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.
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.