Posts Tagged ‘Marx’

retailers

As in the classic Prisoner’s Dilemma, retailers could “cooperate” with one another—paying higher wages and enjoying higher sales—but they don’t. Instead, they “defect”—and, as a result, pay low wages and undermine consumer spending for all retailers, including themselves.*

That’s one way of interpreting the new report by the Center for American Progress [pdf]:

While many of these companies’ lobbyists and trade associations continue to pro- mote a low-wage agenda, their 10-K statements reveal how low consumer spend- ing levels undermine their stock prices. In fact, 88 percent of top retailers explicitly cite weak consumer spending as a risk factor.

That retailers depend on consumer spending is not a revelation, but that many retailers see flat or declining incomes as a risk factor is: 68 percent of companies point to flat or falling disposable incomes as a risk. Sixty-four percent of these companies that filed 10-Ks in 2006 cited incomes as a risk factor in their most recent 10-K, compared to just 32 percent in 2006.

Joan Robinson—who should have won the Nobel Prize in Economics but didn’t (because, of course, she was a non-neoclassical, woman economist) and can’t (because she’s dead)—understood this “essential paradox of capitalism”:

Each entrepreneur individually gains from a low real wage in terms of his own product, but all suffer from the limited market for commodities which a low real-wage rate entails.

And, of course, Old Nick before her:

Every capitalist knows this about his worker, that he does not relate to him as producer to consumer, and [he therefore] wishes to restrict his consumption, i.e. his ability to exchange, his wage, as much as possible. Of course he would like the workers of other capitalists to be the greatest consumers possible of his own commodity. But the relation of every capitalist to his own workers is the relation as such of capital and labour, the essential relation. But this is just how the illusion arises — true for the individual capitalist as distinct from all the others — that apart from his workers the whole remaining working class confronts him as consumer and participant in exchange, as money-spender, and not as worker.

 

*In the old days, when I taught Principles of Economics, I used to illustrate the Prisoner’s Dilemma with Puccini’s opera Tosca. You know: Scarpia kills Cavaradossi, Tosca in turn kills Scarpia, and then Tosca kills herself.

headline

I often explain to students, when I’m teaching economic models, they have to look at what’s happening behind the blackboard—all the implicit mechanisms that allow the models to work as they do.

By the same token, we have to ask, what’s going on behind the unemployment headlines?

The headlines today all trumpet the number of new jobs added in September (248,000), such that the official unemployment rate fell for the first time since August 2008 to below 6 percent (5.9 percent, to be exact).

That’s good news. Employment is picking up. But, of course, that’s not the end of the story. And Tyler Durden helps us see why.

quality of jobs

First, most of the new jobs (4 of the top 5 categories) were in retail trade, leisure and hospitality, education and health, and temp help.

So yes, America added a whole lot of minimum wage waiters, store clerks, groundskeepers and temps: truly the stuff New Normal “recoveries” are made of.

participation rate sept 2014

Second, the labor force participation rate dropped once again—from an already three decade low in August—to 62.7 percent. In other words, as against the 232,000 people who found jobs, the number of people not in the labor force rose to a new record high, increasing by 315,000 to 92.6 million!

average hourly earnings sept 2014

And finally, even while new jobs are being created, hourly earnings are not moving at all (in fact, to be accurate, they actually declined by a penny from the $24.54 in August). In other words, real wages—accounting for inflation—continue to decline.

So, that’s what’s happening behind the triumphant unemployment headlines: the continued creation of lousy, low-paying jobs; the continued exit of hundreds of thousands of workers from the labor force; and the continued decline in real wages.

Anyone want to talk about the reserve army of labor?

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It just so happens that, in class yesterday (actually, in both courses I’m teaching), I presented Marx’s theory of commodity fetishism. I explained that the first chapter of volume 1 of Capital begins with the common sense of the commodity (common sense, that is, for mainstream economists and for those of who live in a commodity-producing society) and ends with making the commodity strange, by denaturalizing it.

I explained, in particular, that Marx’s notion of the fetishism of commodities—that economic agents need to be characterized by certain notions of “freedom, equality, property, and Bentham” in order for commodity exchange to exist—represented a critique of both mainstream economists (for whom commodity exchange is natural, transcultural and transhistorical) and of Ludwig Feuerbach (for whom commodity fetishism was a false or distorted consciousness). In other words, Marx developed a notion of economic subjectivity that is endogenous, both historical and social, as against notions of a given human nature.

Then, after class, a couple of students stayed behind to talk about they and their classmates felt the pressure to fill out their resumés and craft themselves in order to secure advancement (e.g., in the job market) and not to take risks that might raise questions (e.g., on the part of prospective employers). I felt bad for them.

As it turns out, Paul Verhaeghe [ht: sk] confirms both Marx and the students: the current economic situation is bringing out the worst in us.

the financial crisis illustrated at a macro-social level (for example, in the conflicts between eurozone countries) what a neoliberal meritocracy does to people. Solidarity becomes an expensive luxury and makes way for temporary alliances, the main preoccupation always being to extract more profit from the situation than your competition. Social ties with colleagues weaken, as does emotional commitment to the enterprise or organisation.

Bullying used to be confined to schools; now it is a common feature of the workplace. This is a typical symptom of the impotent venting their frustration on the weak – in psychology it’s known as displaced aggression. There is a buried sense of fear, ranging from performance anxiety to a broader social fear of the threatening other.

Constant evaluations at work cause a decline in autonomy and a growing dependence on external, often shifting, norms. This results in what the sociologist Richard Sennett has aptly described as the “infantilisation of the workers”. Adults display childish outbursts of temper and are jealous about trivialities (“She got a new office chair and I didn’t”), tell white lies, resort to deceit, delight in the downfall of others and cherish petty feelings of revenge. This is the consequence of a system that prevents people from thinking independently and that fails to treat employees as adults.

More important, though, is the serious damage to people’s self-respect. Self-respect largely depends on the recognition that we receive from the other, as thinkers from Hegel to Lacan have shown. Sennett comes to a similar conclusion when he sees the main question for employees these days as being “Who needs me?” For a growing group of people, the answer is: no one.

Our society constantly proclaims that anyone can make it if they just try hard enough, all the while reinforcing privilege and putting increasing pressure on its overstretched and exhausted citizens. An increasing number of people fail, feeling humiliated, guilty and ashamed. We are forever told that we are freer to choose the course of our lives than ever before, but the freedom to choose outside the success narrative is limited. Furthermore, those who fail are deemed to be losers or scroungers, taking advantage of our social security system.

A neoliberal meritocracy would have us believe that success depends on individual effort and talents, meaning responsibility lies entirely with the individual and authorities should give people as much freedom as possible to achieve this goal. For those who believe in the fairytale of unrestricted choice, self-government and self-management are the pre-eminent political messages, especially if they appear to promise freedom. Along with the idea of the perfectible individual, the freedom we perceive ourselves as having in the west is the greatest untruth of this day and age. . .

Our presumed freedom is tied to one central condition: we must be successful – that is, “make” something of ourselves. You don’t need to look far for examples. A highly skilled individual who puts parenting before their career comes in for criticism. A person with a good job who turns down a promotion to invest more time in other things is seen as crazy – unless those other things ensure success. A young woman who wants to become a primary school teacher is told by her parents that she should start off by getting a master’s degree in economics – a primary school teacher, whatever can she be thinking of?

There are constant laments about the so-called loss of norms and values in our culture. Yet our norms and values make up an integral and essential part of our identity. So they cannot be lost, only changed. And that is precisely what has happened: a changed economy reflects changed ethics and brings about changed identity. The current economic system is bringing out the worst in us.

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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.

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Recent legal decisions—such as the NLRB’s ruling that Northwestern University’s football players are employees of the school and are therefore entitled to a union election, and U.S. District Judge Claudia Wilken’s ruling on the so-called O’Bannon case, which will enable football and men’s basketball players to receive more from schools than they are receiving now—have raised lots of important questions about how we look at and compensate the work performed by student-athletes in American colleges and universities.

One of the most interesting issues has to do with unpaid labor. Here’s the New York Times editorial board on the O’Bannon ruling:

The N.C.A.A. and its member institutions have no one to blame but themselves for any unintended negative consequences. They built a lucrative commercial enterprise that depended in large part on unpaid labor. Now they have to move forward without exploiting the very students they have always purported to protect.

That’s right: U.S. colleges and universities have been producing and selling athletic performances—especially, but not only, football and basketball games—that are produced by student-athletes who are not paid for their labor. The players do receive some compensation, such as tuition and room and board (and, on the O’Bannon ruling, will be permitted to receive money to defray some additional costs of attending school) but they are not being paid for the total value they produce for the schools they attend. Therefore, the players are performing unpaid labor.*

But why stop there? It may be easier to see unpaid labor when workers, such as student-athletes, receive absolutely no pay—and their employers are raking in huge sums of money from the work they perform. But why not then identify and do something about all the other forms of unpaid labor being performed in our economy? I’m thinking, for example, of autoworkers, restaurant employees, nurses, daycare workers, and so on, all of whom receive wages but wages that are much less than the total value they produce. They, too, are performing unpaid labor, which is then appropriated by their employers and serves as the source of the enterprises’ profits. 

No amount of tinkering with workers’ compensation—whether in the form of establishing a trust fund for student-athletes or raising minimum wages or increasing wages through market pressure or collective bargaining—will ultimately eliminate that unpaid labor. It may diminish it, by changing the ratio of unpaid to paid labor, but vast amounts of unpaid labor will continue to exist.

And that’s the problem that needs to be solved, both on American campuses and in the wider economy.

*In Marxian terms, the players are productive laborers and, by virtue of creating surplus-value, are being exploited by their capitalist employers, the boards of trustees of the colleges and universities where they work. Much of that extra value is retained by the athletic departments (which is then used to pay head coaches, their coaching staffs, and to build new, start-of-the-art athletic facilities), and another large portion is distributed to the NCAA. Hence, the opposition of the schools, coaches, and the NCAA to any measure that increases the bargaining power of the student-athlete-workers.

 

Here is my friend and former fellow graduate student Antonio Callari in an interview on Marxism he did for a group that produces educational videos directed at students and teachers. He starts with Marx’s biography, discusses changes in Marx’s thought and politics during the nineteenth century, and concludes with a discussion of the ways Marxism has (and has not) worked over the course of the past century.

rate of profit

Some Marxists put a great deal of stock in inexorable laws of capitalism, such as the tendency of the rate of profit to fall. I don’t. I don’t look at capitalism with the presumption of any kind of laws of motion nor do I look for them as the outcome of an analysis. For me, it’s all conjunctural.

And, in the current conjuncture, the tendency is for the rate of profit to rise. Not inexorably (there are lots of conjunctural causes). And not evenly (precisely because of changing configurations of those conjunctural causes). But, if you look at the data (such as the rate of profit calculated in the graph above*), we can see the capitalist rate of profit—an index of capitalist success if there ever was one—rising. It’s been rising on average (through a series of upturns and downturns) since 1990 or so, and it’s been rising (even more dramatically) since the onset of the Great Recession.

That, in my mind, is what matters. Right now, what we’re witnessing—precisely because of the measures taken to solve the crisis the capitalists themselves made (starting with the bailout of Wall Street and then continuing through various rounds of quantitative easing, high unemployment, the stagnation of wages, and so on)—is a tendency of the rate of profit to rise.

 

*I understand that “my” rate of profit (based on total corporate profits, flows of investment, and labor compensation) doesn’t exactly correspond to what others calculate as the Marxian rate of profit (which generally includes the stock of capital). I can defend my proxy (for r=s/[c+v]) theoretically. It also tracks other estimates (such as those by Fred Moseley) pretty well.