[Marxism] A letter on Marx to FT by a Marxmailer

Louis Proyect lnp3 at panix.com
Tue Dec 22 19:01:45 MST 2015


FT, December 21, 2015 11:16 pm
Marx’s meditation on Citizen Weston revisited

Sir, Jennifer Hughes’s comments on the increase in purchasing power of 
China’s poorest 40 per cent (Short View, December 17) illustrates why it 
is that a rise in the minimum wage does not result in an increase in 
unemployment. Nor does such an increase engender anything more than but 
a brief but passing inflationary episode.

After describing a fall in the Chinese luxury goods market, Ms Hughes 
writes that “there is growing interest in the power of another type of 
Chinese consumer — the more regular, less flashy sort. Incomes for 
China’s poorest 40 per cent are rising at about 9 per cent a year — more 
rapidly than for the better off . . . investors should think about 
sectors that could get a boost from the bottom 40 per cent.”

Suppose that against a given level of production such an increase 
occurs. The additional purchasing power then causes a rise in the price 
level of what AC Pigou called “wage-goods” as the pay rise does not 
allow ventures into “non-wage goods” (luxury items), only an increase in 
purchasing of the former.

This rise in the price level — and through that, the profitability — in 
the “wage-good” sector entices some entrepreneurs to exit the “non-wage 
good” sector and enter into “wage-good” production. The consequent rise 
in the level of this production soon strips the inflation away, sending 
pricing, profitability and the general level of inflation back towards 
their pre-wage increase mean levels. Only now there is relatively more 
production of “wage-goods”. In addition there will be an increase in the 
tempo of the economy as income will have been transferred towards 
sectors inhabited by those with greater marginal propensity to consume.
Of course some pre-existing concerns operating marginally at 
profitability will be unable to afford the wage rise and will exit the 
field. These losses will be more than compensated by the job growth in 
the “wage-good” industries as a portion of the market’s productive 
forces come to be shifted away from the fashioning of luxury items as 
“investors . . . think about sectors that could get a boost from the 
bottom”.

There is nothing new in this thinking. Marx described the same almost 
exactly 150 years ago in his meditation on Citizen Weston in Value, 
Price and Profit.

John A Imani
Los Angeles, CA, US



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