Is the UN Marxist?
April 10, 2012 Leave a comment
I recently stumble upon an interview of Dr. Heiner Flassbeck the Director of the United Nations Conference on Trade and Development’s department on Globalization and Development Strategies. In that interview he raised two points (at least in the first 5 minutes I forced myself to watch). The first one was that wages were broadly stagnant. The second point was that a struggle was occurring: not between north and south, not between developed and developing but between labor and capital! I’d first like to point out that he did not credit Marx with his assertion (plagiarizing a**). His ”refuses to die” idea was backed up with a chart of logged real wages and productivity from a speech given at the University of Berkeley by Damon Silvers. The chart showed that both variables tracked each other fairly precisely until the 1970’s at which point the growth trend of real wages unperformed that of productivity.
Now if we assume that the un-referenced data is correct and that by productivity it is implied labor productivity and that we are discussing about a chart describing the American labor situation, at face value it would seem that Dr. Flassbeck is right. But before throwing in the towel and replacing all our Bibles with Das Kapital (if you own a Bible), let’s examine the issue a little closer. Using a super standard macroeconomic growth model:
where α and 1-α are the proportions of capital and labor respectively used to produce GDP (here Y) and with the entrepreneur/employer/firm/corporation/capitalist/slave driver trying to maximize profit through:
we can derive what actually drives output growth per worker! It turns out it isn’t capital, it isn’t labor, it isn’t the choice of using one over the other it is… drum roll please… technology. So macro 101 tells us that productivity growth in the long run occurs because of improvements in technology. Even a business grad could have told you that. The crux of the problem however is that this very same econ 101 lesson would have told you that labor wage equals the productivity of that labor, like in the first 20 years of the chart.
The thing about this model is that it counts all labor as being the same. Try telling a German worker he’s the same as a Greek one. The real catalyst for the dichotomy resides in globalization, something Flassbeck seems to deny. If instead of calculating the productivity of labor we calculate the productivity of capital we see that it is dependent on labor. A typewriter doesn’t write scripts without a writer. Let’s say as a publisher you can print 10,000 copies of a good book written by a French philosopher in the 18th century. Let’s say that suddenly an American writer comes along and is willing to be payed a quarter of the Frenchmen’s wage. While the French Voltaire still writes better books (is more productive) he has to convince you that your printing presses will make more money printing his book than say an increasingly popular Jefferson’s (increasingly productive). While for arguments sake the french 18th century writers are better than their american counterparts to not let the latter look like a good bargain the French will have to drop their wage demands. Similarly American workers need to start asking for less even if they are more productive than their Chinese rivals.
The reason for this is that we cannot look at the productivity of labor and wages in a closed circuit but rather in a World wide context. So while I’m sure the communist chart is correct in it’s assertion that industrialized wages aren’t keeping up with its equivalent productivity, I’m quite certain that on a global basis the gap between the real wage and labor productivity is shrinking. Just to be sure I’ll be crunching some numbers and getting back to you on this after exams.