In his recent article, Rob Ashlar draws on the work of Arghiri Emmanuel to rightly critique theories that attempt to justify wage differentials based on productivity alone.
However, Rob’s argument implicitly proposes two explanations for wage differentials, explanations that can also be found in Emmanuel’s work. While these explanations are not necessarily contradictory, taken together they can serve to make what one could call “Emmanuelism” into an unfalsifiable model for explaining the world. In my opinion, they are not wrong, but what they highlight instead is the fact that the wage determination problem is highly complex.
Let me lay out my basic understanding of the argument in the article. Rob starts by discussing the proposition that productivity alone cannot justify the vast differences in wage gaps, and something else must be at stake. I agree with this statement. One must find the cause for unequal wages elsewhere.
Rob then lays out the first driver of wage levels: historical experience shows that only when labor is in scarce supply, and/or the laborers are organized, can workers wrestle better living conditions from the rulers. I also agree with this statement, and would even extend it to more points of history: for example, peasants did much better after the Black Death made their labor more scarce. This is also one of the key drivers of wage differences between “skilled” and “unskilled” labor.
Rob’s article then spends some lines on debating the actual owners of the dividends of increased productivity, which are tangential, before pivoting to international relations between countries. Here, an important point is made: “It is not unequal exchange which leads to low wages, but the other way around.” The gist of this argument is that high-income countries sell dear to low-income countries, low-income countries sell cheap to high-income countries. This causes an ‘unequal’ exchange where high-income countries take advantage of low-income countries.
From here, Rob draws four conclusions. First, that it is not certain commodity types as such, but commodities made by expensive labor which are expensive. To rephrase this, whatever the high-income country produces is expensive, whatever it buys from the low-income country is cheap.
Of course, this dynamic cannot go on forever. As Rob mentions in his second conclusion, to do this in a sustainable manner, high-income countries must sell commodities which the low-income country cannot produce. Otherwise the low-income country would just start producing the same commodities and substituting imports.
The third conclusion is related, but is overall unclear. High-wages in the core countries can only be sustained by using inputs from countries which have low-wages. This is the only way to prevent high wages from cutting into the rate of profit.
The fourth and last conclusion is the corollary: unequal wages cause unequal development. Because the low-wage country is always being short changed, it will not attract investments and upskilling. Hence it will remain low-wage forever. Wages are a “hereditary privilege.” This serves as a second explanation for wage levels.
The argument is built up to state that “wages are the final determinant of development.” This last corollary is, in my opinion, the weakest point of Emmanuel’s system. After justifying wages as the result of class struggle, to explain the exception of white-settler countries, it adds a second explanation: that once they are high, they will always be high, because the dynamics of capitalist development reinforce these differences. Therefore, one can consider wages as an exogenous variable in capitalist dynamics, meaning that wages are given from the outside of the system.
What seems to me to be key here is that wages being exogenous is an assumption that can give us some useful things to work from, but that on its own this assumption does not explain everything. It can close the toy-models one sees in Unequal Exchange, but it cannot close an analysis of capitalism. If one tries to proceed this way, one ends up falling into some sort of circular logic, or having a theory that explains everything and nothing.
To explain this, let us return a few paragraphs. Rob had highlighted that the English industrial workers had rather low wages when compared to their settler peers, but were able to increase them through trade union struggle. Yet, as shown above, the article goes on to state that high wages are the cause of unequal exchange, and hereditary privilege, so must be taken as exogenous and also a determinant of development. By having it both ways, the article is not really clear on what actually is driving things. Is it explanation number one? If so: why aren’t workers in a low-wage country able to organize the same way as in a high-wage country to raise their wages? Or is it explanation number two, “hereditary privilege”? If wages are a hereditary privilege, why were the English workers able to permanently drive their wages up after the industrial revolution? This gives us a pretty unfalsifiable model: If a country has high wages it is because its working class was historically able to raise its wages through class struggle. If it has low wages it is because it is unable to raise its wages due to historical reasons.
Yes, high wages, and the general stickiness of capital are a factor in determining the evolution of wages, but it is not the only one. Otherwise we would not see countries moving up and down the pyramid of nations. The usual way core countries prevent others from moving up the value chain and developing more expensive goods is by setting up IP barriers, or if that fails, trade barriers. A poster case for this would be China. This country is developing and increasing wages through changing its own productive structure, substituting high-value imports and engaging in significant technology generation. And of course it is facing the wrath of those who do not want to be overtaken.
China’s development is a corrective to the Australian counter-example. While the productive basis is not enough to explain wages, China is showing that one can still increase wages by more “classical” theories. Wages cannot be exogenous if political decisions can be made which raise the profile of some countries: Poland for example has undergone rapid US-funded development intended to make it into a poster-child of the successes of post-communism. This shows that imperialism and the pyramid of nations must be more than a circulation-based economic relationship, but an active politico-military system.
I don’t think Rob would disagree with me on any of this, but I think it is worth pointing out the mis-step in the argument for wages as a “final determinant” before one focuses on a single tree and loses the forest. I think one is forced to return to something Rob discounts, that “specific combination of productive forces and productive relations” must not just mean productivity, but a combination of historical factors (including what is societally considered an acceptable minimum goods package), the current strength of labor, accumulated capital in the form of factories and intellectual property / know-how, military might, the international finance system, and a long list of other factors. Indeed, Emmanuel’s project for development was based, to the best of my knowledge, around stopping the mechanisms which prevented low-wage countries from getting better terms of trade. He focused on de-linking, technological transfer, import substitution and increasing the prices of some critical production inputs through the formation of cartels. They are about dealing with the first three conclusions Rob laid above. If he thought that the fourth and final conclusion was a permanent feature, rather than a useful mechanism one gets out of a toy-model, his political project did not reflect it.
Hence, my end statement: I think any theory of wages has to end up being unrigorous, and that wages cannot be adequately considered to be exogenous to the system. Despite its use for helping us to understand capitalism, trying to shoehorn Emmanuel’s models to fit every single country will rob it of any predictive power, capable only of explaining ‘everything or nothing.’
-Renato Flores
