“Guard Labor” and Our Capitalist Economy � Open Economics

“Guard Labor” and Our Capitalist Economy � Open Economics

The term guard labor, for me, calls to mind situations in developing countries in which the wealthy feel the need for multiple armed guards around their estate to keep out possible intruders. The mansions sit on the hill, likely looking out over a valley of slums, paintintg a portrait of a highly unequal society. However, this situation need not be limited to the third world- US inequalities are great enough such that the US employs guard labor strikingly. Mark Thoma to a piecediscussing the economist Samuel Bowles, who has done work on inequality and its relationship with guard labor.

“Prior to about 20 years ago, most economists thought that inequality just greased the wheels of progress. Overwhelmingly now, people who study it empirically think that it’s sand in the wheels.” … Bowles offers a key reason why this is so. “Inequality breeds conflict, and conflict breeds wasted resources,” he says…

Inequality leads to an excess of what Bowles calls “guard labor.” [...] Roughly 1 in 4 Americans is employed to keep fellow citizens in line and protect private wealth from would-be Robin Hoods.

There is also a clear relationship across states between the state’s gini coefficient and it’s proportion of guard labor. There is thus a clear mechanism by which inequality is not just unfair but inefficient:

The problem, Bowles argues, is that too much guard labor sustains “illegitimate inequalities,” creating a drag on the economy. All of the people in guard labor jobs could be doing something more productive with their time—perhaps starting their own businesses.

Thoma writes,

With progressive taxes the lucky do pay a little extra, and that allows society to provide social insurance to the unlucky…if the guard labor hypothesis is correct, it provides yet another rationale for a progressive tax code.

My question is: is a progressive tax code enough to address this societal ill? Redistribution programs are great when they work, but the political space for them is limited. Perhaps our economic structure has endemic fissures like these; in that case, studies like this one call for a deeper look at our society’s basic mechanisms of distributing wealth, rather than retooling around the margins.