7.12.13

SEEKING LEON WALRAS.

Robert Reich contemplates the immiserization of the proletariat.
The number of losers is growing so quickly, and so much of the economies’ winnings are going to a small group at the top — since the recovery began, 95 percent of the gains have gone to the richest 1 percent — that some direct redistribution of the gains is necessary.

Without some redistribution, the losers are likely to react in ways that could hurt the economy. They’ll demand protection from global markets they believe are taking away good jobs, and even from certain technological advances that threaten to displace them (rather than smash the machines, as did England’s 19th-century Luddites, they’ll seek regulations that preserve the old jobs).
It's worth recalling that the Luddites were skilled artisans rendered redundant by machines that could be operated by women and children, in much the same way that locomotive firemen were skilled artisans rendered redundant by diesel-electric locomotives with automatic fueling and, later, electrical transition, and many of the more boring tasks in automobile assembly plants could be programmed for robots.
Without some redistribution, our ever-increasing number of low-wage workers won’t have enough money to keep the economy going. (This is one reason why the current recovery has been so anemic.)
Yes, and the aggregate value of excess demand equals zero, in and out of equilibrium.  Perhaps government action impedes the price discovery implied by taking that identity seriously.  In layman's terms, a slow economic recovery implies some resources in excess supply (incentives to lower prices) but Walras's identity suggests other resources are in a condition of excess demand (incentives to bid up prices).  Professor Reich is correct, though, to suggest that people who find themselves rendered poor are unlikely to wait for Walras, or for Keynes, to come to the rescue.
And without some redistribution, America’s growing army of low-wage workers may fall prey to demagogues on the right or left who offer convenient scapegoats for their frustrations.
More so than the current evangelical base of the Republicans and the public-assistance base of the Democrats?

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