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The Militant, 3 August 1946

Warren Creel

Wages, Prices and Profits

The Working Class Method in Economics

From The Militant, Vol. X No. 31, 3 August 1946, p. 6.
Transcribed & marked up by Einde O’Callaghan for ETOL.


We have looked at facts which shows that the workers are producing more goods but they are not getting more wages. Between the two world wars production per worker doubled but real wages did not go up.

During World War II productivity kept on growing. The U.S. Department of Commerce reports that American industry has gained in efficiency since 1940 so that today it is able to produce the same amount of goods as in 1940 with eight million fewer workers. They say that adding those eight million to the unemployed it had then would make a total of 19 million unemployed at the 1940 level of output (Markets After the War, page 3).

The margin between labor’s output and labor’s wages keeps on increasing.

The difference between what the worker produces and what the worker gets is called “surplus value” in Marxist economics, which is the economic science of the world working class movement. Marxist economics uses methods which are different from ordinary capitalist economics, such as we read in the newspapers.

The economic theories of the capitalist class stem from the mental habits of the capitalists, and the middle class followers of the capitalists. It comes natural to them to think about the things they deal with. That is, they think first in terms of money and prices, and interest rates and profit margins and sales, etc. So they try to build their economic theories around these problems.

Workers are producers, so they tend toward different mental habits. They tend to think first in terms of production, in terms of the amount of useful goods available. They look to the supply of useful workers, and the total amount of useful work done. They regard economics as a problem of fitting together the various types of useful labor, so that the farmer, the miner, the weaver and all the rest can supply one another with the needed goods.

These two methods lead in entirely different directions. One leads to right answers and the other to wrong answers. Workers, who start by looking at production, start in the right place.

It is a fact that the controlling factor in economics is labor done and the amount of useful goods produced.

The problems of the capitalists (such as money and prices, profit margins and so on) are derivative matters, controlled by production. In truth, they are, in the final analysis, only flickering and distorted reflections of production. A method that starts with these reflections cannot interpret even the reflections themselves, let alone show where they really come from.

Thus, even to understand prices and profit margins, we must use the worker’s method. We must begin with the amount of useful labor done and the amount of useful goods produced.

Starting with productive labor is the method of Karl Marx. For any item produced, or for any quantity of production, Marxian economics begins by estimating the amount of useful productive labor that it represents. The given article’s rating in human labor is called its “value,” or “labor value.” The money price, which is a derivative factor, is called “exchange-value.”

A capitalist economist sees all the goods of the world with price-tags on them, representing money-prices, or exchange-values. That is enough for him, and he looks for no more. A Marxist, on the other hand, sees all the goods of the world with value-tags on them, standing for the amounts of useful human labor they represent. The Marxist sees money-prices or exchange-values also, but he understands that they are actually reflections of productive labor, generally distorted reflections.

The national production, we have been talking about in this series, is the output of all the productive labor. That’s the total value. We have seen that the employers pocket a part of this total, called surplus-value, and that their part is increasing.

Does the employer show on his books all of “his share” as profit? What does the employer do with his increasing amount of surplus value?

He can do three things with it:

  1. He can pay himself bigger open profits.
  2. He can pay himself bigger concealed profits.
  3. He can increase wasteful methods of competition.

All three operations are generally employed. Using Marx’s method, we intend to trace what happens to surplus-value in its course through the economic system. We will find that this supplies the answers we are seeking on wages and prices. The general lines of our discussion are, taken from two pamphlets: One is Marx’s Value, Price and Profit, dealing with wages and prices; the other is the programmatic pamphlet of the Fourth International, The Death Agony of Capitalism.

Next week: The Anarchy that Controls Capitalism

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