In the capitalist system, commodities are produced, not for use, but for exchange at a profit

John P Naidu writes that the lack of purchasing power of workers to absorb the output. Low wages makes high profit possible, but at the same time they make profit impossible because they reduce the demand for goods. An insoluble contradiction.

John P Naidu writes that the lack of purchasing power of workers to absorb the output. Low wages makes high profit possible, but at the same time they make profit impossible because they reduce the demand for goods. An insoluble contradiction.

Published Aug 20, 2023

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What is value? This question has perplexed the human mind for more than 2 000 years. The classical bourgeois economists grapple with the question as did Marx. After much deliberation, they correctly concluded that labour was the source of value.

In the capitalist system, commodities are produced, not for use, but for exchange at a profit. And unless you understand that from the outset, the causes of the crisis will be a closed book to you.

For example, with the growth of industry and the expansion of production, the output of goods increases unless the money in circulation is increased to keep pace with the increased flow of goods, prices will fall.

Suppose there are 500 shirts on the market and the consumers have $500 (R9 572) to pay for them. Each shirt will sell for $1. Suppose shirt makers turn out 1 000 shirts – unless an additional $500 is put into the hands of consumers, the price of the shirts will drop to 50c a piece.

To increase profit, capitalists are compelled to accumulate – ever accumulate. If accumulation of capital stops, the amount of profit (as well as the rate) falls.

The capitalist, however, knows that the more he pays his workers the less he has in profit. The accumulation which is essential for him to continue to make a profit is slowed down. He solves that part of the dilemma by paying as low wages as possible. This leaves him continuing to accumulate.

But ever-increasing accumulation means an ever-increasing number of commodities are thrown on to the market, and here he runs into the other half of the shears of the economic contradiction

The lack of purchasing power of workers to absorb the output. Low wages makes high profit possible, but at the same time they make profit impossible because they reduce the demand for goods. An insoluble contradiction.

The well-meaning people who advocate the payment of high wages to workers have overlooked this point. And there’s the rub, to get rid of crises – wrote Marx you must get rid of capitalism.

* John P Naidu, Durban.

** The views expressed here are not necessarily those of Independent Media.

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