Letter from Paul published in The Economist edition of November 2nd.
* SIR – “Labour pains” (November 2nd) pointed out that the share of wages in national income has fallen after being nearly constant for decades after the second world war. During the post-war decades the middle class prospered because of the full-employment policies started by Franklin Roosevelt and continued by both Democratic and Republican presidents and Conservative and Labour governments in Britain.You can see this letter and others here.
In this period the growth of union power, enshrined in legislation and policies, pursued the sharing of monopoly rents and profits of corporations with their workers. By the 1970s, however, the seeds were sown for the beginning of the end of middle-class prosperity. The anti-union policies of Ronald Reagan and Margaret Thatcher made it socially and politically popular to see unions as the villains in the economy. This was quickly supplemented by firms outsourcing to foreign countries where an hour’s worth of labour was paid a much lower real wage.
But now, a new threat is growing that will further hollow out the middle class and make even more significant differences in the distribution between the top 1-2% and the rest of society. This threat is automation. You correctly indicate that policymakers should think about broadening capital ownership as a way of boosting income to workers and restoring a prosperous middle class.
For a creative approach to restoring middle-class prosperity, I recommend the work of Professor Robert Ashford in the forthcoming issue of the Journal of Post Keynesian Economics called “Beyond Austerity and Stimulus: Democratising Capital Acquisition With the Earnings of Capital As a Means of Sustainable Growth”. Professor Ashford proposes a capital-ownership broadening policy that big companies adopt to produce enhanced earnings for their employees, customers, and other poor and middle class people; enhanced corporate profit and growth; reduced need for welfare dependence; and enhanced sovereign creditworthiness.
Journal of Post Keynesian Economics