The ideology of "the market"

One curiosity of the row over top BBC pay has been the attempts of past and present BBC bosses to defend high pay by invoking “the market”. “There is a market for Jeremy Vines, there is a market for John Humphrys” says James Purnell. “We operate in a market place.” Pay is based on a “market-based calculation” say Mark Damazer (9” in). “The BBC does not exist in a market on its own where it can set the market rates.If we are to give the public what they want, then we have to pay for those great presenters and stars" says Lord Hall.

However, the “market” here is a queer one. There aren’t many firms who want to hire someone to read the ten o’clock news, and there aren’t many who can supply the proven skills to do so. It’s a thin market. In such a market, we should understand pay as being set by a bargaining process in which power is exercised on both sides.

Talk of the “market” is therefore what Georg Lukacs called reification – the process whereby “a relation between people takes on the character of a thing and thus acquires a ‘phantom objectivity.’” It obfuscates the fact that wages are set by the power of one person over another. Such obfuscation serves a profoundly ideological function; it effaces the fact that the capitalist economy is based upon power relationships.

Of course, BBC presenters aren’t unusual here. It’s generally the case that the labour “market” is in fact a power relationship.

For example, (many) capitalists have bargaining power and (many) workers do not. This means that, generally speaking, capitalists exploit labour.

And the “market” has given us a relative decline in low-skilled pay since the 1980s. This isn’t wholly due to technical developments but to changes in power, such as the decline of trades-unions and welfare state and adoptions of surveillance technologies that have reduced the efficiency wage element of their pay.

Similarly, “market forces” have given us stagnating real wages over the last ten years. But again talk of the “market” disguises what are in fact dysfunctional emergent features of capitalism – the stagnant labour productivity that has arisen from, among other things, low innovation and capital spending.

What’s more, “demand” is in part an ideological construct. Bosses are well-paid in part because of an ideological belief in the transformative power of leadership – a belief that isn’t wholly backed by facts. And carers and cleaners are poorly paid because of an ideology which devalues their work.

Talk of “the market” is often question-begging; it begs the question of how, exactly, prices and wages are determined in the market. The answer usually involves some element of power.

Now, Hall, Damazer and Purnell are not stupid men and they probably fancy themselves – not perhaps wholly without justification - as among the more liberal and humane members of the ruling cadre. And yet they guilty of an unreflecting inability to see that market relationships are also power relationships. In this of course, they are not unusual. I’ve long complained that centrists and “liberals” have a blindspot about power; we saw just this in this week’s Taylor report for example.

This blindspot, of course, serves the interests of the rich well. The BBC is not impartial.

Comments

[Brian]

I found myself surprisingly annoyed by the salaries which BBC stars earn, and the likelihood that the 'headline' numbers are substantially lower than the total package which would include pensions and payments to production companies. The annoyance I think is maybe partially caused by envy, so let me try and list the reasons for the surprise:
1. These earnings are obtained without downwide risk. Unusual at this quantum.
2. There is not much marginal value added by each star. If Gary L. did not cover the football, someone else would.
3. The stars are milking their relationship with a near monopoly, which monopoly creates the true value in what the BBC provides.
4. There's not much of a case for sticking it to the man, when you are the man (gender next point).
5. All press coverage has been about the gender disparity over pay, not the
larger issue, which is the looting of a publicly funded organisation
6. Chris' point re talk of a market being total baloney.
7. A massive issue in the UK is pay disparity and another is asset wealth disparity caused by the property market working as a pyramid scheme. The BBC is unlikely to look into this matter if it's top talent are beneficiaries and arguably perpetuators of these injustices.

In writing this, my surprise has turned to anger.

[aragon]

As we all know this free market favours the privately educated. And no doubt Southeners.

http://news.sky.com/story/the-bbc-pay-gap-is-bad-its-class-gap-is-worse-10957166

Of course the real scandal is the range of salaries at the BBC.

Sex and Race discrimination are purely statistical and the pool of talent extremely exclusive.

The distinction within talent pales in comparison to the income distribution, and discrimination, when social background is considered.

https://www.theguardian.com/media/2017/jul/22/bbc-massive-pay-gap-hundreds-of-workers-and-top-stars

Of course if we use the real figures for Chris Evans, the average salary is 1% of his BBC income.

http://www.mirror.co.uk/tv/tv-news/bbcs-real-top-earning-presenter-10848757

A market funded by a compulsory tax, with criminal sanctions, and in the case of ITV copyright and access to the airwaves.

The BBC just reflects (or leads) the trends in society, UK and the world.

http://www.economist.com/node/21564414

"Third, there is a reform agenda to reduce income disparities that makes sense whatever your attitude towards fairness. It is not about higher taxes and more handouts. Both in rich and emerging economies, it is about attacking cronyism"

Thousand of applicants for every post, 'proven' (or just familiar) talent is really cronyism, and in the case of Chris Evan, talent proved to be less transferable to Top Gear.

[Tynnie Todgers]

All absolutely true.

Except, of course, when the labour market is opened up to a few million poor foreigners. That has no effect on the bargaining power of workers who are, after all, paid their marginal revenue product.

No blindspot there, no sir.

[Bill Posters]

Pay should be linked to the physical distance you are working off a secure level. Working on ladders must command a premium. The clue is in the terminology HIGH pay.

As regards the BBC. The only person ever due high pay was the late John Noakes (Ok I'll make one exception for Orla Guerin). Reading an autocue or chatting about politics on college green cannot be described as work.

[Luis Enrique]

'Talk of the “market” ... effaces the fact that the capitalist economy is based upon power relationships.'

I am not sure about this. We talk about pricing power in markets all the time. When universities add 'market' supplements to academic salaries, it's because they are trying to attract people who have bargaining power. I think it's quite common to talk about "the market" for something and for that to confer an idea that includes power.

[Magnus]

@Tynnie Todgers,

You're right opening up the labour market has absolutely no effect at all. Before immigration workers (certainly most of them, and the ones you are talking about) had no bargaining power, and after immigration they had no bargaining power.

So no difference. Unless you are somehow invoking the lump-of-labour fallacy? (Clue: which is a fallacy.)

[Luis Enrique]

btw, on the importance of outside options in the labour market, have you seen this (amazing) paper showing how public works programs push up market wages?

http://econweb.ucsd.edu/~kamurali/papers/Working%20Papers/NREGS_GE%20(Current%20WP).pdf

[Blissex]

«Unless you are somehow invoking the lump-of-labour fallacy? (Clue: which is a fallacy.)»

There is a very well informed blogger "Sandwichman" who says that the "lump of labour fallacy" is not a fallacy, with very persuasive arguments.

Actually his arguments, as I constantly remind him, apply to the "lump of wages", which is a different thing from the "lump of labour".

The "lump of labour" is indeed a fallacy, but the "lump of wages" is a quite valid argument: (in the aggregate) it is very easy to replace a £16/hour job with two £8/hour jobs, but it is a lot harder to add a new £16/hour job to an existing £16/hour job.

[Blissex]

«it is a lot harder to add a new £16/hour job to an existing £16/hour job.»

Of course it is easier when the only constraint on higher production is labour. It is very hard when the main constraint, as in Greece's case, is the need to pay in hard currency for imports.

[Blissex]

«how public works programs push up market wages»

The idea of "market wages" is highly suspect in an economy where the level of interest rates at which banks can borrow is a gift of the government, at the very least, never mind tax and spend levels and regulations.

Anyhow, that is likely why "conservative" Economists always advocate lower interest rates to banks and lower regulation of credit (boosts asset prices) rather than public works programmes.
A "card carrying neoliberal" and member of the "Rubin wing of the democratic party" has even traduced JM Keynes to the point of writing:

“Keynes would have added a fourth, one known to us today as the “Greenspan put” – using monetary policy to validate the asset prices reached at the height of the bubble”.

PS of course that “public works programs push up market wages” must be qualified with "in the absence of a thoroughly elastic labour supply". As the Fed and the BoE have repeated many times, a large potential supply of low-wage labour is "anti-inflationary".

[Tynnie todgers]

@ Magnus

Eh? If you'd said workers *retain* bargaining power otherwise one evokes the LOL fallacy, it'd have made sense. Or if you'd left it at workers have none before or after. But what you've written makes no sense.

[Blissex]

«All press coverage has been about the gender disparity over pay»

Pure New Labour/New Democrat/New Conservative "identity politics" point of view: "the markets"/"meritocracy" give everybody their just compensation except when they are discriminated against sexually or racially.

«7. A massive issue in the UK is pay disparity and another is asset wealth disparity caused by the property market working as a pyramid scheme. The BBC is unlikely to look into this matter if it's top talent are beneficiaries and arguably perpetuators of these injustices.

In writing this, my surprise has turned to anger.»

Instead of being so selfish and envious :-), you should celebrate the good fortune of so many property and business rentiers who are enjoying much better living standards than they ever earned thanks to the "market based" upward contributions of their renters and viewers :-).

There are a few books that argue that "the markets" have replaced God as the source of all wisdom and justice. Most Economics books are extended rewrites of the original words of the "all things brights and beautiful" hymn :-).

[Blissex]

All things bright and beautiful,
All creatures great and small,
All things wise and wonderful,
The free markets made them all.

The rich man in his castle,
The poor man at his gate,
the free markets made them high and lowly,
And ordered their estate.