Archive
Mark Thoma goes biblical on jobs…
Mark Thoma brings us the updated version of the injunction, “Let him who has TWO coats give to him who has none”, in a post titled, Government Can and Should Create Jobs . Luke manages to make this point in 12 words, but since Thoma is an economist, he seems to require more than one hundred times that many words to get to the point.
In a town in a country suffering through a recession, a wealthy person just happens to live next door to an unemployed worker. The worker has experience in a variety of trades, and is quite competent, but despite his skill and reputation, there are no jobs to be found. And it isn’t for lack of trying.
Seeing this, and having a kind heart, the wealthier of the two — much, much wealthier — decides his neighbor needs a job, so he sets about creating one. The first option he considers is just to find something for him to do, it doesn’t much matter what, digging holes and then filling them up, whatever. He decides that if he goes this route he will ask his neighbor — wink wink — to watch his grass grow. Both of them know this is a ruse, a made up job to justify the payment, but somehow having the ruse in place allows the unemployed neighbor to keep his dignity in a way a direct cash payment would not. It’s a job not a hand out — he does have to look out his window a few times a day to make sure it the grass is growing like it’s supposed to. But practically it’s a means of support for the neighbor and his family that allows him to continue his diligent search for a job.
Why didn’t capitalism collapse in 1929? (Part three)
Continued from here
The great vampire squid wrapped around the face of humanity (click to expand)
If anybody thought that the magnates of industry and finance were going to lie down and play dead simply because some obsessive, detail oriented, incredibly well read, old fart from Germany offered evidence that their future was bleak … well, Matt Taibbi has two words for you: Goldman Sachs.
The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.
It would be nice to be able to follow that particular rabbit down its hole, but we are concerned not so much with the historical record of how this most rapacious and predatory form of capital came to dominate your life, but the theoretical model which predicted that it would.
If Grossman is correct, Marx detailed four steps businesses would take in the event of any collapse to restore the economic activity, i.e., to turn a breakdown into a temporary downturn:
- Slow down the rate of investment in new machinery, plant, and equipment, raw materials and inventory
- Devalue the existing machinery, plant, and equipment, raw materials and inventory
- Reduce employee wages
- Foreign expansion
It can be argued by critics of this theory of collapse – and many have made this argument – that the performance of the American economy coming out of the Great Depression, and, in particular, following World War II, proved much of Marx’s theory wrong. In the end, capitalism did not collapse despite improvements in the productivity of labor – it proved resilient and ultimately rebounded from a near cataclysm.
But, those critics would have to explain this quote from Lord John Maynard Keynes:
Thus it is fortunate that the workers … resist reductions of money-wages … whereas they do not resist reductions of real wages, which are associated with increases in aggregate employment and leave relative money-wages unchanged, unless the reduction proceeds so far as to threaten a reduction of the real wage below the marginal disutility of the existing volume of employment. Every trade union will put up some resistance to a cut in money-wages, however small. But since no trade union would dream of striking on every occasion of a rise in the cost of living, they do not raise the obstacle to any increase in aggregate employment which is attributed to them by the classical school.
If we are interpreting this passage correctly, Lord Keynes seems to be saying that you are so dumb that as long of you have a job you will not complain that your real standard of living is falling as a result of inflation – provided that drop is achieved gradually and continuously. If the amount of dollars written on your paycheck stays the same, or even increases, you can be incrementally impoverished through inflation without any significant complaint on your part.
What is more, Keynes observes, inflation not only serves to reduce real wages, it can also reduce real salaries, rents, and interest on debt.
Thus Keynes stumbles on a way to do much of what Marx said had to be done – slow the rate of investment in new plant and equipment, devalue the existing stock of plant and equipment, and reduce wages – in a fairly novel way: by progressively and gradually depreciating the purchasing power of the currency. Inflation became a permanent fixture of the American economy.
The question to ask, however, is: Did the policies advocated by Keynes cause the recovery of the economy in the aftermath of the Great Crash of 1929?
This is not a difficult problem for economists to solve. It is fairly easy to build a Keynesian model of the economy in the 1930s, put in the changes imposed on the economy by the New Deal and the Federal Reserve, and measure the effects of those changes on economic activity.
Better yet, there is a wealth of economic data at hand which can be, and have been, sifted innumerable times to discover the answer to that question.
In the badly split field of economics, the results of those studies seem to have one common point of agreement – total hours of work remained well below its peak level until the outbreak of World War II:
Hours worked per adult–including government workers–fell about 27% between 1929 and 1933, and in 1939 remained about 22% below the 1929 level. Many people, including economists, are surprised when they read that there was little recovery in hours worked during the New Deal, because the unemployment rate declined, and typically declines in unemployment go hand-in-hand with higher labor [hours]. But changes in the unemployment rate don’t provide a good proxy for changes in labor [hours] during the New Deal because some New Deal programs included explicit work-sharing. By reducing the average workweek, the New Deal was able to spread employment across workers, but this doesn’t mean there was an increase in the amount of work that was done.
Hours of work never recovered! Capital had reduced those average hours approximately along the lines proposed by the Black-Connery legislation, which mandated a reduced thirty hour work week.
And, if hours of work did not return to peak levels it is obvious capital had suffered precisely the kind of final breakdown predicted by Marx’s theory.
Moreover, unemployment, although below the peak levels earlier in the decade, still was above 15 percent in 1940, despite a large-scale government make-work program.
James K. Galbraith inadvertently points out that much of this “recovery” was an illusion built on Washington debt financed spending:
Roosevelt ran (in 1936) on a platform that he would try to reduce significantly, if not completely eliminate, the deficit in the 1937 fiscal budget — and he sent to Congress a budget that did just that. Roosevelt won by a landslide — but the economy fell like a landslide and in the first 9 month of 1937 the economy fell back to approximately where it was in 1932. In other words “fiscal responsibility” in just 9 months led to a landslide fall in the economy back to where it was near the bottom of the Great Depression . 9 months of fiscal responsibility had undone the good work of 4 years of deficits.
No doubt, this debt was a windfall for investment bankers like Goldman Sachs, who could afford to buy the bonds issued by Washington, and then sit back and watch their otherwise superfluous funds appreciate on the public dime. But, it served no purpose for the millions of working families who were still facing a generational economic catastrophe.
Which leaves Marx’s fourth point – foreign expansion:
Well, there was this rather ugly dust up that cost 82 million lives, left the United States as the only functioning industrial power on the planet, and its currency as the world’s reserve money…
To be continued
Re: The People 
Enemy of The People
This is a blog dedicated to the critique of the most important category of democratic thought: The People.
The People, as a category, places wisdom in the Great Masses (in pseudo-Marxian thought; The American People, in conventional American political discourse.) We will continue in our effort to show this wisdom to be deeply and fatally flawed; and the category itself a subject lending itself to thorough-going critical analysis.
How does this differ from previous approaches?
We make no excuses for The People. We do not accept the Chomsky argument of manufactured consent – a variant of populist and progressive critiques, which seeks to explain the outcome of the political process as some sort of conspiracy by, and, on behalf of, “the rich,” or, in pseudo-Marxian analysis, “the ruling class.”
“No,” we state, The People are not children whose behavior can be excused or explained by some sort of immaturity of a class of individuals newly possessing power, in the face of propaganda by a more or less hidden minority of oligarchs through their intellectual lapdogs.
By doing this we are forced to engage in the critique of the category, The People, itself, and to expose it for what it is: a lie, a figment of political idealism lacking real substance. Democratic political thought has always stood in awe of this category, and has, therefore, never been able to penetrate the superficial appearance of a mass of voters free to act politically solely in accordance with their interests, yet effecting this political act with the most vicious, ugly, and disgusting results.
The Free Democratic State, we will show, is nothing more than that state in which each individual (and, thus, all individual taken together) is (are) free to seek to impose their prejudices, delusions, and, real or imagined divisions on society as the freely arrived at state of society.
For this reason alone, our previous blog, The Alienated Self, was worthy of reading, however few people ever read it.
We begin again from there.
Holy of Holies
As a category, The People, is impervious to criticism; the Holy of Holies; the Grail. It is not until this category is brought to earth to live among us mortals, stripped of its religious characteristics, that it becomes clear The People does not refer to any given real living breathing group of individuals but the abstraction from real living breathing people.
Thus, the term, “The American People,” loses all the characteristics of the actual group of individuals living within the confines of, and citizens of, the United States.
The latter individuals, if anything, are, for instance, racists; unrepentant racists.
The kind of racists who could exterminate the population of native occupants of that territory, and then make movies which blame the victims of the extermination for the crimes committed against them.
The kind of individuals who could dismember the neighboring nation of Mexico, and then attack and excoriate the descendants of that nation for sneaking across the border, even as they hired them to pick tomatoes.
Indeed, they are the kind of individuals who could denude West Africa of it population, transport them in chains to this shore, rape and breed them like prize cattle, work them to the point of death, lynch them, inter them in peonage for generations, marginalize them as 3/5 human and 2/5 mule, deliberately perform scientific observation of them as they died of treatable diseases, shoot them down like dogs with impunity on the streets of New York, Chicago, or Los Angeles, lock them in prisons on manufactured cause, release them to spread the silent death of HIV among their population, brand them ineducable, shiftless, lazy.
And, then ask them why they have a fucking attitude.
But, we digress, do we not?