“We have a better shot at doing something with changes in corporate governance than with direct redistribution”

Posted: 5 November 2014 in Uncategorized
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Robert Solow is probably right: government redistribution of income hasn’t had much of an effect on existing inequalities in the United States. So, it’s time to try something else.

“We need to think of ways to change the market determination of income,” Professor Solow told me. “How does capitalism generate inequality?”

To the extent that widening inequality is caused by the yawning gap between the epicurean pay deals in the executive suite and the stagnant wages paid to those on the shop floor, it might best be addressed at the level of the corporation, not by government. . .

To Professor Solow, that means “we have a better shot at doing something with changes in corporate governance than with direct redistribution.”

One way of changing corporate governance is to let the employees participate in determining how firms are run. It’s likely, if the major decisions in corporations were made by the workers, we’d see less much less inequality and more investment in the things that matter, such as hiring the unemployed, improving job safety, and expanding community services for workers and their families.

That kind of change in corporate governance would also increase the possibility that more of the determination of income would be taken out of the market and improve the ways the government redistributes income.

In other words, a fundamental change in corporate governance would likely improve both the distribution and redistribution of income.

  1. Nate K says:

    I agree. It’s worth pointing out though, that we already see a large difference in income distribution based on politics. Before taxes and transfers, inequality has risen under Republican presidents, but not under Democrats. Income at the 20th percentile has grown at over 2% under Democrats, but only 0.25% under Republicans. In the long run, this makes more difference than redistribution, and yet it goes largely unnoticed in our political discourse. http://natewkratzer.wordpress.com/2014/11/01/democratic-presidents-are-better-for-the-economy/

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