Socialism Q&A (2)

Is it worthwhile for the worker to struggle for gains in wages and benefits if this will cause an increase in prices and negate his efforts?

This is a common argument of the capitalist class to discourage workers from taking action to improve their lot, and depends on the fraudulent claims that the price of commodities will, in fact, rise, that the price of commodities depends on the price of labour and that the capitalist can raise his prices as he pleases.

Firstly, a pay increase will mean increased spending by the workers on their usual necessities—food, clothing, household goods, etc. This increased demand will cause prices to rise temporarily. However, this increase in prices ensures that the capitalist producing those products will be compensated for paying out higher wages. The capitalist producing luxury goods will experience a drop in sales and profits because of overall demand of all goods will remain the same and if the demand for necessaries rises, then demand for luxuries must fall. Thus the luxury producers will be hit with increased wages and falling sales and profits. This will bring about a transfer of capital and labour to the production of those goods giving the highest rate of profit (necessities) until supply equals or exceeds demand and prices fall to their original level or lower.

For proof that higher wages don’t mean higher prices, Marx points out (see ‘Value, Price & Profit’) that the English worker was higher paid than workers in other European countries, but English products undersold those of their competitors. The price of commodities does not depend on the price of labour. Marx has shown that the value of a commodity is determined by the socially necessary labour time required to produce an article:

 “As the exchangeable values of commodities are only social functions of those things, and have nothing to do with natural qualities, we must first ask, ‘What is the common social substance of all commodities?’ It is labour.” (Value Price & Profit)

 Price is simply the monetary expression of value. The market price may fluctuate up and down from the value according to supply and demand, but always tends towards the natural price (i.e., the expression of value as quantities of equal social labour) and over the long term sells at this price. Therefore, as price is set by value, and value is the amount of socially necessary labour crystallized in a commodity, and as any price fluctuations are due to supply and demand, then it is clear that the capitalist cannot raise his prices on a whim, however much he may want to.

In conclusion, we must state that, as wages depend on supply and demand, rising when demand outstrips supply and falling when supply outstrips demand, the worker should take advantage of any opportune time to increase his wages and benefits. This, of course, must be done when demand for labour is high, as it would be economic suicide to do so when demand is low.

It must be seen that any advantage gained could easily be wiped out at the next recession or legislative attack on labour.

 Secondly, as the capitalist cannot raise his prices whenever and to whatever level he pleases, wage increases must come from gaining a greater share of the profits. The capitalist must resist any loss of his portion of the profits, thus creating the inevitable and continuous conflict between worker and capitalist. Consequently, the worker should be aware that the fight for better wages is secondary to the main goal of overthrowing the wage system and replacing it with a system of democratic control of the means of production by, and in the interests of, the people. The social conditions under which Marx wrote have altered little in their general character since he addressed Value,Price & Profit to the First International Working Men’s Association in 1865.

What he states about the limitations of trade unions holds as equally true for today as it did when he wrote it:

“Trades Unions work well as centres of resistance against the encroachment of capital. They fail partly from an injudicious use of their power. They fail generally from limiting themselves to a guerilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class, that is to say, the ultimate abolition of the wages system.”

Toronto Socialist Discussion Group, 2002