Tornado Alley (PROG)

[fuagf]

Cracking the Mystery of Labor's Falling Share of GDP

"Don’t Blame the Internet for Rising Inequality
[...]
The link between the financialisation of capitalism and the rise of the 1 per cent is direct and, now that the evidence is in (thanks largely to the work of French economist Thomas Piketty and the public advocacy of leading economists like Paul Krugman and Joseph Stiglitz), seemingly undeniable. But the fact that the evidence appears undeniable does not mean that it will not be denied: any proposition, no matter how absurd, will have plenty of defenders if it is useful to the dominant class and its ideology.

For a while, defenders of market liberalism were able to argue that the growth of inequality was overstated, and that, in any case, static measures of inequality were less important than dynamic measures reflecting economic mobility. These arguments have largely been abandoned in the face of accumulating evidence that inequality is becoming increasingly severe and entrenched... "

There are four main theories, each of which falls apart under scrutiny.

by Noah Smith

April 24, 2017, 9:00 PM GMT+10

[...]

Economists are therefore scrambling to explain the change. There are, by my count, now four main potential explanations for the mysterious slide in labor's share. These are: 1) China, 2) robots, 3) monopolies and 4) landlords.

[...]

Economists are very worried about the decline in labor’s share of U.S. national income. One reason they’re concerned is because when less of an economy’s wealth flows to workers, it exacerbates inequality and increases the risk of social instability. But another reason is that this trend throws a wrench in economists’ models. For decades, macroeconomic models assumed that labor and capital took home roughly constant portions of output -- labor got just a bit less than two-thirds of the pie, capital slightly more than one-third. Nowadays it’s more like 60-40.

[...]

So monopoly power, robots and globalization might all be part of one unified phenomenon -- new technologies that disproportionately help big, capital-intensive multinational companies. Meanwhile, technology that augments human labor-power -- for example, cheap energy -- might have languished in recent decades, due to the failure to replace oil and gas with better power sources. Hence, small companies that use lots of workers might be losing out in the age of information technology.

That theory still doesn’t explain how landlords might fit into the picture. But it provides a possible way to unify at least some of the competing explanations for this disturbing economic trend.

https://www.bloomberg.com/view/articles/2017-04-24/cracking-the-mystery-of-labor-s-falling-share-of-gdp