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Friday, November 18, 2011

RICARDO'S PRINCIPLES A MINI-TUTORIAL PART EIGHT

There are, in all, thirty-two chapters in Ricardo's Principles, and on this eighth day of my mini-tutorial, I have only managed to discuss the first two. I think we can all agree that another two hundred ten Parts of the Tutorial would be a trifle excessive, so I am going to do a little picking and choosing. In what remains of this tutorial, I shall discuss just two additional chapters, in each of which we find material of the very greatest interest and importance: Chapter V, "Wages," and Chapter XX XI, "Machinery."



Wages first. Ricardo opens the chapter by applying to the special topic of labor the general theory of price that he has developed in Chapter I. "Labour, like all other things which are purchased and sold, and which may be increased or diminished in quantity, has its natural and its market price. 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." [I shall pass over without comment the rather striking use of the word "their."] The market price, Ricardo observes, "is the price which is really paid for it, from the natural operation of the proportion of the supply to the demand; labour is dear when it is scarce, and cheap when it is plentiful. However much the market price of labour may deviate from its natural price, it has, like commodities, a tendency to conform to it."



The "tendency" is explained by Ricardo in the next paragraph, where, echoing Malthus, he asserts that when times are good and wages are above bare subsistence, workers tend to raise up large families, and soon enough [when the children are perhaps ten or twelve, though Ricardo does not say] this increases the supply of labor relative to the demand, and wages then fall to what is required merely to keep the workers alive and allow them to replace themselves with their children when they grow old and die. Thus far, this is straight classical Political Economy of the dismal sort so brilliantly satirized a generation later in the novels of Charles Dickens. But now Ricardo adds a phrase that explodes the simple brutality of Malthus and opens up an entirely new sphere of inquiry. In the very next paragraph, he writes:



"When the market price of labour is below its natural price, the condition of the labourers is most wretched: then poverty deprives them of those comforts which custom renders absolute necessaries." Look at the last five words of the sentence: "which custom renders absolute necessaries." When I first read those words, alarm bells went off in my head. Could he have really meant this, I asked myself, or was it simply a slip of the pen, an unintentionally provocative turn of phrase? Ten paragraphs later, it became clear to me that Ricardo knew exactly what he was saying and intended the reader to construe his words literally. Here is that paragraph -- truly one of the most extraordinary passages in the Principles:



"It is not to be understood that the natural price of labour, estimated even in food and necessaries, is absolutely fixed and constant. It varies at different times in the same country, and very materially differs in different countries. It essentially depends on the habits and customs of the people. An English labourer 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; yet these moderate demands of nature are often deemed sufficient in countries where "man's life is cheap", and his wants easily satisfied. Many of the conveniences now enjoyed in an English cottage, would have been thought luxuries at an earlier period of our history."



It is not the employer who "considers" some level of wages "under their natural rate" but the workers, who have become accustomed to, and hence expect, a certain level of subsistence. hat level is determined not by physiology but by custom, which is to say by the beliefs and expectations of the workers. Contrary to the unexamined mindset of both classical Political Economy and neo-classical Economics, labor is not merely a factor input into production like iron, wool, leather, or wood. To his eternal credit, Ricardo sees this and states it unequivocally, even though the implications of this acknowledgement undermine the entire classical [and neo-classical] intellectual enterprise.



We have here nothing less than the eruption into the calm world of the classical Political Economists of Class Struggle. We are all familiar with the story, even though not all of us have learned the significance of that story from Marx. Workers are paid a wage barely sufficient to allow them to live, at whatever level of subsistence has become customary in their time, and to raise a family of children to replace them. When times are hard and employers seek to drive the wage down, the workers respond with all the force they can muster, because they are being asked to work for wages "on which they cannot live." When business picks up and the demand for labor momentarily exceeds the supply, driving wages up, workers are able to incorporate into their daily lives some small measure of what they consider "luxuries" -- some meat once a week with their potatoes and vegetables, some tea, or even coffee. Now a struggle develops between the workers and the bosses over what counts as "subsistence," with the workers insisting that meat once a week is a necessary part of their lives, and hence counts as a component of a subsistence real wage, and bosses fighting against what they call this immoral and irreligious lusting after "luxuries."



This is an on-going struggle, fought on the shop floor and in the streets, with walk-outs, lock-outs, scab labor, and union organizing. At every step of the way, a ten hour workday, a five day workweek, meat in the diet, indoor toilets, medical care, vacations, pensions -- every one is at one point in time derided by the bosses as unnecessary luxury and demanded by the workers as a part of their necessary subsistence. The ebb and flow of this struggle is determined by the relative power of the two adversaries and by the degree of organization and solidarity that the workers can achieve and sustain. Recall the old bumper sticker: "Support Organized Labor, Who Brought You The Weekend."



Speaking in the broadest and theoretically most abstract fashion, what we have here is a political struggle over the definition of social reality. Admiring as I obviously am of Ricardo's clarity of thought [admiration shared by Marx, by the way], I do not wish to give you the impression that he was a closet socialist or a radical reformer. Perhaps I can balance the scales a bit by quoting a passage from the final paragraph of the chapter. Speaking of the Poor Laws, which Ricardo opposed, he wrote:



"If by law every human being wanting support could be sure to obtain it, and obtain it in such a degree as to make life tolerably comfortable, theory would lead us to expect that all other taxes together would be light compared with the single one of poor rates. The principle of gravitation is not more certain than the tendency of such laws to change wealth and power into misery and weakness; to call away the exertions of labour from every object, except that of providing mere subsistence; to confound all intellectual distinction; to busy the mind continually in supplying the body's wants; until at last all classes should be infected with the plague of universal poverty. Happily these laws have been in operation during a period of progressive prosperity, when the funds for the maintenance of labour have regularly increased, and when an increase of population would be naturally called for. But if our progress should become more slow; if we should attain the stationary state, from which I trust we are yet far distant, then will the pernicious nature of these laws become more manifest and alarming; and then, too, will their removal be obstructed by many additional difficulties."



Sigh. For those in search of heroes, I recommend a return to my tutorial on The Thought of Karl Marx.

1 comment:

Don Schneier said...

Another good companion piece to today's lesson is anything regarding the "austerity" measures that are on the verge of being imposed on Europe, if not on the U. S., as well. Diet pills in place of opiates.