The “Fair Wage” Fiction – Richard Kozul-Wright (3/4)

The problem of inequality won't be solved simply by more education and training; inequality is hardwired into the rules of this hyper globalized world. The director of the Division on Globalization and Development Strategies at UNCTAD joins Paul Jay on theAnalysis.news podcast. Transcript edited for The problem of inequality won't be solved simply by more education and training; inequality is hardwired into the rules of this hyper globalized world. The director of the Division on Globalization and Development Strategies at UNCTAD joins Paul Jay on theAnalysis.news podcast. Transcript edited for clarity. Paul JayHi, I'm Paul Jay. Welcome to theAnalysis.news podcast. Don't forget there's a donate buttonat the top of the webpage. This is part three of my discussion with Richard Kozul-Wright, who's the director of theDivision on Globalization and Development Strategies at UNCTAD, the United NationsConference on Trade and Development. He's the author of the 2020 Report of UNCTAD'Transforming Economies: Making Industrial Policy Work for Growth, Jobs, andDevelopment'. You really should listen to Part One and Part Two, because it will make a lot more sense ifyou do. But it will still make sense, I think, even if you don't. So before I introduce and say hi to Richard, I'm going to read a quote from the report. So thisis in the chapter 'Almost Everyone Left Behind.' "In a textbook world, income distribution is a well-rehearsed fiction. Wages are negotiated inmarkets where everyone has equal bargaining power, and the outcome is a wage reflectingeach worker's productivity. Only in this narrow sense is the income distribution fair. In thereal hyper globalized world of austerity and depressed employment, corporations wieldunique power in wage negotiations, and the textbook foundations of fairness and distributionmelt away. Even so, any rising inequality from more liberalizations is justified, assuming thatthe gains from improved allocation of resources, empowered middle-class consumers, andimproved government revenues would be more than enough to compensate those at thebottom. That conclusion requires dubious assumptions like full employment everywhere andat all times. It also misses the point. Power and policies, not fair competition, determine howadjustment processes play out." So thanks for joining us, Richard.Richard Kozul-WrightNice to be back, Paul.Paul JaySo break that down. When you call this fair negotiations, and they keep talking about a fairwage, it's almost like fair taxes, that it's a well-rehearsed fiction. Why do you call it so?Richard Kozul-WrightIt's one of the great weaknesses of conventional economics, its inability to deal with thedistribution question in any serious way, and to offer what is ultimately just a justification forthe status quo. That's a longstanding debate and a critique of most heterodox economists. Paul JayWhat is that?Richard Kozul-WrightAnyone who is outside of the kind of mainstream neoclassical tradition, based on theseideas that the economic activity is simply a set of transactions between individuals who haveare fully rational and fully endowed with all the necessary information to make optimaldecisions. As long as markets are left alone and not interfered with by governments, thenprices will allocate resources in the most efficient way, and everyone will be happy. I meananyone who recognizes that as a kind of mythical view of capitalist economies, it's in oneway or another heterodox, and it's a broad group that encompasses everybody from bothpost Keynesians through the Austrians and Marxists, to be quite honest. But it's a rejectionof that very stylized view of optimal market behavior.Paul JayOK, well, keep breaking down then.