2.—On the Law of Labor and How to Discover It.
The abstract nature of the conceptions of liberty and property we
have already recognized, and, while noting that existing conditions do not
conform to our ideal principles, we saw that the tendency of social evolution
lay in that direction. In this lies the virtue of such generalizations, for,
while affirming only tendencies, they serve as a guide in the investigation of
the facts of social science. To find the causes that stand in the way of
realizing the abstract law or ideal conception in the realities of social life
becomes the main object of our inquiry. The labor problem may be elucidated by a
generalization which, while embodying our ideal as to the true aim of justice,
will harmonize with the principles already established. At the same time we must
carefully avoid the mistake made by all the classical economists, who, after
setting up abstractions, drew conclusions therefrom and deemed it unnecessary to
compare them with actual conditions or to seek the causes of disagreement, but,
instead, put forward their unverified results as
laws to explain
phenomena on which they were originally not based and hence could not
In order to simplify our conception, let us imagine that equal liberty actually prevails, society no longer displaying an ordered series of exceptions to the law: assume that each individual realizes the benefits of his own activities, property rights conforming to the principle by which we have agreed to represent justice; we thus eliminate privilege and monopoly, and suppose freedom of exchange and contract the only basis of relations in industrial as in all other affairs between men. What under these circumstances would be the law of labor? No new idea is involved in the answer, for but one deduction from the hypothesis is logically possible. The reward of labor would equal the product of labor. And the social value of the service would measure its price. Exchange would be in reality what it is now only in theory,—a return of service for service; not, however, as erroneously believed by Warren and the early Individualist reformers on the one hand, and Marx and his followers on the other, who, in measuring service against service, projected the time-measure of comparison, a standard based on the time theory of value. For services and commodities of like kinds are not exchanged, but only those which are unlike; and though a time-measure is unobjectionable as a standard for quantities of the same service or commodity,—as, for example, a coat that takes six hours to make will be of like value to a similar garment made in the same time because the labor is of like kind,—yet for labor or commodities of different kinds, which alone originate exchange, such a standard is inadequate, useless, and misleading. So that, while postulating the principle that labor should be remunerated with the value of its product, or that service should repay service, I feel it necessary to distinguish against the notion that value is measured by labor-time, or that labor is under all circumstances the measure of value, but in doing so I do not give up the idea that the cost of labor, though not measured in hours, is the chief determining factor in exchange value. Returning from this digression on value, which will turn up again in its own place, let us see what the above generalization is worth in regard to the wages question.
Did labor obtain in wages the value of the product, no theory would be required as at present to determine how much of the product should go to the producer, and what proportion to the landlord, the capitalist, and the tax-gatherer; the only question to determine being the causes operating to raise or lower the exchange value of the product, the whole of which would constitute the wages of labor. For there is no reason to believe that we shall ever reach a stage wherein the proportions in which commodities will exchange for each other will cease to fluctuate, and, while any variation is possible, exchange value must vary accordingly. With ultimate questions of this nature we need not, however, concern ourselves.
Having established a principle in harmony with our earlier
generalizations, which will serve as the ideal law of labor, the theories that
are concerned with temporary phases may be studied and compared. Marx’s
great theory of wages, the explanation of capitalism by the conception of
surplus value, pocketed by the employer in the form of profits representing
simply unpaid labor, is found on close scrutiny to rest on some erroneous
assumptions that once formed the stock in trade of the economists. The
wage-fund theory, which undoubtedly at one time answered a purpose and
for want of a more comprehensive formula served to express the economic
relations existing in a transitional stage, is an accepted dogma underlying
Marx’s most important arguments in support of his position. Then the
labor-time theory of value adopted by Ricardo and fully accepted by
Marx, combined with the wage-fund idea, naturally gave rise to the
conception of the
iron law of wages, a belief in which was essential to
the Marxian exposition of capital and the surplus value theory of labor. Now, if
Marx were scientifically sound in this train of reasoning, the condemnation of
capitalism, as the individualistic system of production, which the tentative and
inadequate generalizations of political economy rendered easy on the part of
Socialists, would still rest on the same grounds, and no economic system
embodying private ownership of capital, competition, and the wage system could
offer the slightest hope to the laboring classes. A social system based on
individualism or the law of equal liberty would always present the evils now
accompanying capitalism, and common ownership of the means of production would
seem the sole and inevitable way of escape for the wage-worker.
But if the generalization of the
iron law of wages is
unscientific and incapable of resuming the widest truths of economics, the
foundation disappears from the conception of surplus value, and we shall still
be able to accept the sociological laws traversed by the Marxian dogmas.
Economists of the present day discard the theories of wages accepted almost
without question a generation ago. And the system of Marx, which was
built upon them, is rejected in many important particulars by some of the
leading men who accept his general scheme of Socialism. Francis A.
Walker’s theory of wages, for want of a better, is currently accepted
by the professors as a masterly statement of the labor question. But perhaps its
only value lies in the fact that it is not a law of wages, not a comprehensive
résumé of the phenomena, but simply an intelligible
restatement of the data which we need a scientific law to elucidate and resume.
Walker’s theory does not increase our knowledge of the causes which
produce and maintain the present arrangement in the division of the product.
Wages, he affirms, consist of the value of what is produced, less rent and
interest, with an allowance (taxes) to the governing authority. But to tell the
wage-worker who groans beneath the load of landlord, capitalist, and tax-grabber
that he has really nothing to complain of, for all he produces returns to him as
wages, except the trifling slice that these sources justly and necessarily
absorb, is not to console him for the hardship of his lot, but only to apologize
for the plunderers.
In examining the labor problem a truth should be kept in view that has an important bearing on the further elucidation of the points at issue. Rent and interest must be recognized as economic facts naturally arising out of present economic conditions, and there is no means of lessening or eliminating their burden except by such a modification of those conditions as will naturally result in their diminution and extinction. In other words, the laborer must be prepared to pay, as he is now forced to pay, both landlord and capitalist’s share out of the product of industry, which share will continue to be fixed by supply and demand, until he is ready to adopt or to obtain such a change in social and political institutions as will result in an economic state wherein this share will grow less and less, leaving more and more of the product to the producer. Now, the first thing to do is to be sure about the way in which the present system works, to find out how the wage-worker’s share is at present determined to do which we must eliminate from the discussion both rent and interest by assuming them either as fixed or absent. And after separately arriving at a conclusion as to the manner in which the wages of labor are determined, the effect of competition, where it is inoperative, the meaning of value in relation to labor and price, and the way the wage system as a whole acts in giving the laborer more or less of his product, then we take up the problem of capital and the factors which determine interest, leaving out rent as before, and knowing already just how wages are determined and how under conditions ideally free they would be fixed, thus investigating in each case from known and actual conditions and finally comparing the separate results obtained. Rent would next demand our study, and, whether or not any conditions can be found that would modify or reduce it, the conclusion in the other cases would be unchanged. And if it is possible to demonstrate the laws of interest and rent are such that means may be adopted to reduce the proportion of the total product that either can demand, we shall have formulated the means of securing to the worker higher wages, a larger share of the product, and so approach our ideal law, which demands the wages of labor to be the full value of the product of labor.