Cooking the Books – Capitalism : whose bonanza?
‘Few ideas are more unshakable than the notion that the rich keep getting richer while ordinary folks fall ever further behind. The belief that capitalism is rigged to benefit the wealthy and punish the workers has shaped how millions view the world, whom they vote for and whom they shake their fists at.’ So began the editorial in the Economist, 30 November.
The editorial went on to argue against this view by saying that the facts showed that income inequality, in the sense of the ‘wage gap’ between the lowest paid and the highest paid workers has not increased and that it is likely to decrease in coming years, describing this as a ‘blue-collar bonanza’. But this is a sleight of hand as it leaves out the incomes of the few who enjoy a privileged, non-work income from owning means of production.
Of course the owners keep getting richer. That is what the capitalist system is all about. It’s about money being invested in production with a view to making a profit. Competitive pressures ensure that most profit is re-invested in further production for profit. So capital accumulates and those who possess what it is invested in come to own more; they get richer. So, yes, capitalism is rigged — structurally determined — to benefit the wealthy as a class, however the proceeds might be divided amongst them.
Does capitalism ‘punish the workers’? Yes, though that’s a novel way of putting it. The source of profit is what wage-workers produce over and above what it costs them to produce and maintain their working skills. A part of what they produce is kept by their employer and subsequently divided into various privileged non-work incomes. In other words, they are economically exploited. Which could be described as a punishment. In any event, it’s a built-in part of the capitalist economic system.
But does the gap between the lower and higher paid workers have to increase? There is nothing built into capitalism that means it should. Wage differentials exist because the different kinds of working skills that workers sell command a different price, due both to their different costs of production and maintenance and to the varying demand for them. Sometimes the gap increases. Sometimes it decreases. Sometimes it stays the same. It depends on the job structure and labour market conditions in any period.
The editorial itself gives a good example of how changing labour market conditions can affect wage differentials:
‘At the end of the 20th century the information revolution vastly increased the demand for college graduates with brains and computing skills. From Wall Street to Walmart these stars were put to work transforming how firms did business, making use of new tools including email and spreadsheets. By the mid-2010s, however, the revolution had matured and the college wage premium began to shrink. In 2015 the average rich-world worker with a bachelor’s degree or more was paid two-thirds more than the average high-school leaver; four years later, the gap had narrowed to a half.’
At the same time there is a labour shortage for certain manual jobs. But will this really amount to a bonanza for blue-collar workers or just the prospect of a modest increase in wages due to their being in a better bargaining position? And what about the other section of the wage-working class that is losing out? It could just amount to no more than a redistribution within the broad working class. In any event, it doesn’t put an end to workers’ economic exploitation for profit. Meanwhile capitalism remains a bonanza for those who own the means of living.