There are many frames that can be used to try to understand the disaster that unravelled last week at the Mount Polley mine in central British Columbia when a dam holding in a tailings pond burst and spilled millions of litres of toxic sludge into creeks and lakes. My aim here is to make such an attempt using the metaphor of embedded, concentric circles that draw on broader and broader contexts of the spill.
At the centre is the mine. The very first reports and company statements claimed that the dam holding the tailings pond at Mount Polley mine was functioning correctly – that it was business as usual, interrupted by a freak accident. It has, however, quickly become clear that there is a history of significant negligence at the mine, specifically to do with the dam. Engineers, workers, a former foreman and government inspectors had all warned about small failures and violations that could easily lead to disaster. This week proved to be the proverbial last straw.
It’s relatively common knowledge that employer-run pensions have been scaled back over the past few decades. I’ve decided to dig some data on pensions for this post to see just how this has taken place in Canada, motivated by a just-released analysis of US pension reform that finds contradictions in how US workers have come to take on more and more of the risk for their retirement income.
First, a bit of background. There are two main kinds of employer-administered pension funds: defined benefit (DB) plans – where retirees receive a set monthly income, or defined benefit – and defined contribution (DC) plans – where retirees receive a variable monthly income dependent on how much they proportionately contributed to the pension plan and how this money was invested. There are also completely individualized retirement savings plans such as the RRSP, but these are essentially individuals investment accounts given preferential tax treatment. However, the link between RRSPs and DC plans is that they generally place investment risk on workers themselves; if whatever financial instrument the money is invested in suffers, retirement income also suffers.
While some employers have eliminated pensions altogether, many have restructured their pension plans. Here’s the Canadian data on registered pension plan membership, plotted as a percentage of employment:
Figure 1. Registered pension plan coverage as a percentage of employment by type of plan (Source: Statistics Canada, CANSIM 280-0008 and 282-0008).
This is an expansion of my last piece on the tar sands. The expanded form was republished as a Bullet at Socialist Project. I’ve decided to post the new bits here as they can stand alone.
On a path to nowhere
One way to see how this happens is to turn to the concept of path dependence from the language of mainstream economics. Path dependence is the idea that history matters and reverberates strongly in the present; more metaphorically, economic decision-making (whether about production or consumption) can follow increasingly well-worn grooves. Indeed in many ways, path dependence is actually a powerful challenge to parts of the mainstream framework, undermining equilibrium and efficiency as paths can diverge from the “optimum” – and also potentially undermining rational choice theory as decisions viewed in isolation now seem irrational.
Even if the tar sands account for but 2% of our economy, getting off this path may be difficult. Taking seriously the idea that a large percentage of fossil fuels will have to be left in the ground to prevent even more dangerous levels of global warming, path dependence becomes even clearer. A recent report notes that 40% of “high-cost” oil projects planned over the next 10 years (requiring a high per barrel cost to break even) are in the tar sands. Despite the potential for volatility in commodity prices, even higher extraction costs or serious political intervention on climate change, the tar sands may continue to expand, a furrow that requiring we dig ourselves deeper and deeper into a climate hole.
The mechanisms are various. Canada’s history of staples-based resource extraction lays the foundation. Expanding infrastructure and expanding extraction reinforce each other: “if we have the pipes, we might as well fill them!” The existence of vocal lobby increases the chance that the now almost $1 billion in direct subsidies, low royalties and significant externalized costs remain absorbed by society at large and encourages further growth of the industry. High profit expectations (until 2009, operating profit as a percentage of sales was significantly higher in the resource sector than in other sectors of the Canadian economy) and an insular boom town mentality also contribute.
On June 25th, a standing-room only crowd of 150 people attended a public forum and discussion titled “Pikettymania, Inequality and You” on Thomas Piketty’s Capital in the Twenty-First Century. Today, I’m happy to post in full the four talks that made up the first half of the event (the second half was all discussion). The total is about an hour in length with each speaker taking 15 minutes. Enjoy!
Yesterday’s World Cup final nicely completed the old line that football is the sport where 22 players chase after a ball, but in the end… In the era of high technology, however, it’s not just 22 players running after a ball of course but a whole support squad of coaches, trainers, physiologists, doctors, dieticians, sleep experts – the list goes on. In a piece that walks a fine line between advertorial and actual content, the Wall Street Journal adds Big Data to the cast of sport’s supporting characters:
The Match Insights tool is exclusive to the German team right now, but SAP has plans to sell it more broadly in the future. “We are all about supporting our home team right now,” said [SAP VP] Mr. Burton. “After this we’ll want to maximize what we think is a credible tool for sport.”
“Match Insights” is a high-tech, data-driven sports analysis tool that collects thousands of data-points per second from cameras and sensors around a football pitch and turns them into complex measures of performance, potential weakness and so on. While it is surely debateable how large an impact such a tool actually has on outcomes (if at all, I would focus not on individual games but on long-run differences), two not quite sport-related aspects of this piece and the quote above in particular stand out for me.
First, this is a nice illustration of the complex, but still-relevant, relationship between states and corporations.
By now, Thomas Piketty’s U-shaped graphs of wealth and income concentration are well known. What has received less attention are the differences between the last, early-20th-century inequality peak and today. One important difference is that the composition of wealth and income has changed: more of the income of the wealthy today comes from (ostensibly, at least) work.
Figure 1. Income going to the top 10% in the US over time followed by distribution of income between labour and capital income in the US, 1929 and 2007. (Sources: New Yorker and Capital in the Twenty-First Century, Figs. 8.9 and 8.10)
It seems not a month goes by without a new study highlighting that CEOs today are earning some enormous multiple of average worker pay. The latest figures put the pay of Canada’s top 100 CEOs at 171 times the average wage. Today’s top billionaires may be richer than Roman emperors but they are more likely to put in a 40-hour-or-more week. While Piketty is not the first to notice that the last few decades have witnessed a profound transformation in the upper class and the rise of “supermanagers”, he provides some of the best data on the exact shape of this enormous change.
The scope of the changes goes far beyond the relative weight of income sources. The rise of a numerically very small class of supermanagers at the top has had impacts on the perceptions and the culture of wealth and work throughout society – and it is this that remains less clear. We know who the supermanagers are, but we know a lot less about how we’ve all changed because of their rise. Certainly, their existence and social position reinforces the tendency towards an acceptance of meritocracy – no matter how much we diverge from it and despite mounting inequalities of resources that are incommensurable with inequalities of skill, education or creativity. The scope of changes, however, goes beyond merit and just desserts: a complex web of material and cultural changes mediated by changing institutions.
In the context of individual, cultural change, it is useful to bring up the work of psychologists like Paul Piff who have studied the effects of wealth on values, attitudes and behaviour. In short, study after study has found intense class-based differences across how people think and act – differences that, in general, do not reflect positively on the rich. One well-known finding is that the rich actually are relatively less charitable then those with low incomes. It is well-known that, generally, the poorer you are, the larger piece of your income you give to charity. Only the very wealthiest give a higher percentage of their income and this is largely aimed at things like “high” arts of which they are primary patrons or the funding of legacies and abetting reputations (named business schools and the like).
Figure 2. Charitable giving by income in the US (Source: Financial Samurai).
Such behaviour accords well with self-reinforcing meritocratic beliefs. Somewhat more cynically, it’s possible to note that the poorest may have been hoodwinked into confusing charity for justice – more charitably, perhaps we simply understand that we will not be getting justice anytime soon and so resort to the lousy second-best of charity, in particular when the welfare state is being slowly dismantled.
The studies carried out by psychologists go much further in cataloguing the social psychology of modern meritocracy. A notable example is a study that found how easy it is to attribute money-making luck to skill. Two players play a game of Monopoly that is rigged so that one player has to win (she gets more money at the start and on each passing of “Go!”). The roles are decided by a coin toss at the start. Perhaps less surprisingly, over the course of the game, the winning player usually became more self-assured engaged in overt displays of power. More tellingly, after the game, winners were likely to attribute their success to skill and (mental) effort rather than chance despite having been explained the rigged rules and witnessing the coin toss. The game was “managed” through skill and the success is testament to it.
Indeed, the old aristocratic value of noblesse oblige is today apparently less of a value the wealthier you are. Today’s wealthy are liable to think they worked their way to the top. On the one hand, this is really true. Not only are workers working longer on average (link to own blog), so are top managers. Economic data is useful in putting a different lens to these social psychology studies. Without the context of broader class dynamics like the rise of supermanagers, the studies can easily give way to moralizing. While they are often construed as morality tales about the value of being nice or the virtues of moderation, their real value lies in shedding light on how the changes in economic relationships are remaking who we are.
Put differently: while the language of precarity is useful, in some sense, workers have always precarious; the wealthiest have, however, not always been managers. The now popular story about vast patterns in distribution needs additional grounding. We need a history of “the making of the working capitalist” that will at once implicitly tell an important part of the story of the remaking of the working class in the neoliberal age.
It’s easy to overestimate the importance of the tar sands to the Canadian economy. Tar sands and their pipelines are after all hailed by the ruling Conservatives, sections of the business press and the ever-present oil lobby as this young century’s “nation-building” project. Yet, a survey recently making the rounds highlights the relative unimportance of the tar sands to Canada’s overall economy: while most Canadians overestimate the importance of the tar sands and 41% are guess that the tar sands account for 12 %to 48% of Canada’s GDP, the reality is that they directly contribute a mere 2% to our domestic output.
I spoke at an event dedicated to Piketty’s Capital in the Twenty-First Century last night in Vancouver. It was great to have a conversation about inequality, economics and politics with an overflowing, diverse crowd. There is a palatable hunger for an understanding of what is going on today and what kind of political action can generate broad-based mobilization.
I’m posting my slides from that discussion here. They focus on the theory in Piketty’s work and are partly expository as one of the aims of the event was to introduce the arguments of the book. However, I have tried to raise some substantive points about how the book and its myriad empirical observations open the door to future avenues of exploration — especially exploration that takes politics seriously and wants to deepen the tradition of political economy.
One of the fruitful things about the book is door it opens out of the stuffy rooms of neoclassical economics back towards political economy. All the more important, however, to remember the task of carrying out a “Critique of Political Economy” (the subtitle of that other Capital): a serious engagement that is at once a serious critique.
On the same day one week ago, teachers in British Columbia began a full strike and the Enbridge Northern Gateway pipeline was approved by the Canadian government. With such telling coincidences, it is hard not to juxtapose the two broad social conflicts in which BC has become a flashpoint: that over the quality of public education and that over the expansion of fossil fuel development.
This juxtaposition is made across the board. Writing in support of additional education spending financed by higher taxes, SFU economist Krishna Pendakur closes with this point:
B.C. must be one of very few places in the world where “invest in our future” means “invest in liquefied natural gas” and not “invest in the education of our children.”
Today I’m happy to present another in a series of feature interviews with outstanding Canadian political economists. In this segment my guest is David McNally — noted academic, activist and author. David is professor at York University and active in a number of grassroots organizations and movements in the Toronto area, including the Greater Toronto Workers’ Assembly. He is the author of numerous books, including his most recent Deutscher-prize winning Monsters of the Market and Global Slump: The Economics and Politics of Crisis and Resistance, published in 2010. I caught up with David to get an update on what has happened to the themes in global political economy he explored in this latter book.
