Posts Tagged ‘surplus’


Mainstream economists continue to insist that workers benefit from economic growth, because wages rise with productivity.

Here’s the argument as explained by Donald J. Boudreaux and Liya Palagashvili:

Firms cannot afford a misalignment of their workers’ pay and productivity increases—the employees will move to other firms eager to hire these now more productive workers. Higher economy-wide productivity, after all, means that workers add more to the bottom lines of employers throughout the economy. To secure the services of these more-productive workers, firms bid up worker pay. This competition for labor services is what links pay to productivity.

Except, of course, the link between wages and productivity has been severed for decades now, going back to the late-1970s. Since then, as the folks at the Economic Policy Institute have shown, productivity has increased by 70.3 percent but average worker’s wages have risen by only 11.1 percent.

So, no, there is no necessary or automatic link between productivity and wages within the U.S. economy. There may have been such a relationship after World War II, during the so-called Golden Age of American capitalism, but not in recent decades.*

A natural question that arises is just where did the excess productivity—the extra surplus U.S. employers appropriated from their workers—go? A significant proportion, as I showed last year, went to higher corporate profits. Another large portion went to those at the very top of the wage distribution.


As is clear in the chart above, the top 1 percent of earners saw cumulative gains in annual wages of 157.3 percent between 1979 and 2017—far in excess of economy-wide productivity growth and nearly four times faster than average wage growth (40.1 percent). Over the same period, top 0.1 percent earnings grew 343.2 percent, with the latest spike reflecting the sharp increase in executive compensation.

In other words, corporate executives—on both Main Street and Wall Street—have been able to share in the extra booty captured from American workers, who were forced to have the freedom to sell their ability to work for wages that have barely increased in recent decades.

That combination of stagnant wages for most workers and the ability of those at the top to capture a large portion of the extra surplus is therefore at the root of increasing inequality in the United States.


*Even then, as I explained back in 2017:

The fact is, the supposed Golden Age of American capitalism was based on a set of institutions that allowed the boards of directors of large corporations to appropriate a growing surplus and to distribute it as they wished. At first, during the immediate postwar period, that meant growing incomes for those in the bottom 90 percent. But, even then, the mechanisms for distributing income remained in the hands of a very small group at the top. And they had both the interest and the means to stop the growth of wages, get even more surplus (from U.S. workers and, increasingly, workers around the globe), and distribute a greater share of that surplus to a tiny group at the very top of the distribution of income.

graph_dl (1) graph_dl

How else to put it? The levels of economic inequality in the United States are obscene.

According to the latest data from the World Inequality Database, the share of pre-tax income captured by the top 1 percent of Americans is an astounding 20.1 percent, while the bottom 50 percent are forced to make due with only 12.6 percent. And the distribution of wealth is even more unequal: the top 1 percent own 37.2 percent but the bottom 50 percent of Americans hold no net wealth at all.

Even Donald Trump’s Federal Reserve Chair Jerome H. Powell has warned that income inequality is the nation’s biggest economic challenge in the coming decade.

Powell and many others recognize that, if present trends continue—with corporate profits growing and the Trump administration in power—economic inequality is only going to get worse.

It’s no wonder, then, that Dani Rodrick argues that the Democratic Party will face a critical test in the next U.S. presidential election:

Will it remain the party of merely adding sweeteners to an unjust economic system? Or does it have the courage to address unfair inequality by attacking it at its roots?

Clearly, Rodrick reflecting on the poor showing of Hillary Clinton in the last presidential election, who promised to continue the policies of economic recovery under Barack Obama, and the fact that most of the proposals currently on the table are aimed at raising taxes on the rich. They don’t really get at the roots of the grotesque levels of inequality the U.S. economy has been generating.

The problem is, most of what Rodrick offers as an alternative agenda for “the Left” also fails that test. His plan for “inclusive prosperity” is confined to “productive re-integration of the domestic economy” (basically, encouraging large corporations to invest in their local communities), directing technological change (to help less-skilled workers), rebalancing labor markets (for example, by promoting unionization and raising minimum wages), regulating the financial sector (with higher capital requirements and tighter scrutiny), and electoral reform (such as more stringent campaign financial rules).

Now, there aren’t many on the Left—at least progressive thinkers and activists I talk to or whose work I read—who would be opposed to such changes. They would, indeed, improve the condition of the working-class and make it somewhat easier for the vast majority of Americans to make their voices heard.

But, by the same token, the kinds of policies Rodrick is putting forward do not meet his own test of attacking the problem of inequality “at its roots.”

The fact is, inequality begins where the surplus is produced and appropriated—in the factories, offices, and warehouses where most Americans work. Workers produce much more value than they receive in the form of wages and salaries, and it’s that surplus that is appropriated by their corporate employers to do with it what they will. Some of it is invested and the rest is distributed for other purposes—stock buybacks, mergers and acquisitions, salaries for corporate executives, and so on—which only serve to make the existing distribution of income and wealth even more unequal.

In other words, it’s that control over the surplus by a small minority of Americans that is the root, the condition or source, of the unfair inequality that characterizes the United States today. And there’s nothing in Rodrick’s set of policies that seeks to fundamentally alter or solve that particular problem.

Perhaps a month ago, when Rodrick first published his piece, he could claim to have been out front in the discussion—and perhaps he still is for mainstream liberals. But already the terms of debate, for the Left, have bypassed him and moved on. Now, politicians, activists, and journalists are asking new questions and posing new solutions—under the rubric of socialism.*

People in the United States often ask whether or not we should keep the socialist label. My answer is an unequivocal “yes,” for two reasons: one is that it ties contemporary discussions and debates to a long historical tradition of criticizing existing conditions and proposing alternatives; second, socialism is based on a recognition that the problems workers face are based on and stem from an “unjust economic system,” and “merely adding sweeteners” doesn’t represent a solution.

The current discussion of socialism is only in its infancy, and it’s impossible to tell at this point where it will end up. But already, in putting issues like a Green New Deal and economic democracy on the table, it is much close to attacking the roots of unfair inequality in the United States than anything mainstream Democrats or Dani Rodrick have to offer.


*Even “On Point,” a radio program produced by WBUR in Boston and broadcast every weekday on NPR stations around the United States, recently hosted an episode on socialism.

Tom Toles Editorial Cartoon - tt_c_c160330.tif

No matter how we measure it, most Americans are falling further and further behind the tiny group at the top.

fredgraph  fredgraph (1)

That’s not at all surprising. Whether we compare the growing gap between average wages and Gross Domestic Product per capita (as in the chart on the left) or real median household income and real Gross Domestic Product per capita (as in the chart on the right), it’s clear the average American has been losing out. A growing proportion of what workers produce hasn’t been going to them but to the richest households for decades now.

That does not mean, contra Robert Samuelson, that “the incomes of most Americans have stagnated for decades.” That’s a canard. No one makes that argument.

No, the real issue is that American workers have been producing more and more but getting only a tiny share of that increase. As I explained last year,

That’s what mainstream economists can’t or won’t understand: that workers may be worse off even as their wages and incomes rise. That problem flies in the face of every attempt to celebrate the existing order by claiming “just deserts.”

It’s what is known as relative immiseration. And it simply can’t be disputed by the alternative statistics invoked by Samuelson or Stephen J. Rose (pdf).

The exact numbers concerning the distribution of income in the United States depend, of course, on a whole host of assumptions and methodological choices, mostly involving what counts as “income.” The more categories that are included in income—starting with the traditional series (wages and salaries, dividends, interest, and rent) before and after taxes, and then including payments from government programs (such as Social Security, unemployment insurance, Temporary Assistance for Needy Families, and the earned-income tax credit), and going so far as to add employer contributions for health insurance and 401(k) retirement accounts, the employer share of the Federal Insurance Contributions Act, government noncash benefits (e.g., the Supplemental Nutrition Assistance Program, Medicare, Medicaid, and housing vouchers), housing services (homeowners paying rent to themselves) and government services (e.g., defense, education, legal system, and administration)—the less measured inequality turns out to be.


In fact, as Rose demonstrates, most of the available studies show growing inequality in the United States, with a high and rising share of income captured by the top 1 percent.** The only real outlier is by Auten and Splinter, who merely demonstrate that it is possible for mainstream economists to make growing inequality virtually disappear with enough “massaging” of the underlying numbers.***

In the end, Samuelson himself is forced to admit,

None of this means we should stop debating inequality. Who gets what, and why, are inevitable subjects for examination in a rich democratic society. By contrast with many advanced societies, income and wealth are indisputably more concentrated in the United States.

And the problem of growing inequality is only going to get worse as we move forward, especially with ongoing automation. As David Autor explains,

employment is growing steadily, and its growth in terms of number of jobs has not been discernibly dented by technological progress. But the sum of wage payments to workers is growing more slowly than economic value-added, so labor’s share of the pie of net earnings is falling. This doesn’t mean that wages are falling. It means that they are not growing in lock step with value-added.

That’s exactly right. Workers’ wages and middle-class incomes may continue to rise in absolute terms but their relative standing with respect to the tiny group at the top—those who are in the position of capturing the surplus—will likely worsen.

Measure by measure, the economic and social landscape is being fractured and American workers are being left behind.


*So that I avoid the problem I encountered when I presented my “Merchant of Venice” paper, this post is not about Shakespeare’s play.

**The main studies include Emmanuel Saez and Thomas Piketty (pdf), Piketty, Saez and Gabriel Zucman (pdf), Gerald Auten and David Splinter (pdf), and the Congressional Budget Office. As I showed in 2016, even Rose, for all the faults in his own study, found

an enormous increase in inequality between 1979 and 2014: combined, the share of income going to the rich and upper middle-class more than doubled, from 30 to 63.1 percent, while the amount of income going to everyone else—middle-class, lower middle-class, and poor—fell precipitously, to less than 40 percent.

***Auten and Splinter arrive at such a misleading result through two statistical maneuvers: allocating underreported income (primarily business income) according to IRS audit data and retirement income. Thus, they conclude, “Our results suggest an alternative narrative about top income shares: changes in the top one percent income shares over the last half century are likely to have been relatively modest.”


Teaching critical literacy.

That’s what professors do in the classroom. We teach students languages in order to make some sense of the world around them. How to view a film or read a novel. How to think about economics, politics, and culture. How to understand cell biology or the evolution of the universe.

And, of course, how to think critically about those languages—both their conditions and their consequences.

I’ve been thinking about the task of teaching critical literacy as I prepare the syllabi and lectures for my final semester at the University of Notre Dame.

Lately, I’ve been struck by the way mainstream economics is usually taught as a choice between markets and policy. Whenever a problem comes up—say, inequality or climate change—one group of mainstream economists offers the market as a solution, while the other group suggests that markets aren’t enough and need to be supplemented by government policies. Thus, for example, conservative, market-oriented economists teach students that, with free markets, everybody gets what they deserve (so inequality isn’t really a problem) and greenhouse gas emissions will decline over time (by imposing a tax on the burning of carbon-based fuels). Liberal economists generally argue that market outcomes are inadequate and require additional policies—for example, minimum-wage laws (to lower inequality) and stringent regulations on carbon emissions (because allowing the market to work through carbon taxes, or even cap-and-trade schemes, won’t achieve the necessary reductions to avoid global warming).*

That’s the way mainstream economists frame the issues for students—and, for that matter, for the general public. Markets or policies. Either rely on markets or implement new policies. Once someone learns the language, they see the world in a particular way, and they’re permitted to participate in the debate on those terms.

The problem is, something crucial is being left out of those languages, and thus the economic and political debate: institutions. The existing set of institutions are taken as given. Therefore, the possibility of changing existing institutions or creating new institutions to solve economic and social problems is simply taken off the table.

Among those institutions, perhaps the key one is the corporation. The presumption within mainstream economics is that privately owned, publicly traded corporations are simply there, allowed to operate freely within markets or nudged in a better direction by government policies. What mainstream economists never encourage students (or, again the general public) to consider is the possibility that institutions—especially the corporation—might be modified or radically transformed to create the foundation for a different kind of economy.

Consider how strange that is. Corporations are the central institution when it comes to the distribution of income and therefore the obscene, and still-growing, levels of inequality in the U.S. and world economies. It’s how most workers are paid (because that’s where jobs are available) and where the surplus is first appropriated (by the boards of directors) and then distributed (to shareholders and others). And as workers’ wages stagnate, and the surplus grows, economic inequality becomes worse and worse.

The same is true with climate change. The major institution involved in producing and using fossil fuels—and therefore creating the conditions for global warming—is the corporation. Especially gigantic multinational corporations. Some make profits by extracting fossil fuels; others use those fuels to produce commodities and to transport them around the world. They are the basis of the fossil-fuel-intensive Capitalocene.

Within the language of mainstream economists, the corporation is always-already there. They may allow for different kinds of markets and different kinds of policies but never for an alternative to the institution of the corporation —whether a different kind of corporation or a non-corporate way of organizing economic and social life.

If the goal of teaching economic is critical literacy, then we have to teach students the multiple languages of economics—including the possibilities that are foreclosed by some languages and opened up by other languages. One of our tasks, then, is to look beyond the language of markets and policy and to expose students to a language of changing institutions.

Now that I begin to look back on my decades of teaching economics, I guess that’s what I’ve been doing the entire time, exploring and promoting critical literacy. I’ve always taken as one of my responsibilities the teaching of the language of mainstream economists. But I haven’t stopped there. I’ve also always endeavored to expose students to other languages, other ways of making sense of the world around them.

Maybe, as a result, some of them have left knowing that it’s not just a question of markets or policy. Economic institutions are important, too.


To complicate matters a bit further, the three elements I’ve focused on in this blog post—markets, policy, and institutions—are not mutually exclusive. Thus, for example, at least some conservative mainstream economists do understand that properly functioning markets do presume certain institutions (such as the rule of law and the protection of private property) and policies (especially not regulating markets), while liberals often advocate policies that allow markets to operate with better outcomes (I’m thinking, in particular, of antitrust legislation) and institutions to be safeguarded (especially when they might be threatened by grotesque levels of inequality and the effects of climate change). As for institutions, I can well imagine noncorporate enterprises—for example, worker cooperatives—operating within markets and relying on government policy. However, such enterprises imply the existence of markets and policies that differ markedly from those that prevail today, which are taken as given and immutable by mainstream economists.


*Dani Rodrik summarizes the terms of the debate well in a recent column: when a local factory closes because a firm has decided to outsource production,

Economists’ usual answer is to call for “greater labor market flexibility”: workers should simply leave depressed areas and seek jobs elsewhere. . .

Alternatively, economists might recommend compensating the losers from economic change, through social transfers and other benefits.

Once again, it’s a question of markets (in this case, the labor market) and policy (more generous social transfers to the “losers”).


Almost 30 thousand people joined the ranks of the global super-rich last year, as booming global stock markets and corporate profits boosted the fortunes of the already very-rich and bumped them up into the ultra-high-net-worth bracket.

The global population of ultra-high-net-worth people, classed as those with more than $30 million in assets, increased by 12.9 percent last year to a record 255,810 people,  while their combined wealth surged by 16.3 percent to $31.5 trillion, according to a report by research firm Wealth-X.


Not surprisingly, most of the gains were captured by those at the very top of the global wealthy pyramid. While all six tiers recorded double-digit growth in ultra wealthy numbers of between 13 and 15 percent, the fastest- growing tier was that of billionaires, which increased by a net 357 to a record high of 2,754 individuals. Almost half (48 percent) of the global ultra wealthy population had a net worth of between $30 million and $50 million, with the number of individuals in each tier diminishing steadily as the wealth pyramid rises. Average net worth for the approximately 122,500 ultra-high-net-worth individuals in the lower tier was $38 million, rising to $342 million for those in the $250-500-million bracket, and a substantial $3.3 billion for the elite group of billionaires. On a collective basis, only those individuals in the top two tiers of the pyramid—with a net worth of more than $500 million—experienced an increase in average net worth in 2017.

All of that makes perfect sense, given the trajectory of global capitalism during 2017. Notwithstanding the fears occasioned by surprising political events (such as the protracted negotiations for Brexit and the vagaries of Donald Trump’s presidency), the fact is last year represented a “sweet spot” for the tiny group at the top of the global economy, “supporting robust wealth gains in the financial, commodity, technology and industrial sectors.”


But then the folks at Wealth-X want us to believe that most of the wealth was “self-made,” based on market conditions that

were clearly supportive of personal enterprise and successful investment, driven by higher financial-sector returns, entrepreneurial wealth creation in Asia and further dynamic growth in technology-related industries.

Clearly, this is not the kind of wealth that represents the property of small artisans and peasant farmers, which in fact is being marginalized and destroyed on a daily basis by the growth of finance, manufacturing, and technology—the primary sources of the wealth of the world’s ultra-high-net-worth people.

Nor is it the property of the working-class, since the wealth they create stands opposed to them and serves as the means of extracting even more surplus from the growing army of wage-laborers across the globe—in Asia, Africa, the Pacific, Latin America and the Caribbean, the Middle East, Europe, and North America.

There’s nothing hard-won, self-acquired, or self-earned about the wealth owned by the world’s ultra-high-net-worth individuals. With their cadre of accountants, tax advisers, and financial consultants (not to mention the politicians whose campaigns they finance), they manage to capture, invest, and keep in the form of cash a large portion of the surplus created by workers toiling away in factories and offices around the planet.

Their personal property is therefore social wealth, created by the united action of all members of society. Only when it is made into common property, into the property of all members of society, will it lose its antagonistic class character.


The argument I’ve been making during this series on utopia is that the utopian moment of the Marxian alternative to mainstream economics is critique.*

Let me explain. All modern economic theories have a utopian moment. In the case of mainstream economics, that moment is a full-blown utopianism—the idea that there is, or at least in principle can be, a perfectly functioning economic and social order. Such an order is both envisioned as a model within the theory (often by stipulating the minimum set of theoretical requirements) and advanced as the goal of economic policies (which move the economy to, or at least toward, the utopia). In this sense, utopia—of sovereign individuals, free markets, and private property—is the fundamental premise and promise of mainstream economic theory.

The Marxian approach is otherwise. Certainly Marxian economists (and social thinkers generally) imagine that the world can and should be radically different from what currently exists. They simply wouldn’t engage in their intellectual and political work if that weren’t the case. But, instead of drawing up a blueprint of what such an alternative might look like, Marxists are engaged in a “ruthless criticism of all that exists, ruthless both in the sense of not being afraid of the results it arrives at and in the sense of being just as little afraid of conflict with the powers that be.” It is a ruthless criticism of both mainstream economic theory and of the economic and social system celebrated by mainstream economists.

This is an argument I’ve made many times, in different ways, over the course of my various talks (e.g, here), papers (e.g., here and here), and posts on utopia in recent years. Here, I want to take the argument one step further. What distinguishes Marxian theory from both mainstream economics (and, for matter, from other criticisms of mainstream economics) is that is based on a materialist critique. That is its utopian moment.

As I see it, the method of materialist critique is both dialectical and historical.** It is dialectical to the extent that it involves the interpretation of economic categories—such as value, productivity, profit and much else—precisely as they are grounded in, deployed and disseminated within, the existing intellectual and social order. It takes those concepts as its own. But it doesn’t simply accept the existing interpretations of those categories but, instead, transforms them into their opposites. In other words, the critical acceptance of those categories is simultaneously their condemnation.

Let me offer a concrete example of what I have in mind. Both mainstream economic theory and capitalism operate on the basis of a notion of free and fair exchange. Each transaction is seen to be a voluntary exchange of goods and services between individuals who offer or receive a sum equal to the value of the commodity in question. A materialist critique starts from that category, not because every transaction holds to the rule of free and fair exchange in the real world (there are many exceptions to that rule, such as monopoly power, which even mainstream economists and defenders of capitalism will acknowledge), but because it is the stated premise of both mainstream economic theory and capitalism (it is their shared utopianism, in the sense I discuss above). Even presuming we’re referring to a system in which every exchange is free and fair, it is possible to show that a tiny minority at the top (the members of the boards of directors of corporations) is engaged in a social theft from workers (who perform but do not appropriate their surplus labor), with all the attendant conditions and consequences of a system based on class exploitation. Therefore, a materialist critique, which starts from the prevailing idea of free and fair exchange, arrives at the opposite conclusion—that capitalist exchange forms part of an economic and social system that is anything but free and fair.***

The method of materialist critique also has an important historical dimension. It focuses on the ways both economic ideas and economic systems change over time, often with radical disruptions between them. Thus, for example, the theories used by economists today (and not only, if we allow for everyday economic representations) are radically different from themselves (in the sense that the terrain of economics is defined by multiple, diverse and incommensurable, concepts and methods) and from theories that have existed in the past (beginning with classical political economy and including the theoretical revolutions within mainstream economics as well as their heterodox counterparts). Similarly, capitalism has changed over time—both within its own history (capitalism today is different from what it was in the middle of the nineteenth century) and as it represents a break from other, noncapitalist systems (such as feudalism, slavery, and so on). A materialist critique focuses on such disruptions and divergences over time, thereby creating the possibility of other radical changes, such as an end to capitalism and the emergence of new, noncapitalist ways of organizing economic and social life.

The most famous example in the Marxian tradition is the transition from feudalism to capitalism. Notwithstanding the wide-ranging debate about the causes and consequences of that transition (among such figures as Maurice Dobb, Paul Sweezy, Robert Brenner, and Stephen Resnick and Richard Wolff), the fact is capitalism had a definite beginning as it emerged from the crises of feudalism in Western Europe (and therefore didn’t always exist, as mainstream economists often presume and proclaim), which also makes it possible to imagine an end to capitalism (based, of course, on the accumulation and aggregation of political and social forces that are opposed to capitalism and imagine and seek to create the conditions for noncapitalist economic and social institutions). Much the same is true in economic thought: mainstream economics today (neoclassical microeconomics and Keynesian macroeconomics) represents a radical break from previous mainstream economic theories (such as the classical political economy of Adam Smith and David Ricardo), as well as the various alternatives to mainstream economics that have emerged alongside it from the very beginning (which are often overlooked in “official,” mainstream histories of economic thought). A materialist critique therefore highlights the absence of history—the history of ideas as well as the history of economic systems—within mainstream economics and capitalism itself.

In the way I am defining materialist critique, it does not represent a simple opposition to contemporary thought and society. On the contrary, it is grounded in them, using their categories as starting points with the aim of substantially and radically transforming them.

If materialist critique represents the utopian moment of Marxian theory, it stands opposed to the specialized knowledge of mainstream economics (and, by extension, of the rest of the modern social sciences) as well as to traditional interpretations of Marxian theory. It differs from contemporary mainstream economics in that it seeks to transform—both dialectically and historically—the existing set of categories instead of accepting them as the given parameters of economic and social life. It of course uses those knowledges as raw materials but only for the purpose of turning them into their opposites. And it is distinguished from the precepts and protocols of dialectical and historical materialism in that it is rooted in the categories that pertain to mainstream economics and capitalism, in order to do battle on that terrain, not a set of sui generis categories (often governed by a humanist anthropology or rational discourse) to establish a new and different science comparable to mainstream economics.

And to be clear, materialist critique is not the same thing as economism (with which materialism is often conflated). On the contrary. In fact, materialist critique represents a ruthless criticism of economism not because it gives too much importance to the economy, but because it gives it too narrow a scope. Economism takes the economy as a given, transmitting its effects to individuals and to the rest of the social structure—instead of focusing on the problem of the complex, changing relationship between the economy and individual and social lives.

In the end, the goal of a materialist critique is to denaturalize and thus disrupt the existing common sense—within both economic thought and capitalism—with the aim of radically transforming the existing theoretical and social reality. It doesn’t accomplish this alone, of course. Those who are engaged in a materialist critique as well as their specific objects form a dynamic, dialectical unity with the exploited classes as both an expression of the concrete historical situation and a force to stimulate change. Nor are there any guarantees, from either side of the relationship or in the often-tense unity itself.

Notwithstanding its aleatory nature, the process of materialist critique starts with the categories that dominate economic thought and the economy itself in order to transform them into their opposites, thus creating new intellectual and political possibilities. The new openings created by materialist critique represent the utopian horizon of Marxian theory.


*The series, thus far, consists of posts on the Bitcoin bubble, the right to be lazypopulism, the economics of controlutopian socialisminequalityinternational trade, healthcare (here and here), the disaster in Puerto Ricoepistemologyvalue theorymacroeconomicseconomic developmentmarketstechnology, work, and mathematics.

**Besides Marx’s own writings, an essay that serves as the catalyst for some of my ideas in this post is Max Horkheimer’s “Traditional and Critical Theory” [ht: db], reprinted in his Critical Theory: Selected Essays, trans. Matthew J. O’Connell and others (New York: Continuum, 2002).

***Moreover, such a system is neither free nor fair for both capitalists and workers. Each is subject to the compulsions and coercions embedded in such a system, albeit in a different way.


The goal of mainstream economists is to get everybody to work. As a result, they celebrate capitalism for creating full employment—and worry that capitalism will falter if not enough people are working.

The utopian premise and promise of mainstream economic theory are that capitalism generates an efficient allocation of resources, including labor. Thus, underlying all mainstream economic models is a labor market characterized by full employment.


Thus, for example, in a typical mainstream macroeconomic model, an equilibrium wage rate in the the labor market (Wf, in the lower left quadrant) is characterized by full employment (the supply of and demand for labor are equal, at Lf), which in turn generates a level of full-employment output (Yf, via the production function, in the lower right quadrant) and a corresponding level of prices (P0, in the upper quadrants). If the money wage is flexible it is possible to ignore the top left quadrant, because, in that case, the equilibrium real wage, employment and output are Wf, Lf and Yf, respectively, whatever the price level. With flexible money wages, the aggregate supply curve is independent of the price level and is represented by YFYF.

That’s the neoclassical version of the story. The Keynesian alternative is that the aggregate supply curve is relatively elastic below full employment and the wage rate is fixed by institutions, and therefore is not perfectly flexible. In such a case, aggregate demand determines the level of output, which will normally fall below the full-employment level.

And so we have the longstanding argument between the two wings of mainstream economics—between the invisible hand of flexible wages and the visible hand of government spending. But, equally important, what the two theories of macroeconomics have in common is the ultimate goal: full employment. In other words, both groups of economists presume that the aim of capitalism is to generate full employment and that, with the appropriate policies—free markets for the neoclassicals, government intervention for the Keynesians—capitalism is capable of putting everyone to work.


But the argument also goes in the opposite direction: capitalism works best when everyone is working. That’s because capitalist growth (e.g., in terms of Gross Domestic Product per capita, the green line in the chart, measured on the left) is predicated on the growth of the labor force (the the red line, measured on the right).

fredgraph (1)

Mainstream economists also argue that a low work rate is an important cause of low incomes and high poverty. They argue that, when considering different policy interventions for this population—including improving educational attainment, raising the minimum wage, and increasing the number of two-earner families—the most beneficial intervention for improving incomes is to assume that all household heads work full-time.

Finally, mainstream economists argue that, in addition to increasing incomes and decreasing poverty, work has an additional benefit: it gives people dignity and a sense of self-worth. The idea, as articulated for example by Brad DeLong, is that having a job gives workers an honorable place in society, which presumably they are deprived of if they receive some kind of government assistance—whether in the form of payments from one or another anti-poverty program or a universal basic income. “Just giving people money” (according to Eduardo Porter) disrupts the incentive to work and undermines the “social, psychological, and economic anchor” associated with having a job.

That’s why there’s such an intense debate these days over the participation rate of U.S. workers. Even though the unemployment rate has fallen to historically low levels (and now stands at 3.8 percent), the lack of participation—whether measured in terms of the labor force participation rate (the blue line in the chart) or the employment-population ratio (the red line)—remains much lower than it was a couple of decades ago.* According to mainstream economists, that’s why rates of growth in output and incomes have slowed. There simply aren’t enough people working.

Once again, there’s an ongoing discussion among mainstream economists about the causes of that decline and what to do about it. More conservative mainstream economists tend to focus on the supply side of the labor market and the unwillingness of workers to make themselves available—mostly because they’re benefiting from some part of the social safety net (such as disability insurance, welfare, or government health insurance). Liberal mainstream economists also worry about the supply side (especially, for example, when it comes to women, who might not be able to work because they don’t have adequate childcare) but put more emphasis on the demand side (for example, the elimination of specific kinds of jobs based on international trade, automation, or the effects of economic downturns). Underlying this debate is a shared presumption that more people working will be better for them and for the economy as a whole.

Even portions of the Left accept the idea that the goal is to move toward more work. Thus, for example, both modern monetary theorists and Bernie Sanders argue in favor of a government job guarantee. The idea is that, if private employers can’t or won’t make the decisions to hire workers and create full employment, then the government needs to step in, as the “employer of last resort.” Again, the presumption—shared with those in both wings of mainstream economics—is that the goal of the current economic system and appropriate economic policy is get more workers to work more.

The utopianism of full employment is so entrenched, as a seemingly uncontested common sense, it’s difficult to imagine a different utopian horizon. But there is one, which emerges from at least three different theoretical and political traditions.

In the Marxian tradition, more work also means more surplus labor, which benefits all those who manage to get a cut of the surplus—but not workers themselves, who fall increasingly behind their employers and others in the small group at the top. That’s because, as employment increases, more workers are performing both necessary and surplus labor. Therefore, even assuming the rate of surplus extraction remains constant, the total amount of surplus created by workers increases. But, of course, the rate itself often increases—for example, as a result of competition among capitalists, who find ways of increasing productivity, which tends to lower the amount they have to pay to hire their workers (as I explain in more detail here). So, what appears to be an unalloyed good in the mainstream tradition—more jobs and more workers—is an economic and social disaster from a Marxian perspective. More workers produce more surplus, which is used to create a growing gap between those at the top and everyone else.

Then there’s the broader socialist tradition, which attacked the capitalist work ethic and claimed “The Right to Be Lazy.” Here’s Paul LaFargue back in 1883:

Capitalist ethics, a pitiful parody on Christian ethics, strikes with its anathema the flesh of the laborer; its ideal is to reduce the producer to the smallest number of needs, to suppress his joys and his passions and to condemn him to play the part of a machine turning out work without respite and without thanks.

And LaFargue criticized both economists (who “preach to us the Malthusian theory, the religion of abstinence and the dogma of work”) and workers themselves (who invited the “miseries of compulsory work and the tortures of hunger” and need instead to forge a brazen law forbidding any man to work more than three hours a day, the earth, the old earth, trembling with joy would feel a new universe leaping within her”).

Today, in the United States and around the world, the capitalist work ethic still prevails.

Workers are exhorted to search for or keep their jobs, even as wage increases fall far short of productivity growth, inequality (already obscene) continues to rise, new forms of automation threaten to displace or destroy a wage range of occupations, unions and other types of worker representation have been undermined, and digital work increasingly permeates workers’ leisure hours.

The world of work, already satirized by LaFargue and others in the nineteenth century, clearly no longer works.

Not surprisingly, the idea of a world without work has returned. According to Andy Beckett, a new generation of utopian academics and activists are imagining a “post-work” future.

Post-work may be a rather grey and academic-sounding phrase, but it offers enormous, alluring promises: that life with much less work, or no work at all, would be calmer, more equal, more communal, more pleasurable, more thoughtful, more politically engaged, more fulfilled – in short, that much of human experience would be transformed.

To many people, this will probably sound outlandish, foolishly optimistic – and quite possibly immoral. But the post-workists insist they are the realists now. “Either automation or the environment, or both, will force the way society thinks about work to change,” says David Frayne, a radical young Welsh academic whose 2015 book The Refusal of Work is one of the most persuasive post-work volumes. “So are we the utopians? Or are the utopians the people who think work is going to carry on as it is?”

I’m willing to keep the utopian label for the post-work thinkers precisely because they criticize the world of work—as neither natural nor particularly old—and extend that critique to the dictatorial powers and assumptions of modern employers, thus opening a path to consider other ways of organizing the world of work. Most importantly, post-work thinking creates the possibility of criticizing the labor involved in exploitation and thus of creating the conditions whereby workers no longer need to succumb to or adhere to the distinction between necessary and surplus labor.

In this sense, the folks working toward a post-work future are the contemporary equivalent of the “communist physiologists, hygienists and economists” LaFargue hoped would be able to

convince the proletariat that the ethics inoculated into it is wicked, that the unbridled work to which it has given itself up for the last hundred years is the most terrible scourge that has ever struck humanity, that work will become a mere condiment to the pleasures of idleness, a beneficial exercise to the human organism, a passion useful to the social organism only when wisely regulated and limited to a maximum of three hours a day; this is an arduous task beyond my strength.

And there’s a third tradition, one that directly contests the idea that participating in wage-labor is intrinsically dignified.

According to Friedrich Nietzsche (in his 1871 preface to an unwritten book, “The Greek State”), the dignity of labor was invented as one of the “needy products of slavedom hiding itself from itself.” That’s because, in Nietzsche’s view (following the Greeks), labor is only a “painful means” for existence and existence (as against art) has no value in itself. Therefore, “labour is a disgrace.”

Accordingly we must accept this cruel sounding truth, that slavery is of the essence of Culture; a truth of course, which leaves no doubt as to the absolute value of Existence.  This truth is the vulture, that gnaws at the liver of the Promethean promoter of Culture.  The misery of toiling men must still increase in order to make the production of the world of art possible to a small number of Olympian men.

And if slaves—or, today, wage-workers—no longer believe in the “dignity of labour,” it falls to the likes of both conservatives and liberals to ignore the “disgraced disgrace” of labor and create the necessary “conceptual hallucinations.” And then, on that basis, to suggest the appropriate government policies such that the “enormous majority [will], in the service of a minority be slavishly subjected to life’s struggle, to a greater degree than their own wants necessitate.”

Nietzsche believed that, in the modern world, the so-called dignity of labor was one of the “transparent lies recognizable to every one of deeper insight.” Apparently, neither wing of mainstream economists (nor, for that matter, many today on the liberal-left) has been able to formulate or sustain such insight.

Contesting the utopianism of full employment with a different utopian horizon creates the possibility of imagining and creating a different world—in which work acquires different meanings, in which the distinction between necessary and surplus is redefined and perhaps erased, and for the first time in modern history workers are no longer forced to have the freedom to sell their ability to work to someone else and achieve the right to be lazy.


*The Bureau of Labor Statistics calculates the labor force participation rate as the share of the 16-and-over civilian noninstitutional population either working or willing to work. Simply put, it is the portion of the population that is currently employed or looking for work. It differs from both the unemployment rate (the number of unemployed divided by the civilian labor force) and the employment-population ratio (the ratio of total civilian employment to the 16-and-over civilian noninstitutional population).