1
$\begingroup$

I'm reading the following paper by Sullivan & Hickel (2023):

Their main claim is that capitalism did in fact not improve wages of low skilled labourers but in fact reduced them.

They also make other claims which seem hard to believe:

Countries governed by communist parties (Cuba, Vietnam, China, etc.) performed exceptionally well, as did countries with state-led industrial policies (South Korea, Taiwan, etc.). Similarly, Cereseto and Waitzkin (1986) find that in 1980, socialist planned economies performed better on life expectancy, mean years of schooling, and other social indicators than their cap- italist counterparts at a similar level of economic development

It is clear however that the expansion of the capitalist world-system caused a dramatic and prolonged process of impov- erishment on a scale unparalleled in recorded history.

Are the assertions made in this paper factual?

In this paper they use the following definition of capitalism:

According to world-systems theorists, capitalism is a system predicated on the ‘‘constant accumulation of capital,” or endless economic growth (Wallerstein, 1983). Under capitalism, some regions - the ‘core’ – monopolize highly- profitable production processes, allowing them to extract resources from the ’periphery,’ i.e., regions that are made to specialize in low- profit goods sold in highly competitive markets (Hickel, Sullivan, & Zoomkawala, 2021). This system initially arose in the 16th century Atlantic, with Northwest Europe as the core in relation to Eastern Europe and the Western Hemisphere as periphery, while Southern Europe assumed an intermediary or ‘semi-peripheral’ position (Wallerstein, 1974).

$\endgroup$
1
  • 2
    $\begingroup$ Since you're reading it, tell us what aspect of capitalism they're talking about and at what point in time does the transition from other-than-capitalism happen and in which economy or economies? How are they defining low skilled labourers? Give us the who, what, when, where. $\endgroup$
    – H2ONaCl
    Sep 16, 2023 at 9:11

1 Answer 1

2
$\begingroup$

Based on their attribution of capitalism as something that has existed since the 16th century, I suspect the authors are eliding over the inherent differences between capitalism and mercantilism. That seems evident from their chosen definition of capitalism. Consequently, with garbage going into their analysis, it isn't surprising that they'd have garbage conclusions coming out.

First, I'll take Alchian & Allen's definition of capitalism over the selection made by these authors any day of the week: a society in which private property rights over most resources are extensive enough that the consequences of future decisions can be capitalized into the property's price. Their reliance on this distinction between the "core" (read: mother country) and the "periphery" (read: colonies) smacks hard of mercantilism; in fact if you read in the word "gold" instead of "capital" in their phrase "constant accumulations of capital," it really fits mercantilism to a T. A chief feature of mercantilism was stringent government control or regulation of resources harvested in its colonies being used for the benefit of the mother country. In short, the criticism these authors are making appear to be of mercantilism, and not capitalism.

Additionally, they apparently are looking only at wages, which is only one component of total compensation (other forms of compensation including things such as unemployment and health insurance, social security, occupational environment and safety, defined-benefit or defined-contribution retirement benefits, and other fringe benefits in the vein of employer-provided food stocks or services [for example: on-site daycare]). It's important one takes note that over the past century (particularly since the early 1970s in the U.S.) that wages have been a declining share of total compensation as government employment and occupational legislation and regulations have shifted worker's compensation away from purely monetary compensation to these other forms. While total compensation has kept pace with the increases in worker productivity arising from capital augmentation, wages have not as, again, larger shares of compensation have trended toward nonmonetary forms.

That the only mention of "money" in the article is about China's money supply, and the article not containing any mention at all of compensation, it's clear the authors have not paid any attention to this basic fact of national income accounting and have therefore ignored the impact its absence would have on their analysis.

It is a basic fact of historical macroeconomics that national and international values for alpha in the Solow model have held more or less constant (see Romer's Advanced Macroeconomics text), meaning the shares of income going to capital and labor have also held constant.

What also seems to be missing is any consideration of how technological advancement, women's entry into labor market participation, and sociological forces such as assortative mating have themselves impacted wages and household incomes. All else constant, more workers in the labor market means reduced compensation for workers in general (that is, both capital and the number of effective workers (i.e., the product of workers times the technological coefficient) are held constant). Due to women's unique penchant for hypergamy, the distribution/allocation of national income across household has also trended away from being more democratic as women tend only to form households with mates that earn a similar or greater income as they themselves earn. As women, with few exceptions, pursue higher-earning mates, that tends towards households now having one of the three possible pairings: high/high earner pairings, high earner/low female earner pairings, or low/low earner pairings instead of the more historical pairings where women earned little-to-no market income and men's wages were higher across the board due to the workforce population essentially being halved.

It's no wonder, then, that this paper arrives at some odd conclusions.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.