Category Archives: Class and Capitalism

Theory of class, capitalism, social relations of production, technology and the general Marxist or post-modern (Re-thinking Marxism) discussions.

Technofeudalism – Some Thoughts to Add to the Argument

Yanis Varoufarskis’ book, Technofeudalism: What Killed Capitalism, draws heavily on two books that I began this blog series discussing: Shoshana Zuboff’s The Age of Surveillance Capitalism and McKenzie Wark’s Capital is Dead: Is This Something Worse?. Given this background, I was more than interested to hear Varoufarkis talk at Adelaide Writers’ Week, and to read the book.

In my reading, Varoufarkis takes from Zuboff an understanding of the economic importance of digital data and the ability of corporations to nudge (or more) consumer behaviour to reshape the market and profit. From Wark, he takes the idea that this is more than a new phase of capitalism and is a different form of production.

My goal here is not to properly review the Varoufarkis’ book. Rather, after a brief explanation of the central thesis (skip to here you are familiar with it) I want to add some thoughts from my own theoretical journey in political economy which I think add credence, or at least possibility, to the concept of technofeudalism.

Book cover: Technofeudalism: What Killed Capitalism? by Yanis Varoufarkis

The Technofeudalism Thesis

To me, Varoufarkis takes the best of Zuboff and Wark, but goes beyond this and builds a more convincing argument by showing how control of data enables its owners to accumulate wealth (and political power) – essentially via rent drawn from the production and exchange which takes place in privately defined and owned spaces in the online cloud.

Just as feudal lords enclosed the commons and extracted a portion of the surplus for the right to live and farm on their estates, so too those who own the cloud fiefdoms (Amazon, Google, Facebook, etc) collect rent from all those whose business models require the public access to those virtual fiefdoms and the information generated within them. Capitalists seeking a profit are trapped in these new tech fiefdoms (because of the high price of exiting in loss of exposure, customers, and profit) in the same way that feudal serfs were trapped on the landlords’ estate.

But others have questioned whether this is really happening at scale and whether it is really not capitalism?

Varoufarkis has a variety of answers:

  • the fact that goods and services are still being produced in capitalist firms does not mean that capitalism is dominant, any more than the rise of a capitalist class in earlier centuries meant that agriculture and land rents disappeared.
  • the data that drives the system is formed from the capture of the thoughts, desires and needs of “cloud serfs” (all of us – knowingly or unknowingly) who provide the data for free.
  • This data capture can be expanded exponentially with little new investment, so financial return is not a return on capital, but rather a rental charge for others accessing this information and operating in this (privatised) space.

It is a dominance of rent over profit as the primary centre of accumulation that signals that capital has been supplanted.

Thoughts

1. Dominant Sectors

Weirdly, thinking about technofeudalism replacing capitalism took me back to historical debates I studied as an undergraduate many years ago. The question was how to characterise the Australian economy in the late nineteenth century. From memory, the traditional view of a predominantly pastoral economy (“riding on the sheep’s back”) was challenged by NG Butlin and others who, armed with Kenyesian economics and new national accounting tools, argued that manufacturing contributed more to economic production. However, those arguing in a Marxist tradition insisted on the need to look at the centres of accumulation and capture of state power as the defining dynamic, rather than the share of the economy. In this light, pastoralism and pastoralists remained hegemonic long after the rise of manufacturing.

I have no idea where these historical debates are at now, but the point here is that how we characterise the economy is theory-dependant, and that simple shares of GDP or workforce are not necessarily conclusive.

In this context, when the world’s richest people are those who own the largest slices of cloud capital, it is not unrealistic to question whether the cloud (and the rent from it) is the new centre and the dominant system, even while traditional profit-making industry is more widespread.

2. Cloud serfs and the definition of production and consumption

Varoufarkis’ technofeudal economy is inhabited by “cloud prols” and “cloud serfs”. The former simply appear to be super-exploited workers in an algorithm-dominated, but nonetheless capitalist production process (hence the proletariat label). However, it is the cloud serfs who take us beyond capitalism. The data collection by search engines and digital platforms is a direct appropriation of productive resources – not a market sale of labour power or other productive inputs which characterise the capitalist production process.

But are people using digital platforms (consumers of those digital services) really producing wealth or enabling the capture of surplus to drive a new economic system? It defies a most fundamental distinction in economics between producers and consumers. However, as I argued in my PhD, this distinction was always artificial – a product of a particular neoclassical theory which conflated work, production, the market and the economy, while households and non-market spaces become consumers.

This distinction is hardwired into our definition of the economy and the national accounts which describe it. Yet around half the goods and services produced in Australia are produced outside the market and market production itself consumes labour power which is produced in the household. In this circular flow between households and market production, the split between production and consumption is arbitrary (or at least theory-dependent).

Marxism draws the production/consumption line differently by positing much activity in the market economy as social reproduction or distribution/consumption of surplus, rather than production. However, it is feminist economics which mounts the strongest challenge to the neat distinction between consumers and producers – both because of the non-market production in the household, but also because much of women’s emotional labour is embodied and not alienable as labour power sold in a market.

In short, we should not simply posit payment and the market as the arbiter of what constitutes production and economic processes. We should be able to analyse the appropriation of personal information and data as a systemic part of the accumulation process on its own terms, not bound by the conceptions of theories based on different economic relations. In this context, the term “cloud serf” may be clunky, but it is consistent with the analysis of the basis of accumulation as rent rather than profit.

3. The mode of production and the metanarrative

Much of the debate around the nature of the new digital economy, whether it is surveillance capitalism, cloud capitalism or technofeudalism is based in narratives around modes of production – the description of the economy as a whole and the metanarrative of the transition from feudalism to capitalism to socialism (maybe, eventually!). But as JK Gibson-Graham point outs, this metanarrative is problematic. The whole idea of “the Capitalist system” leaves no outside, no vision of the other in a perspective which limits political and transformative action.

The alternative, within a Marxism perspective, is a more micro focus on class processes – the different ways in which goods and services are produced and how surplus labour is appropriated. These processes are not economy-wide: there is production and surplus appropriation within households (also, in Resnick and Wolf’s analysis, feudal – bound by ties of family, loyalty and tradition rather than market exchanges), in owner-operated enterprises where there is no direct surplus appropriation, and in government and not-for-profit enterprises where any surplus goes to a common good rather than private profit).

In this analysis, any given person, household, community or economy is characterised by the particular intersection of a range of these class (appropriation) processes as well as non-class processes of power and privilege.

The point here is that, even if one was not convinced by Varoufarkis’ argument that technofeudalism is a new and dominant mode of production (as per point 1 above), it is at least fairly obviously a different set of class processes (by virtue of its non-market appropriation of raw materials and its potential expansion based on data rent rather than capital investment). Free of the question of whether it is the dominant/defining mode of production, there is more scope to analyse the technofeudalist processes on their own terms – and to develop an opposition to them specifically, without it being predicated on the overthrow of society as a whole.

I have vacillated for more than 20 years on the usefulness of the analysis of a “capitalist system” verse a focus on specific production relations and appropriation processes – but either way, it seems to me the technofeudalism argument is challenging, important, and a little petrifying.

Inflation – what to do depends on your starting point

I have a T-shirt that I am wearing as I type this. On its front, in mock Gothic text are the words:

The wealth of those societies in which the capitalist mode of production prevails, presents itself as “an immense accumulation of commodities,” its unit being a single commodity. Our investigation must therefore begin with the analysis of a commodity.

These are the opening words of Marx’s epic work, Capital. As openings go, it is not as memorable as “In the beginning God created the heavens and earth” (Genesis), or “Man is born free, but everywhere is in chains” (Rousseau), or even Marx’s own “There is a spectre haunting Europe”.

However, it was only after reading Anwar Shaikh’s Capitalism and listening to his lectures that I realised the importance of this opening to Capital.

T-shirt with the opening words of Marx's Des Capital.

Comparing starting points

Marx’s words here are a recognition that to analyse capitalism we must start with the production of commodities, and their expression/capture of value. In capitalism, production does not happen as a charitable act or even as a provisioning of society in response to demand for goods and services (because we know that many people are not provisioned and some demand for necessities is unmet). Rather, production is organised and happens in the expectation of profit. From this starting point comes an analysis of:

  • how the production process is structured and contested,
  • the extraction of value beyond the cost of inputs into that production process, and
  • how this surplus is shared through the community – initially the distribution between capital and labour, but subsequently through flows to different parts of capital (e.g. financiers, technology owners) and finally through tax and transfers to different parts of the economy and society.

By contrast, much mainstream economics tends to start from exchange in a market – the price at the meeting of supply and demand. The production process is almost assumed (at least in the first instance). The return to capital is naturalised at an equilibrium rate determined by the market, while at the macrolevel, equilibrium can be obtained (or at least approached) by management of supply and demand – because what governs the economy is not a pursuit of profit but a market whose “natural state” is equilibrium.[1]

At one level, the different starting points mean that we are simply asking different questions and one may choose a theory depending on what question you want answered. However, it is more complicated than that, partly because the above is over-simplified, but also because, as I argued long ago, such theoretical starting points do not just ask different questions, they actually create different objects of inquiry – “the economy” is a different animal in the different theories.

But beyond that, the different starting points may have very different policy outcomes. Take for instance our current problem of persistent inflation.

Inflation

Regardless of the external factors that may have kicked off inflation (e.g. COVID, war, energy shocks), if your economic starting point is a supply and demand equilibrium, you are likely to see the need to reduce demand in the economy to ensure that demand is not exceeding supply and thus pushing up prices. At the most basic level, reducing demand at the macroeconomic demand can be done by:

  • fiscal policy, that is, increasing taxes to take money out of households and business, thus reducing their demand for goods and services), or
  • monetary policy – that is, increasing interest rates which in theory will increase savings (or loan repayments), similarly meaning there is less money to demand goods and services.

Fiscal policy is regarded as dangerous, partly because neoliberalism has convinced us that taxation is bad (and even undemocratic) and partly because surpluses lead to political pressures to cut taxes or spend more – which would be inflationary. So, we are left with the Reserve Bank increasing interest rates to try to dampen demand and bring inflation back to its target zone (2-3% p.a.)

However, if you start your economic analysis not from a theory of equilibrium supply and demand, but rather from a theory of capitalism and flows of value in an economy, then firstly, you might question the possibility of macroeconomic control by demand-management – as Shaikh does. Secondly, you might want to trace the impact of interest rates on flows in the real economy, where higher interest rates represent a bigger claim on surplus by finance capital. In this analysis, those seeking to make money out of non-finance capital are forced, to the extent possible, to increase their prices to maintain their return on capital.

This is most evident in the housing market where rental prices are increasing faster than inflation (September Quarter 2023 CPI: 5.4%, rent increases 7.6%). Higher interest rates increases costs and lowers the return to landlords with mortgages. They then put up rents to cover their increased costs, while landlords without mortgages can cash in on the higher rents attainable in the market. In this scenario, interest rates are driving rental inflation. Further, as the ABS has highlighted, rent increases are one of the major contributors to overall inflation. This is not to deny that there are supply problems in the rental market, but it does suggest that increasing interest rates may have a contradictory inflationary impacts.

Similarly, the conventional wisdom of higher interest rates taking money and demand out of the economy is challenged by the fact that around one-third of Australian households are not paying a mortgages or rent. For many of those households, higher interest rates translates as increased income from their savings. They have more money to spend and there is a growing recognition that this is promoting demand in those groups and undermining the demand-reducing purpose of increasing interest rates.

Conclusion

Put most simply, increasing interest rates to control inflation makes sense if your starting point is a conventional supply and demand analysis where macroeconomic outcomes can be regulated by demand management. But increasing interest rates to attack inflation makes less sense if your analysis starts by looking at how capital will respond to such an increase, and how that will impact on economic flows in the economy. In this scenario, increasing interest rates is possibly counter-productive (even in its own terms – and not even thinking about the human cost of the “desired” economic slowdown). At best it is a blunt instrument when more direct market interventions (such as price caps or taxes) could better impact on the particularly economic flows driving of inflation.

Or, to put it another way (in light of populist media attacks on Philip Lowe and Michele Bullock), don’t blame the person or personality of the Reserve Bank Governor – blame the economic theory.

[1]              In Shaikh’s analysis, this supply-demand-equilibrium applies as much to Keynesian and neo-Keynesian economics as to neoclassical economics, it is just that the former theories recognise that the equilibrium may, without state stimulus, be below a full employment of resources.

Debt, Interest Payments and Choices: A Surprise in the SA State Budget

As we make our way through the first month of a new financial year, political economic debates are dominated by inflation, interest rates and “full employment”. But the discussion of interest rates is generally focused on their impact on inflation at the macro-level, and on mortgages and cost of living at the micro-level. The impact of interest payments on government budgets is usually noted in budget night commentary on the deficit/surplus scorecard, but promptly forgotten for the rest of the year.

However, an unusual occurrence (at least in recent times) in the South Australian state budget should serve to illustrate why interest rates matter to government and to the community. In 2023-24 the amount of government expenditure going to servicing state debt ($1,254m) will eclipse the budget for the Department of Human Services (DHS) ($1,148m). This difference grows over the forward estimates with the DHS budget subject to real cuts (low indexation and older operational savings) while interest payments increase substantially. By 2026-27, interest payments are predicted to be $1,684m, by comparison with a DHS budget of just $1,233m.

Column graph comparing SA State Budget expenditure showing interest payments increasing from 2022-23 to 2026, while DHS expenditure remains stable.

In practice, this means that we are spending more on debt repayments than we are on the Department that is the primary provider of support services for the most vulnerable and disadvantaged people in our state. That feels wrong – but apart from the shock value, does it really matter, or it is just a statistical coincidence with no budget or social impact?

A Debt Problem?

As I pointed out in SACOSS’ post-budget analysis, government debt and deficits are not necessarily a problem – and may represent important economic stimulus or long-term investment. And there is no suggestion that this level of debt in unsustainable, although the budget papers show that a 1 percent point increase interest rates in 2023-24 would equate to an extra $203m in service payments. That would obviously be a significant imposition on the budget, but even with the debt-to-income ratio rising, the government can clearly still maintain payments. However, if debt is unchecked or interest rates continue to rise, at some point interest payments either become unsustainable, or more likely, a significant constraint on budget spending in other areas.

In that sense, the comparison of interest payments and the DHS budget is important because it reminds us of the potential impact and opportunity cost of state debt. I am not suggesting that if we were not paying that money in interest, we would be spending it on human services. That would be wishful thinking! However, all government spending has distributional impacts, and interest payments are no different. The comparison with DHS expenditure simply serves to focus the interest payment discussion on inequality.

Debt, Interest Payments and Inequality

In providing concessions and emergency supports to those on low incomes, and funding charities to provide a range of other supports, the Department of Human Services functions to transfer money and resources from the budget to those most in need. By contrast, interest payments are a transfer from the budget to government bond holders – who, by definition, are those with excess cash to afford to lend money to the government (by buying bonds).

As Piketty has pointed out, (and [as ever] some of the concerns here come from my reading of his work) it is far more advantageous to those with capital to have public deficits and receive interest on their money than to have that capital taxed to balance the budget (Capital in the Twenty-first Century, p.130). So, in creating government debt we have already chosen to favour those with capital by borrowing rather than taxing their money and creating an ongoing flow to rather than from that capital.

Seen in this light, the contrast between the DHS budget and the amount going to debt servicing is an indicator of choices about government priorities – the choice to provide relatively less to the poorest in society (via government expenditure) than to those who are better off (via taxes foregone and interest paid out).

Caveats

Of course, as with everything in economics, it is not as simple as that. The initial use of borrowed capital may be used for things which support those on low incomes, and inflation may quite separately have a counter-balancing impact by undermining the real value of bonds and the interest payable on them. Further, bond-holders may not be South Australian residents and may therefore be outside the tax ambit of the state government. In that sense the taxing v borrowing from capital argument above is not about individual bondholders. Rather it is illustrative of the options of government in general and operates at the level of class: that is, the state government has options to tax local capital rather than borrow from capital in a national or global market.

To the extent that we can look at individual bondholders, it is also worth noting that, as Piketty points out, they are no longer necessarily the wealthiest people in society (as the super-rich can invest more lucratively elsewhere). ABS wealth statistics do not record bonds as a separate category, so it is hard to confirm this. However, it is clear that the low-inflation era of the first years of this century made bonds a safe investment for middle class superannuation and investment funds, so when we talk about bondholders it is likely we are talking about middle and above-average income earners (often via superannuation or investment trusts). In that sense, the DHS/interest payment comparison is not so much about rich vs poor, but about a form of middle-class welfare instead of a transfer to those in most need of the supports that a DHS might offer them.

Finally, there is another (non-taxation) route to balancing the budget and avoiding interest flows to capital owners. That is by cutting expenditure. However, cuts to expenditure (and therefore to services) usually impact disproportionately on the poorest people. Those with the fewest economic resources are likely to be most reliant on support services and have limited or no alternative options, so expenditure cuts usually also impact most on the poor. Further, it is notable that in this SA budget, government debt continues to increase even with operational surpluses from 2023-24 onwards, so balancing the budget is not simply done by cutting expenditure. However, there is little doubt that when government services are cut (the “austerity approach”) this exacerbates inequality, so if fairness or equality is a consideration in balancing the budget, we must ultimately return to revenue issues – and our preference for borrowing rather than taxing capital.

Why Debt and Interest Payments Matter

Budget deficits and surpluses matter, but not for the reasons often touted in economic commentary (“responsible government”, “living within our means”). They matter because they determine the level of debt, which in turn, within any given interest rate regime and revenue base, impacts on the money available to spend on services. And as interest rates increase, so too does the cost of servicing government debt. The choices made to borrow rather than tax capital increasingly manifest in a distribution of government revenue to the middle and upper middle classes rather than to those on the lowest incomes who would benefit most from government service provision.

The fact that the SA state government interest payments now eclipse spending on the Department of Human Services should make us think about government priorities and the need for a stronger tax base.

What Level of Unemployment is Acceptable? Theory and Policy

In a previous post I highlighted unemployment data which showed that, despite all the business and economic talk of labour shortages, the rates of effective unemployment are higher than in the official ABS headline data and that there remains a problem of entrenched long-term unemployment. However, in policy terms, what we make of the level of unemployment – and what to do about it – is shaped by one’s theoretical starting point (with the following discussion of theory drawn primarily from my reading of Anwar Shaihk’s Capitalism, Competition, Conflict and Crisis).

Theories of Unemployment

Neoclassical

In the neoclassical theoretical model there should be no unemployment because in a perfect market wages would be at the price where the market cleared – that is, the demand for labour matched its supply. Any unemployment is therefore a product of market imperfections (lack of full market knowledge or mobility of resources, or pesky things like minimum wages, unions, government regulation, or welfare payments). While unemployment obviously exists in the real world, this is a “natural” consequence of the departure from the perfect competition and the setting of wages above the level of market clearance (zero unemployment). Unemployment then becomes “voluntary” – an option chosen by society and by individuals where welfare payments allow people not to work at the market equilibrium rate.

For Friedman and others, this “natural rate of unemployment” morphed into the NAIRU – the Non-Accelerating Inflation Rate of Unemployment. In theory, once you approach full-employment, there is increasing competition for labour and the price of labour increases, which drives inflation. But with a certain level of voluntary unemployment, that inflation tendency kicks in below the level below full employment – hence, the effective rate of full employment (or the desired level of unemployment) is the point just before employment “accelerates inflation”.

The graph below shows the Australian Treasury estimates of the rate of NAIRU over the last 40 years, with the pre-pandemic estimate just under 5%. While there are endless arguments about the estimates and the theoretical relationships underlying it, the NAIRU and the need to contain inflation has long been a part of the dominant rationale for maintaining some level of unemployment.

Line graph showing the estimated NAIRU declining from around 7% in 1980 to just under 5% in 2019, and the much more volatile official unemployment rate above the NAIRU in the 1980s, and again in the 1990s, falling to below the NAIRU in the early 2000s then rising after the Global Financial Crisis.

Keynesian

By contrast, those coming from Keynesian and post-Keynesian traditions assume an imperfect market and have a theory that demand drives supply and economic growth. Given that the imperfect market will be below full employment, the government can (and should) via stimulus spending boost aggregate demand up to the point of full employment. Modern Monetary Theory (MMT) fits within this tradition, but adds a jobs guarantee as an additional “automatic” stabiliser (see for instance, Kelton, pg 65-66).

In this context, the persistence of unemployment simply shows that neoliberal governments worried about inflation have not provided enough stimulus to reach the levels of full employment.

Classical

Like many classical (and neoclassical) political economists, Anwar Shaikh believes that such Keynesian stimulus measures can lead to short-term economic boosts, but in the longer term unemployment will return as a natural part of capitalist competition. Marx referred to this as the “reserve army of the unemployed”, but it is not a conspiratorial “disciplining of labour”. Rather, in Shaikh’s view ongoing unemployment is a function of the logical response of profit-driven capital to full employment.

Supply and demand processes suggest that as unemployment falls, there is upward pressure on wages. This negatively impacts on profit rate, which in turn, leads to lower investment which decreases the demand for labour. Alternatively, capital can look to counter this increasing cost pressure by increasing labour supply (by migration or capital flight to source labour overseas), and this increased labour supply will lead to unemployment. Or, in response to rising wages, capital can invest to increase productivity, which displaces labour and creates unemployment. There is no pre-determined path, but ultimately capitalist production is driven by profit not demand, and the self-governing mechanisms of profit-seeking ensure some level of unemployment.

Implications of the Different Theories

There are of course lots of variations within the three broad approaches described above, and I am not going to adjudicate these long-standing theoretical differences here. However, it is interesting to look at the implications of the recent employment data (in my previous post) for different aspects of these theories.

The existence of the sustained and significant unemployment highlighted in my previous post is obviously not consistent with the neoclassical paradigm of a perfect market, but it is compatible with the revised Friedmanite version where less than actual full employment is functionally full employment. Since many of those in long-term unemployment are never going to get jobs (as new labour market entrants out-compete them), the relevant inflationary impact will be at some level of unemployment below 0%.

That said, it is not immediately clear how the official unemployment rate relates to the NAIRU and inflationary pressures if, as we saw in my previous post, 72% of the newly-employed do not come from those who are counted as unemployed. The unemployment rate is simply not measuring the potential labour supply which is purportedly driving wages and prices.

The persistent unemployment data is also consistent with Marx’s notion of a reserve army of the unemployed, but again, the data suggests that most of this reserve army is located outside of the ranks of the unemployed. Shaikh’s analysis of capital’s response to near full-employment may be valid, but it relates more to a labour supply not-in-the-labour-force than to the long-term unemployed, who are more an outside sub-class than part of the reserve army.

But perhaps the biggest challenges of persistent long-term unemployment are posed for post-Keynesian theory and the attempts at government intervention to ensure full employment. At the macroeconomic level, having a cohort of semi-permanently excluded job seekers points to the limits of generic demand-led stimulus strategies. It is not just that there has not been enough stimulus. The barriers faced by many unemployed people may prevent them from winning most of the newly-created jobs (as jobs are filled from outside the labour force). More demand management will not (or not easily) create full employment.

A Job Guarantee

This leads many, particularly in MMT, to argue for more direct government job creation through a job guarantee (with the government or government-funded organisations “employers of last resort”). In theory, this should be good for those entrenched in long-term unemployment. Direct job creation can target disadvantaged groups, and there would be a guarantee of a job that they would probably not get in a competitive market. However, here we are not necessarily talking about people who freely move in and out of jobs as the labour market changes. The jobs need to be created and supported in a way to address the specific needs of those with barriers to employment – which is a difficult and resource intensive task.

This is recognised at least in passing by some proponents of a job guarantee, but much of their description of how such a program might work seems to suggest a workforce moving flexibly in and out of the guarantee program. Moreover, even if people with employment barriers flock to a job guarantee, if sufficient numbers of them can’t go back to the private workforce when demand for labour increases, then the macroeconomic “automatic stabiliser” can’t do its job in adjusting labour supply.

These problems may or may not be solvable, but they do mean that the Keynesian-inspired solutions are not as easy as they are often portrayed.

Other Possibilities

There are of course dangers in focusing on labour “supply-side” issues like the barriers faced by long-term unemployed people. This can and has led to reactionary “victim-blaming” policies, and to surveillance and back-to-work programs which pretend that the problem is a deficit in the unemployed person rather than the labour market.

However, if we take the persistence of long-term unemployment as evidence of systemic unemployment within capitalism, as per the classical (and even the neoclassical) theories, then perhaps we can stop demonising and starving those who are unemployed. We might accept that the labour market can’t provide income for everyone, and actually build support and value them outside the labour market.

This could be an argument for a Universal Basic Income, but it could also simply be an argument for the removal at some point of “job seeking” pretences of current social security payments. This already happens (in a minimum and controlled way) for people over 55 where mutual obligation requirements change after 12 months to basically accept volunteer work instead of employment. But the payment is still called “JobSeeker” rather than, say, a Community Participation Allowance, and in practice it may be closer to a job guarantee than a UBI.

Whatever, any income support (universal or not) needs to be at a level which provides for a minimum healthy standard of living – which clearly is not the case currently. This need to increase payments is not just for humanitarian reasons, but a recognition that the unemployed are the collateral damage of capitalist production (the classical theory) or that they are bearing the cost on behalf of the community of fighting inflation (the neoclassical model).

The acceptance of the inevitability of some level of unemployment may not initially sit well with those interested in equality and the rights of those who are struggling, but it can still have progressive possibilities. And it may be better than simply hoping for a full employment which may not be possible.

Of course, if full employment is possible, accepting less is selling out. That is why the theory matters!

“Hard Labour”: A Review of Wage Theft in the Age of Inequality

For a book on industrial relations, Ben Schneiders’ Hard Labour is a good read – interesting, passionate, depressing and hopeful in equal measure. Based on investigative journalism done for the Age newspaper, it traces the rise and exposure of wage theft in Australia over the last 10 years.

Cover Photo: Hard Labour - Wage Theft in the Age of Inequality by Ben Schneiders

I am not sure Schneiders ever gives a formal definition of wage theft, but the book is concerned with workers being paid at rates below the legal minimum or award wages. Many of the examples are familiar (including from Schneiders own reporting): Spotless laundry, McDonald’s, Coles, 7-Eleven, Woolworths, a series of high-end restaurants, and piece-work on farms and in the gig economy. That is the depressing part, but what is interesting is the different models of underpayment and wage theft.

Three Types of Wage Theft

The most straight-forward was unpaid work hours forced on workers by bosses threatening visas, or by industry norms or by the star-power of the workplace. Celebrity chefs and fancy restaurants were Schneiders’ case studies for the later – made even more egregious in some cases by corporate structures which evaded tax as well as industrial relations responsibility. But such unpaid work is also a norm in industries not considered in the book: for instance, for young academics and young lawyers needing to work their way into a decreasing number of secure jobs.

Beyond this enforced free labour, the book also details cases where the standard piece-rates of fruit-pickers, farm workers, delivery drivers and task workers in the gig economy are set so low that it is impossible to make the minimum wage. This is a long-stranding problem, but the stories of successful new union organising among migrant workers in farms on Melbourne’s periphery was one of the most hopeful parts of the book.

Perhaps the most outrageous form of wage theft was hidden in plain sight: workplace agreements which traded away penalty rates and left workers earning less than the award wage. These were negotiated with the union and were rubber-stamped by the Fair Work Commission. The book covers cases with supermarket and fast-food giants effectively sidestepping the “better-off-overall test” (although eventually many of these agreements were voided after legal challenges). Ever-present here was the union, the SDA, which not only failed to protect low paid members, but actively colluded in the negotiation of these (ultimately) illegal workplace agreements – sometimes in the context of cosy closed-shop recruitment schemes.

That matters not just for the workers affected, but for the future of unionism. In one of his most chilling observations, Schneiders notes that in 2020 only about 5% of young workers were members of unions. The rest were rarely exposed to unions, indeed barely knew they existed – or perhaps their first or only experience was with a union that had sold them out. And their remedies appeared to lie outside of union structures (in local organising, in media, or in government watchdogs). It is not a pretty picture for unionism, notwithstanding that some of the heroes in the book are organisers in other unions.

The Bigger Picture

Many of the stories of wage theft in Hard Labour are well known and have been documented by media, Senate Inquiries, and finally in Fair Work Commission findings. But the book is much more than a series of stories lifted from old reporting. It also gives us the background to the media stories (i.e. the campaign organising), the reaction to publication and the industry push-back, and the development of the issue as it unfolded over the last decade.

That story is interesting, but for me the power of the book lies in the broader context. While he says it is not a book of economic or political theory, Schneiders nonetheless puts the story of wage theft in the context of neoliberalism: the choices made to deregulate the economy and to curtail union and worker rights. In this context, wage theft is not a coincidence, nor the work of a few rogue companies. It is a manifestation of a fundamental shift in power in favour of (global) capital. For Schneiders, wage theft is ultimately not an industrial relations story, but a story of power and inequality – and I am not going to argue with a framing that starts with Thomas Piketty and the statistics on rising inequality and the accumulation of wealth and income at the top end.

The point of Hard Labour is that wage theft is both a manifestation of and a contributor to that disproportionate rise of capital incomes and inequality.

Yet despite everything, there is some hope in the book with cases where wage theft was addressed and wages paid out. Perhaps the “golden age” of wage theft is over – or perhaps (as I hinted above) we simply await another series of reports from different firms and different industries?

Time, and further activism, will tell.

Sidenote

Underlying my reading of the book was of our research at SACOSS on waged poverty. One in four Australian households below the poverty line have wages as their main source of income – and that that employment adds costs to already impossible household budgets. Not every worker below the poverty line will suffer wage theft, but many live in the same milieu of precarious work, and wage theft is inevitably part of the story of waged poverty.

Hard Labour is another reminder that (as I argued in my previous post) poverty and inequality need to be tackled in the primary distribution between wages and capital, not just in after-the-fact welfare redistributions.