Warren Creel

Wages, Prices and Profits

The Anarchy Prevailing Under Capitalism

From The Militant, Vol. X No. 32, 10 August 1946, p. 6.
Transcribed & marked up by Einde O’Callaghan for ETOL.

Thus far in this series the facts have brought out three main points:

Wages do not control prices. The wage costs go lower and lower as efficiency goes up in production. Wage costs of production are far below prices.
Efficiency in production does not control wages. This is the personal experience of every worker. His production goes up but his standard of living stays down. Statistics show that the general rule is: the workers produce more but they don’t get more.
It is not the free choice or arbitrary plan of the employers that controls prices and wages. We must look into the employer’s power and the limits of his power. He does not control the economic system by his wishes or orders.

So we have a list of three forces that do not control wages and prices. We have cleared these out of the way. Now what does control them? We can find the answer by Marx’s method, the key to which is: Keep your eye on production and productive human labor and you’ll see the controlling forces in economics.

What Controls Wages and Prices?

We should begin by finding the normal rules that govern prices and wages under capitalism. Later on we’ll see whether the capitalist can stretch these rules in his own favor, and if so, how far.

In the market every capitalist seller tries to sell his goods for the best price he can get. The seller tries to raise prices whenever he can. The buyer tries to buy cheaply. Prices come from this competition between buyers and sellers.

The kind of bargain each can make depends primarily upon market conditions of supply and demand. For instance, if the sellers have only a small supply of goods they can hold out for a high price. But if the sellers have a big supply, they are in a bad price position. They have to sell their goods somehow or take a loss from having unsold goods left on their hands. No single seller can keep his prices high, because he knows the competing sellers will cut prices in order to sell their goods, leaving him with unsold stock on his hands. This is one of the limits to the power of the capitalist seller. He is not free to set his own prices. He has to sell at prices set up by supply and demand, because he sells in a competitive market.

Go Behind Supply and Demand

To find the real rule on prices, however, we have to go behind supply and demand. We have to look back to production, which is exactly what we would expect from the Marxist method. Supply and demand are not accidents; they are rooted in production. For example, a small supply means there has been low production, while a big supply comes from high production.

An industry doesn’t go on operating forever with an over-supply of goods and low prices. A low price will cause changes in the supply. Producers will move out of an industry when prices—and profits—go too low. As they move out and stop producing, the supply gets smaller, and prices tend to go back up.

Similarly a temporary high price will tend to bring up production. The good price will bring in other producers. The new producers will increase the supply and bring down the price.

By such swings back and forth, up and down, the system of capitalist production exercises a sort of “control” over both the market prices of goods and the amount of goods produced. After a list of factors that do not exercise control we are coming to something that does control.

Thus the blind working of competition and prices— the laws of the market—govern the economic system. No human intelligence decides how much goods we need. No human choice governs how much goods shall be produced. An employer plans his own plant, but he does not know the total the market will absorb in the end, or how much of it will fall to his share.

From One Crisis to Another

Marxists have a name for this lack of human planning and control. They call this irrational condition the lawlessness, or “anarchy of capitalism.” Capitalist anarchy results from the operation of certain blind economic laws, above all the law of labor-value, but it obeys no human controls or laws.

An economic system needs some sort of control over production. Capitalist anarchy is harsh, but it gives the only “control” over production that capitalism can ever have. If producers of shoes are making more shoes than the market will take, capitalist anarchy tells them so by low prices, so that factories go bankrupt, workers lose their jobs, and shoe production goes down. When production has dropped down low enough to meet the requirements of this blind system, it tells society so by high prices and scarcity.

Both surplus (“over-production”) and scarcity (“under-production”) bring evil results under this system. Blind capitalist anarchy prevails in capitalist production, swinging it forever back and forth from one evil to the other, from one crisis to another.

Next week: Labor-Value Controls Wages

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Last updated on 26 June 2021