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Fourth International, March 1949

C. Curtis

A Century After the Communist Manifesto (II)

100 Years of Work and Wages

From Fourth International, Vol.10 No.3, March 1949, pp.81-84.
Transcription & mark-up by Einde O’Callaghan for ETOL.

Making a virtue of bitter necessity, American capitalism presents itself as the champion of the American workers’ living standards, relatively the highest in the world. The capitalist class carefully ignores all facts that give the lie to their hypocritical claims, such as, their ruthless opposition to every advance in wages and hours gained by the workers and the resulting strike struggles that fill every page of American industrial history. Above all, they ignore the historical conditions that created the American “standard of living.”

We shall now treat with the wages of the American workers, both absolutely and as a function of increased productivity. Bearing in mind the approximate character of all such estimates, particularly as regards the earlier decades, let us review the nearly 100 years from the time of the writing of the Communist Manifesto. It is first necessary to define productivity, real wages and relative wages, since we shall work with these concepts.

Productivity is the ability to produce a given article in a set time. For example, if one hour is required to produce a commodity at one period and one-half hour at a later stage, then productivity will have risen in this interval by 100 percent, or doubled. Although productivity in certain commodities may change from year to year owing to weather and other natural variations, productivity, taken by and large, tends to rise with improved technology.

Real wages is the ratio between money wages and the price of commodities the worker buys. To illustrate, if money wages increase by 10 percent while prices rise by 20 percent, real wages will have declined by 9.1 percent. On the other hand, if monetary wages remain constant but prices drop 10 percent, real wages will have increased by 9.9 percent.

Moreover, since the unemployed must be supported by those who are employed (leaving aside small amounts of relief), adjustment must be made in considering real wages to Include this factor as well. For example, if out of a group of families with 100 workers, 75 receive $50 a week each, or a total of $3,750 a week, while 25 others remain unemployed, then the real wage per worker is on the average not $50 but only $37.50 ($3,750 divided by 100). In the text below our reference to wages always means real wages, adjusted to the conditions we have specified above.

Relative wages, as used here, is the proportion between changes in wages and changes in productivity. For example, were productivity to rise by 20 percent, while real wages go up only 10 percent, then relative wages would decline by 9.1 percent to an index of 90.9; on the other hand, were productivity to remain constant but wages to rise 10 percent, relative wages would be increased by 9.9 percent to 109.9.
 

Productivity in the United States

The productivity of American workers and their mechanical aptitudes are not inborn biological attributes. A premium has been placed on these characteristics by class relationships in this country and the historical conditions under which the class struggle has unfolded here.

The prevalent theory of capitalist economics is that of “marginal productivity,” according to which a rise in wages can come only as a consequence of a rise in the workers’ “marginal” productivity. Suffice it for the moment to point out that these economists stand the matter on its head. The high productivity of American labor is historically the product and not the cause of high wages. Given the inexorable condition of relatively high wages, as has been the case in this country from the outset, profits could be maintained only on the basis of the most advanced industrial techniques. An environment favoring technology and invention was created.

A dominant factor in the development of the US up to the close of the Nineteenth Century was the open frontier with its lands available for hornesteading. Under these circumstances the capitalist had to compete with homesteading to secure wage earners.

In 1865 Marx wrote,

“In colonial countries (at the time Marx wrote, the US was included in this category), the law of supply and demand favors the working man. Hence the relatively high standard of wages in the United States. Capital may there try its utmost. It cannot prevent the labor market from being continuously emptied by the continuous conversions of wage laborers into independent, self-sustaining peasants.”

It was this social environment that made American productivity the highest in the world.

From the book, America’s Needs and Resources, published by the Twentieth Century Fund, we derive the following table as to the growth of productivity on a national scale.

This means that in the course of 98 years American productivity has increased at least four and a half times, and still going up. Let us now trace the course of wages.
 

A Ludicrous Charge

Among the accusations leveled against the founders of scientific socialism is the canard that they held the theory of the “iron law of wages,” which denies the possibility of raising real wages. This charge is ludicrous. Marx and Engels introduced historical concepts into political economy; they defended and advanced unionism as an effective means of safeguarding and improving workers’ living standards. What they avoided was the fetishism of unions.

Wage standards are not determined by physiological needs alone – so and so many calories, so much rest, shelter and so on, but by “historical and moral elements” as well. Working-class “conditions of existence” are not fixed but relative. Standards of what constitutes a living wage develop with the industrial and social progress of a country and are modified by the course of the class struggle. Comforts of one period can become necessities of another as the result of successful struggles; just the opposite may take place when the workers are defeated. Gains and losses become an integral part of the workers’ wage standards with the passage of time.

Workers’ wages have real limits, however. The most rigid limit is the prior and superior right to profits. Wages may rise with increasing productivity, but only so long as profits remain secure.

Data relating to real wages are by no means readily accessible. Our first table is derived from Alvin H. Hansen’s Factors Affecting the Trend of Real Wages, American Economic Review, March 1925. It covers the years from 1850 to 1890.

The next table for the period from 1890 to 1939 is based on Stanley J. Lebergott’s Earning of Non-Farm Employees, Journal of American Statistical Society, March 1948.

Lebergott continues his series up to 1946. But his figures from the years since 1940 are useless and misleading. He makes no allowances for the distorted character of the Labor Bureau’s Cost of Living Index, which understates the increase in the cost of living. As the BLS itself points out, its index failed to show “the full wartime effect of such factors as lowered quality and the disappearance of low-priced goods ... If account is also taken of continued deterioration of quality and disappearance of low-priced merchandise ... the over-all adjustment for the period January 1941 to September 1945 would total approximately 5 points.” (Statistical Abstract, 1946)

Nor does Lebergott take into account increased taxes on wages, which are likewise disregarded by the BLS indices. Yet withholding taxes in 1943-48 took about 8 percent of the workers’ income. For the years from 1940 it was therefore necessary to make an independent estimate. These estimates are naturally rough, especially those for 1947 and 1948. The figures listed in the table below try to take into account additions to workers’ income in this period, such as mustering out payments, GI benefits, pensions, etc., which are not properly wages. The corresponding data for these years have been taken from the Commerce Department’s Survey of Current Business for July 1947 and July 1948 (National Income Supplement). Total wages and salaries, plus other income, minus taxes, were divided by the total number of wage and salary earners. This average was then adjusted for the corrected Cost of Living Index. The figures thus obtained for the years 1941-48 were “spliced” on to Lebergott’s figure for 1940. I make no pretensions to minute accuracy, but the estimates thus made, in my opinion, do mirror the general trend.

From this assembled material on productivity and wages, we are now in a position to correlate the figures along with a computation of the corresponding relative wages. This is done in the table below. For the sake of mathematical consistency all figures have been recalculated so that the average of 1850-59 in all cases equals 100.

A study of this table shows wages up to 1890 increased at a greater pace than productivity. A graph, corresponding to the figures, would show two curves diverging like the blades of scissors, with the upper blade representing wages. Since that period, however, there has been a reversal. The disadvantageous position of the worker resulting from the closing of the frontier, along with the growth and dominance of large-scale capital have produced just the opposite scissor-like effect, with productivity, instead of wages, becoming the top blade, and rising much more steeply than wages. The two blades of the “scissors” draw farther and farther apart. What is more, at two points (1930-39 and 1946-48), there is a tendency of the bottom blade (wages) to sag, that is, wages even decrease in relation to previous standards.

The question naturally arises: What happens to the products resulting from the increased productivity? Where do they go? They go for the upkeep of the capitalist class. For example, corporation profits, after taxes, have taken the following course (source: National Income Supplement, 1947 and 1948):

Separate and apart from profits, the fruits of productivity go to pay for war preparations, for actual and past wars. And finally, much of it remains unused. Productive potential is one thing, the continued utilization of productive power is something else again. Capitalism stands as an insurmountable barrier to the full utilization of the productive forces, as its business cycles have shown time and again. Much of the productive power remains paralyzed for a long number of years. Relations of production (capitalism) are in conflict with the forces of production.

One of the basic causes for crises is to be found in the “scissors” expressed by the foregoing table. Wages, or the value of labor power, remains relatively fixed, while productive power is constantly improved. Surpluses inevitably result, piling up and periodically manifesting themselves in “over-production.” The growth of productive forces carries with it the threat of ever more frequent and ever longer depressions. Productive power, under capitalism, thus becomes a menace. How different from socialism, under which, society, freed from capitalist relations, will gear production to use and will welcome each new addition to man’s knowledge!

With regard to relative wages, i.e., wages related to productivity, the lot of the workers has deteriorated since 1890. Workers’ wages sink in relation to productive power. In this sense, the Communist Manifesto has certainly proved its validity in this country.

Moreover, wage averages by themselves can be very deceptive, hiding much more than they reveal. They give no picture of the internal stratification of the working class: between skilled, semi-skilled and unskilled; between the organized and the unorganized; men and women; whites and Negroes; white collar and production workers.

Let us try to peer behind the averages.

In 1905, the country was startled by a book called Poverty written by Robert A. Hunter. He estimated that between 14 and 20 percent were continually living in poverty, in conditions “denoted by inability to obtain those necessaries of life which will permit them to maintain a state of physical efficiency.” So disconcerting were Hunter’s facts, that they were discounted and a figure of 10 percent of the population in poverty was generally agreed upon. The “submerged tenth” became a catchword.
 

“One-Third of a Nation”

Thirty years passed. When the depression was in its seventh year, a study was undertaken by the National Resources Committee at the behest of President Roosevelt. It was found that in 1935-36, when the worst effects of the depression were already in the past, one-third of the nation still remained ill-fed, ill-housed and ill-clothed. This one-third was receiving less than $780 per year.

It would be instructive to learn: What percentage of the people today still are “ill-fed, ill-housed and ill-clothed”? In terms of 1947 prices, $780 of the 1935-36 period amount to approximately $1,306. What percentage is receiving less than this amount?

According to the Federal Reserve Bulletin, June 1948, income received in 1947 by the lowest 20 percent of the nation’s spending units was below $1,200. So here we have a partial answer. Amidst unparalleled prosperity not less than 20 percent of the people live in conditions of poverty. When Hunter made his estimate of 14 to 20 percent the figure of 20 percent was calculated by him for “bad” times. After a lapse of 40-odd years, this same 20 percent is characteristic of “good” times. What will happen when times are not so “good”? How far above the figure of 20 percent will the poverty-stricken then rise?

One hundred years after the Manifesto, the polarization of society into poverty at one extreme and great wealth at the other has not decreased but increased. Along with the “concentration of property” there has been a concentration and polarization of income. A picture of the extent of this polarization was given in 1929 by the Brookings Institute.

Here is what we find stated in America’s Capacity to Consume which the Institute issued at the time.

“The 11,653,000 [families] with an income of less than $1,500 received a total of about 10 billion dollars. At the other extreme the 36,000 families having incomes in excess of $75,000 possessed an aggregate income of 9.8 billion dollars. Thus it appears that 0.1 percent of the families at the top received practically as much as 42 percent of the families at the bottom of the scale.”

This concentration of income has been modified but not reversed in the course of the war and postwar boom. The trend remains the same. This is demonstrated to the hilt by the statistical tables compiled by the Economic Almanac of National Industrial Conference for the years up to 1937 and by the Federal Reserve Board for later years.

Thus, since 1910 the upper 10 percent of this country’s population has consistently received about one-third of the national income. The Federal Reserve figures for 1946 and 1947 read 32 and 33 percent respectively (as against the peak figure of 39 percent for 1929).

Meanwhile, the lowest 20 percent of the population received in these same years less than one-half of the share of the national income they received in 1910 and continue to live in conditions of pauperism and semi-pauperism.

In the same 37-year period, the share of national income accruing to the lowest 70 percent of income recipients declined from 43.6 percent to 40 percent.

If the distribution of the national income is a correct guide, and it is, the rich have indeed grown richer and the poor poorer.

At the beginning of this article we asked: Is America immune from the general laws of capitalism, or at least their worst aspects? To what extent does the Communist Manifesto apply to the United States? We are now in a position to sum up our reply.

In the light of factual evidence, the basic laws of capitalist development, as the Communist Manifesto states they affect the workers, have proved valid for the US. This has been shown by:

• The growing proportion of women in industry.
   
• The tendency to diminish skill as a requisite for industrial employment and the tendency to create a typical proletarian in the “semi-skilled” machine tender.
   
• The brutalizing effects of capitalist industrialism on the workers.
   
• The speed-up.
   
• The permanent pauperization of ever-growing sections of the population, especially the aged, even in prosperity.
   
• The steady growth of a permanent semi-pauperized layer of the population; of a. steadily increasing layer of workers unable to maintain themselves at adequate levels even in prosperity.
   
• The growth of mass degradation, manifested by the increase of mental disorders and crime, especially during depressions.
   
• The increasing frequency, intensity and duration of depressions.
   
• The rapid increase of mass pauperization during each successive depression.
   
• The length and intensity of the 1929-41 depression.
   
• The fact that “normal” recovery did not take place, but prosperity resulted only through the medium of war.
   
• The constantly declining wage in relation to productive power.
   
• The tendency of national income to become concentrated in a thin layer at the top.

* * *

The authors of the Communist Manifesto did not foresee the series of imperialist world wars, their havoc and misery. They were, however, predicted by Lenin and Trotsky, who based their teachings on the teachings of Marx and Engels. These wars only render more emphatic the prognosis of Marx and Engels regarding the fate of the workers under capitalism.

By accelerating the decline of nearly the rest of the capitalist world, the war has imparted a feverish boom to the US. Among the primary factors that have fed this boom has been the virtual elimination of European and Asiatic competition on the world markets, while Western Europe and industrialized Asia have fallen into the position of semi-colonies and subjects of the US.

Thanks to the war boom, the American workers have been able to record gains in wages, today the highest in this country’s history. However, this has been accomplished only at the expense of the blackest misery for the workers throughout the rest of this world. On a world scale the sum total of misery has monstrously increased; the results of the war have acted thus far to distribute it to the advantage of the US and the double disadvantage of Europe and Asia.

This boom, achieved against the background of world, ruin, is tremulous and artificial in character. This is revealed in such facts as the growth of productivity amid a decline in relative wages. Real wages have likewise declined since 1945. This is a noteworthy development. All previous booms witnessed steady increases in relative wages up to the crash; today we have a deterioration of workers’ wage standards in the full flush of the boom.

War and depressions alike mean increased suffering for the masses. American development cannot escape the influence of either – or both.

The United States is no exception to the laws of capitalist development revealed with such clarity by Marx and Engels.

 
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