Laying down the law with Marx

How exploitation and real wages can increase simultaneously

[Drawing in progress by April Burke]

This essay will be the first in a series about reading Marx’s Capital.

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Among readers of Marx’s Capital, there’s some disagreement as to whether Marx made the right choice compositionally in putting arguably the most abstract chapters at the front of the book, ahead of much more historically and empirically rich chapters which are much easier to engage in and access and which would no doubt interest a wider audience from the get-go.

The difficulty in those early chapters is not for a want of clarity; on the contrary, almost every line is exceptionally clear. Rather, the difficulty lies in the level of abstraction.

In those first few chapters, Marx is analyzing money, value and commodities outside the particular context of production, and defining some of the most general laws regarding the elements which make up the wealth of society. Laying out different possibilities from an analytical perspective for empirical things he analyzes throughout the volumes of Capital.

As Christoph Henning writes in Philosophy After Marx: 100 Years of Misreadings and the Normative Turn in Political Philosophy (referring, to be sure, not specifically to the early chapters of Capital but the project as a whole):

Marx provided a highly abstract model of capitalism's general modus operandi. When proceeding methodologically from the abstract to the concrete, description of contemporary circumstances requires the progressive introduction of increasingly substantial specific conditions, namely, those under which a given process plays out in each particular instance. […]

Marx's approach was simple: the long-term interplay of forces can only be interpreted once their general logic has been understood. Because this approach involves such a high level of abstraction, the future cannot be predicted precisely. It is a matter, rather, of measuring the range of possibilities staked out by the laws in question.[1]

It’s important to recognize that the types of laws Marx formulates are not laws of nature but laws of economics—capitalist economics in particular: “Marx examined not nature but modern capitalist society,”[2] and even natural laws are not to be interpreted as deterministic down to the finest details. As Henning explains:

The purpose of formulating a natural law is not to predict developments down to the smallest detail but rather that of detecting regularities within phenomena, which remain manifold. A law serves to identify the range of possibilities within which phenomena operate. By no means does the validity of the law of gravity entail that apples drop ceaselessly onto the heads of famous physicists.[3]

Economic laws cannot be as precise as natural laws—they are “less fixed than those of nature,” Henning writes, “Economic Laws are only valid in certain historical constellations;” [4] nonetheless, what Marx does in Capital is measure “the range of possibilities” of capitalist social production.

Let’s home in on and breakdown one of these more abstract passages from Chapter 3 of Capital, Vol. 1.

I’ll then briefly elaborate on how the passage applies to and is likely based in more empirical examples which arise at later points in Capital, how it applies to the dynamic relation between capital and labor which Marx subsequently defines, and how the passage has implications for understanding the composition of the capitalist economy today.

Fluctuations in value and price

In one passage from Ch. 3, Marx analyzes the range of possibilities in which prices of commodities can be affected by changes in value of money and/or changes in the values of commodities (setting aside the existence of artificially raised prices):

A general rise in the prices of commodities can result either from a rise in their values, which happens when the value of money remains constant, or from a fall in the value of money, which happens when the values of commodities remain constant. The process also occurs in reverse: a general fall in prices can result either from a fall in the values of commodities, if the value of money remains constant, or from a rise in the value of money, if the values of commodities remain constant. It therefore by no means follows that a rise in the value of money necessarily implies a proportional fall in the prices of commodities, or that a fall in the value of money implies a proportional rise in prices. This would hold only for commodities whose value remains constant. But commodities whose value rises simultaneously with and in proportion to that of money would retain the same price. And if their value rose either slower or faster than that of money, the fall or rise in their prices would be determined by the difference between the path described by their value and that described by the value of money. And so on.[5]

Ok, let’s break this down:

In the first sentence, Marx defines two ways that a general rise can occur in the prices of commodities:

1. If the values of commodities rise while the value of money remains constant.

2. If the value of money falls while the values of commodities remain constant.

In the second sentence, he simply inverts the logic, elaborating on how the same sets of factors allow for two ways that a general fall can occur in the prices of commodities:

1. If the values of commodities fall while the value of money remains constant.

2. If the value of money rises while the values of commodities remain constant.

He then elaborates on two ways in which prices can be retained even while values change:

1. If the value of money and of commodities rise simultaneously and in proportion.

2. If the value of money and of commodities fall simultaneously and in proportion.

Finally, having defined these parameters, he explains that a relatively slower or faster rise in the value of money in relation to that of commodities would result in a fall or rise in prices, defined by the difference between the two changing values. For example, if the value of money rises slower than a rise in the value of commodities, than the prices of commodities would rise at a rate defined by the difference between the two changing values.

While he is speaking generally, the implications he’s detailing are abstracted from real world problems which have shown themselves in the capitalist form of production.

And while in that passage he is not yet describing the relation between capital and labor, in subsequent chapters we learn from Marx that capital is a particular use of money and that labor power is a form of commodity. Thus, the laws he defined in the above passage will apply directly in the relation between capital and labor, for the values of both capital and labor can fluctuate, whereby the prices of commodities more generally are affected by the difference between the general values of money and of commodities.

Together, capital as money invested in raw materials and machines and capital as money invested in labour power form the broader composition of capital as a whole.

Fluctuations in constant capital and variable capital

In the capitalist production process, Marx distinguishes between producers and money in terms of different forms of capital: labour-power takes the form of variable capital in that its consumption as a commodity adds new value to the production process; and capital itself takes the form of constant capital, the raw materials and means of production, where the value it retains or transfers to the product remains consistent throughout a cycle of production.[6]

In chapter 8 of Capital, Vol. 1, “Constant Capital and Variable Capital,” after defining the value relation and function between these two elements of capital, Marx explains that even the “constant” part, i.e., that capital invested in raw materials and machines, is contingent upon “change[s] of value.” He elaborates by way of a hypothetical example wherein a crop failure in the cotton industry raises the value of cotton throughout the textiles industry.[7] In Capital: Vol. 3, Marx further elaborates on this factor of change in value, analyzing the Cotton Crisis of 1861–5.[8]

On the side of variable capital, Marx explains that, because of differences in the productivity of labour across periods, industries and regions, “it is possible for the price of machinery and the price of labour replaced by that machinery to undergo great variations.”[9]

The cotton crisis example shows how these possibilities for changes in value operate in a more immediately demonstrable fashion, but the laws defined above about changes in value and in price also apply in Marx’s more long-term historical analysis.

In short—as even the Political Economists before Marx had outlined, the historical development of the productive forces under capitalism—between the development of manufacture and machine production, for example—involves a shift in the relation between capital and labor whereby the rate of profit tends to fall; as the means of production become more productive, their products become less valuable.[10]

However, Marx explains that the question left unanswered by the Political Economists on the topic of the tendency for the rate of profit to fall is why it is not yet more substantial or rapid.[11]

Towards answering this question, he elaborates on several counteracting factors—banking, finance capital, increased exploitation of labour, and diminution of the cost of constant capital.

How does this apply to contemporary society?

Exploitation and standard of living can increase simultaneously

Contrary to the belief of many a hopeful Marxist, Marx’s analysis of the counteracting factors in Capital Vol. 3 means that capitalism will not necessarily collapse under its own internal contradictions; rather, capital will displace its limits only to be confronted again at a greater scale,[12] and—unfortunately for all of us—it means that exploitation can increase even simultaneously with increases in real wages.

As Henning explains:

exploitation may increase even when real wages are on the rise; the mature Marx [the Marx of Capital] understood exploitation in terms of the ratio of productivity increases to wage increases. When productivity increases more rapidly than wages, as is to be expected, the capitalist obtains a higher share of surplus value from the labor he has purchased than before. Thus the rate of exploitation has risen despite the rise in wages. Wage levels are not limited by the absolute minimum required for subsistence, but by labour power's variable of value, which is determined by the goods required for its reproduction. Which goods are required and which are not is a question that is answered in the course of social conflicts. This implies the existence of a ‘moral element’.[13]

These possibilities for which the laws formulated by Marx allow are very much applicable to the various periods of capitalist history since Marx’s own time.

The neoliberal “free-market” policies of the late-20^th Century which cut back on regulations of capital enabled ways for capital to overcome various limitations to the rate of profit.

Again, Henning is apt here:

[Economic Laws] do not impose themselves in a mechanically uniform manner, but are rather violated and transformed in manifold ways. But they remain laws – as shown today by the vain efforts of politicians to alter social processes at the touch of a button.[14]

That era, which arguably culminated in the Great Recession, demonstrated a steady increase in productivity simultaneous with real wages remaining constant—i.e., increases in exploitation without increases in real wages.

In my view, the political polarization we see today, especially in the U.S., cannot be properly contextualized without an understanding of these kinds of laws of capitalism.

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[1]. Christoph Henning (2015) Philosophy After Marx: 100 Years of Misreadings and the Normative Turn in Political Philosophy, (Chicago: Haymarket Books), 27.

[2]. Ibid, 553.

[3]. Ibid, 552

[4]. Ibid.

[5]. Marx, Capital: Vol. 1 (London: Penguin Books, 1990), 193.

[6]. Ibid, 317.

[7]. Ibid, 317–18.

[8]. Marx, Capital: Vol. 3 (London: Penguin Books, 1991), 219–34.

[9]. Marx, Capital: Vol. 1, 515.

[10]. Ibid, 510, 512.

[11]. Marx, Capital: Vol. 3, 339–75.

[12]. Ibid, 358.

[13]. Henning, 25.

[14]. Ibid, 553.