Report on the heterodox economics presentations at the American Economic Association’s annual conference.
Michael Roberts is an Economist in the City of London and a prolific blogger.
Cross-posted from Michael Roberts’ blog
While the mainstream sessions were obsessed with AI, having dropped climate change as a major theme in their sessions, the radical economics sessions still analysed the impact of global warming. One paper found that there was “strong and robust evidence that extreme heat increases local market concentration by shifting market share from smaller to larger firms. In addition, extreme heat reduces firm productivity while increasing the average markup. The effects are heterogeneous across firms: productivity losses are concentrated among small firms, whereas increases in markups are observed among large firms.“ Overall, this led to a welfare loss equivalent to 0.124% of manufacturing sector GDP in Europe. Another paper argued that substantial investments are required to drive the green transition, along with mitigation and adaptation strategies. However, “private capital, by its own purposes, has proven insufficient and often misaligned with the needs of a just and democratic transition.”
Hendrik Van den Berg argued that calls for developing new technologies to address the major environmental problems are more of a stalling tactic than a necessary step toward mitigating real ecological problems. “We already have the capacity and know-how to stop global warming, species losses, loss of natural resilience, prevent resource exhaustion, and the soil and water degradation due to industrial agriculture. We do not need new technologies, we only need the political will to act.” But revolutionary change in environmental policy is not possible without the demise of the US hegemony that has imposed the neoliberal policies that sustain ‘absolute capitalism’.
Of course, AI was also on the agenda in URPE sessions. The political economy of Big Tech and whether these companies were ‘techno-feudal’ ie. taking rents rather than making profits, was subject to a withering critique by AK Norris and Tavo Espinosa, independent researchers from the tech industry. They offered a Marxian critique of the techno-feudal hypothesis (which argues that the tech industry’s revenues are made up of rents rather than profits). Using the Marxian labour theory of value, they argued that the tech sector is value-producing, not rent-extracting, through the means of computation, communication, logistics and transportation that are indispensable in the current stage of capitalist development. Norrid and Espinosa used Marx’s theory of ground-rent to argue against Ernest Mandel’s and others’ extension of the rent category to so-called “technological rents.” Contrary to expectations, the tech sector is more labour-intensive than many other sectors and therefore has a lower organic composition of capital than the average. So it produces more value than other sectors.
However, in another paper, Ali Alper Alemdar of St. Francis College reckoned that platform firms represent a new phase of accumulation. “Rather than diffusing competition, the mobility of capital under the platform economy deepens monopolization, allowing firms to dominate production and circulation.” The abstraction and mobility of capital in the platform age reflected a new configuration of accumulation—“intensifying centralization, rentier power and the separation of capital from labour.” I was not sure whether the author was making a turn towards the techno-feudalist rentier theory, or not.
Thomas Trebat’s paper put the searchlight on the global shift toward decarbonization—especially in transport— leading to intensified demand for minerals such as lithium, copper, cobalt, nickel and rare earth elements, essential to batteries, magnets, and clean energy technologies. While China dominates global refining and processing, projected demand now requires new capacity in resource-rich countries of the Global South, including Brazil, Chile, and Peru. Can these states move beyond ‘extractivism’ to support inclusive and sustainable industrialization? A development model is needed that balances the need for domestic industrialisation and the commercial imperatives of global supply chains. But what is that development model?
As always, China’s economy was discussed. Yisheng Yang of the New School for Social Research considered how Marx’s law of profitability applied to China. For him, the problem was that “Marx’s incomplete crisis theory manuscripts, left the debate trapped in false dichotomies.” Really? He looked for a “dialectical interplay between rising OCC and profit squeeze as “concrete universals” , as the reflection of relations of production and accumulation paths in different stages of capitalism as a world-historical phenomenon.” For me, all that just meant that Marx’s law of the tendency of the rate of profit to fall depended on the relation between the change in the organic composition of capital and the rate of surplus value – which is Marx’s law!
Yang found (as many others have) that China’s rate of profit on capital has fallen over the long term, but not in a straight line.
According to Marx’s law, the rate of profit would rise or fall depending on whether the organic composition of capital rose more or less than the rate of surplus value. In China’s case, Yang found that both the organic composition of capital (OCC) and the rate of surplus value (RSV) fell after the end of the Great Recession of 2008. The latter fell because wages rose to squeeze profits – ‘profits squeeze’ (Yang).
But Yang’s data indicate a fall in the OCC between 2008 and 2018 of 33% and a fall in the RSV of just 20%. Under Marx’s law, that should deliver a rise in profitability, not a fall. However, using the latest Penn World Tables 11.0 series, I don’t get the same results as Yang. I find that the OCC rose from 2008 and the RSV also rose, but at a slower pace, so this explains the fall in China’s profitability, a la Marx’s law.
Ningzhi He of University of Massachusetts-Amherst concentrated on the demographic challenge facing China as its population ages. He reckoned the easing of birth control policies had failed to boost fertility, and now the government plans to raise the statutory retirement age. But since grandparents play a vital role in informal childcare, delayed retirement may reduce their availability and dampen women’s willingness to have children. He reckoned the government must move away from market solutions based on monetary subsidies that have failed in the capitalist economies of the West and instead bring the public welfare system back into the state-owned sector.
Returning to an analysis of the capitalism in the West, Evan Wasner of the University of Massachusetts-Amherst presented a paper that showed that just estimating real purchasing power for the average US consumer by deflating wages by the official price index bore little correlation with alternative indicators of economic well-being such as food insecurity, housing instability, or consumer debt defaults. Wasner demonstrated that, contrary to standard real wage data, various components of living costs have risen faster than incomes since 1994 as well as during the COVID-19 inflation spike.
Indeed, this is something that others have emphasised in recent studies, and will be highlighted in the upcoming paper on inflation by Mino Carchedi and me in the Historical Materialism journal soon. For example, Corbyn Trent recently showed that, while US government statistics show average real wages have increased 252% since 1950, actually real incomes have lost 61% of purchasing power since 1950. Roughly 50-60% of actual inflation gets hidden through hedonic adjustments, so-called ‘owner’s equivalent rent’ and basket re-weighting.
In another paper, Robert Williams of Guilford College tracked the unprecedented concentration of household wealth in the US among relatively few hands. Since 1989, household wealth has increased from $17 to over $139 trillion, enough if equally shared to make every American household a millionaire! But most of this bounty, almost 86 percent, redounded to the wealthiest quintile of American households. Williams reckoned a large cause of this growing ineqaulity was due to federal income tax policies that allow the rich to get richer. The annual assistance from federal tax allowances and exemptions for the rich increased from $192 billion in 1989 to $1.2 billion in 2023.
In 2025, the dozen tax expenditures are expected to cost the U.S. taxpayers nearly $1.4 trillion; this level of loss rivals the program costs of Social Security and Medicare. “Yet, they remain deeply under the radar buried in a mind-numbing tax code.” Their explosive growth over the years meant they have played a major role in increasing wealth concentration. Currently, they represent an annual gift to the wealthy that is double what these households may get from their own families.
There are other key reasons for rising inequality of wealth – the ownership of the means of production being the main one, as I have argued elsewhere. But Williams’s study shows that the state adds to that by helping the already rich to get richer by not paying tax. Three key facets – wealth inequality, intergenerational family transfers and tax expenditure benefits – “means that we can only expect the expansion of wealth disparities that challenge the very foundations of our society to continue unabated and without any restraint.”
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