Political Economy

Theory and Practice

April 18th, 2014  |  Published in Political Economy, Politics

I’ve been having some conversations about Occupy and its legacy, and whether it “succeeded”. I tend to think that if such a question is meaningful at all, I’d have to answer by going the Zhou Enlai route. But then I was thinking about the improbable media breakout of Thomas Piketty and his doorstop treatise Capital in the 21st Century.

A few years ago, Piketty and his colleague Emmanuel Saez were obscure economists, well known to income data nerds like me but otherwise anonymous as they went about generating pictures like this:

Rise-of-the-Super-Rich-Piketty-and-Saez-2008

Then Occupy happened, and we saw things like this:

OWS_wonk

And now we have this:

piketty_rock_star

Both Piketty’s theory and Occupy’s practice are open to criticism—some of both will be forthcoming in Jacobin. And of course the salience of inequality, and hence Piketty’s star profile, aren’t wholly a product of Occupy. Still, one could hardly ask for a simpler illustration of the dialectic of theory and practice, and of Marx’s contention that “theory also becomes a material force as soon as it has gripped the masses.”

The Comforts of Dystopia

March 21st, 2014  |  Published in anti-Star Trek, Political Economy, Shameless self-promotion, Socialism

I’m currently working on a longer treatment of Four Futures, my social science fictional speculation about the possible successor systems to capitalism, in a world characterized by pervasive automation and ecological crisis. That book is slotted for Jacobin‘s series; more about that at a later date.

Four Futures was, itself, an extension of “Anti-Star Trek”, a post that still gets some love around the Internet from time to time. The core intuition of both pieces of writing was that while we live in a world that abounds in utopian potential, the realization of that potential depends on the outcome of political struggle. A rich elite that wants to preserve its privileges will do everything possible to ensure that we don’t reach a world of leisure and abundance, even if such a world is materially possible.

But one of the things I’ve struggled with, as a writer, is the tendency of my more speculative writing to mine a streak of apocalyptic quiescence on the radical left. To me, the story I’m telling is all about hope and agency: the future is here, it’s unevenly distributed, and only through struggle will we get it distributed properly. I suppose it’s no surprise, though, after decades in retreat, that some people would rather tell themselves fables of inevitable doom rather than tackling the harder problem of figuring out how we can collectively walk down the path to paradise.

So of the four futures I described, the one that I think is both the most hopeful and most interesting—the one I call “communism”—is the least discussed. Instead it’s exterminism, the mixture of ecological constraints, automation, and murderous elites, that seems to stick in peoples’ brains, with the anti-Star Trek dystopia of intellectual property rentiers running a close second.

But strip away the utopian and Marxist framework, and all you have is a grim dismissal of the possibility of egalitarian politics. You get something like this, from Noah Smith, which echoes my account of exterminism but updates it to our present drone-obsessed times. For a lot of isolated intellectual writer types, it can be perversely reassuring to think that achieving a better world is not just difficult, but actually impossible. How else to explain the appeal of Chris Hedges?

Another piece of news that recently aroused this sensibility was this Guardian post about an alleged “NASA study” predicting the “irreversible collapse” of industrial civilization. Here, via Doug Henwood, is a critique of the study itself and the lazy media that propagated it. And another Twitterer links to this, which is even more damning. In short, the study—which the original author didn’t even bother to link to—had little to do with NASA, and was a crude theoretical model based on a handful of equations. Frankly, as far as futurology goes, I think “Four Futures” was built on a far sounder scientific foundation.

What depresses me is not so much the perambulations of a crank with a Guardian blog, such people will probably be with us forever. But many people I know and like were eager to share this thinly sourced bit of nonsense around Facebook and Twitter, suggesting that it spoke to a desire for apocalyptic scenarios among ostensibly pragmatic leftists.

This fatalism is the perfect complement to the equally inane positivity that pervades bourgeois discourse, whether it’s coming in the form of self-help as dissected by Barbara Ehrenreich, or as the phony utopianism of silicon valley plutocrats. The ruling class tells us that the future is inevitably bright, while left curmudgeons reassure themselves with the conviction that it’s inevitably gloomy. We don’t win from playing this game, taking our meager emotional returns while our opponents take their payment in a much more tangible form.

The Problem of “Capital in the Twenty First Century”

March 10th, 2014  |  Published in anti-Star Trek, Political Economy

Today marks the English-language publication of Thomas Piketty’s eagerly awaited Capital in the Twenty-First Century. I haven’t read the book yet, so I can’t comment on the adequacy of its approach to the problem of capital in the twenty-first century. But I can comment on a specific problem of “Capital in the Twenty-First Century” that turns out to be illuminating.

In his review of the book, Dean Baker complains that Piketty’s account is overly deterministic, largely due to an inattention to the details of institutional structures which shape the distribution of wealth and income, and which are potentially subject to change by political means. In particular, he draws attention to one of his, and my, recurring themes: intellectual property. Using drug companies as a case in point, Baker notes that this industry makes up 2 percent of GDP and 15 percent of corporate profits, based entirely on “government granted patent monopolies”.

Drug patents may be the most egregious example, but there’s plenty more where that came from. After reading Baker’s review, I headed over to Amazon, with the thought of picking up an ebook edition of Piketty’s book. There I found that the Kindle edition retails for a whopping $27.48, for a grand total of $1.45 in savings over the physical, hardcover edition.

Only copyright law and digital copy protections make this possible, of course—copying an ebook is trivial and nearly costless. And who benefits from that? Presumably some royalties accrue to Piketty and his translator, Arthur Goldhammer. Which I can’t really begrudge, although Piketty already enjoys a comfortable faculty position at the Paris School of Economics.

But the other beneficiary is the publisher, Harvard University Press, and it’s a bit harder to see how they need the money. HUP is a division of Harvard University, which, some incidental educational operations aside, is primarily an enormous investment fund presiding over $32 billion dollars in assets. Which brings us around to another of Dean Baker’s objections, which is that the unusual success of Harvard’s investments may not simply be due to the expertise of its financial managers. He proposes insider trading as another plausible (albeit unsubstantiated) explanation: “graduates of these institutions undoubtedly could [provide] their alma maters with plenty of useful investment tips.”

All of which is to say that while I laud Piketty’s support for increased taxation of income and wealth, the peculiar case of his own book illustrates Baker’s important counterpoint. It’s a point that could equally be directed at certain Marxists and other leftists, for whom all efforts at reformist politics are doomed to fail a priori: “capitalism is far more dynamic and flexible than the way Piketty presents it”, and thus we should pay close attention to “the specifics of the institutional structure that is crucial for constructing a more egalitarian path going forward.”

Guards, Workers, Machines

February 17th, 2014  |  Published in anti-Star Trek, Political Economy, Politics, Shameless self-promotion, Socialism, Work

I see that a couple of my longtime interests—guard labor and the relationship between wages and productivity—have surfaced in the New York Times and the Economist, respectively.

The Times published an article by the economists Samuel Bowles and Arjun Jayadev, advancing their research on what they call “guard labor”: the work of security guards, police, the armed forces, prison staff, and others whose function is chiefly “guarding stuff rather than making stuff”, in the words of another economist they quote.

Bowles and Jayadev first proposed the concept of guard labor, as far as I know, in this paper from about ten years ago. Their basic insight is that maintaining a system of unequally distributed private wealth requires a large amount of repressive labor that is not directly productive. I first drew on their idea a few years ago in my sketch of the economy of anti-Star Trek (and I should note that the economics of Star Trek has also gotten another recent treatment.) I returned to it in “Four Futures”, which also considers the increasing significance of guard labor in a society characterized by abundant and unequal wealth alongside ecological scarcity.

In their latest update, Bowles and Jayadev advance their analysis by empirically analyzing guard labor in a cross-national perspective, and relating it directly to income inequality. They find, unsurprisingly, that higher levels of inequality are strongly correlated with a stronger share of guard labor in the economy. To over-simplify only a bit, societies with a greater social distance between the rich and poor require more people to protect the haves from the have-nots. Thus Bowles and Jayadev suggest that reducing economic inequality is an important part of rolling back our increasingly militarized, carceral society.

Meanwhile, at the Economist, we have Ryan Avent (technically unattributed, according to the magazine’s annoying convention), writing about an apparently unrelated topic: the relationship among productivity, economic growth, and wage stagnation. The post is long and contains a number of interesting detours, but the basic point is simple: “productivity is often endogenous to the real wage.” What this means is that technological change in the production process isn’t something that happens independently of what’s happening to the wages of workers. Rather, high wages spur productivity growth because they encourage businesses to economize on labor. Conversely, lots of workers competing for jobs at low wages is a recipe for slow growth, because there is little incentive to use labor-saving technology when labor is so cheap.

As it happens, this is exactly what I suggested a few years ago, in response to Tyler Cowen’s theories of technological stagnation. I’ve elaborated the point, and even drawn on the mainstream economist Daron Acemoglu, who also crops up in Avent’s post. But economics writers have been remarkably resistant to the idea that wages and technology can dynamically interact like this, and the Economist post still treats it as a scandalous proposition rather than something that seems compelling and obvious on its face. Thus we find ourselves trapped in an endless, unhelpful debate about whether or not technology is some kind of independent, inevitable cause of unemployment and wage polarization.

Having examined various aspects of the problems that arise from a glut of too-cheap labor, Avent ends up very close to where I do on these issues, in particular on the value of reducing labor supply. A higher minimum wage is important, since it provides the necessary incentive to economize on labor. But it’s not sufficient, because we also need to reduce the amount of hours of work, both through shorter hours and lower labor force participation. That means something like a Universal Basic Income not tied directly to employment. Which brings us back to the same place Bowles and Jayadev end up as well: massive redistribution to tackle income inequality and share out the benefits of a highly productive economy.

Avent notes with amusing understatement that “redistribution at the scale described above would be very difficult to engineer.” It will require, in fact, pitched class struggle of no less intensity than was necessary to build the socialisms and social democracies of the 20th century. But taking that path is the only way to get to something resembling the two egalitarian endings I sketched, as part of my speculative political economy choose-your-own-adventure in “Four Futures”, which I called communism and socialism. The alternative is to continue along the path Bowles and Jayadev describe, to a society locked down by guard labor—whether that’s the rentier dystopia of pervasive intellectual property I called rentism, or the inverted global gulag of rich enclaves scattered across a world of ecological ruin, which I called exterminism.

The Left and the State

January 20th, 2014  |  Published in Political Economy, Politics, Socialism

The New Republic has long been notorious for posing as a liberal magazine while publishing allegedly provocative or contrarian articles that serve mostly to undermine liberal and progressive politics. This tendency seemed to abate a bit when Facebook millionaire Chris Hughes took over the magazine from the notorious racist and warmonger Marty Peretz. The latest from Sean Wilentz, however, falls squarely within the old tradition. We are to believe that rather than principled critics of the surveillance state, the likes of Edward Snowden and Glenn Greenwald are motivated by “paranoid libertarianism”; they “despise the modern liberal state, and they want to wound it.”

Henry Farrell has already done the necessary demolition of this particular bit of hack-work at Crooked Timber, so there’s no need for me to repeat it. And I’d be less concerned if this line of argument were limited to Wilentz, who has an established track record as a truculent apologist for established government elites. But Wilentz’s argument resembles Mark Ames’ ongoing crusade against Greenwald and Snowden, as well as David Golumbia’s tirade against “cyberlibertarianism” at Jacobin. (Golumbia can be found in the comment section at Crooked Timber as well, mostly supporting the Ames/Wilentz line.) So I’m interested in what drives this obsession with people like Greenwald and Snowden (and presumably Chelsea Manning, although she tends to be invisible in these accounts) as vectors for noxious libertarianism rather than people who are doing courageous and useful work even if their politics aren’t socialist.

I think Henry Farrell is right to see, with Wilentz, an attempt to conflate the ideal of the liberal state with the existing national security state, in an attempt to force defenders of the welfare state to also embrace the authoritarian warfare state. But with the sympathizers to Wilentz’s left, I see something a bit different going on. I found this post from Will Wilkinson helpful in thinking this through. Wilkinson is libertarian-ish in his beliefs, but I find he can provide a helpful perspective despite coming from rather different moral and political economic premises. In this case, I think he correctly identifies the trap that some of these left attacks on people like Snowden or Greenwald fall into.

Wilkinson notes that theoretically, libertarianism is “an argument against the possibility of legitimate government.” This makes it clearly incompatible with most socialist or social democratic attempts to democratize the market or expropriate the means of production. Yet nevertheless “it’s crazily illogical to reason that the actually existing state is justified on liberal terms just because the libertarian critique of the state is false, and a legitimate liberal state is possible.” Substitute “socialist” for “liberal”, and I think the point stands just as well. He further points out that mounting a libertarian defense of our current economic relations depends on a parallel sleight of hand, “confusing our unjustifiably rigged political economy with a very different laissez faire ideal.”

But there seems to be an instinct, among some on the Left, to suppose that defending the possibility of government requires rejecting any alliance with libertarians who might criticize particularly noxious aspects of the existing state. Or, to be a bit more subtle, that any critique that emphasizes government authoritarianism merely distracts us from the critique of private power, in particular the power of the boss.

I don’t think it’s true that attacks on NSA surveillance somehow make it harder to bring up corporate privacy abuses or the tyranny of capital in the workplace. But more than that, I think that when leftists set themselves up as defenders of government against libertarian hostility to the state, they unwittingly accept the Right’s framing of the debate in a way that’s neither an accurate representation of reality nor a good guide to political action.

The Right, in its libertarian formulation, loves to set itself up as the defender of individual liberty against state power. And thus contemporary capitalism—often referred to by that overused buzzword, “neoliberalism”—is often equated in casual left discourse with the withdrawal of the state.

But in the works that developed neoliberalism as a category of left political economy, this is not how things are understood at all. Neoliberalism is a state project through and through, and is better understood as a transformation of the state and a shift in its functions, rather than a quantitative reduction in its size. In his Brief History of Neoliberalism, David Harvey underlines the importance of the state in forcibly creating a “good business climate” by breaking down barriers to capital accumulation and repressing dissent. Hence:

Neoliberalism does not make the state or particular institutions of the state (such as the courts and police functions) irrelevant, as some commentators on both the right and the left have argued. There has, however, been a radical reconfiguration of state institutions and practices (particularly with respect to the balance between coercion and consent, between the powers of capital and of popular movements, and between executive and judicial power, on the one hand, and powers of representative democracy on the other)

The growth of the surveillance state, in this formulation, clearly makes up a central part of the neoliberal turn, and is not something ancillary to it.

However, the misrecognition of the specifically neoliberal state continues to mislead liberals and leftists, and not only on the topic of the national security state–a state, it should be noted, that is inextricably linked with the nominally private sector, in the form of contractors such as the one that employed Edward Snowden. As the neoliberal state moves in the direction of governing through crime, it becomes increasingly important to dismantle the prison-industrial complex, a joint public-private project of domination, exploitation and social control.

And yet there is the persistent temptation to invoke the genie of state repression despite the Left’s documented inability to make it do its bidding. That can take the form of “humanitarian” warmongering or what Elizabeth Bernstein has described as “carceral feminism”: “a vision of social justice as criminal justice” that attempts to deploy the repressive power of the state to protect women who are portrayed as helpless victims.

Or take a very different issue, the recent chemical spill in West Virginia, which has exposed hundreds of thousands of people to toxic drinking water. The always acerbic and astute Dean Baker notes the witless habit of referring to this event as “a failure of government regulation” and a consequence of “free-market fundamentalism”. The real issue, he notes, is that the state protects the property rights of the rich while allowing them to profit from befouling our common resources. Baker has, I think, done some of the best popular writing attacking the fiction that the Right is for free markets while the Left is for government regulation. As I’ve noted elsewhere, the contest before us in the immediate future is between different regimes of state-created and -enforced property, not between the state and the market.

One should not have any illusions that critics of the national security state all share socialist politics. But we should judge these critics by what they say and do and what their political impact is. An endless inquisition into hidden beliefs and motives, and the attempt to unmask a devious libertarian hidden agenda, makes for a satisfying purity politics for those who want to justify their own inaction. But it does nothing to contest the predatory fusion of state and capital that confronts us today, which must be confronted in the government, the workplace, and many other places besides.

Regulatory Theater at the S.E.C.

November 7th, 2013  |  Published in Political Economy, Politics

Lately the Securities and Exchange Commission has been in the news for its newly aggressive enforcement stance. Most prominently, JP Morgan is reportedly settling for $13 billion to end investigations of its mortage-bond sales.

Discussion has tended to center on the particular details of this and other enforcement actions. Was it enough money? Will they admit wrongdoing? Will it be enough dissuade future transgressions? But the profile of S.E.C. chair Mary Jo White, by Nicholas Lemann in the current New Yorker, suggests that flashy enforcement actions may be a distraction from a different problem.

White is a career litigator, who has worked as the U.S. Attorney for the Southern District of New York (which includes Manhattan), as well as in private practice for some of the same Wall Street firms she faced off against in her government capacity. This led many to criticize her appointment for its apparent conflicts of interest.

This is certainly a problem. The response, presented in Lemann’s article, is that lawyers like White are part of a “Killer Elite”, too proud and arrogant to be open to corruption by private interests. This is self-serving to say the least. But even if true, Lemann suggests a bigger problem with appointing an enforcement minded litigator like White—a “cop on the beat”, as President Obama said when he nominated her.

The problem is that “the S.E.C. doesn’t just enforce rules that have been broken. It also writes rules to govern future activity.” This rule-writing process has gone into overdrive with the passage of the Dodd-Frank law, and it is an enormously complicated undertaking. Three years after Dodd-Frank’s passage, much of it hasn’t been implemented because the S.E.C. and other agencies haven’t finalized the rules. The issues involved in just one aspect of the law, the Volcker Rule, are so complex that the “Occupy the SEC” group produced a 325 page comment letter about it.

Mary Jo White’s predecessor, Mary Schapiro, was by Lemann’s account more of a regulator than an enforcer, while White is the opposite. The danger, therefore, is that even as the agency starts taking more high profile wins with headline-grabbing prosecutions, the important rulemaking side of the agency’s mission will fall into neglect or be captured by industry lobbyists. “It’s entirely possible”, writes Lemann, “for the government to become a tougher prosecutor and a more lax regulator at the same time.” And he suggests that’s more or less what White and Obama want.

But strict enforcement of the law is of little efficacy if all the truly dangerous behavior has been rendered legal. An overemphasis on enforcement also fosters a “bad apples” theory that blames financial instability on individual bad actors rather than systemically corrupt institutions. How else to explain the preoccupation with pursuing irrelevant bagmen like Wing Chau and Fabulous Fab Tourre?

Bruce Schneier coined the term “security theater” to describe practices that give the flamboyant appearance of protection against terrorism while doing little or nothing to address real threats. Think of the ritual inconveniences of the airport security line—when as we now know, the people most in danger may be the TSA employees, one of whom was gunned down at Los Angeles airport by a right-wing militant.

The shift in emphasis at the S.E.C. suggests a kind of regulatory theater (a phrase I’m not the first to think of), which produces satisfying headlines of bankers laid low, while failing to write rules that address the real failures of of regulation and oversight in the financial system. The danger is that even some liberals will be bought off by a seemingly populist gesture, even as the emphasis on individual wrongdoers deepens the carceral turn in liberalism while failing to address the inherent contradictions of capitalist finance.

And just as the failure to prevent terrorism merely becomes the pretext for further elaborations of the anti-terrorism bureaucracy, so the lack of sound financial regulation can be a pretext for more of the punitive enforcement actions that White seems to relish. While reassuring the industry that she wants to avoid imposing “unnecessary burdens or competitive harm”, she remarks to Lemann at the article’s close that with regard to systemic risks in the financial system, she sees “any potential risks as a problem that needs to be solved”.

Class, Technology, and Transit Strikes

October 21st, 2013  |  Published in Political Economy, Politics, Socialism, Work

With employees of the Bay Area Rapid Transit system on strike, the Sillicon Valley tech elite has reminded us all that despite their enlightened Bay Area lifestyles, they are still, at root, a bunch of rich dudes. Corey Robin ably documents the reactionary politics and moral degeneracy of people who see themselves as heroic entrepreneurs and the people who get them to work as greedy parasites.

The combination of the strike and the government shutdown has shined a welcome light on the more delusional parts of the tech bro intellegentisa, who revel in government dysfunction and dream of stateless techno-utopias. It’s all the more amusing to see these would-be John Galts dismissing the need for government one moment, and bemoaning the shutdown of a public transit agency the next.

But the most revealing of the tech industry commentaries on the strike is this one, in which Gregory Ferenstein attempts to sort out what he sees as a difference of opinion about the virtues of technology and innovation. He asserts that “the very existence of unions threatens the kind of unpredictable disruption that fuels the knowledge economy”, and that what is at stake in the BART strike is not class struggle but rather the tech elite’s “legitimate philosophical differences that assume the benefits to innovation outweigh the short-term gains of protecting workers”.

In a way, this attempt to change the subject from class to technology is the mirror image of Gavin Mueller’s essay in a recent Jacobin, in which he takes me to task as a techno-utopian and suggests that “instead of depending on capitalism to give us all the machines we need for a socialism without scarcity or drudgery, we put the installation of technology on hold until ‘after the revolution’”. Rather than fight over how different kinds of technologies are implemented and how the losers from change are compensated, he suggests that we concentrate on “the disempowering effects of automation”. Thus manual control over the production process takes precedence over control over the workplace or the economy. But by portraying technical change under capitalism as always and only a nefarious plot to intensify exploitation and disorganize workers, Mueller affirms the gambit of those like Ferenstein who would prefer to debate the merits of innovation rather than the social relations of class and power. He thus makes an ideal foil from the perspective of the libertarian tech bro.

I have no intention of playing that part, however. I’m more interested in examining what the “innovation vs. worker rights” framing presupposes, and what it cedes.

Ferenstein insists that that there’s no need for unions for either the “lucky elite class of tech workers” who have “all the benefits and influence they could ever hope for,” or for the “army of freelance engineers that thrive on unpredictability.” As Scott Kilpatrick observed on Twitter, the “lucky elite” rests on top of a mass of precarious contractors and service employees who have little voice in companies like Google. But Ferenstein’s view is a telling indicator of the wordview of the tech elite, who breathlessly tout “disruption” and glamorize unpredictability and uncertainty. For this elite, losing your job only means moving on to the next startup, or retiring on a pile of stock options. It doesn’t mean prolonged unemployment, homelessness, or being cut off from health care.

For transit workers, of course, disruption and unpredictability have much more dire implications, but Ferenstein would prefer to distract us from that reality by portraying their concerns as the consequence of a philosophical objection to innovation. But instead of playing the straight man to this routine by extolling the virtues of stable employment, let’s ask instead what it would mean to make unstable labor relations the bearable and even pleasant experience that they can be for the elite. It would mean something like what the Danish Social Democrats call “flexicurity”: a system that protects workers rather than jobs, by providing a robust system of unemployment benefits and training programs to ease the burden of joblessness and the transition between jobs.

For the true believers in libertarian secession, such policy would no doubt amount to an intolerable state incursion on the freedom of the entrepreneur. But I’m more interested in the comment of UserVoice CEO Richard White, quoted by Andrew Leonard (and then re-quoted by Ferenstein): “Get ‘em back to work, pay them whatever they want, and then figure out how to automate their jobs so this doesn’t happen again.”

This doesn’t quite get at the real substance of the dispute, which is more about work rules than about pay. In particular, the union wants to preserve a provision that requires mutual agreement between management and the union before an existing labor practice can be altered.

As is typical in disputes like this, the employer tries to portray the work rule under discussion as an absurd impediment to rational management, while the union raises its valid uses. So BART claims that this rule “makes it difficult to make technological changes like having station agents file reports by e-mail instead of writing them out longhand, using e-mail instead of fax machines to send documents and sending paycheck stubs to each work location electronically instead of hand-delivering them.” But it’s hard to see just why the union would object to this. More plausible is the union’s contention that the past practices rule is useful for things like “preventing BART management from making punitive work assignments to employees who have filed workplace complaints.”

This strike thus turns out to be an excellent example of the dynamic I wrote about some while back, the dialectical interplay between class struggle and technological development. I noted there that technology is two sided under capitalism: it can increase material abundance, and it can also oppress and fragment workers, and often it does both at the same time. In that earlier post I posited that “the form that technological change takes is shaped by the strength and organization of workers.” This is what we see played out in the BART strike.

The transit workers’ union, SEIU local 1021, has an interesting post describing their most recent settlement offer. Their proposal, they say, “allows for the continued use of new technology in the workplace but protects workers from changes in work rules that would lead to unsafe conditions.” The post goes on to note the recent fatal accident that occurred recently when two workers were killed by trains under the operation of BART managers. The union strategically positions itself not as an opponent of technology, but as an advocate for innovations that truly improve the transit system, rather than just providing ways for management to degrade the power of labor—whether by imposing unsafe working conditions or by using computer scheduling to disrupt the predictability of the workday, which is the example of anti-worker technology I cited in my earlier post.

In another post, the union notes that “the system is carrying more passengers than ever with fewer frontline workers than ever.” So it seems that the union is not even attempting to preserve all jobs for their own sake, which would be an understandable position but also one that could genuinely impede the introduction of productivity-enhancing changes. Instead, they are trying to shape the development of the labor process in a way that is less dehumanizing to the worker.

But if CEO White got his wish, and we truly did “figure out how to automate their jobs” entirely, the union leadership and the members would probably have some understandable objections eventually. Which is why, as I note in a different post, a viable compromise between labor-saving technology and the working class has to be worked out an economy-wide scale rather than in a single workplace or industry. The Danish model, in other words, or something even more audacious.

Still, the BART strike is a useful starting point for moving away from the technobabble and talking about class and politics. And the approach of “give the workers what they want, then figure out how to automate” is far preferable to the more common “hyper-exploit the workers, while hand-waving about some great innovation that’s going to come along in the future.” What the BART workers are doing can be considered part of the utopian strategy of making labor expensive. And if the tech industry could take on the challenge of transforming economic processes while accepting the rights and dignity of existing workers, that would be some truly disruptive innovation.

The Ethic of Marginal Value

October 1st, 2013  |  Published in Political Economy, Politics, Socialism

Recently David Graeber has gotten some attention for an essay on “the Phenomenon of Bullshit Jobs”, which is notable mostly for getting some important arguments about the nature of work into wider circulation than usual. Mainstream economists have taken notice of Graeber’s contention that much of the activity that people are compelled to perform in return for their wages is “effectively, pointless”.

But the result of mainstream engagement, as often as not, is little more than a demonstration of the narrow perspective of the conventional economist. In that vein, I’m particularly enamored of this contribution from Alex Tabarrok at Marginal Revolution. Tabarrok seizes on an element of Graeber’s essay that echoes something I wrote about a couple of years ago: the weak relationship between the importance of the jobs people do and the reward they receive for doing them. As I put it back then, “it sometimes seems that the distribution of wages is, to a first approximation, the exact inverse of the social utility of work.” Or in Graeber’s formulation,”the more obviously one’s work benefits other people, the less one is likely to be paid for it.”

Tabarrok—along with, apparently, Brad DeLong—views this as an elementary error of reasoning, an example of “the diamond-water paradox”:

Water is cheap and its value low because the supply of water is so large that the marginal value of water is driven down close to zero. Diamonds are expensive because the limited market supply keeps the price and marginal value high. Not much of a paradox. Note that, contra Graeber, there is nothing special about labor in this regard or “our society.”

Moreover, it’s good that prices are determined on the margin. We would be very much the poorer, if all useful goods were expensive and only useless goods were cheap.

The impressive thing is just how much misdirection and and willful obtuseness Tabarrok manages to pack into a few sentences. The argument crumbles at whatever level one chooses to engage it.

To begin with, the chosen example is an amusing one, since it in no way exemplifies what it purports to demonstrate. Diamonds may be scarcer than water, but that is not what dictates their price. The price of diamonds has been maintained over the decades by the powerful DeBeers cartel, which has kept up prices through a combination of marketing and buying up excess supply. I suppose Tabarrok could counter that the phrase “market supply” doesn’t imply that the availability of a commodity is a function of physical scarcity. But I hardly think he would subscribe to the notion that supply in capitalist markets is or should be primarily determined by the actions of powerful monopolists.

Leaving this aside, Tabarrok is avoiding Graeber’s point by bringing up the marginal cost and the supply of different kinds of labor-power, rather than the social value of different kinds of labor. But even on these terms, it’s a pretty dubious argument. Let’s contrast a couple of the job categories that Graeber brings up: advertising and nursing. According to Bureau of Labor Statistics, there are about 620,900 people employed as “Advertising, Marketing, Promotions, Public Relations, and Sales Managers”, and 2,590,600 employed as “Nursing, Psychiatric, and Home Health Aides”. If the nurses make less money, even though there are more than four times as many jobs for them, then by Tabarrok’s account it must be because the skills involved in marketing are so rare, and those involved in nursing so plentiful. And yet by many accounts there is a serious nurse shortage, while I’ve yet to hear of a serious PR flack shortage afflicting the nation.

The more obvious explanation would be that wages are largely determined by how powerful workers are, and how powerful their industries are. In the extreme case of high finance, you have a sector that has succeeded in extracting large rents from the economy, as Felix Salmon explains, and has shared those spoils with a privileged layer of bank employees. But to understand this you would have to understand economic outcomes as the result of power relations, not immutable and impersonal market forces.

The most grievous illusion that Tabarrok propagates, however, is that “there is nothing special about labor” when it comes to the determination of prices by marginal value. This a good illustration of the argument that Seth Ackerman and Mike Beggs make in the most recent Jacobin: marginal productivity theory is an ethical theory masquerading as a description of social reality. What Tabarrok means is not that there is nothing special about labor, but that there should be nothing special about it. Just as DeBeers can increase the price of diamonds by buying up excess supply, the capitalist class ought to be able to keep the price of labor down by flooding the market with the desperate unemployed. The socialist tradition, however—whether in its Marxist or Polanyian form—holds that there is and should be something special about labor, because labor is people, and the freedom and welfare of the people is the proper subject of political economy.

Of course, the apologists for capitalism insist that they are the ones looking out for the welfare of the people, hence Tabarrok’s clucking reminder that “we would be very much the poorer, if all useful goods were expensive and only useless goods were cheap.” But even on its own terms, such defenses only work on a very abstract collective level, where total wealth matters but its distribution does not. After all, who’s “we” here? As Steve Waldman observes, this means that “it is socialists who are the individualists, attending to the sum of individual welfares, while unsympathetic capitalists rely upon collectivism to justify their good fortune and the policy apparatus that magnifies and sustains it.” Or as Oscar Wilde put it, “Socialism itself will be of value simply because it will lead to Individualism”.

Tabarrok seems to think that Graeber is recommending that wages be brought into line with some standard of inherent social value, but this is to miss the point. The point, rather, is to do what we can to separate the right to a decent standard of living from the labor one happens to perform. And, just as important, to break free from the illusions of both libertarianism and meritocracy—that is, from the belief that the price of labor either is or should be the measure of its value.

Curious Utopias

May 13th, 2013  |  Published in Political Economy, Politics, Socialism, Work

The Universal Basic Income hit the Washington Post again this weekend, courtesy of Mike Konczal. He focuses on left objections to the UBI proposal, ranging from its effect on gender equality to its relationship with the existing welfare state to its interaction with the struggle for workplace democracy. In the end, he emphasizes the benefits of the UBI, and insists that while we’re unlikely to see basic income in the United States anytime soon, it’s still worth “taking a moment to think Utopian”.

Matt Bruenig objects to Konczal’s characterization of the basic income as “utopian”, on the grounds that it is not something that “proposes to dramatically overhaul society into an entirely unprecedented structure that will usher in a nearly perfect world.” It is only utopian in the very weak sense that it is not currently on the political agenda as something that is likely to be enacted.

It’s certainly true that basic income is hardly utopian in its etymological sense of meaning “nowhere”. A recent article in Le Monde Diplomatique describes an experiment with UBI in an Indian village. The experiment is run by a trade union called the Self Employed Women’s Association, and it found that with just an extra $3.65 per month, “people spent more on eggs, meat and fish, and on healthcare. Children’s school marks improved in 68% of families, and the time they spent at school nearly tripled. Saving also tripled, and twice as many people were able to start a new business.” This is consistent with the results found in basic income experiments in Namibia and in 1970′s Canada.

Meanwhile, there have long been critics on the Left who criticize basic income proposals precisely for their perceived lack of utopianism. As Konczal notes, Barbara Bergmann argues that it is more important to secure broader access to specific goods like child care, health care, and education: “The fully developed welfare state deserves priority over Basic Income because it accomplishes what Basic Income does not: it guarantees that certain specific human needs will be met.” In a New Left Review essay, Göran Therborn strikes a similar tone, referring to the basic income as a “curious utopia of resignation” arising in response to welfare state retrenchment and diminished prospects for working class control over the workplace or the means of production.

From the perspective of the basic income’s leftist advocates, however, there is another way in which it can be considered a deeply utopian project. Fredric Jameson discusses two different meanings of utopia in his study of utopian politics and science fiction, Archaeologies of the Future. The first is utopia as a fully-elaborated program for the future society, which is close to Bruenig’s sense of the proposal to dramatically overhaul society. But the second is the utopian impulse, which appears across much broader domains of everyday life and politics, including even “piecemeal social democratic and ‘liberal’ reforms”. Such impulses may not themselves be the program for a utopian society, but they can point in the direction of future programmatic realizations.

The French writer André Gorz was a longtime proponent of the basic income, and is also responsible for a well-known theorization of its utopian transformative potential. In one of his early works, Strategy for Labor, he attempted to do away with the tired Left debate over “reform or revolution” and replace it with a new distinction:

Is it possible from within—that is to say, without having previously destroyed capitalism—to impose anti-capitalist solutions which will not immediately be incorporated into and subordinated to the system? This is the old question of “reform or revolution.” This was (or is) a paramount question when the movement had (or has) the choice between a struggle for reforms and armed insurrection. Such is no longer the case in Western Europe; here there is no longer an alternative. The question here revolves around the possibility of “revolutionary reforms,” that is to say, of reforms which advance toward a radical transformation of society. Is this possible?

Gorz goes on to distinguish “reformist reforms”, which subordinate themselves to the need to preserve the functioning of the existing system, from the radical alternative:

A non-reformist reform is determined not in terms of what can be, but what should be. And finally, it bases the possibility of attaining its objective on the implementation of fundamental political and economic changes. These changes can be sudden, just as they can be gradual. But in any case they assume a modification of the relations of power; they assume that the workers will take over powers or assert a force (that is to say, a non-institutionalized force) strong enough to establish, maintain, and expand those tendencies within the system which serve to weaken capitalism and to shake its joints. They assume structural reforms.

One criticism of the basic income is that it will not be systemically viable over the long run, as people increasingly drop out of paid labor and undermine the tax base that funds the basic income in the first place. But from another point of view, this prospect is precisely what makes basic income a non-reformist reform. Thus one can sketch out a more programmatic kind of utopianism that uses the basic income as its point of departure. One of my favorite gestures in this direction is Robert van der Veen and Philippe van Parijs’ 1986 essay, “A Capitalist Road to Communism”.

The essay begins from the proposition that Marxism’s ultimate end is not socialism, but rather a communist society that abolishes not merely exploitation (the unjust distribution of the social product relative to work performed) but also alienation: “productive activities need no longer be prompted by external rewards”.

They then go on to sketch out a scenario in which a reform instituted under capitalism leads to communism without the intermediary stage of socialist construction. This thought experiment revolves around the achievement of an unconditional, universal basic income. Suppose, they say, “that it is possible to provide everyone with a universal grant sufficient to cover his or her ‘fundamental needs’ without this involving the economy in a downward spiral. How does the economy evolve once such a universal grant is introduced?”

Their answer is that the basic income would “twist” the capitalist drive to increase productivity, such that:

Entitlement to a substantial universal grant will simultaneously push up the wage rate for unattractive, unrewarding work (which no one is now forced to accept in order to survive) and bring down the average wage rate for attractive, intrinsically rewarding work (because fundamental needs are covered anyway, people can now accept a high-quality job paid far below the guaranteed income level). Consequently, the capitalist logic of profit will, much more than previously, foster technical innovation and organizational change that improve the quality of work and thereby reduce the drudgery required per unit of product.

If you extrapolate this trend forward, you reach a situation where all wage labor is gradually eliminated. Undesirable work is fully automated, as employers feel increasing pressure to automate because labor is no longer too cheap. Meanwhile, the wage for desirable work eventually falls to zero, because people are both willing to do it for free, and able to do so due to the existence of a basic income to supply their essential needs. As Gorz puts it in a later work, the Critique of Economic Reason, certain activities “may be partially repatriated into the sphere of autonomous activities and reduce the demand for these things to be provided by external services, whether public or commercial.”

The long-run trajectory, therefore, is one in which people come to depend less and less on the basic income, because the things they want and need do not have to be purchased for money. Some things can be produced costlessly and automatically, as 3-D printing and digital copying technologies evolve into something like Star Trek’s replicator. Other things have become the product of voluntary co-operative activity, rather than waged work. It therefore comes to pass that the tax base for the basic income is undermined—but rather than a crisis, as in the hands of basic income critics, this becomes the path to utopia.

Consider, for example, a basic income that was linked to the size of Gross Domestic Product. We are used to a capitalist world in which the increase in material prosperity corresponds to a rise in GDP, the measured value of economic activity in money. But as wage labor comes to be replaced either by automation or voluntary activity, GDP would begin to fall, and the basic income with it. This would not lead to lowered standards of living, because the falling GDP here also denotes a decline in the cost of living. Just like the socialist state in certain versions of traditional Marxism, the basic income withers away. As van der Veen and van Parijs put it, “capitalist societies will smoothly move toward full communism.”

The capitalist road to communism is truly a utopia. Not only in the colloquial sense of a total transformation of a society, but also in its overly simplified and rationalistic picture of social evolution. As Jameson notes, utopias are defined as much by their closures and exclusions as their positive programs, as much by what they cannot say as what they can. A utopia often says more about the present in which it was written than it does about the future it depicts.

In the case of the capitalist road to communism, the things left out include the political struggles that would ensue if social development threatened to evolve the capitalist class out of existence, gradually sapping their profits and their social power. This began to manifest itself even under the meager basic income in the Namibian experiment: white landlords were deeply hostile to the basic income and denied the evidence of its benefits, perhaps because they are “afraid that the poor will gain some influence and deprive the rich, white 20 percent of the population of some of their power.” Also brushed aside are the ecological limits that might make true abundance elusive. Both of these are themes I attempted to flesh out in “Four Futures”. A third issue, which I’ve discussed a bit elsewhere, is the ingrained gender norms that may be reinforced by expanding the domain of “voluntary” labor, which often amounts the imposition of unpaid work on women. But the conceptual clarity of van der Veen and van Parijs’ rendition is enlightening in its very implausibility and incompleteness, a demonstration of the utopian impulse contained in an apparently timid policy proposal.

We Have Always Been Rentiers

April 22nd, 2013  |  Published in anti-Star Trek, Political Economy, Statistics

In my periodic discussions of contemporary capitalism and its potential transition into a rentier-dominated economy, I have emphasized the point that an economy based on private property depends upon the state to define and enforce just what counts as property, and what rights come with owning that property. (The point is perhaps made most directly in this essay for The New Inquiry.) Just as capitalism required that the commons in land be enclosed and transformed into the property of individuals, so what I’ve called “rentism” requires the extension of intellectual property: the right to control the copying and modification of patterns, and not just of physical objects.

But the development of rentism entails not just a change in the laws, but in the way the economy itself is measured and defined. Since capitalism is rooted in the quantitative reduction of human action to the accumulation of money, the way in which it quantifies itself has great economic and political significance. To relate this back to my last post: much was made of the empirical and conceptual worthiness of Reinhart and Rogoff’s link between government debt and economic growth, but all such disputations presume agreement about the measurement of economic growth itself.

Which brings us to the United States Bureau of Economic Analysis, and its surprisingly fascinating “Preview of the 2013 Comprehensive Revision of the National Income and Product Accounts”. The paper describes a change in the way the government represents the size of various parts of the economy, and therefore economic growth. The most significant changes are these:

Recognize expenditures by business, government, and nonprofit institutions serving households (NPISH) on research and development as fixed investment.

Recognize expenditures by business and NPISH on entertainment, literary, and other artistic originals as fixed investment.

The essential issue is whether spending on Research and Development, and on the production of creative works, should be regarded merely as an input to other production processes, or instead as an investment in the creation of a distinct value-bearing asset. The BEA report observes that “expenditures for R&D have long been recognized as having the characteristics of fixed assets—defined ownership rights, long-lasting, and repeated use and benefit in the production process”, and that therefore the BEA “recogniz[es] that the asset boundary should be expanded to include innovative activities.” Likewise, “some entertainment, literary, and other artistic originals are designed to generate mass reproductions for sale to the general public and to have a useful lifespan of more than one year.” Thus the need for “a new asset category entitled ‘intellectual property products’,” which will encompass both types of property.

What the BEA calls “expanding the asset boundary” is precisely the redefinition of the property form that I’ve written about—only now it is a statistical rather than a legal redefinition. And that change in measurement will be written backwards into the past as well as forwards into the future: national accounts going back to 1929 will be revised to account for the newly expansive view of assets.

Here the statisticians are only following a long legal trend, in which the state treats immaterial patterns as a sort of physical asset. It may be a coincidence, but the BEA’s decision to start its revisionist statistical account in the 1920′s matches the point at which U.S. copyright law became fully disconnected from its original emphasis on limited and temporary protections subordinated to social benefits. Under the Copyright Term Extension Act, creative works made in 1923 and afterwards have remained out of the public domain, perpetually maintaining them as private assets rather than public goods.

A careful reading of the BEA report shows the way in which the very statistical definitions employed in the new accounts rely upon the prior efforts of the state to promote the profitability of the intellectual property form. In its discussion of creative works, the report notes that “entertainment originals are rarely sold in an open market, so it is difficult to observe market prices . . . a common problem with measuring the value of intangible assets.” As libertarian critics like to point out, an economy based on intellectual property must be organized around monopoly rather than direct competition.

In order to measure the value of intangible assets, therefore, the BEA takes a different approach. For R&D, “BEA analyzed the relationship between investment in R&D and future profits . . . in which each period’s R&D investment contributes to the profits in later periods.” Likewise for creative works, BEA will “estimate the value of these as­sets based on the NPV [Net Present Value] of expected future royalties or other revenue obtained from these assets”.

Here we see the reciprocal operation of state power and statistical measurement. Insofar as the state collaborates with copyright holders to stamp out unauthorized copying (“piracy”), and insofar as the courts uphold stringent patent rights, the potential revenue stream that can be derived from owning IP will grow. And now that the system of national accounts has validated such revenues as a part of the value of intangible assets, the copyright and patent cartels can justly claim to be important contributors to the growth of the Gross Domestic Product.

The BEA also has interesting things to say about how their new definitions will impact different components of the overall national accounts aggregate. They note that the categories of “corporate profits” and “proprietors’ income” will increase—an accounting convention perhaps, but one that accurately reflects the constituencies that stand to benefit from the control of intellectual property. Thus the new economic order being mapped by the BEA fits in neatly with Steve Waldman’s excellent recent post about late capitalism’s “technologically-driven resource curse, coalescing into groups of insiders and outsiders and people fighting at the margins not to be left behind.”

The changes related to R&D and artistic works may be the most significant, but the other three revisions in the report are worth noting as well. One has to do with the costs associated with transferring residential fixed assets (e.g., the closing costs related to buying a house), while another has to do with the accounting applied to pension plans. Only the final one, a technical harmonization, has to do directly with wages and salaries. This is perhaps an accurate reflection of an economic elite more preoccupied with asset values than with the direct returns to wage labor.

Finally, the reception of the BEA report provides another “peril of wonkery”, related to the one I described in my last post. The Wonkblog post about the report makes some effort to acknowledge the socially constructed nature of economic statistics: “the assumptions you make in creating your benchmark economic statistics can create big swings in the reality you see.” And yet the post then moves directly on to claim that in light of the statistical revisions, “the U.S. economy is even more heavily driven by the iPad designers and George Lucases of the world—and proportionally less by the guys who assemble washing machines—than we thought.” This is no doubt how the matter will be described going forward. But the new measurement strategies are only manifestations of a choice to attribute a greater share of our material wealth to designers and directors, and that choice has more to do with class struggle than with statistics.