Posts Tagged ‘capitalism’


What are U.S. corporations doing with all the surplus they’re managing to rake in? Well, they’re not investing it. Instead, they’re paying it out to shareholders and upper-management, buying back their stock and expanding their portfolios of financial assets, and hoarding the rest in cash. The net effect is to dampen the rate of economic growth and the creation of new jobs.

And that’s worrying mainstream economists and others who celebrate capitalists, since they appear to be failing in their “historical mission” to accumulate capital.

According to a recent paper by Joseph W. Gruber and Steven B. Kamin (pdf), of the Board of Governors of the Federal Reserve System, in the years since the Great Financial Crash, investment spending by non-financial corporations (the red line in the chart above) has been much lower than their “savings” (undistributed profits, the blue line), which has placed them in the position of being net lenders (the black bars at the bottom of the chart).

Their conclusion?

we find that the counterpart of declines in resources devoted to investment has been rises in payouts to investors in the form of dividends and equity buybacks (often to a greater extent than predicted by models estimated through earlier periods), and, to a lesser extent, heightened net accumulation of financial assets. The strength of investor payouts suggests that increased risk aversion and a precautionary demand for financial buffers has not been the primary reason firms have cut back investment. Rather, our results are consistent with views that, for any number of reasons, there has been a decline in what firms perceive to be the availability of profitable investment opportunities.

In other words, corporations have been distributing their profits for many uses other than real investment, a process that started before the crash and has quickened in the years since.

As it turns out, I’ve been teaching about Marx’s theory of the accumulation of capital this week, using the following equation:

ΔK = Δc + Δv = βDI = s – [(1-β)DI + DO + DM + DR]

The idea is that the accumulation of capital (ΔK = Δc + Δv) represents a distribution of the surplus to internal managers (βDI), which is equal to the difference between the total surplus (s) and all other distributions of the surplus—to internal managers other than for the purpose of accumulation ([1-β]DI), to owners (DO), to merchants (DM), and all others (DR ). Obviously, if the distributions of the surplus in the form of CEOs salaries, dividends, merchants, and all others (e.g., taxes to the state, rent to landowners, interest payments, and so on), plus cash holdings, increase, then less accumulation of capital—that is, investment—will take take place.

And that’s exactly what’s been going in recent years—thus undermining the legitimacy of both capitalists and of capitalism.

As Marx wrote (in chapter 24 of volume 1 of Capital), in one of the most quoted and yet misinterpreted passages:

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.

Bitter earnest, indeed—on the part of classical economists then and mainstream (neoclassical and Keynesian) economists today.

Thanks to Bruce Norton, we know that that passage is not Marx’s assertion that capitalists are driven to accumulate capital. Instead, it’s what mainstream economists (then as now) claim is the role capitalists can and should play. It’s one side, if you will, of our pact with the devil: the capitalists are the ones who get and decide on the distribution of the surplus, and then they’re supposed to use the surplus for investment, thereby creating economic growth and jobs.

When they fail to to fulfill that historical mission, and use the surplus to line their own pockets and to share it with their friends, they break the pact and lose their legitimacy in having sole control over the surplus.

Mainstream economists want to do everything possible to encourage the capitalists to accumulate capital. The rest of us recognize that the time has come to replace the capitalists and use the surplus to benefit the mass of people who, until now, created but have had no say in deciding what should be done with the surplus.

(now all together)

(now all together)

You’d think, if you’re going to write about the inhumane effects of robots on our daily lives, you’d at also acknowledge the long, rich history of human movements and thinking about machinery and other technological developments since at least the nineteenth century.

But that’s not what we get from Simon Chandler [ht: ja] who deplores the new artificial intelligence and robotic technologies being developed by a wide range of companies, from Toyota to Amazon. Why? Because they threaten to reduce human autonomy:

With artificial intelligence suggesting to people what to consume, when to turn the heating down, when to get out of bed, and when to do anything else, people will find themselves becoming ever more regularized and automated in their behavior. Regardless of the fact that AI is characterized by its ability to adapt, to learn from how its putative user reacts, it can adapt only so far (especially in its present form) and can perform only so many actions. This means that any person who allows AI into their home will have to adapt to its behavior; will have to begin conforming to their robot helper’s way of doing things, to its rhythms, schedules and choices. As such, they will become more formalized and systematized, losing much of their spontaneity, impulsiveness and autonomy in the process.

Because of this increased tendency toward repetition and inflexibility, the AI or robot assistant will make its “master” more repetitive and inflexible. Its master will come to divide her time and spend her day according to algorithms which, no matter how advanced, are still nowhere near as complex as the human brain. Therefore, with growing frequency, she may be reduced to a mere function of these algorithms, pressured into acting in accordance with her android butler, into adopting the stereotype it foists on her.

Because these AIs would be the product of single R&D centers, such as the Toyota Research Institute, this influence of robots on human behavior will also represent a general homogenizing and centralizing of said behavior. Instead of being the result of innumerable interactions with hundreds of people and with her own community, the AI user’s psychology and personality will be molded to a greater extent by Toyota, Google or Facebook, particularly if this user becomes more socially isolated and more reliant on robotic aids.

What Chandler seems not to understand is that technologies, once invented, take on a life of their own—or, at least, a certain degree of autonomy. And we have lots of examples of people reacting to and thinking about the consequences of those technologies, as they become relatively (and, perhaps these days, increasingly) autonomous.

I’m thinking, for example, of the machine-breaking Luddites who, as both Eric Hobsbawm and Thomas Pynchon explain, were not hostile to machines as such, but using a technique of trade unionism (when labor unions barely existed): “as a means both of putting pressure on employers and of ensuring the essential solidarity of the workers.”

There’s also Marx, who (especially in Part 4 of volume 1 of Capital) wrote a great deal about machinery—as a way of increasing relative surplus-value, in terms of its sweeping-away of handcraft workers, as a means of employing women and children, as weapons against the revolts of the working-class, and much more.

And, of course, building on and extending Marx’s analysis, Harry Braverman’s Labor and Monopoly Capital: The Degradation or Work in the Twentieth Century (pdf): on the role of scientific management as the “displacement of labor as the subjective element of the labor process and its transformation into an object” and the role of machines which “has in the capitalist system the function of divesting the mass of workers of their control over their own labor.”

More recently, we have plenty of other sources, such as AI, Robotics, and the Future of Jobs by the Pew Research Center. What is interesting about the report, which starts from the premise that automation and intelligent digital agents will permeate vast areas of our work and personal lives by 2025, is that almost half (48 percent) of the technological experts who responded to the survey

envision a future in which robots and digital agents have displaced significant numbers of both blue- and white-collar workers—with many expressing concern that this will lead to vast increases in income inequality, masses of people who are effectively unemployable, and breakdowns in the social order.

Finally, there’s Jacobin magazine’s special issue, “Ours to Master,” in which the various authors see new technologies both as today’s instruments of employer control and as the preconditions for a post-scarcity society. As Peter Frase explains,

The mainstream discourse tends toward the facile view that technology is a thing that one can be for or against; perhaps something that can be used in an ethical or unethical way. But technology in the labor process, just like capital, is not a thing but a social relation. Technologies are developed and introduced in the context of the battle between capital and labor, and they encode the victories, losses, and compromises of those struggles. When the terms of debate shift from the relations of production to a reified “technology,” it is to the benefit of the bosses.

I hope readers will find the links to these various sources useful.

My only point is that we can do much better than the humanist discussion of the inevitable engagement of humans with their uncontrollable creations (as in Chandler’s case) by examining the consequences and reactions (within specific and quite different capitalist and noncapitalist contexts) of the relatively autonomous technologies that are being invented today—a complex, contradictory process that will surely continue for the foreseeable future.


The problem of the machine simply won’t go away.

In recent days, both Charles Arthur [ht: ja] and Richard H. Serlin have sounded the alarm about the effects of new technologies and forms of automation on work and workers.*

Even the Bank of America Merrill Lynch (pdf), while identifying the potential benefits (to consumers, based on lower prices, and some businesses, at least the first adopters) of the “creative disruption” occasioned by current forms of technological innovation, spends a good bit of time examining the possibility of rising inequality.

One of the great concerns of innovation is the potential disruptive effect upon the labor market. “Technological unemployment” is a long-held fear that is more relevant for certain individuals than whole economies – at least for now. The greater challenge is how creative disruption can give rise to winner-take-all and monopolistic outcomes. These can actually create incentives for entrenched incumbents to spend more effectively defending their monopoly rents than to innovate further: consider Microsoft’s defense of its Windows operation system near-monopoly for a time. Similarly, the first to market may benefit from sizable first-mover advantages that create strong network effects for the first, rather than the best, technology. In addition, digital innovations create much larger reach for any given entrepreneur, as near-zero marginal cost allows firms to scale up easily. All of these trends tend to concentrate market power and wealth, and thus can exacerbate trends toward greater inequality.

In addition, skill-biased technological change rewards the highly educated and highly skilled over others. More recently, innovative uses of data collection, processing and automation have reached well beyond the factory floor: bank tellers, x-ray technicians, paralegals, secretaries, and many other service positions that once were middle-skill and middle income have been disappearing to the relentless rise of innovation. It may be only a matter of time before jobs we now consider higher skill and higher wage are similarly replaced. As just one example, sophisticated automated systems for wealth management are already under development. Like so many digital services, these have low marginal costs and scale easily, resulting in much lower costs to produce and thus prices for consumers – but also fewer opportunities for employees.

The limiting case here would be general purpose robots that are effective substitutes for human labor but at a fraction of the cost. In that case, widespread unemployment could be an outcome – it depends on whether there develops a large enough sector in the economy where humans have a comparative advantage. This could be the arts and entertainment, or personal care services, or areas that involve deeper analytical thinking that is not amenable to existing forms of AI. The transitions from agriculture to manufacturing, and then manufacturing to services, were feared by some to result in mass unemployment. What happened instead is that some old jobs gradually disappeared as technological progress supplanted them, while new – often unanticipated – jobs arose in their place. This was not always ideal for individual workers, who may have found it very difficult or near impossible to make the kind of transitions needed to gain new work, but overall neither of these transitions caused a massive rise in unemployment. The same may well be true for the next transition.

It may—but I’m not holding my breath.

It is, of course, the case that workers’ wages depend on the number of workers looking for jobs and the rate of growth of employment opportunities, which in turn depend on both the degree of labor substitution in employers’ adoption of the new technologies and the overall rate of economic growth.

Slower expected growth in the years ahead, accompanied by corporations’ decisions to automate many production tasks (of both goods and services), represents a menacing prospect for the majority of workers. They will be adversely affected both by real technological unemployment and by the threat of technological unemployment.

One possibility is to worry about and search for measures to raise the rate of economic growth, so that displaced workers have a higher likelihood of finding jobs in new, growing sectors of the economy. Fast growth is unlikely but that’s what mainstream economists are focusing on today. The other possibility is to question the nature of the new technologies that are being adopted—to challenge not technology per se but, as I have argued before, capitalist technology.

The fact is, in an economy characterized by obscene levels of inequality in the distribution of income and wealth, the adoption of new technologies is guided by those inequalities—and is likely to make them even worse.

And that’s exactly what worries Stephen Hawking.


*But, as always, there’s Matthew Yglesias who attempts to argue that the problem is not automation, but the slowdown in the pace of productivity growth.


Mainstream economists argued, first, that they had identified the end to capitalism’s severe crises, via the institutional and structural changes that had ushered in the “great moderation.” Then, after witnessing the unexpectedly immoderate crash of 2007-08, mainstream economists assured us that economic growth would quickly be restored.

Well now, more than eight years into the current crisis, it is clear both that the initial downturn was much more protracted than mainstream economists (including central bankers, like Ben Bernanke) had the courage to admit and that the persistent negative effects of that crisis continue to depress actual rates of growth below the earlier trend.

According to a new study by Antonio Fatás and Lawrence H. Summers (pdf), “The global financial crisis has permanently lowered the path of GDP in all advanced economies.” The severity and duration of capitalism’s latest crisis can be seen in the charts above, in the successive downward revisions in economic growth (of both potential and actual growth) for both the United States and Europe that extend far in the future. “In fact,” Fatás and Summers argue,

there is overwhelming evidence, both from the current level of output, seven years after the crisis started, as well as the estimates of potential GDP that this has become a permanent shock. It is by now well accepted that these countries will not regain their pre-trend crisis levels.

This persistent crisis of capitalism, which was ignored by mainstream economists, also challenges the mainstream traditions of explaining business cycles by technology shocks and of separating long-term growth dynamics from short-run business cycles.

What mainstream economics obscures from view is that the pattern of capitalist development leading up to 2007 created the conditions for a much more severe downturn than mainstream economists had been willing to admit, and that the severity of that cyclical downturn undermined the long-term rate of capitalist recovery going forward, which has left mainstream economists without a convincing explanation.

Clearly, the predictions by mainstream economists were wrong. But they continue to ignore the real effects of their mistakes, in both the short and long runs, which are being visited upon the working-classes in the United States and Europe.

Capitalism and time

Posted: 6 November 2015 in Uncategorized
Tags: , ,

I haven’t yet read Vanessa Ogle’s new book, The Global Transformation of Time: 1870-1950. However, in his review, Michael Schulson [ht: ra] establishes the basis for exploring interesting parallels between the uneven standardization of time and the development of global capitalism.

A spirit of universalism animated this transition. You can’t have global time without some notion ofthe global. In an era that celebrates interconnectedness and global citizenship, it can be difficult for many Americans, especially on the left, to think of universalism as anything other than a rosy statement of planetary harmony. Ogle is more skeptical: “universalism was never neutral,” she writes, and it’s such an important line that I’m going to quote it again, this time in italics and with a bunch of exclamation points: “universalism was never neutral[!!!]” A universalist ideology was tied up with colonial projects. It was linked to a process of globalization that favored certain parts of the world and hurt others. It put strain on local customs. Sometimes, it simply destroyed them. . .

“The global history of time reform shows how uneven, slow, and full of unintended consequences interconnectedness was,” writes Ogle. She may be overstating the case a bit: time reform was not a perfect, triumphal march for Universal Progress, but it’s not exactly progress-at-a-snail’s-pace when you bring the planet under a single temporal umbrella within the span of a single human lifetime.

But that’s a minor quibble about an important point: the apostles of interconnectedness, whether they’re preaching time reform or the virtues of the Internet Age, will always butt up against resistance. And their agendas reflect certain beliefs about power and the order of the world—because universalism, in case I haven’t mentioned it, is never neutral.

Ogle is giving us, in elegant detail, a snapshot of a fundamental-but-largely-forgotten collision between religious traditions and the forces of scientific standardization. But instead of framing that collision in terms of a straightforward conflict—new science crushes old religion—she’s mapping the delicate interplay that takes place when local traditions confront large, standardized systems.

When confronting this kind of interplay, the most common mistake is to see only two possible outcomes: one in which science wins, and another in which the locals hold out, and continue scheduling their days in the manner of 14th century peasants. What actually happens, of course, is more complicated: the clock in the village square changes to Beirut time, which itself conforms to GMT. But the muezzin keeps using the sun—except that people predict when prayers will start by checking their watches, and they eventually set their watches by the time of their favorite TV show, which happens to come on right after dark, because it’s the network’s marquee program, and the executives want to make sure more people are inside to watch it, so they set the schedule against the sun.

And on it goes. Our time system is a representation of all the ways that the global influences the tiniest rhythms of our days, but also of the ways that, for all its pervasiveness, it cannot.

First, like the standardization of time, the development of capitalism has never been neutral. Both have always involved particular class interests, even as the capitalist class has proclaimed its universalist pretensions, both within and across countries. Second, the attempts to create a standard time scheme, then as now, was and remains just that, a project. It has been, like capitalism, a forceful project to remake the world but, against the prognostications of many—both celebrators and critics—that project has always been incomplete. Many forms of noncapitalism continue to occupy and define the economic landscape. And, of course, to capture the imagination of many people.

Those, it seems, are the timeless lessons of both the global transformation of time and the global development of capitalism.


While we’re on the topic of capitalism and mortality, there’s another new study, discussed by Ana Swanson, that shows are jobs are literally killing us.

The data show that people with less education are much more likely to end up in jobs with more unhealthy workplace practices that cut down on one’s life span. People with the highest educational attainment were less affected by workplace stress than people with the least education, the study says.


Our jobs are killing us—and more of us with harder jobs and fewer years of education—because of long hours and shift work, the lack of health insurance and paid time off, and job insecurity.

If capitalism is creating the kinds of workplace conditions that lower workers’ life expectancy, then perhaps it’s time to create other kinds of jobs, outside of capitalism.

We have years of life to gain.

[ht: sm]