Declining Wages and Rising Unemployment: The Effects, Not Cause of Falling Demand

A Response to Mr. Al Engler

Mr Engler, I must respectfully take issue with your article, ‘Capital Must Be Taxed’ (Dissident Voice, February 12th 2015) which repeats the old Keynesian myth that capitalist depressions are caused by “a fall in demand caused by declining wages and rising unemployment”. These phenomena are the effects but not the cause.

And rather than quoting Thomas Picketty’s, Capital in the Twenty-First Century, I would venture to suggest that one would do far better to read the original Capital published in the nineteenth-century; and, in addition, the associated work, Value, Price and Profit.

An inherent feature of the capitalist system is its Trade Cycle, and Marx is quite clear as to the causes of depressions within this. Marx argued that “capitalist production moves through certain periodical cycles. It moves through a state of quiescence, growing animation, prosperity, over trade, crisis and stagnation”. (Value, Price and Profit, chapter XIII).

In Capital, he further states: “It is a pure tautology to say that crises are provoked by a lack of effective demand or effective consumption… If the attempt is made to give this tautology the semblance of greater profundity, by the statement that the working class receives too small a portion of its own product, and that the evil would be remedied if it received a bigger share; i.e., if its wages rose, we need only note that crises are always prepared by a period in which wages generally rise, and the working class does receive a greater share in the part of the annual product destined for consumption. From the standpoint of these advocates of sound and ‘simple’ common-sense, such periods should rather avert the crisis.” Capital Vol. 2, Chap 20, Sect. 4. (italics added)

The reason there was high taxation and low unemployment in the 1940/50’s was because of post-WW2 reconstruction as admitted by the prominent Keynesian, Joan Robinson. Keynes might have been British but here in Britain, unemployment started to rise in the mid-1960’s and reached one million in the mid-1970’s. Since that time it has not dropped below that figure.

This has had the effect in a market built on ‘supply and demand’, of reducing the demand for labour and thus reducing its price; namely, wages. This, and the personal fear of unemployment, has affected what Marx called, “the relative strength of the combatants”– Capitalists have grown stronger and Labour much weaker.

The idea, therefore, that the alleged golden age of the Fifties and Sixties was due to ‘Democracy’ is a non-sequitur. If the cause was democracy (i.e., majority rule) how did it come to be that a minority (the rich) were able to subvert the interests of the common people? How did this ‘prevailing ideology’, as described in your article, come about?

The simple answer is in the nature of the capitalist system itself in which working people are always at an inherent disadvantage. In simple terms, the system always has to pay them less than the value of what they produce in order to create surplus value and thereby, profit and capital. Thus there ain’t no such animal as, “a fair day’s pay for a fair day’s work”—the misleading and ultimately anti-working-class slogan trotted out by so many—including, unfortunately, trade unions.

The implication in your article that capitalism, by various means, can be made to run in the interests of working people is, in fact, doing them a disservice. This is because, by promoting such ideas, you are effectively prolonging capitalism’s existence and delaying ideas for an alternative. Thus in fifty-year’s time, your grandchildren could be making similar claims to those made by yourself about making the slaughterhouse fit for running in the interests of the cattle.

Given your obvious concern for working people, is this really what you want?

Richard is a poet and amateur blues harmonica player who lives in the seaside town of Clacton on England's east coast. He's had approximately 70 poems published in England and Wales as well as a number of articles. He can be reached at: Read other articles by Richard.