One Image is Worth a Thousand Words (II)

Less than 10 years ago, US firefighters and cops provided the most valuable photo opportunities:

President George W. Bush with firefighters and cops:

NYC, 14-09-01, [1]

Yet more firefighters during the unveiling of the USPS stamp "Heroes", reminiscent of the Raising the Flag in Iwo Jima USPS stamp.

White House, 11-03-02. [2]

[3]

Today, firefighters and cops (among other federal, state and municipal workers) are sacked, so as to pay for the disaster left behind by bankers, their politicians and their regulators. Just look at this woman's face.

Where are the politicians now?


Credits:
[1] The Bush Record. White House photo by Eric Draper.
[2] Photo Wikipedia.
[3] Image Wikipedia.

One Image is Worth a Thousand Words

Man! I'm getting addicted to this "one image is worth a thousand words" thing!

And, in this case, it's not just addictive, but pretty accurate:

Surplus-value and accumulation in comics: brilliant!

To the artist: good job!

Income Numerology

Dürer, Magic Square

Now I am confused. Maybe I should call Harvard symbologist Robert Langdon.

At one hand, the ABS in its Household Income and Income Distribution, Australia, 2007-08, Summary of Findings (catalogue number 6523.0), states that:

"While the mean equivalised disposable household income of all households in Australia in 2007-08 was $811 per week, the median (i.e. the midpoint when all people are ranked in ascending order of income) was somewhat lower at $692".

As the ABS defines it, that's the total after tax income households in Australia received from a variety of sources in a week, with some adjustments (the "equivalised" bit).

Neither in that specific publication nor elsewhere in the ABS website there seems to be any reference to annual mean or median household incomes in Australia. A quick call to the ABS seemed to confirm that (ABS National Information Referral Service, 1300 135 070).

Well, you could say, that's how the ABS likes its household income data: black, no sugar and weekly. Fair enough.

However, in relation to the housing affordability problem, the media keeps mentioning:

"However, the Australian Bureau of Statistics, Household Income and Income Distribution, Australia 2007-08 says that median household income across the country is $66,820!" See here the blog entry.

Or a similar figure for Sydney (instead of Australia):

"The Demographia International Housing Affordability Survey covering markets in six English-speaking nations and Hong Kong found that the ratio of house prices to median annual household income was 9.6 in Sydney. It put the median house price at $634,300 and median income $66,200." See here for the news story.

And here for yet another (but now is the mean, not the median!):

"With the average Sydney-sider earning $66,200 a year and the median house price $634,300, the report by urban planning firm Demographia said Sydney house prices had tripled relative to incomes since the 1980s".

As the authors do not specify any periodicity, you might assume it's an annual figure. Again, fair enough: the authors like their household income data with milk, sweet, and annual.

But then, you stumble on a problem: if those are annual figures ($66,200 and $66,820), even making allowances for inflation, shouldn't they keep a relation of something like 52 to 1 to the weekly amount above ($692)?

Well, they don't. The larger figures are near 100 times the ABS weekly figure.
 
Googling for the string "household median income of Australia" the four top results are Wikipedia with $66,820 (here), presumably for 2007/08, further referring to the ABS, catalogue number 6523.0; and the ABS itself, catalogue number 6523.0, where those figures do not seem to be!

So, where do the figures of $66,200 and $66,820 come from?

So, What's Wrong with Inequality, Anyway?

Well, they say an image is worth a thousand words. So let me save my breath; dear reader, just see the pictures in the two articles linked below:

Resource magnates rally to their protest against tax. The Australian. 10-06-2010.

Aftermath:

1. Then PM Kevin Rudd was deposed in a Westminster-style legal coup de etat (very civilized, actually).
2. Twiggy pockets $500 million in a day as Fortescue soars. SMH. 18-01-2011.

That's part of what's wrong with inequality: unequal access to power.

Land, Rent and Wages (III)

It's been 20 years since you started making shirts for a living and you have grown considerably wealthy.

And you achieved that because you realized the answer to the question in the previous blog was C. This is what you did:

When you started, you were able to make only one shirt a day, selling it for Re 145, as everybody else.

Your costs were Re 140 (Re 65 for labour), for a profit of Re 5 per shirt per day (i.e. 3.4%).

This is summarized as:

Costs, markup and price BEFORE
Materials include depreciation.

After a while, by working faster and possibly longer, you were able to make two shirts, spending twice as much in materials. (This is where we left in the previous blog). [*]

Consider this: your personal expenses during this harder working day remain the same (three meals, lodge, etc), and you can still cover them with Re 65, exactly as you did before. This leaves the second shirt's Re 65 labour compensation available.

That's summarized below:

Costs, markup and price AFTER
Materials include depreciation.

As a worker, you felt tempted either to (1) consume that Re 65, or (2) slow down the working pace.

But as an enterprising artisan you quickly realized that the additional Re 65 charged for labour and included in the second-shirt price are yours to dispose: instead of spending Re 65 in additional consumption, you could invest that amount.

In your case, even though you wore a capitalist and a worker caps, your capitalist side prevailed. So, by adding the monetary items in gray in the table, your real total profit was:

Re 65 + Re 10 = Re 75 (equivalent to a 25.8% profit).

That's what Marxists mean when they say that labour reproduces itself (1st shirt Re 65) and creates a surplus (2nd shirt Re 65). Marx called "surplus value" this unpaid work.

Note that, if required (say, to gain market share), you can afford to make a discount of Re 5 per shirt; even if your mark-up ("book profit") disappears, your surplus value remains and you still make a profit.

Unlike most less productive artisans, your profit no longer is limited to a mark-up: you will still strive to get one, but you don't need to.

Further, soon enough you realized that you don't need to make shirts yourself: you can hire workers to make them for you. You provide one sewing machine, material for each worker and make them work as hard as possible (which is exactly what you once did yourself), paying them Re 65. And you get a profit.[**]

Medieval craftsmen probably shared this duality worker/capitalist, wearing both caps. Over time, however, they evolved their business practices. And they became fully fledged capitalists by hiring workers.

Just like you did.

Enough. If you have questions, ask them. If you have objections, object away, with one condition: don't just say "I disagree"; state your objection precisely. 

Next blog we'll discuss any objections in detail. Hopefully, we'll be able to adopt a more "technical" language, too.

[*] The numerical example here is largely based on a similar example presented in Marta Harnecker's "Los Conceptos Elementales del Materialismo Histórico". Siglo Veintiuno Editores, España. 1969. page 161.

[**] Now you understand why, every time you and your workmates seem too happy, your boss comes up with new jobs.

Update: 17/01/2011 - added a link to Land, Rent and Wages (II)

Dale Carnegie, please...

Barely one day after Gerard Henderson tried to spin the apparently politically-motivated violence in Arizona into an Australian leftist issue (with the ABC -now sans Kerry O'Brien- as usual suspect), The Sydney Morning Herald publishes a link to the website "People OK with murdering Assange".

And, boy! oh, boy! isn't that website a veritable treasure trove of right-wing bigotry, imbecility and ignorance. How can Mr. Henderson possibly ignore this?

Just two examples:

"A dead man can't leak stuff... This guy's a traitor, he's treasonous, and he has broken every law of the United States. And I'm not for the death penalty, so... there's only one way to do it: illegally shoot the son of a bitch." Bob Beckel (Fox News commentator).

Find the video here and here.

Two little questions: Isn't to call for an illegal act defined as incitement to crime, murder in this case? Don't you need to be an American citizen to be a traitor to the United States?

And, to be fair to American right-wingers and to Mr. Henderson, the other fat man, right-end of the screen, appears to be... a "liberal"!

"Julian Assange is not an American citizen and he has no constitutional rights. So, there's no reason that the CIA can't kill him." John Hawkins (far-right blogger)

Unlike Mr. Beckel, at least Mr. Hawkins is right on this: Julian Assange is not an US citizen. This, however, does not mean he has no constitutional rights, or human rights, for that matter. Find Mr. Hawkins' text here.

For Christ's sake, please will someone give Julian Assange a copy of Dale Carnegie's "How to Win Friends and Influence People"?

Land, Rent and Wages (II)

Imagine you live in a rather backward place, where artisans and craftsmen co-exist with modern manufacturing.

And you are poor, although otherwise you are a modern gogetter: enterprising, hardworking, smart, realist and disciplined. As importantly, you are qualified as a tailor and own your sewing machine, inherited from your grandfather.

So, you decide to start a small business requiring little capital: you want to make shirts for sale.

You could be living nowadays in Bangladesh, for all we know, but people in the European Middle-Ages used to operate in similar ways.

You figure it takes you, as it does everybody else, one day to make a shirt, and it costs you to produce it:

Material unit cost (i.e. per shirt)

Should you ask Re 75 for your shirts? Obviously, not!

You are spending one day working on that shirt, but this cost is not reflected in the price. So, you put on your "worker" hat and charge the standard wage paid in the industry (say, Re 65 a day). With that, the shirt price raises to Re 140.

Is this the "right" price? Putting on your "capitalist" cap, you realize it isn't quite good, yet. True, it includes the standard shirtmaker daily wage, but you could get the same amount working for a shirt factory, without going through any other troubles (risking your capital, ordering materials, book keeping, etc.)

So, you must include an amount as compensation for your role as capitalist and for the use of your capital, but how much?

Other things being equal, you'd prefer to sell each shirt at the highest possible price: the excess of the unit price over unit cost being your compensation as capitalist (i.e. your profit per shirt).

However, this is not possible in general: the more you charge, the more customers you turn to your competitors.

In practice, you do the simplest thing: charge the same as everybody else. This is smart thinking, because shirts like the ones you make sell for, say, some Re 145 (give or take a little). This leaves an average margin of Re 5 as unit profit.

Is that good enough? Strictly speaking, it depends: if you had other more profitable -but roughly equivalent- investment options, it wouldn't be. But let's assume Re 145 is a good price.

Let's pause here, to consider something: as an independent artisan, you share characteristics with workers and businesspeople; however, there are differences, if subtle.

You share with workers the need to make a living. And the money you get to make a living (your labour compensation) comes from your labour, just as it does for any other worker.

With businesspeople (or capitalists) you share the need to make profits, and, being an independent artisan, your profits are a mark-up you add on top of your costs.

And like other businesspeople (but unlike other workers), you control all aspects of production. In particular, you control how fast and how long you work (and you get the full benefits/costs of any changes you decide!).

And you are motivated and hardworking, so a little time into your shirt-making, and you find yourself able to produce 2 shirts every day, while everybody else still manages only one!

How much is your daily profit now:

A. Twice as much as before (i.e. Re 10).

B. No change.

C. None of the above?

Think about the answer and we'll check it later, in the next blog.

Baker Street

I can't say I was a loyal follower of Gerry Rafferty: I was quite young at the time.

But I grew up with Baker Street: paraphrasing a radio station, it's part of the soundtrack to my life.

Somehow, Rafferty's death feels as the death of my youth.

And somehow, it's like we are all neighbors in Baker Street:

This city desert makes you feel so cold
It's got many people, but it's got no soul
And it's taken you so long
To find out you were wrong
When you thought it held everything

You used to think that it was so easy
You used to say that it was so easy
But you're trying, you're trying now

Another year and then you'd be happy
Just one more year and then you'd be happy
But you're crying, you're crying now

Gerry Rafferty (16/04/1947 – 04/01/2011) R.I.P.

You call that a leak? This is a leak!

Have you ever heard the word "plutonomy"?

Neither had I, until I found the "Citigroup Attempts to Disappear its Plutonomy Report" blog.

This is what the fine folks at Real-World Economics Review Blog had to say about it:

    "Both reports were leaked and made available on the WEB. Michael Moore referred to them in 'Capitalism: a Love Story', and the now retired US newscaster Bill Moyers has called attention to them. But they seem to have been largely ignored by scholars. They should be required reading."

And this is what a poster (clearly, not a "loony lefty"), had to say:

    "Remarkable: except for its conclusions it reads like a 'loony left' analysis..."

As a "loony lefty" I've got to say: I couldn't agree more.


PS: You can find the links to the reports in the link above, or in the one below:
"New links for secret Citigroup Plutonomy Reports"