A model for how First World wages are based on Third World exploitation

A model for how First World wages are based on Third World exploitation

Days before his first trip to Cuba, Pope Benedict XVI stated that “Marxist ideology [sic] in the way it was originally conceived no longer corresponds to reality.”

Left-leaning commentators concluded with, “says man in giant hat who speaks to invisible cloud people.” It is easy for leftists to poke at the pope’s archaic religious views and supposed authority. Yet the pope’s criticism shouldn’t be dismissed outright, especially because it has some truth to it.

Marxism as it was expressed in the 1800’s doesn’t correspond to material or social conditions today. However, Marxism as methodology necessarily changes its outlook according to changes in material conditions and shifts in class struggle. But this doesn’t entirely cut to the matter either. The pope didn’t need god to tell him what most people realize: that there are significant deficiencies and dogmatisms in mainstream Marxism today and that much of what is called ‘Marxism’ does not fully represent today’s reality. The pope didn’t say anything profound or deep. He was speaking to common perception.

There is one particularly deficient area where most Marxists fail in accounting for modern material conditions. In much of typical Marxism, there is consistent aloofness regarding the significance of the divide between rich over-developed countries and poor maldeveloped countries. 1 Given that the global divide is so basic and long-standing and that many contemporary Marxists continue to overlook the disparity, it is understandable how someone like the pope could call out such ‘Marxism’ for not corresponding to reality.

So the question remains, how can the gap between a handful of wealthy countries and a majority of poor ones be accounted for under a Marxist paradigm? How can Marx’s methodological approach account for the world today?

In some ways, coming to a Marxist understanding on the global gap requires us to toss out much of Marx’s specific conclusions. While some mainstream Marxists resist this, it is necessary if we are to realistically grasp and explain current phenomena.

One of the long-held conclusions in mainstream Marxism is that workers are necessarily exploited under capitalism. This is one of the conclusions which must be reevaluated if Marxism is to come to terms with the world as it actually is today.

The Numbers

The following examples provide an abstract model, based on the labor theory of value, of the mechanism by which value can be transferred between workers themselves. What is shown is how some workers can earn above the value of labor with part of their wages being drawn from the exploitation of others’ labor.

[The following examples refer to the illustration above]

Example 1, Simple Aggregate Model: This is the easiest way to demonstrate this model of aggregated capital accumulation under conditions with steeply tiered global labor markets. For the sake of ease of clarity, fixed capital is ignored in most of these equations. In example one, a capitalist takes $21 to pay for one hour of labor from worker A at $1/hr and one hour of labor from worker B for $20/hr. The end result is a commodity which the capitalist sells for $36 dollars, yielding a profit of $15. In this case, labor in its abstract (or ‘socially necessary’) form creates $18/hr in value [the full value of the commodity ($36), divided by the two hours which produced it], and this represents the value of labor.

In this example, worker B is paid $20 for an hour of labor power: this price of labor power is higher than the value of labor. In this case, for one hour of work worker B is able to purchase 1.11 hours of abstract labor. Consequently, worker A must work 18 hours to purchase the one hour of abstract labor. To clarify further: in this example, $17 in surplus value is exploited from worker A [the abstract value of labor ($18) minus the price of labor power paid as wages ($1)]. Of this $17, $15 is kept by the capitalist and $2 is handed to worker B on top of the full value of labor. Functionally, worker B is an exploiter.

Example 2, Simple Segment Model: This example demonstrates how the system appears and operates at the single-enterprise level. Specifically, it begins to demonstrate how the surplus value rendered through labor can be distributed to other workers. It also demonstrates how this system can operate from the standpoint of individual capitalists who are only directly employing one or the other worker.

In this example, Capitalist A buys one hour of labor from worker A at a price of $1/hr. Capitalist A then sells the commodity to capitalist B for a price of $1.71. In this segment of the capitalist process, it appears the capitalist drew .71 cents of surplus value and the total value of labor for worker A is $1.71. The commodity which passes through the initial (capitalist/worker A) circuit necessarily passes through a second (capitalist/worker B) circuit. 2 In the second part, worker B is paid by capitalist B $20/hr to further handle (e.g., transport, market, account, repackage, shelve, draw up a receipt for, etc) the commodity, after which it is sold for $36. In this case, the final price of the commodity ($36) includes both the ‘raw material’ provided at a price of $1.71 and $34.29 (which appears to be the value of labor for worker B), and it appears $14.29 is the surplus extracted by capitalist B from worker B. This example illustrates how under conditions of disparity wage strata, rates of segmental exploitation can remain fairly constant throughout. In a manner, this model demonstrates how the global economy works from the perspective of the individual capitalists. This is a narrow view also encapsulated by much of what is currently (erroneously) thought of as Marxist class analysis.

Example 3, Aggregated Segment Model: This model fully demonstrates the links between the first two models, and demonstrates how the surplus derived from the exploitation in one segment can be transferred throughout the entire process via the structuring of prices.

What is missed by Example 2 is the manner in which the disparity in price in labor is more than incidental. Price itself does not necessarily reflect value. Instead price is a mechanism through which value is circulated. This disparity between prices of labor didn’t magically happen. It is historically formed, deeply part of the modern system, and militantly enforced by imperial and neo-colonial regimes. This divide is structurally significant. It effects class alignments and the development of class struggle.

Where example 2 falls short is that is sees the process of capital accumulation as random forms of segment labor, not specific forms of labor abstracted as part of a general aggregated process. It fails to define abstract labor within the context of an interconnected historically-formed global economy. There are not multiple separate economies and societies under which production and accumulation are happening ignorant of each other. In the model, the roles that circuit A and B play represent historically-created relations based on power within a larger system of general capital accumulation. Indeed, capital can move around the world with little restriction whereas borders merely serve to bar Third World workers from the status of the hypothetical worker B.

In example three, worker A is paid $1 to work for an hour for capitalist A. From this labor, $17 is rendered as surplus. Capitalist A, in selling the commodity to capitalist B for $1.71, keeps $.71 of this surplus. Capitalist B pays worker B $20 for an hour of work with the commodity, then sells it on the market for $36. In doing so, part of the surplus drawn from worker A goes towards paying worker B $2 above the value of labor, and the remaining $14.29 of surplus is kept as profit by capitalist B. This is basically how example one was illustrated, only in a manner that is an aggregate of two connected processes.

Example 4, Socialist Revolution: In this example, the capitalists have been done away with and exploitation no longer exists. Worker A and B both work for a hour to produce a commodity with a value of $36. In this case, each worker keeps the full value of labor ($18). Yet curiously, for worker B this amounts to a $2 decrease in pay from the previous examples.

Conclusion

This abstract model is significant for a few particular reasons. First, it shows that in a system of drastically disparate wages, some workers can actually receive wages based on the exploitation of others. This raises an interesting notion. Insofar as the hypothetical worker B actually benefits from the system of accumulation, its class interest is different than that of worker A. The demand of worker A to end the system of exploitation implies a lowering of price of labor power for worker B. The higher wages demanded by worker B would necessarily be drawn from the surplus value created by worker A, even if it appears to come from the pocket of capitalist B.

The reality of global disparities between workers themselves, its significance for class struggle, and the further questions it raises are things Marxism must account for if it is to remain relevant and incisive today. Dogma and “Marxist ideology” explain little about the modern world. However, the methodological approach based on Marx’s own has not ceased to be paramount to understanding and changing the roots of today’s common phenomena.

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1That is not to say all Marxists have been silent or ignorant on this contemporary phenomena, but generally, mainstream Marxism has not included a serious evaluation of this phenomena.

2This is just a simple model which uses individual workers to illustrate regionally specific hierarchies in the price of labor power and a single commodity to represent a wide range of economic exchanges. Under actual conditions of global economy and due to the function of prices, this basic principle regarding the the origin and distribution of surplus value applies to all workers even if their labor doesn’t involve commodities exchanged internationally. This is because price, in varying from value, allows for the equalization of the rate of profit.