The proletariat as structured product
In the wake of the 2008 global financial crisis certain terms of art that had been restricted to the niche world of financial engineering suddenly entered the general media discourse. One of these was the now-infamous CDO or “Collateralised Debt Obligation” along with other related assets like Mortgage-Backed Securities (MBS) and various other species of what finance calls “structured products”. In summary these are financial assets that manage the risk return/return profile of debt assets, like mortgages or other long-term repayment loans (student loans, car loans, etc) by means of pooling (“securitization”) and tranching.
The basic idea of pooling many loans to balance out individual risk by the averaging effect of the law of large numbers had already been around for a long time in finance, in one form or another. But the modern structured product market is based on the idea that investors are less interested in an averaged-out return/risk profile, than having the choice between low-risk, low-return and high-risk, high-return products, allowing them to mix and match according to their strategy. Tranching is the process of taking a securitized pool of assets and slicing and dicing them (through a complex mathematical procedure) them into a risk hierarchy of prime (or senior), mezzanine and subprime tranches. The senior tranche is rated at the much desired (by pension funds and other safety-seeking long term investment bodies) triple-AAA “safe as houses” (ahem) rating, with modest but secure returns. The subprime or “equity” (nice branding) tranche is, like junk bonds, attracted to market players who are looking for a higher return and are prepared to take more risk to get it. The details of how this all works need not concern us here, save to register that the basic idea is that there is a queue on which tranche gets paid out first, such that if there are losses from the overall pool, the senior tranche is paid out first, then the mezzanine and finally the subprime or equity tranche has to soak up the losses through defaults, before any of the senior tranches are affected.
What has this got to do with the labour market? In a word, we can apply the model of structured product to the proletariat itself, as a means of managing the return commanded by labour in return for the riskiness or unpleasantness of the work in question. If all the members of the proletariat are perfectly equal in the labour market — that is to say, they all have equal opportunity of access to all work opportunities — then that is akin to the idea of the proletariat as single unstructured pool of securitized assets. In this hypothetical case (I say hypothetical because I cannot think of a single historical example where this has actually happened) the dynamics of supply and demand indicate that riskier, dirtier, more unpleasant jobs would claim a premium return in the labour market through higher wages.
Consider, by contrast, the idea of a tranched or structured proletariat, who have different priority in the queue for picking jobs, in an analogous fashion to how the different tranches of CDOs get paid out. The senior tranche of the proletariat would get first pick of the least risky, most desirable jobs. The middle tranche would go through what remains, once the plums have been picked, selecting the less onerous, less dangerous and unpleasant jobs. To the subprime or “equity” tranche of the proletariat then, would remain only the most unpleasant, riskiest jobs. The very jobs that would demand a premium in remuneration in an unstructured equal labour market situation. Let’s also assume that the “subprime” sector of the workforce is a minority relative to the overall labour market. Instead of a premium for the riskiest jobs, this segment of workers is forced, through lack of alternative employment, into accepting the worst, most dangerous jobs, not only without a recompense in higher wages, but often at even lower than average wages.
From the perspective of the buyers in the labour market — the employers — this “structuring” of the workforce leads to reduced premiums for risky or obnoxious work, and is therefore a more cost-efficient management of the risk/return relation in the labour market.
Anecdotally we can sanity-check this theorisation by looking around us to see if the labour market is structured into a hierarchy of preferment for job access (it is) and whether or not the most dangerous, dirty and unpleasant jobs are in fact the best paid (they are not).
An important caveat need to be registered here. From a historical perspective, this is not a causative account. This is neither the how or the why explanation for the history of the concrete segmentation of the labour market. It is simply an abstract model testing the viability or compatibility of segmentation with profit-maximisation. We are not proposing this as a model of economic hard determinism in the style of pre-war Second International Marxism.
What we are proposing, however, is that Althusser’s later claim that “the last instance never comes” — referencing his earlier idea of economic forces as determinative only “in the last instance” — is not entirely correct. Keynes’ acerbic quip that “Markets can stay irrational longer than you can stay solvent” may be true, but eventually the forces of economic gravity do reassert themselves spasmodically (usually through crisis). The Confederate States of America, for example, discovered to their cost that, when it came to it, their slave mode of production was no match for the competing industrial wage labour one of the Union. The last instance most definitely came for the CSA. Terminally. Althusser notwithstanding.
In the same vein, although the argument for the relative efficiency of the structuration of the proletariat into differentially-privileged strata does not in itself explain how or why that structuration came about, historically speaking. It can explain why it has not yet been replaced over time by an equal-access model, which it would likely have been if an equal labour market was more efficient from the capitalist viewpoint of the development of the productive forces. Conversely, if it could be shown that an equal access labour market was somehow more economically efficient than the unequal, structured access model, then the persistence of the latter would be evidence that any materialist conception of historical development is incomplete or erroneous in some way. But this is not the case here.
Refs:
https://www.investopedia.com/terms/s/structuredfinance.asp
This is an auxiliary text for the chapter on “Standpoint and class” in Ideology and Practice