Posts Tagged ‘economy’

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The clear reemergence of and spreading interest in anti-establishment politics in the United States (together with the electoral success of left-wing and right-wing parties in a growing number of European nations) can be blamed squarely on capitalism.

As I see it, it’s the combination of the failures of capitalism and the unwillingness of the existing economic and political elites to effectively deal with those failures that explains the rejection of mainstream (center-right and center-left) candidates and policies and the turn to alternatives. The failures of capitalism go back some four decades—including stagnant wages, rising indebtedness, and growing inequality—and culminated in the crash of 2007-08—after which wages remained stagnant, people were not able to rid themselves of debt, and inequality continued to grow. What recovery there has been in recent years has mostly been captured by large corporations and wealthy individuals, while economic growth has remained slow. Meanwhile, economic elites have continued business as usual (moving production and jobs at will around the world, more interested in lowering costs, avoiding taxes, and inventing new labor-saving technologies than anything else) and political elites do everything they can to save large financial institutions and a business-friendly environment and imposing the costs—of the bailouts, the continued opening and expansion of markets, the refugees from war-torn zones, and much else—on the working and unemployed populations of their nations.

From this perspective, it’s no surprise that, in the United States, both Donald Trump and Bernie Sanders have attracted so much support—or, that, in Europe, both the Left (e.g., in Greece and Spain) and the Right (e.g., in Poland and Austria) are increasingly able to challenge mainstream parties.

To be clear, this is not to say that politics—political parties and movements, voter attitudes and behaviors, candidates and coalitions—are solely determined by the economy (or some subset of the economy, like class interests). There’s a great deal more that affects the rise and fall of political ideas and campaigns—from political practices and institutions through discourses and identities to media and communication technologies. Still, the failures of capitalism and the unwillingness of economic and political elites to solve or mitigate the effects of those failures to the benefit of the majority of the population have played a significant role in the current disenchantment with mainstream parties and the success of left-wing and right-wing alternatives in the United States and Europe.

But it is interesting that there appears to be a determined effort to absolve capitalism of any responsibility for these new political events. Both Greg Ip (writing for the Wall Street Journal) and Peter Eavis (for the New York Times) have attempted to argue that “it’s not the economy” that explains politics, but something else. And, if it’s something else, it can’t be the failures of capitalism that are to blame.

For both writers, “the economy” is economic growth, specifically growth in GDP. In Ip’s case, the difference between the 1960s (when social disarray and political dissension were accompanied by solid growth and “shared prosperity”) and now (when similar levels of voter discontent are occurring with slow growth and high levels of inequality) means we can’t make sense of electoral grievances in terms of economic discontent. For Eavis, most voters are currently “doing sort of O.K.” (with thousands of new jobs and a low unemployment rate). Therefore, he argues, this election can’t really be about the economy.

Desperate as they are to make such an argument, both Ip and Eavis miss two key issues. First, the economy is not just GDP growth. It’s also, at least for the majority of the population, about a great deal more: the tradeoff between wages and profits and the level of inequality, the ability of the government to capture portions of the surplus and to use it for social programs, the degree of security concerning jobs and the quality of the communities in which people live and work, and a great deal more. And second, capitalism doesn’t always exert its effects in the same way: in the 1960s, when both wages and profits were rising and the possibility of using part of the surplus to improve society (both for those who had prospered and those who had been excluded from that first. “Golden Age” decade of postwar growth), capitalist success created rising expectations (including the rethinking of aspects of capitalism that had previously been deemed successes); while now, in the midst of capitalism’s multiple, spectacular failures, the opposite is true (as people demand redress for their low-paying jobs, crumbling infrastructure, obscene levels of inequality, and the corruption of democratic politics by large corporations and wealthy individuals).

So, no, capitalism can’t be let off the hook. It creates and perpetuates the problems it claims to address. And even though economic and political elites want to believe otherwise, holding firm to the notion that people should be satisfied with current economic arrangements, recent developments in the United States and Europe suggest they’re not.

Not by a long shot.

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We know that the so-called gig economy—in the form of such online platforms as Uber and Airbnb—offers more alternatives in terms of finding transportation and renting property. But it doesn’t overturn the unequalizing dynamics of contemporary capitalism. In fact, it probably makes things even more unequal.

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What about the online platforms for workers, like TaskRabbit and HourlyNerd? They, too, represent a new kind of freedom—and, at the same time, a new way for employers to take advantage of workers.

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A June 2015 report from the McKinsey Global Institute makes clear the advantages for employers: more output (by up to 9 percent), lower costs (by up to 7 percent), and higher profits (by up to 5.4 percent). The idea is that digital platforms enhance recruiting and personalize various aspects of talent management (including training, incentives, and career paths) in the case of high-skilled workers, and improve the screening and assessment of job candidates (thus allowing them to “make better predictions about candidates’ ability to perform tasks as well as the likelihood of their timeliness, reliability, and commitment”) for companies with large low-skilled workforces. It also makes it easier for employers to contract workers for particular projects and then let them go, until the next project (requiring a different group of workers) comes up. So, with better matching, screening, and flexibility, workers produce more, cost less, and create more profits for their employers.

It sounds like a dream come true for employers.* And it is!

The problem, of course, is to sell the new digital labor platforms to workers, both blue-collar and increasingly white-collar. Here’s how McKinsey does it:

Online talent platforms can bring a new dimension to profiles of individual workers: their soft skills, traits, and endorsements from colleagues and superiors. The accumulated ratings and feedback provided to contingent workers through online marketplaces could be valuable, particularly for young people with little other work experience as they seek permanent employment. Accumulating and codifying these reputational elements can help individuals distinguish themselves in the job market and can help employers identify people who are a better fit for the positions they are filling.

In other words, it’s all about freedom and control.

And that’s important to recognize, because capitalism does represent the birth of a new freedom—for example, compared to feudalism and slavery. Under feudalism, workers (serfs) were tied to their employers (lords) in order to gain access to land (and, if the serfs violated those ties, for instance by attempting to attach themselves to a different lord’s demense, there was always the blacklist). As for slavery, workers (slaves) were owned as human chattel by their employers (slaveowners) and could not work for anyone else unless they were rented or sold by their owners (and subject to torture if they didn’t work hard enough).

Capitalism, in contrast, means that workers own their ability to work and are free to sell it to any employer. But it also mean, because their ability to work isn’t worth anything to them unless they sell it to someone else for a wage or salary, workers are forced to have the freedom to sell their ability to work to another group, their employers. (And the employers, of course, appropriate the surplus those workers create—just as their predecessors did from their workers under feudalism and slavery.)

Nothing in the new digital platforms changes that. Workers are still forced to have the freedom to sell their ability to work (and to produce a surplus for someone else, or they won’t be hired). The only thing that’s changed is the amount of data and the kind of analytics that are available to their employers (concerning the positions employers are filling, the skills required, and the paths workers have followed in education or previous positions).

But workers beware: “As data collection and analysis become more sophisticated, users will have to be mindful that every online interaction can affect their professional reputation.” What’s new for workers is they’re now forced to have the freedom to also watch what they do online.

And that’s why workers—both on and off the job—are increasingly being turned into jack rabbits.

 

*It’s also the fulfillment of a dream for neoclassical economists, who in their models spend a great deal of time on issues of job search, screening, and matching—for them, when those issues are solved, the perfect labor market.

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According to a new study by JPMorgan Chase, about 3.1 percent of American adults earned income from the so-called Online Platform Economy (from Uber and TaskRabbit to eBay and Airbnb) between October 2014 and September 2015. (This represents a 47-fold increase over three years, beginning in October 2012.) And the financial significance of the gig economy is growing:

We find that the Online Platform Economy contributed significantly to the bottom line for certain segments of the population, notably labor platform participants in general, and specifically labor platform earners who live in San Francisco, or who are 35 and older or have low-to-moderate incomes. Among these segments, platform earnings represented, on average, more than a fourth of their income over a 12-month span.

Many dream that the “sharing economy” represents an alternative to the grotesque levels of inequality created in the rest of the economy.

As it turns out, it’s just that—a dream. The gig economy is itself contributing to increasing inequality across the U.S. economy.

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Eric Morath notes that “wealthier Americans benefit from the gig economy’s ability to generate more income from their assets.”

Of top income earners who did participate in the gig economy, 82 percent did so by renting an asset like a house or selling products they made or already owned. They did so through capital platform systems such as renting out property through VRBO or selling crafts on sites like Etsy.

Low- and moderate-income individuals were much more reliant on labor platform earnings (from working as an Uber driver or a TaskRabbit mover) than the rest of the population. Labor platform earnings represented more than 25 percent of annual income for participants in the bottom three income quintiles compared to just 20 percent of annual income for labor platform participants in the top income quintile.

And then, not even mentioned in the JP Morgan Chase study, there’s the capital behind all the various online platforms—whether working, renting, or selling. Uber CEO and cofounder Travis Kalanick is now supposedly worth at least $5.3 billion.

Not surprisingly, the gig economy is characterized by the same unequalizing, capital-labor dynamics as the rest of the capitalist economy.

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It’s an issue that often comes up with my students. They believe the key problem in the country is the growing polarization between the two major political parties. Nothing gets done because politicians from opposing parties don’t seem to agree on anything.

But, as Robert Weissman [ht: ja] explains, “That story is not true.”

In fact, Americans overwhelmingly agree on a wide range of issues. They want policies to make the economy more fair and hold corporate executives accountable. They want stronger environmental and consumer protections. And they want to fix our political system so that it serves the interest of all, not just Big Money donors. These aren’t close issues for Americans; actually, what’s surprising is the degree of national consensus.

The problem isn’t that Americans don’t agree. The problem is that the corporate class doesn’t agree with this agenda, and that class dominates our politics.

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The question in the table from a recent Democracy Corps/Roosevelt National questionnaire (pdf) is a good example. Fully 73 percent of those polled were (very or somewhat) convinced by the following story:

The rules that govern our economy no longer work for Americans. For 40 years, economic policies have rewarded large corporations and the wealthiest with the promise that their gains would “trickle down” to everyone else. It hasn’t worked. Instead we have faced sluggish growth and economic insecurity for more and more Americans with all the gains going to the top. It is time to rewrite the rules of our economy so small businesses and average American families have a chance too, not just the wealthy and well-connected. That starts with preventing corporations and CEOs from flooding the political process with money so they can manipulate the rules to their advantage. Then we can focus on policies that will grow our economy and level the playing field—rebalancing the tax code so those at the top pay their fair share like the rest of us, changing corporate governance so CEOs prioritize long term investments in workers and their companies over short-term gains and speculation, and ensuring banks do what they’re supposed to do and serve America’s families and provide loans to productive businesses. We can also raise wages for working people by guaranteeing equal pay for women and create more family-supporting jobs by investing in infrastructure and making college more affordable. We have the power to rewrite the rules of our economy.

The same is true on a wide variety of issues, from increases in the minimum wage to expanding Social Security.

American opinion is not divided. What is true is that the views of the average voter are trumped by a corporate elite that finances and writes the rules for political debate in the United States.

That’s the real gridlock that needs to be broken up.