Let's talk about... abolishing the wages system

Does that phrase, abolition of the wages system, bring to mind "abolition of the law of gravity" or "proposals for the speedy extinction of evil and misery"? This is unfortunate and misleading because unlike gravity, evil and misery, the wages system is a relatively recent innovation. That is not to say that wages were unheard of before they became systematic. Only that they weren't the principal means of subsistence for a large proportion of the population until recent centuries.

The telegraphic version of my argument against the wages system is that it is based on a false accounting analogy, just as national income accounts are based on a false accounting analogy.

The analog is the business enterprise with its system of double-entry bookkeeping. For the profit-seeking firm, monetary receipts and expenditures transit a boundary that corresponds, by definition, with the legal entity of the firm. For the individual employee and for the nation, there is no such obvious correspondence between exchange transactions and welfare. In both cases, the accounting analogy ignores the contribution to public and private welfare of non-market work and environmental amenities and effectively double counts remedial costs -- such as medical expenses and commuting costs -- by what Hueting calls "asymmetric entering": counting expenditures to restore a loss as income with no offsetting entry for the loss.

It turns out that these accounting anomalies are advantageous for some parties in the transactions. That is the "beauty" of capitalist production -- beautiful from the perspective of the capitalist. As Joan Martinez-Alier paraphrases K.W. Kapp, negative social and environmental externalities "are not market failures, they are cost-shifting successes." There is nothing inevitable, universal or eternal in the use of an inappropriate accounting analogy. It is not gravity.

For the Abolition of the Wages System!

Once more, with feeling:

Instead of the conservative motto: "A fair day's wage for a fair day's work!" they ought to inscribe on their banner the revolutionary watchword: "Abolition of the wages system!"

With that sentence Karl Marx concluded the second part of his address on the topic of wage-labor, prices and profit to the Central Council of the International Workingmen's Association. To the end of his exposition, Marx appended three proposed resolutions, the last of which proclaimed:

Trades Unions work well as centers of resistance against the encroachments of capital. They fail partially from an injudicious use of their power. They fail generally from limiting themselves to a guerilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class, that is to say, the ultimate abolition of the wages system.

In his address, Marx refuted the wages-fund doctrine of classical political economy, four years before John Stuart Mill famously recanted his defense of the doctrine in reply to William Thornton's critique. Three years later, the final nail was hammered into the coffin of classical political economy with the publication of Thomas Brassey's Work and Wages, whose conclusions Alfred Marshall predicted "will be found to exercise a very complicating influence on the theory of Distribution."

Before Mill recanted the wages-fund doctrine, it had been the chief "scientific" weapon for denying the legitimacy of trade unionism and the possibility of raising real wages through collective action. After Mill recanted the doctrine, the chief propaganda weapon against unions, higher wages and shorter hours became the claim that the unionists clung to a version of the discredited wages-fund doctrine. This supposed mistaken belief was eventually given the name of the Theory of the Lump of Labour.

In short, until around 1869, unions were wrong because they didn't subscribe to the wages-fund doctrine. After 1870, unions were wrong because they did subscribe. One things was certain. They were always wrong no matter what they believed.

June 27, 2015 is the one-hundred and fiftieth anniversary of Marx's call for the abolition of the wages system -- a fitting occasion for renewing that call:

We do not forget that we are fighting with effects, but not with the causes of those effects; that we are retarding the downward movement, but not changing its direction; that we are applying palliatives, not curing the malady. We shall not, therefore, be exclusively absorbed in these unavoidable guerilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market. We understand that, with all the miseries it imposes upon us, the present system simultaneously engenders the material conditions and the social forms necessary for an economical reconstruction of society. Instead of the conservative motto: "A fair day's wage for a fair day's work!" we inscribe on our banner the revolutionary watchword: "Abolition of the wages system!"

Trigger Warning! The Wage Prisoner's Dilemma

At Foreign Affairs, Erik Brynjolfsson and Andrew McAfee trot out the legendary Luddites and the proverbial lump-of-labor fallacy as they ask, "Will Humans Go the Way of Horses?"

Humans, stuffed and mounted?

In their penultimate paragraph, B. and M. make a welcome call for discussion about "what kind of society we should construct around a labor-light economy" and ask "How should the abundance of such an economy be shared?"

It's a good question. It's actually quite a simple question, if it weren't for a dense propaganda smokescreen, this magazine of untruth, laid down over more two centuries.

There are three issues here. One is that reducing the hours of work would be a marvelously effective way of sharing the abundance of a "labor-light economy." That's the good news. The second issue is that it takes materials and energy to construct and operate robots. Did someone mention greenhouse gas emissions and climate change? I didn't think so. The third issue is that the good news answer to the first issue is a taboo "fallacy" according to the lump-of-labor smokescreen.

Karl Marx, to whom Brynjolfsson and McAfee refer in their second paragraph, described the "great beauty of capitalist production" as consisting of the fact that "it not only constantly reproduces the wage-worker as wage-worker, but produces always, in proportion to the accumulation of capital, a relative surplus population of wage-workers [emphasis added]."

By "beauty," I don't think Marx meant aesthetically pleasing. More like "it's a feature, not a bug." The relative surplus population of workers, the reserve army of the unemployed, is not incidental to capitalist production. It is not a "market failure" or an "externality." It is how the system works. To solve the problem of a relative surplus population of workers would require abolishing the wages system -- thus Marx's declaration, in the June 27, 1865 conclusion to his speech on Value, Price and Profit to the First International Workingmen's Association:

...the working class ought not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the causes of those effects; that they are retarding the downward movement, but not changing its direction; that they are applying palliatives, not curing the malady. They ought, therefore, not to be exclusively absorbed in these unavoidable guerilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market. They ought to understand that, with all the miseries it imposes upon them, the present system simultaneously engenders the material conditions and the social forms necessary for an economical reconstruction of society. Instead of the conservative motto: "A fair day's wage for a fair day's work!" they ought to inscribe on their banner the revolutionary watchword: "Abolition of the wages system!"

Abolish the wages system? But how?

Conveniently, the beneficiaries of the wages system (those FT monkeys) have been telling us how for 235 years. Only they have been screaming, "Don't!" Why is the reduction of the hours of work denounced as being based on a fallacy? Because ultimately, eventually, it could lead to the abolition of the wages system! We wouldn't want that to happen, would we?

Thus the law of supply and demand of labour is kept in the right rut, the oscillation of wages is penned within limits satisfactory to capitalist exploitation, and lastly, the social dependence of the labourer on the capitalist, that indispensable requisite, is secured...

To the naked eye, abolition may look like a one-shot, all or nothing proposition. Not so. Abolition can be incremental. It can proceed in stages. The first stage can consist of simply not forgetting that in their everyday struggles over wages "they [the working class] are fighting with effects, but not with the causes of those effects."

Going beyond not forgetting, I have proposed a form of unionism, the "labor commons", that regards labor power as a common-pool resource to be collectively managed rather than as a commodity to be sold by each individual worker. Conceiving of labor as something other than an extension of and thus the private property of the individual worker is a tall order. The principle of labor as private property is enshrined in chapter five, "Of Property," of John Locke's Second Treatise of Civil Government:

...every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his.

Except for the most part we are not talking about "the labour of his body, and the work of his hands." We are referring to a complex division of labor, co-operation and means of production that dwarfs the manual labor of a person. Regarding labor power as a common-pool resource recognizes the greatly-enhanced social productivity of labor. The wages system is calculated to siphon off the lion's share of that social productivity and award it to the owners of capital.

How does that happen? Consider the wage prisoner's dilemma: given a choice between working long hours for more money and working short hours for less money, many will chose to work longer hours. But if a preponderance of workers choose (or are compelled) to work long hours, they will oversupply the labor market, depressing wages. They may end up working longer hours for less money.

This is not rocket science. It is elementary supply and demand: an observed regularity. And, no, it does not imply or assume "a fixed amount of work to be done." If I flood the market with bananas, it is likely the price of bananas will fall even if the demand for bananas increases in response to the lower price. It is conceivable that the temporarily lower price could instigate a banana craze that subsequently overwhelms the initial price decline. But as a rule...

Imagine the following scenario: 

One hundred workers are fully employed for 40 hours a week. The current wage is $10 an hour. Due to some inscrutable technical feature of the production process, it is determined that optimal scheduling requires workweeks of either 36 hours or 44 hours.

After adjustment to the new schedules, the uniform wage rate will be adjusted to somewhere between $9.09 and $11.11 an hour, depending on the proportion of workers who choose each schedule. Weekly pay will thus range between $328 and $400 for those working a 36-hour week and between $400 and $488 for those working a 44-hour week.

If half the workers choose a 36-hour week and half choose a 44-hour week, hourly wage will remain at $10 and thus the weekly pay will be $360 and $440 respectively. If a majority of more than 55% of workers chose the 44-hour schedule, some workers will have to be laid off, starting with those who have opted for the 36-hour schedule. That should be about enough information to figure this out.

Which schedule would you choose?

It Takes a Leak

 Guardian: "UK under pressure to respond to latest Edward Snowden claims"

The reports first appeared in the Sunday Times, which quoted anonymous senior officials in No 10, the Home Office and security services. The BBC also quoted an anonymous senior government source, who said...

Milton: Of Reformation in England, the Second Book

To be plainer, sir, how to solder, how to stop a leak, how to keep the floating carcass of a crazy and diseased monarchy or state, betwixt wind and water, swimming still upon her own dead lees, that now is the deep design of a politician!

Some Kind of an Index -- No Normative Connotations

Paul Samuelson,"Evaluation of Real National Income,"1950

Production possibilities as such have no normative connotations. We are interested in them for the light they throw on utility-possibilities. This is why economists have wanted to include such wasteful output as war goods in their calculations of national product; presumably they serve as some kind of an index of the useful things that might be produced in better times.

Or to paraphrase George Orwell, "If this boot wasn't stamping on your face, you could put it on your foot and it would keep your toes warm -- FOREVER!"

Four-fifths of the "Economy" is a Complete Waste of Time

There are really two questions we are dealing with here. First, do inputs to production earn their marginal product? Second, do the owners of non-rival ideas have market power or not? -- Dietz Vollrath "What Assumptions Matter for Growth Theory?"

Dietz Vollrath has a new post that goes a long way toward clarifying the battle lines in the fight over the foundations of growth theory. -- Paul Romer, "The Assumptions in Growth Theory"

Huh? These fellows omit the main assumption, the analogy -- "growth is a concept whose proper domicile is the study of organic units..." (Kuznets, 1947). Kuznets cited with approval Sidney Hook's discussion of the dangers of the use of this analogy.

As an argument it is formally worthless and never logically compelling. An argument from analogy can be countered usually with another argument from analogy which leads to a diametrically opposed conclusion.... The belief that society is an organism is an old but fanciful notion. It can only be seriously entertained by closing the eye to all the respects in which a group of separate individuals differs from a system of connected cells, and by violently redefining terms like 'birth,' 'reproduction,' and 'death.'

Growth "theory" gets around this objection to the uncritical use of analogy by ignoring it -- by 'closing the eye' to explicit caveats in the seminal contribution to the measurement of growth. Let's pretend that the economy really is an organism that grows perpetually but never dies.

Name one.

Carry on, growth theorists.

Dean Baker is right about growth... (and a three-card monte game doesn't have to be a scam)

It's all in how the game is played.

Dean Baker wrote:

...growth is not necessarily bad for the environment. And, as a practical matter the only way we will be able to advance environmental goals is by tying them to a growth strategy.

O.K. let's play a game called "[pick a number] myth[s] about [fill in the blank]" "three myths about growth."


Myth: "When people hear the term 'growth' they tend to think of physical objects such as houses, cars, and refrigerators. Growth can mean more of these products."

Reality: "Newer and better treatments for cancer and other diseases are also growth. So is an increase in the number of people going to college or other getting other types of education. Better software is also growth."

Truth: Services don't run on breathair. Services employ workers and require infrastructure. When all the inputs are accounted for -- including labor and infrastructure -- "service and household sectors are not much less energy intensive than are the other sectors of the economy," (Stern, "Economic Growth and Energy" Encyclopedia of Energy, vol 2)


Myth: "growth has been associated with increased use of fossil fuels and other resources."

Reality: "that link has gotten much weaker over the last 15 years."

Truth: The last 15 years? Why stop there? Why not the last 35 years? Or 70 years? Look at David Stern's Figure 4, below. Since 1945 relatively less primary energy has been used per dollar of real GDP. That relative decoupling accelerated after, oh, 1973.

Now look at Stern's Figure 7.

What happened to that "relative decoupling" of GDP from energy use prior to 1973? It appears to have been more than entirely the result of the shift to higher quality fuels. After 1973, there does appear to be some relative decoupling but, as Stern pointed out:

If decoupling is mainly due to the shift to higher quality fuels, then there appear to be limits to that substitution. In particular, exhaustion of low cost oil supplies could mean that economies have to revert to lower quality fuels such as coal.

It's like the warning, "objects in mirror are closer than they appear." In this case, GDP growth and energy use are more closely coupled than they appear. Past results are not a reliable indicator of future outcomes.


Myth: "there are considerable political obstacles to implementing environmental policies in the United States and other countries"

Reality: "there are clearly much bigger political obstacles to putting in place a new economic system"

Truth: Who the fuck knows? Are the relative probabilities of implementing environmental policies or of putting in place a new economic system known? Are they quantifiable? Dean's contention here is where the argument gets interesting. Recall that quote from his op-ed:

...growth is not necessarily bad for the environment. And, as a practical matter the only way we will be able to advance environmental goals is by tying them to a growth strategy.

Yes, in theory, growth is not necessarily bad for the environment. But as a practical matter, it has been increasingly bad for the environment and there is no persuasive evidence of an imminent, fundamental change. So, when Dean says tying environmental goals to a growth strategy is a practical matter, does he really mean 'practical' or does he mean 'rhetorical'?

Dean appears to acknowledge that questioning growth is taboo. Proposals that confront the legitimacy of the growth imperative are systematically excluded from respectable, mainstream conversation. They are dismissed as ill-informed fringe talk by people who "don't understand" that growth isn't necessarily bad for the environment -- that it doesn't necessarily mean more "physical objects such as houses, cars, and refrigerators."

Wanna bet?

The above clip is from Caroline Baum's Henry Hazlitt Memorial Lecture at the 2010 Austrian Scholars Conference, held at the Mises Institute in Auburn, Alabama. You may wonder why Austrian scholars traveled all the way to Alabama for their conference? Never mind.

Baum's lecture, fetchingly titled "Still nonsense after all these years," dwelt on the Sandwichman's favorite fallacy, an appropriate theme for a Hazlitt memorial in that Hazlitt's Economics in One Lesson contained no fewer than four denunciations of "the false assumption that there is just a fixed amount of work to be done."

Less well-known than his ad nauseum Lesson was Hazlitt's outspoken disdain, in the 1950s, for what he termed "the fetish of national income statistics." Point four in Hazlitt's catalogue of reasons for doubting the trustworthiness of growth rate comparisons was the following:

Professor G. Warren Nutter has pointed out that there is 'a long-run tendency... for the industrial growth rates to slow down, or retard, as the level of production gets higher.' There are several basic explanations of this. One has to do with a trick of percentage figures. Another has to do with a physical satiety point in human needs. If only one family in a country has a bathtub, and the next year 50 families get one, the rate of growth is 5,000 percent. But when everybody has a bathtub net growth stops. This principle applies to houses, automobiles, radios, television sets, and so on.

Did you see what they did there?

we want bigger houses, fancier appliances, more cars. In the fifties it was a car in every driveway and that gave way to the two-car garage and now the three and the four-car garage.

... 

But when everybody has a bathtub net growth stops. This principle applies to houses, automobiles, radios, television sets, and so on.

... 

When people hear the term 'growth' they tend to think of physical objects such as houses, cars, and refrigerators

The rhetorical coupling between economic growth and physical objects is highly malleable. It is Sandwichman's contention that it is precisely this ambiguity that has made growth so rhetorically persuasive. Growth appears to mean just about whatever the speaker chooses it to mean with regard to physical objects.

You want bigger houses? Growth means bigger houses! You want to protect the environment? Growth doesn't necessarily mean more or bigger houses! When everybody has a bathtub, net growth of bathtubs stops. But in the fifties, it was a bathtub in every bathroom. That gave way to the two-bathtub bathroom and now the three and the four-bathtub bathroom. Bathtub? Did somebody say bathtub?

This sleight-of-hand is the rhetorical equivalent of the three-card monte trick of throwing down the top card. But it needs to be remembered that the card trick alone is not the whole hustle. Of equal (or greater) importance is the dramatic build-up that induces the mark to bet money on the game.

It makes little sense to argue that the three-card monte game could be played honestly if there were no shills and the dealer did not engage in card tricks. Playing honestly is not the object of the game.

Dean means well when he claims that the only way "to advance environmental goals is by tying them to a growth strategy." Realistically, it's the only way to get into the oldest floating permanent policy crap game in D.C. when it's taboo to not tie goals to a growth strategy.

It is perhaps an understatement to say that there are huge political obstacles "to putting in place a new economic system" but when the existing system precludes effective environmental policies, then there really is not much choice. The rhetoric of growth discounts policies that could make growth "not necessarily bad for the environment."

The Empire of Complicity -- Max Haiven

The struggle against hopelessness is in some ways very personal and in some ways very common. The idea that the global capitalist system as it is today cannot be changed is almost universal. Indeed, this fatalism — at least at the level of individual motivations — is ironically one of the driving forces behind the system’s perpetuation. The vast majority of those whose labors reproduce capitalism (from CEOs and politicians to lawyers and professors; to journalists and software engineers; to store clerks and strip miners) do not do so out of any particular love of the system or economic sadomasochism. Indeed, it is widely recognized that the present order is tremendously destructive, both to the world at large and to our own lives. 

Rather, like most of us, they participate — to a greater or lesser extent — in making capitalism ‘work’ because they believe there is no other option. How many of us take up positions in the architecture of power based on the rationale that our reluctance or refusal to do so would be meaningless? How many of us have been forced to compromise our values because of the economic pressures of the system? How many of us have justified these compromises in the name of inevitability? Of course, most of us work because of economic coercion; only a few of us are ever privileged enough to entertain the opportunity to say ‘no’. But, even so, we can credit the relatively minimal involvement of populations in social movements less to ignorance and apathy and more to a sense of utter futility. If capitalism and its co-optation of all that we value is inevitable, why bother to resist? Why not simply seek to do the best one can within the system?