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Can Growth Ease Class Conflict?

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  • E. Somanathan

Abstract

This paper proposes a theory that links labor supply to wage growth and economic growth, and the conflict of interest between capital and labor. During the early stages of industrialization of a country, "surplus" labor drawn from the traditional sector of the economy is available to the modern capitalist sector at a constant or only slowly rising wage. As industrialization proceeds, this labor surplus vanishes, leading to wages rising in tandem with the growth of output. As long as there is surplus labor, workers in the modern capitalist sector, who are organized, have little interest in growth as it does not raise wages. The effect of growth is external to them, simply drawing more workers into the capitalist sector and enabling the entrants to receive rents. So capitalist-sector workers would like to redistribute income regardless of the adverse effect on growth. Once the economy grows enough for the subsistence sector to vanish, further growth raises wages. Hence, this change in the structure of the economy leads to a reduction in the intensity of the labor-capital conflict. Copyright 2002 Blackwell Publishers Ltd..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Economics and Politics.

Volume (Year): 14 (2002)
Issue (Month): 1 ()
Pages: 65-81

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Handle: RePEc:bla:ecopol:v:14:y:2002:p:65-81

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Cited by:
  1. Philipp Harms & Stefan Zink, 2005. "Growing Into and Out of Social Conflict," Economica, London School of Economics and Political Science, vol. 72(286), pages 267-286, 05.
  2. Dasgupta, Indraneel & Kanbur, Ravi, 2007. "Community and Class Antagonism," Working Papers 127009, Cornell University, Department of Applied Economics and Management.
  3. Dutta, Idranil & Madden, Paul & Mishra, Ajit, 2012. "Group Inequality and Conflict," Department of Economics Working Papers 32979, University of Bath, Department of Economics.

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