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Owners vs. Workers: An Eternal Law of Nature?

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

“A few years ago (November 2, 2013) The Economist magazine, that reliable organ of neo-liberalism that makes few bones about its idolization of material growth as the summum bonum of human existence and its consequent dismissal of anything, such as family life or cultural traditions, that might get in the way of such material growth, ran some articles about labor’s diminishing share of national income.

Over the past 30 years, the workers’ take from the [economic] pie has shrunk across the globe. In America, their wages used to make up almost 70% of GDP; now the figure is 64%, according to the OECD. Some of the biggest declines have been egalitarian societies such as Norway (where labour’s share has fallen from 64% in 1980 to 55% now) and Sweden (down from 74% in 1980 to 65% now). A drop has also occurred in many emerging markets, particularly in Asia.

Even these figures of 70% to 65% for the U.S. are misleading, for as the magazine notes in another article in the same issue, “among wage-earners the rich have done vastly better than the rest; the share of income earned by the top 1% of workers has increased since the 1990s even as the overall labour share has fallen.” So that, “the share of national income going to the bottom 99% of workers has fallen from 60% before the 1980s to 50%.” That is to say, the workers whose job title is CEO are gobbling up not just more money but a greater percentage of it.

All this is bad, opines The Economist, it’s politically dangerous “and it is producing a lot of predictably polarised debate.” Perhaps The Economist is concerned that such instability might derail the engine of wealth redistribution for the rich that doubtless is working well for so many of its readers. So what’s the cause and what can be done? The Economist calmly discusses certain explanations that have been offered – the “weakness of unions” for example – and rejects them, and suggests that “the likeliest culprit is technology” although “[s]ome economists also emphasize the role of globalization….” As for the remedy, well, let’s be sure that we “strengthen workers without ham-stringing firms. Growth, rather than employment protection is the priority.” Of course, “education and training” – that’s needed too. And don’t forget, a “cut in corporate tax rates” and “pension reform” [read: privatizing pensions and turning them over to the good people on Wall St.] and “more privatisation” generally. To its credit, The Economist does note that “income from capital…is often more heavily taxed” than labor income, and suggests that this difference be narrowed.

So here you have it, the world according to The Economist. What can a distributist say in response? In the first place, the fact that since about 1980 it’s been precisely the kind of neo-liberal policies which this magazine generally champions that have suspiciously coincided with the decline in labor’s share of income – this is never so much as suggested as a possible cause. Lower the corporate tax rate, lower taxes on the rich – these are still the neo-liberal catchwords and constitute nearly the entire economic program of many American politicians, despite the fact that doing so has produced exactly this kind of income inequality and been in part responsible for numerous broader social problems. Apparently it’s all because the rates haven’t been lowered enough. Eliminate corporate taxes, make the rich pay the same percentage of their income in taxation as the middle class – the flat tax – and, according to them, voilà, all our problems will be solved.

While no distributist I have ever heard of favors perfect equality of income or wealth, it is a fact that too great disparities of either not only lead to social problems, but are probable signs of injustice. The best way of eliminating such disparities is not via government transfer payments, necessary as those sometimes are, but through better access to well-paying jobs and the possibility of ownership of productive property.

Actually, for a distributist these two points, good jobs and property ownership, are not two separate issues, but the same thing – or at least should be. The defining note of capitalism is that some people will own the means of production and will hire others to work for them. (See Pius XI’s encyclical Quadragesimo Anno, no. 100.) Even if such a division can in theory be just, a distributist wants to ask, Why must this be so? Why must there be this divide between owners and workers? Why cannot workers and owners be the same persons, either individually or collectively?

Under the capitalist model labor is always an expense for the owner. Even if an owner has the best of intentions to pay just wages (and one can wonder how often this is the case), there is always subtle pressure to reduce labor costs. Especially in an economic downturn, this is often considered the obvious thing to do. But consider an alternative model. A firm that is owned cooperatively by its workers will naturally face the same difficulties in a recession that other firms face. But instead of looking upon its workers as a expense to be lessened, the workers are themselves the owners, the ones who will decide the fate of the company, which is also the fate of themselves, their families, their children’s futures, and their communities. Whatever hard choices such a firm must make will be made with an entirely different set of priorities from a firm in which workers are simply an expense to be eliminated as much as possible.

There is no eternal law written in the nature of things that mandates the structural opposition of owners and workers. There is absolutely no reason why policies cannot be devised to promote widely dispersed ownership of productive property. It is doubtless true that not everyone is capable of managing even a small business well, but surely everyone is capable of being part of a cooperatively-owned enterprise. Today’s laws often favor concentrations of ownership in corporate hands. But there is no reason why these laws cannot be changed to promote producer-owned cooperatives and other types of small businesses. The activity of the Mondragon cooperatives in Spain proves that there is no reason why large-scale and highly technical industrial operations cannot be worker owned. Can an economy in which cooperatives and small businesses predominate be achieved overnight? Certainly not, but over time there is no reason why such an economy cannot be created. The obstacles to distributism are neither theoretical nor practical – they rather consist in the stubborn conservatism of those afraid to risk any change or, even worse, in the vested opposition of those who stand to lose their opportunities to exploit both their employees and their customers for their own gain. These are the chief reasons why more progress has never been made toward an economically just society.

There is no better way of ending than by quoting Leo XIII in Rerum Novarum, “The law, therefore, should favor ownership, and its policy should be to induce as many people as possible to become owners” (no. 46).”

You can learn more about this issue here.

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