? The rhetoric is that communism trumps capitalism by relieving short economics, that is, by removing the anxiety of the poor. The ideology, however, cannot justify such rhetoric. Further, the reality for every nation embracing this communist ideology has not been relief, but instead quite the opposite.

“If capital grows, the mass of wage-labour grows, the number of wage-workers increases; in a word, the sway of capital extends over a greater mass of individuals.”

This capitalist “sway” has in times past been a blessing, but sometimes has run amok in corruption. Nevertheless, collectivism has most often (if not always) been multiple times worse than the excesses of individualist capitalism.

“Let us suppose the most favorable case: if productive capital grows, the demand for labour grows. It therefore increases the price of labour-power, wages.”

“A house may be large or small; as long as the neighboring houses are likewise small, it satisfies all social requirement for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut. The little house now makes it clear that its inmate has no social position at all to maintain, or but a very insignificant one; and however high it may shoot up in the course of civilization, if the neighboring palace rises in equal or even in greater measure, the occupant of the relatively little house will always find himself more uncomfortable, more dissatisfied, more cramped within his four walls.”

And so Marx, with no particular place to go economically, resorts to that moralistic argument. Capitalism paves the way for success which may provoke envy, and therefore Marx means it to be the mechanism for social unrest. But the size of one’s home is not the ultimate fount of inner peace or happiness. If one is therefore “more uncomfortable, more dissatisfied, more cramped,” it is not the relative size of the neighbor’s house which causes such angst and resentment, but it is corruption of the soul.

This brings us to God’s Law (Torah). It is sin to covet your neighbor’s house, to desire (1) to take that house from that neighbor (“I must have your property”), or (2) to destroy that neighbor’s house (“If I can’t have it, neither can you”). It is plotting to steal. Marx teaches against God’s Law, which is the same as teaching to sin. According to Christ, such teaching makes a person to be called “least” (Matthew 5:19).

Keep in mind, however, that Marx utilizes dialectic to start a discourse against Torah, the aim (synthesis) being to destroy morality. Once morality is destroyed, God can then be supplanted. The matter of faith is insignificant in relation to this, for once the state creates the ultimate rules for fair play, that is, moral law, the state is in fact a god.

“An appreciable rise in wages presupposes a rapid growth of productive capital. Rapid growth of productive capital calls forth just as rapid a growth of wealth, of luxury, of social needs and social pleasures. Therefore, although the pleasures of the labourer have increased, the social gratification which they afford has fallen in comparison with the increased pleasures of the capitalist, which are inaccessible to the worker, in comparison with the stage of development of society in general. Our wants and pleasures have their origin in society; we therefore measure them in relation to society; we do not measure them in relation to the objects which serve for their gratification. Since they are of a social nature, they are of a relative nature.”

Marx, still away from economics, moves from argument of morality to one of sociology. While acknowledging that “all boats rise” during economic good times, Marx nevertheless notes a distracting difference between the big boats and the small ones. Rather than focus upon the positive of increasing lifestyle and more humane conditions for all, he inhibits pleasure by pointing to the “pain” of having a smaller measure of good things. This is not an uncommon or unknown complaint, for many are jealous of their portion, even if all other things be equal. Marx takes this to its ultimate communist conclusion, however, that jealousy towards apportionment is natural, for “our wants and pleasures have their origin in society; we therefore measure them in relation to society; we do not measure them in relation to the objects which serve for their gratification.”

In essence, society, the superstructure, is blamed. According to communism, it is religion (that is, Torah) and the family, main beams of the capitalist superstructure, which particularly must be held accountable for stirring up the natural tendencies of men to covet. The implication is that under communism, coveting disappears. That is, without morality comes superior morality!

“But wages are not at all determined merely by the sum of commodities for which they may be exchanged. Other factors enter into the problem. What the workers directly receive for their labour-power is a certain sum of money. Are wages determined merely by this money price?”

Marx returns abruptly from morality and sociology.

“In the 16th century, the gold and silver circulation in Europe increased in consequence of the discovery of richer and more easily worked mines in America. The value of gold and silver, therefore, fell in relation to other commodities. The workers received the same amount of coined silver for their labour-power as before. The money price of their work remained the same, and yet their wages had fallen, for in exchange for the same amount of silver they obtained a smaller amount of other commodities. This was one of the circumstances which furthered the growth of capital, the rise of the bourgeoisie, in the 18th century.”

First, those laborers who chose to stay with mining rather than jumping to, for example, agriculture, ought not be viewed as exploited but rather as working within the limits of both their talents and circumstances.

Second, as mining became affected, those metallic commodities became of lesser “value” than before, and capitalist investors therein, whether principals or investors, took a loss of “wage” equal to or greater than that of the laborer.

It might be argued that such miners, though paid, were no more than slaves. If so, they were slaves of totalitarianism, not capitalism, which only exists under freedom and fairness. For where true capitalism ends, tyranny begins.

“Let us take another case. In the winter of 1847, in consequence of bad harvest, the most indispensable means of subsistence – grains, meat, butter, cheese, etc. – rose greatly in price. Let us suppose that the workers still received the same sum of money for their labour-power as before. Did not their wages fall? To be sure. For the same money they received in exchange less bread, meat, etc. Their wages fell, not because the value of silver was less, but because the value of the means of subsistence had increased.”

This seemingly credible argument has many flaws. First, whether under communism or capitalism, the harvest would have been “bad.” Second, the price of subsistence (inflation) rises in accord with the needs of the producer, in this case the farmer. For if the harvest is bad, the farmer must, in order to keep his farm financially viable, raise his prices on that which he has to offer. If the argument is that the farmer should bear this brunt also, it follows that a central authority must be established to force the farmer into such an agreement. Otherwise, the farmer may as well retain his crop for himself. Third, a severe rise in the price of subsistence can only be alleviated by central authority (communism) or by charity (Torah). Since capitalism supposedly is the cause for all inflation, the Marxian ploy here is to present communism as the only reasonable option. Fourth, if the price of subsistence rises, is it not that certain segments of society benefit? For example, though the retailer makes but little profit on his meats, is he not still profiting, and will not his profit purchase more goods once prices alleviate? This is the true nature of capital, that it fluctuates in stature, and therefore has dynamic power to flow through society, strengthening or weakening as it goes. This dynamism motivates creative productivity, for the entrepreneur has optimism that his capital will not only increase but also gain buying power during particular times. In contrast, the “idealized” communist state can never motivate anyone, being a static mass of equations, that one bushel of wheat equals a particular amount of corn, and so forth. This type of fixed pricing disregards supply and demand. The actual communist state, on the other hand, does regard supply and demand, especially that which affects their central command!

“Finally, let us suppose that the money price of labour-power remained the same, while all agricultural and manufactured commodities had fallen in price because of the employment of new machines, of favorable seasons, etc. For the same money the workers could now buy more commodities of all kinds. Their wages have therefore risen, just because their money value has not changed.”

When prices fall due to some favorable condition, it is the nature of competition more so than demand. As such, lower prices beget even lower prices. The marketplace steadies such fluctuations by default. Buyers gravitate to price and quality, choosing winners and losers. Eventually, those business entities which cannot survive lower pricing must fold, and therefore the unemployed pool grows. Necessarily, this loss of competition levels pricing also, and therefore the good times of relative low prices eventually come to an end.

Marx makes it appear, however, that such wonderful conditions may under communism continue unabated. This is untrue for two reasons: (1) communism has no place for competition, and therefore recognizes no such thing as “low” pricing, and (2) communism is not concerned with wages, and therefore “buying power” is just a lollipop fantasy under that system.

“The money price of labour-power, the nominal wages, do not therefore coincide with the actual or real wages – i.e., with the amount of commodities which are actually given in exchange for the wages. If then we speak of a rise or fall of wages, we have to keep in mind not only the money price of labour-power, the nominal wages, but also the real wages.”

Communism has no goal to reform capitalism. This therefore is only dialectic.

“But neither the nominal wages – i.e., the amount of money for which the labourer sells himself to the capitalist – nor the real wages – i.e., the amount of commodities which he can buy for this money – exhausts the relations which are comprehended in the term wages. Wages are determined above all by their relations to the gain, the profit, of the capitalist. In other words, wages are a proportionate, relative quantity.”

Marx makes three points here: (1) that “nominal” wages include a loss of self-worth, (2) that “real wages” include a loss of buying power, and (3) that “relative” wages are disproportionate in relation to profit.

What is a proportionate and proper relative wage?

Supposing a capitalist hires four laborers at $30,000 gross per year each, and profits himself at $90,000 gross (after recapitalization and other business expenses). What if the capitalist were forced to share his “excess” ($60,000) among the five (including himself)? Each laborer would receive an extra $12,000 (60,000 divided by 5), bringing each total to $42,000. In theory, this seems quite equitable. In reality, there are numerous problems. First and foremost, what motivates to keep the capitalist in business? If his goal is $90,000 and he meets it, he is satisfied. If he reaches only $42,000, the capitalist is neither happy nor driven. Thereby, the business may be abandoned, the capitalist retreating to some other venture, or perhaps to wage-labor himself. If so, his laborers are now unemployed. This benefits no one.

Let’s look at a more skewed example. Supposing a CEO for a multinational corporation receives $12M (million) per year. Should instead he receive some different arbitrary amount, say, $5M, and the remaining $7M be distributed amongst the corporate employees? If so, who makes such a decision? If the answer to this is “the corporation,” why should the CEO not receive $12M? If the answer is instead “society,” what does that mean? Will a pamphlet of such standards be published? Who will decide the standard? Eventually, this devolves down that a small elite shall set wage levels for all. This is fascism.

Communism takes a more drastic view. The CEO is considered superfluous, so he receives nothing. He is replaced by a committee. These committee members are, of course, a bit more privileged than the average comrade, and therefore will receive a certain amount more ration than their laborer counterparts. But what is a committee? Is it not a board of directors? Who then is head? If nobody, what are the rules of the committee? Who makes these rules? In this regard, communism can be no more than a more pointed and dangerous form of corporatism, the CEO a tyrant who makes himself to appear benevolent (and furthermore expects such due praise). He is “dear leader” and is, essentially, a god.

If there is a moral here, it is that inequality under capitalism is far preferable to “equality” under communism.

“Real wages express the price of labour-power in relation to the price of commodities; relative wages, on the other hand, express the share of immediate labour in the value newly created by it, in relation to the share of it which falls to accumulated labour, to capital.”

According to Marx, “real wages” are an indicator of buying power. This simply means one’s wages look better when goods and services cost less, and look worse when goods and services cost more. Necessarily, this perception is relative to the level of one’s actual lifestyle, but also is enabled further by the level of lifestyle one desires. Since such perception is possible only under capitalism, the solution from Marx is to obliterate the capitalist marketplace. Under communism, envy and anxiety would thus be absent, replaced by across-the-board mediocrity. This is imagined to be appealing.

“Relative wages” are, Marx asserts, a percentage of labor wage-plus-capitalist profit. If you earn $10 per hour, but the boss earns $20 per hour, you have sold yourself for 33% of your value. Naturally, this excludes the idea that the boss should make anything at all. If, however, the boss is included as a productive worker, his “share” being also, under communist thought, $10 per hour, the relative wage is now calculated as 50%.

We come now to the punch line, namely, that these Marxian formulae and pontifications are all but mere dialectic. For it is not that communism demands the removal of capital profit for the equalization of wages, but rather for the destruction of wealth accumulation, that is, of capital, or, private property. This is the primary and cardinal ordinance of communism, never to be forgotten in discussion with any socialist or communist.