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Early forms of socialism envisioned a better world for everyone, and before socialist theory workers fought for autonomy and respect from their bosses, but Marx and Engels played an important role uniting the workers movement and socialist movement. Marx’s pamphlet “Wage Labor and Capital” is a concise text for articulating how capitalism functions, and how it exploits the workers. Marx had not yet fully developed his concept of labor power, which he explored in far greater detail in Das Kapital, or Capital in English.
David Kotz is Professor Emeritus of Economics at the University of Massachusetts Amherst and Senior Research Fellow in the Political Economy Research Institute. He is the author of the book Socialism for Today: Escaping the Cruelties of Capitalism, Polity Press, forthcoming 2024. He also wrote The Rise and Fall of Neoliberal Capitalism, Harvard University Press, 2015 and 2017. He is a member of DSA’s National Political Education Committee.
NPEC “Why the Working Class?” Curriculum, including Marx’s ‘Wage Labor and Capital’
https://dsa-education.pubpub.org/pub/why-the-working-class/release/6
Foundational Political Education Series: Socialism
September 17, 2023
https://actionnetwork.org/events/foundational-political-education-series-socialism?source=direct_link&link_id=4&can_id=6e32bd9fc928173c7c4f64fb3a5b58ab&email_referrer=email_2027248&email_subject=red-letter-your-npec-newsletter
Foundational Political Education Series: Class
September 24, 2023
https://actionnetwork.org/events/foundational-political-education-series-class?source=direct_link&link_id=5&can_id=6e32bd9fc928173c7c4f64fb3a5b58ab&email_referrer=email_2027248&email_subject=red-letter-your-npec-newsletter
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You're listening to CLASS, an official podcast of the Democratic Socialists of America National Political Education Committee. My name is Elton L. K. This episode is part two of our series, Why the Working CLASS? You can find a link to the curriculum in the show notes or on our website at education.
dsausa. org under resources. A couple of housekeeping items. CLASS is looking for an audio editor to help with the podcast production. Details are in the show notes. The DSA National Political Education Committee has a couple events coming up in the foundational political education series. One hour and a half session on socialism with Megan Day on September 17th.
What differentiates a socialist society from a capitalist one? How do we determine which governments, policies, and movements deserve to be called socialist in a capitalist world? Day will present on the key features and major pillars of socialist thought that distinguish it from other political traditions, including fascism, liberal capitalism, and social democracy.
We also have a session with Eric Blanc on class on September 24th. Why do socialists see the working class as the central agent for social change? Which is obviously relevant to today's topic. Who exactly belongs to the working class? Can workers still change the world today? And what is the relationship between workplace and electoral struggle?
Links to both events are in the show notes. To talk about wage labor and capital, today we have an economist, David Kotz. You'll recognize him from our first few episodes, which happened to be our series What is Capitalism? He is also a member of the DSA National Political Education Committee. Check out his forthcoming book, Socialism for Today.
Escaping the cruelties of capitalism.
Well, welcome back to the podcast, David. I've got a few questions for you here. I'll start with the first one. Provide us some context. This was published in 1849. Describe European capitalism and the working class at this time. Good question. Uh, as you mentioned, uh, wage, labor, and capital is based on lectures given in, uh, 1847 and it was finally published in 1849.
At that time, in the, uh, mid to late 1840s, European capitalism was well into the age of machine based factories. There was rapid development of the economy in that period. There was There were steady technological advances, mass production techniques were introduced, the railroads expanded rapidly in Europe, enlarging the market and stimulating demand for iron and steel.
There was the development for the first time of a real world market taking in almost all of the globe. The working class and class struggle in this period, about which Marx was writing, this period saw a new form of great wealth on the part of the new industrial capitalists, alongside a new form of extreme poverty among the wage workers in industry.
The wage working class was expanding as independent craft workers, such as weavers, were driven out of business because they couldn't compete with the factories, which were hiring relatively less skilled labor. The new industry had sub human conditions. 12 to 16 hour work days. Child labor from age five.
As far as the class struggle in the early 18 hundreds, the capitalist class in Europe was shifting from fighting the landlord class, which had been dominant before the rise of capitalism to directing their fire at the working class. Is it true that the intended audience of this text is workers and not philosophers?
Indeed, uh, this essay by Marx was based on lectures he gave for the German Workingmen's Club of Brussels in 1847. The lectures were published in German in 1849. Definitely it was aimed at workers. It's worth mentioning that the version of Wage, Labor, and Capital that has circulated in English is the one that was edited by Friedrich Engels in 1891.
some decades later. These are often assigned as reading in non academic settings because they present the core ideas of the Marxist analysis of capitalism and its class relations. So this is an early text of Marx's, right? Can you provide some context? How does it relate to his magnum opus, Capital? Well, not surprisingly, Marx's analysis developed over time.
He was quite young in the 1840s, and in 1847, when he gave those lectures at the German Workingmen's Club in Brussels, his analysis of capitalism was not yet fully developed. It was only later in his magnum opus, Capital, first published in German in 1867, that what is regarded as mature Marxism emerged.
Now, what did Engels change? In the original 1847 version, Marx viewed workers as selling what he called their labor to the capitalist. But, uh, in his mature thought, That way of describing it, of analyzing it, was changed to instead of workers selling their labor, a worker selling their labor power. Now that is not just a matter of wording.
It had a, an important effect on the analysis by distinguishing labor power, which is a worker's ability to work for a period of time. from labor, which refers to the actual process of producing things by a worker. Uh, that clarified the nature of the capital labor relation and the source of profits flowing to capitalists.
The later version presents the worker as selling his or her ability to work for a day. Then, after selling that ability, The worker performs the labor with the product of that labor belonging to the capitalist, where the key argument is that the worker's labor creates more value than the worker receives in the form of the wage.
So you've talked about labor power. Can you walk us through the arguments of the pamphlet? Marx presents three topics. First, the relation between labor and capital. Second, what he calls the ruin of the middle classes and the commons, referring to common land before the capitalist era. And third, England's domination and exploitation of bourgeois classes of other nations.
Marx makes the argument that the capitalist's wealth becomes capital only when it is exchanged for labor power, when it's used to purchase labor power, along with the other necessary inputs to production, raw materials, the instruments of labor. That sets the stage for the value of the capital to expand when production takes place.
Now, a key point. How does the capital expand and generate profit for the capitalist? He argues that the wage of a worker for a day is determined by the labor required to produce the goods that will enable the worker to survive and reproduce over time. The cost of producing labor power will vary as capitalism develops and it will be different in different parts of the world.
It depends on the living standard of workers at a particular time and place. Then Marx goes on to argue that at work, the worker creates more value than the wage. Technically, the argument is that the hours worked in the workday are greater than the hours required to produce the goods a worker must consume in the day.
So, for example, if the workday is 12 hours, Then if it requires only six hours of labor in the industries that produce the food, closing, housing, et cetera, that workers need, then the difference between the six hours that represent the value of labor power and the 12 hours of new value that the worker creates in the day, the difference will be what Marx called surplus value, which becomes profit for the capitalist.
Now, Marx criticizes the arguments of what he calls bourgeois economics, that is the mainstream pro capitalist economic theorists and analysts of his day, uh, who claim that labor and capital have a common interest since when the capitalist increases the capital by investing the surplus value that leads to rising wages.
However, Marx counters this by arguing that when capital increases rapidly through the reinvestment of surplus value to operate on a larger scale that the real wage, that is the worker's living standard, can rise but the flow of wealth to the capitalist rises faster. So inequality increases. Thus he concludes the share of profit in the new value grows while the share of wages falls.
The key point that Marx is deriving from this analysis that the interest of capital and labor are directly opposed, where the workers can advance their interests to live better only by reducing profits. Then Marx makes a few subsidiary points. He notes that the capitalists are constantly forced to introduce new, more productive methods of production, typically by increasing reliance on machines in the production process in the era that Marx was writing.
And he points out that this will benefit the capitalists. Only briefly that the capitalist who introduces a new more productive method can earn extra profits by cutting the price and underselling the rivals while still making extra profit. However, once the new techniques are copied by the other competitors, then the general price of the commodity will Because it now takes fewer hours to produce it by all the producers, and the profit falls back to what it had been.
Marx also argues that mechanization, the replacement of hand labor by machines, de skills labor, which tends to reduce the real wage. When capitalists hire less skilled labor, they don't have to pay the expenses of gaining that skill. And so the real wage is reduced and that throws many workers into unemployment.
Another subsidiary point Marx makes is it's a drive to increase Profit through enlarging the scale of production and introducing more and more effective machines cheapens commodities. The small manufacturers cannot compete, and he argues they are driven into the working class. So he's presenting a picture of polarization of the society between a shrinking number of capitalists and a growing working class.
Finally, he throws in the point that the process he's been describing leads to what he calls crises. Thank you. In the 19th century, the word for what today we call economic recessions or depressions, the word was economic crises. So Marx was just using the terminology of that day, that this process leads to periodic depressions and ones of growing intensity and frequency.
Productive capability, which grows rapidly, outstrips the growth of the market. Can you speak a moment about what Marx's background was in economics? Well, Marx, as a student, had studied philosophy and law. He did not study economics, but after his formal education was over, when he was finally expelled from the continent and settled in London, he spent a long period of time in the British Museum studying what was then called political economy, what today would be called economics.
reading Adam Smith, David Ricardo, the leading mainstream economists of a slightly earlier period, and also reading the contemporary economists who had moved away from the earlier ideas of what's called classical political economy of Adam Smith and David Ricardo. So he did become very much up on the economic analysis of his day.
How much of Marx's description of capitalism in 1849 still applies? 174 years later in 2023. Well, most historical analysts are lucky if what they write still seems to hold any water five or ten years later, but Marx's arguments have stood up remarkably well to the test of time. The description that we read, maybe some of it's from the 1860s, it still fits the fundamental features.
and tendencies of capitalism today in 2023. Capitalists still get profit from what Marx later came to call the exploitation of labor. The capitalists taking part of what the workers produce. The capitalists are still driven by competition to expand, to introduce new technologies, new, more powerful ways of producing.
And the class struggle between capital and labor remains central to the capitalist era. In fact, intensified after the period when Marx wrote. However, there are some details which have changed. Capitalism, like any socioeconomic system, has evolved and developed in certain ways. Its fundamental principles remain the same, and Marx really did find them.
The mainstream economists of his day had no clue, but he really found, he deciphered the key motive forces of capitalism. The mainstream economists of his day, whose approach has followed through to today, they analyze capitalism by claiming it has virtues when it's at rest, when it's what they call an equilibrium.
But Marx understood that capitalism's reality is in a dynamic, ever developing system. He really saw that. After the 1840s, monopoly power grew as giant corporations arose, first on the scale of nation states and then on a global scale. Another development is that new forms of imperialism arose after the 1840s.
Capitalism involved imperialism from its founding, but new forms of domination by powerful capitalist nation states emerged later. This was analyzed by Lenin around the time of World War I and by later Marxists. Later, capitalism spread around the world, beyond Europe and North America. But let me single out one, I think, particularly important and relevant development that did not exactly fit what Marx was arguing.
And that is, in some periods, the working class has had sufficient economic and political power to modify in certain ways the way that capitalism performed. The major period in which that happened was the roughly 25 years following World War II. In that period, there were very strong trade unions in Europe and North America and other parts of the capitalist world, the developed capitalist world.
There were strong socialist and communist parties. And as a result, in that period, roughly 25 years after World War II, contrary to the description Marx gave, real wages and profits grew at approximately the same rates. That is, what Marx describes as the chair of profit always increasing did not hold in that period.
In fact, in the US, the data show that from the late 1940s through the early 1970s, which was the heart of that post war version of capitalism, there was some decrease in the degree of inequality that is shown in various The bottom 20 percent of households real income grew somewhat faster than the top 20 percent or the top 5%.
They all grew fairly rapidly. It was actually mildly equalizing. However, it didn't last. And in the course of the 1970s, around the world, mobilized, overthrew that version of capitalism and brought us What we now call the neoliberal era, which looks very much like exactly what Marx was describing, but even more so.
Marx, in the late 1840s, suggested that real wages will rise over time, but profits will rise faster. Well, since 1980, we've seen real wages falling, not rising. Workers real living standards have decreased for significant periods of time in the neoliberal era. I first started teaching Marxist economics in college in the early 1970s and I used to have to say, well, you know, Marx didn't get this one right.
After 1980, I didn't have to say that anymore because what Marx had predicted had arrived in spades and even more so, worse for workers than even Marx had suggested. I think that's a really good insight, and I know that there are a lot of bad faith criticisms of Marx and socialism that essentially looks at how the American working class prospered in the 20th century, and maybe even just kind of like how parts of the economy have prospered in the 20th century, and so I see Marx was wrong and point out how much he got it wrong.
But with neoliberalism and the return of a lot of the conditions that are closer to what Marx was documenting and experiencing when he wrote this text, how is this understanding of capitalism useful for workers and for socialists? Can you explain what class consciousness is? Let me just respond to what you said by noting that it has been noticed that capitalism is now much like its 19th century version.
Capitalism did get modified by the power of working people and their allies acting through the state and in direct confrontation with capital. But it didn't last. And in the period around the big financial crisis of 2008, I saw a line in a New York Times article that said, it almost seems as if capitalism is trying to prove that Marx was right.
This was noticed even by mainstream commentators. Now, how is this understanding of capitalism useful for workers and socialists? It shows why class struggle is a fundamental feature of capitalism. It shows that for socialists, the working class Is the direct victim of capitalism and has a direct interest in a transition to socialism.
And so forms a majority base in the population for opposing capitalism and becoming in favor of socialism if they are not already. This analysis can be used for worker education efforts conducted by socialists. Now that leads to the question of, what about class consciousness? Marx argued that the objective position, the situation of the working class in relation to capital, tends to produce an awareness among them of their exploitation II,
When workers conditions were improving materially, there was still widespread understanding among workers in the developed capitalist countries that the capitalists were exploiting them. However, there is a dominant ideology that pushes in the other direction. Since the 1830s, mainstream economics has argued that there is no exploitation in capitalism, that workers contribute labor and are paid a wage, capitalists contribute their capital.
And there they receive profit in return. It's a, it's an equal and fair system. Marx was aiming to counter that conception in this reading, but pointing out that workers in some objective sense are exploited by capitalism always holds the potential that workers will become conscious of that exploitation and go beyond that in favoring and working toward this replacement by.
A alternative socialist system with no capitalists and Marx referred to that as a class in itself Versus a class for itself the class in itself refers to the objective position of workers as exploited The class for itself refers to a working class That has come to see that socialism represents the only road forward that will end its exploitation and bring a decent life for the working class.
This is Class, an official podcast of the Democratic Socialists of America National Political Education Committee. My name is Elton L. K. Thank you to Casey Sticker, who deserves a big thanks for sound engineering and theme music. Thank you to Palmer Conrad for editing. If you're inspired by anything we've been talking about, if you think the system is rigged and democracy is the solution, join DSA.
Become a member. I've put a link in the show notes to DSA's website. If you're already a member of DSA, please share this podcast with your local chapter. Class is intended to be a resource for chapters and members to articulate, apply, and share socialist theory with DSA and the wider working class. Also, remember to rate and review us on iTunes or your favorite podcatcher.
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