This quote is taken from a footnote to Marx’s Capital Volume II (p. 391 in the Penguin edition). The volume was put together after Marx’s death by his friend and collaborator Engels, drawing on extensive notes. The quote provides inspiration for the analysis of one particular contradiction in the dynamics of capitalism :
“Contradiction in the capitalist mode of production. The workers are important for the market as buyers of commodities. But as sellers of their commodity – labour-power – capitalist society has the tendency to restrict them to their minimum price. Further contradiction: the periods in which capitalist production exerts all its forces regularly show themselves to be periods of over-production; because the limit to the application of the productive powers is not simply the production of value, but also its realization. However, the sale of commodities, the realization of commodity capital, and thus of surplus-value as well, is restricted not by the consumer needs of society in general, but by the consumer needs of a society in which the great majority are always poor and must always remain poor.” (my emphasis)
It is important not to take this quote out of context. In addition, despite significant inequality and poverty, Marx was clearly wrong about the majority always remaining poor under capitalism. However, the contradiction described here between the production of surplus value and its realization upon sale, has given rise to plenty of debate among left economists. Continue reading →
This video tells the story of how a relatively equitable capitalist growth model in the 1950s and 60s gave way to rising inequality and weaker investment. For Professor William Lazonick, the economy of the US (and other advanced nations) currently generates “profits without prosperity”.
After World War II, average wages across the economy tended to increase in line with productivity, so that ordinary workers shared in rising economic efficiency over time. However, since the 1970s, the link has been broken as productivity continued to rise, while wages stagnated. This trend has been largely sustained to the present day.
The video discusses these changes in the US economy, and focuses on the phenomenon of stock buybacks, which shift firm resources away from productivity-raising investment in new technology and a more highly-skilled workforce towards short-term financial gains for CEOs and investors. Lazonick discusses possible solutions to these problems.
Anwar Shaikh is a Professor of economics at the New School for Social Research in New York. His ideas, in his own words, draw mainly but not exclusively on the ‘Classical tradition’ of Smith, Ricardo and Marx. Marx himself was a critic of classical political economy, so in some ways Marxist political economy could be considered as a separate school of thought.
In Shaikh’s 2016 magnum opus, Capitalism, he also draws on Keynes and Kalecki, two economists who greatly inspired the post-Keynesian school. For Shaikh, the Keynesian/Kaleckian emphasis on aggregate demand remains important, but so too does aggregate supply, which is emphasised in mainstream neo-classical economics. According to Shaikh, the classical tradition is not so much demand-side, or supply-side, but ‘profit-side’. The rate of profit is central to his work, and it affects both demand and supply in the capitalist economy.
In this post I want to outline Shaikh’s theory of wages and unemployment, which is covered in Chapter 14 of Capitalism. He covers a great deal of theoretical and empirical ground in the book, not least in this chapter, and it makes for stimulating reading. To avoid making this post too long, I will focus on Shaikh’s own particular theory, rather than spending much time comparing it to alternative theories, which Shaikh does in the book. Continue reading →
According to Tom O’Leary the underlying aim of austerity has been to restore business profits, by putting downward pressure on wages, and reducing taxes on business and the rich. But while wages have stagnated, profits have not recovered significantly. As profits lead investment, growth in the latter has been weak, and the basis for an improved growth performance and living standards has so far failed to materialize.
Those on the right would respond to this by engaging in deregulation and further austerity, which might include reducing workers’ rights and environmental protections, and deepening cuts in public spending and taxes. Such policies would be short-sighted and damaging. Those on the left would favour a large increase in public investment in order to ‘crowd in’ private investment. This could be far more beneficial, as growth in public investment has been weak for years, while the burden of regulation remains relatively low internationally. But at the moment the UK has an unassailable right wing government too distracted by Brexit to engage in such a progressive agenda. Continue reading →
This nine-minute interview with left-Keynesian economist Dean Baker discusses the wisdom or otherwise of the Federal Reserve’s interest rate hikes and their effect on jobs and wages. He notes that despite a low unemployment rate in the US, other measures of the ‘tightness’ of the labour market indicate that there may be more slack in the system and more room for job creation than allowed for by the Fed.
There is a disconnect between economic growth and living standards in the UK and ordinary workers are bearing the brunt. While politicians seize on data showing that the economy is growing at a reasonable pace, average real wages have largely stagnated for the past decade.
Simon Wren-Lewis illustrates here the uniqueness of the UK economy among rich countries, in that it experienced positive overall GDP growth and falling real wages between 2007 and 2015. This implies of course that job growth has been strong, and indeed it has, with record numbers in work. Unemployment has fallen, but there has also been significant population growth. So while our political masters crow about record employment levels, they keep fairly quiet about the fact that this has been made possible by the immigration flows that they claim will slow after Brexit. Continue reading →
A piece here from today’s Guardian newspaper about the benefits to thousands of low paid workers in the social care sector of the recent rise in the national minimum wage. It is now called the ‘Living Wage’, which typically reflects the highly political nature of the policies of former UK finance minister George Osborne. His policy was simply a decent rise in the minimum wage, but of course he had to rename it. The name was stolen from those campaigning for an even higher minimum wage which would ensure that its recipients had enough income to live on.
There were fears that the level of the new Living Wage would damage the care sector in particular, which employs a huge number of low paid workers. But the new research suggests this has not come to pass. The pay bill has apparently risen by nearly 7%, and there has been some compression of wages at the bottom of the pay scale in the sector.
It should be noted that the majority of local councils commissioning social care have raised the fees they pay to providers so that the overall impact on society is partly redistributive, away from taxpayers and towards the low paid. But overall it represents a significant positive change.