Monday, April 20, 2020

Stairway to Serfdom

I posted the above chart four days ago in "From Social Distance to Social Justice" to illustrate Arthur Dahlberg's argument about the eventual consequences of a declining labor share of income. Dahlberg was inspired by Stephen Leacock's The Unsolved Riddle of Social Justice and both Leacock and Dahlberg were influenced by Thorsten Veblen.

The chart also illuminates arguments made by Moishe Postone about Marx's theory of capitalist production. I happen to agree substantially with Postone's interpretation of Marx even though I find his presentation repetitive and difficult to follow. That is, I think I agree with what I think he was trying to say in Time, Labor and Social Domination

What the chart shows is that in spite of a more than threefold increase in productivity over roughly the last half-century, the per capita hours of work increased in a series of steps with each successive business cycle culminating in a higher level of hours per capita. "Because total value created is a function only of abstract labor time expenditure." Postone wrote, "increased productivity yields a greater amount of material wealth but results only in short-term increases in value yielded per unit time." Postone later remarks that one consequence of this dynamic "is the accelerating destruction of the natural environment."

The object of capitalist production is not the material wealth that it yields in increasing quantities. The object is the expanded accumulation of capital through the production of surplus value. At one point Postone asserts that "labor is actually the object of production" and elsewhere that "value operates as a socially constituted form of abstract domination." This may sound like "the man who mistook his wife for a hat" but I think it is absolutely correct and extremely important, if difficult to parse. 

Let me try. Value is abstract, as is surplus value. Material wealth is concrete but it doesn't increase proportionately to value. Labor is also concrete but, in contrast to material wealth, increases in abstract labor time are, ultimately, proportionate to increases in value. Social domination is what ties labor to abstract labor time.

The difficulty here is that Postone -- and Marx -- are referring to a contradictory process. Literally. Explicitly. "Capital itself is the moving contradiction," Marx wrote in the Grundrisse, "[in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth." Here we have an explanation for the oscillations in the red line in the chart above. Productivity gains propel the economic recovery, which enlists more labor and more labor time, which creates a drag on productivity. Statistically, this is a tautology since hours of work is the denominator in the productivity equation.

Why is each successive peak higher than the last one through five business cycles? I suspect that this is not a characteristic feature of "market capitalism" but is an unintended consequence of managed capital. One could call it "inflation" if that term hadn't already been thoroughly colonized by the apologists for capital. "Inflation is always and everywhere a monetary phenomenon," proclaimed Milton Friedman, thereby foreclosing once and for all consideration of any alternative analysis.

Hours inflation is a type of inflation -- just as asset bubble inflation is a type of inflation. But pay no attention to the man behind the screen. "Inflation is a process by which the presumed nexus between signifier (monetary value) and signified (material commodity), representation and 'reality,' becomes strained or even broken altogether," wrote Sarah L. Lincoln. There is that word, "value" again and it is instructive to shuffle through the phases: value, surplus value, labor time, abstract domination.

The presumed nexus between monetary value and the material commodity is that a certain quantity of labor time was expended in production of the quantity. But this is a presumption that becomes more and more strained with the development of modern industry. "On the one side, then, it [capital] calls to life all the powers of science and of nature, as of social combination and of social intercourse, in order to make the creation of wealth independent (relatively) of the labour time employed on it," Marx wrote in the Grundriss. "On the other side, it wants to use labour time as the measuring rod for the giant social forces thereby created, and to confine them within the limits required to maintain the already created value as value."


Clearly, in Marx's analysis labor time is not the power behind the creation of wealth. Instead it is the yardstick, imposed by capital, for measuring the worth of all that creation. Why? To maintain the already created value as value. The danger is that properly acknowledging the powers of science, nature, social combination and social intercourse in the creation of wealth would devalue the massively inflated assets, which presumably entitle the capitalist to a large and increasing share of material wealth. Those assets become "stranded assets," which is a nice way of saying liabilities. 

Marx's argument here is that the more labor time is rendered superfluous by modern industry, the more desperately does capital cling to it as the measure of value. Capital "diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition – question of life or death – for the necessary." The relentless ascent, decade after decade, of hours worked per capita documents the increasing superfluity of that labor time. The less labor time is needed the more of it is needed! This is the very definition of contradiction.

In the last four weeks, 22 million Americans filed new claims for unemployment insurance. What will it take to "get them back to work"? Those 22 million -- along with another 22 or 44 million -- were already redundant before the coronavirus lockdowns were imposed. What if creating those 40 or 60 million jobs requires destroying 30 to 50 trillion dollars worth of imaginary asset value? Anybody wanna buy a barrel of Western Canada Select? A bargain at minus fifteen cents a barrel.

14 comments:

Anonymous said...

In the last four weeks, 22 million Americans filed new claims for unemployment insurance. What will it take to "get them back to work"? Those 22 million -- along with another 22 or 44 million -- were already redundant before the coronavirus lockdowns were imposed. What if creating those 40 or 60 million jobs requires destroying 30 to 50 trillion dollars worth of imaginary asset value?

[ Really interesting essay, but how then is China intent on employing such a vast workforce ever more productively and ending severe poverty this very year for all the distressing epidemic damage? ]

Sandwichman said...

China's GDP per capita is about equivalent to what the U.S. real GDP per capita was in the early 1950s. U.S. is now five or six times that. So clearly there is far less sheer volume of material goods and labor time to be occupied by the superfluous. Nevertheless, it wouldn't be prudent for China to focus exclusively on "growth."

Anonymous said...

"China's GDP per capita is about equivalent to what the U.S. real GDP per capita was in the early 1950s...."

Say what?

https://www.imf.org/external/pubs/ft/weo/2019/02/weodata/weorept.aspx?pr.x=54&pr.y=7&sy=1980&ey=2019&scsm=1&ssd=1&sort=country&ds=.&br=1&c=924%2C134%2C532%2C534%2C158%2C111&s=PPPPC&grp=0&a=

October 15, 2019

Gross Domestic Product per capita based on purchasing-power-parity (PPP) * for China, Germany, Hong Kong, India, Japan and United States, 1980 & 2019

1980

China   ( 310)
Germany   ( 11,287)
India   ( 559)
Japan   ( 8,948)
United States   ( 12,553)

2019

China   ( 19,504)
Germany   ( 53,567)
India   ( 8,378)
Japan   ( 45,546)
United States   ( 65,112)

* Data are expressed in US dollars adjusted for purchasing power parities (PPPs), which provide a means of comparing spending between countries on a common base. PPPs are the rates of currency conversion that equalise the cost of a given "basket" of goods and services in different countries.

Anonymous said...

Nevertheless, it wouldn't be prudent for China to focus exclusively on "growth."

[ China is, of course, focusing on growing well-being, sound environmentally healthy growth and increasing social equity. As for per capita GDP, that of China was 19,504 while that of the US was 65,112 in 2019.

I made the point that by the close of 2020, China will have ended severe poverty in the country which is a monumental accomplishment as a look to India shows. Growth in China will be increasingly sound and inclusive. There will be work enough. ]

Anonymous said...

In the last four weeks, 22 million Americans filed new claims for unemployment insurance. What will it take to "get them back to work"? Those 22 million -- along with another 22 or 44 million -- were already redundant before the coronavirus lockdowns were imposed....

[ This really makes no sense. There is all sorts of important work to be done in America and will remain so. The argument with no evident justification, begins to look merely nihilistic. ]

Anonymous said...

In the last four weeks, 22 million Americans filed new claims for unemployment insurance. What will it take to "get them back to work"? Those 22 million -- along with another 22 or 44 million -- were already redundant before the coronavirus lockdowns were imposed....

[ Good grief, there are any number of people on whom I personally depend and who I am grateful for who are not working now and who I want working again for their sake and for mine. This idea of redundancy for people who are part of my life is ridiculous and even offensive. I am grateful for any number of people I have come to rely on. ]

Sandwichman said...

"This really makes no sense. There is all sorts of important work to be done in America and will remain so."

Sure, there is all sorts of important work to be done that is not being done. It is not being done -- and will not be done -- because labor is kept busy valorizing capital and there is no profit to be made doing the important work that needs to be done.

Thanks for posting the PPP comparisons. I take it as evidence that there is more "inflation" in the U.S. than is measured by the cpi or incorporated into the implicit price deflator.

Anonymous said...

Sandwichman:

"Sure, there is all sorts of important work to be done that is not being done. It is not being done -- and will not be done -- because labor is kept busy valorizing capital and there is no profit to be made doing the important work that needs to be done."

Ah, now I understand the essay and here I can agree.  With this necessary explanation, I find the essay completely sympathetic and important.

Anonymous said...

Sandwichman:

"Sure, there is all sorts of important work to be done that is not being done. It is not being done -- and will not be done -- because labor is kept busy valorizing capital and there is no profit to be made doing the important work that needs to be done."

Suppose we just start with the private healthcare insurance sector, which was highly inflationary in 2019, and think about the redundant workers who might actually be delivering healthcare in a range of ways.

This Sandwichman essay is terrific, but please do make the complaint about redundant workers clearer, at least for the likes of me.

Anonymous said...

Having read the essay again, the argument is excellent but do clarify the harsh-seeming passage about labor redundancy. I really do like this.

By the way, another type of development model to use could be Kerala, India.

Peter T said...

I genuinely do not know what it means to say that labour time is the yardstick..for measuring the worth of wealth, or that labour valorizes capital. Can you explain?

Sandwichman said...

Peter T,

Imagine a world in which skills and tools were generic. Everybody has the same set of skills and the same collection of tools. How much would A offer in exchange for what B made and what offer would B accept? A will trade what he can make in a day for what B can make in a day. That's the Adam Smith story.

Is it because A's and B's products both "embody" the substance of one day's worth of labor time? NO! NO! NO! A thousand times no. It is because both A and B reckon that way. The labor time theory of value is a theory of subjective reckoning, social convention, historical and cultural specificity.

Are skills and tools generic in the real world. Of course not. So then how can we know that labor time is the yardstick for measuring wealth or valorizes capital? We can't know that. But we can build a model and see if the model's predictions match what happens.

IF labor time was the yardstick for measuring wealth and valorizing capital, either labor time would have to perpetually increase over time OR capital would have to be periodically destroyed. Otherwise the rate of profit would fall.

I offer the chart at the top of the post as evidence for labor time increasing over a period of time in which government policies were enacted to prevent or mitigate the periodic destruction of capital.

Peter T said...

Thanks. I can at least see where you are coming from, even though to this non-economist it seems weird. If 'labour time' and 'capital' are socially-constructed categories (which it seems you think they are) then there's no compelling reason - no necessity - for either to have any relationship to the other. Would it not be simpler in this case to construe 'capital' in the above graph as 'elite power'?

Sandwichman said...

"there's no compelling reason - no necessity - for either to have any relationship to the other"

No compelling reason other than the preservation of arbitrary social dominance under a mask of inevitability.