C. Charles

America’s Productive Capacity

From Fourth International, Vol. I No. 6, November 1940, p. 175.
Transcribed & marked up by Einde O’Callaghan for ETOL.

Productivity, Wages and National Income
by Spurgeon Bell
The Brookings Institution, Washington, D.C., 1940; pp.344, including index.

Between the years 1923–1924 and 1936–1937 productivity, the power of a unit of labor to achieve a desired result, increased in manufacturing by 50%; in mining by 89%; in railroads by 43% and in electric light and power by 111%. We use the average of the year 1936–1939 because this marks the high point in industrial production achieved since the crash, although the present year (1940) promises to equal and possibly surpass it. The above four industries account for 75% of the wage workers in the country, and without a doubt similar rates of increase in productivity hold true for the other industries.

Has the greatly increased productivity that has marked these fifteen years resulted in economic benefit to the masses? asks Mr. Bell in his book.

First, has this greatly strengthened power of man over nature meant an increased output? In 1937, the high year since 1929, according to information given by the Federal Reserve Board, total industrial production reached 109% of the average of 1923–25. In manufacturing production was 124%, in railroading 112%, in electric light and power, the only really expanding industry, it reached 238%. Thus realized production was far below what the potential productivity and increased labor supply makes possible. In the meantime the population increased by about 115%.

How did wages fare in this period? In the words of Mr. Bell: “Annual earnings of workers attached to industry have shown a very substantial decline. In terms of money…over 30% and even with allowances for a change in the cost of living it was something like 20%” (computed in real wages – the amount of goods and services monetary wages can buy). In this period, hourly wages increased roughly 20% in monetary terms and 45% in buying power; weekly wages were reduced 10% in money and increased 10% in buying power.

The real gain to the working class in this period is in shorter hours for the employed workers. Working 20% less time, the employed worker was able to buy as much as he formerly did. However, when one considers that very few workers are employed throughout the year, and when one considers the class as a whole, both employed and unemployed, the decrease in real and monetary wages has been, as pointed out, drastic.

The salaried employee in the manufacturing, railroad and electric light and power industries, received $34 less in his annual pay envelop. This would mean a real increase in wages of about 13.6% for each employee, working substantially fewer hours. However, and this is a point that Mr. Bell does not mention, the concept “salaried employee” is a very misleading one: it runs from the corporation official earning $100,000; $50,000; $25,000 or $10,000 a year to the typist who draws $14 or $16 a week. These high “salaries” are merely a form of disguised profits. The improvement in the position of the salaried employee is exaggerated, to speak conservatively.

A decrease of 6% was registered in this period in the income of the capitalist class, from $5,070 millions in 1923–24 to $4,768 millions in 1936–37; in the rate of return to capital the figures are 6.37% and 5.55%, a decrease of 13%. This does not take into consideration hidden profits.

Did prices fall proportionately to the increase in the rate of productivity? In manufacturing prices fell by 33%, in railroads by 20% and in electric light and power by 40%. Or by another method of computation, in manufacturing the unit wage cost fell to 76 while wholesale prices fell to 83.7; in the railroad industry the unit wage cost fell to 78.6 while the unit price on freight fell to 85.9 and the passenger unit price fell to 60.9, thanks to bus competition; in mining the unit wage cost fell to 56.1 while the wholesale price was 81.4; and in electric light and power, the unit wage and salary cost sank to 62.9 while revenue per kilowatt hour was 76.6. These are two different methods, and space does not allow us to go into the basis of the difference in result.

Prices are substantially above the level that increased productivity would allow. The old motive force for a lowering of price with a reduction in the amount of labor involved in producing a commodity is for long periods non-operative in this day of concentration and monopolization of industry.

Capitalist economists are smugly proud of the hourly wage increase from 50.3 cents in 1933 to 58.3 cents in 1934, 62.2 cents in 1935 and up to 71 cents in 1938.

Yet there was no scarcity in labor due to boom conditions with a resultant increase in the price of labor. Labor was not scarce – the opposite is true. Production did increase it is true but even so there was a large proportion (26%) of the labor supply unoccupied. In the prosperous period from 1923 to 1929, with a far less supply of labor, money wages went up only 5.7 cents an hour and real wages 6.8 cents an hour. Yet in 1933-38 real and monetary wages increased tremendously. Why this difference? The answer is not to be found in the workings of the capitalist system, but in the intervention in these workings of the labor movement. The answer to the question, why did hourly wages go up, is not a benevolent Washington government, but the growth and militancy of the trade union movement. This was absent in the previous period.

Mr. Bell believes in the capitalist system. He does not see that capitalism is a barrier to economic progress not only because of the large share of the income taken by the parasitic ruling class [1], but also because the present social system stands in the way of even an approach to the full utilization of the productive potentialities its laboratories and research institutes have discovered.

Capitalism has thrown the country into an economic crisis that has resulted in the loss between 1929 and 1938 of 200 billion dollars. Just as it must undergo periodic crises to keep functioning so it must undergo periodic wars. It keeps the consuming power of the masses of the people down by low wages and high prices. Capitalism has shown the world how to produce. That has been its great historic function. Now it must give way to a new society that will be able to use this productive potentiality.

The forces of production have come in conflict with the property relations of society. This conflict can be “reconciled” temporarily on the Procrustian bed of fascism, or can be really solved by socialism, which will end private ownership of the means of production and thereby give their development an enormous impetus.

For the facts and figures contained in this book we recommend it. It is an excellent case book for the study of Capital – which I imagine was furthest from the writer’s mind when he wrote it.

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Footnote

1. The following figures give the proportion of the income from each industry appropriated by the capitalist class in 1936-37:

Manufacturing		24.7
Railroads		22.4
Electric light and power		64.1

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