Last Saturday, when we were out dancing, my sister asked me a question, which was “With all of the self-checkouts in supermarkets, replacing workers, who is gong to pay the taxes to cover pensions?”. I've dealt with this question before, including recently, but given that I had to keep the answer as brief and as simple as possible, given the conditions of my reply, and competing with the backbeat of Northern Soul, and, given that my sister quickly grasped the gist of that reply, I thought it worthwhile, basically, setting it out, here.
The first thing, which most people don't easily grasp, is its not a question of “money”, and so, also, not a question of people paying taxes or National Insurance. You don't eat, drink, wear or live in money, but the things that money buys – food, clothes, houses. The same cause of the checkout workers losing their jobs, the introduction of technology to replace them, in other words a rise in productivity – more things being produced for any given amount of labour – is the same cause of the unit value of all those things being reduced, and, also, thereby, means that society is able to produce all those things that its members need to consume – whether they are working, retired, still at school, or sick – with fewer of them actually producing those things. Its why, today, workers across the world produce far more “things”, including services such as education, health and social care, entertainment and so on, than is proportional to the increase in the global workforce.
Its also why, the first groups of people in society to realise this fact, were the ruling-class. As soon as the labourers in any society are able to produce more “stuff” than they require for their own necessary consumption, it means that a small group in society – the ruling-class – can consume that surplus of “stuff” without themselves working. These ruling-classes – at different times, slave-owners, feudal landowners, and now capitalists – over the millennia, have been able to appropriate ever vaster amounts of this “stuff”. At one time, it was the building of pyramids stuffed with gold, and, today, its capitalists with several multi-million pound yachts, jets, private islands, spacecraft and so on, not to mention trillions of Dollars of fictitious wealth in the form of shares, bonds and so on.
As I recently noted, in relation to the attacks on pensions in France, and as explained by Robert Owen, 200 years ago, its not a question of workers not being able to produce all of the increase in the quantity of goods and services required to enable them to have higher living standards, including retiring earlier, having shorter working weeks, more holidays and so on, because the rise in labour productivity has, already been far in excess of what is required for that.
Owen realised, at his factory,
“... the working part of this population of 2,500 persons was producing as much real wealth for society, as, less than half a century before, it would have required the working part of a population of 600,000 to create. I asked myself what became of the difference between the wealth consumed by 2,500 persons and that which would have been consumed by 600,000.”
The answer was that, the workers producing all of that increase in real wealth – in that case textiles – was not being used to benefit the workers producing it – although he did provide his workers with better wages, conditions, places to live, schools and so on – but was going to the capitalists who loaned the money to the business. There's two ways that can become manifest. Firstly, the capitalists can just consume more of those additional “things”, including all those things required to produce more “things”. In other words, they can increase their own standard of living, and they can increase the size of their capital, the size of their business, or, in the case of money lending capitalists, the amount of money they have available to lend out, and so obtain interest/dividends and so on.
In that earlier post, I set out the rise in productivity in recent times, which shows the same thing that Owen described, and extent to which workers have already covered, by it, the fact that they are living slightly longer, to be able to enjoy their retirement. Think about something like the Channel Tunnel. If it had to be dug by navvies using picks and shovels, it would never have been built, it was the use of tunnel boring machines that made it economic to undertake. The problem is not that workers are living longer, nor that workers are being replaced by machines, leaving fewer of them to pay taxes to cover spending on pensions.
The problem is that the distribution of the real wealth – all of the actual “stuff” - created by workers, is skewed in favour of a tiny number of very rich capitalists, and their states, who also waste large amounts of it in the form of arms spending, fighting wars and so on. The global ruling class, comprises less than 0.1% of the population. This 0.1% has more net wealth than the bottom 50% of the population, and yet it is this bottom 50%, along with much of the remaining 49.9%, that actually produces all of the wealth in the first place, including all of the machines and other technology that is used to replace them!
Elon Musk has net wealth of $450 billion. If he just gets 1% a year interest on that wealth, it gives him $4.5 billion each and every year, with no need to work or do anything else. That rather puts into perspective the claims about the problem being workers living longer, by a few years, or a few of them claiming a few quid of benefits, let alone a few thousand desperate refugees risking their lives in boats to cross the English Channel. For the ruling-class who appropriate billions each year, it is, of course, very useful for their media to talk every day about a handful of desperate migrants rather than the parasites of the ruling class. Far better to have daily news reports about a migrant who tried to kiss a girl than continued discussion of Prince Andrew and his friends such as Epstein, Trump etc., and their activities.
When the economy was characterised by private capitalists who owned firms, they got their revenues in the form of profits. Because each firm has to compete to stay in business, and because the best way to compete is to operate on a larger scale, to get economies of scale, each capitalist was led to plough their profits back into the business. But, that is no longer the case. The economy is no longer characterised by such privately owned capital, despite the fact that there are around 5 million privately owned small businesses, and self-employed.
The economy is dominated by huge corporations, and these corporations are not privately owned capitals. They, in fact, belong, collectively, to the workers within them. They are socialised capitals. But, those workers are not allowed to control them, just as workers are not allowed to control the money in their own pension funds, whether their company pension funds, or the state pension fund. (In fact, Rachel Reeves wants to use the latter to pump more money into risky ventures, currently, so as to inflate share prices once more, much as has happened in the past, in 1929, 1987, and 2008 ahead of big stock market crashes, as Andrew Ross Sorkin has described.
Instead, control is given to shareholders, which is like giving control of your house to a mortgage lender just because they gave you a mortgage! So, these shareholders, unlike the private industrial capitalists of the 18th and 19th century, have no such objective requirement to plough profits back into the company, to expand it. The company itself still has such a requirement. The workers in the company, including the workers who, nowadays, perform all the functions of the old private capitalists, that is the production managers, sales managers, purchasing managers, administrators, technicians and so on, still have an interest in such expansion, but, not, necessarily, the shareholders, which is why the shareholders have made sure they keep control, and, also, that they appoint boards of directors whose job it is to protect their interests, rather than the interest of the company.
Unlike the old private industrial capitalists, the shareholders have an interest in draining out as much in interest/dividends as possible, and, also, of inflating the share price, which has become the basis of their paper wealth over the last 40 years. This is important in, also, answering the question, asked by Owen, when applied to today, of where has all of the increased wealth gone? If there has been all of the increase in productivity mentioned earlier, where has all of the resultant “stuff” produced gone? Why has it not shown up as an increased ability to produce all of the schools, hospitals, roads and so on that was seen in past times when productivity rose significantly, such as after WWII? Why, instead, do we have roads reverting back to the potholed dirt tracks of the pre-industrial age, schools and hospitals falling into ruins and so on?
In fact, for the last 200 or so years, whenever there has been a big rise in productivity, it first goes along with a period of relative stagnation, of the economy growing at a slower pace than average. The reason is simple. Capitalists introduce labour-saving technology, because a relative shortage of labour had arisen that caused wages to rise, squeezing profits – an overproduction of capital relative to labour supply. By successfully replacing workers with machines, firms can produce the same amount of “stuff” with fewer workers, but, then, also, with wages falling, and fewer workers employed, all of their previous demand for that “stuff” falls. The capitalists grab back their share of all of that surplus “stuff”. That is the point my sister had, also, been making.
In the past, for example, in the 19th century, the capitalists took the opportunity to, also, employ domestic servants in their homes, as a result of their increased profits, and availability of workers, brought about by this rise in productivity from the introduction of machines etc. Even as the living standards of workers rise, and employment grows in such a period, firms can meet the increased demand by employing less workers than they would previously, precisely because of the rise in productivity. For example, they can decide to build a channel tunnel, because they don't need tens of thousands of navvies, but only a few thousand workers and a couple of tunnel boring machines. The point, here, though is that they do decide to build the tunnel, where previously they would not. But, firms especially, now, very large corporations that plan their investments over many years, do not willy-nilly increase their production above what they see in the market, as the demand for their products.
So, the reason we have not had a huge rise in the quantity of “stuff” to meet the modest needs of workers who live a few more years into retirement, despite the fact that productivity has risen more than enough to make that possible, and even to allow workers to retire earlier rather than later, is because those money-lending capitalists (shareholders) who have control of large companies, have chosen not to do so, and capitalist states, also, chose not to invest in infrastructure, in the same way they did, for example, after WWII. Why? Because, from the 1980's, the technological revolution of that time made them strong, and workers weak, enabling Thatcher and Reagan to beat them down. They were able to reduce the share of wealth going to workers, wealth produced by those workers, and to distribute it, instead, to shareholders, bondholders and so on.
Profits of companies rose, and a smaller proportion of those profits went to investing in additional capital, expansion of production, even though the tremendous rise in productivity brought about by the microchip revolution, did mean more “stuff” than ever before did get produced, including “stuff” never seen before, such as video recorders, personal computers and so on. A larger proportion of the money profits, therefore, went in interest/dividend payments to shareholders and bondholders. They used this money, now not needed for capital investment, to just buy up existing shares and bonds, as well as property. It caused asset prices to inflate into astronomical bubbles.
Between 1980, and 2000, the Dow Jones rose by 1300%, although US GDP rose by only 250%, and the same thing was seen in stock markets across the globe. In the 1980's, in Britain, house prices quadrupled. I bought my first house, in 1977, for cash, costing me £5,500. In 1988, I sold it for £22,500, and if I had held on to it, for another 18 months, I could have sold it for £39,000, which would have been more than the £32,000 I paid for the detached house I bought in 1988! In turn, by the time I sold that in 2010, its price had, again, quadrupled to £150,000. This was all part of a crazy asset price inflation, as all of this money went after existing assets, rather than being used to invest in real capital, and so expand production.
The extent of the craziness was shown, in 1987, when global stock markets crashed by 25%, and in 1990, when UK house prices crashed by 40%, and in Japan, property prices crashed by up to 90%, all sparked by rises in interest rates. The same was true of the crash in 2000, when technology shares dropped 75%, and, of course, in 2008 with the global financial crisis. If, instead of simply using the increased profits of companies, during that period, wastefully, to speculate in existing stock, bond and property markets those profits had been used to accumulate capital, to expand production, to produce more stuff, including more houses – rather than building more houses, Thatcher, for example, sold off council houses, and prevented councils building more to replace them – the idea that we can't produce enough “stuff” to meet the needs of pensioners, and, indeed the rest of society for decent roads, schools, hospitals and so on, would be seen for the nonsense it is. But, the decision not to use those profits in that way was a logical decision of shareholders from their own selfish perspective. They do not invest to meet the needs of society, but to maximise their own wealth. When that wealth increasingly took the form of the paper wealth of inflated share, bond and property prices, they have had to do everything possible to keep them inflated.
That is why, rather than using the vast profits they appropriated over the last forty years to invest in increased production to meet he needs of society, and to lighten the burden of labour, they have used it for speculation, and to increase their own lavish consumption. Its why shareholders should have no right to control companies they do not own, and why workers who are the real, collective owners of those companies should have that control.
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