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April 29, 2007
Lenin's Tomb Economics
An interesting example of the level of economic knowledge displayed by our friends over there on the far left:
The wealthiest 1,000 people in the UK have seen their wealth grow by 20% in the last year. Since these people are multi-millionaires and multi-billionaires (65 of the top 1,000 are billionaires), a growth at that rate involves the transfer of millions and billions of pounds to them.
Err, no, it doesn't. Wealth is not a zero sum game.
My figures are a little out of date but they serve to explain what is going on. From 2002 to 2003 total household wealth in the UK grew from £3.588 trillion to £3.783 trillion (source).
With a little rounding that's an increase in total wealth of £200 billion.
The combined wealth of the top 1,000 that our Spartist buddies are worried about is now £360 billion and has grown by the above 20%. Or, (ignoring recipricals and margins and mark ups and all that) some £70 odd billion.
Now, let's make the audacious leap and say that the wealth created between 2002 and 2003 was the same amount (certainly not true but I just don't have the figures) as the wealth created between 2005 and 2006. Or that same £200 billion.
Total wealth increases by £200 billion, £70 billion going to 1,000 people. The rest of us share the £130 billion.
Err, where's the transfer there, from us to them?
April 29, 2007 in Idiotarians | Permalink
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Comments
It's like the Free Trade issue, Tim. It's really an IQ problem. Some people can't understand Pythagoras, some can't understand that you can get richer without my getting poorer. "Pons asinorum" was the expression when I were but a lad.
Posted by: dearieme | Apr 29, 2007 6:29:18 PM
This, I suppose, is an attempt at condescension, yet it fails miserably on three counts:
1) I did not state or imply that wealth is a "zero-sum game".
2) I am not a "Spartist", whatever you suppose that is.
3) It is rather important to grasp the nature of the marxist critique if you think you want to engage with it. Even on your terms, the total wealth in the economy increased by £200bn. The richest 1,000 accumulated $70bn of that growth, with the rest dispersed in a hugely unequal way throughout the economy, as you would anticipate. The accumulation of wealth among the owners of capital is not a result of their special contribution to production, but of their privileged social position. The wealth is generated by those who carry out the productive labour: as such, if a greater share of the wealth they generate ends up in the pockets of the owners, then this amounts to a (massive) transfer of wealth. You may disagree with that basic outlook, but it would be difficult to see that you even knew of it or understood it properly on the evidence of this post, which seems to start from the implicit proposition that any wealth generated in an economy is necessarily the rightful possession of the owners of capital (hence the bizarre rhetorical question at the end of your post).
Here is something to think about. I indicated in my post that inequality is now at its highest level since before World War II. Yet the contribution of labour has not diminished over the last thirty years during which this process has occurred - quite the contrary, workers have accepted enormous increases in their workload. Not only does this register in total hours worked, but it includes the assumption of forms of insecurity that impact uniquely on workers, particularly the lowest paid, and also new responsibilities without commensurate rewards. Even narrowing the frame to the last few years, it is not reasonable to assume that Mittal et al have simply contributed that much additional value to the economy. If you think that this is the case, it is a point that needs explaining and arguing for. I don't know if it is within your powers to seriously examine those assumptions and explain the basis for them, but if you can't even comprehend the basics of the marxist critique, then you are inevitably going to look foolish by trying to engage with it on the basis of totally irrelevant challenges.
Tim adds: Now it's you who can't read:
"then this amounts to a (massive) transfer of wealth. You may disagree with that basic outlook, but it would be difficult to see that you even knew of it or understood it properly on the evidence of this post, which seems to start from the implicit proposition that any wealth generated in an economy is necessarily the rightful possession of the owners of capital (hence the bizarre rhetorical question at the end of your post)."
You're making the same exact error again: you talk about a "transfer" when there's been simply an unequal distribution of the newly made wealth. That was my point, that the word "transfer" is the error. The only way it can indeed be a transfer is if wealth is indeed a zero sum game, which is why I made reference to it.
(There are of course times when wealth is indeed a zero sum game, as in theft, or a negative sum game, as in certain forms of redistributive taxation.)
I do indeed understand the Marxist critique and disagree with it on this point, that value (weath) comes solely from the labour of the current generation of workers. Capital is, after all, simply the labour saved from previous generations and that makes a contribution to current wealth and so should also make a return.
As for Mital (and many others on that list) you've missed the most important point. These people don't make their wealth from the UK or the UK's workforce. (I'm not certain if Mital actually owns a steel works in hte UK....or did he buy Corus?). He owns steel mills around the world (globalisation, you know,) and his wealth therefore comes outside the UK...no British worker was exploited in creating his (or Abramovitch's etc) wealth, even by the Marxist rules.
Finally, no, it wasn't condescention. I was laughing at your analysis of the world.
Posted by: lenin | Apr 29, 2007 6:33:50 PM
You're making the same exact error again: you talk about a "transfer" when there's been simply an unequal distribution of the newly made wealth. That was my point, that the word "transfer" is the error. The only way it can indeed be a transfer is if wealth is indeed a zero sum game, which is why I made reference to it.
I feel I've already made it clear why I referred to a transfer, and in explaining this I didn't insist that wealth is a zero sum game. It isn't an error, it is entirely orthodox in the marxist critique. Not only that, the phrase "transfer of wealth" is commonly used by non-marxist economists and critics to refer to a substantial alteration in the distribution of socially produced goods, for the excellent reasons I've already outlined. You could find this out with a simple Google search.
I do indeed understand the Marxist critique and disagree with it on this point, that value (weath) comes solely from the labour of the current generation of workers. Capital is, after all, simply the labour saved from previous generations and that makes a contribution to current wealth and so should also make a return.
You're merely highlighting your ignorance further. First of all, have the words "dead labour" ever passed before your eyes? The marxist critique has never insisted that the sole source of wealth is the current generation of employed labour. Secondly, capital is not merely the labour saved from previous generations. Capital is a social relationship: if you put the same resources to use in a different productive arrangement (ie the commons), it would not be capital.
As for Mital (and many others on that list) you've missed the most important point. These people don't make their wealth from the UK or the UK's workforce.
I am aware of the fact that a number of these billionaires derive most of their wealth from overseas. I picked this up in both the Telegraph and BBC reports. Did I insist to the contrary? Does it impact on any of the points that I made?
Tim adds: "Capital is a social relationship: if you put the same resources to use in a different productive arrangement (ie the commons), it would not be capital."
The Commons? What, like Hardin's definition of Commons? The one that points out that as soon as there is demand over such Commons over natural regenerative capacity, then there has to be a non-Marxian limitation of access? As there has to be, for any resource in short supply?
Are you really so insane that what is in short supply should have no price?
Posted by: lenin | Apr 29, 2007 7:10:54 PM
"I am not a "Spartist", whatever you suppose that is."
Spartist, from "Dave Spart" character in Private Eye. From Wikipedia:
"Dave Spart – ultra-left wing activist (always of a ridiculous-sounding collective or magazine - sometimes the New Spartsman or the Indescribably Sparty - frequently based in Neasden) who is given free rein to express his views. These always begin 'Once again ...', before attempting to lambast the subject of his anger for allegedly constant misconduct, prejudice or general wrongdoing. This very rarely gets further than a few words before it breaks down into a fragmented litany of 'sickening ... totally sickening ... worse than Hitler ..." and so on, before being abruptly curtailed by the inevitable "continued on page 94". Since he must take the alternative view on any subject, he often ends up contradicting himself and getting stuck in logical circles, frequently stopping with "Er..." but continuing anyway."
The "spartist" tag therefore seems most apt.
Posted by: Kay Tie | Apr 29, 2007 7:25:55 PM
"Wealth is not a zero sum game"
Well, it shouldn't be - but when wages stagnate at the same time as such wealth increases, that's what it becomes. And that's where we are now.
Tim adds: Oh for fuck's sake Martin: learn something. Incomes are incomes, wealth is wealth. One is a flow, the other is a stock. They are different, see?
Plus, of course, wages are not stagnating.
Posted by: Martin | Apr 29, 2007 7:40:06 PM
I don't want to get involved in a spat here, but "It isn't an error, it is entirely orthodox in the marxist critique" made me laugh.
That's all.
Posted by: Mr Eugenides | Apr 29, 2007 8:15:11 PM
Martin,
"Well, it shouldn't be - but when wages stagnate at the same time as such wealth increases, that's what it becomes. And that's where we are now."
Is this more 'orthodox in the Marxist critique'? I think you have just sent Marx spinning;)
Posted by: Kit | Apr 29, 2007 8:32:51 PM
Anyone remember Living Marxism, which mutated into Spiked? I remember thinking years ago that the title was as oxymoronic as Flat-Earthism Today or Modern Phrenology.
Posted by: David Gillies | Apr 29, 2007 8:47:16 PM
There are a lot of people in the country whose principal asset is their home and who are mortgaged up to the hilt. If, for example, you have a 75% mortgage, a 5% rise in house prices will increase your net wealth by 20% - such are the wonders of gearing. Following this line of thought, my experience is that most of the extreme examples of gearing are from lower middle socio economic groupings. Anyone on a 100% mortgage has seen their wealth increase by - answer anyone?
Trying to prove some marxist yawn by looking at a single year's data is such tosh. Sure, rich people have got richer but more interesting is how they fare during a downturn.
Posted by: Peter Pryor | Apr 29, 2007 10:26:17 PM
Marxist Dystopia Boy lenin makes it sound as if all workers would experience productivity without the capital provided by the Evil Ones that he apparently loathes.
lenin (love your name: murderous thug responsible for 10s of millions of deaths), take a socialist with a hoe (not the nappy-headed variety) and a field and measure output. Then, put said socialist in a tractor paid for by a Capitalist Pig, with all of the accoutrements that the socialist needs to plow, plant, and harvest the crop, then measure output again. I predict a massive delta in output. Should the socialist receive all of the gain? An energetic, "YES!" from lenin is supposed. But what of the cost of capital? That's always disregarded by pseudo-anarchist scum such as lenin.
Posted by: skh.pcola | Apr 29, 2007 10:50:50 PM
Tw: ¨Are you really so insane that what is in short supply should have no price?¨
Under marxism, the price is usually paid in blood.
Posted by: APL | Apr 29, 2007 11:23:04 PM
The accumulation of wealth among the owners of capital is not a result of their special contribution to production, but of their privileged social position. The wealth is generated by those who carry out the productive labour: as such, if a greater share of the wealth they generate ends up in the pockets of the owners, then this amounts to a (massive) transfer of wealth.
Good grief!! Do people still believe this stuff?!! Even the Russians have ditched this mindset.
What next: wars between capitalist nations inevitable due to internal contradictions?
Posted by: Tim Newman | Apr 30, 2007 3:27:47 AM
I would like to translate this thread into Russian and pin it up on my apartment block's noticeboard, just to see whether there would be tears of nostalgia, cries of rage or roars of laughter.
Posted by: Tom Paine | Apr 30, 2007 9:40:15 AM
"Tim adds: Oh for fuck's sake Martin: learn something."
LOL! Really, really LOL!
"Incomes are incomes, wealth is wealth. One is a flow, the other is a stock. They are different, see?"
Yes, of course - but in the perpetual darkness of my ignorance, I just can't see how the flow gets quicker without the stock becoming bigger.
Put it like this - correct me if I'm wrong but your definition of 'wealth' presumably includes the ability to buy cheap imports; the alleged
'enrichment' comes from the increased choice and convenience such imports provide.
Nowadays, it seems that a greater proportion of these imports are actually paid for with credit cards. Instead of paying for them with money we EARN straightaway, we have to take on a DEBT to pay for them or bind ourselves to vendors' credit terms. These debts have to be paid for out of 'income' - so how do we, how can we, mention any increase in such so called wealth without also mentioning the impact upon incomes of wealth accumulated in this way?
In such circumstances the relationship between wealth and income is symbiotic.
And Tim, you know damn fine that the evidence is that wages are stagnating, if only because we went round this block in the 'Comments' section here -
http://timworstall.typepad.com/timworstall/2007/04/kellys_theory_o.html
Posted by: Martin | Apr 30, 2007 11:11:11 AM
I was going to call this unnecessary member-waving, but I see that Lenin is being marginally more inept: he can't even state his position in a way that makes sense.
If the rich people are deriving their income solely from the ownership of capital, their incomes are a transfer of wealth if we believe that they don't participate in the process of production (although their capital does). Clearly capital is necessary, what is not necessary to current production is the capital's owners get paid. This is an interesting adjunct to the stuff I've been saying in response to Foss, Foss, and Klein, about the purpose of the firm.
How we decide what to do with the saved-up labour of workers, or persuade them to save it up if no-one is getting paid for it is a separate question.
Posted by: Marcin Tustin | May 2, 2007 9:47:32 PM
