“The Jobless and Wageless Recovery”

Steven Greenhouse, who generally covers labor issues for the NYT, has a blog post about a new paper on the current “jobless and wageless recovery.” The authors (Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin, and Sheila Palma, from the Center for Labor Market Studies at Northeastern University) present the most comprehensive statistics I’ve seen on how capital has recovered in lieu of labor. The chart below, for example, shows that 92% of national income growth has gone to corporate profits in the current recovery.

The same dynamics that led us into the crisis are leading us forward in stagnation. There is no reason to expect a vibrant recovery in consumption if all gains in output and productivity are going to corporations, while government money is running to the sidelines.

The authors don’t delve into what’s causing this dynamic, but it should be obvious to anyone who has followed American political economy in the last 3 decades. Corporations simply have too much power in economic and political spheres. American workers and voters are no longer organized to fight this power. I originally saw the election of 2008 as a correction from the usual feedback loop, and it certainly has been in some ways, but certainly not to the extent that is needed.

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How I Would Reinvent Capitalism

The Nation had 16 activists respond to the question, “If you had the ability to reinvent American capitalism, where would you start? What would you change to make it less destructive and domineering, more focused on what people really need for fulfilling lives?” Three of them resonated with me in particular: Chris Macklin on employee ownership, Dirk Philipsen on how we measure prosperity, and Eugene McCarraher on our “moral imagination.”

I’m not going to block-quote them, however- instead, I’ve put in my own reader submission (limited to 400 words), which the magazine is soliciting from its readers. You’ll see that it attempts to weave together concepts from all three of these columns:

Capitalism’s defining quality is evident in its name- capital, not labor, nature, or morals, is put above all else. This preeminence of capital has ramifications for how we produce, consume, earn, save, and tally it all up; I argue that it causes problems in each of these facets of our economic life. Often, people confuse capitalism with markets (free ones in particular). Instead, I think capitalism has a few distinctive consequences: 1) surplus is distributed by those who own, not those who work and make; 2) more consumption is always better; and 3) anything “outside” the economy, like the environment, may as well not exist.

Capital is relevant to these features because it means that the production process can be owned, and thus the fruits of it can be immediately taken from the hands that produce it. As a corollary, this means that to profit, those who own capital must sell as much as possible, some of which is indeed bought back by those who make the goods. And finally, capital seeks its return without any regard to destruction that it doesn’t have to pay for, like ozone depletion or disappearing wetlands.

As long as capital remains preeminent, we cannot remake capitalism. Instead, we need to gradually remake economic structures to chip away at capital’s power. Giving workers stock ownership is one small step, but giving workers complete control over their enterprise is a more radical fruitful step. It would mean that production and consumption would be more tightly linked, as the amount one consumes would be more in line with what one produces. Lavish consumption would not disappear entirely, but would be made scarce. Remeasuring economic value to include environmental externalities is another small step, but forcing these externalities into pricing through democratically-decided taxes is a larger and more fruitful step (and I guarantee, a worker-run Chamber would fight it a lot less).

These steps must be supported by increased class consciousness through education.  The value of worker ownership and environmental stewardship are obvious to their beneficiaries; demonstrating that capital’s dominance stands in the way of these benefits is critical. A class-conscious society will support economic structures that value labor and value nature, not just profits. Changing capitalism does not mean removing markets or destroying property, but rather reshaping production and consumption markets so economic value is not distorted by power divides between capital and other.

How would you remake capitalism?

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The Geography of Capital

I’ve written a lot about Marxian accounts of the crisis, in which wage stagnation from class dynamics leads to underconsumption and over-indebtedness. However, David Harvey takes a bit of a different tack in explaining capitalist crises in general in his book, The Enigma of Capital, from Oxford UP. Harvey is a self-labelled economic geographer. He studies the internal dynamics of capitalism, but also focuses on the extensive margin, how capital comes to imperialize the economic space (importantly, it does so by necessity).

In the London Review of Books, Benjamin Kunkel does an excellent job unpacking a key model behind Harvey’s work, which is essentially straight out of Marx’s Capital.

A capitalist, in order to produce, must purchase both means of production (Marx’s ‘constant capital’) and wage-labour (or ‘variable capital’). After this outlay – C+V in Marx’s formulation – the capitalist naturally hopes to possess a commodity capable of being sold for more than was spent on its production. The difference between cost of production and price at sale permits the realisation of surplus value…

Production of the total supply of commodities exceeds the monetarily effective demand in the system. As Harvey explains in The Limits to Capital, effective demand ‘is at any one point equal to C+V, whereas the value of the total output is C+V+S. Under conditions of equilibrium, this still leaves us with the problem of where the demand for S, the surplus value produced but not yet realised through exchange, comes from.’

“Fictitious capital,” allowed by monetary exchange, can paper over this issue, but ultimately, as Harvey writes, “The necessary geographical expansion of capitalism is … to be interpreted as capital in search for surplus value.”

Kunkel rightly states that Harvey goes from this account to a multi-faceted explanation of crises, with a common theme:

What unites the strands is the fundamental antagonism between capital and labour, with their opposing pursuits of profits and wages…[which] nevertheless prevents such a balance from being struck except occasionally and by accident, to be immediately upset by any advantage gained by labour or more likely by capital.

Harvey doesn’t really present solutions in the book. He does point out the ecological ramifications of overaccumulation and expansion of capital on the extensive margin. I think Kunkel nails it, though, that Harvey’s brand of Marxism “seems better prepared to interpret the world than to change it.” The book is certainly a worthwhile read during a time of crisis, but one doesn’t read Harvey and begin to think of micro-solutions, like worker ownership of the means of production. Instead, I came away with a visceral understanding of the roots of capital’s globalization, and a great uncertainty over what to do about it.

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Search Theory as a Distraction

David Ruccio hosts an excellent guest piece by Richard McIntyre and Michael Hilliard, which takes a balanced and heterodox look at the work that merited a Nobel Prize this week. First, their positive take on search theory:

The idea that workers and jobs are heterogeneous and that it takes time and effort to match them is a useful idea. Sweden’s “active labor market policy” sought to reduce frictional unemployment even before the now classic papers on search theory were published. Perhaps this is why the Swedish Central Bank made this award, although speculation about the reasoning behind these awards is not terribly productive in our opinion.

Worker and job heterogeneity means that the metaphor of the market is not an accurate representation of the exchange of labor power for a wage. Because it never occurs to most economists that the analytical apparatus of the market IS a metaphor this is not the usual interpretation of search theory. But those interested in the literary aspects of economics could make something out of search theory.’

However, a critique through the lens of class shows that search theory may be more of a distraction than anything:

More important to us is what search theorists don’t do. As Marx and others have pointed out, it is in the labor process, not the labor exchange, that exploitation occurs. And here employers clearly have the upper hand. Further, many labor market and labor process outcomes—employment, remuneration, working conditions, training—reflect what employers choose to do, except perhaps during short-lived moments of full employment. Since the 1970s, in the United States at least, the rhetoric of labor problems has been mainly about workers rather than employers, and mostly with what workers should do to make their labor time more salable. At best search theory tells us that people are doing something useful while they are unemployed. But for the most part it distracts us from the fact that employers have the upper hand in the labor market and that there is no such thing as democracy inside the firm, where Americans spend most of their waking time.

Of course, approaches to economics that use a class lens are not seen as having the theoretical rigor of neoclassical economics. Thus, I think Ruccio is rather apt to refer to this award at the Nobel Prize in Neoclassical Economics, because the criteria they use to give the award seem to exclude any other approaches.

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Employer Power and Wage Theft

A few weeks ago, I finished reading Kim Bobo’s Wage Theft in America (published last year, but new to me). The title is self-explanatory, and the author is the founder of Interfaith Worker Justice, an organization that has advocated and organized tirelessly to ensure workers’ rights are fulfilled. The facts she presents  in the book are stunning- depending on the low-wage industry, most employers have committed wage theft (around 60% in nursing homes, 100% of poultry plants). Total theft is measured in the billions. Wages are stolen in a variety of ways- simply paying below the minimum wage, forcing workers to work off the clock, not paying overtime, and others. Workers who have wages stolen are disproportionally female, minority, and immigrant. Those with the least power in society, and already limited means, have their hard-earned money taken from them. The employers, on the other hand, face weak penalties (they merely have to pay, with interest, the wages they’ve stolen), and enforcement is weak.

Abstracting from these important details, Bobo’s book ulimately reads as an account of economic power and political economy. At the micro-level, employees who fear for there jobs are intimidated to not speak up about wage theft. Only when these workers are made aware of the laws by organizations like Bobo’s are these injustices addressed. At the macro-level, business has effectively neutered the Department of Labor, labor unions, and any political will to address these issues. Hilda Solis is certainly a vast improvement from Elaine Chao, but she’s no Frances Perkins, the New Deal Secretary whose strength and effectiveness Bobo extols. Why don’t we have a Frances Perkins, and a suitable budget in this area? The power of employer communities clearly matters here.

This problem is one that should provoke immediate outrage, even (and I’d argue especially) among free-market proponents. This is a perfect example of cheating, a place where the government must step in to ensure that the at least the exchange of labor for money occurs fairly, lest the very foundations of capitalist labor exchange crumble. On this basis, it seems that Bobo is hoping to organize a movement, and use the labor consciousness of that movement to score further gains for labor. Employers, by lobbying through means like the chamber of commerce, and by imposing their will through managers in breakrooms, represent a real power. Effective organizing and education could theoretically build a movement to counteract that power, generate political will for stronger labor laws and enforcement, and ultimately lead to more just remuneration. This process takes time, but Bobo lays out the blueprint for what a revitalized Department of Labor would look like, and how we can organize to get there. If such a movement could score further victories for workers, like expanded union representation and more widespread living wages, even better. Wage theft, I’m sure Bobo hopes, could be a unifying issue to serve as the entry point for these other gains, all working inside the current capitalist system.

Of course, if the root problem is employer power, the other alternative is to take the power directly from the employers and give it to the employees. Cooperatives like Mondragon are proliferating. Capitalist bankruptcies allow opportunities for worker expropriations, as seen in The Take. Rather than hoping for a series of band-aid wins, this approach would, workplace by workplace, ensure that employees would receive fair wages and then some, as they would make the decisions. This is much more difficult, because it entails bringing about an entirely new economic system, piece by piece. For more on what this looks like, see previous posts on cooperatives.

Either way though, the symptom of wage theft is widespread, obvious, and morally flagrant. The root problem is employer power, and the solution is either to counteract the power, or take it away entirely. These movements can certainly be paired- more labor consciousness is needed if we hope to proliferate co-ops, and realization of concrete alternatives is necessary to generate political will for legislative and enforcement reform. The losses of labor after its New Deal gains should clearly demonstrate which solution is sustainable in the long term. A different type of labor and remuneration, though, is possible. Bobo’s effort to raise awareness of these basic power dynamics is a good start.

(Thanks to ZL for some helpful comments.)

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“First as Tragedy, Then as Farce”

In this video, Slavoj Zizek argues that a creating a more charitable capitalism is a path of folly. For some background on Zizek, check out this profile of him in Der Spiegel (I admit that I hadn’t heard of him until a month ago).

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Social Consciousness and Progress

Daniel Little makes a good point in this discussion of social justice movements:

One of the constraints I mentioned on social change in an earlier post is that we need to test proposed new institutions in terms of how they would work, given people as they are (post). But this is slightly questionable, in that it takes existing social consciousness as a given rather than being itself an object of change.

In particular, a successful outcome of either of these struggles entailed changing more than laws and institutions; each required a change of consciousness and morality in the white population of power-holders. If the majority of the white population had remained violently racist, then democratic racial equality may not have been a sustainable social order…So a strategy for change required changing both structures and consciousness. And this means that we have to be reflective about what sorts of factors we take as fixed rather than changeable.

This also implies a change of emphasis in the analysis of social progress argued previously. Some crucial advances in social justice have been anything but continuous and gradual; but have rather been daring, improbable, and crucial. Being deliberative about strategies of social change does not imply being slow to act or reluctant to take on large challenges.

This also implies a change of emphasis in the analysis of social progress argued previously. Some crucial advances in social justice have been anything but continuous and gradual; but have rather been daring, improbable, and crucial. Being deliberative about strategies of social change does not imply being slow to act or reluctant to take on large challenges.

This sentiment undoubtedly applies to economic change as well. The assumption of a homo economicus, even where it has a grain of truth, is rooted in an economic system that encourages such behavior. Marx was well aware of this, as his notion of materialism put material conditions as the primary cause, and social consciousness as their consequents. Reshaping social consciousness does not necessarily require revolutionary change, though. In church this morning (it is a sunday after all, so forgive me for the religious interlude), my pastor pointed out the conflict between a belief in the social gospel and a belief in scarcity. The solution, she argued, is to build institutions that “promote generosity.”

We can imagine other characteristics we want our social institutions to promote as well. Being willing to re-imagine social consciousness, rather than take it for granted, is indeed a key element of achieving progress. There are a number of radical institutions that have attempted this sort of program (the Catholic Worker movement, the Mondragon cooperative, and others)- linking these efforts through things like the World Social Forum is key to form a more coherent and progressive consciousness.

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Capitalist production of knowledge

I recently came across a quotation from Marxist historian JD Bernal‘s 1939 work, The Social Function of Science, which is often regarded as  one of the earliest works in the field of the sociology of science.

We now see that though capitalism was essential to the early development of science, giving it, for the first time, a practical value, the human importance transcends in every way that of capitalism, and, indeed, the full development of science in the service of humanity is incompatible with the continuance of capitalism.

Bernal was interested not only in science, but also on the impact of science on the world, and the relationship between industry and scientific research. I think these questions are important for scientists (both natural and social) to continue to ask. Today, the pharmaceutical industry is a clear example; the drugs that are researched and developed will be those that will be able to provide the highest returns, meaning that they treat people with money, even if there are other drugs that could improve more lives and to a greater degree in the third world.

And this is also related to the production of economic knowledge. As the American university becomes more of an embodiment of capitalism, the type of economic knowledge produced will tend to serve the interests of capitalists. Economic theories that challenge that status quo have struggled to find acceptance in universities, and the effects are obvious in policy realm as well. The financial bailouts and other policies of the Fed and Treasury are backed by neoclassical theory; certainly an economic theory emphasized the poor would prescribe very different policies.

As universities become more capitalist, they will seek to eliminate theories that challenge them. These changes will then undermine the university’s ability to understand and serve the poor in our society. Hence there does seem to be continued relevance of Bernal’s claim that “science in the service of humanity is incompatible with the continuance of capitalism.”

[The above structure of Photosystem I, from Petra Fromme’s lab at ASU, was determined using X-ray crystallography, a technique pioneered by Bernal]

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iPad Suicides and Capitalist Alienation

As an owner of several Apple products, I’ve been tracking the disturbing story of working conditions inside the Foxcomm factory in China, where the iPad is assembled. People tend to forget that the relative low cost of our electronics are not just the result of technology, but also of the continued exploitation of labor. According to an undercover report,

Liu had his most interesting chats with other workers during meals. Some told him that they envied workers who are sick. They get leave approvals and can get some rest. They also discussed about accidents in the factory: One worker got his finger cut-off during production. A few workers think that the machines are cursed. They believe it’s dangerous for them to use the machines.

Another worker spoke about one of the favorite activities in the factory lines: He likes to drop stuff on the floor. Why? Workers spend achingly up to eight hours standing up, so they feel that squatting down to grab a fallen object is the most restful moment of their working day…

According to one worker, they can’t live without these dreams. They dream of becoming rich one day. Some spend part of their salaries buying lottery tickets and betting on horse races.

Of course, these working conditions would be no news if it weren’t for the wave of suicides in the factory.

Apple as well as Foxcomm executives are responding as one would expect, with stress counselors, psychiatrists, and false promises. Oh, they’re even installing a nets as deterrents.

It’s obvious to anyone that these are band-aids and aren’t addressing the root problem. Of course, wage increases or better working conditions wouldn’t accomplish that either. The fundamental problem is that in industrial capitalism, workers are alienated from the fruits their labor. These psychological damanges should surprise no one, as Karl Marx saw this alienation as a systemic part of capitalism. The exploitation that inherently occurs along with it certainly reduces the workers’ material standard of living, but that’s only half the problem. The idea that these conditions are unique to Apple, Foxcomm, or China is simply naive.

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Deficits, Debt, and Class

When I attended the fiscal sustainability counter-conference, much of the discussion was theoretical and technical and avoided normative or political conjecture. All of the panelists were aware of the political landscape for deficity dovery, and were even more aware of the implications of deficit reduction for the poor and unemployed. However, until reading Rick Wolff’s latest, I don’t think I really grasped the political meaning of the deficit debate and how skewed it is.

In today’s class-divided societies, classes differ over what governments should do and who should pay the taxes. Governments in such societies often turn to borrowing — which produces national debts — as ways to defer and postpone the political problems of resolving class struggles focused on the state…

Employers and employees struggle everywhere over what activities the government should and should not perform.  Employers want governments to support and enhance the profits they seek (build and secure the transportation and communication infrastructures they want, educate their workers, protect their markets, enforce their contracts in courts, etc.).  Employees, in contrast, want the government to support their incomes, families, and standards of living…

The two sides’ relative strengths — their organizations and resources — usually determine the patterns of government expenditures and what portion of the tax bill each side pays.  Rarely employers and employees agree on these contentious issues…

Governments fear the political costs of going so far in placating one side that they risk being ousted from power by the other side.  Borrowing thus eases their problems at least temporarily…

Of course, lenders to governments come chiefly from employers, not employees.  Lenders are, of course, complicit in building up national debts because they collect most of the interest payments from the borrowing governments.  From the employers’ perspective, the national debt often looks like an attractive lesser evil…

Lenders to governments understand that class struggles postponed may thereby be sharpened…

The lenders therefore began refusing to lend any more to Greece (or even to roll over debt coming due) or they demanded much higher interest rates.  In effect, lenders demanded that the Greek government either tax employees more or else cut government spending on employees to free up money to service Greece’s national debt…

The moral of the story of class struggles and national debts is this: government borrowing is capitalism’s very employer-partisan way out from a political dead end…Americans will confront the same basic situation as the immense and growing US national debt brings its lenders to a similar crossroads.

There’s a key difference between Wolff and the deficit dove crowd- the doves, drawing on Modern Monetary Theory, believe that there aren’t limits to government’s borrowing capabilities, at least not for advanced economies. Wolff, however, assumes that the deficit, and the debt in turn, will eventually reach a breaking point, even in the US, the reserve currency issuer. I’m not in a place to judge who is right here. However, I really like Wolff’s idea about viewing deficits as a way of deferring class struggle until the inevitable clash. It mirrors his argument about how consumer borrowing delayed class struggle over stagnating wages, and I think, helps us understand the present political economy.

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