Well yes Mr. Seymour, this is the point

As a share of GDP, wages have fallen from a high of 64% in 1974 to approximately 54% in 2010.

….

Amid a certain fashionable revival of Marx in some corners, it shouldn\’t be controversial to call this for what it is: a stark increase in the rate of exploitation. What has happened is the direct culmination of Thatcherite class war, aimed at breaking up the bargaining power of labour in order to restore profitability to what was a crisis-hit British capitalism.

Exactly.

If you go back to the immediate post war period you\’ll see that the wages share of GDP was around that 54% level (running on memory, perhaps a tad higher, 55, 56%).

And then we had that exercise of union power which increased that wages share. To the point at which, by the mid 70s, the profit share was insufficient to encourage people to invest.

You\’re absolutely correct that the profit share has risen since then. But your underlying assumption that that high wages/low profit share in the mid 70s was a good thing, or even a stable split, is the error.

Another way of putting this is that union power put the wages share too high to encourage the necessary and continual investment needed to keep the economy growing. Thus it had to fall.

6 comments on “Well yes Mr. Seymour, this is the point

  1. “As a share of GDP, wages have fallen from a high of 64% in 1974 to approximately 54% in 2010 …. Amid a certain fashionable revival of Marx in some corners, it shouldn’t be controversial to call this for what it is: a stark increase in the rate of exploitation.”

    I’m sure that there are people reading this site who have a better grasp of economics than I do. Please could somebody explain to me about exploitation. If I employ people and pay them in wages less than 100% of the value of what they produce, by Marxist standards I would be exploiting them, right? But if I paid them 100% of the value, I would be losing money (since the value of their product, when sold, has to cover their wages plus many other things) so I couldn’t afford to employ them at all, nor could anyone else, and they would be out of work and starving unless supported by social security, partly funded from the profits of other exploiters …

    And come the Marxist revolution, will workers be paid 100% of the value of what they produce? Were they in Soviet Russia, are they in China?

    Just asking.

    Tim adds: my argument here is that labour exploits capital just as much. The addition of capital to labour makes labour more productive. More productive labour gets paid more. So, in reality, there are gains from adding capital to labour: those gains being split between the capital and the labour.

    BTW, this wages rising as productivity rises. It’s only true as long as there are employers (ie, capitalists) vying for the ability to earn the profits from employing that newly more producitve labour. Marx did note this and this is one area where he was right.

    Thing is, the only societies we’ve had which didn’t have competing buyers of labour were…..the supposedly communist ones. Stalin was quite clear that he wanted to deliberately depress the returns to labour in order to increase the returns to state owned capital.

    Just another reason Karl would have been turning in his grave at what was done in his name.

  2. And as the share of pensions, welfare, green subsidies and maintainance bills for Tuscan villas increases, so the share of wages must decrease…

  3. “The immediate postwar period” is a bit of a dodgy comparison, given the vast proportion of UK national income immediately postwar that was dedicated to paying off the Americans.

  4. I’m sure that there are people reading this site who have a better grasp of economics than I do. lease could somebody explain to me about exploitation.

    I think a decent understanding of economics gets in the way of being able to explain exploitation. The other thing that has always puzzled me about the concept, is, take products that are jointly-produced. Say surgery – for surgery you need both a surgeon and an anaesthetist (or, before the discovery of ether, several strong men to hold the patient down). Lack either and the surgery would do no good – the surgeon can’t operate on someone who is running away from the pain and knocking someone out but not doing anything is a bit pointless. So how can they both be paid 100% of the value of what they produce?

  5. Tracy: I don’t believe in the labour theory of wages, because it’s ridiculous, but your objection is strawmannish: you split the value created between the different wage-earners based on how much value they created. Since Marx intended the theory to apply to factories, where multiple people work on a single output, it’s obvious that this isn’t an objection to the theory.

    (sensible objection to the theory is equally obvious: I have a job making widgets; my boss buys a machine which means I can make twice as many widgets using no other inputs; so should I get all the benefit of that productivity gain or not?)

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