Posts Tagged ‘economics’

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From Chile to Lebanon, young people are demonstrating—in street protests and voting booths—that they’ve had enough of being disciplined and punished by the current development model.

Last Friday, more than one million people took to the streets in the Chilean capital of Santiago, initially sparked by a sharp rise in Santiago’s metro fares and now uniting in a call for much larger economic and political change in the country.

Near-daily protests in Port-au-Prince, other cities, and the countryside have taken place for weeks now. A deepening fuel shortage in mid-September, on top of spiraling inflation, a lack of safe drinking water, environmental degradation, food scarcity, and mounting corruption have caused Haitians to block roads and highways, demanding the resignation of President Jovenel Moïse and the elite that continues to block fundamental change.

Two weeks ago, Ecuador’s president, Lenín Moreno, was forced to strike a deal with indigenous leaders to cancel a much-disputed austerity package and end nearly two weeks of demonstrations that have paralyzed the economy.

In Beirut, protesters say they are finished with their leaders, many of them former civil war-era warlords who rule the country like a series of personal fiefdoms to be plundered, dispensing the spoils to loyal followers. “We need a whole new system, from scratch,” said one protestor.

Meanwhile, voters in Argentina chose the Peronista ticket of Alberto Fernández and former president Cristina Fernández de Kirchner over incumbent President Mauricio Macri in the first round of Argentina’s presidential election on Sunday, a rejection of austerity of the sort that has sparked violent protests elsewhere in Latin America.

And, as we’ve seen, young people have been marching across the globe—to protest against the introduction of the Fugitive Offenders amendment bill by the Hong Kong government, the imprisonment of separatist leaders in Catalonia, and the climate crisis in London and around the world.

While it may be tempting to search for a single banner or theme for all these protests and movements—for example, a rejection of neoliberalism or a slowing of economic growth—we do need to pay attention to and keep in mind the specific causes, demands, and forces behind the mobilizations. As Jack Shenker reminds us,

Each of these upheavals has its own spark—a hike in transport fares in Santiago, or a proposed tax on users of messaging apps like WhatsApp in Beirut—and each involves different patterns of governance and resistance. The class composition of the indigenous demonstrators in Ecuador can’t be compared with most of those marching against the imprisonment of separatist leaders in Catalonia; nor is the state’s prohibition of protest in London on a par with the repression in Hong Kong, where officers shot live ammunition into a teenager’s chest.

(Although, truth be told, it doesn’t stop Shenker from falling into the trap of attempting to identify what he considers to be the “common threads” that “bind today’s rebellions together.”)

As it turns out, the symposium on my book, Development and Globalization: A Marxian Class Analysis, has just been published by the journal Rethinking Marxism (unfortunately behind a paywall). As I make clear in my rejoinder, I was particularly pleased that all four respondents—Eray Düzenli, Suzanne Bergeron, Jack Amariglio, and Adam Morton (who has just published a blog post on his response)—remarked on how my volume of essays on planning, development, and globalization, written over the course of three decades and published in 2011, remains relevant to the critique of political economy today.

Here, then, is the text of the pre-publication version of my rejoinder:

Changing the Subject: Response to Düzenli, Bergeron, Amariglio, and Morton

Mainstream economics cannot be salvaged. But that hasn’t stopped its practitioners from trying—in recent years, just as they have throughout the course of its history.

Sometimes, in an attempt to refurbish their approach, mainstream economists have changed the underlying theory, such as when in the late-nineteenth century they unceremoniously jettisoned the labor theory of value in favor of utility. Or when, in the 1950s, they attempted to produce a synthesis of Keynesian macroeconomics and neoclassical microeconomics. At other times, they thought the problems that bedeviled their project could be fixed by adopting and incorporating a new technique; thus, we’ve witnessed the changing enchantment with and celebration of a long line of novel (at least for mainstream economics) mathematical and statistical methods, from calculus and econometrics to linear programming and game theory. Each was supposed to stop the bleeding and, each time, it didn’t work—or, alternatively, it solved one problem and, in the process, created new ones. All the while avoiding the larger issues that have plagued mainstream economics from the very beginning.

The latest attempt to save mainstream economics and make it more “scientific” comes in the form of the much-vaunted “empirical turn”—the idea that abstract theory can and should be downplayed or set aside in favor of applied or empirically grounded analysis.[1] The celebration of this shift in mainstream research has also led to the designing of new ways of teaching economics, such as Raj Chetty’s introductory course at Harvard, “Using Big Data to Solve Economic and Social Problems” (Matthews 2019). Chetty (2013) himself has claimed, “as the availability of data increases, economics will continue to become a more empirical, scientific field.”

One of the final topics in Chetty’s course is economic development, which has been subject to salvage operations not dissimilar to the rest of mainstream economics. Since they invented it as a separate branch of economics in the postwar period (Meier 1984), mainstream development economists have sought to rescue their project by introducing new theories (from stages of growth through structuralist rigidities and lags to the existence of institutions to safeguard property rights, contracts, and markets) as well as new techniques (including planning models, input-output analysis, and cross-section growth regressions).

Development economics, like the rest of mainstream economics, has recently been transformed by the supposed turn away from theory to more applied or empirical techniques. As Abhijit V. Banerjee (2005: 4343) put it,

What is unusual about the state of development economics today is not there is too little theory, but that theory has lost its position at the vanguard: New questions are being asked by empirical researchers, but, for the most part, they are not coming from a prior body of worked-out theory.

In fact, Banerjee and his Massachusetts Institute of Technology colleague Esther Duflo (in 2011 and, soon, in 2019) have been at the forefront of this “new development economics.” Their idea is that asking “big questions” (e.g., about whether or not foreign aid works) is less important than the narrower ones concerning which particular development projects should be funded and how such projects should be organized. For this, they propose field experiments and randomized control trials—to design development projects such that people can be “nudged,” with the appropriate incentives, to move to the kinds of behaviors and outcomes presupposed within mainstream economic theory.

It is precisely this approach that has led Duflo (2017: 3) to propose that mainstream economists, especially mainstream development economists, should become more like plumbers:

The economist-plumber stands on the shoulder of scientists and engineers, but does not have the safety net of a bounded set of assumptions. She is more concerned about “how” to do things than about “what” to do. In the pursuit of good implementation of public policy, she is willing to tinker. Field experimentation is her tool of choice.

Here we are, then, in the aftermath of the Second Great Depression—in the uneven recovery from capitalism’s most severe set of crises since the great depression of the 1930s and, at the same time, a blossoming of interest in and discussion of socialism—and the best mainstream economists have to offer is a combination of big data, field experiments, random trials, and a plumber mindset. How is that an adequate response to grotesque and still-rising levels of economic inequality (World Inequality Lab 2017), precarious employment for hundreds of millions of new and older workers (International Labour Organization 2015), half a billion people projected to still be struggling to survive below the extreme-poverty line by 2030 (World Bank 2018), and the wage share falling in many countries (International Monetary Fund 2017) as most of the world’s population are forced to have the freedom to sell their ability to work to a relatively small group of employers for stagnant or falling wages? Or, for that matter, to the reawakening of the rich socialist tradition, both as a critique of capitalism and as a way of imagining and enacting alternative economic and social institutions.

If I had the opportunity to revise my book and include an additional chapter on the so-called new development economics, I would make the following points: First, the presumption that analytical techniques are neutral and the facts alone can adjudicate the debate between which development projects are successful and which are not is informed by an epistemological essentialism—in particular, a naïve empiricism—that many of us thought to have been effectively challenged and ultimately superseded within contemporary economic and social theory. Clearly, mainstream development economists ignore or reject the idea that different theories have, as both condition and consequence, different techniques of analysis and different sets of facts.

The second point I’d make is that class is missing from any of the analytical and policy-related work that is being conducted by mainstream development economists today. At least as a concept that is explicitly discussed and utilized in their research. One might argue that class is lurking in the background—a specter that haunts every attempt to “understand how poor people make decisions,” to design effective anti-poverty programs, to help workers acquire better skills so that they can be rewarded with higher wages, and so on. They are the classes that have been disciplined and punished by the existing set of economic and social institutions, and the worry of course is those institutions have lost their legitimacy precisely because of their uneven class implications. Class tensions may thus be simmering under the surface but that’s different from being overtly discussed and deployed—both theoretically and empirically—to make sense of the ravages of contemporary capitalism. That step remains beyond mainstream development economics.

The third problem is that the new development economists, like their colleagues in other areas of mainstream economics, take as given and homogeneous the subjectivity of both economists and economic agents. Economists (whether their mindset is that of the theoretician, engineer, or plumber) are seen as disinterested experts who consider the “economic problem” (of the “immense accumulation of commodities” by individuals and nations) as a transhistorical and transcultural phenomenon, and whose role is to tell policymakers and poor and working people what projects will and not reach the stated goal. Economic agents, the objects of economic theory and policy, are considered to be rational decisionmakers who are attempting (via their saving and spending decisions, their participation in labor markets, and much else) to obtain as many goods and services as possible. Importantly, neither economists nor agents are understood to be constituted—in multiple and changing ways—by the various and contending theories that together comprise the arena of economic discourse.

Changing the Subject

If those points sound familiar, it’s because they’re issues I’ve been grappling with for a long time. And I couldn’t be more pleased that, in their different ways, all four of the other participants in this symposium—Eray Düzenli, Suzanne Bergeron, Jack Amariglio, and Adam Morton—have identified, expressed their admiration for, and then rearticulated those concerns in their generous and insightful reading of the chapters on planning, development, and globalization that make up my book.[2]

Indeed, I am honored that these friends, colleagues, comrades, and former students have taken the time to work their way through my writings on those topics. I’m also flattered they found at least a few of my ideas and formulations to have merit for the ongoing and still-unsettled debates concerning capitalist development and socialist alternatives. I’m especially pleased they’ve found some of the chapters useful in the classes they teach. But, to be honest, I’m not at all surprised. In addition to their being creative and munificent thinkers in their own right, all of us have been participants in the Rethinking Marxism project. For decades now, I have had the opportunity to work with them and to learn from them in the midst of a wide variety of activities, from mundane organizational tasks to spirited intellectual discussions.[3]

Even more, I simply wouldn’t have been able to investigate and criticize the terms of debate in the areas of planning, development, and globalization without Rethinking Marxism. Partly, that’s because, while my interest in the critique of political economy (especially with respect to Latin America) long predates the existence of Rethinking Marxism, the concepts and methods utilized throughout this particular book emerged from (and, I can only hope, contributed to) the wide-ranging epistemological and methodological debates that have taken place in and around this journal. I feel fortunate to have had as my mentors Stephen Resnick and Richard Wolff and to have been inspired by the hundreds of other scholars, students, and activists who have been directly and indirectly associated with this journal.[4] It’s also because participating in the collective project of editing and producing Rethinking Marxism over the course of thirty or so years was, for me, a necessary complement to the research and writing that went into the chapters that comprise this book (not to mention the other writing projects I engaged in over the years). I know I wouldn’t have survived in the academy—especially in the all-too-often arrogant, brutish, and mind-numbing discipline of economics—without the personal relations, theoretical challenges, and collaborative labors associated with this journal.

I can’t pretend, in this limited space, to address all the interesting and important issues raised by Düzenli, Bergeron, Amariglio, and Morton in their responses. Instead, I want to focus on four themes they’ve identified and that, in my view, remain central to the project of rethinking Marxism.

Contingency of theory

Readers will have noted that all of the respondents raise the “problem of theory.” Amariglio refers to my “interest in shaping debates and altering prevailing discourses,” as defined by both mainstream economics and its heterodox (including Marxist) critics. Düzenli, for his part, notes approvingly the proposition that “the theoretical is always also political, a Marxian position.” Bergeron views the book as in the best sense a “failure,” to the extent that it does not hew “to the narrow disciplinary conventions in economics.” Finally, Morton directs attention to the importance of economic representations and the ways economic sites are “discursively produced.”

I’ll admit that I find it impossible to begin any project—whether writing or teaching—without addressing the problem of theory. That’s the case for exactly the reasons Amariglio, Düzenli, Bergeron, and Morton have mentioned: because it is important to challenge and move beyond the discursive limitations imposed by existing theories; because the different theories that structure those debates have conflicting political conditions and consequences; because the disciplinary conventions imposed by mainstream economics regulate and constrain not only the topics of discussion and debate, but also the ways those topics can be investigated; and finally because the economic landscape is socially, and especially discursively, constituted in diverse ways. Lest we forget, the lines of causality also run in the opposite direction, from the economic and social worlds to the discourses economists and others use to make sense of them, thus reinforcing the contingency of theory.

In my view, those are precisely the kinds of theoretical or epistemological concerns that are central to the Marxist critique of political economy. And they acquire particular resonance for those of us who work in and around the discipline of economics. More so than any other academic discipline, economics is structured by a hegemonic set of theories (the various and changing forms of neoclassical and Keynesian economics) that delimit what economists can and cannot say and do. Mainstream economists themselves are severely constrained by those protocols. All too often so are their heterodox critics, at least to the extent that they accept those constraints and recast their work in a manner that is different from but still runs parallel to that of their mainstream counterparts.

My own way of contributing to the project of rethinking Marxism in the areas of planning, development, and globalization has been to attend to the specificity of individual debates—at particular times, in certain countries—in order to identify their effects, challenge their limitations, and begin to elaborate an alternative way of proceeding. The reason I assembled the various essays that comprise the book was not to announce a set of lessons that pertain to all times and place, but to document a method—of concrete analysis, of ruthless criticism—that might serve as a guide for intervening in discussions and debates in other times and places.

Focusing on the contingency of theory, then, is a way of opening up spaces within particular discursive contexts so that a Marxist alternative—with its radically different theoretical and political conditions and consequences—might be articulated and new paths opened up.

Reading for class

Obviously, class is central to the book. It’s highlighted in the title, it occupies a central place in most of the chapters, and I take it to be a defining characteristic of the Marxian critique of political economy.

Readers of this journal will immediately recognize the way class is utilized in the book, especially the manner in which it is identified, discussed, and further elaborated by Düzenli, Bergeron, Amariglio, and Morton. I certainly give class a priority both in the critique of other discourses and in the various attempts to elaborate an alternative analysis. Other theories—whether in debates about markets and planning, the role of the state in both capitalist and noncapitalist forms of development, and capitalist globalization—tend to downplay or overlook the role class plays. Marxism, at least in the way I understand it, focuses precisely on the class conditions and effects that other discourses generally leave out. Moreover, class is defined in a particular manner; in the way I use it, class refers to the various circumstances whereby surplus labor is performed, appropriated, and distributed. It’s a way of building on the way Marx theorizes class across the three volumes of Capital, beginning with the theoretical “discovery” of capitalist class exploitation in the form of surplus-value—beyond the sphere in which “Freedom, Equality, Property and Bentham” rule—and proceeding to analyze how that surplus is distributed and redistributed across a formation based on the capitalist mode of production.

But, to be clear, it’s a way of “reading for class” (to use Morton’s felicitous phrase) that accords discursive but not causal priority to class. Since there is still a great deal of confusion about this formulation, let me briefly explain. When I raise the issue of class (as against other theories that either “forget about” class or define it in a very different manner), I am not suggesting that class is either the only or most important factor in determining a particular economic or social situation. That would be to attribute to class a causal priority, in a framework that looks for and necessarily then finds a ranking of determinations. I have no interest in either presuming or discovering such a causal ranking. Instead, attributing a discursive priority to class is a way of asking specifically class questions—of other theories and of the economic and social realities for which they are used to analyze.

In that sense, I was interested in finding out what the class implications were of using a particular mathematical planning model that did not “see” or use class as one of its variables. Or the class consequences of making the state the center of accumulation in revolutionary Nicaragua or concluding that one or another macroeconomic stabilization policy had failed in Peru, Argentina, and Brazil. In each case, the Marxian critique of political economy allows one to see—and, of course, then to intervene to mitigate or transform—the class effects of theories and policies that present themselves as supposedly not being about class, in either the first or last instance.

Attributing discursive priority to class is a way, then, of intervening into specific discussions and debates—and of pushing back, especially when it is declared that class (even if it once existed and perhaps was significant) has declined in importance or disappeared altogether from the economic and social landscape. No, the Marxian critique of political economy avers, here’s where class plays a role, here’s where it raises its ugly head, here’s where surplus labor is being extracted from the direct producers by an exploiting class and how it’s being distributed to still others who did not perform it. And, of course, here’s how other class arrangements can be set up whereby class exploitation is eliminated and the direct producers have a say in how and how much surplus labor takes place.

I tend to think of the discursive centrality of class as a way of adding to, rather than supplanting or subordinating, other determinations. Thus, one can ask mainstream economists, “You think introducing markets or planning to a particular situation is just a way of increasing production or consumption, well, what effects does it have on class, that is, with respect to the complex ensemble of class processes in that situation?” Or, for that matter, solving the debt crisis, carrying out a war against the U.S.-backed contras, ending apartheid, or eliminating trade barriers? Or, extending it further, what are the class implications of the theories and policies that are used to make sense of and to deal with the effects of the Second Great Depression, global warming, or for that matter a project to deliver water to poor households in Tangier?[5]

The goal is to add class to the mix, especially when other theories and policies represent determined efforts to keep the discussion as far away from class as possible.

Subjectivity

If the centrality of class is apparent on the surface of the book, then subjectivity is a strong undercurrent. And I couldn’t be more pleased that the respondents, particularly Amariglio and Bergeron, chose to focus their discussion on that theme.

Mainstream economics has, from the very beginning, presumed a given, homogenous conception of subjectivity—of both economists and the agents that populate mainstream economic theories and models. Economists are taken to be scientists (or, alternatively, engineers or plumbers) who use a singular method to arrive at disinterested theoretical and empirical conclusions and policy recommendations. That is supposed to be their singular identity. Similarly, economic agents are assumed to be characterized by and to follow the behaviors contained within and implied by an essential human nature. For example, Adam Smith (22) claimed humans have an innate desire to “truck, barter, and exchange one thing for another” (from which he derived the social and technical divisions of labor and much else); today, mainstream economists maintain that view (evident in the presumption, without any further explanation, of supply and demand schedules in markets), to which they have added self-interested utility-maximization (such that all individuals always desire more commodities, more goods and services, for themselves).

In my view, an underappreciated dimension of the Marxian critique of political economy is its radical rejection of the notion of subjectivity held by mainstream economists. There is no essential human nature; instead, subjectivity is conceived to be historically and socially produced. And there is no singular identity but, rather, multiple and changing identities over time and in any particular situation.

The critique of the mainstream view of subjectivity begins, as I have explained elsewhere (Ruccio 2014), with Marx’s discussion of commodity fetishism:

The existence of commodity exchange is not based on the essential and universal human rationality assumed within mainstream economics from Adam Smith to the present. Nor can the cultures and identities of commodity-exchanging individuals be derived solely from economic activities and institutions. Rather, commodity exchange both presumes and constitutes particular subjectivities–forms of rationality and calculation–on the part of economic agents.[6]

And, we need to add, in a society characterized by commodity exchange, other identities, including communal subjectivities, are also produced (as I argued in 1992).

My aim in the book was to build on this approach and to interrogate the givenness and homogeneity of the subjectivities presumed within mainstream economists. Thus, I sought to challenge the idea of expertise (particularly that of socialist planners), the existence of a “state subject” (e.g., in socialist planning theory and in revolutionary Nicaragua), of the essential notions of “workers” and “peasants” (especially in Nicaragua when, in the midst of war, austerity was imposed), the disinterested role of intellectuals (most notably in the case of the anti-apartheid thinker/activist Harold Wolpe), and the homogenizing effects of globalization (in favor of the hybridity of local, national, and global subjectivities).

I admit, those specific interventions represent only the first steps in challenging mainstream economists’ conception of subjectivity and opening up a space to think through the production and reproduction of multiple and changing identities—within capitalism and in terms of creating the conditions of existence of socialism. Still, they serve as a reminder that, within the Marxian tradition, subjectivities cannot be reduced to class (or, for that matter, that even class identities cannot be read off the presumed logics of class positions). And they force us to confront the subjectivities of economists (and other so-called experts), which are often obscured by reference to science or common sense. From a Marxian perspective, their identities are constituted by the discourses that interpellate them, forcing them to speak and write like mainstream economists and to attack or ignore heterodox (including Marxian) pronouncements and policies. At the same time, their theories and policies play a performative role in the economy and wider society—perhaps especially when they presume that economic knowledge is out of the reach of ordinary people and needs to be left to them, the so-called experts.

Conjuncture

The Second Great Depression occasioned a resurgence of interest in Marxian theory—because of the spectacular failures of capitalism and of the economic theories that celebrate capitalism, and consequently as a result of the search for alternative ways of organizing the economy and wider society and for theories that might help pave the way for those alternatives. That has given many of us, whom mainstream thinkers inside and outside economics have attempted to discipline and punish for decades, new platforms for teaching, speaking, and writing. However, too many of the versions of Marxian theory that have been invoked, by both mainstream economists and pundits and Marxists themselves, have been characterized by deterministic logics and modernist protocols of analysis that mimic those of mainstream economics.

The method of those versions relies on identifying and spelling out the implications of inexorable logics and underlying laws of motion of capitalism. A good example is the accumulation of capital, a central concern of Marx’s critique of political economy in chapter 24 of volume one of Capital. Except, as I have explained elsewhere (Ruccio 2018b), the famous passage that begins with “Accumulate, accumulate! That is Moses and the prophets!” is actually not Marx’s theory of capitalism, but a central tenet of classical political economy, which “takes the historical function of the capitalist in bitter earnest.”[7] In fact, Marx shows, the accumulation of capital—the use of surplus-value for purchasing new means of production, raw materials, and additional labor power—is but one of many possible distributions of surplus-value. So, there’s no necessity for the accumulation of capital—it is up to the whim and whimsy of individual capitalists, if and when they will accumulate capital—and there are many other uses for that surplus, such as distributing a portion of those profits to all the others who share in the “booty” (such as corporate chief executive officers whose incomes are over 300 times the average U.S. worker’s wage and the bankers on Wall Street whose risky decisions instigated the crash of 2007-08).

In my view, then, there’s no necessity for the accumulation of capital and, in general, no necessary laws of motion of capitalism. If we set aside and move beyond that approach to Marxian analysis, what we’re left with is a method (or what I prefer to call, influenced by Paul Feyerabend [2010], an anti-method) of “ruthless criticism” and conjunctural analysis. In that vein, I was pleased to read Amariglio’s observation that “it is the radical, Althusserian notion of ‘conjuncture’ that threads together the entire book.”

Ruccio’s conjuncture-bound essays, perhaps paradoxically, tend to stick with us. These are the kind of Marx-inspired conjunctural writings that are the most useful and meaningful to the majority of readers, writers, and activists (they are “practical,” in that sense). Ruccio’s essays stick with us because they do not pretend to be written from an eternalist or even universalist, transcendental perspective; the lessons Ruccio wishes to convey are not about forever “laws of motion” or a ubiquitous “dynamic” of an ironclad (one might say, iron-caged) capitalist economy. To the contrary, Ruccio’s essays are steeped in “current analysis” and never lazily settle on “capitalism” as forever and anon lapping the exact same oceanic ebbs and tides. That endlessly-recursive, mesmeric rendition of capitalism-as-same—whether in old-style Marxian orthodoxy or newer-style ‘late capitalist’ totalizations—here sleeps with the fishes.

But, I was not surprised to learn, that endorsement also comes with a challenge: what should we make of the current rise of far-right-wing nationalism across the globe, in countries as distinct as Turkey, Hungary, the United Kingdom, the United States, and Brazil. I couldn’t agree more with Amariglio that the attempt to subsume all these diverse occurrences as examples of “neoliberal fascism” or some such “essentially suspends conjunctural analysis by reassuring us that, really, we’ve all been here before.”

This is not the place to offer a Marxian conjunctural analysis of the backward-looking, authoritarian, racist pronouncements and policies of the leaders and members of these diverse movements. In recent years, I’ve attempted to produce some of the elements of that analysis on my blog, including a critique of contemporary mainstream economics for having paved the way for the rise of the new right-wing populisms (Ruccio 2017). But, needless to say, much more needs to be done to make sense of these developments, in their historical specificity—especially, from a Marxian perspective, of their particular class conditions and effects in the current conjuncture.

If my book serves as a guide for such an analysis, even as it determinately fails to offer a general method, it may provide at least some concrete examples of what can be accomplished based on the contingency of theory, reading for class, subjectivity, and conjunctural analysis—in other words, with ideas associated with the rethinking of Marxism. The goal, of course, is to change the subject, and thus to contribute to the project of imagining and creating alternative class possibilities and of building twenty-first century socialism.

Acknowledgments

I owe a very large debt to Eray Düzenli for organizing the session on my book at the 2013 Rethinking Marxism conference (Surplus, Solidarity, Sufficiency, at the University of Massachusetts Amherst) that has turned into this symposium. I also want to thank Chizu Sato for all her work in procuring the papers from the commentators to be part of the symposium. And finally, I am indebted to Rethinking Marxism’s new coeditors, Yahya Madra and Vincent Lyon-Callo, for their patience and understanding in extending the deadline for my rejoinder.

Notes 

[1] Daniel Hamermesh (2013) is one among many who has argued that today top journals in economics—in other words, the leading journals in mainstream economics—“are publishing many fewer papers that represent pure theory, regardless of subfield, somewhat less empirical work based on publicly available data sets, and many more empirical studies based on data collected by the author(s) or on laboratory or field experiments.” Like Beatrice Cherrier (2016), I find the current celebration of the “empirical turn” to be both oversimplified and mischaracterized, since it misses previous episodes of empirical work within mainstream economics (going back to Wesley Clair Mitchell on business cycles in the 1920s). In my view, it also overlooks the role mainstream economic theory continues to play in setting and defining the agenda of empirical research.

[2] The title of the book was supposed to be “Planning, Development, and Globalization: Essays in Marxian Class Analysis,” but Routledge had already used the shorter placeholder title to list the book and at that point it couldn’t be changed.

[3] The same is true of the coauthors of some of the chapters in the book, including Stephen Resnick, Richard Wolff, the late Julie Graham, Kath Gibson, and Serap Kayatekin.

[4] I have attempted to express at least a portion of the immense debt I owe to Resnick and Wolff in two essays previously published in this journal: “Contending Economic Theories: Which Side Are You On?” (2015) and “Chance Encounters” (2018a). I also want to take the occasion to express my gratitude to my late friend and colleague Joseph Buttigieg, from whom I learned many things, including Antonio Gramsci’s philological method—which “requires minute attention to detail” and “seeks to ascertain the specificity of the particular” and, while it establishes complex networks of relations among the details, eschews any attempt to permanently fix those relations, thus avoiding the “danger of becoming crystallized into dogmas” (Buttigieg 1992, 63).

[5] Permit me, if you will, two other examples. Some years ago, I was asked to teach a course on the political economy of war and peace by the Kroc Institute for International Peace Studies. At the time, the discussion was dominated by Paul Collier’s research on greed grievance with respect to resources. With very few exceptions (e.g., Cramer 2003), there was nothing in the literature about class, which of course made it difficult to discuss either the class causes of war or the class conditions of peace. Much the same holds with respect to health care. There is growing concern in the United States that inequality in health outcomes is rising along with the grotesque and still-growing disparities in income and wealth (Zimmerman and Anderson [2019]). However, in contrast to other countries, such as the United Kingdom (which has issued a series of reports over the years on the relationship between health and class, including the Acheson Report, fully titled the Independent Inquiry into Inequalities in Health Report, in 1998), the United States does not collect health data by class. That, of course, makes it impossible to analyze the relationship between class and health, in terms of either the current situation or improved health outcomes.

[6] This interpretation of commodity fetishism relies on the pathbreaking work of Jack Amariglio and Antonio Callari (1993).

[7] This reinterpretation of the role of the accumulation of capital in the Marxian critique of political economy is due to the pioneering work of Bruce Norton (1988), which was published early on in this journal.

References

Acheson, D. 1998. Independent Inquiry into Inequalities in Health Report. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/265503/ih.pdf.

Amariglio, J. and A. Callari. 1993. “Marxian Value Theory and the Problem of the Subject: The Role of Commodity Fetishism.” In Fetishism as Cultural Discourse, ed. E. Apter and W. Pietz, 186-216. Ithaca: Cornell University Press.

Banerjee, A. V. 2005. “‘New Development Economics’ and the Challenge to Theory.” Economic and Political Weekly 40 (40): 4340-44.

Banerjee, A. and E. Duflo. 2011. Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. New York: PublicAffairs.

———. 2019. Good Economics for Hard Times. New York: PublicAffairs.

Buttigieg, J. A. 1975. “Introduction.” In Prison Notebooks, volume 1. New York: Columbia University Press.

Cherrier, B. 2016. Is There Really an Empirical Turn in Economics? Institute for New Economic Thinking, 29 September. https://www.ineteconomics.org/perspectives/blog/is-there-really-an-empirical-turn-in-economics.

Chetty, R. 2013. “Yes, Economics Is a Science.” New York Times, 20 October. https://www.nytimes.com/2013/10/21/opinion/yes-economics-is-a-science.html

Christopher C. 2003. “Does Inequality Cause Conflict?” Journal of International Development 15 (May): 397-412.

Duflo, E. 2017. “The Economist as Plumber.” American Economic Review 107 (5): 1-26.

Feyerabend, P. 2010. Against Method: Outline of an Anarchistic Theory of Knowledge. 4th ed. New York: Verso Books.

Hamermesh, D. S. 2013. “Six Decades of Top Economics Publishing: Who and How?” Journal of Economic Literature 51 (1): 162-72.

International Labour Organization. 2015. World Employment and Social Outlook: The Changing Nature of Jobs. Geneva: International Labour Organization.

International Monetary Fund. 2017. “Understanding the Downward Trend in Labor Income Shares.” In World Economic Outlook: Gaining Momentum? Washington, D.C.: International Monetary Fund.

Matthews, D. 2019. “The Radical Plan to Change How Harvard Teaches Economics.” Vox, 22 May. https://www.vox.com/the-highlight/2019/5/14/18520783/harvard-economics-chetty.

Meier, G. M. 1984. “The Formative Period.” In Pioneers in Development, ed. G. M. Meier and D. Seers, 3-22. New York: Oxford University Press.

Norton, B. 1988. “The Power Axis: Bowles, Gordon, and Weisskopf’s Theory of Postwar U.S. Accumulation.” Rethinking Marxism 1 (3): 6-43.

Ruccio, D. F. 1992. “Failure of Socialism, Future of Socialists?” Rethinking Marxism 5 (Summer): 7-22

———. 2014. “Capitalism.” Keywords for American Cultural Studies, ed. B. Burgett and G. Hendler, 37-40. New York: New York University Press.

———. 2015. “Contending Economic Theories: Which Side Are You On?” Rethinking Marxism 27 (2): 273-81.

———. 2017. “Populism and Mainstream Economics.” Occasional Links & Commentary on Economics, Culture, and Society, 2 March. https://anticap.wordpress.com/2017/03/02/populism-and-mainstream-economics/.

———. 2018a. “Chance Encounters.” Rethinking Marxism 30 (1): 84-95.

———. 2018b. “Strangers in a Strange Land: A Marxian Critique of Economics.” In Marxism without Guarantees: Economics, Knowledge, and Class, ed. R. Garnett, T. Burczak, and R. McIntyre, 43-58. New York: Routledge.

Smith, A. 2003 (1776). The Wealth of Nations. Intro. A. B. Krueger. New York: Bantam Dell.

World Bank. 2018. Poverty and Shared Prosperity 2018: Piecing Together the Poverty Puzzle. Washington, D.C.: World Bank.

World Inequality Lab. 2017. World Inequality Report 2018. https://wir2018.wid.world/files/download/wir2018-full-report-english.pdf

Zimmerman, F. J. and N. W. Anderson. 2019. “Trends in Health Equity in the United States by Race/Ethnicity, Sex, and Income, 1993-2017.” JAMA Network Open 2 (6): 1-10.

I cringe when I listen to or watch these interviews. But here it is, with the Real News Network.

The interview was based on my recent blog post, “Economics of poverty, or the poverty of economics.”

I also want to recommend a recent piece by Ingrid Harvold Kvangraven [ht: ms], who argues that

The interventions considered by the Nobel laureates tend to be removed from analyses of power and wider social change. In fact, the Nobel committee specifically gave it to Banerjee, Duflo and Kremer for addressing “smaller, more manageable questions,” rather than big ideas. While such small interventions might generate positive results at the micro-level, they do little to challenge the systems that produce the problems.

For example, rather than challenging the cuts to the school systems that are forced by austerity, the focus of the randomistas directs our attention to absenteeism of teachers, the effects of school meals and the number of teachers in the classroom on learning. Meanwhile, their lack of challenge to the existing economic order is perhaps also precisely one of the secrets to media and donor appeal, and ultimately also their success.

Exactly!

It’s the revenge of neoclassical economics, as reflected in this year’s prize in economics, which focuses attention on poor people’s “bad” decisions and away from the structural causes of poverty.

As I argued the other day on Twitter, it’s like saying the climate crisis will be solved by individuals turning off lights and recycling their garbage. Not bad things to do, certainly. But, together, all those individual efforts make up only 1-2 percent of the solution. The climate crisis cannot be solved unless and until we direct attention to the real, structural causes. Here, I’m thinking not only of the fossil fuel industry, but also the way the rest of contemporary capitalist economies are organized around the use of fossil fuels—in the production of goods and services, cars as well as digital information. Such a system generates enormous profits, which flow to a tiny group at the top, and continues to destroy the commons, where most of us live and work.

It’s that system that needs to be radically transformed. And as long as economists are lauded for focusing on technical issues around the margins and not on the real causes—of Third World poverty, global warming, and much else—the discipline of economics will continue to be impoverished.

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Yesterday, the winners of the 2019 winners of the so-called Nobel Prize in Economics were announced. Abhijit Banerjee, Esther Duflo, and Michael Kremer were recognized for improving “our ability to fight global poverty” and for transforming development economics into “a flourishing field of research” through their experiment-based approach.

The Royal Swedish Academy of Sciences declared:

This year’s Laureates have introduced a new approach to obtaining reliable answers about the best ways to fight global poverty. In brief, it involves dividing this issue into smaller, more manageable, questions–for example, the most effective interventions for improving educational outcomes or child health. They have shown that these smaller, more precise, questions are often best answered via carefully designed experiments among the people who are most affected.

As every year, mainstream economists lined up to laud the choice. Dani Rodrik declared it “a richly deserved recognition.” Richard Thaler, who won the award in 2017 (here’s a link to my analysis), extended his congratulations to the Banerjee, Duflo, and Kremer and to the committee “for making a prize that seemed inevitable happen sooner rather than later.” While Paul Krugman, the 2008 Nobel laureate, refers to it as “a very heartening prize—evidence-based economics with a real social purpose.”

Nothing new there. To a one, mainstream economists always use the occasion of the Nobel Prize to applaud themselves and their shared approach to economic and social analysis—a celebration of private property, free markets, and individual incentives.

What is novel this time around is that the winners include the first woman economist to win the prize (Duflo) and only the third non-white economist (Banerjee).*

But what about the content of their work? I’ve discussed the work of Duflo and Banerjee on numerous occasions on this blog (e.g., here, here, and here).

As it turns out, I’ve written a longer commentary on the “new development economics” as part of a symposium on my book Development and Globalization: A Marxian Class Analysis, which is forthcoming in the journal Rethinking Marxism.

I begin by noting that idea of Banerjee, Duflo, Kremer and the other new development economists is that asking “big questions” (e.g., about whether or not foreign aid works) is less important than the narrower ones concerning which particular development projects should be funded and how such projects should be organized. For this, they propose field experiments and randomized control trials—to design development projects such that people can be “nudged,” with the appropriate incentives, to move to the kinds of behaviors and outcomes presupposed within mainstream economic theory.

Here we are, then, in the aftermath of the Second Great Depression—in the uneven recovery from capitalism’s most severe set of crises since the great depression of the 1930s and, at the same time, a blossoming of interest in and discussion of socialism—and the best mainstream economists have to offer is a combination of big data, field experiments, and random trials. How is that an adequate response to grotesque and still-rising levels of economic inequality (as shown, e.g., by the World Inequality Lab), precarious employment for hundreds of millions of new and older workers (which has been demonstrated by the International Labour Organization), half a billion people projected to still be struggling to survive below the extreme-poverty line by 2030 (according to the World Bank), and the wage share falling in many countries (which even the International Monetary Fund acknowledges) as most of the world’s population are forced to have the freedom to sell their ability to work to a relatively small group of employers for stagnant or falling wages? Or, for that matter, to the reawakening of the rich socialist tradition, both as a critique of capitalism and as a way of imagining and enacting alternative economic and social institutions.

I go on to raise three critical issues concerning the kind of development economics that has been recognized by this year’s Nobel prize. First, the presumption that analytical techniques are neutral and the facts alone can adjudicate the debate between which development projects are successful and which are not is informed by an epistemological essentialism—in particular, a naïve empiricism—that many of us thought to have been effectively challenged and ultimately superseded within contemporary economic and social theory. Clearly, mainstream development economists ignore or reject the idea that different theories have, as both condition and consequence, different techniques of analysis and different sets of facts.

The second point is that class is missing from any of the analytical and policy-related work that is being conducted by mainstream development economists today. At least as a concept that is explicitly discussed and utilized in their research. One might argue that class is lurking in the background—a specter that haunts every attempt to “understand how poor people make decisions,” to design effective anti-poverty programs, to help workers acquire better skills so that they can be rewarded with higher wages, and so on. They are the classes that have been disciplined and punished by the existing set of economic and social institutions, and the worry of course is those institutions have lost their legitimacy precisely because of their uneven class implications. Class tensions may thus be simmering under the surface but that’s different from being overtly discussed and deployed—both theoretically and empirically—to make sense of the ravages of contemporary capitalism. That step remains beyond mainstream development economics.

The third problem is that the new development economists, like their colleagues in other areas of mainstream economics, take as given and homogeneous the subjectivity of both economists and economic agents. Economists (whether their mindset is that of the theoretician, engineer, or plumber) are seen as disinterested experts who consider the “economic problem” (of the “immense accumulation of commodities” by individuals and nations) as a transhistorical and transcultural phenomenon, and whose role is to tell policymakers and poor and working people what projects will and not reach the stated goal. Economic agents, the objects of economic theory and policy, are considered to be rational decision-makers who are attempting (via their saving and spending decisions, their participation in labor markets, and much else) to obtain as many goods and services as possible. Importantly, neither economists nor agents are understood to be constituted—in multiple and changing ways—by the various and contending theories that together comprise the arena of economic discourse.

The Nobel committee has recognized the work of Banerjee, Duflo, and Kremer as already having “helped to alleviate global poverty.” My own view is that it demonstrates, once again, the poverty of mainstream economics.

 

*The only other woman, in the 50-year history of the Nobel Prize in Economics, was Elinor Ostrom (2009), a political scientist; the other non-white winners were Sir Arthur Lewis (1979) and Amartya Sen (1998).

 

The same day I wrote that capitalism was coming apart at the seams, indicated by the shocking disparity between the compensation of corporate CEOs and workers, the Business Roundtable published its new statement of purpose of a corporation.*  The 180 or so corporate executives who signed the statement declared that all their stakeholders, not just owners of equity shares, were important to their mission.

Many business pundits, such as Andrew Ross Sorkin, greeted the new statement as a sign that the era of shareholder democracy (what he refers to as “shareholder primacy”) had finally come to an end and that a “significant shift” in corporate responsibility to society would be ushered in. Readers, however, had their doubts, most of them echoing JDK’s response to Sorkin’s piece: “Talk is cheap.”

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The fact is, over the past three decades, net dividend payments to shareholders have soared—from $178 billion in 1989 to $1.3 trillion in 2019 (that’s an increase of 630 percent, for those keeping track).** And much of the responsibility is laid at the feet of mainstream economists like Milton Friedman (pdf), who famously declared that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits” and the only responsibility of corporate executives is to their employers, the shareholders—and corporate raiders such as Carl Icahn.

As I see it, the idea of shareholder democracy has merely served as a cover for any and all corporate decisions and strategies. When pushed to take on other responsibilities, or to make other decisions, the corporate defense has long been that it ran counter to the mission of maximizing profits or shareholder value.

In reality, corporations have never attempted to achieve just one objective or to maximize one value. One issue is that the usual objectives or values ascribed to corporate managers are ill-defined. There is neither singular meaning of profits (since, as they’re reported, they’re largely the result of a particular set of accounting conventions, defined over the fuzzy boundaries of the inside and outside of a corporate entity) nor a unique time frame (over what period are profits or dividends maximized—a week, quarter, year?).*** But the defense of such a corporate mission has served as a convenient excuse to resist pressures to make different decisions or adopt alternative strategies—such as increasing worker pay, improving working conditions, implementing environmentally sustainable practices, and so on.

My view, as I argued back in 2013, is that corporations have never done just one thing or followed a single rule. They do make profits (at least sometimes, depending on the definition and timeframe). But they also seek to grow their enterprises and destroy the competition and maintain good public relations and buy government officials and reward their CEOs and squeeze workers and lower costs and reward shareholders and implement new forms of automation and build factories that collapse and. . .well, you get the idea. In other words, they appropriate and distribute surplus-value in all kinds of ways depending on the particular conditions and struggles that take place over the shape and direction of their enterprises.

The problem inherent both in the new Business Roundtable statement of purpose and in the attempts by corporate critics to argue that corporations should take on additional social responsibilities is that corporations are already too central to the U.S. economy and society. They’re the main institution where the surplus is appropriated and then distributed—with all the consequent effects on the wider society. The private decisions of corporate entities, as decided by the boards of directors and implemented by the chief executives, are responsible for the Second Great Depression, the grotesque levels of economic inequality that have been growing for decades now, the global-warming crisis, and so much more. Why would anyone want to give corporations even more power or scope to decide how to solve those problems when they’re the root of the problem in the first place?

No, the only viable strategy is make corporations less important, to decenter the American economy and society from the decisions made by corporate directors and executives. That begins with fostering the growth of other types of firms (such as worker-owned cooperatives) and making sure that the workers employed by corporations play a significant role in corporations (including how much surplus there will be and how it will be utilized). That’s the best way of moving beyond the era of shareholder democracy to a real economic democracy.

Anything else is just cheap talk.

 

*I certainly don’t want to imply that the Business Roundtable was responding to my blog post. No, the fact that they felt it necessary to issue such a new statement of purpose is an indication that American corporations—and, with them, U.S. capitalism—have lost a great deal of legitimacy in recent years. As Farhad Manjoo [ht: ja] recently wrote,

A recession looms, and the nation’s C.E.O.s are growing fearful.

It isn’t the potential of downturn itself that has them alarmed — downturns come and downturns go, but whatever happens, chief executives, like cats, tend to land on their comfortably padded feet.

Instead, the cause of their fear appears to be something more fundamental. . .They’re worried that when the next recession breaks, revolution might, too. This could be the hour that the ship comes in: The coming recession might finally prompt the masses to sharpen their pitchforks and demand a reckoning.

**During that same period, average hourly earnings (for production and nonsupervisory workers) increased by only 140 percent—but corporate profits (after tax) rose by 570 percent.

***As I have long explained to students, that’s the myth that serves as the foundation of the neoclassical theory of the profit-maximizing firm: what exactly are corporate profits and over what time frame are they supposed to be maximized? The assumption of a profit-maximizing firm is equivalent to what one hears from many so-called radical economists, that “capitalists accumulate capital.” Again, no. Accumulating capital (that is, purchasing new elements of constant and variable capital) is only one of the many possible forms in which capitalists distribute the surplus-value they appropriate from their workers. Sometimes they accumulate capital, and other times they don’t. The presumption that they always seek to accumulate capital is the heroic story proffered by classical economists (so that, in their view, capitalist growth would take place), much as neoclassical economists today presume that capitalists maximize profits (so that, in their view, an efficient allocation of resources will result). Marxists presume neither that capitalists maximize profits nor that they always and everywhere accumulate capital.

Banksy-Capitalism

It’s time to get back to blog writing—after a 6-month hiatus during which I taught my final two courses at the University of Notre Dame (A Tale of Two Depressions and Marxian Economic Theory) and prepared for my retirement (which involved, among other things, sorting through, packing up, and moving decades of “stuff”). Now, after 38 years of teaching, I am officially Professor of Economics Emeritus. But, rest assured, I plan to continue this blog and other writing projects. 

For the first time in almost four decades (aside from a few research sabbaticals), I don’t face the prospect of returning to campus and teaching economics. But, I can’t help it, I still worry about what millions of students in the United States and around the world will learn—or at least be subjected to—when they enroll in their economics classes this fall.

One of the major issues for any economics class, especially an introductory or principles course, is how to make it useful for students. My own approach has always been to teach the basics of mainstream economics—the key assumptions, the standard models, the relevant conclusions—and then to teach the critique of mainstream economics (including alternative theories within the discipline of economics). Two for one, I used to tell the students. In my view, they would be better students and citizens of the world when they understood both how mainstream economics affected their lives and how they could criticize and explore alternatives to the hegemonic theories within economics.* And I updated the content, and made it more useful to students, as mainstream economic theories changed and as particular issues were taken up in the media and political discourse.

That’s certainly not how mainstream economists approach teaching. For example, Justin Wolfers, a liberal mainstream economist at the University of Michigan, recently announced that he wants to make introductory economics useful to students by teaching them “a set of tools that can empower them, providing insight that will guide them toward better decisions.” And those “better decisions”? Exactly the presumptions and pronouncements that mainstream economists have celebrated since their approach was invented by Adam Smith and then reinvented in the late nineteenth century as neoclassical economics. It’s the entire arsenal of comparative advantage, rational choice, opportunity cost, given scarcity, and so on.

The approach introduced by Wolfers with such fanfare is no different from the miserable and misleading analogy invoked by Harvard’s Greg Mankiw between international trade and hiring someone to shovel snow. And it accomplishes nothing more than demonstrating that current economic arrangements are exactly as they should be because, in the view of mainstream economists, free trade is always mutually beneficial:

Start thinking this way and you’ll quickly see that the ideas that guide your everyday decisions also propel international trade, which is why American engineers design iPhones, while foreign workers — who have fewer alternative opportunities — do the laborious work of putting them together. By assigning tasks this way, Americans have gotten cheaper iPhones, and Chinese and Indian consumers have gotten greater access to advanced technology.

Fortunately, there are many other economists who are devising courses that are much more useful to today’s students. Last year, Aditya Chakrabortty wrote about one such course, in which students learned that the rules of the economy “aren’t laws of nature.” And just last week, Andrew Simms and David Boyle published a new beginners’ guide to economics for non-experts:

In it we ask some heretical questions that that could get us expelled from most university economics departments, such as: is the price mechanism so clever, or rising productivity always a good thing? We talk about the trouble with growth, and why working less might be better. Our common starting point is that the economy should serve rather than dominate people, and that it must work within planetary ecological boundaries.

As against what Wolfers, Mankiw, and so many other mainstream economists teach their students, these approaches are useful to students because they serve to denaturalize both existing economic thought and economic arrangements, thereby creating space for alternative ways of thinking about how the economy is organized and creating other possibilities.

I’ll only be able to rest easy in my retirement when the teaching of economics is taken out of the hands of mainstream economists and the millions of students who enroll in economics classes are taught to think critically and creatively about the economic dimensions of their lives and the world around them.

 

*So, I was heartened and gratified when, on the occasion of my retirement, some of my former students shared their thoughts about what they’d learned along the way:

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No matter how we measure it, most Americans are falling further and further behind the tiny group at the top.

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That’s not at all surprising. Whether we compare the growing gap between average wages and Gross Domestic Product per capita (as in the chart on the left) or real median household income and real Gross Domestic Product per capita (as in the chart on the right), it’s clear the average American has been losing out. A growing proportion of what workers produce hasn’t been going to them but to the richest households for decades now.

That does not mean, contra Robert Samuelson, that “the incomes of most Americans have stagnated for decades.” That’s a canard. No one makes that argument.

No, the real issue is that American workers have been producing more and more but getting only a tiny share of that increase. As I explained last year,

That’s what mainstream economists can’t or won’t understand: that workers may be worse off even as their wages and incomes rise. That problem flies in the face of every attempt to celebrate the existing order by claiming “just deserts.”

It’s what is known as relative immiseration. And it simply can’t be disputed by the alternative statistics invoked by Samuelson or Stephen J. Rose (pdf).

The exact numbers concerning the distribution of income in the United States depend, of course, on a whole host of assumptions and methodological choices, mostly involving what counts as “income.” The more categories that are included in income—starting with the traditional series (wages and salaries, dividends, interest, and rent) before and after taxes, and then including payments from government programs (such as Social Security, unemployment insurance, Temporary Assistance for Needy Families, and the earned-income tax credit), and going so far as to add employer contributions for health insurance and 401(k) retirement accounts, the employer share of the Federal Insurance Contributions Act, government noncash benefits (e.g., the Supplemental Nutrition Assistance Program, Medicare, Medicaid, and housing vouchers), housing services (homeowners paying rent to themselves) and government services (e.g., defense, education, legal system, and administration)—the less measured inequality turns out to be.

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In fact, as Rose demonstrates, most of the available studies show growing inequality in the United States, with a high and rising share of income captured by the top 1 percent.** The only real outlier is by Auten and Splinter, who merely demonstrate that it is possible for mainstream economists to make growing inequality virtually disappear with enough “massaging” of the underlying numbers.***

In the end, Samuelson himself is forced to admit,

None of this means we should stop debating inequality. Who gets what, and why, are inevitable subjects for examination in a rich democratic society. By contrast with many advanced societies, income and wealth are indisputably more concentrated in the United States.

And the problem of growing inequality is only going to get worse as we move forward, especially with ongoing automation. As David Autor explains,

employment is growing steadily, and its growth in terms of number of jobs has not been discernibly dented by technological progress. But the sum of wage payments to workers is growing more slowly than economic value-added, so labor’s share of the pie of net earnings is falling. This doesn’t mean that wages are falling. It means that they are not growing in lock step with value-added.

That’s exactly right. Workers’ wages and middle-class incomes may continue to rise in absolute terms but their relative standing with respect to the tiny group at the top—those who are in the position of capturing the surplus—will likely worsen.

Measure by measure, the economic and social landscape is being fractured and American workers are being left behind.

 

*So that I avoid the problem I encountered when I presented my “Merchant of Venice” paper, this post is not about Shakespeare’s play.

**The main studies include Emmanuel Saez and Thomas Piketty (pdf), Piketty, Saez and Gabriel Zucman (pdf), Gerald Auten and David Splinter (pdf), and the Congressional Budget Office. As I showed in 2016, even Rose, for all the faults in his own study, found

an enormous increase in inequality between 1979 and 2014: combined, the share of income going to the rich and upper middle-class more than doubled, from 30 to 63.1 percent, while the amount of income going to everyone else—middle-class, lower middle-class, and poor—fell precipitously, to less than 40 percent.

***Auten and Splinter arrive at such a misleading result through two statistical maneuvers: allocating underreported income (primarily business income) according to IRS audit data and retirement income. Thus, they conclude, “Our results suggest an alternative narrative about top income shares: changes in the top one percent income shares over the last half century are likely to have been relatively modest.”