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But in general, each new generation of men "puts in" less and less of any kind of measurable human input muscular or mental. More and more productive input comes from capital instruments and less and less from labor. This shift in input mix accelerates with time; technology builds upon itself.

WHAT DOES THE SHIFTING OF PRODUCTIVE INPUT
FROM CAPITAL INSTRUMENTS TO LABOR
DO TO INCOME DISTRIBUTION?

If we remember that the logic of a market economy is double-entry bookkeeping, under which outtake from the economy is based upon productive input into the economy, then we know that as technological change moves forward, more and more of the productive input is by capital instruments and more and more of the income (under free market conditions) will shift to the owners of capital instruments. Less and less income will be received by the owners of labor power -- the individual workers themselves.

If we actually had the determination of the value of labor under free market conditions, unsupported by minimum wage laws, overtime laws, the legalization of union coercion, and by governmentally subsidized and synthesized employment, my estimate is that labor in the aggregate would provide about 10% of the productive input into the economy and would receive about 10% of the resulting income.

Since all of the studies that have been made on the distribution of the ownership of productive capital show that it is wholly owned within the top 5% to 10% of wealth-holders in the economy, what pattern of income distribution would a free market economy provide under present technological conditions? The answer can be illustrated as follows:

Obviously, if labor were to be suddenly evaluated at its free market value, the condition could continue only momentarily. Starvation of the masses, and the collapse of consumption, as well as production, would be instant.

GOVERNMENTAL MODIFICATION

OF THE INCOME DISTRIBUTION PATTERN:

Since families without income would starve, and since production cannot be carried on in the absence of consumption, what has government done to prevent the collapse of the market economy in the face of the concentrated ownership of the most productive factor of production?

Through governmentally supported redistribution, achieved (1) partly by the legalizing of coercion and the threat of coercion in the fixing of wages and salaries, and (2) partly by redistribution of income through using funds collected by taxes of various kinds from one segment of the population to finance welfare and "created" jobs for the other segment, the actual picture looks more like this:

ECONOMIC INPUT

ESTIMATED ON THE

BASIS OF

FREE MARKET VALUES

Capital

90%

Even so, it is clear that under the accelerating rate of technological change and the continuing concentrated ownership of productive capital, the pattern of income distribution is such that we do not bring into existence more than a fraction of our ability to produce goods and services simply because the purchasing power to buy those goods and services, once produced, is not possessed by those who have unsatisfied needs and wants.

Our techniques of financing new capital formation continue to add more productive power to those whose present productive power is already vastly in excess of their ability or desire to consume. At the same time, the

under-productive (the poor) remain poor.

THE TWO BASIC APPROACHES

TO SOLUTION OF THE

INCOME DISTRIBUTION PROBLEM:

Route 1

Increase governmental redistribution to the workers and the unemployed, who constitute 95% of consumer units, but who furnish only a small fraction of the economy's productive input, until these consumer units receive in fairly equal portions 95% or more of personal income.

The disadvantages of Route I are that:

Since functionally private property in capital instruments exists only where the owner receives all that his capital produces, it would totally destroy private property in the non-human factor of production.

Since capital owners are discouraged by
being deprived of the fruits of their capi-
tal, it would either slow down the rate of
new capital formation on which increase in
the output of goods and services is dependent,
or the government would have to substitute

wage and price controls, and even government
ownership of the non-human factor for private
ownership an arrangement which has never
been able to achieve economic growth rates
comparable with those achieved under free
enterprise.

Route II

Make it possible on an accelerated basis for progressively more and eventually all of the non-capitalowning 95% of consumer units to engage in production through the ownership of both factors so that they may receive income, in accordance with the logic of the market economy, from both factors of production.