Archive for June 17, 2008

Is serious left criticism of government’s share of GDP possible? (3)

June 17, 2008 Leave a comment

Continued from here.

Before you pack a lunch and head out the beach after 6 hours on the job, let me clarify something.

Just because it takes less than 7 hours of work per week to produce all the goods we as a nation consume – perhaps fewer hours than this, once you strip out the material costs of maintaining all of those aircraft carriers making the world safe for Global Warming – doesn’t imply the other 33-34 hours a week of work is stuff and nonsense.

Out of those remaining hours of work we cover such necessary costs as education for ourselves and our kids; medical care; retirement and disability funds for older citizens, and those unable to work for themselves; and, assorted other needs.

We also cover such services of questionable value as Hollywood, nail salons, mega-churches run by feel good evangelists like Joel Olsteen, and, manning aircraft carrier fleets.

Everything which functions as a part of our economic life involves men and women performing those specific functions, to the exclusion of directly productive work, and, therefore, have to be provisioned by the goods producing sectors of the economy.

A nurse, for instance, needs a home, food, automobile, and, clothing – and all the other goods commonly accepted as basic consumer items – as much as a steelworker. The same is true for teachers, and, Joel Olsteen.

However they acquire the dollars to satisfy these needs – directly charging their customers, town meeting tax votes, or, collection plates – those dollars are worthless unless there are corresponding goods actually produced for their purchase. And, this means the workday of folks in the goods producing sectors of the economy has to be extended to support them.

How people get the dollars doesn’t matter, and it also doesn’t matter whether these services are provided by government – as in the case of social security and aircraft carriers – or by “private” activities, as in the case of a good chunk of medical care, nail salons, and, mega-churches.

You could provide medical care, as is currently being debated, through a single payer government program, or as at present through a myriad of private and government sources – still, the folks who perform those specific functions, as they are not themselves directly producing goods, must be provisioned those goods from the work of others who do work in the goods producing sectors of the economy.

On the other hand those who are directly engaged in the production of goods can only receive medical care, etc., if there are a body of folks performing those task who have sufficient consumer means to provide them – if doctors have to build their own houses, construction workers go without medical care.

It is really that simple: we are all of one huge interlocking enterprise, not very different than if we all worked for a single company. The cost of medical care is embedded in every good produced in our economy – whether or not the workers who produced the goods have healthcare coverage themselves!

And, this is also true for aircraft carriers, nail salons and charismatic evangelists who lead mega-churches – all the costs associated with these branches of work have to be embedded in the prices of the goods you purchase at Wal*Mart, otherwise, those involved in these branches of work would be homeless, naked, hungry, and getting around on foot.

As we showed earlier, in 1914, the number of folks working in the services sector of the economy was about half of the folks working in the goods producing sector – 10.7 million in the former, 24 million in the latter.

However, a bunch of stuff we would consider necessary – like near blanket They had very unkempt handsaccess to medical care (if you ignore those 47 million people with none) or, the Occupational Safety & Health Administration – did not exist. Few people went to college, there was no national fund for retirement, and very few nail salons.

All in all life was nasty, brutal, short, and lots of people had terrible nail care.

Who knows why?

Perhaps they just didn’t care about the condition of their nails.

Perhaps they weren’t outraged and disgusted by unsightly cuticles.

I do have an alternative theory about this: blanket (or, at least near blanket) medical care, for instance, requires an extensive infrastructure across a number of number of industries to be effected. Add the cost of nail salons and … well, you get the picture.

All these things take time to build out, and, often it is not until all the pieces have come together that someone says, “Gee! We can put a nail salon on every corner and in every strip mall in suburbia.”

Thusly, an industry is born.

I offer, as do most economists, that the needs of society evolve as the productive capacity of labor increases. Things people by and large went without – like decent nail care, medical care, or, going home from work at night with all their limbs – over time become built into the expectations.

Marx, for instance, stated:

Production … produces consumption by creating a definite mode of consumption, and by providing an incentive to consumption it thereby creates the capability to consume as a requirement.

Which is to say, nail salons require all the real equipment and infrastructure to carry on their business, plus sufficient customers who want manicures and can afford them at the going rate. All of this took some time to evolve.

Apparently, in 1914, there was no overwhelming demand for nail salons.

As we will see, this is not so much true with at least one branch of the economy.

To be continued