Why the distribution of wealth matters: Industrial feudalism and social democracy
DOI:
https://doi.org/10.13133/2037-3643/17886Keywords:
social democracy, welfare state, distribution of wealth, social mobilityAbstract
This paper explains how growing inequality of wealth and asset inflation inhibits social mobility and the functioning of the labour market, whose efficiency is a key feature of macroeconomic theory and labour economics. However, because the composition of wealth differs between social classes, growing inequality of wealth tends to more rigid social stratification, preventing the social mobility that is held to be the great advantage of free market capitalism. The paper outlines a theory of wealth distribution and credit practices that maintain a more or less rigid system of social stratification, which we call industrial feudalism. The origin of this idea is found in the work of Polish economists and social critics in the first half of the last century. Industrial feudalism also restricts the functioning of the labour market. State welfare provision, which is supposed to overcome barriers to social mobility, is undermined when the propertied classes find that they can meet their welfare needs from cash flows generated by their wealth. In this way, industrial feudalism signals the end of the welfare state and social democracy.
References
Addo F.R. and Darity W.A. (2021), “Disparate Recoveries: Wealth, Race and the Working Class After the Great Recession”, The Annals of the American Academy of Political and Social Science, 695 (1), May, pp. 173-192.
Agunsoye A. (2021) “‘Locked in the Rat Race’: variegated financial subjectivities in the United Kingdom”, Environment and Planning A: Economy and Space, 53(7), pp. 1828-1848.
Atkinson A.B and Brandolini A. (2011), “On the identification of the ‘middle class’”, Working Paper Series, n. ECINEQ WP 2011-217, Society for the Study of Economic Stability.
Bagehot W. (1898), “The Postulates of Political Economy”, in Economic Studies, London: Longmans, Green and Co.
Becker G.S. and Tomes N. (1986), “Human capital and the rise and fall of families”, Journal of Labor Economics, 4 (3) pp. S1-39.
Becker G.S. and Tomes N. (1979), “An equilibrium theory of the distribution of income and intergenerational mobility”, Journal of Political Economy, 87 (6), pp. 1153-1189.
Blanchard O. and Gali J. (2008), “Labor Markets and Monetary Policy: A New-Keynesian Model with Unemployment”, NBER Working Paper Series, n. 13897, March, Cambridge, MA: National Bureau of Economic Research.
Breit M. and Lange O. (1934), “The Way to the Socialist Planned Economy”, translated by Toporowski J., History of Economics Review, 37, Winter 2003, pp. 51-70.
Carlyle T. (1829), “Signs of the Times”, in Shelston A. (ed.) (1971), Thomas Carlyle; Selected Writings, Aylesbury, Penguin.
Fisher I. (1913), Elementary Principles of Economics, New York: The Macmillan Company.
Hayek F.A. (1944), The Road to Serfdom, London: George Routledge and Sons.
Hilferding R. (1910/1981), Finance Capital: A study of the latest phase of capitalist development, London: Routledge and Kegan Paul.
Hillig A. (2019), “Everyday financialization: the case of UK households”, Environment and Planning A: Economy and Space, 51 (7), pp. 1460-1478.
Kalecki M. (1971), “Class Struggle and the Distribution of National Income”, Kyklos, 24 (1), pp. 1-9, in Osiatyński J. (ed.) (1991), Collected Works of Michał Kalecki, Volume II, Capitalism: Economic Dynamics, Oxford: The Clarendon Press.
Kalecki M. and Kowalik T. (1971), “Observations on the ‘Crucial Reform’”, in Osiatyński J. (ed.) (1991), Collected Works of Michał Kalecki, Volume II, Capitalism: Economic Dynamics, Oxford: The Clarendon Press.
Kowalik T. (1959), O Ludwiku Krzywickim Studium Społeczno-Ekonomiczne, Warszawa: Państwowe Wydawnictwo Naukowe.
Krzywicki L. (1890), “Nowoczesny prad monopolowy” (The new monopoly current), in Ludwik Krzywicki L., Idea a życie z wczesnej publicystyki (1883-1892) (Ideas and life from early journalism 1883-1892), selected, edited and introduced by Holland H. (1957), Warszawa: Państwowe Wydawnictwo Naukowe.
Lange O. (1929), “’Wrastanie w socjalism’ czy nowa faza kapitalizmu?” (‘Evolution to socialism’ or a new phase of capitalism), in Lange O. (1973), Dzieła tom 1 Kapitalizm (Collected Works, Volume 1, Capitalism), Warszawa: Państwowe Wydawnictwo Naukowe.
Lange O. (1931), “The Role of the State in Monopoly Capitalism”, in Lange O., Papers in Economics and Sociology 1930-1960, translated and edited by Knightsfield P.F. (1970), Oxford: Pergamon Press.
Lange O. (1941-1944), “A Democratic Program for Full Employment”, translated as “Demokratyczny program pełnego zatrudnienia” in Lange O. (1973), Dzieła tom 1 Kapitalizm (Collected Works, Volume 1, Capitalism), Warszawa: Państwowe Wydawnictwo Naukowe.
Lenin V.I. (1917), “Imperialism, the Highest Stage of Capitalism”, in Selected Works (1968), Moscow: Progress Publishers.
Montgomerie J. and Bűdenbender M. (2015), “Round the Houses: Homeownership and Failures of Asset-Based Welfare in the United Kingdom”, New Political Economy, 20 (3), pp. 386-405.
Palley T. (2015), “The middle class in macroeconomics and growth theory: a three-class neo-Kaleckian-Goodwin model”, Cambridge Journal of Economics, 39 (1), pp. 221-43.
Piketty T. (2014), Capital in the Twenty-First Century, Cambridge, MA: Harvard University Press.
Schneider M. (2018), “Carlyle and Boulding: The Two Economists Largely Responsible for Their Discipline Becoming Known as ‘The Dismal Science’”, History of Economics Review, 70 (1), pp. 40-48.
Sweezy P.M. (1941), “The Decline of the Investment Banker”, in The Present as History: Essays and Reviews on Capitalism and Socialism (1953), New York: Monthly Review Press.
Szymborska H.K. (2021), “Rethinking inequality in the 21st century – inequality and household balance sheet composition in financialized economies”, Journal of Post Keynesian Economics, 45 (1), pp. 24-72. Available at: https://dx.doi.org/10.1080/01603477.2021.1969951
Toporowski J. (2010), “The Wisdom of Property and the Culture of the Middle Classes”, in Toporowski J. (ed.), Why the World Economy Needs a Financial Crash and other Critical Essays on Finance and Financial Economics, London: Anthem Press.
Veblen T. (1899), The Theory of the Leisure Class: An Economic Study of Institutions”, New York: The Macmillan Company.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Jan Toporowski
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
