Chris Dillow: The Importance of Class

Mark Thoma refers via Chris Dillow: The Importance of Class to Class, power & ideology, Stumbling and Mumbling:

“Nothing makes sense without class” says Owen Jones. He’s right, if we understand “class” in its Marxist sense.

An objective definition of class is given:

To Marx - though the idea was implicit in other classical economists such as Ricardo - class was not about lifestyle, but about one’s relationship to the economy. If your income comes from wages, you’re working class. If it comes from capital, you’re a capitalist.

I believe Marx defined the Proletariat as those can only earn their sustenance by selling their labour power. This allows the inclusion of the unemployed (or “reserve industrial army”) as part of the Proletariat while excluding the criminal elements (“Lumpenproletariat”). Although some Capitalists are wage earners, their major income comes from the return on Capital either through dividends or capital gains.

This objective definition is contrasted with a subjective definition of Middle Class:

You might reply that, by this criterion, we are almost all working class now. True. Even people who think of themselves as “middle class” are in many cases only a P45 away from poverty. They are objectively working class even if they are not subjectively so.

Dillow goes on to describe the distribution of power within a Capitalist economy:

What’s more, class in this sense is correlated with power: capitalists have it, workers don‘t*. This is because economic power flows to scarce resources and capital is scarcer than labor.

This is probably an over-simplification. The workers do have the power—mainly through the strike. The withdrawal of labour power inhibits the reproduction of capital. This is the reason that the Capitalist has to so restrict or even outlaw strikes. Collective bargaining is just too powerful to be allowed to be unchecked by the ruling class. It has the potential to bring the Capitalist order.

Dillow asks the question about the invisibility of class:

This raises the question. If class is so central to an understanding of the economy, why is it so little discussed?

The answer lies in another of Marx’s insights - that false consciousness prevents people from seeing how capitalist power operates. In this sense, the cognitive biases research program throws up some new theories that vindicate Marx. For example:

• the illusion of control causes people to over-estimate the chances of them escaping the working class through their own efforts, and so under-estimate the importance of collective class action .
• the in-group heterogeneity bias (which is the flipside of the out-group homogeneity bias) causes people in similar economic positions to exaggerate the differences between themselves and so fail to see their common class position.
• the just world effect causes people to think that victims are to blame for their fate - so, for example, the poor are thought to be stupid and feckless even if the cause of their poverty lies elsewhere.
• the optimism bias leads people to think they will succeed if only they work hard enough, and so blinds them to the possibility that their class position will prevent them getting the full fruits of their labour.

Dillow completely misses the importance of the ideological and coercive superstructures that exist to prevent workers from overcoming their exploitation. The ideological superstructure includes:

• Religion that tells workers that their reward lies in the afterlife and that God gives wealth to the rich because they are more deserving;
• Educational institutions that inculturate obedience and compliance;
• The Mass Media who hides protests by workers or casts them in a bad light.

The coercive superstructure includes the police (secret and not so-secret), criminal justice system.

Dillow concludes with:

And here, I part company with Owen. We cannot have a reasonable debate about class, because cognitive biases such as these are ubiquitous. Successful power structures persist in large part because the way in which power is exercised is hidden from us. The importance of class and the lack of discussion of it are two sides of the same fact.

The Capitalist system cannot admit that class exists unless the Capitalists are threatened with a tax increase. Then it is class warfare. As Warren Buffett says, “It is class warfare and my class is winning.”

Read more!

Inside the Trillion-Dollar Underground Economy Keeping Many Americans (Barely) Afloat in Desperate Times

Yves Smith refers to Inside the Trillion-Dollar Underground Economy Keeping Many Americans (Barely) Afloat in Desperate Times by Sarah Jaffe. This part of the US economy is estimated to be growing at 5% p.a..

Millions have dropped out of the job hunt and are trying to find other ways to sustain their families.

That's where the underground economy comes in.…—in 2009, economics professor Friedrich Schneider estimated that it was nearly 8 percent of the US's GDP, somewhere around $1 trillion.…Schneider doesn’t include illegal activities in his count-- he studies legal production of goods and services that are outside of tax and labor laws. And that shadow economy is growing as regular jobs continue to be hard to come by—Schneider estimated 5 percent in '09 alone.

This underground activity is still seen as Capitalist in that the same mode of production is used: people with money hire other people to work for them.

…Lisa Dodson stressed the way communities came together to help one another through tough times, often through off-the-books economic activity, in her book The Moral Underground: How Ordinary Americans Subvert an Unfair Economy.

In one passage, she tells the story of arriving in a small-town farmer's market in Maine, only to overhear a discussion between locals on “neighbors and the market erosion of common fairness.” She wrote:

Just then a middle-aged woman, who had been talking to friends, suddenly turned around to face other shoppers and asked, 'What’s happening to us? Why doesn’t the government do something?' A local farmer, sorting vegetables nearby, responded immediately, 'The government is the same as the oil companies. There’s no difference. We can’t wait for them to do anything.' A young mom holding a baby as she stood in line said, 'So what do we do?' There was no single response, but they were looking at each other to find it.

So, the US workers have a learned helplessness from the Capitalist system. They have been trained to look to the Capitalist class for initiatives. They do not realise that they the power in their hands. That is where wealth comes from—the hands of the workers.

No wonder the Capitalist ideologues ridicule the Labour Theory of Value. They realise that the status quo depends on the workers being aware of their considerable power.

Read more!