Marx, Wages, and Cyclical Crises: A Critical Interpretation

Abstract

This paper examines certain theoretical questions and issues relating to Marx's conception of wages under competitive capitalism. First, it is shown that the distinction between labour and the value of labour power is critically important for understanding the source of profits in competitive capitalism. Second, the value of labour power cannot be reduced either to the classical school's bare minimum subsistence level, or a “physically” determined minimum. Next, the paper discusses Marx's neglected distinction between absolute and relative real wages. It is shown that the purely technical relationship between wages and labour productivity is captured by the notion of absolute real wages. Marx, however, considered relative real wages to hold the key to understanding how one class appropriated the surplus labour time of another. Finally, the paper traces the movement of absolute and relative real wages for the active part of the working class during the various phases of the industrial cycle. It is argued that Marx believed that the secular decline in the value of labour power reflecting rising social (labour) productivity would be accompanied by a relative deterioration in the social position of the members of the active working class, and an absolute immiseration of the three major components of the relatively growing industrial reserve army.