Now there's the rub. In modern enterprise it is to be avoided at all costs.
We should have more Marxist analysis of the tech business. So here is some, looking at the manner in which the major firms of Silicon Valley are being accused of perpetrating monopoly capitalism upon the rest of us. The full story in all its tedious detail is over at Pando Daily*, but the basic allegation (and yes, it is all …
Now there's the rub. In modern enterprise it is to be avoided at all costs.
to be avoided at all costs.
But in a free market, wouldn't that make avoiding competition a competitive activity?
Well yes it would, and in fact classical economics also shows markets tending to oligopoly in the long run if there are significant barriers to entry. Just about every major market you can think of that has been left to its own devices has descended into a cosy cartel of cigar-chomping millionaires dividing up the spoils amongst themselves. The only thing that stops it happening is that they tend to be super-egotists who hate each other, but it's rather unwise to rely on that. That's why laws against colusion and abuse of monopoly power are necessary and why they need to actually be enforced.
> the lesson of Marx's analysis is that capitalism is a pretty productive system but ...
and it's one hell of a big but (and it does look big, no matter where you look from). Since Marx (1818 - 1883) we have had all sorts of labour reform. Workers have rights, very expensive (if you're an employer) rights and very easily exercised rights, too. At least for those of us on the right side of the pond, these "exploitations" are long-gone. For the high-skilled IT industry: at least in theory and mostly in practice, too (other countries may be lagging a little).
So while we may not get the same levels of remuneration as our colonial cousins, some of that gap is made up by the safety net and protections afforded to employees. Whether people place a value on those (or take them for granted) is a different discussion for another day.
"At least for those of us on the right side of the pond, these "exploitations" are long-gone."
Some of them are, sure. We don't have to work 16 hours in coal mines and get paid in Company Script. However, it would be wrong to say that the exploitations are 'gone': Zero-hour contracts, 'voluntary' overtime which isn't, recovery time for 12 hours call-out which you can't take because you have the crash meeting and project work, employers hiring on the grey market and then using the threat of the law to enforce illegally low pay... et cetera, et cetera.
Let's not pretend the Workers ever won, because we haven't.
You want to exploit your workers, make them salaried exempt employees.
As an exempt employee, you're expected to put in over 40+ hours a week. If you work less, beware, some bean counters will try to convince you that any week you don't work 40 hours, the difference comes out as PTO.
Its worse if you're a traveling consultant.
As someone who's been around the block a couple of times, when the company bean counter, tries to play games, and then tells you its part of being a consultant, then its a major red flag. Its one thing for the CEO and founder to work 60+ hours a week. Its another to expect their exempt employees to do the same. (Stock options are worthless and you don't have any skin in the game.) Your salary is based on working an estimated 40 hours a week. If you end up working 60 hours a week, you are effectively short changing yourself.
Bring your own device and and take work home :)
"You want to exploit your workers, make them salaried exempt employees."
Quite. "professional working hours" only means the golf-course on a Friday for board members. For the rest of us it means no lunches!
"Let's not pretend the Workers ever won, because we haven't."
You are right. The British Establishment have been experts at giving just enough to avoid things boiling over into rebellion since ... well, let's say fifty years into the Industrial Revolution. Every improvement in social and welfare provision came because there were clear signs of discontent spilling on to the streets and into the houses of the rich. The last major round of welfare improvements - the Welfare State - came about because there was serious worry about lots of skilled, armed men coming home to find a country not fit for heroes to return to (like after the First World War), and a marked approval of Soviet solidarity.
Any apparent victory for the Workers was merely a side-effect of keeping the Establishment in power.
From where I sit, the article makes a perfectly good and valid point about the wage dynamics in the Valley. Very likely, the scope could also be extended far beyond IT engineers; the same principles and the same interests are prevalent all over the labour market.
The one thing that Marx did not take into account (as have far too few of his fellow economists in the 100-odd years since the last volume of Das Kapital was published), is the effect that international competition has on the economy, and particularly on wages. It's two-fold: On the one hand, the "reserve army" is extended all over the planet, as long as a free labour market exists. On the other hand, there also exists a more-or-less free market for goods, so competition from low-wage countries also has to be taken into account by the capitalists, or their market share would fall; that creates cost pressure, which of course translates into further downward pressure on wages.
That's all true, but should be self-correcting. Over a reasonable length of time anyway. One of the issues is that the free-ish global market grew so quickly, when China, India, Brazil and others all decided to start playing within a decade of each other.
Adding a couple of billion people (potentially at least) to the global labour pool in such a short time was bound to have an effect on wages. But even though it's a really big world, it's still not infinite. There's only really Africa to add (which is happening) and then not much more.
Also, there is an offset which works against the driving down of wages. Prices also drop. If you live in Britain prices of everything you buy have plummeted over the last twenty years, except for 3 main things Food, houses and energy. Now energy inflation is to be expected - peak oil and all that malarkey. But the only reason we have had such food price inflation (at least so I suspect) is that it's the one global market that most definitely isn't free. The Americans subsidise their farmers, and the EU even more so, with a large side-order of trade barriers. If our governments had dumped these (which have consistently been the massive stumbling block in world trade negotiations for 3 decades), then we'd all be gaining quite a bit more from globalisation. Then we could use some of the subsidies to help farmers who'd lose out, and still have change for a tax cut or some more schools'n'hospitals.
The other big imperfection of globalisation has been the world savings rate. Had China been spending all the money we paid them, then the terms of trade wouldn't have been so bad, ordinary Chinese people would have been richer. So they'd have also been buying our stuff, helping our economy too. But the Chinese government instead decided to buy $3 trillion of US government bonds, in order to keep their currency lower, and to keep wages lower within China. Keeping their competitive advantage for longer. But as it turns out helping to screw-up our economies while their own domestic demand wasn't able to take the strain. That imbalance, of all the surpluses Asian governments built up to protect their currencies, all the cash from the oil exporters, not helped by all the big companies sticking trillions in overseas tax-havens to avoid corp tax, went sloshing round around lowering interest rates and people got hooked on cheap credit. It's also one of the reasons we went collectively mad and bid our house prices up so high. That and lack of building.
The horse meat issue was supermarket or food processor profiteering or price competition. Probably more competition, as it was the really cheap stuff that was full of horsemeat. In order to sell some really cheap products they were obviously screwing their suppliers down to too low a rate - or the suppliers were biddding too low knowing they could get dodgy meat. I guess it was a combination of trying to build down to a price, and long complicated supply chains, plus dishonesty.
It may also have been a one-off, as I did read that the glut of horses was down to Romania banning horses and carts on roads, so a whole bunch of horsies went to the knackers in a short period.
The CAP (Common Agricultural Policy) works in various ways. But one way is to protect EU farmers by imposing tarrifs on certain goods coming from outside the EU, into the market. Remove those, and we could buy some foreign food cheaper than (for example) small French farmers could make it. Forcing them to undergo quite a lot of pain and become more efficient, or get out-competed. Thus Africa would have been a lot richer over the last few years, but rural Europe done worse. Britain went through a lot of that pain in the farming industry in the 18th and 19th Centuries.
Politically it was decided that it was better that society fund farming rather than have cheaper food. That's almost certainly un-controversial in large chunks of the EU. Which is why 40% of the EU budget is still spent on CAP.
I'll second the 'excellent article' bit.
"the "reserve army" is extended all over the planet, as long as a free labour market exists."
Depending on where you stand that's either a bad thing or a good thing. It means essentially that workers in fields where this is true will all slowly move towards a worldwide mean wage. For those in poor countries: Great! Although they will never reap the full benefits of being born white and rich, it will move us slowly towards a more equal standard of living. Obviously this is 'bad' for rich white people, whose standard of living will move downwards towards the mean global standard. Great for equality and all that, but most people who are 'robbed' of the money for a second overseas holiday in the year due to price competition from people who don't have plumbing won't see it like that.
Ultimately though, it's the business owners who are raking it in for this new-found global equality for workers. I don't know if Marx would cheer or cry.
There is another side to the CAP - protecting us in Europe from the potential situation of being dependent on the rest of the world for food and finding one day they changed their minds, and we have no farming at all to fall back on.
While I do despair at some of the EU spending, and doubt the CAP is anywhere near perfect, I personally want to know there is at least some food grown locally and that a lot of the quality and specialist foods around Europe have some protection against a global race-to-the-bottom based on pricing and Wall St style trading.
(for example) small French farmers could make it. Forcing them to undergo quite a lot of pain and become more efficient, or get out-competed.
Agreed, in principle, but even there we have distortions in legal and social situations that make a truly free agricultural industry difficult, subsidies or not.
For example, in the UK it is fairly traditional for a farmer to pass the whole farm to an eldest son, other children having to make their own way in the world, unless the children decide otherwise (I know one eldest son who preferred to be an IT engineer, and let his kid brother have the farm). This does tend to keep farms together, hence large and productive.
In France, though, such a situation is impossible. It is illegal not to divide ones assets equally among one's children on death, a parent cannot write a will that favours (or disinherits) one child. The result is that farms get subdivided, or end up run jointly, unless all the children decide to sell up & split the cash. That tends to create small inefficient farms, but the very strong family ethic means that there's little appetite for change. It is, of course, one reason that France is so attached to the CAP.
A very valid point, and well put.
Incidentally, this can already be observed to a degree. In western Europe, you see a small but growing flow of jobs back from low-wage countries where they were outsourced, to new Eruopean contractors with lower pay and less good conditions than they used to be over here; but at least they're local jobs. It's happening in industries from textile to electronics. At the same time, the very low end of low-wage jobs is moving out of places like China, to places like e.g. Bangladesh where the mean income is even lower. Hopefully, over time the wages there will also rise.
The upside for the business owners is, of course, as more people in hitherto low-income economies gain buying power, the market for goods expands.
Yup, good point. The CAP in its current form is bloody awful and needs to be scrapped, but it should then be replaced with some less extreme measure to keep a bit of farming ability and infrastructure in Europe. People forget that the CAP is not only an economic measure but also (effectively) part of the defence budget.
Something I've been thinking about is that the main reserve army country keeps migrating as successful hard work increases wealth in the current reserve army country, whose costs then go up, at which point the best reserve is somewhere else.
Conclusion: when everyone is wealthy enough to choose to not do manual labour, only oppressive regimes will do it, and North Korea will be the world's labour source :)
I'm not as pessimistic as you. I don't think that our standard of living has to drop, so that the rest of the world can catch up. Although it may not grow as fast as it otherwise might have, but that's hard to know.
The point is that as the poorer countries get some money, they'll start importing from us. Or should have, if they so far hadn't been lending that cash back to us. Even then though UK wages didn't stagnate until about 2003-2005 - and some of that was from immigration.
Britain still makes quite a lot of cash from designing stuff. Plus there's lots of services we're good at. There's plenty of good bits of financial services that we can export, such as insurance. So in an expanding global labour force there's the challenge of more competition, but that also becomes a bigger market. What's happened in the last few years is that things have become unbalanced. Rapid change can do that.
"Conclusion: when everyone is wealthy enough to choose to not do manual labour, only oppressive regimes will do it, and North Korea will be the world's labour source"
I'm not convinced of the assumed over-lap there between awful living standards and being an oppressive regime that leads to the conclusion.
There will always be dirt poor people, and I don't feel that they will only live in places like North Korea. For example, I suspect that there will be people poor enough to get their hands dirty amongst the third of the world's population in China and the quarter of it in India for just as long as North Korea is still going.
That said, it's adequate sanctions that could change those places if what you say is correct: By the time everyone else has had the 'uplift' and oppressive regimes were prevented from having it, perhaps NK will want it badly enough to change, and perhaps we will have obtained enough empathy in order to be willing to all pay an extra 10c on a $400 phone to have it built by people getting a reasonable daily calorie intake.
I don't feel I'm it's pessimistic about it, just realistic. For every one of us with plumbing, a vote, a car and access to decent healthcare there are over a dozen people who don't have it. With only so much wealth to spread around, what we lucky few get is going to be a smaller slice of cake.
As those poorer countries get some money, what they'll actually be trying to do is pay the US and China and other 'civilised' countries back for all those infrastructure projects, power stations and roads that we nicely built on credit out of the kindness of our hearts (funny how power stations seem to get bombed early on in any US intervention... one would think it was some kind of business plan...). That will hold them back for a while longer.
Profitable imports from us will come even later down the line, when they perhaps embrace the wonders of consumerism and come to believe that they are not a complete human being worthy of their peers without a new phone every year and start collecting more than a shed-full of worldly belongings and then deciding that some of them can be replaced before they break. At present only the criminally rich in those nations are importing luxury goods from us.
In nations that are ramping up the imports, we have really missed the boat: People drive Toyotas, have LG electronics, et al. I'm struggling to think of any mass-consumer 'bulletproof' product for the developing world that we make in the UK. We do create luxury brands, but you can't support a nation based on selling Rolls Royces. If we want to sell to the developing world, we need to sell them rugged stuff that works for 20 years.
Post script: Then if we bombard them with enough TV, we can convince them to replace their Toyota after a year or two and get them into the consumerism cycle, because the world will be a better place because of it... or something...
Services are genuine work. Exporting them can be just as valuable as manufacturing. As countries get richer they're going to want pharmaceuticals, architecture, aerospace, satellites, pop-culture, building services, insurance, higher education, finance, access to legal services - all areas in which the UK economy is currently strong. Along with being the world's fifth largest manufacturing economy with a fast-growing car export sector for example.
People even on a low level of wages start to want luxuries. Sure that might not be high fashion or whisky for a while (although the factory owners and corrupt governments will be into that pretty quick) - but they might want games for their mobile phones. Or watch films / listen to music.
That's all stuff their economies don't yet do. Also there's probably something about the foreign. When you've been stuck in a poor local market for ever, and you start to get cash and open up to the outside world foreign stuff is likely to become cool. China is currently going mad for fine wines. Obviously not much use to the UK market, we need to get them to think beer, gin and whisky are the real cool. You can't be hip without a hip flask perhaps...
Economics isn't a zero sum game. We don't lose just because they grow. Where we do lose out is in competing for scarce resources. Although that's nice if you're Australia or Canada with loads of mineral resources to export. But if productivity can continue to grow, and we can get to a more sustainable energy system (fission then fusion perhaps) the world economy as a whole can keep on expanding for years.
I agree that there is a place for us as a service-providing nation, but I don't believe that we can unilaterally raise the standard of living over the next 50 years worldwide without sucking a hit down ourselves (Not that I mind not having a new TV every year so that someone the other side of the planet can have a job that pays for plumbing, I should add). More to the point, I don't see how we can do it ethically. If we can only be a service provider unethically, then frankly we deserve to take that hit to our standard of living.
As a species that we have created certain corners of the market that we'd be better off without, created the desire for certain products and attempted to educate via media in developing nations that 'our' services and culture is better than local services and culture. Looking at your list:
Pharmaceuticals - The questionable morality of massive corporation making money out of people in backwards countries suffering from disease. This could be a 'clean' service industry, but a quick look at the habits of GSK shows that it is far from being such. Why cure things when you can make more from treatment?
Architecture, higher education - ultimately things which can be done in-country once we've built up a decent education system there.
Aerospace - The idea that 'you're not a country unless you have an airline' has dropped aside to a degree, which predominantly leaves the big money in military aviation. Like the Al Yamamah deal with the KSA.
Pop-culture - The question of if it is ethical to bombard developing nations with our own culture, performers, morality and values in an attempt to make money and imprint those values is very dubious. Ours is a culture based heavily on sex and drinking. Who are we to brainwash a generation in a developing nation with the values of rap-stars?
Building services - I've already said my peace on the ethics of (re-)building a nation's infrastructure and living off the interest for thirty years.
Finance - Growth areas for the UK: Moving numbers around and making them larger without adding any real value.
Access to legal services - Developing nations have lawyers and mostly get on fine. Are we talking about exporting a bunch of lawyers to litigate on such matters of auto accidents and patents?
In short, a lot of the things and services we are making a buck off are morally dubious. Actually, it's morally dubious to sell them to fellow Westerners - it's downright appalling to turn a profit out of some of them from people in the Third World.
In real terms perhaps you are right: Perhaps we can continue to inflate ourselves as 'service providers' and sustain our standard of living at current levels. I seriously doubt that we as a society will be willing to lose that second car just to do it ethically.
> I don't believe that we can unilaterally raise the standard of living over the next 50 years worldwide without sucking a hit down ourselves
What's so special about the next fifty years? Exactly that has happened over plenty of other fifty-year periods.
>>>"It is illegal not to divide ones assets equally among one's children on death, a parent cannot write a will that favours (or disinherits) one child"
What??!?!?!? So if I want one child to get all my wealth then my only options are... what? Arrange an accident for the less favoured child? Give it to one in advance of my death? That's outrageous!
Couldn't agree more. What if one of your children is a total bastard, or a psychopath? What if one of them deliberately maims one of the others? What if one of them marries an Englishman?
It's a trick question: there are many, many valid answers - from burglary and drug addiction to fraud and political corruption. But the one I have in mind is "operating a cartel". Illegal in most civilised countries, it is almost impossible to prevent.
If you don't take this point, watch almost any episode of "Yes, Minister" or "Yes, Prime Minister" - specifically the part where Sir Humphrey meets someone who is to be influenced at one of their clubs for a drink or dinner. First, Sir Humphrey mentions some plum job that is within his gift, and how hard it is proving to find suitable candidates. Then, taking a sip of his drink, he remarks, "On an entirely different subject..." and then explains how his Minister has some tricky problem to solve - which, by some inexplicable coincidence, his current interlocutor is ideally placed to deal with.
No jury, of course, will ever hear about that conversation. And even if one did, being a jury of Sir Humphrey's peers, it would naturally pretend to see nothing incriminating in it at all.
...............a word like "monopsonist" exists.
It's an arsonist whose had one cheek removed.
As another occasionally frothy mouthed free-market supporter, there's another issue with not paying the engineers (or 'workers') what they should have been paid. That money would have been used to buy shiny electronic things with (they are engineers after all) instead of ending up in Swiss bank accounts or being spent on over-priced art, wine or whatever.
People buying things keep the capitalist ball rolling; might upset a few environmentalists, but that's not what this discussion is about.
"People buying things keep the capitalist ball rolling; might upset a few environmentalists, but that's not what this discussion is about."
People buying things is also a money-trap for the poor. If you're not buying/investing to accumulate more wealth or buying property then you're out of that real race of success.
Shiny new electronic toys are essentially pointless diversions and baubles thrown to us to divert us from gaining ground on the 'winners', much as a bugler might throw pretty chocolate coins over their shoulder in order to gain some ground with the bag of gold they have.
Let's not pretend we're 'winning' capitalism by obtaining things that will be outmoded, obsolete or non-functional and need replacing in less than a decade.
What's winning? Am I winning if I have a nice enough standard of living? Even if someone else has raked in 10 times as much as me, I've still got my nice life. Or do I have to be doing as well as them to count as winining?
Subsistence farming has it's upsides. You're your own boss, the hours are good. But the downsides are also pretty bad, which is why people have historically moved from it to some pretty grim industrial jobs.
It would be lovely if we could achieve equality. Whatever that means. But we almost certainly can't. However we ought to be able to achieve a decent life for most/all, with a balance of work, shiny toys and leisure. We'll probably have to put up with some people doing considerably better than the rest though.
Economic equality is the equivalent of the heat death of the universe.
'Winning at capitalism' to my mind would be obtaining sufficient long-term security (which traditionally came down to owning land and property, but bags of money does these days) that neither yourself nor any of you descendent ever have to work again, can afford to live a life of luxury and obtain crucial advantages for your descendants via the wonders of interest.
That's what our Upper Classes did in feudal times with land, and that's what our new elite are doing these days. The rest of us are content with our toys and gadgets, but in real terms they are transient and fairly empty baubles that we are often pointlessly competitive about possessing. 'Winning' is not strictly about happiness or having the most toys, but securing advantage for your dynasty.
To my mind, we'd all be able to achieve happiness with our lot a little easier if it was not so tied to rampant consumerism. We have reached the stage in the West where our aspirations are too often 'shiny toys', which are tied to both an expenditure of money and a constant 'upgrade cycle'. I firmly believe it to be a trap that keeps many of us firmly in debt. Most of us would be a lot better off if we lacked such a mind-set. Not to come over all Buddhist here, but desire for toys and jealousy at other's toys leads to a lot of unhappiness. Teaching us and embedding in us this jealousy and desire for new 'stuff' is a cornerstone of our society, and nothing is seen at fault with it.
Ok... maybe that was pessimistic!
I know of a couple of industries where employers regularly consult salary surveys, which effectively act as a cartel. Appears to be above board, not the employers sharing information but usually employees. So next time you're invited to take part in a salary survey, think carefully about who will be using the information!
I thought they were in trouble, because they were all being paid too much and making San Francisco unaffordable for non-tech industry people?
So which is it, are they paid too much and are pushing normal people out of communities in San Francisco, or are the people in 'Frisco just imagining it and the tech employees are actually earning less than the "normal" people in 'Frisco?
It can be both. The question isn't whether tech workers are getting more than other workers. The question is whether tech shareholders are getting more of the profits than the staff otherwise would.
If there's a limited supply of skilled staff, and a large demand for them, then wages should be very high. Otherwise the shareholders are making excess profits.
but you'd be well advised to read Das Kapital - as opposed to pretending you've already read it. You'd be surprised to learn (if and after you read it) that what is written there still applies today.
Additionally, it was never finished. Died before the final writeup. Such a drag.
That is a well thought-out, well-reasoned, thoroughly researched and convincing counter-argument. Who could possibly argue with LOLNO?
I Bow before Thee.
Hernando de Soto -- the economist often credited with being the man who finally figured out exactly how Capitalism works -- is a big fan of Marx. Marxists are another matter -- they tried to kill him.
That would be "monopsony capitalism". Here we have the situation where exploitative companies are BUYING labor and cruelly raped creativity at ARTIFICIALLY LOW prices, as opposed to SELLING trinkets (to which we are all entitled) at ARTIFICIALLY HIGH prices while orphaned children and widows starve and are worked to death in the terrible sweatshops of
"Monopoly capitalism", with the adducted threat of violence and property destruction, would be a thing of the UNIONS.
I don't think you understand capitalism-- to be a capitalist, first and foremost, you need to have capital. A union doesn't have capital, it's a body for organized labor. And yes, unions raise wages, just as bosses try to keep them down. You don't need to refer to anyone as recent as Marx, Adam Smith had something to say about this in fact, to the effect that it was no coincidence that the owners everywhere always have tried to break up unions while getting their own agreements in place to keep down labor prices.
For business to win requires capitalism. For workers to win requires free labour market. For customers to win there must be competition.
Nothing good comes from a monopoly or cartel
That's a pretty good description of the whole shebang there.
This principle in part explains the rapid widening of compensation between employees and senior managers. The labour market for employees, particularly in the IT industry, has expanded to be global (look at the proportion of offshore and onshore asian contractors on large SAP projects as an example) with an excess of supply. Whereas the globalisation of businesses has increased the shortage of senior managers capable of running these behemoths, which has lead to inflation in compensation packages.
The purpose of government is to put in place mechanisms that balance the unwelcome elements of a free market which often as some others have mentioned are in the grand scheme of things short term adjustments.
The problem with globalisation is governments struggle to manage (read don't) because the enterprises operate largely outside of a particular governments jurisdiction.
"Not many people take Marx seriously these days and those who do have drunk the entire pitcher of Kool Aid and thus fail to make much contact with reality."
Why not just skip Marx and go right to Schumpeter? As Schumpeter said "Marx’s system is seriously at fault. I mean only that he could have presented a comprehensive economic theory without violating logic–he would always have to do violence to facts”
See interesting discussion at http://archive.mises.org/9511/notes-on-marx/ .