Michael Parenti

Dividends Are Not Royalties (1996)

11 minutes | English

From Dirty Truths (1996).

It has been frequently noted that IQ examinations, while professing to measure innate intelligence, are riddled with racial, gender, and class biases. Thus a low-income, inner-city youth, confronting a seemingly innocuous phrase like “behind the sofa” on an IQ test, may find it unfathomable, not realizing that it is simply a middle-class way of saying “in back of the couch.”

Along with IQ exams, the Scholastic Aptitude Test (SAT) has come under fire. Going through my file, I came across a story, clipped years ago from the Washington Post (4/28/89), noting that the Center for Women Policy Studies found that the SAT was biased against women. The center reported that about one out of every seven questions favored males over females, specifically questions about sports, science, war, and business. A more recent story in the New York Times (5/26/93) reiterated the charge of gender bias.

One claim made for the SAT is that it is designed to predict a student’s college performance. Not true. Men consistently outscore women on the SAT, yet women earn higher grades both in high school and college. But, because of the gap in SAT scores, women are less likely to win scholarships or gain entry to certain schools and programs.

While agreeing that there is gender bias in the SAT, we might also wonder about the test’s unexamined politico-economic bias. What caught my eye was an example offered in the Post article of the questions that favored males. Males are more likely to answer correctly the comparison: “Dividends is to stock as royalties is to writer.” According to the SAT, the correct answer is “true.” Presumably, both dividends and royalties are seen as income, while stock and writer are the respective income producers.

Wait a minute, I thought. What is so correct about that parallel? It is just such thinking that leads some people to accuse me of being a “capitalist” because I earn royalties on my books. But income accrued from stock ownership is something apart from salary or wages or royalties earned from hard work. (“Royalties” are analogous to dividends only when they refer to profits on land, oil, and mineral rights that go to the landowners, something quite different from the royalties that go to writers.)

Dividends from stock represent profits from capital investment, money you make without having to work. The author of a book does not make profits on his or her book. She or he earns an income from the labor of writing it, proportionately much less than the sum going to those who own the publishing house and who do none of the writing. Likewise, those who do the other necessary labor of editing, proofing, printing, and marketing the book do not receive profits. They are paid a portion of the money that the book will make and, like the writer, that portion will be less than the value added to the book by their labor.

The sum going to the owners is profits, the dividends on the stock they own in the publishing house. It is a portion of the value added to the commodity by the labor power of others. It is what federal tax forms used to call “unearned income” and with good reason. Again — it cannot be said too often — profits are what you make when not working. This explains why, in most instances, the secret to getting rich is not to work hard but to get others to work hard for you.

While corporations are often called “producers,” the truth is they produce nothing. They are organizational devices for the expropriation of labor and for the accumulation of capital. The real producers are those who apply their brains, brawn, and talents to the creation of goods and services. Capitalists like to say that they are “putting their money to work,” but money as such cannot create more wealth. Of itself, not all the money in the world can build a house or harvest a crop. Even in regard to what is called “productive capital,” machines and other mechanisms and technologies cannot of themselves produce anything. They need human labor to become productive and are themselves the products of previous human labor.

What capitalists really mean when they talk about “putting their money to work” is that they are putting human labor to work, paying workers less in wages and salaries than they produce in value, thereby siphoning off the surplus for themselves. “Surplus value” is not only a Marxist concept but a reality of life — so much so that the capitalists themselves talk about “value added” meaning more or less the same thing as surplus value: the value that the workers add to the product over and above the wages they are paid and other costs of production.

This expropriation of the value created by labor is the biggest rip-off that working people (including writers) endure. While it is easy for all of us to see the money taken from us by the government, in the form of taxes deducted from our paychecks, it is less easy to see the far greater wealth taken from us in the form of the value created by our efforts and pocketed by those who do not work.

Typically, in an eight-hour workday, the value of the products that workers create in the first two hours of labor will equal their wages. For the remaining six hours, they are performing surplus labor time, creating surplus value that is taken in by the shareholders, bondholders, and others who do not work. It is from this surplus value (or “added value” as management would say) that the corporate capitalists make their profits, after paying off overhead costs, interest on loans, advertising fees, and what little taxes they sometimes pay.

Consider the U.S. Census Bureau’s Census of Manufacturers, which reported that in 1987 workers in twenty manufacturing industries produced an average $95,519 worth of product per worker a year, or $1,837 a week. Yet the wage paid averaged only $394 a week. So the $64 subsequently taken from the worker’s paycheck in taxes was far less than the $1,443 in surplus value pocketed by the owners. This constant and massive transfer of wealth from those who produce it to those who pocket it explains why the net assets of the four hundred richest Americans is $300 billion, while the net assets of the one hundred fifty million poorest Americans is zero.

This process of expropriation of value explains why the owners of big commercial publishers of books, newspapers, and other publications enjoy such immense wealth while most of their writers live at the subsistence level. In 1975, when I published an oped piece in the New York Times, I was paid $150. Eight years later I published another in the Times and, despite the intervening inflation, I again was paid only $150. Today, almost two decades since I first appeared in that illustrious publication, the fee is still $150. I got the same munificent sum for an Op-ed piece I published in the Los Angeles Times. Furthermore, neither of these newspapers — nor most other major publications — pay permission fees or reprint fees to authors. That means the piece might get picked up by various other newspapers who then pay a fee to the Times — but the author sees not a penny of it. Some of the major magazines, known as the “big slicks,” not only have frozen their fees but have reduced them over the years. Forget about trying to keep up with inflation; freelance writers are not even keeping up with the nominal earnings of the 1970s — even without accounting for inflation.

To get an idea of how poorly paid writers are, consider the following. At a meeting of the Washington, D.C. chapter of the National Writers Union, the chair asked for a show of hands of those who had earned over $5,000 from their writing in the previous year. Of about thirty persons, I was the only one who raised his hand — and that’s only because I had a textbook that had enjoyed some college course adoptions.

Writers will tell you about their many grievances, about publishers who lie about sales figures and withhold royalties, about manuscripts accepted then never published, about book publication dates that are postponed for as much as three or four years, about books that are published only to have their distribution deliberately and completely aborted — “privished” it is called — usually because the publisher decides the book is politically unacceptable. Writers will tell you about payments and kill fees never collected, about articles completely rewritten and distorted by clunky-styled editors, about having no say regarding framing, titling, headlining, and rewrite. And they will tell you about major magazines and big publishing houses that have grown rich off their labor.

So a correct analogy would be: “Dividends is to stock as profits is to publisher.” Leave the writer out of it, unless you want to say: “Wages is to workers as royalties is to writers.” To repeat: Authors make money off their own hard work, and usually not all that much. Unlike the publisher, they make nothing from the capital investment on their books because they don’t have any capital invested. Like the proofreaders, editors, printers, and sales representatives, writers create value through the direct application of their mental and physical labor. A portion of the value they create goes to them. The rest goes to the investors.

What the Washington Post article and the study it reported on both missed was the political and class bias in that particular SAT question. The “correct” answer is true only if we accept the capitalist ideological presumption that treats the pocketing of value by investors as identical to the creation of value by writers. Both investor and writer supposedly are “working” in partnership to create “earnings.” Tell it to Forbes, not to us underpaid scribes.

The Post quotes a New York state judge: “After a careful review of the evidence, this court concludes that SAT scores capture a student’s academic achievement no more than a student’s yearbook photograph captures the full range of her experience in high school.” Well said. All I would like to add is that at least one of the SAT questions captures the ideological biases and disinformation of a capitalist system all too well, biases that are so thoroughly ingrained as to go undetected and unchallenged in the very investigations that purport to expose bias.