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Abstract
This article critically discusses the important and relevant—not to mention controversial— views of Ricardo and Marx on the impact of machinery on labor productivity, the organization of production and the wages and employment prospects of the working class during the capitalism of their day. First, the article turns to Ricardo’s assessment of the introduction of machinery and its likely effects on the laborer and the rate of profit and accumulation—one which went through a substantial revision (and reversal) between the first and third editions of his Principles of Political Economy and Taxation. Then, we discuss Marx’s own critical analysis of the historical development of machinery and its impact on the labor process, the so-called “compensation principle,” and how the rising organic composition of capital ostensibly generates a “redundant or surplus-population” during the course of capitalist development. We highlight Marx’s intellectual debt to Ricardo, John Barton (and George Ramsay) insofar as his theory of technological unemployment is concerned. Lastly, the article summarizes the views of Ricardo and Marx and offers some concluding remarks.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 In the October issue of The New Yorker Kolhatkar (Citation2017) reports that automation of the workplace has proceeded to such a degree that, “McDonald’s is introducing ‘digital ordering kiosks’ that are expected to replace human cashiers at 5500 restaurants by the end of 2018. Meanwhile, companies like Uber and Google are investing heavily in autonomous-driving technology, betting that such vehicles will reshape transportation.” In an NBER paper, Acemoglu and Restrepo (Citation2017) report large and robust negative effects of robots on wages and employment in the U.S. During the 1990–2007 period. Their estimates suggest that one more robot per 1000 employees reduces the employment to population ratio by about 0.18–0.34% points and wages by 0.25–0.5%. It is evident that we are beginning to see “new machinery” in the form of robots and computer-assisted processes in the workplace replacing or threatening to replace thousands upon thousands of low-skilled workers in the not too distant future.
2 On June 5th, 1821, McCulloch wrote the following lines to Ricardo which clearly indicate that he was very much vexed by what he had read: “…in my humble opinion, the Chapter on Machinery in this Edition is a very material deduction from the value of the work—Little did I expect after reading your triumphant answer to the arguments of Mr. Malthus that you were so soon to shake hands with him and to give up all—for that is what you have really done…[and he goes to add]…But…you will agree with me in thinking that nothing can be more injurious to these interests [viz., economics as a science] to see an Economist of the highest reputation strenuously defending one set of opinions one day and unconditionally surrendering them the next” (Sraffa, Letters, Vol. VIII, 2004 [orig. 1951], 381–382). In turn, Ricardo confided to Malthus in a subsequent letter dated July 9th, 1821, that “McCulloch has specifically and strongly, objected to my chapter on Machinery—he thinks I have ruined my book by admitting it and have done serious injury to the science…” (Sraffa, Letters, Vol. IX, 2004, 14).
3 Ricardo emphasizes this point in the same letter to Malthus dated July 9th, 1821, where he alludes to his exchange with McCulloch on this matter. He writes, “Two or three letters have passed between us on this subject; in his last, he appears to me to acknowledge that the effect of the use of machinery may be to diminish the annual quantity and value of gross produce. In yielding this, he gives up the question, for it is impossible to contend that with a diminished quantity of gross produce, there would be the same means of employing labor. The proof of my propositions on this subject appears to me absolutely demonstrable” (see Sraffa, Letters, Vol. IX, 2004, 14–15).
4 Marx observes in Theories of Surplus Value, Part II that Ricardo is not entirely consistent in terms of his own distinction between “riches” (use-values) and exchange value, as determined by the socially necessary labor time expended in producing a commodity. Ricardo mistakenly says in the chapter on machinery that the “application of machinery always leads to the increase of the net produce [in terms of commodities] of the country, although it may not, after an inconsiderable interval, increase the [exchange] value of that net produce” (296). Marx rightly counters that “It will always increase that [exchange] value whenever it diminishes the value of labor [labor-power]” (570). See also Ricardo’s cogent presentation of the distinction between “riches” and exchange value in Chapter XX of his Principles entitled, “Value and Riches, Their Distinctive Properties.”
5 Neither Ricardo (nor Malthus) subscribed to the neoclassical idea that Say’s Law of markets must imply the full employment of labor. For Ricardo and the classical economists in general, the Law meant that under capitalism, any amount of capital would tend to be fully utilized without any impediment on the demand side, aside from short-lived periods of unplanned inventory accumulation; in and of itself, the Law “was not used by the classicals to derive conclusions about the performance of the labor market” (see Mongiovi, Citation1990, 76–77). Thus, Ricardo saw no contradiction between assuming the validity of the Law and a process of accumulation which also entailed rising unemployment of labor. For further details on the difference between the classical and neoclassical versions of the Law, see the recent work by Sardoni, Citation2011, 46–50; and Mongiovi, op cit.
6 Marx (see Vol. III, 237) makes a similar point as Ricardo in Capital, and Ricardo’s influence is clearly discerned in the following passage. He writes, “foreign trade partly cheapens the elements of constant capital and partly the necessities of life for which the variable capital is exchanged, [thus] it tends to raise the rate of profit by increasing the rate of surplus-value and lowering the value of constant capital. It generally acts in this direction by permitting an expansion of the scale of production”. See also Schumpeter (Citation1954, 681) on this point.
7 Contrary to the Ricardian model, the rate of profit, r = s/(c + v), in the Marxian system can fall even when the rate of surplus value (s′ = s/v) remains constant or increases. c refers to constant capital or value of means of production; v is variable capital or value of labor-power; and s is profits or surplus-value which goes to capitalists. Marx generally assumed that the accumulation of capital would lead to a tendency for the average rate of profit to fall because, ceteris paribus, the organic composition of capital (q = c/v) would rise more rapidly than the rate of surplus value (s′). For further details on the long-standing and controversial debate surrounding the falling rate of profit, see Meek (Citation1956); Ramirez (Citation2012); Sweezy (1970; orig. Citation1942) .
8 John Barton’s work is entitled, “Observations on the Circumstances which influence the Condition of the Labouring Classes of Society,” and it was published in London in 1817.
9 Marx (see Chapter III, Vol. II of Capital) believed correctly that with the development of capitalism, both the time of production and circulation would be significantly shortened. Anything, therefore, that decreases the time of production, such as investment in new plant and machinery as well as technical improvements will, ceteris paribus, shorten the turnover period of capital, thus boosting the creation of surplus-value and profit.
10 Marx refers to the work of one of the most neglected economists of the period, British economist George Ramsay in TSV II, and more systematically in TSV lll; he credits him with a more precise formulation of Barton’s original idea because he does not limit constant capital to just fixed capital (although he continues to call it that) but includes raw and auxiliary materials in the definition as well. Variable capital (which Ramsay calls circulating capital) is restricted to include only capital laid out in wages (see TSV II, 579; and TSV III, 326). Insofar as the rising organic composition of capital is concerned, Marx quotes approvingly the following passage from Ramsay’s work [An Essay on the Distribution of Wealth, Edinburgh, 1936]: “In countries where industry has much advanced, fixed capital comes gradually to bear a greater and greater proportion to circulating. Every augmentation, therefore, in the national stock destined for reproduction, comes, in the progress of society to have a less and less influence upon the condition of the laborer. Every addition of fixed capital, is made at the expense of the circulating, i.e., at the expense of the demand for labor” [emphasis in the original] (TSV III, 336).
11 Schumpeter (Citation1954), other than Marx, is one of the few major scholars of the history of economic thought to recognize Ramsay’s contributions to the economics of the period but not in terms of the latter’s influence on Marx’s development of his idea of the rising organic composition of capital (see 488).
12 Steedman (Citation1982) stands almost alone in arguing that Marx is strongly indebted to Ricardo for his theory of technological unemployment. More recently, Kurz (Citation2010) makes a compelling and cogent case in tracing Ricardo’s influence on Marx’s views concerning the impact of machinery on the working class. Finally, Schumpeter (Citation1954) also emphasizes Ricardo’s indebtedness to Barton’s analysis insofar as his chapter on machinery is concerned and the important influence it had on Marx’s own theory of technological unemployment.