Friend of the site, Matt Busigin, has a fantastic post up on his blog Macrofugue titled Welcome To Peak Capitalism, which explores the inevitable economic changes that will come about as the number of employed workers (as a share of the total population) declines due to demographic reasons.
He calls it "Peak Capitalism" because we're inevitably going to have more relationships than just the capitalist/laborer, due to the fact that we'll have so many retirees who will need ongoing sustenance.
In his piece, Busigin introduces a twist on a very common chart.
You've probably seen this chart many times, which shows wages declining as a percent of GDP over the last few decades.
 FRED |
But things look a tad different when you look at wages PLUS government transfer payments (predominantly entitlement programs) as a share of GDP.
 FRED |
Currently, wages plus transfer payments as a share of GDP is right in line with the long-term average of 58 percent, as Busigin notes.
Thus we're not quite in a world where capitalists squeeze more and more value out of the system at the expense of
Instead ...
Thus we get to the fundamental reality: capitalists have been compensated for serving the poor and the elderly. The system has worked for everyone. The government has brokered a deal whereby capitalists accumulate capital by providing the infirm and the retired working class sustenance. Perhaps you would change the proportions of profit and transfer payments, but the basic system of transactions and incentives has been proved out.
The facilitating mechanism is the Federal government’s ability to add new financial assets (money and Treasuries) into the system.
That's not to say there isn't an inequality issue. Net worth and income for top-quintile families has grown far faster than everyone else, but by and large the system works.
Through increased productivity, companies extract more and more from their workers. Then the workers are paid back in retirement by the creation of financial assets.