Posts Tagged ‘labor’


Capitalism, to be sure, comes in different—more or less unequal—forms.

For example, the less unequal form of U.S. capitalism in the three decades following World War II was different from the periods before the first and second Great Depressions, when capitalism in the United States became increasingly unequal. The same is true across countries—in the sense that the forms of capitalism in Scandinavia are less unequal that what we are living through in the United States.

But at the heart of all forms of capitalism is a fundamental inequality: between workers and owners, between those who produce the surplus and those who appropriate and receive distributed cuts of it. Those groups play different roles and engage in different kinds of economic behaviors. For example, workers sell their ability to work, most of their income takes the form of wages, and they’re able to save relatively little; owners and high-level corporate executives are able to capture what others produce, their incomes consist of both salaries and other returns on capital, and they can save and invest a large percentage of their incomes.

That basic inequality is mostly hidden or overlooked within mainstream economic theory. But, it seems, in the debate surrounding Thomas Piketty’s new book, at least some people are discovering or finding ways of articulating the fundamental links between capitalism and inequality.

As we saw yesterday, Seth Akerman gets it:

The statistical image that emerges from these numbers is neither Piketty’s vision of rising returns to “capital” as such, nor Krugman’s picture of an increase in returns to managerial “labor.” Rather, we see the burgeoning of a general surplus: an excess of national income over and above what’s needed to pay the nation’s non-managerial workers, appropriated broadly by all those who control capital — whether as shareholders, managers, or financiers.

So does Branko Milanovic, who, in challenging the latest attempt to undermine Piketty’s argument (by Debraj Ray), makes some rudimentary observations that most mainstream economists choose to ignore:

Let me now explain why I disagree with Debraj. While r>g (or r>=g) may be a feature of all growth models it is still a contradiction of capitalism for three reasons: because returns from capital are privately owned (appropriated), because they are more unequally distributed (meaning that the Gini coefficient of income from capital is greater than the Gini coefficient of income from labor), and finally and most importantly because recipients of capital incomes are generally higher up in the income pyramid that recipients of labor income. The last two conditions, translated in the language of inequality mean that the concentration curve of income from capital lies below (further from the 45 degree line) the concentration curve of income from labor, and also below the Lorenz curve. Less technically, it means that capital incomes are more unequally distributed and are positively correlated with overall income. Even less technically, it means that if share of capital incomes in total increases, inequality will go up. And this happens precisely when r exceeds g.

It is indeed a contradiction of capitalism because capitalism is not a system where both the poor and the rich have the same shares of capital and labor income. Indeed if that were the case, inequality would still exist, but r>g would not imply its increase. A poor guy with original capital income of $100 and labor income of $100 would gain next year $5 additional dollars from capital and $3 from labor; the rich guy with $1000 in capital and $1000 in labor with gain additional $50 from capital and $30 from labor. Their overall income ratios will remain unchanged. But the real world is such that the poor guy in our case is faced by a capitalist who has $2000 of capital income and  nothing in labor and his income accordingly will grow by $100, thus widening the income gap between the two individuals.

In their different ways, what Ackerman and Milanovic are arguing is that there is a fundamental class inequality at the heart of all forms of capitalism.


As if to illustrate the point I made the other day (about earnings at the top being themselves distributions of the income captured by capital), Seth Ackerman put together the chart above (from data in Simon Mohun’s recently published article on unproductive labor) comparing the sum of profits and managerial compensation to non-managerial compensation, both as shares of total net income.

Indeed, in a direct rebuttal of the neoclassical marginal-productivity theory of distribution, capital’s share of income has been growing at the expense of labor’s share since the late-1970s.


I find it interesting that Thomas Piketty’s classical treatment of inequality is being interpreted—and criticized—as a battle of capital versus labor. (Is that just because Piketty begins chapter 1 with the story of the August 2012 strike at Lonmin’s Marikana platinum mine? It must be, because the book (as far as I’ve read) focuses much more on rates of demographic growth than it does on class conflict.)

In any case, as I suspected, the main line of attack (at least within mainstream economic thinking) against Piketty’s treatment is to undermine the idea of capital versus labor and to focus instead on growing inequality among workers. We saw this with David Autor’s article. Now, it’s Laurence Kotlikoff:

The deep flaws in parts of Piketty’s book don’t mean that inequality is either small or benign. But the real source of inequality these days is not due to capitalists saving every penny and workers spending every cent or to r always exceeding g. It’s due to labor earnings becoming ever more skewed. This is happening for a variety of reasons, including the advent of smart machines. This rising wage inequality, which Berkeley’s Emmanual Saez and co-author Piketty have spent years carefully documenting, doesn’t pit capitalists against workers. It pits workers against workers.

In my view, the problem with juxtaposing ownership-of-capital inequality and labor-earnings inequality is that it ignores the extent to which earnings at the top are themselves distributions of the income captured by capital. That’s a point that seems to have been missed by both Piketty and his mainstream critics.

Map of the day

Posted: 21 May 2014 in Uncategorized
Tags: , , ,


The International Trade Union Confederation (ITUC) [ht: hk], an alliance of regional trade confederations that advocates for labor rights around the world, debuted its Global Rights Index this week, ranking countries on a 1 (best) through 5 (worst, in darker shades of red on the map) scale on the basis of how well workers’ rights are protected.

According to the report [pdf],

In the past 12 months alone, governments of at least 35 countries have arrested or imprisoned workers as a tactic to resist demands for democratic rights, decent wages, safer working conditions and secure jobs. In at least 9 countries murder and disappearance of workers were used as a common practice in order to intimidate workers.

The United States received a 4 (the same as such countries as Bahrain, Haiti, and Pakistan), indicating a “systematic violation of rights”:

Workers in countries with the rating of 4 have reported systematic violations. The government and/or companies are engaged in serious efforts to crush the collective voice of workers putting fundamental rights under continuous threat.

Robert Jacob Hamerton, illustration from Punch, 29 July 1843

No, I haven’t had a chance to read Thomas Piketty’s book yet. But I’ve just finished my end-of-semester grading. So, soon…

In the meantime, Thomas Frank [ht: ra] offers a few things to look out for, such as:

1. Piketty’s critique of the discipline of economics.

One of the best things about Piketty’s masterwork is his systematic demolition of his own discipline. Academic economics, especially in the United States, has for decades been gripped by a kind of professional pretentiousness that is close to pathological. From time to time its great minds have grown so impressed by their own didactic awesomeness that they celebrate economics as “the imperial science”— “imperial” not merely because economics is the logic of globalization but because its math-driven might is supposedly capable of defeating and colonizing every other branch of the social sciences. Economists, the myth goes, make better historians, better sociologists, better anthropologists than people who are actually trained in those disciplines. One believable but possibly apocryphal tale I heard as a graduate student in the ’90s was that economists at a prestigious Midwestern university had actually taken to wearing white lab coats—because they supposedly were the real scientific deal, unlike their colleagues in all those soft disciplines.

Piketty blasts it all to hell. His fellow economists may have mastered the art of spinning abstract mathematical fantasies, he acknowledges, but they have forgotten that measuring the real world comes first. In the book’s Introduction this man who is now the most famous economist in the world accuses his professional colleagues of a “childish passion for mathematics and for purely theoretical and often highly ideological speculation”; he laughs at “their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.” In a shocking reversal, he calls on the imperial legions of economic pseudo-science to lay down their arms, to “avail ourselves of the methods of historians, sociologists, and political scientists”; the six-hundred-page book that follows, Piketty declares, is to be “as much a work of history as of economics.”

2. His lack of knowledge of U.S. history.

Whenever Piketty moves away from numbers and tries to describe life in the United States, things go wrong in a hurry. The worst example first: Piketty tells us that, unlike the French, Americans feel “no nostalgia for the postwar period” because our economy didn’t grow rapidly in those years. In fact, American GDP often grew by 5 and 6 percent in the ’50s and ’60s and Americans have felt intense sweet wistfulness for those days ever since “American Graffiti” came out in 1973. To be fair, Piketty corrects himself several hundred pages on, but then not because he’s looked around and noticed the four decades of ’50s-revival crap Americans have so eagerly consumed, but because of a stray nostalgic remark by his fellow economist Paul Krugman. It’s all moot, I guess, because before long and without any explanation he reverts to his original position of nostalgia denialism.

Piketty’s command of American political history is, quite simply, abysmal. He announces that the U.S. “never became a colonial power,” which would be news to the people of the Philippines, not to mention the Sioux. He describes Herbert Hoover as a “liquidationist” though that was Hoover’s own term for the policies that Hoover rejected. About the presidency of Franklin Roosevelt—ordinarily an important period for students of inequality—Piketty seems to know almost nothing, except that FDR used wage and price controls during World War II. At one point, he comes close to denying the existence of Rooseveltian liberalism altogether, writing that for we benighted Americans “the twentieth century is not synonymous with a great leap forward in social justice.” As for the great right turn of the Eighties, he asserts repeatedly and with virtually no documentary evidence that it happened because America was falling behind Germany and Japan in economic growth—in other words, that the galaxy of nutty anxieties that fuel modern right-wing politics can be easily deduced from a few lines on a graph.

3. And Piketty’s blind spot when it comes to unions.

Turning to the problem of income inequality here in the United States, there is an even simpler solution, by which I mean a more realistic solution, a solution that builds on familiar American traditions,that works by empowering average people, that requires few economists or experts, that would involve a minimum of government interference, and that proceeds by expanding democracy and participation rather than by building some kind of distant and unapproachable global tax authority: Allow workers to organize. Let people have a say on the basic issues affecting their lives.

Piketty’s biggest blind spot is that he has virtually nothing to say about labor unions. He starts Chapter 1 of “Capital” with an anecdote about a bloody strike in South Africa and he returns to that same tragic episode at the very end of the book, but in between he addresses the matter almost not at all. Piketty talks a good game about democracy, but like other economists who have made inequality their subject, he prefers solutions that are handed down from the lofty heights of expertise.

The best remedy for inequality, however, is the one that comes up from below. Economists may not think very highly of those hardened people in SEIU t-shirts—some of them smoke too much, some are suspicious of “free trade,” some of them (gasp!) didn’t go to college—but the fact remains that in nearly every particular they represent the obvious and just about the only social force on the ground in America that might bend the inequality curve the other way.

In all honesty, one can go even further than Frank. Letting people have a say on the basic issues affecting their lives means more than forming unions. It means letting them having a say in the way the surplus is appropriated and distributed in their workplaces. Now, that’s a solution to the battle between capital and labor that has been going on since the mid-nineteenth century.


There are all kinds of things that make Chicago a curious city. One of them is the WBEZ program of the same name, which answers questions curious listeners pose about the city.

A recent episode focused on the Haymarket Square demonstration [ht: jh] on 4 May 1886, which transformed labor politics worldwide and left an indelible mark on Chicago itself.

What connections do you see between the events of Haymarket and today?

[James] Green: As in the 1880s, Chicago is a city of immigrants and a city of immigrants who are wage-earning people, many of whom are in low-wage occupations, many of whom may not be citizens at all or are viewed as second-class citizens. There are similarities with the Gilded Age and the extremes of wealth.

The unions are pretty tough in Chicago, but they’re under assault. The mayor (Rahm Emanuel) would certainly love to get rid of the teachers union. There’s a lot of pressure on unions to give up things. The eight-hour workday — for a lot of people — is not feasible anymore. You need to work two jobs and overtime.

[Leon] Fink: The larger issues of inequality, worker rights, the basic decency of the workplace are still very much alive today. And some of the issues — the length of the workday and whether there’s a minimum wage — have returned to the political surface. Our culture is also constantly challenged by those who would find scapegoats as a way of turning away from the central issues raised by a movement or by radicals


Volkswagen has accepted the United Auto Workers’ attempt to unionize its Chattanooga, Tennessee manufacturing plants.

Scott Wilson, a VW spokesman, said: “Volkswagen values the rights of its employees in all locations to representation of their interests.  In the United States, it is only possible to realize this in conjunction with a union.  This is a decision that ultimately lies in the hands of the employees. For this reason, we have begun a dialogue with the U.A.W.”

But Republican politicians, local businesses, and outside right-wing groups are attempting to derail the drive.

Two of Tennessee’s most prominent Republicans, Gov. Bill Haslam and Senator Bob Corker, a former mayor of Chattanooga, have repeatedly voiced concerns that a U.A.W. victory would hurt the plant’s competitiveness and the state’s business climate.

A business-backed group put up a billboard declaring, “Auto Unions Ate Detroit. Next Meal: Chattanooga,” while a prominent anti-union group, the National Right to Work Committee, has brought legal challenges against the U.A.W.’s effort, asserting that VW officials improperly pressured workers to back a union.

In addition, Grover Norquist, the anti-tax crusader, has set up a group, the Center for Worker Freedom, that has fought the U.A.W. on several fronts, partly to prevent the election of labor’s Democratic allies who might increase government spending.


Thomas Piketty’s new book, Le capital au XXIe siècle (which is supposed to be released soon in English as Capital in the 21st Century), is creating quite a stir. It is the subject of the latest column by Thomas B. Edsall and was recently reviewed by Branco Milanovic [pdf].

In fact, the chart above is taken from Milanovic’s review. It shows the growing gap between (as Piketty defines them) the rate of growth of world production (g) and the rate of return to capital (r) during the nineteenth century and, after the “special period,” from the mid-1970s onward. For Piketty, that gap is the source of growing inequality in both the functional (capital-labor) and size (top 1 percent) distributions of income.

I’ll refrain from further commentary until I’ve had a chance to read the book (which, if all goes well, I’ll probably end up adding to my Topics in Political Economy reading list in the fall). But, I’ll admit, I am both intrigued (by the model and data) and somewhat wary (especially concerning the definition of capital) of Piketty’s approach. Still, given Milanovic’s summary,  Piketty’s methodological reflections alone warrant further attention:

Appropriately for such a wide-ranging book, Piketty closes his book with an essay on the method to be used in economics. He regards economics as a social science (where the emphasis is on “social”) that can flourish only if (i) it asks important, and not trivial, questions (so adieu Freakonomics and randomistas), and (ii) uses empirical and historical methods instead of sterile model-building. These issues have been debated ad nauseum by the economists, and Piketty has nothing new to add to that, except perhaps in a most important way—namely, by showing in his own work how these two desiderata should be combined to create economic works of durable importance.


Pope Francis offered the only possible response to his being accused of being a Marxist. First, that the “Marxist ideology is wrong.” (How could an official of the Catholic Church, much less the Bishop of Rome, assert otherwise?) And then:

“But I have met many Marxists in my life who are good people, so I don’t feel offended.”


That really is the only way to respond to the kinds of outrageous insults right-wing commentators and business pundits have hurled at him after the publication of Evangelii Gaudium.

And Priyamvada Gopal gets it:

The use of “Marxist” as a slur – along with kindred terms such as “socialist” and “communist” – is not a uniquely American phenomenon but is most familiar to us from the era of the infamous House Un-American Activities Committee, established in 1938 and, later, Joseph McCarthy’s committee.

In that context, and during the “red scares” which followed it during the cold war, these were appellations used to identify and punish any criticism of capitalism, however sympathetic or merely reformist. Indeed, any dissent from mainstream dogma was “un-American”.

As we all know, in the United States, any criticism of individual capitalists or capitalism as an economic and social system still is considered to be associated with Marxism or communism, long after the Fall of the Wall.

But I do need to correct Gopal’s rendering of the long tradition of American anticommunism on one point: the first “red scare” wasn’t in 1918 but earlier, in the nineteenth century, in response to the upsurge of union organizing and the related hunger demonstrations and then in reaction to the Paris Commune.

As Patrick C. Jamieson has explained,

News sources, especially in America, were becoming increasingly worried about the rise of what they perceived as a Communist movement in Paris. This ‘red fear’ was based on both fascination and anxiety over the ideology.  Because of the Commune’s close ties with labor unions, the International Working Men’s Association, socialists, and Karl Marx and Friedrich Engels, the Commune thus “further reinforced the bourgeois notion of class war,” as Gay Gullickson notes.  “Journalists regularly referred to the ‘Reds’ in Paris and used ‘communist’ as a synonym for ‘communard’….” Some journalists even used all three terms interchangeably.  Both American newspapers and periodicals followed a similar path in criticizing the Commune and exposing it to the rest of the world. One historian notes that, “[t]he chorus of abuse in the American press quickly mounted as the Commune unfolded, and after its destruction it was frequently used to epitomize all the horrors of ‘communist’ philosophy….The Commune [brought] out [people’s] worst anxieties about the family, religion, property, and social order.” The Paris Commune became the great fear of anti-Communist Americans who saw the actions of the working class in Europe as a major threat.

So, yes, the “red menace” attacks on the pope have a long lineage in the United States, which stretch back to the nineteenth century—and have clearly outlasted the Cold War.


Apparently, Maine’s Republican Governor Paul LePage is continuing his push to loosen the state’s child labor laws, arguing that 12-year-old children should not be restricted from working and learning life skills.

“I went to work at 11 years old,” he said at a town hall meeting in 2011. “I became governor. It’s not a big deal. Work doesn’t hurt anybody.”

“I’m all for not allowing a 12-year-old to work 40 hours,” LePage told Down East magazine in an interview published this month. “But a 12-year-old working eight to 10 hours a week or a 14-year-old working 12 to 15 hours a week is not bad.”

LePage earlier backed legislation that would have allowed businesses to pay students $5.25 an hour, rather than the $7.50 minimum wage. That bill was unsuccessful.


Note: I just learned that U.S. federal law does not prohibit but only regulates child labor: by limiting the maximum hours of employment for youth between the ages of 14 and 16 years old to 3 hours a day and 18 hours a week on school days and, when school is out, 8 hours a day and 40 hours a week; and by establishing a youth minimum wage of $4.25 per hour for employees under 20 years of age during their first 90 consecutive calendar days of employment with an employer.