Archive for October 2012
Speculating on where growing inequality in the United States might lead, economist Robert H. Frank warned in the New York Times that “extreme inequality might one day spawn a violent revolution, as has happened in many other countries.” But he quickly added that this was “hardly something to hope for.” (1)
Whether revolution is something to hope for depends on which side of the growing inequality divide you’re on. Contra Frank, people working for desperation-level wages, or forced into idleness, or bearing the brunt of government austerity programs, may indeed hope for a revolution.
On the same day Frank’s warning appeared, the Times explored a growing reality for tens of millions of retail workers, who want full-time jobs but are increasingly relegated to low-paying, part-time work and lives of poverty. Might they hope for a revolution?
Part-time workers in the U.S. service industry average $10.92 an hour, compared to an average of $17.18 for the dwindling number of full-time workers. Replacing full-time jobs with part-time hours means businesses cut costs and pay out more to management and shareholders. Employees get the shaft.
It has always been true that business and political leaders don’t care a whit about you and me, but in North America, Western Europe and Japan, there was a time when labor militancy, strong unions, and ideological competition with the Soviet Union bought concessions that raised the material standard and economic security of the bulk of people.
No more. The number of unionized workers has shrunk, communist and socialist parties have disappeared, wizened or marched resolutely to the right, and businesses have intensified their exploitation of workers, with their political servants paving the way.
Business leaders and politicians don’t “give a fuck about you and me”, the organic intellectual George Carlin once observed.
True, but as the Frank article makes clear, there is one respect in which business and political leaders do care about everyone else—whether we’ll turn to revolution.
1. Robert H. Frank, “When low taxes don’t help the rich”, The New York times, October 27, 2012
Jobs—which people desperately need—are promised as the fruit of indulging “job creators,” by giving them what they want. Cheap labor. Low taxes. Bare regulation. No obligations.
Needing jobs, wage-earners are inclined to go along.
The threat of joblessness is even used as a cudgel to bully employees into voting for the employer’s preferred political candidate. David Seigel, CEO of Westgate Resorts, makes an eloquent—though unintended—case for why enterprises ought to be brought under public control, and not left in the hands of private tyrannies. In a memo to his 7,000 employees, Seigel wrote:
“The economy doesn’t currently pose a threat to your job. What does threaten your job, however, is another four years of the same presidential administration. If any new taxes are levied on me, or my company, as our current president plans, I will have no choice but to reduce the size of this company.” (1)
Seigel is over-reacting to how an Obama victory, if it happens, will affect him and his fellow executives. Obama threatened in 2008, as he has in 2012, to raise taxes on millionaires and billionaires. He has yet to keep his 2008 promise. If he wins, it’s doubtful he’ll keep his 2012 promise.
Still, Seigel’s attempted extortion is a real-world version of a satirical oil company ad Saturday Night Live ran many years ago. “Do as we say,” the ad warned, “and nobody gets hurt.”
The Canadian government, too, is in on the game, but uses a carrot (do as we say and you’ll find work) rather than a stick (vote as I say or you’ll lose your job.) What the Canadian government wants Canadians to do is welcome foreign investment (though, as we’ll see, not all of it), in order to enjoy a bounty of jobs.
Capital is not scarce in Canada, which makes the emphasis on foreign, rather than domestic investment, a bit odd.
What’s more, the keen courting of private investment by governments, and the complete exclusion from consideration of public investment, is odd too, since there’s nothing inherently superior about private investment. Indeed, for the bulk of us, it’s unquestionably inferior.
Public investment means that productive assets can be used for public purposes—redounding to the benefit of all, rather than the welfare of a wealthy few. And, a job created by public investment is as much a job as one created by private investment.
So, why the emphasis of private investment?
Because it isn’t good for people with gobs of private capital to invest. And they wield enormous political power.
Private investors use their wealth to dominate governments, through lobbying, the funding of political campaigns, control of the mass media, and by placing themselves—and their loyal representatives—into key public sector jobs.
This is no less true in Canada than the United States. Anyone who has read The New York Times recently will have come across dozens of stories about the super-rich making major political campaign contributions, and about the domination of Congress by millionaires and the paucity of anyone with a blue-collar background in public life. The investing class dominates the state, and public policy reflects its interests. (2)
All to say that government officials, in either the United States or Canada, aren’t creating “business-friendly” conditions in order to create jobs, much less well-paying ones. They’re doing so to enrich private investors, who have their ear, who lunch at the same clubs, studied at the same exclusive schools, and travel in the same circles.
This is clear in Ottawa’s recent decision to block the Malaysian oil company Petronas from buying Canadian gas producer Progress Energy Resources Corp, despite touting the benefits of foreign investment, declaring Canada “open for business,” and promising a bonanza of foreign investment-generated jobs.
The problem is that Petronas isn’t owned by super-wealthy private investors. It’s owned by the Malaysian state. And that, apparently, makes all the difference. “The concern,” revealed an unnamed Canadian government source, “is making sure we’re not allowing Canadian resources to become part of another state’s geopolitical goals.” (3) So much for jobs.
We might wonder, however, why there’s no equivalent concern in Ottawa about not allowing Canadian resources to become part of the profit-making goals of private investors. After all, the point is that Canadian resources aren’t being used for the benefit of Canadians en masse, whether they’re in the hands of a foreign state-owned oil company, or a private one.
The reply might be that private investment creates the benefit of jobs for Canadians without at the same time serving another state’s geopolitical goals.
However, the question of whether jobs are created depends on the nature of the investment. Greenfield investment—the building of new factories, the opening of new mines, the creation of new oil fields—creates new jobs. Brownfield investment—transferring ownership from one set of hands to another—does not. On the contrary, brownfield investors often restructure the companies they buy, a process which almost invariably leads to the sacking of thousands of employees. As it turns out, the blocked Petronas deal was more of the brownfield than greenfield sort.
Of course, that’s not why Ottawa blocked the deal. As an instrument of private wealth, the Canadian government looks after the interests of private investors as a class. And if that means reserving Canada’s natural resources as an exclusive sphere for the enrichment of private investors, while duping Canadians into believing that handing over the country’s resources to private wealth on favourable terms will relieve them of the miseries of actual or threatened unemployment, so it will be.
But this is hardly a favourable arrangement for the bulk of Canadians, who can own, develop and benefit from their resources collectively. They don’t need rich foreign investors to create jobs.
Does David Seigel ever wonder that one day the majority from which he and his cronies have squeezed their millions and billions might tell him, “Do as we say and you won’t get hurt?”
1. Steven Greenhouse, “Here’s a memo from the boss: Vote this way”, The New York Times, October 26, 2012.
2. On the severe underrepresentation of people of blue-collar backgrounds in US public life see, Nicholas Carnes, “What millionaire are you voting for?” The New York Times, October 13, 2012.
3. Steven Chase and Shawn McCarthy, “Conservatives work to clarify foreign takeover policy”, The Globe and Mail, October 23, 2012
The number of manufacturing jobs in the United States and Canada is declining and one important reason why is growing productivity. This is often overlooked in the rush to blame shrinking manufacturing on outsourcing to the Third World. To be sure, the export of manufacturing jobs to low-wage countries has indeed played a part in hollowing out the North American manufacturing sector, but US manufacturing produces more today, with 40 percent fewer workers, than it did in 1979. That means that even if growing global competition for jobs hadn’t intensified, technological innovation would still have exerted downward pressure on manufacturing employment.
Growing productivity frees up labour. This can be either a boon or burden, depending on whether the labour is redeployed to producing new goods and services, or not. If it is, goods and services become more abundant. It’s even possible that manufacturing employment expands, as new products are developed, requiring new workers.
But what happens if freed up labour isn’t put back to work—that is, if there aren’t new products and services to absorb the surplus? The answer is persistently high levels of unemployment, and the ruin of the lives affected.
But all is well, according to economic historian Benjamin Friedman.
“When technology reduces the need for certain kinds of labor, we know that some inventive people will one day come along and find a way to use that freed-up labor making things that other people want to buy.” (1)
Except when it doesn’t happen. There’s no guarantee that some inventive person will show up one day with a plan to put the jobless to work. But even if it were inevitable that this would eventually happen, how long must we wait? Five years? Ten years? Whole generations? And how many lives are ruined in the interim?
Freidman’s prediction has something of a pie-in-the-sky character. Things might be tough now, but don’t worry. The messiah’s coming, and when he arrives he’ll whisk the jobless off into full employment heaven.
Maybe. Not counted among the elect will be those whose employment prospects have been compromised by years of forced idleness.
In the 19th century and through parts of the 20th Britain exported its surplus population to its Dominions and other parts of its empire. With no equivalent outlet today, the United States—with far and away the largest per capita prison population on the planet—warehouses its surplus population in a vast network of prisons.
It needn’t be like this. One of the possible—and promising—outcomes of growing productivity is reduced labour time. Rather than making more with 40 percent fewer workers, why not make more with the same number of workers, putting in 40% fewer hours? If more can be made with less, we should be able to consume more with less effort.
Or how about a plan to redeploy surplus labor to meet pressing human (rather than private profit-making) needs—like repairing crumbling infrastructure, building efficient public transportation, reducing classroom sizes, and developing green energy—rather than placing faith in the distant arrival of an inventive person whose innovative idea will siphon off some fraction of the burgeoning reserve army of labor?
None of this is impossible or unrealistic, though those who are sheltered from economic insecurity, underemployment and the omnipresent threat of joblessness—who are doing well by the present system—would have you believe a rational plan for deploying society’s productive resources and turning technology to our advantage rather than to our detriment is pure fantasy. But their motives in dismissing alternatives that benefit the majority of us—but not them—are plain.
Are we to entrust our future to faith in the eventual emergence of an innovative “job creator” to save us from the failures of capitalism? Or shall we reject the pie-in-the-sky of the well-to-do and take the future into our own hands?
1. David Leonhardt, “Race for president leaves income slump in shadows”, The New York Times, October 23, 2012