Posts Tagged ‘capitalism’

I don’t have strong views about the idea of “platform capitalism,” the concept presented and elaborated in a recent book by Nick Srnicek to make sense of the business model of such companies as Google, Amazon, and Uber. I don’t feel I have a dog in that hunt.

What I do like is Srnicek’s critique of other designations—such as tech companies, sharing, and the gig economy—and his focus on the idea that these are, after all, capitalist firms operating in a capitalist economy. Their raison d’être is to make a profit by centralizing and monopolizing access to data and selling data (or services based on those data) to other firms.

In fact, the notion of “platform capitalism” might be extended to other kinds of enterprises. I’m thinking, for example, of sports franchises and universities. They also operate as platforms inasmuch as they generate profits across a range of activities. Nominally, they produce and sell a commodity (e.g., a football match and higher education)—but that only serves as a pretext for generating profits in other activities: in the case of sports franchises, television revenues, shirts and other memorabilia, food and drink concessions, and so on; similarly, in the case of higher education, on-line courses, research-based fees and patents, food and lodging for students and visitors, branded clothing, and of course collegiate sports spectacles. In both cases, sports franchises and universities operate as diverse, profit-making platforms.

So, in my view, the idea of “platform capitalism” might be a useful way of thinking about at least some forms of capitalism that exist today.

What I find odd, though, is some of the commentary on Srnicek’s work. Consider, for example, Daniel Little’s posing of the questions generated by the emergence of “platform capitalism”:

what after all is the source of value and wealth? And who has a valid claim on a share? What principles of justice should govern the distribution of the wealth of society? The labor theory of value had an answer to the question, but it is an answer that didn’t have a lot of validity in 1850 and has none today.

What Little seems not to understand is that the profits of the enterprises operating under the rubric of “platform capitalism” are still based on the surplus labor of workers who produce the commodities that are being sold. Uber, for example, manages to generate its profits by capturing the surplus of its drivers. It doesn’t own the vehicles and doesn’t directly employ the drivers (with all the associated costs savings) but, since it owns the platform that connects drivers to passengers, it secures a “right” to the surplus created by the drivers and paid for by the passengers. The other kinds of platforms analyzed by Srnicek have different ways of generating profits: by selling advertising based on information collected about users (e.g., Facebook and Google), by renting servers used to process data (e.g., Amazon), and so on. But in all these cases, workers are doing the job of writing and modifying software, collecting and processing data, building and maintaining servers, and supplying the ultimate services to other enterprises or final consumers who purchase the commodities. And the members of the boards of directors of platform capitalist enterprises are the ones who ultimately appropriate the surplus.

Capitalism has, of course, changed since the mid-nineteenth century. The technologies, the modes of employment of workers, the ways commodities are marketed and the role users play, the measuring and processing of data—all of those features of the capitalist mode of production have changed radically since industrial capitalism first emerged. But the basic logic—of capitalists and workers, of creating, appropriating, and distributing surplus labor in the form of surplus-value—is the same for capitalist enterprises today just as it was in 1850.

That’s why the Marxian critique of political economy, modified and updated for the twenty-first century, continues to be able to explain the “source of value and wealth”—including and perhaps especially “the soaring inequalities of income and wealth that capitalism has produced” in recent decades.

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Apparently, “late capitalism” is the term that is being widely used to capture and make sense of the irrational and increasingly grotesque features of contemporary economy and society. There’s even a recent novel, A Young Man’s Guide to Late Capitalism, by Peter Mountford.

A reader [ht: ra] wrote in wanting to know what I thought about the label, which is admirably surveyed and discussed in a recent Atlantic article by Anne Lowrey.

I’ll admit, I’m suspicious of “late capitalism” (like other such catchall phrases), for two main reasons. First, it presumes and invokes a stage theory of development, which relies on identifying certain “laws of motion” of capitalist history. That’s certainly the way Ernest Mandel understood and developed the term—as the latest in a series of necessary stages of capitalist development. For me, the history of capitalism is too contingent and unpredictable to obey such law-like regularity. Second, “late capitalism” is meant to characterize all of a certain stage of economy and society, thereby invoking a notion of totality. Like other such phrases—I’m thinking, in particular, of “globalization,” “empire,” and “neoliberalism”—the idea is that the entire world, or at least what are considered to be its essential elements, can be captured by the term. As I see it, capitalism exists only in some parts of the world, some but certainly not all economic and social spaces, and, even when and where it does exist, it assumes distinct forms and operates in different modalities. Using a term like “late capitalism” tends to iron out all those differences.

So, I’m wary of the notion of “late capitalism,” which for both reasons may lead us astray in terms of making sense of and responding to what is going on in the world today.

At the same time, I remain sympathetic to the idea that “late capitalism” effectively captures at least some dimensions of contemporary economic and social reality. Here in the United States, there’s clearly something late—both exhausted and exhausting—about contemporary capitalism. In the wake of the worst crises since the first Great Depression, growth rates remains low, leaving millions of workers either unemployed or underemployed. Wages continue to stagnate, even as corporate profits and the stock market soar. And the unequal distribution of income and wealth, having become increasingly obscene in recent decades, has ushered in a new Gilded Age.

As Lowrey explains,

“Late capitalism” became a catchall for incidents that capture the tragicomic inanity and inequity of contemporary capitalism. Nordstrom selling jeans with fake mud on them for $425. Prisoners’ phone calls costing $14 a minute. Starbucks forcing baristas to write “Come Together” on cups due to the fiscal-cliff showdown.

And, of course, the election of Donald Trump.

What is less clear is if “late capitalism” carries with it a hint of revolution, whether it contains something akin to the idea that the contradictions of capitalism create the possibility of a radical alternative. Even if contemporary capitalism is exhausted and we, witnessing and being subjected to its absurdities and indignities, are being exhausted by it—that doesn’t mean “late capitalism” will generate the political forces required for its being replaced by a radically different way of organizing economic and social life.

But perhaps that’s asking too much of the concept. If it merely serves to galvanize new ways of thinking, to recommit us to the task of a “ruthless criticism of everything existing,” then we’ll be moving in the right direction.

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I find myself thinking more these days about the fairness of Social Security and other government retirement benefits.

One reason, of course, is because I’m getting close to retirement age—and, as I discover each time I raise the issue with students, young people don’t think about it much.* Another reason is because Social Security (in addition to Medicare, Disability, and other programs) is the way the United States creates a collective bond between current and former workers, by using a portion of the surplus produced by current workers to provide a safety net for workers who have retired.

That represents a kind of social fairness—that people who have spent a large portion of their lives working (most people need 40 credits, based on years of work and earnings, to qualify for full Social Security benefits) are eligible for government retirement benefits provided by current workers. Another aspect of that fairness is the system should and does redistribute from those with high lifetime incomes to those with lower lifetime incomes. While that makes the actual “rates of return” unequal across groups, it’s designed to provide a floor for the poorest workers in society.

Many people consider the U.S. Social Security system fair on those two grounds. That’s true even though some people, by random draw, may live longer than others. However, as Alan J. Auerbach et al. (pdf [ht: lw]) report, that fairness may be put into question if there are identifiable groups that vary in life expectancy, “as this introduces a non-random aspect to the inequality.”

Here’s the problem: retirement benefits in the United States are increasingly unequally distributed on a non-random basis. As I’ve written about many different times (e.g., here, here, and here), there’s a gap in life expectancies between those at the bottom and top of the distribution of income. And the gap has been growing over time.

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That result is confirmed by Alan J. Auerbach et al.: for the male birth cohort of 1930, life expectancy at age 50 rises from 26.6 to 31.7—a difference of 5.1 years. For the 1960 cohort, the lowest quintile has a slightly lower life expectancy than the 1930 cohort but then rises a level of 12.7 years higher for the top quintile, “indicating a very large increase in the dispersion.”

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Not surprisingly (since benefits rise with earnings), Social Security benefits also rise with income quintiles. Thus, for example, for men in the 1930 cohort, workers in the lowest quintile can expect to receive, on average, $126 thousand in benefits over the rest of their lives (discounted to age 50), while workers in the top quintile can expect to receive $229 thousand, or 82 percent more than the lowest income workers.

What is particularly troubling is how the results change when we move to the 1960 cohort. The additional 6-8 years of life expectancy for the top three quintiles lead to large increases in expected Social Security benefits, with benefits for the top quintile reaching $295 thousand. The difference between the highest and lowest quintiles is then expected to be $173 thousand, or 142 percent of the lowest income workers’ benefit.

According to the authors of the study,

These results suggest that Social Security is becoming significantly less progressive over time due to the widening gap in life expectancy.

Not only does the growing gap in life expectancies undermine the basic fairness of the Social Security system. It calls into question capitalism itself.

 

*For understandable reasons. I certainly didn’t think about retirement at that age. (I barely thought about getting a job. I just presumed I would—and would be able to—at some point.) However, when students are induced to do think about retirement, as I’ve written before, most take it for granted that Social Security is doomed. While they expect to pay into Social Security, they don’t expect to receive any Social Security benefits when they retire. Then, of course, I explain to them that making only one change—raising the taxable earnings base—would eliminate the projected deficit and keep Social Security solvent forever.

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Today, thousands of scientists, science educators, and others are protesting in hundreds of cities around the world against what they see as a global political assault on science.

According to Lucky Tran, who serves on the steering committee of the March for Science,

We need another scientific revolution. The first scientific revolution transformed our understanding the natural world and changed civilization as we know it, making us healthier, happier and more productive. Today, we have huge scientific challenges ahead such as climate change, genetic engineering and automation. And yet we are stuck with the hand brake on and unable to act effectively as a society, because a few privileged people are blocking progress at the expense of the rest of us.

Tran might also have invoked Albert Einstein, the most famous scientist of the twentieth century, who in 1949 expressed his support for socialism in the name of social values but with a perhaps more humble view of the role of science.

we should be on our guard not to overestimate science and scientific methods when it is a question of human problems; and we should not assume that experts are the only ones who have a right to express themselves on questions affecting the organization of society.

And the problem?

Production is carried on for profit, not for use. There is no provision that all those able and willing to work will always be in a position to find employment; an “army of unemployed” almost always exists. The worker is constantly in fear of losing his job. Since unemployed and poorly paid workers do not provide a profitable market, the production of consumers’ goods is restricted, and great hardship is the consequence. Technological progress frequently results in more unemployment rather than in an easing of the burden of work for all. The profit motive, in conjunction with competition among capitalists, is responsible for an instability in the accumulation and utilization of capital which leads to increasingly severe depressions. Unlimited competition leads to a huge waste of labor, and to that crippling of the social consciousness of individuals which I mentioned before.

This crippling of individuals I consider the worst evil of capitalism. Our whole educational system suffers from this evil. An exaggerated competitive attitude is inculcated into the student, who is trained to worship acquisitive success as a preparation for his future career.

To which Einstein offered a solution:

I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals. In such an economy, the means of production are owned by society itself and are utilized in a planned fashion. A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow men in place of the glorification of power and success in our present society.

I wonder if today, in addition to defending science, scientists are willing to criticize the existing economic and social institutions and participate in the project of imagining and creating an alternative.

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Apparently, Arturo Di Modica, the sculptor who created Charging Bull nearly 30 years ago, considers Fearless Girl to be an insult to his work and wants it taken away.

Here’s the problem: artists (or, in the case of the opposing sculpture, the corporate sponsors) don’t get to claim the final interpretation of their work. They can attempt to control the interpretation, often with the addition of a title, but that’s it. The rest is up to the viewing public, the conversations they have about the works, and of course the way the images circulate in and through other discourses.

Thus, for example, Di Modica wants us to believe the bull’s meaning is “freedom in the world, peace, strength, power and love.” But that’s not how we see it. For us, his bull has come to represent Wall Street—hard-charging, run-over-everything-in-its-path financial capital.

And the girl? State Street Global Advisors put her there as a marketing stunt, to symbolize the idea that women have finally taken their place in the nation’s financial district. However, as Ginia Bellafante argues, that would be a “false feminism”: “really, how inspiring is a symbol of financial-world gender inequity to a cashier at CVS?”

But what if the girl has a different meaning—of people, both men and women, young and old, represented by a young fearless girl who is standing up to the hard-charging bull of Wall Street?

The late John Berger once wrote that, in the history of art, “men act and women appear.” But the Fearless Girl challenges that history. She doesn’t just appear, she acts—she stands there in an act of defiance against the marauding power of finance, the highest symbol of capitalism itself.

No wonder Di Modica, representing the powers behind him, wants her removed.

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Is it any surprise, as Christina Starman, Mark Sheskin, and Paul Bloom argue, that fairness is not the same thing as equality?

There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness.

Still, I think, many people today are bothered by both—economic unfairness and grotesque levels of economic inequality.

Let me explain. As I have written before, I’m not particularly convinced of the idea being promoted by Starman et al. and by other evolutionary psychologists that fairness is part of humans’ biological inheritance. Instead, I’m more inclined to look in the direction of history and society.

Fairness is, I think, a concept that is part of bourgeois society, which is created and disseminated in a wide variety of discourses and sites, including economics. (To be clear, there may be other notions of fairness in human history, outside and beyond bourgeois society. My point is only that capitalism has its own particular notions of fairness, and they’re the ones that motivate our current “fairness instinct.”)

Fairness is an important part of the self-justification of bourgeois society. For example, market outcomes are considered fair because sovereign individuals are free to engage in voluntary transactions, which result in equal exchanges. That’s an idea that is created and reproduced throughout contemporary society, especially in mainstream economics.

So, yes, individuals within contemporary capitalism are constituted, at least in part, by certain notions of fairness, which they express in a wide variety of contexts, from participating in the ultimatum game to making a distinction between “takers” and “makers.”

By the same token, it’s not particularly shocking that those same individuals agree there should be some degree of inequality in economic outcomes. That’s also part of capitalism’s self-justification, that “fair” processes will produce unequal results. So, people seem to agree, not everyone can or should receive the same income or have the same wealth. We have different abilities, needs, desires, and circumstances, so the discourse goes, resulting in—perhaps even requiring—different amounts of income and wealth.

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But then, of course, income inequalities have become so obscene—so unjustified by any conceivable differences in abilities, needs, desires, and circumstances—that, in the name of fairness, people demand more equality.

That’s how I think we need to reconcile the ideas of fairness and equality—not, as Starman et al. would have it, that people are bothered by fairness but not by inequality, but instead that bourgeois notions of fairness are so challenged and disrupted by existing levels of inequality people demand perhaps not perfect but certainly much more equality than exists today.

The real question is not whether there’s a “universal moral concern with fairness.” Instead, it’s whether the existing system can deliver on its promise to create fair (and, with them, more equal) outcomes—or, alternatively, whether it’s necessary to imagine and create a different set of economic and social institutions, which will actually fulfill that promise of fairness and at the same time deliver much more equality than exists in the United States today.

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One of the arguments I made in my piece on “Class and Trumponomics” (serialized on this blog—here, here, here, and here—and recently published as a single article in the Real-World Economics Review [pdf]) is that, in the United States, the class dynamic underlying the growing gap between the top 1 percent and everyone else was the much-less-remarked-upon divergence in the capital and wage shares of national income. Thus, I concluded, “the so-called recovery, just like the thirty or so years before it, has meant a revival of the share of income going to capital, while the wage share has continued to decline.”

Well, as it turns out, that conclusion is more general, characterizing not just the United States but much of global capitalism.

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We know that—not just in the United States, but in a wide variety of national economics—the share of income going to the top 1 percent has been rising for decades now.

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Thanks to the work of Peter Chen, Loukas Karabarbounis, and Brent Neiman (and the full paper [pdf]), we also know that corporate profits (across some 60 countries) have also been rising.

We document a pervasive shift in the composition of saving away from the household sector and toward the corporate sector. Global corporate saving has risen from below 10 percent of global GDP around 1980 to nearly 15 percent in the 2010s. This increase took place in most industries and in the large majority of countries, including all of the 10 largest economies.

According to their analysis, the rise of corporate saving mirrors an increase in undistributed corporate profits, corresponding to a decline in the labor share for the global economy.

Moreover, the increase in corporate saving exceeded that in corporate investment, which implies that the corporate sector improved its net lending position. Just as I concluded in the case of the United States, the improved net lending position of corporations is associated with an accumulation of cash, repayment of debt, and increasing equity buybacks net of issuance.

If you put the two trends together—increased individual income inequality and increased corporate savings—what we’re witnessing then is increasing private control over the social surplus. Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want—or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares.

And proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control.

Why is it anyone would want to save such an economic system?