Was Marx right…about America?

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Cross-posted from Yves Smith at Naked Capitalism.

We participated in a Room for Debate forum at the New York Times, on the topic of “Was Marx Right?” Readers are likely to say, “But of course!” Yet Marx had such a large opus and his forecasts were so bold that any fair reading has to come to more nuanced conclusion. But at least Marx is suddenly fashionable after many years of being The Economist Who Could Not Be Named.

The other participants were:

Doug Henwood, A Return to a World Marx Would Have Known

Michael Strain, Responsible Politics Can Cure Capitalism’s Ills

Tyler Cowen, Problems Are in Sectors, Not the System

Brad DeLong, Blind to the System’s Ingenuity and Ability to Reinvent

You can read our contribution, Foreseeing the Dangers but Not the Response, at the Times or further down in the post.

But I wanted to take the unusual step of taking issue with an small but crucial part of Doug Henwood’s post. And I hate making Henwood an object lesson, since I really like his work and the statement he makes is widely accepted as true. But it turns out it is more accurately seen as corporate propaganda that is widely accepted as true.

Here is the critical section of Henwood’s post:

How can this all be explained? The best way to start is by going back to the 1970s. Corporate profitability — which, as every Marxist schoolchild knows, is the motor of the system — had fallen sharply off its mid-1960s highs.

I recall Matt Stoller looked into this (using Fed Flow of Funds data) on his iPad when we were both at a Financial Times conference a few years ago and finding that corporate profit grew in the 1970s after they recovered from the nasty oil-shock recession of 1973-1974. That’s not inconsistent with my recollection of the business press as a young MBA in 1979 and 1980. Stock prices were terrible, and the business press was very critical of American companies, particularly American manufacturers.

But lousy stock prices didn’t mean lousy or falling profits. Here are some of the big reasons why the stock market was so depressed:

Inflation, inflation, inflation. Want to know why the Fed is so obsessed with containing inflation, to the extent that they are happy to hobble the economy?

High inflation means you discount future cash flows assuming the continuation of inflation. Those high discount rates mean future earnings are worth very little, which really hurts stock prices and other long-duration assets

High inflation also means investors can’t rely on financial statements. Asset values are in historical dollars, and understated. Depreciation is understated because it is based on historical asset values. That probably means companies are paying more than they should because the value of their depreciation tax shield has eroded. You can’t be sure of profit levels since it depends on whether you use LIFO (last in, first out) accounting, or FIFO (first in, first out). Investors do not like flying blind, so the “I can’t trust the financials” factor makes them even less keen about stocks.

American managers getting their lunch eaten by the Germans and increasingly the Japanese. Both countries were running better manufacturing operations and increasingly making better products. Some of this was by virtue of having newer plants (all post World War II), but much of it was due to being more innovative (for instance, Japanese just-in-time manufacturing) and better labor relations. American management was regularly depicted as sclerotic, and the managers themselves didn’t disagree that much with that assessment.

I asked Stoller to revisit his work and he obligingly put up a post:

I’m putting up this post at the request of Yves Smith. She tells me that the conventional story of the 1970s is that corporate profitability declined as foreign multinationals became competitive with US multinationals. Thus, so goes the story, there was a real impetus to cut labor costs.

Now, I’m no wizard with economic data, so it’s quite possible I have this wrong. But It doesn’t look like corporate profits dropped. The story is more interesting than that. Here’s corporate profits against inflation.

tumblr_inline_n39zkgQ4k71r29f4p

So why the story of lost profits? Well, these narratives serve a purpose, and in this case that narrative is organized around the idea that labor costs needed to go down. Where did the corporate sector get that idea? Well, what grew even faster than corporate profits in the 1970s? Social insurance costs. You see, in 1965, Lyndon Johnson implemented this program called Medicare, and that increased the amount that corporations had to pay to cover the medical costs of older people. And this cost stayed with the corporate sector even during recessions, because it was a labor cost.

tumblr_inline_n3a0cvVzTZ1r29f4p

Eventually, the corporate sector got a handle on these costs, probably by offshoring labor, breaking unions, and financializing. All three of these reduce social insurance contributions to the corporate sector. Check out the following graph.

tumblr_inline_n3a0k2T8F61r29f4p

Today you can see there’s a massive difference between social insurance contributions (blue line) and corporate profits (red line), with roughly $1 in contributions for every $4 in corporate profits. Working your way backwards, there was a smaller yet significant bulge in the mid-2000s, a still smaller yet significant bulge in the mid-1990s, and a even smaller bulge in the early 1980s.

My sense is that this represents the corporate sector gradually shedding not just labor costs, but amount of profit generated by labor. That could mean financialization, increased monopolistic pricing power, offshoring, breaking unions, or all of the above.

Anyway, it’s an interesting phenomenon. Corporate America pays less in social insurance costs than it used to. That means that anyone who says that there used to be x number of workers for every y number of Social Security/Medicare recipients can be reminded that in the 1960s there used to be (roughly) one dollar of contribution to Social Security/Medicare for every two and a half dollars of corporate profits, whereas today there’s (roughly) one dollar of contribution to Social Security/Medicare for every five four dollars of corporate profits.

While there may be other ways to cut the data to come up with a story that conforms better with the official one, an inflation-adjusted look at corporate profits in the 1970s says they weren’t falling on a secular basis. The economy had a bad recession. But despite being mired in stagflation, corporate profits were still rising after the 1974-1975 downturn. Executives were no doubt frustrated by being faced with tougher-than-ever foreign competition, press that showed them little deference, and far less favorable domestic prospects than they’d enjoyed in the 1950s and 1960. But a more hostile environment is not at all the same as showing a profit decline.

Businessmen were overplaying their weakness at the time, to try to extract concessions from the government. As we recounted in ECONNED, the Carter Administration was desperate to do something, anything, to get the economy out of low gear. Business executives and lobbyists sold the Administration on the idea the the US was falling behind in innovation. But that was simply untrue if you looked at any objective measure, like patent filings. Carter’s science advisor nevertheless embraced the idea, while still calling it a “perceived innovation gap.”

And what was the remedy? Deregulation, natch, when regulation has been a major spur to innovation (air quality standards led to major improvements in automobiles, as well as changes in manufacturing facilities like paper mills).

So this would hardly be the first case where businesses sold themselves as being in more desperate shape than they were to win more concessions from government.

And now to our piece at the Times:

It’s important to remember that Marx was a journalist as well as a theorist, and, in contrast with most modern economists, started from empirical observation. Like Adam Smith, he decried the tendency of businessmen to collude to suppress wages, but his study of sweatshop conditions in industrializing Europe led him to take his conclusions much further.

The core of Marx’s analysis is that businessmen would eventually cannibalize their markets through overproduction, which would lead to declining profitability over time. Others, like Joseph Schumpeter, saw periodic crises of capitalism as inevitable, but Schumpeter argued that this upheaval was a matter of “creative destruction,” which his followers believe sets the stage for phoenix-like revivals.

By contrast, Marx believed that overproduction would lead to pressure on wages, which would prove to be ultimately self-defeating, since the drive to lower pay levels to restore and increase profit levels would wreck markets for goods and services. That’s very much in keeping with the dynamic in advanced economies today.

Marx’s forecast has proven correct by this weak recovery. U.S. companies’ profits account for the highest share of gross domestic product in the post-war era, while workers have gotten the lowest cut of G.D.P. growth ever recorded.

The relentless pursuit of lower labor costs by large corporations, which historically paid the highest wages, has helped push pay levels down, which in turn has resulted in weak demand and short job tenures. To the extent jobs have been created since the crisis, they’ve been concentrated at the bottom of the pay spectrum

Marx believed that industrial workers’ degraded conditions would set the stage for the violent overthrow of the system. That has not come to pass. The communist revolutions that did occur, in China and Russia, took place before major industrialization in those countries.

Marx failed to anticipate how the immense growth of commercial enterprises would create the need for a large range of managers, from shop supervisors and office managers to top executives, as well as technocratic experts such as accountants, lawyers, computer programmers and consultants. And while the Great Depression raised fears of radical revolt, the rise of large unions and Rooseveltian social safety nets served as a bulwark against the Red Menace. The well-paid union workers and the growing numbers of white collar employees created a new American middle class.

For more than a generation after World War II, corporations shared the benefits of productivity gains with workers, supporting demand, growth and social cohesion.

This willingness to reinvest in growth by keeping the middle class healthy is now seen in Corporate America as quaint altruism. Thomas Piketty, in his new book, “Capital in the Twenty-First Century,” makes clear that the experience of postwar America (and the rest of the developed world) was a historical anomaly. The more persistent trend, he found, was a rise in inequality when the rate of return on capital — the major source of income for the wealthiest — exceeded the economy’s overall growth rate.

A threat Marx downplayed has accelerated the concentration of wealth among the very richest. As Michael Hudson has noted, Marx recognized the destructive potential of financial capitalism, but thought it was inconceivable that it would become dominant. He believed the industrialists would succeed in keeping the bankers in check. They have not.

As income disparity has widened enormously and class mobility has eroded, Marx’s idea of class warfare seems particularly apt. But as long as there is a sufficiently large remnant of the American middle class, still socialized to identify with the established order, no matter how beleaguered they are, it’s hard to see how any organized, large scale uprising could occur.

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Comments

  1. I don’t know… but Robert Triffin was right about the Bretton Woods Achilles heel.

    Eventually whoever holds the reserve currency ends up having to run constant current account deficits.
    It doesn’t hurt for a while because you can just print money to pay for your debts.
    But eventually, after foreign central banks have too much reserve currency and the US has to devalue their currency so much that foreign central banks scream, the reserve currency becomes worthless.

    Takes a long time but the intervening disruption is not fun.

  2. Yves Smith (and Marx) nails it.

    Inequality is about wage share. But since the rise on neoclassical and neo Keynesian economics, the narrative has been “high wages are inflationary yet high profits are in the national interest”.

    In short, the world has been hijacked by bad economics.

    The brainwashing was so effective that a former leader of a union movement complained wages are too high. What would Marx say to that?

    At least, after 30 years of eradicating the middle class, the topic is being discussed. I’ll take that as some progress.

    • Paul Howes is a victim of his own political ignorance, and an inadvertent victim of Fukuyama’s end-of-history triumphalism.

      What would Marx say? Probably nothing.

      He’d just smack him one at the pub.

    • migtronixMEMBER

      Problem is we tax the crap out of production and consumption and leave the cash hoarders and debt pimps alone. Arse backwards!

      Make holding cash unattractive so it keeps circulating and make earning/spending cash attractive to encourage production and innovation…

      • Agree with all that Mig, and with b_b’s comment.

        Problem now is, those who have benefited most (1%) from this state of affairs to date, are not much affected by policy that would make holding cash (savings) even more unattractive for everyone else. They’re cashed out, and invested elsewhere.

      • migtronixMEMBER

        @op8 “cashed out”.

        Don’t care unless it’s in gold and no one knows where it is I’m coming after it!

        And even if it is unmarked gold they’ll eventually have to span to get any utility. If they try to lease it? Guess what? I’m coming after it!

        The generation war will be financial, they’re going to come after my income and I’m coming after their savings

      • So how do you save for your retirement?

        And why is bidding up share prices in the rigged (high speed trading) stock market a better thing to do than holding cash at interst?

        The idea that we must constantly increase consumption (about 65% of most developed economies) in a resource constrained world is shortsightedly blind.

        Perpetual growth is not possible in a finite world. That is the simple truth of the exponential function.

      • migtronixMEMBER

        @Explorer: I don’t ever plan on retiring; I don’t plan on ever becoming that useless…

  3. Seems the biggest thing Marx missed or as Engels pointed out – was the equity offering and subsequent voluntary or involuntary application of it.

    Nor the ratchet effect modern “scientific economics” [idiom – (sociopolitical theory is the accurate nomenclature)] in its ability to circumvent a wide swath of moral and ethical questions by reductive logic and numerology, therefore shielding its self from from critical analysis outside the sinecures – it – establishes i.e. neoclassical, neoliberal, neo – Keynesian, AET, et al.

    The aforementioned being nothing more than lobbying, marketing, PR, front groups for advancing the policy agenda of the most connected and powerful in society, securing their future in perpetuity at the cost of everything else.

    One smoking gun – “shortly after the Buchanan Committee hearings ended. The actual details of Milton Friedman’s PR deal are sordid and familiar, with tentacles reaching into our ideologically rotted-out era.

    A partial list of FEE’s original donors in its first four years includes: The Big Three auto makers GM, Chrysler and Ford; top oil majors including Gulf Oil, Standard Oil, and Sun Oil; major steel producers US Steel, National Steel, Republic Steel; major retailers including Montgomery Ward, Marshall Field and Sears; chemicals majors Monsanto and DuPont; and other Fortune 500 corporations including General Electric, Merrill Lynch, Eli Lilly, BF Goodrich, ConEd, and more.

    The FEE was set up by a longtime US Chamber of Commerce executive named Leonard Read, together with Donaldson Brown, a director in the National Association of Manufacturers lobby group and board member at DuPont and General Motors.

    That is how libertarianism started: As an arm of big business lobbying.”

    skippy… hard to have an honest and factual debate about humanity’s future with this kind of shenanigans going on… eh.

    • “The aforementioned being nothing more than lobbying, marketing, PR, front groups for advancing the policy agenda of the most connected and powerful in society, securing their future in perpetuity at the cost of everything else.”

      Goes back to bond broker David Ricardo, and his theory of so-called Comparative Advantage, from which we subsequently have the whole “free trade” / globalisation (read, usurer takeover of the world by stealth) meme.

  4. personally i think any theory built on a concept as ludicrous as dialectical materialism willl result in grave errors. History has proved that humanity does not operate in the way marx described it inevtiably would. yes there were some commie revolutions, but no the state did no fade away to a collectivist utopia. In most countries it went from revolultion to reign of terror and then to quasi democratic capitalist cronyism which attempts to imitate the west.

    • Hey Squirell. For the benefit of everyone, can you please detail what dialectical materialism is, and how/why it is ‘ludicrous’?

      • Uni was a long time ago for me – but from what I can recollect Marx took Hegel’s dialectical idealism and turned it on its head as he thought ideas were just material imprints on the brain. Basically DM describes a material process in which contradiction is at the heart of existence. 2 dialectically opposed forces clash and the resulting clash produces a new higher state of affairs. This is the thesis, antithesis, synthesis. As marx was a materialist it followed that humanity must also be a product of this process (no free will possible in Marxism). Thus the dialectcal process manifests in phases of history:
        – feudalism with lord and serf progressing to
        – capitalism with bourgoise and proletariat progressing to
        – communist state where the state would fade away.

        … something like that.

      • I think the point was the critique of early industrialism and where it was headed, followed by the quasi religious banning of sociopolitical theory’s out side the approved reading list, and those that made the debate so narrow, and why.

        Now on the “free will” issue all one has to do is reference psychology and neuroscience.

      • skippy – neuroscience and psychology are the last things i would reference to understand free will … try philosophy instead.

      • migtronixMEMBER

        Now on the “free will” issue all one has to do is reference psychology and neuroscience.

        Such twaddle! It’s one massive observer fallacy
        ..

      • Here it comes and from the quarter expected, the philosophy and fallacy posse i.e. reductive logic mob ergo atomistic and religious attempt at reconciliation… a dogs breakfast if there ever was one.

        See Milton Friedman on that “observer effect” Mig.

        @squirell… Stay away from hospitals when you have the misfortune to suffer a CHI or related injury, go straight to your nearest Metaphysical practitioner.

      • migtronixMEMBER

        Awww we’ve upset the salesman. Riddle me this? Did the people studying neuroscience do it from free will or did their synapses drive them into it? Genius.

      • In your parlance – That’s a logical fallacy called “argument from incredulity”.

      • Unfortunately, many libertarians think that agent-causation or immanent causation is no less mysterious than Cartesian mind–body dualism or Kantian noumenal selves, and that, like Cartesian mind–body dualism and Kantian noumenal selves, it merely shifts the problem to one remove, in this case to a prime mover unmoved, uncaused cause, or cause of itself (causa sui), and thus to something akin to God. However, it seems unlikely that mere human beings can be moved without being moved, that is, without being moved at least in part by a range of physical, psychological, and social factors. The final word on the matter seems to go to the 19th century philosopher Friedrich Nietzsche, who wrote,

        The causa sui is the best self-contradiction that has been conceived so far; it is a sort of rape and perversion of logic. But the extravagant pride of man has managed to entangle itself…with just this nonsense. The desire for ‘freedom of the will’ in the superlative metaphysical sense, which still holds sway, unfortunately, in the minds of the half-educated—the desire to bear the entire and ultimate responsibility for one’s actions oneself, and to absolve God, the world, ancestors, chance, and society—involves nothing less than to be precisely this causa sui and, with more than Baron Munchausen’s audacity, to pull oneself up into existence by the hair, out of the swamps of nothingness.

        In short, libertarians have had a hard time defending the kind of free will that makes us responsible for our actions in any deep and meaningful way. Their appeals to various mysterious ‘additional factors’ such as the mind or soul to explain the possibility of our being uncaused causes of ourselves seem unconvincing. The question arises, as to whether libertarians are able to provide an account of free will that does not make appeal to mysterious forms of agency, but that sits comfortably with our scientific picture of the world.

        One possibility is this. Neuroscience has suggested that electrical signalling in the brain is subject to quantum indeterminacies. Such indeterminacies could translate into undetermined patterns of neurological activity which could provide sufficient latitude for the exercise of free will. Of course, such undetermined patterns of neurological activity would be random, and could not of themselves account for free will, which requires not only alternative possibilities but also free choices. According to chaos theory, small changes in the initial conditions of a physical system can trigger increasingly large events, and can lead to enormous and unpredictable changes in that system’s behaviour. For example, the flap of a butterfly wing in Kyoto could, at least in theory, provoke a violent thunderstorm in Paris. Similarly, an effort of thought or concentration could act on undetermined patterns of neurological activity in the brain and result in an undetermined action, and thereby to the exercise of free will. Most of the time, a person’s actions and the neurological activity that they result from would be determined by past events and the cumulative effects of those past events on that person’s patterns of thinking. For example, most of the time a person’s actions would be determined by a complex amalgamation of addictions, phobias, neurosis, obsessions, enculturation, socialisation, learned behaviour, and so on. However, on certain occasions, such as when a person was genuinely torn between two competing and potentially life-changing choices, the degree of indeterminacy in his brain would rise to such a high level as to permit an undetermined action. Such a window of freedom would be more or less rare, but could exert a profound effect on all subsequent determined and undetermined actions. For example, if Emma had made an undetermined choice to go for a career in teaching rather than in banking, she would, amongst many other things, have had a very different set of friends. She would have married a man whom she would not otherwise have met. Together they would have had ‘other’ children, almost certainly in another house, perhaps in a different city, perhaps even in a different country, and so on.

        http://www.psychologytoday.com/blog/hide-and-seek/201402/the-problem-free-will-and-possible-solution

      • migtronixMEMBER

        Unfortunately sales people have a knack for confusing their ability to bull$hit others as a sign of pre-ordained and immutable functions of a universe set in stone.

        This absolves them of their crimes and keeps well deserved recriminations at bay.

      • @athalone….Migs not bulling, he’s exhibiting an adolescent reaction to information that challenges his deep seated personal beliefs. Evidenced by his over the top emotive responses.

        Ex military here… SEER school, SAS comparable and stuff. So foaming and dummy spats are akin to yabbos on meth down at the pub on a remote job site i.e. just another day at the office [screw drivers at dawn in the shed].

        skippy… Mig, sales was just one area of experience in decades of work, most was in civil and industrial construction internationally.

      • migtronixMEMBER

        Ex mil here too – well at least in so far as I had to do my 2 years compulsory service.

        Your neo-Humian, crypto Kantian skepticism disgusts me!

      • Argument from incredulity again…

        Try something more nuanced…

        “Now we can again return to Mises. If Kant’s project was doomed from the outset due to inflexibility what does this tell us about Mises’ project? Simple. It was complete and utter nonsense. Trying to stuff peoples’ actions and their reasons for doing various things into a tiny box of concepts is not only suffocating, it is borderline delusional. What Mises was really engaged in was the setting up of language traps that he then had people fall into. He tries to section off or limit the basis on which people can act and then purges everything else from his worldview. If an action doesn’t fit in with Mises schema it simply disappears.

        Mises’ project was quite manifestly the product of a sick mind but it can tell us something about more mainstream theories. Neoclassical microeconomic theories, for example, seek to do something similar in a slightly less inflexible and dogmatic way, as I have pointed out elsewhere. And for this reason they too are doomed to fail. Human beings are infinitely mutable and changeable. There are very, very few constants under the sun when it comes to human behavior (the incest taboo being a notable exception) and the moment any constancy or regularity is found and articulated it is likely already on the way out.

        Human beings are also extremely reflexive. Tell them that they act in one way and they’ll almost immediately start acting in the opposite way. This is not surprising given that the one doing the telling is just another human being and so the act of telling just an attempt to establish a relationship of authority — which is what Kant, Mises and the neoclassicals were and are ultimately trying to do. Human beings have a very ambivalent relationship toward authority and so the establishment of such relationships can only last so long before the system is shaken up. So our theories need to be flexible if they want to survive. And when I say “survive” I do not mean survive as a mosquito might in a glob of amber but rather survive in the sense that they can continue to grow and develop together with the events they seek to capture.”

        http://fixingtheeconomists.wordpress.com/2013/07/29/kant-and-his-categories-versus-mises-and-his-praxeology/

      • migtronixMEMBER

        Try an original thought skip…

        Edit : yes it was my actual words from my actual cognition. You on the other hide behind imbeciles…

      • Try addressing the material rather than making it all about me.

        skippy… am I to understand everything you say is original?

      • You on the other hide behind imbeciles… – Mig

        Now your resorting to proclamations of divinity in toto with nary a unpacking of its contents or whence they came,

        So where do I go to pray at the temple of Mig and give offerings to solicit enlightenment?

        skippy…. Please desist with the grandiose self proclamations, its as bad as watching Pell rationalize the rape of children.

      • migtronixMEMBER

        watching Pell

        Right back at you buddy.

        I’m not going to “unpack” the desperate rubbish you pasted above, and having followed the link I realise I should have stopped giving a fk a while ago… Like 3 months… Instead i persisted in what I mistook for for an enlightening conversation.

        Turns out I was having my intelligence insulted. Again.

      • Again you obfuscate and engage in oblique dialogue with out engaging the material presented.

        “I’m not going to “unpack” the desperate rubbish you pasted above,” – mig

        I don’t want to answer direct challenges to my personal beliefs so throw all the toys out the play pen.

        “and having followed the link I realize I should have stopped giving a fk a while ago… Like 3 months’ – mig

        All “I mig” attempts at convincing you to – see things – my way – have failed and as such are unworthy of my divine attention. “I mig” could find more profit in finding softer minds to manipulate.

        “Instead i persisted in what I mistook for for an enlightening conversation.” – mig

        “I” mig am the final arbitrator of what is and what is not an enlighten conversation, having expended great amounts of energy and time am want for a profit and must cut my losses.

        “Turns out I was having my intelligence insulted. Again.” – mig

        If anyone disagrees – with me – they are unintelligent for “I mig” have the knowledge of the Universe up in my head.

        skippy… Mig… what a person does not say or will not say…. has more relevance than what they do say. Large meta study’s on human argumentation bare this out.

        PS. Cordially invited to ply your wares over at NC on the thread that this post links to, challenge yourself, your bias, beliefs.

      • A taste….

        skippy March 31, 2014 at 6:04 pm

        Seems the biggest thing Marx missed or as Engels pointed out – was the equity offering and subsequent voluntary or involuntary application of it.

        Nor the ratchet effect modern “scientific economics” [idiom – (sociopolitical theory is the accurate nomenclature)] in its ability to circumvent a wide swath of moral and ethical questions by reductive logic and numerology, therefore shielding its self from from critical analysis outside the sinecures – it – establishes i.e. neoclassical, neoliberal, neo – Keynesian, AET, et al.

        The aforementioned being nothing more than lobbying, marketing, PR, front groups for advancing the policy agenda of the most connected and powerful in society, securing their future in perpetuity at the cost of everything else.

        Skippy…. equity – the sticky candy of the narcissistic pusher, humanity and life on the orb put in a fish-o-matic financial blender [derivatives up grade to mag rail (EMRG) snack food processor] .
        Reply ↓

        allcoppedout March 31, 2014 at 10:49 pm

        Spot on Skippy. The Levellers came before Marx. All we really need to know is everyone could have a bigger slice. These days we’d have to qualify that, with ‘not of the stuff that is burning the planet’. Biologically, I suspect economics is no more than a sublimation of slavery as we can see it in animal evolution. They key bit is exploiting the energy of ‘someone else’.

        Where might the revolution come from? The future is already with us, laughing at what it knws of our fossil record!

      • migtronixMEMBER

        Oh so the greeks are dead and worthless but not Marx.

        I don’t care for you or your pathetic jibes which you tend to insulate yourself from and cry like a baby when its boomerang back to you…

        Miguel… skip has been a distasteful excursion into 19th century synthetic utilitarianism and prior skepticism… to what purpose ply this fruitless interlocutor who slings insults, banishes history, admonishes thinking and reduces the entirety of life experience into a magnetic resonance image — which like a Rorschach ink plot tells you more about the observer than the patient…

        EDIT: You’re a jerk, I’m the only person who bothers to interact with you because I mistook you for interested and self motivated — and yet you accuse me of wanting to seek out weaker minds! Incredible arrogance and salesmanship!

      • Still persisting in the non engagement of the material which I offered to illuminate the human condition in countenance to others ideological prostrations.

        Skippy… it was notable your biased reading of the Greeks are dead [I let that sleeping dog lay]. You might consider the possibility of reductive logic’s inability to define reality when its devolution is akin to pure navel gazing.

        PS. I don’t care for “other people thoughts” – mig. In a nut shell your character is reveled.

      • migtronixMEMBER

        Reveled? So much the better, you for instance have no character. Merely self satisfaction and miscomprehension

      • Do try and actually retort the material presented outside of your personal mental palates dislike.

        Umm like – “Anyway, all that considered let’s reformulate the question: is Marx relevant for understanding the world today? Frankly, I don’t think so. The key problem today is that wealth inequalities are tied to financial markets. Speculation in assets is what drives most Western economies but it is also what drives the bulk of the inequality (see the work of Jamie Galbraith and his team on this). You cannot find this anywhere in Marx and it is the most pressing economic question today. Some economists are beginning to ask questions surrounding the links between income distribution and finance, but it is new territory altogether. You won’t find much of use in Marx in this regard.”

        http://fixingtheeconomists.wordpress.com/2014/03/31/was-marx-right/

        skippy… your just devolving into a zealots hard dis cog, the inability to incorporate new information and the reexamination of old data under new optics can only be maladaptive.

      • migtronixMEMBER

        Problem is we tax the crap out of production and consumption and leave the cash hoarders and debt pimps alone. Arse backwards!

        Make holding cash unattractive so it keeps circulating and make earning/spending cash attractive to encourage production and innovation

        Or that you self satisfied chronic regurgitator…

      • How much more reductive can u get, hay free market breather, wheres the water going to come from or the energy to make your utopia come true?

        Unleashing the metaphysical super human the entrepreneur?

        skippy… get some facts…

      • migtronixMEMBER

        Where’s what water coming from? Where is it going skip? Can you finally answer that? Where does 70% of the earth’s surface area go?

      • migtronixMEMBER

        Skip there’s no such thing a quantum dislocation. Quantum theory has been rank self reference with nary a physical phenomenon to explain it with. I suspect your grasp of quantum mechanics is more akin to “psychology” than logic.

        Hence? You fail Zermello Frankel set theory! As long as you forced me to say it…

      • Your neo-Humian, crypto Kantian skepticism disgusts me!

        In a nut shell “disgusts” me – is not the position one approaches critical thinking, its simply a wave of the hand used by those minds that have become contemptuous of everything not of their dicta.

        skippy… you would make a fine shaman… .

      • Does your ignorance know no bounds –

        “Where’s what water coming from? Where is it going skip? Can you finally answer that? Where does 70% of the earth’s surface area go?”

        Firstly only one percent of the total is potable water. Secondly when you use water above and beyond its natural replenishment rate you create a human induced scarcity problem [heaps of white papers on request].

        Quantum mechanics is a theory relating to time and space, are you to suggest time and space does not exist in your head?

        skippy…. you bastardize the term logic beyond all knowing to just a rhetorical device.

      • migtronixMEMBER

        natural replenishment rate

        Do tell!

        EDIT: Quantum mechanics is a theory relating to time and space

        No it is not its a theory about space or time…

      • migtronixMEMBER

        Helpful wiki aside nope!

        On closer inspection you will find the probabilistic equations that determine QMs effect on spot charges etc, can only account for space or time … hence the quantum paradox/contradiction

      • “ZFC has been criticized both for being excessively strong and for being excessively weak, as well as for its failure to capture objects such as proper classes and the universal set.”

        That’s with out the criticism of set theory in general.

        skippy… your T or F use of this theory is not applicable and indicative of you constant abuse of terms and their meanings, an attempt to create a truth to satisfy your beliefs.

      • migtronixMEMBER

        The only problem with ZFC is accounting for the 0 set — which no one can.

        Otherwise your recent sojourn into obscure logical analysis and conceptualisation has not been inductive to matter at hand.

        I care not to argue obscure and irrelevant cut&pastes — tell me from your own mouth, preferably w/o the interminable adjectives, and I’ll attempt my best to prove you right in my implacable materialism…

        EDIT: Speaking of shaman… I do plan on going shrooming soon now that its getting colder and wetter here in Vic

      • migtronixMEMBER

        Do quantum effects make our choices our own? [from the link provided]

        No I think a troll chose to do this to me 😀

      • migtronixMEMBER

        For example, the flap of a butterfly wing in Kyoto could, at least in theory, provoke a violent thunderstorm in Paris. Similarly, an effort of thought or concentration could act on undetermined patterns of neurological activity in the brain and result in an undetermined action, and thereby to the exercise of free will. Most of the time, a person’s actions and the neurological activity that they result from would be determined by past events and the cumulative effects of those past events on that person’s patterns of thinking. For example, most of the time a person’s actions would be determined by a complex amalgamation of addictions, phobias, neurosis, obsessions, enculturation, socialisation, learned behaviour, and so on. However, on certain occasions, such as when a person was genuinely torn between two competing and potentially life-changing choices, the degree of indeterminacy in his brain would rise to such a high level as to permit an undetermined action. Such a window of freedom would be more or less rare, but could exert a profound effect on all

        Pure and utter conjecture! Dreamland stuff!!

        EDIT: And while we’re at it, yeah!, lets p#ss on set theory too — its only the basis for all computing?!?!??!!?

      • Funny stuff mig, anywho I just wanted to see how far you would go, your only grumble about the psychology today was the usage of quantum mechanics, nary a peep about all the rest tho. One little phrase is all you could muster to attack the entire article. Common tactic used by some to drag the conversation away from the meat of the issue and kill it off in the fog.

        If peer reviewed and accepted academic data – materials are not suitable for you, what is lol. American scientific is not good enough?

        skippy… shorter sweeter…. all your comments can be boiled to LIES, your telling lies[!!!] skippy… look everyone hes telling lies~ Normally a neoclassical – AET school ploy.

        PS. see copy and pasting removes the avenue for you play a wider rhetorical game, you actually have to deal with the contents therein and unable to play word games, language traps, of a personalized nature. Your left to projections and pejorative statements in lieu of substantive rebuttal. When you can provide the latter, an informed and meaningful conversation might occur. Toynbee really has your strip pegged imo.

      • migtronixMEMBER

        @skip: as usual point is missed…

        I’m with on 90% of it, the 10% I’m trying to figure out and you’re not helping really… I’ve been through all that stuff.

        And as for “libertarian” all that means to me is — leave me alone, I’ll leave you alone; when we need to co-operate lets put in paper so everyone know what to expect — what did you say the other day?
        Until its on wet ink its not worth the court fee? Or something…

        EDIT: Did I say SA isn’t worth it? I read SA/New Scientist/Nature/NatGeo/you name it… That article was pretty piss poor in my opinions.
        Am I allowed to have that? Or is my libertarian proto-free will getting in the way again…

      • “migtronix
        April 1, 2014 at 10:21 am

        Awww we’ve upset the salesman. Riddle me this? Did the people studying neuroscience do it from free will or did their synapses drive them into it? Genius.”

        This is – your – opening salvo over my referencing psychology and neuroscience as a means of observation wrt the term “Free Will”.

        I replied with copious amounts academic materials only to suffer more pejorative declarations.

        Point missed shezz go look in the mirror.

      • migtronixMEMBER

        I do dude I do!

        I knew what I was baiting you into I just didn’t realise how persistent in repetition you’d be!

        Its a failing of mine, I let things slide also, but then they catch up with me…

        EDIT: I see now how your original remark re: Feedman wasn’t necessarily accusatory (the rest was clearly but it was pretty mild) — pardon me, I was on the tram on the way to get a new mobile on Bourke st, the one I was using was #@$%ing up…

      • Whats with your comprehension i.e. Milton Friedman “observer bias” was blinding, tho he did have sense to back down from untenable positions, where Mises was just plain old crazy.

        “The issue is monetarism. What’s that? Well, monetarism is a movement in the economics profession that ostensibly began with Milton Friedman in the 1960s and 1970s (actually, the idea – half formulated – goes back a lot further than Friedman). What Friedman and his minions argued was that the demand for money is static – actually, if I start there this is going to get very boring very fast. Let’s try again. Friedman and his minions argued that, the more money you print the higher prices will rise. “Inflation,” said Friedman, “Is always and everywhere a monetary phenomenon”.

        I won’t go too far into the details, but Friedman was wrong – he even admitted as such. The inflation rate actually depends on how much money people are willing to spend. Even if you print loads of cash and extend easy credit, if people are feeling the bite of… oh, I don’t know… crippling unemployment and wage losses, they might not be so eager to borrow and spend. In addition to this, banks might not be so keen on lending these poor folks money – as they might see them as a major liability.”

        “UPDATE: Hehe, you might have noticed that I did a piece on numerology and mathematical economics today. Well, this piece had me fishing in certain ponds – namely those related to the philosophy of science. Here’s an interesting quote from Spiros Latsis (mentioned in the aforementioned article) on applying Lakatos’ criteria of science (also mentioned in said article) to Friedman’s methodology:

        Thus on the basis of Lakatos’s evaluation of Marxian economics by the same yardstick as ‘degenerate’ science because allegedly all its novel predictions were empirically refuted and their refutation not progressively resolved, on the same threefold graded criteria of ‘progressive-science’ and ‘degenerate-science’ and ‘pseudo-science’, Friedman’s economics was in effect evaluated as being even less ‘scientific’ than Marx’s, that is as ‘pseudoscience’ as opposed to ‘degenerate science’, because it had allegedly never even made any theoretically novel predictions that could possibly be refuted, a necessary condition of being ‘scientific’ in Lakatos’s normative methodology. In fact Lakatos’s LSE colleague, the econometrician and now Labour parliamentary peer Baron Meghnad Desai, then evaluated Marxian economics as a progressive scientific research programme in both his 1974 ‘’Marxian Economics’’ and its 1979 second edition. But he notably failed to identify any successfully predicted novel fact(s) that had rendered it progressive science and which thus empirically countermanded the relatively negative evaluations of both Popper and Lakatos. [My emphasis]

        Milton Friedman go home! And all you morons who discuss monetarism on Krugman’s blog – and generally bung up the internet with intellectual wastes… shut up and get a job – or a proper education!

        UPDATE 2: Looked into it a bit further and I’ve found that although – some might say: definitively – Friedman, though offered the chance, did NOT choose to defend his nonsense in Lakatos’ journal (even though he was offered the last word – a veritable gem in academic debate), some of his devout followers did offer a defence on his behalf.”

        http://fixingtheeconomists.wordpress.com/2011/01/07/krugman-vs-the-neo-monetarists-friedmans-ghost-proves-immune-to-exorcism-by-facts-and-reason/

        skippy… called a statist only to be quantified as a human by ZFC ***Theory***… man that’s some heavy duty stuff… especially when some objects are not computable even in principle… e.g. you can’t put a price [numerical value] on everything.

        PS. bye.

      • migtronixMEMBER

        Dear God man, when have I EVER EVER EVER espoused Friedman? I can’t stand that ChiScho sh!t!

        And you constantly throw it around like libertarian…bizzare…

      • “EDIT: I see now how your original remark re: ***Feedman*** wasn’t necessarily accusatory (the rest was clearly but it was pretty mild) — pardon me, I was on the tram on the way to get a new mobile on Bourke st, the one I was using was #@$%ing up”… – mig

        * my bold

        Ref up thread.

        “See Milton Friedman on that “observer effect” Mig. – skip

        So one is left to wonder if Feedman is now going to morph in to free will or something on your phone.

        Never the less I leave you with one of your own gems.

        “EDIT: You’re a jerk, I’m the only person who bothers to interact with you because I mistook you for interested and self motivated — and yet you accuse me of wanting to seek out weaker minds! Incredible arrogance and salesmanship!” – mig

        I’ve passed this and rest of the thread by a top clinical psychiatrist – clinical neurophysiology sort, my wife teaches at two University’s along with her clinical work [broad social network], for a professional opinion and check for bias.

        BPD is a high probability due to the over the top idealization and devaluation of others, switching between high positive regard and great disappointment [something you can accomplish with an individual in a same – short time frame]. This is compounded by your self aggrandizing wrt unsupported personal opinions and highly emotive rhetorical attempts at refuting any data that is contrary to your world views [American scientific et al does not meet your criteria, where metaphysics does [mathematically supported or not], tho you do utilize scientific discovery when it suits your purpose].

        As far as the libertarian stuff goes, well you present quite a few signifier, the constant demands on others to argue with only ones personal thoughts, cries of copy and paste, heavy reliance on metaphysics [optimal tool to quantify humanity and the universe over all others], incredulous statements about any environmental effects and how that might effect your personal options present and future, free market bias, your unquantified retort of everything as “Pure and utter conjecture! Dreamland stuff!!”, etc.

        Skippy… hating Friedman or Chicago school does not make one anti libertarian, Hopple pissed off as he sees it as too socialistic now…. libertarians have a bad habit of eating – abandoning their weak… survival of the fittest meme – profit or loss paradigm.

        PS. you do know you don’t have to respond to every comment… right?

    • I suppose its all relative. Dialectical materialism didnt sound stupid to me.

      I recall dialectical is basically having the seeds of destruction within itself. Materialism referencing our economic system.

      Put together, the economic system we have bears with it the seeds of its own demise. Eventually the system will cause problems that are only fixed with a change in the system. And that new system too, will one day become outdated and require change.

      In practice, its a bit like the story of Rome. Rome had a system built on perpetual expansion. When it couldn’t expand anymore it fell to people fighting for bigger slices of pie (rather than a bigger pie), imploded on itself with corruption, and something new came.

      You could definitely criticise Marx’s predictions on what direction the system would evolve (smug with hindsight all the same), but change itself is an inevitability. If you see that the change is caused by the structures of the system itself – then you support dialectical materialism (afaik anyway).

  5. A very interesting post.

    “….Marx recognized the destructive potential of financial capitalism, but thought it was inconceivable that it would become dominant. He believed the industrialists would succeed in keeping the bankers in check. They have not……”

    I believe this is really where the whole problem lies. Yves Smith does not really go far enough into it.

    It is one thing to argue that “corporate profits are rising while returns to labour stagnate”, but we need to break down the “corporate profits” into “producer” and “rentier” profits. Otherwise we risk repeating the error Henry George identified more than 100 years ago, of beating up the producers when in fact both they and labour are the mutual victims of the rise of the rentiers. And that is in property as well as finance.

    Schumpeter is the one who has been proved most right in the meanwhile; the lack of revolution by the proles is because they have been too busy turning into petit-bourgeoisie. Marx’s notion that wage erosion was the permanent trend was nonsense.

    I think we are in a completely different paradigm now; we have a petit-bourgeoise majority who have been sucked in that it is in their own best interest to create bubbles in the value of their own homes and stuff the future and the actual creation of real wealth. It is classical economists insights on urban land rent, including Marx’s, that we need to resurrect now.

  6. Rob Burgess is back with a piece quite relevant to this post:

    “Garnaut argues that an inflection point in our stellar economic trajectory was reached in late 2011, and that neither major party (nor any of the small ones come to think of it) has policies to turn us into anything like an ‘economic powerhouse’.

    That inflection point was a reversal in our terms of trade. The resources industries had, up to that point, extracted ever-increasing prices for the commodities we sold to the world, making the prices of the things we wanted to buy from abroad (particularly manufactured goods from China) relatively cheaper year after year.

    With coal prices coming off significantly already, and with the likelihood of iron ore following, Garnaut thinks the only way we’ll sell things to the world is to have a “real depreciation” of the currency.

    By that he means that not only does the dollar need to fall, but that prices and wages in Australia must remain constrained if we are to become competitive with the world.”

    http://www.businessspectator.com.au/article/2014/4/1/politics/does-wa-care-about-shortens-jobs-crisis

    • As someone on NC pointed out, Australia is a huge exporter of water. Now how that pans out in the future, will be quite interesting. Rice is already gone w/ wheat being the biggest hydroponic crop eva only challenged by mineral extraction.

    • All the same voices, pushing the powerful vested interests.

      What is normative is;

      Profit = Revenue – Wages – All other operating costs.

      Simple Maths;

      Profit + Wages = Revenue – All other operating costs.

      The higher the LHS vairables get, the higher revenue must be extracted yes? To the point we’re uncompetitive.

      So After a periond of n years, our recalibration is;

      Profit( + 200% ) + Wages( + 85%) = Revenue – All other operating costs.

      Then we point to wages as being the problem.

      Wage share has shrunk as a proportion of GNI, and can only happen is a scenario similar to what I have pointed out.

      Sure, profit shares may be forwwarding onto to the rentiers such as lenders and property owners, but I opinted out before to Phl’s previous iteratin of the message, re: capital and labour on the same side.

      Capital fired the first shots blaming labour, as they cozied up to the rentiers, hoping they would we a happy marriage, wedded arm in arm.

      Retail is a prime example, happy to gouge customers to pay Frank Lowy. The ‘great moderation’ funded this lunacy (and immorality) until it could no longer fund it, then call for their customers pay cheque reduced and wonder why they shop online.

      Their response? Extract more rent by lower GST limits, as well as enlargening a state bureaucracy for compliance purposes.

      Why does it not occur to them to look at Frank Lowy’s rents?

      That’s why labour becoes antagonistic.

  7. Hockey might be attacking the aged pension.

    http://www.news.com.au/national/federal-government-has-not-ruled-out-cuts-to-the-age-pension-as-part-of-sacrifices-in-the-budget/story-fncynjr2-1226870144859

    I think if this government wants to win the next election it has to go hard like you have to in a rugby game otherwise you’re more likely to get hurt. Make the opposition look like wimps.

    I think the May budget will be pretty entertaining, in a Tarantino sort of way, almost makes me want to skip April. 🙂

  8. The greatest contribution of Marx to philosophy and political economics is his method of analysis and his dept. If one understands it and applies it, his perceptions of reality would match pretty well the reality itself.

    It is funny to look for what Marx did right and what did wrong when today’s famous and well paid economists cannot even forecast the future for next 5 years, but they strongly argue about Marx’s right/wrong vision about today’s reality visioned from more than a century and a half ago. This is quite stupid, funny and entertaining, but it is also a symptom of something else much more important. Why today so many people are suddenly obsessed so much with Marx?

  9. It’s been a long long time since I held a copy of Das Kaptal but I seem to remember several chapters that dealt with the globalization of labor(Europeanization as it were). Specifically Marx was witnessing the beginnings of the off-shoring game of labor/wage/conditions arbitration .

    Marx was very insistent that workers unions internationalize, He lobbied in Switzerland for pan European wage packs so that manufactured goods production did not simply migrate to the country with the lowest wages. Marx was a long long way ahead of his time, which was probably his greatest failing.

    • Gandhi seemed to have the same issue whence he traveled to Britannia and visited the textiles factory of his host.

    • Marx was a long long way ahead of his time, which was probably his greatest failing.

      Unfortunately true of many a great thinkers …

  10. The challenge is for governments is to induce corporations to ramp up capex and wage costs without the mandatory top line growth appearing first. Eventually, big business will kill its reciprocal revenue growth if it continues killing growth in inputs, if it hasn’t begun already.