This article reviews the World Inequality Report 2018, a large collaborative data project based on the work of Thomas Piketty and the late Anthony Atkinson, which critiques the entire literature of inequality measurement from survey data and purports to provide superior, unprecedented and reliable coverage of income and wealth inequalities over the entire world, based primarily on tax records. The article examines three major issues: the coverage provided by tax data in the world economy, the consistency of tax data with other sources of information on income inequality, and the peculiarities of tax‐based measurement of inequality in the United States. Then a comparison is made with measures drawn from other forms of administrative data — specifically payroll records — which are generally more consistent with records of inequality measured in household surveys than are tax records. Following this, the article discusses the analysis of wealth and wealth inequality before offering a few closing remarks about policy.Read full paper here.
In the last year of his life, Pierangelo Garegnani (1930–2011) worked on revising a paper on Marx’s labour theory of value drafted 30 years before, which had remained unpublished. This revised paper is what is reproduced below.
The paper had been read at a 1980 Conference on Marx in Bielefeld, Germany. It was a new version, in English, of the paper ‘La teoria del valore: Marx e la tradizione marxista’, published, together with an early Italian version of Garegnani (1984) as well as some other material, in Garegnani’s Marx e gli economisti classici (1981: pp. 55–90); the project had originated in a series of articles published in the Italian weekly Rinascita in 1978 and 1979. In the opening page of an essay on ‘The Labour Theory of Value: ‘Detour’ or Technical Advance?’, Garegnani (1991: pp. 97 and 113, endnote 4) announced the present work as forthcoming, but in fact the paper did not go to print. In September 2010 Garegnani resumed working on the paper, to add to it a further Section IX concerning more recent discussions on Marx and the labour theory of value. He intended to co-author this additional Section with me, and it is from the ensuing collaboration that I have obtained the typescript of the Bielefeld paper, dated 1981, titled ‘The Labour Theory of Value in Marx and in the Marxist Tradition.’ On why this 1981 paper was still unpublished 10 years later, what went wrong with its publication in 1991, and why then the paper remained dormant for nearly 20 more years, Garegnani supplied little information. About these questions one can only wait for when an examination of his papers and correspondence – a vast task yet to be commenced – will possibly allow for a well-founded historical reconstruction of his choices.
Unfortunately Garegnani passed away in October 2011, before a draft of the additional Section IX could be achieved (see Petri [2015] for further details). But in that last year he also worked on revising the Bielefeld paper, that is the first eight sections of the intended new paper. The result of the revision is presented here. Although not a final version ratified by the author, it is a fully autonomous paper, and quite definitive: the draft contains no incomplete sentences or notes by Garegnani indicating that certain points might need further work. Relative to the 1981 version, it contains additional observations and stylistic improvements, but no changes in the basic arguments.
The aim and contents of the paper were summarized at some length by Garegnani himself when announcing it in the opening page of the 1991 essay. In that summary, which can now be read as an introduction to the arguments contained in the paper here submitted to the public, Garegnani (1991: p. 97) stresses that the paper is devoted to further confirming the thesis, advanced in Garegnani (1984), that the role of the labour theory of value in the classical approach and in Marx was the ‘technical’ one of providing a ‘measurement independent of distribution, of product, wages and means of production,’ thus allowing a determination of the rate of profits as the ratio of net social product to capital advances, surmounting, in the only – albeit imperfect – way concretely available at the time, the (apparent) vicious circle of a rate of profits dependent on relative prices in turn dependent on the rate of profits. With particular regard to Marx, Garegnani explains, the confirmation is achieved by showing that the traditional interpretations that attribute other roles to the labour theory of value ‘have little foundation in Marx’s own work. This applies in particular to the readings often made of some characteristic concepts of Marx, like his distinction between ‘inner’ and ‘apparent’ relations of the bourgeois system, the distinction between ‘abstract’ and ‘concrete’ labour, the representation of the wage as ‘value of labour power’, or the sense in which Marx refers to labour exploitation – a sense which, as he explicitly states, has little if anything to do with the labour theory of value.’ These interpretations ‘have indeed made it difficult to comprehend a large part of Marx’s theoretical work’. No attempt at diplomacy here! The published 1991 essay is then presented as an appendix to that still unpublished paper, defending the latter’s arguments against the views on Marx’s labour theory of value expressed by Samuelson, Baumol, Myrdal, Meek, Morishima, and Sen.
There remains to indicate why publishing this paper today is deemed important. The main reason is that Garegnani’s understanding of the role of the labour theory of value in Marx (and of the correct reading of those ‘characteristic concepts of Marx’) appears to be scarcely known outside Italy [1], a fact that has helped the frequent placement of his overall approach in the ranks of an allegedly anti-Marx ‘Sraffian school’. This reaction is hardly surprising in the light of the substantial diversity of Garegnani’s theses from the long-dominant ones. So dominant was the tradition attributing to the labour theory of value indispensable roles other than the one indicated by Garegnani – for example, the role of proving labour exploitation – that it is not difficult to understand that the spontaneous reaction of scholars steeped in the traditional interpretation may have been one of skepticism, if not of hostility, toward a view which, by claiming that nothing is lost by replacing the labour theory of value with Sraffa’s equations, seemed to reject fundamental elements of Marx’s assessment of the nature of the capital–labour relation. The absence of a detailed exposition in English of the arguments Garegnani supplies in support of his views has made it difficult to give those arguments the attentive consideration warranted by the recognized depth of thought of the author. The publication of the present paper aims at making such adequate consideration possible [2].
The criticism, in the last sections of the paper, of two Italian scholars absent from recent debates does not seem to be outdated either, because views similar to those they expressed are still present today. The near identification one finds in Lucio Colletti’s (1924–2001) writings of the concepts of fetishism, alienation, and abstract labour continues the long (and still alive) tradition stressing the ‘qualitative’ roles of Marx’s labour theory of value, and has been influential outside Italy too (see, for example, Foley 1982: p. 46, fn. 5). The argument put forward by Claudio Napoleoni (1924–1988), that outside the labour theory of value one cannot view profits as the fruit of exploitation [3], is representative of a widely shared view that helps us to understand the reluctance of many Marxists to replace the labour theory of value with the correct analysis of prices as provided by Sraffa.
Independently of how convincing it will be found, this paper questions the idea of a so-called ‘Sraffian school’ antithetical to Marx. Leaving aside the analytical and even philological legitimacy of referring to Sraffa’s work and its later developments as any new particular ‘school’ distinct from the modern reappraisal of the classical approach to value and distribution, the paper shows that no such counterposition is applicable to a scholar highly representative of that line of thought, in whose view Marx’s overall approach actually turns out to be strenghtened, rather than challenged, by the correct determination of rate of profits and prices achieved with Sraffa.
Notes
[1] The publication in 1985 of a French version of the Bielefeld paper (Garegnani 1985), also containing a short appendix criticizing Rowthorn (1974), does not seem to have been widely noticed: I have found it cited in only one (unpublished) paper concerned with Marx’s theory of value, Chattopadhyay (2000).Most of these issues were briefly tackled in this old post. Read paper by Garegnani here.
[2] And at supplying at last the needed background to the 1991 essay.
[3] Napoleoni’s argument is available in English in Napoleoni (1991). Garegnani does not cite this article, presumably because of the little time he had to work on the last three Sections, which have remained almost unchanged from the 1981 version.
Much of the criticism directed at austerity programs implemented after the 2007/2008 financial crisis, more forcefully in the eurozone, have relied on the same arguments Keynes and others raised against the (British) Treasury View developed in the 1920s and 1930s. Austerity, however, has been proposed most insistently in the 2010s by European authorities, led by the German Federal Ministry of Finance, the Bundesfinanzministerium (BMF). While the arguments for austerity then and now share some common elements, there are enough original arguments being presented by the BMF to make many of the criticisms ineffective. The paper reconstructs both views, the Treasury's and the BMF's, to show and evaluate their similarities and their differences.There is also an obituary by Fernando Ferrari here (subscription required).
Traditionally, monetary policy in Latin America followed the recommendations of the missions of the monetary “doctors” who defended an independent central bank and a pro-cyclical monetary policy, adhering to the automatic adjustment of the gold standard. A key function of central banks was to support fiscal stability. The effects of the Great Depression and its aftermath in the periphery countries questioned these recommendations and gave way to a shift in monetary policy. An illustrative example is provided by the creation of the Central Bank of the Argentina Republic (BCRA) under the auspices of Raúl Prebisch, and the technical assistance missions of the United States Federal Reserve to several Latin American countries some of which were led by Robert Triffin. Prebisch actively participated in mission to Paraguay and the Dominican Republic bringing the experience he had acquired as director of the BCRA and the tools devised to adapt monetary policy to a changing external context and circumstances. The use of the discount window and exchange controls, among other instruments, was seen in this new view as necessary to pursue counter-cyclical policies and to provide support for industrialization and full employment in the periphery.Read rest here.
"The biggest shift of all is in the US. Last week, President Donald Trump broke a longstanding taboo by condemning recent tightening by the Federal Reserve. Under him, the US has also embarked on an assault on the World Trade Organization’s dispute settlement system and an open-ended trade war with China."
The widening gaps across firms have been particularly marked in the digital world. Of the top 25 big tech firms (in terms of market capitalization) 14 are based in the United States, 3 in the European Union, 3 in China, 4 in other Asian countries and 1 in Africa. The top three big tech firms in the United States have an average market capitalization of more than $400 billion, compared with an average of $200 billion in the top big tech firms in China, $123 billion in Asia, $69 billion in Europe and $66 billion in Africa. What has been significant is the pace at which the benefits of market dominance have accrued in this sector: Amazon’s profits-to-sales ratio increased from 10 per cent in 2005 to 23 per cent in 2015, while that for Alibaba increased from 10 per cent in 2011 to 32 per cent in 2015.For a country in decline, the US corporations are doing surprisingly well. Again, the problem of deindustrialization is one of the consequences for working class people, and inequality. American corporations, capitalism if you prefer, is doing fine. Workers not so much (and hence Trump).
Milton Friedman's famous presidential address of 1968... aims to undermine the eclectic American Keynesianism of the 1950s and 1960s, the habits of thought to which Joan Robinson attached the (unintentionally) complimentary label of ‘bastard’ Keynesianism. I will only say a little about what that was. In fact, the adjective ‘eclectic’ is meant to remind you that it was not a tight axiomatic doctrine but rather the collection of ideas in terms of which people like James Tobin, Arthur Okun, Paul Samuelson and others (including me) discussed macroeconomic events and policies.More substantively, he argues, correctly my view, that Friedman's misperception model was not accurate, and that the Volcker shock was not caused by any misperception. In fact, Solow suggests that:
So the Fed was in fact able to control (‘peg’) its real policy rate, not for a year or two but for at least six years, certainly long enough for the normal conduct of counter-cyclical monetary policy to be effective.Note that this is the real, not nominal rate. But perhaps Solow's most important conclusion, drawing from the evidence and Blanchard's more recent contributions is that: "findings imply that there is no well-defined natural rate of unemployment, either statistically or conceptually." In that regard, I think that Solow goes further than Blanchard, and I'm glad he does.
Please note the change in date and venue. Bob Rowthorn's Godley-Tobin Lecture. titled “Keynesian Economics: Back from the Dead?” It...
