Bernie Sanders says that the last fifty years have seen a massive wealth transfer... to the rich.

Bernie Sanders has a new hook for his discussion of inequality. The Rand (AKA Bland) corporation has a study out that shows that the share of income going to workers over the last fifty years has declined to the point that, cumulatively, fifty to eighty trillion dollars have gone missing. Well, they have not gone to workers, but rather to non-workers: capitalists, shareholders, parasites; generally the 1%.

The basic mechanism here is that capitalism is built on top of a labor market, where workers are paid only what the competition among them renders suitable to sort them into needed jobs. It is not built to fairly share the gains from their work or anyone else’s work. In fact, it is built to skim off all the gains / profits and send them to shareholders, owners, managers ... anyone who has power in the capitalist system, which the workers surely do not. Workers get other rewards, but a share of the profits is not one of them. They are regarded as a necessary expense, like feedstocks and machinery, and their cost is to be minimized assiduously, now with robots and AI where possible. I learned this in dramatic fashion when a company I worked for, where the CEO chummily addressed us a team members and collaborators in the grand adventure of bioinformatics, sold the company and took all the winnings for himself.

With that in mind, it becomes obvious where the 50 trillion has gone to. It has been shared out among those who have real power in the capitalist system. First comes management. Managers hold the keys to the finances and the profits. They tell the board what is going on. They have been theoretically upgraded over the last seventy years from employees to entrepreneurs, and have taken shockingly increased amounts from the till during that time. Second come the shareholders, who have been theoretically upgraded from stakeholders in the corporate enterprise to the sine qua non of the corporation- its very soul and purpose, not as a "company" of people, or or a part of a wider culture, or a service rendering organization, but as a money gathering entity. Money that is raked up from whatever the "business model" might be into the pockets of shareholders, with the management as a necessary, if unfortunate, intermediary, and employees as an afterthought.

Ownership is the medium of power in capitalism. The shareholders are part-owners, and their interests are built into the stock market system, which is a perpetual readout of the value of each share. Analysts are constantly sifting through the value of each enterprise in terms of current assets and future potential. Corporations buy each other based on these valuations, and bankruptcy awaits those who lose control of their business model and fail to send money back to the shareholders. What the company produces, or its quality of work life, are completely irrelevant to its value. Whatever money is made over costs is shipped out to shareholders, in the form of dividends, share buybacks, or re-investment towards future growth and greater value. Managers have some power in this system, and have been able to capture quite a bit of the winnings, but workers have essentially none.

Labor markets tend to settle on what employees need to get by, rather than on the worth of what they produce. No compensation review or salary offer makes any reference to productivity or worth of the product. They are always keyed to what the market will bear.. the job market, that is. And job applicants are always in a weak position, since unemployment is such a catastrophic prospect. The choice at most interviews, especially the crucial first one out of school, is some pay or no pay. Employers work very hard to avoid competing for labor, with all kinds of illicit agreements among each other, and a carefully cleansed information landscape where workers don’t know what others are being paid. Especially at the low end, this leads to workers competing for crappy jobs that pay little, because the there is always someone who is unemployed who, in light of their dire plight, can make do with even less.

So, as the US economy has grown, growing things, making things, and gaining productivity year over year, little of that has trickled down to workers. Look at people’s lives on the lower end of the economic ladder, and conditions have not visible improved. Indeed, homelessness and hunger are increasingly, instead of decreasingly, common. The middle classes have some increment of technology, like computers, smart phones, and streaming, but the living standard otherwise has not advanced noticeably, even while population pressures increase and the natural world has degraded. This arises simply from the structure of capitalism, when it is taken seriously and grows into the kind of untouchable gestalt it has become over the recent decades.

And it is obvious that this is bad. Bernie Sanders is completely correct to point out that Americans across the spectrum could be much better off if the 1% got less of the income and wealth, and the rest of the citizenry got more. Inequality is obviously corrosive socially and politically, quite aside from the misery it causes at the lower end of the economic ladder. The capitalist system as we practice it is a relic of feudalism, when capital was scarce, sword and blood trumped merit, and serfs knew their place.

There are many ways to approach this problem, which is incredibly systemic and entrenched. Obviously we need to start with a bit of a cultural reboot that reconceives corporations as cultural entities with important roles and stakeholders that go beyond just making a dollar. We need a minimum wage that pays not just subsistance, but a normal, civilized living. Unions are another, if quite fraught, way for workers to retake power in the capitalist ecosystem. We need a tax system that values labor income over passive, unproductive income, and which taxes accumulated wealth as well. Employees should have a seat at the table in all companies- the corporate board table. We need serious regulation and enforcement that levels the playing field for companies that play by the rules, and sets rules that not only sustain, but build, society and the environment over the long haul.

Another idea that is quietly gaining revolutionary steam is employee ownership. There is an excellent book that discusses this, as it is currently practiced by hundreds of companies in the US. One example is the Publix supermarket chain, which has been wholly employee owned through five decades of growth, and is by far the largest such company. While the ESOP (employee stock ownership plan) model may start with a company stock buying plan, the serious work comes with majority ownership by employees. There are about 14 million employees in the US with some kind of company stock ownership plan, and 650,000 who majority-own their companies. This is usually arranged by a loan-financed buyout from a founder or other owners. Then the proceeds of the business pay off the loan as the employees accumulate distributed stock. This mode of buyout is an excellent way to transition from the early entrepreneurial phase of a company to a mature business, as it keeps the company culture intact and avoids the many problems of private equity, which may debt-strip a target company and leave it in bankruptcy, or of public stock ownership, which leads to disinterested owners that demand short-term financial performance over long-term health.

This book is a bit thin on how such companies are managed and how the stock allocations and valuations are made. The stock is partially restricted against outside sale, (though some ESOP companies are publicly traded in part), so companies typically engage experts to value themselves each year. Employees gain stock with time, so it becomes a seniority system, a bit like waiting for a pension or union seniority. That is again not entirely fair to employees who may contribute more despite being young. At any rate, these companies still have professional management, but since it is all employees on the board, and with open financials, there is a track record of fewer layoffs, better morale, more cooperation, and ultimately, better financial performance. And critically, profits are not dispersed to faceless and uninterested "investors", but to the employees.

Imagine if every mature company was not buffeted by stock market analysts and fads, not bled dry by stock buy-backs to fund rich investors, nor haunted by the specter of a private equity strip-and-dump, but was owned wholly by its own employees, who reaped the profits of their collective work and controlled its conditions as well. As increasing numbers of companies become employee-owned, one can imagine a phase transition (analogous to the universality of certain benefits like health insurance) where people just would not want to work anymore for other kinds of companies. Small and startup companies would have to share equity, (as they used to do in Silicon Valley), and would naturally progress as they grew to broad ownership by every employee. That would be amazing!

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