Posts Tagged ‘capitalism’


wage share

It’s obvious to anyone who looks at the numbers that the wage share of national income is historically low. And it’s been falling for decades now, since 1970.

Before that, during the short Golden Age of U.S. capitalism, the presumption was that the share of national income going to labor was and would remain relatively stable, hovering around 50 percent. But then it started to fall, and now (as of 2015) stands at 43 percent.

That’s a precipitous drop for a supposedly stable share of the total amount produced by workers, especially as productivity rose dramatically during that same period.

The question is, what has caused that decline in the labor share?

The latest story proffered by mainstream economists (such as David Autor and his coauthors) has to do with “superstar” firms:

From manufacturing to retailing, giant companies have managed to gobble up a larger and larger share of the market.

While such concentration has resulted in enormous profits for investors and owners of behemoths like Facebook, Google and Amazon, this type of “winner take most” competition may not be so good for workers as a whole. Over the last 30 years, their share of the total income kitty has been eroding. And the industries where concentration is the greatest is where labor’s share has dropped the most. . .

Think about the retail sector, where mom-and-pop stores once crowded the landscape. Now it is dominated by a handful of giants like Walmart, Target and Costco.

It is true, industry concentration has increased dramatically in recent decades (as I explain here). And the wage share has declined (as illustrated in the chart above).

Here’s the problem: exactly the opposite argument is the one that prevailed in the United States for the earlier period. Economists at the time argued that American workers earned a relatively high share of national income because they worked in concentrated industries, such as cars and steel. Thus, their collectively bargained wages included a portion of the “monopoly rents” captured by the firms within those industries.

Now that the wage share has clearly fallen, and shows no signs of returning to its previous levels, economists have changed their story. In their view, market concentration leads to a lower, not higher, wage share.

Why has there been such an about-face in economists’ story about the causes of the declining wage share?

What all the existing stories share is that they avoid identifying anything that has been done to workers as a class. Whether the story is about technological change, globalization, or now superstar firms, the idea is that there are larger forces that unwittingly have created winners and losers—and the losers, if they want, need to acquire the education and skills to join the winners. But don’t touch the basic elements of the economic system that has created such disparate and divergent outcomes.

As it turns out, the presumed rule of a stable wage share turns out to have been an illusion, an exceptional period of relatively short duration during which workers’ wages did in fact rise along with productivity. That wasn’t the case before, and it hasn’t been true since.

The actual rule, as it turns out, is that the wage share falls, as the rate of exploitation increases. That’s how capitalism works, at least much of the time—through periods of faster and slower technological change, higher or lower levels of globalization, more or less concentrated industries.

Sure, under a particular set of postwar conditions in the United States, for two and a half decades or so, the wage share remained relatively stable (and not without pitched battles between capital and labor, as Richard McIntyre and Michael Hillard have shown). But that ended decades ago, and since then workers have been forced to have the freedom to sell their ability to work under conditions that, even as productivity continued to grow, the wage share itself declined.

Mainstream economists have finally recognized the fact that workers’ share of national income has been failing. But they continue to formulate stories that deflect attention from the real problem, the relative immiseration of workers that has them falling further and further behind.


The debate about our ecological predicament is heating up and, as it turns out, the Marxian critique of political economy is at the center of that debate.


Much of the discussion right now concerns the Anthropocene, the idea that the current geological age—overlapping with or, increasingly, after the Holocene—is a period during which human activity has been the dominant influence on climate and the environment.

However, as Benjamin Kunkel [ht: ja] explains, “two of the most formidable contributions so far to the literature of the Anthropocene come from authors who reject the term.”

Jason Moore in Capitalism in the Web of Life and Andreas Malm in Fossil Capital have overlapping criticisms of what Moore calls ‘the Anthropocene argument’. Its defect, as Moore sees it, is to present humanity as a ‘homogeneous acting unit’, when in fact human beings are never to be found in a generic state. They exist only in particular historical forms of society, defined by distinct regimes of social property relations that imply different dispositions towards ‘extra-human nature’. An Anthropocene that begins ten thousand years ago sheds no light on the ecological dynamic of recent centuries; modern Anthropocenes – usually conceived as more or less coeval with mercantile, industrial or postwar capitalism – either ignore the specific origins of the period or, at best, acknowledge but fail to analyse them. A concept attractive in the first place for its periodising potential thereby forfeits meaningful historical content. Moore proposes that the Anthropocene be renamed the ‘Capitalocene’, since ‘the rise of capitalism after 1450 marked a turning point in the history of humanity’s relation with the rest of nature, greater than any watershed since the rise of agriculture.’

Malm, a professor of ecology in Sweden, locates the headwaters of the present ecological crisis several centuries later, in the global warming set off by coal-burning industrialisation. He complains that in ‘the Anthropocene narrative’, climate change is relocated from the sphere of natural causes to that of human activities’ only to be ‘renaturalised’ a moment later as the excrescence of ‘an innate human trait’. Anthropological invariables like ‘tool use, language, co-operative labour’ and so on may furnish preconditions for accelerating climate change, but do nothing to establish it as a predestined episode in the history of the species: ‘Capitalists in a small corner of the Western world invested in steam, laying the foundation of the fossil economy; at no moment did the species … exercise any sort of shared authority over its own destiny and that of the earth system.’ Nor in the time since has the species en bloc become ecologically sovereign: ‘In the early 21st century, the poorest 45 per cent of humanity generated 7 per cent of CO2 emissions, while the richest 7 per cent produced 50 per cent.’ For both Malm and Moore, capitalism must be recognised as the overriding determinant of humanity’s recent ecological career if the present era of natural history is to become a useful object of analysis, not merely of handwringing.

Kunkel doesn’t consider the terminological dispute—Anthropocene or Capitalocene?—to be particularly important. I do.

As I wrote back in 2011,

Human beings have, of course, transformed the planet from the start of agriculture and the beginnings of class society. But it is as a result of the rise of capitalism that the most significant changes—from rising carbon dioxide levels, population growth, and consumption—have been produced.

The real question for the International Commission on Stratigraphy is, should the geologic timescale be changed to include the Age of Capitalism?

I therefore suggested we might begin using Capitalocene as an alternative to Anthropocene.*

A concept only matters in terms of its effects. As I see it, Capitalocene has a number of advantages. First, it recognizes a longstanding literature (which, unfortunately, Naomi Klein, among many others, fails to recognize and credit) on the relationship between capitalism and the remaking of the natural environment—the long tradition of attempts, sometimes referred to as green-red alliances, to develop a relevant intellectual and political program. I am thinking of the line of eco-socialists, from William Morris in the late-nineteenth century and the members of the Proletkul’t movement during the Soviet Revolution to Rudolf Bahro (the East German dissident), James O’Connor (who founded the journal Capitalism, Nature, Socialism), Joel Kovel (who cowrote with Michael Lowy An Ecosocialist Manifesto and the next year his famous book, The Enemy of Nature: The End of Capitalism or the End of the World?), Vandana Shiva (who writes about and fights for changes in the practices and paradigms of agriculture and food, in India, Bhutan, and elsewhere), and many, many others.

Second, Capitalocene points to the ways capitalism—the particular tendencies and dynamics associated with the appropriation and distribution of surplus-value, the accumulation of capital, and much else—has both made the despoiling of the natural environment (e.g., through the use of fossil fuels) central to the production and distribution of commodities and shifted its effects onto poor people and minorities, who bear higher levels of water, air, and other kinds of pollution than anyone else.

Finally, the term Capitalocene carries with it the possibility of imagining the end of capitalism, and therefore a radical change in the way human beings relate to the natural environment. To be clear, I am not suggesting that global warming and other environmental problems would be automatically eliminated with a radical transformation of the way the economy is currently organized. That’s partly because, as Kunkel explains, “the outsized role of human societies in determining the complexion of earthly existence will persist long after the capitalist mode of production—on even its partisans’ most optimistic assumptions—has expired.” It’s also because there’s nothing necessarily “green” about other modes of production (including, as we know, the state capitalism of the Soviet Union). Environmental concerns will require particular changes in thinking to be made central to whatever noncapitalist economies are imagined and enacted as we move forward.

I do, however, maintain that eliminating capitalism will be an important step in setting aside and overcoming many of the obstacles to creating a different, better relationship in and with the natural environment.

Therefore, I agree with Kunkel that “the question of modern humanity’s past and future ecological trajectory can’t be intelligently posed except as a question about capitalism.”

*In fact, Moore (p. 5) credits me as being the first to publicize the concept:

The first thing I wish to say is that Capitalocene is an ugly word for an ugly system. As Haraway points out, “the Capitalocene” seems to be one of those words floating in the ether, one crystallized by several scholars at once—many of them independently. I first heard the word in 2009 from Andreas Malm. The radical economist David Ruccio seems to have first publicized the concept, on his blog in 2011 (Ruccio 2011). By 2012, Haraway began to use the concept in her public lectures (Haraway 2015). That same year, Tony Weis and I were discussing the concept in relation to what would become The Ecological Hoofprint, his groundbreaking work on the meat-industrial complex (2013). My formulation of the Capitalocene took shape in the early months of 2013, as my discontent with the Anthropocene argument began to grow.


There doesn’t seem to be anything remarkable about mainstream economists’ rejection of the new populism.

Lest we forget, mainstream economists in the United States and Europe (and, of course, around the world) mostly celebrated current economic arrangements. As far as they were concerned, everyone benefits from contemporary globalization (the more trade the better) and from the distribution of income created by market forces (since everyone gets what they deserve).

To be sure, those who identify with different wings of mainstream economics debate the extent to which there are market imperfections and therefore how much interference there should be in markets. Conservative mainstream economists tend to argue in favor of less regulation, their liberal counterparts for more government intervention. But they share the same general economic vision—that capitalism is characterized by “just deserts,” stable growth, and rising standards of living.

Except of course in recent decades it hasn’t. Not by a long shot.

Inequality has skyrocketed to obscene levels (and continues to rise), leaving many people behind. The crash of 2007-08 shattered the illusion of stability—and now there’s a deepening worry of “secular stagnation” moving forward. And, while the conspicuous consumption of the tiny group at the top continues unabated, only rising debt keeps everyone else from falling down the ladder.

No wonder, then, that economic populists, especially those on the Right, are rejecting the status quo—and winning campaigns and elections (often in the form of protest votes).

For the most part, to judge by Brigitte Granville’s survey of a variety of Project Syndicate commentators’ responses to populism, mainstream economists remain blind as to “why so many voters have embraced facile policies and populist politics.”

That’s pretty much what one would expect, given mainstream economists’ general commitment to the status quo.

But even when they admit that “much has gone wrong for a great many people,” as Margaret MacMillan does (“Globalization and automation are eliminating jobs in developed countries; powerful corporations and wealthy individuals in too many countries are getting a greater share of the wealth and paying fewer taxes; and living conditions continue to deteriorate for people in the US Rust Belt or Northeast England and Wales”), we read the spectacular claim that today’s populists—these “new, outsider political forces”—are wrong because they “claim to have a monopoly on truth.”

Now, I understand, MacMillian is a historian, not an economist. But the idea that populists are somehow the only ones who claim to have a monopoly on truth is an extraordinary diagnosis of the problem.

Think of the legions of mainstream economists who have lined up over the years to claim a monopoly on the truth concerning a wide variety of policies, from restricting minimum wages and approving NAFTA to deregulating finance and voting no on Brexit. They are the ones who have aligned themselves with the interests of economic and political elites and who, in the name of expertise, have attempted to trump democratic, public discussion of important economic issues.

It should come as no surprise, then, that mainstream economists—such as Harvard’s Sendhil Mullainathan—are so concerned that economists have been demoted within the new Trump administration. The horror! The chairperson of the Council of Economic Advisers is not going to be a member of the Cabinet.

Yes, it is true, business acumen is not the same as economic analytics. (I teach economics in a College of Arts and Letters, not in a business school—and, as I remind my students on a regular basis, I’m the last person they should turn to for investment or business advice.) But that’s a far cry from claiming a monopoly on the truth, which is only available to those who speak and write in the language of mainstream economics.*

If mainstream economists finally relinquished that claim—and, as a result, spent more time both learning the languages of other traditions within the discipline of economics and listening to the grievances and desires of those who have been sacrificed at the altar of the status quo—perhaps then they’d have something useful to contribute to the larger debate about where the world is headed right now.


*According to Andrea Brandolini, the late Tony Atkinson understood this: “‘Economists are too often prisoners within the theoretical walls they have erected’, he recently wrote discussing austerity policies, ‘and fail to see that important considerations are missing”


Noah Smith is right about one thing: mainstream economists tend to use the word “capital” pretty loosely.

It just means “anything you can spend resources to build, which lasts a long time, and which also can be used to produce value.” That’s really broad. For example, it could include society itself. It also typically includes “human capital,” which refers to people’s skills, talents, and knowledge.

But then Smith proceeds, like the neoclassical equivalent of Humpty Dumpty, to make his definition of human capital the master—because, in his view, “it helps to convey some important truths about the world.”

Human capital, as I’ve explained in some detail before, is a profoundly misleading concept.

I don’t want to repeat those arguments here. But I do want to make two additional points.

First, if Smith wants to invoke human capital to say “education and skills are a form of wealth,” then why not include other ways people are able to earn more or less than their counterparts? Why not, for example, go beyond his reference to credentials (he has a Stanford degree) and intellectual abilities (apparently, he can do math well and write well) and refer to some of the other important ways people are sorted out within existing economic relations. I’m thinking of such things as gender, race and ethnicity, immigration status, and so on. They’re all ways workers are able to receive more or less income that have nothing to do with the effort they put into their jobs. Does Smith want to argue that masculinity, whiteness, and native birth are forms of human capital?

No, I didn’t think so.

Second, there’s the issue of capital itself. When capital is treated as a thing (which is what one finds in Smith’s account, as in most versions of mainstream economics), then it’s possible to forget about or overlook the historical and social conditions necessary for those things to operate as capital. Buildings, machinery, and raw materials, robots and computer software, even skills, talents, and knowledge—they only operate as capital within particular economic relations. Only when workers are forced to have the freedom to sell their ability to work to a small group of employers, only then does capital become a means to extract surplus labor from those workers. Once appropriated, that surplus labor then assumes a variety of different, seemingly independent forms—from capitalist profits to land rents, including payments to merchants and finance, the super-profits of oligopolies, taxes to the state, and, yes, the salaries of CEOs and supervisors.

But those payments are not “returns” to independent forms of capital, human or otherwise. They’re all distributions of the surplus-value that both presume and produce the conditions under which laborers work not for themselves, but for their capitalist employers.

They, and not the various meanings neoclassical economists attribute to capital, are the real masters.


Special mention

190038_600 download-1


Last year, as I reported the other day, I published over 800 new posts.

I’ve never done this before. However, I decided to look back over the year and choose one post for each month of 2016:

January—Liberal ideology

February—Who are the capitalists?

March—Yea, they’re angry!

April—Life among the liberal econ

May—Letting capitalism off the hook

June—Globalization, inequality, and imperialism

July—Trump and the Prosperity Gospel

August—The Mandibles and dystopian finance fiction

September—What about the white working-class?

October—Nobel economics—or why does capital hire labor?

November—Condition of the working-class in the United States

December—China syndrome