Item number one: staff at John Lewis are receiving a bonus worth nine weeks’ pay. Item number two: shares should form a part of social security payments, and kids should be given an investment portfolio from a very young age. Is this the shape of things to come?
In a way Marx was right, or at least he had a point, but that does mean his remedy was right?. He said capitalism was inherently unstable because it ultimately means the flow to capital rises while the flow to labour falls. As a result, demand cannot rise to meet potential and the system collapses. In the years since Marx died the economy has changed a good deal. On occasions his predictions looked to be coming true, but on other occasions they looked wrong. Right now appears to be one of the moments when there is a germ of truth in what Marx said. But what is true today may not be true tomorrow, next week, or in the year 2020. That is an important point. Don’t talk too much about the lesson of history. Each period in time is different. Ideas that may have been catastrophic in another era could work perfectly well in another time.
One of the problems with Marx is that the remedy he recommended seemed a good deal worse than the thing it was designed to replace. But just because communism turned out to be such a disaster, and just because there have been occasions over the last century or so when capitalism has worked spectacularly, it does not mean that what Marx said is completely devoid of merit.
And funnily enough the most capitalist of institutions has said something that to my way of thinking seems pretty Marxist. I refer to the IMF and what it calls the globalisation of labour. Wages have perhaps been a victim of globalisation. But corporate profits – the rewards to those who own capital, such as private equity – and the rewards to senior management have escalated. And in hard data this shows up in the form of wages’ share of GDP falling. In 2006 I saw a report saying that the share of wages to GDP had fallen to the lowest level ever recorded – forever in this case was until the beginning of the 20th century. I don’t think it is a coincidence that the global economy fell into crisis some time later.
Then there is technology. As I have said here many times before, I think that the impact technology is set to have on all our lives is greatly underestimated. There is a danger – and it is by no means certain – that the acceleration of automation will exacerbate the way in which wages take on an ever smaller share of the GDP cake.
Just to reiterate, to grow an economy demand needs to rise. If GDP does not trickle down, demand cannot carry on rising in the long run. Maybe the reason why growth before 1820 was so tiny was because of lack of trickle down.
The solution may be to give more people a share in capital.
The success enjoyed by John Lewis is self-evident. For investors, the biggest frustration surely is that you can’t buy shares in the company. I am not sure anyone begrudges the company’s staff their bonus. And if at some future date their bonus is more than 100 per cent of their salary, I doubt that anyone will object – no need for EU rules, or for Boris Johnson to enter the debate.
In yesterday’s thought for the day I referred to the idea that to mitigate against the rise of the machine and the damage this may do, shares should form a part of social security payments. Well, why not?
Then there is the idea that instead of giving children a small sum of money when they are born, they are instead given a portfolio of shares.
Is this is a no brainer? Where is the catch. Anyone got any thoughts?
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