Suppose we enter a world of increasing efficiency, where what once required labor is done by robots, or done overseas, out of sight and mind. Anti-trust concerns have continued to whither away, so the US might have only a handful of corporations that bring us all we need: MegaAgCorp, MegaRoboCorp, MegaMediaCorp, MegaCareCorp, and MegaBankCorp. Indeed efficiencies are so high that each of these corporations has one CEO and just a few programmers tending the machines. Everyone else in the country can do as they please ... they are not really needed. Because of the excess of trained programmers, the CEO hardly has to pay the programmers anything, so he gets all the profits, shared to some degree with the CEO of MegaBankCorp, which is a major shareholder.
This is entirely acceptable and plausible in the capitalist model of laissez-faire, given the technological premises. The CEOs in this model would have to spend furiously to keep other citizens in the country supplied with the funds to buy food and goods, if they wished to do so. They might be prodigious philanthropists, supporting tens of millions of people each with handouts, arts, circuses, and make-work. An entire trickle-down economy could be modeled in this way, resembling in some ways the extremely concentrated wealth conditions of imperial Roman antiquity.
On the other hand, the CEOs might pile up their profits as money- or even as gold if they were infected with Austrian economics. The rest of the population could then go to hell, so to speak. Unfortunately that system wouldn't get very far because with no spending, there is no income, whether in the form of gold or other money. This economy, while perhaps a model of Ayn Rand go-Galt-ism, wouldn't even work on its own terms, let alone larger moral terms. The CEOs would quickly cease to get income, along with everyone else.
It is a problem we are increasingly facing as we live in a new economic landscape with new types of shortages and excesses. For the last two centuries, new machines and cheap energy challenged us to find ever more complex uses for labor. Indeed, labor virtually ceased being labor at all, and turned into thinking. Now with the advent of computers, thinking is getting increasingly displaced as well, and we may end up doing little more than entertaining each other.
It would be a fine pass to come to, but only if the essential supports coming from the concentrated, automated parts of the economy are distributed widely. The idea that everyone should do something for others as far as they are able is certainly important and virtuous. But who evaluates who is able, and what is the worth of their work? If all of this is judged by the Mega CEOs who are the vaunted "producers", the culture is impoverished, and if taken to its economic extreme, such policy becomes rapidly fatal to any semblance of an economy or society.
I think the lesson should be obvious. The productive capacity of our hyper-developed economic system is largely the patrimony of past inventors, researchers, innovators, educators, and laborers. (Matrimony, if one wants a more feminist-friendly spin!) I don't even mention its more general dependence on cultural & natural resources. The managers and capitalists of the means of production are important cogs in the machine's current instantiation and productivity, but are also custodians on behalf of a much larger society of stakeholders. They may deserve a larger than average share, but they do not deserve the whole pie, no matter what market forces or cronyism may say to the contrary.
The idea that workers who are no longer needed in some corner of this vast enterprise can be simply "voted off the island" and sent into jobless penury seems callous to say the least. When amplified to the 10 to 20% levels we see today in the under- and un-employment picture, it amounts essentially to society-wide masochism. Not only are individuals and families reduced to destitution, for which food stamps are not a reasonable and dignified answer, but the entire system is, as Keynes pointed out, made poorer by the waste of so much labor.
I think there are four paradigmatic solutions that the leading ideologies put forward for such a condition. In the idealistic Republican Horatio Alger story, the unemployed work their fingers off inventing new products, services, and business models which so melt the hearts of reluctant bankers that new lending happens, new businesses arise, and more spending occurs in the economy generally. This investment both brings forth new money (via lending) and also brings money out of the savings of the rich as investment and consumption, thereby redistributing income downwards and keeping the economic cycle turning.
A more realistic, hard-headed version of the Republican approach would be that the unemployed remain invisible to the larger economy and good riddance. Perhaps they subsist on alms from private charities, redistributing small amounts of money downwards on a sporadic basis. Money that is rapidly re-collected to the higher levels by the usual mechanisms of private enterprise- payday loans, tobacco and alcohol addiction, and other advertised necessities. Perhaps the unemployed start their own gardens, bartering goods with fellow outcasts and starting an underground economy that remains invisible to the top end of town. They may even develop alternative currencies and markets. Back in the erstwhile conventional economy, contraction occurs and labor becomes cheaper, but as long as the remaining money concentrates upward, all is well.
On the Democratic side, there are two basic approaches, both slightly more socially responsible. The classic counter-cyclical balancing approach is to redistribute public money (from taxes or from de novo money creation) on a more systematic basis than alms, paying unemployment insurance, health insurance, income support of other sorts, and tax cuts weighted to the middle and lower classes. These are designed to raise aggregate demand, raising economic activity and enployment in the private economy back to self-sustaining levels. A very simple relationship, really, which is proven Keynesianism.
Last is the public works approach: direct employment of the unemployed, in public works the country needs so desperately. Our roads are recognized to be of third world status. Our bridges are falling down. Our energy system is antiquated. Our seniors need aid and assistance. Our broadband is sub-par. There is plenty of work to do, and it doesn't take a rocket scientist (also government supported!) to see that unemployment + work that needs doing = solution. The many public works of the Depression, such as Hoover dam, are still paying dividends today. In the wake of enormous money contraction / credit destruction in the private banking collapse, we have plenty of scope for the government to create money needed for such programs. It doesn't all have to go to the banks through various rescue packages, pumped up reserves, etc!
The stakes could not be more serious, both for individuals being crushed by the current downturn, and for our general prosperity and well-being. The simple fact is that we are not "broke". We may be intellectually, politically, and compassionately broke, but that is a different issue!
- Skidelsky thinks about it..
- Paul Solmon thinks about it.
- Executives rake in billions.
- Tech and the concentration of useful work.
- Bill Black agrees that Goldman Sachs was doing god's work.
- Krugman on debt and interest payments ... not a big deal.
- Solar capacity is growing and getting cheaper.
- Planet wrecking heads to new heights.
- Black hats and white hats in the cyberworld.
- On corruption in Afghanistan.
- The State Department bunker in Iraq. What on earth are we thinking?
- Our new Senate: nothing gets done.
- And the civil war, still going.
- Be good to your dog.
- Bill Mitchell quote of the week: A graph of unemployment duration, which is indefensible in a civilized country, putatively the richest and smartest on Earth.