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David Coolidge

The Capitalist Theorists
and the Issue of Wages

(30 December 1946)

From Labor Action, Vol. 10 No. 52, 30 December 1946, p. 3.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

THE persistent demand of labor for higher wages to meet the rising cost of living resulted in a barrage of columns of analysis and counter-demands from the capitalist press and the big associations of employers. One such reply appeared in the financial pages of the New York Times under the signature of Edward H. Collins, financial editor. Collins’ piece is entitled: On the Debasement of Economic Theory. Collins begins with the observation that “The drive of the Congress of Industrial Organizations for a new round of wage increases is an interesting, if depressing, reminder of the fact that, with the possible exception of government spending, more sins have probably been committed in recent years in the name of ‘purchasing power’ than in that of any other single economic doctrine.”

There are many people who will disagree with Mr. Collins in naming the specific economic doctrine which has been used more in recent years for the commission of economic, political and social sins. For instance, there is the doctrine that capitalism is the best possible of all economic systems and must be perpetuated at all costs. Hitler tied his kite to this “economic doctrine” and, financed by big German industrialists, instituted fascism with its concentration camps and gas chambers. There is the “economic theory” or “law” of supply and demand which in some way was the theoretical basis for the demand to eliminate price controls. The “law” is working very well for its proponents with butter at 98 cents the pound. We are reminded, however, that this particular “economic doctrine” did not hold up so well in the period between 1929 and the beginning of the last world war, despite the fact that capitalist economists did yeoman service in its behalf.

We could mention many other “economic doctrines” which did not have their source in the ranks of labor unions or the working class, in whose names many sins have been committed. We could mention “inflation” and “deflation,” “gold standard,” “bimetalism” and a host of others which have kept the “experts” committing fall manner of sins even against each other.

Who Will Benefit

Mr. Collins, however, is not concerned with these mediums for the commission of sin. He wants “an expansion of the purchasing power of the people ...” but he doesn’t believe that the way to get it is the method used by the unions. They want an increase in wages. Collins agrees with Dr. Harold Moulton, president of Brookings Institute, that the way to expand purchasing power is to reduce prices without a reduction in wages. The road to a rising standard of living is the expansion of the purchasing power of the people. “... this doctrine has been the very foundation of the success of American mass production methods under private capitalism.”

If you reduce prices without reducing wages the whole population benefits according to Moulton and Collins. But, If “wage rates are increased, the immediate benefits are confined to the particular group of workers involved ...” This is certainly a curious “economic doctrine” and if true, the consequences of its application would be somewhat appalling. That is to say; If 900,000 steelworkers get an increase in wages nobody will benefit except steelworkers immediately. I suppose the catch is in the word “Immediate.” The assumption must be that these steelworkers carry their pay around in their pockets for months and months ’with a feeling of smug satisfaction that they are men of means. Yet every worker knows that he cannot hold onto his wages, but must spend it immediately on the necessities of life.

If prices are reduced and the line is held on wages, “this not only adds to the purchasing power of the labor group, but it increases the real income of the non-wage urban population ... the benefits are distributed throughout the entire economic system ...” To approach the question in any other way, according to the financial expert of the Times, is to perpetrate a “vulgarization of the purchasing power doctrine.” Not only is it vulgar to approach the question of purchasing power through demands for wage increases, but such an approach is also “oversimplified” and a “caricature.” This is very interesting. We have noted for some time that capitalist employers, their lawyers, accountants and supporters always object to workers making demands which are simple and direct. History shows, however, that wages do not keep pace with profits and high prices. Competition and stuffed warehouses and inventories, lack of buyers reduce prices – not stationary wages. If wage increases are not won, labor will only suffer more. Big business does not want workers to come into wage negotiations with only one set of books. Labor should emulate its betters: have at least three sets of books; for example, one set for the employees, one for the government and one for the stockholders. To do otherwise is “oversimplification” and a “vulgarization.”

The UAW Demands

Mr. Collins is particularly perturbed about the wage demands of the United Automobile Workers. These demands “show how opportunist labor leaders can turn such an economic legend to their advantage.” (The “legend” is the claim that wage increases somehow benefit those who get the increase.) “... to the extent that profits resulting from increased productivity were distributed, it was preferable that it be done through reduction in prices.” So said Dr. Moulton. Mr. Collins is very careful about his grammar and syntax here. The situation is conditional and a suitable syntax is required. Since there is no distribution of profits resulting from increased productivity, it is necessary to be very careful in the wording of one’s propaganda.

Collins has made the astounding discovery that “here, in the UAW, we see a union which within a few months of receiving a wage rise of 16 per cent is returning with fresh demands for another 30 per cent.” If you give them an inch they will take an ell! What the “opportunist labor leaders” ought to do is consult Dr. Moulton. He will explain to them how to get General Motors not to reduce wages while they bring down the price of their cars a few hundred dollars. Needless to say, Collins has nothing to say about the fact that the UAW is asking for another wage rise because he and Dr. Moulton have been unsuccessful in their “heroic” efforts to get the food processors, the packers, the clothing manufacturers and the landlords to use the “profits of Increased productivity” for reducing prices.

The Workers Party regrets that it must inform Dr. Moulton and Mr. Collins that we cannot accept, not their debasement of “economic theory,” but their economic theory itself. We know a better economic theory. In the first place the Workers Party subscribes to the theory that, twist as they may, the capitalist class, its economists, lawyers and financial experts, cannot brew any potion or devise any scheme which will cure the ills of capitalism. No matter how much they may engarland this rotting system with phrases about “purchasing power” through the reduction of prices, this social order will continue to rot and decay. The evidence can be found even in the article of Collins and the position of Dr. Moulton. They talk about reducing prices and never mention the fact that today prices are fixed, not by some really mythical economic doctrine of supply and demand, but by the big monopolists in the interest of monopoly capitalism. But Collins and Moulton never mention the word “monopoly.” Nor do they mention the fact that monopoly capitalism prefers to export the “surplus” rather than to sell at home at reduced prices.

For Workers Power

What worker would object to a reduction in the price of butter, meat or clothing? Who ever heard of labor demanding higher and higher wages as prices dropped lower and lower? Furthermore, where is it recorded that the capitalist employers and their press are fighting for lower prices? Simply lower prices, not to mention lower prices without a reduction in pay.

Our objection to the present demands of labor is that its demands are modest, not broad and inclusive enough. They only demand more wages as a rule. The working class does not see that to confine our demands within the framework of old-fashioned trade unionism is not enough. What would Dr. Moulton, Mr. Collins and the rest of them say to the demand that the workers take over production, manage it and determine their own wages? What would the capitalist economic experts say to the proposal made by the Workers Party that industry be nationalized and that such nationalized industry be under the control of the workers? Only then would Dr. Moulton see his program lower prices with no reduction in wages, put into operation. There would be abundant “purchasing power,” high productivity and continuous mass production. Mass production, not for amassing huge inventories but for supplying the needs of the people.

What would Dr. Moulton and the other capitalist economists say if the working class should take a notion to have its own independent labor party, its own government, army, courts, as well as its own laws determining the level of wages and prices. Dr. Moulton and his kind would probably call this “the debasement of economic theory.”

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