Monday, October 22, 2012

It's the bargaining power, not the contributiion, that determines wealth

One of the fundemental flawed assumptions in our economy, and one which hinders reform, is the assumption of a meritocracy.  This is tied in part to what I discussed a few posts back, the way our langauge is permeated with loaded words.  We use terms such as "earned" and "made" rather than "got" or "received" when discussing income.  These suggest that salaries are entirely justified, subconsciously reinforcing the myth of the meritocracy.

While one's contribution to society matters, that is only one aspect when determining income.  Bargaining power matters as well.  History supports this.

Look at the impact of unions.  Did they make workers more productive?  Beside the slow effects of bargaining for training, no.  In the short term their effect was not an increase in the contribution of workers, but the bargaining power.  They gained leverage.

While the contribution matters, it is the bargaining power which can be changed.  This is why the solution to inequality is not training or education (though those will help), but increased bargaining power for workers.  This takes the form of not just unions, but also laws to protect the right to form unions and bring complaints.

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