Posts Tagged ‘profits’

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capitalist

Who are the capitalists?

It’s one of those questions I always pose to my students, and they always get wrong. Their mainstream economics courses don’t offer much help, since the term is never even mentioned. (I know, bizarre, since presumably what the students are being taught is a theory of capitalism, which surely includes capitalists.)

But, after scratching their heads for a while (since, clearly, they haven’t really thought about it before), they finally offer up some guesses: Shareholders? CEOs? Everyone?

Nope, I patiently and sympathetically respond. Not shareholders, since they offer money to firms in exchange for some portion of equity ownership, for which they receive a cut of the profits in the form of dividends. They’re not capitalists. Nor are the CEOs, who are hired by the capitalists to run the enterprises on a day-to-day basis.* And most of us are not capitalists, since we receive the bulk of our income in the form of wages; we don’t deploy capital to generate additional money in the form of profits.

So, my questions to them continue: What is the position of capital in corporate America? Who occupies that position? Who is the personification of capital in contemporary capitalism? Who is Mr. (and Ms.) Moneybags?

They remain stumped. And so I answer my own question: the boards of directors of capitalist corporations.

As I explained earlier this year:

The members of the boards of directors of corporations (say, of Standard & Poor’s 500 companies) are the ones who sit at the top and are ultimately responsible for the enterprises. They are the people who, during occasional meetings of the boards (for which they receive a small fee), decide the general direction of the corporation, hire and oversee top executives, and fend off crises. In other words, they occupy the position of capital and appropriate the surplus created by the workers within those enterprises. . .

Within contemporary capitalism, then, capitalists are members of corporate boards of directors. And it’s a tiny group. Given that boards are made up of 10-15 members, we’re talking about (for the leading, S&P 500 companies) only 6250 individuals. Even less (closer to 4500), if we subtract interlocking directorates, that is, individuals who sit on more than one board.

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But I was wrong—not about who occupies the position of capital, but about those “small fees.” As it turns out, according to recent research by Williams Tower Watson (a business consultancy that designs “solutions that manage risk, optimize benefits, cultivate talent and expand the power of capital to protect and strengthen institutions and individuals”), the average compensation of members of corporate boards of directors again increased last year, to $265,748 (about half in cash, the other half in stocks). That’s no “small fee” for a part-time position, which involves attending a few board meetings and offering occasional advice—and it’s a lot more than $160,000, which was the average board member’s compensation in 2006.**

So, as it turns out, the small group of individuals who occupy the position of Mr. (and, increasingly, Ms.) Moneybags not only appropriate the surplus from their workers. They also distribute to themselves a growing chunk of that surplus.

Not a bad job if you can get it. . .

 

*Corporate CEOs may not be capitalists but they’re certainly well compensated for their service to capital. According to the Economic Policy Institute [ht: sm], “in 2015, CEOs in America’s largest firms made an average of $15.5 million in compensation, which is 276 times the annual average pay of the typical worker.”

**According to Jena McGregor, “the average director would seem to be earning a little more than $1,000 an hour.”

 

 

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Readers are, I presume, as dismayed as I am by the current terms of debate concerning guns and police violence in the United States.

Yes, important points have been made—for example, about guns and profits, the diversity of victims of fatal shootings, and the racial disparities in police shootings. But the more general debate in the United States has largely ignored or overlooked other key issues, such as discourses of inferiority, people’s right to resist violence, and the nature of state-legimitized violence.

Fortunately, Gayatri Chakravorty Spivak [ht: ja] has weighed in on these topics:

Brad Evans: Throughout your work, you have written about the conditions faced by the globally disadvantaged, notably in places such as India, China and Africa. How might we use philosophy to better understand the various types of violence that erupt as a result of the plight of the marginalized in the world today?

Gayatri Chakravorty Spivak: While violence is not beyond naming and diagnosis, it does raise many challenging questions all the same. I am a pacifist. I truly believe in the power of nonviolence. But we cannot categorically deny a people the right to resist violence, even, under certain conditions, with violence. Sometimes situations become so intolerable that moral certainties are no longer meaningful. There is a difference here between condoning such a response and trying to understand why the recourse to violence becomes inevitable.

When human beings are valued as less than human, violence begins to emerge as the only response. When one group designates another as lesser, they are saying the “inferior” group cannot think in a “reasonable” way. It is important to remember that this is an intellectual violation, and in fact that the oppressed group’s right to manual labor is not something they are necessarily denied. In fact, the oppressed group is often pushed to take on much of society’s necessary physical labor. Hence, it is not that people are denied agency; it is rather that an unreasonable or brutish type of agency is imposed on them. And, the power inherent in this physical agency eventually comes to intimidate the oppressors. The oppressed, for their part, have been left with only one possible identity, which is one of violence. That becomes their politics and it appropriates their intellect.

This brings us directly to the issue of “reasonable” versus “unreasonable” violence. When dealing with violence deemed unreasonable, the dominating groups demonize violent responses, saying that “those other people are just like that,” not just that they are worth less, but also that they are essentially evil, essentially criminal or essentially have a religion that is prone to killing.

And yet, on the other side, state-legitimized violence, considered “reasonable” by many, is altogether more frightening. Such violence argues that if a person wears a certain kind of clothing or belongs to a particular background, he or she is legally killable. Such violence is more alarming, because it is continuously justified by those in power.

The rest of the interview is also worth reading, especially the sections on self-appointed anti-poverty entrepreneurs (who never mention “capital’s consistent need to sustain itself at the expense of curtailing the rights of some sectors of the population”) and “affirmative sabotage” (which involves “entering the discourse that you are criticizing fully, so that you can turn it around from inside”).

As well as Spivak’s conclusion

one must continue to work — to quote Marx — for the possibility of a poetry of the future.

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JPMorgan Chase’s Jamie Dimon knows something about manipulation. In a recent interview, he called the political environment “terrible,” and blamed talking heads on cable news for making it even worse: “They are just jazzing you up. You’re being manipulated.”

Which is exactly what Dimon did by way of a recent New York Times editorial, where he announced that he was going to raise “the minimum pay for 18,000 employees to between $12 and $16.50 an hour” (“depending on geographic and market factors”).

A pay increase is the right thing to do. Wages for many Americans have gone nowhere for too long. Many employees who will receive this increase work as bank tellers and customer service representatives. Above all, it enables more people to begin to share in the rewards of economic growth.

But as Annie Lowry [ht: sm] explains,

Were that it really benevolence, or that the raise was a meaningful one.

Wages have been rising as the unemployment rate has fallen below 5 percent and the labor market has tightened. Employers, in other words, are now competing to hire and retain workers, which means offering those workers more money and better working conditions more broadly. Dimon is doing what thousands of other corporate executives and managers are doing — and what all companies have to do when the economy is good. He just managed to convince the op-ed editors at the Times to give him some publicity for doing it.

Moreover, the raise is puny — $1.85 an hour, spread out over three whole years, meaning inflation will eat some of it up. “That’s a roughly 3.2 percent annual boost after taking projected future inflation into account,”noted Lawrence Mishel of the Economic Policy Institute, a left-of-center think tank. “This hardly seems to deserve a parade.”

Just to put things in perspective, total financial sector profits were more than $700 billion in the first of quarter of this year. JPMorgan Chase itself made a net profit of $5.4 billion during the first three months of 2016, which rose to $6.2 billion in the second quarter.

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Oh, and his own bank decided to pay Dimon $27 million (in cash and stocks) in 2015, up from $20 million a year earlier.

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David Howell is right: attempts to raise the federal minimum wage in the United States (from the current $7.25 to, say, $12 or $15 an hour) have been stymied by a no-job-losses rule—the idea (promoted by mainstream economists and employers alike) that the minimum wage should be set so that there are no job losses for anyone anywhere in the country.

Determining a suitable federal minimum wage based solely on a zero job loss rule is a public policy straightjacket that would effectively rule out any significant raise of the wage floor above that which already exists. Yet from a historical perspective, strict adherence to such policymaking criteria would have also made it impossible to ban child labor (job losses!), as well as many critical environmental and occupational health and safety regulations. It would also foreclose any consideration of policies like paid family leave, which exists in every other affluent country.

As Howell correctly explains, the possibility of some job losses—for some workers, in some places—as a result of significantly raising the minimum wage can be countered by a combination of “emergency relief” (like extended unemployment benefits) and creating new jobs (e.g., through expansionary fiscal policy and public works programs).

So, what stands in the way? Howell focuses on methodological problems (“because the identification of the wage at which there is expected to be zero job loss must be evidence-based, there is no way to establish the higher nationwide wage floors necessary for empirical tests”) and misplaced priorities (such as forgetting about “the moral, social, economic, and political benefits of a much higher standard of living from work for tens of millions of workers”).

Both are valid points. But I’d point to a third: profits. The fact is, when employers threaten to let workers go (or not hire additional workers) if the minimum wage is increased (or mainstream economists make the argument for them), they’re attempting to protect their bottom line. If they kept their existing workers, so the argument goes, their profits would fall; and if they wanted to maintain their current level of profits, they’d have to fire some of their workers and replace them with one or another form of automation. It’s all about pumping out the maximum profits from their employees.

Profits also enter the story in a second way. Private employers see the possibility of compensating for minimum-wage-related job losses—by offering workers public relief and by creating new jobs through public programs—as a challenge to their existing control over workers, jobs, and ultimately profits. That’s the second reason they oppose an increase in minimum wage, because they know full well society has the means to make up for their willingness to eliminate jobs. But then their own role in the economy and the profits that come from that role are called into question.

For both those reasons—the threat to fire workers and the threat to their monopoly as employers—profits are the real obstacle to raising the minimum wage.

There’s no getting around it. We have to challenge the sanctity of private profits, presumed and promoted by both employers and mainstream economists, in order to guarantee American workers a decent minimum wage.

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It’s all going according to plan, at least as mainstream economists and politicians see things. Private enterprises, both large and small, on Main Street and Wall Street, were given every condition to lead the economic recovery from the spectacular crash of 2007-08.*

And, according to today’s job report, it worked: the official unemployment fell in May to 4.7 percent, the lowest it’s been since November 2007. That’s basically the full-employment target they’ve been aiming at since the recovery began.

But from the perspective of people who actually work for a living, the situation doesn’t appear as rosy. They’ve been the victims of the plan. They know the only reason the official unemployment rate has dropped is because many workers have dropped out of the labor force (technically, the civilian labor force participation rate decreased by 0.2 percentage point to 62.6 percent). That still left 7.4 million workers who wanted a job but couldn’t find one. In addition, the number of persons employed part time for economic reasons (often referred to as involuntary part-time workers) increased by 468,000 to 6.4 million, and another 1.7 million people remained marginally attached to the labor force (meaning they were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months).

The result was that workers (production and nonsupervisory employees) have seen their incomes barely budge: their hourly wages only increased by 3 cents (to $21.49), while their weekly earnings only rose by 1 dollar (to $722.06). In comparison to a year ago, both hourly wages and weekly earnings have increased by a meager 2.4 percent.

As I explained a month ago, that’s exactly how the reserve army works: even as the official unemployment rate falls, workers’ wages continue to stagnate and their employers’ profits continue to grow.

Exactly, it would seem, according to plan.

 

*A recovery from the crash that the same private sector created, lest we forget.

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