The US Paradox

Sat Sep 20 05:01:46 CEST 2003

One man's hell is another person's paradise. What even most of the 
American media christened "jobless recovery," shamelessly Dickensian 
The Economist calls dryly "labor productivity growth."

Under the colorful, optimistic drawing of a corporate executive 
entering his office greeted by smiling computers delivering money to 
him, the article extolls the U.S. benefits of productivity growth 
without expansion of labor force in the past decade.

True, from the capitalist perspective this is pure profit. From the 
labor perspective this is a mixed blessing. Of course, in the long 
run the productivity growth must be good for economy. Every 
revolution in technology in the end increased standard of living of 
the wide majority of consumers.

Internet, which to the American Empire is what Catholic Church was to 
the Roman Empire, did already bring benefits even to the poorest 
segments of population around the globe. It is far cheaper to 
communicate over Internet, than to make phone-calls. On-line 
ordering, mail delivery, and bar-code controlled warehousing reduced 
sales costs, etc.

Yet, the hopes that increased profitability will decrease government 
budget deficit through higher tax revenues are not realistic under 
Emperor Bush. He likes to spend money on expensive no-end-in-site 
wars. And his idea of maintaining social peace can be summarized in a 
sound-bite "tax-cuts" -akin to Caligula, he buys people with free 
bread and circuses.

The same go for the future pensions. It won't be easier to pay them. 
Because the earned money is not going towards paying them. In reality 
the statistic is deceiving: while the productivity growth due to the 
implementation of new technology that reduces need for labor, means 
higher real GDP, it also inevitably means higher unemployment rate.

Even The Economist notes that if growth falters - the unemployment 
will rise, and, also, that the growth itself will lead to further job 
losses. That means that the GDP growth will affect realistically only 
the segment of population that remains employed, and that segment 
will be happily shrinking.

Less people will make more money, in short. And more people will have 
to go with less. From the later's perspective this hardly looks like 
the good news. If the productivity grows by 2.5% annually and the 
labor force expands by 1%, then the GDP growth will be 3.5%.

If at the same time the number of people ready to enter the workforce 
expands let's say 2%, what benefit would the surplus 1% have from 
that GDP growth? They will also make poor consumers.

The IT revolution also increased the globalization of business 
operations. That means that profits of American corporations depend 
on developments in foreign labor/consumer markets, as well as in the 
home market.

The ‘American miracle' requires markets. It craves consumers with 
discretionary amounts of money that can spend on gadgetry. And it 
also craves *less* labor intensive operations to make the profit from 
the spread between faster productivity growth and slower labor 
expansion.

Poor, unemployed or underemployed people, however, make for good-for-
nothing consumers, and as such they are inadvertent enemies of future 
productivity growth - a problem that can easily be solved by giving 
them generous consumer loans, and showering them with credit cards.

As it is the practice in the world's most heavily indebted society, 
the U.S. In poorer countries this is usually accomplished by foreign 
banks taking over the local financial institutions and pumping in 
capital.

In the end, this is not such a bad bargain, for now, at least: people 
are given money, and they don't even have to work; they just need to 
spend, to keep the economy growing. Since all countries (and their 
people) - developed and developing, whatsoever - are already indebted 
to the kilt, the interesting question is: to whom are they indebted? 
And how if ever would this debt be resolved?

ivo
Ivo Skoric
1773 Lexington Ave
New York NY 10029
212.369.9197
ivo at balkansnet.org
http://balkansnet.org