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The New International, January 1946


Editorial Comment

The Strike Wave

The Meaning of “Ability to Pay”
The Roots of Labor’s New Approach


From New International, Vol.12 No.1, January 1946, pp.3-5.
Transcribed & marked up by Einde O’Callaghan for ETOL.


January 1, 1946, ushered in a year that may prove to be the most momentous to date in the history of American labor. It was not solely the fact that the “battle of titans” – the United Automobile Workers versus General Motors Corporation – remained deadlocked at year’s end with little prospect for a speedy termination. Nor was it solely the fact that hundreds of other strikes dotted the country from coast to coast, some large, some small, some important, some of little consequence. Nor was it solely the fact that strikes loomed in such strategic nerve centers as telephone and telegraph systems. Nor was it solely the overwhelmingly important fact that strike dates had either been set or were in prospect for industries totaling several million workers, including such basic industries as steel, radio and electric, meat packing, rubber and others, and that the total contemporaneously on strike would add up to general strike proportions.

The combination of all of these factors would, to be sure, suffice to make of 1946 a most momentous year for labor. But this year will find its place in history, above all, because of the new level upon which the battle was joined. Regardless of the union or the industry involved, the issues at stake were nowhere merely a continuation of where the struggle had been left off in 1941.

The issues in the General Motors strike (December New International, UAW vs. GM) were not merely some clever ideas concocted by Walter Reuther. Aspects of Reuther’s line of argument were implicit to one degree or another in almost every one of the current struggles. It is therefore not the “deviltry” of Reuther, as the conservative press sees it, but the stubborn and obvious facts of labor’s situation today that weaves a logic of its own and forces it upon labor as the only line of argument with which to support its demands. Compared to the rest of the top labor leadership, Reuther is less bound by conservative traditions and is, therefore, more conscious of his role, more daring and skillful in presenting labor’s new arguments. But the arguments themselves are rooted in the objective situation and arise logically from it. If the arguments of labor today appear abnormal in the light of past trade union practice, it is only because the objective situation itself is abnormal and requires an abnormal solution. Abnormal situations have never yet been solved by normal measures.

Even Reuther is not aware of the complete implications of his demands, while the other leaders of the CIO (not to speak of the fossilized AFL officialdom) do not even begin to comprehend what is at stake. The revolutionary significance of the whole question of “ability to pay,” “fact-finding” and “opening the books” remains only as an implicit factor in their position while they explicitly deny that there is anything involved which unions have not always demanded. Their denial, including the honest indignation which usually accompanies it, is an evidence of their own blundering and confusion, born out of the clash between their own level of social consciousness and the pressing needs of the objective situation.

Industry Knows What Is at Stake

However, the same is not the case with industry. Both because of the greater degree of consciousness of their interests and because the whole issue is more plainly seen from capital’s side of the controversy, the spokesmen of Big Business are quite well aware of what is at stake. The intransigeance of General Motors in refusing to make profits and prices an issue of collective bargaining and their raising it to the high level of an inviolable principle is neither simply demogogy nor tactical maneuvering. When they proclaim in full page ads placed in practically every daily newspaper from coast to coast that the principle of wages based upon the “ability to pay” would eventually ruin the “free enterprise” system they argue from solid economic fact. It is the great pity of the situation that the working class is not equally aware of this and takes conscious steps to rid itself of this “free enterprise” system in which the capitalist is “free” to exploit labor for private profit while the worker is “free” to stay home and starve if he does not like it.

In its ad of December 30 General Motors declares:

General Motors has faced what it believes is a highly critical issue. It has made its decision. It is important that the public understand the issue. The issue at stake transcends the interests of General Motors. There is involved something far more consequential – a most vital principle.

America is at the crossroads! It must preserve the freedom of each unit of American business to determine its own destinies. Or it must transfer to some governmental bureaucracy or agency, or to a union, the responsibility of management that has been the very keystone of American business. Shall this responsibility be surrendered? That is the decision the American people face. America must choose!

The idea of ability to pay, whatever its validity may be, is not applicable to an individual business within an industry as a basis for raising its wages beyond the going rate.

Consider the implications of such a principle. Who would risk money to develop or expand, a business under such circumstances? Where would be the incentive to do a more efficient job? Would it be intelligent to destroy the incentive for efficiency? Would it not be more intelligent to subscribe to the principle that no one should be forced to pay more than the going rate? Should General Motors, assuming it is more efficient, be required to pay more for materials, for transportation, for services or for wages than its competition? And how much more determined by a political governmental agency?

Do you subscribe to the belief that you should pay for what you buy or the services you use on the basis of your financial resources? It is clear that this is the principle involved.

Labor’s Place Under Capitalism

Considering that it is a piece of special pleading written for propaganda, it still remains a fair description of the relations which govern capitalist production. Because implicit in what they say in the above is the secret of capitalist economy, i.e., the exploitation of labor to produce profits, interest and rents. By drawing out to its full implications the “holy” principle upon which General Motors takes its stand, we lay bare their real concept of the place of labor in the economy.

General Motors complains that if they are forced to pay wages on the basis of “ability to pay” they will also have to pay for materials on the same basis. This statement only makes sense on the basis of a Marxian understanding of capitalism and its economic laws. What General Motors is saving is what Karl Marx established a century ago, that under capitalism both materials and labor power are commodities which the capitalist purchases on the market at the market price.

“We must have the right to buy materials and labor power for as little as we can get it” is what the argument boils down to. “If we must raise wages because we have increased our profits, free enterprise (i.e., capitalism) is impossible,” is the conclusion which follows.

We agree with General Motors when they state that in the long run the principle of “ability to pay” is incompatible with the operation of capitalist production relations. This is precisely why Marxists must support labor’s fight to “open the books” and increase wages on the basis of “ability to pay.” We see in this struggle a transition from the economic relations of capitalism to the economic relations of socialism. The latter cannot, of course, be attained without a workers government and the nationalization of industry. But today the important transition which this struggle helps achieve is the transition in the thinking of the American working class from the acceptance of the status quo to new economic relations.

The American labor movement did not embark upon this struggle with any notions of undermining capitalism. Its understanding of its own role still lags far behind the implications inherent in the demands which it makes.

Reconversion and A “New Slate”

The present strike struggles take place against an economic pattern unlike that which prevailed in the past, either in time of economic upswing or in time of economic decline. The prime role of the trade unions, the constant struggle to defend the workers’ standard of living, was all but suspended for the period of the war by government controls and the iniquitous “no strike pledge.” The gap between rising prices and frozen wages was filled by the lengthened work week with overtime rates. With the return of the forty hour week the “take home” pay drops to almost peacetime levels. However, prices continue to rise. The worker insists that he must have an increase in hourly rates to safeguard his “standard of living.” But what standard of living? That of 1939? That of the war years? That possible today on the basis of his present earnings? The “standard of living” was not handed down at Mount Sinai nor written into the Constitution. It is a fluid thing. It is the result of the historical struggle of the working class upon a given economic level. What the government or the industrialists conceive of as labor’s standard of living, will hardly agree with what the workers themselves conceive of. The worker argues that he needs the same take-home pay now that he earned during the war on the basis of 46, 48, 50 or more hours per week. The capitalist class sees this as an outrageous demand. What has “standard of living” got to do with it, argues the employer, when he is supposed to pay 52 hours wages for 40 hours of work?

As a result of the war-time abnormality, the struggle between capital and labor in the reconversion period begins, so to speak, with a clean slate. It is not, as in the past, a matter of affecting the standard of living by pushing wages a few cents this way or that. It is actually a struggle to establish a norm, a standard of living. This means that traditional criteria cannot play the role they formerly did, above all not the criteria of the cost of living. It means re-establishing a new relationship between wages, prices and profits. As a result everything is raised anew. Old concepts that served the trade unions for decades and are written into its textbooks are discarded as inadequate. Labor is compelled to take a new approach, a broader social approach to its place in the economy. It is not that labor has never at one time or another in the past, gone into bargaining conferences to raise the question of profits, or the increased productivity of labor, or the prices the employer gets for his products, or the need to “open the books,” etc. But these were usually incidental to the main bone of contention, viz. sufficient wages to cover the cost of living. Today, labor is forced to rest its case upon the total economic situation.

Why the Broad Approach Is Needed

Without such an approach labor’s arsenal of arguments is quickly depleted and capital’s supplied with strong reserves. Were labor to confine itself to the traditional single strong point of the past, the cost of living, it would have little basis for demanding a 30 per cent increase. Not that the cost of living has not gone up that much compared with the increase in hourly wage rates. But this would be a meaningless argument because it rests upon the aim of re-establishing wage-price relationships of five years ago in the midst of a vastly changed economic situation. Capital simply states that it must operate its business at a profit in the year 1946. This it cannot do, it claims, if it must increase wages by 30 per cent; Or, as in the case of General Motors, it states that it considers it exorbitant even if it could afford it. In the present negotiations, it is capital which tries to utilize cost of living statistics to bolster its case that labor does not deserve a 30 per cent increase.

The broad social approach which labor is forced to take likewise affects the old class collaborationist concept that the interests of capital and labor are mutually beneficial ones. The National Association of Manufacturers has consistently argued against wage increases during the reconversion period from this basis. The NAM states that it is necessary for labor to wait until industry has reconverted and is producing at a profit before wage increases can be safely granted, since whatever is good for industry will rebound to the benefit of labor. Implicit in the position that the books should be opened and wages based upon ability to pay is the position that wages must be increased at the expense of profits and that, therefore, the interests of capital and labor are antagonistic.

The results of labor’s new approach to wages is to make fact finding increasingly emphasize the company’s books and decreasingly emphasize the Department of Labor’s cost of living index. In theory this means that labor shifts the basis of its argument from the value of labor power as a commodity to the social role of the proletariat in production.

The nature of the present struggles of American labor are unique in the international experiences of the working class movement. A working class so backward politically as to remain tied to the bourgeois parties is confronted on the economic field with fundamental problems that are born in the objective situation of a highly developed capitalist economy and which pose as the only “common sense” solution steps which involve a break with capitalist economic relations. This situation again permits us to appreciate the remarkable genius of Leon Trotsky, who in 1938 posed for the American Marxists this glaring contradiction between the advanced objective situation and the retarded subjective factor, the political backwardness of American labor, and outlined the program of transitional demands as the means of bridging the gap. Trotsky’s contribution remains the basis upon which advanced ideas of revolutionary Marxism can find contact with a politically backward working class which faces an objective situation which permits only of revolutionary solutions.

The very questions posed by the “ability to pay” approach require that labor find its answers in the transitional bridge to socialist solutions. In the first place in this connection is the question, “What if the books reveal that a wage increase is impossible?” Reuther has thus far tried to evade facing this question. Murray, in his negotiations with United States Steel, has avoided giving a forthright answer to the corporation’s claim that the wage increase is only possible after a rise in the price ceiling on steel products. We can rest assured that the workers will not be content with an auditor’s report that states that capital cannot pay what the workers consider a living wage. Labor’s answer must proceed along the lines of our transitional program and demand that the bankrupt owners of industry be relieved of their liability by government nationalization and relieved of the burden of management by workers control of production. Once this demand has been fixed in the minds of labor, the steps toward an independent labor party and the struggle for a workers government become inevitable.

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