I am not sure that I have succeeded in making clear the source of my puzzlement. Let me begin again slowly, going all the way back to Marx’s observations about the development of early factory production and the new capitalist arrangements emerging in England. I shall concentrate on the production of woolen cloth, in part because that played an important role in the early stages of capitalist development and in part because, thanks to a teenage experience at a work camp, it is one of the few aspects of production about which I have any knowledge whatsoever.
After the wool was sheared from the sheep, it was washed and
dried. Then it was carded, which is to say brushed between two pieces of wood
with many nails stuck in them, “bats” as they were called, to sort out and
straighten the woolen fibers. Next the carded wool was spun into thread. This
process of spinning required a good deal of skill if the thread produced was to
be fine and even without knots or kinks. The woolen thread was then woven on
looms, producing cloth that was, when produced by skilled weavers, even and tightly
woven. This entire process demanded a good deal of skill which it took the
workers who did it years to develop.
When capitalist entrepreneurs inserted themselves into the
wool producing process, they began by buying the wool and bringing it to the
cottages of the peasants, who, using their own carding bats and spinning wheels
and looms, turned it into cloth which the capitalists took, paying the peasants
for their labor. The first capitalists who conceived the idea of gathering the
peasant workers into factories provided the wool, the carding bats, the
spinning wheels, and the looms but the workers hired in the factories brought
with them their skills. And since these various activities require different
levels of skill, the capitalists discovered that they could increase their
profits in two ways: first, by rationalizing the entire process so that the numbers
of carders, spinners, and weavers were adjusted to produce a continuous process
without waste time; and second, by paying the relatively scarce skilled
spinners and weavers more money to attract them while paying the carders and those
who carried materials from one worker to another much lower wages.
Eventually, the invention of such mechanical devices is the
Spinning Jenny made it possible to build the skills of the workers into the
machines, as it were, so that unskilled or semiskilled workers, some of whom
did little more than tend machines, could replace the costlier skilled spinners
and weavers.
Observing this process, Marx drew the conclusion that this
was the wave of the future in capitalist production and that the traditional
skills of the working class would be replaced by machinery, with the result
that the working class would be reduced, in effect, to a mass of
interchangeable semiskilled machine operators whose commonality of skill and
activity and consequent wage levels would, ironically, result in a rise of
class consciousness leading to their organization and the overthrow of capitalism.
These were not stupid conclusions by Marx, but they were
wrong and that is not the way in which things developed. Instead, as I have
been observing, there developed a permanent hierarchy of wage levels so steep
that it undermined the unity of the working class and led to the situation
which we now observe in advanced capitalist economies.
This in a nutshell is what I am trying to understand. There is clearly a vast amount of functional
differentiation in the productive activities engaged in by workers these days,
but assuming that employers have no interest in paying workers more than they
need to, it is unclear to me why the pyramid of wages is as steep as it is and it is
especially not clear at all why a liberal arts college degree should serve as a
prerequisite for access to jobs at the higher reaches of the pyramid.
I shall return to this subject tomorrow.
18 comments:
One of the great contributions of Marx to economics was and remains his emphasis that economic phenomena are historical and human rather than natural; whereas conventional economics is founded on the assumption that economics is more akin to natural science, arguably to make more tractable mathematically, on the assumption that "scientific" equates with quantitative and quantitative with formal.
Marx was only familiar with the production-distribution-consumption cycle of his time that constitutes economics and the financial system that underlay, based on the prevailing gold standard and mercantilism in trade.
Obviously, the world has changed immensely since then. With respect to production Marx was only familiar with the first industrial revolution and the onset of the second. The world is now transitioning from the third to the fourth industrial revolution. This means that different knowledge and skills are required along the chain. Here is a brief historical summary. https://sustainability-success.com/industry-1-0-to-4-0-2-3-revolution/
This is also true for money and banking, finance, and accounting as necessary complements for the economics of industrial production and market distribution in a contemporary economic system. Since this is mostly institutional, lawyers and politicians are also deeply involved in the process. Since this system is increasingly complex many people serving in their various capacities know only the details of their own field and function primarily in their narrow job description. The result is that few if any comprehend the dynamics of the system, let alone those that oversee its operations, setting its objectives and developing strategic plans.
Knowledge and skills are becoming more diverse and specialized, as well as compartmentalized, leading to "silos." While it may be possible to identify some of the issues, now knowing the overall system dynamics makes it difficult to impossible to address them effectively.
The hope is that the development of AI will provide knowledge not available to the human mind owing to a lack of capacity for thinking on such a vast scale, involving so much data and so much technical knowledge.
The question then arises whether Marx's method or some adaptation of it can be applied to the current moment of the historical dialectic and also be used to fill in the gaps from when Marx was observing and writing about it, and the present. In a sense, this has been the project of the varied field called heterodox economics.
Many if not most heterodox economists were responding in some fashion to Marx, beginning perhaps with Veblen's institutionalism. The goal has often been to mesh Western economic thinking with capitalism, which is assumed to be the economic system best suited to liberalism. That assumption is, of course, questionable.
My own view is process-based — all this is in the ongoing of working itself out in time through the historical dialectic, that is, the interplay of the forces involved geographically, now that the global level of interaction. This is a lot larger than economics and finance since it involves the dynamics of the world system.
Not that we shouldn't try to get a handle on it. I try to do this day by day as events unfold. "interesting" times we live in. Actually< Marx lived in comparable times in terms of change, although quite different circumstances and conditions.
If the skills of the weavers and spinners were relatively scarce and thus commanded higher wages, then relatively scarce skills today (e.g. expert neurosurgeon or skilled hi-tech something-or-other etc.) will also command higher wages, for basically the same reasons. That does not account for the whole pyramid, for sure, but probably explains a part of it. By your own explanation here, what Marx got wrong had mainly to do with the evolution of technology and a predicted homogenization of skill levels that didn't materialize. Steel plants today, as I understand it, use sophisticated machines that require a fairly high skill level to operate. That skill level is higher, or at least perceived to be higher, than the one required to be a cashier (although being an efficient cashier in a high-stress environment where one is also doing other tasks does require skill). So the worker in the steel plant will usually command a higher wage than the cashier. Since Marx himself recognized that the skills of spinners and weavers commanded higher wages, by the same reasoning skills that are or are perceived to be scarce or scarcer now will command higher wages. Again this is only a partial explanation of the pyramid but a partial explanation is better than none. As others have already mentioned, the decline in union strength and density likely plays some role here also.
(As for the place of the college degree, yes that is somewhat puzzling but that wd probably need a separate comment.)
In other words, at least in the case of the steel plant, the sophisticated machines don't entirely *replace* the need for skilled humans but require a smallish number of fairly highly skilled human operators. Whether this will change in future as robotics etc develops, I have no idea.
This from economist Tyler Cowen:
Is the college wealth premium *zero*?
Now this one is a stunner:
The college income premium—the extra income earned by a family headed by a college graduate over an otherwise similar family without a bachelor’s degree—remains positive but has declined for recent graduates. The college wealth premium (extra wealth) has declined more noticeably among all cohorts born after 1940. Among non-Hispanic white family heads born in the 1980s, the college wealth premium is at a historic low; among all other races and ethnicities, it is statistically indistinguishable from zero [emphasis added]. Using variables available for the first time in the 2016 Survey of Consumer Finances, we find that controlling for the education of one’s parents reduces our estimates of college and postgraduate income and wealth premiums by 8 to 18 percent. Controlling also for measures of a respondent’s financial acumen—which may be partly innate—, our estimates of the value added by college and a postgraduate degree fall by 30 to 60 percent. Taken together, our results suggest that college and post-graduate education may be failing some recent graduates as a financial investment. We explore a variety of explanations and conclude that falling college wealth premiums may be due to the luck of when you were born, financial liberalization and the rising cost of higher education.
More here:
Over 25% of College Degrees Have a Negative Return on Investment
ROI varies substantially by major. Sixty-nine percent of engineering programs deliver a lifetime payoff of $1 million or more, and 97% have ROI of at least $500,000. Another strong major is computer science, where 85% of programs have ROI exceeding half a million dollars. Programs in transportation, construction, and architecture also deliver handsome rewards to their students: 77% have a payoff above $500,000.
But plenty of programs have ROI that students might consider disappointing. 68 percent of programs in visual arts and music have negative ROI, meaning graduates are worse off financially for having received their degree. A majority of programs in philosophy and religious studies leave their students in the red, along with 28% of programs in psychology, English, liberal arts, and humanities.
source: Over 25% of College Degrees Have a Negative Return on Investment
I assume a college degree brings with it the social capital that a high school diploma can't provide. Also, too often in the U.S. that diploma represents mere attendance. If a quarter of the population has completed college, HR has a useful, time saving filter.
It's always been the case that personal connections an change ones life and connections made in university count for way more then who one might have known in secondary or grade school.
Connections:
https://thebaffler.com/salvos/what-happened-in-vegas-hill
The steep pyramid is easily explained by the persistence of rent-seeking and ideology which we humans seem wired to do. Kill unions, cut taxes, privilege debt over equity, make up a just-so story to justify everything - easy, peasy as there will always be true believers and running dogs.
https://compactmag.com/article/how-asset-managers-took-over-your-life
I think Bryan Caplan has argued that a college degree signals to employers something about a prospective employee's reliability, basic diligence etc., but since these traits may not actually be all that necessary to get through college (or at least some large swath of colleges incl. some high-prestige ones), misperceptions may be involved. HR depts that use a degree as a "filter" are not acting v rationally unless the job in question has very specific requirements re particular, say technical, skills. What a liberal arts education is supposed to imbue (communication skills, critical thinking etc.) can also be acquired in high school or on one's own; hence the use of degrees as a filter is often irrational from a substantive standpoint.
Don’t know if it’s at all relevant, but I recall reading many years ago that Marx’s understanding of capitalism was considerbaly shaped by his exposure via Engels to the large scale enterprises typical of Manchester, whereas had he been exposed to the small scale enterprises typical of Birmingham in that same period he might have been led to think along rather different lines. (Birmingham some 70 years later was the setting for the series “peaky Blinders.” But despite the passage of time. one does get the picture from the series of a lot of small scale industrial activity going on.)
LFC, your point was true in 1940 when there were many more HS grads who would have been able to succeed in college then were able to actually go on to higher education. That, of course, is no longer the case.
Another factor is fungibility or the lack of it. Public and private "feeder" high schools produce grads who possess the skills you reference but they are going on to college. Likewise the qualified students from good to average schools.
Yet another factor is maturity, 22 - 25 isn't 17 or 18 (one reason all LEOs should need a degree and POST s/b graduate level). Any job one gets out of HS is going to be limiting unless one continues ones education.
AF, the loss of the premium is what one would expect. We need to break down the tenth decile by tenths and hundredths.
aaall
HS graduates shd have the opportunity to do apprentice programs, training programs etc. if they prefer rather than further traditional education. Requiring that all law enforcement officers have a college degree is a terrible idea, imo. (We've been through this before, I think, so no pt rehashing it.)
LFC, of course but HS plus isn't HS which is where we were above. For example, the electrical union apprentice program is five years and involves classroom and theory as well as on the job experience. Most JCs in CA have technical programs - get your various welding certifications and one can get a good job most anywhere. Santa Barbara JC even has a commercial diving program.
I think the question posed is very simple if the observation is true that the wealth distribution of the 10/10 of a society seems to be historically largely invariant. Then factors such as the various "technological revolutions" would play a minor role, as would education and type of work. On the contrary, if taken as a background, the unusual nature of the phenomenon becomes even clearer, because to this day the acceptance and motives of technological progress are based on the promise of a "better life" for all.
So, if Prof. Wolff's observation is correct, the question is: What stabilizes this invariant distribution?
Observing this process, Marx drew the conclusion that this was the wave of the future in capitalist production and that the traditional skills of the working class would be replaced by machinery, with the result that the working class would be reduced, in effect, to a mass of interchangeable semiskilled machine operators whose commonality of skill and activity and consequent wage levels would, ironically, result in a rise of class consciousness leading to their organization and the overthrow of capitalism.
These were not stupid conclusions by Marx, but they were wrong and that is not the way in which things developed. Instead, as I have been observing, there developed a permanent hierarchy of wage levels so steep that it undermined the unity of the working class and led to the situation which we now observe in advanced capitalist economies.
Let us try to picture that. The idea seems to be that there are categories of workers that command higher wages because of the skills they possess. Eventually machinery renders those workers obsolete. In other words, there must be a moment when no category of highly skilled workers remain to command higher wages.
Makes sense, yes?
In an abstract sort of way it may make sense. There is a moment in history when there are no longer skilled workers, from then on the working class becomes homogenized.
The problem is that de-skilling is a process, not a step, that one ticks and moves on. It happens over and over again. Automobile workers in the first thirty years of the twentieth century went through the same de-skilling that British textile workers experienced in the mid-1800s, for example.
The irony is that these days we cannot turn the TV on without hearing about robots replacing … skilled workers!
the only solution seems to be a "basic income without preconditions".
Maybe a version of the "anthropic principle" explains it: There isn't really an explanation, it was just a coincidence that it happened this way, but if it hadn't happened this way, Marx would have been right and there would have been a revolution and capitalism abolished, hence, we wouldn't be here wondering about it.
BL Zebub,
The irony is that these days we cannot turn the TV on without hearing about robots replacing … skilled workers!
Capital is stored labor, and capital-labor substitution is actually labor-labor substitution. In the following 1-minute video, you see Chinese-owned German-manufactured KUKA robots building Teslas in California. The US is importing Chinese capital and German labor.
Watch robots build Teslas
KUKA is a German manufacturer of industrial robots and systems for factory automation. The Chinese company Midea Group owns more than 95% of the company.
The KUKA Robotics Corporation has 25 subsidiaries in the United States, Australia, Canada, Mexico, Brazil, China, Japan, South Korea, Taiwan, India, Russia and in various European countries. The company name, KUKA, is an acronym for Keller und Knappich Augsburg.
KUKA
Ahmed Fares,
Congealed or stored labor isn't the same as actual human labor.
To suggest that it is usually does not clarify matters.
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