27 thoughts on “Sandpit

  1. Has anyone seen Fran? Fran Barlow, regular and always interesting and knowledgeable. I’ve been away a few months which might explain… Hope you’re still out there Fran.

  2. John Quiggin demonstrates a certain childish approach:

    Ivor, I don’t think arguing about definitions is going to get us far. If you define capitalism narrowly, I’m arguing to replace it with something else.

    However for serious scholars – definitions are critical, and the best definitions are always consise and precise. Apologists for capitalism always try to replace Marx’s understandings of wages, profits, value and capital with “something else”. This is why we are now facing the possibility of real economic catastrophe, the last Act of a Keynesian comedy.

    A precise definition only needs a dozen words – maybe one or two more if in English.

    However, it seems strange, but I have found no suitable definition of capitalism in any Western source. Zero.

    Marx never explicitly defined capitalism but he did cite a differentia specifica (sic).

    In essence – the use of labour-power to produce commodities representing more value than paid for when obtaining the labour.

    Marx also established his “absolute law” of capitalist production – the creation of surplus value.

    Unfortunately these are not adequate as definitions of capitalism as they can also describe feudalism. Serfs also produced commodities representing more value than they were paid.

    Elsewhere Marx described capitalism as a movement of throwing money into production so that it produced more for the investor (aka capitalist). Marx depicted this as a movement of one amount of money M converted into market commodities C which then sold for a larger amount of money M’.

    Anyone half-acquainted with Marx will recognise his T-shirt formula:

    M – C – M’

    However this does not entirely define capitalism, as this money cycle could apply under any form of profiteering such as merchantilism, colonialism etc.

    Capitalism is not merely the use of capital to produce growth or increase productivity.

    In a naive sense Robinson Crusoe used capital to increase his living standard. More accurately however, he was not using capital, he used tools – the products of previous labour. Capitalism does not exist within a Crusoe scenario. This reflects an umbiguity in the use of the word capital. Capital, as commonly understood, is not the problem, something else must feature. Capital, as Marx understood – ie as a social relation – is different and destructive. In fact Marx explicitly stated that means of production were not automatically capital, they needed to be converted into capital by splitting society.

    So it seems that cthe definitive part. Accumulating wealth privately and using it to build huge mansions, castles, luxurious estates and to hire servants, kitchen hands, grooms and etc, and fund armies is not capitalism. Any anti-social accumulation of wealth is used for luxurious consumption. This is inequitable but does not lead to structural economic catastrophe.

    So in short – Capitalism is the accumulation and reinvestment of capital for as long as capitalism lasts.

    Currently, this occurs as a private accumulation through the expropriation of wage labour, but it can occur at the State (ie public) level.

  3. @John Quiggin

    Well, if you had the same position when it came to the insults coming from Megan etc and the “F word”, I would sympathise.

    Lenin used the word infantile.

    It is standard analysis.

  4. @Ivor

    If you don’t like the way I run the blog, apply at the office for a full refund on your way out.

  5. Professor Richard D. Wolff addresses the problem of defining capitalism in this essay titled;

    “Critics of Capitalism Must Include Its Definition”


    Read the article before or after my potted summary and analysis below.

    In summary, Prof. Wolff points out that;

    (1) “Whatever distinguishes capitalism from such other systems as slavery and feudalism, markets and free enterprises are not it.” Both of these things can and did exist within slavery systems and feudal systems.

    (2) “How an economic system organizes the production, appropriation and distribution of its surplus can be used to neatly and clearly differentiate capitalism from other systems.”

    As Prof. Wolff says;

    “Capitalism’s organization of the surplus differs from both slavery’s and feudalism’s. The surplus producers in capitalism are neither property (slavery), nor bound by personal relationships (feudal mutual obligations). Instead, the producers in capitalism enter “voluntarily” into contracts with the possessors of material means of production (land and capital).”

    Prof. Wolff uses scare quotes around “voluntary” to illustrate that the work contract is only nominally and legally voluntary. In reality, there is a certain amount of intrinsic coercion in the system. There is a degree of economic necessity and compulsion which forces most potential workers into such a contract with some employer as the alternatives are starvation, subsistence welfare or crime.

    “Marx used the word “exploitation” to focus analytical attention on what capitalism shared with feudalism and slavery, something that capitalist revolutions against slavery and feudalism never overcame.” – Prof. R.D. Wolff

    At each stage from slave to serf to wage worker, we can see that exploitation remains a given albeit it is transformed in nature each time. It is progressively ameliorated but certainly not done away with entirely. Thus capitalism indeed represents progress but equally clearly it is not the end of progress because alienation and exploitation are not yet done away with.

    Those who can’t see that capitalism is not the end of enlightened progress are either;

    (a) substantially like those social conservatives and privileged beneficiaries of slavery or feudal systems who could not or would not see beyond the extant system and their own interests in it; or

    (b) they are of that part of the exploited class which remains unconscious (in a condition of false consciousness) of the true remaining dimensions of their exploitation and do not (yet) have the analytic capability to decode the situation nor the revolutionary desire to change it.

  6. @Ikonoclast

    I would hope that my approach is consistent with Wolff’s. Although I haven’t read this work I have his “Economics: Marxism vs Neoclassical” (John Hopkins U P, 1987). The first chapter is probably useful for those who have not studied university microeconomics.

    Here Wolff notes that Marx focused on “capitalists” as appropriators of surplus product in the form of surplus value (p 163).

    This is my view. Introducing the dynamic between surplus product (which would arise with Robinson Crusoe) and surplus value (which needs exploitation of others) is the key.

    But what do our capitalists say:

    We care nothing about value – we only care about crisis – or words to that effect.

    see: http://www.archive.is/EkALK

    Hence the austerity, inequality, mountain of debt and closing factories, shipyards and mines.

  7. @Ikonoclast

    I would hope that my approach is consistent with Wolff’s. Although I haven’t read this work I have his “Economics: Marxism vs Neoclassical” (John Hopkins U P, 1987). The first chapter is probably useful for those who have not studied university microeconomics.

    Here Wolff notes that Marx focused on “capitalists” as appropriators of surplus product in the form of surplus value (p 163).

    This is my view. Introducing the dynamic between surplus product (which would arise with Robinson Crusoe) and surplus value (which needs exploitation of others) is the key.

    But what do our capitalists say:

    We care nothing about value – we only care about crisis – or words to that effect.

    see: http://www.archive.is/EkALK

    Hence the austerity, inequality, mountain of debt and closing factories, shipyards and mines.

  8. @Ivor

    Prof. J.Q. said;

    “For me, this piece doesn’t answer the question “Why should we care about value theory”. I care about crises, but not about value.”

    This is a very short statement (or two) and can potentially be misinterpreted. I am not certain exactly what Prof. J.Q. meant by this statement. I think he could have meant any of;

    (a) “This piece does not answer the question “Why should we care about value theory” but other pieces might.”

    (b) “This piece does not answer the question “Why should we care about value theory” and neither does anything else I have read.”

    (c) I don’t regard value theory as important when the sense of it is that we are talking about “what is the source of value”, such as the labour theory of value or the Physiocrats’ theory of value.

    To say “I care about crises” could be reasonably interpreted as “I care about preventing crises”.

    I don’t find the labour theory of value particularly useful if it takes the absolute form of “labour is the source of all economic value”. I think it is clear that nature plus labour is the source of economic value. (Pricing the value is another level of complication.) Neither one (nature) nor the other (human labour) can produce economic value on its own. The ethical or moral philosophy point has to be made first (as an a priori moral assumption) that nature belongs equally to all humans. I mean this in an equal needs and stewardship sense; not in the sense that we can recklessly trash nature and ignore other forms of life or future generations.

    Once the a priori moral assumption is made that nature and what it provides is the equal birthright of all humans in the above needs and stewardship sense, then it is easy enough to subtract nature out of the moral ownership equation. We can then say that from a human activities point of view all economically generated value does indeed come from human manual and intellectual labour.

    An ownership system which appropriates and allocates surplus value (that value beyond the reproductive cost of labour) in any other manner other than by adjudicating between need and effort (the only moral dimensions) is by definition morally exploitative. There is a level of ownership and right in capitalism which goes beyond the moral claims of need and beyond the moral claims of effort to produce. How does this level of ownership legitimate its ownership? What moral claim does it have? Force and custom are the best it come up with. Its claims are morally threadbare.

    The whole dynamic also leads to a crisis-prone system but that is another full discussion. When something is badly engineered or of an out-dated design there comes a point where building something new is a better bet than repairing the current machine or system. This is true of the fossil-fueled energy system and it is true of the capitalist ownership system. Each has served its progress function historically and has now out-lived its usefulness and viability.

  9. The Wolff link is interesting enough to respond to. He says

    In such socialist enterprises, the workers collectively appropriate and distribute the surplus they produce. They perform functions parallel to those of boards of directors in capitalist corporations. Such “workers’ self-directed enterprises” (WSDEs) are unlike slave, feudal and/or capitalist enterprises. WSDEs represent the end of exploitation.

    I agree that WSDEs/worker co-operatives could usefully play a larger role than they do today. However, they don’t (AFAICT) provide any solution to the central problems addressed by Keynesian social democracy

    (i) How do we ensure full employment? If each WSDE decides independently how many new workers to hire, how do we guarantee that those willing and able to work can get a job
    (ii) What do we do about income inequality? The surplus per worker is far greater in (say) a goldmine than a meals-on-wheels service.
    (iii) What do we do about people who can’t worker because of age, illness etc?
    (iv) How do we fund enterprises that don’t generate a surplus

    Wolff doesn’t address any of these questions in the linked article. Does he do so elsewhere?

  10. @Ikonoclast


    You cannot take Tweets literally. But capitalists generally are allergic to value analysis. Capitalists need to ensure that their revenues are sustained above any norms of real value, while also, at the same time, wanting to pay workers well below value.

    Consequently, capitalists force workers wages all the way down to marginal productivity of labour – in complete contradiction to the value workers actually produce. When recession hits – capitalists look for even cheaper labour.

    They then pretend they don’t know how on earth there is insufficient aggregate demand and hope they can fix things by injecting money.

    Maybe the quote should have been – we don’t care about value – we only care about money.

  11. @John Quiggin

    Didn’t the old Yugoslavia have these WSDEs? A fair few people on the Left thought “the Yugoslav model” was something aspire to, but it didn’t work out so well in the end.

  12. @Uncle Milton

    Self-directed is not right. In Yugoslavia the concept was associated labour – at the enterprise level (Basic Organisation of Associated Labour) BOALs. But then there were other community associations up into society and to the national level.

    BOALs and associated labour worked well until Yugoslavia tried to compete with the West even selling white goods as far afield as Australia (Gorenje Brand) and was induced by the IMF to accept loans to fund such reforms.

    There was also a serious problem with cultural/ethnic issues and disparities between rich states – Slovenia and poor Montenegro.

    The internal economy was fine – the external relationships, which led to austerity policies, was their undoing when combined with other factors.

  13. @John Quiggin at comment 9.

    I have to admit I have not read any of Wolff’s books, only a number of his online essays and video viewings of some of his talks. This means I don’t know how he develops these ideas in detail.

    This short essay “Socialism Means Abolishing the Distinction Between Bosses and Employees” gives a few hints.


    I mean particularly the following passage;

    ” An enterprise only qualifies as “socialist” once the distinction between employers and employees within it has been abolished. When workers collectively and democratically produce, receive and distribute the profits their labor generates, the enterprise becomes socialist. Such enterprises can then become the base of a socialist economy – its micro-level foundation – supporting whatever ownership system (public and/or private) and distribution system (planning and/or market) constitute that economy’s macro level.

    Actual large-scale socialism would thus predominantly entail worker cooperative enterprises such as these. Like the capitalist enterprises that once emerged from European feudalism, these new cooperative enterprises would seek to solve problems such as how to organize their interdependencies with one another and with the public, how to relate to private and public property, and how to manage transitions from smaller- to larger-scale enterprises. Different forms of societal socialisms will emerge: some with markets, private property and large corporations, and others with centralized and/or decentralized planning systems, socialized property, constraints on enterprise size etc. Debates, experiments and choices among them will likely characterize the multiple forms that socialism will take.”

    I think that this is interesting. It posits a bottom-up approach where worker owned and managed cooperatives are created first. How this is done in any extensive and influential way is not addressed but maybe we can come back to that. From that point, it is suggested or implied that these entities will seek to solve their problems upwards (as I would put it). This suggests that the macro picture, economic and political, will evolve from the different pressures from a different grassroots form of production.

    However, as I said above, this essay at least does not really address how worker owned and managed cooperatives would arise and come to predominate in the first place. We know our currents laws, ideology, systems of ownership, education and indoctrination are all somewhat (maybe “very somewhat”) predicated against this happening.

    I am guessing but I suspect Wolff would see it occurring (the spread of worker owned and managed cooperatives) via the agency of forces like;

    (a) impoverishment of western workers by labour arbitrage processes under globalising capitalism;
    (b) general market and environmental failures of capitalism (people seekign alternatives;
    (c) education of workers and the public to understand that there are other possibilities (including Wolff’s own work); and just possibly
    (d) further technological change making micro production of at least some products and services more viable.

    He might also see that an eventual change in consciousness (as general political views) of the public would see a willingness to make laws to re-favour labour and even favour worker cooperative enterprise over capitalist enterprise. I think Wolff’s approach is evolutionary rather than revolutionary and very much about direct democratic action and the grass roots approach.

    In relation to your (John Quiggin’s) questions;

    i) How do we ensure full employment? If each WSDE decides independently how many new workers to hire, how do we guarantee that those willing and able to work can get a job
    (ii) What do we do about income inequality? The surplus per worker is far greater in (say) a goldmine than a meals-on-wheels service.
    (iii) What do we do about people who can’t worker because of age, illness etc?
    (iv) How do we fund enterprises that don’t generate a surplus.

    I can only offer the following thoughts. A society of predominantly worker owned and directed enterprises will still need a government. There is no prima facie case at all that government would wither away, However, one would envisage such a society would elect a very different government and demand rather different things from it.

    One could expect that inequality problems would reduce markedly in such a society but would not disappear altogether. Overpaid capitalists, owners, rentiers and specialist managers would largely disappear. Poorly paid workers (relatively), unemployment and invalidity would still exist, albeit in much reduced form from the capitalist excesses we are seeing again today. Social income and social insurance would still need to be provided to some extent by a social democratic government. Similarly, a standard public sector which would be recognisably similar would still need to exist.

    I think the bottom line is there could be great improvements without having to posit that it must or would lead to a withering of the state or to some kind of utopia with no problems at all. Of course, it cannot lead to a total utopian society. Such a thing will always be impossible.

  14. @Ivor

    I’m not an expert on Yugoslavia, and I’m happy to believe that their model worked well in some ways. But clearly, not so well that any significant group there wants to go back to it. (If Wikipedia is any guide it was the (theoretically Marxist) Socialist Party of Serbia that finally killed off worker participation).

    More to the point, even while the system was in operation it didn’t transform life in any fundamental way. It was, AFAICT, a more consultative version of state capitalism.

  15. Wolff discusses unemployment in the following terms.

    Capitalism as a system seems incapable of solving its unemployment problem. It keeps generating long-term joblessness, punctuated by spikes of recurring short-term extreme joblessness. The system’s leaders cannot solve or overcome the problem

    The Yugoslav model worked well up to the point external and old-world cultural forces tore it down. In essence with the exception of a recession in the mid-1960s, the country’s economy prospered under Titoist Socialism. Unemployment was between 5-8% [1964-72], the education level of the work force steadily increased. The life expectancy (which was about 72 years) and living standards of Yugoslav citizens was nearly equal to the life expectancy and living standards of citizens of Western capitalist countries such as Portugal. Due to Yugoslavia’s neutrality and its leading role in the Non-Aligned Movement, Yugoslav companies exported to both Western and Eastern markets. Yugoslav companies carried out construction of numerous major infrastructural and industrial projects in Africa, Europe and Asia.

    The relevance of external factors can be seen in How the IMF Dismantled Yugoslavia although I feel the earlier reliance from the 1950’s on Western loans were important precursors. Inflation was inevitable.

    This is also the perspective of Susan Woodward who cites international constraints as driving policy and the fact that they were forced to balance domestic policies aimed at sustaining minimum standards of living and achieving productivity growth against the conflicting demands of the world economy and national security.

    The Yugoslavs were addicted to competing with the West without realising that Western cost structures included exploited labour from the Third World. One manager of Dalmatia Cement who I met was typical in his proclaiming how close they were getting the efficiency of their concrete production to that in the West.

    The problems were not due to the model of socialism, and no one wants to go back to what in fact eventuated. It is however a useful pointer to a real alternative to catastrophic capitalism particularly for countries with entirely different starting conditions.

  16. @John Quiggin

    It would probably be worthwhile to read Richard D. Wolff’s book “Democracy at Work” which refers literally to democracy in the workplace with Worker Self Directed Enterprises. The interview excerpt below refers to this book and some of its ideas.

    “Mark Karlin: Refreshingly, you offer a key alternative to capitalism in decline. You promote Workers’ Self-Directed Enterprises (WSDE) in Part III of your book. What would be a succinct description of a WSDE?

    Richard Wolff: Quite simply, a WSDE entails the workers who make whatever a corporation sells also functioning – collectively and democratically – as their own board of directors. WSDEs thereby abolish the capitalist differentiation and opposition of surplus producers versus surplus appropriators. Instead, the workers themselves cooperatively run their own enterprise, thereby bringing democracy inside the enterprise where capitalism had long excluded it.

    Mark Karlin: In your sixth chapter, you contrast WSDEs with worker-owned enterprises, worker-managed enterprises and cooperatives. What are the primary differences?

    Richard Wolff: Workers have a long history of multiple kinds of cooperatives. That is, workers can cooperatively own (e.g. their pension fund holds shares in the company that employs them), buy (e.g. the many food coops around the country), sell (e.g. grape growers who combine to market their outputs), and manage (e.g. workers take turns supervising themselves). All such cooperatives can and often do co-exist with a capitalist organization of production in the precise sense of workers being excluded from the decisions of what, how and where to produce and what to do with the profits. What makes WSDEs unique is precisely that they are about cooperative production, about ending the capitalist division of producers from appropriators of the surplus, and replacing it with democratic cooperative decisions governing production and the social use of its fruits.

    Mark Karlin: Where does the much-celebrated (and world’s largest) Mondragon cooperative model fit in with your vision of WSDEs?

    Richard Wolff: Mondragon is the world’s largest and perhaps most successful example of WSDEs’ successful growth in competition with conventional capitalist enterprises. Begun in 1956 with six workers organized into a cooperative enterprise by a Spanish priest, the Mondragon Cooperative Corporation (MCC) now employs over 100,000 workers, is the largest corporation in the Basque part of Spain and the tenth largest corporation in all of Spain. It has extensive research and development labs generating new ways to produce new products and maintains its own university to train its workers and interested others in all the ways of running and building democratically cooperative enterprises. MCC is thus a remarkable testimony to the contemporary viability and strength of non-capitalist production systems.

    Mark Karlin: I recently asked this question in another interview on labor and economics and received an answer that amounted to a sigh. Although there is definitely a growing cooperative movement in the United States, it is still struggling. What will be the tipping point that will persuade US workers that WSDEs are preferable to the current managerial capitalist system? So many workers in the US have been brainwashed that any alternative to capitalism is satanic and communist. How does an idea like WSDEs change from an intellectual concept to a grassroots labor movement?

    Richard Wolff: As has happened often in human history, what provokes change is less any clear vision of where we go next and more the intolerability of where we are. Capitalism is no longer “delivering the goods” for most people.The circle of its beneficiaries grows smaller and richer and more out of touch with the mass of people than ever. In the US, this is particularly problematic because the rationale of US capitalism has long been its creating and sustenance of a vast “middle class.” As capitalism’s evolution destroys that middle class, it opens the space in minds and hearts to inquire after alternatives to an increasingly unacceptable system. WSDEs offer precisely that. Nothing better illustrates that growing interest than the fact that Democracy at Work is going into a second printing three months after it was first published.

    Mark Karlin: Republicans and Democrats both tout the alleged benefits of free trade agreements, despite their lack of adequate support for labor rights and worker remuneration. One thing that free trade advocates claim is that by moving to lower-cost labor, products will be cheaper in the US. While this may be true in some cases, this hardly appears to be the case in name brand products (particularly clothes) and trendy hi-tech products such as Apple. For instance, I went to a retail store and looked at items made by Calvin Klein, Nautica, and IZOD. Not one of the items, not one, was made in the United States. Most were made in China and Southeast Asia. Supposing we assume a worker who gets a few dollars a day produces a Nautica polo shirt for $1. Add the costs of material and equipment and maybe we get to $3. Add management and shipping and maybe we get to $5 per shirt, maybe. But the retail price on upper end brand name polo shirts could be as much as $70. So the shirt is not less expensive; the company is just making a greater profit off of exploited labor overseas. Is that correct?

    Richard Wolff: When US corporations producing for the US market move existing (or open new) production facilities overseas, their usual goal is more profits. They relocate to exploit cheaper labor, lax environmental rules, lower taxes, etc. If they lowered their prices, then the cheaper labor, lax rules, and lower taxes would raise their profits less or not at all. So they rarely drop prices much when they move and then only temporarily to gain market share (thereby pressuring competitors to similarly relocate). Of course, relocating corporations could choose to lower their prices, but profit considerations usually render that a last resort. Finally, corporations in lower-cost overseas locations can usually more easily manage competition among themselves than they do in the US (because local rules against monopoly are less effective and relatively low-cost bribes are more effective).”

  17. Ivor, that’s enough! Take a week off, and only come back if you can mend your manners.

    Megan, you’re on a warning. Any further conflict with other commenters will lead to bans, regardless of whether you’re technically at fault.

  18. For those interested in economic policy with a political economy and social welfare focus, I’m going to plug my new blog. First post is taking the moment of Abbott’s rolling to reflect on the relative fiscal tightness/profligacy of Howard, Rudd/Gillard and Abbott: The federal budget: Coalition versus Labor.

    Apologies if this shameless self-plug is out of line.

  19. “Piss off troll”

    “Re-read its post” (emphasis added. For emphasis).

    Ivor, that’s enough! Take a week off, and only come back if you can mend your manners.

    Wow. A whole week! Having just come back from a one month ban for vilifying me previously, repeatedly.

    “Mel”, “Midrash”, “CandyPants” and perhaps some others I have missed have all been – eventually – banned after similarly vilifying me in some very personal and vitriolic attacks.

    Tim (and anyone else who agrees with what Tim said) – thanks.

    Megan, you’re on a warning. Any further conflict with other commenters will lead to bans, regardless of whether you’re technically at fault.

    That raises an interesting natural justice, or social justice, issue. I can be banned for being attacked (yet again, by whoever is next), because that is “conflict” and it doesn’t matter whether I am “technically at fault” for being attacked.

    Perhaps the correct wording should be something like:

    “You will be banned if you challenge abusive commenters”
    “You must not make comments that provoke personal abuse against you, or you will be banned”
    or, maybe
    “You will be banned if anyone finds your comments challenging to their Id”.

  20. @Megan

    Any of those you like, Megan. You have a long history of getting into fights with other commenters. I have better things to do with my life than adjudicate them. As I said to Ivor, if you don’t like the way I run the blog, you’re welcome to a full refund.

  21. It’s probably worth looking at this site re the worker self directed enterprise and co-operative concepts.


    One hears little about these ideas in the Anglophone world, dominated as it is by hard right-wing neo-conservatism. Much of the economic and social trouble in the non-Anglophone west and Middle East is now driven by Anglophone economic exploitation and/or the unworkable ideas of economic neoliberalism and its concomitant military adventurism (IMHO).

  22. Saw this comment in a reply to an article (“Shares go up and down” by Greg Jericho) in the Guardian. A poster had written:

    “That was why the Future Fund was created. To safeguard the superannuation of politicians and public servants.”

    to which another poster responded:

    “To safeguard the prospects of Peter Costello and friends. He is earning a nice salary by being on the board. It is a complete scam. Why would a sovereign currency issuing nation “save” its own currency?”

    Ignoring the comment about Costello, can anyone here far more knowledgeable than I, comment on the last statement ? Naively it would seem true that if you print your own money, the “unfunded” public super liabilities that people bang on about are not an issue ?

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