Posts Tagged ‘surplus-value’

I don’t have strong views about the idea of “platform capitalism,” the concept presented and elaborated in a recent book by Nick Srnicek to make sense of the business model of such companies as Google, Amazon, and Uber. I don’t feel I have a dog in that hunt.

What I do like is Srnicek’s critique of other designations—such as tech companies, sharing, and the gig economy—and his focus on the idea that these are, after all, capitalist firms operating in a capitalist economy. Their raison d’être is to make a profit by centralizing and monopolizing access to data and selling data (or services based on those data) to other firms.

In fact, the notion of “platform capitalism” might be extended to other kinds of enterprises. I’m thinking, for example, of sports franchises and universities. They also operate as platforms inasmuch as they generate profits across a range of activities. Nominally, they produce and sell a commodity (e.g., a football match and higher education)—but that only serves as a pretext for generating profits in other activities: in the case of sports franchises, television revenues, shirts and other memorabilia, food and drink concessions, and so on; similarly, in the case of higher education, on-line courses, research-based fees and patents, food and lodging for students and visitors, branded clothing, and of course collegiate sports spectacles. In both cases, sports franchises and universities operate as diverse, profit-making platforms.

So, in my view, the idea of “platform capitalism” might be a useful way of thinking about at least some forms of capitalism that exist today.

What I find odd, though, is some of the commentary on Srnicek’s work. Consider, for example, Daniel Little’s posing of the questions generated by the emergence of “platform capitalism”:

what after all is the source of value and wealth? And who has a valid claim on a share? What principles of justice should govern the distribution of the wealth of society? The labor theory of value had an answer to the question, but it is an answer that didn’t have a lot of validity in 1850 and has none today.

What Little seems not to understand is that the profits of the enterprises operating under the rubric of “platform capitalism” are still based on the surplus labor of workers who produce the commodities that are being sold. Uber, for example, manages to generate its profits by capturing the surplus of its drivers. It doesn’t own the vehicles and doesn’t directly employ the drivers (with all the associated costs savings) but, since it owns the platform that connects drivers to passengers, it secures a “right” to the surplus created by the drivers and paid for by the passengers. The other kinds of platforms analyzed by Srnicek have different ways of generating profits: by selling advertising based on information collected about users (e.g., Facebook and Google), by renting servers used to process data (e.g., Amazon), and so on. But in all these cases, workers are doing the job of writing and modifying software, collecting and processing data, building and maintaining servers, and supplying the ultimate services to other enterprises or final consumers who purchase the commodities. And the members of the boards of directors of platform capitalist enterprises are the ones who ultimately appropriate the surplus.

Capitalism has, of course, changed since the mid-nineteenth century. The technologies, the modes of employment of workers, the ways commodities are marketed and the role users play, the measuring and processing of data—all of those features of the capitalist mode of production have changed radically since industrial capitalism first emerged. But the basic logic—of capitalists and workers, of creating, appropriating, and distributing surplus labor in the form of surplus-value—is the same for capitalist enterprises today just as it was in 1850.

That’s why the Marxian critique of political economy, modified and updated for the twenty-first century, continues to be able to explain the “source of value and wealth”—including and perhaps especially “the soaring inequalities of income and wealth that capitalism has produced” in recent decades.


Special mention

freedomtobescrewed17-600  195638_600


Treasury Secretary Steve Mnuchin may not be worried. Nor, it seems, are other members of the economic and political elite. But the rest of us are—or we should be.

As regular readers of this blog know (cf. all these posts), the robots are here and they’re rapidly replacing workers, thus leading to less employment, downward pressure on wages, and even more inequality.

The latest evidence comes from the work of Daron Acemoglu and Pascual Restrepo, who argue, using a model in which robots compete against human labor in the production of different tasks, that in the United States robots have reduced both employment and wages during recent decades (from 1993 to 2007). That conclusion holds even accounting for the fact that some areas of the economy may grow (thus increasing employment for some workers) when the use of robots raises productivity and reduces costs in other industries.


Even though U.S. employers have been introducing industrial robots at a pace that is less than in Europe, their use in American workplaces has in fact grown (between 1993 and 2007, the stock of robots in the United States increased fourfold, amounting to one new industrial robot for every thousand workers). And, once the direct and indirect effects are estimated, robots are responsible for up to 670,000 lost manufacturing jobs. And that number will rise, because industrial robots are expected to quadruple by 2025.

Actually, the effects have likely been even more dramatic, because Acemoglu and Restrepo take into account only three forces shaping the labor market: the displacement effect (because robots displace workers and reduce the demand for labor), the price-productivity effect (as automation lowers the costs of production in an industry, that industry expands), and the scale-productivity effect (the reduction of costs results in an expansion of total output).

What they’re missing is the effect on the value of labor power. As I explained last year, when productivity increases lower the prices of commodities workers consume, the value capitalists need to pay to get access to workers’ ability to work also goes down. As a result, even if workers’ real wages go up, the rate of exploitation can rise. Workers spend less of the day working for themselves and more for their employers. Capitalists, in other words, are able to extract more relative surplus-value.

And more surplus-value means more income for all those who share in the booty: CEOs, members of the 1 percent, and so on.

That’s why the increasing use of industrial robots, which under other circumstances we might actually celebrate, within existing economic institutions represents a disaster—not for their employers (who, like Mnuchin, are not particularly worried), but for all the workers who have been or are likely to be displaced and even those who manage to hang onto their jobs.

Workers are the ones who are going to continue to suffer from the “large and robust negative effects of robots”—unless and until they have a say in how robots and the resulting surplus are utilized.


Noah Smith is right about one thing: mainstream economists tend to use the word “capital” pretty loosely.

It just means “anything you can spend resources to build, which lasts a long time, and which also can be used to produce value.” That’s really broad. For example, it could include society itself. It also typically includes “human capital,” which refers to people’s skills, talents, and knowledge.

But then Smith proceeds, like the neoclassical equivalent of Humpty Dumpty, to make his definition of human capital the master—because, in his view, “it helps to convey some important truths about the world.”

Human capital, as I’ve explained in some detail before, is a profoundly misleading concept.

I don’t want to repeat those arguments here. But I do want to make two additional points.

First, if Smith wants to invoke human capital to say “education and skills are a form of wealth,” then why not include other ways people are able to earn more or less than their counterparts? Why not, for example, go beyond his reference to credentials (he has a Stanford degree) and intellectual abilities (apparently, he can do math well and write well) and refer to some of the other important ways people are sorted out within existing economic relations. I’m thinking of such things as gender, race and ethnicity, immigration status, and so on. They’re all ways workers are able to receive more or less income that have nothing to do with the effort they put into their jobs. Does Smith want to argue that masculinity, whiteness, and native birth are forms of human capital?

No, I didn’t think so.

Second, there’s the issue of capital itself. When capital is treated as a thing (which is what one finds in Smith’s account, as in most versions of mainstream economics), then it’s possible to forget about or overlook the historical and social conditions necessary for those things to operate as capital. Buildings, machinery, and raw materials, robots and computer software, even skills, talents, and knowledge—they only operate as capital within particular economic relations. Only when workers are forced to have the freedom to sell their ability to work to a small group of employers, only then does capital become a means to extract surplus labor from those workers. Once appropriated, that surplus labor then assumes a variety of different, seemingly independent forms—from capitalist profits to land rents, including payments to merchants and finance, the super-profits of oligopolies, taxes to the state, and, yes, the salaries of CEOs and supervisors.

But those payments are not “returns” to independent forms of capital, human or otherwise. They’re all distributions of the surplus-value that both presume and produce the conditions under which laborers work not for themselves, but for their capitalist employers.

They, and not the various meanings neoclassical economists attribute to capital, are the real masters.


Tim Harford offers a short but useful piece on the medieval origins of modern banking—in the Knights Templar, the great fair of Lyon, and so on.*

The Templars dedicated themselves to the defence of Christian pilgrims to Jerusalem. The city had been captured by the first crusade in 1099 and pilgrims began to stream in, travelling thousands of miles across Europe.

Those pilgrims needed to somehow fund months of food and transport and accommodation, yet avoid carrying huge sums of cash around, because that would have made them a target for robbers.

Fortunately, the Templars had that covered. A pilgrim could leave his cash at Temple Church in London, and withdraw it in Jerusalem. Instead of carrying money, he would carry a letter of credit. The Knights Templar were the Western Union of the crusades.

But, with the loss of control over of Jerusalem, the Templars were eventually disbanded in 1312.

So who would step into the banking vacuum?

If you had been at the great fair of Lyon in 1555, you could have seen the answer. Lyon’s fair was the greatest market for international trade in all Europe.

But at this particular fair, gossip was starting to spread about an Italian merchant who was there, and making a fortune.

He bought and sold nothing: all he had was a desk and an inkstand.

Day after day he sat there, receiving other merchants and signing their pieces of paper, and somehow becoming very rich.

The locals were very suspicious.

But to a new international elite of Europe’s great merchant houses, his activities were perfectly legitimate.

He was buying and selling debt, and in doing so he was creating enormous economic value.

And that’s Harford’s mistake: there’s is nothing about the buying and selling of debt (or, for that matter, any other financial service, from changing money to issuing letters of credit) that creates value, enormous or otherwise.

Banking often enables value to be created. Surplus-value, too. But it doesn’t create either value or surplus-value.

What bankers do is capture a portion of the surplus-value that is embodied in the goods and services that are produced, which is then distributed to them by those who actually appropriate the surplus-value. In other words, bankers (like many others, from managers to merchants) share in the booty.

Medieval bankers managed to get a cut of the surplus they did not create. And that’s exactly what bankers do today.


*Harford also notes that “by turning personal obligations into internationally tradable debts, these medieval bankers were creating their own private money, outside the control of Europe’s kings.” But he fails to mention the obvious contemporary parallel, Bitcoin, the private digital currency and payments system that was invented to finance criminal activities.

Cartoon of the day

Posted: 16 October 2016 in Uncategorized
Tags: , , ,



One of the biggest crime waves in America is not robbery. It is, as Jeff Spross [ht: sm] explains, wage theft.

In dollar terms, what group of Americans steals the most from their fellow citizens each year?

The answer might surprise you: It’s employers, many of whom are committing what’s known as wage theft. It’s not just about underpaying workers. They’re not paying workers what they’re legally owed for the labor they put in.

It takes different forms: not paying workers the federal, state, or local minimum wage; not paying them overtime; or just monkeying around with job titles to avoid regulations.

No one knows exactly how big a problem wage theft is, but in 2012 federal and state agencies recovered $933 million for victims of wage theft. By comparison, all the property taken in all the robberies of all types in 2012, solved or unsolved, amounted to a little under $341 million.

Remember, that $933 million is just the wage theft that’s been addressed by authorities. The full scale of the problem is likely monumentally larger: Research suggests American workers are getting screwed out of $20 billion to $50 billion annually.

Actually, employers steal from workers in at least two different ways: when they don’t pay them what they’re legally owed, and even when they do. In the former case, the laws and enforcement are weak—but at least prosecutors and labor groups are getting more aggressive about pursuing wage theft. Maybe, then, workers will be able to recover the back pay they’re owed and employers, instead of just paying small fines when they’re caught, might actually go to jail.

In the latter case, fixing the theft that occurs even when workers are paid what they’re legally owed, is even more difficult, at least within existing economic institutions. That’s because, under the rules of capitalism, workers receive a wage (which, at least under certain circumstances, equals the value of their labor power). But then, outside the labor-market exchange, when workers start to produce, they create value that is equal not only to their wages, but also an additional amount, a surplus. Even when workers receive their legally mandated wages, that extra or surplus-value is appropriated by their employers. It’s legal and, within the ethical code of capitalism, “fair.”

So, within contemporary capitalism, we should be aware of two kinds of wage theft, both committed by employers: the theft of legally mandated wages and the theft that occurs even when workers receive their legally mandated wages.

The first is a case of individual theft, the second a social theft. Both, it seems, are countenanced within contemporary capitalism—and workers are made to suffer as a result.