 Here, the real wage actually then begins to fall on the United States. And actually, if they do it properly, it was up here. And so the fall was, by eroding the union power, you know, we started out here and we ended up over here after all these different shifts and changes in the labor power market. This is where we started, this is where we end up. So the shift to the right in the supply of labor power overwhelmed the shift into the right for the demand for labor power. And the reasons there are interesting and fascinating complex in the entire courses. Number two is an increase in the shift in the supply of labor power to the right because of women entering the labor force. And in part, only in part, women increasingly enter the labor force because their spouses or partners real wage has diminished. And hence, to maintain the family income, it requires another member of that family besides the male to sell, in this case, her labor power in the market to supplement that income so that they can afford the standard of living to which they have been accustomed for so many decades. Be that as it may, that shift in the supply puts downward pressure on the wage. Secondly, the supply increases because of immigration. So into the United States during this period of time comes waves of legal and illegal immigrants, which puts downward pressure on the price of labor market as they come into the labor force taking a variety of different kinds of jobs, first low-paying jobs, then moving up the scale to more high-paying jobs. Third, it's true that demand for labor power shifts to the right, as I explained before, but the shift is not as robust as one might expect because there's an increase in the composition of capital that we have discussed in the course. So the index of mechanization rises, and that's got something to do with the computer revolution. So the US economy doesn't employ as many people as one might expect from a robust K star plus lambda because the composition of capital is changing. More and more of the capital, C plus V, is composed by the value of machines. So you have these dramatic effects in the US economy, which is pushing down the real wage. So let me erase this, and then go back to that real wage. Recall, the value of labor power for all the workers now is equal to the exchange value per unit use value times unit, remember the use value. And this component right here is what economists call the real wage. Well, I think the argument I gave you over this period of time is that the real wage is falling for American workers. So this is being pushed down. Now it is true at the same time the unit value of wage goods is falling as well. So that's a strong argument for the value of labor power falling in the United States. I think what happened, this is my interpretation of what happened here, I think the real wage starts to fall for American workers, blue-collar workers, and I think that American workers start to accept a new norm, a new standard, which is a lower real wage for themselves. So for the first time in US history, for a prolonged period of time, the real wage falls. And connecting that to our Marxist argument, I think that fall in the real wage produces a change, the moral and historical standard in American society in which the workers come to accept a lower real wage. Now I understand their acceptance of this is over-determined by a variety of different things, not the least of which is they're continually being told that they have to cut their wage to be more competitive, otherwise American jobs are going to move overseas. So the global economy acts as a powerful force pushing workers to accept a lower standard of living. Number one, number two, their unions have been eroded. So the unions are not there in the workplace to bargain for higher real wages. Moreover, in many of these industries, the unions themselves are complexly shaped by this message because of global competition. They have to accept a lower real wage in order to save the jobs of the workers. And of course the federal government, then, with this picked up by the media and professors of economics and so forth, give the message that American workers have to come to accept this lower real wage so that we can survive in a global economy. So I mean, the politics change, the culture change, the economics change, and hence I think what happens that this lower real wage becomes normalized. And then in Marxian language, the value of labor power falls as well as the unit value of wage goods continue to fall because of a higher productivity of labor. Remember we did that, the higher productivity is a lower unit value of wage goods. And a very important factor shaping this one is cheap wage goods in China. That is, China becomes a major producer of cheap wage goods, which are produced there, exported to the United States, which enables the wage goods to fall, which in that sense offsets a degree, the necessity for the real wage to fall because workers can go to Walmart and purchase these cheaper wage goods. So if you put them together, we have the value of labor power falling in the United States. In Bengal, we have then, what I just said to you, we have the average cost being pushed down because of a rise in productivity and the denominator, rise in the composition of capital, blah, blah, blah, blah, of reduction in the value of labor power, the United States becomes a relatively cheap place to produce commodities around the world. And so it's a recovery in the industry, not every industry, obviously, but it's a recovery in a number of industries in the US, and that diminishes our loss of surplus value to our foreign competitors. Let me just then put all this, if I may, together in one kind of summary super diagram for what we have said. And the following diagram has become relatively well known because of a comrade of mine and a friend for many, many years has gone across the United States and Europe as well, and he has presented this. This is Richard Wolff. The diagram is as follows. And this is a diagram that Rick and I produced in an article for this journal, Rethinking Marxism, some years ago, just a couple of years ago. I'm going to plot here two things, the real wage of American workers, so this is the United States, and the productivity of American workers in industry. So this is the real wage in industry, the productivity in industry, in manufacturing. And this is over time on the horizontal axis. So I'm going to start with roughly the 1880s in the United States, and all these numbers come from the US government. They're all published numbers. And I'm going to go right up to the present. The productivity of American workers has steadily increased. In fact, starting roughly 1981, it kind of increases even more. So there's been a sustained increase in the productivity of American workers. That's what capitalism can deliver. A rise in the composition of capital, new managerial techniques, and so forth. Everything that Marx described that you have read in volume one is reproduced around the world. And in this example, reproduced in the United States. And the productivity of labor rises. That's a great gain from capitalism. It develops in Marxian language the forces of production. The result is we get more wealth in the numerator with the same or even less labor power. Means workers times the hours that they work. Now let me put here the real wage. Over our history, the real wage kind of looks like this. So over a long period of time, I haven't drawn this properly because this is 100 years. But over the entire 100 years of our great industrialization after the Civil War, it's not just a productivity rose. But the real wages of American workers rose as well. Over a 100 year span, a rather remarkable phenomenon that rise in real wage financed a rising consumption for American workers. And in many ways, it became the envy of the world attracting immigrants into the United States. Obviously, they didn't come only for a higher standard of living. They also came for the freedoms that American capitalism promised individuals. But be that as it may, this rise in the real wage and the consumption that it enabled helped to support, helped to make, I should even say, stronger than support, helped to make the American dream. Which is rising consumption over a longer period of time. So in Marxian lingo, to go back, we have the value of labor power equal to the exchange value per unit use value times the real wage. Well, the argument here is that this real wage is rising. That's the red line over this long period of time. The productivity of labor is rising. That's the black line. And that's pushing this down. So remember now what we did in the beginning of the course. A rise in the productivity of labor means it takes fewer abstract labor hours to produce commodities. And so the unit value falls. And my guess is that the fall in the unit value was greater than the rise in the real wage. And hence the value of labor power fell over time. And that means that the surplus rose. So I think that part of the success story of American capitalism is a rising rate of exploitation. It's the connection of this story I told you about productivity and real wage to the rate of exploitation that is Marx's message. That's precisely what is missing from the stories of American capitalism, which is what economics 305 and Marxism adds. It's this connection here. So the higher real wage and the fall in the V and therefore the higher in the rate of exploitation, in a sense, if I can just summarize this, in a sense there's no revolt in the United States. There's no widespread revolt in part because the higher real wage compensates for the higher rate of exploitation. So capitalism delivers a higher real wage. And a higher consumption, which helps to offset the rise in the rate of exploitation. Along with a variety of other mechanisms which over determines the inability of socialism to mount any kind of sustained presence in the United States, not the least of which is the idea of American exceptionalism, which is the United States delivers not only a higher standard of living, but also all the freedoms associated with a free market system that, too, has an important role to play. 1981, things change. For the first time in US history, this real wage stops rising. It kind of looks something like this. It actually falls a bit, right up to the present. So we have something new after 1981. And this is reflected in the solution to that crisis that I started this lecture with and talked about last time, which is because of changes in the labor market, because of this attack upon unions, because of a changed kind of culture in the US in which workers are willing to accept a lower real wage, this no longer rises. So we have, excuse me, we have now, I'm going to rewrite it over here. The value of labor power. So this is before, this is 1880s to 1981, roughly. This is 1981 to 2008. Now, the real wage is constrained, and it actually even falls just a little bit.