The Precariat and Financialisation
Paul sees the defeat of the working-class, in the 1980's, its subsequent atomisation, and changes in the labour process process as unique. All historical phenomena are unique. Each is nuanced, and conditioned by the specific conditions of its time. Paul sees the transformation of the labour process into one characterised by core-periphery relations of the type I have also discussed, in the past, as replacing the division between skilled and unskilled labour.
“The core workforce has been able to cling on to stable, permanent employment, with non-wage benefits attached to the job. The periphery must relate either as temporary agency workers, or via a network of contracting firms. But the core is shrunken: seven years into the post 2008 crisis, a permanent contract on a decent wage is an unavailable privilege for many people. Being part of the 'precariat' is all too real for up to a quarter of the population.” (p 207)
However, something similar could probably be said of the 30 year period from 1865 to 1895. 1865 is the year of the creation of the First International. In many ways, it represents a high point of the development during that long wave uptrend, after 1843. By 1865, that uptrend is clearly faltering. The US Civil War impacts supplies of cotton to factories, which leads to crises and lay-offs. The First International might be seen both as a culmination of the development of the labour movement during that period, and of the fact that it begins to become apparent that conditions are changing, it can no longer be assumed that wages and conditions will continue to improve. It is similar to the conditions in the 1970's, when the sharpness of industrial struggles intensifies, and far left groups begin to grow rapidly.
The defeat of the Paris Commune could be viewed as equivalent to the defeats of workers in the 1980's. The First International is dissolved, and the labour movement is subdued for twenty years. In Germany, the Anti-Socialist laws are passed, the political focus shifts elsewhere. But, a look at Capital also indicates that, during this period, in Britain too, something like a core-periphery relation is established. Marx notes that the small private companies become dependent upon work subcontracted to them by the professional managers now running the large socialised capitals, and thereby become subordinated to them. In the interstices, the sweatshops arise, whereby the masters operate effectively as wage workers only able to make a small profit by sweating their workers, often themselves Jewish immigrants, escaping pogroms in Europe. And, I have already, earlier, referred to Marx's analysis of the way when cheap sewing machines became available, it led to a plethora of self-employed seamstresses, each working precariously from home.
So, the conditions may be unique, but not that unique. Moreover, the conditions that Paul describes are mostly applicable to the developed economies of Europe, and North America. One of the things, of course, that is specific and thereby creates nuance, is the fact that those developed economies, whilst still advancing, are, in relative decline, as new developing economies, in Asia, Latin America, and now Africa advance at a faster pace, as part of the process of global industrialisation, and the new international division of labour. If we take the example earlier of Foxconn, it employs 1 million workers, making it much more like the kind of production seen after WWII. In fact, the size of the workforce is hard to comprehend. It turns out, for example, that when critics cited the number of suicides of workers at the company, they failed to take into consideration the huge size of the workforce. Further analysis shows that, per capita, the company has a lower suicide rate, not just compared to other Chinese companies, but also compared to companies in the West.
Paul objects that even in those economies only around 10-20% of workers are “industrial” workers, as opposed to service workers. But, this is meaningless. A service industry is an industry as much as a car industry is an industry. The workers in both are productive labourers producing surplus value, and being paid wages. The NHS is a service industry, but it is also an industry organised on traditional mass production, Fordist lines – although it has a rather more hierarchical, and paternalistic structure than most such industries – and with a large workforce. It's not whether workers are employed as “service” workers as opposed to manufacturing workers that is significant here, but the specifics of the actual labour process, and organisation of labour.
Paul says,
“The global wage share of GDP is on a downward trend. In the USA it peaked at 53% in 1970 and has now fallen to 44%. Though the effect is lessened in countries with an export-oriented model, the social impact has been to push the workforce into financialised behaviour.” (p 208)
But, on the basis of Marx’s analysis, we would expect the wage share to fall over the long-term. That is the inevitable consequence of rising social productivity. However, as Marx makes clear falling wages is not at all the same thing as a falling standard of living, for workers. If workers produce 1,000 units of wage goods in 5 hours, but work for 10 hours, and are paid the 1,000 units as wages, they produce a surplus product of 1,000 units, and the rate of surplus value is 100%. Put another way, setting aside the value of constant capital, (which does not appear as a component of GDP) the wage share is 50%. If productivity rises by 50%, workers now produce 1500 units of wage goods in 5 hours, 3,000 units in 10 hours. If workers are paid 1200 units as wages, that represents a 20% rise in their standard of living. However, 1200 units is equal to only 4 hours of labour, so that their wages have fallen by 20%. Put another way, they now produce a surplus product equal to 1800 units, and the rate of surplus value rises to 150%, or the wage share has fallen from 50% to 33.3%.
The wage share, on the basis of Marx's analysis, and as he sets out extensively in Theories of Surplus Value, Part II, particularly in Chapters 15-17, could only be expected to rise, and thereby squeeze profits, in two circumstances. Either, as Ricardo expected, social productivity falls, for example because less fertile land must be cultivated to provide additional agricultural/mineral products, or else, as Smith expected, capital accumulates faster than the supply of labour-power, so that competition drives up wages.
The former never happens, other than as a result of short-term natural disasters. The latter does occur, as described earlier, and is the material basis for the development of labour-saving technologies, and thereby of the Innovation Cycle, and periodicity of the long wave.
For the reasons described earlier, it is impossible to produce surplus value from lending to workers, rather than from the exploitation of labour. However, as Marx describes in Capital III, Chapter 6, and in Theories of Surplus Value, particularly Chapter 22, it is possible to obtain profit other than from surplus value. As Marx also describes there, a capital must physically reproduce the components of its constant and variable capital, on a like for like basis. If productivity rises so that less labour-time is required to reproduce those use values, that comprise these elements of capital, it results in a release of capital. In other words, a portion of output that previously was required to replace capital, on a like for like basis, is now released, and can be used instead for consumption, i.e. revenue/profit. This phenomenon confused Ramsay, as Marx describes in Chapter 22, and it also appears to confuse some proponents of historical pricing.
Similarly, profit can be appropriated on the basis of profit on alienation. As Marx describes in his analysis of James Steuart, profit on alienation cannot be the explanation of profit as a general phenomenon, under capitalism, but that does not mean that it cannot be the basis of profits in particular cases. In other words, an individual firm's profit may result largely, or even entirely from the fact that it trades on the basis of unequal exchange, either buying inputs below their price of production, or selling its output at prices above their price of production.
Malthus sought to defend the role of the landlords by arguing that overproduction, and falling profits could only be avoided by enabling the landlords to provide the demand for the surplus product, thereby enabling the profit to be realised. In putting forward this argument, of course, Malthus failed to account of the fact that by paying for their consumption with the rents they obtained, which were a deduction from profits, this amounted to nothing more than the capitalists simply handing a portion of their surplus product to the landlords gratis.
However, there is valid point here, as Marx also analyses. If the landlords buy commodities to a greater value than they receive in rents, then this represents a transfer of value to capital from the landlords. The landlords must finance this, and the way they did this was to borrow against the value of their estates. This is again a similar situation whereby congealed labour is converted into revenue, although here what actually occurs is a transfer of wealth in exchange for revenue/consumption.
As I set out earlier, if workers are paid wages equal to the value of labour-power, if they must pay interest on any borrowing they undertake to cover their necessary purchases, those wages must cover the interest, so that the interest is a deduction from profits not wages. However, in the post-war period, some workers were able to buy the houses they lived in, and accumulated other assets. That meant they were placed in a similar situation to the landed aristocracy, which, in the 19th century, had covered its consumption by borrowing, and had repaid the loans and interest by selling off parts of its estates.
Capital has sought to encourage workers who built up assets in the post-war period to use them as collateral for borrowing. Any profit thereby obtained represents a similar transfer of wealth in exchange for revenue/consumption. So, workers have been encouraged to take part in equity release scams, to borrow against their home to provide money for children to use as deposits on overpriced houses they cannot afford to buy, to cash in endowment policies, pensions and so on.
This year, according to a report this week from Legal & General, 50,000 UK property transactions will be enabled by parents digging into their pensions for the deposit. A further 23,000 will be supported by a parent’s annuity income, and another 44,000 will be supported by parents releasing equity from their own homes.
But, many of those baby-boomers did not acquire these assets, in the first place, by being taken in by such appeals to immediate gratification, which is more a feature of the lifestyle of more recent generations. At the same time as the state sought to keep asset prices inflated, the baby boomers were incentivised to hold on to the assets they had; whenever the state gave out incentives to encourage demand for houses, to buy stocks and bonds, baby-boomers grabbed them with both hands, including becoming second home owners, buy to let landlords, and so on. So, capital on the one hand wanted to prise the accumulated wealth of baby boomers from their hands – hence all of the media nonsense about intergenerational inequality – whilst on the other, the need to keep the assets of the top 0.01% inflated, created an even bigger incentive for the boomers to hold on to them even tighter!
All the time, this meant that property, pensions, and so on became even less affordable for workers, and drove them further into debt. Contrary to the media attacks on the boomer generation, this was not at all a consequence of the current generations parents and grandparents saving, and purchase of assets, but entirely a consequence of the capitalist state and central banks printing money so as to inflate the assets of the top 0.01%. The idea that financialisation enables capital to extract profits from workers is a delusion. It is only sustained, as with the situation in Greece, Spain and Portugal prior to 2010, and as with the subprime mortgage market, prior to 2008, on the basis of a growing sea of unsustainable debt. The asset price bubbles and debt bubbles are opposite sides of the same coin. Those bubbles will burst simultaneously, in far more dramatic fashion than happened in 2008.
Back To Part 13
Forward To Part 15
Back To Part 13
Forward To Part 15
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