ISR Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

International Socialist Review, May-June 1968


Robert Langston

Marx’s Theory of Wages


From International Socialist Review, Vol.29 No.3, May-June 1968, pp.59-64.
Transcribed & Marked up by Einde O’Callaghan for ETOL.


Ernest Mandel’s new book, La Formation de la pensée économique de Karl Marx (The Formation of Karl Marx’s Economic Thought) is an important contribution to Marxist literature. [1] Most of the book is concerned with the period between 1844, when Marx began his systematic economic studies and drafted the Economic-Philosophical Manuscripts, and 1859. In 1858 and 1859, Marx completed the massive Outlines of the Critique of Political Economy – a work unpublished until 1939 – and the more compact Contribution to the Critique of Political Economy. During these 15 years Marx made most of his fundamental discoveries in the field of political economy.

But Mandel also follows Marx’s philosophical and political development prior to his conversion to communism in 1844 and the beginning of his study of political economy. Mandel describes Engels’ early economic works, especially the Sketch of a Critique of National Economy of 1843, a work which antedates Marx’s endeavors in the field and which partially stimulated them. He offers a sustained interpretation of Marx’s concept of alienation from its inherited metaphysical beginning to its materialist completion. And Mandel develops a theory of alienation and “disalienation” in the transition from capitalism to socialism. Along the way, the author engages in brief but pointed polemics with various contemporary theorists on most of these themes. He does all this in a book of little more than 200 pages.

Such breadth combined with such brevity might suggest superficiality. That suggestion would be wholly unwarranted. The book is enormously concentrated. It could have been longer, for every topic discussed would benefit from expansion. But it is lucid and profound.

Marx began his political life as a philosopher of “young Hegelian” provenance and a radical democrat. He affirmed the rights of man, fought as a journalist against the feudal decay contaminating all German life, and believed following Hegel, that “the State” was the embodiment of freedom and reason. But the confrontation of the real, empirical German state with this idea of “the State” led Marx to reject Hegel’s idealistic abstraction. In reality, he discovered, the state is an instrument of violence wielded on behalf of the special interests of private property.

Marx found that the alienation from which men suffer, the “mutilation of their human essence,” is, in the modern world, a consequence of the real conditions of life under the state.

He was then led to investigate the society in which that state, devoted to the special interests of private property, was rooted. Here he uncovered the secret of alienation. Following some clues of Hegel’s – the concepts that labor is the first form of human activity and that the relation between master and servant, in which the servant labors so that the master may enjoy, is the fundamental social relation – Marx discovered the essence of human alienation in alienated labor.

The task then became to study the specific social relations that produce and perpetuate the alienation of labor. Here he found private property, the social division of labor, and commodity production. But these were just the categories that were uncritically presupposed, taken as natural and eternal, by the bourgeois political economy up to Marx’s time. The critique of society thus became for Marx the critique of political economy. The evolution of Marx’s methods and conclusions can be illustrated by following his treatment of one of the thorniest theoretical problems of classical political economy – the crucial and much misunderstood theory of wages. Marx’s point of departure was Ricardo’s theory of wages, which had been developed largely under the influence of Malthus.

The crucial element in Ricardo’s view was the relation between the supply and demand for labor, as determined by propulation growth.

In the 1843 Sketch of a Critique of National Economy, Engels had violently criticized Malthus’ population theory, with its assumption that population inevitably tends to outrun agricultural production. Engels insisted that the application of science to agriculture could lead to such a long-term increase of agricultural productivity that there was no natural reason for population to press hard on the means of subsistence. But this criticism also undermined the Ricardian wage theory. For given increasing productivity in agriculture, it is perfectly possible for money wages to decline in response to an increase in the supply of labor with no decline in real wages.

Nevertheless, at that point Engels accepted what was essentially the Malthus-Ricardo conclusion. “Labor receives only what is strictly necessary, the bare means of subsistence.” But he derived this conclusion not from any supposed law of nature pertaining to population growth and agricultural productivity, but from social and economic considerations. In the first place, Engels argued that, in competition with the capitalists, workers are inevitably the weaker party, and capitalists are consequently -always in a better position to lower wages than workers are to raise them. Secondly, Engels suggested that workers can be replaced by machines.

This suggestion became the central feature of Marx’s early wage theory, and remained an important constituent of the theory’s further development. In the Economic-Philosophical Manuscripts Marx wrote: “Since man has fallen to the level of a machine, the machine faces him as a competitor.” The progressive replacement of living labor by dead labor must inevitably depress real wages to the physiological subsistence level. This conclusion was now derived from the law of capital accumulation, as was the law governing the short-term movement of wages. For in the Manuscripts Marx recognized that wage changes are tied to the business cycle. During the boom, the demand for labor increases and wages tend to rise. At the same time though, the centralization and concentration of capital has also quickened with the result that there is an ever larger number of formerly independent producers entering the ranks of the proletariat.

Furthermore, the capitalists are busily replacing men by machines. These contradictory tendencies, the one favorable to the workers, the other unfavorable, momentarily balance at the outer limit of the expansion and wages are briefly stationary. Then, with the inevitable collapse, accumulation slows down or ceases altogether, the demand for labor drastically declines, and wages fall.

In his 1847 notebook on Wages, which reflects his thinking at the time of Wage-Labor and Capital, the Poverty of Philosophy, and the Communist Manifesto, Marx indicated his agreement with the bourgeois economists that trade union organization could do nothing to improve the condition of the working class because such class action would only stimulate the further development of the division of labor, the replacement of men by newly invented machines and the shift of capital from one sector of the economy to another. He held trade unions to be vitally important to the working class but saw them solely as organizations within which the class could gain the experience and coherence necessary to overthrow the old society.

Marx believed that the long-run tendency of wages is downward. In the Poverty of Philosophy, he stressed the substitution of cheap, inferior goods for better, more expensive ones in the workers’ consumption. Bread gives way to potatoes, and linen to cotton. In Wages and Wage-Labor and Capital, Marx insisted that while the prevailing minimum wage in different countries varies, the tendency is toward equality at the lowest level. When wages fall after having risen somewhat during the boom, they never again recover their old level.

During this period, Marx also recognized a tendency toward relative impoverishment, which became a central tenet of his theory. The first vague formulation is found in the Economic-Philosophical Manuscripts. Even during the boom, Marx wrote, “for the capitalist, the rise in wages is more than compensated for by the reduction of the quantity of the time of labor.” “Time of labor” in this obscure passage no doubt refers to the time of necessary labor, that is, the time required for the worker to produce the value equal to the value of his consumption goods, which he receives in wages. The worker receives a smaller proportion than formerly of the value he produces.

As Marx will later express it, the relative wage has fallen, or the rate of surplus value has risen. This relative impoverishment results from the productivity increases brought about by the introduction of improved machinery during the boom periods. It thus arises from the very nature of capital accumulation.

In Wages Marx summarized the theory as it stood around 1848:

“In the course of development, the workers’ wage falls in a double sense. First, in a relative sense, in relation to the development of the general wealth. Secondly, in an absolute sense, in the sense that the quantity of commodities which the worker receives in exchange is progressively reduced.”

It is difficult to say precisely when and why Marx revised this conception. Mandel suggests that the careful studies Marx made of the business cycle and of British trade union activity during the 1850s were of great importance in this advance.

In any case, the decisive step had been taken by the time Marx drafted the Outlines of the Critique of Political Economy of 1857-1858. Here there is the clear recognition that subsistence is not exclusively, or even primarily, a physiological category, but a historical one. Marx had carried a step further the process of liberating the understanding of social phenomena from the illusion that the laws under which society moves are fixed and natural rather than dynamic and historical. In the Outlines, Marx devoted much space to the discussion of the expansion of needs which capitalism brings with it. Specifically, he related the expansion of workers’ needs, and the possibility of their satisfaction, to the course of the accumulation of capital.

In the midst of a polemic against those bourgeois ideologues who preached to the workers the virtues of saving, Marx wrote that what “distinguishes the wage worker from the slave is economically only possible insofar as he expands the sphere of his satisfactions during periods of prosperity”; insofar as he “participates in the higher, even intellectual enjoyments, takes part in agitation in his own interests, subscribes to newspapers, hears lectures, educates his children, develops his taste, etc.”

In another passage, devoted to capitalism’s historic function of developing universal needs and possibilities of satisfaction, Marx wrote that “capital drives labor beyond the limits of its natural needs and creates thereby the material elements for the development of the rich individuality, which is many-sided both in production and consumption.”

Furthermore, Marx pointed to a contradiction within the capitalist class. Since every worker is also a consumer, every capitalist, in order to realize the value of his commodities, is interested in stimulating the consumption of all workers except his own. The result is a strengthening of the tendency to create new needs.

In the Outlines, Marx achieved a more dialectical view of the effects of capital accumulation on wagesthanhe had previously had. Mandel writes:

“On the one hand, the accumulation of capital, the replacement of living labor by machines, the increase in the productivity of labor – these tend to decrease the money wage, for the same quantity of means of subsistence or of commodities in general is now produced in a shorter period of time. They may even tend to decrease the real wage, under the pressure of growing unemployment. But on the other hand, the accumulation of capital implies the creation of new branches of industry, and thus the creation of new jobs, and at the same time the creation of new needs and the spreading of these needs to ever larger sections of the population. In this way, it tends to raise the price of labor-power, when unemployment is reduced. The real movement of wages is then no longer determined by simple, mechanical laws, but depends on the dialectical interaction of this double effect of the accumulation of capital on the value of labor-power.”

This dialectical conception of the effect of accumulation on wages and the insight that the needs and hence the subsistence level of workers are social and historical in character, became a foundation of Marx’s mature theory of wages. It is first systematically developed in Value, Price and Profit, written in 1865. Here Marx explicitly stated:

“The value of labor-power is formed by two elements, the one merely physical, the other historical or social. Its ultimate limit is determined by the physical element ... Besides this mere physical element, the value of labor is in every country determined by a traditional standard of life. Itis not mere physical life, but is the satisfaction of certain wants springing from the social conditions in which people are placed and reared up ...”

There is a historically determined lower limit on wages. But because it is historically determined, it is not aboslutely rigid. Its level can (and evidently has, in the advanced capitalist countries) rise in time. And it can also, as Marx is careful to point out, fall in time. But, at least in the short term, the floor is an area of extreme resistance to further wage reductions.

The upper limit on wages, however, is determined only by the point at which capitalists would stop hiring workers, the point at which the encroachment of wages on profits would become too great to maintain profitable production. Between these two limits, the actual level of wages is determined by the state of the class struggle, the resultant of the relationship of forces existing between the antagonists.

This conception of short-term wage determination was associated with a modification of Marx’s view of the function of trade unions. He no longer regarded them solely as organizations preparatory to revolution; rather, he now saw them as possessing a vital role in determining the real wage. More, it is through their struggles that the historically achieved subsistence level is defended. For in their absence, Marx writes, the working class would be “degraded to nothing but an oppressed and unformed mass of starving beings.”

But the relationship of forces of the antagonists does not depend only on the degree of consciousness and organization they possess. Objective economic factors also immediately determine the “respective power of the antagonists.” Chief among these is the movement of supply and demand for labor-power, and this in turn depends primarily on the rate and circumstances of accumulation.

Marx wrote in Theories of Surplus Value: “The general tendency of capitalist production is not to raise the average wage but to lower it.” However, as Mandel argues, this ought to be interpreted in the relative, not absolute, sense. There is a general tendency for the value of labor-power to decline, but not necessarily for the real wage to fall. For, as Marx points out, under conditions of rising productivity, it is perfectly possible for the value of labor-power to decline, while the buying power of the wage and hence the real wage remains unchanged.

By vigorous class action, the workers can prevent a long-term deterioration of real wages. During extended periods of uninterrupted accumulation, during long booms, when the industrial reserve army is contracting or at least stationary, they can win increases in real wages; they can benefit to some extentfromthe heightened productivity of their labor. And wage increases so gained may enter the determination of the subsitence level by raising the needs, expectations and habitual standard of life of the working class. These wage increases thus tend to offset the constant devaluation of labor-power that is inherent in rising productivity.

What the organized working class cannot do in the long term is raise relative wages. The social condition of the working class constantly deteriorates. A process of relative impoverishment is inherent in long-term capitalist development. In Capital Marx wrote: “The situation of the worker becomes worse, whatever his wage may be, be it high or low.” And Mandel writes:

“Marx never expounded in the works of his maturity any kind of ‘law’ of the absolute impoverishment of the workers, although he regarded their relative impoverishment as inevitable.”

Mandel’s book is devoted to the clarification of theoretical issues by tracing the development of a powerful method of elucidating them. There is nothing academic about this work; the textual interpretations invariably serve to deepen our insight into the predicament of the contemporary world. Everywhere Ernest Mandel’s theoretical analysis terminates in the consideration of questions of immediate practical importance to the labor and socialist movements: the revolutionary potential of the workers in the advanced capitalist countries; the struggle against bureaucratic deformation of workers states; centralized planning versus market determination in the transitional economy. Like the theoretical works of Karl Marx himself, this is a totally political book.


1. La Formation de la pensée économique de Karl Marx: de 1843 jusqu’a la rédaction du Capital by Ernest Mandel. François Maspero, 1967.

Top of page

ISR Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

Last updated on 23 June 2009