Another [...]]]> At the end of the day, there’s probably a very huge gap separating me & these guys… They invoke the words of various Popes in support of their arguments, after all. And European racists invoke their theories. But they certainly have a keen eye for the difficulties in modern economics. Some teasers from Part 5:

Another way to state this theory is to say that wages determined by free market bargaining will be “just wages,” and equilibrium conditions will be satisfied.
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In the last thirty years, productivity has exploded for each and every category of labor, but the median wage has stagnated. Indeed, it is lower today in real dollars than it was in 1973. Hence, the standard theory is falsified in practice. Clearly, workers are producing more, but they are not getting any of the benefits; the rewards of increased productivity are going to a few people at the top, while the mass of men have seen no improvement. However, it is obvious that if people are producing more but earning the same, they cannot from their earnings consume all that they produce, and hence the economy will have to rely on the non-economic sources of demand; usury and welfare will replace economic justice as the means to equilibrium.
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In other words, [Adam] Smith recognized that it was power, and not productivity, that determines the outcome of wage negotiations, and power will generally favor “the masters.” But if it is power that is arbitrated in a wage contract, then the solution is to redress the balance of power between the parties. To do this, we must look at the primary source of economic power, namely property.
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Before the reign of Henry VIII, property tended to be a wide-spread condition throughout society. Technically, only the king was a property-holder, in our sense of the term, while nearly everyone else was tenant, either a tenant-in-chief (a duke or other great lord) or a sub-tenant. We associate “tenants” with “renters,” people who normally have only thin, contractual, and precarious rights to the property they occupy, and who pay for these limited privileges the highest amount that the market will bear, an amount called “economic rent.” But this was not so then. Rights in tenancy were nearly as strong as outright ownership is today, and rents were not “economic,” but customary. That is, they were not related to the economic value of the land, but to the value of the services provided to the land: defense, improvements, courts, etc. They were more like a tax than a rent, and did not vary from year to year. We tend to think of a 15th century peasant as powerless and perhaps starving, a mere serf (slave). But that was not the case. Wages were, in fact, quite high. An artisan could provision his family with 10 weeks of work, while a common laborer could do so in 15, wage levels that were not seen again until the late 19th century.
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This brief history shows the power of property to completely change wage relationships. Men who have property—that is, the means of production—are free to negotiate a wage contract, or not, as they wish. But a man with no other means of support must accept the terms offered. In this latter case, the wage contract becomes leonine, that is, based on the inequality of the parties, and leonine contracts are always about power. The CEO does not earn 500 times what the line worker does because he is 500 times more productive, but because he is 500 times more powerful; the seamstress in a sweatshop does not earn a pittance because her productivity is low, but because her power is pitiful. Power, not productivity, is the issue in labor negotiations, and you cannot change wage relationships without changing power relationships. And the key to economic power is productive property.
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The primary justification for private property is that it ensures that each man gets what he produces. As R. H. Tawney put it, “Property was to be an aid to creative work, not an alternative to it.” But when property becomes aggregated into a relatively few hands, when only a few control the means of production, property loses its proper function, and “ownership” becomes divorced from use. In our day, “ownership” is frequently in the form of a corporate share, which losses most of the qualities of actual ownership to become attenuated to a mere lien on a certain portion of the profits, or not, as the managers decide. Oddly enough, this puts not only the worker, but the investor at a disadvantage, as power passes to a new group, the über-managers, who sit on each other’s boards and set each other’s salaries. As John Bogle, the founder of the Vanguard investment funds, notes, the managers take an increasing share of the profits, leaving scraps for those who actually put their money at risk. The result is that the returns to both kinds of labor, actual labor and the stored-up labor of capital, are reduced, while “management” and speculation get the lion’s share of the profits.
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If economists took their own assumptions seriously, they would be the first to protest in front of firms like Wal-Mart or Exxon. But they do not take their own theories seriously, because if they did they would become distributists or something very like it. Indeed, they would note the obvious: that the modern corporation has collectivized production beyond the wildest dreams of any Stalinist bureaucrat.

The final installment promises to explain the “how” of turning a society into one where-in the people are propertied, wages are a just reflection of productivity, and the markets are cleared by sufficient demand without an ever-growing leviathan government. My guess – there-in lies the rub.

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Posted in: Economics
Post tags: Distributism

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