Photo from Wall Street International.

These goods are an integral part of the economic wellbeing and are part of the essential objectives which help build peace and social sustainability which are intrinsic to Humanity’s development.

Ongoing practice proves that the provision of essential Public Goods and its infrastructure are insufficient and ineffective in the capitalist model.

Perhaps the greatest challenge of our times is that one arising from climate change which predicts major disasters and difficulties for the labor market in the near future owing to the ageing population at world level.

A central question may be posed. Is the growth of production in the economy capable of supplying us with the necessary Public Goods and insure a sustainable development for mankind?

Nevertheless, there is previous need to solve a central problem, which is that of the cost of negative externalities in the present system and of its’ poor income distribution.

To formulate a growth perspective that is deprived of a vision that includes Public Goods within a future outlook is a false dilemma. If the State abstains from all interventions in future developments that are fostered by the present model it will have opted for a trickle down in income which impacts on the least favorable sectors in the system.

Worst still, it would not have taken into account the essential costs of productive activities which are essentially those in the private sector. On account of these negative externalities would have to be paid by society as a whole. In this way a different solution will have been indefinitely postponed unless it is a different one from that belonging within the system.

How does it happen and what are the conditions in which the lack of Public Goods comes about and is a cause for resentment by mankind?

A conscientious authority, conscious of the damage to the population, would seek to cover by means of taxes and regulations set by the State.

We would like to make reference to some prevailing situations on account of costs that are not covered within the productive activity: environmental degradation and global warming; insufficient safety measures in productive activities; an end to safe water supply by mining companies that destroy our Human habitat; environmental contamination due to greenhouse gas effects resulting from anthropogenic activities (by human beings) amongst which we can mention the massive burning of fossil fuels, deforestation, changes in the use of the soil and the deregulation of tailings dams, the destruction of the Amazon forest…and others.

This typifies the Social and Ecological Debt in our times. This is tragically associated to what ought to be recognized as a reality for the future, provided the present development conditions are maintained: bringing about as a consequence, the non viability of mankind’s presence in the planet.

Let it be noticed the way productivity has been affected on account of an inexistent concern for the productive and social infrastructure in the United States.

This is traced by some to the post war period, and has been measured for the 1970-1990 period pointing to a set decrease of 1.5%. On a regional basis, productivity decreases are proven to be 3% in the south east of the United States with damages caused due to storms, fires, and heat waves with an estimated cost of thousands of millions of dollars and to which have to be added the effects by Hurricane Sandy in New York (2012).

The uncovered costs are not represented in any accounting report; these become a veritable virtual gainwhich is socially unjustified and constitutes a Quasi-rent. In our view those uncovered costs are added to earnings. Marketable products associated to negative externalities cannot be taken as the origin of social benefits.

Our analysis properly arises from a social ethical principle that considers a productive activity as a part of the task by Mankind and is a benefit for itself.

Time will come when the true costs will be charged as a bill to a society that does not become aware of the serious situation involved.

Thinking-about-nature-as-a-public-good

Thinking about nature as a public good | Photo from Wall Street International.

The antithesis of the degradation of human labor involved in this perspective is the social salary, (associated to Public Goods), which appears to be a goal within the productive activity of mankind.

Hence the need arises for reconverting the quasi-rent in the economy. This said, meaning the need to recover those negative externalities which do not justify the social salary. Let us be reminded that the social salary belongs to the area of Public Goods in the economy.

This Area of public goods from a public policy standpoint is impossible to implement without having a conscious support from the population and thence by the State itself. We have already cited two spheres of concern for our times; global warming and the ageing of the world population which brings on unsolved problems, to this date by the labour market.

Quasi-rent reconversion represents the way of recovering a social wage. This leads us to a surprising or to at least worrisome statements.

This is the situation which has been raised by the Intergovernmental Group of Experts about climate Change (IGECC) when they inform us that the pace in reduction by the CO2 itself of the GDP (less than 0.3 % annually which doubles the rhythm that was observed twenty years ago) and the acceptance of a marked decrease in the per capita GDP (an average of 0,6% annually in the world) will attain a decrease in half the global emissions between 2010 and 2050.

In respect to the more ambitious objective –the reduction of 85% of the CO2 emissions from here to 2050 –it seems totally out of reach when considering the pace at which these measures are being enforced at present.

The important decisions in Science and technology, which are Public Goods, are in private hands today. In any of the situations where knowledge is appropriated the access to basic infrastructure is raised as an unavoidable issue: education, transport, energy, water, and telecommunications…Without this basic infrastructure the benefits of science and technology will not reach the population.

This is a concrete and previous step that the States ought to commit themselves to with their populations. This is equivalent to raising new terms for a citizen´s economy based on the importance and preponderance of Public Goods.

Reconverting the quasi-rent and bringing about a new economic model implies changing the income distribution factors which have prevailed in the course of the 20th and 21st centuries.

This (new organization) will mean tax and market reforms (anti monopoly laws and transparency laws…); social security including contents relative to mass consumption; employment programs supported by the State; retirement funds´ reform applying the solidarity distribution system; the construction of economic and social infrastructure, and addressing global warming and pollution…

The distribution factors constitute the structural framework within which the financial assets and wages are negotiated.

Essential-goods-are-found-in-permanent-interaction-with-nature

Essential goods are found in permanent interaction with nature | Photo from Wall Street International.

The Keynesian financial veilestablishes a relationship between the owner of the real assets and the owner of the financial assets. It is the banking as a middle agent that resolves the financial Debt and consolidates the distribution factors in the capitalist economy. When Debt, via credit, becomes integrated to wages it poses a lethal effect on the household economies.

Finally, Debt turns out to be the necessary result out of the income distribution factors under the present market model in force. Its importance is central for the system to function. Debt administration is what characterizes the financial capitalism of the 21st Century. Its management is at the very same root of the economic cycle as well as the consequences it poses for the administration of the Public Goods.

The social welfare of the population and its growth is the outcome of the production area we have selected as a base for future developments. The productive model and its options cannot come up with a solution which is not compatible with the system.

The growth rate in the economy is not an unknown, but rather what type of growth would be compatible with the development we have proposed for mankind. From a material point of view this points to a productive pillar which becomes articulated in the 21st Century with Science, technology and innovation.

A first approximation leads us to lend impulse to the construction of a productive area which departs from what we can call basic Public Goods and which include education, health and housing. The administration of the Public Goods as a whole, in their diversity, will only be possible on the basis of those three already mentioned. This is the necessary base or the first step. Nevertheless, this necessary condition for future developments is not sufficient.

The activities which are developed within the sphere of the three essential goods already mentioned create a multiple chain of activities for the Public Goods as a whole. Within that whole we acknowledge a new type of remuneration, the social salary. Its singularity consists in that it incorporates the Public Goods into the salary or the training cost of the worker.

Let us summarize. The social salary predominantly establishes that (i) wage growth is proportionally connected to productivity growth; (ii) training costs of the workers ought to be added. The growth of productivity determines the raise of the salaries according to a stated proportionality. Thus this is a second necessary pillar to the one already quoted, which is that of the demand in the system.

The factors (i) and (ii) define the social salary. When these are taken into account we will have taken a fundamental step in income distribution, this cannot be considered as a solution to the nominal incomes but as an element contributing towards the satisfaction of the essential Public Goods and as a central contribution to sustainable economic development.

The social salary is the efficient condition for the development of an economy which is at the service of mankind; it provides an essential content to both the pillars: of production and demand.

If the social salary definitely sets the cost of training for the worker and its proportionality with productivity, new distribution factors will be able to insure the sustainability of the social salary. If this is so, a great first step will have been taken addressing the evaluation of the true costs by the productive activity and the healthy productive social relationships presently ruled by the logic of the Financial Social Debt.

The central factor for the changes in the income distribution factors will be reflected in the social salary.

Some of the changes in these factors are in reference to the anti-monopoly regulations and market transparency; to the policies which cover the incorporation of the social costs in the worker’s wages and take into account social criteria and productivity; to the economy and governance of the cities and its community services (transportation, social insurance, social services for senior citizens and the environment) and to those functions which help integrate the productive activity in the city with the external factors related to quality of life and the environment; to making use of new sources of energy which take into account productivity and the environment; attending to a new criteria for replacing the capitalization systems of pension funds, be these subsidized pensions or of the contributory type with social pillars; addressing environmental measures; attending the automatization of public services and a reinforcement of the telecommunications services…

The already mentioned changes which have been identified branch off throughout the different areas of the economy, i.e., social, mixed and private.

The integration of the Public Goods is reflected in the social salary. The most important challenge to be met is to have Science and technology be made useful and of service to the greatest needs of mankind. This is not possible though without an ethical value system that presides and is central to the socio-economic relationships.

The importance of planning these changes and the integration of the productive area´s activities in the economy is evident. That is in the Social Property Area and in the Mixed and Private Areas. It is in such areas the Public Goods activities are properly incorporated which carries with it the implication to include costs at a higher level of complexity. We would therefore be witnesses to a fundamental redefinition of the market prices.

Given that assigning value to labour will match an increase in productivity and the added cost of training, all of this warranting a social salary and therefore a due value to production.

The social salary is not necessarily found in the advanced economies. Specific compensations cannot be considered to be a social salary. As a matter of fact, these justify low wages and precarious retirement pensions as such. This is the present situation in Germany as well as in the United Kingdom.

An empirical study related to the commercial competition between France and Germany determined that the differences in wages provide an explanation for 90% of the divergent costs and do so as well up to a 40% of the differences in the French and German balance of trade (M. Le Moigne, X Ragot 2015, p.22) Studies by the Federal Republic of Germany’s Ministry of Labor give proof that a raise in productivity is not followed up by a raise in remunerations (Grabka M. Goebel J. 2013 November 13).

Furthermore this is what follows from a study by the IMF (Ostry, Jonathan D., Berg, Andrew. Tsangarides, Charalambos. G February 2014). In direct relationship with Hartz’s Le Moigne (Op.cit. page 5) points that pensions generated at that wage level are miserable: the rightful retirement pension which these would give way to after having worked 45 years in those minijobs would be 150 Euros a month (Le Moigne, Op.cit. Page 5).

As a final conclusion, it can be said that the competitiveness in foreign trade shown by Germany is born on the workers´ shoulders which in practice is far distant from an eventual social salary.

Taking on an era of services and the increase in productivities implies a fundamental reflection about the role of Public Goods and the functions carried out by the State. Our social evaluation system of labor is linked with an integration of Public Goods to the workers’ remuneration, that is, the social salary. This means undertaking changes that are fundamental to the productive social relationships which properly pertain to a society where social-solidarity is put in practice.

If society is made to partake Public Goods in the enjoyment of such social relationships and constitutes the ethical side of such a social-solidarity society as part of it all I ask myself the question-: how will changes have to be conceived then within the labour market and the social reproduction of labor in an environment that is coming up with fast technological and scientific changes?

This is a question which the present system in its organization and regulation of the economy has failed to address. The services´ economy will arise out of the incorporation by the present industrial development to the services provided by Data Science in the different sectors of the economy.

In this new framework for sectorial relationships the social evaluation of the laborer becomes a result out of a more advanced matrix for civilization. The productive matrix related to services, at their present stage, poses difficulties for prime age workers (25-54, 79,8 percent in USA); foreign competition and technological advances have eliminated many of the jobs.

The social evaluation of a mass of laborers which appear to be presently, at least in quantitative terms, as a disposable residue for the labor market solutions, is not a minor problem.

The presence of this in itself argues for the failure of the social policies that make use of combating poverty as part of the results achieved by the market and the regulations for the productive activity in the capitalist economy.

Conclusions

  • The social salary is the key to understand the evaluation and legitimization of the social aspects in a post capitalist system.
  • The social liberals (the third way) seek a solution by means of the Fiscal Pot; they ignore (i) and (ii) refer to the above. With the Fiscal Pot the negotiated compensatory arrangements of the budget are determined according to the rate of growth of the GDP. This goes back to the trickle down policies that sets an environment where income disparities are forgotten. Obscured by the market growth, the issues of what type of growth and at what cost are left aside. This type of setting is reflected in policies undertaken by Germany under Schroeder ´s social-democratic regime (Hartz Reforms) as well as in Merkel´s time and also in reference to the precariousness of jobs in England.
  • The fundamental mechanism of the financial capitalism of the 21st century is the quasi-rent, not in the sense applied by Marshall but as a category which designates costs which have not been included by the capitalist and which eventually becomes a virtual gain. This does not mean that the capitalist earning disappears for the quasi-rent is added to it. I would say it consolidates it.
  • The quasi-rent´s essence lies in the development of negative externalities which are taken to be market failures. I tend to see the quasi-rent´s conversion/realization as a policy that can lead us to the post capitalist age, which is to say to a citizen´s economy. A theory devoid of a vision for a transition is innocuous. Thence that I propose a policy based on the Public Goods, and the reversal of the trickle down for income proposed by the social liberals or the compassionate conservatives in the rightist sector.
  • The compatibility in growth by GDP and the social salary in a citizen´s economy is a function of the quasi-rent´s conversion/realization.
  • The legitimization-labour evaluation of labour by the market is possible in a GDP which is compatible with the social salary. But this is not just any GDP. This turns out to be one that is developed out of the Public Goods where the regulation of the economy is of capital importance. Thence that the areas of the economy makes sense: The social property area, the mixed area and the private area.

Text References

  • Grabka, von Markus., Goebel, Jan. (2013 november 13) Rückgang der Einkommensungleichheit stockt – Bundesregierung, Bundesministerium für Arbeit und Soziales. Berlin.
  • Le Moigne. Mathilde, Ragot, Xavier. (2015 juin), France et Allemagne: une histoire du désajustement européen. OFCE. Working paper n°17
  • Ostry, Jonathan D., Andrew, Berg., Charalambos, Tsangarides. (2014 February) Redistribution, Inequality, and GrowthIMF Staff Discussion Note