Question

Looking at the concept of eliminating social classes as a means of "forcing" equality within a society. Magstadt outlines Marx's theory by summarizing that the harmony among the social classes in addition to the equal distribution of wealth and goods would result in the elimination of social conflict and crime and a flouring economy. In order to receive better wages and reap the benefits of their work, the working class would work harder resulting in more production and profit for the business.

Do these conclusions support such an outcome? Are there sufficient incentives for production or innovation, i.e., why would a person work harder knowing that their efforts would not be rewarded, but rather "penalized" to the extent that their success and hard work would be redistributed to others who did not put forth such effort?

Answer 1

How increased production and profits create an advantage to the working class :-

Equitable distribution of income and wealth helps to promote fair economic development in the society . Thus the following theory's suggests how increase in production and profits will benefit the working class .

1) Increase in production :-

If the worker works more , he will receive more wages than it was earning before . Weaker section of society have a higher propensity to consume as compared to higher classes . The propensity to consume is the percentage of income spend on purchases . More wages will increase the aggregate demand of the market , which in turn will help to increase the production scale .

Increase in profits :-

Higher the production , the more profit is earned by the industry . Higher income will automatically imply higher tax revenues for the government.

Outcome of increase in profits and production :-

For working classes :-

If any industry will start earning better profits , they will generate higher tax revenues to the government. This will help the government to adopt progressive tax system with transfer payments like subsidies, unemployment benefits , Medicare benefits etc , that will help in equal redistribution of income amongst the two sections of society.

For business owners :-

Increased production will reap them better profit percentage due to economies of production. Even after paying their tax liability the business owners will earn better profits than before , this will encourage them to reinvest some portion of their profit in the business for its expansion . Hence expansion in turn would increase employment opportunities for the working class .