Redistributing Misery
KAUS, MICKEY
Redistributing Misery by Mickey Kaus Psst, Democrats! Wanna new idea? Martin Weitzman's got one. In this short, fascinating book,* he says that with one simple change modern capitalism can...
...public works jobs if in a "share economy" IBM will be dispatching teams of recruiters to scour the ghettos for able bodies...
...It's a good bargain...
...Unlike other proponents of such schemes, however, Weitzman does not want to produce labor-management camaraderie or improve productivity, aims he characterizes as "soft-boiled...
...If Weitzman's system stops all such inflation, it would seem largely because it presupposes that unions will somehow be stripped of much of their power...
...Because an additional worker may be hired for only a low fixed wage plus a part of whatever revenue he adds to the firm, management will have a powerful motive to hire as many workers as it can (as long as they are worth at least the fixed wage...
...Weitzman acknowledges that union power is his biggest obstacle...
...So who would lose under this arrangement...
...Even if demand fell slightly, workers' pay would automatically fall along with it (as their bonus shares were reduced...
...Unable to lower wages, they cut costs by laying off workers and reducing production while maintaining their prices (as Detroit did from 1981-83...
...Weitzman's idea is emphatically not workerownership...
...The tenured high seniority worker who receives, in a handful of overpaid industries, a noncompetitive wage...
...He suggests offering (groan) a tax break on bonuses to workers whose unions "foreswear restrictive hiring practices...
...In this short, fascinating book,* he says that with one simple change modern capitalism can overcome its basic dilemma: how to achieve full employment without inflation...
...Of course, in a recession Weitzman's system would be far superior, since the pain of income loss would be spread and prices would be lowered quickly, "wringing out" inflation without the mass layoffs it took to do the job two years ago...
...He also hints, velvet glove style, that "the bargaining power of labor unions is not a natural right...
...Mickey Kaus is a contributing editor of The Washington Monthly...
...Unfortunately, American unions have been going in exactly the opposite direction for decades, fighting to restrict employment in order to boost the pay of those lucky enough to keep working...
...But we need to hear more of the argument he has started...
...Since laid-off employees have little money to buy things, the recession feeds on itself in a vicious cycle of unemployment, low growth, slack consumer demand, and high prices...
...These workers would see their pay reduced because, in effect, they would be forced to compete with the new employees their firms were constantly hiring...
...The change is to pay workers a substantial chunk of their compensation in the form of a variable bonus that represents a share of their firm's revenues or profits...
...Weitzman may or may not convince you that he is the tough-minded successor to Keynes as savior of capitalism (I still feel a little "soft-boiled" myself...
...Weitzman's plan is basically a mechanism for forcing workers who enjoy jobs with comfortable wages to sacrifice in order to give slightly less good jobs to those who have no jobs at all, and to eliminate recessions...
...And there's the rub...
...The standard Keynesian solution—boost demand with government spending—threatens to drive prices up further...
...Only independent managers will keep on hiring and make Weitzman's full-employment machine work...
...Managers will not have to resort to layoffs and instead will maintain full production while trying to lower prices (and hire any workers who might have been thrown out of work elsewhere...
...That is the tragedy of the wage-price spiral...
...But just because gains are temporary doesn't mean unions won't try for them...
...With no vicious cycle of layoffs, lost production, and high prices, any recession would be nipped in the bud...
...A "share system," Weitzman argues, would behave differently...
...Martin L. Weitzman...
...Weitzman also calls into question some other appealing Democratic ideas—who needs...
...And the likely cure for the resulting inflation is a brutal Volckerian recession...
...Weitzman points out that when workers are paid fixed wages, firms in our semi-monopolized economy respond to any economic downturn in the worst possible way...
...His is a more "hard-boiled," and hard-edged, argument...
...Worker-owners might be the first to try to restrict hiring to avoid having to cut new workers in on the profit-sharing goodies...
...The Share Economy: Conquering Stagflation...
...He concedes that in a "share system" unions could still negotiate inflationary pay hikes, but he says these increases will be only temporary because management will soon hire more workers and thus dilute everyone's bonuses...
...Unions are also one reason why Weitzman is less persuasive in demonstrating his idea's superiority in inflation-fighting (as opposed to unemployment—fighting...
...Harvard University Press, $15...
...Capitalists will go on a permanent hiring binge, according to Weitzman, sucking up pockets of unemployment like "vacuum cleaners" until there are simply no unemployed left...
Vol. 16 • January 1985 • No. 12
