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Ignorance is Strength
No full textColin Harrison's novel The Finder (2008) uncovers the hidden hierarchy of differential information. We live in a knowledge economy, or so they say. And in the world of finance, knowledge is power: the power to buy assets before their price appreciates. This knowledge-as-power, though, is profitable only when exclusive. Common knowledge – no matter how sophisticated and complex – is never profitable. Only differential knowledge – i.e., knowledge that is unavailable to others or superior to what they have – can yield a ‘return’.
This differential prerequisite explains why every entity in the pyramid of financial information – whether a person or an organization – has no more than a partial vista, with the remaining view blurred by enforced opaqueness and power-backed misinformation. The different vistas are also deeply formative. Individual ‘actors’ may feel empowered by what they know, but in practice, what they know serves to frame their thoughts and direct their actions – usually without them ever knowing it. Even those at the very top – indeed, especially those at the very top – are slaves to their knowledge, however superior
Soft-wars: A Capital-as-Power Analysis of Google's Power Trajectory
No full textThe capital as power framework, developed by Jonathan Nitzan and Shimshon Bichler, argues that the aim of business is not ‘profit maximization’ but the differential accumulation of social power. Using this framework as a theoretical starting point, I analyze the differential accumulation strategies of Google and Microsoft. I present qualitative and quantitative evidence demonstrating that, despite the fact that Google and Microsoft currently derive the majority of their profits from separate businesses (and so by conventional logic are not in direct competition with one another), the two firms are nonetheless engaged in antagonistic competition over control of the computing industry
Red Giant
Get PDFIn 2012, we published a paper in the Journal of Critical Globalization Studies titled ‘Imperialism and Financialism: The Story of a Nexus’. Our topic was the chameleon-like Marxist notion of imperialism and how its different theories related to finance. Here is the article’s summary:
Over the past century, the nexus of imperialism and financialism has become a major axis of Marxist theory and praxis. Many Marxists consider this nexus to be a prime cause of our worldly ills, but the historical role they ascribe to it has changed dramatically over time. The key change concerns the nature and direction of surplus and liquidity flows. The first incarnation of the nexus, articulated at the turn of the twentieth century, explained the imperialist scramble for colonies to which finance capital could export its excessive surplus. The next version posited a neo-imperial world of monopoly capitalism where the core's surplus is absorbed domestically, sucked into a black hole of military spending and financial intermediation. The third script postulated a World System where surplus is imported from the dependent periphery into the financial core. And the most recent edition explains the hollowing out of the U.S. core, a red giant that has already burned much of its own productive fuel and is now trying to financialize the rest of the world in order to use the system's external liquidity. The paper outlines this chameleon-like transformation, assesses what is left of the nexus and asks whether it is worth keeping. (p. 42)
In the second part of the paper, we looked a little closer at the red-giant argument. Specifically, we wanted to gauge the degree to which U.S. capital had declined and examine whether this decline indeed forced the rest of the world to financialize. And what we found surprised us: the ‘financial sector’ did seem to become more important everywhere, but its rise was led not by the United States, but by the rest of the world!
Our article was published almost a decade ago, so we though it would be interesting to update our figures and see what has changed, if anything
Costly Efficiencies: Health Care Spending, Covid-19, and the Public/Private Health Care Debate
No full textThe debate around public versus private health care often turns on cost – that is, on how to reduce costs, and particularly government expenditures, when it comes to health care. This paper examines the theoretical and empirical relationship between health costs and health outcomes in the context of the COVID-19 pandemic. It proposes an alternative political economic framework – capital-as-power – for understanding how the provision of health care affects the relationship between health care costs and health outcomes, arguing that private health care realizes profits through the strategic limitation of health services. It presents empirical evidence suggesting that in countries which rely more heavily on private health care, higher overall health care expenditures predict more severe COVID-19 outbreaks, contradicting the argument that private health care services are more cost-efficient or will lead to better health outcomes at a lower cost
Does Hierarchy Drive Income Inequality? Liberal Arts & Professional Studies Postcoctoral Fellowship Proposal
No full textThe York Faculty of Liberal Arts & Professional Studies (LA&PS) awards three postdoctoral fellowships annually, of which no more than one can go to a former York PhD. For 2021-2022, this fellowship went to former York PhD Dr. Blair Fix. The award is for one year, with a possible one-year extension. The project’s advisor is Jonathan Nitzan.
PROJECT SYNOPSIS
Income inequality has, over the last 4 decades, increased dramatically in the United States and Canada. It is a concerning trend. Not only is inequality objectionable ethically, it also seems to be corrosive to human welfare. As inequality grows, human well-being worsens. But while the extent and effects of inequality are well-studied, the cause(s) of growing inequality remains poorly understood. My research attempts to address this deficiency.
I propose that hierarchy — the rank ordering of individuals within a chain of command — is central to how humans distribute resources. The idea is that individuals within a hierarchy tend to use their power to accumulate resources. The result is that income tends to grow with hierarchical rank.
I have assembled a variety of evidence that confirms (at static points in time) this hierarchy-income hypothesis. My post-doctoral research will attempt to extend the evidence to understand how hierarchy relates to the growth of inequality. I propose that the recent growth of top incomes (in the United States and Canada) has been caused by a hierarchical redistribution of income. The idea is that income has been taken from those at the bottom of the corporate hierarchy and given to those at the top.
To investigate this hypothesis, I will extend a large-scale numerical model developed during my PhD studies. This model is the first (to my knowledge) to rigorously connect the distribution of income at the macro-level to the fine-scale, hierarchical structure of firms. I have previously found that this model accurately predicts key features of the US distribution of income. In my post-doctoral research, I will extend the model to study income redistribution — changes in income distribution over time.
By studying how growing income inequality (in the US and Canada) relates to the hierarchical structure within firms, I hope to illuminate new ways to combat inequality
Jesús Suaste Cherizola Wins the 2021 CASP Essay Prize
No full textIn his essay, Suaste Cherizola explores a puzzle in political economy — the neglect of assets. Why, he asks, do most radical political economists focus on commodities, when capitalists themselves care about assets? The answer, Suaste Cherizola proposes, owes to a bad decision made by Karl Marx. In formulating his theory of capitalism, Marx insisted that capitalism’s ‘laws of motion’ must be grounded in production. The way to do this, Marx decided, was to focus on commodities — the things that workers produce and capitalists sell.
Marx’s obsession with commodities caused some embarrassing problems. It led him, for instance, to dismiss the stock market as ‘fictitious capital’. (He saw stocks as a kind of ‘false’ commodity — something that had a price but was not backed up by ‘real’ production). In hindsight, this decision was dubious. Fictions aren’t supposed to impact the real world. And yet the motion of the stock market dominates our lives. Something is amiss.
Suaste Cherizola thinks the solution is to turn Marxist theory on its head. Rather than ignore ‘fictitious capital’, he argues, we should ignore the Marxist idea of the ‘commodity’. The reason is simple. Commodities are a small subset of the things that have a price. When you use this small subset to explain everything in capitalism, weird things happen. You end up invoking ‘distortions’ to explain all the prices you’ve excluded from your theory. This ‘distortifying’ is standard practice in neoclassical economics. Sadly, it’s also part of Marxism — an unavoidable consequence of Marx’s focus on commodities. According to Susate Cherizola, "… once the commodity-form has become the basis of our understanding of exchanges, the other forms of economic transactions can only be considered as distortions or mystifications. … The ‘commodity’ thus becomes a theoretical fetish — a concept endowed with supernatural explanatory powers."
A century ago, Marx chastised people for ‘fetishizing’ commodities — treating commodity exchange as a relation between things rather than a relation between people. But perhaps the true ‘fetishism of the commodity’, Suaste Cherizola proposes, is how Marxists have reified the commodity itself. The commodity’s true ‘secret’, Suaste Cherizola argues, may be that it has nothing to reveal
How the Labor Theory of Value Emerges from Egalitarianism
No full textThe purpose of this essay is to put the last vestiges of the labor theory of value to rest. My goal is to explain why when we look at large sections of the economy, we find that value added correlates with labor time. The correlation comes not from some universal law of value. Instead, I argue that it results from a simple heuristic: humans seek income that is equivalent to their peers’. I call this principle the ‘egalitarian heuristic’. If it holds, even in rough form, then value added will correlate strongly with labor time. In short, we do not need the labor theory of value to explain the evidence
Red Giant
No full textIn 2012, we published a paper in the Journal of Critical Globalization Studies titled ‘Imperialism and Financialism: The Story of a Nexus’. Our topic was the chameleon-like Marxist notion of imperialism and how its different theories related to finance. Here is the article’s summary:
Over the past century, the nexus of imperialism and financialism has become a major axis of Marxist theory and praxis. Many Marxists consider this nexus to be a prime cause of our worldly ills, but the historical role they ascribe to it has changed dramatically over time. The key change concerns the nature and direction of surplus and liquidity flows. The first incarnation of the nexus, articulated at the turn of the twentieth century, explained the imperialist scramble for colonies to which finance capital could export its excessive surplus. The next version posited a neo-imperial world of monopoly capitalism where the core's surplus is absorbed domestically, sucked into a black hole of military spending and financial intermediation. The third script postulated a World System where surplus is imported from the dependent periphery into the financial core. And the most recent edition explains the hollowing out of the U.S. core, a red giant that has already burned much of its own productive fuel and is now trying to financialize the rest of the world in order to use the system's external liquidity. The paper outlines this chameleon-like transformation, assesses what is left of the nexus and asks whether it is worth keeping. (p. 42)
In the second part of the paper, we looked a little closer at the red-giant argument. Specifically, we wanted to gauge the degree to which U.S. capital had declined and examine whether this decline indeed forced the rest of the world to financialize. And what we found surprised us: the ‘financial sector’ did seem to become more important everywhere, but its rise was led not by the United States, but by the rest of the world!
Our article was published almost a decade ago, so we though it would be interesting to update our figures and see what has changed, if anything
Living the Good Life in a Non-Growth World. Investigating the Role of Hierarchy
No full textHumanity’s most pressing need is to learn how to live within our planet’s boundaries — something that likely means doing without economic growth. How, then, can we create a non-growth society that is both just and equitable? I attempt to address this question by looking at an aspect of sustainability (and equity) that is not often discussed: the growth of hierarchy. As societies consume more energy, they tend to become more hierarchical. At the same time, the growth of hierarchy also seems to be a key driver of income/resource inequality. In this essay, I review the evidence for the joint relation between energy, hierarchy and inequality. I then speculate about what it implies for achieving a sustainable and equitable future.
NOTE: This essay was written for and supported by the Seoul Platform for Initiating Discourses on an Equitable and Resilient Society
The 1-2-3 Toolbox of Mainstream Economics: Promising Everything, Delivering Nothing
No full textWe write this essay for both lay readers and scientists, though mainstream economists are welcome to enjoy it too. Our subject is the basic toolbox of mainstream economics. The most important tools in this box are demand, supply and equilibrium. All mainstream economists – as well as many heterodox ones – use these tools, pretty much all the time. They are essential. Without them, the entire discipline collapses. But in our view, these are not scientific tools. Economists manipulate them on paper with impeccable success (at least in their own opinion). But the manipulations are entirely imaginary. Contrary to what economists tell us, demand, supply and equilibrium do not carry over to the actual world: they cannot be empirically identified; they cannot be observed, directly or indirectly; and they certainly cannot be objectively measured. And this is a problem because science without objective empirical tools is hardly science at all