Posts Tagged ‘capitalism’

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Should capitalists plan on putting The Doors on their karaoke machines?

According to Paul Mason they should. Me, I’m not convinced.

Before discussing Mason’s argument, let me get a few things out of the way. First, Mason implies he invented the word “postcapitalism,” which makes as much sense as the idea that Al Gore invented the internet. (But maybe Mason gives credit to the long line of other postcapitalist thinkers in the book, which I’ll have to read when it’s published.) Second, I’ve long been suspicious of technological determinist arguments, that is, the attempt to explain history and society (mostly or solely) on the basis of changes in technology. (That’s not to say technology doesn’t matter; just that it’s a mistake to treat it as the essential cause of everything else.) Finally, the bit about Marx’s “Fragment on Machines” (pdf) represents a terrible misreading. (The passages from the Grundrisse are not, as Mason would have us believe, about “an economy in which the main role of machines is to produce, and the main role of people is to supervise them,” but a form or stage of capitalism in which laborers become appendages of machines as a condition for the existence of more, relative surplus-value.)

There is, in fact, a great deal to appreciate in Mason’s discussion. I’m thinking, in particular, of his critique of neoliberalism (which “has morphed into a system programmed to inflict recurrent catastrophic failures” and to create mostly “low-value, long-hours jobs”) and the problems mainstream economists have had in making sense of both information (since they start with the presumption of scarcity) and the rise of new kinds of economies (such as parallel currencies, time banks, cooperatives and self-managed spaces, which they mostly ignore as irrelevant to the “real” economy). I even like Mason’s discussion of the new opportunities for collaboration and the reduction of work time created by recent changes in information technology (although many of us are actually forced to have the freedom to perform more, not less, labor as a result of digital information and information-based automation).

For me, the biggest problem with Mason’s treatment is his two-part argument: that capitalism will necessarily fail when it comes to dealing with new information technologies and that such technologies will necessarily usher in a new, noncapitalist economic and social order, ushered in by “a new agent of change in history: the educated and connected human being”). I just don’t see it.

Let’s consider each of the two parts in order. First, the idea that capitalism will come crashing down as information grows. The key element, for Mason (and for many others before him, such as Jeremy Rifkin), is that the new communication technologies are reducing the marginal (per-unit) cost of producing and sending information goods to near zero, which means that if information goods are to be distributed at their marginal cost of production (zero) they cannot be created and produced by capitalist firms that use revenues obtained from sales to consumers to cover their costs and to realize profits. And that’s the rub: it is precisely the existence of private property (and the other conditions of existence of private commodity production) that keeps the cost of information from going to zero. Information may “want to be free” and capitalist property is certainly an obstacle to the flow of more information but that doesn’t mean information is or will be costlessly produced or utilized. For every Wikipedia there are hundreds of Microsofts—and thousands of other capitalist enterprises that utilize proprietary information to produce still other commodities.

The other side of the argument is thus also questionable: there’s nothing about new information technologies that necessarily lead to forms of economic organization different from or beyond capitalism. Would but that were the case! It’s certainly possible that a democratically organized, worker-owned enterprise would be able to take advantage of networking and other new forms of organizing information but the mere existence of such information technologies does not bring new forms of noncapitalist enterprise (or other socialist or communist forms of economic organization) into existence. I do think we need to pay attention to the way “educated and connected” human beings are utilizing new information technologies (as I often remind my students, they permit such activities as “stealing” the digital information in music and videos and then “sharing” that information within and between communities). But, we need to remember, lots of people have organized noncapitalist forms of economic organization long before the new information technologies were imagined, and they’ll continue to do so (perhaps in different forms) within and at the margins of “cognitive capitalism.”

But to get there—to allow such noncapitalist forms of economic organization to be imagined and put into practice—we need more than new information technologies. We need a ruthless critique of the existing economic order and forms of political organization (aka a political party) to produce utopian discourses and concrete interventions to move us in that direction.

Addendum

While I’m on the topic of postcapitalism, let me also take up the case for socialist recently made by Gar Alperovitz and Thomas M. Hanna. Once again, I’m sympathetic—especially since the more talk about socialism these days the better. And Alperovitz and Hanna do make a convincing case for public ownership and control, including the fact that we already have lots of examples (from the Texas Permanent School Fund to the Tennessee Valley Authority, from publicly owned electric utilities to public internet systems) in our midst. Great! There are lots of ways for the state to distribute the surplus to meet social needs and there’s no reason to limit ourselves to tax-and-spend policies. Why not let the state take direct control of economic activities? But then let’s also talk about how the surplus is produced and appropriated within such state enterprises. If we don’t, then we’re just talking about expanding state capitalism (capitalist enterprises that are owned and/or regulated by the state) and not about eliminating capitalist exploitation itself.

Both Mason and Alperovitz and Hanna seem to overlook that particular aspect—the class dimensions—of the critique of political economy.

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Capitalism, as we know, has become more and more exclusive—benefiting a tiny minority at the very top and leaving everyone else further and further behind.

Not surprisingly, there are all kinds of schemes to make capitalism more inclusive. The latest, from Hillary Clinton and endorsed by Joseph R. Blasi, Douglas L. Kruse, and Richard B. Freeman, is to spread the benefits of economic growth to workers via profit-sharing.

In the United States last year, close to 20 percent of private-sector employees owned stock, and 7 percent held stock options, in the companies where they worked, while about one-third participated in some kind of cash profit-sharing and one-fourth in gain-sharing (when workers get additional compensation based on improvement on a metric other than profits, like sales or customer satisfaction). An exemplar was Southwest Airlines, which paid $355 million of its more than $1 billion in corporate profits last year to union and nonunion workers and managers, on top of salaries.

Our research found that these programs, when combined with worker participation in solving problems, and increased training and job security, raise productivity and benefit workers.

I’m all in favor of workers getting more, whether in the form of higher wages, more generous benefits, or receiving a distributed share of the profits.

The problem, of course, is that—as we’ve seen in the case of the auto industry—workers only benefit when profits are high. And profits are high in part because workers’ wages are low. Plus, workers have no say in determining the conditions under which their enterprises decide if, when, and how they will realize profits in any given year or over a period of time.

Why not get rid of the middle-men (the shareholder-elected boards of directors and the top executives who currently make the key decisions in enterprises) and let the workers themselves decide, as a group, how their enterprises will operate? Let the workers get together on a regular basis and discuss how much surplus there will be and how the surplus they produce will be utilized—how much of the surplus will be put back into their enterprises, how much will be distributed to the communities in which they live, and how much they’ll take home in their pay packages.

Now that would be a real way of sharing the profits and making the economy more inclusive.

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Special mention

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Is it possible that—a quarter century since the Fall of the Wall and in the midst of the severe crisis of Western European democracy, we can finally begin (here as well as there) to reassess the legacy of the “revolutions” (first to socialism and then to capitalism) in Eastern Europe?

That’s what Joan Roelofs [ht: ja] begins to do in her review of Kristen Ghodsee’s recent book, The Left Side of History: World War II and the Unfulfilled Promise of Communism in Eastern Europe, which Roelofs describes as “an elegant book on a forbidden topic.”

These are Roelofs’s own reflections, “informed by but not attributable to Ghodsee”:

Bulgaria, like many others, had been a fascist country since the 1920s, with little freedom or equality. After its communist revolution, a decent standard of living gradually emerged; women, workers, farmers, and the elderly were protected by a social safety net. The Roma minority were assimilated, if willing; others could follow nomadic occupations such as street carnivals; and housing and education were provided for all. Violent crime, death by fire, and other breaches of homeland security, so common in the United States, were extremely rare. Men were required to serve in the military for a short period, but they did not go abroad to get killed and maimed, and murder thousands of foreigners. People did not live on the streets, and prostitution was not an industry. University education was free. Students upon graduation served for three years in their specialties, but in a location selected by government.

As in all countries, there were many imperfections, some serious. There were shortages, sometimes of essential items, not just luxuries. An impressive cultural life existed, despite censorship and repression. Fear of subversion (not irrational) resulted in surveillance and political prisoners. Most people lived a life untroubled by the authorities, yet, as Ghodsee’s informant Anelia pointed out, they accepted the political oppression of others passively, rather than protesting and taking action. This, I discovered, was true even of rank and file Communist Party members, who would have had some influence if they had tried to exert it. CP members, about 10% of the population, had both extra duties and personal advantages.

Roelof continues, offering a variety of explanations of why Bulgarians, especially young people, eventually rejected socialism and celebrated capitalism (including the consumerist values communist leaders themselves had fostered).

Finally, Roelof returns to Ghodsee’s narrative:

She found that in 2013, despite many years of transition and healing, even those who had not been Communist Party members or even supportive of communism were appalled by the current situation in Bulgaria, including the huge inequalities and their own loss of jobs, social safety net, homes, and even heating fuel. Attempts to survive for both rulers and the ordinary citizens included crime, drugs, prostitution, and migration.

There’s a lot to consider here—both for Bulgarians, who may now be expressing buyers’ remorse, and for those of us in the West, who may finally be emerging from the shadow of the Cold War and realizing how appalled we are at the huge inequalities and our own loss of “jobs, social safety net, homes, and even heating fuel” in the wake of the Second Great Depression.

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Marxist economists have spent a lot of time in recent years deconstructing capitalism, showing that there are lots of spaces within modern economies in which capitalism does not prevail. The idea behind “iceberg economics” is that lots of alternatives to capitalism already exist (barter, self-help, producer cooperatives, and the like) and, once recognized, they can be fostered and further developed.

By the same token, it’s also important to focus on instances where capitalism does exist, even when—as in the case of the so-called sharing economy—it might appear that the typical relations of capitalism don’t apply.

Uber, the ride-sourcing service, is a case in point. The owners of Uber maintain their drivers are independent contractors, and all they’re doing is providing “a technology platform that helps willing drivers connect with passengers willing to pay for a ride.” Drivers, in turn, benefit “because they have complete flexibility and control.”

But the California Labor Commission has now ruled that Uber has an employer-employee relationship with its drivers. As Katy Steinmetz explains,

The growing independent-contractor workforce is a key reason that companies like Instacart and Uber have been able to grow so quickly, because the cost of organizing independent contractors is much less than hiring employees. There’s no requirement to pay unemployment tax or ensure that workers are making at least minimum wage. In many cases, the companies don’t have to pay for the smartphones or data plans workers use on the job. They don’t have to deal with the costly spools of red tape that come with federal and state withholdings and healthcare and anti-discrimination laws.

Uber’s relationship with its drivers is an essentially capitalist one, in the sense that it hires the drivers and extracts a surplus from them—without many of the rules and regulations that pertain to other capitalist employers.

Recognizing the capitalist dimension of that relationship is important, at one level, because it pushes back against the ability of Uber and other companies in the so-called sharing economy to shift many of the expenses of running a business onto their employees. Drivers and other workers will certainly benefit as a result.

But only partly. They’ll still be employees of billion-dollar companies. Recognizing the capitalist nature of much of the on-demand economy is even more important, on another level, because it means we can finally go beyond the false image of flexible and in-control independent contractors and put on the agenda the abolition of the wages-system itself.

Then we’d have the chance to build a real sharing economy.

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I’ve discussed the history and implications of the concept of human capital in economic theory. But there’s a new area of economic history that has discovered the origins in slavery of what we have often taken to be purely capitalist forms of management, including the accounting of human capital.

Caitlin C. Rosenthal is one such historian.

Rosenthal, a Harvard-Newcomen Fellow in business history at Harvard Business School, found that southern plantation owners kept complex and meticulous records, measuring the productivity of their slaves and carefully monitoring their profits—often using even more sophisticated methods than manufacturers in the North. Several of the slave owners’ practices, such as incentivizing workers (in this case, to get them to pick more cotton) and depreciating their worth through the years, are widely used in business management today.

As fascinating as her findings were, Rosenthal had some misgivings about their implications. She didn’t want to be perceived as saying something positive about slavery.

Rosenthal needn’t worry. The fact that modern management techniques resemble the methods used by slaveowners doesn’t indicate anything about the positive aspects of slavery but, rather, the similarities between contemporary capitalism and the treatment of human beings as chattel. The ability “to make sophisticated calculations and measure productivity in a standardized way” and “to experiment with ways of increasing the pace of labor” allow both groups of employers “to determine how far they could push their workers to get the most profit.”

In other words, what both systems have in common is the extraction of a surplus from their workers. And treating workers as human capital is one of the conditions for accomplishing this goal, then as now.

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Paul Krugman is right: there is no clear or unambiguous relationship between inequality and capitalist economic growth.

If there were such a relationship, liberal thinkers could make their case that less inequality would promote more growth and everyone would benefit.

The fact is, however, there are more unequal and less unequal forms and periods of capitalist growth. As a result, there’s no general correlation between inequality and growth within capitalism.

The chart above depicts both inequality (the profit-wage ratio, in blue on the left) and economic growth (nominal GDP growth, in red on the right) for the United States. We can clearly see periods of relatively high economic growth accompanied by growing inequality (e.g., in the late 1970s) and periods of very slow economic growth also accompanied by growing inequality (e.g., since 2009). The converse is also true: high economic growth with falling inequality (in the early 1950s) and slow economic growth with falling inequality (e.g., late 1980s).

What this means, at least for me, is we need to pay attention to the particular conditions for economic growth during each period or phase of capitalist development. In general, capitalism can grow (or not) under both more unequal and less unequal conditions.

That’s not to say, however, that within any given period (more or less) growth and (more or less) inequality are not connected. A plausible story can be told that growing inequality during the 2000s fueled the financial bubble that eventually burst in 2007-08.

We also need to reverse the relationship and look at the relationship from growth to inequality. It’s pretty clear that the nature of the growth that has occurred since 2009 has created more inequality, that is, the particular form of the recovery that has been enacted since the crash of 2007-08 has enhanced corporate profits (and incomes at the very top) and made everyone else (who receive wages to get by) pay the costs.

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Finally, while we’re on the topic, there is one general tendency of capitalist growth we need to point out: the role of profitability. In the end, profitability is what makes capitalism work (or not). As we can see from the chart above (which includes just the corporate profit share and growth), each period of a declining profit share is followed by a recession, after which the profit share rises (at least for a time).

So, to paraphrase the Rolling Stones: capitalists can’t always get what they want. When they don’t (leading up to the most recent financial crash), neither will anyone else. And, even when they do (as they have since 2009), there’s no guarantee anyone else will.