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The Prospects Service© Centre for Economics and Business Research ltd
Was Karl Marx always wrong?Year 2, Lecture 3
Douglas McWilliams
Mercers School Memorial Professor of Commerce
Gresham College
11 December 2013
The Prospects Service © Centre for Economics and Business Research, 2013
Objectives
• To assess whether globalisation means that profitability will increase
• To discuss the extent to which ‘exploited workers’ whose wages are initially low benefit from faster real wage growth and so are ultimately better off
Outline
• Karl Marx and his relevant theories• What has happened to profit shares and
profitability• What is likely to happen over the next 20
years• When is ‘exploitation’ good for you
The Prospects Service © Centre for Economics and Business Research, 2013
Background
• ‘Supercompetitive’ emerging economies• Lack of competitiveness of Western economies and
difficulty in correcting this through devaluation• Boost to inflation from upward pressure on
commodity prices and devaluing currencies• So growth shortfall and upward pressure on
inflation likely• Meanwhile, skills and capacity are partly a function
of past growth and so past slow growth will have eroded capacity
5
In the past 30 years the world’s total labour force has increased by 68%
McKinsey Global Insttitute
1980 20100
500
1,000
1,500
2,000
2,500
3,000
Total number of employees in the world (mil-lions)
Emerging Advanced
6
In addition there has been a sharp drop in the number of employees in agriculture
McKinsey Global Insttitute
1980 20100%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percentage of employees in agriculture
Emerging Advanced
7
So that in the past 30 years the world’s non farm labour force has increased by 115%
McKinsey Global Insttitute
1980 20100
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Number of non farm employees in world (mil-lions)
Emerging Advanced
10
The share of labour in each of the 4 major economies has declined recently
Labour share of GDP % in the four largest economies
NBER paper see text for citation
13
In the next 20 years the world’s total labour force is expected to increase by only 24%
McKinsey Global Insttitute
1980 2010 20300
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Total number of employees in the world (mil-lions)
Emerging Advanced
14
..and the speed with which people come out of agriculture will slow…
McKinsey Global Insttitute
1980 2010 20300%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percentage of employees in agriculture
Emerging Advanced
15
So the increase in the non agricultural labour force is likely to be only just over 40%
McKinsey Global Insttitute and Cebr calculations
1980 2010 20300
500
1,000
1,500
2,000
2,500
3,000
Number of non farm employees in world (mil-lions)
Emerging Advanced
Labour does best when its share is between 30% and 60%
1 2 3 4 5 6 7 8 9 100
50
100
150
200
250
Evolution of wages under different levels of ‘exploitation’
20% wage share30% wage share40% wage share50% wage share60% wage share70% wage share80% wage share90% wage share
Implications
• We are now in the middle phase of globalisation• The augmentation of the world’s labour supply continues but it
is starting to slow• Labour’s share of the economy has got smaller• But the higher profits that this allows helps investment• Karl Marx’s predictions may yet be proved right but are unlikely
to be proved right in the near future
© Centre for Economics and Business Research ltd
Unit 1 4 Bath Street London EC1V 9DXT 020 7324 2850 F 020 7324 2855 E [email protected] cebr.com
If you want more contact:
Douglas [email protected]+44 207 324 2860