Posts Tagged ‘profits’

Mainstream economists argue that time makes money. According to the Austrians, production takes time, because of “roundabout” methods, which creates the additional value that flows to capital. Neoclassical economists have a different theory: the return to capital is the reward for savings created by time-deferred consumption. However, in both cases, time is the basis of the value that is captured as profits.*

In Cosmopolis, the 2003 novel by Don DeLillo (adapted for the cinema by David Cronenberg in 2012), Erik Packer’s “chief of theory,” Vija Kinski, explains they have it backwards:

“Money makes time. It used to be the other way around. Clock time accelerated the rise of capitalism. People stopped thinking about eternity. They began to concentrate on hours, measurable hours, man-hours, using labor more efficiently.”. . .

“Because time is a corporate asset now. It belongs to the free market system. The present is harder to find. It is being sucked out of the world to make way for the future of uncontrolled markets and huge investment potential. The future becomes insistent. This is why something will happen soon, maybe today,” she said, looking slyly into her hands. “To correct the acceleration of time. Bring nature back to normal, more or less.”

DeLillo (via Kinski), as it turns out, is right—at least when it comes to healthcare in the United States.

According to a series of reports in the most recent issue of the British medical journal The Lancet (confirming the results of a study I wrote about last year), increasing inequality means wealthy Americans can now expect to live up to 15 years longer than their poor counterparts.

As economic inequality in the USA has deepened, so too has inequality in health. Almost every chronic condition, from stroke to heart disease and arthritis, follows a predictable pattern of rising prevalence with declining income. The life expectancy gap between rich and poor Americans has been widening since the 1970s, with the difference between the richest and poorest 1% now standing at 10.1 years for women and 14.6 years for men.

The obscenely unequal distribution of income and wealth in the United States is responsible for increasingly unequal health outcomes.**

In addition, both structural racism (the “systematic and interconnected web of institutions and factors that lead to adverse health outcomes”) and mass incarceration (on prisoners, their families, and their communities), according to two other studies, exacerbate class-based health inequalities.

While the authors of one of the studies argue that “the health-care system could soften the effects of economic inequality by delivering high-quality care to all,” they conclude that the U.S. system falls “far short of this ideal.” That’s because disparities in access to care—based on income, race, and unequal rates of imprisonment—are far wider in the United States than in other wealthy countries.

Moreover, according to another study, even after the Affordable Care Act’s coverage expansion, twenty-seven million Americans remain uninsured and, even for many with insurance, access to affordable care remains elusive. At the same time, unneeded and even harmful medical interventions remain common (due, in part, to the fragmented health-care delivery system), corporate administration consumes nearly a third of health spending, and wealthy Americans consume a disproportionate and rising share of medical resources.

Thus, the editors of the series conclude,

Although a Series about health published in a medical journal may seem far removed from the political arena where much of the decision making about how to address these factors lies, the message of this collection of papers transcends that distance. . .it is no radical statement to say that Americans deserve better and, most importantly, the time for action has arrived.

It is time, in other words, to make the necessary changes so that money is available to provide decent healthcare for all Americans.

 

*One neoclassical economist, the late Nobel laureate Kenneth Arrow (pdf), did have the intellectual honesty to admit that the absence of future markets represented a severe shortcoming of capitalism, a coordination failure, and supported the case for a socialist economy.

**The authors also note that the medical system in the United States itself influences inequality, as an employer of nearly 17 million Americans. Although physicians and nurses are generally well paid, many other health-care workers are not:

The health-care system employs more than 20% of all black female workers; more than a quarter of these health-care workers subsist on family incomes below 150% of the poverty line, and 12.9% of them are uninsured.

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Both Peter Temin and I are concerned about the vanishing middle-class and the desperate plight of most American workers. We even use similar statistics, such as the growing gap between productivity and workers’ wages and the share of income captured by the top 1 percent.

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And, as it turns out, both of us have invoked Arthur Lewis’s “dual economy” model to make sense of that growing gap. However, we present very different interpretations of the Lewis model and how it might help to shed light on what is wrong in the U.S. economy—with, of course, radically different policy implications.

It is ironic that both Temin and I have turned to the Lewis model, which was originally intended to make sense of “dual economies” in the Third World, in which peasant workers trapped by “disguised unemployment” and receiving a “subsistence” wage (equal to the average product of labor) in the “backward,” noncapitalist rural/agricultural sector could be induced via a higher “industrial” wage rate (equal to the marginal product of labor) to move to the “modern,” capitalist urban/manufacturing sector, which would absorb them as long as capital accumulation increased the demand for labor.

That’s clearly not what we’re talking about today, certainly not in the United States and other advanced economies where agriculture employs a tiny fraction of the work force—and where much of agriculture, like the manufacturing and service sectors, is organized along capitalist lines. But Lewis, like Adam Smith before him, did worry about the parasitical role of the landlord class and the way it might serve, via increasing rents, to drag down the rest of the economy—much as today we refer to finance and the above-normal profits captured by oligopolies.

So, our returning to Lewis may not be so far-fetched. But there the similarity ends.

Temin (in a 2015 paper, before his current book was published) divided the economy into two sectors: a high-wage finance, technology, and electronics sector, which includes about thirty percent of the population, and a low-wage sector, which contains the other seventy percent. In his view, the only link between the two sectors is education, which “provides a possible path that the children of low-wage workers can take to move into the FTE sector.”

The reinterpretation of the Lewis model I presented back in 2014 is quite different:

What I have in mind is redefining the subsistence wage as the federally mandated minimum wage, which regulates compensation to workers in the so-called service sector (especially retail and food services). That low wage-rate serves a couple of different functions: it’s a condition of high profitability in the service sector while keeping service-sector prices low, thereby cheapening both the value of labor power (for all workers who rely on the consumption of those goods and services) and making it possible for those at the top of the distribution of income to engage in conspicuous consumption (in the restaurants where they dine as well as in their homes). In turn, the higher average wage-rate of nonsupervisory workers is regulated in part by the minimum wage and in part by the Reserve Army of unemployed and underemployed workers. The threat to currently employed workers is that they might find themselves unemployed, underemployed, or working at a minimum-wage job.

In addition, the profits captured from both groups of workers are distributed to a wide variety of other activities, not just capital accumulation as presumed by Lewis. These include high CEO salaries, stock buybacks, idle cash, and financial-sector profits (with a declining share going to taxes). And, if the remaining portion that does flow into capital accumulation takes the form of labor-saving investments, we can have an economic recovery based on private investment and production with high unemployment, stagnant wages, and rising corporate profits.

For Temin, the goal of economic policy is to reduce the barriers (conditioned and created by an increasingly segregated educational system) so that low-wage workers can adopt to the forces of technological change and globalization, which can eventually “reunify the American economy.”

My view is radically different: the “normal” operation of the contemporary version of the dual economy is precisely what is keeping workers’ wages low and profits high across the U.S. economy. The problem does not stem from the high educational barrier between the two sectors, as Temin would have it, but from the control exercised by the small group that appropriates and distributes the surplus within both sectors.

And the only way to solve that problem is by eliminating the barriers that prevent workers as a class—both black and white, in finance, technology, and electronics as well as retail and food services, regardless of educational level—from participating in the appropriation and distribution of the surplus they create.

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Actually, robots do kill people.

A 21 year old external contractor was installing the robot together with a colleague when he was struck in the chest by the robot and pressed against a metal plate. He later died of his injuries, reports Chris Bryant, the FT’s Frankfurt correspondent.

While we certainly need to be aware of industrial accidents associated with robots, what we really need to be more concerned about is the relationship between the use of robotics and the metaphorical killing of workers via the elimination of their jobs.

Richard Baldwin [ht: ja], president of the Centre for Economic Policy Research and Editor-in-Chief of Vox (VoxEU.org, which he founded in June 2007), appears to agree:

Technological advances could now mean white-collar, office-based workers and professionals are at risk of losing their jobs

But, he argues, those who expect Brexit or the kinds of protectionist policies advocated by President Trump to bring back manufacturing jobs are sadly mistaken.

I think he’s right. Blaming international trade and immigration for the precarious plight of the working-class within advanced nations is wrongheaded.* Moreover, as Baldwin explains elsewhere, “We shouldn’t try and protect jobs; we should protect workers.”

However, the mistake Baldwin and other technological optimists make is to treat industrial robots (and their contemporary extensions, such as telepresence and telerobotics) in a purely instrumental fashion, as both inevitable and technically neutral. Just like the ubiquitous NRA bumper sticker: “Guns Don’t Kill People, People Kill People.”

As Bruno Latour (pdf) has explained, the NRA “cannot maintain that the gun is so neutral an object that is has no part in the act of killing.”

You are different with a gun in hand; the gun is different with you holding it. You are another subject because you hold the gun; the gun is another object because it has entered into a relationship with you. The gun is no longer the gun-in-the-armory or the gun-in-the-drawer or the gun-in-the-pocket, but the gun-in-your-hand, aimed at someone who is screaming. What is true of the subject, of the gunman, is as true of the object, of the gun that is held. A good citizen becomes a criminal, a bad guy becomes a worse guy; a silent gun becomes a fired gun, a new gun becomes a used gun, a sporting gun becomes a weapon.

And much the same is true of robotics. Employers are different when they have access to robots. They are another subject because they can reconfigure production by purchasing and installing robots; and robots are different objects when they enter into a relationship with employers, who stand opposed to their workers.

So, as it turns out, “it is neither people nor guns that kill” people. And, by the same token, it is neither employers nor robots that kill workers and their jobs. Responsibility for the action must be shared between the two—the employers who utilize robotics to increase productivity and raise profits, and the robots that are engineered, produced, and then sold for particular purposes, like transforming jobs and replacing workers.

So, yes, we shouldn’t try and protect jobs. Instead, we should protect workers. But the only way to protect workers is to create institutions for workers to be able to protect themselves. Leaving the European Union and electing Trump won’t do that. They are merely empty promises. Nor, as Baldwin presumes, will leaving robots in the hands of employers and expecting government programs to pick up the pieces.

It is still the case that most people are forced to have the freedom to attempt to sell their ability to work to a small group of employers, who have the option of using robots to replace them—across the globe—if and when they deem it profitable.

What that means is: robots and their employers do kill workers. Because of profits.

 

*And, as the United Nations Conference on Trade and Development (pdf) warns, “the increased use of robots in developed countries risks eroding the traditional labour cost advantage of developing countries.” That’s another reason to be cautious when it comes to facile predictions that the combination of globalization and robotics will be an unqualified advantage to workers in the Global South.

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