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Monday, December 3, 2018

Academic Political Corruption, Part 2

This article provides a background to one of the important features of my book The Rise of Big Government: How Egalitarianism Conquered America where I discuss the modern American welfare state and its ideological roots in totalitarian Swedish political theory.


In the first installment of this two-part series I discussed two examples of academic political corruption: the increasingly absurd efforts by terracentricists to defend their idea that the Earth was the center of the universe; and the equally absurd attempts by climate "scientists" to defend their deteriorating discipline.

The latter example is particularly disturbing because it involves an often-used trick in quantitative reasoning: when the data does not verify your hypothesis you change the definitions in the hypothesis so that you can reconfigure the data in its image.

Bluntly speaking: climatologists are in the business of redefining "climate" so that they can invent the data they need to save their dying theory of global warming.

Unfortunately, as mentioned, this dishonest practice is not isolated to one discipline. The social sciences have seen a few examples of their own; originally I was going to include two, but this article is lengthy enough as it is.

The change in the concept of poverty over the past half century, approximately, is one of the most under-reported examples of the "retrogressive orbit" phenomenon being practiced today. The change happened in the mid-20th century as part of the beginning of the War on Poverty. It was the result of an effort among social scientists to save Marxism from being defeated by the real-world success of free-market capitalism. 

To see how this happened, let us review Marxist theory and its adaptation of the so-called iron law of wages. That particular feature of 19th century political economy plays a key role in the understanding of the change to the poverty concept.

Marxist economic theory rests on the so-called labor theory of value, where labor is the source of economic value. This is not controversial per se - the theory is not exclusive to Marxism -  but it is ultimately incompatible with an analysis of, e.g., the market-based distribution of income in a modern free-market capitalist system. This is one of the reasons why Marxist economics has failed in every one of its adaptations to the real world; there are many other reasons that we can discuss separately. 

As a result of its reliance on the labor theory of value, Marxist economics distinguishes between two parts of business revenue: the subsistence wage and the surplus - or the profit. The limitation to these two parts always leads Marxists to believe that everything the worker is not paid, is profit. This is ludicrous, of course, but it really is not much more complicated than that.

The subsistence wage, says Marx, is the wage that allows a worker to merely redistribute his labor force. It consists of a minimum intake of calories, minimum shelter (defined in an absolute sense of just offering protection against the forces of nature), minimum clothing and all other features needed to just allow a person to survive. 

This standard of living was defined in the early 19th century by political economist David Ricardo; its application in the mid 19th century in Marx's writings barely changes its absolute content. We need to keep this in mind when we talk about "minimum wage" and "poverty" in a modern context. 

When the subsistence-wage concept is combined with the labor theory of value, the following happens. Suppose a worker spends ten hours per day at an assembly line. Suppose the total sales revenue from a day’s worth of production is $10, or $1 per hour. In order to reproduce his labor, the workers needs to earn, say, is $2 per day; this is the subsistence wage. When that is what workers are paid, the surplus or "profit" from production is $8. 

According to Marxist theory, the worker is being exploited for 80 percent of the value of his work. The "problem" is that workers typically do not make subsistence wages, especially not in modern, industrialized economies. Not even back in the 19th century was the subsistence wage the prevailing form of compensation. Market wages rose with productivity and the evolution of worker skills; in the early 20th century there was a formidable explosion of standard of living in the Western world. 

Time and free-market capitalism was proving Marx wrong. 

His followers needed a remedy, a trick that would move the goal post so it would still look as though his theory was still valid. They found it in a new political invention, one that had emerged in part in response to the squalor of life in mid-19th century industrialized nations. 

The welfare state. 

Its origin was not what we know it to be today. It was based on a theory that has sometimes been referred to as "social conservatism". Its idea was that government should provide a last-resort safety net for those who had absolutely nothing. The benefits were broadly based on the concept of subsistence living: to be poor, it was said, meant to not even have what it takes to survive over time. 

This absolute concept of poverty lasted for a century. The problem - "problem" - is, again, that in a real free-market, capitalist economy, workers do not make subsistence wages. Fewer and fewer people fell through and lost everything. That is not to say it did not happen, but the role of the original welfare state was gradually becoming irrelevant. Workers made a market wage substantially higher than subsistence, and the strength of the mid-20th century economy allowed laid-off workers to find new jobs with relative ease.

Marxist subsistence living was being proven as a thing of the past. 

Enter the relative definition of poverty. To be poor is no longer a matter of survival, but of living at a standard that is determined by what everybody else makes. While strictly speaking not a fixed ratio, the U.S. poverty rate is de facto constant vs. median household income. Our federal poverty limits - there is one for each of a defined set of different family sizes - are marked up annually by a cost of living formula, the design of which is aimed to keep the poverty limits apace with median household income.

The change in the definition of poverty, which was quickly accepted by the social science community back in the 1960s, plays the same role in the practice of political economy as the change of the definition of climate does for climate politics. As I explained in the first part of this article, climate "scientists" are now redefining climate in order to obtain new statistical "evidence" in favor of their coveted global-warming hypothesis. By the same token, when Marxists 

a) saw that their theory of capitalism was being proven false, and
b) realized that this was remove the case for economic redistribution by government,

they simply tossed out the notion that workers are being oppressed into mere survival. Instead, they said, workers are being "oppressed" into living at a steadily improving standard. To make this a problem, they invented a life in "poverty" where the relative content of that life was the motivator for economic redistribution. 

The consequences of this relative definition of poverty are absurd. Even if that life means owning a car, living in a comfortable house, having a 42" flat-screen TV, 100 channels of cable TV, a laptop, a cell phone, three good meals of food per day and money to spare, it is still poverty if it only represents a certain percentage of median household income. If, on the other hand, every family is paid the same amount of money regardless of what work the parents do, and that standard is equal to mid-19th century subsistence, there is no longer any poverty in society. 

When social scientists today use the relative definition of poverty, they never acknowledge the purpose behind it. That is fine so long as their research is strictly aimed at analyzing the concept given its political circumstances, but when the research results in policy recommendations, without any recognition of the relative poverty concept being a moved goal post, that research is - intentionally or not - corrupted by political ideology.

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