Posts Tagged ‘class’


The official plans of both Democrats and Republicans are being disrupted during the current election cycle in the United States. In fact, George Packer [ht: mfa] argues,

2016—even more than the historic election of 2008, during the worst economic crisis since the Great Depression—looks like a year of major political recalibration.

As Dan Roberts explains, business-friendly and economically conservative New Democrats are not happy about the growing attraction of more populist, anti-inequality themes in the Bernie Sanders campaign (and, to a degree, in the campaigns of Hillary Clinton and Martin O’Malley).

At Columbia University in New York this weekend the Progressive Policy Institute, which helped Bill Clinton and Tony Blair pioneer so-called third way politics in the 1990s, held a closed-door strategy session for congressional staffers that was designed to find ways of promoting growth.

“There is no question that the prevailing temper of the Democratic party is populist: strongly sceptical [sic] of what we like to call capitalism and angry about the perceived power of the monied elite in politics,” says PPI president and founder Will Marshall.

“But inequality is not the biggest problem we face: it is symptomatic of the biggest problem we face, which is slow growth.”

Republicans, too, have been attempting to promote a pro-growth agenda (via, e.g., the collection of essays in Room to Grow [pdf]), a kind of GOP reformist version of Bill Clinton. As Packer explains,

The essays don’t upend Republican orthodoxy. They argue that government should intervene on behalf of poor and middle-income Americans, but in ways that apply market principles to public policy, taking power away from Washington and giving individuals more options. Some proposals are familiar: school choice, health-care savings accounts. Others are more daring—for example, having college education underwritten by private investors, then repaid over the next decade as a predetermined percentage of graduates’ earnings. A few ideas, such as a wage subsidy that would increase the pay of workers making less than forty thousand dollars a year, building on the Earned Income Tax Credit, could easily garner bipartisan support.

“Room to Grow” contains a striking description of the American economic landscape: children born into poverty with little chance of escaping it, and middle-class families overwhelmed by the rising costs of health care and education while their incomes stay flat.

Their reform candidate was supposed to be Jeb Bush; now, of course, official attention has shifted to Marco Rubio. But the reality of the campaign has been quite different, especially after Donald Trump. The fact is, the return to white-identity politics has been accompanied by a set of economic policies that consists entirely of wishful fantasies of higher growth but real promises of tax cuts to major corporations and the very wealthy on the part of all the Republican candidates—from Trump to Bush and Rubio.

That’s a recipe for class warfare that upends Republican attempts to attract the votes of American workers—such as the 2,200 steelworkers who, as Packer describes, have been locked out from their jobs.*

East of Canton, there’s a small steel mill owned by a Pittsburgh company called Allegheny Technologies, Inc. On a strip of grass outside the mill, around a dozen locked-out steelworkers were picketing under a white tent, with American flags, water bottles, and defiant signs: “Unfairly Locked Out for 32 Days”; “Greed, Power & Control Rule A.T.I.—Lockout Proves It!” The Canton area has a history of racial prejudice, but the picket line was one place where it was possible to find black and white men hanging out together.

A.T.I. had been requiring some of the hundred and thirty workers at the mill to put in twelve-hour shifts or seven-day work weeks. Families were showing the strain. In June, A.T.I. offered the union representing the employees, the United Steelworkers, a new contract, asking for a hundred and forty-five concessions. The company claimed that it was under pressure from foreign and nonunion U.S. competitors. However, executive pay had risen more than fifty per cent during 2014, and the total compensation of the chief executive, Richard J. Harshman, had risen seventy per cent, to nearly eight million dollars, in spite of the company’s poor performance. (Nearly half of A.T.I.’s shareholders had voted against the compensation packages.)

“I read those hundred forty-five items and got sick to my stomach,” Kurt Reynolds, a burly maintenance worker with a Hemingway beard, said. “I told my wife, ‘If this is what they want, they’re trying to break the union.’ ”

In August, A.T.I. made its final offer. Before the United Steelworkers could bring it to a vote, plant managers escorted employees from the mill and brought in replacement workers. The lockout began. Union workers were girding themselves for a long battle. “It ain’t nothing but corporate greed,” Rick Jones, who has worked at the mill for twenty-two years, said.

Neither party’s growth agenda was likely to speak to these workers’ concerns, Republican tax cuts for the rich even less.

*The lock-out is now in its twelfth week—and it’s likely workers “will lose their health insurance benefits at the end of the month.”


The distribution of income in the United States is increasingly unequal. We all know that. The problem is, the more we focus on the unequal distribution of income, the more we’re forced to discuss the issue of class.

And that’s a real problem for mainstream economists, who either deny the existence of inequality or deny its connection to class.

That’s the only way of explaining why Jason Furman repeats, in two recent papers (“Global Lessons for Inclusive Growth” [pdf] and, with Peter Orszag, “A Firm-Level Perspective on the Role of Rents in the Rise in Inequality [pdf]), the same argument:

Overall, the 9 percentage-point increase in the share of income of the top 1 percent in the World Top Income Database data from 1970 to 2010 is accounted for by: increased inequality within labor income (68 percent), increased inequality within capital income (32 percent), and a shift in income from labor to capital (0 percent).

In other words, for mainstream economists like Furman who actually do pay attention to rising inequality (e.g., as measured by the share of income going to the top 1 percent), it can’t have anything to do with class (e.g., as measured by changing labor and capital shares).

As it turns out, I’m presenting Marx’s critique of the so-called Trinity Formula in one of my courses this week.* Basically, Marx argued that, if the value of commodities is equal to constant capital plus variable capital plus surplus-value, then both the “profit share” (the “profits of enterprise” plus “interest”) and the “rental share” (“ground rent”) represent distributions of surplus-value. In other words, productive labor—not independent factor services—creates, via exploitation, the incomes of both capitalists and landlords.

Marx’s critique of the Trinity Formula is still relevant today because, even if we assume (as many mainstream economists still do, against all evidence) that wage and profit shares are relatively constant, it’s still possible to show that the rate of exploitation has risen.

Consider the following hypothetical chart:


The blue and red boxes represent profits and wages in 1997 and 2007. However, as we can see, the share of income going to CEOs has risen (Furman’s “increased inequality within labor income”). If we combine profits and CEO salaries as different forms of surplus-value, then indeed it is possible for the rate of exploitation to have risen—even if the conventional measure of profit and wage shares remains the same.

In terms of actual national income data, what we’d want to do is add to corporate profits the distributions of the surplus that go to those at the top (including CEO salaries) in order to to get “capital’s share” and subtract those same distributions from wages to get “labor’s share.”

US labor share

As it turns out, Olivier Giovannoni [pdf] has made something like the latter calculation, by subtracting top 1 percent incomes from the total U.S. labor share. As we can see in the chart above, the real labor share in the United States has fallen dramatically since 1970—from about 77 percent to less than 60 percent—just as it has in Europe and Japan.

The only appropriate conclusion is that the increasingly unequal distribution of income in the United States has a lot to do with the diverging movements of the labor and capital shares, and therefore with class changes in the U.S. economy. And the only way to deal with that problem—that class problem—is not by increasing tax rates at the top or by raising minimum wages, but by eliminating the problem itself: the exploitation of labor by capital.

*For the uninitiated, the Trinity Formula is the classical idea that the “natural price” of commodities is equal to the summation of the natural rates of wages, profit, and rent, that is, the idea that the incomes of workers, capitalists, and landlords are independent of one another. The same idea was later articulated by neoclassical economists, who argue that each “factor of production” receives its marginal contribution to production.


According to the latest data from the Social Security Administration [ht: db], the raw average wage in the United States (computed as net compensation divided by the number of wage earners) was $44,569.20 in 2014. Based on data in the table above, about 67.2 percent of wage earners had net compensation less than or equal to the raw average wage.

By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to have been only $28,851.21 for 2014.

About 1 in 7 American workers earned less than $5000 in 2014.


I understand: the only relevance of Karl Marx for the likes of the Wall Street Journal is to poke fun at Marxists who bristle at the idea of paying a fee to visit his gravesite.

“The Friends” of the cemetery are also anticipating an uptick in interest in Marx and in complaints from Marxists. This graveyard, in a leafy, genteel part of north London, typically sees around 200 visitors a day. Most ask to see Marx.

As it turns out, it’s that “uptick” in interest that is, in fact, more interesting.

Clearly, if all were going well for capitalism, there wouldn’t be any interest in Marx. But it isn’t, by a long shot—certainly not when global capitalism appears to be entering a new recession [ht: ja] and a variety of liberal supporters, from Robert Reich to Hillary Clinton, find it necessary to endeavor to “save capitalism from itself.”

Chris Dillow certainly thinks Marx is relevant today, for a variety of reasons: financialization, secular stagnation, the negative effects of inequality on productivity, and the situation of workers. In fact, Dillow argues, there’s a side of Marx that is particularly relevant for us today:

If you start from Engels’ Condition of the Working Class in England and start reading Capital not from the beginning but from chapter 10, another Marx emerges – one whose thinking was rooted in empirical facts about the working lives of the worst off and in an urge to improve these. It is this Marx which is still relevant today.

Certainly, the interest shown by Marx (and, of course, Engels) in the real situation under capitalism of the working-class—aided by Leonard Horner’s “undying service to the English working-class”—puts most contemporary economists to shame.*

But there’s another side of Marx that is at least as relevant today: the critique of political economy. The fact is, Marx didn’t invent an entirely new method to analyze capitalism. He started where mainstream economists (in his day, the classical political economists, such as Adam Smith and David Ricardo) left off and then, based on their own assumptions, developed his critique of their theories. Marx started with an “immense accumulation of commodities” (what today we call GDP) and “just deserts” (that is, the idea that everyone gets what they deserve and the distribution of income under capitalism is “fair”) and then showed how the growth of the wealth of nations was based on “the vampire thirst for the living blood of labour” on the part of capitalists. Therefore, what is an incontrovertible “good” for mainstream economists (more stuff, more commodities) can be seen as a “bad” (since it means more ripping-off of surplus-value by capitalists from the workers who create it). And that class exploitation can, in turn, be directly tied to financialization, secular stagnation, the negative effects of inequality, the situation of workers under capitalism, and much more.

Both mainstream economic theory and capitalism have, of course, changed since middle of the nineteenth century. That’s why the theoretical claims and empirical observations contained in Capital can’t simply be transferred to our own time. What is relevant, it seems to me, is the example of the “ruthless criticism” of political economy—the critique of both mainstream economic thought and of capitalism itself.

That two-fold critique, as exemplified in Marx’s writings, is precisely what is relevant today.

*Of course, their own Adam Smith puts them to shame, as in this passage on the negative effects of the division of labor on workers from Book 5 of the Wealth of Nations:

In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expence of his intellectual, social, and martial virtues. But in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it.

Johannes_Vermeer_-_Het_melkmeisje_-_Google_Art_Project Johannes_Vermeer_-_A_Lady_Writing_-_Google_Art_Project

Every time I see an exhibit of paintings from the so-called Golden Age of Dutch art (or teach about them, especially Vermeer’s, in my Commodities course), I am struck by the extent to which they provide a window on the changing class nature of Dutch society at the time.

That’s why I am intrigued by the new show, at Boston’s Museum of Fine Arts, “Class Distinctions: Dutch Painting in the Age of Rembrandt and Vermeer” (see also this review [ht: ja]). The content of the individual paintings, at least the ones I am familiar with, as well as the economic status of the painters themselves and the new art markets that developed (and ultimately crashed) during the seventeenth century can tell a rich story about the emergence of capitalism in a heretofore noncapitalist economy and society.

And, of course, here we are in 2015, when the United States is characterized by obscene and still-growing levels of inequality. Perhaps, then, we are ready to see and think about class distinctions, at least in seventeenth-century Dutch society.

So, I am intrigued by this show—but also worried. That’s because, according to what I have read, the paintings are arranged in separate rooms according to class. Low, middle, and upper-class, “a bit like airplane seating.”

The exhibit follows a logical sequence by grouping paintings of the wealthiest ranks in one room and then moving down the social strata in the following sections. The final room ties the exhibit together by depicting paintings of ferries and public squares where members of each class intersect.

The question is, what is the notion of class that informs the Boston show?

As I see it, you can’t have one class without the others. It’s a class system—the different classes are related to one another, through performances and flows of necessary and surplus labor—not just different displays of clothing, interior furnishings, and activities. And the emergence of capitalism within the Netherlands created a new pattern of performances and flows compared to what had existed before and what existed even at that time throughout much of the rest of Western Europe.

If the paintings of the period are going to be utilized to illustrate those new class relations, then perhaps it would have been better to group them differently—for example, to show within the same room how the surplus labor that was captured by some households, and then utilized to relinquish members of those same households from the need to work and, in addition, to hire milkmaids and other servants and to purchase items of conspicuous consumption from abroad, was also deployed to make sure additional surplus labor continued to be performed by the other members of Dutch society.

That’s the exhibit of Dutch paintings that, in my view, could have been organized in Boston.


The last time I brought up the issue, I was referring to mainstream economists’ presumption we would forever live in a Goldilocks economy: not too equal and not too unequal but just right.

But, as we know, the Goldilocks economy no longer exists (and hasn’t, for over three decades), as economic inequality has continued to grow.

Well, as Jeff Spross has discovered, the same principle applies to economic growth.

The presumption is, fast economic growth is a good thing. Everyone benefits from a larger economic pie. And slower-than-normal growth is something we should be worried about.

Not so fast. A dark and unpleasant truth is that many economic elites actually have a vested interest in anemic job growth and a slack labor market.

How so? As I explained to my students yesterday, faster economic growth means (usually) tightening labor markets and more worker bargaining power—and, as a result, higher wages. On one hand, those increasing wages mean more worker income and more mass consumption. But they also put the squeeze on profits, and the distributions of those profits to the rest of the economic elite.

To which Spross adds:

Finally, there’s a lifestyle issue at play. If the incomes of everyday workers go up, then elites’ real incomes must go down. The labor they’re buying is more costly. This completely changes where and how the elite can spend their money, and what they can and can’t consume. The rising “servant economy” rests on a wide relative gap between high and low incomes.

Put it all together and that’s why we’re seeing such an intense debate about Fed policy in the current economic situation. It’s not just about interest-rate spreads for banks. It’s about the larger and more complex issue of class bargaining power—inside corporations (between workers and capitalists over the size of profits, and between capitalists and the management to which they distribute a portion of the profits) and outside corporations (not only in terms of the commodities capitalists sell to workers, but also the “booty” they share with shareholders, investors, financial institutions, and others).

As Spross puts it,

Elites obviously don’t want to completely tank the economy. But it certainly works for them if it stays modestly stagnant, maximizing the growth of the pie while minimizing worker bargaining power.

It’s the Goldilocks principle: Don’t run the economy too hot or too cold. Run it just right.

achievement gap


We all know the gap between the rich and poor in the United States has been growing for decades—and there’s been no let-up of that trend during the current economic recovery.

That’s bad enough. However, unless we confront that problem and change the existing institutions, it’s only going to get worse in the decades ahead. That’s because, as Michelle Chan [ht: ja] explains, the country is leaving way too many children behind.

Poverty limits access to basic resources like nutrition and decent childcare. But a geometrically expanding class divide looms over all income brackets, as wealthier parents zealously splurge on “enrichment expenditures”. . .

So poor parents struggling just to cover basic food and shelter face both massive income inequality in their day-to-day lives, plus a seven-fold gap in the amount they can “invest” to help their children thrive in the future. Given that social mobility is already suppressed at all income levels—with children’s future earnings highly correlated with the earnings of their parents—the Herculean amount of “catch up” poor parents must undertake just to get on the same footing as their higher-earning peers makes the great American wealth gap seem even more devastating, for both today’s working households and generations to come. . .

economic status is a growing factor in academic outcomes, as “the relationship between income and achievement has grown sharply” over the last 50 years. So wealth trumps intellect on many levels.

In other words, the income gap is a growing factor in academic outcomes—and the children at the bottom are falling further and further behind.

Why? The achievement gap stems in part from the difficulty poor parents have in educating their children at home, as well as the massive funding gaps in programs like subsidized childcare and Head Start. It’s also because poor children are segregated outside the home into poorly funded and overburdened schools. The exact opposite has been taking place at the top, where both private and public expenditures are moving the children of wealthy households further and further ahead.

All of which means that, just as the income gap has grown sharply since the mid-1970s, so has the relationship between income and academic achievement.

The growing class divide in the United States looms over all aspects of society, especially the fate of our children.