"Wealth of nations" and poverty

[ex_next_worker]

I read through Marx's Economic and philosophic manuscripts and he talks about inevitable poverty for the working class despite economic growth.

There's all this talk about economic development and vanishing poverty within industrially developed capitalist societies and the rising of minimum wages. Can anyone explain this a bit more and whether economic development and poverty are contradictions within this context?

[Oneironaut]

I think the issue you raise deals with primarily class interests. It would make sense for poverty to decrease while economic growth increases, and capitalists might argue that poverty could potentially be eradicated from society with economic growth that would "trickle" down to the masses. The reality of the market economy whose whim we are at is that wealth doesn't "trickle" down... it accumulates in the hands of the property owners.

I'll explain it a little more clearly:
The capitalist's interest is to create capital. He does this by extracting surplus value from workers' labor. When we are paid a wage, that wage is never the equivalent of the value we produce, otherwise the capitalist would only break even and eventually have to go out of business! Because of this, it is in the capitalist's interest to keep our wage as low as possible so that we can keep working, have enough money to raise a family of likely future workers, and not be inclined to revolt.

When economic growth is occurring (which will always be followed by a recession!), the wealth doesn't go back into the hands of the worker, but remains with the capitalist who can use that capital for continued economic growth (and personal benefit of course). This contradiction is exemplified in the 1990's economic boom of the US: CEO pay jumped 535%, while there was a 32% increase in worker pay.

Source:http://www.democracynow.org/2000/8/31/ceo_worker_pay_gap_the_neglected

While some of the meager increase in workers' pay was likely due to the economic boom, the major factor in raising minimum wage is only to keep up with inflation. Workers' real wages have diminished while household income increases.

Source: www.lapop.lsu.edu/LPDC_Report_5.pdf


This is just one aspect of how worker poverty is inevitable even under economic growth.

Another aspect would be that for economic growth to continue, the labor pool must be increased. This idea manifests itself in the free trade zones that run many Third World countries. As the labor pool increases, wages still remain at the minimum level to promote the status-quo, but now the capitalist can extract surplus value from many more workers.

Does that help?

[Oneironaut]

One more note:

Marx is referring to relative poverty and not absolute poverty. Here is a link that explains the two measurements...

http://en.wikipedia.org/wiki/Relative_poverty

[TheCagedLion]

When we are paid a wage, that wage is never the equivalent of the value we produce,

I have been wondering about this, and I wan't to make sure if i've got this right

How do we know that the wage actually isn't the equivalent of the value that is produced - and the profit merely a arbitrary percentage, deemed fit by the capitalist, and added at some point?


Is it because other producers would undercut the price until price = wage, and the producers therefore would have to cut in the wage to stay profitable and competitive?

[Guerrilla22]

According to Smith economic could only happen under a free market system where there no restrictions and no interference on the part of governments in the market. Smith acknowledged that under such a system there would be inequalities as far as income goes. He said that it would be a job of the wealthy to contribute some of their funds to help aleviate the plight of the poor. I guess these days people might call that "redistribution of wealth."