CHAPTER IV FORMULA B AND THE "IRON LAW OF WAGES" Turgot and wages-The actual price of labour and the price of the means of subsistence-Ricardo-Lassalle and the "iron law of wages'-Graduation of wages in the city of Paris-Rise of wages and diminution of the price of the means of subsistence-Share of capital and of labour in production in the United States -Bastiat and Rodbertus. TURGOT said: "The price at which the poor workman sells his labour does not depend upon himself." But does the price at which the merchant vends his goods depend upon himself? If no one wants them, no one will take them. Ricardo having based his theory of value entirely upon labour, attempted to find a mean or standard for it. He says, somewhat vaguely, "The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution The natural price of labour, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the labourer and his family. Nevertheless, he recognised that "the natural price of labour, estimated even in food and necessaries, is not absolutely fixed and constant." He added that, "an English workman would consider his wages under their natural rate and too scanty to support a family if they enabled him to purchase no other food than potatoes, and to live in no better habitation than a mud cabin." Lassalle's sonorous metaphor of "the iron law of wages" is derived from Ricardo's formula. It implies the equality of wages, and in 1848 the workmen were so fully aware that it was fallacious that 1 Ricardo, “Principles of Political Economy,” ch. v. Louis Blanc was obliged at the Luxembourg to refuse his support to the principle of equality of wages which he had preached. The graduated scale of wages in the city of Paris was set up by the workmen themselves in 1880. The scale of wages of the several classes of workmen in the building trade is as follows, according to the "Bordereaux des Salaires" published by the Labour Bureau in The navvy does not buy his bread cheaper than the rough-caster. If the "iron law" applies to the former, it does not apply to the latter. Mr. Bowley in his "Progress of the Nation" compares wages with M. Sauerbeck's "Index Numbers," in which the means of subsistence play an important part. Average wages Sauerbeck's Indexnumbers 45 50 50 55 60 70 70 72 84 93 100 100 77 99 94 88 82 69 82 73 61 Wages have doubled between 1840 and 1900, rising from 50 to 100, or rather from 100 to 200, while prices have fallen from 100 to 61. Therefore, in 1840, £100 in wages would pay for £100 in commodities. In 1900, 200 in wages would pay for more than three times (3.2) £61 in commodities. Consequently the value of wages has risen in the proportion of 1 to 3.2, or, say, 220 per cent. Rodbertus enunciated a formula which Socialists who claim to be scientific attempt to substitute for the "iron law of wages." This is "that the increase in the productivity of labour involves the reduction in the wages of the working classes to a constantly decreasing fraction of the social product." I take the figures contained in the census of the whole of the industries of the United States : 1 2 3 mills. $ mills. 1891 5793 3576 1685 445 25.8 $ mills $ mills. mills. $ mills. $ mills. 1890 6525 9369 4251 1905 13872 16866 6152 5718 2704 490 19,5 7347 7497 1901 1123 5355 2142 1019 45 -6,3 Improvements in plant have not taken away work from the workmen, seeing that their numbers increased by 44 per cent. between 1890 and 1905. The rate of return on capital has decreased by 24 per cent., while wages have risen 11 per cent. This is a condemnation of Rodbertus' formula and a confirmation of Bastiat's, which he expresses as follows:-"In proportion as capital increases, the absolute share of capitalists in the total amount of production increases, and their relative share decreases. The workmen, on the other hand, see their share increasing in both respects." 1 Discussions a la Société statistique de Paris; séance du 20 janvier et du 17 avril, 1909; Journal de la Société de Statistique, févrièr et avril, 1909. FORMULA A. WORK THE MEASURE OF VALUE Rodbertus-The working hour-"The social will"-- Work tickets or vouchers The equalisation of values-Rodbertus alarmed-Inconsistencies of Karl Marx and Engels. RODBERTUS, about 1842, sought to determine the "standard of work" as the measure of value, under the name of the "normal period of work" (Arbeitszeit). "Inasmuch as a working day has a different productive value in different kinds of production, different kinds of work should be assessed relatively to one another and uniformly expressed in terms of a standard unit of work-time. In a particular class of work a working day contains so many hours by the clock, or a working hour so many minutes by the clock; in another class of work it contains so many hours and so many minutes respectively. This presents no obstacle to a division of the standard day or the standard hour, in the different kinds of production, into a uniform number of standard hours or minutes of work. This will give in and for every kind of production a species of scale by which to measure the productive value of a given period of work. "The difficulty arising from the differences among various workmen can be removed by the standard daily task (Normales Tagewerk)." This settles the whole question. The "social will" of the State decrees the standard period of work. This "social will decides and fixes where individual wills had debated and compromised." This social will" implies "a separate organ of society to administer its land and its capital, and to preside over social production and distribution." This central organ, "of monarchical or democratic origin"-it matters little from the economic point of view-is to embrace in itself all economic functions. Public needs are determined by the "social will," as represented by the Prince of the Assemblies. Individual needs are fixed by the standard period of work. "The time which everyone who takes part in production consents to devote to productive work determines the limits of the means which are sufficient to cover the range of everyone's needs." The limits being ascertained, one knows "what is the nature of the needs which are to be satisfied, and therefore the nature and quantity of the articles which are to be produced." From the time when "the duration of work is a common measure of productive power, as well as of needs, nothing can be clearer than the manner in which to proceed." The administration may, (1) fix the value of all products "by fixing the value of the produce of the labour of each individual in terms of every other kind of product, and consequently in terms also of articles for consumption or finished products" (p. 117); and (2) create a currency which answers fully to the requirements of a currency. The economic administration would remit to each producer a receipt for so much standard work, represented by the actual produce created by him in accordance with the rules herein set forth. This document would bear an exact statement of the value created by its holder, and would therefore serve in his hands as a voucher for an equal value. He could then use it to obtain payment for his labour in the social magazines in the form of articles of consumption in exchange for the voucher. This currency would form a perfect measure of value, since each voucher would state the precise quantity of value which had been worked out; in the second place it would afford an absolute security, inasmuch as it would only be issued if the value expressed upon it in fact existed; in the third place it would cost nothing, as it would be merely a piece of paper with no intrinsic worth, yet capable of forming a perfect substitute for money. (pp. 126127.) |