Inequality & productivity

Chris Dillow looks at the interaction between Inequality & productivity.

6. Inequality can prevent a shift to more productive organizational forms. There's reasonable evidence to suggest that worker coops can be at least as productive as their hierarchical counterparts. Which poses the question: why aren't there more of them? One reason lies in inequality. Poor workers lack the access to credit that would allow them to buy their firms. And even if they had such credit, they might not want to own the firm simply because doing so is risky; it entails putting all one's eggs into one basket. In a more egalitarian economy, these problems could be smaller.

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In a Communist/Socialist society, the state would acquire the firms on behalf of the workers. And the productivity of such co-ops is measured by how well they satisfy human needs of the community, not by the profit generated per worker.

Dillow list several reasons why inequality reduces productivity:

1. Inequality might demotivate poorer-paid employees because they look to star employees and bosses to help the firm rather than take the initiative themselves
2. Wage inequality reduces job satisfaction
3. Inequality reduces trust
4. Where inequality is high, the rich will invest a lot in simply protecting their privilege
5. At high levels of inequality, the rich might fear that property rights are insecure
6. Inequality can prevent a shift to more productive organizational forms.

Dillow's conclusion is:

But there's one big fact which hints that they might be significant. Productivity growth has been much lower recently than it was in the 80s. This should be puzzling to people like Ryan, because for years they've told us that Thatcherite reforms in the 80s should have boosted productivity growth. So why has it fallen? Might it be that the benefits of those reforms have been offset by the fact that the increased proportion of income going to the 1% depressed productivity through the above mechanisms?

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Dillow thinks Capitalists are interested in a productive economy. Instead Capitalists are always concerned about the accumulation of Capital by whatever means.

Workers need to take control of the economy away from the Capitalists so that the ecomony can benefit everyone, not just the rich.