Introduction to Political Economy:

Wage-Labor and Capital

September 22, 2008

In order to assist workers and political activists to look into the question, "What is the way out of the economic crisis?" we are printing a series of articles on political economy written by Michael Thorburn. We are printing these articles with the aim to 1) give people a concrete picture of some of the contemporary features of capitalism, 2) provide an analysis of the underlying laws of motion of capitalism, and 3) initiate discussion on some of the lessons from the historical and contemporary struggles of the workers against exploitation and the capitalist system. We invite our readers to contribute to this discussion.

Wage-Labor and Capital

For several years now, the program and propaganda of the ruling class in the U.S. has been directed towards "unfettering the free market system" and "increasing the international competitiveness of U.S. capitalism." The capitalists and their spokespersons claim that the so-called "free market system" is not only the "natural order" of things but also the way to generate the maximum wealth, provide individual opportunity and guarantee individual freedom.

Underlying this entire propaganda is the oldest fairy-tale of capitalism - that capital is the source and creator of society's wealth and that the accumulation of capital in the hands of a few is a result of the hard work and creativity of the individual owners of capital.

On the basis of this fairy-tale, the capitalists naturally insist that the way to increase prosperity and the production of new wealth is to remove any restraints on capital so as to increase its rate of accumulation and self-expansion.

But what is "capital?" If "capital" is looked upon either as a hoard of money or an accumulation of means of production (tools) and raw materials, it can never produce any new value. Dollar bills do not give birth to new dollar bills and even the largest factory in the world will not yield any new products whatsoever if it stands idle and is not set in motion by the labor of the workers. Thus is can be seen that the only thing which creates new values and wealth is the labor of the workers. Throughout history it has always been the muscles and minds, the sweat and creativity of the laboring masses, which has produced all the material blessings.

When the capitalist economists and politicians attempt to attribute some mystical, generative power to capital, they are trying to hide the fact that under the capitalist system, capital is not simply a hoard of money or an accumulation of tools but precisely a social relationship. Under capitalism, the means of production - generally including not only the factories and other tools but also the land and natural resources of the country - are monopolized by the owners of private property. The other side of this coin is the fact that the vast majority of the population - the laboring classes - are deprived of any property in the means of production and therefore are forced to sell themselves day in and day out to the capitalists. It is this social relationship which allows the capitalists to expropriate the product of the labor of others. It is this social relationship which creates the appearance that the capitalist is the agent of social production and that the increasing wealth of society is a function of the increase of capital.

In reality, then, the so-called "free market" is nothing more than a modern-day slave market. The worker comes to this market indeed "free" of any means of securing a livelihood. The "freedom" that the worker has is to try to find a capitalist who will exploit him/her; at best the worker can choose whether to be exploited by GM or Ford. True, unlike the slave system in which the master owned the slave outright, there is no legal compulsion to work for the capitalists. But economic necessity always confronts the worker with the question of going to work for the capitalists or starving. Thus, day in and day out, the worker has no choice but to sell his/her ability to work to the capitalists.

Not only is the worker forced to work for the capitalists but in the "bargaining" over wages, the capitalist has all the advantages. Everyday experience shows that when a worker is "lucky" enough to find a job, the capitalist tells him/her bluntly what the pay will be, adding "you may take it or leave it." The capitalist has millions and billions of dollars hoarded away and is not worried about paying the rent. Furthermore, the permanent and ever-growing army of unemployed workers allows the capitalist to remind anyone who balks at her/his wages or working conditions: "There are plenty more workers to choose from.." The worker, on the other hand, needs the job in order to put food on the table, to keep a roof over his/her head and clothe the family. The worker cannot afford to "hold out" for too long but must take what the capitalist "offers." Thus, the price paid by the capitalist for the worker's labor-power always remains at or near subsistence - the cost necessary for the worker to stay alive and appear again and again in the "free market" to sell her/his labor to the capitalists. Although sometimes the wage may be slightly higher or slightly lower, one thing remains certain: the workers always produces a great deal more during a day's labor than he/she receives in wages. The remainder, the surplus, accrues to the capitalist as profit.

Capitalism, characterized by private ownership of the means of production, means the forcible economic disenfranchisement of the laboring masses who are reduced to the status of wage slaves. The reality is that the individual owners of capital have not gained their vast wealth through their own "hard work" but precisely because their monopoly over the means of production enables them to exploit the labor of the workers. Thus under capitalism the highly advertised "freedom of the individual" and "individual opportunity" means nothing more than "opportunity and freedom" for the few - for the owners of capital. And the wealth, opportunity and freedom of the capitalists is based on the exploitation, poverty, oppression and denial of freedom for the vast majority of the people.