Wednesday, August 24, 2011

Distributing the Wealth and Income

The question of "redistributing" wealth and income pops up in many debates, some related to the value of a strong labor movement, some motivated by other points of concern.

When workers demand "More," which was Samuel Gompers's bottom line, there are two ways to deliver it.

One is increased productivity. However, as the high unemployment rate and depressed wages since the crash of 2008 have shown improved productivity does NOT necessarily deliver a higher standard of living to the working class. It may simply be absorbed by those who own the capital, as they continue to take advantage of the productivity of their employees by laying off a portion of them.

The other is to reset what portion of revenue goes to the employees of employers, and what portion goes to the employers of employees. Employers always balk at that, and scream about "the free market," but there is nothing "free" about the transaction between the owner of capital and a person who desperately needs a job.

It is of course true that the share allocated to labor cannot exceed 100% of revenue on a long term basis. A good part of revenue must be reinvested even in maintaining the plant so it can operate productively, much less expansion. Failure to recognize this has been a prime failing of eager young socialist governments. The oil industry in Venezuela right now is ailing because the government takes too much of the revenue for various social projects (and military purchases), without allocating enough to maintain the goose that lays the golden eggs.

Looking at what remains, anyone who invests their savings in an enterprise expects a return, to compensate them for the deferred gratification. Finally, if the business can only meet the demands of its employees, organized together in the form of a union, by going into debt, then eventually the enterprise will fold.

So, the fundamental question is not one of "redistribution" but of a fair and appropriate DISTRIBUTION of the product of labor.

In a sole proprietorship, with no employees, all increases in productivity are personally delivered by the sole owner and sole worker, who receives all the benefits. When the roles of owner of capital, and employee who has no capital (thus, the need to "find a job"), have been separated, they have partially different and opposite interests. Karl Marx called this "alienation of labor," and it is real, whether Karl Marx said it or not.

This "alienation" is even explicitly expressed by the defenders of an employer's unlimited right to do what he pleases, without reference to the best interests of the employees and their families. A sole proprietor not only reaps all the benefits, but pays all the prices. The employer can say "the benefits are mine, because I invested the capital, it is the job of the employees to pay the prices."

Suppose we were to plan that out of the average revenue over a ten year period, 47 percent should be allocated to capital maintenance and expansion. Another 47 percent would go to labor. That includes the labor performed for necessary and essential management functions. Managers would be paid somewhat more, but probably no more than ten times what the lowest paid employee earns. (New janitor trainee, $20,000 a year, top CEO, $200,000 a year).

Then the investors who put up the capital can get six percent of the revenue as dividends on their investment. This might be more or less than 6 percent RETURN on investment, depending on how wisely their capital was managed, and the ratio of business revenue to capital invested.

That is not REDISTRIBUTION, except by comparison to the present rapacious status quo. It is merely a fair distribution of the revenue generated by a complex collective enterprise. Yes, it IS a collective enterprise. Everybody contributes to its success. Everyone is ESSENTIAL to its success.

What we, as a society, need to do for the disabled, the elderly, the unlucky through no fault of their own, the children impoverished by the bad judgement of their parents, are all separate questions. They are worth looking at, but they are different from the distribution of revenue to those who put their labor into a productive enterprise.

Unfortunately, under our current laws and power relationships, its not so simple. It plays out like this, and this. So until we have better laws, and more sensible ways of doing business that "promote the common welfare" while allowing everyone a reasonable return for what they actually put in, we still have to "Roll the Union On!"

1 comment:

Hector said...

Siarlys Jenkins,

I agree with you totally. I have to run right now, but I'll comment more on this later.

By the way, I'd appreciate your comments on my new theological post over at Alexandria. I realise you don't comment there anymore, but you can read it and comment here.