I don’t know much about economics (it has never stopped me from having opinions on the subject though), and don’t know much about economies in foreign nations. Its one of the things I regret about college is not taking more economics and business coursework.
However in the US income inequality has grown drastically, and is now higher than many Latin American nations. And I assume that can happen because labor and capital come together and produce wealth, then that wealth is divided based on which side has the most power and influence to take what it can.
But virtually all the proceeds of increased wealth in the last 30 years have gone to capital. Which implies that labor has lost a lot of its clout. So why is that?
I can understand that increasing the labor pool reduces labor clout. You can do that via immigration (H1-B or illegal) or outsourcing. You can also reduce the standards of labor by hiring illegal immigrants (who aren’t covered by labor law) or permatemps (who get lower wages and no benefits), all of which make labor accept lower wages and fewer benefits to compete with the larger pool of lower wage labor.
Combine that with union busting and there really is no way for labor to have any influence in how wealth is distributed.
But why isn’t capital losing influence? Fareed Zakaria once said that decades ago people in India really liked learning about real estate tycoons like Donald Trump. But now India has its own billionaire tycoons. So does China, Mexico, Brazil, Russia, etc.
Shouldn’t the fact that there are so many more wealthy individuals and corporations all competing for market share reduce income inequality? Shouldn’t supply and demand mean they should be competing with each other, and accepting smaller profits in the process? Or does the fact that there is such a large untapped labor pool negate that?
In the past there was public unrest over too much power in the hands of too few. But that really isn’t a problem now with union busting & a media/ideological agenda pushing that what is good for the wealthy is good for everyone. Nobody is going to strike or boycott if income inequality goes up. Nobody is going to push for confiscatory taxes to reduce income inequality (a 3% supply side tax hike to 40% was seen as too controversial to pass, nevermind something like the 91% income tax rates seen after WW2).
So basically it seems that supply/demand of labor and capital plays a role. When there is a surplus of labor and little capital, capital has clout. When there is lots of capital but little labor, labor should ahve clout.
But there is a surplus of capital as well as labor in the US. Corporate profits, income/wealth for the top 1% and corporate cash reserves have skyrocketed to record levels year after year. But they don’t compete to invest in a way where they recieve a smaller share of the wealth produced. Plus there are more wealthy individuals and corporations globally, why aren’t they competing to hire talent or use natural resources, and as a result of that competition giving more wealth to labor?
On top of supply/demand you have negative repercussions of moving too far in one direction or another. Since there are no negative repercussions to distributing wealth to capital (no strikes, no protests, no tax hikes, no boycotts, no fears the best employees will leave and find another job, no lawsuits) that isn’t an incentive to reduce it. However you have repercussions to moving wealth redistribution too far in the direction of labor (namely that you will just fire everyone and hire permatemps, or outsource the positions if labor demands wages or protections that are too high).
If anything, the redistribution to capital is a positive feedback system because they can use that capital to push the ideology that what is good for them is good for everyone via the media, economic schools, think tanks, politics, etc.
As China’s labor pool dries up (which it supposedly is, I’ve read the % who are young, healthy and willing to leave family and move to the shores to work has pretty much been dried up), and no other country has all the one stop benefits of China wouldn’t that give more clout to labor?
Can nothing be done about it as long as there is such a global surplus of labor compared to demand?
Won’t all this investment capital sitting around with nothing to do (corporations are making 1.6 trillion a year in profits, corporate cash reserves are at 2 trillion, and wealth for the wealthiest 400 individuals in the US is about 1.3 trillion) just lead to bubble after bubble? Tech stocks, real estate, etc. Will there be a renewable energy or biotech bubble next with massive overinvestment followed by a crash?
Won’t the coming robotics revolutions make it much worse?
Did Marx write extensively about this, if so which was his best book on the subject? Has anyone else written about it in a way that an amateur can understand?