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Treatise on
Twelve Lights
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To Restore America the Beautiful Under
God and the Written Constitution
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PART III B: ECONOMIC
Chapter Eight_
BOLSTERING WORKERS:
STRUCTURING FULL-EMPLOYMENT INTO CAPITALISM
An organized economic society is as
natural and as necessary as an
organized political society
Msgr. George Higgins, 1950[1]
After mechanized warfare the bitterest
thing in modern life is unemployment.
Stuart Chase
He sins who despises the hungry;
but happy is he who is kind to the poor!
Proverbs
14:21
The best kind of assistance is that which
encourages the needy to become the
primary artisans of their own social
and cultural development.
John Paul II, 1995[2]
══ INTERACTIVE CONTENTS ══
I:
Introduction.
The Pain and Baneful Effects of
Unemployment:
· The
Supercapitalistic Perspective
· Employees’
Perspective
II:
Particular Features of the Arch-Amendment – Section Seven
A
problem of economic structure
Toward
a structural solution
Automation,
Outsourcing, and technological progress
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A
dam Smith
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Manic
Mechanization
Macroeconomic
analysis
Speculations
on kinds of private enterprise projects (PEP)
The
superiority of the contract system over force account.
Keeping
the labor market competitive
Decentralization:
administration of PEP by the States
III:
Plausible Objections Considered
Section
seven’s approach is anti-growth
Outsourcing
is good because the freer the trade, the more we prosper.
Work
is already available
Unemployment
promotes labor force mobility
Unemployment
facilitates employee discipline
Creating
jobs costs too much
Accounting
questions
Full
Employment is Inflationary
IV: Final Reflections
ENDNOTES
Chapter Eight_
BOLSTERING WORKERS:
STRUCTURING FULL-EMPLOYMENT INTO CAPITALISM
A decent provision for the poor
is the true test of civilization.
Samuel Johnson, 1770
A simplistic and morally
obtuse approach to economics is the notion that
whatever drives national income down is bad, and whatever pushes it up is
good. This approach overlooks many complexities, including the reality
that when acquired by means of inflicting pain on others, a fortune is
inherently inferior to a lesser amount earned honestly and considerately.
Paying $1,000 to a slave trader degraded all parties to the transaction.
The
same sum for Harriet Tubman would ennoble everyone concerned.
In his Supercapitalism:
The
Transformation of Business, Democracy and Everyday Life ( Knopf, 2007),
the economist Robert Reich emphasizes the distinction between Americans in our
role as consumers/investors vis-à-vis our role as citizens. As citizens,
Reich points out, we have altruistic sentiments quite
separate from cold economic considerations like the GNP.
Reich
cites seven areas of citizen concern, including the way supercapitalists
damage the planet (e.g. global warming) and pollute the culture by “pandering
to our basest instincts for sexual titillation and violent thrill, …”[2a]
As a nation we ought to view Gross National
Product (GNP or GDP) in the perspective portrayed so well by Robert F. Kennedy:
…Yet
the gross national product does not allow for the health of our children, the
quality of their education or the joy of their play. It does not include
the beauty of our poetry, or the strength of our marriages, the intelligence of
our public debate, or the integrity of our public officials. It measures
neither our wit nor our courage, neither our wisdom nor our learning, neither
our compassion nor our devotion to our county. It measures everything, in
short, except that which makes life worthwhile. And it can tell us
everything about America except why we are proud that we are Americans.
RFK, speech at the University of Kansas,
18 March 1968.
The Pain and Baneful Effects of Unemployment
Victory in the cold war has
reduced to desolation the economic system of communism. When the
communist block did pose a genuine threat to capitalism and freedom, any
American who chose to identify flaws in the capitalist system risked
encountering nervous side-glances and political suspicion. Communism's
formidable challenge having now faded into history, Americans are less inclined
to look askance at reformers like former U.S. Labor Secretary, Robert Reich, who
would have us fashion a “new, updated democratic capitalism,”
one “more
suited to our nobler aspirations for the twenty-first century.”[2b]
The alternative is
the supercapitalist status quo,
with its innate social irresponsibility, a consequence of private enterprise in the raw.[3] Under this
postmodernist economic order, plutocrats and technocrats preside over a global economic web that
affords no
preferential option for the poor, and none of Abraham Lincoln’s “higher
consideration” for labor. Backed by legions of lawyers, congressional
lobbyists, and hired-gun economists, however, supercapitalists are very enthusiastic and quite effective
in outflanking mandates for environmental responsibility, and in trashing the moral milieu in which
citizens live and raise children.[3a]
As per this postmodernist version of
capitalism, let us judge the tree by its fruit. Homelessness has risen so
markedly since the advent of economic globalism that extremely impoverished
people constitute a sizeable underclass inhabiting every inner city in the
United States. As of 2002, estimates on the size of this underclass
ranged from 13.5 million down to four million Americans. It was said that
7.5 percent of people who live in the USA are going to become homeless at some
point in their lifetimes.[4]
Less stark than the destitution of
the homeless, but
still a bitter flaw in capitalism, is unemployment. As distinguished
from the democratic capitalism that peaked during what Reich calls the “Not
Quite Golden Age” (c.1945-75), supercapitalism demotes workers by cutting
their wages and/or benefits, downgrading them to the status of underemployed, or
pushing them all the way down to involuntary unemployment. Many work full-time, yet constitute the subject of
David Shipler’s eye opening book, The Working Poor.[5]
In "Toward a Structural Solution to Unemployment," (1993) this writer analyzed means
to create a full-employment economy within the structure of capitalism and free
enterprise.[6] Let readers consider whether this plan’s time has come, and
how it would impact them as ...
· consumers / investors
· workers
· U.S. citizens
· inhabitants
within a common culture.
For those
who wear the latter three hats, i.e. as workers, citizens and
residents of the culture, full-employment will yield many benefits.
However as consumers / investors, under this plan, we will have to pay some of
the cost for structurally instituted full-employment. In return for
ending unemployment, goods and services will cost a little more [up to 10%
more] than for products produced by automated, labor saving methods, or by
cheap, offshore labor.
Hopefully the reader/consumer is not
Oscar Wilde's cynic who knows the price of everything and the value of
nothing. The price of full-employment will be valuable to the consumers
who also work, because the restructured labor market will be intrinsically more
favorable to all workers, including those currently employed.
Second, full-employment will give millions of citizens a stake in the
productive business of America rather than leaving them as embittered and
disaffected economic exiles. Reenfranchising them economically has to
mean a more healthy and stable country politically. Third,
full-employment will remove a cancer at the heart of American culture by
diverting many people from the spiritual darkness of idleness to the positive spirituality of work.
As regards fundamental reform of
America's supercapitalist system, our basic premise was stated by President Abraham Lincoln
a century and a half ago:
Labor is prior to, and independent of capital.
Capital is only the fruit of labor,
and could never have existed if labor
had not first existed. Labor is the
superior of capital, and deserves
much the higher consideration.[7]
To put Lincoln's
preferential option for labor into
practice in the 21st century will require new initiatives that address the
problems of unemployment and underemployment.
In the pledge allegiance to the
American flag we assert the aim of "liberty and justice for
all." These ideals and many of the rights set forth in the
Constitution are but dim abstracts, however, for a breadwinner whom the
economic system deprives of a gainful occupation. Such a citizen would
find more relevant the scriptural admonition: "He slays his neighbor who
deprives him of his living."[8] Thus a major purpose of the
constellation law is to enhance constitutionally a human right declared
"universal" by the United Nations, the right to a job,[9] or
rather real opportunity relative to good job openings (as distinguished from guaranteed job
security). Work is both crucial to the well being of an individual and
basic to the vitality of an industrialized democracy.
The opposite of a job, involuntary
unemployment, is "in all cases an evil," according to Pope John Paul
II in his 1981 encyclical, On Human Work (Laborem Exercens).[10] Prolonged or frequent unemployment ranks among the most
pernicious afflictions which the human personality can suffer. Loss of
confidence or self-respect ensues with an eventual reduction in one's potential
work efficiency and in ability to cope socially.[11] Lack of work is also a wide
gate to the moral decline of the citizens in question, providing as it
sometimes does the occasions and the incentives to embrace criminal or
dissipated lifestyles.
A study in 1976 for the Joint
Economic Committee of Congress, by Dr. Harvey Brenner of Johns Hopkins
University, established a clear statistical relationship
between unemployment rates during 1940-1973, and various social stress
indicators, including national rates of suicide, patients in mental hospitals,
prison admissions, homicides, and mortalities from cirrhosis of the liver.
A one percent rise in the jobless rate — meaning an increase of about one
million unemployed workers — "creates a legacy of stress, of aggression,
and of illness affecting society long into the future."[12] As the American writer, Stuart Chase put it:
"After mechanized warfare the bitterest thing in modern life is
unemployment."[13]
Humanitarian
considerations aside and viewed in
the coldest terms of utility, unemployment remains a foreboding liability for
the nation.[14] Jobless workers have low utility because
they produce next to nothing for the economy. Many draw public
assistance and constitute an economic deadweight upon the rest of the labor
force.
Moreover, according to several
studies the unemployed as a group exhibit abnormally high rates of costly
antisocial behavior.[15] In New York City, for
example, despair due to mass unemployment drew heavy blame for the rampage
of vandalism, violence, burning and looting that marked the 1977 electrical
blackout.[16] The Los Angeles riots of 1992 left 53 dead and
over $1 billion in property damage, as seething discontent in the underclass
became violent after an unpopular guilty verdict in the Rodney King
trial. Hurricane Katrina (August-September, 2005) unleashed a torrent of
social problems in New Orleans, including an orgy of murder and mayhem.
During the months before the storm struck, official unemployment levels for 2005
were averaging about six percent for the city's working population overall,
which is bad enough. Joblessness in the New Orleans underclass was
considerably worse.
When the bitterness and resentment that springs from joblessness
makes citizens into adversaries of civilization
who shoot at rescue workers, it has severe disutility indeed, even to the
extent that alienation of the unemployed might be decisive in some future
threat to the Republic. As the late U.S. Senator Paul Simon warned,
"Employed America is blissfully unaware of the powder keg on which it is
comfortably seated."[19] Or as the economist, Noreena
Hertz, put it more recently, “a world of gated communities next to ghettos
is not only unconscionable, it is also dangerous.”[20]
The hundreds of homeowners, including wealthy residents
of Laguna Beach, California, who watched their houses go up in gigantic
brushfires set by arsonists in 1993, may have thought that the problem of
homelessness was of little direct concern to themselves. Except that at least one of
the arsonists was apparently a street person. A decade later in October,
2003, arson was a factor in even more damaging California fires, with
more than 3500 homes destroyed, 80,000 people displaced, and 22 lives
lost.
Four years passed in southern California until once again
fires set by arsonists reeked havoc. Twenty fires during the month of
October 2007 (some due to natural causes, some via arson, and one set by
schoolchildren playing with matches) scorching some 400,000 acres, or more than
600 square miles in the San Diego/Los Angeles area. Nearly a million residents
had to be evacuated, and more than 2000 homes
and businesses went up in flames.[20a]
Analogously, the victims of arson in
California were
not so unlike that of socially complacent freemen a century and a half earlier
in Illinois. In 1837 the
"Martyr Abolitionist" and newspaperman, Elijah Lovejoy, was shot dead
by a pro-slavery mob and his printing press dumped into the Mississippi River,
prompting another abolitionist to write:
"The thousands of our citizens
who lately
believed they had nothing to do with slavery,
now begin to discover their error."[21]
In Germany, high unemployment during
the 1930's was a prime factor in the rise
of Adolph Hitler. According to the historian Marshall Dill, "there
can be no question that the promise which won Hitler the most votes in the
black depression days was to end unemployment."[22]
All Germans, including citizens
indifferent toward the unemployed, had to suffer the experience of life under
the Third Reich. In fact all Europeans during 1933-1945, not just the tens
of millions who died, were in some way a victim of the dreadful regime that the
poison of unemployment propelled to power.
Across the Atlantic, the Great Depression gave rise to high unemployment in the USA. Here too
joblessness imperiled free institutions. Tens of millions of Americans
gave credence to Fr. Charles Coughlin, the radio demagogue. Meanwhile,
until his assassination, Senator Huey Long was bidding to become dictator of the United States, along the lines
of his autocratic control in the state of Louisiana.
A U.S. Surgeon
General stated the unemployment problem this way:
A man needs not only to be sound
physically, but if his mental health is to be preserved, he must have
self-reliance, the satisfaction of work, the joy of acquisition, the sense of
equality, the opportunity of leading a normal family life, and the
wholesomeness of recreation. Involuntary unemployment creates an attitude
of helplessness, the sense of being beaten, a loss of initiative, of
self-reliance and of courage, creates distrust of government and discontent
with things as they are. It breeds pathological political philosophies,
subversive of our present democratic institutions. This disillusionment
with life produces first a secretive and later open opposition to
authority. Juvenile delinquency, crime, are a result.[23]
According to philosopher, Jacques
Maritain, the fundamental dispositions of
human nature include satisfaction in work performed – a feeling which plays a key
role in a person's mental well being. Maritain sees the sense of
accomplishment and respect for a job well done as basic to human
morality. He argues that a positive disposition toward work is one of the
first movements of the personality toward self discipline.[24]
Another scholar
notes that work has utility also in
providing a person with "'a time structure, contact with people outside
the family, a definition of personal status and identity, a link with goals
other than those of the individual, and the enforcement of activity.'"[25] The wag will
ask, were the horses who pulled the plow
better off than their descendants whom the tractor has put out to pasture?
We respond that unlike animals, men and women have an immortal spiritual
nature. For human beings the satisfaction of work makes for better health
than does an unsolicited state of leisure.
From the collective standpoint too;
work upgrades society not only by developing the character of citizens
individually, but also by bringing people together in common enterprises.
As Pope John Paul II notes, "it is characteristic of work that it first
and foremost unites people. In this consists its social power; the power to
build a community."[26] In the absence of the socially unifying effect of work – even assuming that somehow material needs were
fully provided – we would experience not an "ascent to leisure," as
some utopians have theorized, but more likely a descent into social division and
increasing civil strife.
The British economist, E.F.
Schumacher, wrote that modern economics errs insofar as it tends to overlook
the innate worth of work. Instead, says Schumacher, too many economists
view consumption as the sole end of
economic activity, often regarding labor as but a necessary
evil – a cost to the employer and a disutility to the worker.[27] On the contrary he argued, quoting Pius XI, labor is
“'decreed by Providence for the good of man's body and soul.'”
St. Josemaria Escriva wrote this about the intrinsically spiritual nature of work:
God
‘waits for us every day, in the laboratory, in the operating room, in the army
barracks, in the university chair, in the factory, in the workshop, in the
fields, in the home, and in all the immense panorama of work. Understand
this well: there is something holy, something divine, hidden in the most
ordinary situations’….[28]
Next to the family, said Schumacher,
work and the relationships established by
work are the true foundations of society.[29] According to John Paul II,
disciplined work promotes such virtues as diligence, industriousness,
prudence in undertaking reasonable risks, reliability and fidelity in
interpersonal relationships, and courage in carrying out decisions which are
difficult and painful. “Work can be a means
of sanctification....” [Catechism of the Catholic Church][30]
The Supercapitalistic Perspective
Supercapitalism
has done away with the corporate statesmen
that governed the Not Quite Golden Age.[31]
As a rule, owners
and managers of American industry nowadays are less concerned with whether work is
good for people, than whether their people are good for profits.
A few years more than a decade into the
supercapitalistic era, industry had begun predicting a growing "skills gap," due to inferior
education in the United States combined with rapid growth in economic demand
for higher skill levels.[32] Industry's vision for the U.S. economy was
threefold. First, make schools more efficient at turning out astute and
skillful workers.[33] Second (but rarely stated publicly) cultivate
survival of the fittest competition that is fierce enough to spur workers into
adapting themselves to industrial needs. Third, if both these approaches fail,
automate or outsource the work to workers overseas.
With qualifications, the first two approaches are not without a
measure of merit; but unless modified neither principle will serve the best
interests of workers. The economy ought to serve as a tool in the hands of workers,
not just workers as tools for the economy.[34]
As envisioned by some industrialists
the utility of unemployment is like the missing stool in a gigantic game of
musical chairs. The scarcity of places keeps the workers mobile,
competitive and docile. However, rigging the labor market so some percentage of the workers will always loose their livelihood, no
matter how diligently they try, is exploitative in the extreme. Spin
doctors and marketing experts put the best light on this kind of exploitation
by using euphemistic terms such as industrial reserve, economic flexibility and
labor force mobility.
Punishing people for being
non-technical is another dehumanizing aspect of supercapitalism. If the Declaration of
Independence is correct that "pursuit of happiness" is one of our
inalienable rights, and if one accepts Thomas Carlyle’s maxim, “blessed is he who has found his
work;” then it follows that people pursuing
happiness are entitled to job opportunities and variety in the array of
available jobs. Some industry leaders seem to think they can put workers
into the furnace of hard knocks and bake them to desired specifications.
The batch that gets burned can be thrown into the ash can of unemployment
or even imprisonment. The discarded workers deserve it; they failed to
adapt.
Consistent with the
blame-the-victim approach, or workers as tools for the economy mindset,
is the general idea that workers must be retrained to fit a technocratic
economy if they are to avoid unemployment or underemployment. Placing the
burden of proof on workers to show they are conforming to the needs of industry
puts a stringent twist on the Protestant work ethic. Working hard is not
sufficient to meet this new and more exacting standard. You must also be
willing to toil at a job that is neither satisfying nor matched to your
aptitudes and potential. Surveys show that more than half of Americans
dislike their jobs.[35]
Does it follow that having a detestable job is their own fault? Or does
the fault lie, rather, with the machine-like, ammoral nature of supercapitalism?
Retraining
the unemployed as automatons for a supercapitalistic labor force is undesirable from the standpoint of many if not most
workers. We see it as wrong
ethically because it fails to take into account the differing aptitudes –
physical, intellectual and emotional – among individuals. Moreover, as an overall
approach to the problem of a slack labor market, retraining is a policy
developed in Wonderland, at the department of chimeras and mirages. Even
if the millions of unemployed and underemployed were all magically
metamorphosed overnight into exact matches for the high skill vacancies in
industry, the labor shortage there would instantaneously become a glut.
Millions would still be jobless or underemployed.
Besides, such transformations never
happen. So far as we know, human nature is not subject to radical
change. Given the variegated aptitudes and inclinations associated with
human beings, only a limited percentage of the work force will be able to make
a living – even fewer will find satisfaction – in an economy that welcomes only
technocratic types.
Educators can readily testify that
a significant percentage of our youth are unable in some cases, unwilling or
unmotivated in others, to acquire the equivalent of a high school
education. So, pursued without modification, the vision of technitopia is
creating, and will continue to create, a permanent underclass of jobless,
sporadically employed and demoralized people.[36] This approach is reminiscent of the worker played by
Charlie Chaplin in Modern Times (1936) who is driven berserk by an
automated work environment. He ends up getting fired and going to jail.
Surely a more humane and advisable
approach is to make economic decisions after considering both points of view –
labor's as well as industry's. Pay raises and promotions provide the
incentive and motivation that spurs labor to adapt to industrial change.
Such reinforcement is sufficient, if combined with better education.
Adding chronic unemployment to the equation as an additional lash to the back
of labor is unnecessary. It is unwarranted in light of the American
experience of rising from a pastoral and agricultural nation to a great
industrial power, simultaneously with sustained labor shortage.
The
constellation law would expand the market for labor across a wider spectrum of
the economy. To promote work for workers of all types, blue collar and
unskilled included, is preferable to an exclusive focus on the high skill
sector of the labor market. It is neither equitable nor wise to eliminate
jobs that demand other kinds of intelligence and other sorts of
aptitudes. Phasing out such jobs through automation, or outsourcing them
to East Asia, invites sociological calamity in America and an
economy burdened with gigantic welfare bills.
II. PARTICULAR FEATURES OF THE ARCH-AMENDMENT,
SECTION SEVEN
Existing
U.S. law, the Employment Act of 1946 (15 U.S.C. 1021) declares that it is the
responsibility of the Federal Government to use “all practicable
means” to create and maintain useful employment opportunities for those
“able, willing, and seeking to work.” This statute, and the
1978 Humphrey-Hawkins bill,[38] are quite without teeth, however,
as indicated by chronic joblessness, with but few respites since World War
II.
John Paul II writes with respect to
national economies, as well as the world economy, “there is something
wrong with the organization of work and employment.”[39]
His Laborem Exercens includes automation among the “new
conditions and demands [which] will require a reordering and adjustment of the
structures of the modern economy and of the distribution of work.”[40]
Wishful thinking and/or compassion
fatigue tempt some economists to seek full-employment by redefining it.[41] They are willing to accept
larger and larger rates of unemployment, five to six percent or even
higher. As the late Senator Daniel Patrick Moynihan observed, the rates
of unemployment that were thought intolerable in the early 1960s are now
thought unattainable.[42]
The penchant of some economists for explaining away unemployment is “intellectual bankruptcy” and indulgence in “newspeak”
according to economist Robert Lekachman.[43] Or as former US Senator and economist
Eugene McCarthy put
it, “there has been a slow deterioration in both the fact and the norm of
'full-employment.'”[44]
What is
proposed in this chapter is a practical and non-inflationary alternative to expansionary
Keynesian policies. Being a structural alternative, it avoids the fallacy
that economic growth alone is sufficient to solve the
unemployment problem.
In 2004 U.S. Treasury Secretary,
John Snow, reiterated this fallacy in economically
hard-hit Ohio, when asked about the outsourcing of American jobs.
Sec. Snow replied: “If we can keep the American economy strong and growing and
expanding, we'll create lots of jobs.”[47] The year previous, in his State of the Union Address,
President George W. Bush had also embraced this fallacy:
We must have an economy
that grows fast enough to employ every man and woman who seeks a job…. Jobs are
created when the economy grows; the economy grows when Americans have more
money to spend and invest….
Yes, Mr. President, growth is often desirable. But
growth alone is consistently a failure as a solution to unemployment and
underemployment.[48]
Moreover, growth is sometimes deleterious in some of its side
effects. “Growth for the sake of growth is the ideology of the cancer
cell.”[49] Among the cases in point:
control of the economy by trusts and monopolies before the turn of the 20th
century was among the results of unrestrained growth. Again a century
later, irresponsible and unregulated growth in global supercapitalism gave rise to
multinational mega-corporations answerable neither to environmental protections
nor to labor laws enacted by our elected representatives, nor subject to
collective bargaining by labor unions.
A Problem of Economic Structure
As
with many aspects of human endeavor,
work has its natural trichotomy: agriculture, manufacturing and
services. In the year 1820 some 79 percent of the American labor force
was engaged in farming. The Industrial Revolution brought urbanization,
however, and by 1910 farmers comprised only about 31 percent of the labor
force. Today the agricultural sector employs less than four percent.[50] The demand for farm labor declined as
new technology in
agriculture enabled fewer hands to produce more food. Meanwhile the
workers who left the farm had to find work in cities, mainly in the
manufacturing sector.
In the 20th century even the
manufacturing sector began to employ a declining percentage of the labor
force. Mechanization and automation, followed in time by outsourcing, enabled some factories to produce
increasing quantities of output with decreases in wages. By 2003 factory jobs were fast disappearing.[51] Again an expanding sector of the economy – this time the
service sector – was able to employ, though at lower wages, the growing
proportion of the working population who were excluded from manufacturing.
Service type occupations in 1920
accounted for just over a third of the labor force, but by 1980 two-thirds.[52] Supercapitalism
began offering American labor a back-to-the-wall dilemma, in that even service
sector wages and benefits fell due to automation and
outsourcing, even as the bargaining power of depleted unions fell.[53] When you call for technical
support with your computer, a relatively low wage-earner in India may well answer the
telephone. Paralleling unemployment in the service sector is the under-employment
deriving from poverty level wages and/or short hours.[54]
Not even local service
industries sheltered from global competition
can escape the supercapitalist “steamroller” (to borrow Professor
Reich's metaphor) which suppresses real wages everywhere. With
their overpowering purchasing influence, a host of multinational corporations
led by Wall Mart squeeze the entire production system. Reversing the
former role of unions in raising wages even for unorganized workers, multinationals depress prevailing wages across an
industry, and all the world's wage-stingy supercapitalist industries combine to
exert a restraining or downward push on real wages in all three sectors of labor
within this and other nations.[54a]
There is, unfortunately, no fourth
sector to which labor can migrate.
Just as the end of the frontier in 1893 took away the restless American’s option
to “go west young man,” so the advent of supercapitalism has deprived
workers of a place to go for a new start. The prospect of quality jobs being
automated away or exported, combined with poverty level wages in service sectors, has led to such books as The Collapse of Work by two British
labor union researchers.
The authors, Clive Jenkins and
Barrie Sherman, point out that unlike unemployment early in the 20th century,
which rose and fell primarily in response to economic slumps or booms; recent
levels of unemployment have been rising in Europe and the U.S.A. even during
periods of economic prosperity.[55] The “jobless economic
recovery” of the second Bush Administration comes to mind. In the economies
of the West, where automated methods supply goods and services, John Stuart
Mill's old dictum is now coming home to roost: “`the demand for
commodities is not the demand for labor.'”[56] Expansions in aggregate
demand (i.e. demand for commodities) will no longer create jobs, or rather
not fast enough to match the pace of the increase in productivity.
Economic growth and demand management policies – both fiscal and monetary – are
yielding ever diminishing returns as a solution to underemployment and
unemployment.[57]
Postmodern changes
in the economy's structure have been
called a second industrial revolution.[58] Machines are performing the
functions of the operator — unlike the first industrial revolution in which
technological developments expanded the output of goods and services rather
than systematically reducing the workforce.[59] Formerly, technological
advances served as tools extending man's intelligence, intuition and
ingenuity. Now robot techniques make redundant many of the human skills
that would necessitate initiative and judgment.[60] Moreover, in the past,
technological advances created many manufacturing jobs to produce the new
machinery, whereas microprocessor technology reduces the overall number of
jobs by introducing products that contain fewer parts than the machines
they replace.[61]
In addition to
technological unemployment, another
source of joblessness looms on the horizon: saturation of demand.[62] Nonetheless,
economists in the mold of MIT Professor Emeritus, Paul A. Samuelson,
defend the demand
management approach to unemployment. They argue that growth and extra consumption can
still pick up the employment slack created by automation. Expanding
consumption is supposed to generate new jobs to produce the extras we consume,
and to offset the jobs lost to machines or outsourcing. One difficulty with this
approach is suggested by Mercer and Morgen who present evidence that demand
saturation was one of the causes of the Great Depression, as the productivity
increases of the 1920's began to outpace the increases in demand.[63]
What will happen
in the 21st century as more and more of the labor force looks to be employed in services? As
Fritz Scharpf, a German economist, observes, "the time required for the
actual use of services cannot be reduced substantially."[64] If there is a saturation point for consumption of mass
produced goods like washing machines and electric can openers,[65] which
are time saving for the consumer, how much more surely must there be a
ceiling on expansion of services, given that there are but 24 hours per
day for consumers to utilize time consuming services. Mass production
requires mass consumption. And time constraints for the consumer impose
limits on the demand for services and also therefore on the production and
employment level in that sector. According to Scharpf, services
"cannot be extrapolated without limit, and hence, they cannot support
‘postindustrial’ hopes for an expansion of service employment."[66]
Sooner or later
not just the people who oppose
rampant consumerism on principle,[67] or the rich (who save
proportionately more of their incomes), but the major portion of the
populace will approach a saturation point in the quest for ever more
consumption.[68] Then consumerism must fall further and
further short of the exponential growth of acquisition required if employment
is to keep pace with automation and outsourcing.[69]
Consequently, to achieve
full-employment there must be another
approach than the ever accelerating consumption that is
key to strategies based on economic growth.[70]
The tendency in some circles to
downplay the seriousness of labor force trends is disconcerting. Already
the problem is severe. At 6.5 percent of the labor force (the average
unemployment rate during the first 40 years of the postmodernist era,
1964-2003), jobless Americans would pack 154 Yankee stadiums. At five
percent, the low for the same period, Yankee stadium would be filled 108
times. Scores more stadiums would overflow with the workers who no longer
collect unemployment due to exhausted benefits, frustration with fruitless
searching, or both. In April 2003, The New York Times reported
that Americans either working or actively looking for work had fallen to just
under two-thirds of the adult population. Outside of official U.S. labor force
statistics, then, were 74.5 million adults, up more than 4 million in just two
years:
...the surge of dropouts
suggests that the jobless rate – which was 5.8 percent last month, roughly
where it has been for the past year – offers an artificially sanguine picture
of the labor market, many economists say. “People use the unemployment
rate as some kind of gauge of the health of the economy,” said Robert H. Topel,
a professor of economics at the University of Chicago. But because of the
number of people now outside of the labor force, he said, “the unemployment
rate does not give you the same kind of information it did in the 1970's or
1960's.”[71]
Economists, and press secretaries
for the President, issue economic reports upbeat in proportion as the official
jobless rates drop, or but slightly rise. Their assured statements based
on misleading data or shaky statistics is reminiscent of confident announcements
recently about conditions on the surface of an extrasolar planet invisible from
even the most
powerful astronomical observatories.
Official jobless figures are only
the tip of the statistical iceberg. Underemployment — working in fast food
restaurants, day-care centers and other low paying service industries, or in
part-time jobs — may take people off BLS unemployment roles, but it still
leaves these people in poverty.[72] David Shipler’s
revealing book, The Working Poor
(2004), describes their plight poignantly.
John D. Kasarda noted
in 1990 that "by all accounts" the U.S. leads the world in job
creation.[73] Yet a study by the congressional
Joint Economic Committee found that most new jobs had been of "dubious
quality."[74]
Economist Juliet Schor calculated that a typical 1990 wage earner had to
work six extra weeks per year to earn the average wage of 1973.[75]
At the turn of the 21st century Robert Reich noted that Americans were working
harder than the workaholic Japanese, and outworked Europeans by 350 hours per
year.[76]
The problem
with much of America's new employment is that it "consists of poverty level,
dead-end, service-sector jobs that contribute little or nothing to the nation's
productivity and international competitiveness." Many Americans have
to work two such jobs, or even three, just to make ends meet. America is becoming an
"increasingly polarized nation composed of investment bankers and
corporate lawyers at one end and hamburger flippers and car washers at the
other."[77]
By the end of America's Not Quite
Golden Age, only 40 percent of the
jobs in the American economy paid enough to support a family,[78] that
is to keep a family above the poverty level with the income provided by a
single wage earner working forty hours per week. Alas, the ethic of a
"family wage" had gone the way of the family business and the family
farm. In place of "democratic capitalism," under which many
employers followed an unwritten law that the single wage be high enough so one breadwinner could support
a family; the supercapitalism of the postmodern era necessitates dual incomes, with both parents
in the labor force, and a burgeoning industry in day-care centers (where workers
get paid minimum wages).[79]
Toward a Structural Solution
Only
by ignoring
Mill's dictum and overlooking empirical developments in the economy since
mid-century is the strategy plausible that would expand aggregate demand for
goods and services, on the assumption that firms will be a kind of economic
stomach digesting consumer demands and converting them into demand for
labor. This conversion process still operates of course, but it worked
better in Keynes day than in our own age of stagflation, automation and job
flight to third-world economies. As distinguished from Keynesian fiscal
policy, or the monetary demand management approach of Milton Friedman, the
following is a structural approach.
In 1955, in order to insert a Christian dimension into the May Day festivities
then almost monopolized by Marxists, Pope Pius XII made May 1st an annual
Church celebration, the feast of St. Joseph the Worker. On that occasion
the Pope noted that as labor strives to improve wages and working conditions …
the worker comes up against a certain structure
which, so far from being
in conformity with the nature of things, is opposed to
God’s order and to
the purpose He has assigned to this world’s goods.[80]
Accordingly, the constellation law
addresses the problem of unemployment as
one of structure. The attack on unemployment would be launched
structurally under section seven. A jobs levy (section
7: 9-12) will reward directly those
firms that are structured so as to employ proportionately more labor, because
the tax burden for them will be lighter than for competitors whose production
methods are contrary to labor intensity.[81] At the same time, jobs
levy tax revenues (section 7: 5-8)
will provide the financing for labor intensive public works, conducted through
a program of Private Enterprise Projects (PEP). This two pronged attack
on unemployment, with spending that is labor intensive and taxing that is capital
intensive, would avoid no-gain job substitution that has plagued earlier job
creation programs.[82] Heretofore revenue sources have
been little differentiated from the public works themselves in terms of
labor intensity. Consequently jobs are lost as much by withdrawing tax
money from the private sector, as by putting jobs back into the economy via
public works.
Once the pincers attack on
unemployment starts to yield results,, meaning that the problems of involuntary
unemployment and underemployment begin to ease and the labor market commences to
tighten; then working men and women will find themselves in
a position of greater strength vis-à-vis management.[82a]
Historically, organized labor has made memorable gains during years when the job
market was tight.[82b]
It is full-employment that will vastly strengthen labor and will empower
rank-and-file workers to reach for improvements in real wages, rather than
smiling sycophantically as the CEO leaves corporate headquarters in his
Ferrari. Thus a restructuring of capitalism to generate full-employment
will constitute a counterrevolution to the profit margins now enriching upper
level management and their cronies on Wall Street, while leaving main street
workers behind.
But labor’s reach cannot cross
borders easily, or bargain collectively with a boss who leaves the country in
order to “bottom fish” for cheaper deals in the foreign labor markets.[82c]
Many U.S. corporations have no qualms about betraying their fellow countrymen
and moving overseas to escape the reach of organized labor. Against this
temptation, under section 7:11 of the constellation law, the withholding of jobs
levy tax credits will exercise a punitive influence on companies who
outsource production and meanwhile seek to market the goods and services in the
U.S. In other words, American firms will find outsourcing less to their
liking. Increasingly, there will be more to lose by fleeing than by
staying and negotiating with American workers..
The
constellation amendment, section 7:2,
provides a fall-back procedure should unemployment become so severe at some
point in the future that the measures described above fall short of securing
full-employment. The Federal government would have the authority, by
appropriate legislation, to reduce the duration of the workweek; workmonth or
workyear; thus providing a job for everyone at say 9-1/2 months per year (like
schoolteachers), or four days per week, rather than the "ins"
averaging upwards of 40 hours per week while the "outs" get zero.[83]
During the 12
months ending in January, 2003, the
workweek in the US averaged 34 hours per week, but with variations as wide as
13 hours per week depending on the sector of the economy. Certain types
of manufacturing averaged as high as 45 hours per week.[84]
Firms with high
training costs or considerable fringe
benefits are tempted today to increase production through mandatory overtime.[85] For example, six and seven day weeks,
sometimes for
several months or more, led to a major strike against Boeing Airplane Co. in
late 1989. Similarly, steel industry managers have ordered the use of
overtime rather than recall of laid-off workers. The mining industry has
used overtime in the midst of severe unemployment.[86] When management overworks
people and undermines the pursuit of happiness through family life, for no
purpose other than to let the firm turn away applicants for work and avoid the
expense of training and paying them benefits, then we must conclude that the
economy is not just employing but exploiting labor, and that it is capital not
labor that takes priority.
Only by ignoring history can an
economist maintain that cutting government regulation will suffice to solve
involuntary overtime problems. Unfunded mandates on industry for health
insurance and other employee benefits is to be sure an incentive for industry
to work fewer employees harder, and to take advantage of loopholes in
government regulations by hiring part-timers and temporaries who get no
benefits. But what about the many decades before World War II when
government regulations were minimal or non-existent? The six day week and
12 hour day were the norm during the hey-day of laissez faire
economics. Unless labor defends its interests through collective
bargaining or the democratic process, management will lengthen or shorten
workdays and workweeks primarily on the basis of corporate profits.
Profiteering is, after all management’s job. It is human nature for
entrepreneurs and their managers to neglect factors other than profit, such as
quality of family life the effect of long hours on the worker’s satisfaction
happiness in life and satisfaction deriving from work.
The solution is to introduce
considerations that owners and managers dare not ignore. Against
exploitation and the untamed capitalism that put profits before the vital
interests of people, the constellation law, section 7:3, would authorize legal checks, instituted by a
revitalized Congress, against the overtime that causes unemployment in the
economy.
Some of the aforementioned measures
need to be implemented as soon as possible. Moreover the provisions of
section seven are like weapons to be stockpiled before the adversary arrives in
full force, whether the foe be massive technological dislocation of workers or
demand saturation or both.
What is proposed here is a
practical and non-inflationary alternative to expansionary policies. As
distinguished from Keynesian fiscal policy, or the monetary demand management
approach of the Milton Friedman school, the proposed structural approach would
attack unemployment directly by stimulating demand for labor as labor.
Basically the idea is to secure legal avenues for a kind of pincers attack on
unemployment, with both direct and indirect generation of jobs during the
fiscal years when normal market mechanisms fail to achieve full-employment.
The fall-back approach of
shortening hours of work also involves a double assault on unemployment, but
only one of them is structural. First, shorter time per year on the job
will reduce the labor supply structurally and tighten the labor market.
Second, the increased leisure per worker/consumer will stimulate consumption
and market demand. By giving Americans more time to use the products they
are urged to purchase, spending increases. “Leisure is not…a drain on the
economy, but a lubricant.”[87]
However,
because the increased leisure approach relies partly on increased economic
demand which, thanks to automation / outsourcing, translates into
proportionately fewer jobs, this is a decreasingly effective way of generating
work. Also the reduced hours might put pressure on firms "to
streamline operations" [layoffs?] or "invest in additional
equipment" [automation leading to displacement of labor].[88] Further, laws limiting hours are easier for firms to
evade than sales taxes.[89]
The working poor are especially vulnerable to firms that ask employees to
work unreported and unpaid hours every day.[90]
Finally, as
Juliet Schor concedes in her excellent study, The Overworked American:
The Unexpected Decline of Leisure, "the problem of worktime cannot be
solved without...a durable solution for the crisis of unemployment and
underemployment plaguing this economy."[91] In other words, it makes more economic sense to create a
tight labor market that strengthens labor in collective bargaining agreements
for better hours. Government intervention that levels the playing field
so that fully employed workers bargain from a position of strength in their own
workplace is more in the natural order of things than government helping
workers by imposing limits on their hours. To be sure automation may
itself be so far out of the organic order that it necessitates rather
artificial means to protect flesh and blood citizens against the encroachment
of machines. Hours legislation may eventually be unavoidable. Until
then we had best prioritize the more natural strategy of generating jobs rather
than regulating the duration of any particular job.
For a thorough treatment of the
issue of shorter hours, including its potential as a means to reduce
unemployment, see the cited works of Eugene McCarthy and William McGaughey,
Harvard Professor Juliet B. Schor, and Cornell University economists, Ronald G.
Ehrenberg & Paul L. Schumann.
To meet the problems of unemployment
and underemployment, the arch-amendment mandates no government activity of any
specific type; but new alternatives would be placed at the disposal of the
President in conjunction with a term-limited Congress whose membership is more
populist and less beholden to plutocrats. In the interest of
flexibility, the constellation law imposes no timetable. These options
would be available for some use now, and more intensive utilization as soon as
developments call for it. If forecasts of surging structural
unemployment are realized soon, we have just time to get ready; if the economic
reckoning is postponed, we will loose nothing by an early preparation.
Automation, Outsourcing, and Technological Progress
Automation is a process whereby machines replace
people in the production of goods and services. At the beginning of
the postmodernist era, a dictionary of economics described automation as
follows:
Automation
includes almost every operation that dispenses with human assistance
or
control, whether because of the newly developed control machinery or
because of mechanical improvements on the assembly line.[92]
Automation was a feature of the
postmodernist economy for years until outsourcing accentuated the problems for
American workers in terms of
joblessness and underemployment. This dual source of upheaval
is like a double edged sword. Wielded by finance supercapitalists, whom William
Greider compares to “Robespierre” and his guillotine of French Revolutionary
Terror, the decapitated victims of the postmodern economic revolution are the
millions of rank and file workers who have lost their
well-paying jobs.[93]
During roughly the last quarter century of the 20th century, the 500 largest
multi-national corporations grew sevenfold in sales, yet yielded no gains in
the number of people employed.[94] In other words the leading
firms of the postmodernist economy sold many times more products, which had
to be produced in vastly greater quantity, and yet the number of people doing
the producing remained constant. Clearly someone – or rather something –
accounted for the extra production, but it was not job growth. Over the
long term, net hiring trends remained flat within the 500 giant corporations.
Would not the economy, polity, and
society have been healthier if the same production increases had been
accompanied by enough new hires to generate full-employment? Would not 20th century
America have been a better country, with happier workers, if the expansion of
employment had sufficiently outpaced both population increases and growth in the
economy, and by margins sufficient to fully
employ the labor force?
Full-employment would have put labor in a
stronger position to demand their share of the exuberantly expanding economy.
During the "not quite golden age" ending in the mid-1970s, economic
growth had been fairly evenly divided between rich and poor, with the lowest
one-fifth scoring the greatest gains in income. But during the
supercapitalist era, the lowest one-fifth have hardly gained at all; poor and
middle-class Americans have fallen further and further behind the rich and
the very rich. Supercapitalism, the postmodernist economic system, has
worked to radically widen income inequality.
By 2005 one-seventh of the nation's wealth was
going to the richest one percent of Americans.[94a]
Here is how much the top 20 percent of American
families saw their fortunes advance relative to modest gains for the middle
class, and virtually no gains for poor families:
|
Figure 8.1
|
Income
growth for lowest 1/5 to highest 1/5 of U.S. families:
|
|
Lowest
to highest quintile of American families, 1974-2004
|
|
Source:
|
Economic
Policy Institute, The State of
Working America, 2006/7, Chapter 1, figure 11, referenced in Robert
Reich, Supercapitalism (Knopf, 2007), p. 106.
|
The reader will note once again that
from 1947-1973, prior
to the emergence of supercapitalism, it was the poor, the lowest quintile, who
claimed the highest percentage of income increases, a starkly different trend
than seen above in figure 8.1.
Also before supercapitalism, chief executive officers (CEOs) in major corporations were
very well paid, but not yet disgracefully so.
During the decade of the 1960's they earned 39 times the pay of the average
American worker. Alas, that 39 to 1 advantage was unsatisfactory to
postmodernist supercapitalists. Within twenty years the disparity between
wages and compensation paid to CEOs had widened to 69 to 1. During the
1990's CEO's in the 50 largest U.S. corporations were making 187 times what the
average worker received. By 2006, the CEO / worker wage ratio was 364 to 1.[94b]
Imagine,
however, a labor market where no line of unemployed people clamors for work,
and desirable jobs are
plentiful. Management will then have to share the wealth.
CEO’s may even have to give up the chauffeur-driven limo and drive their own
automobile to work (possibly an Oldsmobile, Chrysler,
or Mustang after they sell their Ferrari).
We cannot redo postmodernist economic history, but we can
look to the future and address the widening gap in income inequality. We
can promote full-employment with all its attendant boons to the poor and help
for the middle class. Such
is a prime socio-economic purpose of the constellation law. The jobs
levy would finance PEP, the labor intensive public works projects
delineated in the arch-amendment, section seven. Simultaneously, being a sales tax graduated
to favor products produced by human beings, and therefore to favor firms that
involve more people in the production process, the jobs levy would
encourage labor intensity wherever practical in the economy. The effect
of the jobs levy would thus be threefold: (1) to discourage displacement of
workers with machines; (2) to introduce a disincentive for firms to cut expenses
by using cheap, outsourced labor; and (3) to levy revenues for labor-intensive public works projects
in the United States.
A form of fear and a line of
opposition sure to arise against any intervention by t
