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Woman Struggling to Embrace Marx (photo: [planeta_roig, flickr)
Aside from the revelations about Marx’s work, I learned two useful things that are central to American life today, yet which I have never once heard stated on the radio or TV or read in a newspaper: I learned about the labor shortage that fueled the 150-year period of rising wages in the United States, and I learned about the fact that corporations used to pay a lot more in corporate taxes, especially as an overall percentage of American tax revenues, than they do now.
As Rick Wolff has explained in various fora (such as here), the 150-year period of rising wages lasted from 1820 to 1970 — essentially, for as long as there was something resembling cheap undeveloped land that could be farmed and before mechanization and computerization had raised productivity and efficiency to the point where employers (both in the city and on the farm) could get by with fewer workers (and so didn’t need to keep hiring them, much less giving them pay raises). Wages have since then started to drop, to the point where even two-income families don’t have the same standard of living their parents enjoyed on one income, much less any hope of improvement on what their parents enjoyed.
As for the corporate tax revelations, those are especially ironic as one of the favored whines of the one-percenters and their shills such as the boys and girls of the Heritage Foundation is that American corporations pay too much in taxes. What the one-percenters won’t tell you, Rick Wolff does — namely, that American corporations used to pay a lot more in taxes than they do now:
Compare income taxes received by the federal government from individuals and from corporations (their profits are treated as their income). The table below (in millions of dollars) is based on statistics from the Office of Management and the Budget in the White House:1
Year Total Individual Income Taxes Total Corporate Income Taxes
(In Millions) (In Millions)1943 6,505 9,5571948 19,319 9,6781968 68,726 28,6651988 401,181 94,5082008 1,145,747 304,346The overall picture is unmistakable. The trend is clear. During the Great Depression federal income tax receipts from individuals and corporations were roughly equal. During World War Two, income tax receipts from corporations were 50 % greater than from individuals. The national crises of depression and war produced successful popular demands for corporations to contribute significant portions of federal tax revenues.
Two extremely important facts, yet until a few weeks ago I hadn’t heard of either of them. I’m betting that not one in a hundred people know of them.
Thanks again, SD.
48 Comments
I was aware of the tax rate but not the labor shortage. Though the labor shortage does not surprise me since and thing better than janitorial work went to white males only.
And not only WWII but the cold war and the space program and and the baby boom helped to feed the labor shortage.
But all this changed with more women working. Blacks and other minorities finally getting a chance at a good job. Add to that Japanese and European imports. The must have car going from a Chevy to a VW or other import.
There you have it.
My pleasure, PW, and thank you for the plug. The more information we have the better chance we have of enacting change.
As cmaukonen notes above, the reduced corporate tax contribution as a percentage of the total Federal revenue is actually well known – folks – nerds perhaps :-) – carried signs back in the 60′s complaining about this and it has gotten much worse in the last 50 years.
The “labor shortage” concept may be a look back and justify rising wages point. I don’t recall it being taught as an economic fact of life, or remembering folks moving from attributing rising wages to “union power offsetting corporate power” as the reason to a simple “shortage bidding war” concept. Indeed from the 70′s forward I was in various layers of management and the mantra was we can not control wages until we destroy unions (when in the 70′s the John Hancock was leafleted for a attempt to unionize, the place went nuts – names taken, folks fired for talking to union folks on the side walk, and when leaflets and agree to sign lists were circulated at USLICO (the US life Ins division of ING today) secretaries were sent in to request the list so they could read and sign – and copy the names of all those that signed – giving them to management who then fired everyone over the next year).
So most seem to go with union power as the cause of rising wages – the labor shortage idea seems a cover-up of the corporate anti-worker attitude at the top of management, despite the HR folks smiles and talks about corporate pro-worker culture.
I continue to go with corporate power or lack of such power as the cause of the wage increase rate as I have only seen wage increase due to shortages in small slices of the work force in small slices of America (machinists in Texas today or oil workers in North Dakota today).
loved this post pw, thanks for writing it
I want to add something missing from the mix;
…
one of the reasons wages have not risen is actual fed monetary policy, the monitor “wage pressure” and make money easier or more difficult to get based on positive, neutral or negative “wage pressure”
whenever you hear the fed say “the economy is heating up, we have to raise interest rates (the cost of money)”
what they really mean is this;
“labor is asking for and getting higher wage, we can’t have that so we are going to make money as expensive as it takes to stop that”
whenever you hear the fed say;
“the economy is stable, we are going to keep the prime low or lower it”
what they really mean is this;
‘labor is not asking for or getting higher wages, we can keep money cheap’
I am not sure greenspan invented this system but he certainly made it the majority policy regarding prime interest rates
Rick Wolff also mentions the role of the computer in all of this. “Efficiency” is essentially another way of saying “Getting by with less people”.
Hey, SD, I just think you and what you do are fabulous. I didn’t want to put this in any of your threads because I didn’t want to distract from the learning experience, which is why I wrote this diary.
One thing that Marx seems to understand better than any other economist or theorist is the role of alienation. Why do people like to grow their own food, or at least have some sort of relationship with whoever grows it — even if that food’s more expensive than what they can get at the supermarket? Why do people like to knit, or do carpentry, or tinker with hot rods — even if they’re rank amateurs who never will be polished pros? It’s a way not to be alienated from the things that sustain you.
There is a model for that now taught in every introductory or at least intermediate undergraduate macro course. It was developed in the late 1970s and has become the ruling conventional wisdom among conventional macroeconomics trained since around 1980. It goes like this:
The economy tends towards full employment. Inflation typically originates in a demand-push event associated with an increase in the rate of growth of the money supply, or a supply shock event validated by an increase in the rate of growth in the money supply. Without that increase the shock would be damped by the ‘natural’ tendency of the economy to stabilize at full employment at the current price level. Now let the inflation go on for a while. At that point, so the theory goes, workers start incorporating that trend into their expectations of what a reasonable ‘real wage’ ought to be and start demanding higher real wages (by withholding their labour until they get them). Employers making the same calculation realize they can pay the higher wages because they are going to get higher prices for their goods in the future. This leads to the inflation becoming ‘embedded’ as they say.
In this theory the critical event is the acceleration in wage inflation, which makes it impossible to get back to a stable price level without causing prolonged unemployment and economic recession. To nip this thing in the bud, the Fed has to put the breaks on as soon as there is any sign of wage inflation. Of course, this increases the rate of before the economy is even close to full employment because imperfect substitutability of different types of labour means that some skills will become scarce long before others.
This is a very destructive theory. For one thing, it ignores the positive effects of tight labour markets on working conditions, skill upgrading, and a generally better environment for workers that employers must offer to keep them. It isn’t all about wages, and if anyone tells you that these benefits are picked up in compensating wage differentials doesn’t know much real economics, and in this group I include graduates of the University of Chicago.
You’re right about the alienation aspect. There are many Marxists whose emphasis is primarily on that subject.
At least 60 million innocent people were murdered to promote the mostly crackpot theories of Karl Marx.
Before the Bolsheviks shot their way to power in 1917, there were dozens of trenchant critiques of Capitalism—many MUCH more insightful than those of Marx.
Yes, neoliberalism is a total failure for the 99% and yes, it would be good if folks could respond with an organized alternative.
But a comeback for Marx? Are you kidding?
Rick’s point on the long labour shortage is a nice insight, but it had to be true of Europe as well. Not all the wage increase in Europe is due to emigration to America and similar countries, and virtually none of it that occurred after World War II. So there is more than just free land and abundant resources at work here. I think a more important factor is that frm the late 1970s governments and monetary authorities began pursuing explicitly deflationary policies in response to the inflation of the 1970s. This had a lot of unintended side effects, not the least of which was a slow-down in investment and productivity growth. Productivity probably also slowed down because the backlog of innovations was being used up and not replaced. I don’t think labour market inflexibility, which is what the IMF, OECD, World Bank and similar overpaid and undertrained economists usually claim.
At least that many were also killed by the crack-pot anti-Marxist theories of a certain unnamed German. So your point is exactly what?
By the way, have you ever actually read Marx? You might learn something. This is not a good blog to parade ignorance unless you are an inveterate flasher.
America was settled in large part by folks leaving Europe to look for work or for a way to be farmers. My ancestors came from Trondheim, Smaland, Scotland and Prussia for that reason.
1) It’s not fair to blame Marx for what Stalin, Mao, and Pol Pot did under the banner of “Marxism” any more than it is to blame Adam Smith for the misery inflicted under his name.
In fact, Adam Smith was a lot more sensible than the average Chicago or Austrian school economist.
2) Marx can be read and appreciated for his historical and economic insights and criticism apart from buy-in to any “Marxist” system.
-stewartm
#1. Russia and China were authoritarian societies long before Marx came along. (Kinda like how the Apostle Paul was a vicious asshole before his conversion and a vicious asshole after it; he just changed his nominal allegiance, is all.) The difference is that once they left feudalism for what most thought was Marxism (but which in reality was state-sponsored capitalism — see #2), their countries went from being feudal backwaters to superpowers on a near-par with the US in less than half a century.
#2. They didn’t actually change the modes of production; they just changed who the middleman was. (Lenin acknowledges as much when he talks of “state-sponsored capitalism”.) Marx, to put things simply (probably too simply), is all about eliminating the middleman and giving the workers full control over the fruits of their own labor.
Exactly.
Yup. :-) Blaming Marx for the reported carnage in the 20th-century USSR and China would be like, say, blaming Jesus Christ for the Holocaust or for the Crusades.
Knew about taxes, knew about earnings meaning less and less for all (two incomes do not equal what one once was), but the REDUCED LABOR details were eye opening . . . SO obvious, but I never dwelled on that much . . .
Great read PW, and yes big thanks and rcc’ds to you and SD for terrific reads . . . good stuff!
And with exquisite timing, here’s this bit of news from David Cay Johnston (h/t Jay Ackroyd):
That’s right, folks: The “recovery” exists only for the top 10%, and really only for the top 1%
Does anyone wonders why guys like Rick Wolff say that capitalism is hitting the fan?
Hi PW,thanks for the convenient links to the series.
I noticed a confusion in the thread #4 as to the way Amtrak does/doesn’t subsidize freight.
From Narprail.org;
The ways in which they get us to pay for their expenses are endless, and if they can get us to think the exact opposite, all the better.
That’s a great look at it, thanks for sharing that translation of it all for us lay folks econ wise . . . good one.
Some of mine were from Småland, also, and from nearby Blekinge. My grandfather left Sweden and joined the US Merchant Marine so he could become an American citizen.
I found very interesting Wolff’s point that when incomes were continually rising prior to about 1970, people were peripherally aware of how much more the “haves” in our country were acumulating, but were so busy becoming “consumers” that they weren’t paying close attention.
It was only when wages flattened, the spouse went to work, and many people took on a second or part time job just to keep pace with their consumer lifestyle that they started to notice the obscene disparity in wealth and income as the capitalists pocketed the increasing surplus value rather than using it to raise wages.
Thanks, pw (and sd too!), great post. (And I have known about the corporate tax problem since we used to protest about it in the 60′s)
Lotta talk on a heavy subject without offering even ONE example of other critiques of Capitalism, much less a LIST of them.
Way to bend facts to suit your claims, too . . . still fighting them dirty commies are ya? Did ya hear, the war is over? That one, anyways . . .
Harumph.
Names? Links to their material? How were their critiques more insightful?
I was thrilled to hear him say that while a few years ago people did not want to hear anything about Marxian theory, today he is giving a couple of talks every week to groups who are seeking him out.
It is a great class. All levels of knowledge and interest. I encourage anyone who is paying attention to what is happening to the 99% to join us on Tuesdays around noon.
Knew about ever lower corp tax rates and the labor shortage is not surprising.
I went to grad school in the mid-70s where the invention of the PC was discussed, along with other enhancements in technology & automation, all with a lot of pom-pom waving huzzahs! Well, one wouldn’t want to “go back,” but even then – and I’m no great brainiac or whatever – I could see that such technological strides would eventually lead to less work for humans. It was pretty much inevitable.
And here we are. I believe (too lazy, so no links) that US citizens are among the most productive on the planet, yet our incomes are stagnant, at best, or, more likely, falling.
Does Marx have something to teach us? I think so. Ignore Marx if you wish to stick your head in the ground & pretend that he had nothing of value to offer. Sure there’s other economists around who also offer good insights, etc.
Thanks for the links and for the insights. This is all good information that would be great for more citizens to know and be more familiar with. One can only wish…
But corp tax rates? Yeah right: like they’re so “High” that the MOTM just “have to” go somewhere else to make a buck. Too bad so many humans are so easily misled.
Great catch!
Great comment, thanks . . . very informative.
What OmAli said. Thanks.
So, after 150 years of “labor shortage” the theory of full employment inflation arises to justify the application of downward wage pressure?
Nah. The energy crisis and one generation of world-domination killed the goose. That “theory” was practice for the econ-demagoguery that proliferates today.
Productivity increases, massive trade imbalance, private indebtedness, and consumer financial speculation (fraud) are not due to full employment, comrade.
L was taught supply and demand and wage push and cost plus price effects – but real world numbers could always be seen outside of any supply and demand thinking.
Indeed micro supply/demand utility curves always seemed after the fact with movement of the intersection up the curve explained by saying there were changes in the economy – ?? – as in computers introduced or new ideas dried up ??
I never bought into it.
Framing an issue is always job one – and the innocence of the rich and corporate – supply/demand made me do it – was I thought rather weak when the power struggle was obvious – even more obvious when I got on the other side of the door and saw our elite plan what they were doing and punish those that did not have their objectives. Hired Management believed that there really were 3 parties of interest that management had to pay attention to – the needs of the workers, the needs of the shareholders, and the needs of society. I saw the change post Reagan where the new hired management 3 objectives were – get board members I can control, get a bonus salary package better than Dad’s, and get into the best CEO only over a thousand employee company only golf tournaments sponsored by my suppliers.
Logic would suggest supply/demand – history suggests otherwise.
Union power to offset corporate power – the German solution – has a history of numbers that either refute supply/demand or require the assumption of really good workers and capital spending productivity improvements by the Boards of Directors that by law in Germany include a Union person. The truth is likely, as always, to be a combination – but I reject the idea that wage gain through 1973 (the high point) was just a supply/demand thing.
I should note that Germany has had to go mercantile post the right wing government (Merkel’s) decision to embrace Austrian school austerity – and now workers wages barely increase. Economic framing and political/military power with lack of war has a lot to do with improved worker’s lives.
I am, I confess, quite unfamiliar with those “dozens” of much “Much more insightful” and “trenchant” critiques than those made of capitalism, by Karl Marx, techno, might you, please, enlighten me?
DW
KPFT, our local pacifica station frequently runs a lecture by Richard Wolff during pledge drives that covers the labor surplus issue very well.
I recall from a history course I once took that one of the factors that allowed for the “Renaissance” was a labor shortage that arose in the aftermath of the Black Death. Serfs became a scarce commodity and were able to bargain for a better deal from local lords or move to the cities.
Labor and legislation worked together to create the “40 hour week”. One of the simplest ways to reduce unemployment would be legislate a 32 hour work week. I am not going to search for a link but I read recently that the actual average number of hours worked has been increasing for quite some time.
Companies routinely mis-categorize salary exempt workers so they don’t have to pay overtime.
High unemployment serves the so called job creators well and will never recede without an outside push.
Verra nice post and thread you have, here, PW, btw.
;~DW
spot on – the framing is the game – and now using the media they own they tell us we have a liberal bias media as they have the media sell the thoughts of the rich and corporate.
As well as influencing universities by funding programs, fellowships and chairs….
One of the things I’ve noticed in the business press over three cycles (1989, 2000, 2008 recessions) is that you will see articles about “labor shortages” right before a recession. Exactly as higher interest rates squeeze operating capital. And there is fretting about how whatever scapegoat investment (personal computers in 1989, broadband telecommunications in 2000, the FIRE sector and “underwater” homeowners in 2007) are going to get their value out of their investment.
And then almost everyone in business moves in lockstep to “cut costs” (lay off workers).
very true – I was lucky in that Paul Samuelson’s world at Tech was Keynesian and techie – using math to explain or finds hints for an explanation – very different than the world I thought I saw being presented to the kids that I knew at Harvard. The B-School (Sloan) was the say way – with much less of the Harvard case studies of our heroes the CEO approach. And I did not continue into the begging for grants mode, taking a math degree and running to the actuarial profession after I concluded physics was too faith based to be a science!! :-)
But it is obvious with today’s think tank jobs and their studies and papers by folks with great credentials that money talks and the view depends on where you are perched – and that bias extends to econ departments across the nation.
Marx died 34 years before the Bolshevik Revolution and outside of the 1848 manifesto of the Communist League had no crackpot suggestions for Lenin. And certainly none for Stalin. IMHO Marx and Engels were too naive in 1848 about what it would take to undo capitalism. And the phrase “dictatorship of the proletariat” did not have the same connotation in 1848 that it does post-Stalin. What clearly happened is that the “proletariat” (how many of the leadership were actually proletariat in the sense of Marx) that took leadership became the new capitalists. Wolff is very clear in his discussion that what resulted in 1917 was state capitalism in which the state behaved as Marx describes in Capital as a monopolist and monopsonist with bureaucrats controlling the means of production, not the workers.
You have to situate Marx in the conversation of 19th century philsophers and economists. In the US that has not been adequately done because of the suppression of Marxism during the Cold War.
Yes there are other critiques of capitalism besides Marx. Here is a partial list:
Charles Fourier
Robert Owen
Pierre-Joseph Proudhon
…
up to Ravi Batra.
Which do you consider more insightful?
Surplus value is an insight that is obvious to all employees (indeed the current euphemism for Marx’s surplus value is “value-added”).
Marx’s analysis of the twin aspects of money was foundational to the financial concept of money taught in economics courses today (after adding an accounting aspect). Marx argues that when any commodity becomes used as money, hoarding and loaning it becomes inevitable. And so does the unequal accumulation of capital.
There are two of Marx’s insights that have been incorporated into business practice even under neoliberalism.
yep – spot on – wish I was as coherent – and thanks for the suggested authors to read.
Marx was an elective in econ – but required in the philosophy course required for a degree in the way back world.
good stuff knut;
the chicago institute uses models that are clearly incorrect
laborers will almost never realize savings enjoyed by their employers, for instance, when the company I work for is doing great they don’t go over to everyone and hand out raises, they give the raise to people who ask for it and we can’t replace for less without it costing us more money.
wages go up because of wage pressure not because companies are doing well, though a company doing well might create wage pressure, the two don’t go hand in hand most of the time
But…raising taxes will demoralize The Job Creators. Oh, the horror!
Good point.
The problem with that explanation is that it was true of one particular round of inflation, which I would argue was the result of the Vietnam War plus all those other elements. To argue that that is the only process of inflation is dangerous, as we have seen.
The thing that I have noticed about economic understanding is the mistaking supply-demand price increases with generalized inflation caused by misalignment of the money supply and the goods produced in which the money supply in a time period exceeds the goods produced.
What was going on in the labor market in the 1970s when this analysis was formulated and not remarked upon then was that women were entering the labor force faster that the labor market could accomodate the new size of the labor force. Opportunities for minorities that had been blocked until the civil rights era increased the labor force in job categories that had not previously experienced downward wage pressure, and automation and other factors were reducing the demand for labor. Those are supply and demand processes that run counter to inflation.
Essentially workers were being blamed for increases in prices that they did not cause.
Another factor that is ignored in this analysis is the fact that Saudi Arabia and other OPEC countries had to do something with their petrodollars. The extension of that was what in the Carter administration was called the Eurodollar crisis. That is, there were dollars in the world economy that the Fed could not control as a national currency. And the obligations that those eurodollars financed were growing rapidly through a multiplier effect of transactions outside the US. That meant that the inflation tended to be external to the US as well as within the US. And that created a financial punchbowl that drove inflation until Paul Volcker, appointed by Carter, snapped it with a large increase in interest rates at the Fed. Instead of lower wages, folks faced unemployment until the Reagan defense buildup reinflated the economy.
And underlying drag on the global economy are the many continuing wars and the debt incurred from the past decade’s US wars.
Wolff’s statement of the problem is direct. We have a backlog of needed and necessary work–infrastructure development, teaching, healthcare,…. And a large number of people who could do that work. Wha exactly is it that is preventing them from getting together? The ground rules of capitalism is what. Expressed as “we don’t have the money to do that.” With the emphasis on we. We have more foreclosed houses than we have homeless families in the US. Why aren’t those getting together?
Now tell me again about the notion of market efficiency.
Twins on every list of Objectives I saw (during the Management By Objectives/MBO craze of the Seventies): Efficiency and Effectiveness. Still hear POTUSes invoke them.
Extraordinary thread, this. Beats the pants off every Book Salon I’ve seen!
however the irony, the REAL job creators are the laborers themselves, without labor there is no wealth, without wealth there would still be labor
A few more minds on Marx.
http://www.foreignpolicy.com/articles/2009/04/15/thoroughly_modern_marx?page=0,0
http://therealnews.com/t2/index.php?option=com_content&task=view&id=767&Itemid=74&jumival=7367
http://www.partnershipway.org/Economics-Politics/building-a-new-economics/what-is-partnerism/?searchterm=marx
Not on Marx, but since there was some mention in the comments of work hours going up but they didn’t have a link, I thought posting this link to a series of Mother Jones mag’s charts on worker-related info. I don’t work for MJ but I luff them. Their graphics are always really good – easy to understand and right to the point if you don’t feel like reading the articles :) Printing them out and sticking them all over a city seems like a good idea to me. If you go to their search box and type in “charts,” you will get a slew in depressing as hell info.
“The Great Speedup” story covers how workers are working more hours, which leads to less actual pay.
A couple of other links:
12 Charts on Workers
Mind-Blowing Charts From the Senate’s Income Inequality Hearing
Oh, I forgot. The Internet Archive has free books you can read online with their reader, or you can download them. Books by Karl Marx.
Don’t bother with the “Google” scanned books, as they are usually poorly done.