Some critical remarks on Kliman's proposition of increasing workers' income

i've been saying all along that what is fascinating or revealing about Kliman's argument is not what is in it but the fact that it needs to be made at all. And what that tells us about the debilitating influence of academic marxian analysis on marxian analysis.

Jura's right with that picture as well - using 'replacement cost' at the end of a period to value inputs (that are input at the start of a period and form the 'capital base' for that period ) will also ensure that in a situation of rising productivity (which decreases the value of constant & variable capital) the 'profit rate' will always rise year on year as you're retrospectively and on paper 'destroying' an element of capital base which reduces the denominator of the profit rate equation, ensuring a lower capital base from which to measure 'profits' against. Also using replacement cost to value both the inputs to and the outputs from the circuit of capital in a period, can also end up with the absurd situations where profit can be made when no labour has been exploited. This is incompatible with a labour theory of value and the view that the accumulation of capital is rooted in and dependent on the exploitation of labour. What is bizarre is that the people who push this anti-TSSI interpretation still retain a labour theory of value, even though logically these two things that they believe in are completely non-compatible. They then have the cheek to point to Marx and say he's internally inconsistent

One thing to note though, a lot of people use the terms 'historical cost' and 'replacement cost' as though they are synonymous with Kliman's 'temporal' and 'simultaneous' terms (so that historical cost is used interchangeably with temporal and replacement with simultaneous) , but that is not really correct, and potentially one of the reasons why people who don't really understand what TSSI is about criticise it.

What the temporal method is, is effectively using 'replacement cost' valuation at the beginning of a period to value inputs (i.e. value them based on their cost/value at the time) and then using 'replacement cost' valuation again at the end of the period to value outputs. A lot of people confuse this (which is the TSSI method) with what they think it means, which is usually something along the lines of continuing to value all assets/liabilities at historical cost throughout their usage (i.e. both at the start of the year and also at the end of the year - so it's a straw man argument against TSSI really). They then point to generally accepted accounting principles which state that valuation should be based on current cost/replacement cost rather than historical cost, and then misleadingly use this to say, "look Kliman's wrong, he doesn't understand how things should be valued properly". They think that Kliman is arguing that everything should be valued at historical cost, but he's not, he's arguing that when calculating a profit rate, the capital base figure used to calculate the denominator of that rate, should not be valued as though it was invested today (as it wasn't!), as this retrospectively and on paper reduces the capital base to a figure lower than what it should be, and thus gives a misleading capital base figure from which to calculate a profit rate (and one that will in general tend to always overstate the profit rate)

TSSI is nothing more the straightforward common sense - that a 200 page book needed to be written setting this out shows the lack of straightforward common sense in academic marxism, and why we could do without it. On that note, Kliman is quite vocal about the need for Marxian analysis in general to greatly reduce its dependence on academia in particular.

edit: also just to add, TSSI is not just about the temporal argument, that's just one part of it, the other part is the argument as to whether values & prices constitute a single intergrated system (which TSSI argues) or whether they are two completely unrelated and independent systems (which the Dual System Interpretation argues). Again though, anyone who has read Vol3 of capital could in no way argue that Marx argued that the value system had no relation to or connection with/bearing on the price system (at the macro/societal level)

We can arrange dueling Marx quotes all we want, but it isn't going to get us very far here. The quotes are not the analysis, are not the critique of capitalist production that Marx actually develops.

That critique is the overproduction of the means of production as capital, which means the overproduction of the means of production to the point where labor power cannot be exploited intensely enough, sufficiently, to prevent a decline in profitability.

Read his Reclaiming Marx... He explains all of this and more, in detail, with close attention paid to Marx's actual writings. It's quite a good book, and a good read. As has already said, his writing is exceptionally clear, and "clean."

Simple fact, or not so simple. Wages as a percent of national income at an all-time, post WW2 high in 1970; at an all time low.... today http://www.businessinsider.com/corporate-profits-just-hit-an-all-time-high-wages-just-hit-an-all-time-low-2012-6

Pensions? That's pretty hilarious, since corporations have used the last 20 years to liquidate workers' pensions in order to move the "profits" directly to their bottom line, while loading up executive pensions.

Health care? Same-same.

As much as I'm enjoying Kliman's writing and the clarity of this explanation of his theory, I am still really really finding it hard to believe the claims about workers income, I know just because something seems counter intutive it doesn't make it wrong but the claims about workers share of income are so out of step with virtually every other economist and report I've read I'm left doubting. His wider theory about declining rates of profit etc I have no such trouble accepting, just the idea that workers share of this declining cake has actually been getting bigger.

Also as I said above, what about the massive rise in pay outs to executives in the form of bonuses and dividends and the well documented fact that their salaries have exploded in ratio to their average employee into the hundreds?

What does that have to do with the issue of worker's share of total profit? Total profit does not consist only of, or even primarily of, executive bonuses.

And he addresses the issue of managerial worker pay increases in the book.

double post

The health care costs as wage increase seems the most suspect to me. Jacobian was telling me that the last years he was still in the US, health insurance for himself, wife & 2 kids amounted to $1000 a month. Apparently it's only got worse since.

Most people (not limited to lefties/Marxists) seem to accept that the US health care system has been turned into a giant rent-extraction machine. Of course Marx's analysis is of a theoretical "best possible functioning" capitalism, which assumes no substantial unequal exchanges, or rent-extraction (other than land rent) for the sake of constructing a fundamental critique of the system. But that doesn't mean we have to pretend that such things don't actually exist in the real world. If Kliman accepts that, minus the health insurance and pension costs, real wages have actually declined (as I think someone mentioned above?) then it seems a little perverse to bundle these in as an increase of real wages. And to say, as someone above said, that they are "lost to capital" is the complete opposite of the truth given they go directly into shareholder and fund managers accounts.

edit: and of course, the USA is not a substitute for the capitalist global economy. I still don't see how the "great doubling" represents the "failure to recover from the crisis of the mid-1970s". Makes no sense at all.

I haven't got that far in the book, had to go whore myself to the man today (job interview) but I was more suggesting that the fact executives bonues and salaries are through the roof in relation to workers wages doesn't really sit well with the notion of workers income being a growing share of national income. I mean with such a polarisation of distribution in this context it is hard to believe that workers are actually recieving a growing share in others. Like I said I'm not saying it's wrong and I look forward to seeing Kliman deal with it in more depth but I don't think I'm odd for finding the claim hard to swallow when it stands in stark contradiction to the assertions of almost every economist across the political spectrum.

Has anyone got any links to anything where Kliman and co knock it out over the actual empirical data rather than theory?

Yeah doesn't the US spend more money on healthcare than the rest of the world but for far less delivery?

They are lost to the company as profit, because they have to be paid out. The fact that they are paid out to other capitalists is about as relevant to the issue as the fact that your wages eventually go to other capitalists as well (when you buy groceries, housing, etc.).

Yeah and it becomes profit for the health care companies. Are health insurance companies profits not included in national income of which workers income is a share of? You suggested earlier that economies of scale meant that health insurance policies are probably no less wasteful than individual workers being paid the cash up front in their wages and then buying their health care, could you explain your reasoning more.

I don't know how many times I have to say this, so I'll just say it once more before I'm done with this debate -- when you're looking at the distribution of income between workers and capitalists, it makes no sense to include unemployed workers in the analysis, since they do not produce income for anyone. If anything, including them will skew the results to look more like the working class is receiving even more of the national income, since these unemployed workers produce no income but generally receive some form of transfer payment (welfare, foodstamps, unemployment benefits, etc.).

A fair point as far as it goes, but in any case this in itself is not going to turn a small increase in real wages into some kind of major decrease in real wages.

As I said to ocelot, this is about as relevant as the fact that workers' wages eventually end up in the hands of capitalists who produce consumer goods. It's not relevant at all to the point that the capitalists spend this money as part of the variable capital and therefore it's not a part of their profit.

Exactly what you would expect from insurance. If everyone got what they paid back (or more) there would be no insurance at all. The whole point is to have a fund that takes in more income than it pays out.

This is not to say that insurance is or is not a rip-off, I'm just saying that this in particular is not a good argument.

Bourgeois ideology or not, it's a simple fact that costs don't increase linearly and therefore bigger companies are generally able to achieve smaller unit costs (this is the main reason why competition tends to lead the bigger firm to win out over the smaller firm). Marx talks about this quite a bit when he deals with the functions of unproductive industries in Vol. 2 and 3 of Capital. Despite the fact that these industries don't create value, the amount of money society spends on unproductive activities is, certeris paribus, smaller than it would be if these unproductive industries didn't exist.

I actually was requesting the page number for the discussion of pensions.

In any case, I'll repeat again that his choice of who counts as a worker when one is discussing the distribution of income and what counts as income is anything but arbitrary -- any other choice than the ones he made would have been illegitimate, for the reasons I outlined above.

Negative income isn't a "form" of income, it's just a phrase that has a common word in it. Again, when you're looking at national income accounts, which is what Kliman is doing, negative income simply isn't relevant, since it's not really "income" in any meaningful sense and does not produce profit for anyone.

You have this exactly backwards, if less income is received by workers as direct wages then they spend less money in stores and therefore less money is lost as sales taxes.

Yeah money eventually goes to health care companies, just like money from my wages eventually goes to food producing capitalists. This does not mean that the money that was paid to me wasn't really a part of my wage. We're talking about what the capitalist has to advance in order to hire workers and have them produce commodities, and the money that the capitalist has to advance for health care, retirement, etc. is most certainly part of this advance. Where it ultimately ends up has nothing more to do with that then where the workers' direct wages eventually end up.

Insurance companies are able to pay less than what individual consumers pay. This is because they have lower unit administrative costs than a bunch of tiny private individuals or accountants would have, and also because they command a lot of purchasing power and are able to drive costs down by guaranteeing more patients. Society-wide, this results in less total money being spent on health care.

Now, it does appear to be the case that they are less efficient at this than government run or single payer health care, but that doesn't change the fact that they are less costly than what would bet the case if wages were paid directly to workers and workers had to pay for their own health care.

No but if food prices rise in order to increase the profits of grocers etc then my wage has decreased in relation ie the higher their profits the less my income is in relation to these profits and national income. Likewise rising healthcare costs that are fueling health insurance company, no?

Your point about economies of scale I get more now, I think I was a bit befuddled because I was comparing it to a single state provider set up, I had forgot to take into account the US is fucking batshit crazy.

Of course, but this will be reflected in the aggregate national accounts. I.e. if the price of the things you spend your wages on rises, and the profit of those producers rises accordingly, the aggregate profit will have been shown to rise while aggregate wages will have stayed the same. So when we're talking about aggregates, we can ignore the price changes because they will show up automatically.

Yes but a rise in aggregate profit and wages staying the same or rising at a lower rate would mean (all other things being equal) the share of national income going to workers would be less, therefore spiraling healthcare prices fuelling higher profits would be expected to have some effect on workers share.

I'm not saying that is empirically true, it's just that antedotal (I know, next to useless) evidence as Ocelot provided in conjunction with the vast majority of reports from economists across the political spectrum makes Kliman's claims seem counterintutive to say the least.

Yes, of course this would be an upward factor in the share of capitalist's income, but this isn't the only factor and it's therefore quite possible to have this be an upward factor in capitalist's share of income while their share has overall (slightly) declined.

For sure.

Like I've said I'd love to see Kliman and those who disagree with him on workers income share knock it out over the validity of the empirical data.

I believe he debated Rick Wolff over this at a talk.

One issue is that I don't think there are almost any Marxist out there with as much familiarity with national accounts and how they're gathered and similar empirical issues as Kliman. (With a couple of possible exceptions.)

True but there are plenty of bourgeois and non marxist economists who are indisagreement with Kliman and they have plenty of experience with empirical data.

Certainly, rising productivity could destroy some element of the capital base on paper. The question is how much and does it matter in any practical circumstances?

If the destruction of this element of capital does matter practically, common sense would dictate that this difference could be measured just as Kliman seems to be measuring the rate of profit.

True or false, why or why not?

Kliman does show that the replacement cost rate of profit that the economists use follows a different trend than the rate of profit that Kliman uses, and has no correlation to the rate of accumulation while his rate of profit has a very high correlation.

Revol, I just listened to this talk, and it seems to answer the questions you had specifically regarding the compatibility of increasing income inequality with a constant wage-profit share.

http://www.marxisthumanistinitiative.org/economic-crisis/video-why-trickle-up-economics-won’t-work.html

Cheers will give it a listen later.

Here's what Kliman says:

.

Now first, Kliman is deploying this argument against the underconsumptionists who claim that the shrinking wage is the cause of either the current contraction or the long term decline in profitability afflicting capitalism. And he's right, to the extent that even if wages and benefits have declined, that would not be the cause of the current contraction or extended decline in profitability.

What has declined is the compensation of workers in proportion to the amount of capital deployed, or animated, by their labor power. That trend can be developed from the information available in part from the Quarterly Financial Review of US Manufacturing and several other reports issued by the US Dept. of Commerce.

That decline in proportion of course is nothing but the trend of the rate of profit to fall demonstrating once again that hell hath no fury like a tendency scorned.

That being said, I question Kliman's claims for the "non-wage" compensation paid by employers in manufacturing and all businesses in the US, as the history of US capitalism since, yes again 1973, not 1981, has been an attack on such benefits and coverage. Kliman actually is a bit late to this recognition that the "turn" in capitalism comes before the "neo-liberal" "capture of power" with the election of that empty-headed lout, Ronald Reagan. Some of us caught the turn as far back as that 1973 year, marked as it was by 2 assaults on living standards of workers and poor-- OPEC and Pinochet.

Anyway, I don't know how he's calculating medical benefits and the such, but the automakers in the US have led the way in getting out from under that obligation, and did that before 2008, essentially "funding" their obligations with stock. I don't know how he's calculating non-government, non-wage benefits, given what has been to company sponsored medical plans, with absolute numbers covered by such plans declining, with "co-pays" and "caps" and "excluded items" rising.

We can look at it perhaps from the angle of household shares of national income in the US. The CBO published Trends in Distribution of Household Income Between 1979-2007 (might have been recently updated).

That study shows the share of the bottom 40% of households measured 19% of the total in 1979, and 14% in 2007. The bottom 60% declined from 35% to 27%; meanwhile the top 20% share increased from 43% to 53% of the national income.

As for those government benefits, the CBO report states "shifts in transfers and federal taxes also contributed to the increase in inequality."

Between 1979-2007 the composition of federal revenues shifted from progressive income taxes to far less progressive payroll taxes. Along with that shift comes a shift in the GINI index for household income in the US from .479 in 1979 to 0.590 in 2007.

The report determines that:

1. All major source of market income become less equally distributed and more contentrated within high income households

2. There is a decrease in total market income attributable to labor and wages, and an increase in the share attributed to capital gains.

3. Increased inequality of hourly wage rates appears to be the biggest contributor to increased inequality in labor incomes.

Now to me, that indicates that Kliman has got something wrong-- not his thesis, that the contraction and secular decline is NOT due to declining wages, but rather that overall workers' compensation has NOT declined as the bourgeoisie continue to strive to offset the decline in the rate of profit.

If people are interested in reading about what has been done to pensions in the US, I recommend the book Retirement Heist.

Kliman addresses the whole issue of "household" income in the talk I posted earlier. I think everyone who is having issues with his thesis should watch it, as it will solve the bulk of them.

http://www.marxisthumanistinitiative.org/economic-crisis/video-why-trickle-up-economics-won’t-work.html

Artesian,

If we're talking about anecdotal impressions, my impression is that health insurance costs have risen so steeply over the ten years that companies are now paying more for their worker's current riddled-with-co-pay-programs than they previously paid for full coverage for their workers. I know that a "you pay nearly-everything and we call insured" private program costs more now than full coverage once cost (since, well, I don't any coverage for that reason).

And I believe Mikus is correct in saying that health care does count as part of the compensation/cost of labor even if the whole field is very dodgy. Sure, the health care system may be fat with overpaid administrators, corrupt insurance deals and so-forth. But it is still part of the realm of consumption.

So households can be getting "more" in compensation even if they get less use out of this "more".

The thing about this is that while it explains the crisis, one shouldn't use it to tell the average work they are better off than previously. IE, The underconsumptionists quoted the Marxist Humanist initiative page might be wrong in their attribution of the cause of the crisis and the direction of the change in surplus value . But to imply this is wrong:

Seems like you're winding up saying "who you gotta believe, my figures or your own sleep-deprived eyes (and tired limbs)."

Of course health care, pensions, unemployment benefits count. The CBO report does not say the bottom half are getting more, but getting less for that more. This is not a question of cost inflation.

The CBO reports says the bottom half, the lower 60% share of the national income has fallen in the period under investigation. Income inequality has grown. The rich have gotten much richer; the not rich have not maintained, much less improved, their position

Meantime the portion of the total national income going to those families in the top 40% has increased to 73%.

People can talk all they want about wages and benefits, but both are used to calculate household income, along with capital gains, dividends, transfers etc.

I've read Kliman and I think he's wrong, but for all the right reasons. I'll look at the video but somebody is going to have to explain to me how a declining share of national income, growing inequality, persistent child poverty rates of 16%-18%, declining portions of the population participating in the labor force translates as the workers maintaining, as a class, their rates of compensation.