Wages, Capital, State

Mon, 13 Jul 1998 14:33:40 -0400 (EDT)
Peter Grimes (p34d3611@jhu.edu)

Dear list;

The recent offerings on global wage inequality have inspired
me to stir from my ordinary obligations during the oppressively
hot Baltimore summer to throw out the following:

1. The brilliance of Marx's analysis in Vol I was to solve the
question of how value could be transferred between classes under
conditions where commodities were priced as a fair exchange of
equivalents (labor time for money wages). The assumptions
underlying his inquiry were precisely those quoted in Andy's
piece--essentially, that in a free market "price gouging" could
not last long, as competitors to the "gouger" would quickly
emerge to set things right. As with Neo-Classical economists
today, Marx assumed that prices evolve to oscillate around their
true values over the medium run.
However, this theoretical assumption of a free market has
never been true anywhere for long, nor could it be because of the
omnipresent obstacles imposed by monopolies, state regulation,
technology, and geography.
It is precisely the presence of these obstacles imposed
collectively that makes "unequal exchange" both possible and
actual. "Unequal exchange" arises from commodities created by
labor in the periphery being assigned a price *BELOW* their
actual value, resulting in a net transfer from periphery => core.
This is the central mechanism that allows the core to accumulate
capital from the periphery, and accounts for the ever-growing
income gap between them. How does this work? Among other
factors--POLITICAL/MILITARY COERCION. Labor in the periphery has
always been *COERCED*, often at gunpoint. Today such naked force
is less frequent than it was during colonialism, but the
regulatory dynamics of the current world-market still rely on the
implicit coercion of massive unemployment in the periphery
combined with gov't repression of unions to insure the
continuation of under-paid labor that enables and perpetuates
unequal exchange. Remember that "Political Economy" is as much
the study of politics as economics.

2. Before c.1975-80, Capital was more encumbered than today by
the limitations of technology. It was still constrained by
geography. In the states of the core, this geographical
constriction allowed for the emergence of labor unions that could
compel both higher wages and better working conditions at those
points where factories were located. Also, it was possible for
the states of the core to tax both monopoly capital (nationally &
geographically bounded) and their workers, and re-distribute a
portion of that income to the lower class and provide social
services to the working class as a whole (public education,
infrastructure, police & fire protection, etc.). The
geographical entrapment of monopoly capital within the confines
of the core states (a necessary by-product of the contemporary
limitations on communications imposed by the absence of cheap
computers and lack of communications satellites) allowed those
states regulatory powers unique to that era. The wealth accruing
to monopoly capital from unequal exchange with the periphery for
raw materials allowed it to AFFORD higher wages in the core,
while the political requirements of state legitimacy within the
core COMPELLED those core states to allow labor unions to press
their demands with a minimum of state interference and even a
degree of state protection, culminating in the development of
PROTECTED labor in the core (in marked contrast to the COERCED
status of labor in the periphery). This was the internal balance
of power between the state, capital, and labor in the core
prevailing between c.1945-75.
Meanwhile, during the same period, the periphery was
characterized by states which lacked the means to effectively tax
either their own local capitalist classes or the expanding role
and power of foreign investment capital. Their desperate
eagerness to both foster local accumulation and also attract
foreign investment precluded aggressive taxation of capital, even
as their lack of access to taxation income vitiated the financing
of the personnel that would have been needed to pursue tax
violations. Further, endemic corruption within the state
bureaucracy acted to siphon off any taxes received into personal
consumption by the bureaucrats involved. Finally, taxes levied
on the working classes were effectively evaded by the fact that
the vast majority of the workforce was in the "informal" sector
operating with cash "under the table." Given such a fiscal
straightjacket, the peripheral states have been unable to provide
even a minimum of social security/legitimation functions.
Instead, they've been structurally dependent on foreign
assistance from the core states via grants and loans, which in
their turn have been poured into repressive militaries (to keep
wages low) and national prestige infrastructure projects
(airports, damns, highways).

3. Now, in the age of geo-stationary satellites, cheap
computers, and cell phones, it is possible for factories to be
built wherever infrastructure (roads & power lines) allows, even
as they are controlled and internationally integrated from a
central office in Manhattan. Meanwhile, offshore banks allow
money to be laundered & thereby liberated from control by any one
state. The net result is a loss of the power to tax profits by
states of either core OR periphery. Simultaneously, the mobility
of capital has enabled it to pit the wage demands of the (now
ineffectively) unionized core directly against those of the
coerced periphery, effectively eviscerating the union power of
core workers. As their wages drop, so do their tax
contributions. The necessary result has been a double blow to
the tax revenue of the states of the core, creating the chronic
fiscal crisis with which we in the core have grown so familiar--
along with the inevitable cut-backs in all social services and
state protections, whose constituencies are so vulnerably
powerless.
The question of global wage protection begs a much more
important one--the emergence of a global state. As I have
written elsewhere:

"Each bout of corporate and state expansion seems to have
followed the same general course: a wave of technological change
enabled an expansion in corporate size and control, stimulating
popular demands for compensatory regulation on a corresponding
governmental scale. Corporate attempts to evade regulation have
often involved crossing governmental boundaries, in turn leading
to bilateral and multilateral agreements between governments on
regulations. Each round has led to an expanded state chasing
after an expanding corporate size."

("World-Systems Analysis" pp. 387-417 _Annual Review of
Sociology_ 1995.)