Contributions of Karl Marx (III)
Posted on 2020-06-05, Richard D. Wolff, Democracy at Work
Welcome to part three of this four-part series on the work and contributions of Karl Marx. Once again, let me remind you that the point in purpose here is not to have you agree or disagree with what Marx wrote, but to become aware of what the perspective of the leading critic of capitalism is, what insights he may have discovered that we can make use of now to improve the economy for all of us. The point is not to agree, the point is to understand and learn from something we should have been studying for the last 75 years but were mostly afraid to do.
Where we left off was on Marx’s basic economic theory the way in which capitalism as a system reproduces the very dichotomy of a mass of people producing a surplus for a minority of people gathering it into their hands and deciding what to do with it. And that was true of slavery and that was true of feudalism and, it turns out, as Marx teaches us, that it’s also true in capitalism. I want to pick up by asking and answering the question when a mass of employees produce a surplus that shows up in the hands and rests in the hands of the employers, a very small part of the population, how does it exactly happen. What did the employers do with that surplus delivered to them?
The surplus takes many forms but the closest word we have to capture the idea is profit. In some sense, every business involves revenues, earning money from selling the fruits of human labor but by having that revenue be larger than the cost of what we paid the workers and what we spent for the raw materials and the tools and equipment. The revenues in short are greater than the costs in a profitable business and that profit, what’s produced by the workers in that situation is received by the employers. But what do the employers do with it and how does that produce the kind of society that capitalism exhibits?
I’m gonna give you a few examples. You’ll be able to supply them yourselves once you get the hang of it. Let’s start with one. I like always to start with what’s called dividends. Most business in modern capitalist society is done by an entity called a corporation. The corporation has shareholders, people who have enough money and wealth to buy one or more shares of that company. They are owners thereby of that company and how big is their ownership depends on how many shares they can afford to buy. In many large corporations a part of the surplus, this extra, this profit, that the mass of workers has produced that flows into the hands of the employers, a portion of that, is distributed to the shareholders. What’s that distribution is called is the dividend. That’s the name we give to it.
Let’s be real clear. What contribution has been made by the person who owns a share? What contribution did that man a woman make to producing the surplus in that corporation? The answer is none! They didn’t spend one minute that year in that factory, in that office, in that store, but they got a portion of the surplus produced by workers who did the labour, delivered to them four times a year by means of a check. That’s the use of this surplus. Those people buying a share, they showed a confidence in the company, they showed, that they were wealthy enough to buy a share and the company rewards them. It has the interesting consequence of saying to wealthy people: here’s a way for you to grow your wealth, but of course, to use the word grow implies that the wealth comes out of itself like a plant, as a seed, and another plant comes out of that seed.
This isn’t that way at all. What these wealthy people have is the means to get a piece of the surplus other people are producing, they get that delivered to them so, now, at the end of the year, they have not only the shares they bought but the wealth in the form of dividends paid to them. How nice for them. The workers who produced the surplus, they don’t get it. The workers who produce the surplus watch it being distributed by their employer to people they don’t know, who had nothing to do with the production process. Remarkable. Here’s another example the employer can decide to take a big fat portion of that surplus and give it to top executives of the company. The CEO, for example, and give him a pay package of 20, 40, 60, a hundred million dollars. Not at all uncommon these days in the United States for sure. That’s an interesting way to use this surplus. Let’s be real clear. The mass of people produces a surplus. If that surplus were distributed to all of them, they could rise up out of their working conditions and their wealth conditions and become wealthier.
But that’s not what happens. The wealth, the surplus they produce doesn’t get distributed back to them it goes into the hands of the employers and they use it to satisfy themselves to keep themselves in of doing what they’re doing and by giving themselves dividends as shareholders. By giving themselves high pay packages, they make sure they’re wealthy enough to keep being in the position of getting pieces of the surplus. In other words, in capitalism, if you’re getting a piece of this surplus and accumulating wealth that’s the way to keep getting surplus and the cumulative wealth or to say the same thing in the language that masses of people have understood for as long as capitalism’s been around, the rich get richer and the poor don’t.
That’s how this system works. There should be no surprise, no shock and awe to discover that capitalism is a system that produces inequality. The system is as efficient in producing wealth at one pole as it is efficient in producing poverty at another. Every 20 years, in every capitalist society along comes a novelist, a sociologist, a statistician to remind us that there’s an awful lot of poor people around the world, an awful lot of poor people around the United States or wherever else.
That anyone who has an illusion that this society makes us all equal, you know, in the idea of liberty, equality, fraternity and democracy, that we talked about in an earlier segment, those ideas are delusions. This is a system that produces inequality because it’s set up to do that. It’s nobody’s mistake, it’s nobody’s cruelty, it’s the way the system works.
And that’s a very fundamental understanding that Marx achieved. It led him to the conclusion that if you want finally to get rid of the gross inequality that capitalism has always produced you’ve got to face the difficult, the awkward, maybe even the scary reality, that to overcome inequality, capitalism itself has to go. You have to do better than that. As long as you leave the employer-employee division, you’re going to have the same kind of inequality among people, that we know, characterized slavery, that we know characterized feudalism and is with us today hint… hint… but we don’t need to hint, because Marx explains to us, which is why it’s interesting that we are stuck in a system that keeps reproducing the very thing we say so many of us we don’t want.
Marx is also interested in pointing out another feature of capitalism. And here it goes. And it’s a wonderful insight of his, comes in fact out of his teacher, the philosopher, in Germany named Hegel who taught that everything is contradictory. Everything about life that we know, is a bundle of conflicting ideas, needs, forces, pressures on us. That to be free of contradiction is to be free of life itself. This is an idea that Marx plays with and he shows us how capitalism illustrates the contradiction. And I’m gonna give you that as an example. Marx explains to us that every capitalist is trying to get as much surplus out of his workers as possible because the more surplus he has, the more dividends he can pay to keep his shareholders happy. The more high salaries he can give his executives the more he can keep this system going because he uses this surplus to reinforce his dominance. So, he wants always to get more surplus.
One of the ways you do that is have the workers not work for, as in my example, $20 an hour, but maybe get them to work for, I don’t know, $15 an hour. You get the same output from them, but you’d give them less which leaves more for you, the capitalist, and you all know, how capitalists do. Some of them do it by bringing immigrants into the country whom they can pay less money. Do it by employing children or women who are not used to the higher salaries that men have been able to get in these societies and so they’re exploited in that way. Others move to a poor country where they can get away with paying lower wages. Whatever it is, a good capitalist graduated from a Master of Business Administration program knows, that you’re clever and you’re good and you’re successful as a capitalist if you economize on your labor costs.
There are many capitalists who do that by replacing people with machines, with automation, a computer, a robot, something that is cheaper to get the work done than hiring a worker. So capitalists are always looking for implementing, competing over ways to save on labor. It’s the way the system works. And then Marx smiles and says: here’s the poor capitalists no sooner are they successful in paying lower wages or no wages at all, then they discover, oh my goodness, the workers, the mass of people don’t have as much money as they used to precisely because we are lowering the wages or replacing them with machines and when they have less money, here comes the punchline folks, they can’t buy the very stuff we’re producing to sell. We will have been clever to reduce our labor costs only to discover that we’re driving right into the stone wall of insufficient demand, insufficient purchases. Not enough of a market for what we sell, which can be as destructive of our success as it would have been to pay higher wages. The system is a contradiction.
The very logic imposed on the capitalist undermines the success of the capitalist. And again, Marx’s punchline, you don’t escape from this kind prediction by a law or a rule or a regulation or a behavior pattern or anything else. This is how this system works. And if you don’t want to have periodic collapses of the economy when capitalists who’ve been so successful in saving on wages discover they have no market that people can’t afford to buy it so then they don’t can’t sell, and then they lay off workers because you don’t point in hiring a worker if you can’t sell what the worker helps you produce, and then will fire those workers, and of course, then they have no income, and they can buy even less than they could before, and you have that downward spiral we call recession and depression. The system is unstable.
Every four to seven years capitalism wherever it has come in the history of the world has produced on average an economic downturn. Workers thrown out of work, business is going out of business, real suffering until the system gets back up again. I like to tell the story that if you lived with a person as unstable as capitalism you would have moved out long ago. Capitalism is a system that produces and reproduces inequality and capitalism is a system that produces and reproduces instability. Those two reasons alone, Marx suggests to us, are reasons to question, to challenge, why we should accept a system that works this way. We could have and we should have, says Marx, gone beyond capitalism. Recognized as he has figured them out and found the contradictions the inadequacies and the injustice – is that this system has bequeathed to us it’s not that the original ideas of liberty equality fraternity and democracy had anything wrong with them. Not at all. Marx was entranced by them as a young person and never gave up on his commitment. What’s remarkable about Marx, is that he located in capitalism itself the obstacles to realizing those objectives and therefore became the critic to show us what those obstacles were so we would understand what kind of changes need to be undertaken to free us from the inequality and the instability that this system cannot escape. In the fourth and final segment of this four-part series we will talk about what kinds of changes Marx’s work points to that might get us out of the failure of capitalism to deliver on liberty, equality, fraternity and democracy.