Scottish-born economist - Angus Deaton - recently published his new book - An Immigrant Economist…
Today, I was (perhaps) going to discuss the Federal coalition’s so-called budget costings, which they have released this afternoon a day and a half before the federal election is held. The major policy proposals are not costed and the whole exercise makes a mockery of their claims to transparency. The Coalition hired three so-called experts to validate the “costings” (after the debacle in the last election when their were major mistakes in the arithmetic revealed) and those characters should be ashamed of themselves for giving their imprimatur to such a shoddy process. Even from the pittance of information they have released it is clear they do not understand the macroeconomic reality and will damage overall growth. So that is all I intend to say about that matter. But in the last few days I have done a few media interviews (radio) on an article that appeared in the local Fairfax press, but was originally published in the Strike! Magazine as – On the Phenomenon of Bullshit Jobs by LSE anthropologist, David Graeber. The title in the local article had changed to “nonsense jobs” – a sign of the conservatism of our press. The interviews I did were interesting because the article brings together a number of strands that further expose the weakness of the economic theory taught to students in most universities. That is much more interesting to write about here than the tawdry realities of Australian politics at present which can be described as indecent ignorance.
David Graeber article seeks to investigate why the 1930 prediction by John John Maynard Keynes that by the Year 2000, “technology would have advanced sufficiently that countries like Great Britain or the United States would have achieved a 15-hour work week” has not materialised.
He might have just concluded – Capitalism and realisation of surplus value. About which I will return.
He notes that contrary to the technological possibilities:
Huge swathes of people, in Europe and North America in particular, spend their entire working lives performing tasks they secretly believe do not really need to be performed. The moral and spiritual damage that comes from this situation is profound. It is a scar across our collective soul.
First, he dismisses the view that it is due to a “massive increase in consumerism”, which has led us to choose “more toys” over “less hours” of work.
His argument is that “we have witnessed the creation of an endless variety of new jobs and industries since the ’20s, but very few have anything to do with the production and distribution of sushi, iPhones, or fancy sneakers”.
Which doesn’t constitute evidence that there has been a massive rise in consumerism, which makes certain demands on how long we work, especially when over the last several decades real wages growth has been suppressed by labour market deregulation. More about which later.
To document the occupational shifts (where the news jobs are), he uses, what he calls a “recent report”, which compares “employment in the US between 1910 and 2000.
The “recent” article, in in fact – Occupational changes during the 20th century – which was actually published in the US Bureau of Labor Statistics publication Monthly Review in March 2006, which makes his claim that is was recent sound rather curious. But a small point.
The BLS study finds that:
Professional, managerial, clerical, sales, and service workers (except private household service workers) grew from one-quarter to three-quarters of total employment between 1910 and 2000; laborers (except mine laborers), private household service workers, and farmers lost the most jobs over the period.
He concludes from that “productive jobs have, just as predicted, been largely automated away” (with a qualification for the “toiling masses in India and China” but there has also been a:
… ballooning … of the administrative sector, up to and including the creation of whole new industries like financial services or telemarketing, or the unprecedented expansion of sectors like corporate law, academic and health administration, human resources, and public relations.
He considerately calls these new areas of work “bullshit jobs” – “pointless jobs”.
Why? He notes that economic theory – by which he actually means neo-classical pure competition microeconomic theory – says that a proliferation of millions of pointless (read: unproductive jobs) should not happen.
Why would a competitive firm keep workers on who are not contributing according to their pay?
Answer: Capitalism is about surplus extraction. More about which later.
David Graeber’s version of the answer is about morality and politics such that:
The ruling class has figured out that a happy and productive population with free time on their hands is a mortal danger (think of what started to happen when this even began to be approximated in the ’60s). And, on the other hand, the feeling that work is a moral value in itself, and that anyone not willing to submit themselves to some kind of intense work discipline for most of their waking hours deserves nothing, is extraordinarily convenient for them.
He recognises that it is difficult for anyone to sit in judgement on someone else’s job. What is social value after all?
But he conjectures that there are “a whole class of salaried professionals that, should you meet them at parties and admit that you do something that might be considered interesting (an anthropologist, for example), will want to avoid even discussing their line of work entirely. Give them a few drinks, and they will launch into tirades about how pointless and stupid their job really is”.
The other point he raises is that:
… in our society, there seems a general rule that, the more obviously one’s work benefits other people, the less one is likely to be paid for it … Say what you like about nurses, garbage collectors, or mechanics, it’s obvious that were they to vanish in a puff of smoke, the results would be immediate and catastrophic. A world without teachers or dock-workers would soon be in trouble, and even one without science fiction writers or ska musicians would clearly be a lesser place. It’s not entirely clear how humanity would suffer were all private equity CEOs, lobbyists, PR researchers, actuaries, telemarketers, bailiffs or legal consultants to similarly vanish. (Many suspect it might markedly improve.)
He thinks the way the “work regime” has been designed is perfect for “maintaining the power of finance capital” and that “productive workers are relentlessly squeezed and exploited” with the “remainder … divided between a terrorised stratum of the, universally reviled, unemployed and a larger stratum who are basically paid to do nothing, in positions designed to make them identify with the perspectives and sensibilities of the ruling class (managers, administrators, etc)”.
Does he really answer his basic question – to explain why we are not all working within the technological limits – that is much less hours? He clearly doesn’t provide a good explanation despite the Op Ed being much longer than most.
To really answer the question and to understand why neo-liberalism has become dominant we have to ground the explanation in the dynamics of the capitalist system, which is why most of the competitive neo-classical theory fails. The latter doesn’t differentiate between the unique characteristics of production systems and thus ignores key dynamics, which yield explanatory capacity.
In a blog like this I cannot write a book each day so the following are just sketches of what a book exploring this question would have to cover.
I was asked in one radio interview yesterday on this topic whether I was a Marxist. I responded by saying I was not an “ist” anything nor did I follow any “ism” but that I thought the essential insights provided by Karl Marx about the essential features of the system of production we know as Capitalism were deep and remained apposite to this day.
That doesn’t mean that I would blindly hold onto every prediction and notion that appears in his work. No one is that prescient. But in detailing how surplus value is created, its role in perpetuating the productive relations, and the dynamics that it engenders, his work forms, in my view, the basis for understanding how our current system operates.
Is there still a dominant, owning class that maintains strategic control over our economy and financial system and has the capacity to dominate and bully elected governments into legislating to their advantage? Obviously yes.
Does the rise of the “middle class” make Marx’s analysis irrelevant? I don’t think so.
Has the fact that day-to-day control of capitalist firms being placed into the hand of specialist managers (the so-called divorce of ownership from control trend) negated Marxist analysis? I don’t think so.
The professional managers and technicians are now highly paid to do the bidding of the owners. Income inequality is rising not falling. Many of the gains made via the Welfare State have been retrenched over the last three decades as trade unions have been attacked and weakened, governments co-opted by powerful financial interests, and the fourth estate harnessed as the propaganda machine for the ruling elite.
While citizens get to vote in national elections, the idea that democratic pluralism has spread the power by eroding the influence of finance capital is ludicrous in the extreme.
The ruling elites perpetuating mass mis-information campaign regarding the capacities of the government to reduce poverty and increase employment, which has stifled most of the redistributive capacity of currency-issuing governments.
They have hectored governments into pursuing widespread deregulation which has eroded the capacity of workers to secure a proportional share of productivity growth in the form of real wages growth and has allowed for a major redistribution in national income towards profits and away from wages.
Who are they? Is the dominant economic class equivalent to the old capitalist class? While there is overlapping membership, the latter group are clearly much smaller in size and successfully co-opt the broader dominant economic players with high salaries, high status and access to privileges not available to other workers.
The trend for corporate sector managers to move into government and influential positions in society is part of this co-option.
E.O. Wright’s identification of workers who exist in “contradictory class locations” (the highly-paid, management and administrative staff that David Graeber thinks do nothing useful) are in this category.
While they do not do anything “productive” and in that sense have “bullshit” jobs, once we understand their role in a capitalist system of surplus production and extraction we realise that they perform the role of control within the labour process.
That role is crucial to the maintenance of the capitalist system – a lesson the early capitalists learned when the workers in the cottage industry either stopped working once they had enough for food and beer or scarpered to neighbouring town to sell the “capital” (spinning jennies etc) to buy even more food and beer.
The creation of the factory system – the so-called “production under the one roof” – was not, as neoclassical economics has claimed, a technologically-driven development. The technology was unaltered. But what was different was the introduction of control and supervisory functions and the early beginnings of workers in a so-called contradictory class locations.
Clearly, workers are not enslaved under capitalism but the major challenge facing the capital is to ensure the labour power they purchase becomes a flow of labour services. This observation suggests that the capitalist firm faces a control problem pertaining to how the managers extract work from the potential they have bought.
In 1974, American sociologist – Harry Braverman – published his premier work – Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century (New York, Monthly Review Press, 1974).
He wrote (pages 57-58):
When he buys labor time, the outcome is far from being either so certain or so definite that it can be reckoned away, with precision in advance. This is merely an expression of the fact that the portion of his capital expended on labour power is the “variable” portion, which undergoes an increase in the process of production; for him the question is how great that increase will be. It thus becomes essential for the capitalist that control over the labor process pass from the hands of the worker into his own. This transition presents itself in history as the progressive alienation of the process of production from the worker; to the capitalist, it presents itself as the problem of management.
In modern terms, the firm agrees to pay a wage to the worker for a given working day (which itself might vary according to various rules). At that point in the exchange the firm has purchases the labour power, which is the capacity to work. No actual labour services have been purchased in that transaction.
The task of management then is to organise, muster and deploy that labour power in a controlled way to ensure that for the time the worker has agreed to work they are delivering the desired flow of labour services to the firm.
It is in that way that the firm ensures they produce enough output from the labour power purchased, which upon sale, will return the funds outlayed on wages (and other materials the workers use) and leave a sufficient residual – profits – which will satisfy the objectives of the owners of the firm.
A study of the modern labour market therefore has to be conducted within the context of the primacy of managerial control and the need for the capitalist firm to maximise the flow of labour they gain from the labour power they purchase.
The production of surplus labour, which manifests as profits if the surplus value embodied in these goods and services is successfully sold, maintains the capitalist social relations. It allows the owner of capital to retain his/her position of power and at the same time ensures the worker has to return each day in order to survive.
Of relevance, was his insights based on anthropological studies that human behaviour within these market systems is not adequately described by the notion of homo economicus, which is the behavioural foundation of the mainstream textbook approach to labour markets.
Homo economicus (or “economic man”) casts people as being rational in all their decision making and capable at all times of achieving outcomes that maximise their satisfaction (“utility”). This views considers that consumers maximise their satisfaction or welfare and business firms maximise their profits via free exchanges within markets.
This free exchange is conducted in competitive terms between free agents. In fact, there is no distinction made between say the supplier of labour and the supplier of bananas or the would-be purchaser of either. These free agents are motivated by their own narrow self-interest but in this pursuit they combine to maximise the outcomes of all.
Conversely, Polanyi and other anthropologists have found that in many societies humans behave with reciprocity where cooperation rather than competition is paramount.
While the mainstream textbooks imply that the selfish behaviour they assume is common across all societies and cultures is a reflection of a basic “human nature”, the evidence provided by the anthropologists and others doesn’t support that conclusion. There is, in fact, a plethora of behaviours observed depending on the social institutions that have developed and the modes of production adopted.
Their work informs us that the capitalist institutions and mode of production is a particular system and the human behaviour that is moulded by that system is context dependent.
Polanyi argued that within a capitalist system the market economy becomes central and begins to dominate the importance of other aspects of society. The society increasingly becomes an economic society and market terminology becomes the way in which we calibrate our perceptions of the health of society.
De-skilling has also produced a plethora of “bullshit” jobs.
Harry Braverman wrote (pages 170-71):
Thus, after a million years of labour, during which humans created not only a complex social culture but in a very real sense created themselves as well, the very cultural-biological trait upon which this entire evolution is founded has been brought, within the last two hundred years, to a crisis, a crisis which Marcuse aptly calls the threat of a “catastrophe of the human essence”. The unity of thought and action, conception and execution, hand and mind which capitalism threatened from its beginnings, is now attacked by a systematic dissolution employing all the resources of science and the various engineering disciplines based upon it. The subjective factor of the labour process is removed to a place among its inanimate objective factors. To the materials and instruments of production are added a “labour force”, another “factor of production”, and the process is henceforth carried on by management as the sole subjective element.
And progressively, these “labour processes” (market-values) subsume our whole lives – sport, leisure, learning, family – the lot. Everything becomes a capitalist surplus-creating process.
If we judge all human endeavour and activity by whether they are of value in a sense that we judge private profit making then we will limit our potential and our happiness.
In the wake of the massive (negative) influence of post-modernism and continental philosophy on Marxist analysis in the 1960s, Braverman tried to re-orient the discussion back to the essence of work and the dynamics of surplus value production as it affected the way people worked and lived.
He was particularly interested in how workplaces were changing as the corporate structures became more concentrated and politically powerful.
Its publication also was in a period where there was a lot of industrial unrest in Europe and elsewhere, which were, in part, motivated by the growing de-skilling that mass produced workplaces had forced onto labour.
Another point to emerge from Harry Braverman’s work is that technology – which was at the forefront of de-skilling – was not in itself the problem – rather it was the way in which the class system saw that technology deployed. It was management that sacked workers not machines.
Harry Braverman’s work emphasised the fact that the logic of capitalism was that all our interests would be “dominated and shaped” by the aims of capital. Workplaces were structured, evolved and redefined to ensure that capital kept the upper hand over labour.
New workplaces were formed to spread the capacity of capital to accumulate and become more powerful. Non-work activities where effort was leisure were increasingly sought as being venues for new workplaces where leisure became work and outcomes led to profit not enjoyment.
The capitalist firm also became more complex over time. Harry Braverman traces the development of firm organisation and demonstrates how increasing concentration allowed firms to create a strata of workers who were not directly productive but who supervised and devised better ways to extract surplus value.
He also traced the development of Taylorism – the so-called method of Scientific Management, which was hardly scientific – more turning his Quaker meanness into more profit for capitalists. In his analysis, he used Taylor’s example of the steel worker “Schmidt” (aka Henry Noll) to demonstrate how hard a worker could work and how stupid workers were – grunt before brains (which needed to be closely supervised).
Schmidt worked harder than almost any normal person could ever work – intentions aside. So normal folk were cast as laggards despite just being reasonably normal.
And normal people were cast as dumb – “a man of the mentally sluggish type” (quoting Taylor) – although this is code for the fact that capitalists hated the humanness of their workers – the free-spirit, jocularity and resistance to oppression etc. Those characteristics didn’t fit the mould. Every second of a worker’s time had to be controlled to ensure it was for the company.
Harry Braverman wrote of this:
The merit of this tale is its clarity in illustrating the pivot upon which all modern management turns: the control over work through the control over the decisions that are made in the course of work.
He wrote in detail about the tendency of capitalist labour processes to separate the conception and execution and degrade the work being done. A creative free for all is, in general, bad for oppressive institutions such as capitalism.
He saw the evolution of capitalism as being the process by which skilled work involving judgement and autonomy is replaced by unskilled controlled work with little autonomy and that as new skilled processes evolve they, in turn, are replaced.
None of this requires that workers are actively coerced to surrender to this process of industrial transformation. Indeed, one could take a Gramscian position and accept that workers are complicit in their own creative destruction. The point is that management is in charge and use various methods to fulfill their objectives – coercion sometimes, consent other times.
It also doesn’t mean that worker resistance is not important in modifying these forces. That resistance can occur directly or via political action through elected governments. Direct resistance is more likely in mature industries whereas in new labour processes the capacity of workers to organise is less developed and more problematic.
The spreading of the labour process, where increasingly, every hour of every day is ripe for commodification is dealt with in detail in Harry Braverman’s chapter on “The Universal Market”.
[References: Braverman, H. (1974) Harry Braverman, Labor and Monopoly Capital: The Degradation of Work in the Twen- tieth Century (New York: Monthly Review Press, 1974)]
But why do capitalists want to keep all these workers employed and what about the rise in the essentially unproductive financial sector?
Again, not that productivity means something different when applied to advancing the interests of capital. Control of the labour process is a productive activity even though in a different system of production – where co-operative sharing of the surplus production was the norm – we would consider the activity to be useless.
Further, activities which ensure the realisation of surplus value in the form of profits is “productive” from the perspective of the aims of capitalists to retain power and their elite positions.
In that context, the recent blog (August 29, 2013) – There is a class warfare and the workers are not winning – is relevant.
I discussed the fall in the wage share in many nations over the last 30 odd years. Up until the early 1980s, real wages and labour productivity typically moved together. As the attacks on the capacity of workers to secure wage increases intensified, a gap between the two opened and widened. The widening gap between real wages and productivity growth manifested as the rising profit share.
At the same time, policy makers bowed to pressures from the financial sector and introduced widespread financial deregulation and reduced their oversight on the banking sector.
This not only led to a massive expansion of the financial sector and the massive redistribution of national income to profits provided the banks and hedge funds with the gambling chips to fuel the rapid expansion of the ‘global financial casino’ expanded.
The vast majority of speculative transactions that occur every day in the financial markets are unproductive, in that they are unrelated to the real economy and advancing our welfare. They advance the income and wealth of the elites and allow the managers and technicians in the contradictory class locations to be assuaged with high pay and status.
The two arenas of deregulation created a new problem – a “realisation” problem. The capitalist dilemma was that real wages had to typically grow in line with productivity to ensure that the goods produced were sold.
Further, they couldn’t create too much unemployment because that would erode the capacity of workers to consume. It was a delicate balance act – they had to maintain real wages growth and employment (well beyond the technological requirements) – at such a level that they still extracted desired amounts of real income (as profits) but didn’t undermine aggregate demand.
In the neo-liberal period a new way was found to achieve this end. The ‘solution” was found in the rise of so-called ‘financial engineering’, which pushed ever increasing debt onto households and firms. The credit expansion not only sustained the workers’ purchasing power but also delivered an interest bonus to capital while real wages growth continued to be suppressed. Households, in particular, were enticed by lower interest rates and the vehement marketing strategies of the financial engineers. It seemed to good to be true and it was.
The increasing private sector indebtedness – both corporate and household – is another marked characteristic of the neo-liberal period.
What about the irony that the workers that matter the most – the cleaners, teachers, nurses etc – receive the lowest pay?
I covered that topic in this blog – Myths about pay and value.
In the face of the growing social and political unrest increasing in Europe in the mid-C19th inspired by Marx’s analysis of surplus value and an increasing realisation that the owners of capital are unproductive participants, a major effort was undertaken to produce a theory of income distribution which demonstrated that all owners of productive inputs get back in the form of income payments what they put into the production process.
So the ideological push to make capitalism appear to be fair led to the development of marginal productivity theory. Thus, the theory became that people are paid according to their contribution to production. That was then represented as a fair system and was used politically to negate the claims that workers were being exploited.
Marginal productivity theory both explained but also justified the outcomes that the capitalist system produced. All was fair. If you wanted higher wages you had to invest in skills to generate higher marginal products. Someone who had invested more in skill development would get a higher return.
But then it was observed that persistent differentials in wage outcomes remained that could not be explained in terms of productivity differentials.
Enter another piece of mainstream ad hocery – the theory of compensating wage differentials. The basic idea is that wage differentials compenstate for differences in the nonpecuniary characteristics of alternative jobs. This dates back to the Wealth of Nations (Book I: Chapter X).
So you have two occupations which are similar in every way but one – danger of work or bad conditions (boredom etc). The more dangerous job will attract a higher wage to compensate for the danger.
The general conclusion is that where jobs are boring, dangerous, dirty, more stressful – that is, are generally less desirable – the market will reward them with higher wages than otherwise. So more pleasant and interesting jobs will offer lower wages than other jobs with less favourable characteristics.
Workers are then seen to shop around for different “utilities” (levels of satisfaction) rather different wages per se when choosing employment.
The segmented labour market theory provides a devastating critique of this mainstream approach to wages. There are good jobs and bad jobs and they pay accordingly. The bad jobs are typically dangerous, boring, unstable, and pay low wages. The opposite is the case for good jobs. The resulting wage outcomes cannot be explained using the mainstream theories.
A good easily read critique of the mainstream distribution theory is Lester Thurow’s 1975 book Generating Inequality. His empirical work found that for the US, the marginal product of labor exceeds its actual returns and the marginal product of capital is less than its actual returns.
As an aside, in his 1968 article – Disequilibrium and the Marginal Productivity of Capital and Labor – which was published in The Review of Economics and Statistics (Vol. 50, No. 1, pp. 22-31), Thurow estimates the ratio of actual returns (profits, wages) to marginal products from 1929 to 1965 for the US. I have plotted his estimates in the following graph to show you how far askew the marginal productivity theory is when applied to a real world case. I wouldn’t, however, hold much store in this analysis because the estimation approach is somewhat speculative and questionable.
I have run out of time today to go further into the low paid-high value question. More about that another day.
The fact is that if workers were truly paid what we as people valued then there would be a dramatic redistribution of national income with the CEOs and hedge fund traders going to the bottom and the cleaners, nurses, teachers, musicians etc going to the top.
That would be a better – but not capitalist – world.
Other related blogs that might be of interest:
- The humanities is necessary but not sufficient for social transformation – for more discussion on this point.
- Technocrats move over, we need to read some books
- We need more fermenting … much more
- Education – a vehicle for class division
- I feel good knowing there are libraries full of books
One could write a book about all this.
Now I have to attend to some media interviews about the Federal opposition costings. I knew I wouldn’t escape talking (or writing) about it today!
That is enough for today!