The International Monetary Fund has, in its most recent edition of the semi-annual World Economic Outlook, made an astonishing, if not, for them, heretical, discovery: that globalization, that great force for worldwide economic prosperity and social justice, has reduced the share of national income going to labour, and, as a consequence, increased the share of national income going to capital, in the form of profits. Has the IMF discovered that globalization is bad for global labour?
Not quite. The IMF argues that while labour's share of income has gone down, the total size of national income has gone up: in other words, the elasticity of income with respect share is both positive and greater than one. This means that labour's income has still gone up, because of the increase in national income, even though the fraction of national income accruing to labour relative to capital has gone down. In a sense, then, the IMF is proposing that globalization is producing an economic valhalla--more money for workers, more profits for capital. Talk about a virtuous circle that global capitalism creates!
The IMF also evaluates what is driving changes in the labour share of income: technological change, an expansion of the global labour force, or labour market policies. The Fund finds, consistent with the dominant economic orthodoxy, that technological change benefits capital and that the expansion of the global labour force benefits capital, but that liberal labour market policies benefit labour. So technological innovation and technical change benefits firms, the expansion of the global labour force as a result of the 'entry' of China and India onto the world stage benefits capital, by driving down global wages, but political economies where it is easy to 'hire and fire' benefit labour.
The IMF has, for the most part, apparently re-discovered elements of classical and Marxist political economy! Marx was, along with some of the classical adherents of the labour theory of value, extremely clear that technological change was biased in favour of capital. Marx's revenge on this point, however, was that as the share of labour in commodities declined, and the organic composition of capital rose, this would lead to a fall in the extraction of surplus value, and hence a fall in the rate of profit. This, according to Marx and others, could, to an extent, be partially offset by tapping into new labour forces had the benefit of increasing the reserve army of labour, fostering competition amongst the labour force that could generate relative, if not absolute, cuts in wages. This could counter, temporarily, the decline in the rate of profit. As for liberal labour market policies, this had a similar effect: disciplining labour so as to offset declines in the rate of profit. Thus, from a Marxist point of view, the Fund has discovered long-standing cyclical and counter-cyclical tendencies within capitalism which were already known by some but which were not accepted by the global economic orthodoxy.
Of course, it is important to stress that Marxist and Marx-inspired measures of the rate of profit are not the same as the profits reported by companies in the Standard and Poors 500. Thus, although Marx believed in a falling rate of profit, this is perfectly compatible with an increasing rate of profit amongst global firms. The two are measuring quite different things; and estimates of Marxian-based profits drawn from conventionally-based measures demonstrate that the increasing profitability of the corporate sector is perfectly compatible with Marx's theory of crisis.
Of course, the IMF does not see its findings as heralding a crisis. Far from it. What is interesting is the extent to which the Fund, the Bank and other global institutions feel the need to justify policies in the face of widespread discontent with the downside of globalization. In an era when resistance is widening, there is a need to shore up the defenses. The IMF offers a fresh pillar for the defense. However, the redoubt is extremely weak. Moreover, it is unlikely to convince global labour, excluded as they are from the prosperity that is accruing to the few during the latest bout of neoconservative globalization.
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