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February 04, 2014

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TickyW

Brilliant! Brilliant!

"The offer I made here stands: if he (JackArt)doesn't accuse me of liquidating the kulaks, I'll not accuse him of murdering Alan Turing"

LOL

Socialism In One Bedroom

The highest tax rate nations, the Scandinavian countries, have not suffered from high tax rates, in fact they have higher living standards on almost any measure you care to mention.

So while higher tax rates will not transform the fundamentals, they will result in a different configuration of a capitalist society, and every indicator would suggest the outcomes are positive. For example, more effective public services.

So part of the fight to improve the condition of the working class should include demands for more progressive taxation. Workers should also be very concerned how the money is being spent, and leftists should be raising these issues.

I don't see how any Marxists could dismiss these issues as not being pertinent, just like other trade union struggles.

breviosity

"Marx's beef with capitalism ... was that capitalists had power over workers by virtue of capital being scarce and labour relatively abdundant."

Marx's beef was that labour is the source of all value, hence it is exploited. Nothing there about supply and demand.

New Marx (the foe of abundant labour) should presumably be against immigration above all else, to lessen the labour supply.

"if he doesn't accuse me of liquidating the kulaks, I'll not accuse him of murdering Alan Turing"

What kind of trade is this? You offer me one brilliant Englishman, in return I give you the ~60 million killed by Stalin and Mao. Admittedly, brilliant mathematicians are worth a lot, but it's more than a bit Nietzschean to suppose they are worth so very much more than the nameless masses.

Luis Enrique

If power derives from scarce capital, how do Marxists explain what we currently observe when capital is so abundant it's piling up on reserves, and there is a dearth of investment opportunity?

chris

@ Luis - financial capital is abundant, but the fact that physical capital is scarce (RELATIVE to labour) is evidenced by the fact that profit rates are quite high, at a time of mass unemployment.
@ breviosity - immigration controls don't reduce the global labour supply, and this matters for wages: remember factor price equalization.
I was NOT equating one death with millions. My point is that Stalinism is not (the only form of) Marxism, and many of us are NOT Stalinists - in fact, anti-managerialists like me are less Stalinist that company bosses and mainstream politicians. Today's Tories have more in common with the homophobes who killed Turing than today's Marxists have in common with Stalin.

Boffy

In the Critique of the Gotha Programme, Marx attacks the Lassalleans, who also thought that Socialism was about redistribution by taxation - a utopian notion with which marx had no truck - for the statement that labour is the only source of value. Marx, also there makes clear that any change in distribution can only be achieved by a change in production relations. That he says is the lesson from his analysis of Capital. Why after this truth has been uncovered, he asks should we revert to the previous bourgeois notions that anything can be achieved simply by taxation.

In his Prefaces to "The Condition of the Working Class", Engels makes clear that it is precisely the relations of supply and demand for labour-power, itself determined on the one hand by the needs of capital accumulation (demand), and on the other by the value of labour-power (supply) which set the level oif wages.

“The history of these Unions is a long series of defeats of the working-men, interrupted by a few isolated victories. All these efforts naturally cannot alter the economic law according to which wages are determined by the relation between supply and demand in the labour market. Hence the Unions remain powerless against all great forces which influence this relation. In a commercial crisis the Union itself must reduce wages or dissolve wholly; and in a time of considerable increase in the demand for labour, it cannot fix the rate of wages higher than would be reached spontaneously by the competition of the capitalists among themselves.”

And Marx makes the same point in Value, Price and Profit.

“I think I have shown that their struggles for the standard of wages are incidents inseparable from the whole wages system, that in 99 cases out of 100 their efforts at raising wages are only efforts at maintaining the given value of labour, and that the necessity of debating their price with the capitalist is inherent to their condition of having to sell themselves as commodities. ... the working class ought not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the causes of those effects; that they are retarding the downward movement, but not changing its direction; that they are applying palliatives, not curing the malady. They ought, therefore, not to be exclusively absorbed in these unavoidable guerilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market.”

Luis Enrique

Chris,

What does the statement "physical captial is scarce relative to labour" mean? What woudl physical captial being abundant rrelarive to labour look like? You are talking about a ratio and calling it small, but I don't see a basis for it. What does it mean to describe an input as scarce at the same time as claiming the marginal returns to it are low?

The ratio of physical captial to labour varies across countries, does the degree of exploitation follow suit?

rogerh

The success of capitalism seems to me to lie in its similarity to family structure and from family structure follows politics via tribal leaders, warlords, monarchs etc etc. So power structures and capitalism or what amounts to capitalism mutually align very easily. Both align with human nature - good and ill. Worker cooperatives seem rather contrived. I am not really sure why the Swedish model seems to work - perhaps the Lutheran ethic, a form of moderated capitalism

So the difficulty with a workable form of Marxism is how its power and allegiance and reward structures work given the crooked nature of the human psyche. Perhaps the best we can hope for is to moderate the worst impulses of the powerful.

chris

@ Luis - mass unemployment (& hidden unemployment) is a sign that labour is abundant - which means capitalists can hire it on favourable terms.
When labour was relatively scarce - eg when we hit full employment in the late 60s/early 70s, profit margins were squeezed; the rate of exploitation declined.
I don't see a problem here.

Socialism In One Bedroom

The point about Sweden is that 'high' taxes are no barrier to economic wellbeing, as some claim. In fact the evidence seems to suggest the opposite.

So, yes Sweden may have other factors that make them a 'success' but 'high' taxes has been no detriment.

"Perhaps the best we can hope for is to moderate the worst impulses of the powerful"

Or release the talents of the not so powerful!

In a world where 85 billionaires are worth more than half the worlds population and where even in the advanced nations wealth inequality is quite startling, moderating the powerful is putting it mildly!

"Marx, also there makes clear that any change in distribution can only be achieved by a change in production relations."

The evidence suggests he was wrong about this.

"Engels makes clear that it is precisely the relations of supply and demand for labour-power"

I think this is true and those who spout off that footballers are paid higher than nurse because people value footballers above nurses should be reminded that the wages are determined not by what people 'prefer' but by the market for that labour!

Luis Enrique

chris,

I think there's obviously a tension between claiming capital is scare but also that there's as much of it about as anybody has any use for (returns from building more of it are lower than on holding cash with a negative real interest rate).

of course I agree that workers' power increases when labour markets are tight, bosses when slack. But that doesn't mean the source of capitalist's power is "scarcity of physical capital", there's any number of alternative explanations (membership of a club with barriers to entry etc.)

chris

@ Luis - there is a tension if you think in textbook terms of a smmothly differentiable marginal product of capital. But you shouldn't. More capital means different capital - and returns on the latter are so low it's not worth investing. This is compaitble with capital-in-place (the stuff that employs workers) being scarce.

Luis Enrique

Chris,

No I don't think that resolves it. Yes captial is heterogenous but capital-in-place can be duplicated, but isn't being so, so I still think odd to call it scarce.

I was thinking that things like barriers to entry are a potential explanation. Given barriers, we have all the capital we have a use for. But if the barriers were removed, we'd be able to use more and we'd get more, making it less scarce.

Of course the extent to which barriers to entry matter in modern economies is questionable, and I still think that scarcity of capital doesn't quite hit the nail on the head. Ability to extract rents is closer to the Mark IMHO.

Luis Enrique

Hmm, no actually i think it probably amounts to the same, you are right - barriers to entry create scarcity in a sense, those inside the barrier don't want to invest more because they are optimising like a monopolist, those outside cannot invest profitably.

Blissex

«However, we have now lost the idea or even perhaps hope that workers can be political agents in themselves. It seems instead that political agency lies only with the rich or the state.»

Where "we" is the majority of South Eastern voters who are property rentiers and see themselves as part of the "lady of the manor" class («sipping port», «smug expression» :->), that is they think they are the "rich", and they hate for workers to be uppity and be presumptuous that they can be political agents in themselves.

My usual numbers again:

http://www.bbc.co.uk/news/business-19288208
«In 2001, the average price of a house was £121,769 and the average salary was £16,557, according to the National Housing Federation. A decade on, the typical price of a property is 94% higher at £236,518, while average wages are up 29% to £21,330»

That's a (usually) tax-free capital gain of around £12,000 per year, for people on median wages of around £16,000 after tax per year.

That £12,000 on top of £16,000 for many million families and voters in the South East is a HUGE number, and the beneficiaries who have worked hard every year at waiting for their property to deliver those capital gains, have no use for and hostility to unions, socialism, political action by workers.

Do you think that unions, socialism, political action by workers could have lifted median wages of £16,000 after tax by another £12,000 tax-free?

Of course not, and the ladies of their mini-manor know that they can only thank the splendid policies of Thatcher and Blair for endless low, low cost debt for boosting asset prices, for holding back house building, pushing up immigration, and financing remortgages so flexibly.

All those ladies and lords of their mini-manor know is that "I'm allright Jack", and that exploitative parasitic workers should have lower wages, and if unemployed lower benefits, especially if from the North because the cost of hired help today is just unbelievable, and thank Thatcher and Blair for all those splendid East Europeans who are eager to pay huge rents to sleep 4 to a room, and to work for minimum wage or less, bringing down the ridiculous costs of gardeners, nurses, cleaners, and supporting the excessively low prices of our properties :-).

Blissex

I see some disbelieving comments about ChrisD's notion that *productive* capital is *relatively* scarcer today, so some points for them to consider:

* That beardie guy was at some time speaking of the "reserve army of labour" as something that greatly improves the leverage of property owners. The existence of a reserve army of labour has the main effect of making *productive* capital *relatively* scarcer; two sides of the same coin.

* That since 1990 a giant reserve army of labour from the second and third worlds have been unleashed onto the markets of the first world, making *productive* capital in the first world *relatively* scarcer, has been very plausibly noted by R. Friedman:
http://emlab.berkeley.edu/users/webfac/eichengreen/e183_sp07/great_doub.pdf

That *relative* prices depend largely on *leverage* (and so called demand and supply curves are full of kinks and are actually ribbons) is a topic discussed very intensely in business schools and political economy departments, and forbidden in Economics departments aligned with the Washington nonsensus.

That *labour* productivity is largely dependent on the general stock of capital is also discussed, but only in political economy departments that still research or teach development economics or economic history.

The Economist for example occasionally mentions just how terrible is a simple thing like delivering beer cases to retailers in Africa. First world people give very much for granted the immense effect on their productivity of a vast stock of reliable roads, trains, telephones, ... As Keynes illuminatingly pointed out almost all capital is long term capital.

Luis Enrique

further (probably unwanted) thoughts ... much of the discussion about a lack of investment opportunities isn't (obviously) about artificial scarcity created by monopolists, but about a more fundamental lack of profitable investment opportunities that would not be remedied by removing barriers to entry, and similar. In which case there is still something odd about calling something scarce when supply is such that we have no further use for it. Or at least, it's still not getting at the root problem which is whatever is preventing their being enough jobs created to tighten the labour market and raise worker bargaining power.

this isn't about whether you can differentiate production functions, it's more about how you see heterogeneity. So you need to think beyond a single aggregate "capital", but you could have heterogeneous capital and production functions then thinking of them as if you could differentiate them is not a problem I can see. And if the root cause is capitalists with market power creating conditions that limit investment and create unemployment, that's not really about physical capital itself being heterogeneous but rather the market position of the firm installing it mattering.

Blissex, we know that when unemployment is high bosses have the whip hand, but there needs to be some more insight than saying unemployment is high *because* jobs are scarce. How does "relative scarcity of productive physical capital" differ from saying "unemployment is high"?

Boffy

@rogerh

"The success of capitalism seems to me to lie in its similarity to family structure and from family structure follows politics via tribal leaders, warlords, monarchs etc etc. So power structures and capitalism or what amounts to capitalism mutually align very easily. Both align with human nature - good and ill."

The problem here being that tribes existed prior to families! The family in its various forms arises out of the tribe, not vice versa. As for human nature, that would depend upon which human nature you are talking about. The human nature of people living in primitive communes was different from that of slave society, was different to that under feudalism, was different to that under Capitalism.

Boffy

@ SIOB,

I don't see how you think Marx has been proved wrong about it being impossible to change distribution without changing the basis of production. If you are right about that, then the reformists and liberals were right all along. No need for Socialism, just keep improving the pay and conditions of workers under Capitalism!

But, the facts show Marx was right. Over more than 100 years of reformism and attempts to redistribute through the tax and benefits system, inequality is greater today than ever, and for the reasons Marx sets out.

"'Engels makes clear that it is precisely the relations of supply and demand for labour-power'

I think this is true and those who spout off that footballers are paid higher than nurse because people value footballers above nurses should be reminded that the wages are determined not by what people 'prefer' but by the market for that labour!"

I don't know who has argued that people prefer footballers to nurses. That seems a strange argument to make. The Marxist argument, however, is that the labour of people like footballers or brain surgeons is complex labour rather than simple labour, because its product has a higher value in the market than the product of the same amount of simple labour.

That indeed can be seen by how much consumers are prepared to pay for the product of 1 hour of the labour of a Premier League footballer compared to the product of an hour of the labour of say a nurse.

Boffy

Just to emphasise the point above, wages are the phenomenal form of the value of labour-power, and, therefore determined by the interaction of supply and demand for that commodity (labour-power). That means the demand is determined by the use value of that commodity, which is a function of how much surplus value capital can extract from it, and of supply, which is a function of the value of labour-power i.e. of the value of the wage goods required for its reproduction.

This determination of wages has nothing whatsoever to do with the value produced by the particular form of concrete labour for example the labour of a nurse or a footballer. The only relation would tend to be that where a particular concrete labour produces high levels of value compared to simple labour, if wages for this labour are low then surplus value will be above average. This will encourage capital to engage in this type of activity, raising demand for that type of labour, and thereby causing wages for it to rise. However, if wages for this type of labour rise above the value of that type of labour-power, that in turn would cause workers to move into that type of concrete labour, thereby reducing wages again.

Boffy

The error made by SIOB is to operate on the Smithian basis of confusing the commodity "labour-power" with "labour" the essence and measure of value. So when he says,

"I think this is true and those who spout off that footballers are paid higher than nurse because people value footballers above nurses should be reminded that the wages are determined not by what people 'prefer' but by the market for that labour!"

This makes no sense as Marx states in criticising such an approach by Smith and his followers, because there is no such thing as market for "labour". There is a market for the products of labour i.e. commodities, and their is a market for the commodity "labour-power", but there is no market for labour, because labour is not a commodity, "labour" no value.

Boffy

@Chris,

Its not the supply of physical capital v the supply of physical labour-power that is significant. The physical means of production are not in themselves capital anyway as Marx sets out. Capital is self-expanding value, and both the means of production and the labour-power are both physical forms of capital one as constant capital the other as variable capital.

It is the fact that the means of production are monopolised by the capitalist class, and that they possess the money-capital to purchase those means of production, whereas the workers don't, which places the capitalists at an advantage over the workers. It is the fact that the production relations as described by Marx ensure that distribution increasingly exacerbates that situation - in the Grundrisse Marx makes a clear distinction between affluence and wealth, because you can be afluent, i.e. have a high income, without being wealthy, i.e. own capital.

What determines whether labour-power is abundant or not is not the level of unemployment, but the extent to which available labour-power can be employed profitably.

Boffy

@Blissex

"That's a (usually) tax-free capital gain of around £12,000 per year, for people on median wages of around £16,000 after tax per year."

But, its a capital gain that could be wiped away and more overnight. Besides, its a capital gain that can only be realised if you intend to swap that house to live in a tent or something, because to realise it you have to sell the house, and that leaves you needing somewhere to live. Somewhere the same will cost you the same, and the exchange costs, somewhere better in the same area will will cost you more, because higher priced houses will have risen more in absolute terms for any percentage increase, meaning you will actually have suffered a capital loss not gain.

You could sell the house in the South-East and buy a much better house for much less money in Stoke, but then you would have to accept not having a job!

Socialism In One Bedroom

"If you are right about that, then the reformists and liberals were right all along. No need for Socialism"

This is only true is you have a very narrow view of what socialism is. For me socialism is profoundly different to how a capitalist market system works. If Boffy is arguing that socialism will basically be capitalism but with a fairer distribution then I would say he is the reformist. Socialism is not just fairer distribution but different distribution, distribution on an entire different basis.

So while I would argue that different configurations of capitalism can deliver different distributions I would argue that it couldn't fundamentally change what that distribution is and the basis of it.

Footballers are paid differently to nurses because of certain characteristics of hiring footballers. For a start, clubs are in an effective bidding war for footballers, as clubs have 'perfect knowledge' about the skills of footballers. So clubs know Messi is better than Stuart Downing for example. But the market for nurses is different, there isn't perfect knowledge and no bidding war between hospitals, well not a pronounced as for footballers.

So the particularities of the market for footballers and nurses is pertinent to what their wage is. Other factors come into the equation obviously.

Blissex

«Besides, its a capital gain that can only be realised if you intend to swap that house to live in a tent or something, because to realise it you have to sell the house,»

I see that myself and several others have wasted a lot of their time explaining that the second most popular and long lasting Thatcher policy avoids that concern: remortgages were "liberated" as one of the first acts of her government, at the same time as Right-To-Buy.

With remortgages a miracle is possible: that rentier incumbents can cash in tax-free their capital gains without selling their assets and thus depressing prices of he same assets, actually boosting them with the example of their fortune.

Some of my usual quotes:

http://www.opendemocracy.net/ourkingdom/oliver-huitson/thatcher-black-gold-or-red-bricks
«Another of Thatcher’s magic potions was ‘home equity withdrawal’ or remortgaging – drawing down the equity in the borrowers home for (mainly) consumption purposes – new cars, holidays, and so forth.
Under the two Prime Ministers that preceded her, James Callaghan and Ted Heath, home equity withdrawal as a percentage of GDP growth was around 36% for both.
Under Thatcher, this exploded to over £250bn across her premiership – a staggering 104% of GDP growth. [ ... ]
But Blair did his homework and let loose – as did Thatcher – a wave of cheap credit, financial deregulation, house price inflation and an equity withdrawal-led consumption boom.
Withdrawals under Blair’s leadership totalled around £365bn, that’s a full 103% of GDP growth over the same period,»

http://www.dailymail.co.uk/money/mortgageshome/article-2105240/Stuck-rent-trap-How-middle-class-family-kept-remortgaging-home-pay-bills-longer-afford-repayments.html
«Certainly, we overstretched ourselves when we bought our lovely period home for £419,000 in 2002. But with mortgage companies practically throwing loans at us in a rising property market, we slept soundly at night, smug in the knowledge the house was making us money. [ ... ]
The valuer had barely been in the house for five minutes yet we were able to borrow a further £80,000. [ ... ]
We were lulled into a false sense of security about our wealth. Whenever we overspent we just remortgaged without comprehending the consequences of taking yet more equity out of the property.
In our defence, we weren’t spending the money on expensive designer clothes, luxurious holidays or flash cars. Much of it was going on school fees and upkeep of the house.
By the beginning of 2008 we had remortgaged three times, taking out a staggering £500,000 loan on a house that wasn’t worth much more. Our interest-only mortgage payments had soared to nearly £3,000 a month.»

It is the modern miracle!

Because remortgaging creates something fabulous: what I call the debt-collateral spiral, a spiral of enormous benefit to the City and rentiers.

When the value of the an asset as collateral goes up, people can borrow more against it; but by borrowing more instead of selling they drive up asset prices, which raises the value of those assets as collateral, and bang!

The debt-collateral spiral has created far greater inflation than the price-wages spiral did decades ago, but since the only inflation economists care about is wage inflation (not goods or services or asset inflation), nobody has objected.

The result is that *private* debt levels have ballooned, following the increase in the value of asset collateral, while lender leverage ratios have ballooned too:

http://alphanow.thomsonreuters.com/2013/04/chart-of-the-week-the-end-of-the-beginning-for-the-uk-consumer/
http://www.independent.co.uk/money/loans-credit/1430000000000-britains-personal-debt-timebomb-8950372.html
http://www.moneymorning.com.au/20090925/surge-in-britains-household-debt-coincided-with-slowdown-in-consumer-spending-growth.html

«But, its a capital gain that could be wiped away and more overnight.»

Probably none of the hard-working ladies and lords of the mini-manors ever thought that was possible: their superior productivity :-) has returned massive capital gains without end for 25 years at least. And given that literally millions of them have cashed in the fruits of their hard-work they know that they can fire any government that dares to stop supporting by any means necessary their entitlement to such capital gains.

Consider people who buy or build houses on flood plains, in locations that get flooded regularly every few years: they are confident that they can fire any government that dares to punish them by not insuring them, one way or another, against any costs of the choice they have made.

Blissex

«How does "relative scarcity of productive physical capital" differ from saying "unemployment is high"?»

The two concepts are perhaps related, but somewhat indirectly.

A ditch can be built in two ways for example:

* lower unemployment and lower value added and less capital by using many workers with shovels.
* higher unemployment and higher value added and much more capital by using a few workers with excavators and fuel (a very important detail).

The capital/worker ratio largely determines the amount value added, while the worker employed/unemployed ratio largely determines how value added is divided between wage and profit. Beardie, Sraffa and others wrote a fair bit about that.

Of course, given a certain stock of capital and a certain amount of potentially employable workers, and how substitutable in practice they are, the two (worker/capital ratio and unemployment) are then somewhat related, but they are very different concepts.

If capital is *relatively* scarce wrt workers more workers may find employment (if profitable) but value added will be lower; if capital is *relatively* more abundant less workers may be employed but value added will be higher.

The optimal situation for workers is lots of capital and few total workers, as in that case the value added will be higher and the share of if going to the workers will also be higher.

A standard observations of historians is that after the Black Plague standards of living for workers went up substantially, as the Black Plague did not destroy capital, and the relative scarcity of workers pushed investment into more productive (in terms of worker time) capital, which perhaps led to eventually to the Industrial Revolution.

Luis Enrique

Blissex

so capital is relatively more abundant in the excavators case, but aren't capitalists going to be making more money in that case? Value added is higher. I thought the Marxist account was that capitalists made money because capital was relatively scarce?

Blissex

«capital is relatively more abundant in the excavators case,»

No, it is going to be more abundant in the excavators and few workers case. In the excavators and lots and lots of workers not so much.

«but aren't capitalists going to be making more money in that case?»

That depends on a lot of other things. Value added ("surplus") is going to be higher with the excavators, but how that gets divided between workers and excavators owners depends also on how many workers there are.

The absolute and relative levels of worker and owner shares is driven by somewhat different factors, including prices in other industries.

«the Marxist account was that capitalists made money because capital was relatively scarce?»

That's the business school account, which is about people with equal bargaining power participating in a symmetrical market.

The marxian account is similar but its essence is different. It is about alienation and power IIRC.

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