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)