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Why didn’t capitalism collapse in 1929? (Part three)

September 25, 2009 4 comments

Continued from here

GSmasterweb

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:

  1. Slow down the rate of investment in new machinery, plant, and equipment, raw materials and inventory
  2. Devalue the existing machinery, plant, and equipment, raw materials and inventory
  3. Reduce employee wages
  4. 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

Obamanomics: An economic disaster of untold proportions…

November 23, 2008 Leave a comment

Vodpod videos no longer available.

more about “Barack Obama’s economic plan“, posted with vodpod

The Moron and his Wall Street crew thought it might be a good idea to inject trillions of dollars into the failing financial system to stimulate new lending, so they handed out billions to every banker they could find – forced them to accept the money, by some reports.

They stuffed hundreds of billions more into the pockets of central bankers from virtually every nation and on almost every continent – Africa, of course, seems to have been bypassed on this astonishing and unprecedented act of charity.

The financial markets responded by immediately shedding trillions of dollars of wealth.

As fast as the U.S Treasury and Federal Reserve could shovel money out the door, investors’ shoveled it right back in. The withdrawal of liquidity from every market proceeded apace as every market player with the means at hand sought the safest form of investment possible: US treasury bonds.

By last week, Hank Paulson threw up his hands and finally surrendered to the obvious: Mr. Market hates money! And, the wealth destruction we are witnessing results not from too little money in circulation, but too much.

Sisyphean efforts notwithstanding, Mr. Market has made clear society is no longer bound by the laws of scarcity and any interventions made on the premise that such scarcity exists will be rebuffed.

Time to wake up, people!

This is not the economy of the Founding Fathers. In about the same time one of that generation of Americans could travel from Boston to England – three months – China will bring 13 new power generating plants online. The productive capacity at our fingertips is of several orders of magnitude greater than that even enjoyed by mid-Twentieth Century Americans.

Now the Messiah has stepped forward to try his hand at the tasks which bedevil his predecessor. Saturday, Barack Obama announced his intention to spend perhaps as much as $600 billion on a stimulus package with a goal of creating 2.5 million new jobs through the start of 2011, according to the Huffington Post:

“These aren’t just steps to pull ourselves out of this immediate crisis; these are the long-term investments in our economic future that have been ignored for far too long,” Obama said in the weekly Democratic radio address. The economic recovery plan being developed by his staff aims to create 2.5 million jobs by January 2011, and he wants to get it through Congress quickly and sign it soon after taking office.

He called the plan “big enough to meet the challenges we face” and said that it will jump-start job creation but also “lay the foundation for a strong and growing economy.

If the Moron and his band of Wall Street predators imagined fixing a financial system choking on bloated bonuses, record profits and years of easy credit with even more trillions of dollars proffered on the easiest of terms, the Messiah and his Clintonite apostles have now decided the fix for an economy predicted to shed millions of jobs and hundreds billion of dollars in government revenue is to “create” more jobs, and run bigger deficits to do it.

Perhaps, we are incredibly dense, but Mr. Market seems to be saying we need less government, less capital, and less work. But, you keep electing people who seem determined to increase all three!

Give us a clue, people: What the fuck are we missing here?

What the fuck is so difficult about having a society where people spend less of their life immersed in the soul destroying filth of labor, greed and, faceless bureaucracy?

What the fuck is so horrifying about devoting less of your time to the mad scramble to pay bills, balance budgets, and find childcare for your own neglected latchkey children, that you would fight so strenuously to increase the very things that makes these things more onerous?

It is clear to us what Donald Trump gets out of this: he couldn’t find a date if he didn’t own a modeling agency.

And, we know what the Moron and Messiah get out of it: Its great to have everyone stand when you walk into a room; its great to glad hand all your class mates who now lead other nations, and know, deep down inside, you won the biggest prize of all – seven fleets prowling the world’s waters, and enough nukes to burnish the surface of the earth with glass, and precipitate a new glacier age.

But just what the fuck do you get out of it?

How is it improving your sex life?

How does it boost your bragging rights at state dinners?

The Messiah has now embarked on culmination of the very disaster begun by his predecessor. Instead of grasping the fundamental logic of this crisis – that working hours must be reduced; and, that government must be reduced along with this – he has chosen to intensify that crisis.

Resolution of this crisis will now likely be imposed in the harshest and most chaotic form possible, with all the incalculably catastrophic unfolding of events that this implies: The default and bankruptcy of the United States government, and subsequent collapse of global economic activity.

By all indications this is the end of the world (market) as we know it…

November 22, 2008 3 comments

When the market closed on Thursday the Standard and Poor 500 index announced to anyone savvy enough to understand that the era of stock markets had drawn to a close.

And, not surprisingly, no one marked that moment.

Certainly the major news outlets covered what was a pretty horrendous day, but there is something left unsaid, something so entirely foreboding, so dire about the closing number – 752 – it is quite the fear whose name must not be spoken: Double Top.

This is the largest such formation ever seen in the history of market.

Just to give you an idea of the scale what just occurred on Thursday: the completion of the S&P double top is akin to the opening of the Seven Seals.

Stockcharts.com defines the double top this way:

The double top is a major reversal pattern that forms after an extended uptrend. As its name implies, the pattern is made up of two consecutive peaks that are roughly equal, with a moderate trough in-between.

An innocuous enough definition, one might not understand how this applies to the closing chart of the S&P 500 on Thursday. So we will show you what it looks like when the chart of the S&P 500 is displayed for the years 1929 to 2008:

sp500-1929-2008

Still not impressed?

What you are seeing is the performance of the S&P for the last 80 years. As you will note, somewhere around the mid-1980s the chart start going parabolic – i.e., begins to climb at an unsustainable rate. By the time of the Clinton Administration – about 1995 – the rate of climb became even more unsustainable.

When the market crashed starting in 2000, it fell for 3 years before reaching the bottom.

But, thanks to Washington, and the beginning of the war against Iraq, the market once again rose to the previous 2000 peak by 2007.

This is where the double top finally made its appearance, and, from there, fell to complete itself finally on last Thursday.

Still not so impressive, until you realize a double top is what is known as a major reversal pattern, which is any chart pattern which signals a reversal of the direction of the market.

Since World War II the overall trend of the market has been up.

This pattern says the overall trend will now be down.

We bet you want to know how far down, since all your retirement is invested in the market through personal saving, investments, 401(k)s and 403(b)s, and, state and corporate pension funds.

How far down pretty much determines when, and under what conditions, you may retire in the near or less near future.

Well, to put it bluntly, the chart says don’t bet on any retirement.

It also says: Don’t bet on any mutual funds, banks, or any other financial instruments.

Don’t bet on insurance companies, or, annuities.

Don’t bet on home equity, or, savings.

A double top has clear predictions about what the future holds for the S&P. It may get it wrong this time, but you would be advised not to bet on that either.

Stockcharts has this to say about how bad the current market meltdown will get in all probability:

The distance from support break to peak can be subtracted from the support break for a price target. This would infer that the bigger the formation is, the larger the potential decline.

Support for our chart was in the area of 800. On Thursday, November 20, 2008, the S&P closed below 755 – thus breaking its support and closing at a level not seen since 1997.  The S&P had reached about 1550 at it peak.

Following the method used in the Stockchart quote, we subtract the support, 800, from the peak, 1550, and arrive at the likely target for the S&P in the coming months: 800 minus 750 equals 50.

The last time the S&P was near 50 was about the same time Harry S. Truman was putting his signature to National Security COuncil Memorandum 68.

The S&P chart is essentially saying there has been no real expansion of economic activity since then.It was all smoke and mirrors, as the market will likely demonstrate for us in the coming months.

The S&P chart is essentially saying there will no stock market within a matter of months. It will be gone, and all the capital market connected to it will be gone as well.

Nothing will likely prevent this fall.

We will only be able to avoid the horrendous consequences, but that will require a very aggressive reduction of working hours, and the virtual elimination of government.

“Staring into the awful face of God…”

October 25, 2008 Leave a comment

Thank you Jehu for taking the time and thought to outline the answer to my question.

Yet, Francis Phalen’s reply to Rudy in the graveyard remains, “Don’t count on it.  Guys like him don’t let go of a good thing.”

Since the paradigm you describe is so counter to the present day paradigm that keeps all the people Francis is talking about in the only position from which to pull the levers of power, how do they begin to see your message as a Golden Path?  My guess is we all “stare into the awful face of God” together before anything like this is even considered.

Do you see this way of life being demanded from the bottom up?  I mean, all those who tuned into the latest episode of Survivor last night, will they see the wisdom or even necessity of this radical thought?  How does this changeover begin?

This is an excellent question – one which reveals not simply the conceptual requirements of a post-economic society, but also the key to understanding the very core of our own times as we stand on the event horizon between the epoch of scarcity and that of abundance.

It is precisely this radical view of our future which has been the driving force of American politics for the last thirty years. That we have not recognized it as such is, above all, symptomatic of the profound grip fascism has on the political and economic discourse.

(NOTE: I would say here, I apologize for returning to the idea that the Party of Washington is the party of fascism. I use it, however, not as a pejorative, but as an accurate description of its ideology. We have come to associate fascism as a rightist ideology, but in fact, if historians are to be believed, it began with the defection of its leaders from the left-wing parties of Italy. The Wiki features an interesting outline of the central economic tenets of fascism, among which is the idea of a “Third Way,” the uncanny resemblance to which you will immediately find in ideology of the Clinton Democrats, right down to the self-given label.)

Americans have been fighting for the reduction in working time for the last forty years!

Why this movement has never been recognized is simple: Americans’ attention has been focused on the chief form a too long work week takes, not on the problem itself.

As we stated earlier, government has expanded to monstrous proportions feeding on the superfluous working hours of society, and driving us to this present crisis. The chief symptom of the expansion of working time has been the expansion of government, and of taxes. Thus, we read this piece in a Massachusetts newspaper:

For years, Massachusetts was known derisively as “Taxachusetts.” But voters could help shed that label in November by completely eliminating the state’s income tax in a single stroke.

If approved, the ballot initiative would wipe out 40 percent of state revenues and give back to each taxpayer an average of $3,600.

The Massachusetts proposal is the most notable of several tax-cutting questions that will appear next month on ballots around the nation.

Others include a North Dakota initiative to cut individual income tax rates in half and trim corporate rates by 15 percent; an Arizona measure to mandate that any initiatives requiring spending or tax increases be approved by majority of all registered voters, not just those casting ballots; and a Maine plan to repeal new taxes on beer, wine and soda.

For forty years now, since well before the so-called Reagan Revolution, Americans have been waging a determined, if blind and unconscious, battle to push back against the ever lengthening work week, beginning, perhaps, with the Jarvis amendment against soaring property taxes in California in 1978. (There may have been earlier examples of this, but we are – we confess – mostly ignorant, and ignorant of them.)

The standard interpretation of the Jarvis campaign is that Republicans don’t like poor and minority people – which probably is true, since it spawned a whole generation of activists who targeted welfare queens and immigrants as the sole cause of all economic difficulties experienced in white suburbs.

However, contemporaneous explanations which relied on the racist ideology shared by the movement’s participants are entirely beside the point, since, as we know, the movement reflected not the economic pain caused by the coloreds but by the collapse of Bretton Woods, and the impact National Security Council Memorandum 68 had on deindustrializing the country.

And, we also know, black people and immigrants have always been blamed, in every period of American history, for every social disorder which has descended upon us, since the outbreak of witch hunts in Salem.

Blaming the coloreds is what Americans do.

Accepting this racism as the explanation for the actual political response of Americans to very real impact of economic events in their lives is what ignorant assholes on the left do.

A tax, of whatever form, and, by whatever level of government, is nothing more than the indirect extension of the working day. When government takes 20 percent of your paycheck you are forced to offset it by working longer hours, if you are to maintain your previous standard of living despite this loss.  How you accomplish this – by working longer hours directly, or adding new members of your household to the work force – is, of course, up to you – the politician doesn’t care one iota.

Likewise, the accumulation of government debt, in the form of bonds and notes, has this same effect. So, we read this in the above mentioned article on the Massachusetts income tax elimination proposition:

The state’s “Taxachusetts” label dates back to the 1980s, when Massachusetts had some of the highest tax burdens in the country.

Then-Gov. Michael Dukakis won the 1988 Democratic Party’s presidential nomination on the success of the so-called “Massachusetts Miracle,” but after his loss, the economy tanked.

Dukakis floated bonds to pay off the deficit, forcing lawmakers to hike the income tax rate from 5 percent to 5.95 percent in 1989, then to 6.25 percent in 1990. It later fell back to 5.95 percent.

The relentless incremental upward creep of taxes, and of public debt – which latter frees the incumbent politician from the political embarrassment of a sudden and massive rise in taxes while building into future budgets ever greater tax increases if they are to finally be repaid – exerts relentless downward pressure on the living standards of working families, leaving them vulnerable to the loss of their homes, living paycheck to paycheck, even forcing them into their own private debtors’ prison of credit cards, kited checks, and revolving accounts – making it impossible for them not to just achieve their modest dreams, educate their children, and retire with some level of comfort, but compelling them to sacrifice each current day in vain hope of someday simply breaking even, or, at the very least, not so broken as to end their days eating dog food.

And, it is right in this midst of this nightmare, this violent vision of our senior years, as we struggle to keep our families together, educated, housed, and fed, Washington comes to us and requests to borrow $700 billion from the Chinese government to bail out its retainers on Wall Street, who have all this time profited handsomely from the swollen public debt – gorging themselves on it to the point of insensibility and euphoria – and from our descent into the status of impoverished wage slaves standing the merest paycheck or illness from financial disaster.

Is it any wonder that, in response to this insult, working families of every political persuasion, without exception, flooded Congress with the singular demand to vote the request down? And, that the promise to reduce taxes is a necessary part of every political candidates platform?

So, in answer to your question: How does this changeover begin?

My answer is this: it has always been there. The first steps American working families took to express their separate interests were the establishment of organizations to demand shorter working time in this country in the 1800s.

As Robert Whaples observed:

[W]ith the continued rise of merchant capitalists, the transition from the artisanal shop to the early factory, and an intensified work pace had become widespread by about 1825. These changes produced the first extensive, aggressive movement among workers for shorter hours, as the ten-hour movement blossomed in New York City, Philadelphia and Boston. Rallying around the ten-hour banner, workers formed the first city-central labor union in the U.S., the first labor newspaper, and the first workingmen’s political party — all in Philadelphia — in the late 1820s.

Our failure has been not to realize that, since NSC-68, this became an immediately political demand – a demand aimed not at employers, who never let down their own fight against the idea of shorter working time, but against government which filled this superfluous working time with its own demands on the wallets and budgets of ordinary Americans, and, thus, on their time away from work.

This has been the single unconscionable failure of those who can imagine a life without work, and a society no longer organized by the requirements of scarcity.

Frankly, there has been no political force to put these two separate threads of the same movement together – tax reduction and shorter working time – and, it is unlikely that any will emerge in the near future – at least until such time as the Democratic Party’s candidate and likely next president, Barack Obama, crashes to earth in this ongoing crisis.

What isolated supporters of shorter working time there are, are wholly under the thrall of more taxes for programs they believe are necessary to the public space – mostly silly pie-in-sky projects to rebuild the infrastructure, improve schools, health care insurance, or to promote environmentally friendly methods of producing energy – none of which requires a dime more in public spending than is available today, and all of which could be done with the merest fraction of current public expenditures.

The leaders of the anti-tax movement, such as Carla Howell in Massachusetts, are hopelessly under the thrall of libertarian delusions that a reduction in the size of government can be realized while ignoring the fate of millions of working families who would be tossed into the streets, as they are summarily shoved off government payrolls and into unemployment – provoking the most astonishing cascade of mortgage and personal debt defaults, and a mass floating population of unemployed families easily eclipsing that of the Great Depression.

Nevertheless, the present crisis will do precisely both of these things: shorten the work week and reduce the size of government.

Unfortunately, it will probably do them both in the worst possible way as has already begun: through the bankruptcy and default of one after another national, state, and local government, and the accelerating layoffs of millions of working families, bankruptcy of the biggest industrial and commercial giants, and an impending tsunami of personal debt defaults. Perhaps in the middle of all this a bulb will pop on above someone’s head.

Until then, as you point out, we will all be “Staring into the awful face of God…”.

What is your vision of the shorter work week?

October 23, 2008 Leave a comment

We received the following emailed question from a friend, and since it is relevant to what we have discussed on these pages, we reprint it in full, along with our response.

I feel the need to ask this question.  I have no doubt of the need to shorten the work week.  For reasons I cannot place into words other than to say you have made a convincing argument understood by my reptilian understanding of economics.

My question is this: What is your vision of the shorter work week.  That is to say, if a person earns 100 dollars a day and thus 500 dollars a week, does that mean he will now earn 400 dollars a week?  How does this square with his need to pay for what he needs to live, food, shelter, clothing, etc. if the “price” for such things does not shrink in direct ratio to this steep drop in earnings?  If the price for such things does not change as well, does this not make it impossible to match in income the “costs” of living?

This is the piece of the puzzle that brings my understanding to a grinding halt.

If I am to go forth in the world making the argument that the need to shorten the work week is obvious, how do I answer this first logical question that I am at once confronted with?

Am I making my question clear?

Yes, you are perfectly clear, and perfectly correct that it difficult for people to understand. Part of the difficulty for me lies in translating the way I think about this into images people who are not at least also partly delusional can understand.

But let me try:

To begin, consider a factory which employs 100 persons, and which produces 42 inch, wide screen, high-definition, picture-in-picture, plasma televisions  and sells them with the expectation of a reasonable profit.

Of these 100 employees, 5 to ten actually work directly or indirectly producing the televisions sold by the company.

The other 90 to 95 employees spend the entire day doing each others hair and nails, giving back massages, advertising the company product to each other, running the company store, selling each other valuable real estate in the company cafeteria, running loan shark operations and football pools, or passing regulations declaring who among the employees can marry whom, how much of what drug each can use, how often in the course of the day their children must recite the Pledge of Allegiance or pray, and which neighboring factory to invade next.

As you might imagine, paying 95 employees, out of a 100 person work force, to simply hang around looking busy, when, in fact, they are doing nothing at all, adds quite a bit of cost to the price of those plasma televisions.

This is basically what has happened to our economy – 5 to ten percent of the labor force make real things, the rest make mischief, and add to the cost of those real things. That all this mischief, and all these costs occur outside the factory, rather than inside, is of no concern to us when it comes to understanding the effect a largely unproductive workforce has on the prices of real goods.

Inside or outside, it makes every thing more expensive that it otherwise would be.

However, there is a deliciously bizarre twist to this for the factory owner, as we will see:

Let us suppose the owner of that factory were to lay off this unproductive 95 percent of the work force: Now we have to ask who would buy all those spanking new plasma televisions?

This, of course, is no concern to him – he only wishes to reduce his costs of production, and still might export the televisions to some other area where the consumer might afford it. His former employees go hungry, but he can salve his conscience by donating his old $1000 suits to the local charity so they might be recycled to some poor slob to wear to his next job interview.

The problem is, however, in our economy this excess workforce is not inside the factory, where it can be quietly laid off. It is outside the factory in the economy, where they can add to the factory owner’s costs indirectly, and, in a way he can’t so easily offset – they haunt him, cause him to twist and turn each night as he fights to find a way to finally subdue them.

Each day he goes to work and lays off another hundred or so, yet, in the morning they appear again – outside the factory gates – as new indirect costs of production: wraiths asking to mow his lawn, give him a pedicure, personally shop for him; as, hedge fund managers, mistresses, county political operatives, DPW crews, a host of tax collectors, or, Navy Seals ready to plant small suitcase nukes in Tehran.

At McDonalds, or DB Bistro Moderne, in the form of a Corniche or a Hyundai – the carrying costs of a superfluous workforce makes itself felt in the generalized upward pressure on prices throughout society. However, relentlessly he trims his workforce, in equal measure, his indirect costs seem to rise.

We could have our factory owner run his operation from another nation, to no avail. Even there, as when he laid off the the first of his employees, rising prices threaten him: fluctuations in currencies soon crush whatever competitive advantage he seeks. He accumulates more, but only at the cost of spreading the disease of inflation throughout the global marketplace.

Of course, one cannot sidestep the problem of a superfluous mass of employed labor except by reducing it. Leaders of industry and government have tried in every manner to offset this cost by various means, and have all failed miserably.

And, there are only two ways to accomplish this: lay off millions in the current labor force – as is being done by companies and governments around the country – and leave them homeless and hungry. Or, reduce their working hours.

Either solution will lead to the rapid fall in prices, but only one will allow people to take advantage of this fall.

So, in answer to the question, “How does all this work?”: If the reduction of the work week is planned, the starting point is to enact this reduction COMBINED with a reduction in taxes equal to the lost wages.

  1. So, for instance, if we were to reduce the work week from 40 hours to 32, a working family paying 20 percent of its wages as taxes, would see their tax rate fall to zero – no payroll tax, no income tax, no state income tax – nothing. We would also want to assure ourselves that other silly taxes: sales, property, excise, etc. were subject to the same income test as well – or eliminated entirely.
  2. This reduction would be combined with offsetting cuts in government budgets, and all government would be required to run balanced budgets – the biggest trick practiced by Washington and government at every level is the issuing of bonds and notes to fund deficits – contributing to inflationary pressure on prices, and larding their rolls with nepotism and cronies.
  3. Public debt service would be eliminated, allowing government to live within their means and continue to deliver necessary services.
  4. Private debt would be eliminated as well, as this is simply a form of compulsory servitude – forcing working families into years of involuntary work to pay for over-priced goods. Without eliminating it, it would not be possible to further reduce the work week without threatening to push families out of their homes and into the street.

Reducing the work week, as is obvious from this incomplete list, is only the beginning. As important is reducing government, which has expanded to monstrous proportions feeding on the superfluous working hours of society, and driving us to this present crisis.

This is where I typically part with most on the left who share the same goal of a world with less work. They have adopted the problematic world view of a necessary role for government – a view, which, in my opinion, leads directly to the present crisis.

If pressed, they will admit government has more often worked for Wall Street than it has for working families. Yet, they find it difficult to conceive we might all be better off without it. The ideological grip of what can only be called an American version of fascism – populism – is too deeply embedded.

Yet, this crisis will do precisely everything I have indicated above – and more – before it is over.

CNN/AP: Venezuela to introduce six hour work day

October 16, 2008 Leave a comment

Forwarded by a keen eyed supporter of shorter working time:

CARACAS, Venezuela (AP) — The government of President Hugo Chavez is planning to establish a 6-hour workday under forthcoming legislation.

Labor Minister Roberto Hernandez announced Monday that he would present a proposed bill before the end of the year to reduce the workday from 8 to 6 hours, improve employee benefits and establish “more forceful” penalties for businesses that violate labor laws.

The president’s allies hold a majority within the National Assembly and most bills proposed by Chavez’s administration are approved without considerable delay.

Chavez presented the same proposal as part of a constitutional reform package that voters rejected last December.

Before the vote, some business owners warned that reducing the workday would force them to cut jobs or close down.