The Productivity Recession

I have written earlier regarding other functional contradictions inherent in Capitalism, once it hits its Saturation Point, as it now seems to have done, such as there being no real source of Profit in a Global Economy, and that a chronic Commodities Scarcity even during a Global Recession would guarantee that Price Inflation would kill any twinge of a Recovery at the very first wave of new hiring and increased Demand.  Now, this small paper will discuss how Productivity contributes to the collective pain and misery that are becoming ever more associated with the ideas and institutions of Capitalism.

Firstly, I understand that people don’t ordinarily think of Productivity as a problem.  People think of Productivity as being equivalent to the idea of making stuff, doing stuff, and keeping busy in a good way.  But in economic terms it is more complicated than that, where ‘Productivity’ is a factor of things, of Goods Produced divided by Invested Labor.  So, Productivity as an Economic Factor, can go up in two ways – 1) the same number of workers can produce a lot more stuff, or, 2) a lot less workers can produce the same amount of stuff at a much reduced cost.  Well, businesses don’t really like the first means of achieving greater productivity, as simply increasing the absolute amount of product leads to Price Deflation, that is, charging less for their product.  It cheapens the Market.  So businesses like to put out the same amount of stuff at less of a labor expense, by firing workers.  So, basically, increased Productivity does not mean, in most cases, that more is being produced, but that less people are involved in and compensated for doing the producing.  

I was reading up on the News, and found a small article on the BBC Webpage, where this one lady journalist was batting back and forth the idea that the West might slip into an eternal state of Stagnation just as Japan has appeared to do, or that the West might still Recover and everybody but the Japanese can go on being happy again.   The detail that caught my eye was where she stated that while all the firings, redundancies, downsizings and unemployment were just simply horrible, that the bright side of it was the Productivity was shooting up, that it seems that the Companies were still getting product out despite the fact that everybody but the Boss and his pretty secretary were fired.  So, to this insightful BBC lady journalist, the ‘silver lining’ in all this economic news is that employees are rather unnecessary and would in fact derail any significant recovery. 

Of course, the sizeable hole in this way of thinking is that Demand will never recover as long as nobody is employed, and that the Boss buying buckets of caviar, new yachts, mansions, and Mercedes-Benzes’, and his secretary buying a new smart phone, slightly faster than her old Smart Phone, simply are not enough to carry us all to a new age of universal prosperity.

Then there is the matter of the numbers themselves.  Yes, when numbers are trending upwards, it is better than numbers trending downwards, sure, but then there is the matter that Bad Numbers following Worse Numbers are still Bad Numbers.  It is like looking at just one Team’s performance in a sports match and to say that if the one team scored nothing in the first quarter, and nothing in the second quarter, but scored one amazing goal in the third quarter, that things were looking up and becoming hopeful for the fourth quarter and last chance before total doom.  But what if the other Team had scored 75, 95 and 168 in those same first, second and third quarters respectively.  Then we would suddenly see that any tiny numerical improvement in the context of this broader picture of total annihilation would be effectively insignificant.  The Boss and his secretary buying something in this quarter is seen as an improvement only because they bought nothing at all in the last quarter, but everybody else is still starving just as badly.

Well, I suppose it is just mean spirited for the rest of us to be fixating on ourselves and our own petty problems when we should be truly happy when the 1% see an opportunity to expand upon their brilliant successes.  So we should be happy at the increased Productivity Factor, but remember, it only helps Them, but for the Rest of Us, well, it only adds to the Pain and the Problem. .  

Oh, and there is that matter that People are looking for Good News, and with every other number going badly, Productivity is the only number on the rise, even if marginally.  So the Economists, the Policy Makers and the Journalists are clinging to it like it is their Last Straw.  They don’t see it as an embedded structural contradiction, that creating Product without Employees kills any chance at not only Recovery and Growth, but any chance that Society will not collapse and the World fall into barbarism and chaos, as we see happening in the Near East and Africa where it has always been the Practice of the Very Rich to keep Employment very low.

Another News story caught my eye.  The United States had created a liberal policy of making it easy to fire workers, thinking that the same principles exercised in reverse would make it easier to hire workers (but it is never so easy to Hire as to Fire, as hiring workers takes advertising, selecting, processing and training the new Workers, even when there are no Governmental Requirements to deal with).   Most of the World followed suit, well, except for Germany.  Now, in retrospect, it seems that liberalizing policies to make it easier to fire workers only resulted in the consequence that millions of workers were fired, mostly because it was just so darn easy to fire them.  And because Consumer Demand in these countries swiftly declined, they fell deeper into Recession, and since they lost the capacity to Produce, at the opportunity of the least sight of Demand anywhere else in the World, they stayed stuck in Recession.  Germany, who didn’t fire everybody, kept a strong domestic Demand, and because they kept their Factories open they were able to answer for any blip of returning Demand.

Of course, this is not to say that every country could have benefitted by keeping their Factories up at 100% Capacity, as there simply would not have been business enough for everybody.   This reminds me of something that happened to me years ago – a young Economist spoke of the Hong Kong Miracle, that in Hong Kong they charged no Taxes to Businesses or to the Wealthy, and so Businesses and Wealthy People flocked to Hong Kong and so Hong Kong was doing rather better than every other City or Country in the entire World, paying for their local Government and necessary Social Infrastructures with Wage Taxes paid by poor people who were just happy to have a job.  He concluded that everybody should do exactly as Hong Kong so that everybody would as Well.   I reminded this Young Economist that there can be only one “Pirate Island”, so to speak, that is a place with no laws, no regulations, and no taxes, and that if “Pirate Islands” were to multiply, soon the leveling effects of competition would again return everybody to the same deadly flat playing field as before, and all would be equally poor again, only this time, with no viable tax and revenue structures in place.  Everybody would in fact be worse off after their “Miracle” played itself through.

Again, regarding the limited “German Miracle”… I remind you of the Commodities Scarcity Recession, that with increased Employment, there would be a huge increase in Commodities Inflation and everything would soon go Crash again.   But, Germany did have a strategy whereby in a General Recession effecting every Economy in the West, that they would do the least worst.  I guess we should all congratulate them on their applied Selfishness, and remember especially that they did in fact succeed the best by caring about the ‘Productivity Factor’ the least, and that they saw the cutting of Labor Costs in the same way as cutting off their Hands and their Feet.  You can only cut off so many of your own hands and feet before it begins to become a problem, don’t you think?

Now, I did read a book a while back, which specified that productivity growth, that is, firing workers to increase profits, is not really supposed to be a problem because it is supposed to lead to increased Growth which would cause these same workers, and even more, to be hired back again.  The way the Policy Makers and Bankers saw it, Productivity increases of about 2% a year could help propel Growth to 4% a year and so Employment would grow by about 2% per annum and everybody would be happy.  But now Growth is flat and Productivity is still at 2%, which means that the Work Force is shrinking by 2% a year.  That means that Demand is shrinking.  That means that the Tax Pool is shrinking.  Remember, Rich People don’t pay taxes, Workers do, but when a Worker loses his job, the money that would have been paid in Wages reverts upward to the Rich Boss who pays too much in Political Campaign Contributions not to have Tax Exempt Status for everything everywhere and all the time.  The reason so many Municipalities are in Fiscal Crisis is because their Tax Structures were implemented back during the old Industrial Phase of Western Economic History, some half a century ago, and they have not been able to realign their Tax Systems to follow the Money upward as it Concentrates at the Top.  When the Workers had all the Money, they paid all the Taxes, and now that the Rich People have all the Money, the Workers still pay all the Taxes, but with a lot less Money – you can’t get Blood from a Stone, and so Cities, States, Provinces and entire Nations are going Bankrupt.   

I have one last point to make.  Yes, some Policy Makers do recognize that it takes more than catering to the Top 1% to make a healthy Economy, and so they have been making the Political Moves to implement Jobs Programs and fostering policies that would encourage hiring workers and increasing Employment.  Yes, yes, this would be fine, but so far it seems that all of this would be done with Borrowed Money, Bond issues, and such.

Well, the problem with Borrowed Money, is that it is very much the same as Printed Money, that is, it seems to just come out of the Blue to help one particular Society, that decided to just help itself, to buy up Commodities that other Societies have to pay Hard Cash for.  So Inflation goes up for everybody, and a Generalized Global Recession for Everybody is curtailed by those who cornerd the Markets with their worthless bonds and cheap slips of paper.   And the World allows it because these particular Economies are considered “too big to fail”. The fear is that if the Big Boat goes down, all the little boats will be sucked under with it.  The Idea of the Global Economy survives in the Notion that in a generalized Collapse, there will be no survivors.   But even with everyone clinging together, not much that is sensible is being put forward.  When it comes to generating actual matters of Policy, every little Political Entity represents only itself and speaks only for itself, and nobody and Nothing exists to speak for All and Everyone.  

But, yes, it is One Global Economy and so we do need One Global Economic Plan.  But, with Democracies in it means that Nobody is In Charge.  And with Nobody in Charge, we can certainly look at the bright side – that we can all glory in our Freedom.  We can all die of starvation and exposure or in the clashes of massive civil unrest in the grateful glow that nobody is telling us what to do.    Yes, it is better to die Free then to let some dictatorial Universal Brotherhood tell us what to do!