Labor Power as the ‘Money Commodity’ — Peter Cooper

For Marx and many Marxists, money is based in a commodity; in Modern Monetary Theory (MMT), it is not, being based instead in a social relationship that holds more generally than just to commodity production and exchange. Even so, to the extent that commodity production and exchange are given sway within ‘modern money’ economies, operation of the Marxian ‘law of value’ appears to be compatible with MMT. It is just that, from an MMT perspective, private for-profit market-based activity will be embedded within, and delimited by, a broader social and legal framework that is – or at least can be – decisively shaped by currency-issuing government. Therefore, even though in MMT money is not regarded as a commodity, it seems that a commodity theory of money can be reconciled with MMT provided, first of all, that the connection between a money commodity and currency is understood to apply only to the sphere of commodities and, secondly, that it is legitimate to regard labor power as the ‘money commodity’. An earlier post gave some consideration to the social embeddedness of commodity production and exchange. The present focus is on the notion of labor power as money commodity. On this point, MMT can be understood as directly linking currency to labor power, which, as Marx demonstrated, is a commodity under capitalism. This raises the question of whether labor power can serve the role of money commodity in Marx’s theory.For Marx and many Marxists, money is based in a commodity; in Modern Monetary Theory (MMT), it is not, being based instead in a social relationship that holds more generally than just to commodity production and exchange. Even so, to the extent that commodity production and exchange are given sway within ‘modern money’ economies, operation of the Marxian ‘law of value’ appears to be compatible with MMT. It is just that, from an MMT perspective, private for-profit market-based activity will be embedded within, and delimited by, a broader social and legal framework that is – or at least can be – decisively shaped by currency-issuing government. Therefore, even though in MMT money is not regarded as a commodity, it seems that a commodity theory of money can be reconciled with MMT provided, first of all, that the connection between a money commodity and currency is understood to apply only to the sphere of commodities and, secondly, that it is legitimate to regard labor power as the ‘money commodity’. An earlier post gave some consideration to the social embeddedness of commodity production and exchange. The present focus is on the notion of labor power as money commodity. On this point, MMT can be understood as directly linking currency to labor power, which, as Marx demonstrated, is a commodity under capitalism. This raises the question of whether labor power can serve the role of money commodity in Marx’s theory....

Interesting post. It brings to mind the notion that if labor power is the "money commodity," then "money," which in modern time is government currency, has "commodity power." In mercantilist times, the basic "money commodity" was gold or gold and silver, or silver, depending the historical period. However, Marx's analysis of the extraction of surplus value by the ownership (rentier) class from the working class — farmers in a (feudal) agricultural society and factory workers in a (capitalist) industrial society shows that labor (time and power) are fundamental. The factory workers that dominate the "working class" in numbers are subject to expropriation of property similar to that of serfs and peasants under feudalism. Under capitalism the managerial class has greater bargaining power than the working class since their quality of labor power is scarcer, being more highly skill and specialized. So the rate of expropriation may be less and at the upper levels top management has managed to "split the profits" with the owners.

A monetary system that is based on precious metals or other objects of barter conceals that labor power is foundational. A state money system makes it clear that the "money commodity" is actually labor power. This somewhat obscured in a fixed rate convertible monetary system in which "money" is anchored to a commodity other than labor power, especially when the "money thing" is a natural commodity like stamped coins minted from precious metals. But the reality is that all monetary exchange is based on labor power as the "money commodity" since it is not "money" that creates commodities but rather labor power.

I am not sure to what degree labor power is correctly categorized as a commodity, however. At the very least, labor power is not a naturally existing commodity since labor power other than unskilled labor is a function of time and ability and specialized ability has to be acquired. Nothing similar to this pertains to commodities defined as goods produced for exchange rather than use, which equates to good produced for sale in a monetary production economy.

As a philosopher, I am skeptical about "commoditizing" humans, which, of course, is what the institution of slavery does. The deep ethical question is whether there is a progression from slavery to serfdom to work for hire in which workers are income dependent. Some serious thinker posit that there is such a connection.

This seems to me to be fundamental to the thinking of Marx. Labor is not a natural commodity for Marx, but only becomes a commodity in a monetary production economy. His analysis of capitalist production shows how work for hire is another from of expropriation of real value from workers through the equation of value with price in a market-based capitalist society whose foundation is a monetary production economy. His solution is to change that foundation for one that supports real freedom rather than the illusion of freedom characteristic of 18th century bourgeois liberalism, a foundation that persists today.

As a philosopher, it strikes me that the fundamental issue in economics is value theory. The equation of value with price is based on either assumption or handwaving. Marx got this. He realized that there is much more to economic value than can be captured by price in markets, and also that that markets are not necessarily reflective of true cost where cost includes real resources.

A good example of this is the present existential crisis presented by climate change, which can be trace in part at least to negative externality, where gain is capitalized while part of the cost is socialized through the false assumption that the "the solution to pollution is dilution." Similarly, for Marx, extraction of surplus value is also a negative externality that workers "pay for" through labor that is not justly compensated for it full contribution. This is concealed by the conventional economic theory of reward being determined on the basis of marginal product.

Forced unpaid work is a form of slavery. In a monetary production economy where income from work is a vital necessity, the extraction of surplus value from workers that have insufficient bargaining power to exact just compensation for the contribution of their labor time and power is forced unpaid work.

The MMT job guarantee (JG or ELR) is a step toward connecting "the commodity power of money" directly with labor power through a living wage. However, this just returns workers under capitalism to the position of serfs and peasants that were self-sufficient in terms of their own production and limited needs in agricultural societies. With the advent of the industrial age and the mass moving, often forced, of former agricultural workers to factories that all changed as urban workers became income-dependent, forced to "work for a living" by bidding their labor power in markets at the going offers.

heteconomist
Labor Power as the ‘Money Commodity’
Peter Cooper

Ramanan — Labour Day!

Nicholas Kaldor on how neoliberalism weakened labour power.

Happy Labor Day to all those that don't have a passive income from portfolio investment. You are the people that get it done.

The Case for Concerted Action
Labour Day!
V. Ramanan

Ramanan — Michal Kalecki On The Effect Of Wages On Employment

Kalecki quote.

The Case for Concerted Action
Michal Kalecki On The Effect Of Wages On Employment
V. Ramanan

See also

@Brankomilan leads us to this (french) pieceabout Austria. It states that the Austrian government enacted a new law which authorizes working days of 12 hours and working weeks of 60 hours.
A). This is a clear case of retrogression. It’s good to read what, in 1921, the International Labor Office stated in its first annual report….

Real-World Economics Review Blog
Productivity in the Eurozone (and why it matters)

Merijn Knibbe

Bill Mitchell — US labour market tepid – there is plenty of scope fiscal expansion

On May 4, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – April 2018 – which showed that total non-farm employment from the payroll survey rose by just 164,000 in April, which was an improvement on the very modest rise in March. The Labour Force Survey data, however, showed that employment only rose by 3 thousand) in April 2018 but was accompanied by a substantial fall in the labour force (236 thousand) which meant that total unemployment fell by 239 thousand. The unemployment rate fell to 3.93 per cent (from 4.07) but this does not signal a stronger labour market. There is still a large jobs deficit remaining. Finally, there is no evidence of a wages breakout going on. Taken together, the US labour market is showing no definite trend up or down at present and it is still some distance from being at full employment.

Bill Mitchell – billy blog
US labour market tepid – there is plenty of scope fiscal expansion
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

See also

Bond Economics
Why The U.S. Labour Market Befuddles Forecasters
Brian Romanchuk

Jianghong Li and Wen-Jui Han — Our 24/7 economy and the wealth of nations

Inventing new ways of  killing ourselves and impairing our children.

Asia Times
Our 24/7 economy and the wealth of nations

Jianghong Li, Senior Research Fellow, WZB Berlin Social Science Center.and Wen-Jui Han, Director of NYU-ECNU Institute for Social Development and Affiliate Professor, NYU Shanghai

David F. Ruccio — Looking for work in all the wrong places

The problem in the United States is not what workers do or what they produce. It’s how they do what they do.

Employers, not workers, are the ones who decide how labor is performed. And when they can outsource jobs to contractors—and, as a result, avoid unions, workplace regulations, and adequate pay and benefits—they can exercise even more power over their workers, including of course the ones they continue to employ.

That, and not the loss of manufacturing jobs to foreign companies, is the real problem facing the American working-class.

A big reason that US manufacturing jobs paid well was unionization. This is also a reason that factories were exported to lower labor cost regions. Bringing manufacturing jobs back to the US won't necessarily lead to a return to the wages paid previously when unionization was strong in the US and labor power was able to confront owner/management power through collective bargaining. US labor power has declined significantly since then and there is no indication of it returning.

Occasional Links & Commentary
Looking for work in all the wrong places
David F. Ruccio | Professor of Economics, University of Notre Dame

Bill Mitchell — Rising inequality and underconsumptionRising inequality and underconsumption

John Atkinson Hobson was an English economist in the second-half of the C19th and worked well into the C20th, dying at the age of 81 in 1940. I have been reflecting on his work in the context of wage and other labour market developments in recent years. Hobson, individually and with co-authors, provided some excellent insights into how rising income inequality, mass unemployment and increased poverty destabilises the economic system through its impacts on consumption spending. He argued that government should engender what he called a ‘high-wage economy’ which would provide the best basis for prosperity. He was writing as an antagonist to the trends of the day, which considered wage suppression to be good for business and society. In this blog, we consider some of those issues. This is a further instalment to the manuscript I am currently finalising with co-author, Italian journalist Thomas Fazi. The book, which will hopefully be out soon, traces the way the Left fell prey to what we call the globalisation myth and formed the view that the state has become powerless (or severely constrained) in the face of the transnational movements of goods and services and capital flows. This segment fits into Part 3 which focuses on ‘what is to be done’.

Bill Mitchell – billy blog
Rising inequality and underconsumption
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — An optimistic view of worker power

An overriding theme of our new book is that the idea that the nation state is powerless, which appears to have become absorbed within the mainstream Left narrative is false at the most elemental level.

We argue that while they Left has seemingly become beguiled by the idea that amorphous capital markets need to be assuaged by policies that increase their capacity to gain increasing proportions of the real income produced around the world, the Right has understood all along that they had to work through the state to gain advantage for their constituents, notably the top-end-of-town and capital, in general.…

Bill Mitchell – billy blog
An optimistic view of worker power
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Distributional conflict and inflation – Britain in the early 1970s

In the previous instalment of this series of blogs I am writing, which will form the input to my next book on globalisation and the capacities of the nation-state, which I am working on with Italian journalist Thomas Fazi, I covered the role of trade unions in a capitalist system where class conflict is a major dynamic. One of the characteristics of the post-modern Left is the denial of the role trade unions play in inflationary episodes. However, once we accept that the unions are creatures of capitalism and embody of the conflictual nature of income distribution within that mode of production, then it is clear that as a countervailing force against capital, unions can precipitate economic crisis if they are ‘too successful’. Too successful in this context refers to the use of their power to control the supply of labour which negative impacts on the rate of profit earned by capital and leads to a decline in investment and a rise in unemployment. Trade unions are a problem for capital. Today, we consider the way in which this ‘problem’ manifested in the inflation in Britain in the early to mid-1970s and the failure by the British Labour Party to fully understand the causation involved. By the mid-1970s, the British Labour government had surrendered to the growing dominance of the Monetarist school of thought, which diverted its gaze from the true nature of the economic crisis. They unnecessarily called in the IMF as a result of this blindness.

Bill Mitchell – billy blog
Distributional conflict and inflation – Britain in the early 1970s
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Lynn Parramore — Cut-Throat Capitalism: Welcome To the Gig Economy

Economist Gerald Friedman warns that the much-hyped gig [freelance] economy is a road to ruin for workers....  

GF: The gig economy has been a giant vehicle transferring income from workers to capitalists. Gig work has become a vehicle not only to drive down wages but to eliminate employment-related benefits (including health insurance as well as retirement pensions and government social security). By undermining labor unions and promoting individualist competition among workers, gig work drives down wages and reduces the possibilities for effective working-class political action.

AlterNet
Cut-Throat Capitalism: Welcome To the Gig Economy
Lynn Parramore

Thom Hartmann — How the War on Workers Is Changing

Since 2000, average worker take-home pay has been on a steady freefall, while pay for executives and CEO's has soared off the charts. 

Thus, on the federal level, the War on Workers has been a huge success.

But while the War on Workers has been steadily eating away at the income of working-class Americans, its ultimate goal is to turn America's activist working middle-class into a dispirited, disheartened, and disempowered working poor-class [with no power].

To do that, the forces behind the War on Workers have to shift their focus to the state level, and do away with the last remaining state protections for workers.

That's where the Koch Brothers and other conservative political power players come in....

All across America, conservative lawmakers are doing everything in their power to quash working-class Americans, thus destroying the integrity and vitality of our democracy by turning the middle class into the working poor. 

A functioning democracy requires a strong and functioning middle-class. 

And despite what conservatives will try to tell you, unrestrained capitalism is not going to get us there, because unrestrained capitalism always produces a working poor-class, and not a strong middle-class.

To get a middle class, you must combine capitalism with government regulation and safety-net programs. It's really just that simple, and history tells the story over and over again.

Truthout
How the War on Workers Is Changing
The Daily Take Team, The Thom Hartmann Program | Op-Ed

David Beckworth — A Paradox of Flexibility or Central Bank Incompetence?

Of course, Professor Beckworth, being an obedient neoliberal, doesn't meet the Keynesian objection concerning where the effective demand is going to come from either to purchase increasing supply or to send a signal to suppliers to produce more, and he doesn't give any indication that he is even familiar with the Keynesian argument, not realizing that New Keynesians are not actual Keynesians at all, but neoclassical economists at bottom, just as Samuelson was.

Beckworth is just "monetary policy, monetary policy, monetary policy." How is that monetary policy working for you these days? Oh right, the Fed is not targeting NGDP.

Market monetarists like Beckworth don't understand money, the relevance of accounting and finance to economics, or stock-flow consistency macro modeling. Have they even perused Godley and Lavoie, for example?

The kicker, however, is that real wages have been falling over the last couple of years, not rising. Oh right, they are not falling fast enough. I see. How about wage stagnation over the last thirty years and an inverse relationship between labor share and profit share. Oh right, not enough, even though inequality of income and wealth and the Gini coefficient of the US the highest of developed countries.

Oh, and did I mention that corporate profits have been rising since the Great Recession? Yeah, those corporations are really being squeezed by wage rigidity, it seems. NOT.

What neoclassical economists dont' see is that there is a tradeoff between wage flexibility and unemployment. Employers generally use both. They cull their work force and also do their best to reduce wages to control costs. But their best strategy is let the least productive workers go and continue to pay productive workers well so that they don't lose them to higher competitive bids, so that their workforce decline competitively.

Economists should be required to work in business for a few years before going to grad school to learn how business actually operates. Sorry, guys, it's more nuanced than you think.

Did I forget anything? After all I am not an economist.

Macro and Other Musings
A Paradox of Flexibility or Central Bank Incompetence?

David Beckworth | Assistant Professor of Economics at Texas State University in San Marcos, Texas

Chris Dillow — Profits, Norms And Power

There are several possible responses to this [decline in countervailing labor power due to neoliberal policy since Thatcher-Reagan]:

- To ignore the role of power . Doing so, I suspect is an example of how beliefs, such as Friedman's, can persist after the conditions in which they were reasonable have disappeared.

- To think that power can be restrained by social norms, as Jesse [Norman] does.It's a good conservative position, to think that free markets are welfare-enhancing if they operate within a particular moral code.

- To think legislation is necessary to rein in firms. This is the statist social democratic view.

There is, though, a fourth view - the Marxian one. This says that the tension between profit maximization and welfare hasn't increased simply because of a failure of law and morals, but because of a genuine shift in the balance of class power. Firms now have power and one thing we know about power is that it'll be used. Unless this changes, hopes of reconciling profit maximization with well-being might well prove mistaken.

Stumbling and Mumbling
Profits, Norms And Power
Chris Dillow | Investors Chronicle (UK)

Corey Robin — Rights of Labor v. Tyranny of Capital

There you have it. The government requiring an employer to hang a poster informing workers of their rights is a violation of the employer’s liberty.

Employers requiring employees to attend a rally in support of Mitt Romney—or otherwise instructing employees how to vote in an election—is an exercise of the employer’s liberty.

Rights of Labor v. Tyranny of Capital
Corey Robin

Prelude to life in a Libertarian paradise, where ownership rights trump human rights and civil rights in world where those who own more are better than others owing to meritocracy.

Robert Oak — Comprehensive Immigration Bill is a Disaster for American Workers

America has a problem, a big problem. We have a Congress who will only act when powerful lobbyists throw enough money at them. Such is the result of the new Comprehensive Immigration Reform bill. This bill will be an unmitigated disaster for working America. The bill increases the U.S. legal labor supply by at least 14 million by giving not just those here illegally legal status but also those who were previously deported who still have family members in the U.S. the legal status to work. Yet the massive increase in the U.S. labor supply caused by legalizing those here unauthorized isn't even half of the labor disaster story this bill will bring....

Hit particularly hard will be American Scientists, Technologists, Engineers and Mathematicians (STEM). Not only will the bill increase H-1B Visas from 85,000 to 135,000, they are allowing the limit to go to 180,000 per year. That is basically all of the jobs created each year in these occupations. That means every single STEM job would end up beingforeigners preferred, forcing U.S. workers out of their careers as the faux pas worker protections are clearly written to be vague and loophole ridden. Just as lobbyists wrote this turkey in actuality, big business will also make sure any U.S. workers protections will be removed before actual legislation passage.

We have shown many times, there is no labor shortage at any skill level in the United States. In particular there is no labor shortage in the Science, Technology, Engineering and Mathematics occupational areas. Yet in this bill there would be no limits [f]or instant green cards for the below occupational categories....

The Economic Populist
Comprehensive Immigration Bill is a Disaster for American Workers
Robert Oak

More wage repression and a further attack on labor bargaining power in order to increase profit share.

Robert Vienneau — Marxian Exploitation As Descriptive

Marx explains returns to capital by his theory of surplus value. For Marx, surplus value arises from the exploitation of workers. Capitalists hire labor power, and the use value of labor power is the ability for the workers to labor under the direction of the capitalists. Suppose the produced commodities (which include the means of production) and labor power are both sold at their (labor) value. Surplus value is the difference between the value added by the workers and the value of their labor power.

I think this account of exploitation is intended by Marx to be descriptive. It is not, for Marx, the basis of a normative judgement of capitalism. I havepreviously documented that many scholars and activists, over more than a century, have shared my view. In this post, I note two more references putting forth a view consistent with mine [Allen Wood and William J Baumol].

Thoughts on Economics
Marxian Exploitation As Descriptive
Robert Vienneau

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)

Michael Hudson — Reality Economics

“Whom the gods would destroy, they first make mad.” And if they would destroy economies, they first create a wealthy class on top, and let human nature do the rest. The acquisition of power soon leads to its abuse, to economic and social hubris. By seeking to protect its gains, perpetuate itself and make its wealth hereditary, the emergence of a power elite locks in its position in ways that exclude and injure those below. The wealthy indebt them, shift the tax burden onto the less powerful, and turn government into an oligarchy. 

It is an ancient tale. The Greeks got matters right in seeing how power leads to hubris, bringing about its own downfall. Hubris is the addiction to wealth and power, an arrogant over-reaching that involves injury to others. By impoverishing economies it destroys the source of profits, interest, capital gains, and even recovery of the original savings and debt principal.

This abusive character of wealth and power is not what mainstream economic models describe. That is why economic theory is broken. The concept of diminishing marginal utility implies that the rich will become more satiated as they become wealthier, and hence less addicted to power. This idea of progressive satiation returns gets the direction of change wrong, denying the basic thrust of the past ten thousand years of human technology and civilization.

Counterpunch
Reality Economics
Michael Hudson | Visiting Professor, UMKC

(h/t Kevin Fathi via email)

Covers most of the important points other than monetary economics. Good summary to pass on. Explains to people who are pissed off, why, and explains to those who are not pissed off yet, why they should be.

Art Shipman — Unit Labor Cost

Labor costs (including benefits) have been declining since 1961. Labor costs cannot be the driver of inflation.

The New Arthurian Economics
Unit Labor Cost
Art Shipman

(h/t Clonal in the comments)