Basics of Marxism Part 2 — Wage Labor and Capital

In part two of our lessons on value, we condense the basic ideas of Marx’s Wage Labour and Capital into a digestible article with updated language and examples.

Karl Marx explains the capitalist labor process and relations in the 1849 pamphlet Wage Labour and Capital, originally written as a series of articles. In order to combat capitalism and heighten the class struggle, it is important to understand it as it truly is. In this text, Marx sets out to do just that in the context of capitalistic social relations between labor and capital.

Labor does not inherently have value. This does not contradict Marx’s labor theory of value. It is, in fact, inherent to it. Something can only have value when subject to particular social relations which grant it a form as a commodity. It does not have any value outside of those social relations. The same thing applies to labor.

If one does not enter into market relations in their production, such as with purely subsistence farmers, then their labor produces no value. Labor can only produce value when it is employed toward the end of commodity production. Labor itself, however, cannot have value except for when it takes on a commodity, with that commodity being labor-power.

Labor-power’s value is measured by the clock. Labor-power is distinct from mere labor in that it’s commodified labor. The wage laborer does not sell their capacity to labor to the capitalist forever. Rather, they sell their labor for a definite period of time for a definite purpose. Wages are the price that the capitalist pays to the worker to buy their labor-power, as they would pay for any other commodity, such as apples or oranges. But how are the prices of commodities determined?

As Marx said in the text:

By the competition between buyers and sellers, by the relation of the demand to the supply, of the call to the offer. The competition by which the price of a commodity is determined is threefold.

The same commodity is offered for sale by various sellers. Whoever sells commodities of the same quality most cheaply, is sure to drive the other sellers from the field and to secure the greatest market for himself. The sellers therefore fight among themselves for the sales, for the market. Each one of them wishes to sell, and to sell as much as possible, and if possible to sell alone, to the exclusion of all other sellers. Each one sells cheaper than the other. Thus there takes place a competition among the sellers which forces down the price of the commodities offered by them.

But there is also a competition among the buyers; this upon its side causes the price of the proffered commodities to rise.

Finally, there is competition between the buyers and the sellers: these wish to purchase as cheaply as possible, those to sell as dearly as possible. The result of this competition between buyers and sellers will depend upon the relations between the two above-mentioned camps of competitors — i.e., upon whether the competition in the army of sellers is stronger. Industry leads two great armies into the field against each other, and each of these again is engaged in a battle among its own troops in its own ranks. The army among whose troops there is less fighting, carries off the victory over the opposing host.

These fluctuations tend to focus around the costs of production of a commodity, with the fluctuations above and below in a particular period tending to average out into the actual cost of production.

How are wages, as the price of labor-power, determined? The prices fluctuate according to competition among the workers and the capitalists, and struggle between the two classes. But their minimum limit is set by the cost of maintaining labor-power.

This limit is essentially the cost of subsistence for the worker, the cost of their survival as a productive laborer, their training into that capacity, and the cost of ensuring reproduction of the workforce so that old laborers can be replaced by new ones. Wages can technically fall below this limit, but not in any sustainable manner, as such a fall begins to decimate the capitalist’s labor force.

Has wage labor always existed? No, and neither has the value-form. Wage-labor must correspond to social relations wherein the laborer cannot access the needs of life, such as food and water, except by purchase as commodities, and where they only have the sale of their labor-power to offer in order to access means of purchase, or money.

For workers in this situation to exist, a threefold process must unfold:

1. Laborers must be divorced from the means of production, which enable them to reap their needs directly for themselves
2. Subsistence must be commodified
3. The purchasers of labor-power must already have money to buy labor-power with and capital to invest in production.

Before we get further, we have to ask: what is capital?

Marx explains:

The existence of a class which possesses nothing but the ability to work is a necessary presupposition of capital. It is only the dominion of past, accumulated, materialized labour over immediate living labour that stamps the accumulated labour with the character of capital. Capital does not consist in the fact that accumulated labour serves living labour as a means for new production. It consists in the fact that living labour serves accumulated labour as the means of preserving and multiplying its exchange value.

Capital, as accumulated value from past labor, cannot be realized unless active laborers can realize it in the process of production. For this to occur, the conditions of wage-labor must be established, which is done by the process of primitive accumulation. Primitive accumulation is both the appropriation of things as commodities, the divorce of the producers from the means of production, and thus the ability to satisfy their needs independently, and the reproduction of the conditions for capitalist production.

Primitive accumulation holds multiple facets:

1. The destruction and seizure of commons, which represent a line of resistance to wage-labor
2. The forcible seizure of wealth, especially in war, and
3. The creation of a class of wage-laborers by this process of dispossessing laborers.

Primitive accumulation is not a one-time thing, but an ongoing process. It is employed whenever the conditions for capitalist production are challenged, and need to be reproduced.

Primitive accumulation’s most well-known role was in the Enclosures in England. But that isn’t the only place in history that it played a part, nor the most important. Primitive accumulation is a powerful force in colonialism, with colonized peoples having their homelands seized, being forced into a class which has nothing to sell but its labor-power. Marx considered the expropriation of Indigenous people in the Americas and enslavement of Africans as the primary instance of primitive accumulation.

The process is at play wherever the commons are being destroyed, wherever laborers who rely on direct production of their needs are divorced from the means of production, and wherever newly appropriated value is used to hire newly created wage-laborers.

This is the origin of wage-labor. In production, the wage-laborer realizes the capitalist’s capital. For this process to be worthwhile for the capitalist, they must get more value out of production than they put in. This is done through the production of surplus-value. The labor-time equivalent to the value of the worker’s wages is called necessary labor time. If a group of workers are paid a collective daily equivalent of $600, then the labor-time of that day corresponding to that value is necessary labor-time. Let’s say that that is 6 hours of collective labor-time.

Now, if the cost of their labor-power is $600 for the capitalist, then what would be the point of hiring them if the capitalist simply makes back a value equivalent to what they paid? The capitalist must make more than they spent. The capitalist needs the workers to labor beyond their necessary labor-time, into surplus-labor-time. The total value of the worker’s labor-power is necessary labor-time plus surplus-labor-time, but the price of their labor-power is only necessary labor-time.

So, for our case, we will say this is an equivalent of 2 hours, corresponding to $200, of unpaid labor-time. This is not literally 2 extra hours at the end of the day, but a fraction of the total workday corresponding to 2 hours. This value of $200 is surplus-value. We will explain the manner in which it is split up in our article about Value, Price, and Profit.

Part of this surplus-value becomes new capital for the capitalist, which can be realized by further investment. The more surplus-value that is produced, the more capital can be invested. This leads to a greater mass and rate of capital accumulation the capitalist can engage in. This outward spiral of growth means that more capital attracts more capital, on greater and greater scales.

This leads to concentration of capital in a few hands, which in turn leads to its consolidation. As capitalists are in competition with each other, the smaller capitalists tend to be ruined in trying to compete with the larger ones, and they are bought out by the larger ones one way or another. As a result, we get the formation of monopolies, and casts greater and greater numbers of people into the class of wage-laborers.

In this grotesque process, the capitalist tries to increase the share of surplus-value in total labor-time by decreasing necessary labor-time, which generally means a reduction of the workers’ share of the product. The workers, by contrast, seek to increase their share of the product, represented by necessary labor-time. This leads to irreconcilable class struggle, which is played out first in the field of production, in the form of labor disputes, and then beyond, where the struggle becomes politicized.

The wage-laborers, the proletariat, have nothing to their names but their labor-power. In this, they also have nothing to lose but their chains. In the course of their struggle, they tend to develop class consciousness, more so when they are a sector of their class in a position where capitalist relations and capitalist crises are especially evident. As the proletariat have nothing to lose but their chains, they represent the capitalists’ doom, and the capitalists simply continue to grow their numbers through primitive accumulation and consolidation.

The proletariat, however, is not the only class which can be progressive. All classes threatened by capitalist expropriation have revolutionary potential, including peasants, small capitalists, intelligentsia, and so on. Their revolutionary potential increases where they are more threatened by proletarianization and pauperization. In some cases, when the proletariat has far better conditions than them and so is blinded to the class struggle, they can even begin revolutions, as with peasants in national liberation struggles.

What is key, however, is that the condition of proletarianization creates the very masses of people who threaten to snuff capitalism out as a historic epoch and build a new socialist society. The class of the proletariat represents a class which can effectively lead the struggle against the present state of things.