Tuesday, April 29, 2008

Marxist version of wages and profit versus that of mainstream economics

They deal with common problems. The Marxist notion is that people sell their labor power to capitalists, and that labor power is reckoned as being just another input to production. Even though people do the work the ultimate control of selling the product and distributing the money gained from the sale lies with the capitalist/owner/executives/upper management or just plain management if it's a small company themselves. This allows the people on top to give workers less than what they deserve through having a greater institutional power.

The mainstream model would say that even though the workers don't own the establishment they work in that they can in fact command a higher wage and therefore a higher share of the money generated from the products that they create if they can prove that the skills that they have are valuable. Higher skills are thought to command higher wages because they're thought to be more scarce than less skilled labor, meaning that if establishments want to employ people with these skills they have to compromise a little bit with the workers. As for the actual money made off of the product, mainstream economics says that in a competitive market the profits will be reduced to a small margin, with more competition making the margins smaller, as well as making the business more subject to fluctuations in supply and demand, which could exert downward pressure on both wages and on the income taken by owners themselves. Yet there are flaws in this.

First of all is the notion that higher skills or more valuable skills are the only way to ensure a better distribution of income in the sense of it being efficient, which in mainstream economics means that it's not made through workers asserting undue power over the poor capitalists and essentially exploiting them. Well. What if you have a job where individually people don't have many skills but collectively they do, and the method that the skills are put to use seriously increases productivity, which in turn increases the amount of possible profit, which whether realized or not exists on a greater scale of magnitude than it did previously?

Mainstream economics would say that the more efficient working methods would not exist socially but would be the property of whomever invented them, who could then command a great deal of money for letting people use the method. But after a certain point these things pass into common usage, no matter if someone originally came up with them and licensed them or not. Once that happens and there is no longer a tax on the increase of productivity gained from the new methods who exactly is entitled to the bigger amount of money now made using them? The workers are the ones who learn the methods and implement them, which would theoretically increase their skill level leading them to command higher wages, but what if the scenario is a lot of people with relatively compartmentalized job functions who nonetheless work together and learn somewhat how to function in the new arrangement? This would lead to an increase in skill too, but what if the added arrangement was something that once created turned out to be pretty siple, and so was simple to implement and learn, but that increased productivity a whole lot anyways?

The thought with mainstream economics is that no matter what people do, learn, know, no matter how production process, work methods, change, that competition will always cause things to balance out. Demand fuels competition and the tendency of demand is to favor lower prices or higher quality, modified by price, forcing companies that don't implement productivity increasing innovations to scramble to produce them through loss of business. Skills command money from companies, that use the skill to produce goods, that are in turn bought or not bought by the same workers, putting a further constraint on the companies themselves. Companies themselves are thought to be neutral in all of this, not having any influence whatsoever as companies in relation to the marketing and controlling of demand on the one hand and pressure in relation to wages, conditions, and hiring on the other. There's no institutional power attributed to companies. Instead, the only function of companies, the thing that supposedly gives people in charge the power to command higher wages for themselves, is to respond to changes in the market intelligently and to continually come up with innovations that lead to higher profits either through selling more stuff or by cutting costs, which in turn is thought to enable them to sell more stuff.

There's no concept of absolute taking by companies in relation to money earned, because the market would theoretically cancel any ensured profits out, and there isn't any concept of institutional power exerted in relation to either labor or to demand and the satisfaction of demand, because again the market is thought to cancel any money made that way out. The only way that companies are thought to be able to exert that power is either in monopoly situations or oligopoly situations, with oligopoly meaning something like six or eight companies in an entire market controlling things. Any number beyond that is thought to be competitive.

Workers are thought to have power only by voting with their feet, i.e leaving jobs that don't pay what their skills would or should command and deciding not to apply for jobs in places that would pay them substandard wages in the first place. Unions are considered to be impediments to this process because through collective bargaining they are thought to interfere with the ability of workers to be hired at wages they want to be hired at, as well as costing the companies money through not letting the wages vary with the demands of the market. If there's a glut of people with the same skills as the workers in the union, so the thinking goes, employers are forbidden from decreasing the amount of wages to reflect that the skills are no longer as valuable as they were, because they're less scarce. Also, if the market for a good falls out, thereby making the skills required to make it less valuable, they can't decrease wages, and they can't fire people as easily as they could without the union.

This doesn't take into account the actual process of collective bargaining, which doesn't consist of workers just imposing their will on the poor capitalists but of a sort of compromise between workers and management that takes into account real profits made by the company as well as market conditions.

**to be continued***

On edit: If the market fails, meaning unjust inequalities exist in it, they're attributed in mainstream economics to one of four factors: workers not competently pursuing training and skills that would be useful for the job market, or being in general irresponsible as individuals, consumers not intelligently spending their money on products that best serve their needs, or else just stupidly handling their money, managers and owners not competently responding to changes in supply and demand and not innovating, or else just completely fucking up, and lastly there not being enough competition in the market.

A Marxist might say that in truth institutional inefficiencies exist on every level and in every market, compounding on each other and leading to a situation where the full functioning of the free market in the way that mainstream economists portray it is impossible to realize. Small inefficiencies also pile up into large economic trends like cyclical recessions and depressions as well as booms. They also lead to the development of the class system and to increasing inequality of wealth. The only way to counter these trends is to give up the free market model as the way to an economically just society and come up with another one that consciously addresses the problems through control of the economy. Which means planning of some sort and the subordination of business to society in general. What form the planning takes, whether it's a very top down centralized system like existed in the Soviet Union or something more participatory is an open question.

On edit #2: It's not even clear that having a broad, homogenized, free market is something that's desirable considering that it would essentially create a single world economy where efficiency could only be produced by people constantly shifting around the world in order to find the best job as well as nullifying the democratic ability of countries to pass legislation having to do with regulation of the economy, not to mention social problems and behavior of business in general. The effect would be the destruction of cultures in the service of the free market as well as the nullification of democracy. Globalization isn't just about globalized trade in products.

All this, all the globalized destruction produced by regulations attached to bodies like the WTO as well as free trade agreements like NAFTA, CAFTA, and the rest, is predicated on the ideal of the free market being something that's viable and that ultimately will lead to the best possible outcome.

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