The money induced inequalities in income (more accurately, output) distribution

In our modern capitalist society, a major inequality results from the very nature of production for monetary profit and the hiring of workers. Marx distinguished production for exchange from production for monetary profit using the equations M-C-M' and C-M-C. Workers ( or in proto/non/precapitalist money using societies, peasants) first and foremost are looking to acquire the basic necessities of life. Generally, this means selling the only reproducible asset they have, their labor power. Workers are paid a wage that is denominated in money. Then they use that same money to purchase what they need from firms.

Here, production is fundamentally broken from consumption. Workers only acquire the output they produce by purchasing it at the market and capitalists are producing, not to satisfy consumption but to accumulate money that will partially be used to consume on the market later. Under capitalism, people spend much of their time either producing or consuming, but these activities are never directly connected.

Normally at this point, Marxists go into explanations of how this leads to the exploitation of workers and how all profit comes from surplus value produced by workers. This may or may not be a valid argument, but it is not the focus of this post. Rather, I would like to direct this post towards the analysis of Michal Kalecki, a polish (Marxian trained) economist and widely seen as an independent (conemporary) developer of John Maynard Keynes's analysis. As is noted above, workers are paid a monetary wage. This means they aren't guaranteed any set standard of living (for the moment I will ignore inflation adjusted contracts, since those are no where near the norm). It also means that the pricing and production decisions of firms as a whole determine the output workers receive, no matter how high or low their nominal wages are.

If worker's for example, form a union and push for higher and higher wages (assuming their productivity stays constant), capitalists as a whole could grant them their wage increases but then raise prices to preserve their profit margin. This is quite a dangerous result for many reasons, not least of which it shows that firms have vast control over the living standards and power of workers, but workers (even when they push back) are only able to achieve limited gains for themselves. For Neoclassical economists, this is unacceptable. It is partially why the concept of competition (specifically “perfect” competition) is so central for them. The process of competition between firms helps them strip firms of their agency and social control. It also leads to the easy defense that any undue power corporations have over our lives is a result of a “lack of competition” that is often attributed to state intervention. Even when they spend their time modeling the economy more realistically (using “imperfect” competition) competition is supposed to exert massive control over firms and if it doesn't, the solution suggests itself (deregulate and break up firms). Interestingly Marxists also rely on competition reducing capitalist agency, but for different effects. Rather then equalizing the power dynamic, it is supposed to make it more brutal since any capitalist which didn't try to expand production, invest and squeeze workers would be destroyed.

Mankiw, Nicholas Gregory. Principles of Economics. Mason, OH: Thomson South-Western, 2011. Print.

Marx, Karl. Capital: A Critique of Political Economy. London: Penguin in Association with New Left Review, 1981. Print.

Lopez, G. , Julio., and Michael Assous. Michal Kalecki. Basingstoke, England: Palgrave Macmillan, 2010. Print.