“The 99” and “The 1%” … of What?

by Andrew Kliman on February 26, 2013

Originally posted at With Sober Senses — By now, everyone has heard about “the 1%” that has supposedly been reaping almost all of the gains in income in the U.S., while “the 99%” have been left in the dust, lagging further and further behind. This notion has been promoted by many liberal and leftist economists and by prestigious publications like the New York Times. And influential segments of the 2011 Occupy movement were largely successful in turning the movement into a vehicle for “the 99%” to protest against “the 1%.”

But almost nobody has bothered to ask, “the 99% and the 1% of what?”

The answer — which I’ll get to below — is surprising. The massive income gains of “the 1%” don’t mean what almost everyone has thought they mean. And partly because the data on the income share of “the top 1%” are little understood and often misunderstood, the extent of the increase in income inequality and, I think, the importance of the issue, have been exaggerated.

Why does this matter? I think there are several reasons. One is that the disproportionate concern over inequality can divert attention from major economic problems like the economy’s failure to rebound from the Great Recession, and what to do about that. And it can tend to divert attention from concrete problems like mass unemployment, people losing their homes, and poverty. And what about the fact, which dominates most people’s lives, that they are forced to do what bosses tell them to do, day after day, year after year — or else starve? Why is there so little outrage about this, or even concern about it? Certainly, the Occupy movement generally focused less on these concrete problems and more on the abstraction “rising inequality.” But the concrete problems are directly about people’s well-being, while concern over inequality isn’t. It may in some cases be driven instead by envy, resentment, or the desire to find scapegoats for other economic and social problems.

Second, the national and first-world-centered framing of the inequality issue is troubling. One-twelfth of “the 99%” in the U.S., more than 25 million people, are part of “the 1%” on the global level. And even U.S. residents whose incomes are at this country’s poverty line are nonetheless in the top 14% of the global income distribution. (The first statistic is based on data reported here; the second is reported here.) Shouldn’t the focus on inequality be broadened, and wouldn’t it be broadened if concern for people’s well-being were the overriding motivation?

Third, there are massive social divisions, between rich and poor, owners and workers, bosses and workers, and so on, that talk of “the 99%” covers over. We are hardly “all in this together.” An unmarried person with income of $366,622 in 2011 was part of “the 99%,” but had very little in common with most Americans. Why should a (problematic) statistical finding that the income of “the 1%” rose much faster than everyone else’s income come to dominate how we understand and grapple with these social divisions? It may be politically expedient in the very short run for a social movement to declare that it represents the interests of 99% of the population, but it seems to me that such declarations have proven to be hollow. In order to forge real unity and create a social movement that’s big enough to change society, a lot of hard work and hard thinking are needed in order to identify genuine commonalities of aspirations and interests, and in order to break down the many economic, racial, gender, philosophical, and other divisions that plague these movements.

He thinks he’s the 1%, but he’s not.

Fourth, I think that the disproportionate concern over inequality largely reflects — and encourages — a distorted understanding of the causes of the Great Recession and the economic malaise that persists long after the recession ended. As I discussed in chapter 8 of my book, The Failure of Capitalist Production, there are very strong reasons, both factual and theoretical, to reject the popular underconsumptionist notion that the Great Recession was caused largely by a substantial decline in the share of output that the U.S. working class was able to buy with its income (i.e., without going deeper into debt). One is that no such decline occurred.

Elsewhere in the book, I argued that a long-term fall in U.S. corporations’ rate of profit was a key indirect cause of the recession. Unfortunately, this argument has frequently been dismissed — without dealing with the data I put forward — on the grounds that “we all know” that wages have stagnated and workers’ share of the product has fallen markedly, and that these trends must have caused the rate of profit to rise. (They would indeed have done so, had they taken place, but they didn’t.) Similarly, the book’s findings that pertain to compensation of workers have been dismissed on the grounds that they contradict the well-known fact that inequality has risen markedly. (But there is only an apparent contradiction, not an actual one.)

Since the evidence suggests that upward redistribution of income isn’t a significant cause of the recession and the persistent economic malaise, downward redistribution of income isn’t going to extricate the economy from the malaise. After all, profit is the fuel on which capitalism runs, so a downward redistribution of income that cuts into profit will tend to destabilize the system even further. Working people’s struggles to protect their jobs, incomes, and homes certainly deserve our support, but there’s no good reason to base that support on the dubious notion that successful struggles will improve the functioning of the capitalist system. Surely a Left that prides itself on putting “people before profit” can come up with sounder bases for supporting these struggles.

Indeed, if downward redistribution were a solution, the U.S. economy should have rebounded smartly from the recession years ago. Between 2007 and 2009, the income of “the 1%” fell by more than one-third, while everyone else experience a fall of just 4%. More than 70% of the total loss of income was borne by “the 1%,” and as the graph below shows, its share of income fell from an all-time high to a lower level than in 1997.

Share of Income of “the 1%” in the U.S.


Source: Internal Revenue Service, Statistics of Income.
Note: “Income” refers to adjusted gross income as defined by the IRS.

But what are these data telling us, anyway, and what does “the 1%” really mean?

The story begins, a decade ago, with the surprising findings of Thomas Piketty and Emmanuel Saez, two French economists who have been close to that country’s Socialist Party. Prior to their work, economists generally agreed that income inequality in the U.S. rose rapidly in the 1980s, but that the growth of inequality slowed down greatly after about 1993. But Piketty and Saez reported a shockingly large — and continuing — increase in the incomes of “the 1%” relative to the rest of the population.


Are animated figures in “the 1%”?

For a long time, it was generally believed that Piketty and Saez’s conclusions differed so drastically from the previous consensus because their data came from the tax authority (Internal Revenue Service), while other researchers employed Census Bureau data. And it was widely believed that the studies based on Census data had failed to capture the rise in income at the top of the income distribution because the Census data were inferior. (The Census Bureau censors information on those with very high incomes, to protect their anonymity, so researchers have to employ a good deal of guesswork in order to estimate top incomes.)

Enter Richard V. Burkhauser. The tide had swung so much in favor of the Piketty and Saez view that a major economics journal rejected a paper by Burkhauser and co-authors simply because its findings, based on Census data, were at variance with those of Piketty and Saez. So Burkhauser and his colleagues looked into why the conclusions of the Census-based and tax-based studies were so different. After four years of work, they published a remarkable paper last year that was basically able to reconcile the two sets of data.1 They showed that they could obtain results from Census data that are very much like those of Piketty and Saez, if they employed Piketty and Saez’s definition of income and their income-sharing “units.” Thus, the reason why Piketty and Saez had come up with such shocking conclusions about rising inequality had little to do with the fact that they had a different data source. It had to do with fact that they were using a very different definition of income and studying very different income-sharing “units.”

A related and equally remarkable paper by Burkhauser and colleagues,2 also published last year, showed just how much depends on the definition of income and the choice of “units.” The Piketty-Saez methods imply that the real (inflation-adjusted) income of those in the middle (the median income) increased by just 3.2% between 1979 and 2007 in the U.S., but the methods most commonly employed imply that it increased by 23.6%, more than seven times as much!

This is partly because Piketty and Saez’s definition of income excludes “transfer payments,” things like government-provided pension income (Social Security, etc.), unemployment insurance benefits, and public assistance. And it’s partly because Piketty and Saez’s “units” are peculiar, something called “tax units” — unmarried individuals, or married couples filing a joint tax return, and, in both cases, any dependent children — while other researchers’ “units” are typically households adjusted for household size. (Because the number of “tax units” per household has risen considerably as the marriage rate has declined, Piketty and Saez’s method increasingly spreads out rising income among more and more “tax units,” and thereby dilutes the rise.)


We are your tax unit. Maintain low tones.

Burkhauser and colleagues also found that, if we consider after-tax income, and include the value of employer- and government-provided health insurance in the definition of income, median income of size-adjusted households rose by 36.7%. This is more than eleven times as much as the increase we get using Piketty and Saez’s methods.

In the same paper, Burkhauser and colleagues also showed how much the definition of income and the choice of “units” affect trends in income inequality. Using Piketty-Saez methods, they found that the bottom 20% of the population suffered a 33% fall in real income between 1979 and 2007, while the top 20% enjoyed a 32.7% gain. But when they used the most common definition of income and choice of “units,” they found that the income of the bottom 20% rose by 9.9% while the income of the top 20% rose by 42%. And when they considered after-tax income and counted health benefits as income, they found that the income of the bottom 20% of size-adjusted households rose by 26.4% while the top 20% enjoyed a 52.6% gain. So inequality increased, according to all three methods, but Piketty-Saez’s methods resulted in the biggest increase, by far, and only their methods, not the others, imply that the income of those at the bottom fell.

The findings of Burkhauser and colleagues seem to have put Piketty and Saez on the defensive. Saez told the New York Times that he hopes to be able to produce data on “post-tax, post-transfer, per adult, adding non-taxable income sources, etc.,” which seems to be tantamount to an admission that their prior studies have employed a questionable definition of income and choice of “units.” Piketty told the Times, “We have always been very clear about the fact that we study changes in the distribution of market income. Our point is that top incomes have taken a disproportionate share of market income growth over the past 30 years, and as a consequence that the market incomes of the lower and middle class have stagnated.”

And he’s right (though other definitions of market income would, for instance, include Social Security income). But there are a couple of problems with Piketty’s defense. One is that he and Saez, not to mention news sources and other economists who repeat their findings, have almost always referred to “income” without any qualifying adjective. The other is that, until the studies by Burkhauser and colleagues came out, no one paid much attention to the exact way in which income was defined, because no one knew that the different definitions matter as much as they do.

So now we have the answer to the question with which we began: “the 99% and the 1% of what?” Not people, not families, not households, but “tax units.” Because the number of “tax units” per household varies and has risen over time, especially among lower-income people (as the income inequality findings suggest), measuring income trends in terms of them is rather like measuring lengths using a rubber ruler. And now we know the meaning of statements like “the top 1% has reaped most of the gains in income” — “the top 1% of ‘tax units,’ not adjusted for size, has reaped most of the gains in before-tax, before-transfer, income received from taxable sources of income.” But in another sense of the word “meaning,” I’m not at all sure that we know what this means. If the significance of this is clear to you, good. It isn’t to me.


Rubber ruler

I basically agree with Saez’s view of the import of the studies by Burkhauser and colleagues: “cash market income of the bottom 99 percent of adults has stagnated but the bottom 99 percent get much more expensive private and government provided health care benefits, some more government transfers, and they have fewer kids.” So their total income, and especially their total income per person, has not stagnated. And I agree with Saez that “[t]his does not seem like a great situation … from a conservative point of view.” The rise in the income of “the 99%” is partly the result of things that are anathema to much of the right: family planning and government-provided benefits won through social struggles. So I don’t think that the remarkable findings of Burkhauser and his colleagues can easily be situated on a left-to-right spectrum.


Andrew Kliman is the author of The Failure of Capitalist Production: Underlying Causes of the Great Recession (Pluto Books, 2012) and Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency (Lexington Books, 2007).


1. Richard V. Burkhauser, Shuaizhang Feng, Stephen P. Jenkins, and Jeff Larrimore, “Recent Trends in Top Income Shares in the United States: Reconciling Estimates from March CPS and IRS Tax Return Data,” Review of Economics and Statistics 94:2, May 2012, 371–88.

2. Richard V. Burkhauser, Jeff  Larrimore, and Kosali I. Simon, “A ‘Second Opinion’ on the Economic Health of the American Middle Class,” National Tax Journal, March 2012, 65 (1), 7–32.

  • Louis Proyect
  • http://akliman.squarespace.com Andrew Kliman

    Yates’ piece is cynical and disrespectful of regular people and reason. E.g., “The imprecise nature of political slogans is a virtue. … slogans … help people develop the mindset most suited to active participation in whatever struggles are at hand.” How many steps from this to “Ignorance is Strength”? The piece helps make clear why the left is in such trouble.

    • Louis Proyect

      Okay, okay. just don’t threaten to sue him.

      • http://akliman.squarespace.com Andrew Kliman

        I would never sue or threaten to sue someone because I disagree with them. I’m totally opposed to suppression of contrary views; that’s how the other side operates. I do think I have had, and continue to have, a political and personal responsibility to protect myself from those who spread false allegations of professional misconduct about me that threaten my job and ability to earn a living.

    • http://magpie68.blogspot.co.uk Brian S.

      Actually, I think Yates hits the nail on the head (which is what, of course, a good slogan should do): “Radical political movements always employ slogans that encapsulate in a few powerful words the aspirations of those fighting for a new world”. Part of the problem with the traditional left was their fetishisation of slogans – somehow if you got the slogan just right the mass movement would see the light and rally behind your banner. But, to quote Yates (more fully) again, “The imprecise nature of political slogans is a virtue. Actual political programs do not derive from words alone but from the balance of class forces that exist at a particular point in time. What slogans do is clarify the most basic political cleavages” There’s nothing “disrespectful” in that – quite the contrary it understands that political communication is a two-way street with the formulator of a slogan suggesting a broad framework of understanding, but with space for those who embrace that to to fill in the picture with their own experience, concerns, and understanding.

      • http://www.marxisthumanistinitiative.org Anne Jaclard

        Slogans can be useful for encapsulating basic ideas of a movement and rallying the troops—any movement, fascist ones just as well as left ones. Michael Yates’ claim in his article that slogans, especially vague ones, are good in and of themselves, because they “help people develop the mindset most suited to active participation in whatever struggles are at hand” makes my hair stand on end. It sounds so much like a fascist approach to politics. And “help people develop a mindset” is so elitist. Keep your hands off my “mindset,” Yates! I want to control my own body, and my own mind. I don’t need you to “help develop” it for me.

        Slogans as such are not good or bad. Some are good, especially those that express a worthwhile demand or aim—“the land to the tillers,” “turn the imperialist war into a civil war.” But other slogans are problematic. “We are the 99%” has positive aspects that others have rightly pointed to, but it expresses no aim at all, and worse, is it inherently confusing. It became downright misleading when it was taken by the left to mean that our problems lie in an unfair distribution of income (or wealth, or something). The consequence has been to truncate the Occupies’ exploration of the economic problems of poor and working people, substituting a populist, distributionist perspective for a real understanding of how capitalism works and the real possibilities for change. This consequence is hugely destructive of thinking, and of the movement.

        Yates says, “’We are the 99%’ suggests an ‘us versus them’ politics that foreshadows the class perspective so badly needed in the United States.” What a condescending remark! Working and poor people are perfectly well aware of class divisions. And why should we have an “us versus them” politics that only FORESHADOWS the class perspective that’s “so badly needed”? Why not actually say what’s going on and demand change? Yates, Brian S., etc. apparently consider working and poor people too “backward” to understand a class analysis, so it has to be made fuzzy and simplistic for them. The dirty little secret behind what seems to be a great appreciation of slogans that have emerged from below is an elitist attitude to people: “this is a really great achievement for them, given their undeveloped mindset.” This is completely contrary to the Marxist-Humanist view. See http://www.marxisthumanistinitiative.org/philosophy-organization/is-it-true-that-%e2%80%9cpeople-are-not-ready-for-socialism%e2%80%9d.html

        • http://magpie68.blogspot.co.uk Brian S.

          Saying that people have “an undeveloped mindset” (not my phrase but not one I recoil from) is not the same as saying that people have undeveloped minds. Its clear from many perspectives – from common sense to doorstep campaigning conversations to sociological research that awareness of class is variable, across time, place, and people. In my experience, its true that most working class people have some sense of the class structure and where they are in it, but that doesn’t automatically produce “class consciousness” (in the sense of using class as an active framework for interpreting the world) and certainly doesn’t automatically produce class-based social action . The simple fact is that the majority of people in oppressed and exploited classes orient to the political world through non-class structures: they vote for capitalist parties, support capitalist leaders, embrace pro-capitalist ideas, and are mobilised along non-class lines of divide (religion,language, nation, clan, caste). Socialists aren’t going to get anywhere by pretending this isn’t so: they are going to have to WORK to change it. And that’s were slogans like this come in.

  • http://gaimmigrantrights.blogspot.com/ Joaquín Bustelo

    Kliman just doesn’t get it. The 99% and the 1% don’t have anything to do with academic studies, precise definitions of tax units nor anything else like that.

    It is an elementary but very clear expression of class consciousness, something that had been absent as a mass phenomenon in this country my entire life, and I’m past 60. It is a recognition that we, the big majority, the working people, are getting screwed by the 1%.

    Occupy Wall Street was just a small seed dropped into a super-saturated solution of class resentment and anger. Thanks to the brutality of the NYPD, on TV and in the newspapers they were talking about these crazy people who blamed everything on the banks and the rich and the politicians.

    And tens of millions reacted by saying, “They’re not crazy, they’re right.” And tens of thousands, perhaps more, actively participated in the movement. Some 7,000 were arrested, mostly for symbolic acts of civil disobedience like refusing to vacate a park.

    For me, what really drove home the enormity of what was happening was recording interviews with people at the Troy Davis Park Occupation in Atlanta, and especially this one: http://www.youtube.com/watch?v=U22s3wyfvxs.

    Even if only briefly, class consciousness and the reaffirmation of our individual and collective autonomy that the camps expressed broke through the political and ideological hegemony of the ruling class.

    The important part of “we are the 99%” is not the arithmetic, but the class identity expressed by “we.”

  • http://akliman.squarespace.com Andrew Kliman

    Joaquín, the problem is that the importance, to you, of the concepts of “the 1%” and “the 99%” is different from their importance to some rather influential people and institutions, like Joseph Stiglitz, Piketty and Saez, the New York Times, and the Democratic Party.

    There are interests that try to harness class anger and resentment and try to channel it along specific paths, including alien paths. I of course don’t think that the popular embrace of the concepts of “the 1%” and “the 99%” was an effort to divert attention from the failure of the economy to recover or the other concrete economic problems I mentioned. Nor was it an effort to promulgate a distorted understanding of the causes of the Great Recession or the view that income redistribution is the solution to persistent economic malaise. Nevertheless, these concepts are being deployed in the service of specific policies, and specific interests that are rather different from the interests of most people who embraced the concepts.

  • Cameron James

    Andrew seems misguided in seeing 1% vs. 99% solely in terms of income inequity. There are some (including myself) that see the split as a clear reference to the capitalist system’s fundamental driving force — the process of the production, appropriation and distribution of surplus-value (or in other terms the theft of the value produced by productive workers above and beyond the wage paid them by the appropriating capitalist). In this fundamental capitalist process, the exploitation of human labor, the split of 1%/99% graphically illustrates the degrading and destructive nature of the process under whose thumb we find ourselves stuck. On the one side are the exploiters and the other the exploited. This theft of human labor from those who labor is just but one of the social degradations challenging us, but one whose solution is requisite for a brighter future. Kliman seems much too narrow in his perception and appreciation of 1%/99%.

    • http://gaimmigrantrights.blogspot.com/ Joaquín Bustelo

      I think maybe Andrew should review his notes from some high school literatuire class. The 99%b and 1% is a meme: metaphor, not mathematics.

      That the ruling class’s political and journalistic operatives will seek to mimic or even steal the slogans and expressions of those who oppose them in order to neutralize the opposition is not new. I remember being really struck by it when Richard Nixon appealed for votes in 1968 because he had a secret plan to end the war in Vietnam. That plan, as it turned out, was simply to bomb the Vietnamese back to the stone age.

      Four years earlier, what Johnson had campaigned on was this: ” We are not about to send American boys 9 or 10 thousand miles away from home to do what Asian boys ought to be doing for themselves.”

      In fact he was already sending them, but his Republican rival’s response was to the effect that he would send even more American boys as cannon fodder to Asia than Lyndon. Suffice it to say, it was not a winning message. Hence Nixon packaged his escalation as a “plan to end the war,” and refused to go into the substance of it.

      What happened? In fact, on the ground, over the next few years, ALL of those messages trying to co-opt what we kids were saying backfired. The content, what people understood, was movement-driven.

      It’s the same with the 99% and the 1%.

  • Arthur

    There are two separate themes in the article.

    The critique of “99% vs 1%” is useless. I have nothing to add to the other comments and links. (I’m assuming the link to SWP illustrating utter sterility was intended to make the same point about the article’s more “nuanced” sterility.)

    But there has been no comment on the article’s points about underconsumptionism and that economic crisis is not caused by increasing inequality and will not be cured by redistribution.

    I think that theme is positive and should not have been linked to critique of growing awareness that “we are many, they are few”. A seperate article elaborating would be useful.

  • Arthur

    I would just like to repeat here my strong recommendation for study of:

    http://www.scribd.com/doc/77012233/Pavel-Maksakovsky-The-Capitalist-Cycle

    This is prompted by just having read the summary of Andrew Kliman’s 2011 book (up to p10 only) as a result of the very unusual event of me agreeing above with something written recently about capitalist crisis.

    FWIW I also agree with the summary’s rejection of absurd “financialization” theories and with Klimer (and Brennan’s) view that there has not been a new cycle since the 1970s and with Klimer’s (and the Austrian) view that there won’t be a recovery until there is a full blown crisis with massive devaluation (which is why I never thought the 1970s problems had ended, despite my not having attempting detailed empirical verification).

    I noticed there is no reference to Maksakovsky in Andrew’s book so he presumably had not read Maksakovsky. He certainly should!

    BTW I think Maksakovsky is correct in simply treating production prices as the further development of value and in explaining how a CYCLIC collapse in profit rates relates to crisis. As far as I can make out Andrew suggests that the long run tendency directly induces the collapse in crisis. That strikes me as rather like claims that crises are due to other non-cyclic factors like greed or capitalism – which Andrew rightly ridicules.

    Also Maksakovsky’s detailed account of (Marx’s) theory of the mechanism producing cyclic collapse in profit rates has to do with the time structure of investment (longer gestation in department producing means of production) conflicting with short term price signals (eg minerals boom sends price signals to build more mining and infrastructure projects, which come on stream a few years later with massive overproduction. This is much more coherent than what I understand of Andrew’s TSSI theory.

    • http://magpie68.blogspot.co.uk Brian S.

      I remember you recommending this before: just downloaded it and it looks interesting. I may come back once I’ve had a chance to take a fuller look.

  • http://akliman.squarespace.com Andrew Kliman

    The criticisms of my essay voiced above are all rooted in a serious misunderstanding (or misrepresentation) of it. I did a word search on the essay and the results are enlightening:

    Word — No. of Matches
    ———————-
    income — 71
    inequality — 15
    distribution — 7
    slogan — 0
    catchphrase — 0
    meme — 0
    theme — 0
    scream — 0
    dream — 0

    IT’S SIMPLY NOT AN ESSAY ABOUT “WE ARE THE 99%” or any similar slogan, catchphrase, meme, theme, scream, or dream.

    It’s an essay about income inequality and the politics of income redistribution. Specifically, it’s about the notion, rooted in the research of Piketty and Saez over the last decade, that “the 1%” has been “reaping almost all of the gains in *income* in the U.S., while ‘the 99%’ have been left in the dust, lagging further and further behind.” It argues that

    “[t]he massive *income* gains of ‘the 1%’ don’t mean what almost everyone has thought they mean. And partly because the data on the *income* share of ‘the top 1%’ are little understood and often misunderstood, the extent of the increase in *income inequality* and, I think, the importance of the issue, have been exaggerated” (emphases added).

    The following comments are therefore misguided:

    1. “Kliman just doesn’t get it. The 99% and the 1% [i.e., the slogan, catchphrase, meme, etc.] don’t have anything to do with academic studies, precise definitions of tax units nor anything else like that. It is an elementary but very clear expression of class consciousness.”

    I do get it, but that isn’t what the essay is about. It’s about income inequality and the politics of income redistribution, which do have to do with academic studies, precise definitions of tax units, and lots of things like that.

    2. “Here’s another critique of the 99 percent type slogans.”

    My essay doesn’t critique “the 99 percent type slogans,” catchphrases, memes, etc.

    3. “Andrew seems misguided in seeing 1% vs. 99% solely in terms of income inequity. … Kliman seems much too narrow in his perception and appreciation of [the slogan, catchphrase, meme, etc.] 1%/99%.”

    I focus on income inequality and income growth among “the 1%” and “the 99%” because that’s what the essay is about, not because I think that is the only or main thing that the slogans, catchphrases, memes, etc. are about.

    4. “The critique of ‘99% vs 1%’ [i.e., the slogan, catchphrase, meme, etc.] is useless. … critique of growing awareness that ‘we are many, they are few’.”

    My essay doesn’t contain a critique of “99% vs 1%” and similar slogans (etc.). Much less does it contain a critique of the “growing awareness that ‘we are many, they are few’.”

    And the following comment is also misguided, but for a partly different reason:

    5. “I think maybe Andrew should review his notes from some high school literatuire class. The 99%b and 1% is a meme: metaphor, not mathematics.”

    I think maybe the author of this should review his notes on Piketty and Saez’s academic writings on the income share of “the 1%” from 2003 to the present, many of which are available at http://elsa.berkeley.edu/~saez/, or his notes on the scads of news articles and talks by politicians, politicos, and academics that uncritically invoke their findings.

    The idea that there’s a growing gap between “the 1%” and “the 99%” begins with Piketty and Saez’s findings that there’s a growing gap between these groups’ *incomes*. This is one version of the concept of “the 1%” vs. “the 99%.” It is the original version, and one that has a precise, determinate meaning. And there’s a straight line between Piketty and Saez, through Joseph Stiglitz, to David Graeber or whoever of OWS. The sloganeering (memetic, etc.) and indeterminate version of the concept is *derivative*. Again, my essay was about the original, determinate version of the concept. It dealt with the derivative, sloganeering, indeterminate version only insofar as and where the two overlap.

    The most charitable explanation of these misunderstandings (or misrepresentations) that I can come up with is as follows. The critics were familiar only with the derivative, sloganeering, indeterminate version of the concept of “the 1%” vs. “the 99%.” And, for some reason, they did not use the information provided in my essay to familiarize themselves with the original, determinate version. Instead, they read the essay in the light of their preconceptions, wrongly assumed that they knew in advance what the essay is about, and then complained that it is defective as a discussion of a slogan, catchphrase, meme, theme, scream, or dream.

    HOWEVER—AND TO REPEAT—THE ESSAY ISN’T A DEFECTIVE DISCUSSION OF THAT SLOGAN (ETC.). IT’S SIMPLY NOT ABOUT IT.

    I don’t think these critics are representative. In the 10 days since my essay was first published in With Sober Senses, it has been republished not only on this site, but also in the journal State of Nature and by Pluto Press (http://www.marxisthumanistinitiative.org/economic-crisis/%E2%80%9Cthe-99%E2%80%9D-and-%E2%80%9Cthe-1%E2%80%9D-%E2%80%A6-of-what.html ; http://www.stateofnature.org/?p=6562 ; http://plutopress.wordpress.com/tag/andrew-kliman/). All three republications were initiated by those who have republished the essay, not by me. I trust that the reason why they have gotten more out of it than the critics have gotten is that they have understood it better.

    • Arthur

      The title, and introduction to the article naturally focussed attention on the theme taken up in most of the comments. A less charitable interpretation of the article being misunderstood is that it had a misleading title and introducton.

      Mine was the only comment that even noticed the other theme (which Andrew still believes was the only one). It also endorsed it and strongly recommended study of Maksakovsky.

      No mention of that comment in Andrew’s response. I still hope he does take up the recommendation to study Maksakovsky. I am reasonably sure he would find it very interesting.

    • Louis Proyect

      I think people were reacting against this formulation–something I’ve heard in one form or another since OWS began. It makes i sound as if talking about the 99 percent is a theoretical error akin to the Okishio theorem:

      It may be politically expedient in the very short run for a social movement to declare that it represents the interests of 99% of the population, but it seems to me that such declarations have proven to be hollow. In order to forge real unity and create a social movement that’s big enough to change society, a lot of hard work and hard thinking are needed in order to identify genuine commonalities of aspirations and interests, and in order to break down the many economic, racial, gender, philosophical, and other divisions that plague these movements.

      • http://akliman,squarespace.com Andrew Kliman

        This statement doesn’t criticize “talking about the 99 percent.” It criticizes “a social movement [declaring] that it represents the interests of 99% of the population” when that declaration is hollow. There’s a big difference.

  • Robert

    This article is really misguided. Despite your extended attempt to prove otherwise in your comments, you clearly are taking aim at the entire discourse around the 99%/1% distinction. There’s a whole body of theory that can tell you about discursive structures and political subjectivity, but the Yates article makes the point well enough.

    You unjustifiably begin talking about the “1%” and “99%” as “concepts.” I suggest you re-read your Marx is you want to know what a concept is. Is there a universe in which these two discursive formulations are being presented as central ontological features drawn out from the study of the capitalist social form?

    Yes, yes, I understand that a number of heterodox liberal economists have done studies in which these percentages were used as a way to create shocking formulations and maybe point to some form of underconsumptionism. But what makes their usage of these particular signifiers the “determinate” ones? Why can’t we dissociate the potential uses of a common signifier in two different contexts? If you want to write a critique of underconsumtionism, by all means go ahead, but there’s really no need to try and be provocative by implicating the central discourse of the largest popular movement that the U.S. has seen in 40+ years.

    • http://akliman.squarespace.com Andrew Kliman

      First, I didn’t say that “their usage of these particular signifiers [is] the “determinate” one.” I said, “It is the original version, and one that has a precise, determinate meaning.”

      Second, I agree that we should “dissociate the potential uses of a common signifier in two different contexts.” That’s what I did in my essay–by restricting my critique to its overuse, and especially to the questionable empirical basis for that overuse, in discussion of *increased* *inequality of income*–not inequality of income as such, and certainly not inequality as such, much less class differentiation. And differentiating different uses is the very thing I’ve been trying to do since, in my comments here. The main point of these comments has been that the critics of the essay have misunderstood (or misrepresented) it because they haven’t dissociated what should be dissociated here. Right?

      Third, you yourself are failing to dissociate my specific uses of the concept of “the 99% vs. the 1%” from others when you write that I am clearly … taking aim at the ENTIRE discourse around the 99%/1% distinction” (my caps). If I’m wrong about that, please show us something in my essay that takes aim at the ENTIRE discourse. (In all these criticism of the essay, there has been exactly one (belated) attempt (Louis Proyect, March 1, 2013 at 11:37 pm) to substantiate the criticism by referring to something specific that I actually wrote.) A more charitable interpretation of what I wrote, and the one I intend, is that it’s an effort to separate the wheat from the chaff, and thereby help strengthen the criticisms of economic and social divisions that are meritorious, by extricating them from the criticisms that aren’t. If future comments on the essay focus on that, the discussion might be much more fruitful than it’s been.

      Fourth, I do think that the concept of “the 99% vs. the 1%” is a concept, and in the exact sense you intend: “these two discursive formulations are being presented as central ontological features drawn out from the study of the capitalist social form” (or study of something that isn’t identified as “the capitalist social form”). They’re presented as the dominant, overriding division in society, not merely as one of many ways of *thinking* of society that may be useful in some contexts, less useful in others, and useless in still others. But that’s not what the essay is about, and people like Piketty and Saez don’t attribute ontological significance to the concept, so I’m writing this just because you asked, not for any other reason.

      Fifth, I wasn’t trying to be provocative–I wrote this essay for a Norwegian publication, Radikal Portal–it was republished here at the request of the editors–and I think it will be understood differently in Norway. I suspect that part of the problem here is that the North Star started as an Occupy-related project, which may have made the essay seem to some of its less-careful readers to be more than tangentially about the derivative, sloganeering, indeterminate version of the concept of “the 99% vs. the 1%.”

      Sixth, the essay does implicate, in a couple of specific ways, ASPECTS OF the central discourse of part of the Occupy movement, because its employment of the concept of “the 99% vs. the 1%” has to some degree drawn on the Piketty-Saez findings (they are definitely not heterodox economists), and because of the other reasons mentioned in the essay. If you think these aspects shouldn’t implicated in the specific ways in which I implicated them, then I suggest that you put forward an argument against what I actually wrote about this; “you clearly are taking aim at the entire discourse around the 99%/1% distinction” doesn’t cut it.

      Seventh, the essay isn’t meant to be “a critique of underconsumptionism.” I doubt that Piketty or Saez, or most economists and others who have cited their findings uncritically, are underconsumptionists. The essay is a critique of the claim that “the 1%” has been “reaping almost all of the gains in income in the U.S., while ‘the 99%’ have been left in the dust, lagging further and further behind” and of the uses to which the claim has been put, underconsumptionism being only one of them.

  • Ben Campbell

    All of this talk about the slogan “we are the 99%” is distracting from the larger economic arguments advanced by Kliman. I wonder what Kliman has to say about how his numbers match up with those of Magdoff and Foster, published yesterday in Monthly Review.

    • Louis Proyect

      Actually, the article was fairly uncontroversial. I have no idea why the OWS had to be dragged into a polemic against underconsumptionism.

      • Louis Proyect

        Oh, I think I just figured out why Andrew dragged OWS in:

        The Zuccotti Park occupation was a dismal failure. The functioning of Wall Street was not disrupted. Occupy Wall Street never occupied Wall Street. Even Zuccotti Park was “occupied” only with the consent of the mayor of New York City, and it was cleared out the moment he withdrew that consent. In the end, no autonomous space was reclaimed. The effort to remake society by multiplying and weaving together autonomous spaces is back to Square One. Even worse, precious little progress was made during the occupation in articulating and working out what the movement is for, or how to solve the serious social and economic problems we now confront
        .
        http://www.marxisthumanistinitiative.org/alternatives-to-capital/the-make-believe-world-of-david-graeber.html

    • http://akliman.squarespace.com Andrew Kliman

      I think this is a productive comment that may help move the discussion forward. I hadn’t seen the MF piece, and I’ve only glanced through it now. So I think that I may have more to say later. But for now:

      1. It seems to be that they’re (appropriately) on the defensive, even though my work isn’t cited.

      2. I’ve already responded to much of what they write here–about the use of data on wages and salaries instead of total compensation, about measuring pay as a share of the gross product (GDP) instead of as a share of national income or net product, about the dicey “production and nonsupervisory workers” data, and maybe about other things, in The Failure of Capitalist Production and in the first section of the article at http://nongae.gsnu.ac.kr/~issmarx/eng/article/28/Kliman28.pdf. (A video and handout at http://www.marxisthumanistinitiative.org/economic-crisis/video-why-trickle-up-economics-won%E2%80%99t-work.html also addresses some of what they write.)

      3. One positive element of the article is the brief acknowledgment that the appropriate measures to use depend on “the nature of the question” being asked. That’s an advance. But they don’t employ the measure of what they call “labor’s share” that’s appropriate to their previous claim that underconsumption is a main underlying cause of the Great Recession. I’ll quote from my article cited at the end of the previous paragraph:

      “the version of the underconsumptionist theory of crisis I was considering rests on the fact that the working class spends a relatively large share of the income it receives on newly produced goods and services, while rich people spend a relatively small share of the income they receive on these goods and services. Thus, if the income received by the working class falls in relation to current output produced, demand for newly produced consumption goods and services will tend to fall. The underconsumptionist account of the underlying causes of the latest crisis proceeds from the claim that this indeed occurred in the U.S.”

      I showed that it did not. MF’s latest numbers may seem to contradict my findings, but they don’t, because they don’t address the specific point at issue–the income received by the working class as a share of current (net) output produced.

      4. One new (for them) argument they make pertains to wages and salaries as a share of PERSONAL income. It’s irrelevant, and total compensation and total working-class income are also irrelevant, whenever the issue is the trend in the income received by the working class as a share of current (net) output. That’s because personal income isn’t a measure of output produced. To quote again from my article:

      “imagine that output is 100 at times 1 and 2 and that the income workers receive is 69 at times 1 and 2. Non-workers receive 21 in dividends and interest at time 1 but 27 at time 2. (The remainder of the output is the portion of profit retained by businesses, 100 – 69 – 21 = 10 at time 1 and 100 – 69 – 27 = 4 at time 2.) Although workers’ share of personal income falls from 69/(69 + 21) = 77% at time 1 to 69/(69 + 27) = 72% at time 2, the income they receive allows them to buy 69% of the output at both time 1 and time 2. This is similar to what actually occurred between 1970 and 2007. Nothing has happened that would induce any crisis of underconsumption, even if we ignore investment spending. Indeed, if workers and non-workers do not reduce the fractions of their incomes that they spend on consumption goods and services, personal consumption is greater at time 2, because the non-workers now have more income.”

      5. I partly agree with them that “the aggregate data also includes the compensation going to CEOs and other upper-level management, which ought to be counted as income to capital rather than labor.” *Part* of their income ought to be so counted. I’ve done a lot of work on this, and the data are inadequate, but the upshot is that, despite their exorbitant compensation and the apparent rise in it relative to other employees’ compensation, there are too few CEOs and other upper-level managers for this apparent rise to have a big effect on the trend in the compensation share of output. Certainly, as MF themselves are compelled to admit, the number of employees who aren’t “production and nonsupervisory workers” is massively greater than the number of CEOs and other upper-level managers.

      6. Unless I missed it, nowhere in the MF article is there any discussion of the trend in the *total* income of the working class (which includes more than wages, salaries, and nonwage compensation of employees). But again, the total income is what’s relevant to the underconsumptionist claim that the income received by the working class fell (prior to 2008) in relation to current output produced.

      7. Contrary to what MF say, “the general trends” in the wages & salary share of output and the compensation share of output were *not* “very similar.” In the corporate sector of the U.S. economy, compensation *rose* slightly as a share of net output between 1970 and 2007. (See the “profit share” graph in the handout cited above; the profit share is everything that’s not the compensation share.)

      8. Contrary to what MF say, “everyday consumption” isn’t based only on wages and salaries. Health expenditures, much of which are funded by employer-provided health insurance benefits, are also “everyday consumption.” And the “everyday consumption” of retired and disabled workers and survivors of deceased workers is largely spending of Social Security and Medicare benefits, half of which have been funded by another part of nonwage compensation, Social Security and Medicare taxes on employers.

  • PatrickSMcNally

    Regarding the first usage of the terms “99%” and “1%” that have been in circulation lately, George Breitmann used such phrases as far back as 1964. I don’t see any reason why Piketty & Saez need to be singled out as the originators of the terms. They’ve been around for awhile now.

    • http://akliman.squarespace.com Andrew Kliman

      I stand corrected. Sorry; that was sloppiness on my part. I *meant* to say that the current popularity of the division of the population into the top 1% and the bottom 99% has its origin in the work of Piketty & Saez on income inequality.

  • gregory meyerson

    One thing I need to understand better is what distinguishes your picture of debt, bubbles and booming stock markets from the underconsumptionist position?

    we know that underconsumptionists emphasize debt driven consumption. You do not. but you do emphasize debt driven speculation and bubbles.

    how do you view profit rates in the context of market distorting speculation?

    what’s your view of current stock market boom? largely fake, I would think would be your answer. could you elaborate?

    is it true that under conditions of long term stagnation, that under capitalism lots of bubbles would be expected that would at some level MAKE IT SEEM like profit rates were healthy?

    I think the strength of your argument is at once the critique of underconsumption and the affiliated implicit understanding of capitalist crisis entailed by an underconsumptionist position that repudiates LTFRP.

    I think the argument that the focus on inequality diverts attention from a host of concrete problems is actually a pretty weak argument. The point is that the focus on inequality ends up getting capitalist crisis wrong at some deep level, as it continually presupposes that the capitalists are doing great and that crisis derives precisely from how great they’re doing.

    foster etc. talk about the concrete problems you mention all the time. and before I began wrapping my mind around your criticisms of UC, I discussed inequality in tandem with all those concrete problems you say have been avoided by virtue of the inequality focus. In fact, most of the LTFRP people held at once to the law’s importance and also largely bought the neoliberal narrative. One thing it would be useful for you to do is to confront nicely your comrades on the LTFRP side who largely accepted the neoliberal narrative.

    McNally might be an interesting case because while you guys differ greatly empirically, he does not reject LTFRP, right?

    BTW, Ben Campbell’s comment is correct, it seems to me. The criticism of Andrew’s rhetoric around 99 and 1 is not the main issue that needs to be thought thru, in this context. unfortunately, we live in a world of “two cultures.” The rhetoric folks seem pretty uncomfortable with statistics and so they “divert” attention to rhetoric.

    • http://akliman.squarespace.com Andrew Kliman

      “One thing I need to understand better is what distinguishes your picture of debt, bubbles and booming stock markets from the underconsumptionist position?

      “we know that underconsumptionists emphasize debt driven consumption. You do not. but you do emphasize debt driven speculation and bubbles.”

      To the extent that the housing bubble was debt-driven consumption, that was obviously an important cause of the financial crisis, the recession, and the continuing malaise. But the underconsumptionists claim that household debt burdens rose because people couldn’t maintain their consumption levels except by using debt to replace lost income. That’s not the case, as I’ve said. The share of U.S. net output that the working class was able to buy, using its income (not debt), didn’t fall between 1970 and 2007. The rest of your question is too big to answer here, but I will say that I think that the U.S. government (including the Fed) pursued policies, in order to manage and maybe try to reverse the relative stagnation of the economy after 1973 (lower profitability, sluggish investment in production, slow economic growth), that contributed substantially to the debt buildup and bubbles.

      “how do you view profit rates in the context of market distorting speculation?”

      I’m not sure that I understand this. I’ve focused on profit data that don’t count capital gains/losses and similar things. They show that the rate of profit of U.S. corporations fell and never recovered in a sustained manner. Profit data that do include the gains/losses show greater short-run volatility, but don’t seem to alter this long-run conclusion. But I need to investigate this more. However, even profit data that exclude them are greatly affected by things like the housing bubble of the last decade and the dot-com bubble of the penultimate decade. In the 2000s, for instance, people were borrowing against the increases in the prices of their homes and using the borrowed money to spend more, which boosted the rate of profit substantially, though temporarily.

      “what’s your view of current stock market boom? largely fake, I would think would be your answer. could you elaborate?”

      I wouldn’t say it’s fake, but I also doubt that it’s driven by optimism regarding the growth of company profits in the long run. Interest rates are ridiculously low, so money for stock speculation is cheap and bond yields are pitiful. Thus, money is moving into stocks and driving up their prices irrespective of expectations of growth of profits in the long run. And Europe is increasingly in worse shape than the U.S., so stock-market demand is probably shifting for that reason, too. And as Keynes stressed, the stock market is a “beauty contest”—investors often don’t look at the fundamentals, but at what they think other investors think that other investors think (etc.) is going to happen—so stock-price movements aren’t terribly good indicators of expectations of future economic performance.

      “is it true that under conditions of long term stagnation, that under capitalism lots of bubbles would be expected that would at some level MAKE IT SEEM like profit rates were healthy?”

      Yes, but only if you cherry pick the data, focusing on the “booms” and ignoring the busts. Bubbles pop. There were massive declines in profitability after the popping of the dot-com and home-price bubbles.

      “I think the argument that the focus on inequality diverts attention from a host of concrete problems is actually a pretty weak argument. The point is that the focus on inequality ends up getting capitalist crisis wrong at some deep level, as it continually presupposes that the capitalists are doing great and that crisis derives precisely from how great they’re doing.

      “foster etc. talk about the concrete problems you mention all the time. and before I began wrapping my mind around your criticisms of UC, I discussed inequality in tandem with all those concrete problems you say have been avoided by virtue of the inequality focus.”

      Well, as I said, this essay wasn’t a critique of undeconsumptionism, much less of Foster specifically. A main thing I had in mind when I wrote that “disproportionate concern over inequality can … tend to divert attention from concrete problems like mass unemployment, people losing their homes, and poverty” was that “the Occupy movement generally focused less on these concrete problems and more on the abstraction ‘rising inequality.’” These things can be and often are discussed in tandem, as you say, but in this instance, they largely weren’t.

      “In fact, most of the LTFRP people held at once to the law’s importance and also largely bought the neoliberal narrative. One thing it would be useful for you to do is to confront nicely your comrades on the LTFRP side who largely accepted the neoliberal narrative.”

      Who do you have in mind? As far as I know, the people who say that the economic crisis is a crisis of neoliberalism (not capitalism itself) all contend that “the rate of profit” (i.e., the thing that they call the rate of profit, but which isn’t one) rebounded “under neoliberalism.

      “McNally might be an interesting case because while you guys differ greatly empirically, he does not reject LTFRP, right?”

      It depends on what you mean by “rejection” of the law of the tendential fall in the rate of profit. He contends that “the rate of profit” rebounded. See this critique of his position and defense of it by Joseph Choonara: http://www.isj.org.uk/index.php4?id=829&issue=135 . It is possible to not reject the LTFRP in a theoretical sense, but maintain that “the rate of profit” rebounded, and that the economic crisis is a crisis of neoliberalism (not capitalism itself).

      “BTW, Ben Campbell’s comment is correct, it seems to me. The criticism of Andrew’s rhetoric around 99 and 1 is not the main issue that needs to be thought thru, in this context. unfortunately, we live in a world of “two cultures.” The rhetoric folks seem pretty uncomfortable with statistics and so they “divert” attention to rhetoric.”

      Gregory Meyerson is a professor of English, and is or was co-editor of Cultural Logic. So I take seriously his view of what’s driving the “diversion” of attention toward rhetoric. I myself don’t have the expertise to offer an informed independent opinion.

  • gregory meyerson

    It occurs to me that there are some important issues around rhetoric. the key question is whether the occupy movement reveals or conceals or some combination of the two the question of “interests,” “material interests.”

    Is occupy’s picture of class interest faulty? if so, how and what is AK’s understanding of class interest?

    • http://akliman.squarespace.com Andrew Kliman

      Well, the Occupy movement was far from homogeneous.

      There’s a widespread view that capitalism is driven by capitalists’ desire to consume and their greed. Some in the Occupy movement obviously had that view, but I don’t know how prevalent it was.

      A more important issue, and the underlying one, is how class interest operates, or better, how capitalism operates. There’s a widespread failure to understand that a lot of things that happen in capitalism are unintended consequences. (The capitalist class didn’t want the financial crisis and Great Recession, and didn’t benefit from it as a class. See the above graph on the massive decline in the share of adjusted gross income going to “the 1%.”) People talk about “the system,” but they often mean the people running it.

      So we get this idea that we need different people to run the capitalist system–my party instead of your party, good capitalists who invest in production and create jobs instead of bad neoliberal capitalists who speculate and consume, or a network of worker-managed capitalist enterprises. And we get scapegoating–e.g., scapegoating of “the 1%,” rather prurient obsession with executive salaries, anti-Semitism–and conspiracy theories, including the really nutty view that the economic crisis is some sort of conspiracy.

      This stuff is so widespread that the less-toxic forms of it were obviously influential within the Occupy movement, as they are throughout the whole society. But you can’t blame people who are newly in a movement, and largely lacking prior information and theory, for that. They begin from what they have. The problem is that the Occupy movement didn’t manage to find adequate ways to help people self-develop theoretically, to have serious debates on contentious matters (or matters that should have been contentious), etc. And *some* in Occupy were dead-set against such things.

  • PatrickSMcNally

    Some comments seem to blur the distinction between “rate of profit” and “aggregate profit” too easily. “Rate of profit” should really be measured in relation to individual goods. At one time the production of clocks and watches was a special craft which only a skilled tradesman would do. Giant clocks called “grandfather clocks” were common that simple wrist watches. As production techniques developed this was replaced by assembly-line methods which allowed the mass-production of huge numbers of clocks and watches by a labor force with average training. The result was that the rate of profit on each such item declined, even as the aggregate profit grew because of vast increases in production.

    Capitalism tends towards crisis when the two phenomena of “declining rates of profit” and “overproduction” come together. But even that does not automatically mean a fall in aggregate profit. What it means is that aggregate profit can no longer be sustained simply through increases in production. Most of the classical rational arguments in support of capitalism have been presupposed on the idea that capital turns to growth in production as a way of sustaining aggregate profit. Hence by allowing capital to pursue profit unhindered, we encourage an increase in production which means more goods for everyone, rich and poor alike.

    When a combination of the decline in the rate of profit with overproduction occurs, this presupposition ceases to be valid. At that point capital seeks to sustain aggregate profits by means of activity which does not entail any increase in production. That is where both wage-cuts and financial speculation begin to enter the picture.

  • Arthur

    Underconsumptionism is absurd. Lower consumption for workers means more profits for capitalists and is conidered prosperity or boom, not crisis. As Marx pointed out, crises are more often preceded by a rise in wages and consumption and consequent fall in profits.

    But it also makes no sense to derive crises directly from value analysis like long run tendency of the rate of profit to fall. Cyclic phenomena involve the contradictions between price and value which move in opposite directions in different phases of the cycle. The crisis is a necessary phase of the cycle to forcibly restore the proportions needed for capitalist accumulation to proceed.

    • Brian S

      But surely a “boom” is not defined simply by rising profits (rate or mass) but by rising output. Your argument would suggest that wages fall when output is rising – and as far as I am aware that is not true empirically.

      • Arthur

        Certainly wages typically rise during a boom, together with profits. I did not intend to suggest the opposite. In fact an acual “boom” implies BOTH are rising, together with prices, faster than output. That reflects the contradictory movement between prices and values which have to be brought back together by a crisis.

        My point re underconsumptionism was that even without empirical verification there is something obviously illogical about suggesting that low consumption by workers would be a problem or crisis for capitalism when in fact it is an essential requirement for profitability. The crisis results in underconsumption (which indeed is an aspect of its functional purpose or “final cause”). Underconsumption does not result in crisis but is produced by crisis.

        My reference to “or boom” in this context was probably confusing. Should have just left it as “prosperity”.

        • PatrickSMcNally

          One should better distinguish “overproduction” from “underconsumption” since the terms have a different tone and are often used with slanted emphasis. A prosperous economy may simply produce more than anyone has a need for, thereby resulting in a huge excess of available goods with no ready buyers. This quite often will result in reductions in the labor force which open the way to recession. Once recession sets in with full force, then the fired workers will no longer be able to purchase things which used to be daily necessities. The first case is overproduction, but the latter one is more often characterized as underconsumption.

          • Arthur

            This simply means overproduction leads to crisis. (BTW overproduction is output more than effective demand – ie more than demand backed by capacity to pay, not “more than anyone has a need for” – poor people may “need” the overproduced goods, but that doesn’t help make profit by selling them.)

            Concept of underconsumption does not just refer to the reduced consumption resulting from an overproduction crisis but to a theory that reduced consumption somehow caused the crisis or that the crisis could be ended by increasing consumption (eg by letting the poor have the overproduced goods they need but are unable to pay for). Such theories of “underconsumption” have always been very popular among “socialists” and are often confused with “overpdocution” (assumed to be “the other side of the coin”), but are directly opposed to Marx’s more scientific analysis of capitalist overproduction.

    • PatrickSMcNally

      “Lower consumption … is considered … boom, not crisis”

      That’s absurd. The USA saw a huge rise in consumption levels during the quarter-century after WWII, and this was regarded as a boom. When stagflation hit, it threatened to undercut consumption as a manifestation of the crisis. Easy credit lines were subsequently made available in order to sustain the consumption levels while Reagan et al destroyed the social arrangements which had been essential to the consumptionist boom of 1945-70. While it’s true that trade unions have often eased the language of underconsumption to advocate reformist politics, it is clearly false to say that a mere drop in consumption signifies better times for capitalism.

      • Arthur

        Not sure if your response crossed with my reply to Brian. I agree that my reference to “boom” was inappropriate.

        Key issue is whether underconsumption (low wages) is a cause or consequence of crisis. Likewise whether raising wages could restore prosperity (as suggested in underconsumptionist arguments often raised from labor movement) or whether as Marx said a sharp rise of wages was more likely to be harbinger of impending crisis.

        • http://magpie68.blogspot.co.uk Brian S.

          Hi Arthur – have you got a reference for Marx’s argument (I don’t ask accusingly – I know its often difficult to locate a precise reference to something you read a while ago: its just that if you did, it could help the discussion.)
          Remember that a capitalist can only make profit from lowered wages if he can sell his products. If there is a general reduction in working class incomes that means demand for working class consumption goods will fall, so capitalism will have to find demand in other sectors (capital goods, luxury goods).
          Of course we need to be clear if we are talking statically or dynamically (ie a situation where wages are (relatively) low/high or one where they are moving up or down).
          I remember hearing there was a saying of Marx “every capitalist is in favour of higher wages for all workers – except his own”). don’t ask me for a reference! It may be apochryphal – but I seem to remember actually reading it somewhere in Marx.

          • Arthur

            “It is sheer tautology to say that crises are caused by the scarcity of effective consumption, or of effective consumers. The capitalist system does not know any other modes of consumption than effective ones, except that of sub forma pauperis or of the swindler. That commodities are unsaleable means only that no effective purchasers have been found for them, i.e., consumers (since commodities are bought in the final analysis for productive or individual consumption). But if one were to attempt to give this tautology the semblance of a profounder justification by saying that the working-class receives too small a portion of its own product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in consequence, one could only remark that crises are always prepared by precisely a period in which wages rise generally and the working-class actually gets a larger share of that part of the annual product which is intended for consumption. From the point of view of these advocates of sound and “simple” (!) common sense, such a period should rather remove the crisis. It appears, then, that capitalist production comprises conditions independent of good or bad will, conditions which permit the working-class to enjoy that relative prosperity only momentarily, and at that always only as the harbinger of a coming crisis. [Ad notam for possible followers of the Rodbertian theory of crises.—F.E.]”

            https://www.marxists.org/archive/marx/works/1885-c2/ch20_01.htm

            The answer to where the capitalist finds a market since the workers are paid less than they produce will be found in the same chapter and volume (reproduction schemes). Capitalists buy the surplus for accumulation and expanded reproduction. When the proportions are wrong there is overproduction and they can’t. But that would be a permanent state rather than a cyclic crisis if workers not being able to buy the product was a problem for capitalism.

            • http://magpie68.blogspot.co.uk Brian S.

              Thanks

            • PatrickSMcNally

              “But that would be a permanent state rather than a cyclic crisis”

              A central feature of capitalism in its decline is that things which used to merely form cyclic crises are indeed increasingly a permanent state. There is no evidence that Detroit and the general area around it in Michigan are going to suddenly revive because of a rejuvenation of the auto industry. Increasingly regions like this are being written off much as Somalia would be. It is that tendency towards a permanent state which really defines the death agony of capitalism.

              • Arthur

                Belief in “permanent crisis” and “death agony” was an understandable mistake around the time of the First World War. A century later it doesn’t make much sense. Certainly capitalism will survive the next crisis if it isn’t overthrown by a mass movement that knows what it wants to replace capitalism with. That won’t exist without overcoming glib talk.

                • http://magpie68.blogspot.co.uk Brian S.

                  For once I agree with you, Arthur. and a theory of cyclical crises rather than a theory of “breakdown” is attractive, but of course we have the problem of the length(s) of the cycle(s) and a need to provide some sort of match to empirical evidence.
                  We also need to factor in structural/ geographic change both in national economies and the global economy. Detroit will never again be the world centre of autombile production, but cars are still being manufactured in the US, and indeed the output of the US automotive industry now seems to be back where it was before the 2008 crisis.

                  • Arthur

                    Yes, its very hard to get to grips with a “cycle” where the last Great Depression was 8 decades ago and we seem to still in the same protracted phase as 3 or 4 decades ago and with such obvious structural change worldwide during those decades. Nevertheless the distinction between understanding a cyclic mechanism and wishful thinking about “breakdown” is centrally important.

                  • PatrickSMcNally

                    Terems like “breakdown” and “crisis” carry connotations which are probably not well-suited for understanding the long steady decline of capitalism. In human terms it is not unusual to identify an “adolescent crisis” or a “mid-life breakdown” when describing the experiences people go through. It is less common to speak of an “old-age crisis” as something identifiably distinct. As people get older we notice that are able to walk less, they seem to have a weaker attention span, they may need going to the toilet, and related changes. But this is only rarely regarded as a “breakdown.” It’s part of a normal process of aging. Likewise, as capitalism gets older, huge numbers of jobs evaporate into smoke, those which remain pay less and offer fewer benefits, even as retirement plans are threatened with default, and so on. The changes which have been steadily mounting for 4+ decades are definitely much more than a mere downturn in the market. But it’s also not clear that any specific “crisis” in the dramatic sense of that term is anywhere on the horizon. Capitalism, like the old grandpa, seems to just quietly be slipping into senility without any dramatic “breakdown” happening.

                    • Arthur

                      1. Globally there has been a rapid expansion of capitalism, with more jobs, higher living standards and half the population now urban.

                      2. As a result of the very long period since the 1930s Great Depression conventional wisdom has become firmly convinced that cyclical crises are now completely under control. Yet it has been clear since 2008 that a “dramatic” crisis is very much on the horizon. Its been nearly 5 years without actually resolving anything, but it certainly hasn’t gone away – and it hasn’t even appeared to go away in the way that the late 1970s problems appeared to go away.

                      3. The 1930s Great Depression was not a “breakdown” and an even bigger crisis would not in itself be a breakdown. But crisis can be an occasion for revolutionary transformation instead of systemic restructuring.

                    • PatrickSMcNally

                      “Globally, there has been a massive expansion of capitalism…”

                      That’s misleading at best. Yes, capitalist restoration occurred in eastern Europe and China a long time ago and Jack Barnes was deranged to start claiming in the 1990s that Yeltsin’s Russia was a “degenerated workers state.” But all of the major leaps outside of the First World in the last century were bound up with socialist revolution. That is just as true for South Korea as it is for mainland China. South Korea was given very favorable terms of trade and allowed to carry out domestic interventions in the market of a kind that would have gotten Allende or Sukarno killed. That was because South Korea was a frontline state in the Cold War, and success there was considered vital. Even so, North Korea was still keeping ahead of the South as late as the 1970s. It wasn’t until the 1980s that South Korea really began to roar ahead.

                      It’s not that I have any interest in going back to Kim Il Sung’s North Korea (or Mao’s China for that matter). But realistically, if some natural accident had caused the Atlantic & Pacific Oceans to rise and cover over most of North America before 1945, then capitalism would have died out in the last century. It was the success of the American Way which preserved capitalism in that century.

                      China today is in a very different position from the USA in the late 19th and early 20th centuries. The USA in those days was not dependent upon China as an export market. China today is very much dependent upon the USA as an export market. More generally, none of the rising capitalist states of today (e.g. Brazil, India) are in a position which compares which the major First World states in 1900. They are far more economically dependent on the contuance of a general First World prosperity, even as they seek to move up the ladder. In this context the clear decline of capitalism in the USA does intend portend the more general global crisis of capitalism as it will unfold in this century.

                    • Arthur

                      1. Apart from restoration of capitalism in East Europe and China and special cases like Korea and Taiwan, there has also been a more general expansion of capitalism worldwide. Africa has stagnated (pre-capitalist relations) but even that shows recent signs of improvement. Asia and Latin-America have been developing rapidly.

                      2. Certainly they are more globalized than ever and any crisis will be global.

                      3. There is clearly a lot of room left for developing poductive forces within capitalist relations given how uneven the development so far has been.

                      4. The Arab spring demonstrates that there is still plenty of scope for bourgeois revolutions.

                      5. Speculation about how near we are to the end won’t help anything.

                      6. What does matter is that people should understand existing trends don’t just continue smoothly in one direction or another. There are sudden changes, crises, which require restructuring and open up further political possibilities. A theory of gradual decline does not prepare people for crises.

                • PatrickSMcNally

                  Although I can fully imagine that capitalism may survive all the way to the end of this century, we are clearly witnessing the signs of ald age decrepitude setting in which are at all like the events of 1914. The period of 1914-45 was more like the kind of mid-life crisis which many people go through somewhere between the ages of 30-50, before readjusting to a more healthy middle-age life-style. Likewise, the epoch of 1848-71 which had moved Marx & Engels to start writing was really more of an adoloscent crisis akin to what people go through between the ages of 13-18.

                  Today capitalism increasingly shows signs of old age weariness that are not going to be reversed by any new spurt of growth. Yes, car production has gone back to what it was in 2008. But the automobile industry no longer provides huge masses of workers with well-paying jobs. Nor is there any indication of a new industry emerging around the Detroit area to take its place. All indicators of the last 4 decades show a steady downslide in the ability of capitalism to maintain that prosperous middle-class which was so central to the American Century.

                  Right now, the prime reason why no genuinely revolutionary crisis has yet emerged is because all acroos the First World people of all types (white, black, male, female, straight, gay, whatever else) still do enjoy many material comforts which are the heritage of the last century. If the recession of 2007-8 had occurred 6 decades earlier in 1947-8, with the war and depression still just recent history, then it’s likely that things would have taken a very different turn. Because the US working class has grown so used to the benefits of being at the top of the hill, it will likely take much longer for any revolutionary ideas to really catch on. But the long-term direction of things is clear and is not merely a fluctuation of cycles.

        • PatrickSMcNally

          “underconsumption (low wages)”

          Such an identification helps to distinguish both of these from overproduction. There has always been a trade unionist argument which attempts to equate overproduction with low wages and implies that simply raising wages will restore consumption levels to a degree where a crisis goes away. If taken literally this would imply that one should be able to solve the crisis in the automobile industry by paying out wages which encourage people to buy three or four extra cars. That’s absurd. There are too many cars as it stands now. Better public transit on electric rails which gradually replace the automobile would be more suitable, rather than an attempt to revive the auto-industry by Keynesian stimulus. But clearly the emergence of West Germany & Japan on the automobile market by the 1970s did create a crisis of overproduction which the US industry has never recovered from.

  • gregory meyerson

    http://www.nationalmemo.com/income-inequality-1-inch-to-5-miles/

    More stats on growing inequality that use Piketty and Saez even though P and S explicitly do not account for total compensation (at least not in the document I read–striking it richer, march 2012)). It makes some sense that in the aftermath of the 2008 crisis, the rich would recover better than the rest. But the reliance on P and S and not Burkhauser is kind of disturbing.

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