Money and Power

1
Money and Power
Lecture 7
How the System Goes Wrong
a left wing view
and
an ecological view.
2
Money and Power Lecture 7 Recapitulation and
outline of lecture
Last week we considered the radical view that
profits arose from exploitation
People were seen not as abstract individuals but
considered in the context of the society and
economy around them -
particularly social class relations
To evaluate this model of an economy we need to
explore its implications a little further -
in particular its conception of work and labour
markets as central to an understanding of how
capitalism actually works
We shall then look at another, different, set of
contradictions in the way an economy might work
The contradictions between humanitys use of
natural resources and
the need to sustain natural resources in the long
run
- ecological and environmental problems
3
Money and Power Lecture 7 The labour market again
Who is selling/buying on the labour market?
Seller worker
Buyer capitalist
What is being exchanged?
wage
for a
ability to work is hired-out to capitalist
This means that the employer can demand the
worker does what the employer requires for the
period of hire. eg worker agrees to work for the
working day, perhaps 8 hours.
the boss has bought the ability to dictate what
another human being the worker does (for 8
hours in above example). Alienation!
PROCESS of working to the demands of the boss is
known as the CAPITALIST LABOUR PROCESS
4
Money and Power Lecture 7 The labour market again
Who is selling/buying on the labour market?
Seller worker
Buyer capitalist
What is being exchanged?
wage
for a
ability to work is hired-out to capitalist
Real wage is the value of the goods consumed by
workers
The real wage is determined by the relative
bargaining power of capital and labour
subsistence
organisation
productivity
unemployment
which might be determined by such factors as
force
law
ideology
5
Money and Power. Lecture 7 Where profit comes
from Production, exploitation and class
In our example from last week

• In our earlier TV factory example, the real wage
  is fixed at 35

But the worker made enough TV sets in a working
day valued at 120 (see example on value added
from previous lecture)
The firm has costs of 50 for materials and
depreciated capital
Radicals say that since she has added 70 worth
of value to the firms output but was only paid
35, the 35 profit is an unpaid expropriation
from her work. She has been exploited!
The worker has thus added value of 70!
and thus makes a profit of 35
The TVs produced sell for 120
But the firm pays the worker 35
6
Money and Power. Lecture 7 Where profit comes
from Production, exploitation and class
The question of why only workers add value to
production may seem like a pedantic point or even
moral point
BUT the analysis highlights one of the best known
and important realities of capitalism
The necessity for bosses to keep control of the
workforce
If they didnt then the TV worker might well
argue that as soon as she has added 35 of value
to the TV sets she had covered her wage costs and
should leave work
This is precisely what the company cannot afford
it could not make a profit at all should this
happen
So the company must exert its power over the
workforce to ensure that a full day is worked
property rights
contractual
What forms does company power take?
legal
threat of the sack
moral argument
cultural norms
7
Money and Power. Lecture 7 Where profit comes
from Production, exploitation and class
The necessity for bosses to keep control of the
workforce
But companies dont necessarily have it all their
own way!
Workers can form trades unions and threaten to
strike
They can try and form a political party to change
thte legal/contractual basis of work
They can revolt and overthrow property rights
property rights
contractual
Make films shaming employers
What forms does company power take?
legal
threat of the sack
moral argument
cultural norms
8
Money and Power. Lecture 7 Where profit comes
from Production, exploitation and class
But this gives us a whole new picture of what the
radicals see as the heart of our society and
economy work.
Far from being a liberal and democratic
organisation, work is controlling, illiberal,
undemocratic and uncreative.
AND IT HAS TO BE IN ORDER TO MAKE PROFITS
But he forced nature of work creates exactly the
contradictory class interests that make society
change. Capitalists and workers can never have
the same interests.
and workers can and must from time to time resist
In doing so they create the possibility of
radical social change
Note that in this interpretation of capitalism,
the necessarily illiberal nature of work is also
the base for justifying change
Also note that the centrality of work to society
as a whole means that the coercive nature of work
has bad effects on most other parts of peoples
lives (alienation again)
9
Money and Power. Lecture 7 Economy and environment
It is often held that competition damages the
environment
That for example, reducing carbon emissions
damages the competitiveness of a firm or country
New Orleans 2005
BUT that carbon emissions themselves damage the
World, hence the economy of the World
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Money and Power. Lecture 7 Exernalities
Reducing carbon emissions damage competiveness
Carbon emissions damage the economy
Economists use the concept of EXTERNALITIES to
explain how the first view might be true for
INDIVIDUAL firms, but the second holds true for
everyone
Producing for example electricity with a dirty
coal fired power station enables the power firm
to make profits
Emitting smoke (therefore carbon) into the
atmosphere causes greenhouse effects that heat
the earth unduly and cause flooding, hurricanes
etc doing huge damage
But the power firm doesnt have to pay for the
damage they only pay for INTERNAL, private
costs such as wages and materials
11
Money and Power. Lecture 7 Economy and environment
So the power firm wont take account of many of
the real costs to the economy as a whole.
Those costs are external to the firm and so are
TRANSFERRED to the general population
Because they dont pay the carbon costs, the
firm continues to produce the damaging carbon,
complaining that attempts to restrict this will
reduce profits and make them unprofitable and
uncompetitive
The left say that is why we need more real social
control over industry to plan the reduction of
carbon emissions
The right say that there should be a market in
carbon emissions, with total carbon emissions
restricted but individual firms trading their
allowed carbon emissions with each other
The left say marketising emissions would allow
too much cheating and give the firms who have
created the problem too much power
The right say that direct controls would be too
bureaucratic