Is an over-supply of labour depressing wages?

Is an over-supply of labour depressing wages?

Are trade union bureaucrats correct in saying Marx believed an over-supply of labour depresses wages? We take a look at what Marx called "the absolute general law of capitalist accumulation" to discover if this is true.

As the debate over migrant labour continues among various factions within the social democratic movement, it should come as no surprise that they do not really disagree over much. Following in the footsteps of the unanimously celebrated Harold Wilson, who once said: “We accept in this congested island the need for control”,1 all agree - whether Remain or Lexit; Progress or Momentum; trade unionist or student radical - that migration ought to be controlled and naturally provide various spurious justifications.

While some have adopted the misguided belief that right-wing populism is driven by economic anxiety and thus seek refuge in electoral arguments in support of stricter controls,, others like Paul Mason argue that migration strains social services and drives down wages.2 While we can usually dismiss this as latent nativism, Blue Labour and leading bureaucrats in the RMT like Eddie Dempsey3 have finally decided to resurrect Marx to support this noblest of claims. This essay is primarily concerned with the latter case.

Iron law of nonsense

Marx originally intended for his critique of political economy to be a six book series encompassing volumes that fleshed out the analysis of concepts that had been introduced in the published works, such as: landed property; finance capital; national economies on the world market; how the tendencies towards breakdown manifest themselves in economic history and; the economic specifics of wage-labour. This fact raised doubts about the completeness of Marx’s published project, and although true that logical sequences are often broken and gaps are apparent in places within the available volumes, Engels had said: “what Marx intended to say on the subject is said there, somehow or other”.4 Further, Marx’s correspondence confirms that Engels had stayed faithful to his friend’s intended treatment of his posthumously published works.5 We are not here concerned with the question of why the original plan for Capital was modified, but for the purposes of this essay, it is necessary to say that Marx had to have known what was essential about capitalist production in order to distil it from the non-essential.

To our great fortune, Paul Embery, Executive Council member of the Fire Brigades Union and active within the Blue Labour faction, did the reading, and concludes that “Karl Marx to Milton Friedman, have agreed that an over-supply of labour depresses wages”.6 Indeed an eccentric take given that Marx resolutely opposed Lassalle’s ‘iron law of wages’ which held that workers were condemned to subsistence wages because there are always too many workers according to the Malthusian theory of population.7 Marx understood that the laws governing wages were complex, and far from being iron were extremely elastic, as will be demonstrated later. In contrast, Embery’s eagerness to lay a blow against what he correctly describes as a “fringe position” has him comparing Marx to a trifling propagandist like Friedman. It is fitting that Capital, once described as “the Bible of the working class” now sits on a politician's bookshelf collecting dust, in the same way a trophy hunter proudly mounts his most fierce casualties upon the weeping walls of his gun room.

A small note before we consider what Marx had observed regarding the relationship between labour supply and wages. Though true that Marx did not sufficiently address the potential internal modifications of the capitalist structure through state interventions, this is likely because his utmost concern was the abolition of capital, rather than its mere modification. Moreover, he held the strongly unwavering conviction that no reform of capitalism could alter its essential capital-labour relation or the value character8 of its social production. Whether Marx was correct is beyond the scope of this discussion - what we’re concerned with is what he actually said. However, for all the perceived limitations of Marxian theory due to its high level of abstraction, it is still the only theory of capitalism which has been substantiated by the actual course of capitalist development.

Marx’s method

At the outset, an analysis of the capitalist social system is confronted with a predicament. On the one hand, it must evaluate the individual character of capitalist entities but on the other, it must adhere to the fact that they are limited in their activity by their relation to the rest of the system. Marx produces a solution to this through using “the force of abstraction”:

The value-form, whose fully developed shape is the money-form, is very elementary and simple. Nevertheless, the human mind has for more than 2,000 years sought in vain to get to the bottom of it all, whilst on the other hand, to the successful analysis of much more composite and complex forms, there has been at least an approximation. Why? Because the body, as an organic whole, is more easy of study than are the cells of that body. In the analysis of economic forms, moreover, neither microscopes nor chemical reagents are of use. The force of abstraction must replace both. But in bourgeois society, the commodity-form of the product of labour — or value-form of the commodity — is the economic cell-form. To the superficial observer, the analysis of these forms seems to turn upon minutiae. It does in fact deal with minutiae, but they are of the same order as those dealt with in microscopic anatomy.9

In order to investigate the characteristics shared by all capitalist enterprises, Marx abstracts from all the features that differentiate them at face value, such as labour productivity and investment ratios etc. Beyond this, in order to examine the specifically capitalist features of modern society, he abstracts from elements like state activities and the existence of separate nations. Furthermore, in the first two volumes of Capital, Marx expressly abstracts from the different ways capital is realised in different enterprises, in order to focus on the production and accumulation of surplus-value. Using a theoretical device that allowed for an examination of the capitalist system as constituted of proportions of a larger whole provided a way of uncovering features shared by all capitalist entities.

Therefore the processes that determine the reproduction of labour power were irrelevant to Marx’s objective namely to show how investment in labour-power produces new and enlarged value. Thus it was enough for Marx to show that the changing needs of capital tendentially produces a surplus population10 - “a mass of human material always ready for exploitation”.11

Accumulation of capital

Capitalist production is defined by the production of exchange-value (not to be confused with price) - the ‘absolute law’ being the production of surplus-value as additional exchange-value. Surplus-value can be understood as the difference between the exchange-value of labour power and its existing productive capacity (or more simply the unpaid portion of labour). Driven by capitalist competition, an increase in the productivity of labour is followed by a decrease in the exchange-value of a commodity. So it follows that an increase in productivity is inconceivable unless it means an expansion of surplus-value in terms of exchange-value. An increase in the rate of surplus-value, in other words, is an increase in the rate of exploitation. Since surplus-value is determined by the time relation between the labour necessary to re/produce workers and the labour appropriated in the form of surplus, increased exploitation would mean a change in this time relation, this can be achieved by either reducing the duration that encompasses necessary labour, or extending the total work time. However, there are natural limits to this, in so far as there are only twenty-four hours in a day, and the duration required to produce workers cannot be reduced to zero.

The objective is to produce commodities containing more labour than is paid for, meaning commodities contain a greater portion of value that cost nothing but can still be realised when sold. Due to the very nature of the wages system, workers will always carry out a quantity of unpaid labour. Any rise in wages will never reach a point at which it would threaten the system of wages itself, and “only means, in fact, that the length and weight of the golden chain the wage worker has already forged for himself, allow of a relaxation of the tension of it”.12 A rise in wages would merely be a reduction in the amount of unpaid labour that the worker must provide. However, when wages endanger profits and accumulation comes to a halt, the mechanism that caused wages to rise is also the same mechanism that brings it back down again:

To put it mathematically: the rate of accumulation is the independent, not the dependent, variable; the rate of wages, the dependent, not the independent, variable.13

Thus, in periods of stagnation, there is a rise in the relative value of money because there is a general fall in the price of commodities, and in periods of growth, there is a drop in the relative value of money because there is a general rise in the price of commodities. Marx, critical of those that attributed this phenomenon of accumulation to an over-supply of labour in one case and an under-supply in the other as “ignorance and complete misunderstanding of facts”.14 Furthermore, Marx goes onto say that the law of capitalist production (that is surplus-value production) that underlies the misleading ‘natural’ law of population is:

The correlation between accumulation of capital and rate of wages is nothing else than the correlation between the unpaid labour transformed into capital, and the additional paid labour necessary for the setting in motion of this additional capital.15

The relative decline in the value of labour power

The production of surplus-value is the same process as that of the accumulation of capital. To secure the demands of accumulation, capitalism is compelled to continually transform the productive domain in an incessant pursuit for further surplus-value, and must transform this surplus-value into capital i.e. through a widened market or new means of production. However, the real significance of Marx’s general law of capitalist accumulation can be found not so much in the various changes that occur throughout the course of accumulation, but rather the effect these changes have on the population that is compelled to sell its labour power.

The development of productive power is reflected in the mass of labour necessary to employ these means of production (the technical composition of capital) and is again reflected in the mass of the means of production employed (the value composition of capital) via the increase in the value of the means of production (constant capital) at the expense of the value of labour power (variable capital). For example, if at once there is an organic composition (the value composition of capital in so far as it is determined by its technical composition, here expressed as a ratio) of 50 constant:50 variable, throughout the course of accumulation it will become 80c:20v.

With the accumulation of capital, therefore, the specifically capitalistic mode of production develops, and with the capitalist mode of production the accumulation of capital. Both these economic factors bring about, in the compound ratio of the impulses they reciprocally give one another, that change in the technical composition of capital by which the variable constituent becomes always smaller and smaller as compared with the constant.16

With the increasing productivity of labour power, not only does the mass of the means of production consumed by it grow, but the value compared with the mass moreover diminishes. Thus the value rises absolutely but not in proportion to the mass:

constant capital 500 = mass 10 machines
constant capital 2500 = mass 100 machines

While the mass developed tenfold, the value only developed fivefold. Moreover, the difference between the constant and variable capital is less than that of the difference between the mass of the means of production and the constant into which the mass of labour power and variable capital is converted. The variable capital increases with the constant but to a smaller degree:

organic composition 50:50
constant capital = $3000, variable capital = $3000, total capital = $6000

organic composition 80:20
constant capital = $14400, variable capital = $3600, total capital = $18000

Under this new organic composition of capital, to raise the variable capital from $3000 to $3600, it was necessary to increase the original capital threefold - a mere 20% increase of the variable capital makes a 300% increase of the total capital necessary.

“Accumulation for accumulation’s sake, production for production’s sake”17 derives its motive power through capitalist competition. Therefore, capitalist production must unceasingly accumulate as relaxation means deterioration. Through competition, capitalist firms are compelled to expand their capital and expand it more rapidly than the labour it employs. “One capitalist always kills many”18 and so the larger capitals absorb the smaller, thus the more rapidly capital accumulates, the more it is concentrated. Competition is therefore a centralisation process, during which more surplus value is divided among fewer firms. However, this process takes place in periods of growth and in periods of stagnation, as centralisation is merely an adjustment in the distribution of available capital. Yet accompanying centralisation “grows the mass of misery, oppression, slavery, degradation, exploitation”.19

While accumulation has made capitalism the most productive social mode of production thus far, it is also responsible for curbing its further development anytime it comes into conflict with social relations specific to capitalist production. So it is accurate to say that accumulation explains the success of capitalism, but due to the value character of production, it is equally accurate to say that accumulation also explains its weakness. Hence “[t]he real barrier of capitalist production is capital itself”.20

Mass misery

The process of centralisation that supplements accumulation sharply divides society into a diminishing number of owners of capital on one end, and a growth in the propertyless masses who can only exist through the sale of their labour power on the other. Although the process of accumulation increases the number of both capitalists and workers, compared to the growing mass of capital there is a relative reduction. The relative contraction of the rate of accumulation tendentially becomes an absolute contraction, as workers no longer produce surplus-value thus capitalists are no longer able to secure it - meaning they can no longer be considered capitalists. Therefore a decrease in the number of capitalists on one end increases the number of workers on the other.

The whole form of the movement of modern industry depends, therefore, upon the constant transformation of a part of the labouring population into unemployed or half-employed hands.21

The independent movement of capital as determined by its profitability is sovereign over the life conditions of the propertyless masses, and the more that capital accumulates the more unstable these life conditions become. Since accumulation both increases the absolute number of workers, yet lowers the demand for labour relative to the growing capital, the production of a surplus population is not only a result but a condition of accumulation, as the volatile demands of capital expansion require a mass of labour power that it can exploit according to its needs. Marx called this the “absolute general law of capitalist accumulation” and is explained as follows:

The greater the social wealth, the functioning capital, the extent and energy of its growth, and, therefore, also the absolute mass of the proletariat and the productiveness of its labour, the greater is the industrial reserve army. The same causes which develop the expansive power of capital, develop also the labour power at its disposal. The relative mass of the industrial reserve army increases therefore with the potential energy of wealth. But the greater this reserve army in proportion to the active labour army, the greater is the mass of a consolidated surplus population, whose misery is in inverse ratio to its torment of labour. The more extensive, finally, the lazarus layers of the working class, and the industrial reserve army, the greater is official pauperism.22

It is essential to note that Marx did not claim that the increasing misery that accompanies accumulation to always be directly observable, but rather as a general tendency that underpinned the actual movements of capital and labour. It is not impossible, for example, that the tendency towards misery may be temporarily suspended in periods of capital expansion as an increased demand for labour may reduce the industrial reserve army and increase the price of labour.23 However, ‘the truth is the whole’, and given the deepening difficulty of capital accumulation, the frequency of recessions, the prolongation of depressions etc. increasing misery will be revealed as the “absolute general law of capitalist accumulation” in the long-term.

So long as capital expansion is possible, the industrial reserve army provides the accumulation process “a mass of human material always ready for exploitation”. A declining rate of accumulation - even if the decline is steady - will invariably expand the industrial reserve army and thereby the mass of ‘official pauperism’. The latter, for what it’s worth, was regarded by Marx as the terminal condition of the accumulation process, and would eventually lead to social actions that could abolish the capitalist system and replace it with a higher state of social production: 24

Along with the constantly diminishing number of the magnates of capital, who usurp and monopolize all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working-class, a class always increasing in numbers, and disciplined, united, organized by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralization of the means of production and socialization of labor at last reach a point where they become incompatible with their capitalist integument. Thus integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.25

It should be understood that the price of labour power does not correspond neatly to the exchange-value that is received, determined in this case by the costs of production and reproduction of labour power.26 For example, when the demand for labour consumes the industrial reserve army, the price of labour power exceeds that of its value and may result in wages higher than its value for some workers. In contrast, there would be little need to reproduce or consider the reproduction needs of the whole working population, if a large enough surplus population had been produced throughout the course of accumulation. It is possible to temporarily offset the fluctuations in wages through wage struggles, political interventions in the labour market or the monopolisation of certain types of labour. However, under competitive conditions and considering the working class as a whole, the movement of wages are regulated exclusively by the size of the industrial reserve army, which to reiterate corresponds to the independent movement of capital as determined by its profitability. Therefore, it is not difficult to imagine a settlement where the wages of the working population do not decrease and may even increase throughout the progress of accumulation, but this does absolutely nothing at all to put an end to the misery of the growing disposable population.

Eternal return

In Marx’s own words, the antagonism between native and migrant labour is:

[A]rtificially kept alive and intensified by the press, the pulpit, the comic papers, in short, by all the means at the disposal of the ruling classes. This antagonism is the secret of the impotence of the English working class, despite its organisation. It is the secret by which the capitalist class maintains its power. And the latter is quite aware of this.27

Only once the labourer learned the “secret” of accumulation that fuels the battle royale of worker against worker, and “organise a regular co-operation between employed and unemployed” could they “weaken the ruinous effects of this natural law of capitalistic production on their class”.28

Contrarily, the political labour movement that’s experiencing an ideological rehabilitation, the one wrongly or rightly characterised as nativist and socially conservative, were not convinced that the increasing misery of the masses was indistinguishable from their revolutionising. They took the position that impoverishment made workers apathetic rather than revolutionary, and anticipated it would set the working-class in opposition to rather than serving in the interests of their class. Thereby, almost by default, excluding the most impoverished sections of the working-class, be they migrants; the long-term unemployed; sex workers; disabled people etc - and this is before they adopt any explicitly exclusionary policies such as colour or marriage bars. The labour movement thus made improving the economic position of industrial workers their primary concern and regarded it as a means by which it could establish some kind of proletarian consciousness. Although workers did develop political consciousness, it turned out not to be a revolutionary one and, as a consequence bound the labour movement in Britain to the fortunes of British capitalism or the British Empire.29 It’s unquestionable that for a period of time there was exceptional growth in political labour organisations, trade unions and workers standard of living. Yet it still hasn’t occurred to seriously come to terms with why political labour movements have functioned so well during periods of tremendous capital expansion but collapse like a house of cards as soon as there’s an economic crisis.

The labour movement attributed unemployment to the prevailing conditions, yet whenever they’ve had the opportunity to do something about it, time and again they have resorted to criminalisation. In fact, an attempt to escape the discipline of the global labour market is merely trading it in for the discipline of a more onerous criminal justice system. Hence the heated discussion around the extent of migration controls and the social democrat love for the police. But where there is smoke there is fire and these discussions merely mirror the transformations taking place on the labour market. It is conceding that unemployment cannot be defeated, and therefore the struggle to overcome it is deserted, only to be mobilised around nonsense programs and policies that neutralise the social convulsions that disturb society as a result of mass misery.

Though the disposable population is a product of current civilization, they are both constantly rejected by yet frequently employed by it. And as promptly as society is relieved of them, the positions they empty out are as promptly filled again from the mass of misery that swells the ranks of the working-class. In the disposable population, the worker is only catching a glimpse into the destiny of their own future, unless their struggle to radically change the existing relations of production advance at a more rigorous and rapid rate. This can only be achieved if a social movement at its most fundamental level emphasises solidarity, freedom, autonomy and consensus. After all, it is only a middle-class attitude that permits to ascribe culpability upon migrants or any section of the disposable population. And for all the loathing that social democrats have for the global liberal order, ultimately it is only a liberal that sees themselves as real while other people are regarded as disposable abstractions.

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Oct 30 2018 19:10


  • To put it mathematically: the rate of accumulation is the independent, not the dependent, variable; the rate of wages, the dependent, not the independent, variable.

    Karl Marx

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