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The tendency of the rate of profit to fall

David Graeber in The Baffler has written a truly extraordinary article:

Of Flying Cars and the Declining Rate of Profit
End of work arguments were popular in the late seventies and early eighties as social thinkers pondered what would happen to the traditional working-class-led popular struggle once the working class no longer existed. (The answer: it would turn into identity politics.) Jameson thought of himself as exploring the forms of consciousness and historical sensibilities likely to emerge from this new age.

What happened, instead, is that the spread of information technologies and new ways of organizing transport—the containerization of shipping, for example—allowed those same industrial jobs to be outsourced to East Asia, Latin America, and other countries where the availability of cheap labor allowed manufacturers to employ much less technologically sophisticated production-line techniques than they would have been obliged to employ at home.

From the perspective of those living in Europe, North America, and Japan, the results did seem to be much as predicted. Smokestack industries did disappear; jobs came to be divided between a lower stratum of service workers and an upper stratum sitting in antiseptic bubbles playing with computers. But below it all lay an uneasy awareness that the postwork civilization was a giant fraud. Our carefully engineered high-tech sneakers were not being produced by intelligent cyborgs or self-replicating molecular nanotechnology; they were being made on the equivalent of old-fashioned Singer sewing machines, by the daughters of Mexican and Indonesian farmers who, as the result of WTO or NAFTA–sponsored trade deals, had been ousted from their ancestral lands. It was a guilty awareness that lay beneath the postmodern sensibility and its celebration of the endless play of images and surfaces.

That is very acute.

In fact, even as those dreams [the Jetssons, and so forth] were being outlined, the material base for their achievement was beginning to be whittled away. There is reason to believe that even by the fifties and sixties, the pace of technological innovation was slowing down from the heady pace of the first half of the century.

This is certainly true for computers. We're still using a crippled version of Xerox PARC's software, dating from 1968, today.

There was a last spate in the fifties when microwave ovens (1954), the Pill (1957), and lasers (1958) all appeared in rapid succession. But since then, technological advances have taken the form of clever new ways of combining existing technologies (as in the space race) and new ways of putting existing technologies to consumer use (the most famous example is television, invented in 1926, but mass produced only after the war.) Yet, in part because the space race gave everyone the impression that remarkable advances were happening, the popular impression during the sixties was that the pace of technological change was speeding up in terrifying, uncontrollable ways.

Alvin Toffler’s 1970 best seller Future Shock argued that almost all the social problems of the sixties could be traced back to the increasing pace of technological change. ...

While many of the historical trends Toffler describes are accurate, the book appeared when most of these exponential trends halted. It was right around 1970 when the increase in the number of scientific papers published in the world—a figure that had doubled every fifteen years since, roughly, 1685—began leveling off. The same was true of books and patents.

Another curve change in the mid-70s, when the neo-liberal dispensation began! (See here and here.)

And now -- drumroll, please -- enter the Old Mole:

ven capitalism’s greatest detractors, Karl Marx and Friedrich Engels, celebrated its unleashing of the “productive forces.” Marx and Engels also believed that capitalism’s continual need to revolutionize the means of industrial production would be its undoing. Marx argued that, for certain technical reasons, value—and therefore profits—can be extracted only from human labor [M-C-M']. Competition forces factory owners to mechanize production, to reduce labor costs, but while this is to the short-term advantage of the firm, mechanization’s effect is to drive down the general rate of profit.

And now...

For 150 years, economists have debated whether all this is true. But if it is true, then the decision by industrialists not to pour research funds into the invention of the robot factories that everyone was anticipating in the sixties, and instead to relocate their factories to labor-intensive, low-tech facilities in China or the Global South makes a great deal of sense.

Exactly.

A case could be made that even the shift to research and development on information technologies and medicine was not so much a reorientation toward market-driven consumer imperatives, but part of an all-out effort to follow the technological humbling of the Soviet Union with total victory in the global class war—seen simultaneously as the imposition of absolute U.S. military dominance overseas, and, at home, the utter rout of social movements.

For the technologies that did emerge proved most conducive to surveillance, work discipline, and social control. Computers have opened up certain spaces of freedom, as we’re constantly reminded, but instead of leading to the workless utopia Abbie Hoffman imagined, they have been employed in such a way as to produce the opposite effect. They have enabled a financialization of capital that has driven workers desperately into debt, and, at the same time, provided the means by which employers have created “flexible” work regimes that have both destroyed traditional job security and increased working hours for almost everyone. Along with the export of factory jobs, the new work regime has routed the union movement and destroyed any possibility of effective working-class politics.

"Any"? Hoping that's not the reveal, here.

With results like these, what will the epitaph for neoliberalism look like? I think historians will conclude it was a form of capitalism that systematically prioritized political imperatives over economic ones. Given a choice between a course of action that would make capitalism seem the only possible economic system, and one that would transform capitalism into a viable, long-term economic system, neoliberalism chooses the former every time.

TINA!

Of course this doesn’t explain everything. Above all, it does not explain why, even in those areas that have become the focus of well-funded research projects, we have not seen anything like the kind of advances anticipated fifty years ago.

Here we go....

[M]ost observers agree that the results have been paltry. Certainly we no longer see anything like the continual stream of conceptual revolutions—genetic inheritance, relativity, psychoanalysis, quantum mechanics—that people had grown used to, and even expected, a hundred years before. Why?

What has changed is the bureaucratic culture. The increasing interpenetration of government, university, and private firms has led everyone to adopt the language, sensibilities, and organizational forms that originated in the corporate world.

Shifting for a moment to the Old Mole:

“The ideas of the ruling class are in every epoch the ruling ideas, i.e. the class which is the ruling material force of society, is at the same time its ruling intellectual force. The class which has the means of material production at its disposal, has control at the same time over the means of mental production, so that thereby, generally speaking, the ideas of those who lack the means of mental production are subject to it. The ruling ideas are nothing more than the ideal expression of the dominant material relationships, the dominant material relationships grasped as ideas.”

(See the "Thoughts on Wage Labor" thread, starting especially at Okagen's comment here.) Back to Graeber:

Although this might have helped in creating marketable products, since that is what corporate bureaucracies are designed to do, in terms of fostering original research, the results have been catastrophic.

My own knowledge comes from universities, both in the United States and Britain. In both countries, the last thirty years have seen a veritable explosion of the proportion of working hours spent on administrative tasks at the expense of pretty much everything else. In my own university, for instance, we have more administrators than faculty members, and the faculty members, too, are expected to spend at least as much time on administration as on teaching and research combined. The same is true, more or less, at universities worldwide.

This is also true for health care; health insurance companies and college administrators are both of the order Siphoptera.

The growth of administrative work has directly resulted from introducing corporate management techniques. Invariably, these are justified as ways of increasing efficiency and introducing competition at every level. What they end up meaning in practice is that everyone winds up spending most of their time trying to sell things: grant proposals; book proposals; assessments of students’ jobs and grant applications; assessments of our colleagues; prospectuses for new interdisciplinary majors; institutes; conference workshops; universities themselves (which have now become brands to be marketed to prospective students or contributors); and so on.

As marketing overwhelms university life, it generates documents about fostering imagination and creativity that might just as well have been designed to strangle imagination and creativity in the cradle.

Because markets! Because shopping is always good, marketing is always good!

That pretty much answers the question of why we don’t have teleportation devices or antigravity shoes. Common sense suggests that if you want to maximize scientific creativity, you find some bright people, give them the resources they need to pursue whatever idea comes into their heads, and then leave them alone. Most will turn up nothing, but one or two may well discover something. But if you want to minimize the possibility of unexpected breakthroughs, tell those same people they will receive no resources at all unless they spend the bulk of their time competing against each other to convince you they know in advance what they are going to discover.

In the natural sciences, to the tyranny of managerialism we can add the privatization of research results.

And computer code...

Giovanni Arrighi has noted that after the South Sea Bubble, British capitalism largely abandoned the corporate form. By the time of the Industrial Revolution, Britain had instead come to rely on a combination of high finance and small family firms—a pattern that held throughout the next century, the period of maximum scientific and technological innovation. (Britain at that time was also notorious for being just as generous to its oddballs and eccentrics as contemporary America is intolerant. A common expedient was to allow them to become rural vicars, who, predictably, became one of the main sources for amateur scientific discoveries.)

Contemporary, bureaucratic corporate capitalism was a creation not of Britain, but of the United States and Germany, the two rival powers that spent the first half of the twentieth century fighting two bloody wars over who would replace Britain as a dominant world power—wars that culminated, appropriately enough, in government-sponsored scientific programs to see who would be the first to discover the atom bomb. It is significant, then, that our current technological stagnation seems to have begun after 1945, when the United States replaced Britain as organizer of the world economy.

And now the $64,000 question:

What are the political implications of all this? First of all, we need to rethink some of our most basic assumptions about the nature of capitalism. One is that capitalism is identical with the market [Braudel doesn't assume this either], and that both therefore are inimical to bureaucracy [ever worked in a cube?], which is supposed to be a creature of the state.

The second assumption is that capitalism is in its nature technologically progressive. It would seem that Marx and Engels, in their giddy enthusiasm for the industrial revolutions of their day, were wrong about this. Or, to be more precise: they were right to insist that the mechanization of industrial production would destroy capitalism; they were wrong to predict that market competition would compel factory owners to mechanize anyway. If it didn’t happen, that is because market competition is not, in fact, as essential to the nature of capitalism as they had assumed. If nothing else, the current form of capitalism, where much of the competition seems to take the form of internal marketing within the bureaucratic structures of large semi-monopolistic enterprises, would come as a complete surprise to them.

What an amazing argument. I am riffling through my mental back catalog of the Old Mole's publications, and I have to admit that Graeber could be right, especially on the second assumption. I'm trying to remember Walter Benjamin and the Frankfurt School (I'm much better on the former, than the latter) and I don't remember this argument being made either. Readers?

* * *

And interestingly.... Graeber doesn't really answer his question: "What are the political implications of all this?" I guess I'm going to have to go back to writing about the 12-points.

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okanogen's picture
Submitted by okanogen on

If you please, this would be a great new sticky. I didn't have more to say yet, because I was falling asleep.

And now, too busy....

CMike's picture
Submitted by CMike on

Globalization is one of the reasons the development of robotics has been slower than one might have expected, but nonetheless that tortoise will be passing some highly significant milestones in the coming two decades. In other news, the first recombinant DNA patent was issued in 1980, and Noam Chomsky says the focus of government sponsored research these days has shifted from electronics to biotechnology. But in this passage from Rogue States, a book he wrote in 2000, Chomsky looked back at some technological history to advance a central economic thesis of his:

...Alan Greenspan recently gave a talk to newspaper editors in the US. He spoke passionately about the miracles of the market, the wonders brought by consumer choice, and so on. He also gave some examples: the Internet, computers, information processing, lasers, satellites, transistors. It's an interesting list: these are textbook examples of creativity and production in the public sector.

In the case of the Internet, for 30 years it was designed, developed, and funded primarily in the public sector, mostly by the Pentagon, then by the National Science Foundation - that's most of the hardware, the software, new ideas, technology, and so on. In just the last couple of years it has been handed over to people like Bill Gates, whom at least, you have to admire for his honesty: he attributes his success to his ability to "embrace and extend" the ideas of others, commonly others in the public sector.

In the case of the Internet, consumer choice was close to zero, and during the crucial development stages the same was true of computers, information processing, and all the rest - unless by "consumer" you mean the government; that is, public subsidy. In fact, of all the examples that Greenspan gives, the only one that maybe rises above the level of a joke is transistors, and they are an interesting case. Transistors, in fact, were developed in a private laboratory - Bell Telephone Laboratories of AT&T - which also made major contributions to solar cells, radio astronomy, information theory, and lots of other important things. But what is the role of markets and consumer choice in that? Well, again, it turns out zero.

AT&T was a government supported monopoly, so there was no consumer choice, and as a monopoly they could charge high prices: in effect, a tax on the public which they could use for institutions like Bell Laboratories, where they could do all the work. So, again, it's publicly subsidized. As if to demonstrate the point, as soon as the industry was deregulated, Bell Labs went out of existence, because the public wasn't paying for it any more [CMike- AT&T was deregulated 1984 and Bell Labs was spun off to a "start up" in 1996]: its successors work mostly on short-term applied projects. But that's only the beginning of the story.

True, Bell Labs invented transistors, but they used wartime technology, which, again, was publicly subsidized and state initiated. Furthermore, there was nobody to buy transistors at that time, because they were very expensive to produce. So, for 10 years the government was the major procurer, particularly for high-performance transistors.

In 1958 the Bell Telephone supplier, Western Electric, was producing hundreds of thousands of these, but solely for military applications. Government procurement provided entrepreneurial initiatives and guided the development of the technology, which could then be disseminated to industry. That's "consumer choice" and the "miracle of the market" in the one case that you can even look at without ridicule.

And in fact that story generalizes. The dynamic sectors of the economy rely crucially on massive public subsidy, innovation, and creativity; the examples that Greenspan gave are mostly some of the most dramatic cases of this.

It's a revealing set of choices. A lot of this is masked as defense, but that's not all - the same is true in biotechnology, pharmaceuticals, and so on. Naturally, business is delighted with all of this: the public pays the cost and assumes the risks (a kind of "socialism for the rich"). And profit and power are privatized - that's really existing market theory. It goes back for centuries, but it is dramatically true now...

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And I'll add, various estimates put the total U.S. cost for the war in Iraq at from $1 trillion to the Joe Stiglitz figure of $3 trillion. If there was a national security reason for going into that war it had to do, not with terrorism, but with a strategic ambition that the U.S. had to have control over the governments exporting oil from that region. The absurdity of the whole thing is that with the unthinkable sum of a trillion dollars for another purpose, a crash pure research program in alternative energy and related fields, the U.S. government almost certainly could have gone a long way to solving the problem of world reliance on Mid East oil inside of two decades from the Gulf War II start date in 2003.

Submitted by lambert on

... unless it's (re-)defined in a new way.

I think the heart of the argument is that the capitalist class did not bring society's productive forces to a point where capitalist social relations would end, as the Old Mole thought they would; rather, they halted "innovation," and reproduced those relations in new contexts. (My argument that the history of the Thai automobile parts industry is a lot like Detroit, down to the music.)

I think that is a very interesting argument that rings true. It also makes sense of the current fetish for "innovation" which is (a) another way to attempt to avoid the falling rate of profit but (b) so often, not. I mean, we call cell phone apps "innovative' or even "disruptive." Oh, by comparison to electricity? Clean water as a utility? O rly?

UPDATE On Iraq, it's a meta "because TINA." The one thing that cannot change is social relations. It not only cannot change, it cannot be questioned. So, control oil from Iraq as opposed to a crash course in enegy independence.

CMike's picture
Submitted by CMike on

With the help of the U.S. Navy's introduction of container shipping methods (or according to Forbes with the help of a government contractor) and free trade agreements, globalization has provided what for industry in the developed world seems like an inexhaustable supply of cheap labor and that cheap labor has put the development of labor saving technology on the back burner for a while. If unionized American garment workers had been employed producing the lion's share of "our carefully engineered high-tech sneakers" over the past four decades not "the daughters of Mexican and Indonesian farmers" then you'd be seeing some "intelligent cyborgs or self-replicating molecular nanotechnology" in the process by now not "the equivalent of old-fashioned Singer sewing machines" that are still being used according to Graeber.

CMike's picture
Submitted by CMike on

you see the default capitalist setting as there being an underclass employed at subsistence wages doing something not an inexorable march towards masses of people being penned up in urban economic wastelands a la the depiction in RoboCop I.

Submitted by lambert on

... in the same way that a balloon falling out of the air to the ground is its tendency (air = rate of profit).

But it always works out on the ground in the real economy. The US is still very far from that point by world standards. The Robocop scenario looks a lot like the reserve industrial army to me. Very useful to elites from a System D standpoint too, I am sure.

Adding... What's interesting is the way the elite's avoided the "inevitable" changes to the social relations of production. That's what "outsourcing" was all about.... That was the essence of the neo-liberal project that began in the mid-70s, is I take it Graeber's argument (my idea that the lesson elites took from the New Deal was "Never Again" in a way.

Submitted by lambert on

People have agency. Classes of people have agency. I object strenuously to the idea that abstractions like "globalization" (or "technology" or "the economy") have agency. Not to say that they aren't handle labels for bundles of historical processes or systems. But that's all they are.

CMike's picture
Submitted by CMike on

You would agree that if someone was out in the country, walking home across a huge clear field, a sudden storm came up, and they were struck by lightening that there would be no human "agency" involved in the tragedy, at least not for the scientific minded. At what point in this example would you say there's (culpable) human agency at work?:

Background

In the mid-19th century, the Soho district of London had a serious problem with filth due to the large influx of people and a lack of proper sanitary services: the London sewer system had not reached Soho. Many cellars (basements) had cesspools of night soil underneath their floorboards. Since the cesspools were overrunning, the London government decided to dump the waste into the River Thames. This action contaminated the water supply, leading to the cholera outbreak.

Outbreak

On 31 August 1854, after several other outbreaks had occurred elsewhere in the city, a major outbreak of cholera struck Soho. John Snow, the physician who eventually linked the outbreak to contaminated water, later called it "the most terrible outbreak of cholera which ever occurred in this kingdom."

Over the next three days, 127 people on or near Broad Street died. In the next week, three quarters of the residents had fled the area. By 10 September, 500 people had died and the mortality rate was 12.8 percent in some parts of the city. By the end of the outbreak, 616 people had died.

John Snow investigation

Snow was a skeptic of the then-dominant Miasma theory that stated that diseases such as cholera or the Black Death were caused by pollution or a noxious form of "bad air". The germ theory was not created at this point (as Louis Pasteur would not create it until 1861), so Snow was unaware of the mechanism by which the disease was transmitted, but evidence led him to believe that it was not due to breathing foul air. He first publicized his theory in an essay On the Mode of Communication of Cholera in 1849. In 1855 a second edition was published, with a much more elaborate investigation of the effect of the water-supply in the Soho, London epidemic of 1854.

By talking to local residents (with the help of Reverend Henry Whitehead), he identified the source of the outbreak as the public water pump on Broad Street (now Broadwick Street). Although Snow's chemical and microscope examination of a sample of the Broad Street pump water was not able to conclusively prove its danger, his studies of the pattern of the disease were convincing enough to persuade the local council to disable the well pump by removing its handle. Although this action has been popularly reported as ending the outbreak, the epidemic may have already been in rapid decline, as explained by Snow himself:

There is no doubt that the mortality was much diminished, as I said before, by the flight of the population, which commenced soon after the outbreak; but the attacks had so far diminished before the use of the water was stopped, that it is impossible to decide whether the well still contained the cholera poison in an active state, or whether, from some cause, the water had become free from it.

Snow later used a spot map to illustrate how cases of cholera were centered on the pump. He also made a solid use of statistics to illustrate the connection between the quality of the source of water and cholera cases. Snow's efforts to connect the incidence of cholera with potential geographic sources centered on creating what is now known as a Voronoi diagram. He mapped out the locations of individual water pumps and generated cells which represented all the points on his map which were closest to each pump. The section of Snow's map representing areas in the city where the closest available source of water was the Broad Street pump circumscribed most cases of cholera.

There was one significant anomaly - none of the monks in the adjacent monastery contracted cholera. Investigation showed that this was not an anomaly, but further evidence, for they drank only beer, which they brewed themselves. Residents near or in the brewery on Broad Street were also not affected as a result of the fermentation of the contaminated water. The beer was safer to drink than the dirty water from the Broad Street Pump.

Snow also showed that the Southwark and Vauxhall Waterworks Company was taking water from sewage-polluted sections of the Thames and delivering the water to homes with an increased incidence of cholera. Snow's study was in the history of public health and health geography, and can be regarded as the founding event of the science of epidemiology.

Now was there in some sense a culpable human agency at work in causing outbreaks of cholera before the germ theory of disease was understood or was it a blight that might have been more properly then been categorized alongside old age, a pathology which even at this late date ultimately remains beyond human control? Would you blame those in charge of society for establishing London though at the time cholera was an unforeseeable consequence? Would you blame anyone in charge who held on to the theory of Miasma after John Snow had first offered his alternative theory?

Submitted by lambert on

Well, what I wouldn't do is assign causality -- not the same as "blaming" -- an academic construct like "technology" or "globalization." That's the key point. That habit of thought is incredibly disempowering politically, because it leads almost inevitably to passive acceptance. "Globalization" isn't some sort of impersonal force, like the weather, any more than disemployment is. Both are the outcomes of choices by people with power to affect policy outcomes collectively. Of course, there are layers of causality all the way down through the mycelial mat and out to sunspots. But "globalization" isn't one of those layers.

I think if the powers that be in London hadn't listened to the map dude, in the same way that the Austrian medical establishment didn't listen to Semmelweiss, they would have been culpable, yes.

CMike's picture
Submitted by CMike on

Did you ever see these back to back Krugman posts?

ONE

TWO

[And by the way, do you know why I don't seem to be able to Copy when I right click on your threads these days? The menu comes up as if I'm highlighting a picture.]

Submitted by lambert on

What do you mean "thread"? When I get behavior like clicking on a link and getting an image dialog, it's because my command and/or control and/or option keys are sticky. Try banging them. There's nothing on the site that has changed and no way for me to affect that.