This is a chapter from the book:
Work and Wealth (2nd revised edition)

V. The world market (1): The price and productive force of labor when compared between nations

Businessmen compete for profit worldwide. They purchase all kinds of business articles abroad if they benefit their profit calculation; they sell their products drawing on foreign ability-to-pay for their turnover as well. The internationalization of trade makes a company’s profitability dependent on whether its products come off well in comparison with goods from all over the world and on foreign markets. How high the return has to be that capitalists demand their labor achieve for them results from what they learn every new day from the international supply of inexpensive goods. They see how workers have to perform in terms of cost and productivity if they are to justify the unit labor costs they give rise to. At the same time, the productivity of capital achieved by the businesses of a national capital location as a whole shows itself in the exchange rate of currencies as a modifying business condition.

Since companies have the freedom to make their investments at any place of their choosing in the whole world, they are explicitly subjecting their wage workers to a global competition over the price of labor. Whether and to what extent their employment is necessary is decided by a universal comparison that the masters of labor expose them to.

1. Competition across national borders: Businessmen see how they are dependent on the productivity of their location’s total capital and enlist labor to deal with the consequences

Capitalist companies conduct their business internationally. They produce for the world market, fighting for profit and therefore for market share worldwide, and thus confronting their peers all over the world with their achievements in reducing their production costs. Conversely, they, along with all the other firms that are active only on their home market, have to deal with suppliers from other nations. As buyers of goods, they pay attention to purchase prices and benefit from cheap offers from abroad. As competing sellers of goods, they have to stand up to the price comparison with such offers. This increases both the opportunities for growth and the demands on the capital outlay required to make the most of these opportunities.

However, companies trying to make money worldwide have to prove themselves in a competition that is not only greater in number. They are confronted with national differences in the skills and customs of profit-making, especially when it comes to paying wages and making use of labor. First and foremost, they are confronted with the nationality of money as a new business condition. The exchange rate between the various currencies is one determinant of how their production price, calculated in their own currency, compares with that of foreign competitors, and conversely, of how good the terms are for them to buy from foreign suppliers. An exchange rate that reduces the purchasing power of one’s national money makes imports expensive; one that weakens the power of a foreign currency makes it more difficult to export to that country. The business successes achieved by companies of different nationalities under the various given conditions set standards beyond their national borders. Those who conquer a foreign market with their goods dictate the price level in that currency that competitors active on that market will face. This price competition across currency borders has now become basically inescapable for every single company, regardless of sector or nationality. In turn, the course of this competition has repercussions on the exchange rates of the national currencies that confront each individual company as a business condition. When global sales successes accumulate on a national scale and turn those companies’ home location into an “export nation,” the strong demand for that country’s money drives up its comparative value. Conversely, when the relative competitive weakness of a nation’s companies leads to a notorious foreign-trade deficit, the oversupply of that country’s currency causes its exchange rate to fall.

The fact that a currency’s appreciation makes imports cheaper and its depreciation can facilitate exports is often interpreted as a self-acting market mechanism for correcting foreign-trade imbalances. It is no wonder, however, that this mechanism never really works. Even on the face of it, cheaper imports are obviously not just a competitive disadvantage for a highly competitive industry but at the same time contribute to lowering its production costs, thereby benefiting its competitive power. Conversely, the industry of a country with a depreciating currency may have a price advantage over foreign suppliers but at the same time has to pay higher prices for the imported goods it needs. And it is a fundamental fact that the consequence of a changed exchange rate does not eliminate the cause for the change, especially the advantage of low unit labor costs due to increased labor productivity as a result of advanced technology. It may happen that individual companies cannot cope with the repercussions that their national companies’ overall success has on their business. In particularly successful exporting nations, even entire industries have gone under when foreign suppliers’ goods have become cheaper due to changes in currency exchange rates. But these are merely undesirable side effects of a quite positive result: the strong exporting country now has greater economic power in relation to its competitors. For when sustained national export success causes the value of a country’s money to outstrip the value of other nations’ money and rise in comparison, then that is because this country’s capital productivity is overall superior. And that is what is reflected in the higher and rising relative value of its money. A strong currency represents the more effective power of command of the capital advance that a nation’s companies invest in their business, that is, the superior productivity of the credit that the nation’s financial institutions put into circulation.[1]

So it is quite all right economically if the foreign-currency proceeds that a company from a strong exporting country realizes tend to fall when measured in its domestic currency. After all, the money earned abroad does not represent the exporter’s superior capitalist command power, but rather the weak overall capital productivity of the country whose firms are losing out in international competition. For companies in a successful exporting nation, such reduced revenue makes it necessary to test how far foreign-currency prices can be raised without harming planned sales. This dilemma faces a company from a country of winners when the country targeted for its exports has effectively become poorer due to the work performed there bringing about insufficient profits in comparison. A successful company remedies this situation with the same recipe it used to gain its leading position on the world market: by stepping up its efforts to make its production factor, labor, even cheaper and more effective.

Thus, that absurd law of capitalist progress is at work in international commodity trade, too: the methods of increasing the return on capital at the same time limit the intended effect. However, this contradiction splits up in a remarkable way in the dealings between winners and losers of international competition. The reduction in monetary wealth created has to be borne by the losing side in world trade; everything produced on that side is worth less when measured in the money of the successful business partners. On the side of the strong exporting nation, by contrast, successful companies get to enter in their books, through the higher value of the unit their wealth is measured in, a relative increase in the economic power they derive from their workers’ labor. The labor that is altogether exploited more profitably creates comparatively more monetary wealth without a single additional bit of actual property having to be produced.

Some of the comparatively increased monetary power of the successful export nation at least also benefits the workers whom the nation’s companies get such sensationally low unit labor costs out of. Some imported consumer goods become cheaper for them, too. And the travel industry sees an uptick in business, giving those workers who still have jobs the opportunity to afford things and especially services on vacation abroad that remain out of their reach at home. However, not many of the benefits of a strong currency make it into the everyday lives of the wage-dependent population, if only because of how modern trade unions make their wage demands. They don’t just customarily justify them by a meticulously calculated inflation rate, they also demand a raise at that exact rate. So when the inflation rate is kept in check by cheap imported goods for mass consumption, mass consumers become no richer but employers get to pay less on wages. Moreover, the way businessmen calculate, when purchasable wealth and wage labor abroad become relatively cheaper, that makes labor in their own country relatively more expensive (which is why nations with the lowest unit labor costs are actually referred to as “high-wage countries”). So they see a need to compensate for this by increasing performance and lowering wages. Otherwise, employers would of course have no choice but to generate their returns where foreign competitors might be profiting from the benefits of a low-valued currency.

2. The one world of the market economy: Multinationals take advantage of the national conditions of profit-bringing labor, thereby creating a global proletariat together with a “precariat” and a “world hunger problem”

Capitalist companies that treat the world as a market, as the sphere where they compete for profit and growth, do not limit their cross-border business to utilizing foreign ability to pay and cheap offers of goods by exporting and importing. They include in their calculations the business conditions that foreign nations have to offer in comparison with each other and with their own location as opportunities for successful investing. They use the power of the money they have at their disposal, i.e., their own assets and the credit they can mobilize, to take advantage of the course of business in foreign countries for their own company’s activities.

Countries with a capital productivity that is far from “developed” are good places for investment because their national money, the effective means to command local labor as well as the country’s resources, counts for little or nothing in international money trading. So foreign currency that one brings in represents a far-reaching power to take possession. This advantage often enough compensates for the disadvantage of the country and its people not yet being terribly well-suited instruments for profitable use as factors of production: they are made suitable. The usual result is that the population is split into a capitalistically utilized minority, whose cheap wages make them better off, another subset who keep their heads above water by serving the course of capitalist business somehow, and a third section who turn up in the hunger statistics. These are the ones who have been cut off from both their traditional means of subsistence and the new sources of income by the private property that has been imported or taken root in the country having ever more extensive command over the use of resources and labor. So capital export creates a little capitalistically productive labor alongside a lot of impoverishment of the modern kind, i.e., caused by potential labor not being used.[2]

If the mass of profit generated in such a country is sufficient and is reinvested; if it’s not merely a matter of taking advantage of a low or non-existent wage level but rather of increasing the productive force of labor on a relatively large scale; if the foreign location is being used to conquer world-market shares; and if money and credit traders also find future prospects interesting enough to declare a nation to be an “emerging market” — that is, if a considerable number of conditions combine, then that can cause this nation’s currency to gain value, making it actually worthwhile for investors to earn such a money. The workers who are needed and used for such a career eventually get to stop being regarded only as labor power to be had at knock-down prices, and to have their wage level and performance compared with those of their colleagues in the centers of the global market economy.

In these countries where the multinationals are at home or buy directly into a capitalistically “developed” course of national business, the free movement of capital gives a significant boost to intensifying competition. For now it is the firms with the highest capital productivity worldwide that set the standards for a profitable use of society’s labor with the power of their money everywhere. And it is the financial industry that makes the crucial contribution to accelerating and establishing this capitalist progress across the board. It links the financial markets in all nations, thus mobilizing the power of money earned worldwide and channeling its capacities to wherever it expects the best business. It gives companies of every size the freedom to compare and utilize wages and other production conditions all over the world. In this way, it ensures that states with their various living conditions are subsumed completely — through and through and down to the last detail — under their market-economy destiny of being compared as investment spheres for credit. For the population dependent on working as a source of income, this results in a certain leveling trend. As multinationals wield their literally unbounded credit power to force the whole world to use the most effective means and methods of production, mobilizing workers and making them compete against each other in all countries and across all borders according to their business needs, this does not make working conditions easier worldwide, but more similar. And with labor productivity tending to equalize, the essential criterion for capital productivity when it comes to capitalistically comparing nations becomes the remuneration of workers. So the differences in wage payments between “low-wage” and “high-wage” countries get leveled as well, in the downward direction.

Thus, the universal competition of companies sorts the population of the modern world. The power of private property creates a global proletariat along with its “reserve army.” Where people were once poor due to a lack of resources, they are now poor by being excluded from wealth that is there. But they themselves see it quite differently. They put their trust on the state power that uses all its might to organize this very world market and manage the consequences.


[1] In the modern world, international trade does not merely deal with commodities, but turns capitalist wealth itself into a commodity in the form of credit. The dependence of currency relations on this international trade makes it strikingly clear that modern money is not merely in the firm grip of the credit industry, but also represents nothing other than the capitalist potency of the credit provided by financial institutions and of the financial markets’ investments, a potency that proves itself — better or worse — in the success of the business they finance. This achievement of credit-money, established by the credit industry, is officially certified through the state’s legal tender entering circulation by way of refinancing the nation’s credit business. That is why the comparative assessment of a national money as reflected in the exchange of currencies is the indicator of a global trading nation’s relative economic power and at the same time the essential standard for it to meet.

[2] The particular forms of poverty to be seen in the “Third World” are thus based on people being subjected to the same pressure to perform wage labor there as the inhabitants of “industrial nations.” Here as there, all the means of labor have been separated from workers and monopolized in others’ hands, as property. Here as there, workers can therefore only live if they live for capital. This commonality is the basis for the difference: here, people scrape by on the wages they earn; there, they become destitute or starve because they cannot comply with the pressure to earn a living by serving the property of others. They are exclusively affected by the negative side of property, the exclusion from all means of individual and productive consumption. They are denied its other side, the appropriation of their labor power by capital, their use for profit.

There’s obviously a long history to the entire globe being subsumed under the business needs of capital, and the resulting forms of poverty. This history also includes an evolution in the way moral critics look at poverty and exploitation in less prosperous regions of the world. They do not see the scandalous conditions there as the result of market-economy interests and principles being pursued consistently throughout the world, but the other way around. They lament them as being a deviation from “civilized conditions” in the mother countries of capital. A number of reasons for this are traditionally identified: rigors of the climate and other natural conditions, the large number and other special features of the local population. especially their “mentality,” local elites and/or Western corporations misusing the command power of private wealth that should actually be having beneficial effects, or even a lack of capital. Only a few decades ago, when there was a clash between the “free world” and the “socialist camp” systems, it was quite common to question if Western trade with “underdeveloped” nations was contributing enough to their “development,” or if wrong terms of trade might, conversely, be leading to an “unfair world trade.” There was moral indignation about conditions that were supposedly part of a whole system where prosperity was unjustly distributed. This idealism that goods should be exchanged fairly on the basis of their true values is now past, as are — all the more — any echoes of a critique of political economy. Today it is with an honorable sense of responsibility that critics attend to the destitute regions of the world now that the market economy has been thoroughly globalized. Modern fair-trade activists and other fundraisers take the conditions produced by the world market of capital as a given; it would be a waste of time to quibble about why they exist. Instead, they “look ahead” and hope for beneficial developments in the future that “every one of us” can and should contribute to — not by “criticizing the system” of course, but mainly by slightly modifying one’s personal lifestyle, i.e., making ethical buying choices. They simply take it for granted that “our” companies mine raw materials and have goods manufactured in Third World countries, with their business interests dictating living conditions there. So these companies are the ones to ask for a better world — by wildly threatening to buy chocolate and computers from alternative suppliers. Business is accordingly booming for such suppliers, which the large concerns set up as their own subdivisions. The bottom line is that enlightened Western consumers are forcing the undisputed masters of the world market to take a self-critical look at their calculations to see if their business might do better with a little “certified” restraint when exploiting the miserable conditions around the world.

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