TMW-25-08

Special mention

152842_600 152836_600

hourly wages-1979-2013

According to the Economic Policy Institute [pdf],

For all but the highest earners, hourly wages have either stagnated or declined since 1979 (with the exception of a period of strong across-the-board wage growth in the late 1990s). Median hourly wages rose just 6.1 percent (or 0.2 percent annually) between 1979 and 2013, compared with a decline of 5.3 percent (or -0.2 percent annually) for the 10th percentile worker (i.e., the worker who earns more than only 10 percent of workers). Over the same period, the 95th percentile worker saw growth of 40.6 percent, for an annual gain of 1.0 percent.

During that same period, productivity in the U.S. economy grew 64.9 percent.

annual wages-1979-2012

Only the “wages” of the top 1 percent (when measured in terms of real annual wages) surpassed the growth of productivity. The cumulative change in the wages of all other groups was less.

In other words, most of the growing amount of value produced by American workers wasn’t paid back to them in the form of wages but, instead, was either retained by their employers or distributed to a tiny group of CEOs and managers at the top.

Sorensen-26-08

Special mention

152765_600 152783_600

tmp556216671317000192

tmp556216671832899584

tmp556216671870648320

The original cartoon, by Adam Bessie and Dan Carino, includes links to further reading embedded within the images.

AD-1AD-2AD-3AD-4

According to USA Today, it costs about $130,000 for a household (of 2 parents and 2 children) in the United States to live the American Dream—to purchase the essentials, enjoy some extras, pay taxes, and put aside some money for retirement. (Yes, it surprised me, too.)

The issue of the American Dream comes up in many courses I teach. A typical definition?

the belief that with hard work and the freedom to pursue your destiny you can achieve success and provide better opportunities for your children.

Many of my students believe the American Dream has been achieved, or at least is within reach, for most people.

The problem is, according to the Census Bureau [pdf], only 15 percent of U.S. households (in 2012) had that kind of income. The rest may be chasing—but, in current circumstances, they’re falling short of achieving—that dream.

895e-image-CH27

source

The answer, to paraphrase Jack Nicholson, is: you can’t handle institutions!

Certainly not Daron Acemoglu and James A. Robinson [pdf]—and not, for that matter, Branko Milanovic. They simply can’t handle the institutions Marx refers to and analyzes throughout his oeuvre.

Milanovic discusses many of the problems in Acemoglu and Robinson’s treatment of Piketty’s book I noticed when I read their critique: dismissing the role institutions play in Piketty’s analysis (although, to be honest, I would have preferred to see less on elite educational institutions and more on the institutions that are the sources of the income and wealth of the 1 percent), the facile equation of Piketty and Marx (and thus, in their mind, guilt by association), the failure to understand what it means that labor income plays a role in driving the inequality of the 1 vs 99 percent (do we really want to treat the salaries of the 1 percent in the same way as we do the labor incomes of the other 99 percent?), and so on. And, of course, there’s Milanovic’s quite-accurate dismissal of Acemoglu and Robinson’s own attempt to conduct an institutional analysis of Sweden and South Africa:

I do not discuss Acemoglu-Robinson  analysis of South Africa vs. Sweden increase in inequality because I really fail to see a great virtue in it. As I unfortunately have to confess, I often find reading Acemoglu-Robinson descriptions of political changes quite superficial: they read like Wikipedia entries with regressions. I had the same feeling here too.

But let me take issue with one of Acemoglu and Robinson’s assertions, with which Milanovic agrees: that there’s no institutional analysis of capitalism in Marx’s texts.

Acemoglu and Robinson do admit that Marx allowed for “feedback from politics and other aspects of society to the forces of production” in the Eighteenth Brumaire but that’s it. They can’t seem to find any other institutional analysis worth its name in the rest of Marx’s oeuvre—nor do they even bother to mention Engels (ever hear of The Condition of the Working Class in England, The Peasant War in Germany, or The Origin of the Family, Private Property, and the State?) or the work of generations of Marxian scholars (on a wide variety of local, national, and international institutions).

But let’s stick with Marx for the time being. Do they want institutions? Admittedly, they won’t find much in the 1844 Manuscripts or the German Ideology. But they might take a look at Marx’s journalism (with Engels, for the Neue Rheinische Zeitung, or Marx alone in the New York Daily Tribune). Or beyond the journalism: The Civil War In France and The Paris Commune. And the list could go on.

But maybe Acemoglu and Robinson and Milanovic are just confining themselves to volume 1 of Capital. Surely, they’ve read the institutional detail in Marx’s discussion of such topics as The Working-Day, National Differences of Wages, the Industrial Reserve Army, and, of course, the entire section on the so-called Primitive Accumulation of Capital, in which Marx analyzes the institutional detail surrounding the Expropriation of the Agricultural Population from the Land, the Bloody Legislation against the Expropriated, from the End of the 15th Century. Forcing down of Wages by Acts of Parliament, the Genesis of the Capitalist Farmer, the Reaction of the Agricultural Revolution on Industry. Creation of the Home-Market for Industrial Capital, the Genesis of the Industrial Capitalist, the Historical Tendency of Capitalist Accumulation, and The Modern Theory of Colonisation.

They want institutions? Then try this vivid summary (from Chapter 31) of the institutions that gave rise to capitalism:

Tantae molis erat, to establish the “eternal laws of Nature” of the capitalist mode of production, to complete the process of separation between labourers and conditions of labour, to transform, at one pole, the social means of production and subsistence into capital, at the opposite pole, the mass of the population into wage labourers, into “free labouring poor,” that artificial product of modern society. If money, according to Augier, “comes into the world with a congenital blood-stain on one cheek,” capital comes dripping from head to foot, from every pore, with blood and dirt.

Acemoglu and Robinson and Milanovic (not to mention Piketty) can’t, it seems, handle that kind of institutional analysis.

c_11242008_520

Fringeli has a suggestion in the comments section on Phillip Inman’s article:

“In the Bavarian town of Lindau, where 18 Nobel-winning economists gathered last week along with 450 graduate economics students from around the world..”

close the building, set it on fire and the world would be all better off…