How The Heck Does Plutocracy Reduce Productivity?

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I fear that we’re getting matters economic rather mixed up over there on the left. For we’ve the claim that higher wages for CEOs, better dividends, reduce productivity or something. Rather than their both being symptoms of improved productivity. After all, there has to be a surplus for the capitalist plutocrats to swipe, doesn’t there? That surplus being created by rising productivity.

Soaraway salaries for top bosses are a marker of a winner-takes-all society. They are the encapsulation of a world where success can only be measured in hard cash and the state is expected to step out of the way. They reward financialisation, where size of dividend is a proxy for value, instead of more sustainable indicators such as measures of productivity, worker satisfaction or safety. They act as a disincentive for a more productive use of resources.

This is the sort of complaint we get from people who don’t know what they’re talking about. They’re aware that higher productivity is a good thing. Vaguely, as most of us are aware that caviar has something to do with fish eggs. But the details, well, they escape. Similarly, more productive use of resources, yes, we’re in favour of that as we are of Mom’s Apple Pie.

But when we start to ask in detail then it all becomes a bit too vague. Productivity is the relationship between the hours of labour put in and the value of production out. This rises if companies – the capitalist plutocrats – invest more in machinery to avoid having to pay labour more by hiring more of it. So, it’s not entirely obvious – for which read entirely wrong – that the plutocrats nicking all the cash reduces productivity.

Similarly, a laser like focus upon the profits that can be appropriated is likely to increase the efficiency with which resources are used. Because producing more value while using fewer inputs is the very definition of making more profit that can be appropriated.

Essentially, Anne Perkins has heard something or other at an Islington dinner party and decided to turn her misunderstandings into a Guardian column. This is perhaps not the right way to run a country nor how to determine C-suite wages. You know, just maybe?

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Rhoda Klapp
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Rhoda Klapp

Every time a CEO gets an extra quid the state gets, what, 60% off the top then a lump of whatever she spends it on. Tax I don’t have to pay. What’s the problem?

Spike
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Static analysis, Rhoda. Any windfall to government goes directly to new programs that could not be justified on their own merits. You will keep paying the same tax.

Rhoda Klapp
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Rhoda Klapp

Are you implying that governments spend all the money they can get their hands on and a little extra? Well!

Spike
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This is the eternally popular Marxist claptrap that any money spent on a corporate function that you don’t understand is money that would otherwise be in your paycheck. (And that includes managing the factory, and me, I’ve got plenty of good ideas and could do it myself.) In fact, keeping all the egos pulling in the same direction, anticipating problems, building a track record of success at this, and being willing to accept the risk of being removed for events outside your control, mean that good management is expensive. But not as expensive as bad management.