I wish I knew more about this. In particular, I wonder about the degree to which non-investment has perhaps crippled productivity to the degree that good and services don’t get produced and people don’t have the money to pay for them anyway.
I recall being struck by one of A.S. Solzhenitzyn’s statements about the economy of the Soviet Union. He said it was “…where labor is cheap and capital dear, unlike in the West where it’s the other way around.”
Why was capital dear in the Soviet Union and cheap in the West? Because the weird socialism of the Soviet Union consumed its capital; like an improvident farmer eating the seed corn he needed for next year’s crop. I wonder if that’s the situation in Venezuela? It probably doesn’t take a lot of disinvestment to cause an oil field to stop functioning, and it sure doesn’t in farming or manufacturing.
Possibly, they “ate the seed corn” buying loyalty among the poorest classes, and finally ate it all so there was no money to fix anything, let alone improve it.
I really do wonder.
Now, why is “labor dear” in the West? Well, it takes capital to make labor productive. A farmer with a tractor (capital) produces a lot more than one who only has a hoe. And so the labor of the farmer with the tractor is worth more than that of the guy with the hoe.
In the U.S., the shares of labor and capital in national income almost never vary since 1929 when they first started keeping statistics. Capital almost always gets 1/3 and labor 2/3, and both tend to move up and down together. Labor’s share is a little higher at full employment than when there is a lot of unemployment, but capital also suffers when there is a lot of unemployment.
It might just be that the 1/3-2/3 ratio is always necessary, so if one takes away too much capital for social programs or whatever, it goes out of whack and labor’s income plummets with capital’s.