Friday, November 24, 2017

Economic Insanity: Chapter 4 (part 2)

When Speed Looks Like Growth (Part 2)

The Technological Trap
Ever-increasing productivity is possible only in a climate of continually advancing technology. Because of this fact, our present assumptions leave us no choice but to encourage technology to expand as fast as possible. Indeed, the new thinking regarding today’s hypercompetitive global marketplace is that if we are to flourish, we need to achieve the impossible—somehow to come up with endless, brilliant, cheap innovation. If we don’t constantly reach new levels of innovation, we get left behind—as individuals, as companies, as a nation. Contrary to what the experts suggest, however, the question is not, “How can we begin to function at these levels?” but rather, “How long can we pursue this insanity before we self-destruct?”
A consumer society, driven by the demands of an ever-expanding technology, is inherently self-destructive. The problem is that as new technologies replace old ones at an accelerating pace, few consumers or companies can keep up. Only the biggest and wealthiest survive, which results in the concentrating of both power and capital in society.
Technology is such an enticing path to step onto. On the surface, it offers us the solutions to all our problems. New technology gives us an advantage in the marketplace, allows us either to produce less expensively or to charge more for newer, higher-quality products, and enables us to accumulate more capital than our competitors. This is a short-term view, though. To stay ahead in the game, or even to stay in the game, we must invest in ever-newer technology, which, as competition intensifies, becomes more frequent and more expensive.
Consider the computer industry as an example. “Any semiconductor maker aspiring to hold or gain market share,” says Charles Ferguson, “must spend enormous sums of money. Current technology requires, on average, $200 million to $1 billion for each generation of process development, $250 million to $400 million for each factory, and $10 million to $100 million for each major device design.”1 And with each new generation (approximately every four years), the R&D and capital-investment requirements double. This is not a game any small or medium-sized company can join. Only the multibillion-dollar corporations can play. In industries such as this, companies are not merely developing technology to further their own ends; technology is actually driving companies in an insanely steep spiral of repeated investment, production, and obsolescence. Not many companies can survive long in this deadly race, and not many consumers can afford the increasing frequency of obsolescence.
Ironically, corporate America has always operated on the assumption that ever-advancing technology is the way out of the mess, rather than the way in. Organizational America, in myopic devotion to its own self-interest, never has understood that unbridled technology is like cocaine. At first it gives you a sense of euphoria and power, a befuddled optimism that you can accomplish anything. But you quickly become addicted to it and, as time passes, you find you need larger and larger doses just to keep functioning at normal levels. It soon becomes a way of life. You live for the drug. It affects your health and interferes with your everyday obligations, and eventually you can’t afford it, so you steal (from future generations) or go into debt to get another fix. It soon controls your life, and it will kill you unless you can throw off its chains.
Unbridled technology is not a panacea for society’s ills. It is not even a harmless short-term thrill. It is a parasite—it thrives and procreates by consuming its host, because the host is never capable of sustaining both itself and the parasite. Soon the parasite becomes too large and powerful and burdensome. For the host will never be composed of only high-tech, high-paid elements. Society’s inherent mix of mental and manual, high-tech and low-tech members establishes a natural limit to the practical expansion of technology.
If we do not carefully control technology’s expansion, it replaces high-paid low-tech workers with low-cost automated processes, pushes those formerly high-paid production workers into low-paying service-sector jobs, shifts wealth from displaced workers to those who own or control the technology, and forces the lower economic levels of society to go into debt to maintain the lifestyle they are accustomed to. Yes, they may have a few more high-tech possessions, which they are able to own because automation has made them more affordable, but life in general, especially big-ticket items like cars and houses and medical care, become so expensive that fewer and fewer people can afford them. We wind up with many workers in low-paying service sector jobs and significantly fewer in high-wage, low-tech jobs; the average income drops; and the only way we can maintain an increasingly expensive standard of living is to borrow it from our children and grandchildren.
Unless we change our assumptions regarding growth and productivity, there will always be pressure to find newer, cheaper, more brilliant innovations. And the pressure will multiply over time. The ideology of progress and growth insists on faster and faster innovation in a never-ending, ever-expanding spiral of production and consumption. And that spiral is growing steeper today in nearly every industry. But where is this spiral leading us? Are we really moving upward and outward, or are we actually traveling in tighter and tighter circles—like water in a bathtub—before we finally go down the drain?
Can we afford this materialistic ideology? I’m talking real dollars and cents here. You don’t have to be an economist to realize that the suffocating spiral of newer and faster innovation cannot continue forever. Even if we had inexhaustible economic resources, we would eventually bump up against very real physical limits. All the technology in the world can make human beings work only so fast. But we’ll never hit the physical limits, because we’re already hitting economic limits. Our increasing productivity is vanishing into the void even as it decreases our overall purchasing power. It isn’t really making our lives better, not in the comprehensive sense. Although we are working faster and faster, our standard of living and real wages are declining. We cannot afford the demands of ever-accelerating productivity, for it is quickly exhausting and bankrupting us, individually and collectively.

The Technological Assumption
A troubling consequence of our single-minded dedication to increasing productivity is that technology, which can be a valuable tool to better our individual and collective lives, has instead become merely an instrument to make individual businesses and the larger economy grow. Businesses do not develop and invest in new technologies to better society. That may happen by luck or chance, but the truth is that businesses develop technologies for the express purpose of becoming more competitive, capturing market share, and increasing their profits.
This prostituting of technology leads to some unfortunate end results, partly because we have come to assume a connection between technology and quality of life that, in fact, does not exist. This assumption, which I have dubbed the technological assumption, is the largely unspoken but pervasive belief that quality of life is to be measured solely in technological terms. In other words, society advances only as technology advances. Although few would deny that civilization is more than material comforts, and that quality of life has spiritual dimensions, the technological assumption is nonetheless so prevalent (we are constantly immersed in its advertising) that the demands of an ever-expanding technology dictate both the shape and pace of our lives.
Because of this pervasive influence, we simply find ourselves measuring society’s progress in terms of comfort and gadgets and technological wonders—space shuttles, CAT scanners, high- definition TVs, aerodynamic automobiles, laptop computers, laser printers, cordless telephones, fax machines, CD players, microwave ovens—and yet in so many ways these measuring sticks of material progress have contributed to an ongoing societal decadence.
Television, for example, was supposed to be (and still might become) a great educational and informational tool, and yet we are now finding that a generation glued to the tube knows so little about the world it lives in that its ignorance frightens us. If you measure its impact by what most Americans watch on a weekly basis, television has not broadened our horizons. Rather, it has captivated and tranquilized our minds to the extent that we cannot think for ourselves. We simply listen and believe. And sometimes we mimic—and that’s when it gets scary. The fault lies not with the technology itself, of course, but with our use of it, and that use is effectively orchestrated by big business, which has its own agenda.
Profit-driven technology has in many ways made our lives easier, perhaps it has even inadvertently made them better in some ways, but has it made them good? Such conveniences as fax machines, personal computers, microwave ovens, and cellular telephones have enabled us to hurry faster, but have they really improved the quality of our lives? It might be argued they have done just the opposite.
Facsimile machines have taken away even the pretense that some aspects of business are not urgent. Now overnight mail is too slow. Everything has to be done now, now, now. We’ve lost the ability to be patient. As one businessman put it, nowadays people call you on the phone to tell you your fax line’s busy.
What about the computer? Oh, I agree, it has made life less tedious—I would have a hard time without mine, in fact—but I have taught college students who cannot write an intelligible sentence because the word processor now checks their spelling and their grammar, and they apparently assume that it can also think for them. They do not realize that writing is the finest exercise to develop clear thinking. Many of these same students are calculator-bound and can’t do simple arithmetic in their brains. An extreme case was the university senior who reduced a problem on an exam to 2x = 100 and then couldn’t arrive at the value of x without his calculator.
On a much higher plane, computers are opening the doors to perplexing moral questions in such areas as nuclear physics, medicine, and biotechnology. We are walking through those doors eagerly, without asking whether or not those doors should be opened at all, and without accepting the responsibility for the potential consequences of our steps. Technology’s forward march cannot be denied. If it can be done, it should be done, especially if there’s a profit in it.
And we call this civilization? Social progress? Yes, we call it that. For we’ve fully indoctrinated ourselves in scientific capitalism’s (and communism’s) a priori equation: technological advance = societal progress. The problem with this equation is one that General Omar Bradley recognized decades ago: “Our knowledge of science has clearly outstripped our capacity to control it. . . . The world has achieved brilliance without wisdom, power without conscience. Ours is a world of nuclear giants and ethical infants.”
The problem is not in developing new technology that might be of benefit to mankind. Of course we can and should do this. The real problem lies in making technology work for us, rather than allowing ourselves to be driven in undesirable directions by technology’s tendency toward rapid and endless proliferation. “[Jacques Ellul’s] point,” say William Scott and David Hart, “was that although individuals can control single machines, the network of machines and organizations is beyond them: ‘If man can claim to be the master of a machine, and even of every machine considered successively, can he claim to be the master of the technological whole of which each machine is a part?’ It is the whole interlocking network of machines that is the problem. But who, specifically, has the responsibility to control the whole? Indeed, who has the capacity to even understand the whole, let alone control it?”2
We are developing new technology without either the moral sense or the social vision to use it correctly and control its proliferation. Consequently, it is using us, shaping us because we refuse to shape it. The technological economy is in control, and we do its bidding, believing its claim that science, science, and more science are the three magic keys to human progress and happiness.

The Crisis of the Postindustrial Society
Let me put today’s high-tech economy in some kind of historical context. In the early 1800s, 90 percent of the workforce was involved in agriculture. Farming wasn’t merely the occupation of choice—it was the occupation of necessity. It simply took nine out of every ten workers to provide food for society. But increased productivity (mainly due to technology) changed all that. Technological advancements in agriculture made farmers more efficient—in two ways. The farmer could accomplish more with his time, and he could also get a better yield per acre. This has continued now for nearly two centuries. By 1940, one farm worker could supply ten nonfarmers with food. By 1980, those ten had increased to seventy-five, and by 1990 less than 2 percent of the total workforce labored in agriculture. The only downside to all this progress was that it eliminated the need for so many agricultural laborers.
This wasn’t an economic problem, however, for technological advances not only caused more bushels per farmer, they also created numerous new factory jobs. Displaced farm help simply moved to the cities and took jobs in manufacturing facilities. This shift represented a significant change in society—the first major change in centuries, in fact.
This, however, was only the beginning. Over the past century technology has worked a similar transformation in manufacturing. Technological innovations have made factory workers increasingly productive. Consequently, we have need today for far fewer blue-collar workers than ever before. And the recent push to become competitive with foreign producers has only quickened the pace of job reduction for both manufacturing and support personnel.
The only problem is that most displaced manufacturing workers have no comparable-paying jobs to move into, as did their predecessors in agriculture. And our dilemma today isn’t limited to manufacturing. In an attempt to become increasingly competitive, nearly every industry that produces a consumable product is downsizing. The bottom line is that increased productivity is creating an economy that requires fewer and fewer workers of all sorts to produce the goods and services we need and want. And both the competitive nature of our industries and recent technological trends indicate that productivity will continue to increase.
According to a Fortune magazine report in August 1992,3 the number of full-time workers in the United States increased by 13.6 million between 1979 and 1989, but the median weekly wage of those workers (in 1989 dollars) dropped from $409.13 to $398.88. The reason for this wage decrease was the nature of the new jobs. While manufacturing shed some 675,000 jobs, most of them high-paying, 5 million of the 13.6 million new full-time jobs (almost all in services) paid less than $250 per week, $13,000 per year—below the poverty level for a family of four. More than 1.6 million of these new low-paying jobs were in restaurants, stockrooms, and retail sales (in other words, support functions for consumer-oriented rather than producer-oriented enterprises).
As a workforce, we have moved away from making things and toward merely buying and selling things. Because producing the items we need requires fewer and fewer workers, we have become a consumer society, the marketplace where the rest of the world can sell its wares. But what happens when we need only 10 or 20 percent of the population to manufacture the products we need and want? What do the rest of us do? Do we get up each morning, as William Abernathy once suggested, and press each other’s pants? It might be argued that this is exactly what we are doing. A nation of superfluous service workers is not an economically healthy nation, and never can be. This is the dilemma of the postindustrial society.
The crux of the issue is that increased productivity, aimed at making companies competitive (and profitable), is inadvertently creating a greater division between the haves and have-nots and is therefore diluting our ability to consume all that we produce, unless we purchase on credit. Capitalism’s solution to the dilemma of a shrinking manufacturing workforce is to introduce new products—primarily services—at an accelerating pace (to perpetually create new jobs to replace the ones we have eliminated). This curbs unemployment (though not misemployment), pressures us to consume more than ever before, and keeps the wheels of capitalism spinning, but how long can we sustain this expanding spiral of debt-driven economic activity without seeing the whole system collapse? An economy built on an expanding foundation of superfluous products and expendable workers cannot endure forever. Technology-driven productivity improvement is fast creating a society in which the vast majority of us must find work in nonproductive activities.
J. W. Smith points out that “when labor is cut from a production process [through the efficiency of technology], the share of production once claimed by this labor is then claimed by the owners of capital.”4 The rich get richer, and the poor get poorer, and the displaced laborer must find employment in nonproductive work. Because of the social rule “no work, no pay,” nonproductive work will continue to expand as our need for production workers shrinks. Nonproductive work, however, does create two very real products: busywork, which is nothing more than making someone jump through an economic hoop to get a share of society’s total income, and advertising, which is essential in the art of creating a need for superfluous products.
Smith estimates that there are more than “80 million people who are either unemployed or employed nonproductively.”5 If we divided up the productive work equally, he adds, we would need to work only 2.3 days a week. “And since only unnecessary work would be eliminated, there would be no drop in our standard of living.”6 Indeed, imagine all the desirable, society-enhancing things we might accomplish in our spare time, if we were simply to eliminate all the nonproductive jobs that our “no work, no pay” social philosophy necessitates.
Smith’s ideas are intriguing, and they would result in a more equal and sane society, but they don’t even address the issues of limitless growth and technology-driven productivity. To effectively rein in these out-of-control economic engines, we must also strive for fundamental philosophical and structural change.
Any way you slice it, our current assumptions and the solutions that spring from them make no sense at all, which is why I’ve titled this book Economic Insanity, an apt description of our present predicament. But if the capitalist answer is not the right one, which direction are we to turn? To my knowledge there are only three other possible solutions:
1. Establish a pervasive welfare system to support the 80 or 90 percent of workers who are idle, so that they can consume their share of our increasing production.
2. Return to a more primitive technological state, which would reduce our productivity and increase the demand for low-tech workers.
3. Rethink the basic assumptions of capitalism, including endless growth, self-interested competition, nonproductive work, and our current system of unlimited capital ownership (which lies at the heart of both our increasing economic inequality and the compulsive drive to innovate workers out of their jobs).
Option 1 offers little if any hope. We’ve been moving in that direction for long enough now that we can read the writing on the wall. Option 2 is both undesirable and probably impossible. Only the third alternative makes any sense, and it is this alternative that I will explore and attempt to justify in the remainder of this book.
The current system is reaching the end of its useful life. It is creating too great a gap between the haves and have-nots and is based on the illogical premise that growth equals health. As with any living organism, though, this premise is valid only to a certain point. Beyond that point, growth is destructive, and several current indicators suggest that we have indeed reached that point. Consequently, we have but two choices. We can either stand by and watch an out-of-control economy devour our future, or we can replace it with a system that makes more sense for the long term.
1. Charles H. Ferguson, “Computers and the Coming of the U.S. Keiretsu,” Harvard Business Review, July/August, 1990, 55–56.
2. William G. Scott and David K. Hart, Organizational Values in America (New Brunswick, N.J.: Transaction Publishers, 1989), 28–29.
3. “The Job Drought,” Fortune, August 24, 1992.
4. J. W. Smith, “Wasted Time, Wasted Wealth,” In Context (Winter 1993–94): 18.
5. Smith, “Wasted Time,” 21.
6. Smith, “Wasted Time,” 21.

Wednesday, November 15, 2017

Economic Insanity: Chapter 4 (part 1)

When Speed Looks Like Growth (Part 1)

Nothing in the modern workplace, and very little in society at large,
encourages us to take our time, or be satisfied with what we have.
We’re being presented instead with a future where we will have to work harder,
but have even less leisure time than we do today, if we are going to maintain our way of life. . . .
We are speeding up our lives and working harder in a futile attempt
to buy the time to slow down and enjoy it.

—Paul Hawken,
The Ecology of Commerce

Perhaps the most ubiquitous prescription for healing modern capitalism’s ills is productivity. Some have called it a cure-all. According to the current economic dogma, it is the grand key to growth in our economy. So, unless we begin to question the growth imperative, economic expansion is the highway we must travel, and productivity is the vehicle that will take us to whatever fate lies at the end of the road.
And here we come to a paradox in economic America. If productivity is such a powerful panacea, and if our productivity is indeed increasing, then why haven’t we seen its effects in our everyday lives? Why do we have to keep working harder and harder just to stay where we are? For most Americans, life in today’s economy is like running up a down escalator. We have become more productive and have applied new technology as if it were a literal scientific savior, but real wages have stagnated, even retreated over the past twenty-five years.

Where Does Our Increased Productivity Go?
One thing is certain: the need for increased productivity today is not created by the expanding wants of the average American citizen. Yes, we may be the “want it all now” generation, but our wants, if anything, have been tempered by the sobering reality that we can afford much less per hour worked than we could twenty years ago—in spite of our increased productivity.
The average worker today—who, we are told, is much more productive than workers of twenty years ago—earns less in real wages than the average worker received in the early 1970s. Granted, we can buy high-tech wonders like laptop computers, microwave ovens, and CD players that our parents would never have dreamed of either needing or wanting, but the staples—housing, food (if you add in government subsidies), health care, and transportation—are relatively much more expensive now than they were twenty years ago. Sure, I can afford a cellular telephone and cable TV, but a house is much less affordable for me than it was for my parents. Our rising productivity, ironically, gets us less of the things we really need with each passing year and yet puts increasing pressure on us to purchase things we don’t really need.
I would argue that in our society the cost of increasing productivity has reached the point at which it seriously outweighs the benefits. Who, to put it bluntly, profits from my increased productivity? I don’t. Not if my name is Average Joe American. Average Joe has been working harder and harder for the past twenty years and is relatively worse off. The economic treadmill has speeded up, and Joe has to run faster and faster just to stay in one place. This being the case, we must ask where this ever-increasing productivity goes? Who, specifically is benefiting from Joe’s increased productivity? There are at least three relevant answers.
The first and perhaps most significant item that eats up Joe’s productivity increases is the peripheral support structure that has been erected for the sole purpose of holding up the sagging weight of capitalism-run-amok. Many of my neighbors, to use a close-to-home example, aren’t directly involved in producing an actual product, something tangible like a refrigerator or rutabaga or car tire—or even something less tangible but equally useful like a haircut or dental examination or history lesson.
We employ millions of people in our economy who sell insurance, shuffle paper, count money, compile statistics, create junk mail, process information, file things, sue other people, manage political “images,” rearrange corporate assets, collect taxes, conduct meaningless research, play the market, dream up deceptive advertisements, supervise people who are capable of supervising themselves, invest other people’s money, and so on. These jobs are not only proliferating, but they also create a drag on productivity, because they are not materially involved in creating tangible products. Most peripheral service jobs cannot be made more productive—not in any significant sense—by either increased worker diligence or technological improvement. How many personal-claim lawsuits or divorces, for instance, can one lawyer handle in a given month? How many more audits can an IRS agent perform this year than last year? How does a corporate spin doctor increase his productivity?
As new technology displaces workers who actually produce tangible products (because actual production jobs are the most conducive to technology-related productivity improvement), these workers find jobs mainly in the expanding service sector. And as the service sector becomes ever larger, it dilutes the productivity increases of those who are producing tangible goods.
The second black hole into which Joe’s increased productivity disappears is the widening gap between the rich and the poor (and, we might add, between the rich and those in the middle). According to a 1994 report by President Clinton’s Commission on the Future of Worker-Management Relations, the top 10 percent of American workers earn salaries an average of 5.63 times greater than wages paid to workers in the bottom 10 percent, a range that is “by far the widest” of all industrialized countries. We are creating a “two-tier” wage structure, which siphons off Joe’s productivity increases and puts them into someone else’s bank account.1
Besides the traditional accumulation of capital by the affluent and the redistribution of wealth—from poor to rich— through the presence of massive debt in the system, the capitalist and executive class is simply taking more of Joe’s productivity increases to line its own pockets than it did in the past. It used to be that a bigger portion of Joe’s increased output was invested back into the company. Nowadays, however, the salaries and bonuses and incentives of owners and top executives have gone through the ceiling. And most, if not all, of this executive pay, comes out of Joe’s increased output.
The third hungry mouth that devours Joe’s increased productivity is debt—corporate, trade, and national. The binge of mergers and acquisitions, LBOs and hostile takeovers during the 1980s left corporate America with a nasty hangover. “Large companies,” says Robert Reich, “are spending upwards of 30 percent of cash flow in interest on borrowing that has been used to defend against potential takeovers or to mount takeovers themselves.”2 The debt we created at this extended office party had two effects. It soaked up loan money that could have been used to strengthen small businesses; it also forced companies to lay off thousands of workers and require those who escaped the ax to increase their efficiency. This increased productivity is mainly used to pay off principal and interest—and makes the lenders of money wealthier than ever.
On the national level, productivity continues to rise, but only at a rate of about 1 percent per year (averaged over the past 15 years). The national debt, on the other hand, has increased since 1977 at an annual rate of about 12.5 percent. To put this in a different perspective, our interest payments on the national debt in 1992 of $292 billion exceeded that year’s annual increase in GNP by $25 billion. In essence, our increased output is not quite enough to pay the interest on the national debt. And what about consumer, corporate, and trade debt? Even though we steadily increase our productivity, we’re losing ground. No wonder Average Joe is so frustrated.
Is Productivity Improvement Really a Panacea?
The upshot of all this is that our current economic predicament is taking a tremendous toll on the average American. To appease our insatiable demand for growth, Joe must work harder and harder or else be replaced by either new technology that can work more efficiently or foreign labor that can work more cheaply. If he is displaced, he usually winds up in a lower-paying service-sector job, or two or three jobs, and must work horrendous hours just to pay the bills. The result is a frantic lifestyle in which he runs faster and faster and yet falls further and further behind. The economy’s demands are consuming his life.
Why do we feel we must increase our productivity to maintain economic health? Primarily because of our belief that this is what improves our standard of living and makes the economy grow. But is it possible that we are barking up the wrong tree? Is it possible that expanding productivity has no direct correlation to economic health? Our frantic push to increase productivity is not improving our economic lot. Is it possible that our problems stem from other causes? Is it conceivable that our constricting “productivity or bust” approach, may actually be counterproductive?

Growth or Speed?
The need for the economy to grow is what drives our current productivity craze, but the very idea that increasing productivity will cause the economy to expand may be more fiction than fact. This statement is absurd if you believe conventional wisdom, but conventional wisdom is what I’m questioning in this book. Let’s look closely, then, at what happens when we increase productivity in an economy.
The problem with conventional wisdom lies in our understanding of what productivity actually does. Productivity on a national level is a concept that gets lost in the fog of nebulous and largely useless statistics. But at the level of the individual worker, productivity means simply producing more units of a particular product in a fixed time period. We can express productivity as a ratio—output divided by input. We generally define output as units of product created; the input we usually choose to measure is labor hours, although this is an admittedly incomplete and sometimes misleading measuring stick.
Once we define exactly what we mean by productivity, there are two distinct ways of viewing productivity increases. One way is to focus on the numerator in the ratio: In an average hour the worker produces 12 units of product this month, compared to 10 units last month. The other way of looking at productivity increases, which is just as valid, is to emphasize the denominator: It takes the worker an average of 50 minutes to produce 10 units of product this month, compared with 60 minutes last month. The first approach defines increased productivity in terms of more product. The second defines it in terms of faster production. Growth versus speed.
The pivotal question, however, is: Does increased productivity add real wealth to the system? And the answer is both yes and no, depending on which way you look at it. In the traditional sense, increasing productivity enlarges the quantity of goods available for our use and consumption, and therefore we might say that it adds wealth to the economy. But real wealth (not the money that symbolizes it) is perishable. We can’t easily store it, because it either rots or becomes obsolete. Consequently, we must do one of three things with it: use it up, consume it, or convert it into debt by trading it to others for a share of their future production. Since real wealth is perishable, if we do not consume it, use it up, or trade it to someone else who can use it, it becomes valueless. It is expedient, therefore, that we purchase all the goods we produce with our expanding productivity. Consumption must keep up with production. And this brings us to the question of speed.
If the time it takes us to produce a given quantity of goods steadily decreases, then we must also consume those goods more rapidly. Everything speeds up. In this sense, productivity does not make us wealthier as a society. We simply produce and consume at a faster pace. There is not really more wealth in the system. It merely appears so, because money and products change hands faster.
Whichever way you look at it, increasing productivity enables capitalists to put their extracted excess to use more frequently. We might say it increases turnover. There are indeed more products in the system during a fixed time period and, in this sense, rising productivity does increase wealth. But we also consume those products at an accelerated pace—our wealth perishes more rapidly. In other words, escalating productivity simply creates a convincing illusion of greater wealth, to say nothing of a more hectic lifestyle.
The problem with this method of achieving economic growth is that in a very fundamental way it is not growth at all. It is merely speed that looks like growth. In a very real sense, our spiral of productivity-driven economic growth is not actually expanding—it is simply turning faster and faster, and the faster it turns, the steeper the slope gets. The dilemma we face with a system addicted to this type of “growth” is that once you reach a high level of productivity, each additional increase becomes more difficult, even as those increases become more critical in maintaining upward momentum. It’s easy for me to cut three minutes off my time if I run a twenty-minute mile. But if I run a four-minute mile, each second I can cut off my time comes at a tremendous effort.
To repeat a metaphor from the previous chapter, we could say that our productivity-driven economy is cancerous. Cancer can be defined simply as uncontrolled cellular growth. Cancer cells, if you will, are tremendously productive cells. They have speeded up natural processes to the point where they have mutated and lost their ability to function usefully. So instead of adding to the health of the body, they become destructive by growing in an uncontrolled manner and depriving normal cells of nutrients.
1. Jon Sawyer, “Income Gap Becoming an Income Chasm,” Deseret News, June 5, 1994, section M, reprinted from the St. Louis Post-Dispatch.

2. Robert Reich, “High-Wage Jobs Needed to Heal Sick Economy,” Deseret News, November 5–6, section A, 15, reprinted from New Perspectives Quarterly.

Thursday, November 2, 2017

Book Review: An American Sickness

If there is one book you should read in the coming months, it is Elisabeth Rosenthal’s An American Sickness: How Healthcare Became Big Business and How You Can Take It Back. Rosenthal is a medical doctor who became a reporter for the New York Times and is now chief of Kaiser Health News, an independent journalism newsroom focusing on health and health policy. She has an MD from Harvard Medical School and has worked as an ER physician. She speaks from both experience and from an impressive array of research.
In his book The Revolt of the Elites and the Betrayal of Democracy, historian and social critic Christopher Lasch made this astute observation: “The market notoriously tends to universalize itself. It does not easily coexist with institutions that operate according to principles antithetical to itself: schools and universities, newspapers and magazines, charities, families. Sooner or later the market tends to absorb them all. It puts an almost irresistible pressure on every activity to justify itself in the only terms it recognizes: to become a business proposition, to pay its own way, to show black ink on the bottom line. It turns news into entertainment, scholarship into professional careerism, social work into the scientific management of poverty. Inexorably it remodels every institution in its own image.”
Lasch did not specifically mention health care, perhaps because he was writing before the market absorbed health care, but his observation certainly applies. In the past twenty years or so, health care has morphed from a service-oriented industry focused on patient care to a big business focused primarily on making a profit. I have argued in a recent Deseret News op-ed piece that health care is not a product or a collection of related products; it is a public good, similar in many ways to education, and when we treat it as a commodity, we unleash the sorts of problems that are on full display in the United States. The primary problem is the profit motive. And Rosenthal spells out in great detail why and how the voracious market has absorbed and remodeled health care.
The first thing to understand about health care is that it is not a typical industry. It does not behave according to traditional “laws” of economics. And this explains why Republicans cannot come up with a workable health-care plan. A common sentiment among conservatives is that getting government out of health care and turning market forces loose would solve our problems. But this solution is like pouring gasoline on a fire. The problem in many ways is the market.
The simplistic comparison between shopping for cars or clothing and for appendectomies or angioplasty certainly holds true, but the reasons why health care doesn’t react normally to market forces are myriad and complex. Rosenthal examines these in detail.
At the beginning of her book, she lists ten “economic rules of the dysfunctional medical market”:
1. More treatment is always better. Default to the most expensive option.
2. A lifetime of treatment is preferable to a cure.
3. Amenities and marketing matter more than good care.
4. As technologies age, prices can rise rather than fall.
5. There is no free choice. Patients are stuck. And they’re stuck buying American.
6. More competitors vying for business doesn’t mean better prices; it can drive prices up, not down.
7. Economies of scale don’t translate to lower prices. With their market power, big providers can simply demand more.
8. There is no such thing as a fixed price for a procedure or test. And the uninsured pay the highest prices of all.
9. There are no standards for billing. There’s money to be made for anything and everything.
10. Prices will rise to whatever the market will bear.
Rosenthal illustrates these rules with scores of stories about people like you and me, with health issues that are very familiar. You may think that some of these rules couldn’t possibly be accurate, but after you read the stories and the analysis of how various parts of the system work, you won’t find them so outlandish. And she covers all her bases: insurance, hospitals, physicians, pharmaceuticals, medical devices, testing and ancillary services, contractors, research and charity, monopolies and conglomerates. She examines the Affordable Care Act and where it falls short and explains how various components of the health-care industry work very hard to get around well-intentioned legislation and regulation, including a bill written by Utah’s Orrin Hatch that is now causing serious problems instead of solving them. But just because industry is ingenious and amoral doesn’t mean we should simply throw up our hands and assume government can do nothing. Our elected leaders need to be informed in order to stay one step ahead of conniving profit seekers.
As Rosenthal compares the mess in the U.S. with the relatively inexpensive and high-quality care offered through a variety of systems in foreign countries, it becomes obvious that the reason they succeed where we fail is that they use government effectively to restrain the profit motive and turn health care into a public good rather than a commodity. We could learn from these countries, if we had the political will, but the Republicans are so addicted to their simplistic free-market ideology and pathetic sloganeering that they cannot even see why government involvement is the only sane path out of our increasingly expensive and chaotic health-care crisis.
While the solution to most of the abuses we see in health care is indeed more (and more informed) government action, Rosenthal doesn’t ignore the fact that government can’t do everything. In the second part of her book, she offers suggestions to you and me about what we can do to prevent profit-minded providers from treating us unethically and robbing us blind. Her advice is spot-on—from demanding itemized bills to making sure hospitals don’t assign out-of-network physicians or anesthesiologists to treat us without our written permission.
This book could be a game-changer if more Americans read it. It would be especially influential if more politicians did.