Anwar Shaikh’s Analysis of Capitalism Is Vital for the Left
· Jacobin
Most economists assume that when workers with similar skills earn very different pay, something must be blocking normal competition. But for Howard Botwinick, capitalist competition itself creates those gaps. His book Persistent Inequalities: Wage Disparity under Capitalist Competition, first published in 1993 and reissued in 2017, shows how the everyday workings of capitalism split the working class into better- and worse-paid groups — no monopoly power required.Botwinick came to economics from organizing. Early on, he helped workers win a union at an electronics plant, only to watch the company shut the plant down rather than deal with them. Looking for a better way to understand what he was up against, he went to the New School for Social Research to study with the economist Anwar Shaikh. Shaikh’s ideas about capitalist competition radically departed from the consensus, shared by many economists on the Left, that giant corporations had largely escaped it.For Botwinick, this meant that if workers organized the most efficient firms in an industry, the ones whose costs set prices for everyone else, they could raise wages across the whole industry. It was, in other words, good news.Botwinick spoke with Stephen Maher about his intellectual origins, what he learned from Shaikh, what the industrial unions of the 1930s got right, his objections to the idea of a Global North labor aristocracy, and the enduring potential of classwide solidarity.Stephen MaherYou were involved in labor politics before and alongside your academic work. How did you get interested in labor issues, and how did your experiences shape the kinds of economic questions you wanted to answer?Howard BotwinickAs a college student in Madison, Wisconsin, I got interested in labor issues by studying Capital and US labor history.After graduating, my first labor organizing job was in a newly built electronics assembly plant that made cable TV boxes — the kind everyone had sitting on their televisions. The workforce was predominantly women, wages were very low, and the assembly line work was very stressful.I had just finished a degree in neoclassical economics, which basically painted the world as a perfect one where workers are paid exactly what they deserve. And if they aren’t treated properly, they are free to leave for a better job somewhere else. In reality, these women were trapped in these jobs because there were very few job opportunities. They were being paid less than a livable wage, and the way they were being treated was ruthless.So I was helping to organize a union there with the United Electrical Workers (UE). After a year, we won the organizing drive, and we began negotiating our first contract. But three months later, they shut the entire plant down.It was a labor-intensive industry, and the plant was basically a corrugated-steel shell on a concrete slab. Rather than deal with the union, they simply went back to Illinois. It was very cheap for them to move, and that was that. Eventually, almost all electronics work moved overseas for similar reasons. Although the wages were already very low in the US electronics industry, they were a hell of a lot lower in developing countries.That taught me a lot about the importance of certain structural determinants in various industries that can either facilitate or hamper union organization. I also started thinking about capital mobility and how you become an effective organizer in a world like that.After several years of ineffective labor organizing on my own in five different workplaces, I decided there must be a better way for me to help the labor movement. I started thinking about going to graduate school in order to deepen my understanding of Marxist political economy.I wasn’t inspired by the contemporary work I was reading until I came across an article by Anwar Shaikh called “An Introduction to the History of Crisis Theories,” which was in a crisis reader put out by the Union for Radical Political Economics. I read it avidly, and I finally said: “There is a guy I can learn a lot from.” So I applied to the New School.Stephen MaherWhat did you find in Anwar Shaikh’s work that was missing from other approaches to Marxist political economy?Howard BotwinickShaikh impressed me as someone who took Karl Marx’s method very seriously. He was poring over all three volumes of Capital, Theories of Surplus Value, and the history of economic thought. He took the process of inquiry that Marx went through very seriously.As I began doing my own work on the labor market, I was impressed by that methodology. How do you carefully work your way down from the abstract level of the first volume of Capital to the most concrete levels where you are dealing with things like ongoing capitalist competition between and within various industries, differential wage and profit rates, the intertwining of capital and labor mobility, and finally, the effect that unions can potentially have on wages?Those are very concrete questions. You have to be ready to arrive at the concrete properly; otherwise you are going to misunderstand a lot of what is going on.Unfortunately, I saw many radical economists making two common mistakes. Some radicals would go from Marx’s abstract arguments in Volume I — or what they thought were his arguments — and then see that the real world was much more complex. They would then dogmatically insist that Marx was a genius, and that those concrete complexities don’t really matter.Other political economists would make the jump to the concrete and say: “There is nothing here in Volume I of Capital. Marx doesn’t talk about wage differentials, monopoly power, effective demand, the role of the state, and all this stuff that is important to contemporary capitalist economies. There is nothing useful there in Marx.” And so, they jump to the concrete.And who is mucking around in the concrete? Neoclassical economists. Because they skipped over a great deal of the journey Marx took, this second group is tempted to incorporate things from John Maynard Keynes and even from more conservative elements of neoclassical theory, like the theory of perfect and imperfect competition. It ends up an eclectic mess.It is almost worse than useless, because you are taming Marx’s argument with neoclassical theory and not giving Marx the chance to speak through his own analysis and really test what his propositions are.The other thing that was very impressive about Shaikh was that he felt that, once you had taken that careful journey and were ready to arrive at the concrete, you then had to test Marx’s theories. You have to test whether they really were the most powerful explanations for what is going on in the modern capitalist economy. And if not, you would need to find a way to incorporate other schools of thought or new dynamics that Marx was not able to consider.And so, Shaikh initially spent several years with one of his grad students, Ahmet Tonak, developing a way to translate Keynesian income categories into Marxist value categories so that things like the rate of surplus value and the rate of profit could be accurately formulated, measured, and tracked over time.Of course, after many more years of work, Shaikh eventually did carefully incorporate selected insights from the classical and Keynesian schools in his recent magnum opus, Capitalism: Competition, Conflict, Crises. But he did this in a highly systematic way, largely retaining the critical importance of Marx’s arguments in Capital.Stephen MaherShaikh’s idea of “real competition” was central to your work. How does it differ from the monopoly capital view?Howard BotwinickBefore going to the New School, I had read Vladimir Lenin and all of the monopoly capital literature, and I was used to thinking in terms of monopoly capitalism. The things Shaikh was saying about Marx’s analysis of competition flew in the face of what I had learned, and I was skeptical at first. But I eventually reread Capital with different eyes, and I saw that Shaikh was right. Marx’s approach to capitalist competition was actually very different.Paul Sweezy and many other radical economists assumed that when Marx was talking about capitalist competition, he was talking about something like perfect competition with tiny price-taking firms. Then, with the merger movements after Marx died, they argued that we now have much bigger firms and Marx’s analysis of competition is no longer relevant.But Marx was never talking about tiny price-taking firms. After all, Marx was writing well into the Industrial Revolution in the 1870s. He made a big deal about large-scale investments with significant levels of fixed capital. He was never talking about the mythical kinds of firms that exist in neoclassical theory.Instead, he was asking the following: How do these large firms, with large amounts of fixed capital and a good deal of uncertainty, effectively compete? No one has perfect information. They are taking a chance, making investments, and trying to get the most profit they can in order to grow and ultimately survive. How do they do this? His analysis of capitalist competition is about that real world.How do these very sluggish, large capitals fight with one another over market share? As Shaikh often notes, the metaphor that Marx generally uses is that capitalist competition is like a war. You try to kill your enemy; you steal market share from them, reduce them, and damage them so that you can grow and expand.You need to expand because a large-scale enterprise needs an expansive scale of production to take advantage of economies of scale. So you must expand, and you are going to come into conflict with other capitals that are doing the same thing. The larger you are, the more vicious the battle is. There is no notion in Marx that, as firms get bigger and more powerful, competition lessens.Stephen MaherHow did this approach change your understanding of labor market segmentation and working-class differentiation?Howard BotwinickI realized: Wow, you do not need a modern theory of labor market segmentation and a new stage of capitalism to understand not only how capitalism brutally exploits the working class en masse but also how different segments of the working class are thrown — in Marx’s words — from pillar to post, from one industry to another.If you do a careful reading of Capital, you see that capitalist competition is constantly differentiating the working class because it is also constantly creating differential profit rates between and within industries. And this places very different downward pressures on wage rates. And then you have the reserve army of desperate workers trying to find a job at any wage they can. So even the most inefficient firms and even dying industries can still find workers who are desperate enough to take jobs with substandard wages and conditions.In sum, Marx’s analysis in Capital lays the basis for a complex structure of differentiation within the working class even as the relentless deskilling dynamics of technical change work to lower the overall levels of skill for the working class.It is a far more complex analysis than labor market segmentationists and others had assumed about Marx when they quoted from the Communist Manifesto. From their superficial reading of Marx, they claimed that he primarily described the creation of a homogeneous working class that would famously become capitalism’s gravediggers. But since workers didn’t rise to the occasion and the segmentationists discovered significant and persistent inequality within the working class, they argued that we had now entered an entirely new period of heterogeneity and segmentation. In fact, Marx’s argument is much richer than that, and there is no need to posit a new stage of capitalism. Wage differentials among workers of similar skill have been around for a very long time.The segmentationists also argued that the modern economy was a dual economy with a monopoly core sector and a competitive periphery. In the monopoly core that was organized by the Congress of Industrial Organizations (CIO) in the 1930s (steel, auto, rubber tire, and so on), workers were supposedly able to raise their wages because those firms had monopoly power. The workers raised their wages, and the firms simply raised their prices.By the same token, firms in the so-called competitive sector lacked monopoly power and could not pass higher wages on through higher prices. There was therefore very little workers could do to improve their wages and working conditions in this very large sector of the economy called the competitive periphery.Well, I worked in the competitive periphery. I saw some lousy unions that were not doing much, but I also saw some good unions doing a great deal to improve wages and working conditions. That showed me immediately that there was much more room for workers to improve their situation than the segmentationists were suggesting.My argument, based on Marx and on the rich detail of capitalist competition, taught me to pay far more attention to structures and technical conditions and to worry less about monopoly power. Once you start thinking that way, you find many other positive possibilities for labor to affect wages and working conditions. For example, many workers in service sectors like health care are highly organizable because capital cannot leave the areas where services are being delivered. They are a captive audience for unions, especially if they involve fairly large workplaces like hospitals.Stephen MaherWhat strategic conclusions follow from Shaikh’s theory of regulating capitals for unions operating under intense competitive pressure?Howard BotwinickOne of the things that I got from Shaikh’s analysis was this notion that every industry has what he calls regulating capitals. I think Shaikh has a strong argument that the logic of this is just a further concretization of Marx’s notion of competitive prices of production.Regulating capitals basically set the standard for those competitive prices of production. Each industry has firms with production facilities that embody the state-of-the-art, most efficient standards possible and are generally accessible to other capitals. This is not due to a rent situation or a monopoly over some scarce resource.These regulating capitals effectively act as the competitive standard for the industry. My argument about wages is that, in the 1930s, the CIO unions confronted those regulating capitals — the most efficient capitals in the industry — and said: You now have to deal with us, and your conditions of production and competitive costs are going to change. We are going to organize all the regulating capitals in this industry. We are raising the cost of hiring labor, and we are raising other costs because we are going to improve our working conditions and slow production down. You have to deal with that.The only way workers can do this is by organizing the entire industry. Then they raise the industry standards, and relative prices will eventually adjust under the new conditions of competition. Monopoly power has little to do with it.Classwide solidarity is the only thing workers have to stand up against the relentless pressures of capitalist competition. If you go down the road of labor-management cooperation, you undermine that solidarity, and you cannot win the battle. You have to take wages and working conditions out of competition, and there are things workers can do to accomplish that.You have to know your stuff. You have to understand how capitalist competition operates between and within industries. Then you can work out how to turn it against capital. Suppose you have a powerful firm under competitive pressure. Workers can respond by taking wages and working conditions out of competition.That is essentially what the CIO did so powerfully in the 1930s. Workers said to capital: You can compete through new technology, advertising, and better-quality products, but you are not going to compete on our backs. You are not going to compete by destroying our health, forcing us to work at unsafe speeds, or paying us wages we cannot live on. That is off the table; it is outside the new dynamics of competition that we are creating. If you do not give us reasonable wages and working conditions, we are going to raise the costs of doing business as usual. We are going to work to rule and organize strikes or slowdowns, and your profits will be seriously squeezed.That is how you turn competition against capital: recognize that employers are under the gun and impose costs on them. And ultimately, if all the regulating capitals are effectively organized, relative prices will adjust to these new costs of doing business.To do this, however, you need militant democratic unions where the entire workforce and the surrounding communities are involved and ready to act. You cannot sit around a board meeting talking about labor-management cooperation from a position of weakness. You have to be strong and able to impose costs on capital, and you probably have to go on strike periodically in order to make your strike threat real. Then you can enter negotiations with the weapons you need.Stephen MaherHow does the falling rate of profit change the horizon of class struggle?Howard BotwinickThat is not a short-run question of strategy or tactics, which is what I was just discussing. But if Marx is right about the falling-rate-of-profit scenario — that capitalism passes through roughly thirty- to forty-year periods of growth followed by a serious profitability crisis and a prolonged downturn — it has broader implications. And this is something else that I learned from Shaikh.During periods of growth, if workers are effectively organized and do not exceed certain limits — for instance, if they do not push wages up faster than productivity growth — there is room for real wages to rise. But that struggle becomes harder and more constrained when the profitability crisis arrives. Accumulation slows, the reserve army grows, and everything workers had to fight for before requires an even greater battle.You hope that, during the period of growth, the labor movement has acquired sufficient organizational strength — and even better, it has organized its own political party that clearly represents its interests. Then, when the crisis comes, workers can say: “What kind of system is this? We have to fight constantly for a reasonable wage and to be treated like human beings even in the good times. Now we face massive unemployment and terrible destruction everywhere simply because the system is not profitable enough. It is time for a new system.”Movements in profitability affect what is possible in different periods. But ultimately, if Marx is right that a crisis arrives every other generation, workers who fought hard and made important gains for themselves and their children will face losing many of those gains during the profitability crisis. That is a powerful argument that we have to move beyond the system. We cannot keep struggling only for reforms. And we haven’t even touched on how capitalism is relentlessly destroying our climate.Stephen MaherMany have claimed that workers in the Global North constitute a “labor aristocracy.” What are the implications of Shaikh’s notion of regulating capitals for this conception?Howard BotwinickFrom the post–World War II period until the 1970s, CIO unions had successfully fought to push up wages in highly capital-intensive industries in the North and Midwest. They were partly able to do this because those capital-intensive industries like steel and auto were difficult to relocate to cheaper labor in the US South. But as that wage differential between the North and South continued to grow, and those Northern plants continued to age, eventually capital moved part of its operations to the South when it needed to build new plants. Capital mobility was slower, but eventually it took place.Now, is there any world where we would have argued that those low-wage workers in the South allowed Northern workers in those CIO industries to become a labor aristocracy that was indirectly exploiting those Southern workers? Quite the contrary — the CIO knew it would eventually be in deep trouble if it did not organize those workers in the South. In fact, many would argue that the lack of union organization in the South became one of the key causes of the post–World War II decline of the US labor movement.It is not terribly different when you think internationally. When most of the regulating capitals were located in the United States, organized workers were able to raise their wages because those regulating capitals were able to incorporate higher wages in their competitive cost structures. However, those potential low-wage workers in developing countries were quietly setting long-term limits for how high wages in the US could go.And as wage differentials continued to grow, capitals increasingly moved to less developed countries in order to take advantage of those lower wages. It happened first in the labor-intensive industries because they were less costly to move. Moreover, in these industries like textiles and shoes, wage costs were a much higher share of total costs, so there was far more to gain by relocating. But eventually, as the wage differentials grew across the border, even capital-intensive industries began to move: first to the US South and then on to even lower wages in Mexico, China, Vietnam, and Malaysia.There is no point here where one could rationally argue that low wages in the US South or across the developing world allowed US workers to achieve higher wages at the expense of low-wage workers elsewhere. Downward wage pressure on workers in the first world is continually intensified by capital’s growing access to lower-wage labor elsewhere. There is no superexploitation and certainly no “labor aristocracy” that includes large segments of first-world workers.In fact, if you do not organize all the regulating capitals across the globe — if you do not organize the entire global industry — your ability to raise wages is greatly constrained. Marx’s injunction “Workers of the world, unite!” is more powerful than ever under today’s increasing levels of globalization and multinational corporations.Stephen MaherCritics often argue that attention to capitalism’s laws of motion leaves too little room for human agency. How do you respond, and what does your analysis imply for racial and gender inequality?Howard BotwinickI would argue that you do not necessarily lose the space for human agency. Rather, you will understand far better how workers’ struggles must ultimately interact with very real dynamics that will make their presence felt whether you like it or not. Whether you ignore them or not, they are going to come down on your head — competitive forces, declining rates of profit, and so on. If you are not aware of and tracking these things, you will not have an effective strategy for dealing with what happens when you press against those limits.In each industry, you have to pay attention to each firm’s profitability, the national location of the regulating capitals, and the particular dynamics of competitive pricing. That allows you to develop an effective strategy for both union intervention and public policy. Without understanding those things, you can claim to be entirely concerned with human agency, but you will be very ineffective and limited in what you can do. Ironically, my more determinate analysis of competitive wage determination actually indicates that workers have far more power to improve their circumstances in far more industries than the segmentationists ever suggested.Very briefly, regarding issues of racial and gender inequality, it is useful to think about my work in two stages. The analysis in my book largely abstracts from race and gender, but it nevertheless shows how capitalism creates not equality but inequality throughout the working class. The combined dynamics of technical change, capitalist competition, and the reserve army of labor result in highly unequal slots within the labor market that have nothing to do with the skill or quality of individual workers. Once we understand this, we can then move on to the question of the discriminatory assignment of a disproportionate number of people of color and women to many of these low-paying and often highly unstable jobs.This would then require a detailed analysis of the historical development of the different components of the reserve army of labor, paying particular attention to how various forms of discrimination and subordination have critically shaped the conditions of entry of both women and people of color into the capitalist labor force. And here, these institutional and historical dynamics may vary within limits in different capitalist countries.However, the bottom line here is that if you fundamentally want to create a more equal society, you better have an understanding of the political economy of capitalism. There is no way around it. A political movement that recognizes these deep systemic dynamics of inequality will be able to develop a richer understanding of why these inequalities continue to occur, and we will be far more effective in uniting all of the different segments of the working class.This article originally appeared in Jacobin, a democratic socialist magazine publishing long-form essays and analysis on politics, economics, and culture. Subscribe to the print edition for $20 a year.
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