The Myth of the Labor Aristocracy, Part 1

— Charles Post

(Note: There are two tables and a graph that accompany this article, but are only available in the print edition.)

[This is the first of a two-part of this essay will appear in our next issue. Read the second part online.]

THE PERSISTENCE OF reformism and outright conservatism among workers, especially in the imperialist centers of North America, Western Europe and Japan, has long confounded revolutionary socialists. The broadest outlines of Marxist theory tell us that capitalism creates it own "gravediggers" - a class of collective producers with no interest in the maintenance of private ownership of the means of production. The capitalist system's drive to maximize profits should force workers to struggle against their employers, progressively broaden their struggle and eventually overthrow the system and replace it with their democratic self-rule.

The reality of the last century seems to challenge these basic Marxist ideas. Despite occasional mass militancy and even proto-revolutionary struggles, the majority of the working class in the developed capitalist countries have remained tied to reformist politics - a politics premised on the possibility of improving the condition of workers without the overthrow of capitalism.

While living and working conditions for workers in the "global North" have deteriorated sharply since the late 1960s, the result has not been, for the most part, the growth of revolutionary consciousness. Instead we have seen reactionary ideas - racism, sexism, homophobia, nativism, militarism - strengthened in a significant sector of workers in the advanced capitalist countries. Since the late 1970s, nearly one-third of U.S. voters in union households have voted for right-wing Republicans.(1)

This paradox poses a crucial challenge for revolutionary Marxists. However, we need to avoid "mythological" explanations, imagined explanations for real phenomena, whether to interpret natural events or to explain the nature of society.  Unfortunately, one of the most influential explanations within the left for working class reformism and conservatism - the theory of the "labor aristocracy" - is such a myth.

Theory of the "Labor Aristocracy"

Frederick Engels first introduced the notion of the "labor aristocracy" in a number of letters to Marx stretching from the late 1850s through the late 1880s.(2) Engels was grappling with the growing conservatism of the organized sectors of the British working class. He argued that those British workers who had been able to establish unions and secure stable employment - skilled workers in the iron, steel and machine making industries and most workers in the cotton textile mills - constituted a privileged and "bourgeoisified" layer of the working class, a "labor aristocracy."

British capital's dominance of the world economy - its industrial and financial "monopoly" - allowed key employers to provide a minority of workers with relatively higher wages and employment security. Engels saw the resulting relative privilege, especially when compared with the mass of poorly paid workers in unstable jobs, as the material basis of the growing conservatism of the British labor movement.

The contemporary theory of the labor aristocracy is rooted in the work of V.I. Lenin on imperialism and the rise of "monopoly capitalism." Lenin was shocked when the leaders of the European socialist parties supported "their" capitalist governments in the First World War. The victory of what he called "opportunism" (his term for reformism) confounded Lenin, who had dismissed the development of "revisionism" (Edward Bernstein's challenge to classical Marxism in 1899) as the ideology of socially isolated, middle-class intellectuals. Lenin believed the "orthodox Marxist" leadership of the socialist parties and unions had long ago vanquished the revisionist challenge.

Lenin had therefore expected that the European socialist leaders would fulfill their pledge, ratified at numerous congresses of the Socialist International, to oppose their ruling classes' war drive with strikes and social disruption. By 1915, Lenin had begun to develop his explanation for the victory of opportunism in the socialist and labor movements. In his article "The Collapse of the Second International," Lenin argued:

"The period of imperialism is the period in which the distribution of the world among the 'great' and privileged nations, by whom all other nations are oppressed, is completed. Scraps of the booty enjoyed by the privileged as a result of this oppression undoubtedly fall to the lot of certain sections of the petty- bourgeoisie and the aristocracy and bureaucracy of the working class."(3)

This segment "represents an infinitesimal minority of the proletariat and the working masses" whose "adherence… with the bourgeoisie against the mass of the proletariat" was the social basis of reformism.

Lenin located the economic foundation of the labor aristocracy in the "super-profits" generated through imperialist investment in what we would today call the "third world" or "global South." According to his 1920 preface to Imperialism: The Highest Stage of Capitalism:

"Obviously, out of such enormous super profits (since they are obtained over and above the profits which capitalists squeeze out of the workers of their "own" country) it is possible to bribe their labor leaders and an upper stratum of the labor aristocracy. And the capitalists of the "advanced" countries do bribe them: they bribe them in a thousand different ways, direct and indirect, overt and covert."

"This stratum of bourgeoisified workers or "labor aristocracy," who have become completely petty-bourgeois in their mode of life, in the amount of their earnings, and in their point of view, serve as the main support of the Second International [the reformist socialists - CP] and, in our day, the principal social (not military) support of the bourgeoisie. They are the real agents of the bourgeoisie in the labor movement, the labor lieutenants of the capitalist class, the real carriers of reformism and chauvinism."(4)

The theory of the labor aristocracy remains an important explanation of working-class reformism and conservatism for important segments of the far left in the industrialized countries. While the mainstream Communist Parties generally distanced themselves from the notion of the labor aristocracy as they moved toward reformist politics in the late 1930s,5 certain left-wing opponents of the Communist Parties continue to defend the theory.

Thus, in the "New Communist Movement" of the 1970s and 1980s, various currents defended the notion that a layer of U.S. workers shared in the "super profits" of imperialism and monopoly capitalism. Max Elbaum (the author of the influential Revolution in the Air(6)) and Robert Seltzer, then leaders of the prominent "new communist" group Line of March, published a three part explication and defense of the theory of the labor aristocracy in the early 1980s.(7)

More recently, Jonathan Strauss of the Australian Democratic Socialist Party (DSP), one of the larger revolutionary organizations in the English-speaking world whose origins lie in Trotskyism, has published a series of articles in the DSP sponsored journal Links(8) that elaborates upon Elbaum and Seltzer's defense of the theory of the labor aristocracy.

Important groups of activists, in particular those working with low-wage workers, are also drawn to the theory of the labor aristocracy. Four members of the People Organized to Win Employment Rights (POWER), a workers' center organizing mostly "low-wage/no-wage" workers of color in the San Francisco area, argued that:

"Another feature of imperialism that distinguishes it from earlier eras of capitalism is the imperialist powers' creation of a "labor aristocracy." The dominant position of the imperialist nations allows these nations to extract super-profits. The ruling elite of imperialist nations use some of the super-profits to make significant economic and political concessions to certain sectors of that nation's working class. Through higher wages, greater access to consumer goods and services and expanded social wage such as public education and cultural institutions, the imperialist elite are able to essentially bribe those sections of the working class…

"For a contemporary example of this, all we have to do is look at the 2004 presidential elections. Statistics show that working class whites in the United States voted overwhelmingly for George W. Bush in an election that could be read as a referendum of the empire's war on the Iraqi people. An analysis that solely focuses on class would suggest that working class whites had and have an interest in opposing a war that, if nothing else, is costing them billions in dollars. But clearly that ain't what happened. Working class whites voted overwhelmingly in support of the war on the Iraqi people. The majority of working class whites, despite their own exploitation, tie their own interests to white supremacy and the dominance of "America" in the world."(9)

Most current versions of the labor aristocracy thesis recognize some of the grave empirical problems (see below) with Lenin's claims that higher wages for a significant minority of workers in the imperialist countries comes from the super profits earned from the exploitation of lower paid workers in Africa, Asia and Latin America.(10) Instead, they tend to emphasize how the emergence of "monopoly capitalism" allows large corporations that dominate key branches of industry to earn super profits, which they share with their workers in the form of secure employment, higher wages and benefits.

Contemporary defenders of the labor aristocracy thesis argue that prior to the rise of large corporations in the late 19th and early 20th centuries, capitalism was in its "competitive" stage. Under competitive capitalism most branches of industry saw a large number of relatively small firms competing with one another through price cutting.

If any particular firm or industry began to experience higher than average profits because of the introduction of new machinery, it was relatively easy for its competitors to either adopt the new technology or shift investment from industries with lower profits to industries with higher profits. Through this process of competition within and between branches of production, new technology was rapidly diffused and capital easily moved between different sectors of the economy, resulting in uniform technical conditions within an industry and equal profit rates within and between industries.

According to Elbaum and Seltzer, Marx's analysis of the equalization of the rate of profit11 applied to the "competitive" phase of capitalism:

"In the era of competitive capitalism, profits above the average rate, i.e. surplus profits, were generally spasmodic and temporary. They were usually derived as a result of technological advances that enabled a capitalist to reduce costs below the industry average, or entrepreneurial skills that opened new markets. However, an abnormally high rate of profit by an individual firm, or in a particular branch of industry, was soon undermined by an inflow of capital seeking the higher rate of profit or by the relatively rapid adoption of cost-cutting innovations by competitors."(12)

The rise of large scale corporations in the 20th century create "institutional or structural restrictions of this process" which "result in monopoly super profits."(13) "Monopoly" or "oligopoly" - where a small number of firms dominate a given industry - replaced competition. Specifically, the enormous cost of new capital's entering these industries (auto, steel, etc.) - the barriers to entry -- allow these firms to limit competition and sustain above average profits in several ways.

These barriers to entry prevent the rapid diffusion of new methods of production across industries, creating what Ernest Mandel called "technological rents" or super-profits(14) for these monopoly corporations. These barriers also prevent capital from moving from low profitability to high profitability industries, blocking the equalization of profit rates. Finally, barriers to entry and restricted competition allow corporations to raise prices above their prices of production, securing super profits for the largest firms in the economy.(15)

In this view competition does not disappear under monopoly capitalism, but tends to operate primarily in those sectors of the economy where large numbers of relatively small firms continue to predominate. Cut-throat competition and the rapid depression of above average profits to the average rate persist in the "competitive" sectors (garment, electronics, etc.) of the economy. There the small scale of investment necessary to start a competitive firm lowers barriers to entry and allows a large number of small firms to survive.

The result is a "dual economy," with two distinct profit rates:

"In the monopoly stage of capitalism, the tendency to form an average rate of profit still exists, since monopoly doesn't obliterate competition in the system as a whole. But it is modified by monopoly power. Therefore, the surplus value of society is distributed both according to size of capital through inter-industry competition (which yields equal profit on equal capital as in competitive capitalism); and according to the level of monopolization (which yields monopoly super profits). Monopolies receive both the average profit and monopoly super profit. Consequently, there arise the phenomena of a relatively permanent hierarchy of profit rates ranging from the highest in the strategic industries with large-scale production and the strongest monopolies, to the lowest in weaker industries with small-scale production, intense competition and market instability."(16)

According to Strauss, Elbaum and Seltzer, monopoly super profits become the primary source of the "bribe" for the contemporary labor aristocracy. The monopoly industries' higher than average profit rates allow these firms to provide higher than average wages and benefits and secure employment to their workers. By contrast, competitive industries earn average (or below average) profit rates and doom workers in these industries to below average wages and benefits and insecure employment.

From this perspective, effective unions are only possible in the monopoly sector of the economy, where the absence of competition creates super profits and allows corporations to "bribe" workers with higher wages and more secure employment. Given the realities of racism and national oppression, "white" workers tend to be overrepresented in the higher paid sectors of the economy, while workers of color tend to be overrepresented in the lower paid sectors of the economy.

The labor aristocracy, as today's theorists see it, is no longer made up primarily of skilled machinists and other industrial workers, as was the case in the early 20th century. Today, the more highly paid workers in the unionized monopoly and public sector constitute a labor aristocracy whose higher wages derive from the super-exploitation of workers in the competitive sectors of the advanced capitalist economies.(17)

Despite its intellectual pedigree and longevity, the labor aristocracy thesis is not a theoretically rigorous or factually realistic explanation of working-class reformism or conservatism. This essay undertakes an examination of the theoretical and empirical economic claims of the labor aristocracy thesis.

We will first evaluate the claim that super profits pumped out of workers in the global South underwrite a "bribe" in the form of higher wages for a minority of the working class in the global North. The essay then evaluates the claim that limits on competition flowing from industrial concentration in key sectors of the economy produces differential profits rates and wages. We will conclude our critique of the theory of the labor aristocracy with an analysis of the actual history of radical and revolutionary working-class activism in the 20th century.

Finally, I will present an alternative explanation of the persistence of working class reformism and conservatism - one rooted in the necessarily episodic character of working-class self-organization and activity, the emergence of an officialdom (bureaucracy) in the unions and pro-working class political parties, and the inability of reformist politics to effectively win or defend working-class gains under capitalism.(18)

Investment, Wages and Profits

Imperialist investment, particularly in the global South, represents a tiny portion of global capitalist investment.(19) Foreign direct investment makes up only 5% of total world investment - that is to say, 95% of total capitalist investment takes place within the boundaries of each industrialized country.

Of that five percent of total global investment that is foreign direct investment, nearly three-quarters flow from one industrialized country - one part of the global North - to another. Thus only 1.25% of total world investment flows from the global North to the global South. It is not surprising that the global South accounts for only 20% of global manufacturing output, mostly in labor-intensive industries such as clothing, shoes, auto parts and simple electronics.

Data for profits earned by U.S. companies overseas do not distinguish between investments in the global North and global South. For purposes of approximation, we will assume that the 25% of U.S. foreign direct investment in labor-intensive manufacturing in Africa, Asia and Latin America produces profits above those earned on the 75% of U.S. foreign direct investment in more capital-intensive production in western Europe, Canada and Japan. It is unlikely, however, that more than half of the profits earned abroad by US companies are earned in the global South.

Thus, assigning 50% of foreign profits of U.S. companies to their investments in the global South probably biases the data in favor of claims that these profits constitute a significant source of total U.S. wages. Yet even accepting such a biased estimate, the data (Table I and Graph I) for the period 1948-2003 supports Ernest Mandel's assertion that U.S. profits from investment in the global South "constitute a negligible sum compared to the total wage bill of the American working class."(20)

Prior to 1995 total profits earned by U.S. companies abroad exceeded 4% of total U.S. wages only once, in 1979. Foreign profits as a percentage of total U.S. wages rose above 5% only in 1997, 2000 and 2002, and rose slightly over 6% in 2003. If we hold to our estimate that half of total foreign profits are earned from investment in the global South, only 1-2% of total U.S. wages for most of the nearly 50 years prior to 1995 - and only 2-3% of total U.S. wages in the 1990s - could have come from profits earned in Africa, Asia and Latin America.

Such proportions are hardly sufficient to explain the 37% wage differentials between secretaries in advertising agencies and "labor aristocracy" machinists working on oil pipelines, or the 64% wage differentials between janitors in restaurants and bars and automobile workers.(21)

Does this analysis mean that imperialism - rooted in the export of capital (and capitalist class relations) across the globe - has no impact on profits and wages in the global North? No - but the impact is quite different from what the labor aristocracy thesis predicts.

In Capital, Volume III,(22) Marx recognized that foreign investment was one of a number of "countervailing" tendencies to the decline of the rate of profit. Put simply, the export of capital from the global North to the global South, especially when invested in production processes that are more labor intensive than those found in the advanced capitalist countries, tends to raise the mass and rate of profit in the North. There is indeed some evidence that foreign profits - from investments in both the global North and global South - constitute an important counter tendency to declining profits in the United States.

Profits earned abroad by U.S. companies as a percentage of total U.S. profits (Table I and Graph I) have risen fairly steadily since 1948, rising from a low of 5.19% in 1950 to a high of 30.56% in 2000.(23) The proportion of U.S. profits earned abroad jumped sharply after the onset of the long-wave of stagnation in 1966, jumping from 6.43% in 1966 to 18.36% in 1986.

Even more indicative is the relationship between annual percentage changes in domestic and foreign U.S. profits (Table II). In a number of years (1967-1970, 1972-1974, 1978-1980, 1986-1990, 1994-1995, 1997-2001, 2003), the annual percentage change for foreign profits was higher than the annual percentage change for domestic profits. In some of these years (1967, 1969-1970, 1974, 1979-1980, 1989, 1998, 2000-2001), total profits earned in the U.S. declined while total profits earned abroad increased.

Higher profits result in more investment across the board in the industrialized countries. More investment eventually brings a growing demand for labor (within limits set by investment in newer, more capital intensive technology), falling unemployment and rising wages for all workers in the industrialized capitalist countries.

Put simply, this means that imperialist investment in the global South benefits all workers in the global North - both highly paid and poorly paid workers. Higher profits and increased investment mean not only more employment and rising wages for "aristocratic" steel, automobile, machine-making, trucking and construction workers, but also for lowly paid clerical, janitorial, garment and food processing workers. As Ernest Mandel put it, "the real 'labor aristocracy' is no longer constituted inside the proletariat of an imperialist country but rather by the proletariat of the imperialist countries as a whole."(24) That "real 'labor aristocracy'" includes poorly paid immigrant janitors and garment workers, African-American and Latino poultry workers, as well as the multi-racial workforce in auto and trucking.(25)

Clearly, these "benefits" accruing to the entire working class of the industrialized countries from imperialist investment are neither automatic nor evenly distributed. Rising profits and increased investment do not necessarily lead to higher wages for workers in the absence of effective working- class organization and struggle.

During the post-World War II long wave of expansion, the industrial unions that had arisen during the mass strike wave of 1934-37 were able to secure rising real wages both for their own members and the bulk of the unorganized working classes. However, since 1973, the labor movement in the United States and the rest of the industrial countries has been in retreat.

Real wages for U.S. workers, both union and nonunion, have fallen to about 11% below their 1973 level, despite strong growth beginning in the late 1980s.(26) Higher than average profits have accrued, first and foremost, to capital, allowing increased investment; and to the professional-managerial middle class in the form of higher salaries.

Nor are the "benefits" of increased profitability and growth due to imperialist investment distributed equally to all portions of the working class. As we will see below, the racial-national and gender structuring of the labor market result in women and workers of color being concentrated in the labor-intensive and low-wage sectors of the economy.

Whatever benefits all workers in the global North reap from imperialist investment in the global South are clearly outweighed by the deleterious effects of the expansion of capitalist production on a world scale. This is especially clear today, in the era of neoliberal "globalization."

Although industry is clearly not "footloose and fancy free" as some theorists of globalization claim - moving from one country to another in search for the cheapest labor(27) - the removal of various legal and judicial obstacles to the free movement of capital has sharpened competition among workers internationally, to the detriment of workers in both the global North and South.

The mere threat of moving production "off-shore," even if the vast majority of industrial investment remains within the advanced capitalist societies, is often sufficient to force cuts in wages and benefits, the dismantling of work rules and the creation of multi-tiered workforces in the United States and other industrialized countries. Neoliberalism's deepening of the process of primitive accumulation of capital - the forcible expropriation of peasants from the land in Africa, Asia and Latin America - has created a growing global reserve army of labor competing for dwindling numbers of fulltime, secure and relatively well paid jobs across the world.

Put simply, the sharpening competition among workers internationally more than offsets the "benefits" of imperialism for workers in the global North.(28)

Monopoly, Super-Profits and Wage Differentials

The claim that monopoly super-profits, resulting from industrial concentration and the limitation of competition in key sectors of the economy, produce higher than average wages - and a labor aristocracy of unionized workers - is also open to empirical challenge. During the long boom of the 1940s, 1950s and 1960s, certain branches of production did seem to enjoy stable higher than average profits and wages flowing from the rise of oligopolies. However, as that boom turned into the long stagnation beginning in the late 1960s, these industries began to face persistently lower than average profits and sharpened competition both at home and abroad.
By 1980, the impact on wages and working conditions are apparent. According to Howard Botwinick:

"(T)he 'eternal' core ["monopoly" industries - CP] was beginning to show more and more evidence of peripheral ['competitive' industries - CP] behavior. Industries like steel and auto were experiencing serious profitability crunches and were becoming more and more interested in lowering the wages and working conditions of their primary work force. In addition to relocating to low-wage areas, core firms were successfully extracting serious concessions in wages and working conditions from their work forces. Even more distressing, a 'secondary' labor market was developing within the factory gates of these core firms as two-tiered wage packages were increasingly introduced on a wide scale."(29)

As early as the mid-1970s, statistical studies of the relationship between industrial concentration and profit and wage differentials began to challenge the central factual claims of the monopoly capitalism thesis.

In his 1984 study, Willi Semmler(30) reviewed the existing literature on industrial concentration and profit rate differentials and carried out his own statistical analysis for the United States and West German economies since the second world war. He found, first, that while there was evidence of a correlation between industrial concentration (monopoly) and profit rate differentials before 1970, he also found that marked profit rate differentials existed between and within concentrated industries in this period.

In other words, profit rate differentials had multiple causes before 1970. Semmler also found that when profit rate differentials were examined through the 1970s and early 1980s, the correlation between industrial concentration and higher than average profit rates all but disappeared. Instead, "differentials of profit rates are significantly related to the productivity, capital/output ratios, and unit wage costs of each industry."(31)

Howard Botwinick's 1993 study of wage and profit differentials reviewed the literature published since Semmler's work was completed, and found similar patterns.(32) Industrial concentration, again, could not explain profit and wage rate differentials. In fact, not only were factors like labor productivity, capital-intensity of production, and the like more important in accounting for profit and wage differentials; but many of the highly concentrated industries that had experienced higher than average profits prior to 1970 were experiencing lower than average profits in the 1970s and 1980s.

More recent studies have confirmed the absence of a strong correlation between industrial concentration and higher than average profits and wages. Instead, profit and wage differentials were rooted in differences in labor-productivity and capital-intensity of production.(33)

The empirical problems with the monopoly super profits argument - so central to contemporary theories of the labor aristocracy - are rooted in the very notions of "monopoly" and "oligopoly."(34) The notion that the existence of a small number of large firms in an industry limits competition, allowing higher than average profits and wages, is derived from neo-classical (non-Marxian) economics' vision of "perfect competition."

For neoclassical economists, perfect competition - which allows instantaneous mobility of capital between branches of production, uniform technology, equal profit rates and wages - exists only when a large number of small firms exist in a market. Any deviation from this is "oligopoly" - a form of "imperfect competition" that creates obstacles to capital mobility, different techniques, and higher than average profits and wages.

The notions of perfect competition and oligopoly/monopoly are both conceptually and empirically flawed. Perfect competition is an ideological construction - an idealization of capitalist competition that makes the existing economic order appear efficient and just.

Real capitalist competition - from the birth of capitalism in English agriculture in the 16th century, through the industrial revolution of the 18th and 19th century to the emergence of the transnational corporations in the 20th century - has never corresponded to the dream world of "perfect competition." Capitalist competition is fought through what Marx called the "heavy artillery of fixed capital" - constant technological innovation, taking the form of the increasing mechanization of production.

Older investments in fixed capital, even if they no longer allow a particular firm to reduce unit costs and raise its profit margins and rates, cannot be abandoned immediately in favor of new and more efficient machinery. According to Botwinick:

"Given the presence of fixed capital investment, however, new techniques cannot be immediately adopted by all firms in the industry. Because fixed capital generally requires prolonged turnover periods, new techniques will be adopted primarily by those capitals that are in the best position to do so. Thus, although new capitals will enter the industry with 'state of the art' equipment and other existing capitals will gradually begin to replenish and expand their productive facilities with the latest techniques, older, less efficient capitals will also tend to live on for many years. This is particularly true within prolonged periods of rapid growth… Rather than creating identical firms, competition therefore creates a continual redifferentiation of the conditions of production."(35)

Put simply, competition - not its absence - explains the diversity of technical conditions of production and the resulting differentiations of profit and wage rates within and between industries throughout the history of capitalism. The higher wages that workers in unionized capital-intensive industries enjoy are not gained at the expense of lower paid workers, either at home or abroad. Instead, the lower unit costs of these industries make it possible for these capitals to pay higher than average wages. As we have seen over the last thirty years, however, only effective worker organization can secure and defend these higher than average wages.

Racial and gender inequalities can be best understood in relationship to the profit and wage differentials created through capitalist accumulation and competition. As race, nationality and gender structure the "employment queue" in capitalist societies, women and workers of color are over-represented in different segments of the "active" and "reserve" armies of labor.

Different industries, with diverse technical conditions of production, profit rates and wages, thus recruit workers from these racially and gender defined sectors of the working class. In general, women and workers of color tend to be over represented in labor-intensive, low-wage sectors; while white and male workers tend to be over represented in the more capital-intensive, higher-wage sectors.

Thus race, nationality and gender do generate a stratified working class as workers are distributed into branches of production that competition and accumulation - rather than monopoly or imperialist super profits - continually differentiate in terms of technique, profitability and wages.  n

[The second part of this essay will appear in our next issue. Read it online.]

Notes

  1. New York Times' compilation of exit polls for the years 1972-2004 [www.nytimes.com/packages/pdf/ politics/20041107_px_ELECTORATE.xls]
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  2. Jonathan Strauss, in "Engels and the theory of the Labor Aristocracy", Links: International Journal of Socialist Renewal, 25 (January-June 2004) [www.desp.org. au/links/bank/ issue25/Strauss.htm], presents a useful summary of Engel's writings.
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  3. http://www.marxists.org/archive/lenin/ works/1915/jun/x01.htm
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  4. http://www.marxists.org/archive/lenin/ works/1916/imp-hsc/pref02.htm
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  5. See C. Post, "The Popular Front: Rethinking the History of the CPUSA," Against the Current 63 (July-August 1996) on the Communist Parties' evolution into reformist organizations.
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  6. Revolution in the Air: Sixties Radicals Turn to Lenin, Mao and Che (London: Verso Books, 2002).
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  7. "The Labor Aristocracy: The Material Basis for Opportunism in the Labor Movement, Part I: The Theory of the Labor Aristocracy," Line of March 11 (May-June 1982) [home.conexus.net.au/~benj/LOM.htm]; "Part II: The U.S. Labor Movement Since World War II," Line of March 12 (September-October 1982); "Part III: The Polemic Within the Communist Movement," Line of March 13/14 (March-April 1983).
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  8. Strauss, "Engels and the Labor Aristocracy" 2004; "Monopoly Capitalism and the Bribery of the Labor Aristocracy," Links: International Journal of Socialist Renewal 26 (July-December 2004).
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  9. J. Browne, M. Franco, J. Negron-Gonzales & S. Williams, Towards Land, Work & Power (San Francisco: POWER: United to Fight, 2005), 46.
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  10. Elbaum and Seltzer, "The Labor Aristocracy," Part I, 16-17; Strauss, "Monopoly Capitalism," 49.
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  11. Capital, Volume III (Harmondworth, England: Penguin Books, 1981), Part Two.
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  12. Elbaum and Seltzer, "The Labor Aristocracy, Part I", 41 (note iv).
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  13. Strauss, "Monopoly Capitalism," 50.
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  14. Late Capitalism (London: New Left Books, 1975), Chapter 3. This is the main economic argument of Strauss, "Monopoly Capitalism," 50.
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  15. Elbaum and Seltzer, "Theory of the Labor Aristocracy, Part I", 41 (note iv).
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  16. Elbaum and Selzter, "Theory of the Labor Aristocracy, Part I" 41 (note iv). Strauss relies heavily on the work of Ernest Mandel, which does attempt to reconcile notions of "monopoly" with a classical Marxist concept of competition. Elbaum and Seltzer do not cite other Marxist and radical economists as the source of their theory of "monopoly capitalism." However, both arguments bear a close relationship to the theories of Paul Sweezy and Paul Baran, Monopoly Capital (New York: Monthly Review Press, 1966); and especially the work of David Gordon, Richard Edwards and Michael Reich, Segmented Work, Divided Workers (Boston: Cambridge University Press, 1982).
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  17. Elbaum and Seltzer, "The Labor Aristocracy, Part II" presents a fairly detailed discussion of the composition of the "labor aristocracy" in the US since the second world war, which is very similar to Gordon, Edwards and Reich's discussion of the "primary labor market" under "monopoly capitalism" in Segmented Work, Divided Workers.
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  18. My arguments against the "labor aristocracy" argument owe much to Tony Cliff, "Economic Roots of Reformism," Socialist Review (Old Series) 6,9 (June 1957); Ernest Mandel, "What is the Bureaucracy?" in T. Ali (ed.), The Stalinist Legacy: Its Impact on 20th Century World Politics (Harmondsworth: Penguin Books, 1984); and Sam Friedman, "The Theory of the Labor Aristocracy," Against the Current (Old Series) 2,3 (Fall 1983).
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  19. These statistics are drawn from Kim Moody, Workers in a Lean World: Unions in the International Economy (London: Verso, 1997), Part I; and personal correspondence May 15, 2002 and October 23, 2004.
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  20. Mandel, "What is the Bureaucracy?" 19.
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  21. Jane Osburn, "Interindustry Wage Differentials: Patterns and Possible Sources," Monthly Labor Review (February 2000), Table I ("Mean Hourly Wages of Selected Occupations in Selected Industries, 1998), 36.
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  22. Chapter 14, Section 5.
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  23. Clearly, US corporations earn above average or "super"-profits on these investments-the result of the combination of low wages and labor intensive techniques common in the global South, rather than the transnationals' "monopolistic" position in the world market.
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  24. Mandel, "What is the Bureaucracy?" 19.
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  25. Some exponents of the labor aristocracy thesis have argued that "unequal exchange"-the ability of firms in the global North to obtain raw materials, components, consumer goods (clothing, electronics, etc.) and foodstuffs from the global South below their value-is the basis of the "imperialist bribe" to the "labor aristocracy" of the advanced capitalist countries. Specifically, they argue that "unequal exchange" lowers the cost of inputs (raw materials, components), elevates profit rates in the North by lowering the cost of inputs (raw materials, components); and reduces the cost of food and consumer goods, increasing the living standard of some workers. (See Arghiri Emmanuel, Unequal Exchange: A Study of the Imperialism of Trade (New York: Monthly Review Press, 1972)

    The question of "unequal exchange" in the capitalist world economy involves a variety of theoretical and technical measurement questions which are beyond the scope of this essay. (See Anwar Shaikh, "Foreign Trade and the Law of Value, Parts I-II," Science & Society (Fall 1979 and Spring 1980) Granting the reality of "unequal exchange," the notion that it produces benefits only for a minority of workers in the global North is not tenable. Again, all workers in the global North-from the most poorly to the best paid-would benefit from "unequal exchange." They would benefit from elevated profit rates and the resulting increase in accumulation and demand for all labor-power. Similarly, lower cost consumer goods and food "affects the standard of living not only of a minority 'aristocracy of labor' but the whole of the working class of the industrial countries." (Cliff, "Economic Roots of Reformism," 4)
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  26. Lawrence Mishel, Jared Bernstein and Sylvia Allegretto, The State of Working America, 2004/2005 (Ithaca, NY: Cornell University Press, 2005), Chapter 2.
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  27. For instance, Michael Hardt and Antonio Negri's influential Empire (Cambridge, MA: Harvard University Press, 2000), which I reviewed in Against the Current 99 (July-August 2002).
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  28. See Kate Bronfenbrenner and Stephanie Luce, "The Changing Nature of Corporate Global Restructuring: The Impact of Production Shifts on Jobs in the US, China, and Around the Globe," Submitted to the US-China Economic and Security Review Commission (October 14, 2004) [www.uscc.gov/researchpapers/2004/cornell_u_massreport.pdf].
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  29. Persistent Inequalities: Wage Disparity Under Capitalist Competition (Princeton: Princeton University Press, 1993), 45.
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  30. Competition, Monopoly and Differential Profit Rates (New York: Columbia University Press, 1984)
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  31. Semmler, Competition, 127.
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  32. Botwinick, Persistent Inequalities, 155-170.
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  33. David G. Blanchflower, Andrew J. Oswald and Peter Sanfey, "Wages, Profits and Rent-Sharing," The Quarterly Journal of Economics, 111, 1 (February 1996);   Kenneth R. Troske, "Evidence on the Employer- Size Wage Premium from Worker-Establishment Data," The Review of Economics and Statistics, 81, 1 (February 1999); Osburn, "Interindustry Wage Differentials;" (2000); Julia I. Lane, Laurie A. Solomon and James R. Speltzer, "Establishment Wage Differentials" [http://www.urban.org/UploadedPDF/ 410505.pdf] Urban Institute Working Paper, 2001 all come to similar conclusions on the determinants of profit and wage differentials.

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  34. Our critique of the theory of "monopoly capitalism" is indebted to Steve Zeluck, "On the Theory of the Monopoly Stage of Capitalism," Against the Current (Old Series), 1,1, (Fall 1980); Botwinick, Persistent Inequalities; Semmler, Competition; and Anwar Shaikh, "Marxian Competition versus Perfect Competition: Further Comments on the So-Called Choice of Technique," Cambridge Journal of Economics 4 (1980).
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  35. Botwinick, Persistent Inequalities, 131.
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This is the first of a two-part essay. Charlie Post teaches sociology in New York City, is active in the faculty union at the City University of New York, and is a member of Solidarity. He would like to thank the editors of Against the Current, Joaquin Bustelo, Steve Downs, Sam Farber, Fred Feldman, Sebastian Lamb, Mike Parker, Jane Slaughter and Teresa Stern for their comments on an earlier draft of this essay. Special thanks to Kim Moody and Anwar Shaikh for their general comments and their help with obtaining data on the weight of foreign direct investment in world and US investment (Moody) and on the US profits earned abroad as a percentage of total US profits and domestic US wages (Shaikh).

ATC 123, July-August 2006