Lars P. Syll — Inequality and the culprit economists overlook — their own wage theory

The so-called class struggle is between workers and owners over the capital-labor share. It is based on asymmetrical power, with employers and workers with bargaining power vying for share. Workers with little or no bargaining power are left out at the table. They constitute "the precarity." Leading precarious lives economically, they must accept any offer or receive income, forced to rely on charity or the dole. Since few workers are in a strong bargaining position, this keeps the wage bill down and enables owners to take a greater share of the pie than they would be able to with power being symmetrical. This is basically unjust and anti-social as classical economists observed. 

Neoclassical economists justified this situation with a marginalize analysis that ignores key social, political and economic causal factors such as class structure, social status, power relationships, political influence, and economic clout. Social scientists are well aware of these  disparities, but discussion of them is considered out of bounds in the orthodox economics profession as being contrary to the dominant paradigm, if not Marxist.

"Inequality" is not really the best term to name this disparity of wealth and income based on social, political and economic asymmetries, because it implies that the solution is equality. No one is arguing that economic equality is the ideal. Some disparity of income and wealth is a natural outcome of individual uniqueness that results in differences. The basic principles involved involve social justice and equal rights, as well as the effective and efficient functioning of a society.

The problem with economic liberalism taken to an extreme is that supposed (assumed) natural laws dictate economic efficiency and effective to society rather than the well-being of society as a whole (system) and the individuals that comprise it as its elements. What determines a system is the relationships among the elements, and in a social system this is culture and institutional arrangements. Human beings are not stimulus-response mechanisms whose behavior is determined by instinct and laws of nature to which they are subject. Superior intelligence enables humans to discover laws of nature and use them to their advantage in ways that other animals cannot. Human beings are not at the mercy of "market forces," nor is the alternative economic liberalism or "serfdom."

The economic problem with respect to wealth and income disparity is the empoyer-employee share, as well as employees having power to other employees with less power. This does not arise naturally from economic factors as marginalism claims, but rather from asymmetries of social structure and power relationships that lead to wealth and income disparities that then feed back into the system to produce greater asymmetries socially, politically, and economically. It is a vicious cycle that eventually results in a level of dysfunction that leads to social unrest and societal dysfunction.

Lars P. Syll’s Blog
Inequality and the culprit economists overlook — their own wage theory
Lars P. Syll | Professor, Malmo University