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The “Race to the Bottom” is Only a Symptom

August 30th, 2010

Last week the NYT highlighted an ongoing labor struggle between Dr. Pepper Snapple and a local labor union, which Dissent Magazine characterizes as the latest installment in an ongoing “race to the bottom“, something like Marx’s iron law of wages. Per the Times,

The strike has become so important because of the prominence of the brands and because of its unusual nature: a highly profitable company is taking the rare and bold step of demanding large-scale concessions.

Dissent notes that the productivity gains of the last several decades have simply not “trickled down” in to the pockets of the American worker, instead they’ve been pocketed by the corporate elite. If this sounds somewhat familiar, it should.

Mike LeBerth, president of the local union echoes a familiar, but mistaken refrain:

“This whole economy is driven by consumer spending, so how are we supposed to keep the economy going when they take away money from the people who are doing the spending?”

Mistaken, because economies aren’t driven by consumption, they’re driven by production. The standard GDP-economy puts the cart before the proverbial horse. Per J.B. Say, Production must precede consumption; prosperity increases where production is permitted.

In fairness, I have to admit I’d be hard-pressed to find a better example of corporate greed, than a company which showed a $555M profit on $5.5B revenue in FY2009. What LeBerth describes, is not the problem. The real problem, or problems, are much greater.

The case of Dr. Pepper Snapple illustrates nicely that the “race to the bottom” is but a symptom* of monopoly rents.

In this instance, a substantial portion (approaching 100%) of their profits are attributable to intellectual property, a considerable barrier to market-entry enforced by the government under penalty of law. Make no mistake: this is not a “right” in any sense of the word, it is a privilege granted by government, to corporations X, Y and Z, protecting them from A, B and C and anyone else who might otherwise be tempted to start their own competing business. The effects of such privilege are obvious: where a lucrative market exists, profits are concentrated among those who benefit thereby.

Insofar as this case embodies a “race to the bottom”, it is the monopoly privilege of intellectual property which drives a wedge between workers of various classes: those inside the protected industry may enjoy leverage over those outside. To a probably substantial degree, the wages taken by the union are a derivative economic rent, extracted from the rest of the economy (i.e., the non-union employees in other industries in the local market), but coming first and foremost from the privilege granted the corporation. And it is precisely this privilege which enables a corporation like Dr. Pepper Snapple to exercise such a degree of economic power over its own workers, as to demand considerable concessions even when posting record profits.

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* For brevity’s sake I will limit discussion to this one problem, although I do not doubt that you could point out several more, each of which would merit examination of its own.

Comments

2 Comments

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  • Don says on: August 31, 2010 at 7:40 am

     

    Once again we see gov’t grant (intellectual property) with huge (unintended) consequences. Dissent is barking up the wrong tree, or addressing the symptom rather than the cause. In short, they haven’t a leg to stand on.

  • Aurini says on: September 1, 2010 at 10:19 am

     

    [Paraphrase] “Intellectual Property being granted to a corporation…”

    I lean towards focusing on the ‘corporation’ as the distended part of the organism. Since I am a writer, I’m aware of the rationale behind the concept of Intellectual Property, and I don’t buy into the “Information wants to be Free!” pseudo argument. That said, the main threats to IP (historically) have not been individual pirates – even today, I think their effect is negligible (and DRM is not the solution) – but rather, the threat has been well established private businesses.

    Within a State-Run society I want the protection of IP to sue the pants off of anybody that tries to profit off of my work. In an Anarchist sea-steading paradise? I dunno, I’d probably formed an armed wing of the Writer’s Guild.

    Point is, IP was initially designed to protect the individual – and like most things, it has morphed into something protecting the corporations – vast, alien-minded entities, immortal and immoral, afforded legal status of individuals within our society, but whose goals are deeply non-human.

    I’ve been thinking of writing a post about The Corporations; might use yours as a jumping off point.

no third solution

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