After All These Years

During the industrial age, capital and labor were bonded together. Neither could succeed without the other. Capital built the production facilities that provided the jobs, labor did the work of production. From the beginning, until the end, the manufacturing plants drew workers from the streets and fields; from those with few if any better options. Until the early 20^th century, capital could, did, dictate the pay and the hours worked. In the beginning, and for a long time, distribution of profit was completely at the discretion of the capitalist. They didn’t share well; still haven’t learned to.

Unions brought some parity to the relationship. Unionized labor brought America never before seen prosperity. This parity was to be relatively short lived; ended by a combination of bad politics, offshoring, and automation (technology). Parity meant that labor could demand a fair share of profits; receive a fairer share. As union power began to decline in the 1960s, so did labor’s share. Labor’s declining share meant that our overall prosperity declined; the disparity in income and wealth between the working class and the wealthy has been growing since the advent of the information & technology age and the associated automation, and especially since the nearly concurrent offshoring of manufacturing. We now live in an overpopulated world with an ever diminishing demand for human labor.

Rather than effectively address the growing disparity, our leaders have prattled on about markets, entrepreneurship, and capitalism. Rather than take effective remedial action, too often, they have made matters worse by giving tax breaks to the rich (capitalists).

We are now more than 50 years into the information & technology age with no workable plan for making the transition, for dealing with the associated wealth and income distribution problems that have arisen. Persisting, instead, on applying methodology and ideology from the industrial age to an real world economy of little resemblance.

Dealing with the distribution problem sooner rather than later would save the world a lot of further pain and suffering, of death. Then, it was all about getting workers some semblance of their fair share. Today and going forth, it is about getting the whole of the populace a fair share. Then, the industrialists/capitalists needed workers. Today, not so much, and, ever growingly, less. With today’s technology, it is becoming harder and harder to imagine a job that can’t be automated.

The purpose of a society’s economy is to provide that society with the necessary goods and services. People have need and wants; thus there will always be a demand (needs + wants = demand) for goods and services. In this, the information and technology age, capital may not need as much labor, but it does need a market for the produced goods. There will be a market for goods and services only if the enough of the populace has the wherewithal. Demand plus wherewithal equals market ( demand + wherewithal = market) for produced goods. If there is no market, there is no reason to produce. In the past, wages provided the wherewithal; workers’ want and needs provided demand, this demand coupled with the wherewithal from wages produced a market. Of late, with the ever increasing disparity, more and more, consumer debt has been used as wherewithal. Going forward, the question is how to give a populace the means for purchasing those goods and services, providing the market to keep the production lines going for the long term?

For the producers, a market is buyers for their goods or services.

For the buyers, a market is sellers of needed and wanted goods

and services.

When Paul Krugman wrote that we could all make a living selling each other houses, he was kidding. A service economy is not self sufficient. The USPTO does not issue patents for perpetual motion machines, will not be issuing any utility or design patents for service economies either. The wherewithal for services is not coming from services; ultimately, it’s coming from production. People can’t really make a living selling one another services. Wealth comes from creation of value, from making a product. IBM can call its products whatever, but Mark Benioff’s software is not a service; it is, as he says, a product. One that creates wealth.

To date, a couple of really abhorrent things that have been done to address the issue of diminished demand for labor. One, is to warehouse the redundants in public housing. Two, is to warehouse them in prisons. Another less abhorrent way is to subsidize their employment as the US Government is doing with Walmart, Microsoft, McDonald’s, …, … . Via Medicaid, housing subsidies, food stamps, …, the US government has been providing a good share of a Walmart hourly worker’s gross income/livelihood, sometimes almost as much as Walmart; while all while the Walton family pocketed more than $200 billion. Same can be said for fast food giants like McDonald’s, Burger King, … , The shareholders make more from the employees’ labor than the employees. Not a good model for going forward.

If the salary of workers at McDonald’s were to double (to become a living wage) the cost a Big-Mac would increase about 20%. The very next thing that would happen would be that their jobs would be automated. In 2017, Walmart talked of increasing workers wages in order to stay competitive with Target, etc. In 2022, Walmart plans to spend $14 billion on automation. All the fast food chains, and Walmart, …, deliberately avoid paying benefits by limiting their employees to 20-30 hrs per weeks; deliberately taking advantage of the government subsidies. It is a part of their business model. It has been reported that Walmart instructs its new hires on how to apply for food stamps, Medicaid, housing assistance, etc.

Another consequence of the advent of the information & technology age and the concurrent offshoring of jobs has been an increase in homelessness. Between the end of the Great Depression and 1960, homelessness had virtually disappeared in America. Note the date, 1960 is shortly after the beginning of the information & technology age, and at the beginning of the beginning of the offshoring of jobs. There were, of course, other compounding factors with government policy and politics being the two major ones. “Rather than take effective remedial action, too often, they have made matters worse.” In the face of the increasing homelessness of the 1980 recession, the Reagan administration cut funding for housing. Oh, there were hobos in the 1950s and 60s, but hoboing was a choice. For these new, involuntarily, homeless, first you lose your job, then your home. Or, as is more likely these days, your depressed wages aren’t sufficient to pay the inflated rent, you lose your home, then you lose your job. Homelessness in America may run as high as 4.0 million. 4.0 million out of 327 million total may not seem to be that many, but it is a lot of pain and suffering, and may represent as much as 4% of our unemployed. Today, as many as 4.0 million more people are homeless than were before the onset of automation and offshoring.

What is the current employment rate? It obviously not the current 6% given for U3 (U3 being U6 after southern politicians got through jiggering it to fit their feudalistic model of economic servitude). Neither is it the current 10% shown for U6. A true unemployment rate would take into account the less than living wage paid by McDonald’s, Walmart, Target, …; the lack of benefits paid by fast food, restaurants, Walmart, …, of these ~ 8 million workers; the reduction of hours to avoid paying benefits by fast food, restaurants, Walmart, …; the whole of America’s underclass, especially those millions of workers in the American South being paid poverty wages, (they are not even being paid subsistence wages) {subsistence + debt ~ living?}; the 40% of all US workers who are not making a living wage. Taking these thing into account, the real current unemployment rate is more like 20%.

Yet another phenomenon of consequence to these consequences of the information & technology age and offshoring was the wave of early retirements of people in their early fifties we began to see around 1980. Ostensibly, one person’s early retirement meant another’s job opening; a net positive. Problem was, the early retiree’s retirement income usually came from returns on their investments in stocks, mutual funds, … . The returns, too, often have come at the expense of worker’s wages. Some from US owned factories in China (factories that their, the early retirees’ investment help build). Some came via corporate executives pumping the price of their stocks to enrich shareholders who then increased executive salaries at the expense of workers wages. Early retirees made more off the work of the Chinese worker in the US owned factory in China than the worker; more from the McDonald’s or Burger King workers’ labor here in the US than the workers themselves. Capitalist are cannibals. They kill and eat the workers, and in doing so, kill and eat their own consumers. We hear the Mitch McConnells say poor people want something for nothing, but hear them say nothing of the wealthy and very rich people stealing a large share of working peoples’ wages. That, Mitch, is getting something for nothing.

How is this so? A main reason is that the shareholders, not the workers, elect the board that hires the corporate CEO. The CEO works indirectly for the shareholders, it is they, not the workers, who, via the board, control the CEO’s salary. It would no doubt improve workers’ wages if they had a seat on the board, a significant say in who got hired as CEO and what that CEO got paid.

It’s as if the wealthy have first class tickets that give them the privilege of first dibs, the middle class get their salaries and a shot at wealth, and the lower class workers (representing more than 40% of the population) get to fight for anything left over. The wealth of the capitalists and wealthy may initially have helped build factories here and abroad, but today’s returns on investment from the McDonald’s and Walmarts has nothing to do with building; they are like a ticket to the gravy train available only to those with wealth. Wealth itself controls access to unearned income.

It is good and proper to think about increasing workers share in this age of technology and automation. But, as noted, if the wages of McDonald’s hourly workers were raised to living wage levels, McDonald’s will forthwith automate their jobs out of existence; same with Walmart, and the rest. As we have seen, this is true for all manufacturing, and production. We need to look to, to ask: How does a society distribute the wealth from production when there are fewer and fewer, and even no workers? How does a society provide the wherewithal to insure a market for the production of goods and services. There has been little or no demand for the justification for unearned money when it goes to the wealthy. Why should there be such a justification for unearned money going to the general, formerly working class, population? What if a share of the return from automation was awarded the general populace? What if, for a change, a share of all return on capital went to the general populace instead of just to the wealthy?

We hear all the time that people need something to do. There are a lot of things that need be done. A service economy could indeed be a service economy. Mental healthcare would be very good service to have. So would: preschool, public schools, free internet, comprehensive universal healthcare, university education, … . So would museums and parks, and postal service. Instead of the old, for profit, what is good for business, model, the new model should simply ask what needs to be done? That was really always the question, we just hadn’t realized it before. These things are examples of the real services in the goods and services an economy should provide a society. Think a moment on how many lives have been ruined by generational mental health issues.

It is possible to generate wealth, to distribute that wealth, while providing the needed goods and services.