Why is Capital So Much Stronger than Labor?

June 1st, 2014 at 2:09 pm

Thomas Piketty’s analysis of inequality through the ages kicked off an important debate about the causes of and solutions to the problem of the increased concentration of wealth and income.  Central to Piketty’s economic mechanics is his assumption that, barring some cataclysm, wealth will increasingly accumulate to those at the top of scale as long as its rate of return (the rate at which wealth holdings appreciate) exceeds the economy’s growth rate.  From this diagnosis, his prescription is redistribution through the tax code.  This certainly falls out of his model: once you accept the inevitability of narrowly held wealth accumulation, the only solution is to tax and redistribute.

Note, however, that this is not a onetime solution; it implies consistently ratcheting up the redistributive function to offset relentless accumulation.  Moreover, in most political systems I can envision, there’s a fatal flaw here: the increasingly wealthy and powerful won’t stand for it, a criticism Piketty himself of course recognizes (he’s not naïve).

So how should we think about this problem?  In fact, some of Piketty’s critics point out that there are actually a variety of ways to alter the distribution of market outcomes, aka the primary distribution of income (in contrast to the secondary distribution after taxes and transfers).  These ideas range from more union power to better balance that of capital, higher minimum wages, patent reform, restraints on the financial sector, charging polluters and financial bubble blowers for the negative externalities they generate, direct job creation to tighten the labor market and enforce a more equitable distribution of growth, and more.

But from where I sit in the nation’s benighted capital, the chance that any of these will see the legislative light of day anytime soon is far too low.  Not zero, maybe.  The President himself, for example, has taken steps to raise the minimum pay of workers on federal contracts and enforce better environmental standards.  But neither he nor his successors can make much of a dent in the forces skewing the primary distribution in the face of well-organized and highly effective political opposition.

Much of this opposition can be traced to capital itself, as wealth accumulators have the resources to control political outcomes (recent political science research quantifies their disproportionate influence).  And, of course, given the drift of campaign finance in recent years, concentrated wealth has ever more inroads into the political process.

All of this raises a fundamental question that curiously seems to be unasked: why is capital so powerful?

One reason is that labor power is so diminished, what with private sector unions at seven percent of the workforce (public sector unions, historically less vulnerable to outside pressure, are at 35 percent but under attack).  But that just begs the question: why isn’t labor more powerful, with “labor” in this context referring to not only unions but to the much larger group that depends on paychecks for their economic well-being.

I don’t know the answer to these questions, but my experience as a policy wonk and economist in government has led me to believe that economics, as currently practiced, is part of the problem.  Not the discipline itself, which historically has been flexible enough to offer wide ranging and useful tools for analyzing and solving economic problems.  I’m talking instead about the way it interacts with wealth and power today to support capital and hamstring labor.

For example, it’s widely argued that government actions that set wages or regulate commerce create “inefficiencies.”  Regulate an industry and capital will flee; raise the national wage floor and employers will leave the market (or, in Piketty’s world, handily substitute machines for workers).  Increase a marginal tax rate and workers will supply less labor; investors, less capital.  Form a union and the unionized firm will face competitive disadvantages that will put it out of business.  Provide a safety net benefit to someone and they’ll work less.  Tax a polluter and you’ll crash GDP.  Tax a financial “innovator” and credit markets will dry up.

Conversely, cut back on a tax rate, a safety net program, the minimum wage, the unionization rate, financial oversight, and growth, jobs, and liquidity will flourish.

I’ve been arguing against these positions for decades, backed by considerable empirical evidence showing that moderate changes to tax rates, minimum wages, union density, the safety net, regulatory oversight and so on trigger nothing like the disasters their opponents claim and can yield important benefits (which is not to say there are no “negative impacts” at all).  Yet the bar to win the anti-interventionist argument is set remarkably low.  You don’t need evidence; you can just cite “basic economics.”

One symptom of this mindset is the elevation of GDP above all else.  I found it striking that during one round of the recent Obamacare debate, opponents got long mileage from a CBO report showing that some recipients of subsidized health coverage could now choose to work less, clearly a good thing for them.  But this unlocking of job lock was widely pilloried for reducing potential GDP.  When the CBO projected that a minimum wage increase would raise wages of 24.5 million and cost the jobs of 0.5 million, guess which number won the debate?

Armed with these distorted arguments, capital is not just insulated against labor.  It is in a position to steer every economic policy debate its way.  As Suresh Naidu writes in a wonderful essay on many of these same points, “In a thoroughly marketized world, the wealthy can purchase educational reform, ….,think-tanks, legislative language…”

Surely part of solving the inequality problem will require reducing the outsized political power of those with the most resources (and to be clear, I’m arguing that their usual dominance is highly amplified and uniquely unopposed in our current politics).  If I’m right about the role of economics today in supporting capital and opposing labor, then part of winning that fight requires a new economics that encompasses a much broader scope of human and societal well-being, that more readily sees market failures, more accurately gauges and fairly judges reactions to policy changes, and places a much heavier weight on shared prosperity, and not solely through redistribution, but through market outcomes.

As another Thomas—Pynchon—said: “If they can get you asking the wrong questions, they don’t have to worry about answers.”  Progressives have all kinds of ideas to shape a more equitable primary distribution.  But those ideas will never get much oxygen if we remain voluntary trapped in the cramped debate of a short-sighted economics.

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32 comments in reply to "Why is Capital So Much Stronger than Labor?"

  1. foosion says:

    It’s also the logic of collective action.

    One company with a lot of resources who has a major interest in something will pay a lot of attention and expend considerable energy to get its way. One thousand unorganized individuals don’t have the time to become informed or enough individual stake to affect the outcome.

    Add in concentrated ownership of media and our one thousand individuals can be convinced to vote against their interests. Don’t forget the political science research showing politicians do the bidding of the best off, while essentially ignoring the wishes of everyone else on virtually every issue.


    • Robert Buttons says:

      Exactly. Central govt and reams of regulations work in favor of conglomerates with copious resources. Weak govt, and less regulation favors smaller firms.


      • Fred Tremarzo says:

        Exactly. Then the larger ones will eat up the smaller ones and take the power abdicated by the goverment. One man, one vote does not exist in the Capital world.


  2. Sandwichman says:

    So how should we think about this problem: “economics, as currently practiced, is part of the problem”? And “why is capital so much stronger than labor?”

    I think John R. Commons hit on something that needs to be very seriously considered. I would argue that Commons’s point is also germane to Thorstein Veblen’s analysis of what he termed “conscientious withdrawal of efficiency” by business. Economics assumes otherwise. It does so without any theoretical or empirical basis for the assumption. It just seems that any other assumption would undermine the consensus.

    Commons:

    “Going back over the economists from John Locke to the orthodox school of the present day, I found they always had a conflicting meaning of wealth, namely a material thing and the ownership of that thing. But ownership, at least in its modern meaning of intangible property, means power to restrict production on account of abundance while the material things arise from power to increase the abundance of things by production, even overproduction.”

    Veblen:

    “The mechanical industry of the new order is inordinately productive. So the rate and volume of output have to be regulated with a view to what the traffic will bear — that is to say, what will yield the largest net return in terms of price to the business men who manage the country’s industrial system. Otherwise there will be “overproduction,” business depression, and consequent hard times all around. Overproduction means production in excess of what the market will carry off at a sufficiently profitable price. So it appears that the continued prosperity of the country from day to day hangs on a “conscientious withdrawal of efficiency” by the business men who control the country’s industrial output. They control it all for their own use, of course, and their own use means always a profitable price. In any community that is organized on the price system, with investment and business enterprise, habitual unemployment of the available industrial plant and workmen, in whole or in part, appears to be the indispensable condition without which tolerable conditions of life cannot be maintained. That is to say, in no such community can the industrial system be allowed to work at full capacity for any appreciable interval of time, on pain of business stagnation and consequent privation for all classes and conditions of men. The requirements of profitable business will not tolerate it.”

    The prejudice of economists is that the entrepreneur is the quintessence of “efficiency” and “productivity” while the worker is constitutionally inclined to “shirk.” As Warren Samuels pointed out, this is a very one-sided view of things. It is a very consequential one-sidedness because it excludes from analysis something that may be the very basis of profit and consequently of inequality. Consider Joan Martinez-Allier’s remark that “Externalities are not so much market failures as cost-shifting ‘successes’.”


    • Sandwichman says:

      More Commons:

      Efficiency tends to increase the abundance of goods, or to reduce the man-hour costs, or to reduce the hours of labor. Scarcity distributes the output to those who can pay and withholds it from those who cannot pay, or increases the hours of labor, or reduces the pay to laborers who do not have equal bargaining power.

      Consider, in the light of this distinction, the contemporary “efficiency wage hypothesis” presented as a microfoundation of the “New Keynesianism.” Aside from ascribing to Keynes the opposite* of his position with regard to wage rigidity and persistent unemployment, the efficiency wage literature treats increasing the abundance of goods as the sole objective of the firm. In effect, the so-called “New Keynesians” simply resurrect the old wages-fund doctrine of (vulgar) classical political economy.

      *Keynes explicitly dismissed the rigidity argument, New Keynesians argue that wage rigidity is central to Keynes’s explanation of persistent unemployment,


  3. Mark Jamison says:

    The Powell Memo from the early 70s defined a strategy that American business, especially big business has executed to perfection. The marketing of a particular vision of the American economy has been flawless and combined with the political execution and manipulation of the Republican Party this has led to large parts of the electorate that vote largely against their own interests.
    We really don’t have a political party that represents the interests of labor. The Democratic Party represents an amalgam of interests and points of view, some of which are contradictory. The Clinton economics team led by Robert Rubin and Larry Summers really didn’t do the average American worker much good in either the short or the long run.
    How we rebalance things depends a great deal on whether the progressive elements of the Democratic Party can attract sufficient numbers to begin electing candidates at all political levels – the Atwater strategy of creating a deep political bench by focusing on local races really does work and it’s something Democrats, who tend to focus on national races, don’t do very well.
    The comments of sandwichman above seem particularly thoughtful and on point. Veblen fails in a lot of ways but the idea of being careful and thoughtful about how you define efficiency is very important. What is supposedly economically efficient is often a question of “for whom” or for how long or under what conditions and particulars. And economically efficient may be socially or culturally destructive.


    • wendy beck says:

      The party that comes closest to representing labor, Working Families, just sold out its membership by supporting Andrew Cuomo in a deal that would have him support Democrats for legislature instead of a number of his Republican allies.

      When a “Democrat” makes a deal to NOT support Republicans, you know we are in another world — a world where even Democrats aren’t “Democrats” and can’t be expected to do even the minimum to support working people. And in making this deal he probably destroyed the Working Families party’s credibility as a voice for working people.


  4. Robert Buttons says:

    Pikkety has mistaken the growth of the money supply for the growth of real capital. Look at Piketty’s figure 9.8 which shows a massive increase in inequality after 1971: the year Nixon ended Bretton Woods. The rich are in a much better position to use newly created dollars (falsely designated as “capital”) in financialization and rent seeking to increase wealth. The answer is sound money,

    It makes no difference if rich industrialists, corrupt politicians or self-serving (public employee) economics professors are making the decisions, redistribution is inherently unfair because of (best case) sub conscience bias or (worst case) outright corruption.The answer is free markets and weak central govt.

    It is Quixotic to think that the “science” of economics can tell us how to redistribute. Scientific concepts like “controlled studies” and “reproducibility” are, and will always be, absent in such a complex system as econ. We can’t even predict GDP growth within an order of magnitude! I’m no big fan of Adam Smith (He largely ripped off smarter folks like Cantillon) but the answer here is rely on the invisible hand. There was a MASSIVE decrease in wealth disparity in laissez-Faire 19th Century England.


  5. Robert Buttons says:

    “Economics, as currently practiced, is part of the problem.”

    Said the austrians about the monetarists, and the keynesians about the monetarists and the neo-classicists about the marxists and the monetarists about the keynesians, etc etc etc.


  6. Nick Batzdorf says:

    The FHA has done a great job of expanding home ownership, and I like the idea of something like that to expand capital ownership – in addition to all of the above (taxing, unions, realistic minimum wages, etc.).

    Companies are going to automate at an accelerating speed no matter what – and that’s a good thing for the people who own the machines. So the issue is who owns the machines.


    • Robert Buttons says:

      The FHA has done a great job at pushing up home prices, thereby enriching those that own the houses (ie the capital).

      Those machines you decry make goods cheaper and cheaper so the poor can have higher standards of living. After all, economics should be more about standard of living and less about GDP, employment, etc.


      • Nick Batzdorf says:

        And the problem is that the standard of living is declining. This is the old supply side/demand side chicken-and-egg argument. Or really the failed supply side experiment.

        To be clear, I don’t decry the machines at all, I accept their inevitability and say we need a policy response to ensure that capital – the machines – isn’t concentrated in the hands of ten people while everyone else starves.

        At that point enriching those who own the capital is a good thing! The machines will do all the work for us and it won’t matter that labor has lost all value.

        http://www.technologyreview.com/view/519241/report-suggests-nearly-half-of-us-jobs-are-vulnerable-to-computerization/


  7. Larry Signor says:

    Awesome post, Jared.


  8. Rima Regas says:

    Great piece, Jared! 99% of our problems are rooted in PoliSci. We all need to drive this point home to voters.


  9. Kevin Rica says:

    What is in short supply sees a rising price. The converse is true: what is in surplus sees a falling price.

    When you have an open border, wages cannot rise because immigration will overwhelm any potential labor shortage.

    Why suggest direct job creation if we have an immigration policy based on the false justification that we have a labor shortage? We flood the market with cheap labor and wages stagnate or collapse. Why are we surprised?


  10. readerOfTeaLeaves says:

    If I’m right about the role of economics today in supporting capital and opposing labor, then part of winning that fight requires a new economics that encompasses a much broader scope of human and societal well-being, that more readily sees market failures, more accurately gauges and fairly judges reactions to policy changes, and places a much heavier weight on shared prosperity, and not solely through redistribution, but through market outcomes.

    This is one of the finest OTE posts, ever.
    This is like a triple in the bottom of the eighth inning 😉

    Economic thinking that takes into account the fact that humans are social critters, rather than mere ‘profit maximizers’, is long overdue. Our economic assumptions have been far too limited, far too focused on capital formation, and far too embedded with metaphors originating in early 19th-century technologies (like ‘engines’).

    We need to start asking the right questions about economics, including a focus on the social contexts in which economic behavior occurs.


  11. Smith says:

    Here is a totally different and I would argue more accurate interpretation of Piketty and his proposals.

    Instead of “From this diagnosis, his prescription is redistribution through the tax code,” what I see are higher tax rates laying the foundation for less inequality by preventing the buildup of future wealth. Also, using funds for infrastructure, education, basic science and health research, paying down the debt, and ensuring government service attracts top talent, is not anything like redistribution in the classic sense (that would be funneling new tax receipts to EITC and SNAP or introducing a negative income tax). A huge point is also that confiscatory rates discourage excessive compensation in the first place. This is not Piketty’s prescription anyway, this is what worked in the U.S. during two world wars, and in the mostly peacetime postwar era of the late middle twentieth century. (1945 -1980) http://eml.berkeley.edu/~saez/course/Labortaxes/taxableincome/taxableincome_attach.pdf

    I find it most discomforting to read “Note, however, that this is not a onetime solution; it implies consistently ratcheting up the redistributive function to offset relentless accumulation,” I’m pretty sure Piketty says nothing about ratcheting or a need to ratchet. Indeed since he recommends 80% rates on $1 million or more, there is not that much room left to ratchet. If the meaning of ratchet is just to insinuate only small incremental increases could ever pass, that contradicts the historical record of both most increases (and decreases).

    There are many ideas to lower inequality and as noted above: “These ideas range from more union power to better balance that of capital, higher minimum wages, patent reform, restraints on the financial sector, charging polluters and financial bubble blowers for the negative externalities they generate, direct job creation to tighten the labor market and enforce a more equitable distribution of growth, and more.” But mostly these are complements to tax hikes, possibly necessary, but definitely not sufficient. Higher wage scales at lower incomes will create inflation if the 1% compensates themselves at current rates, since they control prices. Moreover, even if everyone in the 99% doubles their income, exactly how does that begin to adequately address the current level of inequality as 99% make 10 and 100 times less than the 1%. I say it doesn’t alter the imbalance materially on a scale necessary to change the power structure. This is a mathematical fact. $20,000 vs. $2 million is 1/100th the income. $40,000 vs $2 million is only 1/50th. Guess who still runs things? It is doubtful the non-tax argument even envisions such a favorable outcome as doubling current income levels. But $20,000 vs. $2 million taxed at 90% and guess what? The result of $20,000 vs. $200,000 creates an order of magnitude measure of progress.

    Not attacking more forcefully the direct cause of inequality and conceding in advance the defeat of necessary and proven steps needed to redress the excessive compensation awarded the 1% doom society and the economy to the continued imbalance, inefficiencies, and distortions that result from the large and growing inequality of income, wealth, and power. Misunderstanding the critical nature and essential role of higher and indeed confiscatory marginal tax rates matches exactly the conservative argument to build up the poor instead of trying to tear down the rich.

    On another note “Why is Capital So Much Stronger than Labor?” Aside from Taft-Hartley and numerous other legal and economic assaults on labor rights, millions of workers no longer labor in coal mines, as longshoremen, in steel mills, and auto factories. The nature of work has changed as the U.S. became a service economy. Workers are also not recently radicalized by ten years of average unemployment of 17% (1931-1940).


  12. fasaha traylor says:

    Great piece,and with a few exceptions,great comments. But if economics is the problem, what can be done about it? Sorry to put that on you, and I recognize that a well articulated problem is at least the first step toward a solution, but where are the institutional sites to launch a counterattack? Or how can they be built?


    • Jared Bernstein says:

      There’s definitely some countervailing forces brewing in the econ world. To some extent, the work harks back to earlier approaches to the discipline before “rational expectations” and mathematical models that are by necessity fraught with simplifying assumptions took over. I’ll write more about this, maybe.


  13. Ben says:

    Wh”at is often lost in such discussions is the forcible violence with which the labor union movement was formed in the late nineteenth and early twentieth centuries — which forced concessions from capital, by threatening to raise costs unacceptably — either shutting down the means of production, or bodily injury to management. Such actions have been made illegal through such mechanisms as Taft-Hartley and Landrum-Griffin, while institutions of capital fairness enforcement (such as the National Labor Relations Board) have been rendered impotent through appointment of labor opponents, or refusing to ratify nominations of a working quorum.

    The refusal to confront Reagan “capital reforms” — which transformed American capitalism to the now debunked Japanese zaibatsu model — has been a huge political mistake for Democrats. The removal of barriers between finance and industry, and between commercial and investment banking, has proven to be a self-sustaining driver of accumulation, as much as any Piketty tax redisribution might attempt to claw back capital to the public sector.


  14. Tom Richards MAmoderate says:

    I agree with most of your many points. So:
    o tax ALL (passive & earned) income >$1-mil at 90% (as Ike did).
    o tax estates >$19-mil at 90%, to restore capital to republic.
    o spend on infrastructure.
    o add single payer option to ACA for all basic medical care.
    o import tax imports of out-of-balance nations year in arrears.
    o set $15 minimum wage, 28 hour week & double overtime.
    o reestablish Glass-Stegall.
    o add Amendment XXVII corporations are not citizens.
    o elect ONLY candidates who subscribe to the above.


    • Robert Buttons says:

      Confiscatory taxation takes capital from the productive and rewards (1) politicians (2) corrupt political cronies and (3) special interest constituencies (who are essentially selling votes).


  15. rationalrevolution says:

    This is an issue I’ve been working on for a decade now, and I’m really surprised that more people haven’t arrived at the same solution that I put forward, which is simply ensuring a more equal distribution of capital ownership.

    doing this solves so many problems. It doesn’t solve everything, it solves a lot, and is relatively easy compared to other options as well. The most important thing about ensuring a more equal distribution of capital ownership is that it solves the democracy problem, because once capital itself is fairly equally distributed, there political power is also equally fairly distributed.

    Any solution that doesn’t re-distribute capital ownership is doomed to fail, because the capital ownership will ultimately undermine it.

    Anyway, here are my articles that address this issue:

    http://rationalrevolution.net/articles/capitalism_evolution.htm

    http://rationalrevolution.net/articles/restore_america.htm

    I’m also currently working on an article that expands up on my National Individual Investment Program and makes a case for it over simple re-distributive taxation or a guaranteed income.


  16. Matt says:

    Henry George answered this ages ago: ‘capital’ is more powerful than ‘labor,’ because ‘capital’ as we use it includes land, which means that ‘capital’ owns the very earth in which labor must take place. That’s a pretty overwhelming bias in the system.


  17. ken mclaughlin says:

    I have read with intriguing interest the comments posted above. Obviously to us well educated arts/sciences majors; but not in economics, the current situation, with its vortex of political/social/economic ramifications seems a very complicated multi faceted subject, requiring a variety of brilliant minds to discern and hopefully solve to society’s best interest. Attempting to discern the real truth to implement solutions of excessive greed and resulting severe social/political/economic inequality, is akin to attempting to focus while in a giant whirlpool. No one mind set can accomplish this. That aside, I did not see mentioned in the above thoughtful, astute comments, a recognition of the complete lack of morality, character, and citizen loyalty, by the current “robber baron element;” characteristics so necessary for the survival, growth, and health of communities and nations. This country was founded and flourished upon those principles, in addition to back breaking labors and work ethic, centuries longer than the current feeding frenzy of technology wonders that like amoebas, evolve every few minutes..All the various social, political, and economic manipulations by the “1%” to keep all to themselves and exclude everyone else, just appears a feudal Europe replay.. To the above gurus, pardon my possibly simplistic analogy.

    Obviously, as the above stated, just ramping up taxes is not the magic answer, since there are more tax loopholes and offshore accounts than fish in the sea, along with judgmental resentment. Nor is an industry wide abolishment or down sizing of so called “safety nets” an answer, as though the disabled, elderly, and unemployed trapped in them, have “chosen to be non productive eaters.” Free loaders at every level are an obvious population

    We no longer have an unpopulated continent to run to, and away from, political disorder, as did centuries ago forbears, so a multi disciplined understanding and concept of the “metastasized economic/political/social malignancy,” must be developed by minds far smarter than I, or most others are; before any “solution” is found. Then, educate the voting public to said solution(s) in a manner that lay people can understand, hopefully creating some “uniting” the 99%, to solve these matters before we disintegrate into anarchy, and anarchy appears to be on the current horizon.

    What it would take to ultimately “pull this off” is another story,” but some real intervention, dedication, and citizen loyalty, and involvement, far beyond no commitment flag waving and bible thumping; characteristics not usually found in many decades now, would be a pre requisite. Elections for our “representatives” are also on the horizon. Any takers for these suggestions????


  18. Theodora says:

    Nothing will change until Democrats take control of the message away from the right. At least since Reagan they have either ignored easily disproven claims like self-financing tax cuts (one of the most damaging lies the right has spread, IMO), played defense or just rolled over and played dead. Meanwhile the right has been busy test marketing deliberately misleading but seductive terms and messages. For example they got everyone to adopt their term “privatizate” when they found the public didn’t like the idea of turning over their SS money to Wall Street and everyone, left and right now uses the terms. Had the left half a brain they would have countered with a phrase of their own – “profitize” comes to mind- and refused to play along no matter how much the media chastised them for Incivility.

    The media should bear most of the blame, however. They take the position that if the opposing party doesn’t make the argument then they have no obligation to do so, the necessity of an informed citizenry for a healthy democracy be damned. Instead they opt for faux balance rather than facts in their reporting and have fun treating politics like a game.

    For example I have seen exactly one article by the MSM debunking the “tax cuts pay for themselves” lie in the years since Reagan sold this budget busting fairy tale to the public. The article even quotes Bush II Econ advisors admitting that tax cuts have never come close to paying for themselves – info that a rational person would think the media would have been all over.

    http://www.washingtonpost.com/wp-dyn/content/article/2007/11/30/AR2007113002190.html

    Sadly poll after poll show that the American public agrees with The positions of Dems on many issues yet they oppose Democrats’ proposals. It is long past time for Democrats to take back the conversation and for the media to give the public facts, not spin. In addition they need to convince mainstream people particularly the young, of the importance of voting in off year elections. Til then nothing much will change.


  19. Robert Duncan says:

    Jared, big fan. My own humble observation is that there is a misconception about capitalism. My perception is that there is a widespread presumption that “free market capitalism” with entrepreneurs creates the greatest “efficiency” and “productivity” [as observed above] of goods and services, whereas government intervention only mucks it up.

    My further observation is that every entrepreneur doesn’t want to be a capitalist – but really wants to be a monopolist. Every entrepreneur wants more market share no matter what, with the ultimate goal being 100% control of its defined market. There are many ways to achieve this: patents, buy out competitors, undercut competitors and drive them out of business, advertise more, engage the political arena do further your advantages, etc., etc.

    What we see today are very big companies using every mechanism available to them to achieve this concentrate more and more market share/power in their domain to the point that there is little or no meaningful competition.

    Labor, the individual worker, has no such equivalent, countervailing power or influence.

    Free market capitalism as a theory has little or no self-correcting component to such concentrations of market domination/control by a limited number of entities (except for sea changes: horse and buggy to auto, or screw-ups).

    For awhile, the people/government recognized that monopolies were not in the best interest of society; government intervention was acceptable. But the political round of deregulation took care of that. And perhaps, in a world of super conglomerates our concept of monopolies/oligopolies – is outdated and fails to recognize the undue control and influence a Walmart and other conglomerates have over the market and society.

    The concentrations of wealth that you discuss are the result of the growth of these monopolies, oligopolies and conglomerates in the world (not possible 50 or 100 years ago).

    If capitalism is not self correcting, and further concentrations of wealth are inevitable, society has to decide if in the long run if this is good for the health of our society. My observation: capitalism is not self-correcting; concentrations of wealth are inevitable (all other things being equal); and such concentrations of wealth are not good for the long term health of society. I believe a very large, financially healthy middle class and a very small lower class/economic stratum creates the strongest most viable, stable society over time.

    This trend and the future of our society can only be addressed if a majority of people understand these issues and support that corrective actions be taken. The business class and the politicians their money supports expect that they can obfuscate, misdirect and confuse enough people to ensure this doesn’t happen.


    • Davis X. Machina says:

      The median American voter has the macroeconomic intuitions of a 13th c. Burgundian peasant. Tell him r > g and he’ll tell you “Deus lo vult”.


  20. Steve Finlay says:

    As you say, it is very important to ask why capital is so powerful relative to labour. I am convinced (although some people emphatically disagree) that this power imbalance has reached a level which is damaging to human welfare and safety.

    This is not a new question; the anomaly is that economists have NOT been looking at it recently. Adam Smith discussed it in Chapter VIII of An Inquiry Into the Nature and Causes of the Wealth of Nations, and I believe that most of his analysis is still true today. He wrote in part:

    “What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little, as possible. The former are
    disposed to combine in order to raise, the latter in order to lower, the wages of labour.

    It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily:
    and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment. In the long run, the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.

    We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform, combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and, one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations
    to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy till the moment of execution; and when the workmen yield, as they sometimes do without resistance, though severely felt by them, they are never heard of by other people.”


  21. David L Wetzell says:

    We need 3 fronts contra $peech.
    1. Progressives/Dems doing what they want to do, albeit for slightly different reasons.
    2. Moderate Repubs/Independents pushing the GOP to end the use of partisan primaries for congressional elections so as to ensure the GNP is a center-right party that can no longer game the system w. a Nixonian Southern Strategy.
    3. Outsiders/#OWSers/Third parties pushing for the use of 3-seat proportional elections for “more local” elections, not unlike as was used in IL from 1870-1980, so as to: 1. Mitigate rivalry between two major parties. 2. Make these elections more likely to be meaningful. 3. Help minorities have a better chance to be swing-voters and third parties be better able to bring up new issues or new frames for existing issues.

    These combined wd make for a system that’d equilibrate contra $peech more effectively, which wd make it harder for wealth inequality to continue to grow.


  22. David L Wetzell says:

    Labor needs to become more selfless, not unlike as developed in European labor unions more so than the US. If they had supported other good causes more so in the past then it’d have been harder for the system to tilt so strongly against them since 1982.

    dlw


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