The Transmission of Labor in the Age of the Factory
On the clock of the artisanal world, Smith formulated his ideas at the eleventh hour, when the development of a market in labor itself had become inescapably obvious but the commencement of the industrial revolution was as yet perceived only dimly. With the founding of the Ricardian school of economics at the beginning of the nineteenth century, the most widespread form of considered reflection on the economy in Britain moved to an explicitly industrial view of society. Ricardo envisioned a social order with three classes: owners of capital, owners of land, and wage earners in the owners' employ. He saw all workers as dependent laborers, and he
took the mechanization of production for granted. If political economy moved smoothly in the wake of economic change, reflecting and generalizing upon it, would not British thinkers come to discard the notion that wage laborers sold materialized labor? Smith had already found it difficult to reduce the wage contract to the exchange of products. Would not the sale of labor in the form of a product appear increasingly anachronistic in the age of the factory? For social investigators coming after Marx, it may seem more "accurate" to encode labor in the form of "labor power." But this partiality reduces culture to a reflection of social organization. When Ricardo set out to clarify the role of labor in economic life, he did not reject but reinvigorated older suppositions about labor as a commodity.
In his Principles of Political Economy , composed more than forty years after Smith's Wealth of Nations , Ricardo identified some of the major confusions in his predecessor's work. Ricardo uncovered the surreptitious moves Smith made between two specifications of how labor determines the value of commodities: as Ricardo summarized the difference, sometimes by "the quantity of labour bestowed on the production" of the commodity, sometimes by "the quantity of labour which that commodity would purchase." To set the matter straight, Ricardo declared that only with the first definition could an invariant measure of value be obtained. He reached this conclusion by observing that the value of labor in exchange varied—that is, the quantity of labor in the goods that the worker could buy in return for selling his own labor fluctuated with market conditions. By comparison, Ricardo believed that the quantity of labor the worker bestowed on a product provided a fixed standard for comparing the value of goods in the face of apparent shifts in exchange values. Ricardo reasoned that if a commodity suddenly required a lesser quantity of labor for its production due to technological improvement, that commodity would be exchanged for a lesser quantity of embodied labor.
Given the initial trajectory of his thinking, Ricardo might well have arrived at the view that the owner purchased labor as if it were a potential rather than as if it were already materialized in a product. After all, the very first line of his book, by which he definitely announced his entry onto the front stage of the British intellectual drama, sent him on a straightforward path: "The value of a commodity . . . depends on the relative quantity of labour which is necessary for its production, and not on the greater or lesser compensation which is paid for that labor." He could not have chosen a more auspicious starting point for considering discrepancies between labor costs and labor quantities. His emphasis on the quantity of labor might have led him to consider how employers derive varying quantities of labor from their workers' potential. Yet he retained the idea that labor was delivered in the form of a product even under penalty of introducing inconsistency into his system.
Whereas Smith resorted to his second definition of value in exchange when he observed that with the advent of reliance upon accumulated stock in production the wage of the worker is no longer equal to the entire value of the products created, Ricardo's approach assumes that the transition to capitalist conditions of production in no way compromises Smith's first definition of value, based on the labor materialized in a product. If the relative prices of commodities are determined by the quantities of labor they contain, this remains true no matter how much of this quantity of labor is reimbursed to the workers as a wage. So Ricardo thinks only Smith's
first formulation of value, based on the labor bestowed on a commodity, is accurate: "If the reward of the labourer were always in proportion to what he produced, the quantity of labour bestowed on a commodity, and the quantity of labour which that commodity would purchase, would be equal, and either might accurately measure the variations of other things: but they are not equal." If we impose on this formulation a set of categories alien to Ricardo, we can say that the two quantities represent forms of the same thing, labor, but materialized versus living labor. If the difference between them is only a matter of form, why should they not be equals in exchange? With the help of Marx's tradition, we can pose the question. Ricardo could not. For him they were equal because they were the same. When he observed the inequality he saw, not two different forms of labor, but labor products delivered with the help of capital versus labor traded against labor.
Although Ricardo professes to make a theoretical choice in favor of the quantity of labor bestowed on a good as the measure of value, his analysis actually uses the cost of labor as that measure. The most obvious evidence for this slippage lies in his arithmetical examples throughout the Principles. Ricardo expects the reader to understand that if two owners pay the same amount in wages, they receive the same quantity of labor. If Ricardo identifies the cost of labor with the quantity received, he omits the employer's utilization of the labor as a step that decides how much labor the employer actually receives. Did he ignore this process as a simplifying assumption? Could he not have thought that the variations among employers in the quantity of labor actually extracted from the worker for a certain wage averages out for the economy as a whole? And then, in the aggregate, why could he not equate quantity received with cost? Ricardo's use of the famous "wages fund" theory rules out this interpretation. This doctrine starts from the assumption that capitalists in a society "advance" wages to the workers out of their total
stock of capital. The capitalists decide in advance what amount of this stock to allocate for the maintenance of productive labor and what part to consume themselves, that is, their budgeting determines the amount of capital "destined" for the payment of wages. Ricardo assumes that if the amount of capital allocated for the payment of wages in a society declines, then, all else being equal, the quantity of labor purchased by employers declines in the same proportion. They cannot use the falling demand for labor to get the real unit cost of labor to decline. (As Marx pointed out, by treating the length of the workday as fixed and irrelevant, Ricardo ignored the process of using labor power itself.) Therefore the reduction of the quantity of labor to its cost does not just represent an averaging out of the use that capitalists can make of labor at the same point in time. It means that even in different circumstances the capitalists cannot make better "use" of or extract more work out of the labor they buy—they purchase it as if it were already embodied.
The second implication of Ricardo's reduction of the quantity of labor to its cost is that it can make his argument appear circular. Samuel Bailey, an early and vociferous critic of Ricardo, called attention to this in 1825:
Mr. Ricardo, ingeniously enough, avoids a difficulty, which on a first view, threatens to encumber his doctrine, that value depends on the quantity of labour employed in production. If this principle is rigidly adhered to, it follows, that the value of labour depends on the quantity of labour employed in producing it—which is evidently absurd. By a dextrous turn, therefore, Mr. Ricardo makes the value of labour depend on the quantity of labour required to produce wages, or, to give him the benefit of his own language, he maintains, that the value of labour is to be estimated by the quantity of labour required to produce wages, by which he means, the quantity of labour required to produce the money or commodities given to the labourer. This is similar to saying, that the value of cloth is to be estimated, not by the quantity of labour bestowed on its production, but by the quantity of labour bestowed on the production of the silver, for which the cloth is exchanged.
Even if Bailey misrepresents Ricardo's argument, he insistently identifies labor with its product at moments when he might well have considered labor power itself as a ware. Read literally, Bailey appears correct in saying that "the value of labour depends on the quantity of labour employed in producing it" is nonsensical. As a declaration in which "labor" actually refers to "labor power," however, the words follow perfect logic and anticipate Marx's conceptual shift. A habitual process of interpretation in Britain reduced "labor" to its exchangeable product and rendered a potentially insightful formulation "evidently absurd."
As is well known, Ricardo's formulation of the labor theory of value became the dominant form of economic reasoning both among specialized theorists and among popularizers of political economy. One of Ricardo's earliest followers, James Mill, imagined the factory worker as the owner of the finished product who negotiated with his employers over how much of his realized output he would yield. Mill classified the wage as a form of payment in advance because the worker received it before the product had actually been disposed of in the market. In Elements of Political Economy , Mill wrote that:
the commodity, when produced, belongs in certain proportions to both [capitalist and laborers]. It may happen, however, that one of these parties has purchased the share of the other, before production
is completed. . . . In point of fact, it does happen, that the capitalist, as often as he employs labourers, by the payment of wages, purchases the share of the labourers. When the labourers receive wages for their labour, without waiting to be paid by a share of the commodity produced, it is evident that they sell their title to that share. The capitalist is then the owner, not of the capital only, but of the labour also.
Here the capitalist cannot even be said to have purchased any labor until he buys a completed product. Mill transformed the transaction between the capitalist and the worker into an ordinary exchange between commodity owners, both of whom trade labor already embodied in products—materialized labor.
The postulate that employers purchased only materialized labor became a standard assumption in British political economy. Peter Gaskell, in his celebrated book on The Manufacturing Population of England , suggested that labor had no exchange value until it entered the sphere of circulation as a finished product. "Of itself it [labor] is nothing . . .," he said,"—it must be stamped or moulded to bring it into a state fit for useful exchange." John Stuart Mill, perhaps the most famous purveyor of the nineteenth century's common sense, supposed that wage laborers received loans from their employers, for they were paid before the finished products which they gave their employer had been disposed of in the market. Were employees
to wait for payment of a wage until their labor products were resold on the market, they would become capitalists like their employers: investment in products for resale, not authority over labor power, defines the capitalist's role in the employment relation.
The conception of the transmission of labor presented in high theory coincided with that presented in the journals of the factory workers' insurgency during the 1830s. When the factory workers' press theorized the employment relation as a kind of economic exchange, it described the purchase of labor as concretized in a ware. For example, The Poor Man's Advocate said in 1832 that the mill owner who purchased a "stipulated quantity of labor" from workers was comparable to a customer who bought finished cloth in a store.
The course of development of British political economy poses a genuine riddle when one recalls how the accepted definition of value, the quantity of labor embodied, might have caused economists to consider the actual determinants of the quantity of labor delivered. If Adam Smith confused the hiring of labor with the purchase of its product, this might be attributed to the ambiguities that often accompany the founding of a new science. But if Ricardo and his followers, conscious of the need for revision, confused labor with its product, their failure identifies the restricted ways in which the British could imagine abstract labor as an economic factor at all. Of course, British commentators were perfectly capable of describing labor not as a product but as a force. The class of workers supplies "a given quantity of power for the production of commodities," E. S. Cayley wrote in 1830. But remarks such as this define labor as a resource at large. They do not retain this formulation when they analyze the mechanisms by which labor is conveyed in a commercial transaction.
In the analysis of the social mechanisms of capitalism, the signifier labor served two functions in classical British political economy. First, it establishes the medium for expressing prices, the framework within which prices can mean something. In its second function, labor generates the particular messages that the general medium transmits: it specifies the particular values and the movement of values among commodities. In The Principles Ricardo moves back and forth without distinction between these two symbolic functions. Thus, when he says that labor "determines" prices, this can mean either that it fixes prices or, at other places, that it lets one ascertain prices. Ricardo conflates these two functions by using the words regulate and measure interchangeably. In the end, abstract labor came into sight for the British only in the process of exchange. They could not compare labor as a capacity in production or as an activity, only via the finished goods that were traded against each other. The generalizing of labor occurred at the completion of the production process. Nassau Senior, for example, excluded economically productive actions from the category of "labour" unless people performed them for the purpose of exchange.
An emblematic contradiction between form and content runs through the Wealth of Nations: the argument makes labor the fount of value, preparatory to sale, whereas the language of analysis treats the labor activity—production—as itself a vending transaction. Smith declares, "Labour was the first price, the original purchase money that was paid for all things. It was not by gold or silver, but by labour, that all the wealth of the world was originally purchased." As the German commentator Theodor Bernhardi remarked in 1847, Smith here equates the original process of production—the creation of a good through the labor activity—with the socially organized way of acquiring goods through monetary exchange. When Smith discusses the determination of the level of wages, he transforms the labor of the isolated worker into a system of trade. "The produce of labour," he
asserts, "constitutes the natural recompence or wages of labour." He frequently uses phrases such as the "labour commonly employed in acquiring or producing any commodity," another expression which makes production analogous to acquisition by exchange. Every person who sells his labor, Smith says, "becomes in some measure a merchant," a turn of speech that places the laborer and the tradesman (who merely deals with finished goods) in similar roles.
No wonder Smith's usage makes no distinction between commerce and industry. He assimilated the process of production to that of exchange. Spokespersons for the common people of Britain in the nineteenth century expressed the same point of view. When they criticized the capitalists' abuse of their power, they defined the capitalists not by their position in production but by their position as manipulative peddlers in the market. The holders of capital, William Heighton explained to trade union members in 1827, "effect exchanges by proxy, without working at all themselves and accumulate the wealth which other people's labour has created through the medium of profit."
The British identification of the commodity of labor in the sphere of circulation left its impression upon the English language. The British, but not the Germans, felt the need to emphasize a single word as the signifier of production undertaken for the sake of exchange. History kindly provided an Anglo-German mediator who noticed this long ago. Friedrich Engels called it to the attention of both German and British readers in translations and annotated editions of Kapital. As Engels discovered, the English language in the course of the eighteenth and nineteenth centuries came to rely upon work to refer to the qualitative activity of making use values; whereas labor , the only word that indicated diverse activities as serving a general productive function, became the marker for the activity considered as an abstract creator and quantitative measure of exchange value. Certainly
Smith testified to this usage when he argued that "there may be more labour in an hours hard work than in two hours easy business."
The difference in meanings between work and labor in economic discourse did not lie in them as a potential waiting to come to life with the historical development of wage labor; people strove to create the distinction in the course of the eighteenth century. Sir James Steuart, for example, had put forward the same conceptual distinction before Smith but had marked it with another arbitrary pairing of terms, that of simple labor , production for use, versus industry , production for exchange. Steuart's writings show that the need to mark the difference in perspectives on the work activity—the need the terms work and labor happened later to fulfill—preceded the actual semantic differentiation. Therefore we cannot attribute this differentiation to the stock of words that English, as opposed to German, fortuitously had at its disposal. The Germans had equivalent lexical options available to them. The English term work derives from the same source as the German verbs werken and wirken and, before the rise of liberal commercialism, had a parallel range of meanings. Likewise, the Germans had at their disposal the verb arbeiten to correspond to labor , inasmuch as the German term, too, was originally associated with the Latin concept of
painful exertion or molestia. The Germans did not consecrate the words available to them to differentiate between production for use and production for exchange, although werken survived into the first half of the nineteenth century as a verb referring to productive activity. We can conclude that the divergence reflects a difference in the concepts with which people apprehended economic activity, given the original similarity in lexical resources but the final difference between German and British usage. As components of popular languages, these terms and the conceptual operations to which they corresponded were the property in common of economic agents in each country, not the preserve of speculative intellectuals.