Posts Tagged ‘capital’


Special mention

Tom Toles Editorial Cartoon - tt_c_c180103.tif  80b26fec55ef05d7bfb84e7187e89626


Special mention

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And the Republican Congress. . .

The premise and promise of the House and Senate versions of the Tax Cuts and Jobs Act are that lower corporate taxes will lead to increased investment and thus more jobs and higher wages for American workers.

Marx, it seems, would have endorsed the idea:

Accumulate, accumulate! That is Moses and the prophets! “Industry furnishes the material which saving accumulates.” Therefore, save, save, i.e., reconvert the greatest possible portion of surplus-value, or surplus-product into capital! Accumulation for accumulation’s sake, production for production’s sake: by this formula classical economy expressed the historical mission of the bourgeoisie, and did not for a single instant deceive itself over the birth-throes of wealth. But what avails lamentation in the face of historical necessity? If to classical economy, the proletarian is but a machine for the production of surplus-value; on the other hand, the capitalist is in its eyes only a machine for the conversion of this surplus-value into additional capital. Political Economy takes the historical function of the capitalist in bitter earnest.

Except for one thing (as Bruce Norton has explained): Marx never presumed capitalists would follow any kind of fixed rule, including using their surplus-value to accumulate capital. That’s only what the mainstream economists of his day—classical political economists like Adam Smith and David Ricardo—attributed to, or at least hoped from, capitalists. They’re the ones who thought capitalists had a “historical mission” of accumulating capital.

As I explained to students in class yesterday, you only get the accumulation of more capital out of corporate tax cuts if you assume everything else constant.

Consider, for example, the general law of capitalist accumulation:

K* = r – λ

where K* is the rate of capital accumulation (∆K/K), r is the rate of profit (surplus-value divided by the sum of constant and variable capital, s/[c+v]), and λ is the rate of all other distributions of surplus-value (including taxes to the state, CEO salaries, stock buybacks, dividends to stockholders, payments to money-lenders, and so on).

So, yes, if you hold everything else constant, corporate tax cuts, and thus a lower λ, will lead to a higher K*.

But that only works if everything else is held constant. If capitalists choose to use the tax cuts to increase CEO salaries, stock buybacks, and/or dividends to stockholders, then all bets are off. The Tax Cuts part of the act will not lead to the Jobs part of the act.

And even if capitalists do use some portion of the tax cuts to accumulate capital, that will only result in new jobs if technology is held constant. However, if they use it to invest in newer constant capital (e.g., automation and other labor-displacing technologies), then again we’ll see few if any new jobs.

And even if and when new jobs are created, the effect on workers’ wages will depend on the Reserve Army of Unemployed, Underemployed, and Low-Wage workers.

Clearly, there are lots of hidden steps and assumptions between slashing corporate taxes and more jobs.

That’s why Donald Trump and House and Senate Republicans have decided not to even attempt to justify the tax cuts but only to ram it through Congress in the shortest possible time.

They pretend they’re taking “the historical function of the capitalist in bitter earnest” but, in the end, they’re just attempting to line their benefactors’ pockets.


Special mention

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Almost very time MFA hears a mainstream economist speak—on topics ranging from the danger of raising the minimum wage to how we all benefit from free trade and globalization—she responds, “Where did they get their degree, from a Cracker Jack box?”

No doubt, she’d react in the same manner if she listened to the members of the closing panel at the 2017 Lindau Meeting on Economic Sciences, who were asked to answer the following question: what could and should we do about inequality?

It’s a terrific question, given the obscene—and still rising—levels of inequality that characterize contemporary capitalism, in the United States and around the world. But those who take the time to watch the video (available here) just aren’t going to learn much about either the causes of inequality or what we can do about it.


The panel consisted of three winners of the so-called Nobel Prize in Economic SciencesDaniel L. McFadden (2000), James J. Heckman (2000), and Christopher A. Pissarides (2000)—and one “young economist,” Rong Hai.

Individually and together, the panelists simply don’t have anything interesting or insightful to say about inequality.

It’s true, none of the men received their Nobel Prizes for research on inequality, although Hai is currently doing research on inequality (e.g., in relation to credit constraints and tax policy). That itself is a comment on how little inequality has figured as an important concern within mainstream economics. And, given the venue, they’re all mainstream economists. Because of that, there’s little they can say—and a great deal they simply can’t say—about inequality.

Their comments (only some of which were actually prepared) range from the obvious—the issue of poverty is different from that of inequality—to the all-too-frequent sidestep—inequality is caused by globalization and technology.

But they don’t have anything to say about contemporary economic and social institutions, especially those of capitalism, or about history. They don’t discuss in any detail the changes in recent decades that have led to the current obscene levels of inequality or, for that matter, the relationship between the factor distribution of income (e.g, between labor and capital) and the size distribution of income (e.g., the growing gap between the 1 percent and everyone else).

Their concern about and knowledge of the causes and consequences of inequality are, at least to judge from their presentations in this panel, stupefyingly limited.

Maybe MFA is right: they did get their degrees from Cracker Jack boxes.


It’s about time someone pointed out the obvious: “Bosses are dictators, and workers are their subjects.”

We generally don’t talk that way, of course. However, as Elizabeth Anderson [ht: ja] explains, contemporary workplaces are like private governments, in which employers have dictatorial powers over their workers—and workers have almost no say in how they are governed.

Like Louis XIV’s government, the typical American workplace is kept private from those it governs. Managers often conceal decisions of vital interest to their workers. Often, they don’t even give advance notice of firm closures and layoffs. They are free to sacrifice workers’ dignity in dominating and humiliating their subordinates. Most employer harassment of workers is perfectly legal, as long as bosses mete it out on an equal-opportunity basis. (Walmart and Amazon managers are notorious for berating and belittling their workers.) And workers have virtually no power to hold their bosses accountable for such abuses: They can’t fire their bosses, and can’t sue them for mistreatment except in a very narrow range of cases, mostly having to do with discrimination.

Dictatorship in the workplace—after workers are forced to freely sell their ability to work in the labor market—seems obvious to me and many other heterodox economists. But it’s certainly not obvious to mainstream economists, who like their classical predecessors continue to celebrate the freedom and mutual benefit of wage contracts and the efficiency of firms that are ruled by the representatives of the property owners.*

What is even more interesting, at least to me, is the way Anderson mentions the issue of time and then seems to let it slide.

Here’s how she begins her essay:

Consider some facts about how American employers control their workers. Amazon prohibits employees from exchanging casual remarks while on duty, calling this “time theft.” Apple inspects the personal belongings of its retail workers, some of whom lose up to a half-hour of unpaid time every day as they wait in line to be searched. Tyson prevents its poultry workers from using the bathroom. Some have been forced to urinate on themselves while their supervisors mock them.

But then Anderson, after mentioning “time theft,” moves on to the various ways employers exercise dictatorial control over their workers and forgets about time. But isn’t time what the employer-worker relationship is all about—the reason that employers act like dictators and workers are forced to surrender almost all their rights while they are working?

What is mostly absent from Anderson’s analysis is time, especially the distinction between necessary labor-time and surplus labor-time. During part of the workday, employees—whether at Walmart, GM, or Google—work for themselves, and thus receive a wage equal to the value of their ability to work. But they continue working and during those extra hours they aren’t working for themselves, but for their employers. That’s time that’s stolen from the workers, which forms the basis of their employers’ profits.

So, the real “time theft” is not what workers do to their employers, exactly the opposite, what employers do to their workers—when, after necessary labor-time is completed, workers are forced to have the freedom to engage in surplus labor-time.

Thus, when Amazon workers exchange casual remarks while on duty, they’re cutting into the surplus labor-time due to their employers. The half-hour Apple workers wait in line to be searched, for which they are not paid, is a way of making sure that particular activity doesn’t cut into the surplus-time due to their employers. By the same token, when Tyson prevents its’ poultry workers from using the bathroom, who are then forced to urinate on themselves, less time is being spent engaged working for themselves and more for their employers.

In other words, under conditions of workplace dictatorship, time is stolen from workers to  benefit their employers.

Furthermore, because employers, and not workers, are the ones who appropriate the benefits of surplus labor-time, it puts workers in the position of continuing to be forced to have the freedom to sell their ability to work and to submit to the dictates of their employers.

Thus, “time theft” is both a condition and consequence of the private dictatorship of employers in the workplace.

A whole book could in fact be written about this idea of “time theft,” inside and outside the workplace.

For example, inside the workplace, new technologies have the effect both of allowing time to slip out of employers’ grasp—as, for example, when workers appear to be working at their desks but, in fact, are surfing the internet or catching up with friends and family members on Facebook—and allowing employers to tighten their grip—especially when it permits control over the pace of work and new forms of surveillance. Technology seems to cut both ways when it comes to “time theft” in the workplace.

But “time theft” is also important outside the workplace. Consider, for example, the standardization of time—which robs many of us of local traditions of time—as well as the fact that there is a large and growing gap in life expectancy between those at the top and bottom of the economic scale—which means time is being stolen from the poor and distributed to the rich.

I could go on. The important point is “time theft” is an ongoing problem of contemporary capitalism, both within the dictatorship of the workplace and in the seeming democracy of our lives outside of work.

It’s time someone wrote that book.


*In fact, Oliver Hart and Bengt Holmstrom were awarded the 2016 Nobel Prize in Economics for “proving” that capitalist firms (and not, e.g., worker-owned enterprises) represent the most efficient way to organize production.


capital shares

Yesterday, I showed that conventional thinking about factor shares has been finally overturned: they are not necessarily constant, especially within existing economic institutions.

In fact, labor’s shares have been declining for decades now.

The opposite is true of capital’s shares: they’ve been rising for almost three decades.

The profit share of national income has, of course, a cyclical (short-term) component. It falls in the period preceding each recession, and begins to rise again during recessions. That’s how capitalism works.

But the profit share (illustrated by the blue line in the chart above, measured on the left side) also exhibits secular (longer-term) movements—and, since 1986 (when it reached a low of 7 percent), it more than doubled (to a peak of 15.4 percent in 2006) and remains still very high (at 13.6 percent in 2016).

Over that same period, the share of income captured by individuals at the top—the top 10 percent and, a smaller group, the top 1 percent (in the red and green lines, respectively, measured on the right)—who receive distributions of the surplus, also increased dramatically. The share of income of the top 10 percent rose by 29.7 percent (from 36.4 to 47.2 percent of total factor income) and of the top 1 percent by even more, 40.2 percent (from 25.4 to 35.6 percent).

To expand the conclusion I reached yesterday: under existing economic institutions, factor shares do in fact change—and they’ve been turning against labor (beginning in the mid-1970s) and in favor of capital (since the mid-198os) for decades now.

That’s a fundamental change in the class nature of the U.S. economy that needs to be reflected in economists’ theoretical models—which also needs to be corrected in reality, by radically transforming existing economic institutions.