#value extraction

Digital industrialism is characterized more by the destruction of value and its conversion into share price than the creation of value and its distribution to the stakeholders who made it possible. Digital industrialism exacerbates the imbalance between the traditional factors of production – land, labor, and capital, giving voice only to the needs of the venture capitalists and their mindless pursuit of growth.

Business executives often argue that lower tax rates for companies and wealthy households are necessary for innovation and entrepreneurship but the facts explain why the opposite is actually true. From 2004 to 2013 about 9,000 companies in the Compustat database wasted $6.9 trillion on stock buybacks — that’s equivalent to nearly half their profits. They also spent $7.5 trillion on dividends, the normal way of providing holders of corporate stock with income on their portfolio investments. The US companies in the S&P 500 Index, which account for over 70 percent of total US market capitalization, did half of those buybacks, represented 54 percent of their combined profits — an astonishing development. In 2013, the average compensation of the 500 highest paid executives was $32.2 million, with 84 percent from stock-based compensation that incentivizes massive buybacks to manipulate the stock market. Yet these highest paid corporate executives may actually be jealous of the $1 billion pay packages of the biggest hedge-fund activists who are the chief financial cheerleaders for doing buybacks to boost stock prices. These people are far less interested in creating value over the long run than in extracting it for themselves over the short run through stock market casino games. Hedge-fund managers, of course, have much of their income taxed at the corporate tax rate, while most corporate executives lobby for lower tax rates for themselves and their companies. Why give tax breaks to people who actively manipulate the stock market? Why are we helping to ensure that they remain comfortably ensconced among the 0.1 percent? And why give tax breaks to companies whose profits are used for this purpose, instead of something useful? The broken tax regime is part of the problem of inequality. It incentivizes value extraction, not value creation.

To give more substance to my very brief definition—class is the collective social expression of the fact of exploitation, the way in which exploitation is embodied in a social structure. (By ‘exploitation’, of course, I mean the appropriation of part of the product of the labour of others: in a commodity-producing society this is the appropriation of what Marx called ‘surplus value’.) Class is essentially a relationship—just as capital, another of Marx’s basic concepts, is specifically described by him, in some ten passages I have noted, as ‘a relation’, ‘a social relation of production’, and so forth. And a class (a particular class) is a group of persons in a community identified by their position in the whole system of social production, defined above all according to their relationship (primarily in terms of the degree of control) to the conditions of production (that is to say, to the means and labour of production) and to other classes. The individuals constituting a given class may or may not be wholly or partly conscious of their own identity and common interests as a class, and they may or may not feel antagonism towards members of other classes as such. Class conflict (class struggle, Klassenkampf) is essentially the fundamental relationship between classes, involving exploitation and resistance to it, but not necessarily either class consciousness or collective activity in common, political or otherwise, although these features are likely to supervene when a class has reached a certain stage of development and become what Marx once (using a Hegelian idiom) called ‘a class for itself’. The slaves of antiquity (and of later times) fit perfectly into this scheme. Not only do Marx and Engels refer repeatedly to ancient slaves as a class; in a whole series of passages the slave in antiquity is given precisely the position of the free wage-worker under capitalism and of the serf in mediaeval times—as the proletarian is to the capitalist, and the serf to the feudal lord, so the slave is to the slaveowner. In each case the relationship is specifically a class relationship, involving class conflict, the essence of which is exploitation, the appropriation of a surplus from the primary producer: proletarian, serf or slave. That is the essence of class.