Class, power & ideology

“Nothing makes sense without class” says Owen Jones.
He’s right, if we understand “class“ in its Marxist sense.
To Marx - though the idea was implicit in other classical economists such as Ricardo - class was not about lifestyle, but about one’s relationship to the economy. If your income comes from wages, you’re working class. If it comes from capital, you’re a capitalist.
You might reply that, by this criterion, we are almost all working class now. True. Even people who think of themselves as “middle class” are in many cases only a P45 away from poverty. They are objectively working class even if they are not subjectively so.
In this sense, Marx was right to predict that capitalism would produce an increase in the numbers of the working class. Remember, 200 years ago the yeoman farmer, the master craftsman, or the comfortably off idle wife were all significant social roles. They are, I suspect, less significant now.
What’s more, class in this sense is correlated with power: capitalists have it, workers don‘t*. This is because economic power flows to scarce resources and capital is scarcer than labour.
This perspective yields answers to three key questions which cannot be answered without the concepts of class and power:
- why has inequality increased since the 1980s? It’s because a mix of technical change and the emergence of a mass supply of cheap labour from China and India have increased the power of capital relative to labour.
- why is the pain of deficit reduction falling upon public sector workers and benefit claimants rather than the “rich”? It’s because the “rich” have power and workers and benefit claimants don’t.
- why did the state bail out bankers but not ordinary workers who lost their jobs? It’s because bankers have power - though the precise source of this is another question.
This raises the question. If class is so central to an understanding of the economy, why is it so little discussed?
The answer lies in another of Marx’s insights - that false consciousness prevents people from seeing how capitalist power operates. In this sense, the cognitive biases research programme throws up some new theories that vindicate Marx. For example:
- the illusion of control causes people to over-estimate the chances of them escaping the working class through their own efforts, and so under-estimate the importance of collective class action .
- the in-group heterogeneity bias (which is the flipside of the out-group homogeneity bias) causes people in similar economic positions to exaggerate the differences between themselves and so fail to see their common class position.
- the just world effect causes people to think that victims are to blame for their fate - so, for example, the poor are thought to be stupid and feckless even if the cause of their poverty lies elsewhere.
- the optimism bias leads people to think they will succeed if only they work hard enough, and so blinds them to the possibility that their class position will prevent them getting the full fruits of their labour.
And here, I part company with Owen. We cannot have a reasonable debate about class, because cognitive biases such as these are ubiquitous. Successful power structures persist in large part because the way in which power is exercised is hidden from us. The importance of class and the lack of discussion of it are two sides of the same fact.
* I’m simplifying horribly here. Many workers - most obviously the bosses who control firms owned by external shareholders - do have power. I’ll leave this for another time, as I don‘t think it much affects the main thrust of my point.

Comments

[Giuseppe Paleologo]

All three facts can be understood within the context of mainstream economics. Since Indian and Chinese worker are considered part of the labor input, it's oath mentioning that global inequality has decreased, which doesn't seem to be consistent with Marxian theory. Neither it's clear why are government workers being screwed now by capitalist and not in previous eras,, when their benefit increased. What is different? And, restricting our attention to the US, the recently approved health care reform represents a large redistributive program. How is it consistent with concept of class and power?

Finally, it seems to me that false consciousness explains little. There are cognitive biases, but you'd believe that after 200+ years people would have come to their senses.

[Cahal]

Good post, one niggle:

'why has inequality increased since the 1980s? It’s because a mix of technical change and the emergence of a mass supply of cheap labour'

Partially, but I am unable to believe that rent extraction by the FIRE industry is not a significant factor.

Giuseppe, people have spent many hundreds of years in far worse conditions than ours and failed to rise up because of cognitive biases.

[Jimmy Hill]

Which cognitive biases do Marxists suffer from?

[Luis Enrique]

How can you be so confident something hidden from us exists?

[guthrie]

Surely the workers have vast amounts of capital at their disposal, namely pension funds. The problem is that the funds are managed by the financial industry in order to make profits for themselves (And some for the pensioners) as part of global capitalism, so even the workers savings get co-opted into the capitalist system.

[Richard]

It's a pity Marx never completed chapter 52 of volume 3 of Capital where he was due to go into more depth about class.

[Luis Enrique]

In what sense is capital scarce? Global savings glut, all that money seeking returns, why isn't every positive NPV project financed?

[JazzBumpa]

This is a great post.

But please have a look at Thoma's repost. It is 1000 times more readable.

White space, indents.

They really do a lot.

Cheers!
JzB

[Brant Williams]

"- why has inequality increased since the 1980s? It’s because a mix of technical change and the emergence of a mass supply of cheap labour from China and India have increased the power of capital relative to labour."

Once again someone takes the time to answer this question...then they miss the obvious. To answer this question...you have to look at the last time it happened. The last time inequality grew so rapidly was in the 20's.

Why? Because of the growth of the financial sector, and its ability to siphon off fees and commissions in an economy that grows rapidly in a period of unsustainable credit expansion.

Most economists...and economic thinkers seem to miss this, yet it is so obvious. It is probably because with the exception of Austrian Schoolers...most economist ignore the credit cycle...and the effect of credit balances (debt) in the economy. When you have a period of delusional credit expansion (which is as much a social phenomenon as an economic one), those in the financial sector are positioned to siphon off gains because they are the ones who deploy the new capital! It is as simple as that.

The period from 1932 to 1950 was the greatest re-equalization in incomes this country has ever seen? Why did it happen? Because those in the financial sector that levered themselves up in the 20's to speculate were offered no protect after the collapse. To a person they were allowed to default or bankrupted if their investments led them that way. No one bailed them out.

Do you want to equalize incomes? Stop protecting the financial sector. Price capital correctly (ie raise interest rates) and return finance to its true role...as a support function for true value added economic activity.

Finance is not a value adding activity. It is a support activity. Finance can exist as a value adding sector ONLY temporarily, in the presence of an unsustainable credit boom.

[The Pedant-General]

"why is the pain of deficit reduction falling upon public sector workers and benefit claimants rather than the “rich”? It’s because the “rich” have power and workers and benefit claimants don’t. "

No: it's because public sector workers and benefit claimants are drawing on the public purse rather than contributing to it.

It is by definition impossible to reduce public spending without spending less on those people consuming that spending.

The alternative - to raise taxes - is not possible since the state already takes more than 50% of GDP. Raising this proportion further is just never going to be sustainable.

[Jonathan Monroe]

You might reply that, by this criterion, we are almost all working class now.

False. An increasing minority of the population are retired, and living off the wealth accumulated during their working lives. Where this wealth consits of paid-off houses, private-sector pensions, and conventional savings and investments, the retired are objectively part of the bourgoisie.

Non-destitute pensioners benefit from hard money and cheap labour. There is a reason why they are the core of the Tea Party.

[Tim Almond]

"why did the state bail out bankers but not ordinary workers who lost their jobs? It’s because bankers have power"

Am I missing something? It seems to me that at the moment they were bailed out, the banks had very little power. All the power rested with the government to bail them out or not.

[Philip Walker]

why did the state bail out bankers but not ordinary workers who lost their jobs? It’s because bankers have power - though the precise source of this is another question.

Well, it's a very pertinent question given it sits squarely within the ambit of your footnote: bankers, after all, are workers who have power (and not only the managing ones). They were bailed out while their capitalist employers sustained losses.

If this is, as you say, a 'key question', doesn't it suggest that the capital-labour split is not in fact the one which we need to worry about?