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Published online by Cambridge University Press: 13 January 2009
With the development of the division of labor, the household has declined in importance as a unit of economic production. Yet even as the individual wage earner has assumed a central place in modern exchange economies, the household has still been seen as an important unit of distribution, in which wage earners provide for their non-income-producing family members. With the breakdown of the family in recent decades, however, the communal income-sharing function of the family has, in significant part, been taken overby the state.
In this essay, I examine this fundamental change in the structure of production and distribution in modern exchange economies. Going beyond this, I propose a new structure of markets–markets for rights to influence collective decision-making within a society. Such markets, I suggest, wouldprovide a source of income for each member of the society.
1 It was not until around 1890 that more than half the members of the male labor force in the United States were employed outside agriculture. While agriculture at that time was not the only basis for subsistence households, most agricultural production was subsistence farming.
2 Durkheim, Emile, The Division of Labor in Society [1893], trans. George, Simpson (New York: Free Press, 1947).Google Scholar
3 Another example of the effects of nonproductive activities like wage bargaining in the economy is provided by farmers. Farmers are in a set of markets that have nearly the opposite social structure from that of automobile manufacturers. The suppliers of their inputs (farm-implement manufacturers, chemical companies which manufacture fertilizers and pesticides, and seed suppliers) are much larger and more concentrated than they. Their product markets, in contrast, are as highly competitive as any product market in the economy.
It is true, of course, that farmers confront an inelastic demand, and have an especially large component of random variation in output, due to weather. These conditions, however, are insufficient to account for the especially poor economic position of farmers in modern corporate society, as compared to their position in earlier social systems.
A result is that farmers are in a much worse economic position, relativeto others in the economy, than was true before the growth of the corporate economy. While their fathers and grandfathers may have worked harder than their counterparts who were employed at jobs in the city, they nevertheless had leisure, spending Saturdays in the local market-town and relaxing on Sundays. Farmers today, in order to earn a living, work their fields at nightby tractor headlights as well as on Saturdays and Sundays; and one or more family members often augment the family income by working at a job in town.
On the side of the farmers' inputs, employees of the corporations that supply them have an incentive to increase their own wages at the expense of prices passed through to farmers. Farmers can increase their income only through increasing their productivity. They are not employees, and theirproduct markets are competitive-auction markets. They are squeezed between an irresistible force and an immovable object. They constitute the principal portion of the economy lying outside the broad segment of the economy populated by corporate actors as employers and natural persons as employees.
4 Perhaps the best comparison of wages is with other firms in the automobile industry that are parts suppliers to the automobile manufacturers. These firms are generally small and highly competitive, and their principal customers are not consumers, but the large auto-mobile manufacturers. Confronted with this structure, they cannot pass through wageincreases to the customer. The result is that their employees–engagedin the same kinds of activities as their counterparts employed by the auto manufacturers, but not covered by the collective-bargaining agreements which are negotiated corporation-wide for the auto manufacturers–are paidless.
This pattern is not confined to the American domestic automobile industry, but is even more pronounced in Japan. Another illustration of the wage differential is the sale by General Motors in the late 1970s of its Frigidaire subsidiary. The sale was brought about by a two-dollar-an-hour wage differential between Frigidaire workers, covered by the GM-United Auto Workers wage agreements, and the wages of employees of other refrigerator manufacturers, in an industry where the product market was more competitive.
5 The extremely high rate of defection of divorcedincome-earning fathers from payment of alimony is a strong indicator of thefact that income redistribution even to one's own children is ineffective once the household as a living unit is broken. Economists who have examined the effect of marriage dissolution on income available to children havefound the effect to be very large.
6 The data in Figure 1 represent the percentage ofhouseholds with no children under age eighteen. Data for 1950 through 1980 are from U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970 (Washington, DC: U.S. Government Printing Office, 1975)Google Scholar, supplemented by U.S. Bureau of the Census, Statistical Abstracts of the United States: 1947, 1949, 1984 (Washington, DC: U.S. Government Printing Office, 1947, 1949, 1984).Google Scholar Data for 1930 are from the 1930 census report, using interpolation because figures reported were for children under age twenty-one;see U.S. Bureau of the Census, Census of Population, 1930 (Washington, DC: U.S. Government Printing Office, 1931).Google Scholar A data point for 1875 was obtained by use of Edward Pryor's analysis of family structure in Bristol, Rhode Island, recalculated using all households as the base; see Pryor, Edward T. Jr, “Rhode Island Family Structure, 1875–1960,” in Household and Family in Past Time, ed.Peter, Laslett(Cambridge: Cambridge University Press, 1972), pp. 571–89.CrossRefGoogle Scholar In the same volume (p. 80), a sample from Bristol, Rhode Island, is reported as having 13 percent of households without children in 1689.
7 This figure is reproduced from Preston, Samuel, “Children and the Elderly,” Scientific American, vol. 251, no. 6 (1984), pp. 44–49.CrossRefGoogle ScholarPubMed
8 For arguments about the importance of these incentives in the United States, see Murray, Charles, Losing Ground (New York:Basic Books, 1984).Google Scholar
9 Okun, Arthur M., Equality and Efficiency: The Big Tradeoff(Washington, DC: Brookings Institution, 1975).Google Scholar
10 For a formal statement of this, see Coleman, James S., Foundations of Social Theory (Cambridge: Harvard University Press, 1990), ch. 31.Google Scholar
11 I should note that there are suggestions from several points of this idea of eliminating barriers between economic and political resources. In particular, these suggestions may be found in the libertarian branch of the law-and-economics movement, whose theorists have beendescribed as engaged in the effort to “constitutionalize laissez faire.” Other law-and-economics theorists have also begun to examine the political-economic interface from this perspective; see, e.g., Posner, Richard A., The Economic Analysis of Law, 3ded. (Boston: Little, Brown, 1986).Google Scholar In what may appear a perverse twist of intellectual paths, this brings the path of such theorists close to that of Marx, who also aimed at a merger ofthe economic and political systems.
12 These legal sanctions are entirely appropriate. The representative is merely an agent for his constituents, and it is their votes he is in effect selling (and thus stealing for personal use) when he sells his vote.
