Is serious left criticism of government’s share of GDP possible? (5)

Continued from here.

THE PLOT SO FAR:

Synopsis: We are trying to address two assertions of the Democratic Party left, as framed by Jared Bernstein, that government spending effects these ends:

1. Rebalancing our economic system, and
2. Reconnecting economic growth and broadly shared prosperity.

We have offered, in refutation, our own views:

1. Government is a form of the imbalance in our economic system – not the only form, mind you, but the most important form currently, and,
2. Economic growth, so-called, is incompatible with a broadly shared prosperity.

As evidence we have introduced a brief review of the changes the economy has undergone from 1914 to 2002:

1. Agriculture virtually disappeared as a significant job for Americans. Manufacturing, mining and construction doubled over the same period.
2. The number of people producing of goods remained mostly unchanged, but shifted decidedly to away from farming and into industry.
3. Services grew rapidly over the period to its present status as the main form of employment in the economy.
4. Government, during the same period, grew just as rapidly from about 2 million people to 21 million in 2002.
5. The overall workforce went from 36 million people to 131 million – all of it on the services side of the economy.

We offered the view that, in an modern economy, such as our own, the prices of goods reflect not only the direct cost of producing those goods, but, also the costs associated with the two non-goods producing sectors, the services sector and government – perhaps eighty five percent of the prices of goods.

FInally, we offered the view that unlike the services sector, which are compelled to find not only the material means to deliver their services, but also consumer demand for their services, government, through its coercive capacities, particularly in time of war and other national emergencies, can take control of economic activity, and subject it to its own ends.

As we have shown, the above power of government is, at the minimum, not unalloyed, with such historical consequences as war, and, such economic consequences as inflation and an overworked population.

Still, this was war: The Great War, the, unfortunately nicknamed, war to end all wars, which, in turn has been followed by quite a slew of wars, which had ends far less noble – including our own present wars in Iraq and Afghanistan to control the pivotal oil producing Middle East.

It is one thing to simply describe the consequences of The Great War, and quite another to assert the current difficulties associated with our present economic circumstances can be traced, in large part, to the government’s expanding share of GDP.

And, of course, that latter assertion is the point of this series.

We continue:

Between the war to end all wars, and all the wars which followed unended to this very day, an economic catastrophe of unequaled magnitude in all of human history occurred: The Great Depression.

We might call it, “the economic imbalance to end all economic imbalances.”

You may think we are being unnecessarily snide here, but, in truth, many people at the time thought this was the end of capitalism.

Not a minor fluctuation in the normal flows of economic activity, according to the Wiki, The Great Depression:

had devastating effects in both the industrialized countries and those which exported raw materials. International trade declined sharply, as did personal incomes, tax revenues, prices, and profits. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by 40 to 60 percent.^[2][3] Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as farming, mining and logging suffered the most.

In the United States the impact was ugly; generating a mass floating population of dispossessed, impoverished, voters compelled to live in improvised shelters – Hoovervilles – and beg for food:

A Hooverville was the popular name for a shanty town, examples of which were found in many United States communities during the Great Depression of the 1930s. The word “Hooverville” derives from the name of the President of the United States at the time. These settlements were often formed in unpleasant neighborhoods or desolate areas and consisted of dozens or hundreds of shacks and tents that were temporary residences of those left unemployed and homeless by the Depression. People slept in anything from open piano crates to the ground. Authorities did not officially recognize these Hoovervilles and occasionally removed the occupants for technically trespassing on private lands, but they were frequently tolerated out of necessity. Some of the men who were made to live in these conditions possessed building skills and were able to build their houses out of stone. Most people, however, resorted to building their residences out of box wood, cardboard, and any scraps of metal they could find. Some individuals even lived in water mains. Most of these unemployed residents of the Hoovervilles begged for food from those who had housing during this era. Several other terms came into use during this era, such as “Hoover blanket” (old newspaper used as blanketing) and “Hoover flag” (an empty pocket turned inside out). “Hoover leather” was cardboard used to line a shoe with the sole worn through. A “Hoover wagon” was a car with horses tied to it because the owner could not afford gasoline; in Canada, these were known as Bennett buggies.

Dirt cookie, anyone?

When voters go through such economic catastrophe’s as the Great Depression, you can bet Washington takes notice.

Herbert Hoover, of hooverville fame, then President of the United States, and, CEO of America Inc., according to Benjamin Kline Hunnicutt,

began to incorporate shorter hours as a basic part of his administration’s Depression policies-a position consistently pressed on him from the time of the stock market collapse by Secretary of Labor Doak and later by his Emergency Committee on Employment and his Organization on Unemployment Relief.

The reason for this proposal, far from unusual at the time, was simple:

[It} was occasioned by what was then seen to be the larger social and economic problem of “overproduction.” Many Americans, businessmen and labor leaders alike ‘ believed that chronic unemployment and massive disruptive surpluses constituted national threats and were the bitter fruits of improved productivity and economic abundance. A “mature economy” was seen to be a real and present danger.

The same industrial power governments had tapped to slaughter millions in The Great War, was also rapidly transforming the economic landscape in the United States.

Agriculture, as we have seen, was collapsing as a sector of the labor force, industries were everywhere growing up overnight.

In truth, society was for the first time experiencing an unprecedented condition in human history: too much could be produced given the relatively limited consumption patterns of the country, and the appearance of this massive cornucopia of productivity was a constant threat to economic activity itself.

However, Hoover’s voluntary proposal for a reduction of working time was not to be.

Neither, was the more insistent demand for a mandatory reduction of the work week by law, as advocated by labor unions, and passed by the Senate in 1933.

Instead, as Hunnicutt states (and, we extensively excerpt),

… Roosevelt abandoned the project of controlling production and lost patience with business voluntarism. He was convinced by new advisors such as Harry Hopkins to act directly to stimulate economic activity. Leaving his suspicions about market maturity and limited growth behind, Roosevelt began to use such things as public works, liberal moneary policy, larger government payrolls, and deficit budgets to promote production and consumption. As Robert Heilbroner described these events:

to the economists in the Roosevelt administration . . . the government not only could but should use its spending powers as an economic instrument for securing full employment … They envisioned a new form of guided capitalism-a market society in which the all-important levels of employment and output would … be promoted, protected against decline and stimulated toward growth by public action.”

Such programs as the WPA demonstrated that Roosevelt had begun to think of the Federal government as having an obligation to provide work for its citizens if the private sector could not. But government would be the employer of last resort. The first line of attack would be to stimulate business activity. Whatever slack was left in the economy would be taken up not by shortening the hours of work but by constructive government spending policies. Hence, Roosevelt, at the prodding of his advisors, consistently opposed the 30 hours legislation throughout the Depression, offering his own programs as a series of alternatives.

There was, in our opinion, a much less optimistic explanation for Roosevelt’s turn against the 30 hour work week – an explanation drawn on the experience of The Great War: Government was now an independent player.

To be continued