Distribution
These days, the nation, the world, is faced with the problem of how to distribute wealth, wealth that is being created using less and less labor input? How to distribute the profits from highly capitalized, highly automated, production? Unions, that had been much a part of the solution to the distribution problem in the early 20th century, are becoming more and more irrelevant. A new economic model is desperately needed.
Since the dawning of the Industrial Revolution, wealth has been created by the production of manufactured goods. To date, the sharing/distribution of this wealth has been by way of exchanging labor for wages. Except for the brief period from around 1940 to 1970 when union jobs commanded good wages, this method never really work all that well; much of the time, the god awful of Zola, Dickens, and Sinclair Lewis. In this, the age of technology, for a price, many task can be, have been, partially or completely automated using a combination of computers, servo motors, sensors, and programming. Now, many tasks, once performed by well paid union workers, are being performed by ‘robots’. Today’s work force tends to be either professional, highly technical, or service, with the professionals and technicians being well paid and the service workers often being paid less than a living wage. Good paying blue collar union jobs have become rare. In the heydays from around 1940 to 1970, the wealth created from the production of manufactured goods was distributed via the good union salaries to the economy as a whole. As a consequence, merchants thrived, towns thrived, schools thrived, farmers thrived, contractors thrived, … Much of society, including municipal governments, was premised on this model.
We now need an economic model that will somehow directly distribute the profits from production to the population in a somewhat equitable manner that doesn’t rely on the exchange of labor for wages. If, somehow, sufficient numbers of the population shared in the profits from automated manufacturing, and distributed their share into the community at large by consuming goods and services, thus giving others the means of consuming, such a model wouldn’t look a great deal different than the one existent from 1940 to 1970. If, for example, in exchange for the federal monies granted corporations during the COVID pandemic, the government had demanded corporate shares in return, in a sense, the public, via the government, would now be part owners in these corporations. The federal government could then distribute any future returns from this ownership to the public. In another example, a government, federal, state, or local, could exact a share of a corporations profits by way of taxes, then distribute those revenues to the populace. Governments can nationalize corporations. And, no doubt, there are, will be proposed, other ways of accomplishing distribution going forward.
There has to be another way. Not changing isn’t an option. It makes no sense to continue doing something that does not, cannot, work.
Are you saying ‘socialism + electricity = *’? Nationalization of production will never happen because the educated elite is aware of Hayek’s valid points about aggregation of information, and because the populace at large has thoroughly assimilated the record of state communist experiments.
In any case, distinction between production and services is not very important, because consumption will flow from one to the other as utility functions adjust to availability and price.
Labor market frictions have been the primary barrier to impoverishment of the working class by the iron law of wages. Computer-aided uberization is destroying that barrier, even for highly skilled labor. When I was young, job-shoppers earned twice my hourly wage, but I didn’t begrudge them because they had no benefits or security. Today, job shoppers actually earn significantly less than salaried engineers, as corporate outsourcers learn to exploit monopsomy power via uberization.
What society needs to do is restore labor market frictions in the form of significant minimum wages, and support for unionization. And, whilst redistribution is needed (particularly with respect to health care) intervention on the wage side, rather than redistribution is important to avoid status panic, which has been the main driver of Trumpian populism.
Corporations, which are government chartered collectives, were always problematic in terms of being property. Back in the 1930s, Berle & Means discussed the strange nature of corporate ownership in that title, benefit and control could be granted to separate parties. One of the conclusions was that the then 50% corporate tax rate on profits made the government a beneficial owner as payment for the privileges of the corporate entity. That was the solution for then and into the 1970s, but with the lower modern tax rates, it makes sense to simply make the government a partial owner. Corporate ownership is so sliced and diced already, even more so if one counts the different forms of shares and options and warrants, that adding a form of beneficial government ownership would require only minor changes in legal structure. If a company wants to continue its ability to operate as a legal person with limited liability, it could simply grant shares to the government. If it decided it made more sense to risk liability and have more limited legal and political rights, it could do so as well. It isn’t socialism. It’s about making the government more captailst.
First order economic analysis would suggest that standing on the shoulders of giants is a sunk cost.
The idea that we should distribute wealth either depends on moral philosophy or on second order economic analysis. Not much money in either of those, so progress is going to require getting citizens to want to talk about it. Not easy given that “socialism bad” is a very simple sound bite.
I do have some hope. I think the real point of “Black Lives Matter” takes quite a while to filter into the consciousness even of receptive people; it is a sound bite that is more than a sound bite. When someone comes up with a way to make “redistribution” equivalent to “profit sharing”, things may change.
i continue to believe that welfare as a normal expectation for everyday life is not a good idea or even a workable one. i think a minimum wage would help restore the imbalance in labor-bargaining leverage… and i don’t think it would disavantage businesses except in competition with low wage (low rent) countries.
government ownership of company shares presents the same problems as government ownership of business, and while i don’t panic at the idea of “socialism” (certainly not what republicans call socialism), i think it’s an idea that ignores the best of what “capitalism” can do.
the “mixed economy” seemed to work well until the rich got too rich and became the defect and corrupt drivers of public policy.
by all means talk about this, but try not to get mired in old words and old ideas and try to think out the real world (politics) of solutions.
@Kaleberg
The corporate model is one of the most successful ever. Managing the most complex of systems is what the model does best; an important tool in any economic model. That alone may be enough to justify its existence.
@ Arne
Isn’t distribution at the very core of economics? There is no ‘way’ it has to be done.
@ coberly
These things we believe and think, are they really thinking, or are they things we’ve been taught since infancy?
What role, if any does history play when times are unlike any known before? Weren’t capitalism and socialism both products of the industrial age?
Ken Melvin
i don’t know. i had to “learn’ to think to have a chance of solving real world problems. that involved mostly “check your work” not only your arithmetic (and spelling) but your assumptions. and looking for overlooked facts and factors that might change your answer.
as for the unreal world. what progress i have made toward thinking about that involves first something like the discipline that comes from thinking about the real world (under peer review) but also paying attention to the mistakes other people make… some more obvious than others.
i am not claiming that i succeed most or even much of the time. but where i can check against “right” answers that sometimes turn up, i think i do a little better than many people… who do seem to be relying on what amounts to hearsay and what they want to believe.
i don’t think “taught from infancy” so much… though that may turn out to be basic… as it is believing what you have heard…even, due to the way brains work, things you don’t believe but hear many times so it becomes part of your “thought” process without your even knowing it.
can’t even claim i know what i’m talking about right now, all i can do is urge people to try to doubt themselves. i think to some extent it is a matter of effort.
i think capitalism and socialism were products of the industrial age, but social-ism (without the ism) at least precedes the industrial age by at least a hundred thousand years. we have to learn how to make capitalism safe for the values that sustained humanity all that time.
i have read a lot of history which turns out to be the “historian” just repeating the lies of the newspapers of the times. so maybe history can help us learn from the past (everything helps)..but can lead us into smug error. all times are unlike any known before. all times are like everything we have ever known.
i read an essay today by yanis varoufakis which may be relevant. i’ll link it if i get time later. if anyone cares.
Hoping for a return to normal after Trump? That’s the last thing we need – The GUARDIAN
see if this works. i do not entirely agree with yanks, but i think he points out some things about trumpists we need to keep in mind.
spell check thinks y a n i s is spelled yanks.
well, the first line above was supposed to be a link.
try this
Thanks for the link Coberly—I read something similar today about the flip back to fascism if Biden performs as expected. I am very late to this discussion because while the problem has been discussed since at least the 1990’s, no one has come up with solutions which are both politically practical—fit within our learned context—and effective. While redistribution of wealth is necessary what do we do with the added leisure?
Speaking of the real world, let us not pretend that the current distribution of income, or the “irrelevance” of unions, is simply the result of technical and market evolution. It’s certainly been facilitated by decades of federal policy, including keeping the minimum wage very low, failing to provide public housing, wrecking the weak anti-poverty policy apparatus we had, leaving medical care in private hands, filling the tax code with bs like step ups in market value of assets when one spouse dies, as well as the hostile environment for union organizing and gains, etc, etc.
All of which raises the issue of the role of money funding political races and an army of lobbyists, and the challenge of enacting any kind of policy to shift the income and wealth distributions in a more egalitarian direction that doesn’t leave such a huge proportion of children in poverty.
That means that any fix needs to work politically AND as policy. For that reason strategies like the government taking an ownership share of corporations as a clear quid pro quo for allowing limited liability and/or bailing firms out are attractive. Easy to understand both the policy AND the justice of the rationale.
@MCK
I took a shot at that while back:
http://angrybearblog.com/2020/10/redux-et-redux.html#more-59589
Terry
I don’t think we need to worry about excessive leisure. people are creative.
and having any job at all… that you have to get up and go to.. will eliminate the sit around and drink in front of the TV that our minders are so fearful of.
if i had more time I might start a new business.
as for political and practical… i think that’s what i have been trying to get people to understand. the problem does not look unsolvable to me. but we need at least a large core population keeping the politicians honest or making them smart.
MCK
yes very much to paragraphs one and two.
i don’t think the government taking ownership shares is practical, nor is it political in the long run.
i don’t mind government running health care.. because markets cannot manage a pay or die situation. in the long run though, owning shares means the the companies will own the government which will put share profits ahead of good policy.
a clear separation of government and business is an important check and balance… one which we have lost and won’t help by putting the government at the mercy of markets.
we need to have government honest enough to regulate markets… just as we need honest referees in a football game, otherwise it’s just gang violence.
note that this is what our current politicians call “socialism,” and they have convinced half the population that “socialism” means soviet style Big Brotherism.
our problem is to educate the people. and the only way i can think of doing that is getting elected to enough places to put in sensible programs locally. and to work with Democrats to get sensible programs enacted (small at first) so people can see they work and xon’t actually take away their freedom.
small is a good idea at first, because the True Left has a tendency to overreach. they would build an unstable “socialism” that the people would revolt against or the eternal badguys would subvert and own.
for example, right now the True Left wants to turn Social Security into welfare as we knew it. they are so consumed with the picture of redistributive (retributive justice?) that they can’t see why Roosevelt designed SS as “worker paid insurance” in the first place. They keep saying “Social Security Works! so lets change it into something that doesn’t work.”
They like to say Roosevelt always intended to expand Social Security. But they think expand means welfare for all as a regular part of life. They can’t understand that Roosevelt meant expanding the concept of worker paid insurance (protected from markets, but not paid for, by the government) to cover health insurance, unemployment insurance… while leaving welfare to cover exceptional cases where worker-paid won’t work.
for this to work well, wages need to be high enough so workers can afford to pay for their own insurance.
this seems to me a much healthier, and more politically palatable, way of doing things than the eternal war between predatory capitalism and hard left “demands” for taxing the rich to pay for needs the people could insure themselves for if only they understood how it works.
predatory capitalism leads to great inequality in wealth, pauperization of workers, and makes the people easily swayed by a “strong man” who will help them “get even” with the rich. strong men come in both left and right flavors.
ken
yep.
i don’t know if it would help or hurt if i try to point out
that slavery was not invented in the American South. It has been universal throughout history, including in black africa before the white man set foot in the place.
this might hurt because it distracts from your main point which is that “slavery” is still with us (white as well as black).
it might help because the idea that White people invented slavery keeps white people and black people hating each other when they need to be united to fight against the slave owners.
on the other hand, playing the race card seems to help the Democrats win elections and sometimes make life a little better for both white and black.
The notion of “predatory capitalism” is a diversion from a true understanding of what causes pauperization of workers. Marx himself understood that, and never implied that capitalist exploitation is equivalent to malice and greed of individual capitalists. It is the logic of markets that impels a capitalist to squeeze out every bit of labor cost, lest he see his business be driven to bankruptcy by more ruthless competitors.
This same logic would apply even to a sea of independant single-person producers, producing directly for consumers, who naturally seek the best deals. Unfortunately, computer-aided uberization is finessing the labor market frictions that have mitigated labor’s race to the bottom. As a society, we (via government) need to sustain frictions, or create effective equivalents.
Ron Weasley
thanks for the john prine.
i don’t know if that was my typo or just spell check telling us it knows more about what i was saying than i do.
W E A K L E Y
(it was spellcheck. i checked.)
rick shapiro
with due respect to Marx… i think there is a cast to be made that pure capitalism leads to pauperization of workers.
but i was thinking of business models that are frankly predatory. i think we can hope to regulate those once we convince the honest rich that they don’t like being robbed by the dishonest rich either. so regulating capitalism should not make them think they are about to be robbed by the poor.
could this be the “friction” you are speaking of. or can i call it “checks and balances”/
because I don’t think pure socialism (whatever that is) would be good for us either.
damn typos:
a CASE to be made
as good a olace as any to mention
one useful “friction” would be the boycott: even without labor unions
the people to decide to boycott one company at a time for preadatory practices including low wages.
this is something we could do now to send a message to our political as well as business leaders (or are those the same people?)
but it all depends on getting the people to work together. something that never seems to happen until it all goes to hell and they run through the streets chopping heads off everyone who looks blueish.