Jared Bernstein — r > g meets c > l

Or: Part 2, why is capital so much stronger than labor?...

But to me, c>l, or capital>labor, is more worrisome than r>g, though of course the two are related (“labor” here means not just unions, but those who depend on paychecks). To be clear, I’m being “cute” here because unlike r and g, c and l are not obvious, measurable quantities, though critics like Jamie Galbraith have argued ‘r’ ain’t so measurable either. It’s not hard to think of measures: the change in the profit share of national income (close to “alpha” in Cap21) relative to that of the labor share; the unionized share of the workforce; political science measures of capital’s influence versus labor’s of the type Gillens has developed.

All of these show c increasingly gaining on l (the labor share of income is still much larger than the profit share–there are a still a lot more who depend on paychecks than stock portfolios…but it’s given up about four percentage points–$550 billion in national income or about $4,000/worker–in recent years).

And like r>g, there’s a self-perpetuation to c>l, especially in today’s pumped-up money-in-politics climate. When I talk about “the toxic interaction of wealth concentration of political influence” I’m referring precisely to the ability of capital to promote the policy set that reinforces r and blocks l....

... think of the problem of c>l in terms of a simple equation where capital’s clout over labor on policy matters is a function of B*x, where B is an elasticity that translates x, ...  

Even if B were stable, capital’s relative clout would be higher based on the growth of x. But B too has increased, as the high court has facilitated more power from money in politics and the influence of lobbyists has burrowed its way deeply into both parties...

So part of the answer must be to reduce both B, the elasticity that maps capital’s growing resources onto political power, and x, the resources themselves. And, as I stressed yesterday, both of those factors are movable by policy, but the conundrum and challenge is that the force of c>l blocks the needed interventions.

Wealth translates into institutional power and this results in political capture. This is the objective of neoliberalism, which views capital as the dominant force because capitalists are more able to organize society efficiently, and therefore they should be rewarded with privilege, asymmetric power, and the largest share of the economic pie.

This is John Jay's "those who own the country should govern the country," versus Abraham Lincoln's, "government of the people, by the people, and for the people."

Jared Bernstein | On the Economy
r > g meets c > l
Jared Bernstein