Archive for November 15, 2009

The Great Lie: Jobs and economic growth

November 15, 2009 4 comments

art.detroithome.cnnIt is the LIE that killed Detroit.

It is killing California.

It is killing Florida.

It is killing Puerto Rico.

It is turning Michgan into a wasteland of abandoned factories and $12,000 homes.

The lie is the assertion that there can be no creation of jobs without economic growth.

And, that lie will be on full display during the Messiah’s jobs summit in December. In announcing the his summit, the Messiah reinforced that lie by inferring a relationship that patently does not exist:

“We’ll gather CEOs and small business owners, economists and financial experts, as well as representatives from labor unions and non-profit groups, to talk about how we can work together to create jobs and get this economy moving again,”

Let us be clear: there is no relationship between getting the economy moving again and creating jobs. None. The one has nothing to do with the other. He might as well have linked creating jobs to the discovery of water on the Moon: We’ll gather Nasa scientists, economists and financial experts, as well as representatives from labor unions and non-profit groups, to talk about how we can work together to create jobs and discover water on the Moon.”

Let us begin at the beginning

The most widely used measure of economic activity is the Gross Domestic Product, a measure defined by Wikipedia in the following excerpt:

The gross domestic product (GDP) or gross domestic income (GDI) is a basic measure of a country’s overall economic performance. It is the market value of all final goods and services made within the borders of a country in a year. It is often positively correlated with the standard of living, though its use as a stand-in for measuring the standard of living has come under increasing criticism and many countries are actively exploring alternative measures to GDP for that purpose. GDP can be determined in three ways, all of which should in principle give the same result. They are the product (or output) approach, the income approach, and the expenditure approach. The most direct of the three is the product approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to people’s total expenditures in buying things. The income approach works on the principle that the incomes of the productive factors (“producers,” colloquially) must be equal to the value of their product, and determines GDP by finding the sum of all producers’ incomes.

There is nothing is this very long tedious definition which states a relationship with the level of joblessness in a country. Is this definition correct? Is there an error in the presentation of the matter? Is there some hidden relationship which our untrained eyes are incapable of seeing?

Then why is it that every time an economist or politician speaks of the pressing need for jobs does the conversation turn back to the question of generating economic growth if there is nothing about GDP which can be connected to the level of employment?

Recessions and unemployment:

Another trick of the shitheel economist and his patrons on Wall Street and Pennsylvania Avenue is to  promote the entirely fictional assertion that unemployment is somehow caused by recessions.

Can this assertion stand up to scrutiny? We believe it cannot for two reason, the first and most important of which is the subtle redefinition of a recession taking place, the original of which is again provided by Wikipedia:

In economics, a recession is a general slowdown in economic activity over a long period of time, or a business cycle contraction. During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits and inflation all fall during recessions; bankruptcies and the unemployment rate rises.

In this definition, jobs are expressly linked to the definition; employment and unemployment are considered in a mix of economic indicators including GDP, which, as we have shown, does not include them in its definition.

However, an examination of the last two recessions (1991 and 2001) will show that jobs losses continued even after those recessions were considered at an end as is shown in the following chart porn provided by the Federal Reserve Bank.

jobless recoveriesThe gray bars in the chart are the periods of recession, as determined by the National Bureau of Economic Research (NBER) which is widely acknowledged by Washington policy makers and economists to be the authority on such things, and which has included such Messiah administration luminaries as Christina Romer, the Messiah’s chair of the Council of Economic Advisers (CEA). (She is currently on leave from the NBER)

The circles highlight the 1991 and 2001 recessions when the NBER called an end to recession even as unemployment was rising! If a recession can be considered over when unemployment is still rising – and all indications are that this present Great Recession will be defined in a similar fashion – obviously recessions either are not the cause of unemployment, or play no practical role in it.

Additional evidence of this can be found in a comparison of the US and German economies in this recession. As we have mentioned before, Barkley Rosser, at Econospeak blog has provided evidence which shows that although the German economy has suffered through this recession with a fall in GDP twice that of the United States, its unemployment rate has remained essentially unchanged while the US unemployment rate has increased more than 60 percent.

At the risk of appearing to beat a dead and discredited economic aphorism, we reproduce his findings again:

Country 2009 GDP decline Sept. 08 Unemployment Rate Most Recent Unemployment Rate Month
Germany -4.9 8 8.2 (Sept. 09)
France -2.1 7.9 9.9 (Aug. 09)
UK -4.4 5.5 7.9 (July 09)
US -2.9 6.1 9.8 (Sept. 09)
Netherlands -4 2.5 5 (Aug. 09)
Switzerland -1.7 3.4 4.1 (Sept. 09)

What is there about this evidence that makes it so difficult for economists to absorb it – or are they just so ignorant of the suffering of ordinary Americans, so contemptuous of their hopes and dreams, so callously insensitive to what it takes to raise a family in a hailstorm of withering economic forces that any chance for that plum sinecure in the administration, or crumbs gathered from the table of Wall Street bankers is enough to drive them to destroy the integrity of their own profession.

Productivity and Unemployment

Another lie promoted by economists is that jobs are lost as the result of improvements in productivtiy of labor. The argument goes something like this: In order to improve their profit margins, companies are driven to reduce the amount of labor required to produce their products. This improvement in the productivity of the economy causes unemployment.

Wikipedia has this to say about productivity:

Productivity is a measure of output from a production process, per unit of input. For example, labor productivity is typically measured as a ratio of output per labor-hour, an input. Productivity may be conceived of as a metric of the technical or engineering efficiency of production.

The entry on labor productivity adds this:

Workforce productivity is the amount of goods and services that a labourer produces in a given amount of time. It is one of several types of productivity that economists measure. Labour productivity can be measured for a firm, a process or a country.

Fair enough, but what does this have to do with jobs?

It is typical of the lax and disordered mind of the economist that labor (work) is constantly conflated with jobs, when the two are only tangentially related. It is true that every job requires work – if you’re not an economist – but it does not follow – and the work schedule of most economists prove – that there is no naturally given amount of work associated with any job.

It is possible, therefore, that a job during the relatively primitive times of the 19th Century may have required as much as 72 hours of work per week – six days a week, at 12 hours a day – but there was not then and there is not today any natural requirement that only a 12 hours day, six day a week work schedule constitute a real job.

A job is merely (merely!) a means to measure the contribution of each member of society – other than economists and Paris Hilton – to the total work required by society to produce the things it need. It need involve no more work than is the average of all the work need by that society divided by the total members of that society – including economists and Paris Hilton – who perform it.

Productivity reduces this requirement by enhancing the capacity of labor to produce its need in a shorter period of time; it follows that it is not and cannot be the source of unemployment.

Let’s be clear about this:

Slow economic growth, recessions and improvements in productivity no more cause unemployment than sex causes venereal disease, but they can all be accompanied by a good fucking!

And that is what you are in for at the Messiah’s jobs summit…