Sunday, February 24, 2013

Peter Cooper — Inner Growth Requires Time to Self Reflect

I would say that in the area of economics I have only ever had three light-bulb moments : perceiving the source of surplus value (Marx) ; encountering the principle of effective demand (Kalecki, Keynes) ; and understanding the implications of monetary sovereignty (MMT). Each of these insights had a big impact on me and made sense of a lot of other things all at once.
In thinking about paths to a better society, the understanding of monetary sovereignty seems the most important of the insights. It makes clear that real resources are the only genuine constraint and that, regardless of what capitalists or ‘bond vigilantes’ might think of the matter, economic activity need not be for profit, growth is not compulsory, materialism is not the only alternative, and the wage-labor relation or income tied to labor time is not a law of nature. None of these things are necessary or inevitable for a monetarily sovereign society, if we so choose.
But what will we choose? Do we even know what we really want? As regular commentator jrbarch often points out most eloquently, to know what we really want, we have to know ourselves. Light-bulb moments in our inner lives require self-reflection.
heteconomist.com
Inner Growth Requires Time to Self Reflect
Peter Cooper

16 comments:

Matt Franko said...

OK,

"encountering the principle of effective demand (Kalecki, Keynes)"

Got it...

"and understanding the implications of monetary sovereignty (MMT)..."

Got it...

"perceiving the source of surplus value (Marx). "

Now this one I have trouble with, dont understand this at all...

From the wiki on Surplus Value:

"A worker who is sufficiently productive can produce an output value greater than what it costs to hire him."

OK lets look at this in an agricultural context...

One hires workers to sow the seeds and pays them for sowing the seeds; they are paid the value for sowing the seeds... ie "no surplus value" present...

Next labor required, is the harvest. One hires workers to harvest the fruit and pays them for harvesting the fruit; they are paid the value for harvesting the fruit... ie no "surplus value" again.

Where does the "surplus value" come from?

What happens between the sowing and the harvest?

Is this where the "surplus value" comes from?

Who does that part of the process?

rsp,





Tom Hickey said...

The concept of surplus value originates in agricultural. Before agriculture that was no surplus. Tribal "economies" were subsistence economies. No unemployment, and no surplus. With agriculture came surplus product over subsistence. The question is, of course, who "owns" the surplus. The "obvious" answer was the owner of the land. Under a monarchy, this was the monarch. Under feudalism it was the landlords. Since the owner of the land did not work, the surplus extracted was considered economic rent, i.e., unearned gain. This convention was transferred to capitalism, in which land was replaced by factories, workers were transferred en masse from agricultural work to industrial, and owners received the profit as economic rent. Although it is crudely expressed, this is the basic idea behind worker exploitation by private ownership.

peterc said...

Matt, the value of labor power in Marx is the cost of reproducing workers and their dependents. If it takes five hours of labor time for the workers to produce enough output to reproduce themselves, but they are contracted to work ten hours a day, five hours of each day will be spent producing surplus value for the capitalist. In other words, the capitalist pays workers for a certain amount of labor time, not (as alleged in the neoclassical marginal productivity theory of distribution) in accordance with what they produce.

The cost of reproducing workers' labor power in Marx is socially determined. Workers, by forming unions for example, can raise their pay above mere physical subsistence. But in the absence of unions or government regulations protecting workers' pay and conditions, competition would tend to drive wages down to physical subsistence levels whenever there was a surplus of workers ("reserve army" or in today's terms "excess supply" of labor).

Matt Franko said...

Tom and Peter thanks..

"enough output to reproduce themselves"

That's an interesting concept! I have to think about this some more...

but what happens if there is a bumper crop and the price collapses and the operator cannot get even enough balances back to cover the sunk costs of the the balances paid to the planters and the harvesters?

Does Marx say that the workers have to "give the money back"? I would think not... this is probably why the US has farm subsidies and crop insurance...

Similar to the recent car company "bailouts" here in the US where GM and Chrysler were facing bankruptcy but the govt came in and gave them both free USD balances to get them out of bankruptcy (including the associated union pension funds)...

So if you have a bumper crop or a crop failure, then govt has to step in... or if you manufacture things that no one ends up wanting to buy, looks like to prevent chaos, an authority has to step in with free balances anyways... just as with the bank bailouts...

Seems like "surplus value" is often fleeting. Does Marx address this?

What happens in Marx if the future perceived "surplus value" does not ever materialize? Did he advocate govt bailouts in those situations? Or just let it all go into liquidation mode and everybody involved has to start over?

rsp,

peterc said...
This comment has been removed by the author.
peterc said...

Matt, there is always the risk in Marx's theory that the surplus value created in production will not be realized in the marketplace (a realization crisis).

Marx wasn't so much concerned with particular policies within capitalism to address or prevent crises. He was focused on analyzing capitalism, as it functions (in his view), in an effort to demonstrate that it had within it the seeds of its own destruction if workers performed their revolutionary role.

A central significance, for Marx, of labor being the sole source of new value was that it suggested a tendency for the rate of profit to fall over an expansionary phase, because he argued that the proportion of value invested in constant capital (machinery, plant, raw materials) would rise relative to variable capital (labor, the source of new value). The way out, internal to the logic of capitalism, was for a crisis in which capital values collapsed and revived the rate of profit.

But Marx was not suggesting that crises were a good thing (he thought the system should be overturned), only that it was functional to capitalism.

The theory is *not* saying that capitalism is unfair because workers receive less than the full value they produce. Value is not real wealth. Labor is the source of all new value, but not the source of all new real wealth. Machines, animals, nature, and workers all create real wealth.

Value itself, for Marx, should be ended, because it is at the basis of capitalism. Value is a magnitude of labor time, or its equivalent objectified in money. The owner of capital has command over that labor time, and gets to determine its allocation. A worker, who lacks capital, must sell his or her own labor power to capitalists or capitalist governments to survive.

Marx ultimately wanted the separation of income from labor time (the end of the wage labor relation) and a separation of income from the ownership of claims on society's labor time (private ownership of capital).

Marx saw capitalism as accumulation of surplus value for its own sake, and therefore the accumulation in private hands of claims on the labor time of others for its own sake.

Bit quick and dirty, and not well structured, but hope this helps a little.

Matt Franko said...

Thanks Peter yes this has helped me understand further what Marx had in view wrt Capitalism...

rsp,




Matt Franko said...

There is a scripture this reminds me of here:

"6 I plant, Apollos irrigates, but God makes it grow up.
7 So that, neither is he who is planting anything, nor he who is irrigating, but God Who makes it grow up.
8 Now he who is planting and he who is irrigating are for one thing. Yet each will be getting his own wages according to his own toil." 1 Cor 3:6-8

So from a Marxian perspective, in this agricultural context, Paul reveals that so to speak, "God provides the surplus value" ...

What we do with that "surplus value", ie the distribution of it, looks like it is probably important to say the least... based on Who it comes from.

I have to think about this in an industrial context...

rsp,

Tom Hickey said...

BTW, the concept of "surplus" is dismissed in neoclassical economics and neoliberal political economy in that it introduces the possibility of economic rent. In neoclassical economic all factors "earn" iaw their marginal contribution. There are no unearned gains and no parasites in the system or vampires sucking on the system.

peterc said...

Good quote, Matt.

I would just add that every society beyond some minimal level of development produces a social surplus (that is, they produce more than is necessary merely to reproduce the previous period's level of production). But under capitalism, Marx argued that this social surplus takes the form of surplus value. So the driving factor becomes value creation for its own sake without regard to its use value, rather than the real wealth (use values) being the focus.

Magpie said...

@Matt,

Perhaps a more concrete example would further clarify things.

Let's go back to your specific farm example. To be concrete: you hire X workers; at the end of the season, you get Y bushels of fruit, which you, as the farm owner, sell for $Z.

If you had to pay each worker exactly Z/X dollars you would not stay in farming, for every dollar you received for your crop would go out to your workers in wages. The only way for you to stay in business is if the combined wages are less than $X. The difference between your revenue ($Z) and your wages bill (less than $Z) is your profit (i.e. the surplus value in money).

But you could make the calculation based on bushels, instead of money. If you had to pay your workers Y/X bushels, would you stay in business? Like before, no, you wouldn't: you need to pay them less (now measured in bushels) than the product of their work, for you to have something left to sell: this is the surplus product.

So, the worker needs to be able to subsist during the season on less than Z/X dollars or equivalently less than Y/K bushels. Marx called that to "reproduce the labour power of the workers".

But the workers produced exactly Z/K dollars and Y/K bushels: it costs less to reproduce the workers' labour power than the value they create.

Hope this helps.

Tom Hickey said...

Good example, magpie.

In a tribal hunter-gather society, everyone makes the subsistence wage and quits work for the day and eats the day's catch, which has to be consumed that day if there is no refrigeration.

With agriculture, a surplus is possible since grain is not immediately perishable and more grain can be produced than is needed for subsistence. Some of this grain is stored as the surplus used for trade, as a hedge against drought years, and to support those who do not produce grain but perform other functions like providing organization (palace), specialist knowledge (temple) and protection (military).

Historically, the producers were given a subsistence wage, that is, just enough to survive and reproduce, whether they were slaves serfs, or tenant farmers. There was no middle class other than a few craftspeople and traders.

These become the four cases of Vedic society, for instance, the brahmin priests who are also the teachers, the kshatrya warriors from whom the rulers are selected, the vaishya tradespeople, and the sudra serfs. Those who don't fint into the system are "outcastes" and they have to survive by doing the work that other classes reject as "unclean," like sanitation.

This overall institutional arrangement remained fairly stable as long as the agricultural age persisted. When the industrial age began to replace it, then the same institutional arrangements were transferred to the newly emerging system.

A big difference, however, was the rise of the middle class, upper and lower, i.e., the haute and petite bourgeoisie. This class was an ownership class like the upper classes. Eventually, the upper middle class or haute bourgeoisie largely replaced the upper class through the power that resulted from wealth accumulation, and the leaders of this class provided the rulers instead of the military or religious authority doing so.

The really important aspect is that the lower middle class or petite bourgeoisie is given right to own land and the opportunity to share in the a surplus to a limited degree as well as the possibility of rising to the upper middle class or haute bourgeoisie. This effectively separated them from their natural affinity with the working class, which still was compensated as close to the subsistence level as possible by weakening its bargaining power in markets. Because they were co-opted by property, aligning it with the upper middle class, the lower middle class often overlooked that its wages and opportunities were also being suppressed by imposition of a double-standard through institutional arrangements, i.e., that they were being treated as workers but allowed to rise somewhat above subsistence living. How much of the surplus they are allowed, however, is expanding and contracting depending on power relationships. The period after WWII was a period of unprecedented expansion. Presently the surplus $ of the lower middle class is contracting as they get crammed down toward the working class, and some even fall into the underclass by becoming homeless.

Enter Marx to explain this. Then, of course, Marx and his ideas were suppressed by the upper middle class become rulers, whose rule was threatened by this explanation.

Tom Hickey said...

BTW notice that my historical analysis above, the producers are the workers that actually produce the goods that go to subsistence and surplus.

In the neoliberal construction the owners and rentiers are construed as the "makers" and the workers as the "takers."

Matt Franko said...

The more I find out about Marx the more he continues to look (to me) like a textbook dispersed Israelite.

To me, Marx is flat out longing for the economy of Israel under the Mosaic Law... where each household received a GUARANTEED equivalent allotment of land and God provided the "surplus value" through agricultural bounty... it was a classless society, no human government.

He, being dispersed out of the land and into the nations here in the west, and God withdrawing from him, it's like he is just left scratching his head trying to make sense of all of this...

Being an Israelite none of this makes any sense to him: social classes of humans, industrial economies, human (vice God) authorized surplus value, human (vice God's) civil government... he doesnt understand ANY of these things, they are foreign to who he really is... it's all chaotic to him...

the western nations (ie "gentiles") just don't make sense to him (as it probably shouldn't)...

He's a "fish out of water" here in the west...

rsp,

Tom Hickey said...

Interesting take on Marx, Matt. I hadn't thought of it that way before.

Marx has often been accused of being "anti-Semitic" in that he saw most European Jews of his day as bourgeois worshippers of the golden calf rather than as universalist humanists allied with the worker.

Marx wrote a tract about it, On the Jewish Question (1844).

Tom Hickey said...

BTW, Marx was against normative religion, which he saw a hopelessly corrupted, and I believe that to a large extent he was correct. Many spiritual teachers have said the same thing. But he was an essentially spiritual person dedicated to using reason and argument to make the world a better place for all other than those he saw as exploiting others for personal gain and class privilege.

Spirituality is not necessarily connected with religion, nor is it necessarily theistic. Humanism is spiritual in that it is concerned with living iaw true values but it is not normative religious in the sense of imposing doctrine, ritual and observances based on supernatural criteria.

What humanism does is substitute reason for the anthropological concept of god, which is pretty much in line with Western philosophers from the earliest days. Many Christian theologians and philosophers interpreted God philosophically in terms of reason or intelligence and equated that concept of God with that of faith, arguing that faith is rational. Augustine followed PLato, and Aquinas followed Aquinas philosophically, and these are two of the chief strains in Christian thought.

Yoram Hazony recently mounted a somewhat similar argument in The Philosophy of Hebrew Scripture.