The Fairy Tale of Capitalism, or FTC, is a mythology, as is the Wild West, portrayed in thousands of movies, radio and television programs.
Once upon a time, Growth measured Prosperity in the Society. “Growth of GDP”, the kind of Growth they had in mind, was perhaps the Professors’ favorite hymn. In “Growth of GDP”, sung often, Growth led and Prosperity followed. Some listeners envisioned enlarging the Aristocrats' wealth and letting the Downward Trickle distribute the Prosperity to the 99 Percent. But that is another story.
|Ali Amir Beg (ca. 1558), image: Wikimedia.org|
A CEO Chief Executive Officer, sometimes called the President, was the Manager who outranked all other Managers in a Firm. The CEO could tell any of the Workers or other Managers what to do. By hiring appropriate Staff, the CEO worked to improve the Shareholders’ part of GDP10, and incidentally the CEO’s part.
There were many kinds of CEOs. Some founded the Firm, the usual case with the smaller Firms. Many were Managers who had pleased the previous CEO, often by their performance at other Firms. For older or larger Firms, especially those in which the previous CEO was Aristocratic, the CEO was an Aristocrat from birth. Sometimes a Board selected for CEO a Worker who had become a Manager and who had shown talent.
The Staffs did not include the CEOs. But not uncommonly a member of the Staff was chosen for CEO. Some of the Staffs became CEOs when an Aristocrat wanted a person of demonstrated talent, instead of a son or niece or paramour of presumed talent, to manage a Firm, reminiscent of the Ottomans.
|GDP50 grew slowly then shrank.|
People understood the Economist Piketty only slightly better than other Economists, because he presented many pictures. The pictures showed the Prosperity wasn’t evenly shared among the Society. GDP01 was not much smaller than GDP90. Piketty’s pictures showed GDP50 grew ever more slowly as the years had passed and then shrank. GDP90 slowed to nearly nothing. GDP10 grew nicely, though ever more slowly. In later years, overall GDP growth sometimes outpaced GDP10. GDP01 grew rapidly over the years, though with variability.
Responding to the unsettling conflict between Piketty’s pictures and their favorite song, some Professors added a few verses to “Growth of GDP” describing how even though redistribution allocated much Growth to the Ten Percent, that was necessary if the Ninety Percent were to get any. But most continued to sing the classic form, which members of Government understood well, owing to their frequent discussions with the Staffs, who the Professors educated.
The Economists held Economist Saez in high regard for the arcane mathematical runes with which he always punctuated his expressions. Saez, a frequent collaborator with Piketty, had unusual talent for pictures among Economists. Saez described how the Supercompensation that the Boards paid the CEOs in the period following the great wars grew to about 40% of the aggregate incomes of the Aristocracy. But that’s another story.
I’m grateful to my friends who reviewed a prepublication draft and offered helpful comments.
Ali Amir Beg, “Janissary Recruitment in the Balkans” (1558, Wikimedia) https://commons.wikimedia.org/w/index.php?curid=22361418
Daniel Brockman, “The Fairy Tale of Capitalism: Workers, GDP and Economists” (Mar 17, 2017) https://daniel-brockman.blogspot.com/2017/03/the-fairy-tale-of-capitalism-workers.html
“Koprulu Mehmed Pasha” (Wikipedia) https://en.wikipedia.org/wiki/K%C3%B6pr%C3%BCl%C3%BC_Mehmed_Pasha
Thomas Piketty, “Capital in the Twenty-First Century” (2014, English translation) http://amzn.to/2fJg7Oi
Saez, Piketty and Zucman, "Distributional National Accounts: Methods and Estimates for the United States" (NBER Working Paper NO. 22945, Dec 2016) https://eml.berkeley.edu/~saez/PSZ2016Slides.pdf
Emmanuel Saez, https://eml.berkeley.edu/~saez/