«as a sociologist who studied real property and has been working on an alternative to neoliberalism.»
I reckon that the most important sociological development has been the switch from sons to property and shares as the main retirement asset (especially for many women); the second most important the much larger percentage of retirees among voters than in the past. The combined effect has been that a large number of retirees no longer see their sons as a profitable asset and vote for higher wages, but they see everybody else's sons as a cost and vote for lower wages, just as they no longer regard housing as cost of living, but as a source of large incomes.
Equality/inequality is not relevant to analyze the state-of-the-art of a given capitalist formation. Philosophically, there are mere relations of quantity and they may arise or disappear at any moment, in any type of society (the same is true for freedom, which is not a category, but just a relation).
Income is just an accountancy device, a classification. It bears no real meaning in the material world. A capitalist may decide to earn, according to the laws of the country he is living, a certain amount of his wealth in the classification of income. An unproductive worker will receive his/her wages in the form of income. This or that quantity of wealth may be classified as income. Something that is considered income today may not be considered income tomorrow, if the laws of a State changes in this way.
The important factor is the organic composition of capital (OCC). That is, how much of dead labor is employed in relation (not the philosophical one, this is just the vulgar sense of the word) to living labor: the ratio between fixed capital and variable capital.
There is no and will never be an official statistic for OCC, because that's a Marxist category and those who have the instruments of measure at this scale are capitalists. But there are approximations done by some individual economists (e.g. Michael Roberts) and, from that, we can infer the social (average) profit rate of capitalism. And all of those numbers point to the direction that OCC is rising and the social profit rate is falling. In other words, the working class may even be earning more than ever - but it is being dwarfed by the amount of crystallized wealth that must be increasingly be erected in order to sustain those wages (or, if you insist, “income”).
Now, for the earnings of the capitalist class. Indeed, the capitalist, as a human, must take some portion of the profits of his means of production in order to sustain himself and his family (capitalism is a patriarchal mode of production, therefore the individual always presupposes the family, that goes without saying). And, equally so, the growth of this spending may slowdown the velocity of the rise of OCC and the fall of the social profit rate (the growth of the luxury sector). But this has a limit, because, as stated, the personal spending of the capitalist is a direct deduction of the surplus value generated by capital itself. In other words, the capitalist is him/herself an obstacle to capital; the perfect capital has no human capitalist as its owner (but this is impossible, because the capitalist is the personification of capital; the perfect capital can't exist in the real world).
It should be noted that the pension systems in the Nordic countries are legally mandated, with a quite narrow strategic latitude as defined in legislation. The future pensioners do not personally participate in investment decisions to anything like the extent that characterizes the US system under 401(k).
In fact, at least in Finland, the assets of the nominally private pension funds have traditionally been counted as assets of the public sector when calculating the public debt ratio, etc. The pension funds are treated as something not very different from a sovereign wealth fund.
«The answer is that it is driven mainly by income from private pensions that is treated (rightly) as capital income.»
This is both right and wrong as written:
* Pensions and pension funds as such a just deferred labor income, not capital income; most clearly in the case of final salary pensions, but that applies also to individual pension funds. If someone works for 40 years and expects to live another 20 years then their total income over the 40 years must be stretched over 60.
* What is capital income is the *profits* (rents or capital gains) on the pensions funds. It is these that give pensioners a right-wing mentality.
So for example and most importantly when a worker pays the mortgage on a house ("this house is my pension") that is simply deferred labor income, but when the house is rented or sold at a bigger price the profit is capital income.
It is mostly the capital gains on houses (especially those purchased purely as retirement assets) that have made a large portion of the working class switch their vote from social-democracy to neo-liberalism, because they have been so huge.
“There were even prophetic council house sales by local Tories in the drive to create voters with a Conservative political mentality. As a Tory councillor in Leeds defiantly told Labour opponents in 1926, ‘it is a good thing for people to buy their own houses. They turn Tory directly. We shall go on making Tories and you will be wiped out.’ There is much of the Party history of the twentieth century in that remark.”
«they are best-paid workers and richest capitalists. This makes for an elite of about 3% of Americans. [...] they accomplish the fusion of capital and labor. Hence the elite strongly defends the rights of capital, low taxes on capital incomes and wealth, and everything else that goes with it»
Also the 20-40% of voters in the USA and UK who have middle-class incomes and own property (or shares) have the same political positions, because they give for granted their income as workers and know they will rely on their income as rentiers when they stop working to retire (or are already retired). Also those in that 20-40% usually are keen on policies not just to boost capital incomes but also to cut wages, pensions, social insurance as they reckon that the wages, pensions, social insurance for the lower classes are a cost to them and any impact on their own is more than compensated by large gains on their property and stocks.
That 3% if important, but politically the 20-40% is far more important: IIRC B. Delong has written that neoliberalism also was a response to the desire of the middle class (especially the upper-middle class) for more inequality.
The concept of homoploutia treats, in my view contrary to economic logic, as one and the same the productive labor of workman producing surplus value and the unproductive labor of the capitalist in getting the workman to produce, realise in circulation, spend on personal needs or luxury and accumulate the rest, that is consuming the surplus value. All these earning highest labor income actually perform the functions which in the beginning individual capitalist performed himself but had to bring in more individuals for as capital accumulated - procurement, personnel, production supervision, sales, marketing, accounting, finance, etc. They do capitalist's functions and get a share in the total surplus value produced by workman labor. Their income appears to be worker income but is in essence capital income. Hence, they are nothing but avatars or split personalities of the capital personified. Thus their unquestioned support to capitalism.
The “lost” (vandalized?) distinction of Classical economics between earned and unearned income has led to much mischief in the academy and among the policymakers whose ideas stem therefrom, and much misery for the bulk of the citizenry.
«He asks what a society of much greater compositional equality might imply for class contradictions»
A. de Tocqueville "Democracy in America" (1834) volume 1, part 2
“In France, most of those who hire out their services to till the ground are themselves owners of a few plots of land which, at a pinch, will enable them to live without working for anyone else. When these people offer to work for a great landlord or a neighbouring tenant farmer but are refused a certain wage, they withdraw to their small and await another opportunity.
I think that, on the whole, it can be said that the slow and gradual rise in wages is one of the more general laws of democratic societies. As conditions become more equal, wages rise, as wages increase, conditions become more equal.
But nowadays one great and unfortunate exception occurs. I have demonstrated in a previous chapter how the aristocracy, once expelled from the political life, had withdrawn into certain areas of industrial enterprise and had created its power there in a different form. This has a strong influence on the rate of wages.
As one must already be very rich to take on the great industries of which I speak, the number of entrepreneurs is very small. Being few in number they can easily league together and fix the level of wages as they like.
Workmen, by comparison, are very numerous and their numbers are constantly on the increase for, from time to time, extraordinary periods of prosperity occur when wages rise wildly, attracting people in the locality into manufacturing industry.
Now, once men have embarked upon this career, we have seen that they cannot escape from it because they soon pick up habits of body and mind which render them unsuited for any other work. These men usually lack education, energy resources. They are, therefore, at their master's mercy.
When competition, or any other circumstances, reduce the master's profits, he can curb their wages almost at will and can easily recoup from them what the fortunes of business take from him. Should they choose to strike, the master, who is wealthy, is easily able to wait, without risk of ruin, until necessity brings them back since they must work every day so as not to die, for they own almost nothing but the strength of their arms. Oppression has long since reduced them to poverty and, as they become poorer, they are easier to oppress -- a vicious circle from which they cannot escape.”
Is there also perhaps something to say about "organizational inequality" – the kind of difference in power depending where you are in an organization hierarchy, and how much wealth you can milk out of this?
I think this is important because it seems that it was people in a power position in state bureaucracies that were the most militant in transforming the communist as well as the keynesian societies into neo-liberal ones.
Branko! Although I have always had difficult reading your work I thought sincerely you might give this piece a try (mine). I never realized you are ALWAYS saying “inequality,” believe it or not. I knew there was something “economics” in there but every time I tried to read one it just got wonkish/boring after you make your first statements. The bit I liked, though, was the review of the book about “equality” in distinct societies: hunter-gatherer, etc. With that in mind, here is something I recently wrote as for the whole inequality bit showing my scholarly stuff! I will give you the link to the ‘Note.’ Yoy shoud get the link to the piece also I would think so, ha ha…https://substack.com/profile/38504787-jacob-silverman/note/c-139708853
It’s almost as if we are edging just a little bit closer to the broadly accepted realization that it’s wealth inequality even more so than income inequality which pollutes our socioeconomic environment and endangers our systems of democratic accountability.
Question: as anyone who knows the politics of Taipei will tell you, Taiwan has very high inequality from property (land) ownership. Is this reflected in the compositional variable?
Very interesting, like the Homoploutia paper, but maybe there is also another way to look at the data - in cohorts: West, LAC, Nordic and to a lesser extent Asia and Eastern Europe. It seems the relation between IFC and Gini in each of the first three is horizontal, i.e. Gini does not vary much with IFC and may even be negative in LAC and the West. If this is true, there are probably other important factors to consider as well.
“China, on the other hand, stands out by its relatively high income inequality, given its low compositional inequality”. China, land of too muchness, has two Ginis: one coastal, the other inland, each around 3.2 but, when aggregated, produce a (World Bank) Gini of 3.8.
The gap is 3000 years old but, heroically and slowly, closing it
That straight line seems highly tendentious to me in what is a fairly scattered cloud.
In that cloud I can imagine three subclusters, two lower ones once centered on ESP, one on DNK, and an upper one centered on MEX. But souther/central american countries are a very special case because of the presence in most of two rather different economies and polities.
If I were to draw lines I would drive *two* sloping downwards, the lower one from CHN to ROU and the upper one from DOM to URY.
This is very interesting to me as a sociologist who studied real property and has been working on an alternative to neoliberalism.
«as a sociologist who studied real property and has been working on an alternative to neoliberalism.»
I reckon that the most important sociological development has been the switch from sons to property and shares as the main retirement asset (especially for many women); the second most important the much larger percentage of retirees among voters than in the past. The combined effect has been that a large number of retirees no longer see their sons as a profitable asset and vote for higher wages, but they see everybody else's sons as a cost and vote for lower wages, just as they no longer regard housing as cost of living, but as a source of large incomes.
Equality/inequality is not relevant to analyze the state-of-the-art of a given capitalist formation. Philosophically, there are mere relations of quantity and they may arise or disappear at any moment, in any type of society (the same is true for freedom, which is not a category, but just a relation).
Income is just an accountancy device, a classification. It bears no real meaning in the material world. A capitalist may decide to earn, according to the laws of the country he is living, a certain amount of his wealth in the classification of income. An unproductive worker will receive his/her wages in the form of income. This or that quantity of wealth may be classified as income. Something that is considered income today may not be considered income tomorrow, if the laws of a State changes in this way.
The important factor is the organic composition of capital (OCC). That is, how much of dead labor is employed in relation (not the philosophical one, this is just the vulgar sense of the word) to living labor: the ratio between fixed capital and variable capital.
There is no and will never be an official statistic for OCC, because that's a Marxist category and those who have the instruments of measure at this scale are capitalists. But there are approximations done by some individual economists (e.g. Michael Roberts) and, from that, we can infer the social (average) profit rate of capitalism. And all of those numbers point to the direction that OCC is rising and the social profit rate is falling. In other words, the working class may even be earning more than ever - but it is being dwarfed by the amount of crystallized wealth that must be increasingly be erected in order to sustain those wages (or, if you insist, “income”).
Now, for the earnings of the capitalist class. Indeed, the capitalist, as a human, must take some portion of the profits of his means of production in order to sustain himself and his family (capitalism is a patriarchal mode of production, therefore the individual always presupposes the family, that goes without saying). And, equally so, the growth of this spending may slowdown the velocity of the rise of OCC and the fall of the social profit rate (the growth of the luxury sector). But this has a limit, because, as stated, the personal spending of the capitalist is a direct deduction of the surplus value generated by capital itself. In other words, the capitalist is him/herself an obstacle to capital; the perfect capital has no human capitalist as its owner (but this is impossible, because the capitalist is the personification of capital; the perfect capital can't exist in the real world).
It should be noted that the pension systems in the Nordic countries are legally mandated, with a quite narrow strategic latitude as defined in legislation. The future pensioners do not personally participate in investment decisions to anything like the extent that characterizes the US system under 401(k).
In fact, at least in Finland, the assets of the nominally private pension funds have traditionally been counted as assets of the public sector when calculating the public debt ratio, etc. The pension funds are treated as something not very different from a sovereign wealth fund.
«The answer is that it is driven mainly by income from private pensions that is treated (rightly) as capital income.»
This is both right and wrong as written:
* Pensions and pension funds as such a just deferred labor income, not capital income; most clearly in the case of final salary pensions, but that applies also to individual pension funds. If someone works for 40 years and expects to live another 20 years then their total income over the 40 years must be stretched over 60.
* What is capital income is the *profits* (rents or capital gains) on the pensions funds. It is these that give pensioners a right-wing mentality.
So for example and most importantly when a worker pays the mortgage on a house ("this house is my pension") that is simply deferred labor income, but when the house is rented or sold at a bigger price the profit is capital income.
It is mostly the capital gains on houses (especially those purchased purely as retirement assets) that have made a large portion of the working class switch their vote from social-democracy to neo-liberalism, because they have been so huge.
http://www.conservativehome.com/thetorydiary/2014/03/how-thatcher-sold-council-houses-and-created-a-new-generation-of-propertyowners.html
“There were even prophetic council house sales by local Tories in the drive to create voters with a Conservative political mentality. As a Tory councillor in Leeds defiantly told Labour opponents in 1926, ‘it is a good thing for people to buy their own houses. They turn Tory directly. We shall go on making Tories and you will be wiped out.’ There is much of the Party history of the twentieth century in that remark.”
«they are best-paid workers and richest capitalists. This makes for an elite of about 3% of Americans. [...] they accomplish the fusion of capital and labor. Hence the elite strongly defends the rights of capital, low taxes on capital incomes and wealth, and everything else that goes with it»
Also the 20-40% of voters in the USA and UK who have middle-class incomes and own property (or shares) have the same political positions, because they give for granted their income as workers and know they will rely on their income as rentiers when they stop working to retire (or are already retired). Also those in that 20-40% usually are keen on policies not just to boost capital incomes but also to cut wages, pensions, social insurance as they reckon that the wages, pensions, social insurance for the lower classes are a cost to them and any impact on their own is more than compensated by large gains on their property and stocks.
That 3% if important, but politically the 20-40% is far more important: IIRC B. Delong has written that neoliberalism also was a response to the desire of the middle class (especially the upper-middle class) for more inequality.
The concept of homoploutia treats, in my view contrary to economic logic, as one and the same the productive labor of workman producing surplus value and the unproductive labor of the capitalist in getting the workman to produce, realise in circulation, spend on personal needs or luxury and accumulate the rest, that is consuming the surplus value. All these earning highest labor income actually perform the functions which in the beginning individual capitalist performed himself but had to bring in more individuals for as capital accumulated - procurement, personnel, production supervision, sales, marketing, accounting, finance, etc. They do capitalist's functions and get a share in the total surplus value produced by workman labor. Their income appears to be worker income but is in essence capital income. Hence, they are nothing but avatars or split personalities of the capital personified. Thus their unquestioned support to capitalism.
The “lost” (vandalized?) distinction of Classical economics between earned and unearned income has led to much mischief in the academy and among the policymakers whose ideas stem therefrom, and much misery for the bulk of the citizenry.
«He asks what a society of much greater compositional equality might imply for class contradictions»
A. de Tocqueville "Democracy in America" (1834) volume 1, part 2
“In France, most of those who hire out their services to till the ground are themselves owners of a few plots of land which, at a pinch, will enable them to live without working for anyone else. When these people offer to work for a great landlord or a neighbouring tenant farmer but are refused a certain wage, they withdraw to their small and await another opportunity.
I think that, on the whole, it can be said that the slow and gradual rise in wages is one of the more general laws of democratic societies. As conditions become more equal, wages rise, as wages increase, conditions become more equal.
But nowadays one great and unfortunate exception occurs. I have demonstrated in a previous chapter how the aristocracy, once expelled from the political life, had withdrawn into certain areas of industrial enterprise and had created its power there in a different form. This has a strong influence on the rate of wages.
As one must already be very rich to take on the great industries of which I speak, the number of entrepreneurs is very small. Being few in number they can easily league together and fix the level of wages as they like.
Workmen, by comparison, are very numerous and their numbers are constantly on the increase for, from time to time, extraordinary periods of prosperity occur when wages rise wildly, attracting people in the locality into manufacturing industry.
Now, once men have embarked upon this career, we have seen that they cannot escape from it because they soon pick up habits of body and mind which render them unsuited for any other work. These men usually lack education, energy resources. They are, therefore, at their master's mercy.
When competition, or any other circumstances, reduce the master's profits, he can curb their wages almost at will and can easily recoup from them what the fortunes of business take from him. Should they choose to strike, the master, who is wealthy, is easily able to wait, without risk of ruin, until necessity brings them back since they must work every day so as not to die, for they own almost nothing but the strength of their arms. Oppression has long since reduced them to poverty and, as they become poorer, they are easier to oppress -- a vicious circle from which they cannot escape.”
Hence the (ongoing) power of the enclosure movement.
Is there also perhaps something to say about "organizational inequality" – the kind of difference in power depending where you are in an organization hierarchy, and how much wealth you can milk out of this?
I think this is important because it seems that it was people in a power position in state bureaucracies that were the most militant in transforming the communist as well as the keynesian societies into neo-liberal ones.
Branko! Although I have always had difficult reading your work I thought sincerely you might give this piece a try (mine). I never realized you are ALWAYS saying “inequality,” believe it or not. I knew there was something “economics” in there but every time I tried to read one it just got wonkish/boring after you make your first statements. The bit I liked, though, was the review of the book about “equality” in distinct societies: hunter-gatherer, etc. With that in mind, here is something I recently wrote as for the whole inequality bit showing my scholarly stuff! I will give you the link to the ‘Note.’ Yoy shoud get the link to the piece also I would think so, ha ha…https://substack.com/profile/38504787-jacob-silverman/note/c-139708853
It’s almost as if we are edging just a little bit closer to the broadly accepted realization that it’s wealth inequality even more so than income inequality which pollutes our socioeconomic environment and endangers our systems of democratic accountability.
Excellent.
Question: as anyone who knows the politics of Taipei will tell you, Taiwan has very high inequality from property (land) ownership. Is this reflected in the compositional variable?
Very interesting, like the Homoploutia paper, but maybe there is also another way to look at the data - in cohorts: West, LAC, Nordic and to a lesser extent Asia and Eastern Europe. It seems the relation between IFC and Gini in each of the first three is horizontal, i.e. Gini does not vary much with IFC and may even be negative in LAC and the West. If this is true, there are probably other important factors to consider as well.
“China, on the other hand, stands out by its relatively high income inequality, given its low compositional inequality”. China, land of too muchness, has two Ginis: one coastal, the other inland, each around 3.2 but, when aggregated, produce a (World Bank) Gini of 3.8.
The gap is 3000 years old but, heroically and slowly, closing it
«came up with the following graph»
That straight line seems highly tendentious to me in what is a fairly scattered cloud.
In that cloud I can imagine three subclusters, two lower ones once centered on ESP, one on DNK, and an upper one centered on MEX. But souther/central american countries are a very special case because of the presence in most of two rather different economies and polities.
If I were to draw lines I would drive *two* sloping downwards, the lower one from CHN to ROU and the upper one from DOM to URY.