Exploitation and accumulation: the postwar compromise and neoliberalism

The hybrid nature of the mode of production and the switch from the postwar compromise to neoliberalism are the two keys to the interpretation of the trends of accumulation in Section 1.1. We first consider the changing forms and degrees of exploitation that shaped upper incomes and, then, address their puzzling consequences on accumulation.

Capitalist and managerial surpluses

In a hybrid social formation such as managerial capitalism, surplus labor is squeezed out through two channels (within nonfinancial corporations):

• 1 The capitalist surplus. The capitalist surplus is equal to the NVA of the sector minus taxes and wages. The resulting profits can be broken down into four components: (i) interest, (ii) dividends, (iii) share buybacks net of the issuance of new shares (as discussed below), and (iv) retained profits. Interest is a cost; the three other flows are the consequences of decisions regarding the use of profits.
• 2 The managerial channel Upper wages are paid to managers. (We classify retained profits within capitalist income although they also provide the foundations of potential expanded forthcoming upper wages of managers.)

With the exception of share buybacks, which were forbidden during the postwar compromise, this pattern of exploitation was observed during the two social orders. Within specifically neoliberal managerial capitalism, corporations repurchase their own shares, thus feeding a flow of income in favor of shareholders supplementing dividend payouts. An important aspect of neoliberal deregulation to the benefit of upper income layers was the authorization of share buybacks in 1982 (Securities and Exchange Commission

Rule 10b-18). In the remainder of this study, share buybacks are always approached net of the issuance of new shares. (Buybacks can be negative if issuances are larger than repurchases.)

The present section is an attempt at the empirical estimate of the flows of surplus conveyed through these two channels. A number of obvious approximations must be made. Beginning with the managerial surplus, there is no criterion allowing for the separation between the wages of managers and popular classes. Studies locate a border between, broadly speaking, upper and lower classes, at around 3% of income hierarchies, not specifically wage income (Banerjee-Yakovenko, 2010 and Tao et al., 2016). We place the boundary at 5%, since this is the first fractile for which we have access to the necessary data for a broader group than the top 1% (which is certainly too narrow). There is no breakdown of wages within the corporate sector. We use the general hierarchy of wage incomes in the entire US economy (from Thomas Piketty’s and Emmanuel Saez’s data). The percentage for the top 5%, thus derived, is applied to the total wages paid within the NFC sector. We consider the figures obtained as broad estimates of the managerial surplus. Data are available regarding the capitalist surplus, that is, the total of retained profits, interest, dividends, and share buybacks. The sum of the two components is the total surplus.

The resulting estimates are presented in Figure 1.2, beginning in 1929:

• 1 The upper variable is the percentage of the total surplus in the after-tax value added of the NFC sector. We take 1968-1976 as reference years (marked by the horizontal dotted segment), at 27.7%, in line with the share of surplus prevailing since World War II. The upward trend in income distribution, beginning during the 1970s, was the expression of the class features of neoliberalism. The percentage reached 38.3% between 2015 and 2017, manifesting a gain of 10.6 percentage points of the after-tax NVA (rounded up to 11% in the figure).
• 2 The lower variables break down the total surplus into its two components, namely, managerial and capitalist. The percentages fluctuated jointly at about 15% to the 1970s, prior to the hike in managerial income up to 20%, manifesting the sharp increase in upper wages during neoliberal decades. A “comeback” of the capitalist surplus is then apparent.

The gain of 11 percentage points of NVA by the total surplus must be related to the well-known stagnation of the purchasing power of lower wages. The profile of the hourly purchasing power of the income of “production and nonsupervisory employees” as in Figure 1.3 is familiar: a complete stagnation between 1970 and 2019, with a dramatic transitory fluctuation downward.

Figure 1.2 The total surplus (capitalist and managerial surpluses) extracted within the US Nonfinancial corporate sector, as percentage of the total after-tax net value added in the sector, 1929-2017.

Sources: Table 1.14 in NIPA, and Table B2, Top Wage Income Shares (Piketty-Saez, 2003).

Figure 1.3 Hourly earnings of production and nonsupervisory employees, 1947- 2019 ($2012). The hourly nominal wage of production and nonsupervisory employees has been deflated by the Consumer price index. The number of production and nonsupervisory employees amounted to 88% of employees in 1947 and 82% in 2019.

Source: BLS, Employment, Hours, and Earnings from the Current Employment Statistics survey.

Accumulation and consumption during the two social orders

The rise in the total surplus during neoliberalism as compared with the postwar compromise did not materialize into larger rates of accumulation as could have been expected. Figure 1.1 shows that the opposite occurred: the steady rise in the managerial surplus from the mid-1970s to 2000 is associated with diminished rates of accumulation. The final upsurge in the capitalist surplus in the wake of the crisis of 2008-2009 did not result in larger accumulation rates: these hikes in upper incomes were at the origin of dramatic increases in consumption.

This is shown in Figure 1.4. The two variables are the personal consumption expenditures of households and their residential investment, as percentages of GDP, but the two variables have been normalized to 0 in 1952.1. The consumption of households gained about 10 percentage points of GDP.

A more detailed analysis shows that the bulk of this rise was concentrated in the purchase of services. The comparison between this figure and Figure 1.3 reveals that the increase in consumption expenditures cannot be imputed to popular classes, since their purchasing power stagnated. This rise must be pinned on upper classes, matching the hike in their income.