Tuesday, July 2, 2019

THE WAY WE ARE NOW


Alerted by Jim’s evocation of Frederick Jameson’s minatory words, I shall not here attempt to imagine the end of capitalism, but I shall begin a general analysis of the present situation, drawing, as I indicated, on the work of Marx and the data of Piketty et al.

We human beings at all times and in all places live by purposefully and collectively transforming nature as well as ourselves in order to meet our needs and gratify our desires.  Capitalism organizes this activity by placing ownership of the means of production in private hands, thereby enabling the owners to demand a ransom for the use of the means of production from those who actually use it to do the work.  The ransom is called profit.  This arrangement is enforced by the police power of the state and its courts, and is rationalized and sanctified by religion, philosophy, literature, mass media, and neo-classical economics.

Part of the ransom is re-invested to expand the scope of production in hopes of increasing the flow of profit; part is devoted to maintaining the life style of the owners of the capital; and more and more as the years go by, a part of the ransom is simply accumulated in monetary form but neither re-invested nor spent on luxury goods.

Ever since the emergence of the modern joint-stock corporation, as memorialized by Adolf Berle and Gardiner Means, it has become common for the class of managerial employees to hi-jack a portion of the profit and pay it to themselves in the form of exorbitant salaries and stock options, comfortable in their insulation from the shareholders who are, in legal theory if not in economic practice, the owners of the ransom.

It is immediately obvious that this set of arrangements guarantees that the owners of capital will, barring a temporary Depression or a destructive World War, grow steadily richer.  At some times, those doing the work will be successful in demanding a larger share of what they produce, either in the form of higher wages or in the form of government transfer payments.  At other times, the share of those who do the work will be driven lower.  But always, structurally, inevitably, ineluctably, the owners will grow richer.  This is the outcome that Marx’s theory predicts and that Piketty’s data confirm.

Since capitalists are mortal but capital is not, over time an ever larger share of the ransom is passed on to young men and women who, though no doubt of sterling character, have had no hand at all in its accumulation.  In Piketty’s term, derived from the French, there emerges the patrimonial economy.  This is an eminently satisfactory state of affairs if you are one of those born to the purple.  For the rest of us, not so much.

Species in which individuals of one sex is very much larger than individuals of the other are said to be sexually dimorphic.  A striking example is the blanket octopus.  According to the National Geographic, “Males are about the size of a walnut—less than an inch long—but some females can reach a whopping six feet long.”  Capitalism, we might say, exhibits a monstrous economic dimorphism.  The aggregate net worth of the lower one half of all American households is zero:  the totality of the value of their assets, be they homes, cars, bank accounts, television sets, cell phones, or household furnishings is offset by the totality of their debts – mortgages, credit card debt, student loans, and the like.  Bernie likes to say, for effect, that America’s richest three people have more wealth than the bottom half of the population, but that actually underestimates the disparity, if Piketty, Saez, and Zucman are to be believed.

What to do?  I shall address this vexing question tomorrow.



19 comments:

  1. Eight brief paragraphs, so much to ponder! In addition to Berle and Means, I need to add Bourdieu's Distinction to the pile. Inasmuch as the lifestyle of the owners of capital includes more or less purely aesthetic benefits and privileges, I sometimes wonder why the wealthy, as a herd, have such bad taste.

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  2. If I recall what Bourdieu finds, the wealthy French have good taste; they listen to Bach, enjoy impressionist art, etc.

    The question, for which I have no answer, is why at least some wealthy Amerikans have such bad taste, for example, Trump.

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  3. Thanks, Bob! This is great stuff, and I look forward to tomorrow's installment :-).

    One request: you've mentioned the Berle and Means analysis several time of the managerial class hijacking a portion of profits. I'm tremendously interested in learning more about this process and your thoughts about it, as it seems to me to be one essential way in which Marx's analysis was wrong (or at least, stands now in need of updating). Could you in some not-so-distant future post explain this analysis in a bit more detail? Thanks in advance!

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  4. Managers accumulating capital neither confirms or denies anything Marx said, Paul. He's not wrong there.

    Professor Wolff, as you well know Marx's analysis also doesn't make any overall long term prediction about income inequality, beyond the fact equality will never obtain. He's explicit in the theories of surplus value and the 61-63 notebooks that the working class can have a rising standard of living (use-values), albeit their actual living will be less than ideal (i.e., alienation and still being subservient to masters)

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  5. In case you missed it, the fact checker from the Washington Post, while discussing Bernie Sanders, just dismissed the claim about the bottom 50 percent having no wealth at all as “not especially relevant” since their lack of wealth manifests as debt. Which is both mystifying and unsurprising.

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  6. Chris (and others),

    I've been watching this video entitled Understanding Marxism with Richard Wolff.

    I realize that he simplifies a bit for a mass audience, but otherwise, is he worth listening to when he speaks about Marxism?

    The sarcastic humor is good in any case.

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  7. Sorry, forgot to link to the video.
    https://www.youtube.com/watch?v=eU-AkeOyiOQ

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  8. I know some people who say that the solution to the problem of inequality (capitalism) will somehow deal with that other problem you mentioned, namely, climate change. I must confess I do not see that possibility, since it seems to me, however, one defines socialism, it is still predicated on the production of more and more for more and more people. I'd concede that a socialist world order might slow down climate change, but only by a very little. The long term consequences for the world would remain disastrous. Since you mentioned the two problems side by side in a previous post, I imagine you have some thoughts on the matter. I want to hope there is a conjoined solution. Please tell me that there is and what it is. Thanks. rm

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  9. Wallerstein,
    Maybe e-mail me about this? I don't want to air too much criticism about (not Robert Paul) Wolff publicly, before I hit the job market, but needless to say, of all the interpretations of Marx that I've read, and I've read A LOT (280 independent citations in my thesis), he's in the bottom 3, somewhere around Stalin/Vulgar Marxism, and Cold Warriors.

    If I had to pick ONE Marx scholar to focus on, I would say stick to Moishe Postone. (After him Paul Mattick JR, and Patrick Murray). Postone has lots of good videos on youtube and he participated in a few podcasts which I know you enjoy. Maybe try his several podcasts on Diet Soap/Doug Lain's podcast.

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  10. Chris,

    Thanks. I don't have your email and it doesn't appear in your blogger profile.

    Mine is vivepablo@gmail.com

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  11. In the past, Robert Paul Wolff has mentioned that the invention of the managerial class is actually necessary to capitalism's survival. I'd love to see more analysis about how and why this happened, but that seems like the correct judgment.

    Marx WAS wrong about the managerial class. Marx predicted that owners of capital would consolidate so much wealth that revolution was inevitable. The fact that revolution hasn't happened is evidence that Marx was incorrect. It seems like this managerial class might be the source of his oversight. Because of this new system of capital consolidation, the working class gets a false sense of hope. Some of them CAN ascend to the richest class from the lower classes. The profit from capital CAN be shared with the workers. The inherent clash of interests at the core of capitalism is suddenly much less obvious.

    Hot take on Richard Wolff: his interpretation of marx is watered down, but it's probably the correct direction society has to take toward full communism. It's much easier to imagine his society than a society without the free market at all. Democracy in the workplace just seems like the obvious next step in our evolution. I mean, it's either that or the molotovs.

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  12. Sonic, I'm going to be blunt, Marx never predicted anything of that sort, that's complete nonsense. Indicate to me a single section of Volumes I-III, or the theories of surplus value, or the 61-63 notebooks where Marx makes that prediction. One place! That's it! This canard needs to die. Marx never once thought revolution was inevitable in a single theoretical text, and he discusses managers copiously in his notebooks. I wish people who hadn't read Marx, wouldn't talk about him as if they had...(or any scholar for that matter).

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  13. @Chris

    Imagine 100 people and $100.

    Now suppose one person -- for convenience let's call this person Bezos -- has all the $100. The other 99 persons, therefore, are left with nothing.

    Inequality is about distribution. More precisely, about how something -- the $100, in this case -- is distributed among a population. This first distribution: Bezos has it all, the bottom 99 have nothing. It's pretty intuitive that this "all and nothing" distribution of money is the most unequal possible (unless, we considered debt, which for simplicity we won't). Let's call that situation absolute inequality.

    Imagine now a second distribution. We take $0.99 from Bezos' pockets and re-distribute that amount in equal parts among the other 99 persons. Bezos now has $99.01; the 99 others have $0.01 each.

    That second distribution is the result of re-distributing from the first. It's also intuitive, I think, it is barely less unequal than the first. It is less unequal, nevertheless.

    Indeed, by increasing the amount of money we re-distribute from Bezos to the rest, we could get more equal distributions. For instance, if instead of re-distributing $0.99 from Bezos to the rest as we did above, we re-distributed $1.98, Bezos would have $98.02 left; the others $0.02: it would be a little more equal.

    How are those distributions calculated? Easy. Assuming -- as we did -- we re-distribute among the 99 in equal parts what we take from Bezos: Bezos keeps $100.00 - X and the others get X/99. Note this two formulae: they depend on X and the size of the population (100-1) only.

    Using such formulae we could do many other such re-distributions, gradually increasing the amount taken from Bezos and given away to the others until Bezos and everybody else had $1.00. In contrast with the absolute inequality situation we started from, this situation is called absolute equality.

    Here are three more (more on this in a moment):

    Bezos 99 Other
    20 $80.20 $0.20
    21 $79.21 $0.21
    22 $78.00 $0.22

    Just like inequality is about distribution, it is also a matter of degrees: there are infinitely many between the two absolutes (100, in our example, starting with 0 and ending with 99).

    Furthermore, inequality is not limited to income or wealth. It is a feature of every statistical distribution. One can legimately speak of inequality in heights, weigths, lifespans, health.

    ------

    Let's introduce standard of living in our discussion.

    What determines it? Many things: income -- of course -- but wealth, too. Price levels, technology. We could go further: environment, political stability, history, society, culture, climate, geography, religion, et cetera.

    I didn't mention any of those things above. What I mentioned is the formulae. Check them.

    So (check the little table) if it took an income of only $0.20 to maintain an acceptable standard of living, with the second distribution in that table -- when the 99 had $0.21 and Bezos $79.21 -- everybody enjoys at least that minimum standard of living.

    If, because of prices increases, say, the cost of achieving the minimum standard of living rose to $0.22, then without any change in inequality, the 99 at the bottom would be in dire straights.

    If, on the other hand, prices fell the bottom 99 would find their living standards improving, even as inequality remains constant.

    Indeed, because living standards are determined by things beyond inequality, it is conceivable that it took, say, $200.00 to achieve an acceptable standard of living: beyond even Bezos' means, in the situation of absolute inequality.

    Indeed, it's conceivable that if it took $200.00 to maintain an acceptable standard of living even in the case of absolute inequality Bezos falls short.

    Conversely, if the cost of achieving the minimum standard of living remains constant (say, at $0.21), but inequality changes, people will experience a change in their standard of living.

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  14. (Continuation from the previous comment)

    You said,

    He's explicit in the theories of surplus value and the 61-63 notebooks that the working class can have a rising standard of living (use-values), albeit their actual living will be less than ideal (i.e., alienation and still being subservient to masters)

    Maybe I'm reading too much in your brief comment, but you seem to conflate increasing living standards with decreasing inequality. That is not warranted.

    And I beg to disagree with your comment that Marx did not predict a concentration of capital in few hands. He did. And it did happen. Whether that capital is managed by the capitalists themselves or by professional managers acting on their behalf is utterly irrevelevant.

    I'm also disappointed by your comments on Richard Wolff. This may be more a personal limitation than anything else, but I can't tell how he compares to Moishe Postone, because when I tried to read Postone I couldn't understand a word.

    AnonyMouse

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  15. Another red herring? No thanks. You haven't read marx either, as we already established.

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  16. For some reason I'm reminded of Travis Bickle, Robert De Niro's character in Taxi Driver:

    "You talkin' to me? You talkin' to me? Then who the hell else are you talkin' to? You talkin' to me? Well I'm the only one here."

    :-)

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  17. Chris I would be interested in details of anything that you have published on Marx.

    Regards

    another Chris

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  18. Chris W,
    Sure. Can you try to get my e-mail from Wallerstein or Professor Wolff? I hate to impose on them, but I'm a fairly private person and don't want to make my e-mail publicly available here.

    If you're unable to do that, I'll make it publicly available.

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  19. Or, give me your e-mail and I'll contact you.

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