The Crisis (Pt 4)

May Day strikes

On May 1, International Workers’ Day, a wave of worker and renter strikes swept the United States. Workers protested the dangerous conditions in which they are forced to work during the COVID-19 pandemic. Among the companies struck were Amazon, Walmart, FedEx, Target, Instacart, Shipt, and Whole Foods. The May Day strikes show the increasing influence the internationalist traditions of the world workers’ movement is having on the U.S. working class, especially among the lowest paid and most exploited workers. The current medical-biological-economic-employment crisis has only deepened this tendency.

Also, and this should be noted, the internationalist implications of the global May Day holiday stand in complete opposition to the traditional AFL-CIO union leaders, Bernie Sanders, and many progressives and newly minted “democratic socialists” going down the disastrous road of economic nationalism and China bashing. Trump and the other economic nationalists, both Democrats and Republicans, are trying to divert attention from the disastrous mishandling of the pandemic by the U.S. government — both federal and state — to China. More on this in the coming weeks.

‘Party of Order’ versus Sanders

As we saw last week, Bernie Sanders has for many years operated well within the limits of capitalist, or — to use traditional Marxist language — bourgeois, politics. He has done nothing to organize an independent workers’ party or an independent workers’ media, either print, radio-TV or Internet. Nor is he internationalist like the working-class leaders of the past, such as Sanders’ personal hero Eugene Debs. Rather, Sanders is an economic nationalist and an imperialist dove.

Why then is the Party of Order so hostile to Sanders? As its leaders know full well, capitalism has in many countries survived presidents and prime ministers far more radical than Bernie Sanders. No knowledgeable person believes that U.S. capitalism would be in danger of being abolished under a Sanders administration.

However, despite his overall pro-capitalist, pro-imperialist stands, Sanders has stubbornly defended health care as a basic human right and especially opposes the current employer-centered health care system. Sanders also advocates free college for those who can handle the academics and abolishing all student debt. As a result, while the leadership of the Democratic Party has made Sanders their captive, they still don’t consider him to be one of them. Why don’t they? The key to understanding the answer to this question is to be found in Marx’s theory of surplus value — his most important discovery in the field of economics.

What is Marx’s theory of surplus value and how does it differ from earlier theories of surplus value? The problem that stumped Marx’s forerunners, both classical economists and pre-Marxist Ricardian socialists, was how to reconcile the principle of the exchange of equal quantities of labor with the reality of profit, interest and rent (1) — which together Marx called surplus value.

Pre-Marxist socialists generally assumed that surplus value arose because of some form of cheating. Their key demand was to abolish what they saw as the unequal exchange between capital and labor, which they believed would abolish profit and rent and thus the capitalist and landlord classes. Related to this is how the capitalist class succeeds in forcing free-wage workers to work for them part of the time free of charge.

Surplus value

It appears that when workers agree to sell their labor to employers for a certain period, they are paid for the value of their labor. The more hours they clock in, the more they are paid. If the bosses don’t pay them the value of their labor, wage workers can, unlike chattel slaves or medieval serfs, quit and find bosses who will pay them more. This is indeed the appearance of things, and modern bourgeois economists armed with all the tools of higher mathematics take this appearance for reality.

But if the workers are paid the full value of their labor, where does the bosses’ profit come from? There is always the possibility of cheating, but assuming a free market prevails, won’t competition itself guarantee that at least on average the workers will receive the full value of their labor? This is exactly what happens on average with other commodities. Why is labor an exception?

The economists give various answers to these questions. Running a corporation or even a small business is a lot of work, they say. And to be fair it is. (2) But what about the stockholders who are the actual owners of all major corporations? Being a stockholder is not a hard job. Indeed, stockholders are not required to work at all, yet many are very rich indeed. They realize gigantic incomes through the payment of dividends and the appreciation of the value of their shares on the stock exchanges.

Where do the incomes come from that do not appear to be tied to any labor performed? The thrifty capitalists, the economists claim, do not consume all of their income at once but rather save a portion. Or as one of the 19th-century English economists — Nassau Senior — said, the capitalist “abstains” — that is, does nothing — 24 hours a day, every day of the year. Leaving aside the false arguments and answers given by economists in the pay of capital, where does the surplus value — profit, rent and their derivative incomes — actually originate?

Let’s take a closer look at what happens when you are hired for a job. You show up for work at the appointed time and agree to put your ability to work — your labor power — at the disposal of the employer or his representatives for a certain period. In reality, you don’t sell your labor to the boss but rather your ability to work, which Marx called labor power. The boss might assign you to do this or that task, or you might perform the same task every day. In any case, it is up to the boss or his representative such as the shop foreman to decide exactly what task you perform. But if you want to continue receiving a paycheck, whether it’s high or low, you must do what the boss tells you to do. If you do not, you lose your job and with it the associated wage.

In return for your labor power, the capitalist agrees to pay you a sum of money large enough for you to buy enough commodity use values to keep you alive and raise the next generation of workers who will eventually replace the workers of your generation. The point is, and anybody who has ever had a job will understand this, while the time clock is running, your “time” — your ability to work — belongs to the capitalist who bought it, and not to you at all.

Remember, “value” in this context is simply a shorthand term for the amount of labor, measured in some unit of time, that under the prevailing conditions of production is on average necessary to produce a given quantity of commodities of a given use value and quality. The labor you are required to perform as a worker must be greater than the value you receive — the quantity of labor represented by the value of the money you receive in the form of your wage, as well as the value of the commodities you purchase with the money that you receive as a wage in return for your sold labor power.

If your labor does not produce a value greater than the value of your sold labor power — surplus value — your labor power will have no use value for the boss and he will soon cease to purchase it. Therefore, even assuming the boss pays you the full value of your labor power in the form of your money wage, you must in addition to reproducing that value perform an additional quantity of labor for the boss, his family, the company stockholders, and other hangers-on free of charge.

This is capitalism’s dirty secret that economists who are merely the hired guns of capital seek to conceal. The greater the ratio of this unpaid labor to the part of your labor that is paid for, the greater is the rate of surplus value, defined as the ratio of unpaid to paid labor. The higher the rate of surplus value, the higher is the rate of profit, all other things remaining equal — and for the most part even when other things are not equal.

Exploitation versus super-exploitation

We sometimes hear of cases where workers are paid below the minimum wage or are not paid at all for periods of time. This is called “wage theft.” Even bourgeois politicians, and sometimes even some economists, denounce these cases as the “exploitation of labor.” Marx, however, defined the term “exploitation” differently. In cases of wage theft, the boss is failing to pay the full value of your labor power. When you are paid less than the value of your labor power, you are forced to choose between paying your house rent or your grocery bill or replacing your clothes that are wearing out.

If you are an “illegal immigrant” or have no union protection — the rule not the exception in the U.S. today — and the boss has stolen part of your wage, you will have great difficulty or it will be just plain impossible for you to make your house rent, buy adequate food for you and your family, replace your family’s clothes that are wearing out, and so on. You will be able to pay for some of these things but not all. This is what Marxists call super-exploitation.

But what about if you earn a good wage that covers the cost of all the necessities for you and your family? Are you exploited then? The economists will answer no. But Marx would say yes. You are still performing unpaid labor for the boss. This indeed is the essence of capitalist exploitation.

Average profit and profit maximizing

Each boss strives to make not just the average profit — that is, the minimum profit he can realize and in the long run stay in his current line of business — but also the highest rate of profit possible. The average rate of profit appears in the capitalist’s mind as the average rate made over all the lines of business he can enter as well as the average calculated over both good and bad years within a given industrial cycle. At any given time, however, the boss strives to maximize the rate of profit. Capitalist competition is therefore all about the search for a super-profit above and beyond the average rate of profit.

To maximize the rate of profit, capitalists must, therefore, aim to pay you as little as they can get away with. Every person who has ever worked for a wage knows this basic truth. This is not because the boss is “greedy,” as progressives think, but because the economic laws that govern the capitalist mode of production impose it on every individual capitalist through the medium of competition. But what determines the wage? Why doesn’t the wage simply fall to zero, which is what would happen if the boss got his way?

The value of labor power

We know that the value of the wage must be less than the value your labor produces in a given period of time. This establishes the upper limit of the wage. But how much less? This depends on the conditions in the labor market. The labor market is a special market where the sellers of labor power seek out the buyers of labor power. The buyers of labor power are the class of capitalists who have a monopoly on the means of production.

Where will the wage settle between the maximum level, where surplus value would disappear rendering labor power without any use value for the boss, and zero? Well, the wage can’t be zero because then workers would have no incentive to work and cannot live. To a large extent, where the wage settles between the point where surplus value vanishes and zero is determined by how desperate the sellers of labor power are for a job. If the sellers are in a position to withhold their labor power for a time if the offer from the first capitalist is too low, the workers have time to “shop around” to find a buyer who is willing to pay them a little more. The more the workers are in a position to “shop around” for a better wage offer, the more wages will tend to rise.

The extent to which workers are in a position to search for better job offers depends in part on the stage of the industrial cycle. During the boom, when the demand for labor power is strong, workers are in a much better position to demand a better wage. In contrast, during the recession/depression phase of the industrial cycle, the relationship of forces between the capitalists and the workers shifts in favor of the capitalists. As a result, wages will tend to fall.

But looking over a series of industrial cycles, the exact point where wages settle between the theoretical minimum approaching the mathematical limit of zero and the maximum where surplus value and profit disappear depends largely on the degree of workers’ organization, both in trade unions and politically. The stronger the unions and workers’ political parties, and the state of labor rights (3), the closer wages will rise toward the point where the rate of profit tends toward zero.

Globalization and the equalization of the value of labor power

Over long periods of time, a value of labor power is established in each nation that must include at the very least the basic biological necessities. Also, there is an additional value bosses have to pay due to the gains workers have won over centuries of class struggle. This extra moral element differs from country to country and over time. The more the global labor market becomes unified, the more the value of labor power will, like other commodity values, equalize. Though we are still a long way from a truly global value of labor power, the equalization of the value of labor power is indeed a growing trend.

No wonder there is so much opposition to globalization in the “old” capitalist countries of Europe and the United States, where the value of labor power is historically high compared to that of the great majority of workers in the world. Reactionary trade union leaders, “progressive” social-democratic politicians like Bernie Sanders, and insomuch as they lack revolutionary class consciousness or revolutionary perspectives, the mass of workers in old capitalist countries want to retreat into the shell of the nation-state that our modern productive forces have outgrown.

It is always in the interest of the capitalist class to make conditions on the labor market as tough as they can be for the sellers of labor power, the working class. The capitalists don’t like what they call “entitlements” such as those championed by Bernie Sanders — for example, the right to health care or the right to higher education. They don’t like unemployment insurance either, because it gives workers, at least for a while, the ability to turn down offers to purchase their labor power they perceive as too low. The capitalists don’t like welfare, especially if the benefit exceeds the level below which the unemployed part of the working class — the reserve army of unemployed — will literally start dying out.

The capitalists also dislike Social Security because it reduces the number of workers who are forced to offer their labor power on the labor market. Why should anybody, the capitalists believe, over a certain age — for example, 65 — be paid a sum of money, even if this money is simply deferred wages when they still have the strength to be pounding the streets in search of an employer willing to buy their labor power? Or if they can no longer work, the bosses incline toward the view — to use a term popular with the German fascists — that they are “useless eaters.” That is, from the bosses’ point of view, the worth of the “life” of a human being that belongs to the working class is measured only by their ability to produce surplus value.

Now, we can begin to understand why the Democratic Party leadership is so opposed to Bernie Sanders. The Democratic leaders, much like the Republican leaders and indeed Bernie Sanders as well, all support capitalism. However, the Democratic and Republican leaders also do all they can to increase the rate of profit on the capital owned by U.S. capitalists. Sanders, while he also supports capitalism and indeed U.S. imperialism, wants to improve the wages and social insurance of U.S. workers within the broader framework of U.S. monopoly capitalism (imperialism). This is what Sanders calls “democratic socialism.”

Sanders knows there must be a positive rate of profit, and he sides with U.S. capitalists in their struggle with foreign capitalists, particularly upstarts like the Chinese capitalists. However, he wants to see higher wages for U.S. workers even if this means a somewhat lower rate of profit for U.S. capitalists. This is the main difference separating Sanders from the Democratic (and Republican) leadership. It also explains Sanders’ popularity with the Democratic Party’s largely working-class base.

Health care as a human right versus health care as a commodity

Sanders and other progressives often claim that the Democratic and Republican Party leaderships oppose health care as a human right due to the influence of the private insurance companies. (4) Indeed, many, perhaps most of, the Democratic leaders are heavily dependent on the insurance companies to finance their election campaigns. However, if the opposition to health care as a human right were confined to a group of capitalists, the task of winning the Democratic Party to single-payer health care would come down to breaking the stranglehold of a specific group of capitalists over the current Democratic leadership. This, though it would require a sharp struggle, appears to be doable. This indeed is what Bernie Sanders’ politics comes down to.

But once we understand Marx’s theory of wage labor and surplus value, we realize that the problem isn’t only with the insurance capitalists. The problem is the entire capitalist class. Let’s assume that health care as a human right — some form of single-payer — is implemented as in other capitalist countries. If this were achieved, it would immediately improve the position on the labor market of the U.S. working class in relation to the capitalist class. For example, if a worker has a child with cancer that is fatal if left untreated, that worker will not be forced to sell her labor power to the first capitalist who offers to buy it because the child now has a right to medical care as a human right. Put another way, the boss can longer deny the child the medical care the child needs to survive.

It is in U.S. workers’ interests that the boss is stripped of the power he now enjoys to deny workers and their children the medical care they need even when it is a matter of life or death. And despite the enormous miseducation on this issue being carried out by the bosses’ media and politicians, workers in the U.S. are increasingly realizing it.

Here, Bernie Sanders has played a positive role, even though he doesn’t get to the root of why the bosses and their bought-and-paid-for politicians — the Democratic and Republican leaderships — oppose health care as a human right. Naturally, all the basic human instincts we inherited from the animal world favor health care as a human right. But the capitalists, and the politicians who serve them from Trump to Biden, are opposed.

The same is true with free college. Workers generally hope their children will have easier lives than they have had and will need a college education — increasingly required for many jobs. But if college isn’t free, workers with such hopes are often forced to work multiple jobs. And as soon as they reach the age of 16, the children who hope to get into state college must get at least part-time jobs as they pursue their studies.

What would happen if Sanders’ program of free college were realized? This would mean that public universities — not private colleges and universities — would be free for all those who demonstrate that they can handle the academics. This used to be largely the case in the U.S., but over the decades increasingly expensive tuition was added. It was added by politicians in the pay of capital, both Democrats and Republicans, precisely to force more people into the labor market to increase the rate of profit for the capitalists.

The same is true of college debt. College graduates are forced into the labor market to pay off their college debts thanks to Joseph Biden and other capitalist politicians. They can’t use the bankruptcy laws capitalists themselves routinely use to get out of debt. The more college graduates are transformed into debt slaves, the more they become wage slaves.

Again, Sanders’ program would strengthen the position of the wage earners against the owners of capital on the labor market. If his program were realized, it would encourage unionization and put downward pressure on the rate of surplus value and thus the rate of profit. For this reason, not only the Republicans but also the Democratic leadership currently represented by Joseph Biden are opposed to these Sanders-supported reforms.

The rise and decline of American capitalism

Capitalism rose to great heights in the U.S. for several reasons. First, the white European colonists were able to capture a huge area of North America without having to face the opposition of any rival capitalist nation-states. (5) This established a unified market over large areas of North America without tariff or other trade barriers.

As a result, except for the U.S. Civil War, more accurately described as the war of the slaveowners’ rebellion, the U.S. capitalists, unlike their European counterparts, didn’t have to squander huge amounts of capital on building up military forces to defend themselves against rival capitalist states. Also, protected by the Atlantic and Pacific Oceans, the U.S. was largely immune to the danger of military invasion from any rival nation-state.

Second, the U.S. is rich in agricultural lands of varied types. In the sub-tropical U.S. South, originally using African slave labor, the land was ideal for the cultivation of cotton, the chief raw material of the British textile industry. The northern U.S. was ideally situated to grow corn and wheat. The U.S. also had natural wealth in the form of coal and other fossil fuels and mineral wealth in the form of metal ores — gold, silver, copper, iron and other metals. As this great natural wealth became available for export, gold and silver flowed into the U.S. banking system causing the U.S. home market to expand rapidly.

The U.S. capitalists faced one problem that was typical of other “white” colonial countries like Australia and Canada as well. That was a shortage of wage labor. Rising U.S. capitalism solved this problem in two ways. One was the encouragement of European immigration. This not only provided the U.S. capitalists with labor power but also acted as an important social safety valve for the European capitalists.

However, despite the encouragement of European immigration, labor was still in short supply. As a result, conditions on the labor market were far more favorable for the workers than was the case in the European capitalist countries. Therefore, U.S. wages were relatively high from the beginning, leading to a higher value of labor power than was the case in Europe or anywhere else. As a result, U.S. capitalists bought expensive machines from the British machine-building industry, far more developed than that of the U.S., that were not profitable to use in Britain, and still less so in other European countries, due to the far lower British and European wages.

The result was that labor productivity grew much more rapidly in the U.S. than elsewhere during the 19th century, and by the end of the century was the highest in the world. This meant that an hour of labor performed by an American worker counted for considerably more than the average world-market hour of labor. Because of this, the U.S. was increasingly able to undersell the European capitalists, capturing an ever-larger share of the world market.

Another advantage U.S. capitalists enjoyed was that from the late 18th century onward, U.S. industry was to a considerable degree financed by British money capitalists in search of higher interest rates than they could realize in Britain. This brought still more gold from abroad into the reserves of the U.S. banking system, leading to still further expansion of the U.S. home market.

During the 20th century, however, these advantages began to fade. Germany, which also experienced rapid capitalist development during the late 19th century, developed a powerful capitalist industrial economy, and its science and technology began to rival that of the U.S. After World War II, Japanese technology also developed rapidly. In recent years, China has also applied science and technology to industry that increasingly rivals that of the U.S.

Just as British money capitalists had been obliged to finance the development of their U.S. rivals, in the 20th century U.S. money capitalists financed the development first of European and then Asian capitalists. The law of uneven development, which favored the U.S. during the 19th century, has, especially since 1945, been working increasingly against the U.S.

The U.S. capitalists responded to this new situation by moving their production abroad in search of higher rates of profit, leading to the growing de-industrialization of the U.S. proper. However, moving industrial production beyond the boundaries of the U.S. nation-state is not without dangers in a world that is still organized on the basis of nation-states. U.S. policymakers hope to scatter the industries producing surplus value around the world so that no nation-state becomes powerful enough to challenge the U.S. politically or militarily. U.S. policymakers are also concerned that today’s “supply chains,” as they call them, could fall into the hands of a rival nation-state.

The current pandemic-economic crisis only increases these concerns. Today, U.S. policymakers view the concentration of so much of the world’s industry in China as a particular danger, which they aim to reverse. This is leading to rising tensions between the U.S., which increasingly cannot tolerate China’s peaceful rise, and China.

This brings us to yet another reason why the Democratic leadership is so opposed to Sanders’ program. During the rise of U.S. capitalism, it could afford to pay U.S. workers more than their European not to mention their Asian counterparts because of the vastly higher productivity of labor in the U.S.

However, as this advantage in labor productivity became increasingly eroded, the U.S. capitalists can less and less afford to maintain a higher wage level. Sanders’ proposals appear increasingly unacceptable to the U.S. capitalists and their hired-and-paid for politicians. While in the days of the U.S. industrial monopoly Democratic politicians like Harry Truman and John F. Kennedy were willing to consider health care as a human right, today’s Democratic leadership joins hands with the GOP in resisting this demand to the bitter end.

China, Trump, Democrats and Republicans, Sanders, and the progressives

Should the U.S. economy fail to rebound in time, Trump and the Republican Party, thanks to the COVID-19 crisis and resulting tens of millions of unemployed, will no longer be able to run on a “prosperity platform” as they had planned. Instead, they plan to run a campaign that combines racism and red-baiting by blaming the crisis on the Chinese Communist Party. (6)

Joseph Biden and the Democrats are already echoing these claims, though when it comes to racist red-baiting campaigns it must be conceded that the Republicans and above all Donald Trump have the upper hand. Trump, whatever else you may say about him, is a master of racist demagoguery and red-baiting.

Most significantly, Sanders and the pro-Sanders and even not so pro-Sanders progressives are thoroughly disarmed, since they too are, like Trump, economic nationalists. Like Trump and the Republicans, they too — though perhaps with greater sincerity — complain that the “neo-liberal” Democrats like Biden, by allowing China to trade on equal terms with other nations, are responsible for the flight of industrial jobs from the U.S. to China.

Instead of advocating unity between U.S. workers and our class brothers and sisters in China — and all other nations — many Sanders or former Sanders supporters criticize Biden and the “corporate Democrats” for allowing China to participate in the world economy on equal terms. They, therefore, are disarmed before Trump’s red-baiting and anti-Chinese racist scapegoating against the Chinese and other Asian peoples. Once progressives are drawn into the anti-Chinese campaign as Sanders has been, they are on the road to disaster. Remember, the logic of the growing economic and thus political competition between the U.S. and China is pointing toward not so much a “cold war” but rather a shooting war.

Next week I will begin the examination of the economic crisis that has accompanied the global pandemic.

To be continued.


1 Surplus value is divided into profit and rent. Profit is sub-divided into the interest that all owners of capital are “entitled” to plus the profit on capital appropriated by the owners of industrial and commercial enterprises. Earlier economic writers who dealt with surplus value would call it “interest” or “rent,” which are specific names of fractions of the total surplus value. Marx was the first person to name surplus value as a separate economic category and not confuse it with “interest” and “rent” as fractional parts of the total surplus value.

Also, profit and rent are the money forms of surplus value. This is an important point often overlooked. Surplus value embodied in unsold commodities is not yet profit or rent. Before surplus value becomes profit or rent, the commodity must be sold. Besides, realized surplus value is measured in terms of the use value of the money commodity — some unit of weight of gold bullion. As the 1970s illustrated, profit measured in terms of U.S. dollars or any other devalued currency is not genuine profit because, though surplus value is being produced, it is not being realized in terms of the use value of the money commodity.

Profit can also not be measured in terms of the real physical economy like Sraffians do. A situation where businesses are profitable in terms of paper currency or the real physical economy but not in terms of gold bullion is an unsustainable situation. For a closer examination of this almost universally overlooked point, see here and here. (back)

2 Does this mean that the bosses produce value? It depends on what you mean by the term “boss.” Marx was quite clear that “labor of superintendence” is value-producing labor. But the capitalists do not have to perform the “labor of superintendence” because they can hire managers to perform that labor for them just like they hire people to perform all the other labor necessary to run a business. The capitalists like to talk about labor and management. This is deliberately misleading. We should always say instead labor and capital, or even better, the working class and the capitalist class. (back)

3 The strongest workers’ political organizations are workers’ states, where the working class has organized itself as the ruling class — called by Marx the dictatorship of the proletariat. The existence of workers’ states puts pressure on the capitalists to improve the wages of the working class to prevent the workers from turning to communism. The capitalists conduct huge ideological campaigns aimed at putting the workers’ states — whether past or present — in the worse possible light and do everything they can to overthrow such states. (back)

4 If he did not make this claim, Sanders would have a tough time justifying his decision to work within the Democratic Party and his support of Joseph Biden’s presidential campaign. (back)

5 Native Americans were organized into about 500 nations. These nations — and this was how nations were originally organized everywhere in the world — were tribes descended from more or less fictitious common ancestors. However, Native Americans in what was to become the United States were not divided into classes, did not have the notion of private property, and therefore did not have a state for the non-working ruling class as an organization to hold down those who are forced to work. Indeed, while some Native Americans in other regions did have societies divided into classes and states, they did not have capitalism and therefore did not have the modern capitalist nation-state.

Despite heroic opposition by Native Americans, the white European colonists, later known as “Americans,” were able to crush opposition relatively easily. The classic continent of bourgeois nation-states is Europe. Europe is divided into Great Britain, France, Germany, Poland, Italy, Russia, and smaller nation-states. Germany, the most powerful, unlike the white colonist Americans, faced massive opposition from other nations of Europe, and after World War II and the Cold War finally fell under the military and political domination of the U.S. The lack of strong rival bourgeois nation-states in North America during the late 18th and 19th centuries was a precondition for the rise of the United States to world domination in the 20th century. (back)

6 Despite having claimed to have “defeated communism” once and for all, the U.S. capitalist class cannot get away from red-baiting. This enables the Republicans and Trumpers who attack the Chinese Communist Party to claim that they are not racist but are only opposed to “communism,” even if “communism” means, in this case, the economic competition of rising Chinese capitalists. In reality, racism in various forms and anti-communism went hand and hand during the 20th century and now in the 21st century as well. (back)