Monday, April 23, 2012

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

Sign up for Newsletter. Send email to

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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.