The Rate of Exploitation of Workers at WestJet Airlines Ltd.

Introduction

In two others posts I presented the twenty largest employers in Toronto according to level of employment (see A Short List of the Largest Employers in Toronto, Ontario, Canada) and the twenty largest employers in Canada according to profit (see A Short List of the Largest Private Employers in Canada, According to Profit). The largest employer, in terms of employment, is the Canadian Imperial Bank of Commerce.

I have tried to calculate the rate of exploitation of workers by various employers, such as Magna International in an earlier post (see The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One); Magna International is one of the largest employers in Toronto.

I also calculated the rate of exploitation of Air Canada workers (see The Rate of Exploitation of Workers at Air Canada, One of the Largest Private Employers in Canada). This time I calculated the rate of exploitation of another airline: WestJet. 

The Nature of the Rate of Exploitation

But what is the rate of exploitation? And why not use the usual rate of profit or the rate of return? The rate of profit is calculated as profit divided by investment. Since employers purchase both the means for work–buildings, computers, office supplies, raw material–and hire workers–we can classify investment into two categories: c, meaning constant capital, or the capital invested in commodities other than workers; and v, or variable capital, the capital invested in the hiring of workers for a certain period of time (wages, salaries and benefits).

The purpose of investment in a capitalist economy is to obtain more money (see The Money Circuit of Capital), and the additional money is surplus value when it is related to its source: workers working for more time than what they cost to produce themselves. The relation between surplus value and variable capital (or wages and salaries) is the rate of surplus value or the rate of exploitation, expressed as a ratio: s/v.

When the surplus is related to both c and v and expressed as a ratio, it is the rate of profit: s/(c+v).

In Marxian economics, you cannot simply use the economic classifications provided by employers and governments since such classifications often hide the nature of the social world in which we live. The rate of profit underestimates the rate of exploitation since the surplus value is related to total investment and not just to the workers. Furthermore, it makes the surplus value appear to derive from both constant capital and variable capital.

I decided to look at the annual report of some of the largest private companies in Toronto and Canada if they are available in order to calculate the rate of exploitation at a more micro level than aggregate rates of surplus value at the national or international level. Politically, this is necessary since social democrats here in Toronto (and undoubtedly elsewhere) vaguely may refer to exploitation–while simultaneously and contradictorily referring to “decent work” and “fair contracts.” Calculating even approximately the rate of exploitation at a more micro level thus has political relevance.

I took the data from the 2018 annual report–the most accessible annual report. 

Conclusions First

As usual, I start with the conclusion in order to make readily accessible the results of the calculations for those who are more interested in the results than in how to obtain them.

We have the following:

The rate of exploitation or the rate of surplus value=s/v=232,658.7/997,313.3=23%. 

That means that for every hour worked that produces her/his wage, a worker at WestJet works around an additional 14 minutes for free for WestJet. 

In a 5.2 hour work day, the worker produces her/his wage in 4 hours 14 minutes (254 minutes) and works 58 minutes for free for WestJet.

Of course, during the time that the worker produces her/his own wage, s/he is subject to the power of management and hence is unfree (see, for instance, Management Rights, Part Four: Private Sector Collective Agreement, Ontario  and   Employers as Dictators, Part One). The same applies to the following. 

In an 8-hour work day, the worker produces her/his wage in 6.5 hours and works for 1.5 hours free for WestJet.

In an 8.5-hour day, the worker produces her/his wage in  6 hours 55 minutes and works for free for 1 hour 35 minutes for WestJet.

In a 10-hour day, the worker produces her/his wage in 8 hours 8 minutes and works for free for 1 hour 42 minutes for WestJet. 

Given this rate of exploitation and oppression, what are we to make of the following management rights clause in the collective agreement between WestJet and the Canadian Union of Public Employees (CUPE) Local 4070 (or, in French, Syndicat canadien de la fonction publique (SCFP))? 

ARTICLE 3 – MANAGEMENT RIGHTS

3-1.01 Except to the extent expressly limited or modified by a specific provision of this Agreement, the Company reserves and retains, solely and exclusively, all of the inherent rights, powers and authority to manage the business and direct its workforce and all the matters relating thereto. These rights, powers and authority include, but are not limited to hiring, assigning, promoting, demoting, classifying, transferring, lay-off, recall, suspending, discharging or otherwise disciplining Cabin Personnel; establishing and enforcing rules of conduct; maintaining order and efficiency; requiring Cabin Personnel to observe reasonable rules and regulations which may be promulgated by the Company, introducing new equipment; determining the location(s) of the workforce, operations, and facilities; planning, scheduling, directing and controlling operations.

3-1.02 The Union shall be advised of any changes to policies governing Cabin Personnel at least five (5) Days before such policies become effective unless the Parties mutually agree to a shorter advance notification period. This five (5) Day requirement will not apply when the Company is required by law to make immediate changes or in the event of emergency circumstances that reasonably require immediate change.

Is this management rights clause an example of the nature of “fair contracts” according to the major Canadian unions (such as CUPE, Unifor and NUPGE)? See  Fair Contracts (or Fair Collective Agreements): The Ideological Rhetoric of Canadian Unions, Part One: The Canadian Union of Public Employees (CUPE)Fair Contracts or Collective Agreements: The Ideological Rhetoric of Canadian Unions, Part Three: Unifor (Largest Private Union in Canada)  and Fair Contracts or Collective Agreements: The Ideological Rhetoric of Canadian Unions, Part Four: The National Union of Public and General Employees (NUPGE)(The Second Largest Union in Canada).      

Should not unions, even in the public sector, be teaching the limitations of collective agreements and collective bargaining? In the private sector, should they not also be teaching the workers that no collective agreement and no collective-bargaining process can abolish the exploitation of the workers–without driving the company out of business?

Or are unions silent on such limitations? Moreover, do they try to sell the idea to their members that the collective agreement is fair? 

What do you think? Given what you think, what should you be doing? Are you doing it? Why or why not? 

Data on Which the Calculation Is Based

I will calculate the rate of exploitation or the rate of surplus value for each approximate variation of the length of the working day (a more detailed explanation of how to calculate the rate of exploitation is provided in the post The Rate of Exploitation of the Workers of the Canadian Imperial Bank of Commerce (CIBC), One of the Largest Private Employers in Toronto and in Canada).

(in thousands of Canadian dollars)

Revenue 4,733,462
Operating expenses 4,578,235
Earnings from operations 155,227
Earnings before income taxes (EBT) 135,882

There is a difference of 19,345 between the category “Earnings from operations” and “Earnings before income taxes” (155,227-135,882=19345).

This difference can be accounted for on the basis of the category “Non-operating income (expense)”. 

Non-operating income (expense):
Finance income 29,421
Finance cost (57,027)
Gain (loss) on foreign exchange 2,966
Gain on disposal of property and equipment 4,049
Gain (loss) on derivatives 1,246

When you add the numbers that are without parentheses (that is to say, considered to be income) and subtract the numbers that are in parentheses (that is to say, considered to be an expense), then the net result is an expense of (19,345). 

Operating expenses need to be broken down further since expenses for maintaining workers as wage workers form one of the two considerations for the calculation of the rate of exploitation.

Expenses ($ in thousands)
Aircraft fuel 1,231,632
Salaries and benefits 999,381
Rates and fees 691,293
Sales and marketing 440,292
Depreciation and amortization 429,906
Maintenance 232,053
Aircraft leasing 139,703
Other 398,038
Employee profit share 15,937
Total operating expenses 4,578,235

Adjustments

In Marxian theory, it is necessary to question whether some expenses are expenses for both the individual employer and for the class of employers (and fractions of their class, such as those who live on interest); where there is a coincidence of expenses for individual employers and the class of employers,  the expense is deducted from total revenue.

On the other hand, there are expenses that are expenses for the individual employer but are not expenses when looked at from the point of view of the class of employers; in such an instance, they are paid out from the surplus value produced or obtained by workers and are to be included in income before taxes. For example, interest is such a category. 

As I wrote in another post: 

As explained in another post, interest in many instances can be treated as part of the surplus value produced and therefore added to net income since, although from the point of view of the individual capitalist it is an expense, from the capitalist economy as a whole it is derived from the production of surplus value. 

In addition, there are some so-called expenses that are allegedly salaries and other forms of income that are likely derived from surplus value; they have the form or appearance of wages or salaries but are really surplus value in disguise (such as the “salary” of CEOs). They need to be subtracted from expenses and added to “Earnings before taxes.”  

Adjustments of Non-operating income (expense) and Surplus Value (s)

I will treat this subcategory and its amount “Finance cost (57,027)”  as part of the surplus value produced by WestJet workers but paid out as interest to loan capitalists (banks, for example). The same applies to the other amounts within this category. The result is an additional $94,709 thousands (29,421+57,027+2,966+4,049+1,246=94,709). This amount needs to be added to “Earnings before income taxes (EBT),” 135,882, with the result: 

Temporarily adjusted Earnings before income taxes (surplus value (s) $230,591 thousands. 

Adjustments of Salaries and Benefits: Variable Capital (v)

Salaries and benefit plans can be further broken down:

Salaries and benefits plans 880,701
Employee share purchase plan 102,692
Share-based payment plans 15,988
Total salaries and benefits 999,381

The category “Employee share purchase plan” does not need any adjustment since it does indeed form part of the benefits of WestJet workers.

A note provides additional information:

Employee share purchase plan (ESPP)

The ESPP encourages employees to become owners of WestJet and provides employees with the opportunity to significantly enhance their earnings. Under the terms of the ESPP, employees may, dependent on their employment agreement, contribute up to a maximum of 10 per cent, 15 per cent or 20 per cent of their gross salary to acquire voting shares of WestJet at the current fair market value. The contributions are matched by WestJet and are required to be held within the ESPP for a period of one year. For the year ended December 31, 2018, our matching expense was $102.7 million.

The above $102,692 million is thus WestJet’s contribution to the purchase of WestJet stock.

I will assume that the employee share purchase plan forms part of the total income of WestJet workers. This assumption is justified since such a plan is designed, apparently, to replace a pension plan (and I have treated pension plans when calculating the rate of exploitation as part of salaries and benefits). From The Globe and Mail (May 14, 2019):

The questions from employee groups on the call quickly focused on the employee share-purchase plan. Instead of a pension plan, workers can invest as much as 20 per cent of their pay in WestJet stock and the company will match it. 

The employee share purchase plan amount does not change the calculation of v, but it does clarify why it should be included in the category “Total salaries and benefits.”

If the $102,692 is added to the amount of salaries and benefits, we obtain $983,393. 

Adjustments for Share Based Payment Plans

The same could only partially be said of the other category “Share based payment plans.” 

The following note elaborates on the nature of “Share-based payment plans”:

Share-based payment plans
We have three equity-settled share-based payment plans whereby either stock options, restricted share units (RSUs) or performance share units (PSUs) may be awarded to pilots, senior executives and certain non-executive employees. For the year ended December 31, 2018, share-based payment expense totaled $16.0 million.

“Share-based payment plans” is further broken down as follows:

Stock option plan 10,428
Key employee plan 5,039
Executive share unit plan 521
Total share-based payment expense 15,988

With no further detailed information about “Stock option plan,” and since pilots undoubtedly produce surplus value (they are exploited), I will assume that only ten percent of 10,428 is surplus value appropriated by senior management; this is also justified since pilots are likely to form most of the personnel in this category (although it is impossible to determine this with precision). Consequently, 10 percent of 10,428 is 1042.8 and is subtracted from “Total share-based payment expense” and added to “Earnings before income taxes (EBT).” The remaining 9,385.2 million is added to the category “Salaries and benefits plans” and the added amount from “Employee Share

Adjustments for Stock Option Plan

Temporarily adjusted Earnings before income taxes (surplus value (s): $231,633.8 thousands. 
Temporarily adjusted salaries and benefits: variable capital (v): $992,778.2 

Adjustments for Key Employee Plan

A note indicates the nature of the “Key employee plan”:

(d) Key employee plan
The Corporation has a key employee plan (KEP), whereby restricted share units (RSU) are issued to senior management and pilots of the Corporation.

Since pilots form part of this group, I will follow the same logic as for the group who receive stock options–10 percent of 5,039 is 503.9 and is subtracted from “Total share-based payment expense” and added to “Earnings before income taxes (EBT).”  The remaining $4535.1 ]  is added to the category “Salaries and benefits plans.

Accordingly: 

Temporarily adjusted Earnings before income taxes (surplus value (s): $232,137.7 thousands. 
Temporarily adjusted salaries and benefits: variable capital (v): $997,313.3

Final Adjustments: Executive Share Unit Plan

The category “Executive share unit plan” is different from the other two share-based payment plans.

A note indicates the nature of “Executive share unit plan”: 

(e) Executive share unit plan
The Corporation has an equity-based executive share unit (ESU) plan, whereby RSUs [restricted share units] and performance share units (PSU) may be issued to senior executive officers.

“Executive share unit plan” is probably compensation, not mainly for the coordination of the work of others but for the exploitation of others–it is pure surplus value. Accordingly, 521 is therefore completely subtracted from “Total share-based payment expense” and added to “Earnings before income taxes (EBT).” 

With this, final adjustments are possible and the rate of surplus value or the rate of exploitation can be calculated. 

Final Calculation (Based on Adjustments) of Surplus Value, Variable Capital (Salaries or Wages and Benefits) and the Rate of Surplus Value 

The result of all of these adjustments is: 

Adjusted earnings before income taxes (surplus value (s): $232,658.7 thousands. 
Adjusted total salaries and benefits: variable capital (v): $997,313.3

To calculate the rate of surplus value, we need to divide “Adjusted earnings before income taxes” (s) by “Adjusted total salaries and benefits” (v).

So, with the adjustments in place, the rate of exploitation or the rate of surplus value=s/v=232,658.7/997313.3=23%. 

That means that for every hour worked that produces her/his wage, a worker at WestJet works around an additional 14 minutes for free for WestJet. 

In a 5.2 hour work day, the worker produces her/his wage in 4 hours 14 minutes (254 minutes) and works 58 minutes for free for WestJet. Of course, during the time that the worker produces her/his own wage, s/he is subject to the power of management and hence is unfree (see, for instance, Management Rights, Part Four: Private Sector Collective Agreement, Ontario  and   Employers as Dictators, Part One).

In an 8-hour work day, the worker produces her/his wage in 6.5 hours and works for 1.5 hours free for WestJet.

In an 8.5-hour day, the worker produces her/his wage in  6 hours 55 minutes and works for free for 1 hour 35 minutes for WestJet.

In a 10-hour day, the worker produces her/his wage in 8 hours 8 minutes and works for free for 1 hour 42 minutes for WestJet. 

I have used the lengths of the working day as 5.2, 8 8.5 and 10 because the length of the working day varies. According to one source:

They have a flexible schedule for part time. Full time is required 40 hours. They do permit shift trading.

In my last role 8.5hrs, in prior roles it depended on my shifts etc.

8 to 10 hours per day

26 hours a week. Everyone starts out a part time.

The above lengths of the working day, translated into hours per day (assuming a five-day work week) are:

  1. 5.2 hours per day or 312 minutes
  2. 8 hours per day or 480 minutes
  3. 8.5 hours per day or 510 minutes
  4. 10 hours per day or 600 minutes 

Comparison of the Rate of Exploitation of WestJet Workers with Other Workers

The rate of exploitation of WestJet workers is quite low relative to other workers. Below I organize the rates of exploitation that I have calculated so far, from lowest to highest: 

  1. WestJet workers: 23%
  2. Telus workers: 58% 
  3. Air Canada workers: 70%
  4. Magna International workers: 79% (2019); 43% (2020) 
  5. Bank of Montreal (BMO): 92% 
  6. Bell Canada Enterprises (BCE): 100% 
  7. Canadian Imperial Bank of Commerce (CIBC): 120%
  8. Toronto-Dominion Bank (TD Bank): 123% 
  9. Royal Bank of Canada (RBC): 124% 
  10. ScotiaBank (Bank of Nova Scotia): 147% 
  11. Suncor Energy workers: 148% 
  12. Rogers Communication: 209% 

The divergences in the rate of exploitation are substantial: the absolute percentage difference between the rate of exploitation of WestJet workers and the rate of exploitation of Rogers Communications workers is 186%. 

Factors That Determine the Rate of Exploitation in Relation to Divergences in the Rates of Exploitation 

The rate of surplus value has three main factors which determine its level: 

1. The real wage (basket of commodities consumed by workers at non-changing prices). In the short term, the real wage is undoubtedly influenced by the class struggle–the level of organization of workers, the aims of such organization, the extent of the elimination of competition among workers and so forth. Even in the long run, it may be influenced through the incorporation of more and qualitatively more diverse commodities (historical and moral influence)–but this should not be exaggerated since real wages ultimately are limited by the rate of accumulation.

2.  The absolute level of the production of surplus value, determined by such factors as

a. the length of the working day. For example, if workers work 7 hours a day, with a rate of exploitation of 100%, then the worker produces her/his wage in 3.5 hours and produces a surplus value of 3.5 hours. If the working day increases to 7.5 hours, then the rate of exploitation increases, from 100% to 114% (s=4; v=3.5; s/v=4/3.5=1.14=114%). 

b. the intensity of work (which itself can be a function of other factors, such as the level of managerial organization, the principles of managerial supervision and technological conditions that force workers to work at an intensified level). The same number of hours may contain, relative to before, more labour. With a constant real wage, more surplus value is produced and hence a higher rate of exploitation. 

3.  Relative surplus value, determined by changes in technology (which alter the value of the commodities consumed by workers, reducing the value of the commodities consumed by workers, thereby increasing the remaining value as surplus value. For example, at the brewery where I worked, when I first started to work there, we could produce a maximum of 550 bottles of beer per minute, and when I quit, we could produce a maximum of 1,400 bottles per minute. The value of the bottles of beer undoubtedly decreased (although the price did not reflect this proportionately–taxes form a substantial portion of price). With lower values–and prices–for commodities consumed by workers, the workers perform less time producing the equivalent value of their wage and hence more time producing a surplus value, which therefore raises the rate of exploitation, s/v. Thus, with the technological change in beer production, the value of beer decreased. With the same level of worker beer consumption as before (the same real wage), the value of the commodity the workers sell (labour power–the capacity to perform labour for a certain period of time) decreases, leading to more value remaining for the employer–hence more surplus value and a higher rate of exploitation.  

To explain the divergences in the rate of exploitation at this micro level according to the above three factors or variables would require much more empirical work (and probably theoretical work to make required connections). I lack the capacity for this. If others can in any way improve on the calculation of the rate of exploitation, feel free to do so.

In any case, other factors undoubtedly influence the perceived or empirical rate of exploitation (as calculated by me). Thus, one major factor that would need to be included is the difference between the surplus value initially produced (or received by commercial and banking institutions) and the final distribution of surplus value. The production of surplus value and its distribution are unlikely to be the same since the proportion of investment in constant capital (c) and variable capital (v) will vary according to the kind of industry and level of technological development. I explain this in a comment to the post The Rate of Exploitation of Workers at Air Canada, One of the Largest Private Employers in Canada.  

Static Versus Dynamic Considerations of the Rate of Exploitation

The above comparative analysis definitely has limitations since it provides only a snapshot picture of rates of exploitation for different employers. When we consider the mobility of workers within and between industries, however, there may be a tendency towards an equalization of the rate of exploitation. This would require further empirical research, of course, as well as further theoretical considerations.

One author argues that there is a tendency towards equal rates of exploitation via worker mobility (he sometimes calls it labour mobility). He refers to Adam Smith’s theory of worker mobility. Adam Smith was a political philosopher and political economist who published the book The Wealth of Nations in 1776.

From Jonathan Cogliano (2021), “Marx’s Equalized Rate of Exploitation,” Working Paper Series, University of Massachusetts, page 20: 

One implication of the view put forward in sections 4 and 5 is that Marx fully adopts [Adam] Smith’s theory of the turbulent equalization of the whole of the advantages and disadvantages and re-purposes it into a turbulently equalizing rate of exploitation is that workers then know the degree to which they are exploited and move between sectors accordingly. Marx discusses how workers understand that they are exploited in his discussion of the struggle over the length of the working day, but he does not state explicitly that workers know their rate of exploitation (Marx 1976, pp.342-344). However, the wholesale adoption of Smith’s balancing whole of the advantages and disadvantages of labor implies that workers do know the degree to which they are exploited and migrate across sectors in response to changes or differentials across sectors.

Workers making decisions of how to allocate their labor across industries in this way does not require that workers base the decision on magnitudes measured in labor values— i.e. basing the decision on surplus value and the value of labor power. Workers’ movement across sectors as informed by money prices still induces the EQRE. As Foley (2016, pp.378- 380) discusses, surplus value captures overall surplus labor effort in the money form and if workers base their mobility decisions on the effort they expend and the wage they are paid then these movement decisions will tendentially induce the EQRE. This rests on some notion of a connection between labor effort and money value added

It would be necessary to consider both theoretically and empirically the dynamics of worker mobility in relation to the rate of exploitation to determine whether such a tendency in fact holds. Unfortunately, there is little research here in Toronto or indeed in Canada, as far as I can tell, concerning anything having to do with the rate of exploitation at the micro level and its interface with tendencies at the macro level.


Economics for Social Democrats–but not for the Working Class, Part Three: Critique of Jim Stanford’s Theory of Money, Part Three, or How Commodities and Money Dominate Our Lives

Introduction

I have already criticized Mr. Stanford’s definition of money as purchasing power in two previous posts (see Economics for Social Democrats–but Not for the Working Class, Part Two: Critique of the Social Democrat Jim Stanford’s Theory of Money, Part One   and Economics for Social Democrats–but not for the Working Class, Part Two: Critique of Jim Stanford’s Theory of Money, Part Two). I turn now to the social effect of commodity and money production as commodity fetishism and money fetishism. 

Mr. Stanford’s definition of money fails to connect it to the peculiar kind of social labour that produces commodities and how this peculiar kind of social labour necessarily gives rise to money as the monopolizer of purchasing power. To repeat his definition of money (from Economics for Everyone: A Short Guide to the Economics of Capitalism, 2008, page 189: 

Very broadly, money is anything that allows its holder to purchase other goods and services. In other words, money is purchasing power.

We can compare this with Marx’s views on money. From pages 168-169: 

The forms which stamp products as commodities and which are therefore the preliminary requirements for the circulation of commodities, already possess the fixed quality of natural forms of social life before man seeks to give an account, not of their historical character, for in his eyes they are immutable, but of their content and meaning. Consequently, it was solely the analysis of the prices of commodities which led to the determination of the magnitude of value, and solely the common expression of all commodities in money which led to the establishment of their character as values. It is however precisely this finished form of the world of commodities – the money form – which conceals the social character of private labour and the social relations between the individual workers, by making those relations appear as relations between material objects, instead of revealing them plainly.

Since money as simply given hides the “social character of private labour and the social relations between the individual workers,” it is necessary to analyze how it arises theoretically (and practically through the actual exchange process)–which is what Stanford precisely fails to do. From Capital, page 139: 

Everyone knows, if nothing else, that commodities have a common value-form which contrasts in the most striking manner with the motley natural forms of their use-values. I refer to the money-form. Now, however, we have to perform a task never even attempted by bourgeois economics. That is, we have to show the origin of this money-form, we have to trace the development of the expression of value contained in the value-relation of commodities from its simplest, almost imperceptible outline to the dazzling money-form. When this has been done, the mystery of money will immediately disappear.

For Stanford, however, there is no mystery to money. It is simply the power of a specific thing to purchase other things. How and why money permits its owner to purchase other things–including the capacity of workers to perform human labour–remains a mystery on the basis of Stanford’s definition. Stanford, in fact, merely assumes the power of money to purchase commodities. At least eighteenth and nineteenth century political economists were able to infer from exchange relations that labour formed their basis as value (although they also assumed that the kind of social labour that produced value was concrete labour). From pages Capital, 173-175: 

Political economy has indeed analysed value and its magnitude, however incompletely,  and has uncovered the content concealed within these forms. But it has never once asked the question why this content has assumed that particular form, that is to say, why labour is expressed in value, and why the measurement of labour by its duration is expressed in the magnitude of the value of the product.  These formulas, which bear the unmistakable stamp of belonging to a social formation in which the process of production has mastery over man, instead of the opposite, appear to the political economists’ bourgeois consciousness to be as much a self-evident and nature-imposed necessity as productive labour itself.

The above quote links up to the theme of commodity fetishism and money fetishism, or the loss of power by workers over their own life process (the production process of their own lives) and the positive acquisition of power of the things they produce–commodities, money and, ultimately, capital. 

Mr. Stanford’s definition of money as “purchasing power” fails miserably to address something which is very relevant for members of the working class: Why does the ownership of money by employers confer so much power over the workers at work? 

By severing the connection between the positive monopoly of immediate purchasing power of money from the negative lack of such power of commodities, Stanford fails to grasp the organic or internal connection between the difference in power between commodity power–especially the commodity called labour power–and money power (represented by the employer)

Part of the answer to the question of the asymmetry in power relations between the owner of commodities and the owner of money is found in Marx’s theory of commodity fetishism, and the associated theory of the money fetish, which is really a development from commodity fetishism. By fetishism is not meant some kind of personal fetish, such as a fetish for a particular part of the human body or a particular item of clothing. Rather, it is a fetish in that human powers appear as the power of things, whether as commodities (commodity fetishism) or as money (money fetishism), or indeed as a thing called capital (capital fetishism). As Elena Lange (2021) notes, Value without Fetish Uno Kōzō’s Theory of ‘Pure Capitalism’ in Light of Marx’s Critique of Political Economy, page 225: 

The inversion of the problem – money is not to be explained on the basis of the fetish character of the commodity, but the commodity is to be explained on the basis of the fetish-character of money – however leaves open the question how money is capable of paradigmatically representing general social exchangeability.

Stanford, with his one-sided positive definition of money as purchasing power, cannot link the power that ownership of money confers to the employer. He cannot do so since he fails to link the nature of money in a capitalist society to the nature of the kind of labour that requires money as an external power (“purchasing power”).  Money for Stanford  just has purchasing power–it appears to have this active power independently of the way in which the producers’ own labour (the labour of the working class) is organized and how they relate to each other by way of the topsy-turvy relation between things (commodities and money).

The Nature of Commodity Fetishism–and the Domination of Workers 

Stanford cannot understand the nature of commodity fetishism since he simply assumes that a thing called money has purchasing power by nature. He obviously rejects connecting the nature of money to the peculiar social labour that produces commodities. In fact, I doubt that he is even aware of the connection (since he interprets Marx’s labour theory of value as some sort of moral theory that is applicable throughout history). 

Commodity fetishism arises because the labour performed by the workers is not social labour as it is being performed and, as a consequence, the relations between the labours of workers who work for different and independent employers lack direct social connections. Materially, though,  they form, interdependent relations. At the brewery where I worked, for example, brewery workers did not produce the bottles that they needed to produce the beer, nor the barrels of soap needed to make the bottles move smoothly along the line, nor the chains on which the bottles moved, nor the machines, such as the soaker, the filler or the labeler. There was thus a material dependence of the workers in the brewery on the workers who produced the bottles, the barrels, the soap, the chains, the soaker, the filler and the labeler. 

The labour performed by us to produce the beer, though materially dependent on other labour processes, did not express its dependent nature directly by means of those who produce beer, along with the whole set of other workers jointly communicating and deciding on what to produce, how much to produce and how to produce according to the diverse productive and personal needs of the producers (and other members of society). Rather, the dependent (and interdependent) nature is only expressed indirectly, through the relations of commodities to each other in the exchange relation and the exchange process–since the labour performed during production in a society characterized by a class of employers is only social labour indirectly. The commodities themselves then obtain human characteristics that appear to arise from the nature of the commodities as natural things (such as beer) rather than through their nature as social things. Thus, beer having a price seems to arise from the nature of beer  whereas price in fact arises in the first place because of the organization of production as private, isolated production.  This attribution of social relations between humans as an attribute of commodities and their relations is what Marx calls commodity fetishism. From Capital, Volume 1, pages 164-166: 

The mysterious character of the commodity-form consists therefore simply in the fact that the commodity reflects the social characteristics of men’s own labour as objective characteristics of the products of labour themselves, as the socio-natural properties of these things. Hence it also reflects the social relation of the producers to the sum total of labour as a social relation between objects, a relation which exists apart from and outside the producers. Through this substitution, the products of labour become commodities, sensuous things which are at the same time suprasensible or social. In the same way, the impression made by a thing on the optic nerve is perceived not as a subjective excitation
of that nerve but as the objective form of a thing outside the eye. In the act of seeing, of course, light is really transmitted from one thing, the external object, to another thing, the eye. It is a physical relation between physical things. As against this, the commodity form,
and the value-relation of the products of labour within which it appears, have absolutely no connection with the physical nature of the commodity and the material relations
arising out of this. It is nothing but the definite social relation between men themselves which assumes here, for them, the fantastic form of a relation between things. In order, therefore, to find an analogy we must take flight into the misty realm of religion. There the products of the human brain appear as autonomous figures endowed with a life of their own, which enter into relations both with each other and with the human race. So it is in the world of commodities with the products of men’s hands. I call this the fetishism which attaches itself to the products of labour as soon as they are produced as commodities, and is therefore inseparable from the production of commodities.

As the foregoing analysis has already demonstrated, this fetishism of the world of commodities arises from the peculiar social character of the labour which produces them.

Objects of utility become commodities only because they are the products of the labour of private individuals who work independently of each other. The sum total of the labour of all these private individuals forms the aggregate labour of society. Since the producers do not come into social contact until they exchange the products of their labour, the specific social characteristics of their private labours appear only within this exchange. In other words, the labour of the private individual manifests itself as an element of the total labour of society only through the relations which the act of exchange establishes between the products, and, through their mediation, between the producers. To the producers, therefore, the social relations between their private labours appear as what they are, i.e. they do not appear as direct social relations between persons in their work, but rather as material relations between persons and social relations between things.

It is only by being exchanged that the products of labour acquire a socially uniform objectivity as values, which is distinct from their sensuously varied objectivity as articles of utility.

Stanford, by assuming as given that money has purchasing power, fails to derive such power from human relations characteristic of a society where the workers lack the power to direct their own lives and–therefore–money arises as a result that permits others to direct their lives.

Stanford presents the purchasing power of money as natural to money–it is (“that is the way it is” attitude–with a shrug of the shoulders). The purchasing power of money, however, derives from the lack of such power by commodities, and the lack of such power is in turn derived from the nature of the labour that produces value–abstract labour, or labour that is not social as it is being performed but requires a further process–a process of exchange–if it is to form part of the labour of society. 

In a society characterized by the production of commodities and their expression in money (with its immediate power to purchase), the power of workers to produce their social lives (reciprocal production of human life) assumes the form of a relation between things produced. The origin of commodity and money fetishism is thus in production–the way production is organized. From Guido Schulz (2012), “Marx’s Distinction between the Fetish Character of the Commodity and Fetishism,” in pages 25-45, Studies in Social & Political Thought, Volume 20, page 26: 

The fetish character of the commodity, which Marx also calls “mystic character”, originates in the “peculiar social character of the labour” that gives products their commodity form. Therefore, the fetish originates in production. Although production is ultimately social under capitalism, it is privately organized and carried out by atomised producers. Capitalist production thus entails a conflict between sociality and asociality. An objective mediation between the two extremes of sociality and asociality is established through the process of commodity exchange. The social relation between the producers is thereby established. Instead of consciously creating immediate links between the
producers, in place of “rationally regulating [production], bringing it under […] common
control“, the social link gets reified and externalized in commodities.

Abstract labour as labour that is not yet social assumes the form of a relation between commodities, things with physical and supersensible (social) qualities that regulate the participants in exchange rather than the participants regulating the process. From Guide Schulz, page 27: 

But value relations objectified in commodities do not only establish the socializing link between producers. From the viewpoint of the individual producer, these objectified value relations even gain autonomy and regulative social power. This non-imaginary regulative social power is twofold: “[R]elations based on the exchange-value of commodities (‘social relations of things’) come to control the distribution of labour-products and the distribution of the labourers themselves within the production process” (Carver 1975, p.51).

All human production is social in character in that, if we are to produce our lives and continue to live as a species, we must in one way or another work for each other in even a temporary social division of labour. This “working for each other,” however, in a situation where labour is not social as it is being performed, assumes the form of a relation between produced commodities, with the social nature of the labour expressed not in the immediate or material form in which it exists but in another use value (as I have already explained in an earlier post–see  Economics for Social Democrats–but Not for the Working Class, Part Two: Critique of the Social Democrat Jim Stanford’s Theory of Money, Part One). If there are two commodities produced, say beer and a pair of pants, the social nature of beer production is not expressed in the beer but in the pair of pants. From Samezo Kuruma (2018), Marx’s Theory of the Genesis of Money How, Why, and Through What is a Commodity Money? page 144:

How, exactly, is the value of a commodity indicated? Given that a commodity cannot indicate its value on its own, it is indicated instead by another commodity with which it is in a relation of exchange. Yet in the case of that other commodity as well, its natural form is its use value (not value), and it does not, on its own, have a form of value in addition to its natural form. The natural form of that other commodity must therefore become the form of value. This is indeed what happens … he [Marx] traces the development of the
form itself, and in so doing thoroughly solves the riddle of money.

The pair of pants in this case is immediately exchangeable or convertible into the beer since it represents objectified social labour–objectified labour that is freely convertible into any useful form. Similarly, the  labour that produces the pair of pants represents general social labour, or labour that can assume many different forms. The pair of pants is immediately exchangeable with the beer (its “purchasing power”) despite the concrete labour that produces the pair of pants being separated off and being produced independently of the other commodities  because this particular labour represents general social labour. 

This power of immediate exchangeability, or its purchasing power, is derived from the negative way production is organized in a capitalist society; there is no unity of workers with each other as human beings who produce for each other. The unity arises through the emergence of a special commodity that functions as an external unifier of producers who are socially external to each other despite their material interdependence. 

It is through the development of this simple expression or form of value–the value of the beer being expressed in another use value, the pair of pants or what have you–that there arises the money form, as the final form where value achieves a uniform and general expression in just one commodity that then becomes money as the monopolizer of general exchangeability or purchasing power ultimately emerging from the nature of abstract labour and embodied in one particular use value (and hence one particular form of concrete labour). 

The property or characteristics of commodities as social products requires a form different from their immediate use value as the product of concrete labour. This form–ultimately the money form or money–then has the social characteristic of being immediately exchangeable or convertible into any particular commodity or use value.

This social power is transferred to commodities, but only potentially, not immediately since commodities cannot immediately express their value in their own use value. In turn, this social power becomes concentrated in one commodity–which becomes money.

Stanford, by ignoring completely the process by which money acquires the immediate power to purchase all other commodities, himself contributes to commodity fetishism since he fails to link the property of money of having immediate purchasing power with the lack of such power of commodities and, in turn, their lack being due to the peculiar social nature of the labour that produces the value of commodities. 

The Nature of Money Fetishism

The fetish character of commodities is a simpler form than the money form since the relations between producers is still expressed as a relation–although a relation between things. From Marx, Capital, Volume 1,  page 176: 

As the commodity-form is the most general and the most undeveloped form of bourgeois production, it makes its appearance at an early date, though not in the same predominant and therefore characteristic manner as nowadays. Hence its fetish character is still relatively easy to penetrate. But when we come to more concrete forms, even this appearance of simplicity vanishes. Where did the illusions of the Monetary System come from? The adherents of the Monetary System did not see gold and silver as representing money as a social relation of production, but in the form of natural objects with peculiar social properties.

Does Mr. Stanford enlighten workers on how money has the property of “purchasing power?” Not at all. He assumes such a property as given without explaining it. The money form, however, is a form that hides its own nature. From Marx, Capital, Volume 1, pages 168-169: 

It is however precisely this finished form of the world of commodities – the money form – which conceals the social character of private labour and the social relations between the individual

Commodity fetishism, as a social relation between workers as exchangers that assumes the form of a relation between things, is converted into a money fetishism as money emerges as the unique power of a commodity to be converted immediately into any commodity form.  Money thereby assumes the form of a thing that has–“purchasing power”–by its very nature, apparently  independently of the nature of commodities and commodity production. Money fetishism is a development of commodity fetishism. From Desmond McNeill (2021), 
Fetishism and the Theory of Value: Reassessing Marx in the 21st Century, pages 61-2: 

There is a similar important passage later in the same volume [of Marx’s book A Contribution to the Critique of Political Economy, published in 1859]:

A social relation of production appears as something existing apart from
individual human beings, and the distinctive relations in which they enter
in the course of production in society appear as the specific properties of a
thing. … This perverted appearance manifests itself merely in a more striking
manner in money than it does in commodities. (Marx 1970: 49)

Here, Marx is making the point that money fetishism is a developed form of commodity fetishism.

As Georgios Daremas (2018) says, “The Social Constitution of Commodity Fetishism, Money Fetishism and Capital Fetishism,” in pages 219-249, Judith Dellheim Frieder Wolf, Editors, The Unfinished System of Karl Marx Critically Reading Capital as a Challenge for our Times  page 226: 

An inversion has taken place: money—instead of being seen as a reflector of a commodity’s value (as the universal equivalent or representative, as the passive agent of reflection)—is perceived as the active agent positing the value of the commodities. From a logical point
of view, the basis of money fetishism is the collapse of a relationship of reflection/representation to that of an identity. The inner connection of the commodity’s value represented by the money form is reduced to a social feature inherent in money per se that appears to hold an external, contingent connection to the multiplicity of commodities bestowing value upon them.

Stanford, by assuming the purchasing power of money without explaining it, reinforces the fetishism of money. This is hardly in the interest of workers. 

Probably in a follow-up post, I will in future elaborate on the further development of commodity fetishism and money fetishism as capital fetishism (I have already hinted at such a fetishism in referring several times to the domination of workers’ lives by their own actions and by the products of their labour). 

Conclusion

The way in which the labour process is organized in a society characterized by a class of employers involves the relations between workers assuming the absurd form of a relation between things leads to the mystery of why a particular commodity–money–has the magical ability to purchase all other commodities whereas they, on the contrary, lack such power. 

Commodity fetishism is easier to understand than money fetishism since it relates more directly to the production process and involves the expression of value in a not-yet fixed form. With money fetishism, on the other hand, money seems to have purchasing power capacity immediately, independently of the organizational structure of labour. Stanford, by simply accepting the purchasing power of money without linking it to that structure, contributes to hiding the real nature of money and the real nature of commodities as alienated forms of human social labour. 

It is instructive of how dominant social democracy and social reformism are here in Toronto (and undoubtedly in many other capitalist cities) is the lack of any criticism of Stanford’s definition of money. 

I will conclude this post in anticipation of a possible future post on capital fetishism by quoting from Thomas Hodgskin’s book (1825), Labour Defended against the Claims of Capital: 
Or the Unproductiveness of Capital proved with Reference to the Present Combinations amongst Journeymen, pages 71-73: 

Betwixt him who produces food and him who produces clothing, betwixt him who makes instruments and him who uses them, in steps the capitalist, who neither makes nor uses them, and appropriates to himself the produce of both. With as niggard [stingy] a hand as
possible he transfers to each a part of the produce of the other, keeping to himself the large share. Gradually and successively has he insinuated himself betwixt them, expanding in bulk as he has been nourished by their increasingly productive labours, and separating them so widely from each other that neither can see whence that supply is drawn which each receives through the capitalist. While he despoils both, so completely does he exclude
one from the view of the other that both believe they are indebted him for subsistence. He is the middleman of all labourers … Not only do they appropriate the produce of the labourer; but they have succeeded in persuading him that they are his benefactors and employers. At least such are the doctrines of political economy; and capitalist may well be pleased with a science which both justifies their claims and holds them up to our admiration, as the great means of civilising and improving the world.

The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part Three, Updated, 2020

Introduction

In two others posts I presented the twenty largest employers in Toronto according to level of employment (see A Short List of the Largest Employers in Toronto, Ontario, Canada) and the twenty largest employers in Canada according to profit (see A Short List of the Largest Private Employers in Canada, According to Profit).

I have tried to calculate the rate of exploitation of workers of workers in several capitalist companies: Magna International, Bell Canada Enterprises (BCE), ScotiaBank (Bank of Nova Scotia), Bank of Montreal (BMO), Telus, Royal Bank of Canada (RBC), Suncor Energy, Toronto-Dominion Bank (TD Bank),Rogers Communications Inc., the Canadian Imperial Bank of Commerce (CIBC) and  Air Canada,  (see for example The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One).

I thought it might be useful to begin the comparison of rates of exploitation of the same capitalist employer for different years. Although this fails to capture the dynamic of capitalist relations of production and exchange (being two snapshots at different times), it may provide further insight into the nature of capitalist society.

The structure of the post is as follows:

  1. I outline the nature of the rate of exploitation
  2. I then provide “Conclusion first,”
    a. the 2020 rate of exploitation is indicated
    b. the 2020 rate of exploitation is compared with the 2019 rate and some possible explanations of the differences are provided
    c. a long quote of a discussion around tactics and strategies between Sam Gindin (former research director of the Canadian Autoworkers Union (CAW) (now Unifor) and me relating to  union ideology.
    d. Further brief criticisms of Mr. Gindin’s political position
    e. Consideration of an Integram Bargaining Report produced by Unifor Local 444 (Integram is a division of Magna International), dated November 8, 2020 in relation to Mr. Gindin’s views
  3. How I calculated the rate of exploitation (including adjustments) as well as a justification for interpreting the substantial decrease in the rate of exploitation in terms of “fixed costs.”
  4. The conclusions as stated in 2.

The Nature of the Rate of Exploitation

But what is the rate of exploitation? And why not use the usual rate of profit or the rate of return? The rate of profit is calculated as profit divided by investment. Since employers purchase both the means for work–buildings, computers, office supplies, raw material–and hire workers–we can classify investment into two categories: c, meaning constant capital, or the capital invested in commodities other than workers; and v, or variable capital, the capital invested in the hiring of workers for a certain period of time (wages, salaries and benefits).

The purpose of investment in a capitalist economy is to obtain more money (see The Money Circuit of Capital), and the additional money is surplus value when it is related to its source: workers working for more time than what they cost to produce themselves. The relation between surplus value and variable capital (or wages and salaries) is the rate of surplus value or the rate of exploitation, expressed as a ratio: s/v.

When the surplus is related to both c and v and expressed as a ratio, it is the rate of profit: s/(c+v).

In Marxian economics, you cannot simply use the economic classifications provided by employers and governments since such classifications often hide the nature of the social world in which we live. The rate of profit underestimates the rate of exploitation since the surplus value is related to total investment and not just to the workers. Furthermore, it makes the surplus value appear to derive from both constant capital and variable capital.

I decided to look at the annual report of some of the largest private companies in Toronto and Canada if they are available in order to calculate the rate of exploitation at a more micro level than aggregate rates of surplus value at the national or international level. Politically, this is necessary since social democrats here in Toronto (and undoubtedly elsewhere) vaguely may refer to exploitation–while simultaneously and contradictorily referring to “decent work” and “fair contracts.” Calculating even approximately the rate of exploitation at a more micro level thus has political relevance.

Conclusions First

As usual, I start with the conclusion in order to make readily accessible the results of the calculations for those who are more interested in the results than in how to obtain them.

The Rate of Exploitation

So, with the adjustments in place: s=1081; v=2,509. The rate of exploitation or the rate of surplus value=s/v=1081/2,509=43%.

I will first consider this rate in relation to the workers in 2020, and then compare this rate with the 2019 rate of exploitation.

That means that for every hour worked that produces her/his wage, a worker at Magna International works around an additional 26 minutes for free for Magna International. Alternatively, in terms of money, $1 of wage or salary of a regular Magna International worker produces around $0.43 (43 cents) surplus value or profit for free.

  1. In an 8-hour work day (480minutes), the worker produces her/his wage in 336 minutes (5 hours  36 minutes) and works 144 minutes (2 hours 24 minutes) for free for Magna International.
  2. In an 9-hour work day (540minutes), the worker produces her/his wage in 378 minutes (6  hours 18 minutes) and works 162 minutes (2 hours 42 minutes) for free for Magna International.
  3. In an 10-hour work day (600 minutes), the worker produces her/his wage in 420 minutes (7  hours) and works 180 minutes (3 hours) for free for Magna International.
  4. In an 12-hour work day (720 minutes), the worker produces her/his wage in 503 minutes (8  hours  23 minutes) and works 217 minutes (3 hours 37 minutes) for free for Magna International.

Comparison of the 2019 Rate of Exploitation with the 2020 Rate of Exploitation

2020: So, with the adjustments in place: s=1081; v=2,509. The rate of exploitation or the rate of surplus value=s/v=1081/2,509=43%.
2019: So, with the adjustments in place: s=2,258; v=2,862. The rate of exploitation or the rate of surplus value=s/v=2,258/2,862=79%.

The absolute decrease in s is substantial: 1,177, and the rate of decrease is 52% (1081-2,258)/2,258=-1,177/2,258).

By contrast, the absolute decrease in v is much less: 353, and the rate of decrease is (2509-2862)/=2509=-353/2862=12%.

The substantial decrease in the rate of exploitation is likely due to the treatment of workers as “fixed costs” as the pandemic forced employers to retain workers despite the relatively extra costs associated with it (partly offset by federal, provincial and municipal supports).

There may, of course, be other causes of the decrease in the rate of exploitation, such as problems pertaining to supply of inputs, but I will leave that issue aside.

It should be emphasized that the exploitation of workers pertains to the production of a surplus beyond the production of the value equivalent of their own costs of production. Even during the time the workers require to produce their wage, they are oppressed by employers since they are subject to the will of the employer (or her representatives) and to the control over their labour.

Political Considerations

The rapid decrease in the rate of exploitation of workers of Magna International with the onset of the pandemic will likely call for an opposite pressure to increase exploitation directly through intensification and an extension of the working day and changes in technology and organization of the production process. Pressures to increase tax breaks for such capitalist employers (and corresponding reduction in state expenditures for welfare measures) may also arise. Of course, some workers will not just lay down and accept such counter-pressures.

Why is it that workers have to put up with this situation? Should they not be organizing not only to resist exploitation and oppression and increased pressures related to those phenomena but also to abolish such pressures? Not according to the social-democratic or social-reformist left. Such organizational efforts, for them, are undoubtedly unrealistic. New structures are supposedly to arise without criticizing the old structures.

Thus, for social democrats like Sam Gindin (former research director for the Canadian Auto Workers (CAW) (now Unifor), challenging the ideology of “decent jobs or work,” “fair contract,” “fair collective agreement,” “fair deal,” “fair wages” and other abstract phrases (rhetoric) is relatively unimportant. New material structures more relevant to the lives and experiences of working people are somehow to arise without constantly challenging the existing social structures–and the corresponding ideology that justifies such structures.

Frankly, I doubt that such new material structures will arise without a persistent and constant challenging of the ideological rhetoric rampant among the left in general and unions in particular.

I will include a rather long quote from a previous post. It is a conversation between Sam Gindin (a self-claimed “leader” of radical workers here in Toronto despite his probable own explicit denial of such a title) and me:

Re: A Good or Decent Job and a Fair Deal
Sam Gindin
Sat 2017-02-18 8:05 AM
Something is missing here. No-one on this list is denying that language doesn’t reflect material realities (the language we use reflects the balance of forces) or that it is irrelevant in the struggle for material effects (the language of middle class vs working class matter And no one is questioning whether unions are generally sectional as opposed to class organizations or whether having a job or ‘decent’ pay is enough. The question is the autonomy you give to language.

The problem isn’t that workers refer to ‘fair pay’ but the reality of their limited options. Language is NOT the key doc changing this though it clearly plays a role. That role is however only important when it is linked to actual struggles – to material cents not just discourse. The reason we have such difficulties in doing education has to do with the limits of words alone even if words are indeed essential to struggles. Words help workers grasp the implications of struggles, defeats, and the partial victories we have under capitalism (no other victories as you say, are possible under capitalism).

So when workers end a strike with the gains they hoped for going in, we can tell them they are still exploited. But if that is all we do, what then? We can – as I know you’d do – not put it so bluntly (because the context and not just the words matter). that emphasize that they showed that solidarity matters but we’re still short of the fuller life we deserve and should aspire to and that this is only possible through a larger struggle, but then we need to be able to point to HOW to do this. Otherwise we are only moralizing. That is to say, it is the ideas behind the words and the recognition of the need for larger structures to fight through that primarily matter. Words help with this and so are important but exaggerating their role can be as dangerous as ignoring it.

What I’m trying to say is that people do, I think, agree with the point you started with – we need to remind ourselves of the limits of, for example, achieving ‘fair wages’. But the stark way you criticize using that word, as opposed to asking how do we accept the reality out there and move people to larger class understandings – of which language is an important part – seems to have thrown the discussion off kilter.

On Sat, Feb 18, 2017 at 7:00 AM, Frederick Harris <arbeit67@hotmail.com> wrote:

I was waiting to see whether there was any dispute concerning either the primary function of language or its material nature. Since there has been no response to that issue, I will assume that the view that the primary function of language is to coordinate social activity has been accepted.

What are some of the political implications of such a view of language? Firstly, the view that “But material conditions matter more” has no obvious basis. If language coordinates our activity, surely workers need language “to reproduce themselves.”

The question is whether coordination is to be on a narrower or wider basis.

Let us now take a look at the view that a contract (a collective agreement) is fair or just and that what workers are striving for is a decent or good job.

If we do not oppose the view that any collective agreement is fair to workers and that the jobs that they have or striving to have are decent jobs, then are we saying that a particular struggle against a particular employer can, in some meaningful sense, result in a contract that workers are to abide by out of some sense of fairness? Does not such a view fragment workers by implicitly arguing that they can, by coordinating their action at the local or micro level, achieve a fair contract and a good job?

If, on the other hand, we argue against the view that the workers who are fighting against a particular employer cannot achieve any fair contract or a decent job, but rather that they can only achieve this in opposition to a class of employers and in coordination with other workers in many other domains (in other industries that produce the means of consumption of workers, in industries that produce the machines and the raw material that go into the factory, in schools where teachers teach our children and so forth), then there opens up the horizon for a broader approach for coordinating activity rather than the narrow view of considering it possible to achieve not a fair contract and a decent job in relation to a particular employer.

In other words, it is a difference between a one-sided, micro point of view and a class point of view.

As far as gaining things within capitalism, of course it is necessary to fight against your immediate employer, in solidarity with your immediate fellow workers, in order to achieve anything. I already argued this in relation to the issue of health in another post.

Is our standard for coordinating our activity to be limited to our immediate relation to an employer? Or is to expand to include our relation to the conditions for the ‘workers to reproduce themselves’?

“They turn more radical when it becomes clear that the system can’t meet their needs and other forms of action become necessary -”

How does it become clear to workers when their relations to each other as workers occurs through the market system? Where the products of their own labour are used against them to oppress and exploit them? Are we supposed to wait until “the system can’t meet their needs”? In what sense?

I for one have needed to live a decent life–not to have a decent job working for an employer or for others to be working for employers. I for one have needed to live a dignified life–not a life where I am used for the benefit of employers. Do not other workers have the same need? Is that need being met now? If not, should we not bring up the issue at every occasion? Can any collective agreement with an employer realize that need?

Where is a vision that provides guidance towards a common goal? A “fair contract”? A “decent” job? Is this a class vision that permits the coordination of workers’ activities across industries and work sites? Or a limited vision that reproduces the segmentation and fragmentation of the working class?

Fred

I guess workers’ explicit consciousness of their own exploitation and oppression and their discussion of such experiences is to arise only after the emergence of “larger structures to fight through.” It is, however, likely that such “larger structures” will simply mimic the “narrower” structures if both are not criticized. How is the CLC (the Canadian Labour Congress)  substantially different from union structures in terms of challenging the class power of employers? Or is Mr. Gindin referring to the larger structures, such as the class power of employers?

My own experience with union reps has been that they assume the necessity and legitimacy of the class power of employers–and do not do anything to raise the issue of the legitimacy of the class power of employers, the exploitation of workers and their oppression among their own members; their aim is to improve the working conditions without questioning at all such class power, exploitation and oppression. I have been a union member, a union rep (union steward and member of a collective-bargaining committee), a member of the executive of a union and a rep for an Equity and Social Justice Committee. I have seen up close the assumptions and limitations and unions–and have tried to address such limitations when and where I could.

The false nature of Mr. Gindin’s political position stands out when he claims the following:

Which brings me back to the point that the problem is not [Wayne] Dealy [union director for the Canadian Union of Public Employees (CUPE) Local 3902] or Sean [Smith,  Unifor Local 2002 Co-Ordinator and Toronto Airport Workers Council (TAWC) activist”] or others but OUR Collective inability to provide them with an effective alternative politics…They can be criticized but only if we do so with humility and part of criticizing ourselves. [my emphasis] 

Is there evidence that Mr. Gindin criticizes his own views? Are union reps (and union members) really conscious of the exploitative and oppressive nature of the class power of employers as such? If so, what are they doing about it? I fail to see evidence of it. I also fail to see evidence of Mr. Gindin engaging in self-criticism. He implicitly assumes that he knows what workers need–and that is not an explicit and real consciousness of their exploitation and oppression–with or without unions, collective bargaining and collective agreements

Let us look at an Integram Bargaining Report produced by Unifor Local 444 (Integram is a division of Magna International), dated November 8, 2020 (see  https://d3n8a8pro7vhmx.cloudfront.net/uniforlocal444/pages/43/attachments/original/1604838387/Integram_Ratification_Bulletin.pdf?1604838387).

It contains such enlightening items as the following:

Our members are their most vital asset that sets the supplier bar in this industry and deserves proper compensation through pay and benefits that award them for their labour and aids the company in retaining their highly skilled workforce. [my emphasis]

I find this language both typical of union reps–and disturbing. As I pointed out above, it is likely that Magna International treated the workers as a “fixed cost” in order to retain them during the worst moments of the pandemic. However, to read a union rep write that Magna workers are “an asset” surely is both disturbing and in need of criticism. Should any human being be considered and treated as an “asset?” Consider any member of your family. Would you want them to be treated as “an asset?”

That they are “assets” is real enough–to be exploited by Magna International (and all other private companies)–but should we not be criticizing this? Is Mr. Gindin in any specific way? Apparently not–since radicals are supposed to only criticize such views in “material cents.” Perhaps Mr. Gindin can provide an example of this in his own concrete practice? I see no concrete examples of his recommendations–they are so vague.

Where is Mr. Gindin’s “humility?” Where is his “self-criticism?”

Let us continue with this Integram Bargaining Report:

deserves proper compensation through pay and benefits that award them for their labour

This is ideology frequently expressed by union reps. “Proper compensation” is a synonym for “fair wages” and, indirectly, a “fair contract.” The union rep clings to the appearance of workers selling their “labour” [labour is an activity that requires a material link between that labour and the means to be used–without those means, there is only a capacity for labour or labour-power. As Marx remarked, in Capital: A Critique of Political Economy, volume 1, page 277:

When we speak of capacity for labour, we do not speak of labour, any more than we
speak of digestion when we speak of capacity for digestion. As is well known, the latter process requires something more than a good stomach.

Workers lack the conditions for the realization of their capacity for labour–just as many in the world lack the conditions for the use of their digestive tract–they lack food. The Unifor union rep., by identifying labour with the commodity which the worker sells, simply ignores the difference between a capacity and the conditions for its exercise–and such neglect of the conditions is hardly in the interests of workers.

How workers sell “labour” that is already linked to the means of production owned by (Magna) Integram (and hence under the control of Integram is a mystery. Furthermore, by identifying compensation with labour, the exploitation of workers by Magna Integram is excluded, and the internal or necessary relation between the wage and the profit of Magna Integram becomes broken.

Does Mr. Gindin criticize this approach so typical of union reps? Not at all. Rather, he criticizes those who engage in such criticism. For him, radicals are to indulge such beliefs. After all, it is only “discourse” and has no “autonomy.” This dismissal of ideological struggles is itself arrogant and lacks humility. Mr. Gindin somehow knows what workers need without even considering in any detail how union reps aid to legitimate the existing class power of employers by constantly using such language.

Where has Wayne Dealy provided any criticism of collective agreements (not the particular provisions of collective agreements) publicly? Sean Smith? Frankly, I find it astounding that such arrogance displayed by Mr. Gindin in his assumption that we are not to engage in criticism of union reps’ views is paraded as “humility” and “self-criticism.”

Let us listen to what Mr. Gindin called “Our Tracy” (McMaster, a union steward for Local 561 of the Ontario Public Service Employees Union (OPSEU); who was also vice-president of the local union at one point):

Collective bargaining is limited and imperfect, but a fuck-ton better than none.

I have hardly denied that collective bargaining is better than none. I have belonged to several unions in my life, and I certainly would prefer to belong to a union when working for an employer than not belonging to one. However, I do not take seriously her claim that “Collective bargaining is limited and imperfect.” I see no evidence that Ms. McMaster takes such a view seriously. Where is the evidence that she has inquired into “the limitations and imperfections” of collective bargaining? Rather, for Ms. McMaster, collective bargaining provides an imperfect but ultimately fair contract.

Perhaps Mr. Gindin can provide evidence to the contrary it. I doubt that he will–or can.

Mr. Gindin’s tactics are as follows: Let us try to convince such union reps of our views. Frankly, I think such an effort is, for the most part, a waste of time. Of course, there are exceptions, and it is necessary to use one’s judgement under specific circumstances and in relation to specific union reps. However, my judgement was and is that it Ms. McMaster would never be really convinced of the “limitations and imperfections” of collective bargaining.

Rather than indulging such union reps, it is in the interests of workers to criticize them and to expose their lack of a critical approach to collective bargaining.

Let us continue to look at this Bargaining Report:

Your bargaining committee achieved Pay Raises, Benefits Improvements, Lowering the new higher grid, Buy-out packages, and Signing Bonus. A healthy contract that reflects a greater worth in our Integram members.

Such achievements, of course, are in the interests of the workers. But why call it a “healthy contract?” Apparently, this is a synonym for a “fair contract”–and I have shown that Canadian unions persistently use such language to justify both the collective-bargaining process and collective agreements (see, for example,   Fair Contracts (or Fair Collective Agreements): The Ideological Rhetoric of Canadian Unions, Part One: The Canadian Union of Public Employees (CUPE)  or Fair Contracts or Collective Agreements: The Ideological Rhetoric of Canadian Unions, Part Three: Unifor (Largest Private Union in Canada)). No collective agreement can express something legitimate–unless the necessary exploitation and oppression of workers by employers (including Magna Integram) is somehow legitimate.

In the Bargaining Report, there then follows a list of items that were obtained by the bargaining committee. Not one word of the “limited and imperfect” nature of the collective agreement or the collective-bargaining process. Not one word on the management rights clause, implicit or explicit in the collective agreement. Do not workers persistently experience the power of management in a variety of ways? Why the silence over such experiences? Does the collective agreement address such power? Or does it only address the limited areas defined by collective-bargaining legislation?

For Mr. Gindin, though, to question the “language” used by union reps, as well as the omission of any criticism of the limitations of collective bargaining and collective agreements, expresses merely “moralizing.”

I will leave Mr. Gindin with his fake humility and his fake self-criticism. I will continue to engage in “discourse analysis”–that is to say, with a criticism and exposure of the limited nature of unions, collective bargaining and collective agreements.

Data on Which the Calculation Is Based

The calculation of the rate of exploitation is undoubtedly imperfect, and I invite the reader to correct its gaps. Nonetheless, the lack of any attempt to determine the rate of exploitation at the city level has undoubtedly reinforced social-reformist tendencies.

Now, the calculation:

In millions US dollars:

Sales $32,647
Costs and expenses $31,641

Cost of goods sold 28,207

Material $19,750
Direct labour 2,498
Overhead 5,959

Depreciation and amortization 1,366
Selling, general & administrative 1,587
Interest expense, net 86
Equity income (189)
Other expense, net 584
Income from operations before income taxes $1,006

[28,207+1,366+1,587+86+584=31,830; 31,830+1006=32,836; 32,836-189=32,647]

Adjustments

As I indicated in the 2019 post, a couple of adjustments are necessary.

Adjustment on Cost Side of Direct Labour and Corresponding Adjustment of Income  from Operations Before Taxes

I wrote in the 2019 post:

On page 37 [of the 2019 annual report], there is a reference to pension benefits. I assume that this category belongs to “direct labour” since it forms part of the deferred wages of workers that is paid in the current year (but then again, it is unclear whether the category of direct labour includes this, but since it is subtracted from net income, this leads me to believe that it is not included in that category). This should be added to direct labour. Hence, direct labour would be: 2,815+47=2,862, “Costs and expenses” would be $37, 255 “Costs of goods sold”would be $34,069, and “Income from operations before taxes” should be adjusted downward accordingly.

Now the 2020 “Pension and post-retirement benefits” is  (11).

This US $11 million should be added to “Cost and Expenses,” “Direct labour” and subtracted from “Income from operations before taxes.” Accordingly:

Temporarily Adjusted Costs and Expenses: $31,652
Temporary Adjusted Costs of Goods Sold: $28,218
Adjusted Direct Labour Costs: $2,509
Temporarily Adjusted income from operations before income taxes: $995

Adjustment of income from operations before income taxes due to interest expense, net

Another adjustment relates to interest. As I indicated in my post about the 2019 rate of exploitation of workers at Magna International:

An adjustment should probably be the treatment of the payment of interest: despite being an expense from the point of view of the individual capitalist, it probably forms part of the surplus value. It should be added to “Income before income tax expense.”

Accordingly, it is necessary to add $86 “Interest expense, net” to “Income from operations before income taxes” and subtract it from “Cost and expenses.”

(“Equity income” is already subtracted from costs since it is not really a cost at all but rather income.)

Adjusted Cost and Expenses $31,566
Adjusted Direct Labour $2,509
Adjusted income from operations before income taxes $1081

The Rate of Exploitation

So, with the adjustments in place: s=1081; v=2,509. The rate of exploitation or the rate of surplus value=s/v=1081/2,509=43%.

I will first consider this rate in relation to the workers in 2020, and then compare this rate with the 2019 rate of exploitation.

That means that for every hour worked that produces her/his wage, a worker at Magna International works around an additional 26 minutes for free for Magna International. Alternatively, in terms of money, $1 of wage or salary of a regular Magna International worker produces around $0.43 (43 cents) surplus value or profit for free.

The following provides information about the length of the working day:

  1. There are 3 shifts. 9 hours a shift.
  2. Typical 8 – 12 hours per shift.
  3. 8-12 hrs, 7 days a week, with very last minute overtime mandating, and i mean literally as your punching out theyll tell you that you have to stay for another 4+ hours. No work life balance and management could care less because theyre at home on the weekends. Better positions come with 100% more stress, more responsibilities that others pass off cause they dont want to do it, 1000s of strings attached and literally no way to avoid getting screwed by them. Constant harassment and belittling by management and engineers and if you report it, youre facing constant retaliation and impending termination. If your not part of the HR posse or the “good ol’ boys club”, youre nothing but a rug for them to walk across. So, if you value your sanity, health and family, this is not a place to work.
  4. I have been there for 3 years until i quit and half of the plant is doing either 10 or 12 hours 7 days a week
  5. Article 17 (page 51) of the collective agreement between Magna International and Unifor Local 2009AP: Employees normally work an eight-hour day, five days per week

Accordingly:

  1. In an 8-hour work day (480minutes), the worker produces her/his wage in 336 minutes (5 hours  36 minutes) and works 144 minutes (2 hours 24 minutes) for free for Magna International.
  2. In an 9-hour work day (540minutes), the worker produces her/his wage in 378 minutes (6  hours 18 minutes) and works 162 minutes (2 hours 42 minutes) for free for Magna International.
  3. In an 10-hour work day (600 minutes), the worker produces her/his wage in 420 minutes (7  hours) and works 180 minutes (3 hours) for free for Magna International.
  4. In an 12-hour work day (720 minutes), the worker produces her/his wage in 503 minutes (8  hours  23 minutes) and works 217 minutes (3 hours 37 minutes) for free for Magna International.

Comparison of the 2019 Rate of Exploitation with the 2020 Rate of Exploitation

2020: So, with the adjustments in place: s=1081; v=2,509. The rate of exploitation or the rate of surplus value=s/v=1081/2,509=43%.
2019: So, with the adjustments in place: s=2,258; v=2,862. The rate of exploitation or the rate of surplus value=s/v=2,258/2,862=79%.

The absolute decrease in s is substantial: 1,177, and the rate of decrease is 52% (1081-2,258)/2,258=-1,177/2,258).

By contrast, the absolute decrease in v is much less: 353, and the rate of decrease is (2509-2862)/=2509=-353/2862=12%.

Factors or Determinants of the Rate of Exploitation and Its Changes

Normally, when there is a change in the rate of exploitation, whether positive or negative, we should look at the general factors that govern the production of surplus value.  In general, there are three ways of changing the rate of exploitation:

  1. changing the real wage (the absolute amount and variety of commodities consumed by workers);
  2. changing the absolute amount of surplus value produced either by
    1. changing the length of the working day intensity of labour or
    2. changing the intensity of labour length of the working day
  3. changing (in fact, increasing) the relative amount of surplus value produced, generally through new technology, thereby decreasing the value of the commodities produced that form the real wage consumed by workers (with a fixed or constant working day and a constant amount of commodities consumed by workers, but with less labour time required to produce them, the amount of labour time required to reproduce the workers’ wages is reduced and more labour time constitutes surplus value).

As Ben Fine  and Alfredo Saad-Filho (2016) describe the factors with a view to increasing the rate of exploitation by employers in their book Marx’s Capital, pages 36-37:

Assume, now, that real wages remain unchanged. The rate of exploitation can be increased
in two ways….

First, e [the rate of exploitation[ can be increased through what Marx calls the production of absolute surplus value. On the basis of existing methods of production – that is, with commodity values remaining the same – the simplest way to do this is through the extension of the working day. …

There are other ways of producing absolute surplus value. For example, if work becomes more intense during a given working day, more labour will be performed in the same period, and absolute surplus value will be produced. The same result can be achieved through making work continuous, without breaks even for rest and refreshment. The production of absolute surplus value is often a by-product of technical change, because the
introduction of new machines, such as conveyors and, later, robots in the production line, also allows for the reorganisation of the labour process. This offers an excuse for the elimination of breaks or ‘pores’ in the working day that are sources of inefficiency for
the capitalists and, simultaneously, leads to increased control over the labour process (as well as greater labour intensity) and higher profitability, independently of the value changes brought about by the new machinery.

The desired pace of work could also be obtained through a crudely applied discipline. There may be constant supervision by middle management and penalties, even dismissal, or rewards for harder work (i.e. producing more value).

The above are general conditions for the determination of the rate of exploitation and its changes. The specific change observed in the rate of exploitation of workers at Magna International are unlikely due to these general conditions. Rather, the decrease in the rate of exploitation in 2020 relative to 2019 is likely due to the specific economic conditions that accompanied the pandemic.

One Possible Explanation for the Substantial Decrease in the Rate of Exploitation

Part of the explanation for the  substantial decrease in the rate of exploitation was probably the treatment of workers at Magna International, in part, as “fixed costs.”

Initially, Magna International laid off many of “its” workers, but it also sought to retain them by paying them additional money beyond that flowing from the government initially through federal  unemployment insurance (although it may have also been a function of provisions in the collective agreement concerning layoffs).

Magna International did lay off around 2,000 workers in Ontario during the initial wave of COVID. From https://lfpress.com/business/local-business/magna-cuts-production-2000-local-staff-amid-fallout-from-covid-19:

Magna cuts production, 2,000 local staff amid fallout from COVID-19

Magna, one of the largest automotive employers in the London region, has laid off about 2,000 workers locally as the fallout from the COVID-19 pandemic sweeps through the manufacturing sector.

Article content

Magna, one of the largest automotive employers in the London region, has laid off about 2,000 workers locally as the fallout from the COVID-19 pandemic sweeps through the manufacturing sector.

The Canadian auto parts giant has closed its two St. Thomas plants, Presstran and Formet, employing a combined 1,500 to 2,000, as well as Qualtech in London, which employs about 275.

“Both Formet and Presstran will be temporarily suspending operations today . . . Qualtech will also temporarily suspend its operations,” read a statement from Scott Worden of Magna’s corporate communications department.

“Magna is committed to both the health and financial well-being of our employees. We will be providing additional payments to employees beyond the minimums provided under the federal Employment Insurance program.”

The closings are not unexpected, and may not last long, as the Detroit Three automakers, Toyota and Honda have all closed plants for up to two weeks across North America as a result of the coronavirus.

Presstran is a stamping plant and Formet supplies several different parts to many automakers, including truck frames to GM plants in the U.S. Qualtech supplies seating systems.

“Magna continues to closely monitor developments related to coronavirus (COVID-19) with a focus on the health and safety of our employees and our operations. In addition, we are in daily communication with our customers, many of which have recently announced partial or full temporary production suspensions at plants in Europe and North America,” read an additional statement from Tracy Fuerst, vice-president of corporate communications at Magna.

The automaker said it will continue to follow World Health Organization protocol on cleaning the workplace and limiting contact with between people.

“We continue to assess our operations on an individual basis and are beginning to temporarily suspend manufacturing operations at a number of our manufacturing divisions around the world . . . many of our facilities are expected to suspend operations with production status re-evaluated week to week,” said Fuerst.

Further evidence for treating Magna International workers as fixed costs comes from Annual Information Form, Magna International Inc., March 25, 2021, page A-17:

Despite inevitable temporary layoffs of employees in light of the suspension of production during the first half of 2020, we took a number of steps to minimize the impact felt by our employees, including: maintaining employee benefits coverages through the temporary layoff period; …

We also engaged emergency government support programs primarily for employees to maintain compensation levels and/or benefits for a certain period, where applicable. The countries in which Magna engaged such programs included Canada, the United States, the United Kingdom, Germany, Austria and China. These programs allowed participating employees to remain on our payroll while inactive or furloughed due to mandatory stay at home orders, with Magna receiving full or partial reimbursement for such inactive labour.

The view that workers were treated more as fixed costs (probably out of fear that Magna International would lose such workers to other employers if they were not treated as fixed costs) is supported by the relatively limited decrease in v when compared to s.

Treating workers as “fixed costs” under the conditions of the pandemic is understandable since workers are not linked politically or legally to particular employers; they can work for another employer (if they can find another employer who will hire them). See Do Workers Work for a Particular Employer or for the Class of Employers? Part One: A Limitation of Some Radical Left Critiques of Capitalist Relations of Production and Exchange (A.K.A. Capitalism) and  Do Workers Work for a Particular Employer or for the Class of Employers? Part Two: Critique of Unions and the Social-Reformist or Social-Democratic Left).

This treatment of workers as fixed costs (to retain them over the short term) and the resulting decrease in the rate of exploitation is consistent with abnormal conditions that capitalist employers generally try to avoid since, on the one hand, they own means of production (c) that fail to absorb surplus value and, hire relatively more workers (v) than can be exploited under given conditions. From Karl Marx, Capital: A Critique of Political Economy. Volume 2, The Process of , page 111:

The point is simply that under all circumstances the part of the money that is spent on means of production – the means of production bought in M-mp [money used to purchase means of production, such as computers and other machines, raw material, buildings and other produced commodities necessary for labour to be performed] means of production – must be sufficient, i.e. must be reckoned up from the start and be provided in appropriate proportions. To put it another way, the means of production must be sufficient in mass to absorb the mass of labour which is to be turned into products through them. If sufficient means of production are not present, then the surplus lahour which the purchaser has at his disposal cannot be made use of; his right, to dispose of it will lead to nothing. If more means of production are available than disposable labour, then these remain unsaturated with labour, and are not transformed into products.

In effect, in terms of the pandemic, Magna International purchased too much labour power (the capacity to use the means of production and to produce value–a capacity sold by workers) and too many means of production. Not all of the labour power purchased could be exploited, and not all the means of production owned by Magna International could absorb labour and hence surplus labour and surplus value.

There may, of course, be other causes of the decrease in the rate of exploitation, such as problems pertaining to supply of inputs, but I will leave that issue aside.

It should be emphasized that the exploitation of workers pertains to the production of a surplus beyond the production of the value equivalent of their own costs of production. Even during the time the workers require to produce their wage, they are oppressed by employers since they are subject to the will of the employer (or her representatives) and to the control over their labour.

Conclusion

The rapid decrease in the rate of exploitation of workers of Magna International with the onset of the pandemic is likely due to the temporary) overinvestment in the purchase of labour power relative to the inability of management to use the means of production to exploit the workers. This situation will likely now call for an opposite pressure to increase exploitation directly through intensification and an extension of the working day and changes in technology and organization of the production process. Pressures to increase tax breaks for such capitalist employers (and corresponding reduction in state expenditures for welfare measures) may also arise. Of course, some workers will not just lay down and accept such counter-pressures.

Why is it that workers have to put up with this situation? Should they not be organizing not only to resist exploitation and oppression and increased pressures related to those phenomena but also to abolish such pressures? Not according to the social-democratic or social-reformist left. Such organizational efforts, for them, are undoubtedly unrealistic. New structures are supposedly to arise without criticizing the old structures.

Thus, for social democrats like Sam Gindin (former research director for the Canadian Auto Workers (CAW) (now Unifor), challenging the ideology of “decent jobs or work,” “fair contract,” “fair collective agreement,” “fair deal,” “fair wages” and other abstract phrases (rhetoric) is relatively unimportant. New material structures more relevant to the lives and experiences of working people are somehow to arise without constantly challenging the existing social structures–and the corresponding ideology that justifies such structures.

Frankly, I doubt that such new material structures will arise without a persistent and constant challenging of the ideological rhetoric rampant among the left in general and unions in particular.

Where is there evidence that Mr. Gindin has contributed to the creation of material structures that question the fundamental economic, political and social structures characteristic of a society dominated by a class power of employers by indulging in the beliefs of union reps? Does the organization Green Jobs Oshawa, to which Mr. Gindin contributes, do so? Where is the evidence that it does?

What are Mr. Gindin’s fellow social democrats like Herman Rosenfeld (who worked in the education department of the Canadian Auto Workers (CAW) (now Unifor) doing to fight against the exploitation of workers and oppression of Magna workers? Mr. Rosenfeld wrote an article, criticizing the existence, practically, of a company union at Magna, CAW Local 88, comparing it to the independent union Unifor Local 2009 AP. The independent union is certainly preferable to a company union, but even an independent union at the local level of a particular employer in effect assumes the legitimacy of the power of employers as a class (see my criticism in the post    Do Workers Work for a Particular Employer or for the Class of Employers? Part Two: Critique of Unions and the Social-Reformist or Social-Democratic Left).

The false nature of Mr. Gindin’s political position stands out when he claims the following:

Which brings me back to the point that the problem is not [Wayne] Dealy [union director for the Canadian Union of Public Employees (CUPE) Local 3902] or Sean [Smith,  Unifor Local 2002 Co-Ordinator and Toronto Airport Workers Council (TAWC) activist”] or others but OUR Collective inability to provide them with an effective alternative politics…They can be criticized but only if we do so with humility and part of criticizing ourselves. [my emphasis] 

Is there evidence that Mr. Gindin criticizes his own views? Are union reps (and union members) really conscious of the exploitative and oppressive nature of the class power of employers as such? If so, what are they doing about it? I fail to see evidence of it.

I also fail to see evidence of Mr. Gindin engaging in self-criticism. He implicitly assumes that he knows what workers need–and that is not an explicit and real consciousness of their exploitation and oppression–with or without unions, collective bargaining and collective agreements.

:

.

For Mr. Gindin, though, to question the “language” used by union reps, as well as the omission of any criticism of the limitations of collective bargaining and collective agreements, expresses merely “moralizing.”

I will leave Mr. Gindin with his fake humility and his fake self-criticism. I will continue to engage in “discourse analysis”–that is to say, with a criticism and exposure of the limited nature of unions, collective bargaining and collective agreements.

.

An Inadequate Critique of a Radical Basic Income: The Case of the Toronto Radical John Clarke, Part Three: Basic Income

Introduction

In two earlier posts, I criticized the views of the  radical activist here in Toronto, John Clarke (see  Critique of the Limited Aim (Solution)–Decent Wages–of a Radical Social Democrat: The Case of the Toronto Radical, John Clarke: Part One and   Critique of a Limited Definition of the Problem: The Case of the Toronto Radical John Clarke, Part Two). In particular, I criticized his proposed solution or aim in the first post (decent wages) and his identification of the problem in the second post (unequal distribution of produced consumer commodities). I now address his criticism of the proposal of a basic income. 

Let me add that, in the second post, I added an addendum, in which Mr. Clarke proposed engaging in radical practice to replace capitalism (a.k.a., the class power of employers). Mr. Clarke continues to advocate for more radical solutions. Thus, he wrote on Facebook (May 3, 2022): 

The murder of Rosa Luxemburg by social democratic leaders points to something about reformism. If you think capitalism can be incrementally transformed, you need it to function well. This means, at a time of crisis, you have to be prepared to defend it against the very working class you claim your political project will liberate.

In time, the logic of the reformist approach produces representatives who dispense with any polite fictions of socialism in the cloudy future and whose loyalty to capitalism is beyond question. They then go about breaking strikes, imposing austerity, degrading the environment and dropping bombs on oppressed countries with every bit as much enthusiasm as any openly declared representative of the capitalist class.

The problem with the above is not what it states, but in what it omits. Before Mr. Clarke’s more explicit radical turn, he advocated such reformist policies as “decent wages” and a reformed welfare state (despite acknowledging that economic coercion formed a necessary aspect of a society characterized by the class power of employers). Indeed, as I wrote in another post: 

I have already criticized, briefly, his apparent recognition of economic coercion and his subsequent ignoring of this recognition in a pamphlet with several articles written by him (see  Basic Income: A Critique of the Ontario Coalition Against Poverty’s Stance  and “Capitalism needs economic coercion for its job market to function” (Ontario Coalition Against Poverty: OCAP)). I have, however, now come to the conclusion that Mr. Clarke recognizes the existence of economic coercion only in order to criticize neoliberalism and not the class power of employers and hence not capitalism as such. 

Mr. Clarke, if he has indeed taken a more radical turn, would do well to engage in critical inquiry into his former beliefs. He should also rethink the thrust of his criticism of basic income in light of his more explicit rejection of capitalism. Of course, if he comes to the conclusion that basic income should still be rejected, but has an alternative proposal that would link immediate needs of workers, citizens, immigrants and migrant workers with the long-term need to abolish the class power of employers and the associated economic, political and social structures, and he provides valid reasons for his rejection, I would agree with him. Basic income as a policy is really only a tool or means to the end of economic coercion, and if there are better alternatives that will link immediate and long-term needs, then I would support them and reject basic income. 

Let us turn to Mr. Clarke’s views on basic income–at least before his more radical turn.

Mr. Clarke’s Critique of Basic Income

Mr. Clarke has this to say about basic income (see his post, dated June 21, 2021 https://www.youtube.com/watch?v=r40D6fU760s&t=4s) (The following is practically verbatim):

Part 2: Basic Income

Those among the left who support basic income make a fundamental mistake in that they don’t take into account the necessity of economic coercion that was outlined above. They imagine that basic income has some magic quality that would make it exempt from the factors that constitute economic coercion and that would prevent basic income from being realized. Furthermore, they believe that existing income-support systems fail to meet people’s needs because of some design flaw; they believe that only if income-support systems could be reorganized in a better way, it would meet people’s needs. But that is not what is driving the process that is making them inadequate.

The left make an unwarranted assumption that basic income would be more adequate–that it is somehow going to meet people’s needs that existing programs do not. It will somehow be exempt from the limitations that other income-support programs are not.

Some among the left point to the pilot project of basic income instituted by the former Liberal government in Ontario. It is true that the project provided levels of income significantly higher than current social assistance levels, but to assume that such a project, if generalized throughout Ontario, would maintain such levels, is unwarranted.

Another unwarranted assumption is that basic income would be better because it would be universal. Those among the left who advance this view are filled with false hopes since no program of basic income actually being considered in the real world has universal scope; it will be targeted, with only some people qualifying.

It is also suggested that the stigma attached to existing income-support systems would be reduced if basic income were introduced and therefore would be more popular and it would be harder for governments to cut it. Mr. Clarke disagree with this. If a basic income were introduced, it would be attacked and questioned in exactly the same way as existing programs. In addition, popularity even if it existed would not save it. Public health-care programs have been under attack and faced massive austerity cutbacks despite being vital, necessary and popular.

Another suggestion is that basic income would be an unconditional benefit. In practice, that is unlikely to be the case. Mr. Clarke, on the other hand, does agree that existing income-support programs are bureaucratically intrusive. They are fused with elements of moral policing. And these things do indeed need to be challenged.

It has also been suggested that basic income will happen and will save us from the workless future based on robots. This view that we are on the cusp of an automated life is exaggerated, and the real situation is much more nuanced than that. On the other hand, Mr. Clarke does not deny that technological displacement is not a real issue. What he does question is that basic income is the magic solution to that problem. Capitalism does not function by allocating a certain adequate fund owned by billionaires in Silicon Valley so that people can receive an adequate standard of living. Since the industrial revolution, capitalists have used the introduction of new machinery to gain a competitive edge over their rivals, to displace workers and to create a greater climate of desperation and to try to drive down wages and that’s the fight that we are going to be in. We are going to have to fight in this situation as workers have always fought against technological displacement. We are going to have to fight for reduced hours of work. We are going to have to take up a whole series of important struggles.

It must be said that only under an irrational, profit-driven greedy system is this an issue. The idea that technological gains, which increase the productivity of human labour, should be something that we should be alarmed about, is confined to this system. Why should not those productive gains be used to benefit everyone? Why do we not take the machines away from the capitalists and use them to everyone’s advantage?

Mr. Clarke then refers to the various pilot projects on basic income because this is a big selling point for people who promote basic income. In Ontario, as mentioned above, a pilot project in basic income was initiated under the Liberal government for 2000 people. It provided a higher level of income than social assistance, it was relatively secure until the Tories cut it. They did intensive studies to show that people were better off. The studies prove nothing. They were not studying basic income but rather poor people. Of course, it is obvious that if you increase the level of income, people’s health is better and, in general, people’s lives are better.

The question that needs to be posed is: What effect basic income would have if it were implemented across a larger area of a capitalist economy. Basic income takes us in directions that are very dangerous–directions that we should be fighting rather than embracing. Basic income is essentially a proposal for a massive extension of social provision by way of the cash benefit. Seventy percent of the people in the pilot project in Ontario were not on social assistance. What they were primarily looking at was a wage top-up system. So the idea of basic income is to extend the benefit to a wider proportion of the working population.

This situation entails the commodification of social provisions, and such commodification is enormously dangerous. What it does is have you accept the low-wage, precarious workforce. But you then allegedly take away the worst effects of it by taking tax revenues paid by other working-class people not just a wage top up to those workers but what is in effect a wage subsidy to low wage employers. This has the effect of removing pressure on such employers to increase wages. It undermines the efforts to raise minimum wages. It simply accepts the low-wage precarious workforce but tries to provide a kind of limited sedative. This is a major mistake.

Mr. Clarke also believes that by providing so much more in the form of a cash benefit, you would facilitate the agenda of austerity and privatization. This cash benefit would be used, in practice, to justify the further gutting of public services. This is why the right is so enamored with the idea of basic income. Both eff Bezos and Milton Friedman favoured a basic income, and the Canadian Chamber of Commerce favours a national pilot project on basic income. Friedman n particular argued that unions, minimum wages and social programs were all monstrous totalitarian interferences in the freedom of the marketplace. On the other hand, he recognized that pure capitalism without limits could be counterproductive. Consequently, what was necessary was the provision of a basic income at a minimum level, without any other social support system in place. The American right-winger Charles Murray has developed this further as has the Canadian right-wing institute the Fraser Institute. Murray advocates providing a minimum basic income that does not interfere with the flow of low-wage workers but that at the same time prevents social breakdown. Basic income for Murray is not to supplement and augment existing social provisions but rather replaces them.

Focusing on basic income enables the right to divert attention from the gross inadequacy of existing income-support systems. Basic income as a social policy would thus take us to playing the game of the right in the context of a capitalist economy and especially at this time, with the present balance of forces in society.

The counterargument by progressives on the left, of course, is that that is not their vision–that that is not the kind of basic income that they want. They want other systems to be strengthened; they want good minimum wages. The problem with that is that it does not take into account the prevailing situation. It does not take into account the present balance of forces. It does not take into account the agenda of capitalism. It assumes somehow that a wish will get you there. The kind of basic income that comes into existence would be shaped by the prevailing situation. If you assume that what you want or imagine can be realized, then you can create any number of utopias. Some people claim that universal basic income could be provided at such a level that they can literally decide whether they can participate in the job market or not. Where the money is to come from, and who is to provide it is unclear.

But as Pam Frache, from Toronto’s Workers Action Centre put it so well, to expect the capitalist state to provide the working class with an unlimited strike fund is an absurdity. And to suggest at this point in time, after forty years of defeat at the hands of neoliberal attack, that we’re in a position to win even a fraction of that is preposterous. Someone the other day stated that Mr. Clarke’s arguments were wrong because his version of basic income would be universal; it must be adequate; and it must be financed entirely by attacks on wealth. Of course, you can demand that the sky rain whiskey, but it’s just not going to happen. It is not realistic. Philippe van Parijs, Belgian advocate of basic income, has even suggested that basic income could even transform, could transform society, could abolish capitalism. Of course, if wishes were horses we could bet on basic income. However, we have to deal with reality. At the moment, it constitutes a very dangerous and distracting leftist illusion.

The New Democratic Party (NDP) [the social-democratic party here in Canada) are making a lot of effort in trying to win a basic income. Mr. Clarke is sad to say that some union leaders are buying into the idea. Social movements are backing it. Even a section of the anti-capitalist left is embracing basic income in this situation. It poses sometimes as a very transformative, radical bold proposal, but Mr. Clarke believes that it makes its peace with the capitalist marketplace and the neoliberal order. It says: wages will remain low, but it will be topped up by the tax revenues. This is a mistaken direction.

The Potentiality of Radical Proposals, Such as a Robust Basic Income, to Point Beyond a Society Dominated by a Class of Employers

It should be noticed that Mr. Clarke’s soul reference to what could be considered a radical aim that points beyond a society dominated by a class of employers is an isolated reference that Mr. Clarke fails to integrate in any way with his proposal for an enhanced welfare state. Thus, he states above: 

Why do we not take the machines away from the capitalists and use them to everyone’s advantage?

Yes, indeed, why do we not do that? How would we do that? By only enhancing the welfare state? How does only enhancing the welfare state contribute to that goal or aim? Mr. Clarke’s question is actually purely rhetorical. It serves no purpose that would enable workers to organize themselves in the present to realize that goal–an internal aim. Mr. Clarke’s aim of enhancing the welfare state is the primary focus; the reference to taking “the machines away from the capitalists and using them to everyone’s advantage” is not linked in any way to that focus. 

Could proposing a radical basic income that points beyond a market for workers by involving  a robust or enhanced or thick basic income that increases the freedom of workers from economic coercion be a stepping stone to the goal of taking “the machines away from the capitalists and using the to everyone’s advantage?” 

Of course, I fully admit that a basic income can be used for conservative purposes, for social-democratic purposes or for socialist purposes–just as can a proposal for welfare reform. It is to what basic income is linked that determines its conservative, social-democratic or socialist nature and not the proposal itself. Mr. Clarke, however, cannot admit that because his goal is decidedly reformist despite his radical rhetoric to the contrary. 

Consider Philippe Van Parijs and Yannick Vanderborgh’s (2017) view in Basic Income: A Radical Proposal for a Free Society and a Sane Economy, page 124: 

There is, however, no reason why one should wait until full abundance to start realizing partially the distributive principle that defines communism. Indeed, if it turns out—in light of historical experience and for deep-seated reasons to which Marx paid insufficient attention—that capitalism does better than socialism at developing the forces of production, this gradual transition to communism could happen in the context of a capitalist economy. The proposal of an unconditional basic income makes a lot of sense in this perspective. While not yet in a state of abundance, our society may plausibly be regarded as affluent in the sense that it could cover everyone’s fundamental needs unconditionally with a basic income, topped up in some cases to address special needs such as disabilities

This sounds fine, but I agree with Mr. Clarke that it is likely utopian–but not for Mr. Clarke’s reason that it is unrealizable. A robust basic income would interfere in the market for workers. Even if the resistance of employers were overcome–a big if–the working of the capitalist economy would be distorted substantially, leading to breakdowns in the accumulation process of capital and could be a threat to other workers–unless further measures were introduced. Thus, if a robust basic income were in place, it is likely that productivity of labour would initially decrease as economic coercion became less effective; absenteeism and other measures that entail the avoidance of work (understandable given the dictatorial nature of such work–see for example my post  Employers as Dictators, Part One) would also likely rise. For example, resistance by workers to work certainly characterized some sections of the working class during Michael Seidman (1991), Workers Against Work: Labor in Paris and Barcelona During the Popular Fronts, page 9: 

Furthermore, I wish to bring out the utopian dimension of resistance, a word which I have chosen because of its positive connotations. The importance of resistance in two major European cities in the fourth decade of the twentieth century indicates that refusals of work should not be dismissed as the behavior of “backward” or “primitive” working classes. Certainly, resisters did not articulate any clear future vision of the workplace or of society. Unlike the Marxists, they did not fight to take state power or, in contrast to the anarchosyndicalists, abolish or minimize the role of the state. I do not wish to
ignore the fact that workers’ refusals to work harmed the fight against Franco and weakened French defenses in a period of Nazi rearmament. Yet one might interpret resistance itself as suggesting a working-class utopia in which wage labor would be reduced to a minimum. Resistance was also a conjunctural and cyclical phenomenon, but refusals remained an intrinsic part of working-class culture and manifested themselves in different periods with various divisions of labor. During the Popular Fronts, workers revolted against a variety of disciplines, including that imposed by working-class organizations. Wage earners certainly wished to control their workplaces but generally in order to work less. One may speculate that the way to eliminate resistance is not by workers’ control of the means of production but rather by the abolition of wage labor itself.

The idealization of work in its present form meets the resistance of workers in various ways. Marx recognized this. From Marx-Engels Collected Works, 1843-1844, “Economic and Philosophic Manuscripts of 1844, Estranged Labour,” page 274: 

What, then, constitutes the alienation of labour? First, the fact that labour is external to the worker, i.e., it does not belong to his intrinsic nature; that in his work, therefore, he does not affirm himself but denies himself, does not feel content but unhappy, does not develop freely his physical and mental energy but mortifies his body and ruins his mind. The worker therefore only feels himself outside his work, and in his work feels outside himself. He feels at home when he is not working, and when he is working he does not feel at home. His labour is therefore not voluntary, but coerced; it is forced labour. It is therefore not the satisfaction of a need; it is merely a means to satisfy needs external to it. Its alien character emerges clearly in the fact that as soon as no physical or other compulsion exists, labour is shunned like the plague. External labour, labour in which man alienates himself, is a labour of self-sacrifice, of mortification. Lastly, the external character of labour for the worker appears in the fact that it is not his own, but someone else’s, that it does not belong to him, that in it he belongs, not to himself, but to another.

If a robust basic income were implemented, it would interfere with the accumulation of capital, leading to the emergence of problems that would require further measures that would involve further interference in the process of the accumulation of capital. It would be better to be conscious of such a possibility and the need for a conscious movement that aimed to abolish wage labour–rather than enhancing the welfare state (itself still grounded on wage labour) or in a reversion to a neoliberal paradise.

Mr. Clarke’s implicit assumption that it is utopian to propose a robust or enhanced basic income, given economic coercion, is a conservative stance. It uses a radical view–that economic coercion is a fact of life in a society dominated by a class of employers–to draw conservative (social-reformist) conclusions. The same method was used by Mr. Bush in his one-sided use of Marx’s theory of surplus value (see Basic Income: A Critique of the Social-Reformist Left’s Assumptions and Analysis: Part Two and  Social-Reformist Leftist Activists Share Assumptions with the Right).

Mr. Clarke’s Inconsistent Call for Class Struggle

Mr. Clarke often calls for struggle (including class struggle) to achieve reformist aims. Of course, we should struggle to obtain higher wages, more secure employment, safer workplaces, expanded and better social housing, expanded universal healthcare, childcare and so forth. But why does he include struggle for an enhanced welfare state and exclude it from the process by which basic income arises? Mr. Clarke provides no reason for his exclusion of struggle for a basic income. He simply assumes that the class of employers will automatically achieve a minimal form of basic income–and simultaneously assumes that, if we struggle, we can achieve an enhanced welfare state despite the resistance of the class of employers.

I will simply quote from previous posts as well as from above Mr. Clarke’s many references to the need for struggle in order to substantiate my claim that he emphasizes struggle for enhanced welfare reforms, on the one hand, while ignoring the possibility and the need for struggle to achieve a robust basic income that threatens the existence of the market for workers on the other; such a collection of quotes provide a concentrated form of proof of my claim (rather than just being scattered). The quotes are sometimes overlapping since Mr. sometimes simultaneously argues for the need to fight for enhanced welfare reform while ignoring such need in the case of a robust radical basic income: 

Mr. Clarke’s Call for Class Struggle in the Case of an Enhanced Form of Welfare Capitalism

The alternative is to rejuvenate our unions and fight for decent wages, to fight to increase minimum wages, to fight for workers’ rights–rather than extend the cash benefits and extend the reach of the marketplace. It is far better to put considerable effort into the struggle for public services. … 

We need a fight to ensure that disability benefits are adequate and meet people’s needs and that they are secure. We need to challenge the intrusion and moral policing that goes on within these systems.

Again: 

But to extend the cash benefit widely out into the workforce is a huge mistake. And we could do so much better. Rather than try to get what in practice would be a meager cash benefit, it would be so much better to struggle to challenge the commodification of housing, the neoliberal city, the blighting of urban space with this agenda of greed by fighting for a massive extension of social housing. So that’s a benefit that goes to working-class people and does not go into the pocket of landlords. There’s a need to fight for increases in the adequacy of healthcare. The pandemic has made that absolutely clear. We need pharmacare, dental care, a unviersal childcare program that is not an empty perennial liberal promise. We need post-secondary education to be free; we need free public transport systems. On all of these fronts, we need to take up a fight.

But people will say: We have suffered defeats. We cannot win these things. Mr. Clarke argues that the left has for a very long time been forced on the defensive. The class struggle has not gone in our favour for a considerable period of time. But there is no alternative but to rebuild and to fight back and to win what we can. And to challenge this society but to fight for a different society. That’s absolutely indispensable. There in fact is not some social policy ruse that can just put things right.

Again: 

During the pandemic, struggles have broken out across the world, from Minneapolis to New Delhi to East Jerusalem. As the global health crisis subsides, there will be a strong determination to fight for something better. As we challenge, not just the ‘economic scarring’ left by the pandemic, but the impact of decades of austerity, we shouldn’t settle for a commodified form of social provision that makes its peace with the neoliberal order. We need to fight employers to win decent wages and to take to the streets to demand massively expanded social housing, greatly improved public healthcare, free public transit, universal child care and much else beside.

Mr. Clarke’s Lack of Reference for the Need to Engage in Class Struggle in the Case of the Proposal for Basic Income

Let us now see how Mr. Clarke presents basic income: 

Basic income is not going to solve the problem. Our lack of strength, our lack of ability to fight in the way we need to fight is the problem we have to address. We need to build that movement now more than ever. In this situation of global crisis we need more than ever to fight back, and we can do so much better in focusing our struggles than to fight for the commodification of social provision and basic income.

Again:

I wish I could convince more BI supporters to consider the foundations before they try to put the roof on. One such supporter told me a few months ago that my arguments on the role of income support in this society constituted ‘an irrelevant history lesson’ but I beg to differ. To provide nothing at all to people who are unemployed or otherwise outside of the paid workforce has proven impossible so income support emerged to contain social unrest. However, it is always provided reluctantly and to the least degree possible because it limits the economic coercion the job market rests on.

Conclusion

This inconsistency is explained by Mr. Clarke’s reformist aims. Despite Mr. Clarke’s references to exploitation  and economic coercion, he assumes that they are somehow fixed and permanent. Rather than directly trying to develop a movement for abolishing exploitation and economic coercion (with a struggle for both enhanced welfare reforms and a robust basic income being linked to such an aim), Mr. Clarke proposes reformist measures that do not address at all the issue of exploitation or economic coercion as such. Somehow, the movement for welfare reform is supposed to lead to taking over the machines owned by employers. This is utopian in the bad sense of the term as being unrealistic. 

Rather, a proposal for a robust basic income that questions the premises of the class power of employers and the associated economic, social and political relations would point the way out of both the current situation and the class situation that we constantly face. 

In a future post, I may will inquire into a possible explanation hinted at above: Mr. Clarke’s real aim is not the elimination of capitalism but of neoliberalism. 

Taking Possession of Vacant Housing and Protecting the Environment from Profits: The Need to Consider Both Process and Product or Result

A person on Facebook posted the following relating to the problem of accessible housing:

Isabella Gamk shared a post.

Thought the group would like this
May be an image of car and road

Isabella Gamk
“Housing Shortage”? This is not that old of a building and could be fixed up. This building has been shuttered to make room for a condo. There are many such buildings in Toronto. In Canada there 1.3 million empty homes in Canada, many just sitting vacant waiting to be turned into condos. They never talk about this when they say they need to build more homes.

Fred Harris

But to turn them into homes–would it not require an attack on the principle of the sanctity of private property on a massive scale? And would not that require an organized mass struggle? And why stop there? What of the means of production used to construct houses? Why not convert them into common property of all?
well we are on a planet with finite resources. Perhaps we should leave some of those resources for future generations and civilizations.
Fred Harris

Which resources? The cranes, drills used to construct the houses? These are supposed to be left untouched–in the name of “future generations?” If we leave these means of production to employers–we in fact leave a process that constantly strips the natural world of what future generations will need. Employers who own drills, cranes, etc. purchase or rent them with the goal of obtaining more money–profit. But profit at the end of the process is just–money–and not more money. So they need to reinvest again–and again–and again.
To end the rape of the earth, it is necessary to end the rule of the class of employers.
Unless you have an alternative diagnosis of the problem of the rape of the earth and how to stop it. I am all ears.

Now, I am hardly objecting to the goal of trying to take over vacant homes in order to address the serious problem of a lack of adequate housing in Canada and elsewhere. If a movement to seriously aim for that goal were ignited and grew, it could form the point of departure for pointing to solutions that go beyond a society dominated by a class of employers.

To find out more about Ms. Gamk, I looked on the Net. I did listen to an interview with her, dated September 28, 2019 (https://www.youtube.com/watch?v=TFZOhVXcmf4&list=LL).

Ms. Gamk is the founder of POOF–Protecting ODSP OW Funding. ODSP is the Ontario Disability Support Program and OW is Ontario Works (social assistance). She has had a number of health issues in her life, including cocaine addiction, HIV and glaucoma, among other issues.

She receives ODSP, but she points out that ODSP covers $497 for rent and welfare will cover $390. She argues that these need to be doubled–immediately–and then within six months it needs to brought up to average market rent. She argues that even if you double the amount from ODSP, it is $994, but a bachelor suite rents out now between $1100 and $1500; this means that those who receive ODSP would still have to dip into money destined for basic needs was $662 prior to last fall’s 1.5 percent increase–it increased to $672. This is inadequate to survive. Many are now relying on food banks and community meals to eat. Even the NDP, which stated that it would increase rent allowances by 27 percent over three years, would be insufficient, leading to homelessness. Ninety-five percent of the people on the streets receive ODSP or OW.

To double the rates, people would freak because they would be afraid that it would be necessary to raise taxes substantially. But they could tax the corporations and stop giving them incentives, etc. to them.

She also argues that many on the streets want to have a job, but they are stuck because of their homeless circumstances. Furthermore, although there are a number of vacant units for the Toronto Community Housing Corporation, which provides subsidized housing; many of these units are inhabitable due to the large repair bill that TCHC has–without sufficient funding to provide such repairs. She had to wait 20 years to gain access to a unit with TCHC, but even then repairs are often shoddy because of a lack of money and there are often cockroaches and bed bugs. But the homeless will still have to wait 10 to 20 years to gain access to TCHC units. This is wrong.

TCHC, or Toronto Housing, is charging $139 for rent for those who receive ODSP or OW. Why is not John Tory, the mayor of Toronto, increasing the rent to $390 (as allowed for those who receive OW, which is funded by the province) in order for Toronto Housing to receive increased funds to repair the buildings and units? The argument that it is $139 for low-income workers is invalid. The minimum wage, now being $14 an hour works out to $1,750 for a four-week month. That person making $1,750 can surely afford $390 for rent.

She has organized protest rallies, created. distributed and emailed flyers for the rallies. She joined ACORN (Association of Community Organizations for Reform Now); their logo is on her flyers. She had already been a member of OCAP–the Ontario Coalition Against Poverty). OCAP in particular did not support POOF; they never put POOF’s events on their pages; they never helped distribute flyers; they didn’t help with anything.

OCAP pulled out in part because she opposed affordable, subsidized housing based on the level of income because she believes such housing keeps people in poverty; she also opposes shelters for the same reason; furthermore, she opposes homeless people having the right to live in stairwells whereas OCAP believes they should have the right to do so. ACORN and POOF are fighting to clean up the buildings; OCAP does not care about the buildings or the tenants in the building; they care only about the homeless–but only to the extent that they want to keep them in shelters. POOF, on the other hand, is demanding more money for ODSP and OW recipients.

Another reason why OCAP opposes POOF is because Isabella does not consider sex work to be a job like any other job. If you do it because you want to, then that is fine. However, if you do it because you are in poverty and need to do it in order to obtain money, then it is not right.

Once you are in such a system, it is difficult to move anywhere else except within the system–which leads to the perpetuation of poverty. Furthermore, it is difficult to move within the system even if you have problems with neighbours–whether due to noise or harassment. In addition, if you want to move outside of Toronto Housing, with the inadequate level of rent money that ODSP and OW recipients receive, they cannot afford to move anywhere else except within the Toronto Housing system.

Her solution would be to scrap Toronto Housing and bring ODSP and OW rates for rent to average market rent, and low-income families should receive a rent-subsidy cheque so they could afford average-market rents.  Furthermore, if Toronto Housing is still to exist, land owned by that organization should be used exclusively, she implies, for Toronto Housing units rather than to build condo units as is happening now.

The interviewer, Michael Masurkevitch, implied that we could fund such a system by taking away some of the income of CEOs and distributing it to the lower-income people and homeless in order to achieve a balance.

Ms. Gamk argued that this is true since she implied that the use of high-end or very expensive cars in public these days (which was not the case in earlier times) provides evidence of the availability of money and hence the possibility of taxing the rich to a greater extent.

Given the more recent advocacy for taking over vacant homes on Facebook–as the quotes at the beginning indicate–it would seem that Ms. Gamk now advocates more radical measures in order to address the issue of the lack of housing in Toronto and in Canada. However, it is unclear whether she advocates taking over the vacant homes with compensation or without compensation. I should have asked her that in order to clarify the situation.

However, there are a number of points that can be made.

  1. Focusing on the seizure of existing housing stock (a social product of various workers) without considering the processes that produce such housing stock is one-sided. They are two sides of the same coin. The initiator of the above Facebook post, Isabella Gamk, may not have thought about this before, but when I pointed it out, she shifted her attention (in effect ignoring the connection between process and product) to the issue of finite resources on Earth.
  2. However, when I pointed out that the kind of society in which we live necessarily involves a tendency towards the infinite exhaustion of resources, Ms. Gamk did not respond. Now, this lack of response can be interpreted in various ways. Perhaps she would reconsider her position–and respond later. However, there is no such response from her despite three days having passed. Or she considers my response incomprehensible. If so, she should have asked for clarification–which she did not. Or she chose to simply ignore my response and ignore the need to connect up the fact of limited resources on this planet and the tendential infinite process characterized by an economy–which contradicts the finite nature of the world on which and through which we live.Given the fact that Ms. Gamk did not respond, I choose to interpret her silence as an indication of her failure to connect up the result of diminishing resources on this planet with this tendential process (which I have briefly indicated on my blog on the page The Money Circuit of Capital; I also tend to believe that she probably fails to link up the  result of homes being empty and not being used despite a lack of adequate housing here in Toronto, Ontario, Canada, with the process of producing those homes.

Her reference to treating sex work as a job as being okay if the person wants to do it but not okay if they are in poverty and have to do it in order to obtain money to live fails to address using the same logic to all jobs that involve working for an employer. She probably means by poverty a certain level of income; the use of this category to determine whether a person lives in poverty or not is shared by the social-democratic or social-reformist left. The use of level of income as the prime factor in defining what constitutes poverty certainly has its place in terms of level of consumption and the quality of life outside work; I too have had a lack of money to the extent that I had to apply for and receive social assistance temporarily. I also remember trying to find enough pennies in the apartment (when they existed) in order to be able to go to McDonalds to buy the relatively cheap coffee and muffin combination.

Nonetheless, Ms. Gamk obviously accepts the market standard since she advocates such a standard for ODSP and OW recipients receiving the market rate. Of course, advocating increased rates for such recipients is legitimate, but we should question the adequacy of such a standard. We should also question whether people who work for an employer do so out of their own free will or whether they do so out of need to obtain money–even if their wage or salary is considered by some as relatively high. If we question that, then we can redefine what poverty means–a definition that is broader than the definition of poverty according to level of income. I quoted such a definition in another post (“Capitalism needs economic coercion for its job market to function” (Ontario Coalition Against Poverty: OCAP)). From Geoffrey Kay, The Economic Theory of the Working Class. London: Palgrave Macmillan, 1979, pages 2-3:

The absolute poverty of the working class is visibly present in the conditions of work where everything the worker touches belongs to another. The means of production he uses, that is, the machines, buildings, materials, etc. all belong to the employer, who also owns the output. The only thing the worker owns is his capacity to work, and his economic welfare depends upon his being able to sell this at the best possible price. In the course of this [the twentieth) century, particularly during the period of the post-war boom, this price measured in terms of the commodities it can purchase, the real wage, has risen to unprecedented heights, at least in the advanced industrial countries of the west.

As a result of this and the maintenance of full or near full employment backed up by social welfare, the working class has enjoyed greater prosperity and security than at any time in history. In these circumstances it appears strange to talk of absolute poverty, and the old socialist claim that the working class has nothing to lose but its chains seems and archaic relic of the past when the working class did indeed live in dire poverty. Yet the fact remains that the working class today has no greater economic autonomy than its forbears a hundred years ago.

Consider the situation of a contemporary worker who loses his job. This has happened to several million workers in the industrialized world since the long boom faltered in 1973 not counting the other millions of young people who have never found jobs at all. Many of the workers who have recently suffered unemployment for the first time, earned wages that allowed them to enjoy all the trappings of ‘affluency’—decent housing, cars, television, refrigerators and so on. But the loss of the job puts the standard of living immediately in jeopardy, particularly if unemployment lasts for anything more than a few weeks. In the unlikely event of a working class family having a large private income, its initial response to unemployment is to cut back spending on marginal items, and attempt to maintain its lifestyle intact in the hope that new work will be found shortly. As the period of unemployment lengthens, it begins to eat into savings, but this does not hold out much hope.

Working class savings are notoriously low, and often take the form of insurance policies that can only be cashed in at a considerable loss. If the family decides to sell of its consumer durables, apart from reducing its standard of living immediately, it will invariably make further losses as second-hand prices are always far below prices for new articles. Moreover, many working class purchases are financial by hire purchase where the interest element makes the actual price higher than the market price, and the family that sells off relatively new times bought in this way often finds that, far from releasing cash, it lands itself in further debt. Working class affluence is entirely dependent upon wages: remove these—i.e., unemployment—and the absolute poverty of its social situation shows through very quickly. In the nineteenth century unemployment meant immediate destitution; the modern worker is clearly much better off than his forbears—for him and his family poverty is a few weeks, maybe even a few months away.

As Marx also wrote, in relation to prostitution not in its usual, particularized, sense but in a general sense (from Grundrisse: Foundations of the Critique of Political Economy (Rough Draft), page 153–a draft written between 1857 and 1858, which forms the basis for the writing of Capital, volume one of which was published in 1867)

(The exchangeability of all products, activities and relations with a third, objective entity [money] which can be re-exchanged for everything without distinction – that is, the development of exchange values (and of money relations) is identical with universal venality, corruption. Universal prostitution appears as a necessary phase in the development of the social character of personal talents, capacities, abilities, activities. More politely expressed : the universal relation of utility and use. The equation of the incompatible, as Shakespeare nicely defined money.

I invite Ms. Gamk and any others to broaden their definition of poverty to include most workers who need to work for an employer in order to obtain the money they need to live (some workers, such as managers, may be excluded since their function is to exploit and oppress workers–even if they too need to work for an employer).

The major problem with Ms. Gamk’s approach has to do with focusing on issues of distribution of already produced commodities rather than their production. For once I agree with Sam Gindin (although this should be center-stage and the focus for criticism of all social-democratic or reformist organizations). He writes ( https://socialistproject.ca/2022/04/inflation-reframing-the-narrative/):

But we need to be sober about an inevitable ceiling on redistributive policies. If we don’t also address the democratization of production – if we don’t also redistribute economic power, capital’s control over production and investment will leave it with the capacity to undermine or sabotage alternative priorities and redistribution goals.

We can put controls on house prices, but developers can refrain from building more houses or build the kinds of housing society needs. We can put controls on gas prices, but this won’t address the issue of a planned phase-out of the oil industry and investment in renewables. We can set drug prices, but the drug companies will still decide which kinds of illnesses they should focus on to maximize their profits. And we can’t control the price of food or adequately subsidize food as needed without a radical rethinking of food production.

As the struggle over distribution comes up against such impasses and causes new crises, the crucial lesson to internalize is not to retreat from our goals. It is to organize to go further.

However, Mr. Gindin then elaborates a little by what he means by “going further”:

and pose public ownership and planning in key sectors – not just for ideological reasons but also as a practical matter of self-defence and meeting critical social needs.

If he means by “public ownership” the mere nationalization of industries without a thorough restructuring, then my earlier criticism of “public ownership” also applies to his proposal (see, for example, my criticism in  A Critical Look at The Socialist Project’s Pamphlet on Green Jobs Oshawa).

Public ownership hardly is identical to democratic control of the workplace by workers, citizens, immigrants and migrant workers.

I will leave the issue there.

Of course, part of the problem may be the way in which I responded to her post. If others have suggestions about how I can improve my communication skills, feel free to comment. I am always open to improvement in my communication skills. Or perhaps my logic is faulty. If so, please provide counterarguments.

Economics for Social Democrats–but not for the Working Class, Part Two: Critique of Jim Stanford’s Theory of Money, Part Two

Introduction

In a previous post (Economics for Social Democrats–but Not for the Working Class, Part Two: Critique of the Social Democrat Jim Stanford’s Theory of Money, Part One), I questioned Mr. Stanford’s theory of money as purchasing power, as well as his implied reduction of Marx’s critical dual or twofold theory of commodities to a labour theory of value. I showed that Mr. Stanford fails to explain why money has a monopoly power of immediate purchasability.

In a subsequent post, I also showed how Stanford’s inadequate theory of money leads him to assume a “real economy” that is somehow independent of the process of producing value (and surplus value) and consequently his false conclusion that there is not a trade-off between the economy and the health of workers (in the context of the pandemic, but this trade-off applies generally in the context of a society dominated by a class of employers). (See Economics for Social Democrats–but not for the Working Class, Part Three: The Health and Safety of Workers and an Economy Dominated by a Class of Employers Are at Loggerheads). 

In this post, I will further develop the importance of the nature of money as “purchasing power,” in particular how this power (and the lack of such power at the level of commodities) involves or entails a process that escapes the control of the participants in the exchange process.  

The Expression of the Dual Nature of the Commodity Requires a Double Movement of Sale and Purchase 

I will assume the reader has read the first post on money and therefore is familiar with the dual nature of both the labour that produces commodities and the dual nature of commodities.

The real expression of the dual nature of commodities is expressed in a dual movement, from commodities (represented by C) exchanged for money (represented by M), which is the realization of the value of the commodity, and the opposite movement of the conversion of M into C, which is the realization of the use value, not of the original commodity, but of use values for the original owner of the commodity. The whole movement is thus: C-M, and M-C, or C-M-C, where the dash represents an exchange.

From Capital: A Critique of Political Economy. Volume 1:Capital, pages 199-200:

Let us now accompany the owner of some commodity, say our old friend the linen weaver, to the scene of action, the market. His commodity, 20 yards of linen, has a definite price, £2. He exchanges it for the £2, and then, being a man of the old school, he parts for the £2 in return for a family Bible of the same price. The linen, for him a mere commodity, a bearer of value, is alienated in exchange for gold, which is the shape of the linen’s value, then it is taken out of this shape and alienated again in exchange for another commodity, the Bible, which is destined to enter the weaver’s house as an object of utility and there to satisfy his family’s need for edification. The process of exchange is therefore accomplished through two metamorphoses of opposite yet mutually complementary character – the conversion of the commodity into money, and the re-conversion of the money into a commodity. The two moments of this metamorphosis are at once distinct transactions by the weaver- selling, or the exchange of the commodity for money, and buying, or the exchange of the money for a commodity – and the unity of the two acts: selling in
order to buy.

The end result of the transaction, from the point of view of the weaver, is that instead of being in possession of the linen, he now has the Bible; instead of his original commodity, he now possesses another of the same value but of different utility. He procures his other means of subsistence and of production in a similar way. For the weaver, the whole process accomplishes nothing more than the exchange of the product of his labour for the product of someone else’s, nothing more than an exchange of products.

The process of exchange is therefore accomplished through the following changes of form:

Commodity-Money-Commodity
C-M-C

As far as concerns its material content, the movement is C-C, the exchange of one commodity for another, the metabolic interaction of social labour, in whose result the process itself becomes extinguished.

The Escape of the Whole Process of Simple Circulation from the Control of the Participants with the Emergence of Money 

In the external measure of the value of commodities via money as measure, there is, indeed, all commodities on one side and money on the other side, but in the actual exchange of commodities with money (money as a means of purchase or as a means of circulation) this is not the case; on the contrary, there is necessarily a separation in space and time between the act of sale (realization of the value of the commodity in money) and the realization of money in various use values (purchase).

The unity of value and use value, hidden in the commodity, is expressed as mutually exclusive and external forms of sale and purchase so that crisis becomes a possibility as the gap between the realization of the value of a commodity and the realization of use values of an equivalent value becomes intensified. The whole process is what Marx calls simple circulation, and this process escapes the control of the participants in the exchange process.

To make the following a little easier to follow, we can consider the following: 

  1. The owner of linen wants to sell the linen in order to buy a Bible.
  2. The owner of money who buys the linen obtained the money by selling wheat. 
  3. The owner of the Bible sells the Bible to the former linen owner in order to buy brandy (but the brandy does not directly figure in the total metamorphosis or total exchange of the linen for the Bible since we end with the Bible owner possessing money and the linen owner possessing the Bible.
  4. At the beginning of the total exchange process, the linen owners owns the linen (a use value for others) but does not want it.
  5. At the end of the total exchange process, the former linen owner now owns a use value useful to her (and the linen also is useful for the farmer, the former owner of wheat). 
  6. The money stops circulating for the moment at the end of the process with the former owner of the Bible aiming to purchase some brandy (but not yet doing so). 

Pages 207- 209: 

The circulation of commodities differs from the direct exchange of products not only in form, but in its essence. We have only to consider the course of events. The weaver has undoubtedly exchanged his linen for a Bible, his own commodity for someone else’s. But this phenomenon is only true for him. The Biblepusher, who prefers a warming drink to cold sheets, had no intention of exchanging linen for his Bible; the weaver did not know that wheat had been exchanged for his linen. B’s commodity replaces that of A, but A and B do not mutually exchange their commodities. It may in fact happen that A and B buy from each other, but a particular relationship of this kind is by no means the necessary result of the general conditions of the circulation of commodities. We see here, on the one hand, how the exchange of commodities breaks through all the individual and local limitations of the direct exchange of products, and develops the metabolic process of human labour. On the other hand, there develops a whole network of social connections of natural origin, entirely beyond the control of the human agents. Only because the farmer has sold his wheat is the weaver able to sell his linen, only because the weaver has sold his linen is our rash and intemperate friend able to sell his Bible, and only because the latter already has the water of everlasting life is the distiller able to sell his eau-de-vie. And so it goes on.

The process of circulation, therefore, unlike the direct exchange of products, does not disappear from view once the use-values have changed places and changed hands. The money does not vanish when it finally drops out of the series of metamorphoses undergone by a commodity. It always leaves behind a precipitate at a point in the arena of circulation vacated by the commodities. In the complete metamorphosis of the linen, for example, linen-money-Bible, the linen first falls out of circulation, and money steps into its place. Then the Bible falls out of circulation, and again money takes its place. When one commodity replaces another, the money commodity always sticks to the hands of some third person.  Circulation sweats money from every pore.

Circulation bursts through all the temporal, spatial and personal barriers imposed by the direct exchange of products, and it does this by splitting up the direct identity present in this case between the exchange of one’s own product and the acquisition of someone else’s into the two antithetical segments of sale and purchase. To say that these mutually independent and antithetical processes form an internal unity is to say also that their internal unity moves forward through external antitheses. These two processes lack internal independence because they complement each other. Hence, if the assertion of their external independence proceeds to a certain critical point, their unity violently makes itself felt by producing – a crisis. There is an antithesis, immanent in the commodity,
between use-value and value, between private labour which must simultaneously manifest itself as directly social labour, and a particular concrete kind of labour which simultaneously counts as merely abstract universal labour, between the conversion of things into persons and the conversion of persons into things*; the antithetical phases of the metamorphosis of the commodity are the developed forms of motion of this immanent contradiction.

A Limitation of Stanford’s Definition of Money as Purchasing Power: A Lack of Control Over the Total Social Process of Exchange

Stanford, by not linking the purchasing power of money to the dual oppositional nature of labour and commodities characteristic of a capitalist society, fails to address the loss of control over the total process of exchange by the participants in exchange. This loss of control is linked to what Marx called commodity fetishism, where things produced by workers gain independent power over the producers. 

The issue of commodity fetishism will, however, be addressed in another post in this series. Commodity fetishism is both a process of the exchange process becoming independent of the participants in that process and the resulting independence not only appearing to be attributes of things rather than social attributes originating from the producers themselves but actually being social attributes. The issue also has to do with the further development of commodity fetishism in the forms of money fetishism and  capital fetishism, where the process increasingly takes on an independent form that not only escapes the control of workers but increasingly controls their lives. The internal opposition between abstract labour and concrete labour then becomes a nightmare for workers as their own working lives are used against them to exploit and oppress them.

This commodity fetishism  is a process of the products of social labour coming to dominate the producers rather than vice versa. This appears to be and in some senses is independent of the workers.

Hence, Stanford, by failing to link his definition of money to a dual theory of labour and commodities, fails, in other words, to understand the essential relation between the nature of money as purchasing power and the domination, oppression and exploitation of workers on the basis of their own social labour becoming independent of them in exchange and ultimately controlling them at work. 

Conclusion

Mr. Stanford’s theory of money as “purchasing power” is inadequate because it fails to deal with the dual nature of labour and the dual nature of commodities, and this dual nature generally involves a temporal and spatial split between the realization of the value of the commodity and the realization of the use value of the commodity (in the form of many use values). This split leads, in the first instance, to the creation of an exchange process that escapes the control of the participants in that process; it also leads to the possibility of an economic crisis.

Ultimately, it leads to a production process that not only escapes the control of the participants in exchange but also of the producers, leading to their domination and exploitation. That may be  shown in further posts, however. 

The Rate of Exploitation of Workers at Bell Canada Enterprises (BCE), One of the Largest Private Employers in Toronto

Introduction

In two others posts I presented the twenty largest employers in Toronto according to level of employment (see A Short List of the Largest Employers in Toronto, Ontario, Canada) and the twenty largest employers in Canada according to profit (see A Short List of the Largest Private Employers in Canada, According to Profit).

I have tried to calculate the rate of exploitation of workers of Magna International in an earlier post (see The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One); Magna International is one of the largest employers in Toronto. I also calculated the rate of exploitation for Air Canada workers and the Canadian Imperial Bank of Commerce (CIBC) workers. 

The Nature of the Rate of Exploitation

But what is the rate of exploitation? And why not use the usual rate of profit or the rate of return? The rate of profit is calculated as profit divided by investment. Since employers purchase both the means for work–buildings, computers, office supplies, raw material–and hire workers–we can classify investment into two categories: c, meaning constant capital, or the capital invested in commodities other than workers; and v, or variable capital, the capital invested in the hiring of workers for a certain period of time (wages, salaries and benefits).

The purpose of investment in a capitalist economy is to obtain more money (see The Money Circuit of Capital), and the additional money is surplus value when it is related to its source: workers working for more time than what they cost to produce themselves. The relation between surplus value and variable capital (or wages and salaries) is the rate of surplus value or the rate of exploitation, expressed as a ratio: s/v.

When the surplus is related to both c and v and expressed as a ratio, it is the rate of profit: s/(c+v).

In Marxian economics, you cannot simply use the economic classifications provided by employers and governments since such classifications often hide the nature of the social world in which we live. The rate of profit underestimates the rate of exploitation since the surplus value is related to total investment and not just to the workers. Furthermore, it makes the surplus value appear to derive from both constant capital and variable capital.

I decided to look at the annual report of some of the largest private companies in Toronto and Canada if they are available in order to calculate the rate of exploitation at a more micro level than aggregate rates of surplus value at the national or international level. Politically, this is necessary since social democrats here in Toronto (and undoubtedly elsewhere) vaguely may refer to exploitation–while simultaneously and contradictorily referring to “decent work” and “fair contracts.” Calculating even approximately the rate of exploitation at a more micro level thus has political relevance.

Conclusions First

As usual, I start with the conclusion in order to make readily accessible the results of the calculations for those who are more interested in the results than in how to obtain them.

Adjusted Net Income: 5587.3=s
Adjusted Total labour Costs: 5611.7=v

The rate of exploitation or the rate of surplus value=s/v=5587.3/5611.7=100% (after rounding).

That means that for every hour worked that produces her/his wage, a worker at BCE works around an additional hour for free for BCE. Alternatively, in terms of money, $1 of wage or salary of a regular BCE worker produces around $1 surplus value or profit for free. 

In terms of varying lengths of the working day: 

  1. In a 7.5-hour work day (450 minutes), the worker produces her/his wage in 225 minutes (3 hours  45 minutes) and works 225 minutes (3 hours 45 minutes) for free for BCE.
  2. In an 8-hour work day (480 minutes), the worker producer her/his wage in 240 minutes (4 hours) and works 240 minutes (4 hours) for free for BCE.
  3. In a 10-hour work day (600 minutes), the worker producers her/his wage in 300 minutes (5 hours) and works 300 minutes (5 hours) for free for BCE.
  4. In a 12-hour work day (720 minutes), the worker produces her/his wage in 360 minutes (6 hours) and works 360 minutes (6 hours) for free for BCE.

Of course, during the time that the worker produces her/his own wage, s/he is subject to the power of management and hence is also unfree during that time (see The Rate of Exploitation of Magna International Inc., One of the Largest Private Employers in Toronto, Part Two, Or: Intensified Oppression and Exploitation and   Employers as Dictators, Part One).

Do you think that these facts contradict the talk by the left and unionists of “fair wages,” “fair contracts” (see  Fair Contracts (or Fair Collective Agreements): The Ideological Rhetoric of Canadian Unions, Part One for the rhetoric of the largest union in Canada, the Canadian Union of Public Employees (CUPE)) and “decent work?” Do they ignore the reality of life for workers, whether unionized or non-unionized? If exploitation and oppression of workers is a constant in their lives, even if they are only vaguely aware of it, should this situation not be frankly acknowledged by their representatives? Do such representatives do so? If not, why not?  Do workers deserve better than neglecting the social context within which they live and work? Should such problems be addressed head on rather than neglected? 

Even if workers were not exploited, they would still be oppressed since they are used as things (means) for purposes which they as a collectivity do not define (see The Money Circuit of Capital). Does that express something fair? Management rights clauses (implied or explicit in collective agreements give management as representative of employers–and as a minority–the power to dictate to workers what to do, when to do it, how to do it and so forth–and is not the imposition of the will of a minority over the majority a dictatorship? (See  Employers as Dictators, Part One). Is that fair? Do union reps ever explain how a collective agreement somehow expresses something fair? Is that fair?

Is the following an example of what union reps mean by a “fair contract?”

COLLECTIVE AGREEMENT
BETWEEN
UNIFOR
AND
BELL CANADA

CRAFT AND SERVICES EMPLOYEES
EFFECTIVE FEBRUARY 23, 2017 

ARTICLE 8 – MANAGEMENT RIGHTS

8.01 The Company has the exclusive right and power to manage its operations in all respects and in accordance with its commitments and responsibilities to the public, to conduct its business efficiently and to direct the working forces and without limiting the generality of the foregoing, it has the exclusive right and power to hire, promote, transfer, demote or lay-off employees, and to suspend, dismiss or otherwise discipline employees.

8.02 The Company agrees that any exercise of these rights and powers shall not contravene the provisions of this Agreement.

Should workers not be discussing why management has these rights? Should workers not be discussing whether an unelected management should have such rights? Should workers not be discussing how to organize to abolish this dictatorship? Should workers not be criticizing any union rep who claims that a collective agreement somehow expresses a “fair contract?” A “good contract?” All other such platitudes? 

Data on Which the Calculation Is Based

The calculation of the rate of exploitation is undoubtedly imperfect, and I invite the reader to correct its gaps. Nonetheless, the lack of any attempt to determine the rate of exploitation at the city level has undoubtedly reinforced social-reformist tendencies.

Now, the calculation: 

In millions of Canadian dollars:

Page 113:

Operating revenues 23,964

Costs
Operating costs 13,858
Severance, acquisition and other costs 114
Depreciation 3,496
Amortization 902
Finance costs
Interest expense 1,132
Interest on post-employment benefit obligations 63
Other expense 13
Total costs: 19,578

Net income: 4386 [23,964-19,578=4386] [the 3253 is after taxes; if you add taxes, you get 4386 as well]

Operating costs need to be broken down further since costs for maintaining workers as wage workers form one of the two considerations for the calculation of the rate of exploitation.

Labour costs
Wages, salaries and related taxes and benefits 4,303
Post-employment benefit plans service cost (net of capitalized amounts) 247
Other labour costs 1,005
Less:
Capitalized labour 1,032
Total labour costs: 4,523

Adjustments

In Marxian theory, it is necessary to question whether some expenses are expenses for both the individual employer and for the class of employers (and fractions of their class, such as those who live on interest); in such a case, the expense is deducted from total revenue. On the other hand, there are expenses that are expenses for the individual employer but are not expenses when looked at from the point of view of the class of employers; in such an instance, they are paid out from the surplus value produced or obtained by workers and are to be included in income before taxes.

Adjustment of Total Labour Costs

Capitalized Labour

It is necessary to consider the category “Capitalized labour” since it is not treated as a labour cost by BCE whereas here it will be so treated. Capitalized labour involves the following:

CAPITALIZED LABOR means all direct costs of labor that can be identified or associated with and are properly allocable to the construction, modification, or installation of specific items of capital assets and, as such, can thereby be written down over time via a depreciation or amortization schedule as capitalized. 

I have chosen to treat capitalized labour as part of labour costs since it is current labour that is involved in the operations of BCE; the work performed by workers in installing and assembling machinery includes surplus value.

Temporarily Adjusted Total labour Costs: 5555

Severance, acquisition and other costs

It is necessary to make adjustments for this category since part of the money expended relates to costs destined to be received by workers. To take this into account, it is necessary to break the category down further.

Severance 63
Acquisition and other 51
Total severance, acquisition and other costs 114

I assume that “Acquisition and other” are non-labour expenses.
In a note, it states:

Severance costs consist of charges related to involuntary and voluntary employee terminations. In 2018, severance costs include a 4% reduction in management workforce across BCE.

Given that the severance package for management is likely to be much higher than for regular employees, the 4 percent reduction in the management workforce likely results in a higher percentage of severance pay to that 4 percent. It is impossible to determine with precision how much higher. I will assume 10 percent. The reason for taking into consideration such a difference is that the severance for management is likely to be a function of its exploitation of other workers and not its own exploitation.

Ten percent of 63 is 6.3; therefore, this 6.3 needs to be added to net income and subtracted from 63.
Temporarily adjusted Net income: 4392.3

This shift from considering part of severance pay from a cost to a part of net income also changes the total costs by reducing it by 6.3. Therefore:

Temporarily adjusted Total Costs: 19,571.7

The remaining severance is 56.7. This needs to be added to the category “Post-employment benefit plans service cost” since it forms part of the income of workers and costs for BCE. Accordingly:
Adjusted Total labour Costs: 5611.7

Adjustment of Finance Costs

Another adjustment relates to interest. As I indicated in my post about the rate of exploitation of workers at Magna International:

An adjustment should probably be the treatment of the payment of interest: despite being an expense from the point of view of the individual capitalist, it probably forms part of the surplus value. It should be added to “Income before income tax expense.”

As for the category “Interest on post-employment benefit obligations,” from the point of view of BCE, it is an expense or cost because, presumably, BCE had to borrow money (and pay interest) to meet its financial obligations to its retired workers; this interest comes from the surplus value produced by the workers and is therefore included as part of profit.

Accordingly, both “Interest expense” and “Interest on post-employment benefit obligations” are deducted from “Total costs” and added to “Net income,” and “Total costs” are therefore also adjusted.

Operating revenues 23,964
Adjusted Total Costs: 19,571.7- 1,132 – 63=18,376.7
Adjusted Net Income: 5587.3=s
Adjusted Total labour Costs: 5611.7=v

The Rate of Exploitation

The rate of exploitation or the rate of surplus value=s/v=5587.3/5611.7=100% (after rounding).

That means that for every hour worked that produces her/his wage, a worker at BCE works around an additional hour for free for BCE. Alternatively, in terms of money, $1 of wage or salary of a regular BCE worker produces around $1 surplus value or profit for free. 

The length of the working day at BCE, like most places, varies. Here are a sample of working days from the Internet:

I worked, on average, twelve hours a day.
I worked about 8 hours a day on the average.
10 hours per and about 50 hours weekly and was paid for only 37.5 weekly.

The collective agreement between Bell Canada and Unifor Atlantic CommunicationLocals (Unifor ACL) states: 

(c) Employees whose standard hours of work are eighty (80) hours in a scheduling period, will normally work either ten (10) scheduled tours of eight (8) hours. Employees whose standard hours of work are seventy-five (75) hours in a scheduling period, will normally work ten (10) scheduled tours of seven and one-half (7.5) hours. …

(d) Tours can be scheduled for a maximum of ten (10) hours with mutual agreement between the employee and their direct supervisor.

(e) Longer tours, to a maximum of twelve (12) hours per tour, may be scheduled with the mutual agreement of the employee(s), their direct supervisor, Labour Relations and the Council. Such special
arrangements must be committed to in writing and signed by the parties prior to implementing. These arrangements can be cancelled by any party with eight (8) weeks notice.

Since Bell workers are exploited 100 percent, the calculation of the number of hours they work to produce the equivalent value of their wage and the number of hours they work for free for Bell is relatively easy.

  1. In a 7.5-hour work day (450 minutes), the worker produces her/his wage in 225 minutes (3 hours  45 minutes) and works 225 minutes (3 hours 45 minutes) for free for BCE.
  2. In an 8-hour work day (480 minutes), the worker producer her/his wage in 240 minutes (4 hours) and works 240 minutes (4 hours) for free for BCE.
  3. In a 10-hour work day (600 minutes), the worker producers her/his wage in 300 minutes (5 hours) and works 300 minutes (5 hours) for free for BCE.
  4. In a 12-hour work day (720 minutes), the worker produces her/his wage in 360 minutes (6 hours) and works 360 minutes (6 hours) for free for BCE.


The Rate of Exploitation of Workers at ScotiaBank (Bank of Nova Scotia)

Introduction

In two others posts I presented the twenty largest employers in Toronto according to level of employment (see A Short List of the Largest Employers in Toronto, Ontario, Canada) and the twenty largest employers in Canada according to profit (see A Short List of the Largest Private Employers in Canada, According to Profit). The largest employer, in terms of employment, is the Canadian Imperial Bank of Commerce.

I have tried to calculate the rate of exploitation of workers of Magna International in an earlier post (see The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One); Magna International is one of the largest employers in Toronto.

The Nature of the Rate of Exploitation

But what is the rate of exploitation? And why not use the usual rate of profit or the rate of return? The rate of profit is calculated as profit divided by investment. Since employers purchase both the means for work–buildings, computers, office supplies, raw material–and hire workers–we can classify investment into two categories: c, meaning constant capital, or the capital invested in commodities other than workers; and v, or variable capital, the capital invested in the hiring of workers for a certain period of time (wages, salaries and benefits).

The purpose of investment in a capitalist economy is to obtain more money (see The Money Circuit of Capital), and the additional money is surplus value when it is related to its source: workers working for more time than what they cost to produce themselves. The relation between surplus value and variable capital (or wages and salaries) is the rate of surplus value or the rate of exploitation, expressed as a ratio: s/v.

When the surplus is related to both c and v and expressed as a ratio, it is the rate of profit: s/(c+v).

In Marxian economics, you cannot simply use the economic classifications provided by employers and governments since such classifications often hide the nature of the social world in which we live. The rate of profit underestimates the rate of exploitation since the surplus value is related to total investment and not just to the workers. Furthermore, it makes the surplus value appear to derive from both constant capital and variable capital.

I decided to look at the annual report of some of the largest private companies in Toronto and Canada if they are available in order to calculate the rate of exploitation at a more micro level than aggregate rates of surplus value at the national or international level. Politically, this is necessary since social democrats here in Toronto (and undoubtedly elsewhere) vaguely may refer to exploitation–while simultaneously and contradictorily referring to “decent work” and “fair contracts.” Calculating even approximately the rate of exploitation at a more micro level thus has political relevance.

Conclusions First

As usual, I start with the conclusion in order to make readily accessible the results of the calculations for those who are more interested in the results than in how to obtain them.

We have the following:

Adjusted Income before income taxes $11,724=s
Adjusted Total salaries and total benefits $7,989=v

The rate of exploitation or the rate of surplus value is s/v; therefore, s/v is 11,724/7,989=147 percent.

This means that, in terms of money, $1 of wage or salary of a regular bank worker results in $1.47 Canadian dollars surplus value or profit for free. Alternatively, for every hour worked, a Scotiabank worker works 88 minutes (or 1 hour 28 minutes) for Scotiabank for free.

I will calculate the rate of exploitation or the rate of surplus value for each approximate variation of the length of the working day (a more detailed explanation of how to calculate the rate of exploitation is provided in the post  The Rate of Exploitation of the Workers of the Canadian Imperial Bank of Commerce (CIBC), One of the Largest Private Employers in Toronto and in Canada).

  1. 7-hour work day: Scotiabank workers spend  170 minutes (2 hours 50 minutes)  to obtain their wage for the day, and they spend 250 minutes (4 hours 10 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  2. 7.5-hour work day: Scotiabank workers spend 182 minutes (3 hours 2 minutes) to obtain their wage for the day, and they spend 268 minutes (4 hours 28 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  3. 8-hour work day: Scotiabank workers spend 194 minutes (3 hours 14 minutes) to obtain their wage for the day, and they spend 286 minutes (4 hours 46 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  4. 9-hour work day: Scotiabank workers spend 219 minutes (3 hours 39 minutes) to obtain their wage for the day, and they spend 321 minutes (5 hours 21 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  5. 9.5 hour work day (to cover a 47.5 hour work week spread out in five days): Scotiabank workers spend 231 minutes (3 hours 51 minutes0 to obtain their wage for the day, and they spend 339 minutes (5 hours 39 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  6. 12-hour work day: Scotiabank workers spend 291 minutes (4 hours 51 minutes) to obtain their wage for the day, and they spend 429 minutes (7 hours 9 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  7. 15-hour work day: Scotiabank workers spend 364 minutes (6 hours 4 minutes) to obtain their wage for the day, and they spend 536 minutes (8 hours 56 minutes( in obtaining a surplus value or profit for free for Scotiabank.

Scotiabank workers do not belong to a union. Would their becoming unionized turn their situation into one where they had a “fair contract” and “decent work?” I think not. Unions can limit exploitation and can control some aspects of their working lives, but in principle workers are things to be used by employers even with unions. This does not mean that a non-unionized environment is the same as a unionized environment. With unions that are independent of particular employers, that is to say, are real unions, there is an opportunity for workers to develop organizations of resistance against the power of particular employers.

The ideology of unions–that somehow they can produce a “fair contract” and “decent work”–needs, though, to be constantly criticized. Workers deserve better than the acceptance of such ideology by the left.

Data on Which the Calculation Is Based

Now, the calculation:

In millions of Canadian dollars:

2019

Revenue

Interest income

Loans $ 29,116
Securities 2,238
Securities purchased under resale agreements and securities borrowed 502
Deposits with financial institutions 928

Total interest income: 32,784

Expenses

Interest expense

Deposits $13,871
Subordinated debentures  294
Other 1,442

Total interest expense: 15,607

Net interest income 17,177

Non–interest income 

Card revenues 977
Banking services fees 1,812
Credit fees 1,316
Mutual funds 1,849
Brokerage fees 876
Investment management and trust 1,050
Underwriting and other advisory 497
Non-trading foreign exchange 667
Trading revenues 1,488
Net gain on sale of investment securities  351
Net income from investments in associated corporations 650
Insurance underwriting income, net of claims 676
Other fees and commissions 949
Other 699

Total non-interest income: 13,857
Total revenue 31,034

Provision for credit losses 3,027
[Net Revenue]: 28,007

Non-interest expenses

Salaries and employee benefits 8,443
Premises and technology 2,807
Depreciation and amortization 1,053
Communications 459
Advertising and business development 625
Professional 861
Business and capital taxes 515
Other 1,974

Total non-interest expenses: 16,737

Income before taxes 11,270

Adjustments

In Marxian theory, it is necessary to question whether some expenses are expenses for both the individual employer and for the class of employers (and fractions of their class, such as those who live on interest); in such a case, the expense is deducted from total revenue. On the other hand, there are expenses that are expenses for the individual employer but are not expenses when looked at from the point of view of the class of employers; in such an instance, they are paid out from the surplus value produced or obtained by workers and are to be included in income before taxes.

In the category “Salaries and employee benefits,” there are the subcategories “Performance-based compensation” and “Share-based payments.”

Salaries and employee benefits
Salaries $ 4,939
Performance-based compensation 1,761
Share-based payments 278
Other employee benefits 1,465
$ 8,443

There is a table titled “Compensation of key management personnel” in the annual report that is relevant. This category covers the following employees:

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Bank, directly or indirectly, and comprise the directors of the Bank, the President and Chief Executive Officer, certain direct reports of the President and
Chief Executive Officer and Group Heads.

The table is as follows:

Compensation of the Bank key management personnel

For the year ended October 31 ($ millions) 2019
Salaries and cash incentives  $17
Equity-based payment  $25
Pension and other benefits 5
Total $47

It should be noted that this table refers only to the end of October 31 as does all the information above since the fiscal year for Scotiabank ends on October 31.

This more detailed information does not influence my decision to include the whole category of “Share-based payments” to the category of surplus value rather than to “Salaries.”  The CEO of Scotiabank, Brain Porter, plus five other senior executives, received a total compensation of over $29 million. It is likely that “Share-based payments” are allocated according to the level of pressure on subordinates to perform (including organizational  and policy decisions to ensure such pressure is effective); such payments likely are received by senior and middle (and, perhaps, lower management) based on performance targets that they either set or force subordinates to achieve.

This situation is somewhat similar to the calculations I made for the Royal Bank of Canada workers.

This means that “Salaries and benefits” is reduced by $278 million and the category “Income before income taxes” is increased by $278 million.

I also assume that 10 percent of the amount of the category “Performance-based compensation” is actually surplus value and not salaries that are due to actual work. In other words, some of “performance-based compensation” is due to management obliging workers to work at a certain level (and some of it is due to the workers themselves working at a certain level of intensity in order to receive some form of performance compensation).

My logic is the same as my calculation in some other banks (such as the CIBC), where I wrote:

However, the gap between executive pay and the pay of regular employees has widened over the years, so it is reasonable to infer that the category “Performance-based compensation” is divided into two parts: one part is a function of the number of hours worked by regular employees as well as the intensity of that work; the other is based on the extent to which bank managers and senior executives are successful in exploiting those regular employees. …

it is probably reasonable to assume that a minimum of 10 percent of the “Performance-based compensation” comes from the exploitation of senior bank executives of regular workers.
It would be necessary to have more detailed information to determine whether more or less of the money obtained in this category were distributed between regular bank workers and management executives. If regular bank workers received more, then the rate of exploitation would be less than the rate calculated below. If management executives received more, then the rate of exploitation would be more than the rate calculated below.

On the assumption of 10 percent, though, this means that 10 percent of the total of “Performance-based compensation, ” is reduced by 10 percent.

It also means that this 10 percent ($176 million) is allocated to the category “Income before taxes.”

Adjusted Results

Adjusted Income before income taxes $11,724=s
Adjusted Total salaries and total benefits $7,989=v

The Rate of Exploitation of Scotiabank Workers

The rate of exploitation or the rate of surplus value is s/v; therefore, s/v is 11,724/7,989=147 percent.

This means that, in terms of money, $1 of wage or salary of a regular bank worker results in $1.47 Canadian dollars surplus value or profit for free. Alternatively, for every hour worked, a Scotiabank worker works 88 minutes (or 1 hour 28 minutes) for Scotiabank for free.

The length of the working day varies. To the question: “On average, how many hours do you work a day at Scotiabank?,” the answers were:

  1. 8 to 9 hrs per day.
  2. 8 hours and 30 mins
  3. 8 hours a day from Monday to Friday with 1 hour for lunch
  4. 48 hours a week
  5. 9 Am to 6 pm
  6. Depends on department , some are typical 8:30-5 while others such require much longer hours,up to 12-15 hours per day
  7. 37.5 hrs per week

I will calculate the rate of exploitation or the rate of surplus value for each approximate variation of the length of the working day (a more detailed explanation of how to calculate the rate of exploitation is provided in the post The Rate of Exploitation of the Workers of the Canadian Imperial Bank of Commerce (CIBC), One of the Largest Private Employers in Toronto and in Canada).

  1. 7-hour work day: Scotiabank workers spend  170 minutes (2 hours 50 minutes)  to obtain their wage for the day, and they spend 250 minutes (4 hours 10 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  2. 7.5-hour work day: Scotiabank workers spend 182 minutes (3 hours 2 minutes) to obtain their wage for the day, and they spend 268 minutes (4 hours 28 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  3. 8-hour work day: Scotiabank workers spend 194 minutes (3 hours 14 minutes) to obtain their wage for the day, and they spend 286 minutes (4 hours 46 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  4. 9-hour work day: Scotiabank workers spend 219 minutes (3 hours 39 minutes) to obtain their wage for the day, and they spend 321 minutes (5 hours 21 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  5. 9.5 hour work day (to cover a 47.5 hour work week spread out in five days): Scotiabank workers spend 231 minutes (3 hours 51 minutes0 to obtain their wage for the day, and they spend 339 minutes (5 hours 39 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  6. 12-hour work day: Scotiabank workers spend 291 minutes (4 hours 51 minutes) to obtain their wage for the day, and they spend 429 minutes (7 hours 9 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  7. 15-hour work day: Scotiabank workers spend 364 minutes (6 hours 4 minutes) to obtain their wage for the day, and they spend 536 minutes (8 hours 56 minutes( in obtaining a surplus value or profit for free for Scotiabank.

It should be noted that I have used the verb “obtain” rather than “produce.” In Marxian economics, bank workers, as well as sales workers do not produce surplus value but rather transfer the surplus value already produced. This does not mean that these workers are not exploited capitalistically; they are used impersonally by the employer to obtain surplus value and a profit. Furthermore, things produced by others are used by employers such as Scotiabank to control their working lives in order to obtain surplus value or profit.

Scotiabank workers do not belong to a union. Would their becoming unionized turn their situation into one where they had a “fair contract” and “decent work?” I think not. Unions can limit exploitation and can control some aspects of their working lives, but in principle workers are things to be used by employers even with unions. This does not mean that a non-unionized environment is the same as a unionized environment. With unions that are independent of particular employers, that is to say, are real unions, there is an opportunity for workers to develop organizations of resistance against the power of particular employers.

The ideology of unions–that somehow they can produce a “fair contract” and “decent work”–needs, though, to be constantly criticized. Workers deserve better than the acceptance of such ideology by the left.

Economics for Social Democrats–but Not for the Working Class, Part Two: Critique of the Social Democrat Jim Stanford’s Theory of Money, Part One

Introduction

In an earlier post, I indicated that Jim Stanford’s view concerning the creation of jobs reflects a social-democratic or social reformist position (see Economics for Social Democrats–but Not for the Working Class, Part One: Critique of Jim Stanford’s One-Sided View of Job Creation in a Capitalist Society). In this post and subsequent posts, I will begin to look in more depth at Mr. Stanford’s economic views. It is all the more necessary since the main title of his major book is Economics for Everyone. His book is most definitely not for everyone since, although it appears to be for the working class, it ultimately opposes their interest as a class to struggle for the abolition of capitalism. Furthermore, despite the subtitle of his book, A Short Guide to the Economics of Capitalism, it certainly does not express the nature of capitalist society adequately. 

For example, Mr. Stanford’s definition of money has little to recommend it since it fails to explain to workers how money (and hence prices) confers upon employers the power to direct workers’ lives. Marx’s theory of money, by contrast, is designed to do just that.

The following necessarily involves a theory of money, and it is not easy.

Stanford’s Inadequate Definition of Money Has a Historical Antecedent

Let us look at one of Mr. Stanford’s references to money (related to prices) in his book. Page 189:

Very broadly, money is anything that allows its holder to purchase other goods and services. In other words, money is purchasing power.

Mr. Stanford’s identification of money with “purchasing power,” interestingly enough, already had been expressed by a nineteenth-century author, Samuel Bailey, whose theory Karl Marx criticized. From Elena Lange (2021), Value without Fetish Uno Kōzō’s Theory of ‘Pure Capitalism’ in Light of Marx’s Critique of Political Economy, pages 225-226:

… this position echoes Bailey’s identification of money with ‘power of purchase.’  [Quoting Bailey] ‘If the value of an object is its power of purchasing, there must be something to purchase. Value denotes, consequently, nothing positive or intrinsic, but merely the relation in which two objects stand to each other as exchangeable commodities’. Although we will return to this, Marx’s critique of the notion of money as ‘power of purchase’ presents a useful summary of the previous discussion, namely the inability of a formal, functionalist and nominalist theory of money to explain money’s function of general social exchangeability, or, which is the same, the measure of value. ‘Power of purchasing’
hence does not explain the logical significance of money, but presents a tautology. It is well worth quoting the passage at length: [from Marx]

[Bailey’s] entire wisdom is, in fact, contained in this passage. ‘If value is nothing but power of purchasing’ (a very fine definition since ‘purchasing’ presupposes not only value, but the representation of value as ‘money’), ‘it denotes’, etc. However let us first clear away from Bailey’s proposition the absurdities which have been smuggled in. ‘PURCHASING’ means transforming money into commodities. Money already presupposes VALUE and the development OF VALUE. Consequently, out with the expression ‘PURCHASING’ first of all. Otherwise we are explaining
VALUE by VALUE. Accurately expressed it would read as follows: ‘If the value of an object is the relation in which it exchanges with other objects, value denotes, consequently’ (viz., in consequence of the ‘if’) nothing, but merely the relation in which two objects stand to each other as exchangeable objects’ (I.e., [pp.] 4–5). Nobody will contest this tautology. What follows from it, by the way, is that the ‘VALUE’ OF AN OBJECT ‘DENOTES NOTHING’. For example, 1lb. of COFFEE = 4 lbs of COTTON. What is then the value of 1lb. of COFFEE? 4 lbs of COTTON. And of 4 lbs of COTTON? 1lb. of COFFEE. Since the value of 1lb. of coffee is 4 lbs of COTTON, and, on the other hand, the value of 4 lbs of COTTON = 1lb. of COFFEE, then it is clear that the value of 1lb. of COFFEE= 1lb. of COFFEE (since 4 lbs of COTTON = 1lb. of COFFEE), a = b, b = a, HENCE a = a. What arises from this explanation is, therefore, that the value of a use value = a [certain] quantity of the same use value.

The problem with Bailey’s and Stanford’s characterization of money is that nowhere do they explain why a specific thing called money has this power to purchase at all, and how this power to purchase is different from (and yet related to) other things that are on the market (call them commodities–products of labour that are produced for sale). Other commodities do not have “purchasing power” directly–whereas money does. Why is that? Is there a connection with the purchasing power of money and the lack of purchasing power of all other commodities? 

If money is the power to purchase, then what it purchases, by implication, is not money and lacks purchasing power. Hence, money has a monopoly of power over purchasing, and all other commodities lack this direct power of purchasing.

At one pole, there is money, with its monopoly power of purchasing commodities directly, and at the other pole are commodities that lack this power of direct purchasing power. What explains this situation? Mr. Stanford does not address the issue since he is undoubtedly unaware of the problem. For him, the purchasing power of money is simply given rather than something to be explained. 

[As an aside, this definition is obviously inadequate even from the point of view of workers’ everyday experience. For instance, I use my Royal Bank Westjet Master Card to purchase almost everything (in order to accumulate Westjet dollars to be used to see my daughter, Francesca. 

Although my credit card has purchasing power and thus falls under Stanford’s definition of money, obviously the day of reckoning will arise if I do not transfer my deposit funds to pay off my credit card. From this point of view, the deposit funds are money, but not my credit card.)

Stanford’s Distortion of Marx’s Labour Theory of Value Related to Ignoring Marx’s Theory of the Commodity, Value Form, Money and Prices 

This lack of an explanation of the unique monopoly power of money goes hand in hand with a distortion of Karl Marx’s theory of value and commodities. Mr. Stanford reduces Marx’s theory to the so-called theory that labour in general, and only labour, produces value. From his book (2008) Economics for Everyone: A Short Guide to the Economics of Capitalism, page 54:

An economic underpinning for this fightback was provided by Karl Marx. Like the classical economists, he focused on the dynamic evolution of capitalism as a system, and the turbulent relationships between different classes. He argued that the payment of profit on private investments did not reflect any particular economic function, but was only a social relationship. Profit represented a new, more subtle form of EXPLOITATION: an indirect, effective way of capturing economic surplus from those (the workers) who truly do the work. Marx tried (unsuccessfully) to explain how prices in capitalism (which include the payment of profit) could still be based on the underlying labour values of different commodities. [my emphasis] 

Mr. Stanford’s evident distortion of Marx’s theory comes out even more clearly from the following passage (page 71): 

For simplicity, the classical economists adopted a labour theory of value. In this theory, the prices of producible commodities reflect the total amount of labour required to produce them (including both direct labour and the indirect labour required to produce machines and raw materials used in production – a complication we’ll discuss in the next chapter). Marx realized this simplified theory was wrong: prices under capitalism must also reflect the payment of profit. But he was politically committed to explaining prices on the basis of their “underlying” labour values, so he undertook a complicated (and ultimately unsuccessful) attempt to explain prices on the basis of labour values  [my emphasis]. Neoclassical economists, responding to Marx, tried to provide an intellectual and moral justification for the fact that profits are paid on capital investments by attempting to show that capital itself is actually productive. These efforts, too, were unsuccessful.

In the end, the relevance of this long controversy is not entirely clear. Productive human effort (“work,” broadly defined) is clearly the only way to transform the things we harvest from our natural environment into useful goods and services. In this sense, work is the source of all value added. For society as a whole, just as for that lazy teenager, if we don’t work, we don’t eat. Nothing else – not alien landings, not divine intervention, and not some mystical property of “capital” – is genuinely productive. Under capitalism, profits are paid on capital investments. These profits reflect a social institution called “private ownership,” not any real productive activity or function. (In fact, as we’ll see, it’s not even possible to clearly measure capital, let alone to prove that it is productive.) Because of this institution of private ownership of capital, profits are reflected in the prices of various goods and services (and hence also in GDP).

We can accept that human work is the sole driving force of production while simultaneously recognizing that prices (and things that depend on prices, like GDP) depend on other factors, too – namely, under capitalism, profit.

There are a couple of points worthy of notice in this passage. Firstly, Mr. Stanford’s view that labour is a primary but not exclusive determinant of value (and price–for him there is really no difference between them since he reduces money to purchasing power) is somewhat similar to David Ricardo’s nineteenth century theoretical position, which held a 90 percent labour theory of value, so to speak since Ricardo argued that it was labour mainly but not exclusively that formed the value (and price) of commodities. . Ricardo (1821/2004)  wrote in his On the Principles of Political Economy and Taxation (page 30):

SECTION IV

The principle that the quantity of labour bestowed on the production of commodities regulates their relative value, considerably modified by the employment of machinery and other fixed and durable capital.

In the former section we have supposed the implements and weapons necessary to kill the deer and salmon, to be equally durable, and to be the result of the same quantity of labour, and we have seen that the variations in the relative value of deer and salmon depended solely on the varying quantities of labour necessary to obtain them,—but in every state of society, the tools, implements, buildings, and machinery employed in different trades may be of various degrees of durability, and may require different portions of labour to produce them. The proportions, too, in which the capital that is to support labour, and the capital that is invested in tools, machinery and buildings, may be variously combined. This difference in the degree of durability of fixed capital, and this variety in the proportions in which the two sorts of capital may be combined, introduce another cause, besides the greater or less quantity of labour necessary to produce commodities, for the variations in their relative value—this cause is the rise or fall in the value of labour.

Secondly, like many reformists (as well as some self-proclaimed Marxists), Mr. Stanford identifies Marx’s labour theory of value as either identical to or merely a variant of Ricardo’s labour theory of value. Ricardo identified labour as such or general labour (which was performed in prehistoric times, in ancient Greece, in feudal Europe, etc.) as the main determinant of the value of commodities. Labour as such is what Mr. Stanford calls “human work is the sole driving force of production.”  Mr. Stanford implies that this is supposedly Marx’s position. Such a view is a complete distortion of Marx’s theory–since it lacks any relation to Marx’s theory of commodities, value, use value, money (and hence prices).

It should be pointed out immediately that Ricardo had a labour theory of value but failed to connect his labour theory of value to the existence of money and its monopoly power of immediate purchasing power. The same applies to Mr. Stanford’s own reference to the purchasing power of money, on the one hand, and his attempt to partially dissociate prices from labour on the other (we cannot even talk of “value” in relation to Stanford’s theory since for him there is really only prices). 

If money is purchasing power, or the capacity to immediately be exchangeable with other commodities (with the other commodities lacking this power), then a theory should be able to explain how and why and through what means money has this power. From Capital: A Critique of Political Economy. Volume 1:  page 186: 

The difficulty lies not in comprehending that money is a commodity, but in discovering how, why and by what means a commodity becomes money.

In terms of the structure of the first two chapters of volume one of Capital, Samezo Kuruma (2018), in his Marx’s Theory of the Genesis of Money How, Why, and Through What is a Commodity Money? has this to say (pages 54-55): 

Marx analyses the how of money in the theory of the value form [in the third section of the first chapter of Capital, and the why of money in the theory of the fetish character [the fourth section of the first chapter of Capital], whereas in the theory of the exchange process [chapter two of Capital] he examines the question of through what. …  Marx’s indication of these three difficulties clearly suggests that he managed to brilliantly overcome them, but no hint is provided as to where this is carried out. My view is that Marx answered the questions of how, why, and through what, respectively, in Section Three [of chapter one of Volume 1 of Capital], Section Four [of chapter one of Volume 1 of Capital], and Chapter Two [of Volume 1 of Capital]. So the three problems in the sentence are listed in the order that Marx solves them in Capital.

Incidentally, Marx does not pose these three problems as a sort of logical schema or in some frivolous manner; they are realistic problems. Without solving each, an adequate understanding of money is not possible. Indeed, earlier political economy slipped into a variety of errors by failing to solve those problems.

Marx’s explanation of the purchasing power of money lies, on the one hand, in the specific nature of the labour that results in the existence of money as a monopoly power–abstract labour or general human labour or universal labour without distinction. This general social labour, unlike earlier societies, does not find its expression in the immediate results of the production process (the process of producing our lives as human beings).

The reference to the immediate results of a labour process that does not result in a social product directly means that it can only be expressed indirectly or through a process of mediation–the exchange process. Contrary to Stanford’s characterization of Marx’s theory of value, the kind of labour is therefore historically specific and not some general social labour that exists and acts as or functions exclusively as social labour regardless of  the kind of society. Stanford, however, presents Marx’s labour theory of value as just that: as ahistorical. 

Abstract labour is a kind of negative labour–it is not social labour as workers work concretely or materially, and it is this labour which produces the value of a commodity, say beer, and not the labour which produces the beer as beer concretely.

On the other hand, a definite kind of labour, concrete labour, produces a definite kind of  use value, say beer. But the result of this concrete labour, since it is linked to abstract labour, is a commodity that is not yet social in its concrete form of beer. A further process–the exchange process–is required to convert the beer into a form where it can function as “purchasing power”–by being able to be converted into any form of commodity–money. 

At one pole is the commodity, beer, which lacks “purchasing power,” and at the other pole is money, which monopolizes purchasing power. 

I will elaborate on this in the next section.

Mr. Stanford, therefore, does not have a theory of money that links money to a specific kind of production. His theory of money as purchasing power, like Bailey’s theory, is an exchange theory of money. Marx, on the other hand, had a production theory of money that referred to a specific kind of society. That theory, however, cannot be characterized as merely a labour theory of value; Marx in fact had a dual or twofold theory of labour.

Marx’s Dual or Twofold Theory of Labour and Commodities

This labour that is connected to the monopoly purchasing power of money is not general labour that human beings have performed throughout history, but labour that is organized in a specific way–as I pointed out in one of my published articles, Dewey’s Materialist Philosophy of Education: A Resource for Critical Pedagogues? In pages 259-288, The European Legacy, Volume 11, Issue 3, pages 274-275: 

Marx provided a systematic logical critique of present capitalist society (the contextual basis for the functioning of schools), on the basis of a dual theory of use or a dual theory of labour. It is this theory which provides the ground for his analysis and critique of capital as well as his subsequent account of the history of the emergence of capital. It is an understanding of capital logically via the twin concepts of concrete and abstract labour, and their further development, which constitutes his critique; an understanding of the coming into being of capital presupposes this logical determination.

Marx relied on Aristotle’s distinction between the use of shoes as shoes and the use of shoes as a means for obtaining another commodity (as a means of exchange):

Take for example, a shoe—there is its wear as a shoe and there is its use as an article of exchange; for both are ways of using a shoe, inasmuch as even he that exchanges a shoe for money or food with the customer that wants a shoe uses it as a shoe, though not for the use peculiar to a shoe, since shoes have not come into existence for the purpose of exchange.

Both are uses of shoes, but they are not the same kind of use. Marx expanded the idea of the dual use of things to include labour in capitalist society. Labour in capitalist society has a dual use which constitutes a contradictory dynamic that develops the material production process, while also tending to undermine the material production process through crises. Marx evidently considered that a dual theory of the use of things or a dual theory of labour was central for a critical understanding of capitalist society:

[London], August 24, 1867
The best points in my book are: 1) the two-fold character of labour, according to whether it is expressed in use value or exchange value. (All understanding of the facts depends upon this.) It is emphasised immediately, in the first chapter.

Marx reiterated the importance of the two-fold character of labour for his critique of capitalist society a few months later:

[London], January 8, 1868

It is strange that the fellow [Eugen Duhring] does not sense the three fundamentally
new elements of the book:
. . . 2) That the economists, without exception, have missed the simple point that if the commodity has a double character—use value and exchange value—then the labour represented by the commodity must also have a two-fold character, while the mere analysis of labour as such, as in Smith, Ricardo, etc., is bound to come up everywhere against inexplicable problems. This is, in fact, the whole secret of the critical conception.

It is Marx’s argument that social labour, in the form of abstract human labour, has distinctive characteristics which oppose it to human labour as concrete labour. It is only through being connected to other labours indirectly that it becomes social labour. The concrete labour that is performed has no direct connection to the labour of other people. To put it another way, the material process of life and the social process of life, which form a unity in the case of human beings, since human beings are both material and social beings, is sundered in capitalist society.

This situation can also be expressed in terms of parts and wholes. Each capitalist unit is a part of the total division of labour. However, this part is quite curious. It is a part that does not function as a part qualitatively while human labour is being expended. The labour being performed is not social labour, connected to other human labour and determinate needs. It needs to become a part only after the micro-production process is at an end, if it is to count as a part of the whole.

Since concrete labour is not social labour as it is being performed, and since the latter is not expressed immediately in concrete use-values, the possibility arises that the amount of concrete labour does not translate into the same amount of social labour. This possible non-identity has major implications for the structure of human life: a dynamic quantitative process is built into production. The quantity of labour required to produce output becomes a concern because the mere expenditure of concrete human labour does not necessarily suffice to meet standards set by the general level of productivity in a particular industry. If those standards are not met, the capitalist firm cannot in the long run reproduce itself. For the capitalist firm to survive, an external pressure is brought to bear on producers to meet that standard. The peculiar character of the part of a whole in capitalist production is thus that the quality of functioning as part of total social labour is transformed into a purely quantitative form. The specific quality of social labour in capitalist society is the priority of its quantity over its concrete quality, or abstract labour over concrete labour.

There is further evidence that Marx considered the twofold character of labour to be of major importance. Ironically, Marx explicitly underlines its importance by providing a separate heading for it in the first chapter and emphasizing its importance for his critique of political economy (Capital, Volume 1: pages 131-132):  

2. THE DUAL CHARACTER OF THE LABOUR EMBODIED IN COMMODITIES

Initially the commodity appeared to us as an object with a dual character, possessing both use-value and exchange-value. Later on it was seen that labour, too, has a dual character: in so far as it finds its expression in value, it no longer possesses the same characteristics as when it is the creator of use-values. I was the first to point out and examine critically this twofold nature of the labour contained in commodities. As this point is crucial to an understanding of political economy, it requires further elucidation.

This dual character of labour produces a commodity–a contradictory unity of use value and value, and this is linked to the nature of money.

The Dual or Twofold Character of Labour and Commodities, on the One Hand, and the Nature of Money (or the Form of Value) on the Other: Or How a Commodity Becomes Money 

Marx’s dual theory of labour is related to Marx’s dual theory of commodities. Commodities have two essential aspects to them: they are both use values and values, and concrete labour produces use values whereas abstract labour produces the value of the commodity. 

This nature of commodities as involving two essential aspects is not, however, immediately expressed in the commodities themselves. It is only concrete labour that is expressed in the use value of the commodity as the specific kind of labour that produces the specific kind of commodity, such as beer. The concrete labour which we performed in the Calgary brewery where I worked, for example, resulted in the concrete beer as beer. Simultaneously, the social nature of the labour performed, as forming part of the total labour of society within a division of labour, is not social labour in its immediate form as beer.

Since a social process emerged that resulted in the performance of labour that is not immediately social in nature (a negative process, if you like), another process is required to express the social nature of the labour performed–a process of exchange. 

From Capital, Volume 1, page 165:

Objects of utility become commodities only because they are the products of the labour of private individuals who work independently of each other. The sum total of the labour of all these private individuals forms the aggregate labour of society. Since the producers do not come into social contact until they exchange the products of their labour, the specific social characteristics of their private labours appear only within this exchange. In other words, the labour of the private individual manifests itself as an element of the total labour of society only through the relations which the act of exchange establishes between the products, and, through their mediation, between the producers. 

Since the concrete labour performed is not social labour directly but only indirectly, its social nature can only be expressed indirectly–through another, different commodity, in the use value of another commodity. However, merely expressing one commodity, say beer, in another commodity, say in steel, would not express the general social nature of the labour that produces value. To express adequately abstract labour and value, it is necessary that the internal opposition of the commodity between the concrete labour and concrete use value, on the one hand, be completely contrasted with abstract labour and value on the other in an external form–ultimately in money as the unique commodity that has the monopoly power of being able to purchase any commodity. This monopoly power of money necessarily excludes such power attaching to the other commodities. Capital, Volume 1, page 161:

Finally, the last form, C [practically, the money form], gives to the world of commodities a general social relative form of value, because, and in so far as, all commodities except one are thereby excluded from the equivalent form. A single commodity, the linen, therefore has the form of direct exchangeability with all other commodities, in other words it has a directly social form because, and in so far as, no other commodity is in this situation. 26

26. It is by no means self-evident that the form of direct and universal exchangeability is an antagonistic form, as inseparable from its opposite, the form of non-direct exchangeability, as the positivity of one pole of a magnet is from the negativity of the other pole. This has allowed the illusion to arise that all commodities can simultaneously be imprinted with the stamp of direct exchangeability, in the same way that it might be imagined that all Catholics can be popes. It is, of course, highly desirable in the eyes of the petty bourgeois, who views the production of commodities as the absolute summit of human freedom and individual independence, that the inconveniences resulting from the impossibility of exchanging commodities directly, which are inherent in this form, should be removed.

Money is the form of value–the expression of value, or the expression of the general nature of the labour that is not directly social. The internal opposition of abstract labour and concrete labour, and value and use value, finds expression through the external opposition of all commodities on the one side expressing their value in one commodity–money.

Stanford’s definition of money as “purchasing power” simply fails to address “how, why and through what means” something can serve as money or purchasing power of commodities. 

Obviously, not all social labour is expressed in this form; when I cooked for my daughter, my cooking was social in nature but it did not assume a form different from the concrete result. In a capitalist society, by contrast, the social nature of labour assumes–and must assume–a form external to the concrete use value produced by concrete labour. 

Political Implications of the Monopoly of the Purchasing Power of Money

The connection between a specific character of social labour and money has political implications since such a connection expresses a kind of society that necessarily escapes the control of the workers and in fact leads, ultimately, to the control over them of their own products. 

To treat Marx’s theory as purely an economic theory without any political implications, of course, is useful for both academics–and for the class of employers. 

Elena Lange(2019) has addressed this issue by noting that Marx’s theory is a theory of fetishism and not just a labour theory of value in her article “The Transformation Problem as a Problem of Fetishism,” pages 51-70, in Filosofski Vestnik, Volume 40, issue Number 3, page 52: 

For Marx, lacking in the classics, and strangely ignored in Marx‘s modern interpreters, the distinction between abstract and concrete labour is the crucial critical heuristic to clear the path to a thoroughgoing critique of the capitalist relations of production and its inverted self-representations. This distinction is directly reflected in the formulation of the labour theory of value, by determining the social substance of value as abstract-general human labour and distinguishing it from concrete labour as manifested in the commodity’s use-value.  This conceptualisation equally allowed Marx to pierce the problem of form and content – the problem of fetishism.

Mr. Stanford, by assuming as a fact the direct purchasing power of money rather than explaining it, misses the connection between the monopoly of the purchasing power of money and the lack of social power of all other commodities–including workers (after all, there is a market for workers, is there not?). 

The nature and implications of this connection between the production of commodities (a contradictory unity of use value and value) via abstract and concrete labour, the expression of the value of a commodity in money and the fetishism of commodities will be addressed in another post in this series, however. The next post in this series will look at how the exchange process escapes the control of the participants in the exchange process 

Conclusion

Mr. Stanford’s definition of money as purchasing power is definitely an inadequate definition of the nature of money since it excludes the conditions for something to be money: concrete labour cannot be directly social labour. His interpretation of Marx’s so-called labour theory of value is also definitely inadequate since it excludes any consideration of the dual nature of labour and commodities in a capitalist society; in effect, he treats Marx’s theory to be a variant of Ricardo’s ahistorical theory of all labour throughout history somehow producing (exchange) value. Ricardo’s labour theory of value has little connection with the necessity for money to arise, on the one hand, and the monopoly nature of money (and the simultaneous exclusion of other commodities) on the other.   

Mr. Stanford’s definition of money as “purchasing power” has also a parallel in Ricardo’s theory in that both fail to connect their theory of money to capitalist production. 

Stanford’s view, similar to Ricardo’s view, that somehow labour is more or less the primary cause of the quantitative price of commodities but not the exclusive cause once “capital” (meaning machinery and other means of production that last longer than one year) fails to engage in any inquiry into the peculiar kind of labour (really a kind of organization of  social labour) that needs to be expressed in something other than the immediate use value (such as beer) which is produced. 

 His reduction of Marx’s theory to Ricardo’s theory leaves Mr. Stanford’s theory of money without any connection to the purchasing power that money has–a power that ultimately is exercised over the working class. The twofold or dual nature of labour necessarily involves the expression of the nature of abstract labour as value in the form of money, which excludes all other commodities from being money; purchasing power on one side necessarily involves a lack of such a power on the other side. 

Mr. Stanford’s economics for everyone–is it really for the working class? 

The connection between a specific character of social labour and money has political implications since such a connection expresses a kind of society that necessarily escapes the control of the workers and in fact leads, ultimately, to the control over them of their own products. That connection will be explored in another post. 

 

The Rate of Exploitation of the Workers of the Bank of Montreal (BMO), One of the Largest Private Employers in Canada

Introduction

In two others posts I presented the twenty largest employers in Toronto according to level of employment (see A Short List of the Largest Employers in Toronto, Ontario, Canada) and the twenty largest employers in Canada according to profit (see A Short List of the Largest Private Employers in Canada, According to Profit).

I have tried to calculate the rate of exploitation of workers of Magna International in an earlier post (see The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One); Magna International is one of the largest employers in Toronto as well as the rate of exploitation of workers at the Canadian Imperial Bank of Commerce (CIBC) (see ???).

But what is the rate of exploitation? And why not use the usual rate of profit or the rate of return? The rate of profit is calculated as profit divided by investment. Since employers purchase both the means for work–buildings, computers, office supplies, raw material–and hire workers–we can classify investment into two categories: c, meaning constant capital, or the capital invested in commodities other than workers; and v, or variable capital, the capital invested in the hiring of workers for a certain period of time (wages, salaries and benefits).

The purpose of investment in a capitalist economy is to obtain more money (see The Money Circuit of Capital), and the additional money is surplus value when it is related to its source: workers working for more time than what they cost to produce themselves. The relation between surplus value and variable capital (or wages and salaries) is the rate of surplus value or the rate of exploitation, expressed as a ratio: s/v.

When the surplus is related to both c and v and expressed as a ratio, it is the rate of profit: s/(c+v).

In Marxian economics, you cannot simply use the economic classifications provided by employers and governments since such classifications often hide the nature of the social world in which we live. The rate of profit underestimates the rate of exploitation since the surplus value is related to total investment and not just to the workers. Furthermore, it makes the surplus value appear to derive from both constant capital and variable capital.

I decided to look at the annual report of some of the largest private companies in Toronto if they are available in order to calculate the rate of exploitation at a more local level.

The lack of any attempt to determine the rate of exploitation at the city level by has undoubtedly reinforced social-reformist tendencies.

Conclusions First

As usual, I start with the conclusion in order to make readily accessible the results of the calculations for those who are more interested in the results than in how to obtain them.

The rate of exploitation or the rate of surplus value of Bank of Montreal workers is s/v; therefore, s/v is 7,533/8,162=92 percent.

This means that, in terms of money, $1 of wage or salary of a regular bank worker results in $0.92 cn surplus value or profit for free (calculated on the basis of the procedure outlined in the post on the rate of exploitation of Canadian Imperial Bank of Commerce bank workers). Alternatively, for every hour worked, a Bank of Montreal worker works 55 minutes for free for the Bank of Montreal.

It also means the following:

Data on Which the Calculation Is Based

The calculation of the rate of exploitation is undoubtedly imperfect, and I invite the reader to correct its gaps.

In millions of Canadian dollars:

Page 18:

Summary Income Statement
Income
Net interest income $12,888
Non-interest revenue $12,595
Revenue $25,483 [add the first two]
Insurance claims, commissions and changes in policy benefit liabilities (CCPB) $2,709
Revenue, net of CCPB $22,774 [subtract $25 483 by $2 709]

Expenses
Provision for (recovery of) credit losses on impaired loans $751
Provision for (recovery of) credit losses on performing loans $121
Total provision for credit losses $872 [add the last two]
Non-interest expense $14,630
Total expenses $15,502

Net income $7272 ($22,774-$15,502)

Adjustments

In Marxian theory, it is necessary to question whether some expenses are expenses for both the individual employer and for the class of employers (and fractions of their class, such as those who live on interest); in such a case, the expense is deducted from total revenue. On the other hand, there are expenses that are expenses for the individual employer but are not expenses when looked at from the point of view of the class of employers; in such an instance, they are paid out from the surplus value produced or obtained by workers and are to be included in income before taxes.

In the annual report, the category of “Non-interest expense” is subtracted from total revenue, to yield the category “Net income.” However, to calculate the rate of exploitation according to the principles of Marxian economics, it is necessary to make certain adjustments. To that end, we need to look in more detail at the category “Non-interest expense.”

Non-Interest Expense
(Canadian $ in millions)
Employee compensation
Salaries $4,762
Performance-based compensation $2,610
Employee benefits $1,051
Total employee compensation 8,423
Premises and equipment 2,988
Other 2,665
Amortization of intangible assets 554
Total non-interest expense 14,630

As in other posts on the rate of exploitation in Canadian banks, the category “Performance-based compensation” causes some problems, which requires adjustments. It appears that most employees receive some kind of bonus based on performance. One site indicates the following:

BMO – Bank of Montreal pays an average of C$4,459 in annual employee bonuses. Bonus pay at BMO – Bank of Montreal ranges from C$993 to C$9,500 annually among employees who report receiving a bonus. Employees with the title Branch Manager, Banking earn the highest bonuses with an average annual bonus of C$9,500. Employees with the title Customer Service Representative (CSR) earn the lowest bonuses with an average annual bonus of C$993.

On the other hand, according to the Bank of Montreal Proxy Circular, all executives receive short-term incentives based on performance, senior executives receive mid-term incentives based on performance, and senior vice-presidents and above receive long-term incentives based on performance.

As I argued in my post about the rate of exploitation of Canadian Imperial Bank of Commerce workers:

However, the gap between executive pay and the pay of regular employees has widened over the years, so it is reasonable to infer that the category “Performance-based compensation” is divided into two parts: one part is a function of the number of hours worked by regular employees as well as the intensity of that work; the other is based on the extent to which bank managers and senior executives are successful in exploiting those regular employees. …

it is probably reasonable to assume that a minimum of 10 percent of the “Performance-based compensation” comes from the exploitation of senior bank executives of regular workers.
It would be necessary to have more detailed information to determine whether more or less of the money obtained in this category were distributed between regular bank workers and management executives. If regular bank workers received more, then the rate of exploitation would be less than the rate calculated below. If management executives received more, then the rate of exploitation would be more than the rate calculated below.

On the assumption of 10 percent, though, this means that 10 percent of the total of “Performance-based compensation, ” is reduced by 10 percent.

Adjusted Results

This 10 percent reduction in Performance-based compensation results in a reduction in total employee compensation” by $261,000,000 and an increase in net income by the same amount. This adjustment yields the following accounts:

Adjusted net income $7,533 (this represents surplus value or s)
Adjusted total employee compensation $8,162 (this represents variable capital or v)

The Rate of Exploitation of Bank of Montreal Workers

The rate of exploitation or the rate of surplus value of Bank of Montreal workers is s/v; therefore, s/v is 7,533/8,162=92 percent.

This means that, in terms of money, $1 of wage or salary of a regular bank worker results in $0.92 cn surplus value or profit for free (calculated on the basis of the procedure outlined in the post on the rate of exploitation of Canadian Imperial Bank of Commerce bank workers). Alternatively, for every hour worked, a Bank of Montreal worker works 55 minutes for free for the Bank of Montreal.

According to a few people who have worked at the Bank of Montreal, the length of the working day is the following (it is unclear whether lunch is included and unpaid or not]:

  • Eight thirty to four thirty [8-hour working day]
  • Working hours are steady. 8:45-5:15 everyday Monday to Friday [8.5-hour working day]
  • The bank has a 7.5 hours work day and is a 9am – 5pm environment. However, the bank has flexibility to accommodate your commuting schedule. [8-hour working day]
  • At that time i think they were M-W 10-3, T&F 10-8 and Sat. 10-4 [average of 410 minutes, or 6 hours 50 minutes, or 6.8 hours]
  • The Hours of what I work is 8:00am to 4:30pm [8.5 hours]
  • 9 hours, sometimes up to 12, but hours can be cut any time
  • 9.5 but paid for 7.5 often losing breaks due to lose of break time as others underperformed and I had to pick up the slack… regularly.
  • 7.5 hours per day
  • The hours were fixed at 8 hours a day. However, working days were flexible along with more shifts.

I will calculate the division of the working day from the shortest to the longest in the above quotes accordingly. I use minutes rather than hours.

  1. For a 6.8-hour working day (410 minutes), BMO workers spend 214 minutes (3 hours 34 minutes) to obtain their wage for the day, and they spend 196 minutes (3 hours 16 minutes) in obtaining a surplus value or profit for BMO.
  2. For a 7.5-hour working day (450 minutes), BMO workers spend 234 minutes (3 hours 54 minutes) to obtain their wage for the day, and they spend 216 minutes (3 hours 36 minutes) in obtaining a surplus value or profit for BMO.
  3. For an 8-hour working day (480 minutes), BMO workers spend 250 minutes (4 hours 10 minutes) to obtain their wage for the day, and they spend 230 minutes (3 hours 50 minutes) in obtaining a surplus value or profit for BMO.
  4. For an 8.5- hour working day (510 minutes), BMO workers spend 266 minutes (4 hours 26 minutes) to obtain their wage for the day, and they spend 244 minutes (4 hours 4 minutes) in obtaining a surplus value or profit for BMO.
  5. For a 9-hour working day (540 minutes), BMO workers spend 281 minutes (4 hours 41 minutes) to obtain their wage for the day, and they spend 259 minutes (4 hours 19 minutes) in obtaining a surplus value or profit for BMO.
  6. For a 9.5-hour working day (570 minutes), BMO workers spend 297 minutes (4 hours 57 minutes) to obtain their wage for the day, and they spend 273 minutes (4 hours 33 minutes) in obtaining a surplus value or profit for BMO.
  7. For a 12-hour working day (720 minutes), BMO workers spend 375 minutes (6 hours 15 minutes) to obtain their wage for the day, and they spend 345 minutes (5 hours 45 minutes) in obtaining a surplus value or profit for BMO.

It should be noted that I have used the verb “obtain” rather than “produce.” In Marxian economics, bank workers, as well as sales workers do not produce surplus value but rather transfer the surplus value already produced. This does not mean that these workers are not exploited capitalistically; they are used impersonally by the employer to obtain surplus value and a profit. Furthermore, things produced by others are used by employers such as Bank of Montreal to control their working lives in order to obtain surplus value or profit.

Bank of Montreal workers do not belong to a union. Would their becoming unionized turn their situation into one where they had a “fair contract” and “decent work?” I think not. Unions can limit exploitation and can control some aspects of their working lives, but in principle workers are things to be used by employers even with unions. This does not mean that a non-unionized environment is the same as a unionized environment. With unions that are independent of particular employers, that is to say, are real unions, there is an opportunity for workers to develop organizations of resistance against the power of particular employers.

The ideology of unions–that somehow they can produce a “fair contract” and “decent work”–needs, though, to be constantly criticized. Workers deserve better than the acceptance of such ideology by the left.