Posts Tagged ‘capitalism’

1207toonwasserman

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.

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Special mention

 

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Stuart M. Butler thinks we’re being distracted by the Great Gatsby curve (which, remember, posits a positive relationship between income inequality and income immobility).

I agree—but for very different reasons.

Butler’s argument is that we’re focusing too much on inequality instead of mobility, that is, finding ways to move people at the bottom (characterized by “high school dropouts, pitiful savings rates, and the problem of children parenting children”) up the income ladder.

The problem, of course, is, even if some individuals succeed (within or between generations) in moving up the ladder, the existence of the ladder and the growing gap between rungs on the ladder mean we’re still faced with the fundamental problem of grotesque levels of inequality. The only change (if upward and, with it, downward mobility increase) is different people occupy those highly unequal positions, that is, a highly unequal society remains.

It’s a bit like the problem with Paul Samuelson’s famous statement (in “Wages and interest: a modern dissection of Marxian economics,” American Economic Review 47 [1957], 894): “Remember that in a perfectly competitive market, it really does not matter who hires whom; so have labor hire capital.”

The fact is, if labor and capital changed sides, and labor hired capital, it would still be the case that capital and labor occupy different positions in capitalist production: labor receives wages in exchange for their ability to work, while capital gets the profits produced by the laborers.

So, we can either focus on who occupies which rung in the distribution of income (or who hires whom in the capital-labor relationship) or we can focus instead on the obscenely and increasingly unequal distribution of income (and the fact that, in the existing capital-labor relationship, the capital share is growing while the labor share is declining).

If we don’t focus on the real problems of inequality and class, we’ll just continue to be distracted by the Great Gatsby curve.

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While we’re on the topic of keywords, let’s try another one: capitalism.

According to Richard Wolff, critics of capitalism need to be clear about what they mean by capitalism. It’s not free markets or free enterprise, both of which have been present in various forms of slavery and feudalism (and, of course, both of which have been absent in various forms of capitalism). Instead, it’s how surplus labor is organized, in the form of surplus-value.

Whatever distinguishes capitalism from such other systems as slavery and feudalism, markets and free enterprises are not it. . .

So then how should we define capitalism to differentiate it from alternative economic systems such as slavery, feudalism and a post-capitalist socialism? The answer is “in terms of the organization of the surplus.” How an economic system organizes the production, appropriation and distribution of its surplus neatly and clearly differentiates capitalism from other systems.

In slavery, one group of persons, the slaves that are others’ property, performs the basic productive labor. Slaves use their brains and muscles to transform objects in nature into what masters desire. Masters immediately appropriate their slaves’ total output, but they usually return a portion of that output for the slaves’ consumption. The excess of the slaves’ total output over what they get to consume (plus what replaces inputs used up in production) is the surplus. The masters take that surplus and generally distribute it to others in society (e.g., police and army, church, etc.) who provide the conditions (security, belief systems, etc.) needed for this slave organization of the surplus to persist through time.

Feudalism displays a different organization of the surplus. Serfs are not property as slaves are; lords do not immediately and totally appropriate what serfs produce. Instead, serfs and lords enter into personal relationships entailing mutual obligations (in European feudalism: fealty, vassalage, etc.). In medieval Europe, lords assigned land parcels to serfs, whose labor there yielded outputs. Feudal obligations typically included either 1) serfs’ laboring parts of each week on their assigned plots and keeping the proceeds and laboring other parts of the week on the lord’s retained land, with the lord keeping the product of that labor (“corvée”); or 2) the serf delivering to the lord as “rent” a portion of the product (or its monetary equivalent) from the land assigned to and worked by the serf. Corvée and rent were forms of Europe’s feudal surplus.

Capitalism’s organization of the surplus differs from both slavery’s and feudalism’s. The surplus producers in capitalism are neither property (slavery), nor bound by personal relationships (feudal mutual obligations). Instead, the producers in capitalism enter “voluntarily” into contracts with the possessors of material means of production (land and capital). The contracts, usually in money terms, specify 1) how much will be paid by the possessors to buy/employ the producer’s labor power, and 2) the conditions of the producers’ actual labor processes. The contract’s goal is for the producers’ labor to add more value during production than the value paid to the producer. That excess of value added by worker over value paid to worker is the capitalist form of the surplus, or surplus value.

And the alternative? The elimination of the exploitation that is common to slavery, feudalism, and capitalism.

41GDU+UlrQL._SY344_BO1,204,203,200_ culture

For most mainstream economists, culture is either a commodity like any other (and therefore subject to the same kind of supply-and-demand analysis) or a reminder term (e.g., to explain different levels of economic development, when all the usual explanations—based on preferences, technology, and endowments—have failed).

For Raymond Williams [ht: ja], culture was something very different.

Williams makes it clear early on that if he could pick only one term to investigate, it would be “culture.” The word comes from the Latin verb colere and originally meant “to cultivate,” in the sense of tending farmland. A “noun of process,” it gradually expanded to include human development, and by the late 18th century, people commonly used “culture” to mean how we cultivate ourselves. Following the Industrial Revolution, however, the word took on a new emphasis: It came to mean both an entire way of life (as in “folk” or “Japanese” culture) and a realm of aesthetic or intellectual activity that stood apart from, or above, the everyday (basically, what people parody when they say “culchah”). Over several hundred pages, Williams shows how dozens of writers developed these senses of “culture” in order to explain, and manage, the changes remaking British society in the 19th century—from rapid industrialization to the new markets it created for literature, and from land enclosure to overseas colonization.

Williams (along with, of course, many others, including Stuart Hall and Edward Said) redefined the meaning of culture, which provided “a record of change, and of the clashes of interest that drive that change.” Williams and the other “cultural materialists” of the time challenged both traditional humanities scholarship (which sought to identify and cultivate the elitist “finer values”) and traditional Marxism (according to which culture either reflected the “economic base” or, in its mass commodified form, forced workers to accept capitalist values).

Implicitly, Williams and the others also challenged mainstream economists’ version of culture, by emphasizing the idea that culture both registers the clashes of interest in society (culture represents, therefore, not just objects but the struggles over meaning within society) and stamps its mark on those interests and clashes (and in this sense is “performative,” since it modifies and changes those meanings).

That’s the approach I took in my presentation last year in my talk on “Culture Beyond Capitalism” in the opening session of the 18th International Conference on Cultural Economics, sponsored by the Association for Cultural Economics International, at the University of Quebec in Montreal.

The basic idea is that culture offers to us a series of images and stories—audio and visual, printed and painted—that point the way toward alternative ways of thinking about and organizing economic and social life. That give us a glimpse of how things might be different from what they are. Much more so than mainstream academic economics has been interested in or able to do, even after the spectacular debacle of the most recent economic crisis, and even now in the midst of what I have to come the Second Great Depression.

And it was in honor of Williams that I accepted the invitation to write the entry on “Capitalism” for Keywords for American Cultural Studies, and later, with Maliha Safri, to launch the Keywords series in the journal Rethinking Marxism.