Posts Tagged ‘exploitation’

Liberal mainstream economists all seem to be lip-synching Bobby McFerrin these days.

Worried about automation? Be happy, write Laura Tyson and Susan Lund, since “these marvelous new technologies promise higher productivity, greater efficiency, and more safety, flexibility, and convenience.”

Worried about the different positions in current debates about economic policy? Be happy, writes Justin Wolfers, and rely on the statistics produced by government agencies and financial firms and the opinions of mainstream economists.

Me, I remain worried and I have no reason to accept mainstream economists’ advice for being happy.

Sure, new forms of automation might lead to higher productivity and much else that Tyson and Lund find so alluring. But who’s going to benefit? If we go by the last few decades, large corporations and wealthy individuals are the ones who are going to capture most of the gains from the new technologies. Everyone else, as I have written, is going to be forced to have the freedom to either search for new jobs or deal with the fundamental transformation of the jobs they manage to keep.

When it comes to separating fact from fiction, aside from the embarrassing epistemological positions liberals rely on, where are the statistics that might help us make sense of what is going on out there—numbers like the Reserve Army of Unemployed, Underemployed, and Low-wage Workers or the rate of exploitation.

You want me not to worry? Analyze what’s going to happen to workers and the distribution of income as automation increases and calculate the kinds of economic numbers other theoretical traditions have produced.

Even better, let workers have a say in what what and how new technologies are introduced and change economic institutions in order to eliminate the Reserve Army and class exploitation.

Then and only then will I be happy.

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Apologists for mainstream economics (such as Noah Smith) like to claim that things are OK because good empirical research is crowding out bad theory.

I have no doubt about the fact that the theory of mainstream economics has been bad. But is the empirical research any better?

Not, as I see it, in the academy, in the departments that are dominated by mainstream economics. But there is interesting empirical work going on elsewhere, including of all places in the International Monetary Fund (as I have noted before, e.g., here and here).

The latest, from Mai Dao, Mitali Das, Zsoka Koczan, and Weicheng Lian, documents two important facts: the decline in labor’s share of income—in both developed and developing economies—and the relationship between the fall in the labor share and the rise in inequality.

I demonstrate both facts for the United States in the chart above: the labor share (the red line, measured on the left) has been falling since 1970, while the share of income captured by those in the top 1 percent (the blue line, measured on the right) has been rising.

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Dao et al. make the same argument, both across countries and within countries over time: declining labor shares are associated with rising inequality.

And they’re clearly concerned about these facts, because inequality can fuel social tension and harm economic growth. It can also lead to a backlash against economic integration and outward-looking policies, which the IMF has a clear stake in defending:

the benefits of trade and financial integration to emerging market and developing economies—where they have fostered convergence, raised incomes, expanded access to goods and services, and lifted millions from poverty—are well documented.

But, of course, there are no facts without theories. What is missing from the IMF facts is a theory of how a falling labor share fuels inequality—and, in turn, has created such a reaction against capitalist globalization.

Let me see if I can help them. When the labor share of national income falls—the result of the forces Dao et al. document, such as outsourcing and new labor-saving technologies—the surplus appropriated from those workers rises. Then, when a share of that growing surplus is distributed to those at the top—for example, to those in the top 1 percent, via high salaries and returns on capital ownership—income inequality rises. Moreover, the ability of those at the top to capture the surplus means they are able to shape economic and political decisions that serve to keep workers’ share of national income on its downward slide.

The problem is mainstream economists are not particularly interested in those facts. Or, for that matter, the theory that can make sense of those facts.

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There are plenty of reasons to be interested in—and, even more, concerned about—Facebook. Many of them are raised in the recent review of Facebook-related books by John Lanchester [ht: db]: the fragmentation of the polity (via the targeting of posts), the dissemination of “fake news” (which played an important role in the 2016 U.S. presidential election), the undermining of other livelihoods (such as journalism and music), the level of surveillance of users (much more than any national government), the violation of anti-monopoly rules (via individualized pricing), and so on.

All of them are important—and they get at what the Facebook business model is all about:

For all the talk about connecting people, building community, and believing in people, Facebook is an advertising company.

That’s right. That’s how the owners of Facebook make their money: they track users, collect information, and then sell that to advertisers.*

But it still doesn’t get at the issue of who works for Facebook, who creates that value, what the class structure of Facebook (and Google and other such companies) is.

Lanchester’s answer is that we, the two billion or so of us who use Facebook, actually work for the social-media giant.

Access to an audience – that unprecedented two billion people – is a wonderful thing, but Facebook isn’t in any hurry to help you make money from it. If the content providers all eventually go broke, well, that might not be too much of a problem. There are, for now, lots of willing providers: anyone on Facebook is in a sense working for Facebook, adding value to the company.

In one sense, Lanchester is right: if Facebook users don’t create or repost content and click on and respond to one another’s postings, then Facebook’s business model falls apart. In fact, as Lanchester explains,

Perhaps the biggest potential threat to Facebook is that its users might go off it. Two billion monthly active users is a lot of people, and the ‘network effects’ – the scale of the connectivity – are, obviously, extraordinary. But there are other internet companies which connect people on the same scale – Snapchat has 166 million daily users, Twitter 328 million monthly users – and as we’ve seen in the disappearance of Myspace, the onetime leader in social media, when people change their minds about a service, they can go off it hard and fast.

But what I find interesting is the fact that Lanchester can write a longish essay on Facebook and never once mention the word labor—and the only people who seem to be working are Facebook users.

What about Facebook’s employees? As it turns out, Facebook reported a headcount of 18,770 in its first-quarter earnings release (and likely employs more workers, as independent contractors for specific projects). Why don’t we consider them to be the ones who create the value realized by selling space to advertisers and information to others who purchase the data gathered by Facebook? And Facebook employees the ones who are working for and being exploited by Facebook’s board of directors?

When General Motors sells cars, the people who purchase and drive the cars aren’t being exploited; GM workers are. The same is true for other corporations, from Abbott Laboratories to Zoetis (which, along with Facebook, make up the Standard & Poor’s 500, covering about eighty percent of the American equity market by capitalization). They’re employees, not their customers, are the ones who create value and surplus-value.

So, why is Facebook (and, by the same token, other social-media and internet companies) different?

The answer, I think, is our relationship to the commodity being produced and sold is different. We purchase cars—and, if we’re aware of it, we know they’re produced by exploited auto-workers. But in the case of Facebook, we’re not purchasing anything at all, at least directly. We post content to our friends or advertise a business or try to form a community. And then it’s Facebook that collects data about us and sells it—not to us but to others, other corporations. Without our participation, of course, Facebook would not have anything to sell, and therefore no way of making a profit.

And, more generally, we seem to be spending more and more time involved in activities for which we are not remunerated but are essential for the profit-making activities of corporations we don’t work for. We post on social-media sites. We use search engines to navigate the internet. We search for flights. We check-out and bag the commodities we purchase at retail stores. And so on.

But I’m not convinced we’re creating value and subjecting ourselves to class exploitation. We may be performing labor but we’re not working for those corporations. And we are being commodified, and participating in our commodification.

But we’re not working for those corporations. Their employees are—and they’re the ones who are being exploited.

 

*Although, according to a recent report, Facebook may exaggerate the reach of its advertising platform: it claims to reach millions more users among specific age groups in the U.S. than the official census data show reside in the country.

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