Sunday, March 30, 2014

No law of capitalism?

Image via GulfCoastProgressive, 2006.
Wanted to reply, but didn't,
Actually, there is. http://en.wikipedia.org/wiki/Iron_law_of_wages #DasEiserneGesetz #Malthus #Ricardo #tcot #Marx
The Iron Law of Wages. Only there are a few countries, generally in northwestern Europe, where it has been partially repealed (#SocialDemocracy #TradeUnions). Not in the US, where young Pierre received his (private) education, and where it's considered rather bad form to talk about it, or, in the words of Henry Blodgett, the author of the article Pierre linked to,
These days, if you suggest that great companies should serve all of their constituencies (customers, employees, and shareholders) and that American companies should share more of their wealth with the people who generate it (employees), you get called a "socialist." You get called a "liberal." You get told that you "don't understand economics." You get accused of promoting "wealth confiscation." You get told that, in America, people get paid what they deserve to get paid: Anyone who wants more money should go out and "start their own company" or "demand a raise" or "get a better job."
If you really believe companies should share with employees and you're not a "socialist" or at least a "liberal"—if you expect shareholders out of the goodness of their hearts to moderate their "rational self-interest", or to consider the larger issues of what really helps the economy in the long run as opposed to their own immediate quarterly balance sheet, without government and organized labor getting involved—then you certainly don't understand conventional macroeconomics, which sees the operations of the market as a greater-than-its-parts sum of all the millions of local and purely selfish decisions made by the participants.

The situation in the US today of which Blodgett complains is the direct historical result of the crippling of organized labor beginning with the Taft-Hartley act passed over President Truman's veto in 1947 and the subsequent gradual withdrawal of government from its proper functions of seeing that the wealth is indeed shared. Left to itself, capital simply works this way; Western European experience shows that it may not take a revolution to move to a better system, but it does take a government, and a government in which workers are directly represented as stakeholders. There may be little bits of Major Barbara capital-run utopia at information-revolution companies like eBay (free bagels on Wednesday!), but I'm not sure how great or sustainable that is (we're just starting to hear about illegal wage-fixing in Silicon Valley, aren't we?), and most of us* will never get to work in one.
*Disclosure: My pretty nice company is a nonprofit with a list of internationally government-funded clients working under very strict US and New York regulations on research outfits, and I can't tell you how grateful I am.
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