The digital economy, surplus value and monopoly

The digital economy, surplus value and monopoly

More thoughts from a seminar. It was organised by one of the North London CLPs and was advertised as a look at the Digital Economy. So what did I learn and what did I think?

On asking how transformational is the Digital Economy, I am reminded that CV 19 has shown who are essential workers and raises the question as to why they are so poorly paid and that the Digital Economy is not yet ubiquitous. Distribution is not yet virtual and will never be, although with AI driven trucks and airborne drones, a lot of jobs can still be eliminated but I am reminded of Carlota Perez’s comments that the railways created demand for more horse drawn freight miles. The other work apart from the obvious health service workers that cannot be virtualised is cleaning and security.

One thing that was not said is that the platform companies and their software benefit from massive economies of scale, and the critical scaling factor is the number of market participants i.e. the consumers and suppliers; for Air BnB, room providers and renters, for Uber, drivers and riders. While some market place creators have applied massive imagination and science to the problems of IT scalability to support their global marketplaces, the IT plant is not at the heart of the value of these market places although we need to recognize that we’ll have to pay for cycles and the power they consume.

Copyright and closed source makes the software monopolistic which is then applied to the relationship with Labour, and in the case of both Air BnB & Uber non software capital is outsourced to the supplier! The value of the company is based on this market activity, not the value of capital employed and not the so-called cost of the software; the software expropriates the surplus value from the suppliers and the size of these markets acts as a further barrier to entry for competitors.

Copyright since it inhibits copying of the software, also underwrites the share value. This is important as we consider if these monopolies should be placed under common ownership. We need to recognize that copyright enables rental income on an infinitely available resource i.e. the software.

These problems are not new, it’s about how combine labour and the world’s natural resources to produce new stuff, the market is meant to optimise this and the platform companies break these economic rules, but fortunately we know how to regulate monopolies.

There is a need for some new thinking about the value of software and how markets might ensure optimal resource allocation but today the basic facts are that software copyrights enable the expropriation of surplus value and establish a rental income yielding super-profits, super-profits funded by the consumers.

The relationship between these marketplace platform companies[1] and their suppliers is exploitative, copyright laws add to the barriers to entry. Their practices are contrary to decent behaviour and the monopolistic nature of the enterprise, together with the subversion of the capital markets undermines their economic justification.

That’s the problem for socialists


[1] Banks are platform companies. …

Automating the professionals

Automating the professionals

I attended a seminar the other day which raised some questions in my mind about the next and prior waves of automation, the location of value creation and the legal/social barriers to adoption. Much is spoken of the use of artificial intelligence to augment or replace professional workers and this note briefly looks at this. It examines the nature of decisions and the need to transparently serve a human rights agenda, the question of regulation and assessment by one’s peers, and why it’s so hard to organise Trade Unions amongst the software authors. …

Politics matters, even against a disease

Politics matters, even against a disease

It would be odd not to comment on the CV19 pandemic. For various reasons I have been looking back at my blog and remember at one stage it was a semi-public diary. Because it’s my blog, this is quite abstract and very political, I hope that my readers are keeping safe with their families.

It would seem that the worst of it may be over in the UK, provided that there isn’t a second wave. The best, most understandable charts are held at the FT and I have posted a screen grab of the their chart as at 19th April 2020. These charts and the Govt. numbers underestimate the deaths cased by CV-19 because they only count those that died in hospital; those who dies in care homes or at home are not counted.

The figures are probably double the official ones.

 

Within the Labour Party the fight for the tone of Starmer’s Party continues with some, including, it seems, him saying that we need to be a responsible opposition, which it seems to mean is not to oppose. The role of Labour in Parliament must be to act in the interests of people’s lives and safety; the Govt’s response to the COVID19 outbreak must be held to account, and where wrong opposed. The lack of preparedness, the lack of speed, the lack of PPE, the failure to test, all in breach of WHO guidance, the stupid exceptionalism in refusing to co-operate with EU & WHO are all failures, and the constant lying are things that as an opposition we should be challenging and where it makes a difference seeking to get changed.

The lack of tests and lack of hospital staff PPE is a continuing disgrace, to which there are simple answers. NHS Staff are dying. At least the Tories have postponed their Immigration Bill, but the current Brexit transition laws on immigration and citizenship are driving EU citizens back home, which is critically effecting the NHS ability to operate.

Much of the so-called economic security measures are problematic. Firstly, for the wage subsidy there is too much discretion left to the employers, whether to declare work essential and whether to apply for furlough subsidy. Firms can only get the subsidy if the workers are not working; instead of furlough, some people are having their hours & money reduced which is causing real hardship. People, even vulnerable people, have no say in whether they have to work i.e. if their work is essential. This is all compounded by the shit level of statutory sick pay, which the companies often avoid by using bogus personal service contracts. Some companies fear that the lockdown and consequent slump will cause their companies to fail and have started redundancy programmes, where again the statutory minimum is unsatisfactory for the low paid, often being less than their notice entitlements, and certainly less than their bosses’s. (The notice period for consultation was reduced from 90 days to 45 by the Tories).  The support for the self employed/personal service companies is weak and the paperwork requirements onerous as is the furlough scheme. Not the least of its half arsed provisions is that this is only available to companies with a three year trading record and it only protects the average profit over that period; so it’s a bit amusing for those that have been hiding their income in a bloated expense budget, but less so for those with marginal profitability or companies started more recently.

Other factors increasing the misery is that Universal Credit is appallingly low, and there is a five week waiting period for it. This is a problem well known to anti-poverty campaigners, the only upside is that a bunch of people who have never considered themselves as possible benefit claimants are now learning what hostile environment means as they have to put themselves through the degrading application process.

Another under considered fact is that the Courts are hard to keep safe, they’re old and under cleaned and they have reduced their capacity s a response to CV19. This means that those unfairly dismissed will have difficulty getting justice as their representatives and the courts struggle to adjust with the extra work and reduced capacity caused by lockdown. The Tribunal notification deadlines should be extended.

Another group of workers who will suffer are those with less than two years service who will be denied any redundancy payments or any protection against unfair dismissal and will thus be more likely to succumb to threats to make them comply with reduction of hours or made to work in unsafe environments. Since the lockdown is to isolate the disease, these failures risk everyone’s health.

In the long term, we should be looking to see,

  1. Sick pay & Redundancy increased and made state payed
  2. The two year service requirement for unfair dismissal to be abolished.
  3. Universal Credit’s waiting period to be abolished, actually this should be scrapped and rebuilt from scratch

The final piece of the jigsaw, is aggregate demand. It’s one of the reasons we should be subsidising wages during the crisis, the economy will not recover if people aren’t spending, and the poor spend more of their next £1 than the rich. The government is doing this through monetary quantitative easing (QE) i.e. giving money to the banks; they have rejected a universal basic income as in Spain, increasing Universal Credit payments or even a people’s QE. …

Employee self-defence

Employee self-defence

I have been meaning to write an “employee self defence” manual for a while now, and something came across my desk today to remind me of this ambition. Here’s mine off the top of my head.

  • Always reply to management in writing and in good time.
  • Know where your contract is, make a good .pdf copy of it and keep a copy of any variations particularly if you work for a business unit that has been subject to a TUPE agreement, you’d be surprised how careless some managements can be in keeping good records. If you opt out of the working time directive or refuse to, keep a record.
  • While contracts can be varied unilaterally i.e. imposed, it depends on the wording of the original contract, if you object to the changes, let management know in writing, it can’t stop it but it may be relevant for future grievances or disciplinary processes.
  • Keep a contemporaneous diary and keep it off your employer’s IT; they can deny it to you when you need it or worse, amend the record.
  • See your Doctor when needed and take their advice, don’t make them look a fool. If signed off sick, make sure your appropriate management know and they have the appropriate documentation.
  • Tell your management if you are disabled or chronically sick, they won’t make reasonable adjustments unless they do.
  • If you want flexible working arrangements, you have a legal right for this to be considered, understand the management process, they may mandate a specific form and make sure your application and their reply is in writing.
  • Know your grievance and whistle blowing policy so you know who to talk to when you need it.
  • If you think it’s a grievance, lodge it, the least that will happen is that your case is in writing, actually shit managements might retaliate but your case is in writing and if they’re bad, it’ll only get worse anyway.
  • Know the IT use and record management policy of your employer; don’t break them and complain if others try and get you to do so too, by for instance, using personal phones or emails and whatsapp or twitter to discuss work matters. If an employee, don’t use your own phone for any work business; they have a duty to provide one if you need it for work.

That’s it for the moment but I know there’s more. …

QE 2020

QE 2020

Goodness, here’s the Bank’s page on Quantitative Easing. The last tranche is £645bn. It’s a shit load of money and I find this an important quote,

Suppose we buy £1 million of government bonds from a pension fund. In place of the bonds, the pension fund now has £1 million in money. Rather than hold on to this money, it might invest it in financial assets, such as shares, that give it a higher return. And when demand for financial assets is high, with more people wanting to buy them, the value of these assets increases. This makes businesses and households holding shares wealthier – making them more likely to spend more, boosting economic activity.

The italics and underlining are mine. This is not a plan, it’s a dream. More likely!

If this is designed to boost aggregate demand, then it does so through the lending market and is mitigated by peoples expectations and animal spirits. Poor people spend more of what comes in and are also more debt adverse or will be excluded from borrowing [more] and there’s more of them. If it’s defending aggregate demand that’s needed then we should be pumping this money out through the benefit system nc. the in-work benefit payments; SSP and Redundancy should be state paid/underwritten benefits, not paid by employers nor underwritten by loans. If it’s about protecting the poor inc. the in work poor and vulnerable, then doubly so.

See below/overleaf for a chart showing its size compared with both the fiscal deficit and balance of trade deficit. …

It’s cold outside

It’s cold outside

Carlotta Perez argues that Kondratiev Long Waves have an internal shape. One of the trends is the rollout of the driving technology from the core to the periphery and this takes place in the maturity phase as profitability of the once new technology declines. Another important event is the next eruption and where that takes place. Between the Steel & Oil phases, the world’s core moved from England, the economic and political epicentre of the British Empire to the USA and we should remember that this role was contended for by both Germany and the Soviet Union. It’s moved once, it can move again but it’s most unlikely to come back to England. I wonder what being part of the periphery will be like. I suppose it depends upon where the core is. Will it remain in the USA or move, to China or even the EU. The key will be the dynamism of the innovation economy; it looks like, due to Brexit, the UK’s Universities will decline and that much of aerospace and biosciences will leave the UK. Otherwise the UK & US industries may be defended by the ubiquity of English, but the EU has had 40 years of using it as their language of commerce and to a great extent the language of government.

I can’t see it clearly, but the corruption and financialisation of the anglosphere economies are stymieing innovation and inhibiting “creative destruction”; there is opportunity for other national economies to do better. It would also seem that Perez’s predicted regulatory correction is nostalgic this time, looking back to times when things seemed better, or defending old out dated business models. We  cannot recreate the industries of the steel revolution.

It’s unlikely to be pleasant, especially if the UK moves from being a 2nd tier economy to peripheral one. …

More from Meadway

More from Meadway

I went to one of the local labour political education workshops at which James Meadway was speaking. Odd, since I had been reading of his views, in particular with respect to his contention with MMT; I wrote them up on this blog. but it was good to hear him in person.

I have written about MMT and its contention with the Labour front bench a couple of times and summarised my understanding of the MMT position on International Trade. A couple of years ago I wrote on their views on Monetary vs. Fiscal policy, this latter article also summarises and links to articles critical of MMT.

Meadway emphasised two things, “Not all Currencies are equal”, the dollar is still the international trade denominator. The second point is that making debt default the policy tool to deal with private sector foreign exchange debt is not wise as the biggest FX debt holders are probably HSBC and Barclays. While the UK public sector FX debt is tiny, this private sector debt is not and it’s questionable if we could bail the banks out a second time which since the ring fencing of retail and investment banks is mired in the swamp would jeopardise the people’s savings.

He also emphasised the importance of ownership, investment and universal services as socialist agenda items and thus the creation of an irreversible shift in power; not so sure my memories of Thatcher selling off the Mutuals is evidence that this will work but it will be a powerful manifesto. …

Confusing

While there is not a lot of theory for HR professionals, one piece of good practice is to separate performance management systems from pay assessments in order to encourage employees to admit their weaknesses. I wonder why no-one does this? …

The politics of MMT

The politics of MMT

I was prompted to remember some of my recent Macroeconomic reading as someone was asking about Modern Monetary Theory (MMT). I read Reclaiming the State (Gibson & Faizi) last year, and I picked it up again to re-read the section on International Trade. I have not yet finished it, but I remember thinking that while public finance may not be a constraint on the economy, the long term balance of trade may well be, even for a monetary sovereign.

Meanwhile this article “Brexit the slippery slope of left sovereigntism from modern monetary  theory to spiked” at https://tendancecoatesy.wordpress.com explores the political inertia that MMT’s exponents may be riding. Much of it is based on an interview with James Meadway, once John McDonnell’s economics adviser which is available, at the link below/overleaf. For Coatsey’s regular readers they will be unsurprised at his pugnacious attacks on Faizi’s endorsement of the Full Brexit and Spiked. Meadway’s musing are interesting in that he emphasises that MMT, like Keynesianism  says nothing about inequality and ownership of the means of production. The interview also addresses the moderation in Labour’s 2017 Manifesto. Below/Overleaf are links and excerpts for further reading of Meadway’s views …  …