The rhetoric of political campaigns — especially hard-fought ones spending money like investment banks — always seems to be aimed at someone else. Someone of less than average intelligence, too weak-minded to see through transparently misleading claims, so gullible they believe it’s all about people just like them.
Who are these people, right? Who would believe this stuff? It’s embarrassing. It reminds me what I felt watching the Three Stooges as a young child: It’s not nice to laugh at them; they can’t help it.
Of course, in truth it’s all just retail marketing. That’s the way it is. It doesn’t reflect on the audience. It’s always been that way, vacuous and inane, although sometimes you have to wonder whether the marketing consultants and ad agencies are all about selling a product or candidate, or about selling themselves to the next client. (You remember that ad where they had this so-and-so that did such-and-such? What the heck was that selling?) Whether candidates or cars, I suppose retail is the way it is because it works, somehow. Somebody benefits, even if it’s not always apparent who.
Sure it’s lame stuff, but there are grades to everything. And even though it wasn’t anyone’s campaign battle-cry, the phrase “income inequality” struck me as among the lamest.
Income inequality? What the hell is that? Does anyone seriously believe we should all be paid the same?
No one believes that. Yet, if you needed a phrase with absolutely nothing going for it, to incite the mob to howls of ‘class warfare’ and come with pitchforks and torches for those trying to ‘soak the rich’, you could do worse than ‘income inequality’.
So, why does it persist?
I think because, underneath all the charts and graphs and turgid prose that nobody pays any attention to, are the vague outlines of a disturbing idea that has not been well-articulated.
Bear with me. Take a breath.
The output of any enterprise, whether a new car, a new Hollywood film, or a new building, is the result of an organized, collective effort.
Yes, there are leaders. I did say ‘organized’. My point is that capitalism is about organization. Henry Ford got it. Eventually, even vaudeville got it.
If the enterprise is successful, its output has utility, and it brings in revenue. The reward.
So the reward gets divided up somehow, among all the ‘workers’, their bosses, their bosses’ bosses. And that’s the first question: How?
Economists like to teach “marginal utlity”, which is to say that workers (whoever they are) are paid at a rate that the last widget they build just breaks even, because the firm will build just so many widgets, no more and no less.
Which probably made sense when economics was about scarcity, when there was never enough to go around and you could sell as many widgets as you could profitably make. Yet I have never worked with, or for, a firm that would not have happily built and sold more widgets than they did. They had the capital. They had the ‘workers’. The widgets were profitable. If only they could find more buyers.
And that’s the true underlying scarcity in the developed world: The scarcity of markets.
So, again, how are the participants in a firm compensated? What determines their piece of the action?
In a phrase, ‘bargaining power’. And that’s as much about psychology as it is facts and figures.
Now, economists also like to teach that supply and demand operate in a way to guarantee the optimum use of society’s resources (although there seems to be some disagreement as to whether this holds true for the sex trade, or the trade in controlled substances; no free markets there).
So here’s the idea that the phrase “income inequality” dances around, without quite nailing: The idea that bargaining power by itself will never lead to an optimal division of spoils.
And I’m going to assert that ‘optimal’ is to be defined as ‘pro-economic growth’, because anemic growth is the key problem for affluent societies, and not just recently.
To employ the old-fashioned language, if everything goes to workers, there is no return to capital, and hence no capital. If it all goes to capital, there are no workers, and no consumers (buyers). Can there be a market mechanism that finds the best division of spoils?
I’m skeptical. And I will tell you why I’m skeptical: For over fifty years there have been certain consistent trends. Vast and growing accumulations of capital. A steady loss of bargaining power among labor. Lower and lower marginal tax rates. And steadily lower economic growth.
I’m not so foolish as to believe in some simple-minded arrow of causality. I believe in Nuclear Economics, where everything is a chain reaction going round and round. But I don’t see any evidence of a self-moderating corrective force adjusting the division of spoils in an optimal way.
Now, I expect Market apologists to argue to the contrary, that what we see is the optimum. I expect them to argue that this is just what advanced societies do, that we can only adapt our expectations to it.
The trouble is, at its bottom, this argument always seems to turn out to mean something like this: If it’s what the Market arrives at, then it must be for the best. Because it’s the Market.
To which I can only reply, If you think the Market is a suitable object for unquestioning faith, then you ought to be out campaigning to legalize prostitution, since it seems to be one of the few remaining avenues available to stimulate economic growth, without losing our faith in Market omniscience.
To be fair, this is not easy. Growth is a hard problem. But it’s a lame game to just tsk-tsk something about the wisdom of the markets, as though the retail public ought to be learning acceptance, while the clockwork Market-God works out our fate.
A lame game indeed.
To be contnued…