This post is about one aspect of the trade-offs that exist in an economy between producers and consumers: retail size and the corresponding efficiencies. To develop some simple insights, consider an economy with only a few positions. The economy has a retail sector, and many other sectors, which we will lump together as non-retail, except for the suppliers sector, which makes and sells things to the retail sector.
The positions in the economy are retail workers, supply personnel, other workers, unemployed, retail managers, and retail owners. Let’s assume they are all distinct to keep things as understandable as possible. Consider two alternatives, one in which all retail is of some average size, non-chain, and local, and the other in which some retail is very large, chain, and regional or national. Outside of retail, things are mostly identical between the two alternatives. There are differences, and they go like this. The large retail has more low-level worker efficiency, and gets by with fewer workers. This means that in the first alternative, there are less unemployed people, and more retail workers, per item sold or per dollar in sales. It also means that, in the management hierarchy of the large retail, there are more managers, and the upper salaries are larger, since salaries tend to go upward, sometimes rapidly, in larger organizations. Furthermore, ownership may be more concentrated.
Besides the labor efficiency of the larger retail, it has supply efficiency, in that larger quantity buying may get discounts, justified by cost or motivated by competition. The discounts in part come from the supply sector workers and owners. It would be possibly to consider consolidation of supply firms, but that is an unnecessary complication.
Contrast the two. Prices would be lower in the large retail case, as there are efficiencies to be gained, so everyone’s earnings would go more into retail and less into other sectors. There would be more goods passing through the retail sector. Other sectors would suffer from the redistribution of spending. This has an effect on benefit allocation. There would be more unemployment in the large retail case, so more taxation would have to flow from the population in general to those who are unemployed and need some sort of assistance in order to maintain a tolerable standard of living. Taxation could come from anywhere, but if it is not very progressive, it hits a middle sector of the population, leaving the lower and higher ones with less effect.
So, in one simple situation, the benefits of society are distributed differently in a small-only retail case or a large retail case, and going from small-only to large means unemployment would be greater, more benefits would flow to higher pay managers and wealthy owners than to workers. Other sectors would lose some benefits, as lower prices in the large retail would draw more spending there.
To generalize from this simple example in a single sector, conglomeration tends to move benefits from the poorer portion of the population to the wealthier. Perhaps there are exceptions to this, but that seems to be the trend. Is this desirable in a Just Deserts economy? The question is a very basic one. How much of society’s benefits should be allocated to different classes or percentiles of the population? Government regulation, most likely taxation, can affect this, and can also affect the ability of large retail, or any large organizations in an economic sector, to exploit the potential advantages of size. What should be done?
This question needs to be set into the context of the whole Just Deserts economic system. One principle is the maximum income effect. This might be done with a Maximum Salary law plus a wealth tax, or tax rates similar to those in effect in the United States during the era around John Kennedy’s presidency, when the top rate was 90%. This change has as a side effect, the reduction of major corruption, meaning it would be possible to pass laws affecting large businesses without the expectation that they would be riddled with loopholes designed by those donating blocks of funds to politicians or otherwise arranging for them to be rewarded.
Another effect of this change would be that ownership of corporate organizations and private companies would be different, in that many or perhaps most would be employee owned; others might be stock companies, but ownership would be more widely distributed among individuals. Government agencies charged with amassing pension and other types of funding might be owners as well. Thus, when the two alternatives are compared, the wealthy that are benefited by the large retail are not the exceeding wealthy, but simply those who have arranged to have substantially higher wealth and income. Estimates might be that an asymptote for the upper salaries are five times average salary, but there are many ways in which this might be figured out.
Perhaps the largest of the differences between the large retail case and the small-only retail case is the change in the unemployment fraction. All other things being about the same, small-only is less labor-efficient, and therefore employs more people per dollar spent on retail consumption. To be able to judge what might be better or worse, it is necessary to determine how the situation of more or less large retail could be adjusted by government intervention.
Taxation is the common tool that governments use to affect such things. Consider a market share effect on a profits tax. Profits might be figured in some convenient way, but in general, they would be taxed at some rate. If there was also a mechanism by which market share of any particular retail organization could be measured, the profits tax rate could be increased for larger market share and reduced for smaller market share. This would favor non-chain individual retail organization, as well as local over regional and regional over national.
The tax rate increment relating to market share could be determined in different ways. One way would be to bundle all retail together, and simply look at sales fraction on a national or regional, or even international, scale. Then a table would have to be constructed, akin to the many tables of tax rates that are dependent on such things as income, which says how much bump up there would be for a market share of such and such. The table really would control the eventual outcome of the trade-offs between large and small retail. If the tax rates were much larger for bigger market share, then larger organizations would shrink, and small ones proliferate. If the tax rates were only slightly larger, they would only slow down the agglomeration of small retail into large retail. So, juggling the tax rate table is equivalent to determining what spectrum of organizational size is desired.
Only good data resources would allow this tax rate table to be set up. If the goal is to reduce employment, then it would be necessary to understand just what head counts were needed for different scales of businesses in the retail sector, as well as to understand the secondary effects that happen in other sectors and especially in the supply sector. If the goal were instead to affect the median wage, then a different set of data would need to be collected, being the employment data needed for the first option but also salary or wage and hours-worked information for all employees. Some combination of these goals might also be accomplished by just having these two sets of information.
One thing that has not been discussed adequately in Just Deserts economic system posts is how to do a transition from some other system to a Just Deserts system. Clearly, this can be done very gradually, to allow everyone affected by it to make necessary adjustments in their own personal plans, or it could be done rather quickly, to bring about the effects within a single generation or even less. The two aspects of this speed question relate to evasive possibilities. As is well-known, any type of change in a system of large wealth disparities that affects the upper tier wealth or income will be evaded, or politicized, or subject to lobbying. There does not seem to be any mechanism that can avoid this, and so, it may well be that some Just Deserts system can be theoretically designed, and it will look impressive on paper, but there will be no implementation path that is tolerable to those whom it would affect.
No one wants to go through a violent revolution, as it does not simply make some basic changes, it undermines an economy, disrupts all manner of commerce, causes migration, and leaves everyone full of uncertainty and foreboding. Short of such a revolution, there does not seem to be any way that those who might want to live under a Just Deserts economic system could get their hands on the levers of power. There is no educational miracle on the horizon. Cajoling and convincing is not likely to be effective. Some bright new ideas are needed related to transitioning from something else to a Just Deserts system, and these will take a lot of work to develop and refine.