The monthly debate program "Intelligence Squared US" recently featured an episode on the topic "Income Inequality Impairs the American Dream of Upward Mobility." It was an interesting and lively debate, and I would recommend listening to it. Of particular interest, though, is something that one of the participants said. Nick Hanauer is a wealthy investor who argued in favor of the motion. In one of his comments, he did a great job of expressing a point that I myself make so often that it might fairly be called one of my "hobbyhorses": that the economy is socially constructed and that very few economic results represent the inexorable working out of impartial processes, much less scientific laws.
The statement in question begins at about 1:05:04 in the video. Hanauer points out that in the last 40 years or so, profits as a percentage of US GDP has doubled while the amount going to labor has decreased by almost 20%. The latter figure, he argued, amounts to a trillion dollars per year. (In the quote Mr. Hanauer briefly refers to "Ed." This is Ed Conard, one of his opponents in the debate, who is also wealthy.)
Here's something you need to understand. That trillion dollars isn't profit because it needs to be, or should be, or has to be. It's profit because powerful people like me and Ed prefer it to be. That trillion dollars could very easily be spent on wages or on discounts for consumers. This isn't a consequence of some magical law of economics. This is a consequence of differentials in power.
Well said, Mr. Hanauer!