Capitalism, wages and exploitation

The crisis is leading to an increase in the level of exploitation and to an ever-widening gap between the super-rich and the impoverished masses. The question for workers is whether to confine themselves to a struggle for a slightly larger share of the wealth they have created under conditions of capitalism or to establish a system that does away with such contradictions altogether.

Proletarian writers

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Proletarian writers

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The intensification of capitalist crisis in the past decade has brought the working class face to face with a direct assault on its living conditions, social gains and wage levels. The International Labour Organisation (ILO)’s Global Wage Report 2012-13 throws light on the differential impact of the recession on wage levels in different parts of the world, and attempts to point the way forward for more equitable growth in the future.

According to the ILO, average real wages after inflation grew globally by 1.2 percent in 2011, down from 2.1 percent in 2010 and 3 percent in 2007. The bulk of these increases are accounted for by China, however. Taking China out of the equation, the figures look even worse: 0.2 percent growth in 2011, down from 1.2 percent in 2010 and 2.3 percent in 2007.

Increasing inequality

The picture is clear: outside of China, real wages overall are stagnating. In the imperialist countries, real wages fell in 2008 and 2011, the so-called ‘double-dip’. Looking over the period 2000-11, real wages rose just 5 percent in total in the imperialist countries, despite the fact that labour productivity (the amount of wealth produced by each worker) in the same period grew by over twice that amount.

This trend, whereby wage growth proceeds at far lower rate that labour productivity rises, is not new, however. With the exception of the special conditions prevailing in the first few decades after the second world war, when a combination of full employment and the international strength of the working-class movement combined to ensure a temporary reversal of the trend, it has been a general law of capitalist development since its earliest days.

What this leads to, as the ILO has pointed out, is an ever “smaller piece of the pie for workers across the world”. Looking at the distribution of income between workers and capitalists, the ILO has correctly concluded that “there is a long run trend towards a falling share of wages and a rising share of profits in many countries”.

The ILO criticises the increasing inequality generated by capitalism, arguing that the break-up of the stable relationship between productivity growth and rising real wages causes imbalances, and in particular restricts growth of demand in the domestic market, which in turn limits the prospects of growth and development. For the ILO, rising real wages on the basis of rising labour productivity should form the basis for what it calls “growth with equity”.

The ILO believes that the key to re-establishing a ‘just’ link between wage growth and productivity growth has to be the creation of a political and legal environment that is more favourable to collective bargaining, with legal protection for lower-paid workers, including minimum wage laws, and employment creation.

The argument is straightforward, and on one level seems very appealing: a fairer deal for workers, a sympathetic attitude to workers’ organisations, and support for the poorest – who wouldn’t want that?

‘Fair’ wages?

The underlying logic of the argument is ‘A fair day’s wage for a fair day’s work.’ This deceptively-attractive proposition underpins all trade-union economic struggle within capitalism. The basic wage relation is accepted – that workers must sell their labour-power to an exploiting class – and, on the same basis, capitalism as a system is accepted – albeit with the aim of somehow reforming the system so that the workers can access a larger share of the cake.

So what is meant by a ‘fair wage’? Usually when people use this term, they are demanding a level of pay that enables workers to live decently, while still allowing employers to earn a profit. But the source of these profits is still exploitation – and still a rising level of exploitation at that.

Marx long ago explained that the value produced in a working day is made up of two parts: thatwhich goes to the workers as pay for their labour-time, and a surplus that goes to the capitalist. Both these values are produced by the worker. The source of capitalist profit is unpaid labour time – hours that the worker is forced to work for the capitalist over and above the value of the goods the worker needs to survive. The higher the proportion of the total value that is made up by this unpaid surplus value, the greater the degree of exploitation.

‘A fair day’s wage for a fair day’s work’ is still capitalist exploitation. Even if they are paid ‘living wages’, the proportion of society’s wealth that goes to workers steadily declines as productivity rises. The workers’ share of the cake continues to shrink, while the capitalists become ever wealthier and more powerful from their theft. What the workers need is not just to renegotiate the terms under which the capitalist exploits them, but to end capitalist exploitation altogether.

The ILO is much more limited in its demands. By linking productivity and wages, the share going to capital in the form of profits is maintained, and the system is protected. This is the usual social-democratic pipedream: look after the workers within capitalism, all the while making sure capitalism is safe.

But there is a further problem. As production becomes increasingly capital intensive, the cost of machinery and raw materials makes up a bigger and bigger proportion of the total value of products produced, while the proportion represented by wages (and remember, it’s only this part of the process that produces the new values known as profits) diminishes.

This is another fundamental law of capitalist production: there is a progressive rise in what Marx called the organic composition of capital. As technology advances and machines become bigger and more expensive, as the organic composition rises, so the rate of profit will fall unless the rate of exploitation rises to offset it. It is not working-class militancy that creates the crisis of profitability; it is the logic of capitalist accumulation itself.

Marx called this the law of the tendency of the rate of profit to fall, and demonstrated that it is an iron law of capitalism.

Put in the terms employed in the ILO report, what capitalism needs is precisely to increase the share of profits at the expense of the workers and to ensure that labour productivity rises faster than real wages in order to prop up the rate of profit. And that is exactly what the capitalists have been doing.

The offensive against the working class is not an irrational response that unfairly hits the poor; it is a rational response designed to bolster the rate of profit and offset crisis at the expense of the poor. In the battle of survival, the capitalists will do whatever it takes to stay in the game.

Communists will read the ILO report and glean from it the details of how the capitalist crisis is hitting the working class and how inequality is increasing, and draw from it the conclusion that the rate of exploitation is increasing.

As capitalist crisis deepens, so class confrontation increases. Our ruling class is not deluded. It is defending its class interests. And we must do the same, class against class, until we can bury this system once and for all through revolution.