A certain American professor – of sociology, naturally – called Matthew Desmond has decided to pleasure us with the ignorance of his knowledge of the subject under discussion, economics. I’m not the first to note this and doubt I shall be the last. But in his introductory paragraphs in the New York Times Magazine – a place where the editors clearly don’t know enough to catch such errors – he tells us that:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]“Low-road capitalism,” the University of Wisconsin-Madison sociologist Joel Rogers has called it. In a capitalist society that goes low, wages are depressed as businesses compete over the price, not the quality, of goods…..[/perfectpullquote]
If the price of goods is constantly being depressed then what is that doing to the real wages of the workers? Good, excellent, you now know more economics than a professor of sociology. Actually, than two such professors plus the editorial team of the New York Times Magazine. For, just to explain for those who might be sociology professors or editors, if the price of things declines then you can buy more things with your labour. That’s what declining prices means. And, equally true and equally obviously so, being able to buy more things with the rent of your labour means that your wages have just risen.
Given that this error appears in paragraph two of the screed we don’t need to trouble ourselves all that much more with the views of this sociologist upon economics. Even though it will be fun to do so:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]so-called unskilled workers are typically incentivized through punishments, not promotions[/perfectpullquote]
We are all aware of the whippings that the current United States thrives upon, aren’t we? The punishments for leaving the plantation, as with slavery, or the farm as with feudalism, serfdom? Walmart, Amazon, McDonald’s, have not all raised wages – announcing, nay trumpeting that fact as they do so – in recent years?[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The O.E.C.D. scores nations along a number of indicators, such as how countries regulate temporary work arrangements. Scores run from 5 (“very strict”) to 1 (“very loose”). Brazil scores 4.1 and Thailand, 3.7, signaling toothy regulations on temp work. Further down the list are Norway (3.4), India (2.5) and Japan (1.3). The United States scored 0.3, tied for second to last place with Malaysia. How easy is it to fire workers? Countries like Indonesia (4.1) and Portugal (3) have strong rules about severance pay and reasons for dismissal. Those rules relax somewhat in places like Denmark (2.1) and Mexico (1.9). They virtually disappear in the United States, ranked dead last out of 71 nations with a score of 0.5.[/perfectpullquote]
Wages are higher where? Brazil, Thailand, the US? Indonesia, Portugal – where I currently sit – or America? Thus, if we wish to talk about capitalism going high – to concentrate upon those higher wages say – we would want to do what with worker protections? That is, it isn’t just an ignorance of real wages, our sociologist is having problems with basic logic.[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Slavery was undeniably a font of phenomenal wealth. By the eve of the Civil War, the Mississippi Valley was home to more millionaires per capita than anywhere else in the United States. Cotton grown and picked by enslaved workers was the nation’s most valuable export. The combined value of enslaved people exceeded that of all the railroads and factories in the nation.[/perfectpullquote]
As a matter of simple history all that wealth was wiped out by 1865 of course. Meaning that it’s unlikely to have all that much influence upon the current state of play, eh?[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Perhaps you’re reading this at work, maybe at a multinational corporation that runs like a soft-purring engine. You report to someone, and someone reports to you. Everything is tracked, recorded and analyzed, via vertical reporting systems, double-entry record-keeping and precise quantification. Data seems to hold sway over every operation. It feels like a cutting-edge approach to management, but many of these techniques that we now take for granted were developed by and for large plantations.[/perfectpullquote] [perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]When an accountant depreciates an asset to save on taxes or when a midlevel manager spends an afternoon filling in rows and columns on an Excel spreadsheet, they are repeating business procedures whose roots twist back to slave-labor camps. And yet, despite this, “slavery plays almost no role in histories of management,” notes the historian Caitlin Rosenthal in her book “Accounting for Slavery.”[/perfectpullquote]
Well, yes, as Don Boudreaux points out:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]John Mellis, in his “A brief instruction on how to keep…” [A Brief Instruction and manner how to keep books of accounts] from 1588, already introduced depreciation, so the comment that [Desmond] makes in his article about depreciation originating from the need to account for slaves’ diminishing productivity is another historically false statement.[/perfectpullquote]
And double entry?[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Not so. Modern accounting dates back, not as Prof. Desmond implies to antebellum America, but to 13th and 14th century northern Italy, where merchants developed it to keep track of their commercial affairs.[/perfectpullquote]
Sure, there were slaves in 13th and 14th century Italy. But double entry bookkeeping wasn’t developed to keep track of them. Oh, and that existence of chattel slavery then does rather kill off that attempt to insist that chattel slavery was something unique to the American experience too.[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Slavery did supplement white workers with what W.E.B. Du Bois called a “public and psychological wage,” which allowed them to roam freely and feel a sense of entitlement. But this, too, served the interests of money. Slavery pulled down all workers’ wages. Both in the cities and countryside, employers had access to a large and flexible labor pool made up of enslaved and free people. Just as in today’s gig economy, day laborers during slavery’s reign often lived under conditions of scarcity and uncertainty, and jobs meant to be worked for a few months were worked for lifetimes. Labor power had little chance when the bosses could choose between buying people, renting them, contracting indentured servants, taking on apprentices or hiring children and prisoners.[/perfectpullquote]
Do these people never, ever, consider matters? If widespread slavery held down wages in a capitalist system then why were American free wages considerably higher than those in the slavery-free Europe of the time? Why did those millions board those boats – voluntarily – to come to America?[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Witnessing the horrors of slavery drilled into poor white workers that things could be worse. So they generally accepted their lot, and American freedom became broadly defined as the opposite of bondage. It was a freedom that understood what it was against but not what it was for; a malnourished and mean kind of freedom that kept you out of chains but did not provide bread or shelter. It was a freedom far too easily pleased.[/perfectpullquote]
American freedom was of some lesser kind than European? That really isn’t what the flow of people tells us now, is it?[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]In recent decades, America has experienced the financialization of its economy. In 1980, Congress repealed regulations that had been in place since the 1933 Glass-Steagall Act, allowing banks to merge and charge their customers higher interest rates.[/perfectpullquote]
Eh? Glass Steagall never did say anything about interest rates. It enforced the separation of the banking and securities industries. Might have been a good idea, might not – I think not but so what? – but it was nothing at all to do with interest rates. Nor, really, about bank mergers either.
Oh, and have interest rates – properly measured, the gap between deposit and lending rates – risen or fallen in recent decades anyway? Now answer again absent the effects of QE.[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Consider, for example, one of the most popular mainstream financial instruments: the mortgage. Enslaved people were used as collateral for mortgages centuries before the home mortgage became the defining characteristic of middle America. In colonial times, when land was not worth much and banks didn’t exist, most lending was based on human property. In the early 1700s, slaves were the dominant collateral in South Carolina. Many Americans were first exposed to the concept of a mortgage by trafficking in enslaved people, not real estate, and “the extension of mortgages to slave property helped fuel the development of American (and global) capitalism,” the historian Joshua Rothman told me.[/perfectpullquote]
Slaves often enough were the collateral for a mortgage. But the system of mortgages didn’t actually start there:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Mortgages are mentioned in English common law documents that take back as far as 1190. These documents illustrate the beginnings of a basic mortgage system. They describe how a creditor is protected in property purchase agreements. Specifically, a mortgage was a conditional sale where the creditor held the title to the property while the debtor could sell that property in order to recover the money paid.[/perfectpullquote]
Further, wasn’t there a Russian novel about collecting the documents of the now dead serfs to be able to mortgage them?
All in all our sociologist manages to show very little knowledge of the economics of the subject under discussion. Which is a pity, as he’s trying to write about the economics of the subject under discussion.
What he really wants to say is that because American capitalism was built upon slavery, upon the processes of slavery, therefore modern American capitalism is like slavery. Which is indeed problematic given that American workers gain some of the highest real wages in the world. Some slavery, eh?
But then if you really want to enrage try pointing out that American slaves enjoyed some of the highest real wages of slave populations anywhere over history or geography.