Can Growth Ease Class Conflict?
In: Economics & politics, Band 14, Heft 1, S. 65-81
ISSN: 0954-1985
This paper proposes a theory that links labor supply to wage growth & economic growth, & the conflict of interest between capital & labor. During the early stages of industrialization of a country, "surplus" labor drawn from the traditional sector of the economy is available to the modern capitalist sector at a constant or only slowly rising wage. As industrialization proceeds, this labor surplus vanishes, leading to wages rising in tandem with the growth of output. As long as there is surplus labor, workers in the modern capitalist sector, who are organized, have little interest in growth, as it does not raise wages. The effect of growth is external to them, simply drawing more workers into the capitalist sector & enabling the entrants to receive rents. So capitalist-sector workers would like to redistribute income regardless of the adverse effect on growth. Once the economy grows enough for the subsistence sector to vanish, further growth raises wages. Hence, this change in the structure of the economy leads to a reduction in the intensity of the labor-capital conflict. The dual economy model implies that growth rates rise over time & fall after the exhaustion of the labor surplus, which is consistent with the stylized fact of economic growth. 1 Figure, 1 Appendix, 23 References. Adapted from the source document.