Socialist View of the Results of the Free Market Economy: Excerpt from Ferdinand Lassalle's "Open Letter" (1863) In his “Open Letter” (1863), written at the request of a Leipzig workers’ committee, socialist leader Ferdinand Lassalle (1825-1864) explains his “iron law of wages,” a key to socialist economic critique. According to Lassalle, supply and demand in the free labor market inevitably keeps workers’ wages around the subsistence level; entrepreneurs benefit exclusively from labor profits; and temporary advantages resulting from increased productivity and lower prices are offset again by further wage reductions for workers.
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page 1 of 3 [ . . . ] 2. The iron economic law that determines the working wage under current conditions, under the rule of supply and demand for labor, is this: the average working wage always remains reduced to the subsistence level necessary for a given people to exist and propagate in the manner in which it is accustomed. This is the point around which the actual daily wage always swings and gravitates, without ever rising for too long above that point or being able to drop down below it. It cannot permanently rise above this average – for otherwise the easier, improved situation of the workers would cause a rise in workers' marriages and workers' propagation, a rise in the workers' population, and consequently an increase in the supply of hands, which would once again reduce the working wage to – and below – its previous level. The working wage also cannot permanently remain far below this subsistence level, for then the result is – emigration, celibacy, abstention from procreating, and finally a poverty-induced reduction in the number of workers, which consequently diminishes the supply of workers' hands even further and therefore brings the working wage back up to its previous level. The real average working wage therefore lies in this constant movement around a center of gravity to which it must continuously revert; sometimes [it is] situated a little above this point (period of prosperity in all or individual branches of work); sometimes a little below it (period of more or less general desperation and of crisis). The restriction of the average working wage to the barest means necessary for a given people to exist and propagate in the manner in which it is accustomed – this is, let me repeat, the iron and cruel law that controls the working wage under current conditions. This law cannot be disputed by anyone. Here, I could introduce as many guarantors as there are great and famous names in the science of national economy, and indeed from the liberal school itself, for it is the liberal economic school that discovered and proved this law.
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