How do you like them facts?

Published by Anonymous (not verified) on Tue, 12/09/2017 - 11:00pm in


Apologists for mainstream economics (such as Noah Smith) like to claim that things are OK because good empirical research is crowding out bad theory.

I have no doubt about the fact that the theory of mainstream economics has been bad. But is the empirical research any better?

Not, as I see it, in the academy, in the departments that are dominated by mainstream economics. But there is interesting empirical work going on elsewhere, including of all places in the International Monetary Fund (as I have noted before, e.g., here and here).

The latest, from Mai Dao, Mitali Das, Zsoka Koczan, and Weicheng Lian, documents two important facts: the decline in labor’s share of income—in both developed and developing economies—and the relationship between the fall in the labor share and the rise in inequality.

I demonstrate both facts for the United States in the chart above: the labor share (the red line, measured on the left) has been falling since 1970, while the share of income captured by those in the top 1 percent (the blue line, measured on the right) has been rising.

labor shares

Dao et al. make the same argument, both across countries and within countries over time: declining labor shares are associated with rising inequality.

And they’re clearly concerned about these facts, because inequality can fuel social tension and harm economic growth. It can also lead to a backlash against economic integration and outward-looking policies, which the IMF has a clear stake in defending:

the benefits of trade and financial integration to emerging market and developing economies—where they have fostered convergence, raised incomes, expanded access to goods and services, and lifted millions from poverty—are well documented.

But, of course, there are no facts without theories. What is missing from the IMF facts is a theory of how a falling labor share fuels inequality—and, in turn, has created such a reaction against capitalist globalization.

Let me see if I can help them. When the labor share of national income falls—the result of the forces Dao et al. document, such as outsourcing and new labor-saving technologies—the surplus appropriated from those workers rises. Then, when a share of that growing surplus is distributed to those at the top—for example, to those in the top 1 percent, via high salaries and returns on capital ownership—income inequality rises. Moreover, the ability of those at the top to capture the surplus means they are able to shape economic and political decisions that serve to keep workers’ share of national income on its downward slide.

The problem is mainstream economists are not particularly interested in those facts. Or, for that matter, the theory that can make sense of those facts.

Tagged: 1 percent, economics, economists, exploitation, facts, inequality, mainstream, outsourcing, surplus, technology, theory, wages, workers

Who’s working for Facebook?

Published by Anonymous (not verified) on Thu, 07/09/2017 - 11:00pm in


There are plenty of reasons to be interested in—and, even more, concerned about—Facebook. Many of them are raised in the recent review of Facebook-related books by John Lanchester [ht: db]: the fragmentation of the polity (via the targeting of posts), the dissemination of “fake news” (which played an important role in the 2016 U.S. presidential election), the undermining of other livelihoods (such as journalism and music), the level of surveillance of users (much more than any national government), the violation of anti-monopoly rules (via individualized pricing), and so on.

All of them are important—and they get at what the Facebook business model is all about:

For all the talk about connecting people, building community, and believing in people, Facebook is an advertising company.

That’s right. That’s how the owners of Facebook make their money: they track users, collect information, and then sell that to advertisers.*

But it still doesn’t get at the issue of who works for Facebook, who creates that value, what the class structure of Facebook (and Google and other such companies) is.

Lanchester’s answer is that we, the two billion or so of us who use Facebook, actually work for the social-media giant.

Access to an audience – that unprecedented two billion people – is a wonderful thing, but Facebook isn’t in any hurry to help you make money from it. If the content providers all eventually go broke, well, that might not be too much of a problem. There are, for now, lots of willing providers: anyone on Facebook is in a sense working for Facebook, adding value to the company.

In one sense, Lanchester is right: if Facebook users don’t create or repost content and click on and respond to one another’s postings, then Facebook’s business model falls apart. In fact, as Lanchester explains,

Perhaps the biggest potential threat to Facebook is that its users might go off it. Two billion monthly active users is a lot of people, and the ‘network effects’ – the scale of the connectivity – are, obviously, extraordinary. But there are other internet companies which connect people on the same scale – Snapchat has 166 million daily users, Twitter 328 million monthly users – and as we’ve seen in the disappearance of Myspace, the onetime leader in social media, when people change their minds about a service, they can go off it hard and fast.

But what I find interesting is the fact that Lanchester can write a longish essay on Facebook and never once mention the word labor—and the only people who seem to be working are Facebook users.

What about Facebook’s employees? As it turns out, Facebook reported a headcount of 18,770 in its first-quarter earnings release (and likely employs more workers, as independent contractors for specific projects). Why don’t we consider them to be the ones who create the value realized by selling space to advertisers and information to others who purchase the data gathered by Facebook? And Facebook employees the ones who are working for and being exploited by Facebook’s board of directors?

When General Motors sells cars, the people who purchase and drive the cars aren’t being exploited; GM workers are. The same is true for other corporations, from Abbott Laboratories to Zoetis (which, along with Facebook, make up the Standard & Poor’s 500, covering about eighty percent of the American equity market by capitalization). They’re employees, not their customers, are the ones who create value and surplus-value.

So, why is Facebook (and, by the same token, other social-media and internet companies) different?

The answer, I think, is our relationship to the commodity being produced and sold is different. We purchase cars—and, if we’re aware of it, we know they’re produced by exploited auto-workers. But in the case of Facebook, we’re not purchasing anything at all, at least directly. We post content to our friends or advertise a business or try to form a community. And then it’s Facebook that collects data about us and sells it—not to us but to others, other corporations. Without our participation, of course, Facebook would not have anything to sell, and therefore no way of making a profit.

And, more generally, we seem to be spending more and more time involved in activities for which we are not remunerated but are essential for the profit-making activities of corporations we don’t work for. We post on social-media sites. We use search engines to navigate the internet. We search for flights. We check-out and bag the commodities we purchase at retail stores. And so on.

But I’m not convinced we’re creating value and subjecting ourselves to class exploitation. We may be performing labor but we’re not working for those corporations. And we are being commodified, and participating in our commodification.

But we’re not working for those corporations. Their employees are—and they’re the ones who are being exploited.


*Although, according to a recent report, Facebook may exaggerate the reach of its advertising platform: it claims to reach millions more users among specific age groups in the U.S. than the official census data show reside in the country.

Tagged: advertising, class, data, employees, exploitation, Facebook, internet, surveillance, workers

Cartoon of the day

Published by Anonymous (not verified) on Mon, 04/09/2017 - 10:00pm in

Cartoon of the day

Published by Anonymous (not verified) on Mon, 14/08/2017 - 9:00pm in

Platform capitalism?

Published by Anonymous (not verified) on Tue, 23/05/2017 - 11:00pm in

I don’t have strong views about the idea of “platform capitalism,” the concept presented and elaborated in a recent book by Nick Srnicek to make sense of the business model of such companies as Google, Amazon, and Uber. I don’t feel I have a dog in that hunt.

What I do like is Srnicek’s critique of other designations—such as tech companies, sharing, and the gig economy—and his focus on the idea that these are, after all, capitalist firms operating in a capitalist economy. Their raison d’être is to make a profit by centralizing and monopolizing access to data and selling data (or services based on those data) to other firms.

In fact, the notion of “platform capitalism” might be extended to other kinds of enterprises. I’m thinking, for example, of sports franchises and universities. They also operate as platforms inasmuch as they generate profits across a range of activities. Nominally, they produce and sell a commodity (e.g., a football match and higher education)—but that only serves as a pretext for generating profits in other activities: in the case of sports franchises, television revenues, shirts and other memorabilia, food and drink concessions, and so on; similarly, in the case of higher education, on-line courses, research-based fees and patents, food and lodging for students and visitors, branded clothing, and of course collegiate sports spectacles. In both cases, sports franchises and universities operate as diverse, profit-making platforms.

So, in my view, the idea of “platform capitalism” might be a useful way of thinking about at least some forms of capitalism that exist today.

What I find odd, though, is some of the commentary on Srnicek’s work. Consider, for example, Daniel Little’s posing of the questions generated by the emergence of “platform capitalism”:

what after all is the source of value and wealth? And who has a valid claim on a share? What principles of justice should govern the distribution of the wealth of society? The labor theory of value had an answer to the question, but it is an answer that didn’t have a lot of validity in 1850 and has none today.

What Little seems not to understand is that the profits of the enterprises operating under the rubric of “platform capitalism” are still based on the surplus labor of workers who produce the commodities that are being sold. Uber, for example, manages to generate its profits by capturing the surplus of its drivers. It doesn’t own the vehicles and doesn’t directly employ the drivers (with all the associated costs savings) but, since it owns the platform that connects drivers to passengers, it secures a “right” to the surplus created by the drivers and paid for by the passengers. The other kinds of platforms analyzed by Srnicek have different ways of generating profits: by selling advertising based on information collected about users (e.g., Facebook and Google), by renting servers used to process data (e.g., Amazon), and so on. But in all these cases, workers are doing the job of writing and modifying software, collecting and processing data, building and maintaining servers, and supplying the ultimate services to other enterprises or final consumers who purchase the commodities. And the members of the boards of directors of platform capitalist enterprises are the ones who ultimately appropriate the surplus.

Capitalism has, of course, changed since the mid-nineteenth century. The technologies, the modes of employment of workers, the ways commodities are marketed and the role users play, the measuring and processing of data—all of those features of the capitalist mode of production have changed radically since industrial capitalism first emerged. But the basic logic—of capitalists and workers, of creating, appropriating, and distributing surplus labor in the form of surplus-value—is the same for capitalist enterprises today just as it was in 1850.

That’s why the Marxian critique of political economy, modified and updated for the twenty-first century, continues to be able to explain the “source of value and wealth”—including and perhaps especially “the soaring inequalities of income and wealth that capitalism has produced” in recent decades.

Tagged: capitalism, capitalists, exploitation, platform capitalism, surplus, surplus-value, workers