We're All Capitalists Now

Those concerned about inequality often place emphasis on the “income share of labour,” a.k.a. the ratio between the amount doled out in wages and the amount doled out in profits, treating it as a useful index of “how workers are doing.” This is logical enough insofar as workers are the ones, so the story goes, who have to rely on wages to eat.

In this sharp if somewhat technical review of Piketty’s Capital in the 21st Century, Peter Lindert (there’s a link to the pdf here) reiterates how unhelpful this measure is.

Shares of labor versus capital in current income…have never proved to be good predictors of inequality, and continue to be poorly correlated with it over time and space.

One caveat that Piketty raises in Capital is that returns on capital, high or low, only matter for his analysis insofar as they are concentrated in the hands of the few. If capital wealth was equally held by everyone, or if returns on capital were doled to everyone by the state on a per capita basis, then increasing the rate of return on capital would at worst have no impact on income inequality and, if returns to labour were unequally distributed, could actually increase overall income equality. Here’s Lindert again:

Having 60 percent of national income go to labor incomes could reflect perfect equality, with 60 percent of the population equally sharing labor incomes and the other 40 percent equally sharing property incomes. Or it could mean horrific inequality if the 60 percent going to labor were shared by everyone except one propertied ruling family.

Of course, one doesn’t need such extreme hypotheticals to make the point. In today’s industrialized economies, many if not most workers actually rely solely on income capital for the last 10-25% of their lives (i.e. when they are retired). In such societies, one way that returns on labour could fall is workers all decided to to be richer in their retirement than during their working years – i.e. to save more in the early days and spend more on the backend. Of course, to say “we are all capitalists now” is not to deny that there is massive inequality in the holding of wealth, or that some are for all intents and purposes wholly excluded from any ownership of the commonweal. But it does demand that we shift attention away from abstract class categories toward questions of actual distribution and how economic structures impacts its evolution.

Lindert’s first example points to a very different problem. In most people’s minds, what Marx called exploitation–the idea that some were able to get an income from the social weal without working–was synonymous with the immiseration of the working classes. Yet one possible future (one that concerns some proponents of a basic income) is a world in which there is a reasonable level of income equality, but in which only some people have access to (/choose to/get the additional benefits from) work. It seems unlikely that workers in such a world could be called exploited; it is certain that the income share of labour would still tell us close to nothing about how just the society was.

Democracy for Everyone!

Good news, everyone: finance is getting more democratic, because technology.

You know how democracy works, right? It means that a service that was previously only sold to some people gets sold to everyone now. It used to be that only finance dudes got to have finance, but now everyone does. Hooray! Let’s watch a video of democracy happening.

What were we talking about? Oh yeah: today’s breathlessness about the democratizing potential of financial institutions comes from Mohammed Al-Erian, who as “Chair of Barack Obama’s Global Development Council” apparently has a job whose sole requirement is an uncriticial embrace of the Silicon Valley doctrine of social policy: “the best way to deal with the social problems caused by deterministic technological change and inevitable laissez-faire economic governance is just let them keep happening.”

He assures us that this creeping expansion of financial logic into all areas of our lives isn’t just democratic, it’s also disruptive. I mean, what could be more disruptive than just letting faceless, inevitable social processes (“innovations suddenly appear…mechanisms emerge… business models face challenges”) proceed without any attempt to manage their social consequences at all?

Tackling these claims to disruption, democratic potential and to brand-new, never before-seen processes can get pretty tiring. Jill Lepore at The New Yorker has done a pretty devestating take-down of the disruption discourse, attacking head-on the idea that economic change proceeds in big leaps rather than incremental steps. Peter Frase at Jacobin points out that those most committed to “disruption” get cold feet when the disruptions aren’t derived from a tech-enabled business model. If Evgeny Morozov has made his career skewering those with a growing religious faith that “more tech means everything is better for everyone” and, if he can be accused of throwing out the baby with the bathwater, part of the reason has to be that there is just so, so much dirty bathwater.

There are lots of reasons to be happy about increased access to certain financial services. Bringing down the prices of life insurance and small business loans could put them in them within the reach of people who didn’t otherwise have access to them. That could make their lives better. Al-Erian may be right that technological change will “reduce the cost of financial intermediation while providing for fairer risk-pooling outcomes and better credit underwriting.”

But here’s the thing: cell phones are now within the reach of almost everyone, and it hasn’t made society more democratic. Buzzfeed may have displaced community newspapers, but I can’t see how that makes things more democratic. The last 40 years of financial innovation brought us near-unprecedented levels of wealth inequality and the largest economic crisis since the 1930s. Why would anyone believe that the next 40 years of financial innovation are going to automatically create a utopia of equal democratic citizenship? How can Al-Erian keep using this word “empowerment”  to describe things like kickstarter, Kiva and bitcoin? It’s inconceivable.

The End of Capitalists

Do not pass Go, do not collect $200

Now, I am not sure I totally agree with his reading of the politics, for reasons I’ve tried to spell out elsewhere. But JW Mason does a good job of making a point that has occasionally come up with since the economic crisis drove down interest rates, namely i. that there is no reason to think that real interest rates should be above zero, and ii. when real interests rates are very low, capitalists (qua [...More] ‘ The End of Capitalists ‘

“The Danes do it better”

There’s a lot of noise in Chris Maisano’s long critique of Lane Kenworthy‘s work, but in his key claim he’s on the nose and pithy to boot, calling out Kenworthy for adopting the “Danes do it better” argument.

Kenworthy, a professor of sociology and political science at the University of Arizona, has followed the popular “Ted Talk” strategy for academic notoriety: make a controversial claim about a well-known subject in easy-to-understand terms. Kenworthy’s particular [...More] ‘ “The Danes do it better” ‘

“The worst of times, like the best, are always passing away”

A weak translation, I am told by the internet, of Boethius. It almost makes one want to learn ancient Greek. Almost.

Seriously, though, 24 Hour Party People is a great movie.

Wolves in Women's Clothing

In a (damning, though fair) review of Corey Robin’s 2011 book painting conservative ideology as united only by the revanchist urge to maintain rule (and a slightly less controversial text from a grinning TV posterboy of the American left, Chris Hayes), Andrew Seal argues that placing affect/feeling of individuals at the centre of their analysis—as he claims both authors do—means consistently mistaking hegemony for hierarchy, missing the forest for the trees, and forgetting [...More] ‘ Wolves in Women’s Clothing ‘

The Will to Power at Qatar Airways

So, go read this description of the working conditions for airline attendants at Qatar Airways. What’s going on here? Sure, the working realities for south Asian men depicted in the article make it impossible to describe the attendant’s conditions as “horrendous,” but still, this seems not only unpleasant, but also irrational on the part of the employer.

Neoclassical economists have no way to explain the existence of employees at all. In the world of endless [...More] ‘ The Will to Power at Qatar Airways ‘