Treatise on
Twelve Lights

To Restore America the Beautiful Under
God and the Written Constitution

 

 

 

PART III B: ECONOMIC

 

 

 

Struble’s remarks to accompany 8th & 9th chapters [4½ minutes] Click Here

Audio only!  Sound, not video_

 

 

 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

Adam Smith

A dam Smith

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

 

Deprived of meaningful work, men and women lose their
reason for existence; they go stark, raving mad.

Feodor Dostoevsky, The Brothers Karamazov

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?

 

 

Employees’ Perspective

            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 the polity to counter layoffs is that – however well intentioned – the policy will impair technological improvements.[95]  A critic of the journal article I published in the UK, “Toward a Structural Solution to Unemployment,” called the approach "Ludditism,"[96] an ill considered label in that the reform would not displace machines per se, as the Luddites sought to do.[97]  From the Luddite's standpoint, the more productive the machines, the more they were hated.  The constellation law, section 7: 8, seeks, rather, to have the unemployed water-ski, as it were, behind the most productive machines, the tow rope being a "tithe to workers" of ten percent. 

A variation on the Luddite accusation is that a tax on automation will impair capital formation.  According to this argument, the jobs levy carried to its logical extreme would tax America back to the horse and buggy.

On the contrary, however, the utility of automation turns on whether a new technology is slightly or substantially more efficient as determined by the marketplace, i.e. whether human labor remains competitive with the machines in question.  Horse and buggy, indeed!  Even Dan Patch drawing a buggy down the straightaway would be left in the dust by an old four-cylinder Ford Pinto.  Where automation overwhelmingly outpaces labor intensity, then the machine must prevail.  No Ludditism here.

Sometimes, however, firms automate not for the sake of cost effectiveness at all, but to reduce the non-monetary difficulties involved in dealing with human beings.  "People are trouble – machines obey" is the real reason for some of the automations in the UK, according to Mike Cooley.[98]

 

One man, one problem;
no man, no pro
blem.

Stalin’s motto for maintaining dictatorship

 

The Soviet tyrant, Joseph Stalin, adopted the policy of liquidating potentially troublesome Russian politicians.  Similarly, autocratic CEO’s automate or outsource not just to get rid of burdensome labor costs, but also to avoid problems associated with organized labor.

Although Stalin’s rivals got ousted from their rib cages, workers get off a little easier they only get pushed out of the work force.  And so, unlike murder, taking away a man's job is not always of permanent effect.  And yet the longer the duration of joblessness the more seriously its toll on emotional health.  As the bitterness of unemployment persists, the worker becomes less employable.  Eventually he or she may sink into the ranks of the underclass.

Sometimes automation has no profit-making utility,[99] or only a modicum of economic advantage over the labor intensive method, and yet firms may still decide for automation because it is slick and trendy and may attract investors.  In such cases, let us rejoice if the jobs levy tips the scales and deters a fashionable transfer from people to machines.  If men and women are doing a comparably effective job, why should robots displace them?  Good riddance to a technological change that reduces the workforce in a firm, and yields only slim benefits, or none, for the consumer or for the economy as a whole.

The benefits will indeed be slim if the automation cannot increase product quality enough to maintain its competitive position in the marketplace at a tax induced price rise of ten percent or less; or, alternatively, if the automation cannot increase productivity enough to lower the costs per item, offset the tax rise, (the jobs levy) and maintain or reduce the original after-tax price.  On the other hand, a technological change that really does improve productivity or product quality sufficiently to compensate for the new retail tax will still be profitable to the firm that invests in it.

Take the modern calculators, for example, whose efficiency is very substantial indeed compared to the old adding machine.  Even if an automation tax had been in force decades ago, it would still have paid an accounting firm to convert to electronic calculators when the time saved by the new machines, and the lower wage costs from employing fewer accountants, offset the additional jobs levy on the sales of the firm's services.  Another example is the modern equipment used in construction.  Suppose that throughout the 20th century a tax on capital intensity, at a graduated rate between zero and ten percent, had been levied on building construction.  Would U.S. contractors still be using the old methods for everything from earthmoving to erecting skyscrapers?  To hold in the affirmative is to deny the substantial margin of efficiency that accompanies modern techniques of construction.

Another case in point is the telephone.  Automatic switching equipment puts through billions upon billions of calls so rapidly and reliably that to handle the same workload by the operator assisted system used until the 1920's would, it has been estimated, require a workforce of operators as large as the entire population of the United States.  Here again, the technological advantage in robotics is so overwhelming that the jobs levy would, even at its maximum rate of ten percent, be an easy economic obstacle to surmount.

On the other hand, to cite an actual occurrence from the late 1970's, a 132 room residence hotel employed 13 men and women, including three elevator operators.  The hotel management bought an automatic elevator, laid off the three elevator men, and operated with ten employees, thus saving on labor to cover part of the purchase price of the elevator, and paying the rest of the cost by raising the rent.  The three elevator operators had doubled as bell-hops, so the tenants had to lose the luxury of room service, thus paying more for less product, while the three men permanently lost their jobs.  (Two did find jobs elsewhere).  Only the elevator company (and the few men it employed during the several days of installation) and the owners of the hotel, really gained anything.  The workers, the customers and society were the losers.  A jobs levy might have discouraged this change, if the marginal savings to the hotel from the robot elevator were less than the resulting increase in jobs levy payments by the hotel.  Otherwise society would at least have collected some of the extra profits going to the firm, for the purpose of creating jobs.[100]

If automation is advantageous by a substantial margin – that is the key proviso! – then a compensation to society of from one to ten percent will be nothing insurmountable.  Chief Justice John Marshall once observed that the power to tax is the power to destroy; later Justice Oliver Wendell Holmes, Jr. added the qualifier, if unlimited.[101]  As proposed here the power to tax automation would emphatically not be unlimited; its maximum (section 7:9) is ten percent, which can present no great stumbling block to the capital formation that represents real progress.  And where human labor is no longer competitive with automated production methods, no tax as low as ten percent is going to make labor intensity competitive again.  What with the ceiling on the tax, automation will continue its inexorable advance where it is genuinely useful.

 

Let us raise a fine point on investment that maintains machines and replaces worn equipment.  Such expenditures do not result in manpower reductions.  Unlike new automation, maintenance would make no significant difference in the input ratio of capital to labor on which the jobs levy is to be based.  However, if firms could calculate the capital component of output at the depreciating value of their equipment, the jobs levy rate would fall as equipment aged.  A firm would get a tax break for letting its capital stock deteriorate, just as slumlords save money on maintenance and pay less in property taxes by letting inner city apartments decline in assessed value.[102]

The objection here that firms would be unable to determine replacement prices on their equipment is unrealistically pessimistic.  Any owner of a used car can consult a blue book for its value.  Surely the market alone would provide a whole train of statistical aids to assist firms in accounting for the various provisions of the national sales tax that the jobs levy would be.

Another perspective on new investment concerns the argument that the jobs levy would counteract traditional tax breaks to firms for capital investment.  Would the government be giving with one hand while taking with the other?  That depends.  Suppose new investment is in equipment that supports rather than displaces workers.  In that case the firm will continue to receive a tax break in the form of a jobs levy that remains relatively low on the graduated scale — below 10% and maybe as low as zero % depending on the input ratio or capital to labor in the production process.  But where new equipment produces layoffs, then indeed some of the gains represented by traditional tax breaks would get canceled out, because the jobs levy rate for the company will rise toward the 10% maximum.  Thus the firm would have a financial incentive to think carefully about whether or not its capital improvements will benefit the people who work for the company.

America's highway system provides an instructive analogy on how public intervention can spur corporate responsibility.  Let us postulate that rather than our current system of speed limits and weigh stations which limit the wear and tear on highways – though at some expense for trucking firms and to society for enforcement – society had instead deregulated truck speeds and loads entirely.  The deregulation might have made the trucking industry more profitable, but society would have paid heavily in terms of safety and repairs to torn up roads.  Likewise we might let the laissez faire advance of automation / outsourcing tear up society with unemployment and its dreadful effects.  Alternatively, through the democratic process, we can deal with the deleterious side effects of supercapitalism.  In this case there is no solution other than government intervention, and a jobs levy limited to 10% is regulation of a milder form.

under supercapitalism, regulations are the only means of getting companies to do things that hurt their bottom lines. … To suggest that a vast, untapped reservoir of corporate benevolence is available for the asking is to seriously mislead the public – and once again divert attention from the important job of deciding what such regulations should be.  (Reich, Supercapitalism)[102a] 

The graduated jobs levy does not represent a termination of progress, nor of government intervention against modern technology, any more than regulation of trucking meant reversion to the horse drawn wagon.  The jobs levy could not possibly tie industry to outdated and really inefficient methods.  The tax may, however, by its very existence and the philosophy underlying it, counteract the modern idolatry toward machines and technology, and thus promote humanity's dominion, rather than technology's domination of humanity.[103] 

 

Things are in the saddle,
And ride
mankind.”  Emerson[104]

 

Pope John Paul II warns, "technology is undoubtedly man's ally....  However it is also a fact that in some instances technology can cease to be man's ally and become almost his enemy."[105]   Vaclav Havel, anti-communist dissident, later President of the Czech Republic, warned of a "planetary challenge to the position of human beings in the world," as they are "dragged helplessly along by the automatism of global technological civilization...."[106]  Observed Havel:

Technology – that child of modern science, which in turn is a child of modern metaphysics – is out of humanity's control, has ceased to serve us, has enslaved us and compelled us to participate in the preparation of our own destruction.[107]

            The momentum in technology sometimes conjures up its own madcap agenda that mandates at a minimum its supervision by human wisdom and intelligence, and when necessary the forcible diversion of technology into channels helpful to humanity, rather than harmful to us.  One facet of bridling the wild stallion of technological change would be compensating workers by taxing the automation that displaces workers so that we can employ hands and minds elsewhere, rather than relegate human skills and ingenuity to the economic refuse heap.[108]

Under the constellation amendment (section 7:9) the term applied to the jobs levy at its maximum rate of ten percent per retail sale is "tithe to workers," to symbolize the proper subordination of machines to human beings.  Just as men and women pay tithes in service to their Creator, so let machines pay tithes to humanity.  As long as the three tier hierarchy of economic progress is recognized — the blessings of God, the initiative of human beings, and the productive capacity of technology, in that order — then our children will escape slavery to machines.  Observes John Paul II:

...we must first of all recall a principle that has always been taught by the church: 
the principle of the priority of labor over capital.... We must emphasize and give 
prominence to the primacy of man in the production process, the primacy of man 
over things.  Everything contained in the concept of capital in the strict sense is 
only a collection of
things.[109]

 The seventh section of the arch-amendment would promote a more salutary sharing between capital and labor in the benefits of the American economy.  By using the democratic process to introduce human or social considerations into the profit motive itself, the jobs levy would help to move the economy away from supercapitalism's amorality.  At the same time the constellation law would restore democratic capitalism in a form refurbished for the 21st century.[110]

 

Manic Mechanization

            According to Louis Emmerij, a Dutch economist, promoting more labor intensive technologies in the West "would go against one of the few comparative advantages which the industrialized countries still have today.  Any trend toward maintaining or even reinforcing the labor intensity of our economy would jeopardize our competitive situation in international trade." So he argued in 1980.[111]  In other words, the rich nations owned most of the machines, and automation saved them from competing on a level playing field with less mechanized economies where people play a more important role.

Now, more than a quarter century later, international free trade organizations like the WTO have not just leveled the playing field, but are slanting economic competition in favor of nations who pay slave wages to workers.  Outsourcing combined with automation overseas enables high-tech, low-paid workers abroad to nullify the productivity edge that automation once yielded to Americans working in the manufacturing sector.

Those who continue to push for automation and outsourcing give precious little heed to a human advantage enjoyed by much of the West, including the U.S.A., namely a highly motivated and skilled labor force.  Many American workers are still willing to work hard, are receptive to following instructions, and do bring useful skills and education to the workplace.  Unlike technological progress, which modern communications is proliferating abroad with great rapidity, a high quality work force is acquired slowly, and not easily regained if lost.  A host of cultural as well as economic factors are involved in converting a lackadaisical work force into one that is motivated, disciplined and skilled.  Witness perestroika, the economic restructuring in the U.S.S.R. beginning in the 1980's, followed by the complete collapse of Communism.  In the Russian economic experience, converting from communism to capitalism did not make Russians work as well as Germans.

            Undoubtedly our own nation has a precious resource in the form of hard working Americans.  But the longer or the more frequently a segment of the labor force remains without work, the poorer their work habits will become, and the lower their productivity will be when and if the economy employs them.[111a]  Not since 1969 have we seen a nationwide rate of unemployment below four percent (although there have been regional exceptions as low as the two percent range, notably in New England in the late 1980's).[111b]  With rates of unemployment worse during the postmodernist era than any comparable duration since the Great Depression, the last workers hired have steadily degenerated in terms of confidence and work discipline.[111c]  Spending many months living in the economic waste bin is debilitating at best.  At worst it can destroy a person.  Many of the aberrations afflicting American culture derive, in part, from the demoralization that goes with chronic joblessness.  (See Brenner, above)

The chronically unemployed person carries a productivity handicap.  If he returns to work his acquired shortcomings will, in the short-run, add a component of lower productivity to the active labor force.  But in the long-run people do recover their morale and strength of personality.  As on-the-job training and practice restores the confidence and skill that idleness has eroded, the formerly unemployed will lift their collective level of output closer to the average productivity of the work force.

  To be sure, the process will be costly and will take time to yield mature results.  However, to suffer further deterioration in the quality of the average American worker by letting unemployment and welfare erode motivation and skills, would be to sacrifice a fundamental advantage exceeding in value even our natural resource base.  No economist is indifferent to the value of natural resources like timber, for example.  Yet some economists remain nonchalant about the effect of underemployment and unemployment on the health and morale of the American workforce.[112]

As more sensitive economist, Maurice Scott, points out, real economic progress requires "the right balance" between labor intensive and capital intensive investment.  In neither case, urges Scott, should there be an overemphasis.  The "optimum mix" depends, says he, on a number of labor force considerations.[113] 

Unlike Scott, however, not a few economists discount or disregard issues critical to the worker's livelihood.  The constellation law would override their ivory tower disregard of labor.  We the people, in convention assembled, would define the optimum mix as one which yields full-employment. 

     Because the American consumer powers the world's greatest national marketplace, the USA has a unique political/economic opportunity to initiate a global shift in consumption patterns so as to favor workers over machines everywhere on the planet. 

Be forewarned, however.  The jobs levy will restrict imports in ways that are certain to rile WTO, NAFTA and similar free trade regulators.[114]  Globalist economists and plutocrats rarely give an inch without a fight, and the WTO now wields an iron rod.  In December, 2003, for example, President G.W. Bush came under intense pressure from backers of a WTO order that he terminate tariffs protecting the American steel industry.  As authorized by the WTO, a spokesmen for the EU warned that the European trading bloc would retaliate with $2.2 billion in retaliatory sanctions on U.S. exports if the tariffs were not completely abolished, in accordance with a WTO order. 

In this country, Bush encountered demonstrators backing the tariffs.  “You don't save the steel industry by caving into the blackmail from Europe halfway through what you promised,” said Leo W. Gerard, president of the United Steelworkers of America.  In 2002 the US had imposed the tariff on imported steel; the move was meant to give the troubled U.S. industry three years to consolidate and regain a profitable footing.  Since 1997 forty-one steel companies had declared bankruptcy, eliminating more than 50,000 jobs.[115] 

In the end, however, the demands of the WTO trumped the 150,000 Americans still employed in the steel industry.  President Bush bowed to the WTO and reneged on his promise to American steel.  The tariff on steel was abruptly stopped 20 months into the three-year recovery window.[116]  A month earlier the Speaker of the U.S. House of Representatives had lamented that…

 

the World Trade Organization has a sword over our head. We need to get it done. So that is probably – my gut feeling about this is we fought a revolution 230 years ago to stop Europeans from telling us how we have to tax in this country, and it puts the hair up on the back of my neck that we have to do this at all. But we have to do it.[117]

 

Labor union leadership often sides with the left.  But many conservatives are in the same camp with liberals on the issue of protectionism.  As a case in point, Patrick J. Buchanan, wrote in 2002:

 

The World Trade Organization has just given Europe the right to hit the United States with $4 billion in tariff sanctions – to punish us for giving tax breaks to U.S. exporters like Boeing, Microsoft and GE.  Under WTO rules, we are not permitted to retaliate. We must stand and take the EU sucker punch, however hard it wants to hit.  Perhaps this "stick-it-to-the-Americans" ruling will at last awaken us to the folly of having created this monster. A showdown with the WTO over whether free trade trumps U.S. national interests was inevitable the day we joined this outfit. Let's get it on, and let's get it over with.[118]

 

George W. Bush was, however, no Pat Buchanan.  The President backed down, showing not just his own metal; but more importantly revealing the willingness of the WTO to wield the big stick, as compared to the feebleness of the Feds in standing by their oaths to uphold and defend the U.S. Constitution.

 

If international treaties trump the laws of our republic, even overruling U.S. constitutional law, then the labor intensity incentives as proposed in the constellation law are as good as checkmated.  To parry this sort of threat from globalist tribunals, the constellation law states explicitly (section 8:2 ) that “the U.S. Constitution supersedes any international treaty.”  We are at such a pass in this country that to reassert and reinforce the authority of the Constitution will be, in and of itself, a revolutionary act.  More precisely we will be taking counterrevolutionary action by nullifying globalist usurpations, thus restoring the stolen scepter to America's lex rex   

            A point made earlier is so pertinent to Emmerij's obsession with mechanization that it bears repeating: the retail tax will discourage automations of but slight economic utility, while not hindering technical innovations that have a substantial efficiency advantage.  The latter will stay competitive in the huge domestic market, allowing economies of scale that firms can also apply to exports.  Notice also that section seven applies the jobs levy to U.S. sales alone, so that sales overseas can be at prices just as low as before the tax.

The jobs levy would be nothing like a tariff which discriminates against imports and invites retaliation against our exports.  Unlike a tariff, the jobs levy is even handed; it will be uniform for goods and services sold in the United States, "imports as well as American makes" (section 7:2).  Thus the effect of the tax will be to change prices so as to enhance the competitiveness in the American marketplace of merchandise made in labor intensive firms that pay their workers well.  This effect on prices will operate independently of the product's country of origin (assuming importers can cover the transportation costs, which is where home based production will have the edge).

In addition, suppose the EEC (European Economic Community or Common Market) should reciprocate in kind by adopting jobs levies of their own.  Such a development would be a major step in solving the structural unemployment problem in the industrialized democracies worldwide, without depriving high-tech companies, wherever based, of their marketing advantage if their methods are, as we have emphasized, substantially more cost effective and/or qualitative.

However, the tax will confront first and foremost the American consumers, for as the world's leading consumers we have entered into a Faustian bargain, and are spending disposable income so as to drive the economy onto an anti-worker course.  We dearly deserve such an economic cattle prod insofar as we bungle our responsibility as consumers and are “unwittingly pushing” in a direction that hurts working neighbors and harms their families.  In other words, the jobs levy will coax each consumer to be more of the consumer citizen, and not exclusively the bargain hunter, i.e. to “make our personal purchases and investments a social choice as well as a personal one.”[119]

When the consumers' buying habits favor technologies that adversely impact the labor market and worsen unemployment, then those consumers need organizational help to shop in a manner that is socially and economically responsible. Moreover, each member of the consuming public needs to know, as Robert Reich puts it, that he or she is not an isolated individual shopping responsibly in “lonely forbearance.”[120]  Otherwise the mass of consumers will shop in such an irresponsible fashion collectively as to render consumer responsibility individually of little economic significance.  

 

Again the primary objective of the jobs levy is to promote the employment of well-paid American workers.  It is argued, however, that if a company decides against automation or outsourcing in order to avoid the jobs levy, then the firm's more labor intensive mode of production might be less competitive in selling to foreign markets.  This objection exaggerates the utility of economies of scale, which decline in importance wherever “the new economy” of supercapitalism prevails.[121]  IBM's loss of market share in the 1990s to smaller and more flexible firms demonstrated what experts on even “the old economy” had long known:

The advantages of internal economies of scale are limited to a certain range of output, since above a certain level of production, the diseconomies (inefficiencies) of scale offset the gains resulting from larger size.[122]

 Given the weakening benefits of economies of scale, diversification of certain industries into firms that specialize in exports, while other firms concentrate on domestic sales, allows for an economy every bit as competitive overall, if not more so, than an economy dominated by bigger firms that do both.  

Another concern sure to be expressed presupposes that every well-paid American makes the U.S. economy that much more disadvantaged when competing against imports produced by cheap foreign labor.  The relatively high wages of still more American workers will, according to this view, make it impossible to compete here at home not only with imports manufactured in third world countries, but also with U.S. owned production outsourced to third-world workers (that is imports produced by American owned firms operating abroad).  With trade advantages under, for example, NAFTA [North American Free Trade Agreement] foes of the jobs levy will argue that economies like India’s or China’s would be even better situated to capitalize on U.S. markets that feature a preference for labor intensive products.

On the contrary, however, under the constellation law (7:11) the labor half of the capital/labor mix would be calculated on the basis of payroll expenditures, not headcounts.  The higher the wages that firms pay, the more they will improve their capital/labor mix for jobs levy purposes.   

Nor would a firm here or overseas gain anything by keeping the payroll constant while reducing expenditures on capital maintenance.  Such technological downgrading would adversely affect the price of their goods and services when sold in the American marketplace, for two reasons:  First, it would reduce worker productivity because employees' tools would deteriorate over the long term.  Second, section 7:11 requires that the capital component of input be calculated at replacement value, not at a value depreciated for lack of maintenance.  As a consequence, letting capital stock deteriorate would do nothing to improve the firm's capital/labor mix for the purpose of calculating the jobs levy rate.

Thus, the jobs levy will be a boon to labor intensive firms who pay well.  The lower tax rate will afford them a competitive edge against companies whose well-paid workers are relatively few, and who therefore must incorporate a higher tax rate into the prices of their products.  Firms contemplating relocation abroad will have a disutility to weigh, i.e. reduced jobs levy tax credits for every reduction in wages vis-à-vis capital input.  This formula will introduce competitive downsides for job-flight to third world economies, and also for eliminating jobs by means of automation.

Conversely, levying the jobs levy at rates graduated downward for the firms with more employees who earn good pay is sure to let such companies offer better prices than would otherwise be economically possible for them.  Such firms will thereby offer positive monetary reinforcement to American consumers whose buying habits favor labor intensity.  Under this move away from amoral supercapitalism, even shoppers oblivious to social responsibility will suddenly find it more advantageous than previously to favor products in proportion as the production process – wherever located – relies less on robots or cheap overseas labor, and instead pays employees commensurate with the dignity of human work.


Macroeconomic Analysis

            Figures two and three below indicate the macroeconomic effects of section seven, and how they would differ from either fiscal or monetary demand-management approaches.

Figure 8.2

 

 

In figure 8.2 the horizontal axis represents aggregate supply which is equivalent to Gross Domestic Product (GDP) or national income (Y).  The vertical axis represents spending or aggregate demand.  The 45 degree bisector represents the familiar principle that economic equilibrium will occur where investment equals savings (I=S).[123]

Suppose the economy is in equilibrium at Y1 but Y2 represents full-employment — a situation not unlike the U.S. economy in the 1970's and 1980's, when the USA experienced a "prosperity unemployment" rate of six to seven percent or more.  The demand management route to full-employment is to increase GDP, shifting C+I+G (1) upward by increasing either investment (the monetary approach) or government spending or consumption (the fiscal approaches), or all of these until the GDP reaches C+I+G (2), which at "c" intersects with Y2, the full-employment level.[124]  Recent history has demonstrated how inflationary such approaches to the unemployment problem can be. 

By contrast, the structural approach would not seek to shift the C+I+G curve at all.  Instead by means of the jobs levy and the public works (PEP) the economy would be altered structurally toward labor intensive technologies; which would shift Y2 to the left.  Thus Y2 – the GNP necessary for full-employment – can be pushed leftward to coincide with Y1 by changing the capital/labor mix, in such a way as to get the same quantity of output because the labor force is fully employed and therefore doing more work.  The entire labor force would then be employed at "b" on the C+I+G (1) curve – the original GDP level.  The watchword is not to shift Y2 too far to the left, and lower GNP by sliding down the I=S line to the left of "b". 

To diagram the structural procedure another way, figure 8.3 represents a production function, with the vertical axis (Q) for aggregate output.  The horizontal axis (L) represents the aggregate labor input; L1 is less than full-employment, L2 is full-employment.  The "p" curves represent productive capacity at a given capital/labor mix; and a lower productivity from the last workers hired is indicated in the steeper slope of the curves to the left of L1

At L1 the p1 curve is more productive and yields more of Q than the more labor intensive p2 curve (which intersects at "c" instead of "b"); but at L2 the p2 curve intersects at "d" and corresponds to the output formerly achieved at L1 but now achieved, by the structural approach, at L2 or full-employment. 

Figure 8.3

 

 

On the other hand, getting to L2 by the expansionary demand management approach would mean monetary/fiscal measures to heat up the economy and move it up to Q2 via the p1 curve – an inflationary procedure.  The opposite error would be to carry the labor intensification too far, and shift labor force productivity not just from p1 to p2, but all the way down to p3, which would mean a decline in GNP to Q3 (where p3 intersects at "e" with full-employment).

Thus, the task of the President and Congress will be to identify the capital/labor mix where the labor force, fully employed, can produce the same output as did the more capital intensive labor force at less than full-employment.  In short, their objective will be to move from "b" to "d."

If in the future, structural unemployment becomes so massive that full-employment is out at Y3 (in figure 8.2) and the ceiling on the jobs levy halts the leftward shift of Y3 before it reaches Y1, then jobs for the remainder of the unemployed can be created by reducing the number of days per year that people work.  More workers would be providing the same number of man-hours as before the change, so economic output would theoretically be the same.  In practice, however, GNP would fall somewhat because the last workers hired tend to have a lower productivity, and this substandard productivity is not compensated for — there being no aggregate increase in man-hours through newly created jobs.  The tendency toward reduction in output is one reason why shortening the duration of work time should be a last resort, subordinate in priority to pushing more of the labor for up to full-time and maintaining aggregate output.

To summarize:  In dealing with people who suffer unemployment, laissez faire market forces are less like the benevolent hidden hand postulated by economist Adam Smith than the gloved hand of Dr. Strangelove.  Chronic unemployment requires a structural solution.  Likewise with underemployment.

Lest inflation rear its head, as with expansionary demand-management programs, the expenditures on the PEP program of public works will put back into the economy in government spending, no more than the dollar value taken from the economy in jobs levies.  But the spending is to be labor intensive, and the taxing levied against sectors that are capital intensive.  The impact has to shift production in a labor-using as opposed to a labor-saving direction, so that it will take more workers to produce the same GNP.  The required extra labor will come from the pool of unemployed workers.


Speculations on Kinds of Private Enterprise projects (PEP)

            The constellation law (section 7: 8-9) provides that all revenues from the jobs levy be applied to Private Enterprise Projects (PEP).  From the work performed through PEP the taxpayers have the right to expect visible and worthwhile returns.

Specifically, what kinds of activities might PEP usefully undertake?[125]  Such questions will ultimately be for Congress and the President to resolve on the basis of experience and need, and doubtless the choices will vary over time with changing community desires and requests.  Ten possibilities are considered below.

Lewis & Clark High today.

 Dedicated in 1912 by 
Teddy Roosevelt.

First, renovation of existing buildings and homes is a promising prospect for public works.  Human labor is at a premium, unlike the capital intensive process of wrecking old buildings and putting up new structures.  In renovation projects the necessity of spending relatively more money on wages will serve well the job making purpose of PEP.  Another advantage is that cultural and architectural landmarks are preserved rather than razed.  Moreover, the cost is often less than new construction alternatives.

For example at Lewis and Clark High in Spokane, WA (the site for my student teaching in 1981) this pre-First World War landmark was preserved at about 3% less than estimated for new construction scenarios.  Reopening in 2001, renovation exhibited numerous non-monetary advantages over the wrecking ball approach.

 

In addition to financial and educational benefits, the Lewis & Clark High School renovation has had a huge positive improvement impact on community character. The project triggered the renewal of a three-block core of Spokane’s downtown, elevating deteriorated, near-blighted buildings and streetscapes to one of the finest urban core settings in the city.[126]

 

Under section 7: 6-7, the states are to oversee and administer PEP at their own expense, and renovation projects have the potential to give states sufficient returns to cover the administrative costs.  To avoid the legal and equity problems that ensue when public works are applied to private property, the state might first purchase (with state funds) the properties suitable for renovation.  PEP moneys would then be applied to the restoration of these properties, whose enhanced value when resold will offset part of the cost to the state of overseeing the projects, or perhaps even yield the state a profit.

A second possibility for PEP projects is a program to improve the esthetic quality and durability of ordinary public properties, including sidewalks. On Boston's Beacon Hill, for instance, the walkways are predominantly brick, which makes for a more pleasant ambiance in the neighborhood than sidewalks of concrete or blacktop.  Over the long term a brick surface is far more durable; its flexibility survives expansions under the searing heat of summer and contractions during winter freezes.   And in terms of labor intensity, many more workers are required for bricklaying than blacktopping or pouring concrete from cement trucks.  Although the bricking is a slower process, it yields a more lasting and attractive product; and it has considerably more utility in generating jobs.

This kind of project is hardly new.  For example in 1990, New York City announced a two year project to repave a pair of lower Manhattan streets with cobblestones.  The plan was for workers to lay by hand the rectangular, granite stones known as Belgian block along historic sections of Greene and Mercer streets.[127]  The new element under the arch-amendment would be the tax graduated against capital intensive sectors in order to finance such projects.

A third possibility is to bury powerlines underground.  The elimination of poles and overhead wires would contribute both to esthetic quality and to urban safety.  The activity is fairly labor intensive.

A fourth option would be the construction of more bicycle and jogging paths.  Abandoned railway rightaways are ideal for bicycles because they are level, and they are relatively inexpensive to purchase for public ownership.

A fifth area of promise is the restoration of the railway roadbeds still in service.  Public funds have built and are now maintaining the highways utilized by trucking firms; so there would be no inequity in public expenditures on private railroad tracks, some of which, like the land-grant railways, were publicly subsidized in the first place.  The condition of the deteriorating tracks in this country is in glaring contrast to the high quality lines in Europe and Japan.  Reversing the decay of American tracks would save a national asset of both peacetime and wartime value.  Because the work is fairly labor intensive, and the task massive in scale, such projects would do much to reduce unemployment among unskilled workers.

A sixth potential area is solar energy.  It has been estimated that a program of solar energy would create some 5.4 to 6.6 times as many jobs as do nuclear programs.[128]  Recycling might be a seventh feasible field for PEP operations.

In addition to blue collar and unskilled manual laborers, the ranks of the unemployed include many white collar workers.  An eighth possible area for PEP would be research, records and writings.  The writers projects of the 1930's did much to preserve the cultural history of that period.  Unemployed writers can do likewise for our own turbulent age.

Public libraries offer a number of possibilities.  Translators could, for example, convert into Braille the books which are now inaccessible to the blind.  Foreign language translation might be useful.  Also contracts for the restoration of old or damaged library books would help revitalize the labor intensive bookbinding industry, which is so depressed in many towns and cities that one cannot get books rebound.

Another possibility involves computer access to library collections.  Before this can happen, books must be entered onto computer data banks – a formidable undertaking especially if the collection is extensive.  To put the Library of Congress on computer, not just the titles but the contents of the books themselves, would be a monumental and never ending task that alone would swallow up a great deal of white collar unemployment.  Volunteers, some of whom may be unemployed, do similar work already for Project Gutenberg and other private undertakings.  These non-profits might bid on PEP projects and put some of their volunteers on the payroll.

A ninth field of operations is totally labor intensive and would be helpful in reducing congestion on city streets.  Automated traffic lights do not cope well with traffic overloads.  Sometimes they worsen the backups.  We are not proposing to remove traffic signals nor abolish red lights, but rather to supersede the robots when traffic problems call for human flexibility and intelligence.  Stationing traffic directors at key intersections has worked well in other countries.  In urban America too, white-gloved traffic facilitators would ease both gridlock and unemployment.

Tenth, with dirt roads newly reopened under section 8:3 of the constellation law, we will need more patrols to deter irresponsible use of public lands.  This means more people on the ground and is therefore labor intensive.  Also America's highway system would be safer if PEP were to staff unpatrolled rest areas.  The way South Dakota staffs its freeway rest areas is worthy of investigation as a possible model.  Providing coffee and cookies to keep drivers alert would reduce accidents.  Attendants in rest stops could also double as night watchmen.  Having a staffer on patrol would make it safer for drivers to stop and rest after dark, or make use of the facilities.

The areas above are possibilities, proposed by way of speculation, which in no way preclude or take priority over other kinds of labor intensive public works that PEP could undertake with the jobs levy revenues.


The Superiority of the Contract System over Force Account

            Public works projects begin at a fork in the road.  There are two basic ways for the public sector to employ people: force account and the contract system.  Force account is the method which sets up a government agency to hire, supervise and pay workers directly.  This method of organizing industry was intrinsic to the command economies of the Soviet Empire until 1991.  It is also the method the United States used for WPA projects during the Great Depression.  Force account is included in the Humphrey-Hawkins bill passed by Congress in 1978.  There the official terminology is "government employment reservoir."[129]

By whatever name, putting the employed on government payrolls is widely perceived as being inferior to an efficiency driven system of competitive bids between private firms.  The latter system harnesses private enterprise through government contracts.  By increasing their own efficiency, corporations strive to outbid and out-perform their competitors and thereby win prized contracts.

The moon race of 1961-72 is a good example.  In 1958 Congress created the National Aeronautics and Space Administration.  NASA is a Federal agency that undertakes only a minority of its work by force account, i.e. with NASA employees.  The agency performs the bulk of its assignments by contracting with private firms.  In fiscal year 1971 – a year memorable for two manned lunar landings – of the dollar total of all NASA projects, private industry did over 80 percent.[130]  Meanwhile the Soviet space program relied on the command economy and force account.  Although the U.S. space effort had to overcome a substantial Russian headstart, the race was ultimately no contest.  American astronauts reached the moon's surface six times and even drove the lunar landscape in moon-rovers.  At this writing, a third of a century later, the Russians have yet to advance their cosmonauts beyond earth orbit.

The strength of the contract system was also evident in World War II.  German war production, as impressive as its objectives were sinister, adhered to the principle that government should provide specifications for weaponry while private industry designed and built the weapons.[131]  On the Allied side, via the famous runs to Murmansk and Archangel, the capitalistic West shipped military supplies produced by private industry to save the eastern front and the command economy of the USSR.

For generations prior to that conflict, our forefathers relied mainly on private industry.  They built the United States into the wealthiest nation in history, and the most technologically advanced.  Fulton, McCormick, Morse, Edison, Bell, the Wright brothers, and Ford, to mention a few leading lights of America’s rise to industrial greatness, were private entrepreneurs not government employees.

            During the Great Depression the Federal government supported a majority of its work projects under the force account system.  The prime Federal agency for this system was the Works Projects Administration (WPA).  WPA workers were federal employees receiving government paychecks.

To be sure, the WPA performed humanitarian service during the Depression by giving work and salary to millions of Americans who were in financial desperation.  It appears, however, that as compared to private industry, WPA was "notorious for lack of discipline and its tolerance of loafing,"[132] and that WPA did construction more slowly, and at substantially more cost per project than did private firms operating under government contracts.[133]

The 1930's did, however, see some public works conducted by contract through PWA, the Public Works Administration.  PWA’s best known project was Grand Coulee Dam on the Columbia River.  Throughout FDR's New Deal, PWA was the main Federal agency to employ the contract system for public works.[134]  In part because PWA spending amounted to less than a third of WPA's, and also perhaps because PWA employed the standard, non-controversial contract system, PWA received less media coverage than WPA.  Yet as indicated by the records of the 1939 and 1940 congressional hearings on public works programs, the PWA was substantially more efficient than WPA.[135]  There appears to have been a consensus of contemporary opinion that private industry was working by contract more economically and efficiently than WPA by force account.  Private industry's estimate was that it could do from 50 percent to 500 percent more work per dollar than WPA.[136] 

Nevertheless the Congress viewed the whole spectrum of work projects as strictly a short term proposition, to be terminated as soon as the Depression ended.  It was not project efficiency that took priority, but employment of workers quickly and in quantity.  Such priorities had to favor WPA and force account.

Unlike public works of the Depression era, section seven of the constellation law is not intended for short-term emergency efforts, but rather as a constitutional commitment to full-employment over the long-term.  The Great Depression experience indicates that force account enables government to employ a given quantity of workers more quickly and cheaply.  But quick and cheap is not a good long-term approach.

If permanent public works are to win credibility as a real improvement over welfare, then 21st century projects must achieve more than merely giving wages to the unemployed.  The aim of PEP is also to accomplish tasks heretofore neglected, while using the slack in the labor force as a resource.  In terms too of political demands, only the evident utility of the public works will satisfy the taxpayer who must foot the bill.  And without productive efficiency, public works would put too little back into the economy to avoid adverse effects on GDP (as per P3 in figure 8.3).

During the Great Depression, private industry paid higher wages; and so under PWA contracts, the man-hour costs were perhaps 50 percent higher than under WPA.[137]  Yet private industry's total output per man-hour was relatively so efficient that PWA could have the same project done by contract for substantially less – wage differentials included – than by WPA through force account.

Another political difficulty with WPA was that it put the government into competition with private industry, disrupting the conventional sectors of the economy.  Construction companies protested vehemently to Congress that WPA was taking away their business.[138]  The Federal agency, WPA, was doing by force account what the workers in private industry were clamoring to undertake.  Private firms insisted that their employees were reduced to underemployment or outright joblessness because the government had subsidized unfair competition.

Here the central issue was articulated in the 19th century by John Stuart Mill.  "A government cannot have too much of the kind of activity which does not impede, but aids and stimulates individual exertion and development.  The mischief begins when, instead of calling forth the activity and powers of individuals and bodies, it substitutes its own activity for theirs..., bids them stand aside and does their work instead of them."[139]

By combining depression era work projects with the contract system, however, PWA sponsored new work projects without intruding into private markets.  Private industry was enthusiastically supportive, because PWA projects were performed solely by private enterprise.  Far from competing with private business, PWA contracts were eagerly sought prizes above and beyond the privately generated market opportunities.

Likewise under the constellation law, section 7:8, the PEP program will mean more work and more business in the private sector, not less.  Private firms will compete among themselves for the lucrative extra business that PEP generates.

To sum up: private enterprise has proven its utility in the United States.  The system whereby the government lets out contracts to private industry is not perfect – the flawed mirror on the Hubble space telescope proved that, as has occasional bid rigging.[140]  Nonetheless, the contract system has proven better by far than force account when the purposes are (as also with PEP) 'to generate work for the workers, who accomplish useful public projects within U.S. borders.'


Keeping the Labor Market Competitive

            Another hotbed of resistance to WPA was from organized labor.  WPA was required to hire some 90 to 95 percent of its employees from the relief roles,[141] largely to the exclusion of union members.  Therefore labor unions much preferred PWA projects, which drew workers from the regular job market.  Lobbies for organized labor even attempted to obtain legislation excluding WPA from heavy industrial work, where the unions had been able to keep a corner on the jobs, and where the bulk of union members were employed.[142]

Under section 7:8 of the arch-amendment, government will not be placing particular citizens in particular jobs.  Unlike the WPA's direct recruitment of welfare recipients, PEP will be contracting with private firms who can hire who they want at the skill levels that fit their methods.  Exactly which workers go to which jobs, and which jobs are union shop, will be for private industry and labor to work out in normal competitive fashion within the conventional job market.  Rather than have social workers do the job placement according to political criteria, PEP will instead generate work for the unemployed by expanding the regular labor market, increasing the aggregate number of private sector jobs, and letting the economic interplay of supply and demand for skills determine each worker's location in the labor force.

Consider this analogy: adding several stories to an office building makes room for newcomers if original tenants move to more desirable floors and offices.  Likewise, whenever PEP expands an industry in which the work is desirable and the supply of labor is readily recruitable (i.e. elastic), then the firms in question will recruit climbers from less attractive jobs.  In turn, the vacating of jobs by climbers will make room for workers currently idle.[143]

When public service jobs are created by force account, the program leads to leapfrogging over equivalent ranks in the private labor market.  Force account tends to hinder ranking according to merit and performance, thereby undermining a competitive factor in capitalism that is conducive to efficiency.  By contrast, both the jobs levy and the PEP program will expand employment in private firms, where the market determines who gets what job.

     

Decentralization: Administration of PEP by the States

            To supervise PEP, section 7:3-4 allocates authority to Congress for macro policy, and to the States for micro policy.  A contention sometimes heard is that where the Federal government provides the funds, the Federal authorities should make the policy decisions – the old “he who pays the piper should call the tune.”  Under the constellation law it is we the taxpayers who will pay and who are supposed to call the tune through our representatives in Washington, D.C.  But for decisions in detail, we the people have even closer and hopefully more responsive representation available at the state level.  By virtue of political, economic and geographic proximity, the state governments are better situated to discern the local problems, allocate funds, and oversee the actual performance of projects.

If Congress were to find, as an hypothetical example, that Kentucky has critical unemployment, and that a number of the cities in the Bluegrass State have aging, dilapidated housing; then by setting the amount of PEP funds for renovation of housing in Kentucky, Congress would be deciding in broad outline, the size, nature, and location of the effort associated with the PEP funds.  Congress would be calling the overall tune, and with an eye to sponsoring labor intensive projects.  While section 7: 7 lets each State government play its part at the locality, Congress will still conduct the orchestra consisting of the 50 States.  Congress will determine the quantity and general type of PEP projects in each State, Kentucky included.

Authorizing the Kentucky legislature and governor to determine the cities and neighborhoods in which to locate renovation projects, will allot political responsibility according to awareness of the local economy and proximity to the problems.  To award contracts and supervise actual work on the project are also functions more properly State than Federal.  Longtime Kentuckians know more about the local housing conditions and about the character of private firms in the area, and about the residents who might have to relocate, than does the Congress or some Federal agency it delegates.  Moreover, the State government in Frankfort will have an interest in superintending the firms to see that they meet specifications and quality controls; not only because poorly done projects reflect on State officials politically, but also because in allotting future funds Congress will naturally tend to be more generous with those States that administer PEP effectively.

Clearly the States are in the best position to administer the details of public works within their borders.  The Federal government is, on the other hand, more aware of the overall problems of the nation and how particular localities fit into the national picture.  Hence, macro-authority will be conferred on Congress and micro-authority on the States.

As far as responsiveness to citizen wants and needs is concerned, a voter can go to the state capitol building and speak to his legislator, or testify at the appropriate committee hearing on the unemployment situation in his own occupation, or on the condition of housing in his neighborhood.  Also the hardship associated with relocation is likely to find a more sympathetic ear.  The citizen will speak with a great deal more leverage in the office of her legislator than she could muster in the nearest office of her Congressman, or the regional office of some Federal agency headquartered in Washington, D.C., 

Section 7:7 would delegate authority in such a way as to enhance the input of the people the projects effect most directly.  Because residents of the localities have to live with the finished project, they have an interest in imaginative and creative arrangements which upgrade rather than despoil the neighborhoods.  For the same reason – having to experience in their neighborhoods the finished projects – the local residents can provide the best perspective on subjective questions about quality verses quantity, like weighing variety, durability and beauty against immediate costs per unit.

Appreciation of excellence tends to increase with proximity to the user.  To the extent, then, that localities are more inclined to emphasize quality over quantity, decentralizing PEP decisions will promote high grade public works.

Moreover, decentralizing the burden of administrative costs will have the advantage of promoting smaller bureaucracies.  When as now, a State agency receives a block grant from the Federal government, it can subtract the administrative overhead from the general allocation.  Over time a rising ratio of overhead costs verses expenditures on the actual public works will lead to proportionately more nonproductive paper pushers.  But under section 7:7 of the constellation law, overhead costs of PEP will not be payable from the Federal funds.  Unable to dip into the PEP allocation, States will have to obtain administrative funds independently rather than withdrawing them from the Federal grant.  Thus, States will have a special budgetary incentive to limit the size of the administrative apparatus for PEP.

During the 1930's the various Federal public works programs were accompanied by lengthy lag times in approval of projects, due to extensive red tape in Federal agencies.[144]  However, the State agencies that will administer PEP will have incentives for smallness as explained above.  Because the smaller bureau has fewer personnel to shuffle papers, it is inclined to minimize the paperwork burden by reducing red tape.  Moreover, as a general rule, decentralization will yield less of the paralyzing, stifling bureaucracy than will the policy of centralizing all decision making in Washington, D.C. 

 

III. PLAUSIBLE OBJECTIONS CONSIDERED

 

Section Seven’s Approach Is Antigrowth

            The structural strategy for full-employment can be mischaracterized as anti-growth.  On the contrary, however, the structural approach to unemployment derives from recognition that while growth is often (though not always) desirable, exclusive reliance on growth has failed to extend the economic franchise, i.e. to expand participation rights in the economy.  Even as the aggregate gets more productive and wealthy, an increasing portion of the labor force is excluded from being productive participants in their country's economic life.[145]  As society increases in wealth it may provide expanded unemployment and welfare benefits to displaced workers, but these are poor substitutes for a job.  Growth is generally good, but obviously not good enough to single-handedly solve the chronic problems of unemployment and underemployment.  What is proposed here is not to eschew growth but to attack unemployment and underemployment by structural reforms that work independently of growth.

 

Outsourcing is good because the freer the trade, the more we prosper.

            Much of the cheerleading for outsourcing is an exercise in blind faith, bolstered by statements that lack any substance beyond the prestige of the speaker or writer.  For example, in his “Outsouce of Confusion,” Bruce Bartlett of National Review informs us, without any discernible evidence in logic or experience, that “when jobs go, we grow.”[146]  His claim is hard to reconcile with the previous year’s estimate by investment banking firm, Goldman Sachs, that "offshoring" accounted for 1 million of the 2.7 million manufacturing jobs lost from 2000-2003.[147]  An economy.com forecast that outsourcing of jobs to India would increase seven fold in five years did not seem to shake Bartlett’s faith in free trade.[148]  Unfazed, he recommended that jobless Americans hold fast to the hope that somehow better jobs will replace the ones lost.  Bartlett continues:

 

I can't really offer any comfort to unemployed programmers, but the process of outsourcing is good for both the U.S. and world economies. Any jobs saved in the short-run by restrictions on outsourcing will come at the expense of better jobs in the future that will not be created.[149]

 

            Great men of faith, like St. Thomas Aquinas, remind us that when in league with the intellect – i.e. when not incompatible with right reason – faith is a divine gift.  But blind faith might well be misleading precisely because it is blind.  The globalist faithful insist that the drawbacks of the new economy are temporary; that great and grievous suffering does not spring from flaws in the system, but from the fact that their experiment “has not been running for long enough, that wealth will ultimately trickle down to all.”[150] 

However, asks the Cambridge University professor of international business, Noreena Hertz, “who will look after capitalism’s initial losers while they are waiting for the benefits to trickle down?”  Furthermore, Hertz reminds us, when mega-corporations promise jobs and investment flows in return for public subsidies, they “often do not materialize, or if they do can swiftly vanish … or even be withdrawn.”[151]  Or as economist Harley Shaiken puts it,

 

What we're looking at today in terms of outsourcing – that is computer and service jobs – are precisely the jobs that were promised to previous generations of factory workers who were displaced. The notion was, "not to worry, you too will be in the computer industry."[152]

 

            Not surprisingly, the most blindly faithful to the supercapitalist economy, and to outsourcing, are the plutocrats and prospective millionaires/billionaires who hope to gain the most.  Indeed, the big gainers have been the executives of large American firms.  Since the end of the Not Quite Golden Age of the American economy in the 1970's, the income disparity between the average employee and his top boss increased nearly tenfold (see data above).  What was already a very considerable gap widened to a great chasm.  At the turn of the 21st century, the head of Microsoft, Bill Gates, enjoyed a personal wealth equal to the net worth of the bottom 50% of American families combined.[153]

            A concurrent development is the emergence of the USA as “the most unequal society in the industrialized West,” with the income differential between the top and bottom ten percent of Americans wider than at any time since the Great Depression.  Nearly 14 percent of the population, or 36.5 million Americans, now live in poverty, while the top one percent owns forty percent of the country’s wealth.[154]  During the years 1962-2001 – roughly the first four decades of the postmodernist revolution – the top one percent nearly doubled their ratio of wealth relative to the median American household, from 36 times the median net worth to 69 times.[155]

            From 1980-2002 the share of national income earned by the bottom 90% of American workers fell, while the hyper-rich began to pull away from even the merely rich.[156]  The dangers inherent in the increasing concentration of wealth at the top are undesirable from the standpoint of a democratic society, as Alan Greenspan has warned.[157]  

            The benefactors of widening inequality in the economy have also enhanced their political power through the consolidation of plutocracy.  It is noteworthy, moreover, that even some members of the economic elite are warning that an economy led by meritocracy is passing away.  A relevant fact is that economic mobility, moving from one income group to another, has ceased increasing in the American economy.  Under supercapitalism, America is becoming a country beholden to the rich and the very rich.[158]

At the lower end of the economic spectrum, the last three decades have seen a 28 percent drop in entry-level wages in real dollars for male, high school graduates.  Unskilled workers across the board have experienced declines in real pay.  A fifth of American workers bring home earnings below the official poverty level.[159]  Simultaneous trends like the seven fold surge in the postmodern era prison population are no coincidence.  Studies by Bruce Western of Harvard show how mass incarceration is “an important feature of a uniquely American system of social inequality.”[159a]  While the winners get palatial homes and beautiful automobiles, American supercapitalism leaves millions of losers (including a disproportionate number of war veterans) to be homeless or go to prison.

Outsourcing supporter, President George W. Bush, once jokingly described his political base as “the haves and the have-mores.”[160]  Unfortunately, rich and very rich Americans are not kidding about using outsourcing of jobs as a way to amass yet more wealth, often over the dashed hopes and anguish of working Americans.  Their victims, the men and women who look to a job here at home for their livelihood, see the idea of amassing wealth by shipping one’s precious job overseas as cruel deception.  It is neither funny nor friendly, given the imperatives of personal and family survival –considerations which the rich and the very rich (like the Bush family) don’t relate to personally.

            For the working poor, the unemployed, the homeless, and other victims of outsourcing, the “when jobs go, we grow” maxim is a hallucination based on blind faith in the trickle-down effect of growth.  In practice, laissez faire economic growth has operated less like trickle down to the worker than pass across to the investor.  U.S. economic expansion during the last two decades of the 20th century, saw most of the gains go to the top fifth of American families.[161]

Trickle-down indeed!  Maybe blind faith is sort of like invincible optimism.  In the case of outsourcing we are told not to worry about the degree to which our jobs are being sucked away to distant lands.  Be patient, they reassure us, and stay optimistic that off-shoring to foreign labor markets, where the wage-rate is a fraction of America’s minimum wage, is sure to yield well-paying jobs for the average American.

“This faith,” William Greider points out, “has attained almost religious certitude, at least among some governing elites….”[162]

 

Free-market theory is not really a science so much as a value-laden form of prophecy, so it is not subject to definitive proofs of right or wrong except in those cataclysmic moments when reality provides the crushing refutation.[163]   [William Greider, One World, Ready or Not: The Manic Logic of Global Capitalism]

 

            If outsourcing is so promising, then why are globalist money brokers like the World Bank and the International Monetary Fund dictating terms that erode labor institutions, and that have “smashed” union power as Professor Hertz puts it?[164]  Not to be excessively alarmist, but organized labor might be one of our last lines of defense against a new world order that features “democracy overwhelmed” by supercapitalism,[164a] and an underclass trapped in neo-serfdom. 

Already, transnational corporations are challenging national sovereignty and penetrating the boundaries between business and elected governments.  In the United States, boards of directors and the management of mega-corporations do not get elected by anything resembling a popular constituency.  As their power waxes representative government wanes.  Already corporate giants are becoming so brazen as to lecture public officials, informing elected representatives that they, the global corporations, “‘are now under the control of the financial markets and not, any longer, of national debates.’”[165]

Another evil that springs from outsourcing is overwork.  Our plutocratic overlords justify the creation of Homo economicus as sheer necessity if we are to stay competitive in the global marketplace.  Scorned is the notion that “Gross National Happiness is more important than Gross National Product.”  The Japanese economy, which is all about foreign trade, causes people to work themselves literally to death, by suicide or otherwise.  The Japanese have even given this economic tragedy a word, karoshi

Americans are now more overworked than even the Japanese – or any other population in the industrialized world.[166]  The spin-off effects of longer and longer hours on the job are multifarious:

 

 

            One judges the tree by its fruit, and the tree of the postmodernist economy, and of outsourcing in particular, is proving bitter except for the upper strata.  We the people are entitled to decide our socio-economic future, and we dare not endure a continuing string of rancid economic harvests on the promise that outsourcing’s yield will mysteriously morph into something sweet.

 

Work Is Already Available

            One hears sometimes that creating jobs in unnecessary. “Just look at all the want ads in the newspaper.”  Or, “anybody can find a job who really seeks one.”  These sound-bite claims contain what is known as the fallacy of composition – the illogical assumption that what is true for the part must be true for the whole.[168]  Take the distinction between thread and fabric, for example.  Automatically to equate the characteristics of cloth with its component threads overlooks the fact that not only do threads differ from one another, but woven together the threads have collective behavior patterns that are distinctive.  For example, one thread will pass through the eye of a needle but the cloth will not.

Likewise, one laid-off worker might find a job after a diligent search, but in recessions and depressions, or with rising structural unemployment, the jobless Americans as a group cannot all find work no matter how perseveringly they search.  As Stuart Chase notes, "to hold as some do that any worthy man can secure a job if he only applies himself diligently enough is to be guilty of a total, and almost criminal misconception of the course of the Industrial Revolution."[169]

Before the Industrial Revolution the conviction had prevailed for centuries that gainful employment was available to anyone willing to work.  Almost a consensus prevailed well into the 19th century that involuntary unemployment was impossible for the able-bodied.  By the 1870's, however, bitter experience had convinced many observers otherwise, and the severe economic depression of 1893-1897 made it obvious to almost everyone that the condition of the American economy itself could produce high levels of involuntary joblessness. 

Theorists who defended the economic status quo abandoned the old line that there was plenty of work; they argued instead that joblessness was a necessary evil under capitalism, the pool of unemployed serving as a valuable industrial reserve which industry could muster into service during economic booms.[170]

Historically, the examples of postwar Japan and West Germany give the lie to the supposed necessity of a reserve army of unemployed workers.  For decades after their postwar economic miracles, Japanese and W. German unemployment rates rarely exceeded two percent even as their capitalist economy thrived.  In W. Germany the rate averaged one percent.[171]  Moreover, while American firms had few qualms about layoffs, large firms in Japan regarded job stability for their employees as a quasi-family duty, even during troughs in the economic cycle.[172] 

Under supercapitalism, however, full-employment has been redefined to allow for unemployment rates of five to six percent or even higher.  And even in Japan, most corporations have abandoned their commitment to life-time employment.[172a] 

 

Unemployment Promotes Labor Force Mobility

            A nuance on the industrial reserve argument is that unemployment promotes the mobility of the labor force.  But surely full-employment too would have utility, for it would further the flexibility of the labor force by diminishing the fear that promotes featherbedding.  A tighter labor market means plentiful jobs, less reason for clinging to obsolete jobs as a means of survival, and less fear by workers of transfers to jobs or towns where their skills may be put to better use.[173]  With more jobs available, there will be less fear of economic change.  Fear and flexibility can be inversely proportional.

In a full-employment economy labor unions will find it easier to secure their members places that are economically useful, rather than fighting for featherbedding arrangements that keep the membership in positions that represent a conspicuous waste of the human resource.  Until 1964, for example, featherbedding to keep railway firemen on diesel locomotives was imposed by means of union strike threats in 1937, and of an actual strike in 1950 against four major rail lines.[174]  In a special message to Congress in 1963 on the railroad labor dispute, President John F. Kennedy singled out "general unemployment" (it was then 5.6%) for having created "fear and resentment against the very kind of modernization and change upon which our economic progress must in the long run depend."[175]

 

Unemployment Facilitates Employee Discipline

            A nother plausible objection is that full-employment would diminish management's leverage on the worker and reduce job discipline.  Quitting a job would be too easy an option for an employee, and dismissal too minimal a threat.  According to this view increased mobility and independence for workers, leads to lower productivity on the job.  Thus, sustained full-employment has a deleterious effect on the economy, while the threat of unemployment disciplines labor, and fearful workers are more productive..[176]  As the economist Michal Kalecki has written,

Under a regime of permanent full-employment, 'the sack' would cease to play its role as a disciplinary measure.  The social position of the boss would be undermined and the self assurance and class consciousness of the working class would grow....[Business leaders’] class instinct tells them that lasting full-employment is unsound from their point of view and that unemployment is an integral part of the normal capitalist system.[177]

The foregoing argument, which has been called the "equity-efficiency tradeoff,"[178] is contrary, however, to the American experience.  Americans have long been a highly productive people, building a great industrial empire from out of a wilderness, notwithstanding that scarcity of labor rather than unemployment was the norm for more than two centuries after the landings at Jamestown and Plymouth.[179]  Also the economic miracles in West Germany and Japan took place over decades when productivity was high and when labor was scarce.  Efficiency and equity coexisted.

Violations of equity create resentment and malaise, factors that never show up as fluctuations on the index of leading economic indicators.  If morbid states of mind are widespread in society the result can be very disruptive to the economy.  Pathologies in the workplace necessitate all kinds of checks and balances to prevent workers from cheating or engaging in other unproductive and demoralizing activities on the job.  As a result employees must be hired to monitor other employees, to prevent things from going wrong, like passive resistance, about which a healthy society would be unconcerned.  Bureaucratic gridlock is a case in point of how the solution can be worse than the malady.  In the U.S. Postal Service, inspectors with guns walk through the workplace, and one-way windows are a commonplace means of monitoring workers. 

A society where honesty is the norm, and such demoralizing measures are unnecessary, would be less bureaucratic and more efficient economically.  The equity implicit in full-employment will surely provide economic payoffs associated with good feeling and high morale factors not so easy to isolate empirically, but no less real.

Fear of becoming unemployed is not the sole motive for doing one's best on the job.  The satisfaction of a job well done is a powerful motivator, especially for people bolstered by confidence, rather than deflated and demeaned by the omnipresent threat of unemployment. 

Promotions and raises are also incentives that function nicely without the fear of becoming jobless.  Normally, advancement is contingent on good references from former employers.  Also, advancement is often related to seniority with a firm, and being fired or resigning without good cause can mean lower wages or rank in the next job.  Indeed, a poor recommendation from a former boss on the basis of one's excessive independence from discipline could severely setback a career.  Clearly, full-employment would not deprive management of all leverage on the worker.

In addition, if full-employment is coupled with reductions in the availability of welfare, then a virtual quid pro quo would result in terms of management's leverage.  At present if a worker is laid-off for low productivity he may have public assistance to fall back on.  Downgrading the welfare option would represent a tradeoff for the worker's upgraded options in the full-employment economy.  And full-employment will surely strengthen the impetus for welfare reform.

Economic productivity is also related to employee morale.  In Japan the paternalistic relationship between firms and their employees used to create a sense of belonging; it included a kind of élan and loyalty exhibited by workers toward their company.  The callousness and cutthroat tactics of American management in laying off workers without any considerations beyond maximization of profits[180] is deemed realism by the supercapitalists, but really it lowers morale and with it productivity.  When the economy is for the worker and not just the worker for the economy, morale and productivity enjoy parallel increases.  The commitment of many Japanese firms to the job security of their employees was a major contributing factor to the hardworking labor force that made Japan a great economic power, second only to the U.S.

 

The earlier reference to welfare reform warrants elaboration in terms of the drag on productivity in the U.S. economy.  Let us emphasize here that as long as there are too few jobs, it would neither be moral nor expedient for a wealthy nation to deprive needy citizens of public assistance.[181]  But when enough jobs do become available in a full-employment economy – jobs sufficiently above minimum wage to make the living wage a reality again – and when earning one's livelihood is a real and ready option, then it becomes ethically sound to cut back on welfare for adults of sound mind and body.  Fewer opportunities to freeload would discourage indolence where it exists, and would reinforce the healthy desire to pitch in and make one's contribution to the national economy.  Also to the extent that welfare has an eroding effect upon the work ethic, it has a depressing long term influence on the human resource that underpins the economy.[182]  After and only after making jobs sufficiently plentiful, ought we administer a collective dose of tough love by making it more painful to ignore the Biblical injunctions about earning one's own bread.[183]

 

Creating Jobs Costs Too Much

            A nother point of objection is that public works will cost a lot of money.  True enough!  It will not be cheap.  But America's gold, silver, paper money, coin, stocks, bank deposits, etc. are not the nation's truest wealth.  The real economic resources of America consist in human know-how, energy, discipline and desire, with factories, machines, farms and natural resources, in turning out and distributing goods and services.[184]  To leave heads and hands unemployed is to waste real wealth.[185]  It is more wasteful than if bars of gold from Fort Knox were rocketed into the face of the sun.  As the poet Shelley put it,

 

There is no real wealth but the labor of men.  Were the mountains of gold and the valleys of silver the world would not be one grain of corn the richer; no one comfort would be added to the human race.

 

On the subject of human capital an economics textbook published at the end of the not quite golden age put it quite simply, each person is wealth.[186]  Indeed what could be more wasteful of such economic wealth than having people producing absolutely nothing for the economy while collecting public assistance money ?[187]  Moreover, when it comes to a decision between money and men, Abraham Lincoln put the choice as pointedly for his generation as for ours:

 

We are for both the man and the dollar;
but if we must choose between them,
we put the man above the dollar.
[188]

 

Today the restoration of full-employment is not only a human priority but an economic bargain.  The increased number of wage earners will spread the tax burden to a wider base.  Furthermore, section 7:5 categorizes the PEP program as domestic, so that even if the attack on involuntary unemployment costs annually as many billions of dollars as, say, a year of war in Iraq cost, still the dollars spent in domestic work projects will circulate right back into the American economy.  For the most part, the U.S. war capital disappeared into Middle East markets, was blown up by the enemy, or was invested in problematical enterprises.  By contrast, PEP spending will stay in this country in the form of goods produced for use here, services performed here, salaries paid to Americans who re-spend the bulk of their incomes here. 

Another aspect of cost is that, in the short run, the structural means of restoring the jobless to working status will reduce somewhat the purchasing power of the workers who were employed all along.  (See above, figures 8:2 & 8:3)  Suppose for instance, that without lowering or raising GDP, jobless Americans are enabled to obtain work at a prevailing wage that exceeds what they made on public assistance.  Suppose further that these formerly unemployed people constitute seven percent of the work force.  Their rise in spending power will have to come from somewhere, and since the structural measures in the constellation law do not increase GDP, the additional income will have to be paid for by the remaining 93 percent of the working population.[189]  In the long run, if GDP continues to increase as historically it has in this country, then the income of the 93 percent will rebound.  But, yes, in the short run the structural solution to unemployment will entail some material sacrifice by the 93 percent.  To repeat, the country's national income as a whole will not drop; but there will be a redistribution to the extent that the formerly unemployed move closer to the average share.

Americans have a long-standing reputation overseas for their generosity.  After WW II, one out of every seven federal tax dollars went to foreign countries under the Marshall Plan.  Surely a generous people will give whatever portion of their plenty proves necessary to restore jobs and self-reliance to their unemployed neighbors and fellow citizens.  After all, jobless Americans are much closer to us than needy foreigners.  Moreover, this short term material sacrifice will have social compensations like less crime; also moral compensations in terms of the nation's spiritual health; and even the material compensation of smaller welfare rolls.

The world being what it is, some portion of the 93 percent will balk at reduction of their economic affluence for any purpose whatsoever.  But the selfishness that will leave fellow citizens and neighbors trapped in the torment of unemployment — while explaining away their plight and justifying our course by reference to an industrial reserve, or to their laziness, or to an unemployable underclass — is not the kind of impulse that we are wise to embrace as national policy.

 

Accounting Questions

            The idea of a jobs levy tax at the retail level also raises accounting questions.  Until the computer age, calculating a variable tax rate for each product would have been a cause of migraines for retailers, maybe even driving some of them out of business.  Fortunately this is one headache where the latest technology will spare us a lot of aspirin.  Already there is a plenitude of published materials, computerized tax programs, and consultant services available to taxpayers.  If the constellation law requires retail firms to attach a special sales tax (the jobs levy) to their products, would not the government and/or the market supply the lists and the services to make such calculations?  Are such calculations possible?  Easily so, given today’s computer technology.

Nonetheless it is argued that accounting and compliance problems may be exacerbated in the case of capital intensive imports.  Foreign firms selling products in the USA would have a strong incentive to cheat in computing their capital-labor ratios.

Admittedly as regards corporate deception the overseas factor presents detection difficulties.  The opportunities for fraud would be lessened, however, by this provision [section 7:10]: the tax rate for the jobs levy shall be uniform for all brands or trademarks of a particular product category – imports as well as American makes – which are sold in this country.  Even the most chameleon-like corporation will find it hard to claim the rate for wooden boats when the product they sell in U.S. markets is mass produced automobiles.  

The more challenging deceit to detect would be in claiming jobs levy credits (section 7:11) based on interbrand comparisons.  Even here, however, competing firms would have a strong incentive to look out for and to report anything that hints at cheating by a competitor.

When data is suspicious, the agency that Congress assigns jurisdiction over the jobs levy could temporarily withhold tax credits, pending an investigation.  In the case of dubious applications the agency could, as Congress provides by law, deny tax credits.  Additional arrows in the agency's quiver might include fines to deter corporate deception.

Moreover, interbrand comparisons would be calculated relative to the one benchmark brand whose capital-labor ratios are most practical for the government to verify.  Such an operating standard of comparison in each particular product category would simplify calculations for everyone concerned, including the agency issuing the tax credits.

It runs against the instincts of many conservatives to admit that anything good can come from federal agencies, especially by expanding their authority and power over the economy.  But sometimes you can save money and reduce federal intrusion by bringing in little sister and ousting big brother.  The little sister here would be the jobs levy collection agency; the big brother is the massive welfare apparatus that hangs like a ball and chain around the ankle of American enterprise.  By moving the economy to full-employment, much of the raison d’être for the welfare state's gargantuan size will pass away.

 

 

           Full Employment is Inflationary 

            Uncertainty continues in the economics profession about unemployment and its relationship to the value of the dollar.  Many economists have subscribed to the Phillips curve or tradeoff theory, according to which a drop in unemployment means a rise in inflationary pressures, and vice versa.[190]  Other economists say that in light of stagflation, with simultaneously rising rates of inflation and unemployment, the Phillips relationship has failed the test of historical experience.[192]

            Robert Reich takes  it a step further, arguing that hourly wage earners no longer have the power to bargain effectively for more pay; and that the cutthroat competition that characterizes supercapitalism renders the raising of prices, as a way to pass wage inflation along to consumers, an artifact of the old economy.  Consequently, longtime Federal Reserve chairman, Alan Greenspan, was among the first to recognize that inflation remains low even when the economy heats up.[194]

            In an email question about his 2007 book, Supercapitalism, I asked Dr. Reich whether under supercapitalism Adam Smith's axiom still holds true, namely that when labor is scarce, firms bid against each other for the limited supply of labor, and thus drive wages higher.[196]  I asked also if by availing corporations of plentiful workers outside the U.S., outsourcing is preventing the Phillips relationship from causing a surge in wages in much the same fashion as a massive reserve army of unemployed Americans?  Reich responded succinctly as follows:

Globalization and technological displacement have both contributed to
the decline and/or stagnation of the wages of routine workers.
[198]

If outsourcing and automation are the prime culprits for wages going nowhere within the framework of global supercapitalism, then the plethora of older estimates based on the Phillips curve are reliable only for the Not Quite Golden Age.  Those calculations claimed that the stability of prices in America was dependant upon having several million workers idle.  In other words the old economy needed unemployment the way an engine needs coolant.  Millions of citizens on the lower rungs of the economic ladder had to be sacrificed, in a kind of economic triage, to keep the economy from overheating and inflation from devaluing the currency.[200]

Back in 1953 inflation was low and unemployment was down to 2.9 percent, raising questions even then about the validity of the Phillips relationship.  By the mid-1950's the introduction of automation had begun in earnest.[202]  Fitoussi and Georgescu-Roegen present evidence that by 1980 the bulk of unemployment in Western economies was of the structural type,[204] unrelated to downturns in economic growth. 

Whether or not the Phillips' formulas still apply, or indeed were ever as ironclad as claimed, the pertinent factor for us now is how the structural reforms, operating independently of economic growth, will impact the stability of the dollar.  We may err on the side of caution and still safely assert that insofar as the attack upon structural unemployment keeps its focus on structural means, the solution to unemployment will be non-expansionary and therefore non-inflationary.  In other words, if the structural means to full-employment change neither aggregate output nor national income, then the economy will be in little danger of overheating and driving up prices.  In the 21st century, the risk is slight that wages and prices will spiral out of control, because economies can run faster with lower levels of unemployment.[206] 

           

IV. FINAL REFLECTIONS

            The Brenner study cited early in this chapter shows clearly the debilitating effect which joblessness has upon individual citizens.  Our republic is no better than the individuals who compose it; the tumor of unemployment has a malignant effect on the whole country as well as upon the jobless citizen and his family.  Theodore Roosevelt went so far as to say, the idle man is a curse to the community, and cannot be a good citizen.[215]

In our view, it is the system which is a curse to the breadwinner if, through no failure in effort, he or she cannot adequately support self and family.  The postmodern economic system of supercapitalism has produced the highest levels of prosperity unemployment in U.S. history.  After the war economy of the Vietnam era, the number of Americans receiving unemployment compensation has fluctuated between five and eleven million, plus some millions more of hidden unemployed, and still more millions of underemployed and working poor. Among the jobs that do exist, a declining percentage pay a living wage, which is enough to support a family.

Involuntary idleness of supercapitalist dimensions works against the health and civic character of society in several ways.  The victims of unemployment suffer increasingly from lack of purpose and loss of self-esteem.  Diversions like alcohol or drug abuse and other forms of dissipation are particularly enticing to people who are chronically idle.  Not only is the individual left demoralized and bored, but his energies are lost to the economy.

To meet this internal challenge to the culture and to our economy, we would not exchange the capitalist system for another like socialism but rather exorcise the demon from the existing economic system.  The general strategy is to steer a course that eschews the equity / efficiency tradeoff, i.e. that eludes the Scylla of economic inefficiency while escaping the Charybdis of chronic unemployment.  The latter is a maelstrom born of the Industrial Revolution that has sporadically engulfed workers during cyclical economic downturns.  Since the 1950s when Norbert Wiener coined the phrase "second industrial revolution" to describe the onset of automation,[216] unemployment has inexorably imbedded itself into the entire range of the economic cycle – at the crests as well as the troughs.  Now, thanks to outsourcing, the problem has redoubled from a serious predicament to a crisis.

To escape the clutches of unemployment will require collective intervention by the state for purposes that are both economic and humane.  To enforce full-employment is humane because the alternative is dreadfully cruel – the deleterious effects and bitterness of life associated with the sort of economic structure that excludes millions of Americans who want to work.

Promoting full-employment also means economic gain, because the welfare system converts joblessness into a fiscal deadweight.  The unemployed remain consumers in a welfare state, but since they add nil to production they lower productivity for the labor force collectively.  Putting this deadweight back to work as an active part of the labor force – even if for a time its productivity is substandard – will let the formerly unemployed begin carrying their own weight. 

Former welfare recipients thus employed will offer a macro-economic compensation for productivity losses on the micro-economic level.  The key here is to look at productivity in relation to the labor force as a whole, both employed and unemployed, rather than make policy decisions solely on the basis of the productivity exhibited by those fortunate enough to have a job.  (See above, figures 8.2 and 8.3)

 

The political avenues for such a policy are delineated in the constellation law.  Section seven sets forth a system for the President and the Congress to shift both public and private spending toward labor intensive sectors of the economy.  Operating via the contract system, PEP would undertake labor intensive projects.  PEP would avoid capital intensive blacktopping, for example, preferring projects like bricklaying or various other types of public works (as suggested above) that employ humans rather than robots.  While PEP directs public spending into labor intensive public works, the jobs levy at its graduated rates will meanwhile encourage more consumer spending in the labor intensive sectors of the marketplace.  This dual system will not stimulate economic growth but rather restructure the economy, so as to insure that capitalism’s power to create wealth is balanced against the human and spiritual necessities for a healthy society.

The scale of this new economic approach would be limited by the source of its revenue — a jobs levy graduated up to the maximum of ten percent on retail price.  The procedures in section seven are not economically all embracing.[217]  God willing they will, however, dovetail the dual forces of consumption patterns and public works, so as to move the economy to, or at least much closer to sustained full-employment.  If full-employment is still beyond reach, then under section 7:2 Congress can resort to reductions in the workweek, workmonth or workyear, in order to convert what unemployment remains into more leisure time for all.  Perhaps we could start with vacations equivalent to the summer and winter vacations enjoyed by many European workers.[218]

 

It may seem that such provisions could be enacted as statute law, unlike other sections of the constellation law, where constitutional issues are obvious — like basic structural changes in the government, and modifications in the church-state relationship.  Economics, however, is not necessarily a constitutional matter.   Then why, it will be asked, should the country have a constitutional Amendment on behalf of full-employment rather than a simple act of Congress?

A general answer involves the fact that the Constitution was written prior to the Industrial Revolution in America.  This epochal economic transformation beginning in the early 19th century, and continuing throughout the century, reduced the relative strength of labor vis-à-vis the power of capital and capitalists.  Also the Industrial Revolution made workers dependent for a livelihood on people whom they would never see, and upon forces beyond their control as citizens.  Sudden cycles of unemployment disproved the assumption held for centuries that the economy would in its natural course produce enough jobs to go around.[219]  So dramatic was the Industrial Revolution's impact that the citizen/worker is now entitled to fresh constitutional guarantees suitable for the drastically new situation.

Add to this the intent to establish a new civil right: the able bodied citizen's right to an opportunity to earn his or her living.  A job is to the economic sphere what suffrage is to the political — participation in the economy by the worker, as in the body politic by the voter.  While clamoring obsessively for the expansion of civil and human rights (including some dubious or even demented claims), America was meanwhile lagging well behind Germany and other European countries in developing economic participation rights.[220]

At present government civil-service workers, and tenured faculty of universities enjoy a virtual certainty of participation in their occupational sectors of the economy.  Extending some kind of assurance to the rest of the labor force would be an expansion of the economic franchise.[221]  Like other civil rights, extensions of suffrage are not unworthy of constitutional guarantees, as evidenced by Amendments 15, 18, 24, and 26, which expanded the electorate to blacks, women, the poor and the young.

Another reason for constitutional as opposed to statutory changes is the vulnerability of ordinary legislation to the legal obstacles and pitfalls that corporate attorneys might interpose.  Against mere statute law they might claim that it is unconstitutionally discriminatory to tax private production methods like automation.  Also vulnerable to lawsuits would be any attempt by Congress to reduce the workweek in the private sector.  Attorneys for vested interests could immeasurably complicate and compound the practical problems associated with a full-employment policy.  Unless an explicit constitutional corridor exists in which general policy is virtually invulnerable to litigations, then jurisprudential monkey wrenches will surely be dropped into the machinery of the jobs program, making the political approach unworkable.  Such tactics have impeded the progress of labor since the days of Samuel Gompers.[222]

If the arch-amendment is ratified, then so long as government pursues avenues delineated in section seven, the jobs policy will be constitutionally bulletproof.  Not even the most capable of corporate lawyers is likely to get far with a claim that the U.S. Constitution is unconstitutional.

Another reason for an Amendment to the Constitution is that statutory formulas are subject to deletion or dilution whenever Congress enacts a superseding statute.  In mandating full-employment, a statute would be as binding as a rope of sand — effective only as long as various special interests were willing, or a majority of Congressmen were altruistic.  The unemployed are at the bottom of the socioeconomic ladder; they are politically mute, demoralized, disorganized and short on funds.  Their political leverage alone would never hold many lawmakers to their cause.  Moreover, a member of Congress has an affluent lifestyle that affords little whereby to identify personally with the anguish that wage earners experience who cannot find work.  To anyone near the top of the economic pyramid (at last count congressional salaries were $165,200 per year) the wolf at the door has far less immediacy or reality than for workers at the lower echelons.

This is a perennial phenomenon with elites. To illustrate how the problem is not so much a matter of the head as of the heart, i.e. one’s desires and empathies, consider the case of Seattle in early 2000.  My daughter and I returned from Europe after becoming accustomed to excellent subways, trains, and trolleys, and landed at Sea-Tac airport some 15 miles south of Seattle.  As we rode a crowded, bouncing bus – not a rail system but Metro bus #194 – along the roadway into the city center, finally into tunnels floored with tracks adaptable to rapid transit, but filled instead with more buses, we reflected upon the priorities of the city.  Only a month previously the Kingdome (a multipurpose sports facility) was demolished while still unpaid for, to make room for a more upscale baseball field for the Seattle Mariners, and across the street a second stadium for the Seattle Seahawks football team.  Never mind that the Kingdom seated 55,000 comfortably (both football and baseball in one stadium) and protected spectators from the rains that keep the Puget Sound region green.  Never mind the incongruity of the extravagance of two new stadiums before the old one was paid for, even as the government expressed intent to save money by cutting back on ferry service across Puget Sound.  The failure to prioritize mass transit over a new stadium was not so much because the elites who run Seattle have their heads screwed on wrong (as is sometimes asserted), but rather that their hearts were in strong sympathy with the few and the very few, to borrow Disraeli’s old phrase.  Inherent in what might be called a preferential option for the elite is a carelessness or disregard for those classes for whom public transit is a necessity.

Members too of the economics profession are far removed in their personal situation, and in their socioeconomic status, from the experience of the average unemployed or underemployed worker.  As upper class scholars of the past have sometimes exuded a superb sneer in dismissing the ordinary mass of mankind,[223] so the economists in their ranks sometimes let their sense of class infuse their economic reasoning with a condescending air.  In his History of Unemployment, John A. Garraty notes that such economics superstars as Adam Smith, Thomas Malthus, and David Ricardo paid little heed to the problem of unemployment.[224]  The missing motive in their lives was heart-felt experience with the tragedy and torment that unemployment inflicts on ordinary citizens.  Postmodernist economists too enjoy a privileged situation; the most influential of them are tenured faculty, secure in their posts at prestigious universities, and receiving upper-middle class incomes or better.

In short, many of the theoreticians and politicians who bemoan the plight of the poor, have never been on speaking terms with any poor people.  If forced to make a choice, their visceral inclination will be to oppose intervention on behalf of the unemployed and underemployed, meanwhile defending the inviolability of the marketplace as per automation and outsourcing.[225]

 

The economists in question,
when they are implored by the
starving poor for bread,
tender them a stone.

Matthew Carey[226]

 

This instinct carries over to the politicians and plutocrats who cite academic studies to support their policies.  In the late 18th and early 19th century, government and industry leaders used economists like Thomas Malthus and David Ricardo to free them from any obligation to help the impoverished or the cause of labor.  Malthus and his iron law of population held that population increases at a geometric ratio, whereas food supply increases only arithmetically. It followed plausibly that public intervention to feed the poor would only exacerbate the problem of poverty by keeping alive more and more people to consume proportionately less food.  Malthus thus gave politicians an out, a plausible rationale for opposing the minimum wage or any other form of regulation disagreeable to the moneyed interests.

Similarly, Ricardo's iron law of wages provided a pretext for corporate employers to shirk the burden of fairness in terms of pay.  It was Ricardo's theory that the economy set a natural wage which was at the subsistence level for a worker and his dependents.  Where wages exceeded the subsistence level the supply of labor would soon increase, and the higher supply would then force wages back down to the natural rate.  Paying workers better was therefore seen as futile, like Sisyphus pushing his stone.  Poverty level wages were thereby justified as a concession to a cruel but inescapable economic reality.[227]

Likewise during the postmodernist era, economists citing the Phillips curve bolstered government's reneging on the pledge implicit in the Humphrey-Hawkins full-employment act.  Today supercapitalist public relations departments offer lucrative consulting contracts to economists who serve the corporate plutocracy as hired guns.[227a]  Thus a confluence of contrived economic theory and economic interest helps keep well paying jobs scarce, and reduces workers to a weak bargaining position vis-à-vis the relative few who write the paychecks.

Ideas are, in truth, forces, and the postmodern descendants of Ricardo and Malthus provide the force and power of ideology whereby to exploit the labor force unfairly.  Americans receiving paychecks would thus do well to heed economist Robert Lekachman’s lonely cry: the experts will never solve your problems.[228]  The growing underclass of Americans excluded from full and fair participation in the economy need something more sure than altruistic sympathy from upper income economists who have little or no experience with want.

Unlike a host of broken reeds that the poor have looked to in the past, a constitutional Amendment is about as permanent a fixture of our republican system as is possible.  Only the Constitution is authoritative enough to make government enforce the right to earn.  Only the Constitution is solid enough to secure the Lincolnian and Papal principle that the economy is for people, not people for the economy.

In short, the one U.S. law which the Congress can neither rescind nor water down is the written Constitution.  Moreover, unlike statute law, the bulletproof parts of the written U.S. Constitution are invulnerable to challenges in court on constitutional grounds particularly if, as per section four of the constellation law, judicial usurpation is arrested.  The depoliticizing tendency of the Constitution, along with its superintending and stabilizing role, are crucial elements if the statutes of 1946 and 1978, committing the nation to full-employment in principle, are to be enforceable in practice.

The necessity of state intervention derives from the nature of uncontrolled capitalism, which is a turbulent stream fed by man's acquisitive instinct.[229]  A major component in commerce is avarice, capitalism's dark side; so that the better instincts in man must channel and sometimes divert the stream of capitalism, like the powerful river whose waters we levee and dam for flood control, power, and irrigation.  The high sounding notion that capital is best allowed to flow in its natural course has led to many human tragedies, such as the small children laboring in mines during the 19th century because shafts could be bored smaller, with less cost and more profit to the operators than shafts large enough for adults.  The scandal of such laissez faire exploitation belatedly led to the enactment of child labor laws.

Unregulated economic activity led also to a ruinous exploitation of the environment, as 19th century photographs of timber industry operations document starkly.  The landscapes left behind by logging firms too often resembled the no-man’s land of First World War battlefields, until post WW I lawmakers began mandating reforestation.  The principle that profiteering must be balanced against stewardship necessitated political intervention.  Corporate responsibility would then become part of the standard process of harvesting our forests and other natural resources.

More recently we have seen Homo economicus follow his avaricious instincts for profit by outsourcing in order to layoff American workers; also by opting unnecessarily for automation.

In short, not all is beneficial that is natural to capitalism.[230]  Uncontrolled, the torrent of greed for capital sweeps the last to be hired into the poverty and despair of joblessness.  Tamed, however, the mighty stream of capitalistic enterprise can serve more of humanity, including our jobless fellow American citizens.


 

 

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 ENDNOTES

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[1] Msgr. Higgins' Column, 24 April 1950, quoted in Gerald M. Costello, Without Fear or Favor: George Higgins on the Record (Mystic, CT: Twenty-Third Publications, 1984), p. 170.

[2] John Paul II, Catholic Relief Services Message, 1995, quoted in Anthony F. Chiffolo, ed., Pope John Paul II: In My Own Words (NY: Barnes & Noble Books, 1998), p. 85.

[2a] Robert Reich, Supercapitalism: the Transformation of Business, Democracy and Everyday Life (New York: Alfred A. Knopf, 2007), p. 98.

[2b] Ibid., pp. 129-30, 167; cf. pp. 126, 169.

[3] Ibid., pp. 45, 70-80, 142; Noreena Hertz, The Silent Takeover: Global Capitalism and the Death of Democracy (New York: The Free Press, 2001), pp. 18-23.

[3a] Reich, ibid., p. 88; cf. chapter three, pp. 88-130.  On the huge surge in corporate influence in Congress, beginning with a vengeance in the mid-1970s, see Reich's fourth chapter, "Democracy Overwhelmed," pp. 131-167.  On the propensity of supercapitalism to pander “to our basest instincts for sexual titillation and violent thrill, …” see pp. 98-99, 119-121, 199-200, 209, 213.

[4] Cheri Honkala, Richard Goldstein, and Elizabeth Thul, with William Baptist and Patrick Grugan, “Globalisation and homelessness in the USA: building a social movement to end poverty,” Development in Practice Abstracts, vol. 9, no. 5, 1999, citing the Journal of Academic Emergency Medicine.  See also, Leslie Kaufman, “Surge in Homeless Families Sets Off Debate on Cause,” The New York Times, 29 June 2004, p. A18.

[5] David K. Shipler, The Working Poor: Invisible in America (New York: Alfred A. Knopf, 2004); see also Jill Duerr Berrick, Faces of poverty: Portraits of Women and Children on Welfare (New York: Oxford University Press, 1995).

[6] Robert Struble, Jr., "Toward a Structural Solution to Unemployment,” International Journal of Social Economics 20, no. 11 (1993): 15-26.  http://ceres.emeraldinsight.com/vl=3443810/cl=24/nw=1/rpsv/cw/www/mcb/03068293/v20n11/contp1-1.htm

[7] Abraham Lincoln, First annual message to Congress, December 3, 1861.

[8] Sirach 34:22; cf. 4:1.  The book of Sirach is part of the Roman Catholic and the Orthodox Old Testament.  Protestants may find it among the Deuterocannonical books of the RSV Common Bible.  In the Epistle of James 5:4, defrauding the laborer of his wages is one of the Bible’s four sins which cry out to God for vengeance, indicating the importance of fair labor practices in the divine plan.

[9] "Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment." [Article 23, section 1, Universal Declaration of Human Rights, adopted by the United Nations, 10 December 1948].  See also Donald S. Howard, The WPA and Federal Relief Policy (New York: Russell Sage Foundation, 1943), pp. 785-88.

[10] Pope John Paul II, Laborem Exercens 18.  This encyclical “On Human Work,” was published 14 September 1981.  The English translation is from the Vatican Polyglot Press.

[11] As WPA Administrator under FDR, Harry Hopkins, noted in 1935: the world generally believes, "...that there is something intrinsically good in earning a living.  It is a deep-seated conviction.  It is, in fact, such a deep-seated conviction that without work men actually go to pieces.  They lose the respect of their wives, sons and daughters because they lose respect for themselves, even though they have broken no laws and even though their deportment as fathers and neighbors continues to be above reproach."  Quoted in Howard, The WPA and Federal Relief Policy, op. cit,, p. 778.

[12] U.S. Congress, Joint Economic Committee, Estimating the Social Costs of National Economic Policy: Implications For Mental and Physical Health, and Criminal Aggression, by Harvey Brenner.  Joint Committee Print, vol. 1, paper 5 (Washington, D.C.: Government Printing Office, 1976), pp. v, 5-7.

[13] Chase quoted in Albert U. Romasco, The Poverty of Abundance: Hoover, the Nation, the Depression (New York: Oxford University Press, 1965), p. 125.  On the human suffering associated with unemployment see also, Andrew Levison, The Full Employment Alternative (New York: Coward, McCann & Geoghegan, 1980), chapter 1.

[14] David N. Ashton, Unemployment under Capitalism: The Sociology of British and American Labour Markets (Brighton, UK: Wheatsheaf Books Ltd., 1986), chapter 6, "The Social Cost of Unemployment and the Response of the Unemployed."

[15]  U.S. Congress, Brenner report, pp. 42-43, 122-23, 137-47.

[16] Christian Science Monitor, July 18, 1977, p. 1.  The Wall Street Journal, "High-Tech Track," April 13, 1983, p. 1, quotes Harley Shaiken of M.I.T. as fearing that industry is already "creating a permanent technological underclass of unemployed, despairing people, particularly within certain areas of the country such as Detroit."

[19] Paul Simon, Let's Put America Back To work (Chicago: Bonus Books, 1987), p. 21; Carlton Rochell with Christina Spellman, Dreams Betrayed (Lexington, MA: Lexington Books, 1987), p. 8.

[20] Noreena Hertz, The Silent Takeover: Global Capitalism and the Death of Democracy, op. cit., p. 210.

[20a] Cover Story, Time, 5 October 2007, vol. 170, pp. 34, 37.

[21] The Civil War, National Public Broadcasting Service, 1991, episode 1.

[22] Marshall Dill, Jr., Germany: A Modern History (Ann Arbor: University of Michigan Press, 1961), p. 358, cf. p. 337.  See also, John E. Rodes, Germany: A History (New York: Holt, Rinehart and Winston, 1964), pp. 522, 532, 546; also Thomas Janoski, The Political Economy of Unemployment: Active Labor Market Policy in West Germany and the United States (Berkley: University of California Press, 1990), pp. 67-68.

[23] Dr. Thomas Parran's 1938 testimony before a U.S. Senate committee quoted in Howard, The WPA and Federal Relief Policy, p. 779.
            For an extensive study of the way unemployment has impacted its victims in recent years see, Ashton, Unemployment under Capitalism (1986), op. cit., chapter 5, "The Experience of Unemployment."  See also, Marie
Jahoda, "Unemployment: Facts, Experience and Social Consequences," in Christopher Freeman & Luc Soete, eds., Technical Change and Full Employment (Oxford, UK: Basil Blackwell, 1987), pp. 9-21; Paul Simon, Let's Put America Back To Work, op. cit., p. 11 for details of a 1980 study which found that job loss is the most stressful of 42 life changing emotional events, behind only the death of a spouse or close family member.

[24] Jacques Maritain, Education at the Crossroads (New Haven: Yale University Press, 1943), p. 38.

[25] Marie Jahoda, University of Sussex, quoted in Colin Hines and Graham Searle, Automatic Unemployment (London: Earth Resources Research Ltd., 1979), p. 25.

[26] John Paul II, Laborem Exercens 20.

[27] E.F. Schumacher, Small Is Beautiful: Economics As If People Mattered (New York: Harper & Row, 1973, Perennial Library ed., 1975), pp. 54, 56.  See also Lloyd J. Dumas, The Overburdened Economy: Uncovering The Causes Of Chronic Unemployment, Inflation, And National Decline (Berkley: University of California Press, 1986), pp. 37-39.
            According to Kim B. Clark and Lawrence H. Summers, "Labor Market Dynamics and Unemployment: A Reconsideration," Brookings Papers on Economic Activity (1979, no. 1): 15, 66; unemployment is seen by some economists as having value because turnover promotes an efficient matching of persons to jobs.  Also, they note, unemployment is said to reduce firms' recruiting costs.

[28] St. Josemaria Escriva (1902-1975), founder of Opus Dei, quoted in Brian Finnerty, “Find God at Your Desk,” Catholic Digest (January 2005), p. 32.

[29] Schumacher, ibid., p. 37.  See also Robert Lekachman, Economists at Bay: Why the Experts Will Never Solve Your Problems (New York: McGraw Hill Book Co., 1976), pp. 76-77; Ben Seligman, Most Notorious Victory: Man in an Age of Automation (New York: The Free Press, 1966), pp. 359-61, 364-65, 367, 383-84.

[30] John Paul II, encyclical Centesimus Annus 32 (1 May 1991); Catechism of the Catholic Church, (United States Catholic Conference, 1994), 2427.

[31] Reich, Supercapitalism, op. cit., pp. 45, 60, 70-80.

[32] Robert S. Boyd, "Millions of new jobs coming, but who's able to do them?" in The Seattle Times, 7 May 1989, p. A3.

[33] Juliet B. Schor, The Overworked American: The Unexpected Decline of Leisure (New York: Basic Books, 1991), p. 61: From the outset of the Industrial Revolution many employers looked to the elementary school to instil habits of work discipline necessary for factory production.  The more drugery in school at very dull subjects the better insofar as it '"habituated, not to say naturalized [them] to labour and fatigue.'"  Schor is Associate Professor of economics at Harvard University.

[34] See John Paul II, Laborem Exercens 12. “...we must first of all recall a principle that has always been taught by the Church: the principle of the priority of labor over capital.”  This principle directly concerns the process of production: in this process labor is always a primary efficient cause, while capital, the whole collection of means of production, remains a mere instrument or instrumental cause.  This principle is an evident truth that emerges from the whole of man’s historical experience.”

[35] Tamara Schweitzer, "U.S. Workers Hate Their Jobs More Than Ever," (Inc.com, March 6, 2007) www.inc.com/news/articles/200703/work.html This survey of 5000 U.S. households found older workers job satisfaction at just under 50%, while of workers aged 25 and under only 39% were satisfied.  Leaving aside pay, bonus plans, promotion policies and excessive workload – the most common complaints – still only 56% said they found their work and co-workers interesting.

[36] That a growing underclass of the unskilled is already developing is documented in a joint report issued 2 June 1994 by the U.S. Departments of Labor and Commerce. (N.Y. Times, 3 June 1994, p. A18).
            Unskilled workers in an automated economy can be expected to suffer considerably:  Y.S. Katsoulacos, The Employment Effect of Technical Change: A Theoretical Study of New Technology and the Labor Market (Brighton, Sussex, U.K.: Wheatsheaf Books, 1986), p. 154.
            See Eli
Ginzberg, Thierry J. Noyelle, and Thomas M. Stanback, Jr., Technology and Employment: Concepts and Clarifications (Boulder, CO: Westview Press, 1986), p. 97, on how the value of retraining is mitigated by the fact that one in six white youth fail to get the equivalency of a high school education; one in four for blacks, and one in two for Hispanics.  "As a result, it is becoming increasingly clear that those who are left behind by the educational system – those with less than a high school education – are likely to be left behind by the labor market.  We are in danger of creating a class of permanently unemployable or `underemployable' individuals.  There are, of course, jobs that still demand little skill, but it is doubtful that there will be enough of them to go around, given the strong tendency toward general upgrading of hiring requirements.  There is nothing in the currently evolving transformation that leads us to expect a repetition of the late 1960s, when the economy ran at full speed and unemployment rates dropped to below 4 percent.  In a manufacturing economy, almost anyone was employable if she or he was willing to expend physical effort.  In a service economy this is not true."  The authors are economists associated with Conservation of Human Resources, Columbia University.

[37] Wayne Laugesen, “Can’t fire Christians For Faith,” National Catholic Register, April 25-May 1, 2004, pp. 1, 10.

[38] U.S. Public Law 95-523.

[39] John Paul II, Laborem Exercens 18.

[40] Ibid., 1...."the widespread introduction of automation into many spheres of production,..."

[41] John A. Garraty, Unemployment in History (New York: Harper & Row, 1978), pp. 242-43, 247.  At this writing Garraty was Professor of History at Columbia University; and later, after his retirement, the Gouveneur Morris Professor Emeritus of History at Columbia.

[42] Daniel Patrick Moynihan, Family and Nation (New York: Harcourt Brace Javonovich, 1986), p. 22, quoted in Paul Simon, Let's Put America Back To Work, p. 3.

[43] Lekachman, Economists at Bay, p. 208; also see pp. 4, 46, 52.

[44] Eugene McCarthy & William McGaughey, Nonfinancial Economics: The Case for Shorter Hours of Work (New York: Praeger Publishers, 1989), p. 7.

[47] John Byczkowski, “Treasury’s Snow says jobs coming,” The Cincinnati Enquirer, 3/30/04, online edition.

[48] McCarthy & McGaughey, Nonfinancial Economics: The Case for Shorter Hours of Work, pp. 4-7.

[49] Quotation from Edward Abbey (1927-1989). http://www.abbeyweb.net/quotes.htx

[50] Sidney Ratner, James H. Soltow, and Richard Sylla, The Evolution Of The American Economy (New York:  Basic Books, 1979), pp. 141, 421; , op. cit., Unemployment under Capitalism (1986), pp. 40, 47-48.

[51] For an excellent article on job flight in the Midwest see, Steven Greenhouse,” As Factory Jobs Disappear, Workers Have Few Options,” The New York Times, online ed., 13 September 2003.

[52] Ronald E. Kutscher, "Structural Change in the United States, Past and Prospective: Its Implications for Skill and Education Requirements," in Eileen Appelbaum & Ronald Schettkat, eds., Labor Market Adjustments to Structural Change and Technological Progress (New York: Praeger, 1990), pp. 55-57; Statistical Abstract 1988, p. 8; Lloyd G. Reynolds, Labor Economics And Labor Relations, 7th ed., (Englewood Cliffs, N.J.: Prentice-Hall, 1978), pp. 66-67; p. 12.

[53] Reich, Supercapitalism, pp. 85-86; Mike Cooley, Architect Or Bee: The Human/Technology Relationship (Slough, England: Hand and Brain Publications, 1981?); Colin Hines and Graham Searle, Automatic Unemployment, op. cit., pp. 11-12, 32; Clive Jenkins and Barrie Sherman, The Collapse of Work (London: Eyre Methuen, 1979), pp. v-vi, 128.

[54] On underemployment and relatively low pay in the service sector see Rochell, Dreams Betrayed, op. cit., pp. 4-6, 37-38.
            See also Lloyd Dumas, The Overburdened Economy, op. cit., pp. 19-23.  Dumas, who is Professor of Economics at the University of Texas, demonstrates that the shift to services from manufacturing was far less favorable to workers involved than the earlier shift from the agricultural sector to the manufacturing sector.  The shift to services resulted from a train of developments roughly as follows:
            Layoffs in the manufacturing sector created a resevoir of low cost workers available for employment in services.  Therefore an expanding supply of services became possible even as the demand for services increased, the latter largely due to lower real wages requiring two or more breadwinners per household rather than one per family as was formerly possible.  With both adults working, services once performed in the home had to be purchased in the marketplace, hence the burgeoning growth in fast food, day-care and similar service industries.  The shift to service, Dumas concludes, is not the result of workers bettering their lot but rather of labor up against the increasing difficulty of making ends meet--"merely another symptom of an economy in decline."
            See also Eli Ginzberg, Thierry J. Noyelle, and Thomas M. Stanback, Jr., Technology and Employment: Concepts and Clarifications, op. cit., in the section entitled "Work Force Trends: Good Jobs or Bad Jobs?", pp. 25-27:  Differentially higher growth of services has led to an overall increase in the proportion of low-paying jobs verses high-paying jobs since the 1950s.  For the period 1960-75, high paying jobs (earnings greater than 120% of the national average) accounted for 35% of the job increases.  But low paying jobs (less than 80% of the national average in pay) accounted for 54% of the job increases.

[54a] Reich, Supercapitalism, pp. 85-86, 92.  The dynamic of competition between workers within the globalized labor force is even pushing wages down in the third world like Indonesia and Sri Lanka.  Likewise, all countries in the global economy see a widening inequality of income between rich and poor.  Reich, pp. 122-123.

[55] Jenkins & Sherman, p. vi.

[56] Mill quoted in Ibid., p. 80.

[57] Garraty, Unemployment in History, pp. 249-50, notes that inflationary policy has come to be regarded by some economists not as a stimulus to economic growth, as Keynes believed, but a depressant.  They see inflation as like a medicine requiring larger and larger doses over the years to achieve the same effect.  Eventually it fails altogether.

[58] Norbert Wiener, The Human Use of Human Beings: Cybernetics and Society (Garden City, N.Y.: Doubleday & Co., 1950, 1954), pp. 136-62.

[59] Jenkins & Sherman, The Collapse of Work, p. 3; Garraty, Unemployment in History, p. 236.
            According to Julius
Rezlar, Automation & Industrial Labor (New York: Random House, 1969), pp. 11-12, cf. pp. 5-10: "Automation is a revolutionary phase of the technological development in which human functions of operating and controlling equipment, collecting information, and making decisions concerning the production process have been replaced by mechanical and electronic devices."

[60] Abraham Weiss, "Labor and Automation," in Francis X. Quinn, S.J., ed., The Ethical Aftermath of Automation (Westminster, Md.: The Newman Press, 1962), p. 72; Jenkins & Sherman, ibid., p. 105.  Mr. Weiss was director of research for the Teamsters.

[61] David S. Salisbury, "The third 'industrial revolution': robot factories and electronic offices," Christian Science Monitor 72 (Oct. 8, 1980), pp. 1, 9.

[62] On production oversupply see McCarthy & McGaughey, Nonfinancial Economics: The Case for Shorter Hours of Work, op. cit., pp. 153-54.

[63] Lloyd J. Mercer and W. Douglas Morgan, "Alternative Interpretations of Market Saturation: Evaluation for the Automobile Market in the Late Twenties," Explorations in Economic History 9  (Spring 1972): 270-71, 275, 278-79, 285-86.  See also Alexander Gourvitch, Survey of Economic Theory on Technical Change and Employment (New York: Augustus M. Kelly, 1966, reprint of 1940 work), pp. 206-07.  Gourvitch summarizes Simon Kuznets' point that luxuries are made into necessities by technical change.  Thereafter, whatever further cost reduction may be attained through technical improvements "will be calling forth an ever diminishing response in the way of expanding markets."

[64] Fritz W. Scharpf, "Structures of Postindustrial Society, or Does Mass Unemployment Disappear in the Service and Information Economy?" in Appelbaum & Schettkat, eds., Labor Market Adjustments to Structural Change and Technological Progress (1990), pp. 34-35.

[65] Schumacher, Small Is Beautiful, op. cit., p. 33, states that it is both unwise and predatory to rejoice that what were luxuries for our fathers have become necessities for us.  Killingsworth writes that America's shortage of major growth industries in recent years may be related to our having already achieved a very high level of material well being. [Charles C. Killingsworth, "Implications of Automation for Employment and Manpower Planning," in Simon Marcson, ed., Automation, Alienation, and Anomie (New York: Harper & Row, 1970), p. 336].  The British author, E.J. Mishan, writes that in the efforts to continually expand, modern capitalism "depends directly on its success in whetting and enlarging the appetite of the consuming public so as to enable it to engorge the burgeoning variety and volume of goods.  Clearly a discriminating public will not serve."  E.J. Mishan, Pornography, Psychedelics and Technology (London: George Allen & Unwin, 1980), p. 174.

[66] Scharpf, "Structures of Postindustrial Society," p. 34.

[67] "It is not wrong to want to live better; what is wrong is a style of life which is presumed to be better when it is directed toward `having' rather than `being' and which wants to have more not in order to be more, but in order to spend life in enjoyment as an end in itself.  It is therefore necessary to create lifestyles in which the quest for truth, beauty, goodness and communion with others for the sake of common growth are the factors which determine consumer choices, savings and investments."  Papal encyclical, Centesimus Annus 36 (1 May 1991).

[68] The rapidly increasing use of national parks and other outdoor resources may indicate a trend already underway in the direction of simpler more natural lifestyles.  Also backward bending supply curves of labor, deriving from the tendency of hours of work per year to fall as real income rises, suggest that workers see diminishing returns after their spending power reaches certain levels.  On the latter point see, Albert Rees, The Economics of Work and Pay (New York: Harper & Row, 1973), p. 50; Juliet B. Schor, The Overworked American: The Unexpected Decline of Leisure, op. cit., p. 47.

            Arthur Francis, New Technology at Work (Oxford: Clarendon Press, 1986), p. 198, argues, however, that most people have a long way to go before their wants will be satisfied.

[69] Report of the U.S. National Commission on Technology, Automation, and Economic Progress (Washington, D.C.: Government Printing Office, 1966), p. 11, figure 9, indicates that in at least four industries (chemical, agricultural, primary metals, and fabricated metal products) employment tends to rise at a rate much slower than concurrent increases in productivity and output.  In chemicals, for example, from 1947-65, a quadrupling of output called for an increase of but 40% in employment.  Hereafter cited as Automation Commission
            See also A.J. Jaffe and Joseph Froomkin, Technology and Jobs: Automation in Perspective (New York: Frederick A. Praeger, 1968), p. 150; Seymour R. Wolfbien, "The Pace of Technological Change and the Factors Affecting It," in Marcson, ed., Automation, Alienation, and Anomie, p. 74; Joseph D. Keenan, "Automation and the Welfare of the Country," in Quinn, pp. 117, 123, cites a study in San Francisco which found that for every five workers displaced by electronic data processing only one new job was created.

[70] John A.G. Pierson, Full Employment (New Haven: Yale University Press, 1941), pp. 97-98.  Pierson states that "...in spite of the fact that the expansion of leisure time itself gives a powerful impetus to the development of new wants, the interesting possibility arises that society's real or physical capacity to consume may in future fail to keep pace with society's capacity to produce, unless the working week is very drastically shortened indeed or a large proportion of the labor supply is diverted into the production of individualized goods and services lying outside the reach of mass-production techniques."

[71] Monica Davey with David Leonhardt, “Jobless and Hopeless, Many Quit the Labor Force,” The New York Times, online edition, 27 April 2003.  Excellent article with statistics and charts. 
http://www.nytimes.com/2003/04/27/national/27JOBS.html?th

[72] Carlton Rochell with Christina Spellman, Dreams Betrayed: Working in the Technological Age, op. cit., p. 1: Rochell predicted during the Reagan Administration that "it is now becoming clear that underemployment will be far more devastating than unemployment.  Vast numbers of skilled and experienced adults, unable to find a niche in an automated society, will be forced into jobs well below the level of both their aspirations and their abilities...."  cf. pp. 6, 37-38.

[73] John D. Kasarda, ed., Jobs, Earnings, and Employment Growth Policies in the United States (Boston: Kluwer Academic Publishers, 1990), p. 1.  Even Japan's annual employment growth rate is less than half that of the US in the past 15 years (0.8% verses 2%).

[74] Barry Bluestone, "The Great U-Turn Revisited: Economic Restructuring, Jobs, and the Redistribution of Earnings," in Kasarda, ed. ibid., p. 7.  Bluestone notes that 58% of jobs created, 1973-84, paid less than $7400 (in 1984 dollars), whereas less than 20% paid that low for the new jobs created 1963-79.  Today there is near unanimous agreement, claims Bluestone [p. 8] that "wages have stagnated and earnings inequality has increased."

[75] Schor, The Overworked American: The Unexpected Decline of Leisure, p. 81 with fn. 78.  In 1990 dollars the '73 wage rate was $11.31; in 1990, $10.03.  To reach 1973 standard of living workers needed 245 more hours or 6+ weeks per year. 

[76] Robert B. Reich, The Future of Success, (New York: Vintage Books, 2002), pp. 112, 217-218.  Copyright 2000.

[77] Kasarda, p. 1.

[78] Christopher Lasch, "Conservatism against Itself," First Things, April 1990, pp. 20-21; Reich, Supercapitalism, op. cit., chapter 1, "The Not Quite Golden Age," pp. 15-49.  Lasch cites a 1976 estimate.

[79] Lasch, ibid.;    Reich, Supercapitalism, ibid., chapter 1, and p. 85.  See also Lloyd Dumas, The Overburdened Economy: Uncovering The Causes Of Chronic Unemployment, Inflation, And National Decline (Berkley: University of California Press, 1986), pp. 19-22.  Dumas was Professor of Economics at the University of Texas.  He demonstrates that the shift to services from manufacturing was far less favorable to the workers involved than the earlier shift from the agricultural sector to the manufacturing sector.  The shift to services resulted from a train of developments roughly as follows:
            Layoffs in the manufacturing sector created a reservoir of low cost workers available for employment in services.  Therefore an expanding supply of services became possible even as the demand for services increased, the latter largely due to lower real wages requiring two or more breadwinners per household rather than one per family as was formerly possible.  With both adults working, services once performed in the home had to be purchased in the marketplace, hence the burgeoning growth in fast food, day-care and similar service industries.  The shift to service, Dumas concludes, is not the result of workers bettering their lot but rather of labor up against the increasing difficulty of making ends meet--"merely another symptom of an economy in decline."
            See also Eli Ginzberg, Thierry J. Noyelle, and Thomas M. Stanback, Jr., Technology and Employment: op. cit., in the section entitled "Work Force Trends: Good Jobs or Bad Jobs?", pp. 25-27:  Differentially higher growth of services has led to an overall increase in the proportion of low-paying jobs verses high-paying jobs since the 1950s.  For the period 1960-75, high paying jobs (earnings greater than 120% of the national average) accounted for 35% of the job increases.  But low paying jobs (less than 80% of nat. ave. in pay) accounted for 54% of the job increases.

[80] Pius XII, address at the Vatican to the Catholic Assoc. of Italian Workers, May 1, 1955, quoted in Henri Rondet, S.J., Donald Attwater, tr., and editor, St. Joseph (New York: P.J. Kenedy & Sons, 1956), p. 223.  Italics mine.

[81] For general arguments in favor of some way of overseeing the process of automation, see: Robert L. Heilbruner, "The Impact of Technology: The Historic Debate" in John Dunlop, ed., Automation and Technological Change (Englewood Cliffs, N.J.: Prentice-Hall, 1962), p. 23; Robert E. Cubbage, Who Needs People? (Washington, D.C.: Robert E. Luce, 1963), p. 107; Frederick Pollock, Automation: A Study of Its Economic and Social Consequences, tr. by W.O. Henderson and W.H. Chanlener (New York: Frederick A. Praeger, 1957), p. 71.

[82] Janoski, The Political Economy of Unemployment: Active Labor Market Policy in West Germany and the United States, op. cit.,p. 139: "With job substitution, state-created jobs simply replace or compete with private sector jobs; there is no net increase in employment."

[82B] The WW I years, 1914-1918, are a case in point.  Historic gains for the working man and for labor unions occurred during that period, as the halt in immigration together with the induction of workers into the armed forces tightened the labor market.  Richard B. Morris, William Greenleaf and Robert H. Ferrell, America: A History of the People (Chicago: Rand McNally & Co., 1971), p. 538; U.S. Department of Labor, Bureau of Labor Statistics, A Brief History of the American Labor Movement, 4th ed., (Washington, D.C.: Government Printing Office, 1970), p. 24.

[82c] Noreena Hertz, The Silent Takeover, op. cit., p. 46.

[83] Rochell, Dreams Betrayed, p. 92 (1987), reports that the U.S. workweek averaged 13% longer than in what was then West Germany.  In 1993 Volkswagen, Europe's largest auto maker, offered production workers a choice between a four-day work week with lower pay or the elimination of 30,000 jobs. [New York Times, national ed., 29 October 1993, pp. C1, C5].
            In favor of workweek reductions see, for example, Eugene McCarthy & William McGaughey, Nonfinancial Economics: The Case for Shorter Hours of Work, op. cit.; Juliet B. Schor, "Americans Work Too Hard," New York Times, national ed., 25 July 1991, p. A17Schor states that "trading income for time is cost-free," and that "fatigue and inefficiency" result from long hours.  "The growing scarcity of leisure, dearth of family time and horrors of commuting all point to the need to resume an old but long-ignored discussion on the merits of the 30-hour or even the four-day week."
            Also in 1983 Frank Stille and R. Zwiener did a macroeconomic simulation of hours reductions for West Germany which showed that, contrary to an overwhelmingly negative appraisal by economists, employment effects could indeed be positive.  Their simulation showed that "a careful combination of wage increases and additional working time reductions might put a more or less unchanged total volume of hours onto more persons."  Reported by Frank Stille, "Structural Change in the Federal Republic of Germany: The Case of Services," in Eileen Appelbaum & Ronald Schettkat, eds., Labor Market Adjustments to Structural Change and Technological Progress (New York: Praeger, 1990), p. 111.
            See also Marie Jahoda, "Unemployment: Facts, Experience and Social Consequences," (1987) op. cit.,, pp. 20-21; Jenkins & Sherman, The Collapse of Work, op. cit., pp. 126-36, 164; Hines & Searle, Automatic Unemployment, op. cit., pp. 43-44, 65; Louis Emmerij, "The Social Economy of Today's Employment Problem in the Industrialized Countries," in Edmond
Malinvaud & Jean-Paul Fitoussi, eds., Unemployment in Western Countries (London: The Macmillan Press, 1980), pp. 62-69.
            However, Paul A.
Samuelson, Economics, 10th ed., (New York: McGraw-Hill, 1976), p. 578, argues against workweek reductions because, says he, the policy is based on a "lump of labor fallacy."

[84] The average workweek for production or nonsupervisory workers on private nonfarm payrolls, from January 2002-January 2003, was about 34 hours per week.  It ranged from as low as 32 hpw in services, to 45 hpw in certain sectors of manufacturing.  Source: US Dept. of Labor, Bureau of Labor Statistics. With the onset of the recession in 2008, the average workweek had dropped to 33.5 hours, the lowest level in the more than 40 years since the Dept. of Labor began keeping track of hours worked.

[85] Ronald G. Ehrenberg & Paul L. Schumann, Longer Hours or More Jobs? An Investigation Of Amending Hours Legislation To Create Employment (Ithaca, N.Y.: New York State School of Industrial & Labor Relations, Cornell University, 1982), pp. 1, 131-39; Schor, The Overworked American: The Unexpected Decline of Leisure, op. cit., pp.65-66.

[86] Schor, Ibid., pp. 66-68.

[87] McCarthy & McGaughey, Nonfinancial Economics: The Case for Shorter Hours of Work, op. cit., pp. x, 129-31.

[88] Ibid., p. 128.

[89] Schor, The Overworked American: The Unexpected Decline of Leisure, pp. 55, 141-43.

[90] David K. Shipler, The Working Poor: Invisible in America (2004), op. cit., pp. 67, 78, 92, gives examples of firms who force employees to clock in well after beginning work in order to evade minimum wage laws, or to accept “forced breaks,” in which pay is deducted for time off although the employee works right through the “break.”

[91] Schor, supra., p. 151.

[92] The McGraw-Hill Dictionary of Modern Economics (New York: McGraw-Hill Book Co., 1965).

[93] William Greider, One World, Ready or Not: The Manic Logic of Global Capitalism (New York: Touchstone, 1997), pp. 25-29.

[94] Noreena Hertz, The Silent Takeover: Global Capitalism and the Death of Democracy (2001), op. cit., p. 47.  Employment remained virtually flat at about 26 million people within the 500 largest global corporations.  Hertz cites Greider, ibid.

[94a] Reich, Supercapitalism, pp. 105-06 with endnote 25 for IRS citation.

[94b] Data source:  Carola Frydman & Raven E. Saks, "Historical Trends in Executive Compensation, 1936-2003," working paper # 15 (Nov. 15, 2005), p. 45, table 6, http://tinyurl.com/f3pzz, referenced in Reich, ibid., p. 109;  AFL-CIO facts..

[95] In the past, nearly every major advance by labor has been opposed on economic grounds:  Garraty, Unemployment in History, op. cit., p. 132; Dennis J. Comey, S.J., "Ethics and Economic Society," in Quinn, op. cit., pp. 45-46; James C. O'Brien, "Automation and the Older Worker," in Quinn, p. 97.

[96] Robert Struble, Jr., "Toward a Structural Solution to Unemployment, International Journal of Social Economics 20, no. 11 (1993): 15-26.

[97] In fairness to the Luddites Greider makes the case (supra, p. 39) that “the Luddites weren’t against progress.  They were against their exclusion from progress.”

[98] Cooley, Architect or Bee, op. cit., pp. 74-75; Rochell & Spellman, Dreams Betrayed, op cit, pp. 1, 6.Keenan, "Automation and the Welfare of the Country," in Quinn, op. cit., pp. 123-24. 

Cambridge University economist, Noreena Hertz, notes that firms which are emphatically not struggling, but performing at levels considered acceptable in pre-global capitalistic times, are currently under pressure to downsize (i.e. layoff workers) in order to satisfy stock market investors and/or avoid being swallowed up in a merger.  Hertz, op. cit., p. 47.

[99] Garraty, Unemployment in History, pp. 236-37; Gourvitch, Survey of Economic Theory on Technological Change & Employment, op. cit., pp. 60-61.

[100] Keith Dix, What's a Coal Miner to Do? The Mechanization of Coal Mining (Pittsburg: University of Pittsburg Press, 1988), p. 214 notes that in 1936-1940, during a strong trend toward capital intensification, local coal miner's unions broke ranks from the leadership of John L. Lewis to propose taxes on the output of mechanization, with the revenues to be used to aid displaced workers.

[101] 277 U.S. 218 (1928) at 223.

[102] “Cities that urgently need to replace obsolete buildings paradoxically base much of their financing upon a tax that encourages owners to hold on to deteriorated structures and penalizes owners of new ones.  Every increase in the property tax rates on structures [not land] reduces the desirability of putting capital funds into new buildings, creates an incentive against upgrading quality by new construction, and discourages maintenance.”  Encyclopedia Britannica, 15th edition, 28: 427.

[102A] Reich, Supercapitalism, supra., p. 204; cf. pp. 127-130, 196-97, 207, 213-14.

[103] Isaiah 2:8 is reflected in the decree of Vatican II, Apostolicam Actuositatem 7 (On the Apostolate of the Laity) where it states, "in our own time, moreover, those who have trusted excessively in the progress of the natural sciences and the technical arts have fallen into an idolatry of temporal things and have become their slaves rather than their masters."  See also Vatican II, Gaudium et Spes 57; Gustave Weigel, S.J., "Automation in the Life of a Catholic," in Quinn, op. cit., p. 185; Heilbruner, "The Impact of Technology: The Historic Debate," op. cit., p. 7; Seligman, Most Notorious Victory, pp. 399, 403-04.

[104] Ralph Waldo Emerson, Ode inscribed to W.H. Channing

[105] John Paul II, Laborem Exercens 5.  See also Quinn, op. cit., p. 5; Schumacher, Small Is Beautiful, op. cit., pp. 153-54, 74-75. 
            As President Kennedy observed in 1963, "automation does not need to be, we hope, an enemy.... I think machines can make life easier for men, if men do not let the machines dominate them." [John F. Kennedy, Public Papers of the Presidents of the United States, 3 vols. (Washington, D.C.: Government Printing Office, 1962-64), 1963, p. 829].

[106] Vaclav Havel, "The Power of the Powerless," XX, in Living in Truth (London: Faber and Faber, 1987), p. 115.

[107] Ibid., p. 114.  Cf. Vaclav Havel, Disturbing the Peace: A Conversation With Karel Hvizdala (New York: Alfred A. Knopf, 1990), p. 14.

[108] Senator Eugene McCarthy, "Political, Social, and Economic Implications," in Quinn, op. cit., p. 221; Rees, The Economics of Work and Pay, op. cit., p. 137.  Both Weiss [in Quinn, op. cit.] and Rees contain general reflections on the necessity of compensating people by drawing from the technical progress that displaces them.  Senator McCarthy proposes to do so by taxing machines.

[109] John Paul II, Laborem Exercens 12.

[110] On the restoration of democratic capitalism in an updated 21st century form, see Reiceh, Supercapitalism, supra, pp. 126, 129-30, 167; cf. 86-87.  During the JFK Administration, Joseph Keenan, AFL-CIO vice-president, stated that '"Easing the burden of technological change and achieving a fair and widespread distribution of its benefits is a goal to which American labor is dedicated.'"  Keenan, "Automation and the Welfare of the Country," in Quinn, op. cit., p. 125. 

[111] Emmerij, in Malinvaud & Fitoussi, eds., Unemployment in Western Countries, op. cit., p. 59.

[111A] Garraty, Unemployment in History, op. cit., pp. 23, 41.

[111B] The New York Times, national ed., 14 February 1989, p. 9, has a chart comparing unemployment rates in New England and the United States as a whole, from 1978-1988.  In October, 1988, Maine, New Hampshire and Vermont all reported unemployment rates of 2.3%, then the lowest in the nation.

[111c] According to Garraty, supra., p. 41, many studies have shown that "prolonged unemployment does tend to make people 'lazy, both by undermining their self-confidence and through its effects on diet."  See also, W. Norris Clarke, S.J., "Cultural Dimensions of the New Leisure," in Quinn, op. cit., pp. 205-06.

[112] Thomas Janoski, The Political Economy of Unemployment: Active Labor Market Policy in West Germany and the United States, op. cit., p. 1, articulates well the wastefulness of unemployment, and the necessity for worker productivity to remain high if international competition is to be met.
            Another economist who emphasizes the importance of full-employment in maintaining the skill level of the labor force is Lloyd Dumas, The Overburdened Economy, (supra), pp. 94-95.

[113] Maurice Scott with Robert A. Laslett, Can We Get Back To Full Employment? (London: The Macmillan Press, 1978), p. 49.

[114] Mary Graham, The Morning after Earth Day: Practical Environmental Politics (Washington, D.C.: Brookings Institution Press, 1999), p. 65.

[115] Lara Jakes Jordan, “Advisers Urge Bush to Drop Steel Tariffs,” Associated Press, 12/1/03; Jennifer Loven, Associated Press, 2 Dec. 2003, dateline Pittsburg.

[116] David E. Sanger, Backing Down on Steel Tariffs, U.S. Strengthens Trade Group,” NY Times, 12/5/03, online ed.  Noreena Hertz, The Silent Takeover: Global Capitalism and the Death of Democracy, op. cit., pp. 53-54, describes how the German government bowed in similar fashion to corporate pressure.

[117] Press Conference With Dennis Hastert, then Speaker of the House, Thursday, Nov. 6, 2003

[118] Patrick J. Buchanan, “The New World Order Grows Teeth,” online column, September 9, 2002.

[119] Robert B. Reich, Supercapitalism, op. cit., pp. 83, 86, 98-99, 101-02, 127;  Reich, The Future of Success, op. cit., p. 78.

[120] Reich, Supercapitalism, p. 127 

[121] Reich, ... Success, supra., p. 106; cf. pp. 89, 100.  At p. 106, Reich states that in “the old economy” economies of scale were more competitive, whereas now, in, the new economy, “the winners are small, highly flexible groups that devise great ideas, and trustworthy brands that market them effectively.”  See also, Reich, Supercapitalism., pp. 64-65. 

[122] The quotation is from an entry entitled, "Economies of Scale (Economies of Mass Production)" in The McGraw-Hill Dictionary of Modern Economics (New York: McGraw-Hill, 1965), p. 172.  Paul A. Samuelson, Economics, op. cit., pp. 24-29, discusses economies of scale, fixed inputs and the law of diminishing returns.
            I would suggest also that such inputs as the supply of management qualities like flexibility and adaptability can sometimes exist with a frequency that is inversely proportional to the size of the firm.

123] Samuelson, Economics, ibid., pp. 191-94, discusses GNP and national income.  On the investment equals savings principle, pp. 204, 224-26; also see Garraty, Unemployment in History, p. 218.

[124] Samuelson, ibid., pp. 343-44, supports this expansionary approach.

[125] The Automation Commission Report, op. cit., p. 36, table 6, lists six possible areas in which public works might employ 5.3 million workers.  Simon, Let's Put America Back To Work, op. cit., pp. 137-38 suggests 18 categories of public works.

[127] The New York Times, 6 July 1990, p. A14.

[128] Hines & Searle, Automatic Unemployment, p. 36.

[129] U.S. Public Law 95-523, sect. 102, f(4) and sect. 206, c(1).  Force account is also the method proposed by the late Sen. Paul Simon for his "Guaranteed Job Opportunity Program."  Simon, Let's Put America Back To Work, op. cit., chapter 4.

[130] U.S. National Aeronautics and Space Administration, Annual Procurement Report, fiscal year 1971, pp. 2, 4, 7.  For examples of technological excellence under the contract system one can look as far back as the ancient roman roads and aqueducts.  See for instance, Tenney Frank, A History of Rome (New York: Henry Holt, 1923), pp. 173-74, 168.

[131] Eric Bergaust, Wernher von Braun (Washington, D.C.: National Space Institute, 1976), p. 66.

[132] U.S. Congress, House, Hearings Before the Subcommittee of the Committee on Appropriations, 76th Congress, 1939 and 1940 hearings, vol. 25, pp. 1005, 1210; Samuelson, Economics, p. 359.  Hereafter cited as public works hearings.

[133] Ibid., vol. 13, pp. 527, 575; vol. 25, pp. 998, 1005, 1008, 1014, 1020, 1210, 1214.

[134] Ibid., vol. 13, pp. 482-528.

[135] Ibid., pp. 521, 526-28, 575-77; vol. 25, pp. 998, 1005, 1008, 1014, 1020, 1210, 1214.

[136] Ibid., vol 25, pp. 998, 1020.

[137] Ibid., vol. 13, pp. 54-57; John Kenneth Galbraith and G.G. Johnson, The Economic Effects of the Federal Public Works Expenditures, 1933-1938 (Washington, D.C.: Government Printing Office, 1940), pp. 52-53.

[138] Public works hearings, ibid., vol. 25, pp. 1005-08, 1014, 1020, 1121, 1210.

[139] John Stewart Mill, On Liberty 117 (published 1859).

[140] Probably the primary difficulty with the contract system is bid rigging.  This form of fraud is illegal, and new detection methods, including computers and interstate exchange of information, have magnified the dangers for firms who conspire to rig bids.  Such conspiracies are vulnerable also to whistle blowing by any official whose firm is victimized by the practice.

[141] Searle F. Charles, Minister of Relief: Harry Hopkins and the Depression (Syracuse, N.Y.: Syracuse University Press, 1963), p. 145.  The WPA policy of hiring direct from the relief roles had the unfortunate result of forcing people onto relief in order to qualify for a job.

[142] Donald S. Howard, The WPA and Federal Relief Policy, op. cit., p. 572, fn. 3.

[143] Rees, The Economics of Work and Pay, op. cit., p. 99.

[144] Charles, Minister of Relief, supra, pp. 138-41, indicates that WPA offices in particular struggled with a terrific paperwork burden.

[145] Paul G. Schervish, The Structural Determinants of Unemployment (New York: Academic Press, 1983), p. 1, discusses the "ratchet phenomenon" where post recession levels never quite return to pre-recession lows.

[146] Bruce Bartlett, “The Outsource of Confusion: When jobs go, we grow,” National Review Online, 4 February 2004.

[147] Goldman Sachs quoted in Cincinnati Enquirer online, 3/30/04.  Goldman Sachs is hardly an advocate for workers, as Noreena Hertz points out, op. cit., p. 51.  See also, Bob Herbert, “Outsourcing jobs is a threat to the U.S. economy,” New York Times, Tuesday, January 27, 2004.

[148] IANS, Newindpress.com, “Outsourcing jobs in India to increase seven times by 2008,” 8/23/2003.

[149] Bartlett, supra.

[150] Noreena Hertz, The Silent Takeover:op. cit., p. 50.

[151] Ibid., pp. 57-58.  Hertz instances the swift vanishing of jobs and investment with a reference to the case of BMW, the German auto manufacturer.  The firm sold off of its plant in Longbridge, near Birmingham, after successfully lobbying the government of the UK to grant a 150 million pound subsidy to the Land Rover factory there.  Hertz is, by the way, no Marxist (see pp. 10, 25).

[152] Harley Shaiken, Professor of Labor and the Global Economy at the University of California, Berkeley, interviewed by Margaret Warner in, Online News Hour, March 11, 2004.

[153] Robert Reich, ... Success, op. cit., pp. 74-75, 102; Reich, Supercapitalism, op. cit., p. 159; AFL-CIO, executive paywatch, www.aflcio.org/corporateamerica/paywatch/ceou/  

[154] Hertz, op. cit., p. 44.

[155] John Karl Scholz, Wealth Inequality and the Wealth of Cohorts, 13 May 2003.  Professor Scholz of the Univ. of Wisconsin, Madison, dept. of Economics and Research on Poverty, has compiled data on (among other categories) the net worth of the top one percent of American households vis-à-vis the net worth of the median American household.  He compares and contrasts these figures for 1962 and 2001.  As per his request, cited with permission.

[156] David Cay Johnston, “Richest Are Leaving even the Rich Far Behind,” The New York Times, June 5, 2005, p. 1, section 1.

[157] Ibid.

158] Ibid.

[159] Noreena Hertz, op. cit., p. 46.

[159A] Bruce Western, “Incarceration, Employment and Public Policy, New Jersey Reentry Roundtable, session 3, April, 2003, online at,  http://www.njisj.org/reports/western_report.html 

[160] At New York’s annual Alfred E. Smith Memorial Foundation dinner (October 2000), then presidential candidate GW Bush identified his base as “the haves and the have-mores” in a speech during the 2000 presidential campaign.  He joked, "This is an impressive crowd, the haves and the have-mores. Some people call you the elite. I call you my base:"  [Replayed in the Michael Moore film, Fahrenheit 9/11].  On the Bush administration’s support for outsourcing see, John Byczkowski, “Treasury's Snow says jobs coming,” The Cincinnati Enquirer, 3/30/04, online edition.  Secretary of the Treasury, John Snow, is quoted as follows:  “The outsourcing of U.S. jobs ‘is part of trade ... and there can't be any doubt about the fact that trade makes the economy stronger.’”

[161] Noreena Hertz, op. cit., p. 43.  See above, figure 8.1.

[162] Greider, One World, Ready or Not, (1997) op. cit., p. 53. 

[163] Ibid., p. 48; cf. Reich, Supercapitalism, p. 51.

[164] Hertz, Ibid., pp. 8, 39.

[164A] Reich, Supercapitalism, chapter four, "Democracy Overwhelmed," pp. 131-167.

[165] Hertz, supra., pp. 10-11, 51-54.  Quote from the former president of the German Bundesbank, Hans Tietmeyer.  See also, Reich, ibid.

[166] Hertz, Ibid., pp. 13, 21, 49-50; Robert Reich, ... Success, op. cit., p. 112.

[167] Hertz, ibid., pp. 13, 20-21, 48-50; Reich, Supercapitalism, supra, p. 105 on how stress in the U.S. has given the nation poorer health relative to the UK.

[168] Samuelson, Economics, op. cit., p. 14.

[169] Chase quoted in Romasco, The Poverty of Abundance, op. cit., p. 127.

[170] Garraty, Unemployment in History, op. cit., pp. 49, 78, 106, 121, 128; Ashton, Unemployment under Capitalism, op. cit., p. 29.

[171] Schnitzer, Martin, East and West Germany: A Comparative Economic Analysis (New York: Praeger Publishers, 1972), p. 127, cited by Lyubov Zhabskaya, “East and West Germany,” April 2002, http://econc10.bu.edu/economic_systems/Country_comparisons/East_West_Germany.htm

[172] J.A. Orr, H. Shimada, & A. Seike, U.S.-Japan Comparative Study of Employment Adjustment, Bureau of Labor Statistics Paper (Washington, D.C.: U.S. Dept. of Labor, 1982), cited in Ronald Schettkat, "Adjustment Processes in the Economy: Labor Market Dynamics in the Federal Republic of Germany," in Appelbaum & Schettkat, eds., op. cit., “Labor Market Adjustments to Structural Change and Technological Progress” (1990), pp. 216-217.

[172A] Reich, Supercapitalism, supra, p. 125.

[173] Janoski, The Political Economy of Unemployment: Active Labor Market Policy in West Germany and the United States, op. cit., p. 4; Weiss, "Labor and Automation," in Quinn, op. cit., pp. 51-52.

[174] Leonard A. Lecht, Experience Under Railway Legislation (New York: Columbia University Press, 1955), pp. 210-11, 221.  In 1963-64 a nationwide railway strike was imminent largely in order to maintain the firemen in freight and yard service jobs, some 90 percent of which were unnecessary according to a U.S. Government arbitration board.  Some three decades after the introduction of the diesel locomotive, government mediation and the threat of Federal intervention led to an agreement to eliminate by attrition the firemen on non-passenger locomotive.  See also Facts on File, 1963, pp. 129, 244, 424; 1964, pp. 116-17, 124, 149.

[175] J.F.K., Public Papers, 1963, p. 593.

[176] Schor, The Overworked American: The Unexpected Decline of Leisure, op. cit., pp. 75-76.

[177] Michal Kalecki, "Political Aspects of Full Employment," in Selected Essays on the Dynamics of the Capitalist Economy 1933-1970 (Cambridge: Cambridge University Press, 1971), pp. 140-41; quoted in Schor, Ibid., p. 75.

[178] Janine Ludlam, "Reform and the Redefinition of the Social Contract under Gorbachev," World Politics 43 (January 1991): 303, attributes the phrase “equity-efficiency tradeoff” re the utility of unemployment to Ed Hewett of The Brookings Institution.

[179] Richard B. Morris, Government and Labor in Early America (New York: Columbia University Press, 1946), pp. 44-46, 48-49, 513, 528.  Until well into the 19th century scarce labor was maintained by the availability of farming as an alternative to wage earning.

[180] See, for example, James W. Donovan, "A Case Study: Laying Off American Workers, Gouging Mexican Workers," New Oxford Review 59 (January-February 1992), pp. 10-13.

[181] John Paul II, Laborem Exercens 18.

[182] According to James Skidmore, the head of a group of management consulting companies in 1979, the major cause of a then worsening U.S. productivity relative to that of competitor countries, seemed to be a diminishing "drive and will to work hard."  Christian Science Monitor, June 13, 1979, p. 112.  On the point that inflation can be sociological in origin, as well as economic in the strictest sense, see Bruno Durieux, "Inflation: a Sociological Explanation," Manchester Guardian Weekly, August 10, 1974, p. 12.

[183] Acts of the Apostles 18:3; 20:34-35; 1 Corinthians 4:12; Ephesians 4:28; 1 Thessalonians 4:11; 2 Thessalonians 3:10-12.  Cf. John Paul II, Laborem Exercens 26. 

[184] Samuelson, Economics, op. cit., p. 163.  One of the earliest works to discuss the relative value of money is Aristotle, The Politics I 3.13-17 (1257a-1257b25).  In 1961 President Kennedy put the principle as follows: "The real wealth of a nation is its farms and factories and the people who man them."  J.F.K., Public Papers, 1961, p. 57.

[185] On economic waste see, Eugene McCarthy & William McGaughey, Nonfinancial Economics: The Case for Shorter Hours of Work op. cit., chapters 5-7, pp. 51-111, and pp. 135-37; Janoski, The Political Economy of Unemployment: Active Labor Market Policy in West Germany and the United States, op. cit., p. 1.

[186] Armen Alchian and William Allen, Exchange and Production: Competition, Coordination, and Control, 2nd ed. (Belmont, California: Wadsworth Publishing Co., 1977), p. 162.

[187] Schumacher, Small Is Beautiful, op. cit., p. 219.

[188] Lincoln quoted in Theodore Roosevelt, The Works of Theodore Roosevelt, Herman Hagehorn, ed., 20 vols. (New York: Charles Scribner's Sons, 1926) 17: 66, 363.

[189] The 93 percent referred to in text is a simplification.  Actually, the cost of integrating the unemployed into the economy will not come solely from the pockets of the workers employed already, or from American business.  Other elements contribute to GNP, like tourism from abroad and trans-national corporations operating in the U.S.

[190] A.W. Phillips, "The Relation Between Unemployment and the Role of Change of Money Wage Rates in the United Kingdom, 1861-1957," Economica 25 (November 1958): 283-299.

[192] Ashton, Unemployment under Capitalism (1986), p. 37, attributes the instability of the Phillips relationship to "changes at the national and international level."  Leon H. Keyserling, Full Employment Without Inflation (Washington, D.C.: Conference on Economic Progress, 1975), pp. 24-26, gives seven reasons why departures from full employment actually increase inflation.  See also, Lekachman, Economists at Bay, op. cit., pp. 49-51. 
            For an extensive and authoritative survey of earlier literature on the Phillips curve see, Anthony M. Santomero and John J. Seater, "The Inflation-Unemployment Tradeoff: A Critique of the Literature," Journal of Economic Literature 16 (June 1978): 499-544.  At p. 533 the authors indicate that some empirical evidence and much theoretical evidence support the view that there is no long-run inflation/unemployment tradeoff.

[194] Reich, Supercapitalism, op. cit., p. 97.

[196] “The scarcity of hands occasions a competition among masters, who bid against one another, in order to get workmen.”  Adam Smith, The Wealth of Nations, 5th ed., chap. VIII, paragraph 17.

[198] Email exchange between Robert Reich and Robert Struble, October 19, 2007.

[200] Dumas, The Overburdened Economy, op. cit., p. 259, notes that "dependency theory" economists believe that improvement in economic conditions for some requires increased exploitation and misery for others.  Lester C. Thurow, The Zero-Sum Solution: Building a World-Class American Economy (New York: Simon & Schuster, 1985), pp. 312, 314, indicates that when economists discuss the "natural rate of unemployment" they usually refer to the aim of keeping unemployment high for the foreseeable future to depress inflation.  "Governments deliberately step on the economic brakes to control inflation with high unemployment.  From a social perspective the unemployed are not unemployed but unpaid workers being used to discipline the wage demands of the employed."
            Masudul Alam Choudhury, “A Critique of Developments in Social Economics and the Alternative,” International Journal of Social Economics 18 (1991): 44, states that the Phillips curve is a “replay of the neoclassical idea of equity-efficiency tradeoff using macroeconomic variables.”... Since ethical neutrality is intrinsic to this theory, argues Choudhury, the resulting policy gets “enclosed in an ethically neutral environment.”

[202] Rezlar, Automation & Industrial Labor, op. cit., p. 35.

[204] Jean-Paul Fitoussi and Nicholas Georgescu-Roegen, Structure and Involuntary Unemployment," in Malinvaud & Fitoussi, eds., Unemployment in Western Countries, op. cit., pp. 215-222.

[206] Reich, Supercapitalism, supra, p. 97.

 

[215] Theodore Roosevelt, Works, op. cit., Hagehorn, ed., 17:70.  From T.R.'s essay in The Outlook, February 4, 1911.

[216] Norbert Wiener, The Human Use of Human Beings: Cybernetics and Society (Garden City, N.Y.: Doubleday & Co., 1950, 1954), pp. 136-62.

[217] "The state could not directly ensure the right of work for all its citizens unless it controlled every aspect of economic life and restricted the free initiative of individuals.  This does not mean, however, that the state has no competence in this domain, as was claimed by those who argued against any rules in the economic sphere.  Rather, the state has a duty to sustain business activities by creating conditions which will ensure job opportunities, by stimulating those activities where they are lacking or by supporting them in moments of crisis."  John Paul II, encyclical Centesimus Annus 48 (1 May 1991).

[218] Schor, The Overworked American: The Unexpected Decline of Leisure (1991), op. cit., p. 82, table 3.2.  Under collective agreements French workers have won 5 to 6 weeks annual leave, German workers 5.5 to 6 weeks, and British workers 4 to 6 weeks.  Meanwhile in the USA vacation time declined [p. 80].

[219] Garraty, Unemployment in History, op. cit., pp. 49, 57, 59, 106.

[220] Janoski, The Political Economy of Unemployment: Active Labor Market Policy in West Germany and the United States, op. cit., pp. 20-23; cf. 17-18.

[221] Lekachman, Economists at Bay, op. cit., pp. 78-79; O'Brien, "Automation and the Older Worker," in Quinn, op. cit., p. 97.

[222] After courts had overturned pro-labor laws of 1883-1884 forbidding cigar making in tenement houses (passed by the New York legislature with assistance from the young assemblyman, Theodore Roosevelt), Samuel Gompers who had worked hard for the reform noted: "Securing the enactment of a law does not mean the solution of a problem as I learned in my legislative experience.  The power of the courts to pass upon constitutionality of law so complicates reform by legislation as to seriously restrict the effectiveness of that method."  [Gompers, Seventy Years of Life And Labor, op. cit., 1:194; cf. his chapter IX].
            More recently chief justice Richard Neely of the W. Virginia supreme court blames delays inherent in the open ended litigation system for impeding America's economic progress.  The financial risks of litigation lead also to small companies being excluded from markets or forced to merge. Richard Neely, How Courts Govern America (New Haven: Yale University Press, 1981), pp. 209-212.

[223] Garraty, Unemployment in History, op. cit., pp. 56, 39.

[224] Ibid., pp. 69-70.

[225] Luc Soete, "Employment, Unemployment and Technical Change:  A Review of the Economic Debate" in Christopher Freeman & Luc Soete, eds., Technical Change and Full Employment (Oxford, UK: Basil Blackwell, 1987), p. 32.  Soete reports that since the automation debate of the 1960s there has been a gradual, near comlete, disinterest in the subject of technological unemployment on the part of the academic economics community.  Indeed there has been a general neglect in macroeconomics of the technical change factor and the focus has instead been on general equilibrium as the main approach to the understanding of the operation of economic markets and economic agents.  There is "a broad consensus among most contemporary economists to treat the technology factor as a black box, not to be opened except by scientists and engineers or occasionally by economic historians,"  says Soete.  Among other things its measurement is as messy as its definition.  Most economic analysis is directed toward short-term problems, so that "it becomes `reasonable' to treat this long-term `messy' technology variable as essentially continuous and exogenous."
            This outlook undoubtedly lies also behind the failure of labor economics to pay much attention to the technology factor, says Soete. (Cf. p. 33)

[226] Matthew Carey (1760-1839), “The Poor in a Land of Milk and Honey.”  Annals of America v.6, p.23ff.  Quoted from Ted Kobernick’s Commonplace Book.

[227] Thomas P. Neill, Modern Europe: A Popular History (Garden City, NY: Doubleday & Co., 1970), pp. 81-82.  For Ricardo's statement of the subsistence theory [the iron or brazen law of wages] see his Principles of Political Economy and Taxation, (1817) chapter 5.  This theory was generally abandoned about mid-19th century for the wages-fund theory, which in turn gradually gave way in the 20th century to the marginal-productivity theory of wages.

[227A] Robert Reich, Supercapitalism, op. cit., pp. 158, 160.

[228] Lekachman, Economists at Bay: Why the Experts Will Never Solve Your Problems, op. cit.

[229] The following is an excerpt from remarks by my great-granduncle, Congressman Isaac Struble, delivered in the House of Representatives, May 16, 1890: "...remember that as a universal rule mankind is selfish, and to a large extent extremely so; that men in all vocations are earnest, vigorous, and persistent in efforts to secure the most that can, by any possibility of human effort, be gotten as a result of business application; that in manufacturing, as in all employments, the selfish spirit is ever alert and active, and the individual will always avail himself of every facility to advance his personal and financial welfare...." Congressional Record, 1890, pp. 4779-80.

[230] The papal encyclical, Centesimus Annus 42 (1 May 1991) takes a very unfavorable view of old style capitalism "...in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality and which sees it as a particular aspect of that freedom, the core of which is ethical and religious" (at 42).
            Although the collapse of communism is encouraging to Pope John Paul, he notes that the Western countries "run the risk of seeing its collapse as a one-sided victory of their own economic system and thereby failing to make necessary corrections in that system" (at 56).  The demise of Communism is not enough, he insists, to solve the realities of exploitation, human alienation, and the enormous material and moral poverty in the world.  "Indeed, there is a risk that a radical capitalistic ideology could spread which refuses even to consider these problems in the a priori belief that any attempt to solve them is doomed to failure, and which blindly entrusts their solution to the free development of market forces" (at 42).
 

 

 

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