The rate of exploitation posted by Richard Seymour

It's just gone 'Third World' in the US:

Call centre workers are becoming as cheap to hire in the US as they are in India, according to the head of the country’s largest business process outsourcing company.

High unemployment levels have driven down wages for some low-skilled outsourcing services in some parts of the US, particularly among the Hispanic population.

At the same time, wages in India’s outsourcing sector have risen by 10 per cent this year and senior outsourcing managers based in the country command salaries above global averages.

Pramod Bhasin, the chief executive of Genpact, said his company expected to treble its workforce in the US over the next two years, from about 1,500 employees now...

Labels: capitalism, exploitation, rate of profit, recession, the rate of exploitation, wage labour, wages

The capitalist calculation problem posted by Richard Seymour

Explanations for the global financial and economic meltdowns generally focused on a few particulars. For the right, poor people caused the crisis through reckless borrowing, while the subsequent deficit was made worse by reckless spending on the poor. Worse than the poor themselves are the socialistic legislators who introduce ridiculous laws forcing companies to cease practises such as 'red-lining'. For the centre-left, the power of a barely regulated financial sector allowed the banks to make irresponsible decisions, and speculators to wreak havoc with economic stability by blowing bubbles then bursting them and making off with the dough. Though more sociologically realistic than its rightist competitors, this account neglects the reason for the financial turn in the first place, which was the otherwise intractable crisis of capitalist profitability.

The underlying problem is the impossibility of rational economic calculation in a capitalist system. Decisions have to be made by competing private firms which consistently misrepresent themselves to one another, to their workers, to their creditors, and to their consumers. As we usually discover in the middle of a crisis, misrepresenting one's assets and rate of return is normal practise for a capitalist entity. Not only that, but they consistently undermine any basis for predictability, and thus for rational calculation by revising the terms of their production, by downsizing, by cutting wages, tossing aside worker-management agreements, etc. etc. The only mechanism for calculation within the sphere of private accumulation is competitive market pricing. To see this as a secure basis for economic calculation, one has to also accept a number of philosophical and normative commitments that are quite eccentric: extreme methodological individualism, subjective value theory, the Kantian epistemology of the Austrian school, etc. These are not ideas one subscribes to lightly, or without a delight in perversity.

In fact, market pricing can tell us a thing or two. It can tell us something about the range of options available to us, with our cash, as private consumers or entrepreneurs. It can tell you what each purchase or investment will cost you. About the social effects of market transactions, however, it can't tell us a thing. This is no small matter. A system that persistently closes off fields of information to us, disclosing only that which pertains to our individual aggrandisement, is one that rewards behaviour that, while beneficial to the individual capitalist or consumer, is socially destructive and irrational for the economy as a whole. As to the information relevant to investment decisions, market pricing discloses surprisingly little. Suppose you are a capitalist. What will be rational to invest in tomorrow depends on what other capitalists are planning today. But whether what they are planning will work depends on what you are planning. And being capitalists, you don't share information around willy-nilly. It isn't the done thing. More to the point, you would need some sort of aggregate information about projected social needs, long-term developments, demographic changes, etc. Market pricing will tell you something about what was in demand yesterday, but it can't tell you what will be in demand thirty years from now.

So much the worse if you aren't a capitalist. If you're a capitalist, your only problem is how to improve returns on investment, usually in the short-term. Beyond that predatory social role, a whole series of problems enter one's vista. The question of how to rationally allocate investment, and structure social consumption in a rational manner, involves prioritising needs and wants in a way that requires information that market prices don't provide. Do you build social housing, raise incomes, or invest in a new marina? If you're a capitalist, it's easy - the marina offers more returns, hence more money for future investment and accumulation. If you're not a capitalist, other considerations hove into view. Or take pensions: how much of the social product should be set aside for future consumption? Should this be a fixed amount, or does justice demand that it increases as social production increases in the future? And what sort of infrastructure and public goods will future generations need? What about 'green' development? The only way market prices will help anyone make such decisions is by alerting investors and consumers as to what such decisions will cost them in the immediate term - hence, the attempt to meet such challenges through engineering market-driven, financialised measures such as carbon trading, pensions linked to the stock markets, etc.

In the real world, rational economic decision making is only possible to a limited extent due to the existence of an extensive non-market sphere, socialised public bureaucracies, national statistics agencies, offices for public planning and development, local authorities with oversight, etc etc. Tellingly, their behaviour becomes more irrational, wasteful and incompetent the more they are penetrated by marketised logic, the more they attempt to behave like corporations. They accumulate high overhead costs, duplicate capacity, fail to collect relevant information, and undermine the very rationalising aspects of service delivery that they are there to provide.

The core of the capitalist calculation problem is this: as a system of competitive accumulation, it involves individual capitalists in attempting to extract surplus value from the unique commodity known as labour-power; but to realise that surplus value, they must be able to occupy more of the market than their competitors, and engage in labour-saving innovation and rationalisation; but while this may be rational for individual investors on the basis of current market prices, in the aggregate it results in less labour-power being employed across the industry, thus a reduction in the total surplus value produced*; so while individual capitalists can increase their share of total surplus value, the aggregate tendency will be for the rate of return on investment to decrease, thus for investment itself to decrease, and in the long run for capitalism to enter into repeated crises and contractions. Irrational and anarchic, crisis-prone, with no means of rational planning and prediction, and ultimately bailed out by governments who socialise its losses, capitalism has one hell of a calculation problem.

Meanwhile, I hear tell there's a socialist calculation problem...?

*Update. Rick Kuhn points out that there is a mistake here: "This says that there is a fall in the absolute amount of labour-power employed and sv produced. In fact the organic composition of capital can (and often does) rise as the employment of labour power expands and the absolute mass of surplus value created rises. The issue is that new investment is more capital intensive so there is less labour power (and, given a constant rate of exploitation, surplus value) relative to total capitalist outlays on labour power and constant capital. The decline in the rate of profit may choke off investment before a decline in employment which is then a consequence of the crisis. Conversely, boom phases during which there is both rapid investment can be accompanied by both falls in the organic composition of capital and rises in employment."

Labels: 'free markets', capitalism, hayek, market metaphysic, menger, mises, neoclassical economics, neoliberalism, prices, rate of profit, wages

Talking Balls about immigration posted by Richard Seymour

Labels: european union, immigration, neoliberalism, new labour, racism, tories, wages

The speculators attack posted by Richard Seymour

The current speculative attack on the Euro is a very powerful vote against EU states that investors (capitalists) do no believe have moved swiftly enough to cut their budget deficits. The rules of the Stability and Growth Pact agreed among EU member states say that budget deficits must not exceed 3% of GDP. Those rules were designed to put a cap on public spending. They have provided the occasion for various EU governments to slash and burn welfare and public services, and they effectively insulate any government that wishes to do so from criticism - this is the cost of being a member of the EU, they say. Of course, the rules are subject to interpretation and haggling, and two of the most powerful EU states - namely France and Germany - were able to force through some get-out clauses when they went in to deep recession in the early 2000s and found themselves repreatedly breaching the 3% limit. Nevertheless, EU member states are now being pressured to get their own budgets back within that limit.

Greece has been the subject of investors' disapprobation lately, with a deficit of 12.5% (slightly lower than the UK, at 13%, and comparable to Ireland and Spain). The government has been instructed to look for ways to make big spending cuts to meet this EU target. And though it was elected on a promise not to cut wages, the spending cuts agreed at the EU include a 10% cut in wages. George Papandreou, defending this betrayal, was able to cite a speculative attack on government bonds, which drove up the yield (the interest repayable) to more than twice that of Germany - which means it costs the Greek government more than twice as much to fund its deficit. He said: "Greece is at the centre of an unprecedented speculative attack: we cannot be at the mercy of creditors. Despite our tragic mistakes, our fate is today defined by rating agencies that bear responsibility for the 'bubble' that led to the global crisis in the first place." So, the pressure being applied by this 'virtual parliament' of capitalists is being used to deflect criticism of the elected parliament of Greece while it does the exact opposite of what it was elected to do. This is Pasok's only answer to the trade unionists who will be undertaking mass strike action this week.

The effects of such policies are not difficult to establish. The Irish government, arguably the most enthusiastic neoliberal state in Europe, didn't hang about. Its response to the economic crisis was to impose several austerity budgets which depressed GDP by 5%. It has recently introduced a budget intent on reducing expenditure by 15bn euros over the next four years, reducing total state expenditure by a quarter. Unemployment has been driven up to 12.5%, and a wave of mortgage defaults has left thousands of families without homes. But if the word from the corporate press in Ireland is any guide, then big business loves it, and especially the Minister of Finance, Brian Lenihan, whose beatification is not far off. And this is what they intend for the rest of Europe. The pressure isn't stopping with Greece. A whole spate of southern European economies including Italy, Portual and Spain are coming under scrutiny, and all will be expected to attack working class consumption, suppress wages, slash the public sector and subsidise industry.

On one level, this is crazy. Of course there are budget deficits during a recession, especially one as deep as this. This is what you would expect as tax intakes drop. It is quite normal and rational for a government to build up a deficit during a recession, because it is supposed to act in a counter-cyclical fashion. On another level, it is hypocritical. This is not just because rules are being made to apply to southern European economies that do not apply to the union's more powerful constituents. As Joseph Stiglitz has pointed out, the ECB is happy to lend to banks, but not when it comes to member states. It's all stimulus where private finance-capital is concerned, but sour-faced austerity when public sector budgets are involved. But then, that is the point. The EU isn't attacking Greece, or neglecting Greece, as Stiglitz claims. Greek capital will do well out of this. It will benefit from suppressed wages, will probably make a tidy profit from sold public assets, and will enjoy the continued access to Balkan and Eastern European labour markets that membership of the EU brings. It's a not an attack on Greece. It's a class war.

Labels: capitalism, class struggle, european union, greece, neoliberalism, pasok, public spending, recession, trade unions, wages

This is a stick up posted by Richard Seymour

Labels: bankers, banks, capitalism, finance capital, profits, recession, wages, working class

The wages of recession posted by Richard Seymour

"The study, the most comprehensive examination of wage-law violations in a decade, also found that 68 percent of the workers interviewed had experienced at least one pay-related violation in the previous work week."

Labels: capital, crisis, exploitation, labour, profits, recession, surplus value, wages

The bad news 'recovery' posted by Richard Seymour

Labels: exploitation, labour, productivity, profits, the rate of exploitation, wages

No shit. posted by Richard Seymour

After seeing the latest batch of dismal economic statistics and hearing ominous noises about new cut-backs and another round of lay-offs, I was going to write one of those posts pointing out that "It's worse than you think". I don't need to now, since the Chancellor has just come out and said we are in for the worst economic downturn in sixty years. The reason why it could get particularly bad in Britain was spelled out by Larry Elliott a while ago. To wit, the government's babbling insistence that Britain is particularly well-placed to withstand a credit crunch is absolute drivel, because the government's growth strategy has depended to a large extent on the City, even as they have allowed over 1.5 million manufacturing jobs to be lost. Having allowed the fundamentals of the economy to be eroded, there is little to help us weather the financial storm. Further, the government has relied on a personal debt surge to sustain consumption, with the total amount of debt more than doubling since 1997. The ratio of debt to disposable income in the UK was 162.9 percent [pdf] as of late 2006, which was even higher than the figure in the US. Real household incomes in the UK have risen by only 0.35% a year since 2001-2. Now that the debts are being called in and credit is increasingly difficult to get, we are arguably more exposed to a terrifying slump than America, which has a far more activist state, much more investment in manufacturing and is very quick to slash interest rates should the going get tough.

Officialdom is torn between the need to alleviate the problems faced by industry and the desire to avoid strengthening labour's hand. Take a look at the battle going on over interest rates in the UK. Practically everyone outside the Bank of England appears to be pleading for a cut, including the most powerful sectors of capital. The only person on the Monetary Policy Committee who has been calling for a cut, however, is the labour economist David Blanchflower. His colleagues argue that rates have to be kept high to counteract potential wage rises. In fact, far from the likelihood of real-terms wage rises being unleashed by a rate cut, real wages have fallen. In the last quarter, median wage rises were 3.5%, but the inflation rate (CPI) rose to 5% in the same period. At the same time, however, outside the UK Continental Shelf (oil and gas), profits have been falling - from 6.6% to 4.9% in manufacturing, and with a slight dip of 0.1% in the services sector. An overriding priority of capital, therefore, is to curb its costs. If they can't transfer the costs to workers as producers, in terms of real wage cuts, they will try to transfer them to workers as consumers, in terms of price increases. The government has taken the lead on this with its incomes policy in the public sector, cutting real wages for millions of workers. This is why wages rose by only 2.7% in the public sector, compared to 3.8% in the private sector, last quarter.

The political class is hardly divided on this question: the argument is only over the rate at which the burdens of the recession should be transferred to workers. The Tories are taking the opportunity to demand a tax cut for businesses. Cut taxes for capital, and you're going to have to cut public spending on services depended on by the poor. Either that or, as the Tories have a propensity for doing, tax consumption more. The trouble they will almost certainly face in a year's time, barring a Lazarus-like revival for the government, is that pay cuts have stimulated successive waves of labour struggle, which are likely to intensify as the crisis worsens. It will be a raucous period, whoever governs, simply because we can't afford to let them pass the costs of their crisis onto us. And I'm not talking about 'we might have a one day strike and hope the government makes a small concession'. It has gone way beyond that: with ongoing real-terms wage cuts, and an anticipated 2 million officially unemployed by Christmas (meaning the real unemployment rate will be over 3 million), government efforts to discipline trade union members through their leadership are apt to flounder. If the present course continues, it will probably lead to acts of violence in Grosvenor Square.

Given that Alistair Darling can see the shit hitting the fan in slow motion, does he have any solutions? Well, no. The government is still pursuing its blessed "knowledge economy" [pdf], as evidenced by the continued encroachment of private capital into academic institutions and the recent announcement that City Academies might run failing primary schools, even as the academies are themselves failing. It is devoted to neoliberal policy solutions, which is why it is set to plough a billion pounds into the nationalised Northern Rock even as they slash jobs, just to keep it running as a possible private sector entity. Brown remains intransigently opposed to any windfall tax on energy companies who are reaping obscene profits while we... well, you know what we reap. Even the moderate lefties at Compass are starting to sound like class warriors in contrast to this spent administration (not that the Compass group of MPs have a spine between them). There is going to be no relief for manufacturing: the government isn't about to abandon a strong pound when London is the financial centre of the world and try to build an export-driven manufacturing economy. I need hardly say that all of this punishes Labour's core voters for the benefit of the wealthy, just when the collapse of the core vote is looking deadly to the government. This is why it could be heading toward another 'heartland' wipe-out, this time in Glenrothes (where, lord save us all, Gordon Brown is 'masterminding' Labour strategy). And to think - the only likely alternatives to Brown that the big battalions of the labour movement can produce are Alan Johnson and David Miliband.

Labels: economy, interest rates, new labour, prices, recession, strikes, wages

The going rate of exploitation posted by Richard Seymour

Found on the Marxmail mailing list, this little beauty from the Irish Times. It tells us that the average Irish worker produces 48,500 euros of profit per year for the owners. These figures were produced by the Unite union to disprove the idea that profits for Irish capitalists are somehow 'too low' or being squeezed by unjustifiably higher wages. Actually, it suggests an extraordinary rate of exploitation. According to the Industrial Development Agency [pdf], the average wage in Ireland was 627.24 euros per week in 2007, which is just over 32,000 euros per year. This figure is offered by the IDA as an instance of how competitive the Irish labour market is for foreign direct investors. It boasts of a skilled, educated labour force capable of the production of a great deal of value at lower cost than German or Dutch workers (but, interestingly, a bit more expensive than the average UK worker). According to Unite: "In total terms, profits in the sector increased by over €5.6 billion in the five-year period [2000 - 2005], while total wages - despite a substantial increase in employees [over 50,000] rose by well under half". Some industrial sectors experienced a rate of profit as high as 40%, which is well above average, comparable to the UK Continental Shelf (north sea oil) in recent years.

Where to begin? With the fact that for every 2.5 euros of value produced by an Irish worker, the capitalists get to keep 1.5, just because they own the means of production? Or with the fact that the rate of exploitation has clearly risen quite dramatically, and Irish capitalists are complaining about this state of affairs? "No fair! Every increase in value produced should go to us exclusively, not those greedy bloody workers!" It is just this core aspect of production that should be borne in mind when you read statistics about inequality, usually couched in moralistic terms or those of social cohesion. Growing inequality is a state of affairs produced by class struggle, by capital's endeavour for more profit in particular. It is a social injustice rooted in the system, not a deviation from it. The Irish employers' yelp for more profit is just the latest phase in that struggle. The other context to be remembered is the recent push by Irish corporate capital for acceptance of the Lisbon Treaty - disgracefully supported by Labour, just under two-thirds of Green Party members, and some trade unions in Ireland. Sinn Fein and the Irish SWP were integral to the campaign for a 'No' vote. Much of big business rallied for the Treaty through Ibec, the Irish equivalent of the CBI, which welcomed the Treaty's 'liberalisation' components. What did they expect to get out of the deal? Same thing as when they backed the EU Constitutional Treaty in 2005, before French workers blew the thing to kingdom come. More privatisation and deregulation, further opportunities for accumulation. As Ibec said: "A yes vote for the Lisbon Treaty creates the potential for increased opportunities for Irish business particularly in areas subject to increasing liberalisation such as Health, Education, Transport, Energy and the Environment." The Treaty also vaunted increased militarisation as part of the EU's supporting role for the American empire. It's extremely important that Ireland voted 'No' to this measure, because Ireland is the only state that is required by law to hold a referendum on EU Treaties. Gordon Brown, for example, has no intention of offering British workers the chance to express their view - it's far too risky, and there is too much at stake, particularly when he's busy slashing wages for millions of public sector workers.

Incidentally, Richard Boyd Barrett, a key anti-Treaty campaigner, will be at Marxism on Sunday to give a bit of background. If you're there, you might check him out.

Labels: capital, eu treaty, exploitation, rate of profit, wages

Cost of Labour II posted by Richard Seymour

I'm busy, but I'm too annoyed not to respond quickly to this. The gist of it is that opposing immigration controls is all very well, but to take one's lead from Marx is to subject oneself to misleading Victorian tropes. Hence:

For better or worse the situation in the UK isn't really consistent with Marx's predictions of a vast proletarian class with the capitalists and their retainers living like plantation owners among their slaves.

That is, of course, a caricature of marxism that originates in the revisonist literature of Kautsky and Bernstein. Whatever the connotations of the word 'proletariat', the sociological use to which Marx puts it could hardly be clearer: it refers to those who do not have access to the means of production and are therefore compelled to sell their labour-power in order to live. This does not necessarily entail plantation-like arrangements or any other kind of slavery than economic compulsion. It is quite compatible with higher standards of living - actually the intensity of exploitation may be increased in circumstances where the standard of life is higher. But it is on this basis that the author upbraids me for mixing up 'middle class' and 'working class' wages:

Instead there's something like a working class amounting to 35% of the population, with perhaps 55% of the population belonging to a middle class whose income is subsidised (tactically or accidentally rather than for reasons of social justice etc) by property income.

I'm afraid this is an estranged Blairite fantasy. There is not 55% of the population living on income from property, or even receiving income substantially subsidised by property. Most of the population do not own shares (the vast majority of which are owned either by multinationals or by pension and insurance companies) or second homes from which they could profit (about two million adults own second homes). There are a large number of private shareholders, 11 million in 2004, just over a third of the working population. Millions of those owners will not be part of the working population, so revise the proportion down as you see fit. Most, 56%, do not even have private pension schemes, from which they might indirectly acquire a profit. And realistically, in most cases such schemes will, where they do not disappear into a financial black hole, simply deliver deferred wages. All of which is reflected in the distribution of wealth. The bottom 50% of the population owns less than 6% of the wealth, and the bottom 75% of the population owns just over a quarter of the wealth. So, I search in vain for this 55% of the population who are profiting from the labour of others by virtue of their ownership of property.

All of this builds to what I think is the main point, which is that in adopting Marx's formulation on the determinants of wages (the reproduction of labour power), I produce an argument that is "bizarrely amenable to the kind of xenophobic nonsense Lenin rightly deplores". That argument was that: "The combined costs of reproducing one's labour power as a Polish worker is lower than the cost of reproducing one's labour power as a British worker." In fact, it isn't at all compatible with the anti-immigrant argument that immigration reduces wages. Recall that one of the arguments of the government and various pro-market commentators in general is that immigrants are in fact doing jobs that British workers refuse to do, and that we should welcome this as healthy competition. That is an argument for exploitation, and it assigns to workers themselves the key determining role in the level of unemployment, implying voluntary unemployment due to laziness or being 'spoiled' by a comfy welfare system, and that if they only shifted themselves and accepted a slightly less lavish lifestyle they could have paid employment. In pointing out that wage differentials are socially determined, not the result of some personality quirk or stubbornness on the part of unemployed workers, one concedes nothing to the anti-immigrant argument. In fact, in saying that lower wages for migrant workers are partially the result of the lower socially determined cost of reproducing labour power (that includes the cost of supporting families) in the country to which they will return, one can explain why employment soars as a result of migration. In contrast to the anti-immigrant scenario of scarce jobs being fought over by a large number of people, this analysis (and the empirical data) would indicate that jobs are created by the availability of cheaper labour (this doesn't take into account the large amount of migrant labour that is just making up for specific skill shortages). And by doing these jobs, immigrant workers can actually increase the demand for 'native' workers.

Now I pointed out that overall wages increased. The blogger 'catmint' prefers to talk about a nebulous notion of 'working class wages' - defined apparently by nothing more concrete than their being on the lower end of the income scale. In those lights, 'catmint' maintains that 'working class wages' stagnated as a result of immigration. The study cited in the earlier post indicates that wages didn't rise as quickly as they might have for lower income earners during the period of increased migration of Polish workers. This has been siezed on by reactionary commentators who have long argued that immigration hurts unskilled workers. Let me just point out the general empirical picture on that score. According to Nigel Harris almost 200 econometric studies have looked in vain for this effect in the US, where immigration is much more intense, and haven't found it. You can see one such here. It is a debatable effect, it is temporary, and it is slight where it is detected. Further, "tend to affect earlier cohorts of immigrants rather than the historical poor of the US – blacks or Hispanics". In Europe, a recent analysis of eighteen studies on immigration found that the reported effects on wages vary, but they all tend to "cluster around zero".

About those weasel words, "bizarrely amenable". Might I just point out that conjuring up a middle class majority is "bizarrely amenable" to one kind of right-wing propaganda, and conjuring up an immigrant threat to the working class "bizarrely amenable" to another kind entirely?

Labels: immigration, labour, marx, wages

The Cost of Labour posted by Richard Seymour

Given that New Labour were the ones who tried to stoke up anti-immigrant xenophobia in Crewe and Nantwhich, on the assumption that the 'white working class' is basically racist and authoritarian, we can almost bet that the government will place themselves to the right of the Tories on this question at the general election despite the evident failure of this strategy by yesterday morning. That is, while the Tories will be trying to position themselves as the nice party of progress, disavowing the furious xenophobia and anti-Islamic bigotry of the Conservative Party from base to peak, New Labour will do all but throw on the jackboots and chant "skinhead, oi oi" in the vain hope of staking out a 'populist' territory. Am I over-stating the case? Is this overly pessimistic? I don't think so. If the experience of Margaret Hodge didn't teach the Labour leadership that pandering to racism just bolsters the far right, then nothing could, not even the loss of 18.2% of the vote in a heartland seat on a high turnout.

Undoubtedly, many Labour members thought the campaign was disgusting. They will agree with Compass that the campaign was "poisonous" and "smacks of the poison spread by the far right". They will plead with the party bosses to come up with something to deal with spiralling inequality and slightly ameliorate the class structure that is generating so much justified resentment. And they can even offer a pragmatic argument, if no one will listen to the principled one. They can say that if the government stokes up racism about immigration, they can't expect to benefit from it because the racists will quite logically say that it happened under New Labour's watch and vote for someone else. But is anyone listening? Are there any forces capable of making this point heard? Does New Labour even have anything else to offer? Like I say, I think not. Brown may be overthrown, but he'll only be replaced by some oleaginous Blairite. We are just going to have to get ready for a 2010 atrocity, with all the filthiest rhetoric about immigrants and 'yobs', and all of the worst aspects of the government's social authoritarianism given a full public airing. The only possible antidote is the antifascist movement which, if it mobilises quickly and en masse, can undermine the vague 'respectability' that the media and politicians have been giving to racist arguments about migration and Muslims. As a start, United Against Fascism and Love Music Hate Racism have called a national demonstration against fascism and racism on 21 June, starting from Tooley Street behind the London Assembly building.

Anyway, that's a long intro to what this post is actually about. Anti-racist argument about immigration rightly stresses the contribution that immigrants make to the economy and the society in general. The TUC points to the benefits to public services, and our growing need to make up a labour shortfall caused by a declining birthrate and a longer life expectancy. We rightly point out that services we value could not have been built without the work of migrant labour. When we are told by some who should know better that immigration pushes wages down, empirical refutation isn't difficult to find. For example, a recent study for the Low Pay Unit found that overall pay tends to increase a bit as a result of immigration, although the lowest paid might experience a slight fall. Even conceding for a moment the ridiculous idea that addressing domestic inequality by raising barriers to preserve global inequality is some form of social justice, the evidence suggests that restricting immigration is a poor way to reduce domestic inequality. One kind of argument that sometimes comes out though, especially from pro-market commentators, such as Nigel Harris (whose book Thinking the Unthinkable is a very good treatment of the whole topic, despite his present neoliberal orientation), is that immigrants do the kinds of jobs that 'indigenous' workers will not, and that this leads to economic growth. Such is the view propounded by the Home Office. Now, it is just uncontroversially the case that, for example, the recently influx of Eastern European workers into the UK did stimulate growth and coincided with an overall rise in real pay for most workers. Undoubtedly, those workers were filling a supply gap that was not being met otherwise. Yet there are two problems with this kind of argument. The first is that it implies a kind of voluntary unemployment by British workers. The second is that it implies that the exploitation of migrant labour is okay, and actually a good thing. This may be a logical argument for some elements of the CBI, but it isn't our argument. It is true that the argument implicitly favours a freer movement of labour, against the global management and coercive systems (border controls, visa and pass systems, detention centres, extensive surveillance etc) which seriously weaken our class. To that extent, it is superior to the anti-immigration argument from the likes of Polly Toynbee, who has falsely argued that higher immigration leads to greater competition for work and lower wages all round. But it still misconstrues the case.

I find it useful just to look at what Marx said about the source of wages. In Capital, Volume I, chapter six, the argument is put that wages are the payment, not for labour, but for labour power. That is, capital is augmented (makes a profit) because it withholds a definite quantity of unpaid labour. What one is paid for is labour power, one's capacity to work, understood as "the aggregate of those mental and physical capabilities existing in a human being, which he exercises whenever he produces a use-value of any description." One is paid so much as is necessary to reproduce that labour power in its "normal state" - Marx speaks of reproducing the means of subsistence, but here he clearly refers to a historically produced subsistence as opposed to the minimum amount of nutrition, clothing and so on that one could possibly live with. The means of one's subsistence can include sufficient wages to use the internet, purchase a car, mortgage a house or pay rent on a flat, have the normal range of consumer durables, including a washing machine and perhaps any other labour-saving device that allows you to get to work on time and have sufficient hours after the working day to unwind and recuperate for the next eight hours. It would also include support for a family, which is after all the unit through which the labour is replaced. If you look at the UK national minimum wage, or the US mimimum wage, the level is determined not by reference to some ahistorical level of bare subsistence, but by how much it costs to reproduce one's labour in the here and now. If the rate is far too low in both cases, this is a concession to the needs of poverty employers whose margin of profit is slight. In comparing the wages of migrant and 'indigenous' workers, one therefore has to look at the determinants of the cost of labour power.

The combined costs of reproducing one's labour power as a Polish worker is lower than the cost of reproducing one's labour power as a British worker. We can suppose this is given some expression in the minimum wage levels in both countries. The British minimum wage is roughly equivalent to 1,190.49 per month, whereas the Polish minimum wage is roughly 329.49 per month. So, suppose a degree-educated twenty-something man migrates from Warsaw to London for a year or two to get some money together. Say he has a wife and small children. As will often be the case, he takes a demotion and works in relatively low-skill jobs for wages that would not sustain much of a life in London, but will support a single man in cheap accomodation and allow him to send a bit home every month. Further, because of his precarious position, the employer has more leverage and can extract more intense work and higher levels of productivity (naturally, the employers prefer to speak of the admirable motivation of such workers, as if it was just a cultural quirk rather than the result of a particular mode of capitalist discipline). In the case of someone who has got here by illegal means, the advantage is even more decisively on the side of the employers. It is a similar story with undocumented workers in the US. So, where a job might have gone unfilled because the cost of reproducing labour was too high for the employer to afford it, suddenly he might be able to hire two or three additional workers. The rate of employment can actually increase dramatically as a result of such immigration, and in fact that seems to have happened.

Necessarily, anti-racists have to play the numbers game. When the right complains that immigration is somehow deleterious to our economy and public services, we rightly point to increased employment, higher growth and increased tax receipts. But of course, the advantage to the employers partially depends upon this international coercive apparatus which loosely corresponds to a global 'colour bar'. It maintains a rough segregation of labour that permits the continued flow of managed migration without allowing the cost of labour power to equalise across nationalities. That is far from the 'free movement of labour', because freedom is impinged variously by quotas, by status differentials, by a plethora of restrictions that are designed to enhance profitability. The basis upon which socialists support free movement for labour is not that it delivers cheaper labour for business, but by contrast that it strengthens us as a class to be able to move wherever there is work, rather than existing as part of a domestically-confined large reserve army of labour. At the moment, European capital supposedly requires 8% unemployment - the 'natural' or 'non-accelerating inflation' rate of unemployment. Anything lower and the bargaining power of labour pushes up the cost of labour power (that's the 'accelerating inflation'), which is disadvantageous to the employers. However, we don't necessarily fancy being appendages to the machinery of capital, and that is what we become when migration is restricted to suit its interests.

Labels: immigration, labour, marx, prices, profits, wages

9/11 on the stock exchange posted by Richard Seymour

Biggest plunge since 9/11. Bush advocating a stimulus package (tax cuts for business, mainly). Wall Street panicking. Dramatic increase in long-term joblessness among skilled workers. What on earth is going on?

Some sort of crisis, I wager.

Labels: economy, jobs, recession, stock market, wages

Wages, prices and profits posted by Richard Seymour

As teachers threaten strike action over public sector pay, Socialist Worker reminds us why. It isn't just the lousy 2.45% pay deal that Ed Balls has offered teachers, which amounts to an effective pay cut. The chart on the left shows projected inflation versus Brown's planned pay rates up until 2011, and as you can see, there's a year on year fall in spending power.

Part of the inflation is driven by rising global energy and commodity prices, while companies appear to be driving their prices up to make up shortfalls in profits or pay off debts. The most recent report suggests that food prices rose 5.9% year on year, and liquid fuels like heating oil rose 32 per cent. Our electricity and gas bills are going to go through the roof this year. Once again, prices are rising on essential goods in a way that will disproportionately hit the poor. (Parenthetically, I note that "stagflation" is the word on the New York streets, largely because of the horrific increase in import prices.)

The government's solution appears to be to stop us greedy bastards consuming so much with a modern day incomes policy. Your pay is apparently what's causing inflation and, well, they'll fix that in a hurry. Aside from pegging incomes for public sector workers, it looks as if the Bank of England will use any increase in inflation to maintain higher interest rates and thus curb consumption further. Interest repayments relative to disposable income are at a very high rate, averaging 19% just over a year ago according to a study by Price Waterhouse Coopers. In December it was revealed that 1 million people in the UK are having difficulty repaying their mortgages, which means borrowing more or extending the mortage. That also represents a reduction in disposable income.

SW points out that while median executive pay is up 7.8%, recent research that finds three quarters of monthly paid workers actually ran out of money in the last week of their pay run and have to subsist on a mixture of borrowing and scraping. No surprises there - practically everyone who isn't on an above-average income goes through this, and there are always nasty little shocks (a bill you forgot about, overdraft charges that the bank has just made up, a rise in minimum repayments on your credit card, a direct debit that bounces because you're fifty pence short, thus incurring another bank fee). And it's going to get tighter and tighter. As Larry Elliott relates, the government seems to be doing everything it can to take us back to the Bad Old Days Of The 1970s. As Elliott also points out, incomes policies have a way of collapsing within a short space of time. Are trade unionists really ready to believe that a country with a net worth of £6.5 trillion, where the Prime Minister has a bottomless pit to pay for war and is always ready to cut taxes for businesses while funding whatever ludicrous white elephant scheme he thinks fit, is unable to afford decent levels of public sector pay?

Labels: incomes policy, new labour, socialism, trade unions, wages

The (increased) cost of living and dying posted by Richard Seymour

Food prices are at their highest level for fourteen years and a recent surge in wheat prices is going to drive up prices even further. Real-terms inflation for essential goods has been rising dramatically for a while, which means that the cost of living for the poorest is most dramatically affected. Rising global oil prices will compound this effect. Concurrent with this is the continuation a long-term decline in labour's share of income. Andrew Glyn's recent Capitalism Unleashed tells some of the sordid story behind this (although I find fault with his profit-squeeze theory of capitalist crisis), and of course it is a story of the successful temporary restoration of ruling class power following the years of insurgency that terrorised them in the 1960s and 1970s. So it is that in Britain labour has a lower share of national income, a de facto incomes policy designed to lower it even further, and savage attacks on welfare, specifically disability benefits at a time when our living conditions are already being squeezed. Meanwhile, taxes on corporations have been repeatedly cut. Two Labour MPs appeal in vain for the spurning of neoliberalism. There isn't much to be hoped for from the Labour left. Hope lies, as ever, with the proles.

Labels: inflation, neoliberalism, prices, profits, wages

Something else for Gordon Brown to choke on posted by Richard Seymour

Oh dear. Barely his second full day on the job, and already he's got the first national postal strike in more than a decade, and it's solid, and it's aimed at his policies. Socialist Worker has a tonne of reports and pictures coming in from across the country, and it looks like the posties have hit hard. Bear in mind what's happening here: at a time when inflation on necessary goods is hitting the poorest hardest, and when house prices and rents are increasingly unaffordable, Brown is applying brakes on wages. One of the means by which New Labour has always run a tacit incomes policy has been to restrain public sector wage growth, thus setting the trend for the rest of the economy. The attempt to enforce a 2.5% cap on wage rises means that there is a de facto cut. House price inflation stands at 11%. Hidden inflation on essential goods was as high as 9% this Spring. Therefore it's extremely important that the posties break this policy now, while Gordon is still fresh.

Labels: capitalism, gordon brown, postal workers, prices, profits, wages

Sponging rich bastards. posted by Richard Seymour

It's official: Tony Blair will leave office, having overseen the rise of the richest rich bastards that have ever raked it in on UK soil. The wealthiest 1,000 people in the UK have seen their wealth grow by 20% in the last year. Since these people are multi-millionaires and multi-billionaires (65 of the top 1,000 are billionaires), a growth at that rate involves the transfer of millions and billions of pounds to them. Unsurprisingly, many of these people (Mittal, Branson, the Hinduja brothers) have been close to New Labour.

The Telegraph reports today that: "The top one tenth of the top one per cent of earners now take home the same slice of total national income as they did in 1937. The gap between the super-high earners and the rest has widened to pre-war levels after decades of convergence." Much of the annual growth in the wealth of the very rich is accounted for by massive corporate bonuses for the top CEOs, particularly in the financial zone. At the same time there is a wave of sackings going on in that very same square mile: funny how that works.
This news emerges not long after the UN report suggesting that Britain was one of the worst places to grow up in, and shortly after it was revealed that 200,000 more children live in poverty this year. Only a few months ago, figures revealed that the cost of living is shooting up for ordinary people, while the government and the Bank of England have set out to restrain wage growth, despite the fact that most people's wages fall behind inflation growth.

Gordon Brown has decided to foreshadow his brief reign as Prime Minister with an attack on public sector pay, reneging on previous agreements with health workers. Strike action is very close, it seems. This Tuesday, Mayday, a quarter of a million civil servants will be on strike over job cuts, low pay and privatisation.

Labels: billionaires, capitalism, inequality, poverty, wages