Under Capitalism, Welfare State’s Main Function is Corporate Welfare

Thanks to a Twitter friend, I just stumbled across remarks from 2005 in which Walmart CEO Lee Scott called on Congress to pass a higher minimum wage:

“The U.S. minimum wage of $5.15 an hour has not been raised in nearly a decade and we believe it is out of date with the times. We can see first-hand at Wal-Mart how many of our customers are struggling to get by. Our customers simply don’t have the money to buy basic necessities between pay checks.”

At first glance this seems decidedly odd, coming as it does from the CEO of a company which — as you know if you’ve been following the Black Friday news — is notorious for keeping its workers’ pay as low as humanly possible.

But if you think about it, there’s really no contradiction at all. There’s a fundamental prisoner’s dilemma at the heart of capitalism. It’s in the interest of large corporations collectively to guarantee sufficient purchasing power to keep the trucks moving and the inventories turning over. But it’s in the interest of individual large corporations to keep labor costs as low as possible.

Likewise, it’s in individual employers’ interests to pay only enough to maintain employees in subsistence while they’re actually working, without enough of a surplus to save against periods of sickness or unemployment. But it’s in the collective interest of employers to pay enough to cover the minimum reproduction cost of labor power.

Overcoming such prisoners’ dilemmas is the main purpose of the capitalists’ state. When the state mandates a minimum wage sufficient to facilitate the reproduction of the workforce (of course it doesn’t in practice, outside the European “social democratic” model of capitalism), the cost falls on all employers in a given industry equally. And unlike the case of a private, voluntary cartel, individual employers are unable to defect for the sake of a short-term advantage from double-crossing their competitors. So funding the minimum reproduction cost of labor-power is no longer an issue of cost competition among employers; it’s a collective cost of an entire industry that can be passed on to consumers as a cost-plus markup, via administered pricing.

Marx had a lot to say about this phenomenon, as illustrated by the Ten-Hours Act in Britain (Capital, vol. 1 ch. 10).

“These acts curb the passion of capital for a limitless draining of labour-power, by forcibly limiting the working-day by state regulations, made by a state that is ruled by capitalist-and landlord. … [T]he limiting of factory labour was dictated by the same necessity which spread guano over the English fields. The same blind eagerness for plunder that in the one case exhausted the soil, had, in the other, torn up by the roots the living force of the nation.”

This common interest in preventing “exhaustion of the soil,” Marx argued, explained the counterintuitive support of many capitalists — as exemplified by employer Josiah Wedgwood — for the Ten-Hours Bill.

The state, in many ways, functions as an executive committee of the economic ruling class, carrying out for them in common many necessary functions it’s not in their interest to carry out individually. The state, in short, cleans up the capitalists’ messes for them.

Things like the minimum wage, collective bargaining, and universal healthcare may be perceived by individual capitalists as a restraint or an imposition. But they’re supported by the smarter capitalists — especially those in the industries that benefit most from them. Just consider the role of General Electric CEO Gerard Swope in the business coalition behind the New Deal.

The minimum wage increases aggregate purchasing power among the working class at large, and helps secure employers a reliable pool of labor power on a sustainable basis. The welfare state keeps unemployment, hunger and homelessness from reaching politically destabilizing levels that — without the state cleaning up the capitalists’ mess at taxpayer expense — might result in capitalism being torn down from below. Universal healthcare, whether on the British or Canadian model, externalizes labor costs on the taxpayer which would otherwise be (and are, in countries like the U.S.) borne by employers who provide health insurance as a benefit.

Any time you hear soccer mom rhetoric about “our working families,” or self-congratulatory platitudes to the effect that “Democrats care,” look behind the voice and take a look at what the hands are actually doing. In a freed market — without the state to do the capitalists’ bidding — corporate capitalism would wither like a garden slug with salt on its back. The state works for the capitalists, not for you.

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