WEA online conference: Capital Accumulation, Production and Employment
- Setting the scene
The proliferation of financial assets, with economic growth limited and sporadic, has given way in the new millennium to widespread unemployment, income gaps, and weaker welfare programs. The same policies that have obliterated social services and kept labor cheap have favored global enterprses and financial deepening. Besides, the onset of the new millennium represents a new age of democracy where democracy allows for election to office but not to power (Madi, 2015).
Taking into account evidence from the USA, Fullbrook warns “American democracy has become a sham. It still maintains the trappings of democracy, but in reality it is a system of government controlled by the richest 1% of its citizens” (Fullbrook, 2011). Stiglitz elaborates the same; in his opinion, much of current inequality is due to the manipulation of rules in the financial industry: “The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed” (Stiglitz, 2011).
Indeed, given that central banks’ shareholders are in the top 1%, the global economy, or at least the world’s number one economy, has been commanded by their specific interests. Page, Bartels and Seawright (2013) inform that the top 1 percent or so of US wealth-holders:
”… are extremely active politically and much more conservative than the American public as a whole with respect to important policies concerning taxation, economic regulation, and especially social welfare programs.”
Moreover, the top one-tenth of 1 percent of wealthholders may tend to hold still more conservative views. Their conclusion is that these contrasting views about the economic policy may explain why some public policies in the United States seem to contradict the expectations of the majority of US citizens. And, considering that policy makers may give priority to their sponsors instead of to the people, the resultant economic policy will significantly violate democratic ideals of political equality.
Considering the specific interests that command policymaking, Michael Hudson (2015) states:
“The financial sector has the same objective as military conquest: to gain control of land and basic infrastructure, and collect tribute. To update von Clausewitz, finance has become war by other means.” Actually, public debt crises suggest the possibility that the objective of main creditors is to raise rent by forcing governments to borrow, and forcing them to pay by relinquishing public property or people’s income. In Hudson’s words, “debt-strapped nations permit bankers and bondholders to dictate their laws and control their planning and politics”. Indeed, the power of wealthholders to drive the economy and to impose deleterious effects on the working conditions must be seriously considered.
- What about investment?
Currently, private investment remains lower than before the 2007/8 crisis. As Ruccio (2015) points out, since the global crisis, the American recovery has been mainly related to corporate profits and incomes for the 1 percent. Indeed, both consumer spending and business investment have slowed down. In particular, as Ruccio explained, consumer spending has been influenced by the stagnation of most people’s incomes. And in spite of the expansion of profits, they have not been invested. As a matter of fact, he says:
“while profits (especially from domestic sources) continue to grow, corporations are using those profits not for investment, but for other uses, including stock buybacks, mergers and acquisitions, and CEO salaries.”
Indeed, the impacts of globalization need to be reconceptualised in the contours of a new accumulation dynamics where the relationship among nation states and capital flows has created a new competitive framework. For instance, current global competition in investment is driven by technology innovations. Germany has recently launched the project Industrie 4.0 that is considered “of significant importance to the continued competitiveness of German industry” (Germany Trade & Invest, 2015). In October 2015, The USA White House published President Obama’s program, A Strategy for American Innovation, which states:
“But the United States cannot afford to be complacent. Our economic competitors are dramatically increasing their research and development (R&D) investments.”
According to this program, the United States needs to excel in science, technology, engineering, and mathematics (STEM) fields. In this attempt, new public and private initiatives and policies are needed to ensure that not only more Americans, but also immigrants could participate in and benefit from the innovation economy.
In spite of the national technological and productive attempts to enhance inclusive growth, it is clear that the rules of economic globalization are designed to benefit the rich. As Stiglitz (2011) highlighted, these rules encourage “competition among countries for business”. This competition drives down taxes on corporations and weakens environmental protections. In addition to deep changes in working conditions, the competition among nations undermines fundamental core labor rights, including the right to collective bargaining.
- Challenges to workers
In contemporary capitalist societies the global financial architecture has favored the expansion of financial assets, capital mobility and short term investment decisions – increasingly subordinated to rules of portfolio risk management (Madi, 2013). In this scenario, changes in production have been based on competitiveness and corporate governance criteria. Therefore, the new trends in capital accumulation and production shape a scenario where job instability and fragile conditions of social protection increases. As a result, workers need to redefine their skills, become informal entrepreneurs, or migrate. Indeed, it is urgent to face the increasing challenges to support an ethically defensible approach to working conditions.
According to Stiglitz (2011), many factors must be considered while analyzing current challenges to workers. First, labor-saving technologies have reduced the demand for many middle-class, blue-collar jobs. Second, globalization has created a global marketplace, confronting expensive unskilled workers with cheap unskilled workers overseas and favoring outsourcing practices. Third, social changes have also played a role in the labor market changes, such as the decline of unions. Four, political decisions are influenced by the top 1% who favor policies increasing inequality.
Piketty (2014) has also acknowledged the relevance of wealth and income inequality. His 15-year program of empirical research, conducted in conjunction with other scholars, analyzed the evolution of income and wealth (which he calls capital) over the past three centuries in leading high-income countries. Among the lessons, the outcomes of the research highlighted:
- There is no general tendency towards greater economic equality.
- The relatively high degree of equality seen after the Second World War was partly a result of deliberate policy, especially progressive taxation, but even more a result of the destruction of inherited wealth, particularly within Europe, between 1914 and 1945.
- In Europe, a “patrimonial capitalism” – the world dominated by inherited wealth – of the late 19th century is being slowly re-created.
- Inequality within generations remains vastly greater than between them.
USA: Perhaps the most extraordinary statistic is that:
“the richest 1 percent appropriated 60 percent of the increase in US national income between 1977 and 2007.”
Indeed, one of the most striking conclusions is the rise of the “supermanager” in the USA.
Unfortunately, without changes in capital accumulation and production, automation and technological unemployment will also increase inequality. It is worth recalling Stephen Hawking’s words:
“If machines produce everything we need, the outcome will depend on how things are distributed”. Indeed, given that the machine-produced wealth may be evenly shared, or concentrated in the machine-owners small group, the technological trend seems to drive an “ever-increasing inequality.” (Ruccio, 2015a)
In truth, all these questions reflect issues of current power, politics and economics in a social context where democratic institutions are being threatened. Taking into account this reality, Peter Radford (2015) highlights that:
“Unfortunately America has, for four decades or so, bent over backwards to privilege capitalism over democracy. The result is the ongoing economic crisis that we continue to live through.”
- The Wea Conference
The 2016 WEA conference
Capital Accumulation, Production and Employment: Can We Bend the Arc of Global Capital Toward Justice? ( http://capital2016.weaconferences.net/)
15th May – 15th July 2016
will focus on various aspects of global accumulation, production and employment from a broad perspective, examining their interlinkages with other economic, social, and political processes. Concerns with social inclusion extend well beyond purely economic accounts of justice and fairness. The degree of economic inequality also affects social cohesion and political stability, and it can also have negative implications for economic growth and democratic institutions. Considering the current social and economic challenges, Peter Radford has suggested the need to constrain capital and make it work for all people. In his own words: ‘We can bend the arc of capitalism to our will if we wish”.
In truth, this conference calls for a deep examination of current power, politics and economics in a social context where democratic institutions are being threatened. This attempt also involves critical thinking about theories of justice in the light of applied challenges: To what kind of justice should we bend the arc of global capital? What are justice conditions and criteria, given the concern about capital accumulation, employment, and production?
Fullbrook, E., “Of the 1%, by the 1%, for the 1%”. RWER Blog, April 13, 2011 https://rwer.wordpress.com/2011/04/13/%E2%80%9Cof-the-1-by-the-1-for-the-1%E2%80%9D-joseph-e-stiglitz
Germany Trade & Invest, “INDUSTRIE 4.0 – Smart Manufacturing for the Future”, 2015 http://www.gtai.de/GTAI/Navigation/EN/Invest/Service/Publications/business-information,t=industrie-40–smart-manufacturing-for-the-future,did=917080.html.
Hudson, M., “Finance as warfare”. WEA Books, 2015 http://www.worldeconomicsassociation.org/books/
Madi, M. A., “Ethics and Economics”, WEA Pedagogy Blog, November 10, 2013 https://weapedagogy.wordpress.com/2013/11/10/ethics-and-economics/
Madi, M. A., “2016: Promises and Problems”, WEA Pedagogy Blog, December 29, 2015 https://weapedagogy.wordpress.com/2015/12/29/2016-promises-and-problems
Page, B. I., Bartels, L. M. and Seawright, J., “Democracy and the Policy Preferences of Wealthy Americans”, American Political Science Association, Perspectives on Politics, 11 (01), March 2013, pp. 51-73. http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=8864478&fileId=S153759271200360X.
Piketty, T., Capital in the 21st century, Harvard University Press, March 2014.
Radford, P., “Quote: Capitalism”. RWER Blog, September 28, 2015. https://rwer.wordpress.com/2015/09/28/quote-capitalism
Ruccio, D. F., “6 and 1/2 years into the “recovery”’, RWER Blog, November 5, 2015. https://rwer.wordpress.com/2015/12/05/6-and12-years-into-the-recovery-but-little-has-been-recovering-except-corporate-profits-and-incomes-for-the-1-percent
Ruccio, D. F., “Capitalism and technology and Stephen Hawking”, RWER Blog, October 19, 2015a https://rwer.wordpress.com/2015/10/19/capitalism-and-technology-and-stephen-hawking
Stiglitz, J., “Of the 1%, by the 1%, for the 1%”. Vanity Fair Magazine, April 30, 2011. http://www.vanityfair.com/news/2011/05/top-one-percent-201105.
USA WHITE HOUSE, “A Strategy for American Innovation”, White House paper, 2015. https://www.whitehouse.gov/the-press-office/2015/10/21/fact-sheet-white-house-releases-new-strategy-american-innovation.
From: pp.8-10 of World Economics Association Newsletter 6(2), April 2016