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January 26, 2011



How would you go about tranferring the ownership from the capitalists to the workers?

Presumably the would require some form of compulsion to force shareholders to either sell there shares to the workers or to use powers of compulsory purchase to affect the transfer? I presume this would have to be done by the state?


Excellent post.

Ofcourse policies to transfer ownership are just as difficult as policies to raise the wage share.


Very interesting post. Distinctions between capitalism and market economy very fine, as too socialism and statism.

But Chris, one of the reasons socialists get 'trapped' by Statism is that when workers and the poor demand a larger share of national income they tend to have the forces of the State turned on them, viz Tunisia.

Luis Enrique

The main determinant of the real wage is productivity. If worker owned firms are less productive than capitalist ones, real wages will fall. Doesn't that dominate other considerations?

I don't really understand these demand-side stories about boosting output. I mean, I do in the short-run, in recessions, when Y

I don't know where you get the idea that capacity utilization is high in the UK. You think we've got inflation because firms are running overtime etc.?


Socialism, as I've always understood it, is a generalised system of production for need not for profit. This is perfectly compatible, at least in theory, with a economy where markets play a significant role. But those markets, or at least most of them, would have to be organised such that something other than the accumulation of profit was their motive force. Which worker owned firm could, on its own, introduce such a change to a whole market? Only States, or organisations somewhat larger than States, such as the EU, can do that sort of thing.

Luis Enrique

umm .. it seemed to eat a bit of my comment. ah, I tried to use a less than sign.

I meant, when output is below potential output. But how do demand side stories change potential output? (perhaps you are talking solely about recessionary situations)

If you think that raising the labour share of income will raise the real wage, which raises demand, which raising investment, which raises output, which raises the real wage etc. haven't you built a perpetual motion machine? You must have some story in which at some level raising the labour share increases output, but once a certain level is reached, it doesn't. Where are we relative to that level?

Luis Enrique

also ... is Mervyn saying that the 'wage squeeze' will come in the form of a further decrease in the labour share of income?

Alternatively, he could mean that the income shares stay constant, but we face higher imported inputs prices, so the real purchasing power of total UK income (so to speak) falls. In which case real wages and real profits fall together and the question you pose, why must the squeeze fall on workers, does not apply.


@ Luis - I'm pretty sure Merv is saying that the share of wages in GDP will fall. Falling real wages and rising real GDP mean just this, unless there's some odd changes in relative prices.
The argument that a rising wageshare might raise output is that higher wages imply higher demand, which raises capacity usage and therefore investment, which in turn raises productivity and growth - so it is a perpetual motion machine. This actually happened in the 50s and 60s, but as I say, I doubt it can be done again.
@ Rosccoe, Duncan. Yes, it is difficult to achieve the transfer. But it's impossible if we never even think about how to do it. Why don't we think about what sort of socialism we want, and then think about how to get there?


So when the workers own the means of production, do they also provide any new capital when its required as well? After all you can't ask anyone from outside to put in capital, having just appropriated the business from its original owners. Or does the State provide the capital for expansion? In which case the history of State directed capital investment is,shall we say, somewhat less than satisfactory.

Luis Enrique

ta. a small query: I have often wondered about real GDP data: if it's calculated using reference prices and domestic output quantities, does it fully capture how deteriorated terms of trade can make us poorer in a real sense? Such a measure could be showing GDP going up (imports down, exports maybe up) whilst we've gotten poorer (the technology we use to convert exports into imports has worsened?)

I am probably overlooking something obvious and embarrassing myself again.

oh - and if you really do think we have an economic perpetual motion machine at our disposal, ought we not be moving heaven and earth to get it started?


Incidentally, I think the sort of position being sketched here is close to that known as "distributism"; which was G.K. Chesterton's pet philosophy.

Edward Spalton

Attlee's government had a go at something like this with nationalisation. The trouble was that the employees (or rather their unions) wanted no share of responsibility for the management. They just wanted more pay, less work, more holidays etc.
With the trade union laws of the day and the culture of surrender to union demands which had built up during the war and continued until the Eighties, they usually got it.

Concerning the foundation of the National Coal Board, I once heard Emmanuel Shinwell say that he thought the coal owners were the most short-sighted, blinkered, greedy people he had ever met - until he had to deal with the National Union of Mineworkers! They wanted no part in the management of or responsibility for their industry. They just put their demands on the table and mostly got them.

In the early Sixties, I worked in a coal merchant's business. Every Summer the price of coal would go down by (say) tens shillings (50p) per ton, only to go up by £1 to £1.10.0 (£1.50) per ton in the Autumn. It was the way the NUM used the National Coal Board to collect its demands. No competition from foreign coal was allowed.

That was how things worked out in practice.

Luis Enrique

it is possible that his reference to rebalancing tells us that Mervyn has in mind something like deteriorating terms of trade, inflation originating in China, and an end to borrowing money from abroad to raise living standards above where they would otherwise be. That's something that falls on wages earnings and capital income earners equally, isn't it?


"The left’s faith in statism has, in effect, crowded out interest in non-statist alternatives. And this has left it with very few intellectual resources."

I have some thoughts on this here chris.


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