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The Wage[s]-Lump Doctrine — still dogma after all these years

The Wage[s]-Lump Doctrine — still dogma after all these years

“The wage-fund doctrine was the quintessential product of what Marx termed vulgar political economy; a dogma concealing real economic relations, on the one hand, and justifying them, on the other. It was a transparent effort to disarm the working-class movement, and an attempt (largely successful) to rally public opinion behind bourgeois resistance to the demands of working people for a better life. It was the principal ideological weapon in the arsenal of capital in its disputes with labor over the level of wages.” — Kenneth Lapides, Marx’s Wage Theory in Historical Perspective

The lump-of-labor fallacy CLAIM is the wage-fund doctrine in disguise. The fallacy claim’s conclusions about the ultimate futility of workers’ demands are indistinguishable from the doctrine’s conclusions.. Only the premise from which those conclusions are deduced has been altered. Instead of asserting a certain quantity of work to be done, the fallacy claim attributes that fixed assumption to a designated scapegoat: workers, unions, populists. The claimants’ own assumptions are left undefined, as an amorphous “in reality.”

That undefined “reality” is a given amount of capital for employing workers that can only be increased or decreased as a result, respectively, of a decrease or increase in the cost of labor. That is to say, a wage-fund lump!

The wage-fund doctrine was debunked in 1826 by Sir Edward West. It was “recanted” in 1869 by John Stuart Mill. The lump-of-labor fallacy CLAIM was shown to rely on the discredited fixed wage-fund assumption by Charles Beardsley in 1893. So why do economists (& CEOs) still cling to this dogma?

Because it conceals real economic relations, on the one hand, and justifies them, on the other.

Because it disarms working-class movements and rallies public opinion behind bourgeois resistance to the demands of working people for a better life.

Because it is the principal ideological weapon in the arsenal of capital in its disputes with labor over the the hours of work.

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Projection and Disavowal

I don’t believe in intellectual property… I don’t believe in compound interest…

Nobody believes in the lump-of-labor fallacy. Mr. Nadella is engaging in a game of projection and disavowal that is as old as capitalism. He is affirming the reality of an event that only happens in the imagination — the production of something out of nothing. To perform this usurious hat trick, one must assume something one knows is not true — that money is fertile. The attribution of a bogus “fallacy” to others is a device for distracting attention from the deception involved in simultaneously fetishizing and disavowing the “productivity” of a mere formal claim to entitlement.

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Gorz: “The Right to an Income and the Right to Work,” part one

Gorz: “The Right to an Income and the Right to Work,” part one

From “Orientations and Proposals — The Reduction of Working Time: Issues and Policies” of Andre Gorz’s Critique of Economic Reason (1989) translated by Gillian Handyside and Chris Turner. I am posting the section on “The Right to an Income and the Right to Work” in two parts. This is part one:

The Right to an Income and The Right to Work 

When the production process demands less work and distributes less and less wages, it gradually becomes obvious that the right to an income can no longer be reserved for those who have a job; nor, most importantly, can the level of incomes be made to depend on the quantity of work furnished by each person. Hence the idea of guaranteeing an income to every citizen which is not linked to work, or the quantity of work done.

This idea haunts all the industrialized capitalist world of today. It has as many supporters on the Right as on the Left. To look only at recent history, it was (re)launched in the USA at the end of the 1950s by left Democrats and libertarians on the one hand and by neo-liberals (principally Milton Friedman) on the other. Since the end of the 1960s, several local experiments with a local basic income guarantee have been conducted in the USA. Richard Nixon tabled a bill to introduce a measure of this kind in 1972 and it was narrowly defeated. In the same year, George McGovern, the Democratic presidential candidate, included the guaranteed income in his programme. The object was to find a cure for poverty, which showed up more in the USA than elsewhere on account of the absence of a nationwide statutory social insurance system. The guaranteed income was meant as a substitute for such a scheme. European neo-liberals now dream of substituting such a basic income guarantee for the existing welfare-state institutions.

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Is the Job Guarantee a Ponzi Scheme?

“The basic idea is that the government can’t run out of money. It creates money just by spending.” — Stephanie Kelton

This is true. Government cannot run out of its own money. But what is money? It is a token or pledge that can be redeemed for something of value. If government creates much more money than there are things of value to redeem it for the prices of those things go up. Not to worry, Zach Carter assures us:

But even inflation doesn’t impose a hard limit on policy options. The Federal Reserve can raise interest rates to deal with it, Congress can raise taxes to pull money out of circulation or even impose price controls.

Hyman Minsky expanded on this explanation in his financial instability hypothesis:

The first theorem of the financial instability hypothesis is that the economy has financing regimes under which it is stable, and financing regimes in which it is unstable. The second theorem of the financial instability hypothesis is that over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system.

In particular, over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy with a sizable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make position by selling out position. This is likely to lead to a collapse of asset values.

The financial instability hypothesis is a model of a capitalist economy which does not rely upon exogenous shocks to generate business cycles of varying severity. The hypothesis holds that business cycles of history are compounded out of (i) the internal dynamics of capitalist economies, and (ii) the system of interventions and regulations that are designed to keep the economy operating within reasonable bounds.

See? If “the authorities” decide to “exorcise [the demon of] inflation” through taxation or higher interest rates, it won’t be the government that goes belly up. It can’t run out of money. It will just be those speculative and Ponzi units whose net worth will evaporate. No problem!
It remains a mystery to me why job guarantee proponents point to Minsky as the patron saint of the job guarantee idea. It was, after all, Leon Keyserling who drafted the Full Employment Act of 1946, The Freedom Budget (1966) and job guarantee provisions of Humphrey-Hawkins (1976). Good old “siphoning off the increment to pay for the excrement” NSC-68 Leon.
Mr. Keyserling was a big fan of spending that “paid for itself” by augmenting growth in the gross national product. His 1966 Freedom Budget was also touted as being financed through an “economic growth dividend.” The idea was that economic growth of five percent over a ten year period would generate the revenue to pay for the program.
If it wasn’t the government doing it, the method of financing that Keyserling advocated would be a Ponzi scheme because it relied on revenues that would presumably arise solely from disbursements and not from the sales of value-added goods or services. Fortunately, a government cannot operate a Ponzi scheme because “it creates money just by spending.”
So, technically speaking, a job guarantee is not a Ponzi scheme. It’s only a wee bit Ponzyish.

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Jobs, Jobs, Jobs: GUARANTEED! — May 20 update

Class war? What class war?

Stephanie Kelton Has The Biggest Idea In Washington 

“Everybody wants a piece of Kelton these days because a simple, radical idea she has been workshopping her entire career is the next big thing in Democratic Party politics. She calls it the job guarantee… “

  • “Once an outsider, her radical economic thinking won over Wall Street. Now she’s changing the Democratic Party.”
  • “A onetime college dropout at California State University in Sacramento, Kelton has managed to earn the esteem of both Sanders and an oddball clique of multimillionaire Wall Street traders.”
  • “If you listen to Kelton long enough, you notice that she never refers to “bankers” or “Wall Street” with the derisive tone common among her political allies. She talks instead about “the financial community.”
  • “After all, Wall Street took her under its wing before Democrats took her seriously.” 
  • “Her career had changed tracks. She wasn’t just a clever economist with some quirky ideas anymore. Her credibility with Wall Street began to register as academic clout.”
  • “There are thousands of left-wing economists. But it’s hard for the economically inexpert to distinguish brilliant creativity from quackery. Kelton’s social credentials with Wall Street helped her stand out.”

I dunno what that’s about. Something about Wall Street?

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Jobs, Jobs, Jobs — GUARANTEED!

The current mania for “job guarantee” policies is making the Sandwichman anxious. I’ve been on the full employment beat for over 20 years so I think I have a pretty good grasp of the terrain. First principle is that there are no panaceas. My favorite policy option — reduction of working time — is not a panacea. Neither is yours.

Like my learned friend Max B. Sawicky, I am in favor of a job guarantee — provided it meets MY criteria. The proposals currently being shopped around don’t. That should not be a fatal flaw. Inadequate policy proposals can serve as the starting point for dialog that can lead to better proposals. From the left, Matt Brunig, and from the center?, Timothy Taylor have offered constructive critiques of the current proposals. I would like to offer a bit of critique from history.

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Active Measures against the Spectacle

Passivity is a key term in Guy Debord’s Society of the Spectacle:

12. The spectacle presents itself as something enormously positive, indisputable and inaccessible. It says nothing more than “that which appears is good, that which is good appears. The attitude which it demands in principle is passive acceptance which in fact it already obtained by its manner of appearing without reply, by its monopoly of appearance.

13. The basically tautological character of the spectacle flows from the simple fact that its means are simultaneously its ends. It is the sun which never sets over the empire of modern passivity. It covers the entire surface of the world and bathes endlessly in its own glory.

96. The ideology of the social-democratic organization gave power to professors who educated the working class, and the form of organization which was adopted was the form most suitable for this passive apprenticeship.

144. The commodity society, now discovering that it needed to reconstruct the passivity which it had profoundly shaken in order to set up its own pure reign, finds that “Christianity with its cultus of abstract man … is the most fitting form of religion” (Capital).

219. One who passively accepts his alien daily fate is thus pushed toward a madness that reacts in an illusory way to this fate by resorting to magical techniques. The acceptance and consumption of commodities are at the heart of this pseudo-response to a communication without response.

What, then, constitutes activity? Debord’s reply to this crucial question is inadequate — rhetorical slogans about an amorphous “revolution.” I would suggest instead two things, the autonomous disposal of disposable time and the labor strike (work stoppage or job action).As should be clear, capital seeks to colonize disposable time with commodity consumption and “The Spectacle.” How, then, does one distinguish between active use of disposable time and passive commodity consumption during one’s free time? The distinction can be based on the criterion of whether what one does in one’s free time will contribute to one’s ability to withstand an interruption of income.  Disposable time should be used to prepare for the struggle to obtain more disposable time!

Because, “there is, thank God! no means of adding to the wealth of a nation but by adding to the facilities of living: so that wealth is liberty– liberty to seek recreation–liberty to enjoy life–liberty to improve the mind: it is disposable time, and nothing more.”

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Job Guarantees, Collective Bargaining and the Right to Strike

“Guaranteed jobs programs, creating floors for wages and benefits, and expanding the right to collectively bargain are exactly the type of roles that government must take to shift power back to workers and our communities,” — Senator Kirsten Gillibrand

“By strengthening their bargaining power and eliminating the threat of unemployment once and for all, a federal job guarantee would bring power back to the workers where it belongs.” — Mark Paul, William Darity, Jr., and Darrick Hamilton,

“Support for workers’ right to organize and collectively bargaining would, of course, be part of any such effort.” — Harry J. Holzer

 “This, then, was the broad issue to which Samuelson and Solow’s paper was addressed: Were price stability and full employment – or, as it was sometimes put, were price stability, full employment and collective bargaining – compatible in the America of their times?” — James Forder

Under conditions of full employment, can a rising spiral of wages and prices be prevented if collective bargaining, with the right to strike, remains absolutely free?  Can the right to strike be limited generally in a free society in peace-time? — William Beveridge, Full Employment in a Free Society

Everyone is talking about Job Guarantees these days and no one appears to have thought through the implications of such a policy for collective bargaining with anything like the thoroughness that William Beveridge did in 1946. In 1960, Paul Samuelson and Robert Solow concluded their discussion of full employment and inflation with a disclaimer:

We have not here entered upon the important question of what feasible institutional reforms might be introduced to lessen the degree of disharmony between full employment and price stability. These could of course, involve such wide-ranging issues as direct price and wage controls, anti-union and antitrust legislation, and a host of other measures hopefully designed to move the American Phillips’ curves downward and to the left.

We are told by the adherents of Modern Monetary Theory that inflation is not a problem. The government just sops up inflation by taxing back some of the money it has created to fund the program expenditures. Correct me if I’m wrong, but that seems like what they say. At the same time, though, at the same time, advocates of a Federal Job Guarantee tout the increased bargaining power that it would give to workers.

Usually that bargaining power is not specified as collective bargaining power. Harry Holzer’s comment is the exception. Senator Gillibrand’s mention of Job Guarantee and expanding the right to bargain collectively may have just been a smorgasbord of good things and not meant to imply advocacy of collective bargaining specifically for people in the Job Guarantee program. To use a distinction Richard Freeman and James Medoff adopted from Albert O. Hirschman, the “bargaining power” mentioned by Paul, Darity and Hamilton could as easily refer to the “exit” of individual choice as to the “voice” of collective action.

Well, who doesn’t want to see workers gain more bargaining power? That is not a rhetorical question. To ask it is to call attention to the very powerful political forces that have seen to it, especially over the last 40 years or so, that they don’t. Could it be that the advocates of the Job Guarantee have not done their opposition research? Do they suppose that the regime of supply-side, trickle-down, corporate neo-liberalism was inadvertent?

I am not so certain that the Kochs and the Waltons and Jeff Bezos and Jamie Dimon are going to shrug their shoulders and say, “O.K., workers, your turn now. Best of luck!” Regardless of whatever MMT says about inflation, the “inflation!” card will be played against any proposed job guarantee election platform, as will the “socialism!” card, the “moochers!” card, the “boondoggle!” card, and, yes, even the “lump-of-labor!” card.

In individual terms, bargaining power comes down to the alternative options if one quits a job — what is the Best Alternative if There is No Agreement (BATNA). Collectively, bargaining power is determined by strike leverage, which is a mutual perception of the relative capabilities of the two parties to endure a prolonged work stoppage. A Job Guarantee would appear to give additional leverage to unions in the event of a work site closure or the hiring of replacement workers. The amount of leverage depends on what the rules are regarding the eligibility of striking workers for a Job Guarantee. Presumably, workers currently on strike would be ineligible. But what happens if the employer hires scabs (otherwise known as “replacement workers”)? What if the company closes down and moves away? Would there be a waiting period before discharged workers become eligible for the Job Guarantee?

And what about the rights of the Job Guarantee workers themselves to collectively bargain and to strike? Until relatively recently public employees were denied the right to collective bargaining and the right to strike. Even today those rights are not universally acknowledged:

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service… A strike of public employees manifests nothing less than an intent on their part to obstruct the operations of government until their demands are satisfied. Such action looking toward the paralysis of government by those who have sworn to support it is unthinkable and intolerable.

Who said that? Governor Scott Walker in 2011? Chris Christie? No, Franklin Delano Roosevelt, in a 1937 letter to the president of the National Federation of Federal Employees. Scott Walker cited FDR in a 2013 speech. Could a Job Guarantee program that denied participants the right to strike become a Trojan horse for rolling back public sector unionism? That is not a rhetorical question.

The conspicuous lacunae in the Job Guarantee literature regarding collective bargaining and the right to strike strikes me as an elephant in the room. The fact that no one talks about it could not conceivably be because no one notices it. For what is at stake here is nothing less than the sovereignty of the State and its monopoly on the legitimate use of violence. In an astonishing paragraph in his essay on the “Crtique of Violence,” Walter Benjamin makes this not so much “clear” as available for deciphering.

Benjamin’s provocative claim, distilled from the writings of Georges Sorel and Carl Schmitt, is that “Organized labor is, apart from the state, probably today the only legal subject entitled to exercise violence.” Let that sink in…

Benjamin goes on to offer qualifications and explanations that address the inevitable objections to that statement. By conceding the political right’s standard objection to the labor strike as violent, however, Benjamin — again following Sorel — has isolated and emphasized the one circumstance in which it is not — the revolutionary general strike. This is not to discount the inevitability of retaliatory violence from the State.

The insertion of Benjamin’s argument into the debate on the Job Guarantee idea may seem esoteric to the casual reader. The reason it doesn’t seem esoteric to me is that I have spent the last 20 years studying the history of anti-labor rhetoric of the right and how it gets translated ultimately into seemingly innocuous “policy principles.” Public works as an employment stabilizer sounds like a good idea — what happened to it? Full employment after the war sounds like a good idea — what happened to it? The reduction of the hours of work sounds like a good idea — what happened to it? As John Stuart Mill rightly pointed out, “He who knows only his own side of the case, knows little of that.”

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LOMPIGHEID: “Omgekeerd omgekeerd.”

Last week I was browsing through one of the books on the shelf at work, which had in it three essays by the inter-war German Marxist Karl Korsch. One of the essays, a 1932 introduction to Capital mentioned mentioned a section in Chapter 24, “The So-Called Labour Fund” as exemplary of Marx’s critique of political economy. The “labour fund” was more commonly known as the wages-fund, the doctrine famously recanted by John Stuart Mill in 1869.

After it had been repudiated in various degrees by the economists who formerly propounded it, the defunct doctrine became a straw man “fallacy” attributed to precisely the trade unionists who had been the targets of the doctrine’s disdain. Marshall dubbed the re-purposed doctrine the fallacy of the fixed work-fund. David F. Schloss christened it the Theory of the Lump of Labour.

As is my habit, I searched on “labour fund” and “lump of labor/labour” to see if anyone had previously made the connection between Marx’s critique in Capital and the ubiquitous attributions of the fallacy by economists to non-economists. What I discovered was a six-page discussion of my own historical investigation by a Belgian economist, Walter Van Trier, published in 2013 in the Belgian journal Over-Werk.

The title of the journal is somewhat of a pun as “over” means both “about” and “above” in Dutch, so it could mean both about work and overwork in English. The word lompigheid also contains a bit of a pun — as one might guess lomp is lump and lompigheit (with a ‘t’) refers to lumpiness, while lompigheid (with a ‘d’) means rudeness or clumsiness.

I am posting below a translation of the section from Van Trier’s article that deals specifically with my analysis of the lump of labor fallacy. The full article, in Dutch, can be found here. Happy May Day!

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Job Guarantee versus Work Time Regulation

There has been a bit of commotion recently about the Job Guarantee idea (AKA employer of last resort). I don’t consider myself an opponent of the strategy but I do have several reservations about its political feasibility, the marketing rhetoric of its advocates, and its economic and administrative transparency. Some of these concerns I share with an analysis presented by Robert LaJeunesse in his 2009 book, Work Time Regulation as Sustainable Full Employment Strategy. For that reason, it would be timely to post an excerpt from Bob’s discussion of”Job guarantees versus work time regulation.”

One thing that has puzzled me about the Job Guarantee rhetoric is the invocation of Hyman Minsky as patron saint of the strategy. There is no question that he advocated a job guarantee with the government acting as employer of last resort. But in the passages I’ve read, the proposal was either contingent to a broader discussion or supplemented with various other proposals some of which might be regarded as more far-reaching and controversial even than the job guarantee.

For example, a 1968 proposal argued that, “In addition, it will be necessary to restrain profits and investments; in particular, the highly destabilizing tendency for investment demand to explode will have to be brought under control.” Nineteen years later, Minsky supported a proposal for “a maximum of 32 hours of work a week at the minimum wage” but argued it needed to be supplemented by other programs such as a universal, non-means tested child allowance. Both of these proposals were historical and context specific, with the earlier one arising from a critique of LBJ’s War on Poverty and the later one in response to Reagan administration proposals for welfare reform.

The following excerpt is from pages 125-134 of  Work Time Regulation as Sustainable Full Employment Strategy. 

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