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Reality versus Romer-Bernstein
Obama economic advisers Christine Romer and Jared Bernstein made projections for unemployment in 2009. Their projections were the basis for the Obama stimulus plan passed in the opening moments of his Presidency. We thought it might be interesting to see how those projections have panned out so far.
Below is the chart, courtesy of SeekingAlpha.com.
All we can say is, it’s a good thing economists get graded on a curve.
Is serious left criticism of government’s share of GDP possible? (8)
Continued from here.
What we have asserted so far, in the previous seven articles, is not, in our minds, demonstrable facts – scientifically proven knowledge – but is being done to offer a reasonable answer to the question we have posed: Is serious left criticism of government’s share of GDP possible?
We want to emphasize this for two reasons:
- We are not qualified to settle this issue to the extent required for a peer reviewed study in the field of economics. The material covered here bridges a wide field of separate inquiries, the expert voices for which are far more qualified than we to investigate and confirm, or, refute, in part or as a whole – however little attention it will ever get from them.
- What we have asserted so far is of such minor importance, in comparison to that which we will assert next, that the spectrum of political thought in this country – left to right, conservative and liberal, Democrat and Republican – will immediately ignore it, as it strikes to the very root of government itself.
That assertion can be summed up briefly:
In this present crisis, government is not the solution to our problem; government is the problem. Ronald W. Reagan
We are, in other words, suggesting the left embrace this 
statement, and, provide the kind of honest criticism of government which is necessary to make that criticism the driving force of American politics.
We angrily reject the argument that embracing this view is an argument to embrace the author of the Welfare Queen myth, any more than embracing Socrates views on ethics is tantamount to seeking the company of boys.
Apart from the fact the right, including Ronald Reagan, never truly believed in the truth of this statement – just as they have, by and large, never disowned their gay children, practiced abstinence before marriage, or, avoided taking advantage of the most liberal abortion laws when circumstances required – they have not made even the slightest practical dent in the growing black hole of government spending.
So far as we can tell, there has never been a single Republican, or, Democratic admistration – federal, state or local – since the Great Depression which has spent fewer dollars, and, employed fewer people, by the end of its term in office than it had at the beginning.
Not one.
And, as we will show, the reason for this is simple: Since 1950, permanently, and, even before, as has been seen in the Great War, and, the Great Depression, government has emerged as an independent player, pursuing its own agenda, and exploiting the growing productive power of society on its behalf, against society – and, so far as we can tell, this condition exists not only in this country, but in all nations, simultaneously.
But, there is also another reason: the right has never been able to come to grips with the implications of Ronald Reagan’s statement – massive and sustained unemployment, economic collapse, the likes of which has not not been seen since, and would dwarf, the economic catastrophe which accompanied the Great Depression.
The potential for this calamity in the event of a reduction of government’s share of GDP can only be prevented by the reduction of the work week.
However, it is our belief, this calamity is likely not only in the case that Ronald Reagan’s dictum is observed, but, even if it is not.
To explain why, we now fast forward to the story of National Security Council Memorandum 68.
To be continued
Is serious left criticism of government’s share of GDP possible? (7)
Continued from here.
We would like to say there is at least one powerful argument in favor of Hunnicutt’s assertion that,
Roosevelt and the majority of Americans saw this free time as a tragedy that had to be eliminated by increasing economic activity-an activity stimulated by government spending if necessary.
Although true, it is just not related, in my opinion, to the unemployment crisis spawned by the Great Depression.
There is another cause, which predates the Great Depression, and, which Hunnicutt calls the only competing alternative to shorter work time on the part of American voters: the need for higher wages.
What we have to show, simply enough, is that this demand for higher wages became an over-riding concern of American voters by the time of the Great Depression, and, when combined with the catastrophic unemployment of the that event, made it possible for Roosevelt to offer his alternative approach as a conservative, palatable, alternative, bridging both concerns: avoiding unemployment and generating more income.
As the chart below shows, since 1914, and continuing until today, the price level has exploded upward in a persistent, secular, inflationary spiral.
A spiral which, based on figures supplied by the Bureau of Labor Statistics, has, over the past 94 years, made it necessary for voters to earn $2166 today for a basket of goods they could have purchased with $100 in 1914!
An argument could be made here, and we will make it, that even the catastrophic unemployment of the Great Depression affected only 25 percent of the population.
Inflation, on the other hand, though muted by the deflation of that event, continued to exert a powerful psychological pressure on the thinking of American voters – employed and unemployed alike – making Roosevelt’s expansionist policies appear to be a safer alternative to doing nothing, on one hand, and, reducing the work week, on the other.
In a monetary regime of rampant inflation, “free time,” is experienced as a tragedy not just in the obvious form of unemployment, but also in the associated forms of sub-employment, and, stagnant wages.
This free time can exist in the form of a voter unable to find work, unable to find enough work, forced by circumstances to accept lower wages for work, and, forced to accept year over year net negative increases in wages for work.
And, its resolution can appear in the form of extending the voter’s working time on a first job, adding a 
second job, adding more members of the household to the workforce, and, relying on extended family members to supplement income.
Thus we find, according to one study by Evan Roberts in 2003 – well after Hunnicutt’s paper, of course – this change in the labor force participation of married women:
One of the most important changes in the United States labor market in the twentieth century was the increased participation of married women. In 1900 just 5.6% of married women were in the labor market. By 1998 61.8% of all married women were working or looking for work. The change is all the more notable because the labor force participation rates of single women have grown not twelve hold, but just by half in the same century (from 43.5% to 68.1%). Increased participation by married women in the labor market has occurred because the relationship between characteristics of women and their families, and labor force participation at a point in time has changed.
Of course, the actual relationship between married women entering the labor force and inflation is far more complicated than this simple assertion – and, far beyond this blog’s ability to nail down.
However, the coincidence of these two trends – price level, and work force participation of married women – indicates there is much to be understood on the subject.
To be continued
Is serious left criticism of government’s share of GDP possible? (6)
Continued from here.
Now, before we proceed, we have to address the rather disturbing disagreement between ourselves and Mr. Hunnicutt, who offered this unpalatable conclusion to his groundbreaking 1984 work, THE END OF SHORTER HOURS,:
Certainly, the end of the shorter hour movement has many dimensions and causes which must be explored. But the short narrative of events presented in this essay suggest two important dimensions and causes-one social, the other political. Among the reasons for the ending of the shorter hour movement was the fact that American attitudes toward free time changed. For over a century, American workers and their supporters valued shorter hours. They did so for a variety of reasons-some economic and some non-pecuniary. Only higher wages competed with this issue for workers’ attention. During the 1920s and early 1930s labor and other groups and individuals saw in “the progressive shortening of the hours of labor” a practical foundation for liberal idealism as well as a necessary remedy for economic ills. But during the Depression, free time took the form of massive unemployment. Instead of accepting labor’s 30 hour week remedy, Roosevelt and the majority of Americans saw this free time as a tragedy that had to be eliminated by increasing economic activity-an activity stimulated by government spending if necessary. The concept of free time as leisure-a natural part of economic advance and a foil to materialistic values was abandoned. The reform continuum in this one area was broken by Roosevelt’s New Deal and by the modern adherence to economic growth as the great liberal goal.
As far as we can tell, in this view, there was a kind of cultural shift in the way Americans viewed a shorter work week. The majority of Americans came to see “free time as a tragedy.”
And, as Franklin Delano Roosevelt agreed with them,
Since the Depression, public policy has been designed to maintain “adequate demand” and “full employment.” Government deficit spending, liberal treasury policy, increased government payrolls, and expanded public works projects have usually been employed whenever the private sector has shown indication of stagnation.
It is possible, we suppose.
However, we tend to support the view of a contemporary of those events, who had quite a different take on things – Bertrand Russell
Russell penned the following in 1932, ahead of the debates in Washington:
In view of the fact that the bulk of the public expenditure of most civilized Governments consists in payment for past wars or preparation for future wars, the man who lends his money to a Government is in the same position as the bad men in Shakespeare who hire murderers. The net result of the man’s economical habits is to increase the armed forces of the State to which he lends his savings.
Following up on the point, Russell notes the lessons learned, so to speak, from the carnage of The Great War:
Modern technique has made it possible to diminish enormously the amount of labor required to secure the necessaries of life for everyone. This was made obvious during the war. At that time all the men in the armed forces, and all the men and women engaged in the production of munitions, all the men and women engaged in spying, war propaganda, or Government offices connected with the war, were withdrawn from productive occupations. In spite of this, the general level of well-being among unskilled wage-earners on the side of the Allies was higher than before or since. The significance of this fact was concealed by finance: borrowing made it appear as if the future was nourishing the present. But that, of course, would have been impossible; a man cannot eat a loaf of bread that does not yet exist. The war showed conclusively that, by the scientific organization of production, it is possible to keep modern populations in fair comfort on a small part of the working capacity of the modern world.
The Great War, in short, had taught governments, they could maintain massive military resources at the ready, even as the material living standard of the population improved.
Now, it is possible only Russell understood this new reality spawned by the improvement in productivity brought about by industrialization.
It is possible, Franklin D. Roosevelt, the President, and new CEO of America Inc., in 1933, did not really understand how industry had changed the potential for war making and war preparations, despite having served as Assistant Secretary of the Navy – the most logistic intensive branch of the services.
It is possible he did not understand this, even though, as Assistant Secretary, he helped expand the Navy in those years, and, founded the United States Navy Reserves.
Perhaps, we can also ignore this:
Roosevelt developed a life-long affection for the Navy. Roosevelt negotiated with Congressional leaders and other government departments to get budgets approved. He became an enthusiastic advocate of the submarine and also of means to combat the German submarine menace to Allied shipping: he proposed building a mine barrier across the North Sea from Norway to Scotland. In 1918, he visited Britain and France to inspect American naval facilities; during this visit he met Winston Churchill for the first time. With the end of World War I in November 1918, he was in charge of demobilization, although he opposed plans to completely dismantle the Navy.
Perhaps, most importantly, we can forget, or ignore, this:
In the aftermath of World War I, the defeated German Empire signed the Treaty of Versailles.[7] This caused Germany to lose a significant portion of its territory, prohibited the annexation of other states, limited the size of German armed forces and imposed massive reparations. Russia’s Civil war led to the creation of the Soviet Union which soon was under the control of Joseph Stalin. In Italy, Benito Mussolini seized power as a fascist dictator promising to create a “New Roman Empire.”[8] The ruling Kuomintang (KMT) party in China launched a unification campaign against rebelling warlords in the mid-1920s, but was soon embroiled in a civil war against its former Chinese communist allies. In 1931, an increasingly militaristic Japanese Empire, which had long sought influence in China[9] as the first step of its right to rule Asia, used the Mukden Incident as justification to invade Manchuria; the two nations then fought several small conflicts until the Tanggu Truce in 1933.
National Socialist Adolf Hitler became the leader of Germany in 1933 and soon began a massive rearming campaign.[10] This worried France and the United Kingdom, who had lost much in the previous war, as well as Italy, which saw its territorial ambitions threatened by those of Germany.[11] To secure its alliance, the French allowed Italy a free hand in Ethiopia, which Italy desired to conquer. The situation was aggravated in early 1935 when the Saarland was legally reunited with Germany and Hitler repudiated the Treaty of Versailles, speeding up remilitarization and introducing conscription. Hoping to contain Germany, the United Kingdom, France and Italy formed the Stresa Front. The Soviet Union, concerned due to Germany’s goals of capturing vast areas of eastern Europe, concluded a treaty of mutual assistance with France.
Before taking effect though, the Franco-Soviet pact was required to go through the bureaucracy of the League of Nations, rendering it essentially toothless[12][13] and in June of 1935, the United Kingdom made an independent naval agreement with Germany easing prior restrictions. The United States, concerned with events in Europe and Asia, passed the Neutrality Act in August.[14] In October, Italy invaded Ethiopia, with Germany the only major European nation supporting her invasion. Italy then revoked objections to Germany’s goal of making Austria a satellite state.[15]
In direct violation of the Versailles and Locarno treaties, Hitler remilitarized the Rhineland in March of 1936. He received little response from other European powers.[16] When the Spanish Civil War broke out in July, Hitler and Mussolini supported fascist Generalísimo Francisco Franco’s nationalist forces in his civil war against the Soviet-supported Spanish Republic. Both sides used the conflict to test new weapons and methods of warfare[17] and the nationalists would prove victorious in early 1939.
With tensions mounting, efforts to strengthen or consolidate power were made. In October, Germany and Italy formed the Rome-Berlin Axis and a month later Germany and Japan, each believing communism and the Soviet Union in particular to be a threat, signed the Anti-Comintern Pact, which Italy would join in the following year. In China, the Kuomintang and communist forces agreed on a ceasefire to present a united front to oppose Japan.[18]
We can ignore all this, but, it probably would be a mistake.
Which, of course, brings us back to Russell’s point:
… the bulk of the public expenditure of most civilized Governments consists in payment for past wars or preparation for future wars …
To be continued
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:
- Rebalancing our economic system, and
- Reconnecting economic growth and broadly shared prosperity.
We have offered, in refutation, our own views:
- Government is a form of the imbalance in our economic system – not the only form, mind you, but the most important form currently, and,
- 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:
- Agriculture virtually disappeared as a significant job for Americans. Manufacturing, mining and construction doubled over the same period.
- The number of people producing of goods remained mostly unchanged, but shifted decidedly to away from farming and into industry.
- Services grew rapidly over the period to its present status as the main form of employment in the economy.
- Government, during the same period, grew just as rapidly from about 2 million people to 21 million in 2002.
- 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
Is serious left criticism of government’s share of GDP possible? (4)
Continued from here.
On the way back from the nail salon this morning, I stopped to fill the tank in my Lincoln Navigator – which, as you can imagine, was a bit pricey, but, fortunately, not as pricey as filling my twin his and her stretch hummers – when it occurred to me, “Hey, what is all this corn in my gas?”
Apparently, while I wasn’t looking, someone, somewhere, decided I not only need decent nail care, but also corn in my gasoline.
Nobody, so far as I know, did a market survey of American consumers, asking us if we are getting our daily requirement for corn-laced gasoline. Nobody, so far as I know, asked me, or, for that matter, you, whether we would like to get our daily minimum requirement for corn in the form of a gasoline additive. Nobody, so far as I know, asked us how much we were willing to pay for this additive to our clean, pure, pristine gasoline – with all its healthy, Global Warming, hydrocarbonic goodness.
MMMMmmmm! Corn Laced Gasoline, makes my mouth water – of course, when it seeps into the water table, it also makes my water make my mouth water, or something like … cancer – it’s all a bit complicated.
In any case, someone decided we all needed corn-laced gasoline, because, getting our corn the old fashion 
way, by eating it, or, by eating the animals who were eating it, just wasn’t getting the job done.
So they passed a law declaring, henceforth Americans can get their daily requirement for corn by drinking their gasoline.
About this time, Haitians started enjoying another delicacy – dirt cookies.
Coincidence?
Probably.
It is quite difficult to trace the connection from a law in Washington mandating the addition of corn ethanol to gasoline and the impact on the price of food in Haiti. In fact, it is difficult to trace the impact of any law or mandate made in Washington to prices generally.
But, like obscenity, we all know it when we see it.
Take World War I for instance – you have to go back to a time before world wars had numbers (according to Admiral Woolsey, we are up to IV. He doesn’t like dirt cookies, by the way, and, more’s the pity since, as a player in Washington, dirt cookies are one of his special products.)
Back then it was just called the Great War, and it has a complete write up here, if you have been living in a box, or, are a graduate of a typical American public school system.
Actually, it wasn’t all that great – by the standards of World War II, it was just so-so.
But, it was pretty revolutionary for its time: by the end of the war, economic growth exploded in the United States, Britain and Italy, and, the government’s share of the economy rose to 50 percent in Germany, France and Britain.
As the Wiki explains:
One of the most dramatic effects was the expansion of governmental powers and responsibilities in Britain, France, the United States, and the Dominions of the British Empire. In order to harness all the power of their societies, new government ministries and powers were created. New taxes were levied and laws enacted, all designed to bolster the war effort; many of which have lasted to this day.
Basically your government found that the goods producing sectors of the American economy could be enlisted in war to the extent unthinkable in all former conflicts – back to the Garden of Eden!
Huge numbers of working age men could be forcibly withdrawn from the labor force and marched face forward into the ferocious, lethal, lead filled winds of machinegun lines of fire; entire towns could be massacred, laid waste, pillaged, and set to the torch; and – this is truly bizarre, although you will not think so – ECONOMIC OUTPUT GREW!
GDP expanded!
Technological progress swept like a storm across the vast structures of industry, and, it became more productive!
Government could reach in and not simply impress millions of hale youth in forced death marches, but, also reconfigure entire industries to meet its wartime needs for everything from bullets to butter!
War was good for business.
But, business was even better for war.
But, before you get all giddy with excitement over how masterful your public servants in Washington were at promoting economic growth – albeit, at the expense of a good portion of the populations of all major nations – we should tell you there was a cost.
The Wiki notes:
Work stoppages and strikes became frequent in 1917–18 as the unions expressed grievances regarding prices, alcohol control, pay disputes, fatigue from overtime and working on Sundays and inadequate housing. Conscription put into uniform nearly every physically fit man, six of ten million eligible. Of these, about 750,000 lost their lives and 1,700,000 were wounded. Most deaths were to young unmarried men; however, 160,000 wives lost husbands and 300,000 children lost fathers.[92]
Inflation raged, alcoholism rose, the population was worked to the point of exhaustion, a generation of young men were destroyed, “Over 40 million casualties resulted, including approximately 20 million military and civilian deaths.[3]“
And, the fatherless children in all major nations looked to their nation’s leaders and asked plaintively: “Are you my daddy?”
To be continued
Is serious left criticism of government’s share of GDP possible? (3)
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 
access 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
Is serious left criticism of government’s share of GDP possible? (2)
Continued from here:
Let play a game:
You’re the President, and it is 1914.
Yes, you’re President Woodrow Wilson.
But, you’re also the CEO of America Inc., company which produces what we will call widgets, but, which really are the total material social product of the American economy in 1914 – in proportion as needed, food, clothing, housing, all capital goods, factories etc.
- To produce these widgets, requires a work force of industrial workers.
- Now, once those widgets produced, they have to transported to the place where they will be used, and offered for sale. They also have to run – power of varying sorts. And, all of this requires a work force of service workers to perform
- America Inc. also has to be managed, and this too requires so many people doing jobs which are not directly providing any of the things listed above – medical care, funds for retirement of those no longer able to work, what Michael T. Ware euphemistically calls “protection,” etc.
Three different sectors of the economy, with their associated work forces each of which perform functions which evolve over time, and which may change as a proportion of the work force over time as the needs of the customer – the America Inc. work force – evolve.
Yep, American Inc. is the company, the work force, and the customer. Aside from imports and exports, America Inc. produces and consumes everything.
Since the industrial work force produces everything, the needs of the services work force, and the government work force are completely supplied by their output – food, clothing, housing, etc.
The industrial work force, therefore, cannot simply stop working when they have met their own needs for goods; they must work longer to supply the goods needed by the service work force, and the government work force, in return for which, they receive such things as medical care, education for themselves and their kids, and, “protection.”
Now, because work in 1914 is mostly a pain, and not at all pleasant, by and large, nobody wants to work to a minute longer than they need. The faster all the work is done, the sooner everyone can go home and enjoy that new fangled device the phonograph.
Unfortunately, they still would have to wait patiently for another 70 years before Public Enemy released their first CD, “Yo! Bum Rush The Show,” in 1987.
The important thing here, however, is not the absence of decent rap music in 1914, but that after all the work of producing things like food, clothing, shelter, and phonographs, we had to work additionally to provide, education, medical care, etc. (however rudimentary these were at this time) and, the “protection” services of government.
As in any company, the cost of provisioning for such things for America Inc. appears as an additional cost borne by the customer at the time of purchase.
Which is to say this: if Mattel were to suddenly decide to provide enough for its China employees to afford food, clothing, and housing, and, were also to provide healthcare coverage, education benefits for those employees and their children, AND, patrol the Persian Gulf with its own aircraft carriers to ensure its control of global oil supplies, the cost of all these additional expenditures would simply be added to the cost of all the made in China products it offers for sale at Wal*Mart.
Not that we would be complaining, here. Anytime children can get medical attention for common ailments, preventative care, and, boo-boos, we are just happy with the world!
Okay, we might object to being forced to pay for those aircraft carriers, even though they make it possible for us to drive our Lincoln Navigators with the windows down and the air conditioner running full open, as we talk on our cell phones ordering pizza, because because we are so busy working we can’t get home in time to fix dinner for our kids, who we neglect not out of some fucking spite that they are sucking away our youth, but because if we don’t kill ourselves generating two incomes in our families, our precious little ones will end up in a FUCKING HOMELESS SHELTER!
Sorry…lost it there for a minute.
What I meant to say was this: If Mattel were to provide the above, the cost of those things would end up in the prices of the products it sells.
And, the same is true of America Inc.: All the costs associated with services and government expenditures end up in the prices of the goods we purchase.
In 1914, that additional cost was about 35 percent of the prices of goods.
By 2002, that cost was about 85 percent of the prices of goods.
You read me right: Eighty-five percent of the prices of goods in this economy reflects the cost of government and other services.
That may or may not be of interest to you, but this will be: that eighty-five percent in excess costs, represents 34 hours a week of additional time you spend at work neglecting your kids, and stuck in a car commuting with your ear pressed against a cell phone ordering pizza for dinner.
Have I got your attention yet?
Is it clear now that the cost of government is something with which to be concerned?
Is the possibility of a shorter work week enough of left concern to be a necessary component of the debate over the size of government?
To be continued…
Re: The People 
Is serious left criticism of government’s share of GDP possible? (9)
Continued from here.
This is the background for National Security Council Memorandum 68 (NSC-68):
The United States emerged from from World War II – in somewhat better economic shape than it went in.
(We will ignore, for the time being, that this failed attempt at collective race suicide resulted in the slaughter of 72 million persons – roughly 4 percent of the population of the belligerents.)
The Great Depression had receded into the background of American life with a vengeance. Gross Domestic Product is estimated to have nearly doubled during the war, entire industries, built from scratch, and, an almost innumerable list of scientific and technological breakthroughs had added productive capacity of the society.
By 1939, the industries of all major nations were operating full on in a desperate heat to increase their military capabilities against their rivals.
By 1942, every major nation, save France, produced more than it had in 1938.
By 1945, owing to the massive destruction imposed on the Axis powers – Germany, Italy, and Japan – the Allies had increased their GDP from twice to 5 times the former.
The global impact of this massive ramping up of industry was quite simply staggering by the standards of the time: nearly 5 million military trucks produced by all countries; nearly 1 million aircraft of all types; 51 million metric tons of merchant shipping; 193 aircraft carriers.
We include the table below, drawn on data provided by the Wiki to give you an idea of the scale of the war effort:
According to data from the Bureau of Labor Statistics, 30 million voters in the goods producing sector supported themselves, plus another 16.5 million working in the services sector, plus, 6 million more in government, AND, an additional 16 million serving on active military service, in two major combat theaters, stretching more than two-thirds of the way around the globe!
According to another study:
Despite this massive, sustained war effort, the authors of this study noted:
Seventy-two million slaughtered human beings, yet, war had become an “inconvenience” for the civilian population.
Cold truth, perhaps, but no colder than this excerpt from an article published during our present war:
For us as a nation, war has ceased even to be an inconvenience.
War good for business?
Hah!
Business has become good for war.
Thanks, in large part, to NSC-68
To be continued