What is “The Iron Law of Wages”? It is, as already stated, only Lassalle’s statement and interpretation of Ricardo’s “Law of Wages.” Ricardo expresses his law in these words: “The natural price of labor is that price which is necessary to enable the laborers, one with another, to subsist and to perpetuate their race, without either increase or diminution.” Ricardo has previously explained what is to be understood by market price and what by natural price. Market price is the price actually obtained for an article; the natural price is that which pays labor and the profits of capital. Through miscalculation, too much or too little of a commodity is at times offered on the market, and it departs from its natural price. If too little is offered, profits will be too high, and capital will rush to the production of the commodity in order to gain the unusual profits, until competition forces them down to the usual rate, or, very likely, below it, when capital will be withdrawn from the production of said commodity. So the market price fluctuates about the natural price with a continual tendency to return to it. Now, labor is a commodity, and may be increased or diminished in quantity like other commodities. In an advancing state of society the market price will be above the natural price, and may continue so for a long time; but early and frequent marriages and large families will produce all the labor required, and reduce it to its natural price eventually. In a declining state of society, on the other hand, labor would sink below its natural price, and the supply would diminish on account of frequent deaths, few marriages, and small families.
This law of wages may be difficult for those to comprehend who are not thoroughly familiar with economic discussions. In order to make it clearer, I will quote, with a few changes and abbreviations, a passage of some length from John Stuart Mill,[188] giving a lucid explanation of the law. “Mr. Ricardo assumes,” says Mill, “that there is everywhere a minimum rate of wages—either the lowest with which it is physically possible to keep up the population, or the lowest with which the people will choose to do. To this minimum he assumes that the general rate of wages always tends; that they can never be lower beyond the length of time required for a diminished rate of increase to make itself felt, and can never long continue higher. This assumption contains sufficient truth to render it admissible for the purposes of abstract science.... But in the application to practice it is necessary to consider that the minimum of which he speaks, especially when it is not a physical, but what may be termed a moral minimum, is itself liable to vary.” A rise of the price of food will permanently lower the standard of living of laborers, “in case their previous habits in respect of population prove stronger than their previous habits in respect of comfort. In that case the injury done to them will be permanent, and their deteriorated condition will become a new minimum, tending to perpetuate itself as the more ample minimum did before.” It is to be feared that this is the way in which a rise in the price of provisions usually operates. “There is considerable evidence that the circumstances of the agricultural laborers in England have more than once in our history sustained great permanent deterioration from causes which operated by diminishing the demand for labor, and which, if population had exercised its power of self-adjustment, in obedience to the previous standard of comfort, could only have had a temporary effect; but, unhappily, the poverty in which the class was plunged during a long series of years brought that previous standard into disuse, and the next generation, growing up without having possessed those pristine comforts, multiplied in turn without any attempt to retrieve them.” ... The salutary effect of a fall in the price of food is of no permanent value “if laborers content themselves with enjoying the greater comfort while it lasts, but do not learn to require it.... If from poverty their children had previously been insufficiently fed or improperly nursed, a greater number will now be reared, and the competition of these, when they grow up, will depress wages probably in full proportion to the greater cheapness of food. If the effect is not produced in this mode, it will be produced by earlier and more numerous marriages, or by an increased number of births to a marriage.” I believe Mill renders the law as plain as it can be made, without entering into subjects foreign to this work. The standpoint is this: labor is a commodity, like wheat or potatoes, which is increased or decreased according to the existing demand. The laborers live not for themselves, but solely for the higher classes, in particular, for the capitalists. This is the way Lassalle expresses it to the laborers of Frankfort in an eloquent speech, which has not yet ceased to be a power in Germany: “What is the consequence of that law, which, as I have proved to you, is accepted by all political economists? What is the consequence of the same? I ask. You believe, perhaps, laborers and fellow-citizens, that you are human beings—that you are men. Speaking from the standpoint of political economy, you make a terrible mistake. Speaking from the standpoint of political economy, you are nothing but a commodity, a high price for which increases your numbers, just the same as a high price for stockings increases the number of stockings, if there are not enough of them; and you are swept away, your number is diminished by smaller wages—by what Malthus calls the preventive and positive checks to population; your number is diminished, just as if you were vermin against which society wages war.” Lassalle then shows them how much shorter the average of life is among the laboring classes than among the wealthy. He demonstrates to them that poor and insufficient food means starvation. “There are, gentlemen,” says he, “two ways of dying of starvation. It, indeed, happens seldom that a man falls down dead in a moment from hunger; but when a man is subjected to a greater expenditure of power than he is able to replace, on account of poor food or a miserable mode of life—when he gives out more physical energy than he takes in—then, I say, he dies of slow starvation.”
Rehearse this in a thousand different ways and with all the resources of oratorical art, to laborers really ill-fed, ill-housed, and ill-clothed, and you shall indeed find yourself soon standing upon a volcano, whose forces are no longer latent and slumbering.
In his definition of capital Lassalle clothes the same thought contained in his “Iron Law of Wages” in other words. The definition reads as follows: “Capital exists where a division of labor obtains and where production consists in the creation of values in exchange, and in such a system of production it is the advance of labor already performed (congealed, coagulated labor), which is necessary to sustain the life of the producer. This advance of coagulated labor brings it to pass that the excess of labor’s product over and above what is necessary to support the life of the producer accrues to the person or persons who made the advance.”
The more one reflects upon this definition, the more meaning is discovered in it. It has furnished the text for many a social-democratic sermon. Like Marx, Lassalle holds that capital is based on a theft—on that theft, namely, “which deprived the masses of their right in the soil, in the earth—the common heritage of all.”
It is substantially the same doctrine which we have met with so often—viz., that labor alone is the source of wealth, and if capitalist and landlord could be swept out of existence the entire social product would go to the laborer. It resulted from a one-sided development of certain teachings of Adam Smith’s “Wealth of Nations.” “The produce of labor,” says Adam Smith, in one place—and, as will be seen, he means the entire product—“constitutes the natural recompense or wages of labor.
“In that original state of things which precedes both the appropriation of land and the accumulation of stock, the whole produce of labor belongs to the laborer. He has neither landlord nor master to share with him.
“Had this state continued, the wages of labor would have augmented with all those improvements in its productive powers to which the division of labor gives occasion. All things would gradually have become cheaper. They would have been produced by a smaller quantity of labor; and as the commodities produced by equal quantities of labor would naturally, in this state of things, be exchanged for one another, they would have been purchased likewise with the produce of a smaller quantity.”[189]
Repeat this to the man toiling and moiling for a bare subsistence, while he crouches before the employing capitalist surfeited in luxury; or to the poor tenant farmer, whose half-starved family can hardly find the wherewithal to cover their nakedness, while his absentee landlord indulges in the extravagant pleasures of a gay capital—and do you imagine that from it he will be slow to draw a very natural conclusion, and one fraught with tremendous practical consequences? If that originally and naturally belonged to him which another now enjoys, will he not long to return to the state of nature? As he reflects upon his wrongs and sufferings, will he not be filled with hatred towards that one who, as he thinks, unjustly and cruelly keeps him from the fruits of his labor? And as time goes on, and the hardships he endures sink more and more deeply into his mind, will he not finally, in desperation, resolve to put down his oppressor, be he landlord or be he capitalist, and to reverse, by the force of a strong right arm, an unnatural and artificial social organization?