Capital not ideology

Back in 2014, French economist Thomas Piketty published a blockbuster book, Capital in the 21st century.  Repeating the name of Marx’s Capital, the implication of the title was that it was an updating Marx’s 19th century critique of capitalism for the 21st century.  Piketty argued that the inequality of income and wealth in the major capitalist economies had reached extremes not seen since the late 18th century and unless something was done, inequality would continue to rise.

The book had a huge impact, not just among economists (particularly in America, less so in France) but also among the general public.  Two million copies were sold of this monumental 800p publication which was full of theoretical arguments, empirical data and anecdotes to explain increased inequality of wealth in modern capitalist economies.  The book eventually won the dubious honour for the most bought book that nobody read, taking over from Stephen Hawking’s The Brief History of Time.  I suppose Marx’s Capital is also part of this club.

Many critiques of Piketty’s arguments followed, both from the mainstream and the heterodox.  Piketty has made a great contribution in the empirical work that he, fellow Frenchman Daniel Zucman and Emmanuel Saez have made in estimating the levels of inequality in capitalist economies.  And before that, there was the father of inequality studies, the recently deceased Anthony Atkinson, (whose work was the foundation of my own PhD thesis on inequality of wealth in 19th century Britain).

But, as I argued in my own critique of Piketty, which was published in Historical Materialism at the time, Piketty was not following Marx at all – indeed, he trashed Marx’s economic theory based on the law of value and profitability. For Piketty, the exploitation of labour by capital was not the issue but the ownership of wealth (ie property and financial assets), which enabled the rich to increase their share of total income in an economy.  So it was not the replacement of the capitalist mode of production that was needed but the redistribution of the wealth accumulated by the rich.

Piketty’s fame among the mainstream soon faded.  At the 2015 annual conference of the American Economic Association, Piketty was feted, if criticised.  Within a year, all was forgotten. Now, six years later, Piketty has followed up with a new book, Capital and Ideology, which is even larger: some 1200pp; as one reviewer said, longer than War and Peace. Whereas the first book provided theory and evidence on inequality, this book seeks to explain why this had been allowed to happen in the second half of the 20th century.  And from that, he proposes some policies to reverse it.  Piketty broadens the scope of his analysis to the entire world and presents a historical panorama of how ownership of assets (including people) was treated, and justified, in various historical societies, from China, Japan, and India, to the European-ruled American colonies, and feudal and capitalist societies in Europe.

His premise is that inequality is a choice. It’s something ‘societies’ opt for, not an inevitable result of technology and globalisation. Whereas Marx saw ideologies as a product of class interests, Piketty takes the idealist view that history is a battle of ideologies. The major economies have increased inequalities because the ruling elites have provided bogus justifications for inequality. Every unequal society, he says, creates an ideology to justify inequality. All these justifications add up to what he calls the “sacralisation of property”.

The job of economists is to expose these bogus arguments.  Take billionaires. “How can we justify that their existence is necessary for the common good? Contrary to what is often said, their enrichment was obtained thanks to collective goods, which are the public knowledge, the infrastructures, the laboratories of research.” (Shades of Mariana Mazzucato’s work here).  The notion that billionaires create jobs and boost growth is false.  Per capita income growth was 2.2% a year in the U.S. between 1950 and 1990. But when the number of billionaires exploded in the 1990s and 2000s — growing from about 100 in 1990 to around 600 today — per capita income growth fell to 1.1%.

Piketty says that the type of free-market capitalism that has dominated the US since Ronald Reagan needs to be reformed. “Reaganism begun to justify any concentration of wealth, as if the billionaires were our saviours.” But; “Reaganism has shown its limits: Growth has been halved, inequalities have doubled. It is time to break out of this phase of sacredness of property.

He does not want what most people consider ‘socialism’, but he wants to “overcome capitalism.”  Far from abolishing property or capital, he wants to spread its rewards to the bottom half of the population, who even in rich countries have never owned much. To do this, he says, requires redefining private property as “temporary” and limited: you can enjoy it during your lifetime, in moderate quantities.

How is this to be done? Well, Piketty calls for a graduated wealth tax of 5% on those worth 2 million euros or more and up to 90% on those worth more than 2 billion euros. “Entrepreneurs will have millions or tens of millions,” he said. “But beyond that, those who have hundreds of millions or billions will have to share with shareholders, who could be employees. So no, there won’t be billionaires anymore. From the proceeds, a country such as France could give each citizen a trust fund worth about €120,000 at age 25. Very high tax rates, he notes, didn’t impede fast growth in the 1950-80 period.

Piketty also calls for “educational justice” — essentially, spending the same amount on each person’s education. And he favours giving workers a major say over how their companies are run, as in Germany and Sweden.  Employees should have 50% of the seats on company boards; that the voting power of even the largest shareholders should be capped at 10%; much higher taxes on property, rising to 90% for the largest estates; a lump sum capital allocation of €120,000 (just over £107,000) to everyone when they reach 25; and an individualised carbon tax calculated by a personalised card that would track each person’s contribution to global heating.  He calls this moving beyond capitalism to “participatory socialism and social-federalism”.

This all smacks of returning capitalist economies to the days of the so-called ‘golden age’ from 1948-65, when inequality was much lower, economic growth was much stronger and working class households experienced full employment and were able to get educated to levels that enabled them to do more skilled and better paid jobs.  There was a ‘mixed economy’, where capitalist companies supposedly worked in partnership with trade unions and the government. This was a myth.  But if you accept Piketty’s premise that this social democratic paradise existed and its demise was brought about by a change of ideology, it is possible to consider that “redistributive ideas’ could gain support after the experience of the Great Recession and the rise of extreme inequality now.

Piketty argues that the social democratic parties dropped their original aims of equality and opted instead for meritocracy ie hard work and education will deliver better lives for the working class.  And they did so because they had gradually transformed themselves from being parties of the less-educated and poorer classes to become parties of the educated and affluent middle and upper-middle classes. To a large extent, he reckons, traditionally left parties changed because their original social-democratic agenda was so successful in opening up education and high-income possibilities to the people, who in the 1950s and 1960s came from modest backgrounds. These people, the “winners” of social democracy, continued voting for left-wing parties but their interests and worldview were no longer the same as that of their (less-educated) parents. The parties’ internal social structure thus changed— it was the product of their own political and social success.

Really?  The failure of social democratic parties to represent the interests of working people goes way back before the 1970s.  Social democratic parties supported the nationalist aims of the warring capitalist powers in WW1; in Britain, the leaders of the Labour Party went into coalition with the Conservatives to impose austerity and break the trade unions in 1929.  After WW2, social democracy moved from Attlee to Wilson to Callaghan to Kinnock and finally to Blair and Brown.  It was a similar story in continental Europe: in France from Mitterand to Hollande; in Germany from Brandt to Schmidt.

This was not just because the composition of the SD parties changed from industrial workers to educated professionals.  The very health of post-war capitalist economies changed.  The brief ‘golden age’ came to an end, not because of a change of ideology (or as Joseph Stiglitz has put it, ‘a change of rules’) but because the profitability of capital plummeted in the 1970s (following Marx’s law of profitability as outlined in Capital).  That meant that pro-capitalist politicians could no longer make concessions to labour; indeed, the gains of the golden age had to be reversed in the ‘neoliberal’ period.  So ideology changed with the change in the economic health of capital.  And social democratic leaders went along with this change because, in the last analysis, they do not think it is possible to replace capitalism with socialism. “There is no alternative” – to use Thatcher’s phrase.

At least, Piketty reckons it is possible to go beyond capitalism, unlike Branco Milanovic who, in his latest book, Capitalism Alone that I reviewed recently, agrees with Thatcher and reckons capitalism is here to stay. “You have to go beyond capitalism,” says Piketty.  In an interview, when asked “Why this word ‘beyond”, why not “To get out of capitalism”?  Piketty replied: “I say “go beyond” to say go out, abolish, replace. But the term “exceed” me allows for a little more emphasis on the need to discuss the alternative system. After the Soviet failure, we can no longer promise the abolition of capitalism without debating long and precisely what we will put in place next. I’m trying to contribute.

Piketty reckons the “propriétariste and meritocratic narrative” of the neo-liberal period is getting fragile. “There’s a growing understanding that so-called meritocracy has been captured by the rich, who get their kids into the top universities, buy political parties and hide their money from taxation.  That leaves a gap in the political market for redistributionist ideas.

But Piketty’s answers are just that: a redistribution of unequal wealth and income generated by the private ownership of capital, not replacing the ownership and control of the means of production and the exploitation of labour in production with a system of common ownership and control.  Apparently, the big multi-nationals will continue, big pharma will continue; the fossil-fuel companies will continue; the military-industrial complex will continue.  Regular and recurring crises in capitalist production and accumulation will continue.  But, as these vested interests of capital are still not generating enough profitability to allow any significant increase in the taxation of extreme wealth and income that they control, what chances are there that the current ‘ideology’ of the ‘sacralisation of property’ can be overcome, without taking them over?

24 Responses to “Capital not ideology”

  1. vk Says:

    “The book eventually won the dubious honour for the most bought book that nobody read, taking over from Stephen Hawking’s The Brief History of Time.”

    Ironic for you to mention that, since Piketty clearly demonstrates in his “Capital XXI” that he didn’t read Marx, too.

    “To do this, he says, requires redefining private property as “temporary” and limited: you can enjoy it during your lifetime, in moderate quantities.”

    I know vulgar economists are not required to learn basic philosophy nowadays, but at least they could study a little bit of logic.

    Private property can only be private property when it is inheritable. That’s what enables accumulation of wealth (and thus what makes private property, private property). If you can’t inherit private property, it is not private property; if private property is not inheritable, it self-abolishes as such.

    To put it in other terms, private property is ontologically inheritable; or, it is only a social category as long as (among other things) it is inheritable. Private property which is not inheritable is personal possession, not private property. Personal possession can be passed through (by accident or by design), but it is not inheritable. Inheritance presupposes a legal contract, enacted and guaranteed by the State, and thus presupposes a class-based social relation.

    “[…] a lump sum capital allocation of €120,000 (just over £107,000) to everyone when they reach 25”

    That wouldn’t work because the Euro is a fiat currency: for the universal transfer of €120,000 to translate the purchase power of today’s €120,000, there would need to be an equal productive capacity that could be able to satisfy the new middle class’ necessities.

    In Ancient Rome (until the High Empire period), the beneficia system worked because money was directly proportional to the weight of the coin in silver (denarius and sesterces) and in gold (aureus). Besides, the imperial office controlled the empire’s main grain’s producing province (Aegyptus). The coin you had had absolute “value” no matter the epoch because it literally had a socially convened quantity of precious metal, and production and distribution of essentials for survival was guaranteed.

    That’s not true in a fiat currency system: the Central Bank can simply print more and devalue. The worker would receive the fool’s version of €120,000, not today’s €120,000.

    “This all smacks of returning capitalist economies to the days of the so-called ‘golden age’ from 1948-65, when inequality was much lower, economic growth was much stronger and working class households experienced full employment and were able to get educated to levels that enabled them to do more skilled and better paid jobs. There was a ‘mixed economy’, where capitalist companies supposedly worked in partnership with trade unions and the government.”

    Post-war Western Europe wasn’t a “mixed economy”. A mixed economy, when applied historically, designates a transition period between two systems. The Spanish and Portuguese empires were mixed economies (transition between manorialism and capitalism); the Carolingian empire was a mixed economy (transition between ancient slavery to manorialism).

    Today’s only existing mixed economy, by historical standards (and the juri is still out), is China. They key here is the prospect of system change. The European social-democrats abandoned the prospect of transition to communism in the 1930s; their goal is only to give capitalism “a human face”, not to overcome it. Welfare State is not, and should not, be considered a mixed system. There’s already enough documentation that confirms the welfare state that arose in some Western European countries (not all, e.g. Italy never had a formal welfare state; as neither had Portugal and Spain) as simply a social engineering operation done by the American and Western European elites in order to stop communist advances on the peninsula. It was always meant to be temporary.

  2. Boffy Says:

    “the profitability of capital plummeted in the 1970s (following Marx’s law of profitability as outlined in Capital).”

    Not true. Profitability certainly did fall in the 1960’s and 70’s, but it did so because wages rose, and the rate of surplus value fell, as demonstrated by Glyn and Sutcliffe in relation to Britain, and Thirlwall, Heidensohn, and Zygmant, Nordhaus et al in relation to other economies.

    But, this fall in the rate of surplus value is contrary to Marx’s Law of the Tendency for the Rate of Profit To Fall. Marx makes clear that his law is based not on a falling rate of surplus value, as proposed by Smith, Ricardo and Malthus, but on a rising rate of Surplus Value, because it is premised upon rising social productivity, the creation of a relative surplus population, falling wages, and a rising mass of profit.

    The squeeze on profits seen in the 1960’s and 70’s, and described by the above authors is consistent with the periodic squeezes on profits caused by such rising wages and falling wages, which flows from the long wave cycle, and the fact that after a certain period of extensive accumulation, existing labour supplies start to get used up, the social working-day cannot be expanded, so that the mass of surplus value cannot continue to be expanded, and as labour is used up, wages rise faster, thereby reducing the rate of surplus value, and rate of profit.

    This is the opposite of the conditions that Marx describes in relation to his tendential law. What it is consistent with is the overproduction of capital, which brings about this situation whereby the social working-day cannot be expanded so that absolute surplus value cannot be increased, and whereby relative surplus value cannot be expanded without a technological revolution that raises social productivity.

    In other words it is the conditions of profits squeeze that Marx describes in Capital as resulting from overproduction of capital.

    “Given the necessary means of production, i.e. , a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e. , the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given…

    There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0. The purpose of capitalist production, however, is self-expansion of capital, i.e., appropriation of surplus-labour, production of surplus-value, of profit. As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.”

    This fall in the rate of surplus value, caused by rising wages, which is the product of the overproduction of capital relative to the available supply of labour is the opposite of Marx’s tendential law.

    • vk Says:

      Fall of profit rate due to rising wages can (and do) happen. But they are fortuitous and not the ultimate cause of crises in capitalism. It is determined by class struggle.

      Even when wages go up, it doesn’t mean profitability necessarily must go down. Sure, from the point of view of the capitalist class, profitability could’ve been even higher and rising wages is never funny — but that’s not what determines a rise or fall in profit rates, but the objective profit rate measured against the last designated period of time’s profit rate. Wages may go up, but productivity of labor can go even higher, in which case profit rate would go up, not down, as a result of rising wages (that would be the classic industrial revolution scenario, where the novus homo would be of a superior degree of education and sophistication than the last novus homo, thus necessarily having to receive higher wages in order for it to reproduce itself as such).

      The tendency of the profit rate to fall is the absolute truth only in the very long term. In the short and medium term, you may or may not be observing this Law.

      Over-production is a circular logic concept. You over-produce when there’s not enough people to consume what you produced. But that’s only your point of view: from the point of view of the consumer, he/she bought exactly what he/she needed. What was over-production ten years ago may not be over-production now; it’s just a moralist term to designate the direct observation of a crisis (since every capitalist crisis is, concretely, a failure of the system to function properly).

      • Boffy Says:

        “Fall of profit rate due to rising wages can (and do) happen. But they are fortuitous and not the ultimate cause of crises in capitalism. It is determined by class struggle.”

        That is most emphatically not what Marx or Engels say. Wages can rise, and profits be squeezed either because the value of labour-power rises – caused by falling social productivity, which itself is the opposite of the conditions Marx sets out in his tendential law – or because the demand for labour-power rises relative to its supply so that wages, as the market price of that labour rises. As Marx says, in the quote from Capital III, Chapter 15, given above, wages rise because, the social working day cannot be expanded further, causing a limit on the extraction of absolute surplus value, and because given the existing technology, neither can the value of labour-power be reduced, sufficiently, so as to raise relative surplus value. So, the mass of surplus value, thereby, remains constant, or even falls, whilst the mass of advanced capital rises, so that the rate of profit, thereby falls. This is also the same argument that Marx sets out in TOSV, Chapter 21.

        Furthermore, as Marx sets out there and in Chapter 15 as cited above, because the demand for labour-power rises faster than the supply, this causes the market price of labour-power/wages to rise, and this further squeezes profits. This is precisely what Marx describes as being a crisis of overproduction of capital, because it is conditions in which the additional capital cannot act as capital, it produces no rise in the mass of surplus value, and may even cause a reduction in the mass of surplus value. Again that is the opposite of the condition Marx specifies in his tendential law, which he says, contrary to the laws set out by Smith, Ricardo and Malthus requires, that the mass of surplus value, and rate of ssurplus value be rising!

        Your claim that wages are determined by class struggle, rather than by objectively determined material conditions endogenous to the laws of capital is pure bourgeois subjectivism. It negates the whole basis of Marx’s theory.

        As Engels puts it,

        “The history of these Unions is a long series of defeats of the working-men, interrupted by a few isolated victories. All these efforts naturally cannot alter the economic law according to which wages are determined by the relation between supply and demand in the labour market. Hence the Unions remain powerless against all great forces which influence this relation. In a commercial crisis the Union itself must reduce wages or dissolve wholly; and in a time of considerable increase in the demand for labour, it cannot fix the rate of wages higher than would be reached spontaneously by the competition of the capitalists among themselves.”

        (The Condition of the Working Class, Chapter 10)

        And, as Marx himself puts it,

        “I think I have shown that their struggles for the standard of wages are incidents inseparable from the whole wages system, that in 99 cases out of 100 their efforts at raising wages are only efforts at maintaining the given value of labour, and that the necessity of debating their price with the capitalist is inherent to their condition of having to sell themselves as commodities.”

        (Value, Price and Profit)

    • mandm Says:

      Marx makes it clear that both his labor theory of value and his expanded reproduction schema assume (1) a mature industrial capitalism and (2) a global economy. The rate of surplus vale and the tendency of the rate of profit to fall are not only long term tendencies (as vk points out) but global tendencies. What you say about profitability in the special case of the militarized petro dollar economy of the US in1970’s sounds like and is pure gibberish.

      • mandm Says:

        correction: the second sentence should read: The rate of surplus value and tendency of the rate of profit to fall are not only long term phenomena but global phenomena.

      • Boffy Says:

        “What you say about profitability in the special case of the militarized petro dollar economy of the US in1970’s sounds like and is pure gibberish.”

        Except I was talking about the US, particularly, but the UK and Europe. Nor was I talking about solely the 19790’s, but the conditions that pertained in the 1960’s also.

        So I’m afraid that as usual the gibberish is entirely of your own creation.

        What is more, its not just the 1960’s and 70’s where this process can be seen, but, as Marx says, characterises all such periods of overaccumulation of capital. For example, in the long wave uptrend period that begins around 1890, we see a similar effect, with wages rising as the demand for labour-power rises. It goes along with the ability, as Trotsky describes in Flood tide and elsewhere, for workers to become more confident, and rebuild their organisations. In that period, that is manifest in the unionisation of unskilled workers for the first time – New Unionism. It sees mass social-democratic parties created. In the subsequent period, as capital accumulation becomes extensive, and the supplies of labour-power are used up, wages rise further squeezing profits. This crisis of overproduction of capital can only be resolved by a new technological revolution, and the creation of whole new consumer goods industries based upon it, which is what happens in the 1930’s and 40’s.

        Or we can take Marx and Engels’ other example. A new long wave uptrend began in 1843. In the years that followed, as capital accumulated, a new process of extensive accumulation sets in and existing labour supplies start to get used up, with a consequent restriction on the growth of surplus value, as wages again rise. Marx specifically refers to this situation,

        “Take, for example, the rise in England of agricultural wages from 1849 to 1859. What was its consequence? The farmers could not, as our friend Weston would have advised them, raise the value of wheat, nor even its market prices. They had, on the contrary, to submit to their fall. But during these eleven years they introduced machinery of all sorts, adopted more scientific methods, converted part of arable land into pasture, increased the size of farms, and with this the scale of production, and by these and other processes diminishing the demand for labour by increasing its productive power, made the agricultural population again relatively redundant. This is the general method in which a reaction, quicker or slower, of capital against a rise of wages takes place in old, settled countries. Ricardo has justly remarked that machinery is in constant competition with labour, and can often be only introduced when the price of labour has reached a certain height, but the appliance of machinery is but one of the many methods for increasing the productive powers of labour. The very same development which makes common labour relatively redundant simplifies, on the other hand, skilled labour, and thus depreciates it.”

        (Value, price and profit)

        It is this new technology introduced in response to the crisis of overproduction of capital, and the squeeze on profits caused by rising wages, as a result of the normal endogenous laws of the long wave cycle, that is the basis of Marx’s tendential law, not vice versa! VK’s claim that rises in wages are simply “fortuitous”, is wholly subjectivist in nature, and negates Marx’s entire theory. There is nothing fortuitous about it whatsoever, as Marx and Engels themselves describe. This cyclical rise and fall in wages, and consequent cyclical squeeze on profits, arising from an overproduction of capital is entirely explicable in terms of the laws of the long wave cycle.

        In the stagnation phase, there is intensive accumulation, as firms introduce new labour-saving technologies, precisely in response to the squeeze on profits arising from rising wages. The labour-saving technologies, create a relative surplus population, precisely because rising output can now be produced with the same or even less labour. The shortage of labour that led to the rise in wages and squeeze on profits, is then reversed, as Marx described above in Value, price and profit. But, this creates the conditions for his tendential law, not as a cause of crises, but as the consequence of them, and the means of overcoming it. It means that relative surplus value is increased, the mass of profit rises, but by less than the rise in the advanced capital – hence the falling rate of profit. But, as Marx says, this falling rate is much less than it was said to have been, and is cancelled out by the countervailing forces that arise due to the rise in productivity etc.

        As the mass of profit increases, and new industries arise with high rates of profit. Capital flows to these new industries. Employment starts to rise more rapidly, as seen in the 1950’s and 1960’s. At a certain point, the old technologies have stopped being replaced by the new technologies, and instead as capital accumulates, it does so using additional amounts of these new technologies. In other words, instead of 2 old machine A’s, being replaced by 1 new machine B, all of the A’s have gone, and it is simply a question of employing additional B’s. So, the rise in productivity that the previous replacement cycle brought about, slows down.

        As capital accumulates now on this extensive basis, additional capital accumulation requires proportionally more additional labour, because of this slowdown in productivity. As more labour is employed on this basis, and as the growth of the labour supply from bringing women into the workplace, encouraging immigration slows down, and as the ability to extend the working-day via overtime reaches its limits, or workers gaining higher hourly wages in the new conditions, defer from working overt-time, so that ability to extract absolute surplus value reaches its limit.

        So, the ability to expand surplus value becomes constrained, further accumulations of capital, only means that more labour yet is employed, and the so the demand for labour-power exceeds the supply causing wages to rise as describe by Marx and Engels above. In conditions of slowing productivity, due to extensive accumulation replacing intensive accumulation, neither can relative surplus value be increased, and the rise in wages now causes relative surplus value itself to decline. Capital has been overproduced, and additional capital cannot act as capital.

        That is what causes the crisis. The only solution is to raise the rate of exploitation, which can now only be achieved via a new technological revolution, again as described by Marx in VPP above. That is what was seen in the 1920’s and 30’s also. It is certainly what is seen in the 1970’s and 80’s. In both cases, it also then leads to whole new high profit industries being created, and capital accumulating within them, raising the overall rate of profit.

        There is absolutely nothing fortuitous in this cyclical. It is absolutely reproducible from the innate laws of motion of capital, and is reproduced on a regular basis of around 50 years, which is what leads to the periodic crises of overproduction that were seen in the 1820’s/30’s, the 1870’s/80’s, the 1920’s/30’s, and the 1970’s/80’s, and will no doubt be seen again in the future, though I suspect that the specific conditions arising after 2008, of money printing and austerity to reflate asset prices, which have restrained the recovery, have extended the current uptrend for perhaps 5 years, so that the new crisis will manifest around 2030/35, unless other changes occur in the intervening period.

      • Boffy Says:

        Correction,

        Second para, which reads,

        “Except I was talking about the US, particularly, but the UK and Europe.”

        Should obviously read,

        “Except I was NOT talking about the US, particularly, but the UK and Europe.”

  3. oaklandsocialist Says:

    Reblogged this on Oakland Socialist and commented:
    A valuable contribution from Michael Roberts. It might sound a bit technical or abstract, but it is relevant to the Democratic Party debate the other night. What Roberts takes apart here is exactly what Sanders and Warren argued in that debate.

  4. Boom Says:

    This does seem closer to socialism than “Socialism with Chinese Characteristics”. You can at least make sure people get a decent education (instead of being organized into cramming to a tiny selection of universities) and the richest will have much less bargain power, instead of flamboyantly forming a growing billionaire’s club in the parliament. Also, this avoids silly statistics as showing rise in wage as moving away from poverty, or black people in Southern USA would hardly be considered poor (and I can say they are no better than the poor in Brazilian’s largest cities).

  5. Nadim Mahjoub Says:

    Thanks, Michael. I have read Marx’s Capital vol.1. I am not planning to read Piketty’s books so you are helping me saving time.
    “Reaganism begun…” If that is in the original text you should add [sic] after begun.
    “But the term ‘exceed’ me allows…” I think there is ‘for’ missing after exceed.
    Finally, please write i.e., not ie.

    • Nadim Mahjoub Says:

      Actually, it should be “ther term ‘exceed’ allows me to.
      By the way, I think the title should be “Capital, not ideology”.
      I though disagree with that. I think it is both: capital and ideology go hand in hand. Capital needs consent, social consent of a significant proportion of the population. That applies to capitalism and pre-citalist formations alike.

      • antonio Says:

        “Capital needs consent, social consent of a significant proportion of the population.”
        It is not true. If you and your social class (capitalist) own 90% of the existing capital in any society (present, past, future, small or large) you only need (and get) the SUBMISSION of the owners of 10% (the population). Submission, not consent. What does happen is that it is not an eternal and indefinite submission: revolutions exist.
        Regards

      • Nadim Mahjoub Says:

        It is you, a revolutionary, considers it “submission.” I am not talking about capital as only an ownership, but also as a relationship that is supported by ideology. Social contract and compromise, for example, have existed. Look at post WWII period. Even under dictatorships, do you think the rulers rule only and exclusively by force? Are you telling me that the majority of the Chinese population consider themselves living in “submission”? Furthermore, revolutions are exceptional events, the Events. Only when the social contract and consent cannot be guaranteed, discontent might transform into revolution. But most of the time discontent do not become a revolution. Look at the recent examples in Greece, Spain, Occupy, now Chile, France’s Gilets Jaunes…

      • antonio Says:

        ‘I am not talking about capital as only an ownership, but also as a relationship that is supported by ideology. Social contract and compromise, for example, have existed. Look at post WWII period. ‘
        Relations?. The main ones are economic, productive relationships. Capital and its productive relations, is (almost) everything that exists, according to materialistic and scientific socialism. Capital + economic relations are the Economic Structure and this social structure determines and decides (at 80% to say a figure) on the rest: political, social, cultural, family, friendships, love and sexual activity, etc … Contracts? Social contracts? If signed between subjects (individual and collective-social classes) with similar economic power (for example about 50% each part) are fair agreements, they are agreements with consent. If there is no economic equality between the subjects there is no contract or consent, there is only SUBMISSION. The Golden Age (1945-1975) has nothing to do with World War 2. That period is, in fact, a later event and derived from the revolutionary events of 1917-Russia and 1949-China. It is a progressive phase of a revolutionary impulse (Ragnar Frisch, Rosa Luxemburg). Since the eighties we are in its regressive, reactionary phase. And the false social contract of the Welfare State is a (weak) agreement derived from these socialist revolutions.
         ‘Even under dictatorships, do you think the rulers rule only and exclusively by force? ‘Yes, just by force.
        ‘Are you telling me that the majority of the Chinese population consider themselves living in“ submission ‘? And it is. And (less) also in Europe, USA, etc …
        ‘Furthermore, revolutions are exceptional events, the Events. Only when the social contract and consent cannot be guaranteed, discontent might transform into revolution. But most of the time discontent do not become a revolution. Look at the recent examples in Greece, Spain, Occupy, now Chile, France’s Gilets, Jaunes ’
         Yes, they are exceptional events and only happen in the country, but they are necessary. These are the events that stop the social collapse, and impel, again, the society to more and more egalitarian relations. They drive societies with less submission. It is only a matter of time. It is possible that in Europe (Greece, Spain, etc …), in 2/3/4 decades, at the end of the sinking in progress, at the end of the sinking of the current false social contract, that exceptional event … and necessary.
        Regards,
         

  6. benl8 Says:

    Nice summary of Piketty, et al. The average wealth or net worth in the U.S. per adult is $403,000 says the Credit Suisse bank’s Global Wealth Report, 2018. It’s $432,000 by my calculation using Fed’s Flow of Funds report. 40% of the households own a net zero percent of the nation’s wealth, says the CS Databook. Something foul is going on, and it’s becoming a common perception. Some 400 adults own more than 150 million adults — that’s not right, quite obviously. The very large charity United Way’s report, ALICE, says that 40% of homes can’t afford seven basics of life. The myth that the billionaires deserve their wealth is a myth and is dissolving under scrutiny. Since January 2009 household net worth increases from $48 trillion to $108 trillion (Flow of Funds report). Why? Who benefitted? Is this fair? Something that will stop being “sacralized” is the financial wealth of the few. That is a step forward. Robin Hahnel, a “libertarian socialist”, will be listened to when he repeats his plan calling for worker councils and production councils. Inequality will not be abolished, but extreme inequality will be put behind us, I hope. So Piketty would start taxing wealth at $32 million. That’s a lot better than Warren or Sanders. Financial assets are a secondary currency, and they appreciate much faster than the major currency. The graph shown above only goes to 2013, today the ratio GDP to wealth is 1 to 5. ($20 trillion to over $100 trillion) What is ideal? Who decides? The major corporations spend 93% of profits on dividends and buybacks over ten years, and half of workers work for corporations or establishments with more than 500 workers. It all points to a shift for the better. We are poised, but that means little I fear.

  7. Julien Says:

    Thank you.

  8. fredtorssander Says:

    Monopoly (or oligopol) capitalism changes the rules a bit I think. The monopoly-capitalists are not slaves under the market or the competition with other capital. Not to the same degree as capitalists were before, and as non-monopoly capital is today. And monopoly capitalism confronted with a) capitalist crisis, b) socialist movement and c) socialist states and/or liberation movements in the colonies have means to defend their monopoly-profit rate. In Germany the long depression at the end of the 1800-s was lifted by military spending and social insurance. Countering crisis a) and b). 1890 Germany began a naval race which continued on to WWI. After the armistice the depression started again in Germany, but was then countered by method b) only. The Weimar Republic. The turning point came 1927 with the unemployment insurance law.
    Next turning point was 1932 when the welfare state (for some) and the military spending was combined by countering crisis a) and b) and c) under the nazi-rule.
    At the end of WWII it was back to depression – but milder – and then this was lifted by welfare and military spending – this time the cold war preparations from 1950. Crisis a) b) and c).
    It was not until after the re-unification of Germany that the depression started anew, with The fall of the wall 1997.
    A diagram made from working hours per employed (vertical) and (as presumed consumed value made per hour) working hours per inhabitant (horizontal) shows the changes. http://www.fredtorssander.se/fredpress/wp-content/uploads/2018/09/TyDi1.jpg
    The question today is if the global monopoly capitalists and their competing states can agree on surplus absorption by countering crisis d) the climate. Or if the established a) b) c) will be used first. I’m afraid that looks more probable.

    • Boffy Says:

      “In Germany the long depression at the end of the 1800-s was lifted by military spending and social insurance.”

      This is Keynesianism pure and simple, a version of the Permanent Arms Economy. Military spending is not a means of increasing growth, but of diminishing it. Military spending is financed by taxation, which is a deduction from surplus value. That surplus value would have been used for real capital accumulation, which itself puts value back into the economy. Military spending does not put value back into the economy, because unlike say a bridge, or factory the armaments are not consumed either individually, or productively.

      “It was not until after the re-unification of Germany that the depression started anew, with The fall of the wall 1997.”

      The fall of the wall, and need to drain surplus value from the west to finance reconstruction of the East is a parallel example to military spending. Keynesian demand management via government spending is not a means of ending crises of overproduction, or stimulating growth. In a period of overall long wave expansion, such as the 1950’s, then as Mandel showed, it can cut short recessions, but in periods of long wave downtrend, it only acts to drain surplus value, reduce capital accumulation, slow growth, and raise inflation and interest rates. The need to reconstruct the East, by taxing surplus value produced in the West, is an equivalent to the effect of military spending, with the difference being the ultimately the reconstruction of the East does put value back into the economy.

      But, your claim that a depression set in after 1997 is in any case wrong, as the data shows. Growth was higher in 2000 than in 1997, and was higher in 2007 than 2000, and even it was higher in 2010 than 2007. German growth like EU growth has slowed after 2010, because of the imposition of austerity to deliberately slow growth, and thereby keep interest rates lower so as to reflate asset prices, and because money printing has had the same effect inflating asset prices, and thereby artificially drawing money-capital away from real capital investment into financial speculation in search of capital gains.

      More generally, global growth and trade increased significantly after 1999, up to the global financial crash of 2008.

      • fredtorssander Says:

        I don’t think that it is relevant in the case of Germany in the 1890s if “Military spending does not put value back into the economy, because unlike say a bridge, or factory the armaments are not consumed either individually, or productively.” Germany were late-comers to the scramble for Africa, and the building of a new German fleet – 8 battleships – was meant to bring Germany even with Great Britain. The German armaments of this arms-race were financed by speculation on future super-profits by colonization. This made (monopoly-) capitalists invest their savings. And made common capitalists and petty-bourgeoisie eager to support the state by paying taxes. Bismarck had already before this ensured the loyalty of the working class by the world’s first social insurances. As Michael Roberts writes in his book The Long Depression “Depressions provoke a social and economic response. The depression of the nineteenth century provoked an imperialist rivalry that eventually led to World War I.”
        I do think that the German fleet-race had the effect of Keynesianism even though it happened before Keynes. But it would be wrong to describe it as “… Keynesianism pure and simple, a version of the Permanent Arms Economy.” It was more like Bastard Keynesianism (Joan Robinson)
        You write that my “claim that a depression set in after 1997 is in any case wrong, as the data shows. Growth was higher in 2000 than in 1997, and was higher in 2007 than 2000, and even it was higher in 2010 than 2007.” The likeness I see between the period after 1997 and the period before 1898 in my diagram (http://www.fredtorssander.se/fredpress/wp-content/uploads/2018/09/TyDi1.jpg ) has not been calculated in the same way as growth, but is built on working hours per worker as a function of the produce (also measured in working hours) consumed per inhabitant. Together those variables make line describing the development of productivity. Growing productivity makes a diagonal line downwards to the left, where both average working hours for employed and the necessary number of hours to clothe and feed (etc.) an average inhabitant grows less.

    • Anti-Capital Says:

      “It was not until after the re-unification of Germany that the depression started anew, with The fall of the wall 1997.”

      Let’s get our dates right: The East German government change policy and allowed East Berliners free access to West Berlin in 1989. East Germany and West Germany were unified in 1990. Physical demolition of the wall was completed in 1991.

      • fredtorssander Says:

        You are of course right about The fall of the wall. I really don’t know what I was thinking about. And the dramatic turn in the German productivity function that began in 1997 can hardly be explained by what happened in 1991. A look at other possibilities doesn’t present anything definite. The Asian crisis – well maybe, but why not the Mexican? The beginning of the dismantling of the nuclear power as an example of searching for a new surplus draining? That would be something for crisis research to delve into.

  9. rojaspedro1959 Says:

    Marxism does not offer solutions to current capitalism.

    It predicts that capitalism will be destroyed but nothing else. it offers no solutions or alternatives.

    Piketty is an economist educated at the height of liberalism and yet he tries to find evolutionary solutions to the current economy.

    Right? … I don’t know… but alternatives.

  10. Anon Says:

    “ But, as these vested interests of capital are still not generating enough profitability to allow any significant increase in the taxation of extreme wealth and income that they control, what chances are there that the current ‘ideology’ of the ‘sacralisation of property’ can be overcome, without taking them over?”
    The problem with this position is that while the rate of profit is decreasing, the mass of profits have been increasing, at least in the US. This isn’t out of place with what Marx predicts in Vol III. Social democracy at least has some possibility within this frame of reference even if it’s less likely to happen. The rich aren’t getting as much profit out of their capital but they also have more of it then ever.

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