Thomas Piketty — Europe and the class cleavage

In all the referendums for the last 25 years the working classes have systematically expressed their disagreement with the Europe presented to them, whereas the richest and the most privileged classes supported it. During the French referendum on the Treaty of Maastricht in 1992, we observed that 60% of the voters with the lowest incomes, personal wealth or qualifications voted against, whereas the 40% of the electorate with higher incomes voted in favour; the gap was big enough for the yes vote to win with a small majority (51%). The same thing happened with the Constitutional Treaty in 2005, except that this time only the top 20% were in favour of the yes vote, whereas the lower 80% preferred to vote no, whence a clear victory for the latter (55%). Likewise for the referendum on Brexit in the UK in 2016: this time it was the top 30% who voted enthusiastically to remain in the EU. But, as the bottom 70% preferred to leave, the leave vote won with 52% of the votes. 

What is the explanation? Why are votes on the European Union always characterised by such a marked division of social class? This outcome is all the more puzzling as the structure of the vote for the different political parties has long since ceased to be so clearly marked by the class structure, with the three dimensions of social division (qualifications, income, personal wealth) all pulling in the same direction. Since the 1970-1980s; the most highly qualified have swung distinctly towards the left wing parties in both countries, whereas those with the highest incomes and personal wealth continue to tend to support the right-wing parties, which are themselves undergoing change. On the other hand, during the votes concerning Europe in 1992 (French referendum on Maastricht Treaty), 2005 (French referendum on constitutional treaty) and 2016 (UK referendum on Brexit), the intellectual and economic elites in both instances found themselves supporting the EU as it existed, whereas the less privileged categories on the left and on the right rejected it.

The reason for this, according to those who are better off, is that the working classes are nationalist and xenophobic, perhaps even backwards. However the xenophobia of the less well off is no more natural than that of the elites. There is a much simpler explanation: the European Union, as built in recent decades, is based on widespread competition between countries, on fiscal and social dumping in favour of the most mobile economic actors and functions objectively to the benefit of the most privileged. Until the European Union takes strong symbolic measures for the reduction of inequalities, for example a common tax which impacts the richest, enabling the taxes of the poorest to be lowered, this situation will continue....

Le Monde — Le blog de Thomas Piketty
Europe and the class cleavage

Thomas Piketty

Daniel Margrain — Class Matters

The prevailing orthodoxy in terms of class identification over the last few decades has been through the nexus of lifestyle choices and job roles. Indeed, this understanding of class in the subjective sense has, since the emergence of neoliberalism four decades ago, been in the ascendancy while conversely, the recognition that class is an objective category measured in terms of ones relationship to the means of production, has been in retreat....

Renegade Inc.
Class Matters
Daniel Margrain

Raúl Ilargi Meijer — Austerity, Bloodletting and Incompetence

Punxsutawney Phil Hammond, the UK chancellor, presented his Budget yesterday and declared five more years of austerity for Britain. As was to be expected. One doesn’t even have to go into the details of the Budget to understand that it is a dead end street for both the country and for Theresa May’s Tory party.

So why the persistent focus on austerity while it becomes clearer every day that it is suffocating the British economy? There are many answers to that. Sheer incompetence is a major one, a lack of empathy with the poorer another. Conservative Britain is a class society full of people who dream of empire, and deem their class a higher form of life than those who work low-paid jobs.

When you see that the British Parliament has even voted that animals don’t feel pain or emotions, you’d be tempted to think it’s a throwback all the way back to the Middle Ages, not just the British Empire. They’re as lost in time as Bill Murray is in Groundhog Day. Only worse.

But perhaps incompetence is the big one here. The inability to understand that if your economy is not doing well, you need to stimulate it, not drain even more of what’s left out of it. The people in government don’t understand economics, and therefore rely on economic theory for guidance. And the prevailing theories of the day prescribe bloodletting as the cure, so they bloodlet (let blood?). Let it bleed.

This is not a British problem, it’s pan-European if not global. Neither is the UK Tory party the only one being killed by it, all Conservative parties share that faith. They’re just lucky that their left wing opponents have all committed hara kiri, and joined their ranks when it comes to economics. All of Europe’s poorer have lost the voices that were supposed to speak for them, to economic incompetence.

Obviously, the US democrats did their own hara kiri years ago. One might label -some of- Bernie Sanders’ views left-wing, but he’s trapped in a system that won’t let him breathe.
All of this leads me to question the following:

The Automatic Earth
Austerity, Bloodletting and Incompetence
Raúl Ilargi Meijer

Eric Zuesse — What America’s Aristocracy Want

The American aristocracy want inequality of rights, with two basic polar-opposite classes: the ‘elite’, with themselves at the top of everything, and everybody else below them, as subjects to be ruled by them, in such ways as they (themselves, and their fellow ‘elite’) can agree to do. They are convinced that they have earned their high status, in one way or another, and they compete ferociously amongst themselves, to rise even higher within the aristocracy.

This is the essence of conservatism in political liberalism. Liberalism was essentially about ending the privilege of monarchies and aristocracies, a project that was largely completed at the end of World War I.

However, this is did not end a privilege ruling elite. "Bourgeois liberalism" simply replace the feudal ruling class with a capitalistic one.

This involves overreach and just as the feudal oligarchy was terminated so too will the bourgeois oligarchy.

This is what Donald trump ran on. But he plays the curious part of being a member of the oligarchy and the supposed champion confronting it. This suggest that the end game has not yet begun in earnest.

Barack Obama had the chance of becoming the next FDR, but he or his party were real for it. Bernie could have also, but the party was not yet ready for it either.

The question is who will seize the opportunity of a wave that has crested and when will that wave have actually crested and begun breaking.

Strategic Culture Foundation
What America’s Aristocracy Want

Eric Zuesse

George Carlin summed it up:

Glenn Greenwald — Brazil’s Corrupt Congress Protects its Bribe-Drenched President, Finalizing Elites’ Two-Year Plot

Just imagine the most extreme, primitive cartoon version of a gleefully hypocritical moralizer – a preacher who leaves his weekly whorehouse orgy to go directly to Sunday church to rail against hell-bound sinners – and you’ll have a perfect vision of the majority faction that sanctimoniously paraded itself that day. The slime that oozes from their pores is palpable....

The Intercept
Brazil’s Corrupt Congress Protects its Bribe-Drenched President, Finalizing Elites’ Two-Year Plot

Glenn Greenwald

Because Brazil is a beacon of freedom democracy and lack of corruption. (snark)

Unbelievable chutzpah!

Sputnik International
Mercosur Suspends Venezuela's Membership After Brazil's Request

Cameron K. Murray — Economic bandits

In the US, the expression "game of mates" is "old boy network."

The traditional concept of class pretty much signifies networks of different degrees of privilege — the social, political and economic pecking order.

Fresh Economic Thinking
Economic bandits
Cameron K. Murray

Lars P. Syll — Marx and the Matthew effect

If you are unfamiliar with the Matthew effect (Wikipedia).

Lars P. Syll’s Blog

Marx and the Matthew effect

Lars P. Syll | Professor, Malmo University

Cameron K. Murray — Game Of Mates: Nepotism Is Costing The Economy Billions

"Old boy" networks more than nepotism. This is integral to class structure and class power. It's not just economics but also politics. Wealth gives power and power increases wealth. It's a self-augmenting system and it is the basis of capitalism and plutonomy from the sociological standpoint.

Fresh Economic Thinking
Game Of Mates: Nepotism Is Costing The Economy Billions
Cameron K. Murray

Robert Paul Wolff — The Connection Between Expropriation and Exploitations, Part Two

… “Clearly,” I said to myself, “workers in a capitalist economy are getting the short end of the stick, but Marx’s explanation, invoking the distinction between labor and labor-power and all the rest, is wrong. So what is the explanation? What is more, how can we capture in our explanation the central feature of capitalism to which Marx devotes so much time in the opening chapters of Capital, namely its mystification of what is going on?”

So I went back to Marx’s text and looked again. And there it was, as plain as day. The workers in a capitalist economy get only a portion of what they produce by their skill and labor, because by a long historical process of expropriation, they have been denied ownership of their own means of production – of their tools, of their machinery, even of their skills – until all they have left is their labor, which if they wish to live they are compelled to sell in the marketplace as though it were a commodity whose natural price is the cost of its reproduction. Why don’t farmers get to eat all the food they grow, after setting aside what is needed for seed? Because they do not own the land and the farm tools. Why don’t factory workers get to wear the clothing they make or to sell it to buy the food they need? Because they do not own the wool or the cotton or the thread or the machinery with which they turn these materials into clothing.

How, I asked, can we capture this situation in a set of formal equations that explains exactly how the workers are getting screwed and simultaneously explains why in a capitalist economy it seems as though the workers are getting a fair return for their labor? Here is what I came up with:

The Philosopher's Stone
The Connection Between Expropriation and Exploitations, Part Two
Robert Paul Wolff | Professor Emeritus, University of Massachusetts Amherst

David F. Ruccio — Markets, power, and the distribution of income

Joseph Stiglitz usefully explains that there’s more than one theory of the distribution of income. One theory, he writes, focuses on competitive markets (according to which “factors of production” receive their marginal contributions to production, the “just deserts” of capitalism); the other, on power (“including the ability to exercise monopoly control or, in labor markets, to assert authority over workers”).…

The only major problem with Stiglitz’s account is he leaves out a third possibility, an approach that combines a focus on market with power, that is, a class analysis of the distribution of income (which the late Stephen Resnick begins to explain in the lecture above).

According to this class or Marxian theory, markets are absolutely central to capitalism—on both the input side (e.g., when workers sell their labor power to capitalists) and the output side (when capitalists sell the finished goods to realize their value). But so is power: workers are forced to have the freedom to sell their labor to capitalists because it has no use-value for them; and capitalists, who have access to the money to purchase the labor power do so because they can productively consume it in order to appropriate the surplus-value the workers create.…

My only point is to point out there’s a third possibility in the debate over the distribution of income—a theory that combines markets and power and is focused on the role of class in making sense of the grotesque levels of inequality we’re seeing in the United States today.

And, of course, that third approach has policy implications very different from the others—not to force workers to increase their productivity in order to receive higher wages through the labor market or to hope that decreasing market concentration will make the distribution of income more equal, but instead to attack the problem at its source. That would mean changing both markets and power and, thus, eliminating class exploitation.

Occasional Links & Commentary
Markets, power, and the distribution of income
David F. Ruccio | Professor of Economics, University of Notre Dame

Brad DeLong — Must-Read: Miriam Ronzoni: Where Are the Power Relations in Piketty’s Capital?

The extremely-sharp Miriam Ronzoni excellently puts her finger on a substantial hole in Thomas Piketty’s Capital in the Twenty-First Century…

WCEG — The Equitablog
Must-Read: Miriam Ronzoni: Where Are the Power Relations in Piketty’s Capital?
Brad DeLong

David F. Ruccio — What’s class got to do with it?

The other day, I recommended the first two installments in the TPM series on “the road to inequality”—albeit with the caution that there was too little discussion of capitalism as a system.

Now, the third installment is in. Jared Bernstein’s “digging around in the data weeds” yields a first-rate introduction to the various measures of inequality in the United States (with which regular readers of this blog will be familiar), all of which point in the same direction: “toward greater economic distance between people and households in their economic outcomes.”

Unfortunately, Bernstein—by his own admission—focuses on the size (individual or household) distribution but shies away from any kind of extended discussion of the class distribution of income….

Here’s the problem: it’s not just that wages are more equally distributed than profits, thus leading to more inequality. As I see it, the opposing movements of the wage and profit shares signal a fundamental change within capitalism that puts more and more value in the hands of capitalists—to do with it what they will—and less in the pockets of workers. 

It thus makes workers (and society as a whole) even more dependent on capitalists, who are able to not only capture the surplus created by those workers, but also to use the surplus to rig the system to get even more of the surplus now and for the foreseeable future.… 

Occasional Links & Commentary
What’s class got to do with it?
David F. Ruccio | Professor of Economics, University of Notre Dame

Ann Pettifor — “What are the economic possibilities for our grandchildren?”

The relevance of Keynes today and the peril of continuing to ignore him.

Debtonation
“What are the economic possibilities for our grandchildren?”

Ann Pettifor

Erik Loomis — A Glimpse Into the Black, Shriveled Hearts of the Republican Class Warriors

Brad DeLong says this is a must-read. I agree. Bonus: It's short.

Sharpen the pitchforks.

Lawyers, Guns & Money
A Glimpse Into the Black, Shriveled Hearts of the Republican Class Warriors
Erik Loomis | Assistant Professor of History at the University of Rhode Island

See also

Naked Capitalism
Detroit: A Case Study of Oligarchs and Vigilantes Taking Over Public Safety in a Big City
Yves Smith

Two worlds.

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only. — Charles Dickens, A Tale of Two Cities

Pavlina R. Tcherneva — When A Rising Tide Sinks Most Boats: Trends In Us Income Inequality

In the postwar period, with every subsequent expansion, a smaller and smaller share of the gains in income growth have gone to the bottom 90 percent of families. Worse, in the latest expansion, while the economy has grown and average real income has recovered from its 2008 lows, all of the growth has gone to the wealthiest 10 percent of families, and the income of the bottom 90 percent has fallen. Most Americans have not felt that they have been part of the expansion. We have reached a situation where a rising tide sinks most boats. 

This policy note provides a broader overview of the increasingly unequal distribution of income growth during expansions, examines some of the changes that occurred from 2012 to 2013, and identifies a disturbing business cycle trend. It also suggests that policy must go beyond the tax system if we are serious about reversing the drastic worsening of income inequality.

Tricked down isn't happening. Time for some new narrative to dupe the rubes.

Levy Institute

When A Rising Tide Sinks Most Boats: Trends In Us Income Inequality

Pavlina R. Tcherneva | Assistant Professor of Economics, Bard College Research Scholar, Levy Economics Institute

Keane Bhatt — Progressive Policies Are Popular - So Why Should Democrats Be Afraid of Them?

A HuffPost/YouGov poll (6/20/13) found that 74 percent of the US public supports requiring companies to offer paid sick leave to their employees; paid maternity leave garnered 61 percent approval. In a number of recent polls, the idea of free community college received majority support (The Hill, 1/20/15)–one poll found that more Republicans favored the measure than opposed it, rather remarkable given that the idea was only recently popularized by President Obama himself.

So it's not voters' preferences that, in Blitzer's words, "could hurt Democrats" facing elections. A likelier reason is election funding. Political scientists Walter Dean Burnham and Thomas Ferguson observed that politicians largely depended on financing from economic elites (AlterNet, 12/18/14) in what were probably the most expensive midterms in history (Washington Post, 10/22/14)

This is entirely consistent with first Chief Justice John Jay's view that the people who own the country should govern the country, making a lie of Abraham Lincoln's "government of the people, by the people and for the people." So much for the left in the United States. There is in effect one party, the party of the ruling elite, which fields two candidates for each office to create a façade of democracy.

Citi called this result "plutonomy." It is aptly characterized as "oligarchic democracy," as Aristotle foresaw in Politics. Wealth and power skew the selection process. Aristotle thought that true democracy could be best achieved by random selection using choice by lot, thereby eliminating class bias.

Truth out

Progressive Policies Are Popular - So Why Should Democrats Be Afraid of Them?

Keane Bhatt, FAIR | Op-Ed    

Ismael Hossein-Zadeh — Class Interests as Economic Theory

Succinct explanation of the transition from classical to neoclassical economics and marginalism.

The formal theoretical shift from classicism to neoclassicism was pioneered (in the last three decades of the 19th century) by three economists: William Stanley Jevons, Carl Menger and Leon Walras. A detailed discussion of these pioneers of neoclassical economics is beyond the purview of this essay. Suffice it to say that all three categorically shunned the labor theory of value in favor of utility theory of value, that is, “value depends entirely upon utility,” as Jevons put it. 

At the heart of the theoretical/philosophical shift was, therefore, the move from labor to utility as the source of value: a commodity’s value no longer came from its labor content, as classical economists had argued, but from its utility to consumers. The new paradigm thus shifted the focus of economic inquiry from the factory and production to the market and circulation, or exchange. 

By the same token as the new school of economic thought abandoned the classicals’ labor theory of value in favor of the utility theory of value, it also discarded the concept of value, which comes from human labor, in favor of price, which is formed (in the sphere of circulation or market) by supply and demand interactions. Henceforth, there was no difference between value and price; the two have since been used interchangeably or synonymously in the neoclassical economics. 

Once the focus of inquiry was thus shifted from how commodities are produced to how they are bought and sold, the distinction between workers and capitalists, between producers and appropriators, became invisible. In the marketplace all people appear as essentially identical: they are all households, consumers or “economic agents” who derive utility from consuming commodities, and who pay for those commodities “according to the amount of the utility/pleasure they derive from their consumption.” They are also identical in the neoclassical sense that they are all “rational,” “calculating,” and utility “maximizing” market players. 

An obvious implication (and a major advantage to the capitalist class) of this new perspective was that in the marketplace social harmony and “brotherhood,” not class conflict, was the prevailing mode of social structure. “The supposed conflict of labor with capital is a delusion,” Jevons asserted, arguing that “We ought not look at such subjects from a class point of view,” because “in economics at any rate [we] should regard all men as brothers” [8].

It should be pointed out (in passing) that the utility theory of value did not start with Jevons. The theory had already been spelled out in the late 18th and early 19th centuries by earlier economists such as Jeremy Bentham, Jean-Baptiste Say, Thomas Malthus and Claude Frédéric Bastiat. However, Jevons and his utilitarian contemporaries of the second half of the 19th century added a new concept to the received theory: the concept of marginal utility or, more specifically, diminishing marginal utility. According to this concept, the utility derived from the use or consumption of a commodity diminishes with every additional unit consumed. 

Despite the fact that Jevons’ addition of the concept of marginal utility to the received utility theory of value was conceptually very simple (indeed, the whole concept of utility and the so-called “law of diminishing marginal utility” are altogether banalities or truisms), it nonetheless proved to be instrumentally a very important notion in the neoclassical economics. For, the term “marginal” was soon extended to other economic categories such as marginal cost, marginal revenue, marginal propensity to consume, and the like; thereby paving the way for the application of differential calculus to economics. “By introducing the notion of marginalism into utilitarian economics, Jevons had found a way in which the utilitarian view of human beings as rational, calculating maximizers could be put into mathematical terms” [9].

Counterpunch
Class Interests as Economic Theory
Ismael Hossein-Zadeh | Professor Emeritus of Economics, Drake University

Jon D. Wisman — “Government Is Whose Problem?”

Abstract: This article addresses the political meaning of President Ronald Reagan's 1981 declaration that "government is the problem." Whereas historically the state had been used by elites to extract as much surplus as possible from producers, with democratization of the franchise, the state became the sole instrument that could limit, or even potentially end, the extraction of workers' surplus. Once control of the state is in principle democratized by the ballot box, the fortunes of the elite depend solely upon controlling ideology. In 1955, Simon Kuznets offered the highly influential conjecture that while rising inequality characterizes early economic development, advanced development promises greater equality. However, rising inequality in most wealthy countries over the past four decades has challenged this hypothesis. What those who embraced Kuznets' conjecture failed to recognize is the dynamics by which the rich, with their far greater command over resources, education, and status, inevitably regain control over ideology and thereby the state. Over the course of history, only the very severe crisis of the 1930s discredited their ideology and led to a sustained period of rising equality. However, by 1980 they had regained ideological ascendancy. This article examines how this struggle over ideology has unfolded in the U.S. since the democratization of the franchise in the late nineteenth century. It concludes with reflections on whether the current crisis holds promise of again de-legitimating the elites' hold on power and ushering in another period of rising equality.

“Government Is Whose Problem?” 

Jon D. Wisman

(h/t James in the comments)

See also

Tom Dispatch

The Great American Class War — Plutocracy Versus Democracy 
Bill Moyers

Peter Radford — Business schools and inequality [HBS smackdown]

Peter Radford smacks down his alma mater, Harvard Business School, as perverted. Harsh. Managerial capitalism at its worst. The good new is that now the public is waking up to the fact that the managerial class is engaged in class warfare against them.

Real-World Economics Review Blog
Business schools and inequality
Peter Radford

See also:

Truthout | Opinion
Debating Capitalism - Redefining Outdated Terms
Richard D Wolff | Professor ofEconomics Emeritus, University of Massachusetts, Amherst

Chris Dillow — Leftist Tories?

As James O'Connor wrote:

"The capitalistic state must try to fulfill two basic and often contradictory functions - accumulation and legitimization...This means that the state must try to create or maintain the conditions in which profitable capital accumulation is possible. However, the state also must try to maintain or create the conditions for social harmony." (The Fiscal Crisis of the State, p6)

Insofar as the Tories have been successful down the decades, it's because they've been able to balance accumulation and legitimization; Thatcher stressed the former, Disraeli the latter, but they are two legs of the same beast.

This raises two questions. First, how strong are the material pressures on the Tories to adopt a more egalitarian stance? I'm in two minds here. On the one hand, working class power is sufficiently weak that it can be ignored, which means there's little need to "bribe the working classes", in Bismarck's phrase. But on the other hand, the social norm against corporate tax-dodging is strong, and the hope that enriching companies would encourage investment and growth seems to have been dashed - both of which point to the need for more legitimization policies.

Secondly, if redistributive policies can be adopted by the "right" (eg Disraeli, Bismarck), and if they can be shunned by the "left" under pressure from capital (eg New Labour), could it be that we over-rate the importance of the colour of the government, and under-rate that of the social norms and class power which constrain governments? At least some economic research (pdf) suggests the answer might be: yes.

Stumbling and Mumbling
Leftist Tories?
Chris Dillow | Investors Chronicle (UK)