Wage, Price, and Profit in the Philippines

 “Higher wages for the workers slow the growth of the economy,” according to many employers. These words are not new- in fact, these words have been spoken by both anti-union bosses and even Socialists alike. In this essay, Marx responds to a member of the latter, John Weston, and exposes this false notion. 

According to this argument, called the “wage fund theory,” an increase in the worker’s wages results in an increase in necessary commodities, like meat, soap, gas, and others, thus increasing the cost for everyone. Thus, wages determine prices- a change in the amount of wages results in a change in the market value of commodities. 

In a limited sense, Weston is right. When the demand for necessities goes up, it is only natural that the price goes up as well, since there are more buyers and the quantity of necessities being produced remains the same, supposing that no change has happened in a factory’s machinery, or the number of workers employed, or in inflation or deflation. 

First, we have to give an example of what he means. Let’s say there are 100 kilos of meat on the market and at the same time buyers for 1,000 kilos of meat. Since the workers now have more money to spend on meat, competition will be very strong among the buyers, each of whom desires to get one, and if possible all, of the hundred kilos for himself (since after all, he might think that the price will go further up in the short term and thus reselling the meat would be a good opportunity for such buyer to earn a profit). In this scenario, one buyer will offer a relatively higher price per kilo of meat. 

However, in the long run, the price will not go further up. Eventually, supply will meet demand. This is because the increase in demand for necessities brings with it a decrease in demand for luxuries. Workers spend their money on necessities and the capitalists spend their profits on luxuries- this is a fact. However, if wages increase, it usually means a decrease in the profits of the capitalist. Thus, they spend less money on luxuries. After some time, the capitalists producing luxuries will soon realize that there are higher profits to be made producing necessities, and part of the productive forces will switch to producing necessities. 

Thus, the higher amount of wages merely results in, not a change in the productive powers of labor, nor in the aggregate amount of production, but that given amount of production would have changed its form, from luxuries to necessities, and the workers stand to benefit due to their higher purchasing power. The shift also means that small businesses, even those producing luxuries, will nevertheless continue to operate. 

Marx here has demolished Weston’s argument. He has shown that it is in fact important for workers to form unions and agitate towards higher wages against their capitalist bosses - this would improve the standard of their lives. However, he nevertheless notes that such an argument springs from, and is maintained by the notion that “wages determine prices.” We can see here that it does not. But then the question rears its head- if not wages, what actually determines prices? 

According to Marx, “price” is merely “the exchange value of a commodity, reckoned in money.” Weston contends that a rise in wages will be no good because the prices of commodities will have risen; in this case he would mean that wages are indeed measured by the prices of the commodities upon which they are spent. In other words, we begin by saying that the wages determines the value of commodities (since to restate, an increase in the amount of wages would theoretically always increase the price of other commodities permanently), and we wind up by saying that the value of commodities determines the amount of wages. Thus we move to and fro in a circle, and subsequently end up determining nothing at all. 

We know now that price is not determined by wages. But Weston also contends that price is determined by supply and demand. This wrong notion comes from the fact that bourgeois economists (and bourgeois economics as a whole) works to advise capitalists on how to maximize profits or politicians on how to minimize welfare. 

An example of how this happens - in our earlier example, it is possible that the individual sellers of meat will take good care not to fall out among themselves and depress the price of meat at the moment when their adversaries are competing with one another to force it up, and then the army of the sellers stand facing the buyers as one man, fold their arms philosophically, and there would be no bounds to their demands were it not that the offers of even the most persistent and eager buyers have very definite limits. However, as stated, even in this scenario supply will quickly catch up to demand, since it would be impossible for these sellers to keep up their “alliance.” The other capitalists producing luxuries cannot keep pumping these luxuries out at their current value and keep bearing losses. And they won’t just simply stop producing or scale down production of luxuries (at a permanent loss to themselves) because obviously, they’ll be attracted to tapping into a market which needs more of the necessities. The capitalist producing luxuries would have an economic adviser tell him that “since there is an decrease in demand for luxuries, the price of these commodities you’re producing will go down. It is advisable that you switch to creating necessities in order to save your business, and price them to what they used to sell for before wages rose, given that the workers have had their wages increased and are thus eager to obtain more necessities. If there are alliances between producers, you can undercut their inflated prices and obtain more of the market share before they finally end up having to lower their prices to match yours.” 

In other words, the capitalist who has moved his production from luxuries to meat would then snap up the demand for meat that the existing meat producers had previously formed an alliance in, because otherwise the capitalist would be losing. He has chosen to move his production than simply scale down his production of necessities, and thus he needs a profit. To join the cartel means that he will be maintaining an “artificial scarcity,” which he doesn’t want to do, because all things considered, it is more in his interest to make use of his machines and workers to produce meat, even at the price before the “alliance” formed, because to sell would increase his profits much more. 

Which is not to say, however, that cartels don't exist. They do (just look at OPEC), but in general, in terms of the usual commodities, competition in some form still exists in many important sectors of our capitalist mode of production.

Thus, Marx, in his definition of “price,” found a further explanation of why, for a particular product, supply and demand equilibrate at a particular price despite fluctuations in supply and demand from time to time. We can see that while supply and demand can explain to you why the market price of a commodity rises above or sinks below its value from time to time, it can never account for how that value eventually settles.

And anyway, to determine price by the relation between supply and demand would beg the question of “what then determines the relation between supply and demand?” As we have seen, supply and demand determines the price, which fluctuates around the value, and tends towards it. At the risk of repeating, in our hypothetical scenario, the capitalist’s shift from producing luxuries to necessities would still mean that the necessities he is producing would be the same price as it was even before the workers had their wages risen, since to overprice it would be self-defeating - no one would buy it, it would defeat the point of having the workers’ wages rise in the first place. 

Moreover, and most importantly, “supply and demand” especially cannot explain why a certain amount of money is given for a certain amount of labor. If it is because of supply and demand, then it should be natural for wages to rise and fall. In this case, why is Weston so adamant about preventing workers from wanting a rise in wages? 

We now have to look at what determines the “exchange value” of a commodity, because it gives the actual explanation of what actually determines price. For example, if I can trade a pair of shoes for two kilos of vegetables then we can say that a pair of shoes is equivalent to a kilo of vegetables. But why is this so? The standard and most logical answer would be to say that “the vegetables only had to be planted, watered, and then sown, whereas a pair of shoes would require that big machinery would be obtained, and then the shoes which would then be cut and holed, and then laces put on it, etc., and that's why the shoes, which don't weigh as much as vegetables, but nevertheless should be exchangeable for 2 kilos of vegetables."

Thus, we can see that the “exchange value” relates to how much “value” a commodity has - how much work was put into it. As Marx puts it: “If it takes twice as much labor to make a coat as to make a pair of sandals, the value of the coat will be twice that of the sandals.” 

However, the value put into a commodity actually has two components. Marx calls this the “cost of production.” Although it is true that in our above example, we would consider shoes more valuable since it took someone more work and time to obtain it than vegetables, this manual labor is only one side of the equation. On the other hand are the raw materials and instruments used to cut a piece of leather and tan and hole it, etc. The raw materials are consumed, and the instruments depreciate due to time and how heavily it is used. Of course, these raw materials and instruments also cost money. In the capitalist system, these are usually provided for by the capitalist, who pays the laborer a particular amount of money in exchange for a set amount of the laborer’s time, to produce a quantity of pairs of shoes that the capitalist later on sells. Thus, in this example we see that the value of a commodity is made up of accumulated (also called “dead”) labor, and new (also called “living”) labor. The raw materials and instruments are the capital, accumulated labor, while the work put in by the worker on these tools and in creating the shoes is his living labor. Thus, the equation can be put in this way: price = accumulated labor (raw materials + depreciation of instruments) + living labor. These all make up the cost of the production that the capitalist puts into the commodities he manufactures. 

This formulation avoids the trap of saying that “the value of commodities determines the value of labor and vice-versa,” since when we actually look at it, the term “value” referring to a homogenous whole does not really determine anything. After all, if we apply such a formulation, we end up saying: "what is the value of a ten hours working day? How much labor is contained in that day? Ten hours’ labor." Thus, another nonsensical argument. The worker cannot sell “labor,” as a homogenous whole since in order to labor, one has to have means of labor - a workplace, tools, raw materials, and so on. But what the worker has is the capacity to perform labor on the tools and raw materials that the capitalist owns. In this way, we can see that what the working man sells to the capitalist is not directly his labor, but his labor power. Wages are thus merely the sum of money paid by the capitalist for either a (1) particular labor time (usually 9 hours), or for (2) a particular output of labor. Since the laborer sells it, it is like any other commodity. For the same sum, the capitalist could have bought, for example, two pounds of sugar or a definite amount of any other commodity. 

Since we know that labor is a commodity, it has a price, which, as we have seen, is merely “the exchange value of a commodity, reckoned in money.” Wages are only a special name for the price of labor power, commonly called the price of labor, for the price of this peculiar commodity which has no other repository than human flesh and blood. This means that our equation for determining the cost of production can also apply to labor power, in this way: cost of production of labor power = cost required for maintaining the worker as a worker + cost required for developing him into a worker. Thus, we can already see a disparity here: one set (the capitalist) buys continually in order to make a profit and enrich themselves, while the other set continually sells in order to earn their livelihood (the laborer). 

First, let’s talk about the cost required for developing someone into a worker. The less the period of training that any work requires, the smaller is the cost of production of the worker and the lower is the price of his labor (his wages). For example, it might take P400,000 and 4 years for a student to go to college and become an engineer, whereas it might take P10,000 and 1 year for another to take up a vocational course, say, becoming a mechanic. Thus, since the “investment,” so to speak, of turning someone into an engineer costs more than turning someone into a mechanic, and so is the time it takes to become a worker. Both the time taken to finish a course and money in it are after all products of labor and thus the labor-power of practing commands different prices in the market. An engineer makes more than a mechanic because it took more effort to become a mechanic, just as higher-effort things cost more money.

As for the cost of maintaining the worker as a worker, this refers to the cost of living (as in, buying the commodities the worker needs for his day to day existence such as food and electricity, although this varies from province-to-province), as well as the cost of reproduction, whereby the race of workers is enabled to multiply and to replace worn-out workers by new ones; the latter includes the worker’s rearing of his family to create more workers, etc. In some cases, the mere bodily existence of the worker suffices (as in work which requires no expertise or training at all) and thus the cost necessary for his production is almost confined to the commodities necessary for keeping him alive and capable of working. This is also called the physical element of the labor power. 

However, there is also the social or historical element of labor power. The traditional standard of life in a country, which refers to the satisfaction of certain wants springing from the social conditions in which people are placed and reared up, also helps determine wages. For example, in America, there is a higher standard of living; the American worker has to buy machines or cars, but in the Philippines, we can get by with hand-washing our clothes and riding the jeep. Thus, in the former, the minimum wage might be P700, while in the latter, only P300. These two elements, the physical and social, distinguish labor power from all other commodities. 

Second, let’s look at the accumulated labor, or capital. This consists of raw materials, instruments of labor and means of subsistence of all kinds, which are utilized in order to produce new materials, instruments, and means of subsistence. It is called “accumulated” because these refer to past, materialized labor in the form of commodities, which does contribute value to the commodities produced, but in itself does not really create value - living labor must work on (Marx uses the word “serve,”) this mass of dead labor in order to maintain and multiply the exchange value of the latter. For example, a factory worker owns the machines, the land upon which the factory is situated, and some cotton. He employs the worker for P500, out of which the worker produces P1000 worth of textiles. Take note of this distinction- the worker does not produce the textiles, he produces P1000 worth of textiles. He produces capital in the form of money, which the capitalist reinvests into the running of his factory, hiring new workers, and paying his bank loans. With profit, his own capital grows. Marx likens the process to that of a vampire sucking the blood of his prey, who lives longer the more labor it sucks. 

The capitalist also takes into account the wear and tear of the instruments of labor. If, for example, a machine costs him P100,000 and wears out in ten years, he adds P10,000 annually to the price of the commodities so as to be able to replace the worn-out machine by a new one at the end of ten years. Just like a machine is replaced and/or maintained, the worker is also maintained (through wages) so that he can buy his daily needs, while capital also expands, in the latter case the capitalist is able to buy more instruments and machinery, thus he will have to hire more workers to service this capital. Hence, increase of capital is increase of the proletariat, that is, of the working class. 

As we have said, the laborer is employed for either a particular labor time or for a particular output of labor (also called piece wages). 

First, let’s talk about labor time. If the worker creates a value of P1000 in ten hours, then in five hours he creates a value of P500. If he is paid P500 a day, he has, therefore, already repaid the capitalist within those five hours. They should call it quits, right? But this is not the case. The capitalist has paid for ten hours of labor, and the worker thus has to work that P1000 worth. For the worker, the value of the ten hours’ labor is P500, for the capitalist it is P1000, of which he pays P500 to the worker as wages and pockets P500 for himself. 

It is just the same with piece wages. Let us assume that our worker makes twelve items of a commodity in twelve hours. Each of these costs P200 marks in raw materials and depreciation of the machines and is sold at P250. Then the capitalist, on the same assumptions as before, will give the worker P25 per item; that makes P300 for twelve items, to earn which the worker needs twelve hours. The capitalist receives P3000 for the twelve items; P2400 for raw materials and depreciation and there remain P600, of which he pays P300 to the worker in wages and pockets P300. Here, too, the worker works six hours for himself, that is, for replacement of his wages (half an hour in each of the twelve hours), and six hours for the capitalist. Thus, we can see that labor power has a value, which can be summed up into an equation: value of labor power = cost of production of the labor + surplus. 

In either case (whether time or output), the wages paid by the capitalist have a double purpose: it was used reproductively for capital (used to pay the worker) which produced value higher than what was paid, but unproductively for the worker, since his wages have been exchanged for means of subsistence which have disappeared forever and the value of which he can only recover by repeating the same exchange with the capitalist. 

All this talk about “time” does not mean that the value of a commodity is determined purely by time, or that the lazier or the clumsier a man, the more valuable his commodity, because the greater the time of labor required for finishing the commodity. Marx calls this notion a “sad mistake,” which unfortunately has not prevented bourgeois economists from latching onto this idea that “since Marx says work is measured in time, it means that one who grows 1 kilo of vegetables per sowing season should be paid as much as one who grows 2 kilos, as long as they spent the same time to do it. Thus socialism does not promote productivity.” According to Marx, the “time spent laboring,” refers to the quantity of labor necessary for its production in a given state of society, under certain social average conditions of production, with a given social average intensity, and average skill of the labor employed. This is also called “socially necessary labor time,” or SNLT. For example, when, in England, the power-loom was invented and came into production to compete with the hand-loom, only one-half the former time of labor was wanted to convert a given amount of yarn into a yard of cotton or cloth. The poor hand-loom weaver now worked seventeen or eighteen hours daily, instead of the nine or ten hours he had worked before. Still the product of twenty hours of his labor (using the hand loom) represented now only ten social hours of labor (using the power loom). All things being equal, and using the same type of machinery, one person might be extremely efficient at crafting yarn into cotton, and another might not be so wise. In any case, we look at the average intensity and skill of the labor employed on the yarn in order to find the SNLT, by which we measure the price of commodities. 

Since SNLT differs per commodity and per person, we can thus see that it would be foolish to expect everyone to be paid the same. After all, as Marx has said, the time spent developing the worker into such a worker partly determines the value of his wages- it also determines the SNLT needed, and accordingly, the workers’ compensations, only that the wage system prevents the workers from getting what they actually produce (and thus, what they actually deserve as compensation). Thus, when Marx asks “What is the common social substance of all commodities? It is labor.” He necessarily refers to the type of labor produced by a specific individual on one hand, and on the other SNLT as what gives this social substance its value (why the prices of commodities of the same class and its supply and demand equilibrate where they do). 

This excess labor then forms the bedrock, not just of Value, Price, and Profit, but also of Kapital, of Lenin’s Imperialism, and all other Communist works - the labor theory of value. This is the capitalist’s “cut,” so to speak; and this is called “surplus value,” or as Marx also calls it, “profit.”  

Where is surplus value composed of? Four things, namely: (1) rent, (2) interest, (3) industrial profit, and (4) taxes. Rent is paid to the landlord on which the business is situated, whether the land is used for agriculture, buildings or railways, or for any other productive purpose. Interest is that claimed by the money-lending capitalist on the sum borrowed by the capitalist. The rest belongs to the capitalist entirely, as his industrial profit. Of course, if the capitalist is his own landlord or funded his own venture, he would not have the surplus value diminished. In other words, the laborer is forced to pay every expense that the capitalist incurs and more- and he himself has his own bills to pay. 

Thus, we see that constant capital is not what produces profit. A lot of bourgeois arguments pretend that the capital advanced by the capitalist is what entitles him to a profit, since after all it is not the worker who has purchased these. This is wrong: as we have pointed out, in the production of new commodities, no new value is created by the machines and raw materials. Their old values are merely transferred into the new commodities. In fact, our earlier examples where we deducted the price of capital is already generous- capital is meant to more than pay for itself. New added values to products can only come from the labor power of the workers attending to the machines and raw materials. As we have also pointed out, the workers are required to work for a period longer than it takes to produce the equivalent of the wages paid to them. The difference between the total value that the workers create and the wages that they receive is what is called surplus value or unpaid labor. Thus, the formula can be stated as follows: surplus value = price - money spent on capital - wages. The rate of surplus value, also called the rate of exploitation, is arrived at by dividing the amount of surplus value by the amount of wages paid (in other words, the ratio in which the working day is prolonged over and above that extent, by working which the working man would only reproduce the value of his laboring power, or replace his wages). 

For example, in a fast food restaurant, a new spatula with which to flip burgers might cost P200. In the hands of a minimum wage-paid burger-flipper, it will more than pay for itself, even factoring the costs that the business owner might have incurred in, for example, asking someone to buy the spatula for them. But the worker does not stop after his wages (and thus the maintenance of his livelihood) have been paid; he does not even stop after the spatula has been paid. He goes on for way more than that, even beyond what is to be paid to a landlord, or bank, or even franchise fees, or what the capitalist spends putting his papers in order and paying the aforementioned people, that the capitalist is able to pocket an amount by the end of the day that he neither invested into nor worked for. On the part of the factory owner who makes these spatulas, he makes sure that his machine which puts together these spatulas can produce more spatulas than what the machine is worth (even factoring in the cost of raw materials, wages paid to the workers, etc.) 

Another more insidious argument is that "risk" borne by the capitalist entitles him to a profit. This requires an extended discussion, but suffice to say that the capitalist never takes a greater risk than himself becoming a laborer. Please read "Does Risk Entitle a Capitalist to Profit?" for this.

Prices, as we have previously mentioned, are the “exchange value of a commodity,” formed by accumulated labor (raw materials + depreciation of instruments) + living labor. Thus, the common notion that prices are simply arbitrary quantities of pesos tacked onto a produced commodity is incorrect- to do so would be overpricing, and would drive the capitalist out of business vis-a-vis their competitors. Similarly, prices cannot be under-priced because that would also put the capitalist out of business. Prices are instead sold at their real values taking into account this formula for the exchange value of a commodity, where the surplus labor put in by the worker forms the capitalist’s profit. 

It is naturally in the interest of the capitalist to obtain a larger surplus value in order to obtain a larger profit. In this case, he aims to make the rate of labor exploitation higher. The limits of the working day being restricted under our current labor laws, the maximum of profit corresponds to the physical minimum of wages under the maximum number of hours which can be worked. Thus, the capitalist is constantly tending to reduce wages to their physical minimum, and to extend the working day to its physical maximum, while the working man constantly presses in the opposite direction. This results in the inversely-proportional interest between surplus value and profit. Capital’s share, profit, rises in the same proportion as labor’s share, wages, falls, and vice versa. Profit rises to the extent that wages fall; it falls to the extent that wages rise. 

However, bourgeois economists would naturally have an answer to this: they would say that in times of economic upturn (for them “brought about by more worker productivity,”) wages will also rise, and therefore the struggle between labor and capital is a myth. This line of reasoning is also put forward by “bread-and-butter” unions in order to prevent workers from agitating too much. They are wrong. If, for instance, in times when business is good, wages rise by five per cent, profit on the other hand by thirty percent, then the comparative, the relative wages, have not increased but decreased. Wages will not rise thirty percent, and the capitalist naturally has his many reasons ("what if there is a slump in the economy?" is one of those prevalent lies he tells to his workers). Another example is, if, by the use of the spinning jenny, I can turn out twice as much yarn in an hour as before its invention, say, one hundred pounds instead of fifty, then in the long run I will receive for these hundred pounds no more commodities in exchange than formerly for the fifty pounds, because I can deliver double the commodity at the same cost.

Thus, to say that the worker has an interest in the rapid growth of capital is only to say that the more rapidly the worker increases the wealth of others, the richer will be the crumbs that fall to him. All the talk of “trickle-down” economics where the expansion of the wealth of the wealthy somehow passively benefits the workers was not even new in Marx’s time (and that was a time of rapid economic rise), because in every case, the workers still aren’t getting what they’re supposed to. 

And even then, the foregoing examples are of the most favorable possible outcome. In cases instead of economic downturn, where essentials rise in price due to scarcity, the workers receiving the same wages as before nevertheless have their relative wages lowered even further. Thus, the money price of labor, (nominal wages) do not coincide with real wages, that is, with the sum of commodities which is actually given in exchange for the wages. And we should never forget that workers fare the worst in downturns; they can get fired, lose their homes, and end up more vulnerable to disease due to a drop in their standard of living. 

All this means that while it is just for workers to agitate for higher wages in order to better improve and heighten their standard of living, still their relative wages remain stagnant, and still all their actions fight with the effects (lowering relative wages), but not with the causes of those effects (the huge extraction of surplus value); that they are retarding the downward movement, but not changing its direction. And even this is something the capitalists can't concede. Workers agitate for higher wages or a reserve fund for themselves can be freed at least for some weeks from the compulsion to sell their labor-power on a continuous basis at the given market rate. Capitalism does not like that at all. That is also why the State is very jealous of the power to strike, although granted in several Constitutions and laws, including ours, because a strike means the right to abstain from selling labour power at the offered price whenever they like.

In the Philippines, we live in a semi-colonial and semi-feudal society, the bastard in-between child of feudalism and capitalism. Here, the big comprador landlord class, and not the wealthy industrialists, are the ruling class, and as long as they remain so, the Philippines cannot yet be called a capitalist country.  It has a hybrid character as merchant capitalist and feudal owner of haciendas: 

In the “merchant capitalist” sense, it engages in some manufacturing but it imports the majority of its means of production (the tools it uses to keep its factory running and the expertise needed to repair these tools, among others). And in the "feudal" sense, it uses some amount of mechanization in its haciendas but continues to use the cheap labor of seasonal farm workers to produce a large amount of agricultural surplus for local processing, domestic trade and export. Thus, at every turn the big comprador landlord class depends on the foreign monopoly capitalists; both obtain their profit on the backs of the Filipino workers and farmers. The full dynamics of this relationship, as well as how it came to be is explained more in Jose Ma. Sison’s Philippine Society and Revolution. 

Suffice it to say that the big comprador landlord class and the foreign monopoly capitalists maintain two conditions in the Philippines in order to obtain “superprofits,” which refers to the taking the extraction of surplus value explained earlier above and beyond its normal level, which ends up in a vicious cycle- because superprofits are extracted from the Filipino laborers, this hinders their ability to obtain wages. Less spending leads to less need among the domestic capitalists to produce (since anyway, the vast majority of Filipinos would not be able to afford these commodities), and thus the economy is retarded- it has no space to grow other than remaining a source of raw materials, primarily agricultural commidities, for cheap to the imperialist powers. This causes poverty, which depresses wages even further, and so on. This led to the phenomenon of the massive flight of workers to other countries (OFWs). 

There are two ways in which this exploitative relation and superprofits is maintained: first, through “permanent inflation,” and second, through cheap labor. 

Permanent inflation refers to the continued rise in price of commodities due to the foreign monopoly’s control in the supply and price of these commodities, especially of important products like oil and petrol. Because the relative wage of the worker goes down due to the machinations of the exploiting classes, the market is therefore limited, even despite the fact that oil and petrol are essentials. Thus, in order to obtain a bigger profit, the foreign monopolies maintain more demand than what can be supplied- here, artificial scarcity will drive prices up. This should be contrasted with our earlier example where the capitalist producing luxuries shifts into producing meat due to an increase in demand. What we dealt with there is the microeconomic scale of producing a commodity in a given country; what we are dealing with here is an already-established energy monopoly, especially since no small amount of capital is required before a corporation can even get its foot in the door, so to speak, in the energy business. Thus, despite the fact that the high demand should have opened a market for cheap energy, no players can enter because the foreign big businesses have rigged it from the get-go. 

Cheap labor refers to what we have already mentioned, “the interest of the capitalist to obtain a larger surplus value in order to obtain a larger profit” is realized here, since the foreign capitalist is not restricted to the cost of labor in his home country- he can outsource labor, and maintain this low price for him to continuously exploit. Because the Philippines is not an industrialized country, and productivity in many systems of production remains low, there are more workers than jobs, and thus a reserve army of workers (who have no stable jobs) comes along. The influx of supply leads to lower wages. 

What happens here is that the foreign corporations, usually by way of setting up “industrial enclaves,” where they use advanced machines and technology. Say for example the average wage used to work these machines in America is equivalent to P700, but in the Philippines, it only costs P300. In this case, the capitalist is able to maximize his profit, since after all the product will sell for the same price, whether it is made by American labor or Filipino labor. The difference in the social or historical element of labor power is used to maximize the profits of the foreign monopoly capitalist. 

This is the peculiarity of the coming of capitalism to the Philippines. Unlike in Europe where the  dispossession of the peasantry transformed them into urban factory workers, its specific effect in the country was the perpetuation of landless peasants. Since the agrarian development in the country was mainly linked with the external market, it did not, as in Europe, lead to any development of local industries. Without local industries to absorb the dispossessed peasantry, They remained tied to the land (and their respective landlords) instead of permanently going to factories, thus perpetuating the feudal system in this way (which is why we remain semi-feudal). This was the plan of the ruling class all along, to maintain a reserve of cheap labor.

In this way, we have taken the worst characteristics of capitalism witihout retaining its "best" or what Marx calls the "progressive" element of capitalism (not being tied to a specific part of land, workers in Europe could change employers and form a city-based class of workers, and thus had some semblance of social mobility).

And we have already talked about the “vicious cycle” where labor is kept cheap by permanent inflation, and thus the country cannot remain developed, and because the country is underdeveloped and wages are low, there is no incentive to produce the means of production in Philippine-owned and run factories, and in fact there is more incentive not to produce because the foreigners want us to import the means of production and the expertise needed to run it, which we cannot do without, and so on. 

The Americans will definitely not bring their technology here wholesale - if they are forced to bring their business here due to cheap labor, they will make sure that they bring their technology only piece by piece, in order that the Philippines likewise develops its industry only piece by piece, if at all, and thus still ripe for exploitation. In fact, we can already see this in the way America gives us foreign aid to go to projects decided by them- mainly into extractive industries (like, exactly, labor) and export agriculture. This is in order to divert their client-state, the Philippines from promoting a well-balanced developing economy and instead serve as a source of raw materials from the dependent country (the Philippines) and manufactures from the metropolis (US). In order to do this, foreign aid is earmarked for infrastructure, like roads and ports coming to and from the big haciendas. It is definitely not in the interest of an industrial capitalist country to allow a subservient underdeveloped economy to develop into another industrial capitalist country, because in the short term, the wages of the workers would go up, and the superprofits reaped by these big American corporations would be diminished. In the long term, an industrialized country turns into another competitor. 

For example, we can see that prices of commodities are usually higher in the Philippines than in other countries. For example, the computer industry is centralized in the US and Japan. Because wages are cheaper in the Philippines, it costs more SNLT for Filipinos on average to afford a computer. Moreover, since we do not have a domestic industry producing computers, the monopoly capitalists can sell computers at a much higher price. Another example is agriculture in America compared to the Philippines. The former has much more mechanization on their farms, and despite the relatively higher wages paid to a farmer in America, the end result is still that agricultural goods are still cheaper in America than the Philippines. The extra produce not sold there is then shipped off to the Philippines. Another way is that raw materials are imported cheaply from the Philippines, processed and manufactured in America, then sold to the Philippines at a much higher value. 

The question that faces us now is how is this contradiction between cheap labor and the price of commodities solved? There are two main ways: the first is to bring down the standard of living down to the wages the worker receives. In this case, the health, education, culture, and other aspects of the worker’s life are reduced. For example, instead of eating three meals a day, the worker has to make do with one. Instead of buying new clothes for their children, the worker will buy the biggest size, sew it smaller, then remove the threads as their children get bigger. And this is all while agricultural land is bulldozed and turned into malls and resorts. 

The second way is to increase wages so that they are equivalent to the worker’s labor-power, or how much value the worker can put into the products. We can see that the minimum wage of workers has, due to immense pressure the workers, especially in genuine trade unions like the Kilusang Mayo Uno have put on Congress, risen over the past few years, although inevitably permanent inflation rears its head and eats a lot of these gains up. This, again, is what the whole point of Wage, Price, and Profit is- an affirmation of the need for militant trade union activism (as distinguished from merely bread-and-butter unions) in order to better the livelihood of the exploited Filipino workers, on the path to securing the future of our country through national industrialization. 

Afterword: This text was prepared merely as a guide to understanding Wage Labor and Capital, and Wages, Price, and Profit by Marx. These two texts served as the main guides in writing, but other sources were used. Andrew Collier’s Marx: A Beginner’s Guide is sketched out the primary arguments (and thus what should be the main takeaways) of the texts. There are several concepts which were not explained in detail: the absolute and relative magnitude of profit, the rate of profit, and the distinction between products and commodities (social labor), to name a few. As for implications on the Philippines, the Gabay sa Pag-aaral ng Marxistang Teorya ng Sahod, Presyo, at Tubo, which is intertwined with Espesyal na Kursong Masa Hinggil sa mga Manggagawa. For a more thorough discussion on the concept of “superprofits,” Lenin’s Imperialism: The Highest Stage of Capitalism, covers this, which should be supplemented by IBON Foundation’s Lenin’s Imperialism in the 21st Century. The importance of studying these texts in full cannot be overstated.