Economy

Toronto Squeezing Out the Middle Class

By Ben Bull
Published February 09, 2009

Toronto's suburbs are becoming poorer. This is one of the many worrying income conclusions made by the Toronto Star in its look at recently released 2006 census data this weekend.

"We are becoming a city of the servant class - who earn servant wages and live in the city's northern suburbs - and the downtown elite who run everything," said University of Toronto urban studies professor David Hulchanski.

Perhaps the most concerning conclusion of all is the continued growth in income disparity between the classes:

Between 1980 and 2005, median earnings for the top 20 per cent of full-time, full-year earners in Canada increased by 16.4 per cent. By contrast, median earnings in the bottom one-fifth fell 20.6 per cent. Meanwhile, median earnings of those in the middle stagnated, inching from $41,348 in 1980 to just $41,401 when calculated in 2005 dollars.

I remember house shopping in Toronto a few years ago. Me, my wife and our four kids went to see a stacked house in the downtown, Liberty Village area.

The house was two bedrooms, with one of those optimistically named 'kitchen dining room' combos featuring a bathroom sized kitchen and a children's play set for a table and chairs. Asking price, $360,000.

My real estate agent just shook her head and ushered us out, complaining, "They're squeezing out the middle class."

She was right. What would my family have done if we'd have moved there? Apart from bumping into each other all day, we would have become house poor, dependent upon credit to pay the bills with little or no money for such luxuries as going out for a drink or, God forbid, taking a vacation now and again.

The Disappearing Middle Class

The middle class is disappearing. For those of us still clinging to our modest disposable income status, those middle class staples of secure, well-paying jobs and manageable expenses are slipping from our grasp. And for those of us trying to work our way up to middle income status, the rungs on the ladder are growing further and further apart.

In the corporate world, the solution to the recession-induced cost-containment dilemma is to cut out middle manager jobs and salaries, and scale back the benefits for low-end workers. As for the high-end workers, well ... how many CEO salary pay cuts have you read about recently?

Worse still is the fact that the middle class is still paying for everything. For all this talk of corporate tax cuts and 'trickle down' economics, Canada's corporations still receive preferential treatment when it comes to tax filing time.

Urban/Suburban Income Split

One of the more alarming features of the Star article was the graphic depiction of our changing income trends (not available on-line), a series of colored graphs showing the income spread across Toronto's inner city regions and suburbs. From median income earner suburban dwellers in the 1970s and downtown poverty, to a 180 degree flip today.

These days, apart from isolated pockets of low-income areas in Toronto's core, and high-income areas clustered around Yonge Street north of Eglinton, all of the low income earners in the GTA are sequestered in the suburbs.

What does all this mean? Well, the income disparity growth is by far the more worrying picture. A clear link has been made in the past between crime, poor health and poverty. But as we all know, social unrest only deepens as the income gap widens.

I recall the UK recession of the early '80s. Riots became the norm. Young people, enraged by their lack of prospects and the 'fat cat' salaries of the nationƏs BBC elite took to the streets to showcase their distress.

Put simply, people don't like being poor with no prospects, but what irks people more is watching five percent of the population swan around with bulging wallets, seemingly impervious to the misery and hurt swirling around them.

One of US President Barack Obama's first acts in charge was to suspend salary increases for $100k White House earners. He also heavily chastised Wall Street's fat cat CEOs in his first days in office.

Well, that's a start. But it will take some real, concrete, lasting measures to stop our slide into a permanent us and them society.

Hilary Clinton, in her bid for the Presidency last year, talked of glass ceilings for women. These same barriers exist between the classes today. If we are going to lift them, we need to address income fairness, and quickly, before these barriers slam down for good.

Ben Bull lives in downtown Toronto. He's been working on a book of short stories for about 10 years now and hopes to be finished tomorrow. He also has a movie blog.

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By Ryan (registered) - website | Posted February 09, 2009 at 12:18:02

Great find, Ben.

I'm not surprised to see income inequality increasing in Toronto. That simply tracks the country as a whole, which has been experiencing increased income inequality over the past several years as successive Liberal and Conservative governments adopt more American-style public spending patterns. (the US has the worst income inequality - and the lowest socioeconomic mobility - in the OECD.)

What really interests me is the fact that the split seems to roughly match the urban/suburban divide as well. Historically and throughout most of the world, this is the norm: wealthier people living downtown (because they can afford to be close to relatively scarce urban amenities) and poorer people living in the suburbs (cheaper because they're farther from the zeitgeist).

It was only during the postwar period in North America that this universal pattern reversed - that the wealthy lived in the suburbs and the poor lived downtown - a reversal made possible through cheap, abundant fuel and massive public road infrastructure.

It's worth studying in more detail what is happening in Toronto to re-reverse this trend (though Toronto never really depopulated the way many other North American cities did).

My hypothesis is that at least some of the shift will be attributable to the suburban build-out hitting the point of diminishing returns - longer and longer distances to 'affordable' low-density subdivisions (or "drive 'til you qualify), bottlenecks and congestion even on multilane arterial roads, etc. - and the global peak in vehicle fuel production rates.

Part of why it's getting so expensive to live in downtown Toronto is that they're not making any more of it. What they are making more of (low density, single-use suburban sprawl) is no longer the first choice for people with money.

The inner suburbs have mostly urbanized by now, the outer suburbs are too far away, and the middle suburbs, built in the 1970s and '80s and squeezed on both sides, are reaching the end of their sell-by date.

The first step toward making urban living more affordable is to make it more abundant - and that means throwing away the outmoded zoning rules (and planning/building mindsets) that make it illegal to build urban neighbourhoods.

That won't address the overarching trend toward greater inequality, which is a structural problem related to Canada's effective abandonment of the goal of universal public goods; but it will at least stop the hemmorhaging.

The Ontario government seems to understand this, given the impressive work they've already done with Places to Grow. Yet the benchmarks they've set are still a bare minimum, and municipalities like Hamilton are still stubbornly resisting the spirit and purpose of the legislation.

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By Rusty (registered) - website | Posted February 09, 2009 at 12:31:22

"Part of why it's getting so expensive to live in downtown Toronto is that they're not making any more of it. What they are making more of (low density, single-use suburban sprawl) is no longer the first choice for people with money. "

Exactly!

It's very difficult to find an affordable family home in downtown TO these days. I know 'rich' people and they either want to live in an inner city suburb (Yonge and Eg, Beaches) or downtown. They don't want the 'new' suburbs or the ones which are 'past their sell by date' as you say.

Most of the downtown development in TO has been condos. The market is inflated too, so it's only really a prospect for DINKs or affluent singles. Sadly, many of the condo districts have not appplied remedial planning measures to integrate the condos into the surrounding neighbourhood.

I suspect that while these stats are probably in line with most of Canada (and the developed world?), mid-sized cities like Hamilton may buck the trend a little. The hollow cores endemic to most mid-sized cities, are not attractive locales for the rich. However, neither are the Ancaster's or high end Mountain pockets that used to attract the well to do. The suburbs seem to be becoming less appealing to all but those who can't afford anything else.

In the end housing prices determine the value of the area. If your house is cheap - it's cheap for a reason.

I agree that creating more downtown markets will help to redress this trend, however when it comes to addressing the income gap spread it will take a lot more than this.

Cheers

Ben

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By LL (registered) - website | Posted February 09, 2009 at 13:11:23

Interesting article, Ben. Much to think about.

Wasn't social mobility (the American dream) and the "middle class" always a myth anyways?

Corporate capitalism is bureaucratic, which tends to obscure things. So does the "immaterial" nature of the G7 economies. But generally, if you work for the owners of capital and derive most of your income that way, you are part of the working class - white collar or not. We all want prosperity. But at some point, it's time to start considering a collective strategy.

Another thing struck me about this article. Generally, people find it unjust when they are shown the way wealth is distributed in society - especially at times like this. But there is very little clear thinking about this. Most people are hesitant to see economic value as objectively, materially rooted in labour (and nature). Even more, they are unwilling to consider the notion that these inequalities arise from exploitation of labour (and nature). "That's marxist and leftist. We can't think about that."

But if value really is just subjective - a marginal utility - aren't the elite "entitled" to as much as they can "legally" horde? On what ethical basis do we say "enough"?

Finally, I want to comment on the specific problem of overpriced real estate in downtown TO. One obvious solution would be to reform downtown Hamilton so that it's attractive for these white collar workers to settle here and commute by transit. I'm not talking about kicking out the poor people, just getting some decent transit and quality of life features.

This raises the problem of gentrification. But I think we can cross that bridge when we come to it. Also, I look around the neighbourhoods downtown and I can't help but noticing that most of them are already populated by white-collar types. It's just City Hall and the Chamber of Commerce that haven't caught up with the reality by prioritizing the inner city with their subsidization arrangements. They're still stuck on putting the bulk of public funds into sprawl. It just blows my mind.

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By jason (registered) | Posted February 09, 2009 at 13:14:09

hey, you can always move back to Hamilton, Ben! Lol.

I saw this article and was intrigued by it as well. It's certainly noticeable in Toronto. It's less noticeable in Hamilton, but look at the increase in prices in the downtown area over the past decade. It's happening here, albeit more slowly, even with the 'depressed downtown' and mid-size city problems.
There was a news story recently of a suggestion for the city to purchase two homes downtown on Charlton Ave, adjacent to Durand Park. Total cost to purchase both homes was in the $700,000 range ($350,000 each). The idea to buy these homes first surfaced 10 years ago. At that time, the city could have snagged both for around $250,000 total ($125,000 each). Quite an impressive increase in value in downtown Hamilton in one decade. Downtown and the west harbour is on the rebound here, but I think what's really driving this is the quality and uniqueness of the wonderful old homes downtown.
For the time being, however, downtown Hamilton is a great buy for the middle/upper class as well as great rental options for young folks and the poorer end of the working class.
The key will be to learn from the mistakes of places like Toronto and try to develop a downtown that is livable for all.

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By LL (registered) - website | Posted February 09, 2009 at 13:23:50

Even the most hardnosed economist would have to conclude that there is pent-up demand for living in areas where - as Ryan put it - urban amenities are available: transit, walkability, culture, etc.

You would think that more developers would capitalize by building new developments in the "new urbanist" fashion or concentrate on reforming inner suburbs, thus responding to what the consumers want.

Unfortunately, it's much cheaper for them to leverage municipalities into subsidizing ticky-tack greenfield developments. The only solution is for "consumers" (citizens) to get what they want is to organize politically. If action is limited to the individual level, it will never happen.

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By Rusty (registered) - website | Posted February 09, 2009 at 13:52:08

There are so many under utilized downtown neighbourhoods - in Hamilton and Toronto. In Toronto some of the challenges to the transit friendly, QoL neighbourhoods include an over abundance of affordable housing. Areas like Moss Park and St Jamestown are in great locations, but you can never attract more diverse residents when there is so much concentration of one income bracket in one place.

It's such a waste of potential. You have to start scaling back the proportion of housing - Regents Park style - to start re-defining the neighbourhood and providing viable housing options for other income brackets.

A couple of blocks up from my house is a gigantic Sally Army hostel. It takes up about a quarter of the block, on a residential street. What good can come of this? How can you 'integrate' other income housing into such an out-of-whack design? The hostel effectively kills off any potential the immediate area has to create wealth through alternative income housing on the back of the transit line, streetwall, availability of amentities benefits of the neighbourhood. Essentially all that potential wealth evaporates.

Good neighbourhoods are like good meals. They need a base of accessible location, transit, and QoL amenities and then a light sprinkling of all different types of housing. This choice of housing also helps to address gentrification problems. If you have a healthy mix of high-end housing options as well as regulated affordable housing (e.g. Co-Ops)then you can reign back the gentrification effect.

It's not easy but if you apply at least one general principal - don't build too much of the same thing - then you can go a long way to creating a healthy mixed neighbourhood.

Ben

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By Ryan (registered) - website | Posted February 09, 2009 at 14:06:12

But at some point, it's time to start considering a collective strategy.

Absolutely, which is why I made reference to the policy of universal public goods that Canada has abandoned.

Most people are hesitant to see economic value as objectively, materially rooted in labour (and nature).

I'm inclined to disagree with this. Value seems to inhere more in knowledge and technique than in labour or raw materials per se.

Consider that average North American productivity has increased by a factor of 15 since 1870. People certainly don't work 15 times as hard today as then - probably the opposite is true. Similarly, there certainly isn't 15 times as much raw material as then.

On what ethical basis do we say "enough"?

I can think of a few answers to that.

  • Fairness - it's inherently unfair to have an extreme inequality of wealth, to live luxuriously while others suffer poverty and despair.

  • Fairness (part 2) - if wealth is mainly a function of knowledge and most knowledge exists in the public domain, it's instrumentally unfair for a few to claim most of that value for themselves.

  • Common Interest - it's possible to live a safer, richer and more comfortable life in a society where most people are educated and gainfully employed than in a society where most people are impoverished. You have more productive workers to choose from and a larger consumer market for your products.

  • Rational Self-Interest - People will not tolerate extreme inequality forever. The people on top of an extremely unequal system are forever under threat of being usurped in a popular revolution.

These are just a few common attempts to answer the question of where enough is enough. Of courese there are many others, and the stuff of political philosophy and politics trades extensively in discussion around them.

This raises the problem of gentrification.

The evidence seems to suggest that gentrification does not, in fact, displace the poor. See the bottom half of this essay for more details:

http://raisethehammer.org/article/765/

You would think that more developers would capitalize by building new developments in the "new urbanist" fashion or concentrate on reforming inner suburbs, thus responding to what the consumers want.

You would think.

The smart money in progressive cities is doing just this, but in Hamilton, it's still too easy to get approval for a new sprawl development on a greenfield adjacent to a highway.

Not to mention the fact that our zoning rules make urban development outside the downtown core all but illegal.

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By nonfat milk (anonymous) | Posted February 09, 2009 at 14:28:49

Great discussion folks!

I'm out of lurking-mode to make a request - sooner or later "A Smith" is going to post a comment on here to try and troll the issue over to his libertardian bugbear (I hope I didn't draw him here candlejack style by mentioning his name), all I can suggest is, don't reply to him, don't get involved or the first intelligent discussion on RTH in a while will get hijacked like all the others.

Please please please please please...

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By UrbanRenaissance (registered) | Posted February 09, 2009 at 15:46:53

Rusty said: "It's not easy but if you apply at least one general principal - don't build too much of the same thing - then you can go a long way to creating a healthy mixed neighbourhood."

Well said Rusty, I was making this exact point a while back about Harry Stinson's plans for Hamilton, Toronto went to one extreme, creating islands of wealth within the city, while letting outlying neighbourhoods wither. (Its a shame those graphics from the print article aren't on the website, they do a great job of showing the change of the city over time). But we also have to be careful to not swing too far the other way because those higher income residents pay proportionally higher taxes that offset the cost of social programs to help those in need. Hopefully city council will join the rest of us in the 21st century and start changing zoning laws to encourage mixed use areas.

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By OccassionalCommentor (anonymous) | Posted February 09, 2009 at 15:53:53

*Sigh* Resource-based Economy *Sigh*

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By A Smith (anonymous) | Posted February 09, 2009 at 19:15:59

Ben >> Put simply, people don't like being poor with no prospects, but what irks people more is watching five percent of the population swan around with bulging wallets, seemingly impervious to the misery and hurt swirling around them

You sound like an envious little b#&$@%. Most of the world would love to earn what our middle class does and would love to have the opportunities that our freedom allows. If you have your health, than nothing is stopping you from becoming as rich as you want to be. Drop the class envy and produce something that people want to buy. Otherwise, just shut the f%^$ up.

That being said, if you want more disposable income, call on your politicians to abolish taxes on the first 35K. Since 2001, corporations have had big tax reductions, it's time the average person got one too.

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By Grassroots are the way forward (registered) | Posted February 09, 2009 at 23:28:56

LL: You bring up some very good points. Yes most people do sort of cringe at the thought of "leftist" ideals, until, the situation warrants it. People go on about the social safety until they are the ones that need it.

Maybe if people just forget about the left/right paradigm and focus in on the issues such as you pointed out. Why do the elite hold so much power and have the ability to direct policy even when that policy is detrimental to either the people or the environment.

I do not like the fact that the chamber of commerce holds as much power as it does, as their voice does not represent the people. They are a fee paying organization and some of their members as such as the temp companies contribute to the growing levels of poverty by denying stat holiday pay, overtime, access to EI and WSIB benefits, pay low wages and people do not have access to medical benefits, no real security, they can be dismissed in a wink of a eye.

You are right, organizing is the key, it is the people that need to organize to get their voices out into the public domain. It is best to change things at a local level, this where the people have the most power to change things. People need to get involved into whatever issue drives them, whether it is poverty, the environment, there all sorts of issues out there. People need to become involved in the political process, maybe it is time to have more public forums, in order to engage the people.

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By A Smith (anonymous) | Posted February 10, 2009 at 02:57:05

world would love to earn what our middle class does allows. If you have your health, than nothing is stopping Drop the class envy and produce something that people want if you want more disposable income, call on your politicians have had big tax reductions, it's time the average person You sound like an envious little b#&$@%. Most of the and would love to have the opportunities that our freedom you from becoming as rich as you want to be. to buy. Otherwise, just shut the f%^$ up.

That being said, to abolish taxes on the first 35K. Since 2001, corporations got one too.

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By nonfat milk (anonymous) | Posted February 10, 2009 at 07:52:22

Steady, lads, steady...

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By LL (registered) - website | Posted February 10, 2009 at 18:48:10

Re: Universal public goods.

The welfare state didn't fall out of the sky on some stone tablets. It was the elite response to class conflict. Nor is it being dismantled randomly. This is part of pressures exerted in the global capitalist system as a whole. I agree with you broadly that we need to struggle for a new concept of public good. But it might be something different (I would argue decentralized and directly democratic) than the welfare state. On that score, we need strong, coherent analysis and a clear, specific explanation of what fairness, justice, and feedom are. The narrow sector of humanity who control capitalism and the state think it's "fair" that they be able to keep all their loot. And they've drummed their story into the populace for decades.

"Value seems to inhere more in knowledge and technique than in labour or raw materials per se."

I already responded to that on another post, where you claimed value was derived from "knowledge embedded in labour". I'll reprint it here:

"I'm rather unclear on what you mean by "knowledge embedded in labour". Is "embedded knowledge" knowledge that has been created in the past? If so, let us assume that it was created through thinking, reading, experimenting, researching, tinkering, teaching, writing, etc. Are these activities not forms of work? If so, and if they contribute to profit and capital accumulation, are they not just a specific form exploited labour? I'm a little rusty on labour theory these days. But I know the marxist tradition has had a lot to say about intellectual work... [K]nowledge, as far as the property system is concerned, is essentially a form of CAPITAL. Like any form of capital, living where knowledge has accumulated to a great degree allows even working class people to have a higher standard of living. But that goes for any form of capital. It's the basic reason why a coffee farmer in Ethiopia works a lot harder than a steel worker in Hamilton, but makes less money."

"Consider that average North American productivity has increased by a factor of 15 since 1870. People certainly don't work 15 times as hard today as then - probably the opposite is true. Similarly, there certainly isn't 15 times as much raw material as then."

Part of this increase in productivity is indeed explained by the accumulation of knowledge/capital, which, I stress again, is the product of intellectual labour. But another part of it is explained by the accumulation of material/capital - machines and the money to buy them. Marx covers the second aspect very thoroughly in "Capital". As for raw materials, I think it's fair to assume that capitalism is exploiting resources at a faster rate than it was in 1870. Even if it is exploiting less materials per capita (hence with greater productivity), again, it's important to remember that the accumulation of capital is partly responsible for the greater productivity. As a systems theorist, you should know that capital embodies a lot of EMBEDDED ENERGY (emergy), most of which originates with the sun and becomes available to us after plants have captured it through photosynthesis. That includes fossil fuels, which basically consist of solar energy embedded in the remnants of dead organisms.

To me, this indicates a natural source of economic value, created by the "work" of ecosystems. Nevertheless, the debate over economic value is still mostly between proponents of the labour theory and the proponents of marginal utility. Knowledge on its own can no more produce value than masturbation can produce a child. It's the creation, use, implementation, codification, and dissemination of knowledge that creates value. These activities are surely forms of work. I would argue that what you have here is an important DIMENSION of the labour theory of value. Sure, knowledge/capital exists in the public domain and is a source of wealth. That's a very relevant argument for equality. But physical capital - the means of production - are an embodiment of the surplus value of workers. It also ought to be in the public domain, democratically controlled by the workers themselves.

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By A Smith (anonymous) | Posted February 10, 2009 at 23:00:07

LL, Just because you can't compete in the free market, does not give you the right to steal other people's stuff. Sam Walton started with next to nothing and through his hard work, individual effort and determination, became the richest man alive. He never forced people to shop at his stores, but simply offered consumers good products at excellent price points. In the process of helping the consumer, they rewarded him with their business.

Furthermore, he never forced anyone to work for him, they chose to work for him and at the wages they both agreed upon. Complete freedom all the way around. What is wrong with that?

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By Ryan (registered) - website | Posted February 11, 2009 at 09:07:46

LL wrote:

The welfare state didn't fall out of the sky on some stone tablets.

No, it developed incrementally through centuries of trial and error.

The pillars of universality - civil liberties, comprehensive education, comprehensive health care, public infrastructure, contract law, labour law, consumer protection law, financial regulations, welfare, and so on - are in place because they addressed real problems in a way that meets people's needs and satisfies people's sense of fairness.

It looks a bit like a hodgepodge, but (at least in Canada), it reflects hundreds of years of testing into what rights and public goods are "essential to preserving Canada as a free and democratic country".

Short of launching a full-scale defence of strong national government in a blog comment, I'll point out in passing (and in the acknowledgement that the subject deserves much more discussion) that strong national governments coupled with democracy and a commitment to civil liberty are very strongly associated with dramatic improvements in personal freedom, social violence, and economic prosperity.

I'm skeptical of too much decentralization, if for no other reason than the fact that right-wing conservatives support decentralization precisely because it erodes the federal government's capacity to set and enforce national standards for public goods.

In this vein, over the past two decades the principles of universality in Canada have been eroded steadily by successive governments that have passively adopted the corporate maxim that freedom, civil liberties and essential public goods are a luxury Canada cannot afford if it is to compete globally.

However, the problem is mainly political, not technical. What we need to do to restore universality is pretty clear, at least in a general sense; but the political will to reverse the rollback is lacking among the Big Two political parties.

let us assume that [embedded knowledge] was created through thinking, reading, experimenting, researching, tinkering, teaching, writing, etc. Are these activities not forms of work?

That's an interesting definition of labour, and it may serve as a means to invigorate a labour theory of value; but it threatens to dilute the concept of labour until it no longer has any analytical or predictive power.

In the very broad sense that value derives from human input, I think we're in agreement (though I would caution that in an economic sense, value is also a function of demand).

However, when it comes to knowledge, it's important to stress that more is different.

Average productivity is 15 times higher today than 140 years ago not only because there's more knowledge, but also because the knowledge is embedded in ecological systems of knowledge that vastly multiply our ability to derive principles from, extend, and recombine our knowledge.

Those ecological systems are conceptual (the theory of evolution, for example, is the necessary foundation of all modern biology and the context in which biological research takes place), physical (particularly the system of publicly funded universities drawing and training students and supporting both pure and applied research), and economic (applied knowledge informs innovations which, when delivered to market, produce tangible improvements in comfort, convenience, safety, and of course productivity).

The information that drives nearly commerce these days is either directly in the public domain or else derived from information in the public domain. Examples of the latter include: Google's PageRank algorithm, which is proprietary but was developed by university students working from mathematical principles; and Wal-Mart's logistics system, which combines readily-available techniques for capturing, storing and summarizing sales data to minimize inventory costs.

Do the owners of Google deserve 100% of the money that comes from recombining already-existing mathematical concepts that were derived in publicly funded universities?

It seems to me that they certainly deserve a significant share of that money, since they were the first ones to create a useful new service and bring it to market (and invent an extraordinarily clever way to monetize it); but society as a whole also deserve to share in the generated wealth, since the owners could not have added their own inventiveness if there were not already an extensive public ecology of knowledge to work with.

That money, in turn, can be used to further strengthen those very public goods that make such innovation possible.

If so, and if they contribute to profit and capital accumulation, are they not just a specific form of exploited labour?

Exploited from whom? Some 80-90% of all knowledge is inherited from the past - from people who are now dead and gone. If some legal means is established to redistribute the value of that labour to its rightful owners, who should get the money? The contributions to our collective knowledge are so extensive that it's hard to escape the conclusion that the money belongs to society as a whole.

Frankly, I'm skeptical that a Marxist analysis of labour is going to add much value beyond, say, Warren Buffet's famous observation: "Someone's sitting in the shade today because someone planted a tree a long time ago."

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By LL (registered) - website | Posted February 11, 2009 at 16:18:49

You seem to be looking at the question with one eye open. Sure, the founders of Wal-Mart and Google were able to leverage accumulated "systems" of knowledge. But this is secondary to their access to capital in the more traditional sense. You haven't offered a satisfactory counter-argument to the notion that capital embodies the surplus value of generations of exploited workers.

And I don't quite understand how you find it exotic or controversial to consider teaching, writing, designing, number-crunching etc. to be forms of work. Or to consider knowledge systems to be a form of "social capital". From my understanding, this is all quite conventional, in business as well as sociology and labour studies departments.

Now, you make a great point when you say:

"...value is also a function of demand."

This is the "subjectivist" position of neo-classical economists who by-and-large support a marginal utility concept of economic value, which squarely contradicts your thesis about knowledge creating objective value lying outside the realm of exchange.

Let me stress, I'm not a marxist. In a broad sense, I think economic value has both a subjective and objective dimension. But I think economists are very weak on what human "subjectivity" is and how it's formed - specifically, how personality is shaped ("warped", I would say) by socialization within hierarchical institutions of the state and capital. I think neo-classical economists cherry-pick social psychology data and know next to nothing about anthropology. In short, I think their concept of human nature is severely narrow and ahistorical.

It's a similarly narrow view of humanity that can't concieve of a decentralized society. Behind the call for a centralized leviathan lies the assumption that people just can't keep their s#!t together within institutions of free and voluntary association.

I can sort of see where this is coming from. There is a lot of chaos and disorder out there. At this moment, people are not ready for self-management. But the problem with statism as a solution is that no matter how "high" of an authority you want to create, there will humans running it who will be just as flawed as the humans on the local level. I would argue even more so, since power (like capital) tends to attract "clever" types while distance and anonymity makes accountability more difficult.

Someone with an interest in cities should be sensitive to this. Hamilton produces much wealth and it's citizens contribute greatly to the federal coffers. But when we need something - say light rail, which pretty much everyone in the city agrees upon - we have to beg for transfer payments. How much is lost to waste and graft as it filters through the federal bureaucracy?

Now there is a national - even global - division of labour, which creates regional inequalities and boom-and-bust cycles. But I would question the success of the Canadian state at solving this problem. Nova Scotia was the richest region in Canada until confederation. Jane Jacobs once compared Newfoundland to Iceland and noted that they were virtually identical in every respect except that Iceland was both independent and rich. (Maybe that's a dated example, considering the problems Iceland is currently experiencing.)

If anything, regional inequality is an argument against political centralization, since it tends to impose a metropolis-periphery dynamic. But one must understand the anarchist position in its entirety, which includes economic and technological decentralization. It proposes libertarian soc'ialism as an alternative to capitalism, direct democracy as an alternative to the state, and the confederal principle to organize disparate regions from the ground up.

"If some legal means is established to redistribute the value of that labour to its rightful owners, who should get the money?"

I'm not talking about redistribution. I'm talking about expropriation of the means of production to solve the problem at its root. Some anarchists - mutualists - talk about gradual, legal ways to bring worker control through co-ops, alternative banking, and appropriate technology. They even talk about a "free market", which is very from what A Smith and his ilk talk about. I wish them luck and lend a hand if it gets going locally.

But to me, the warped, people-exploting, earth-destroying nature of today's capitalism necessitates a SOCIAL REVOLUTION, which would create a new "legal" framework. Personally, I'm not opposed to a new constitution, though many anarchists would disagree. After that, direct and participatory democratic processes would determine how wealth is distributed.

Now it's not going to happen tomorrow. It would require decades of movement building and praxis, where people learn how to self-manage their collective affairs, and where the values of solidarity and mutual aid replace the crass values of today. But if we don't tackle these problems RADICALLY (at their roots), we will never come close to solving them.

Even the reforms you talk about will never happen without revolt. The welfare state didn't emerge through "trial and error", as if politicians were studiously experimenting for the benefit of the people. Politicians of the "Big Two" parties were always representing their true constituency - the tycoons. It was the Knights of Labour revolt of the 1880's, the Winnipeg General Strike, the On-to-Ottawa Trek and other labour unrest of the '30s, the AFL-CIO drives of the '40s and '50s - not to mention more turbulent events in other countries - that forced their hand into reforming the system.

"...democracy..."

As far as I'm concerned, we don't live in a democracy. Political power is concentrated in a few hands. The ritual of voting does very little to change that. Democracy is direct and participatory.

"...freedom..."

I won't deny that we have some freedom in this country compared to totalitarian regimes - freedoms that were hard won through struggle. But we're still a long, long way away from a free society. Most people experience coercion and domination on a daily basis - most notably in the capitalist workplace, an authority people "choose" to submit to as an alternative to starvation and homelessness. "Free speech" is fine - until you say something outside the orthodoxy, then you're likely to be blacklisted in your industry or profession. "Freedom of association" is great - until you use it to assemble in protest, then the cops have all kinds of tricks up their sleeves to subvert the constitution.

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By A Smith (anonymous) | Posted February 11, 2009 at 17:12:47

LL, do consumers exploit Walmart and other businesses when they buy items that give them more utility than it costs them to buy?

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By Ryan (registered) - website | Posted February 12, 2009 at 01:13:53

LL wrote:

Sure, the founders of Wal-Mart and Google were able to leverage accumulated "systems" of knowledge. But this is secondary to their access to capital in the more traditional sense.

Why is it that they dominate their respective markets? They do not have special, privileged access to capital. The difference is that in their own ways, they have leveraged information more effectively than their competitors.

Note: I'm not defending Walmart's business model; but merely pointing out that their market share is mainly due to their extra-efficient logistics system. (This was clearly demonstrated during the last couple of years, as rising fuel costs started seriously to eat into their profit margins.)

Walmart's dominance is emphatically not due to their employee policies, which seem to be a wash. Their lower per-worker payroll costs are offset by lower productivity, higher employee turnover, and higher rates of theft.

Costco, by contrast, pays its workers generously and has a strict policy on maintaining a positive, respectful work environment for its employees. These higher costs are balanced by higher productivity, less turnover and lower rates of theft.

Are Costco employees more trustworthy than Walmart employees? Of course not. They just care more because they're treated like actual human beings.

And I don't quite understand how you find it exotic or controversial to consider teaching, writing, designing, number-crunching etc. to be forms of work.

It's not that; it's the fact that most of the knowledge we have to work with doesn't need to be re-invented for each generation and each citizen.

My understanding of the labour theory of value (and I may well be wrong - please correct me) is that it's based on the premise that if my labour adds value, I should be entitled to the proceeds therefrom; and that capitalists unjustly expropriate some of the proceeds of my labour for themselves. In other words, the workers should own the factory.

My point about knowledge in the public domain is that we have access to it but did not produce it ourselves. Something like 90% of all the information we use to produce value through our work is pre-existing.

Who owns that value? Not me the worker, since I didn't actually do the work to produce it. Not my employer the capitalist, since she didn't do the work either.

If the workers in a company aren't actually responsible for 90% of the value that comes out of our work, it's not clear that they have any more direct claim to it than the capitalists who own it.

The ownership of that labour is so widely distributed that it seems only fair to conclude that the value accruing to shared knowledge belongs to everyone - to society as a whole.

That's something very different, it seems to me, from what Marx had in mind in his assessment of the relative contributions of workers and capitalists to the value of the produced goods.

This is the "subjectivist" position of neo-classical economists who by-and-large support a marginal utility concept of economic value, which squarely contradicts your thesis about knowledge creating objective value lying outside the realm of exchange.

I made no claim about knowledge creating "objective" value. All value is value to humans, and that is strictly subjective.

Price is one method of establishing subjective value; and for many things it's a reasonable, workable proxy, though it's not without some serious problems.

I wrote in some detail about those problems in another RTH comment not long ago:

http://raisethehammer.org/blog/1205#comm...

For other things - like health care and education - price fails entirely to capture subjective value. This is partly due to the effects of positive network externalities. Some of the benefits of, say, education accrue to society as a whole rather than the individual receiving it, so when people have to pay for their own, they tend to under-invest, and society as a whole is worse off.

It's also partly due to the nature of for-profit competition, which is more interested in allocating capital and reducing risk than in providing a service. As a result, a market for health care paradoxically produces a health care system with which most people are dissatisfied.

I wrote more about the economics of health care as a commodity in a blog a year and a half ago:

http://raisethehammer.org/blog/694

In such cases, when citizens recognize that the market price is failing to indicate value accurately, they may establish publicly funded mechanisms to bypass the market failure and deliver the public goods directly, at the federal, provincial or municipal level based on what works from an instrumental perspective.

I don't see any inherent contradiction between the two: each mechanism of assigning value works for its own domain.

It's a similarly narrow view of humanity that can't concieve of a decentralized society. Behind the call for a centralized leviathan lies the assumption that people just can't keep their s#!t together within institutions of free and voluntary association.

That's simply not true. The reason I support a "centralized leviathan" as you put it is not because I think people can't be trusted, but rather because it's impossible for individuals to solve collective action problems in the absence of some consistent rule of law to which everyone is equally subject.

A rule of law based is what makes shared trust possible.

It means I don't have to worry about whether my neighbours are planning to raid my house, and I don't have to invest my scarce resources in adding fortifications. It means my neighbours don't have to watch me building fortifications and wondering whether it means I'm going to raid them, prompting them to build fortifications as well in an escalating arms race.

I believe humans are basically reasonable and fair at heart, and that we establish governance systems to ensure that society operates fairly. Further, I believe strongly that western civilization is becoming progressively more civil, humane, tolerant, and peaceful over time. Steven Pinker explores this in his lecture "A brief history of violence":

http://www.youtube.com/watch?v=ramBFRt1U...

The dynamics of escalating violence are not due, as some people have argued, to some intrinsic malevolence at the heart of human nature. Rather, it's what happens when shared trust doesn't exist between people.

All it takes is one aggressive, greedy person - or even one person's fear that another is aggressive and greedy - to start a race to the bottom as even nonviolent people participate in the arms race defensively.

The only way to break the vicious cycle is to establish a shared framework of trust through a fair system of rules to which everyone commits and under which everyone is accountable.

I wrote more on this here:

http://raisethehammer.org/blog/1190

I'll reply to the rest of your comments tomorrow.

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By Grassroots are the way forward (registered) | Posted February 12, 2009 at 08:43:04

Ryan: I thought I would comment to your statement that western civilization is becoming more civil, humane, tolerant and peaceful over time.

Well maybe on some levels it is but on others it is not. What about all the wars, the weapons of mass destruction, the miltary-industrial complex and growing militarization of the police forces.

There are lots of examples out there about the police, who are causing much hurt toward the people, it is much more prevalent in the US but it is coming here as well. I recently watched a video in which a young man who was skateboarding was accosted by a police oficer. In watching this video I was appalled by the actions of said officer. There was no just cause for this behavior but it seems that the powers that be, seem to find no wrong in this behavior. If we do not hold those accountable for their actions well then, it could turn into something that we really do not want to see and that is a totalitorian state.

I watched another video of a person who was riding their bike on the sidewalk in the middle of the night, the police drove up to her, she got off the sidewalk and the response from the officer was again very questionable for the so called minor infraction.

The police are supposed to provide a necessary function in our society but if we allow it to go unchecked well who knows, somehow it does not seem right that certain types of personalities should be in a position of power if they cannot exercise that right without a sense of balance between what is right and wrong.

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By A Smith (anonymous) | Posted February 12, 2009 at 12:53:46

Ryan, >> My point about knowledge in the public domain is that we have access to it but did not produce it ourselves. Something like 90% of all the information we use to produce value through our work is pre-existing. Who owns that value? Not me the worker, since I didn't actually do the work to produce it. Not my employer the capitalist, since she didn't do the work either.

So what? Just because someone discovers something, this does not mean they add value to society. Only those people, like Sam Walton and the Google guys, who actually incorporate the "good" ideas into products that people can use, create value.

Everybody had access to the same knowledge that Sam Walton had, but only he spent money on computer and satellite systems, taking on additional risk, in order to bring it to fruition. That is the whole point of free market competition, to reward those people who risk their money to bring the customer something better and cheaper.

Therefore, it is more appropriate to say that wealth goes to the bold and the smart, rather than just the smart. That is also why, people like Sam Walton, Fred Smith (founder of Fed Ex) and Warren Buffet are richer than those people who feel more comfortable in the safety of a 9 to 5 job.

Life really is pretty fair. In Canada, almost anybody who is willing to work hard, endure large amounts of stress and setbacks, risk their reputation and money, has a pretty good shot at building wealth and getting rich. It isn't as easy as working a normal job, but than again, it shouldn't be.

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By Ryan (registered) - website | Posted February 12, 2009 at 22:59:39

Grassroots wrote:

Well maybe on some levels it is but on others it is not. What about all the wars, the weapons of mass destruction, the military-industrial complex and growing militarization of the police forces.

I would respectfully submit that all these things are actually getting better in general, but that our tolerance for them is withering faster than they are improving.

Again, I urge you to watch Steven Pinker's video, in which he defends his thesis about declining violence using pretty clear empirical data.

For me, the most compelling example of this is a contrast between public attitudes toward the Vietnam War and the Iraq War.

The Vietnam War was grinding along for close to a decade before anyone even noticed it; and even then the main focus of protest was on American military casualties, not on the vastly greater Vietnamese civilian casualties. The final toll was something like a million Vietnamese soldiers and two million Vietnamese civilians.

The Iraq war, by contrast, triggered the largest single anti-war rally in history - the February 15, 2003 protest in 800 cities around the world involving between 10 and 30 million protesters - before the war officially even began. I was at the Toronto rally and it was easily the biggest and most diversely-attended event I've ever attended.

Opposition to the war has been sharp, widespread and persistent - even in the US, where public support for the war was barely above 50% for only the first year or so.


As for police brutality, I strongly suspect that what has changed in recent years is that new technology has made it much easier to record, broadcast and compile incidents of abuse. This, in turn, has focused more public attention on the problem, which has resulted in even closer public scrutiny.

Again, our tolerance for police violence - like all forms of violence - has declined much faster than the violence itself, so we paradoxically find ourselves more outraged by fewer incidents.

Police forces have already made important steps toward reducing police violence and brutality - including more rigorous psychological screening for new recruits, sensitivity training, civilian oversight boards and so on - and as they come to realize that the public is scrutinizing them more closely than ever, they will continue to improve their conduct.

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