Tuesday, April 5, 2011

The Real Story Behind Job Creation & The Servant Problem (2 articles)

Tuesday, April 5, 2011 by The Guardian/UK
March's job numbers were greeted rapturously by the business press. Scratch the surface of the data and things are not so rosy
by Dean Baker

When the labour department announced that the US economy had created 216,000 jobs in March, it set off a round of celebrations throughout Washington policy circles. The word in the New York Times, the Washington Post and other major news outlets was that the economy was back on course; we were on the right path.

Those who know arithmetic were a bit more sceptical. If the economy sustained March's rate of job growth, it will be more than seven years before we get back to normal rates of unemployment. Furthermore, some of this growth likely reflected a bounceback from weaker growth the prior two months. The average rate of job growth over the last three months has been just 160,000. At that pace, we won't get back to normal rates of unemployment until after 2022.

That's a long time to make ordinary workers suffer because the folks who run the economy are not very good at their job.

In addition to the job growth numbers, the March data also showed that the unemployment rate slipped down by another 0.1 percentage point. It now stands at 8.8%, almost a full percentage point below its year ago level of 9.7%. This, too, was treated as cause for celebration. While that may sound like progress, a more careful look at the data makes this number less impressive. The percentage of the population that is employed has actually fallen by 0.1 percentage point over the last year.

In order to be counted as unemployed, you have to say that you are looking for work. The unemployment rate did not fall because the unemployed had found jobs; rather, the unemployment rate fell because people have given up looking for work. Only in Washington would this be hailed as good news.

Remarkably, as the mixed basket of economic news in the March employment report was being celebrated, a major piece of unambiguously bad news was almost completely ignored. The commerce department released data on construction spending for February (pdf).

A decline of 1.4 % in spending in February, coupled with sharp downward revisions to the data for the prior two months, left nominal spending in February 6.2% below its November level. The slump in construction is virtually certain to be a major drag on growth in the first quarter. The big culprit this time is the non-residential sector – as a result of the bursting of the bubble in this sector, coupled with a fading out of stimulus spending on government projects.

Other recent economic news also suggests that the economy's momentum is more likely to slow than accelerate in the months ahead. Nominal wage growth has been virtually flat the last two months. With food and gas prices rising sharply, this means that real wages are falling, leaving workers with less money to spend.

House prices are again falling rapidly, having declined at the rate of 1.0% a month for the last three months. If this pace of decline continues, by the end of the year, homeowners will have lost more than $2tn in equity compared with peak hit in the summer of 2010. This loss of housing wealth implies a reduction in annual consumption of $120bn.

There was also a big jump in the trade deficit reported for January. While the celebrants of recent trade pacts were excited by the growth in exports, people who know economics recognise that the larger increase in imports will be another drag on economic growth. With most of the country's major trading partners experiencing weak growth, there is little prospect for an improvement in the trade deficit any time soon.

And, investment in equipment and software also appears to be weakening. New orders for capital goods (excluding volatile aircraft orders) in February were down 6.8% from the levels reported in December. In addition, the government cutbacks, threatened at the federal level and going into place at the state and local level, will be a further source of drag on the economy.

In short, there is little basis for last Friday's celebrations about the economy. The February jobs report would have been mediocre if the economy were already at normal rates of unemployment. In the context of a badly depressed economy, it is pathetic. We should be seeing jobs growth at two or three times this rate.

But the real bad news is that it is more likely to get worse than better. Yet again, the business press is missing the story.

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Monday, April 4, 2011 by TomDispatch.com
by Lewis H. Lapham

"Man must be doing something, or fancy that he is doing something, for in him throbs the creative impulse; the mere basker in the sunshine is not a natural, but an abnormal man." -- Henry George

The news media these days look to outperform one another in their showings of concern for the lost battalion of America’s unemployed. Consult any newspaper, wander the Internet or the television talk-show circuit, and at the top of the column or the hour the headline is jobs. Jobs, the bedrock of America’s world-beating prosperity, the cornerstones of its future comfort and well-being -- gone to Mexico or China, deleted from payrolls in Michigan and Ohio, mothballed in the Arizona desert.

The nation’s unemployment rate, officially pegged at 9.4% but probably nearer to 17%, in any event no fewer than 25 million Americans, a number more than equal to the entire population of North Korea, out of work or on the run. The metrics, so say President Obama, the Wall Street Journal, and A Prairie Home Companion, are not good. The stock markets may have weathered the storm of the recession, as have the country’s corporate profit margins, but unless jobs can be found, we wave goodbye to America the Beautiful.

Not being an economist and never having been at ease in the company of flow charts, I don’t question the expert testimony, but I notice that it doesn’t have much to do with human beings, much less with the understanding of a man’s work as the meaning of his life or the freedom of his mind. Purse-lipped and solemn, the commentators for the Financial Times and MSNBC mention the harm done to the country’s credit rating, deplore the trade and budget deficits, discuss the cutting back of pensions and public services. From the tone of the conversation, I can imagine myself at a lawn party somewhere in Fairfield County, Connecticut, listening to the lady in the flowered hat talk about the difficulty of finding decent help.

Speaking Tools Versus Busy Bees

The framing of the country’s unemployment trouble as an unfortunate metastasis of the servant problem should come as no surprise. The country is in the hands of an affluent oligarchy content with Voltaire’s observation that “the comfort of the rich depends upon an abundant supply of the poor.” During Ronald Reagan’s terms as president, the income that individual American families received from rents, dividends, and interest surpassed the income earned in wages. Over the last 30 years, the wealth of the emergent rentier class has been sustained by an increasingly unequal sharing of the gross domestic product; the percentage of GDP accounted for by manufacturing fell from 21% to 14%, and the percentage accounted for by finance rose from 14% to 21%.

Eugene V Debs Speaks

The imbalances become greater over time; as between compensations awarded to the high-end baskers in the sunshine and those provided to the low-end squatters in the shade, the differential at last count in 2009 stood at 263 to 1. With wealth comes power in Washington, so it’s also no surprise that the government, whether graspingly Republican or scavengingly Democratic, adopts the attitudes and prejudices of the monied sultanate. So do most of the nation’s news media, their showings of concern expressed in the lawn-party voices of the caterers distributing the strawberries.

The lines of work are as numberless as the hooks in the sea, but they divide broadly into employments bent to one’s own purpose and those bound to a purpose other than one’s own. It is the former that reflects the founding idea of America. The Puritan settlers of the seventeenth-century New England wilderness arrived from an old world in which the civilizations both east and west of Suez fetched their food and shelter from the work of variously denominated slaves.

The ruling classes of antiquity, like those in medieval and early Renaissance Europe, regarded the necessity of having to earn a living as a mortification of the body and a degradation of the mind. Aristotle had classified slaves as “speaking tools,” available for every purpose except their own, and for the next 2,000 years, in Asia as in Europe, it was generally understood that the terms of a man’s employment were settled at birth. The newfound land of North America afforded an escape from the burdens of the past imposed by the divine right of inherited privilege as well as those enforced by Barbary pirates and British naval officers, the architects of the New Jerusalem bringing with them the Protestant belief that it was by a man’s work that he was known, not only to himself, but also to God and to his fellow men.

On no less an authority than that of John Calvin, they had been given to understand that there was “no employment so mean and sordid (provided we follow our own vocation) as not to appear truly respectable and be deemed highly important in the sight of God.” The thought embraced St. Benedict’s Catholic certainty that “Idleness is the enemy of the soul,” as well as the meditation of the Roman emperor Marcus Aurelius, who likens the work for which men are by their nature born to that of “craftsmen who love their trade,” equivalent in turn to that of the “sparrows, ants, spiders, bees, all busy at their own tasks, each doing his own part toward a coherent world order.”

Further searches for a coherent world order on the western shores of the Atlantic encouraged the authors of the Constitution to conceive the document as a tool turned to the making of things, of laws as well as of ships and cider mills and songs. As with the plow and the surveyor’s plumb line, the instruments of government were meant to support the liberties of the people, not the ambitions of the state. In answer to questions being asked in Europe about what sort of persons were likely to be well received in the new republic, Benjamin Franklin in 1782 published a pamphlet, Information to Those Who Would Remove to America, in which he observed that in America people “do not inquire concerning a stranger, What is he? but, What can he do? If he has a useful art, he is welcome… But a mere man of quality, who on that account wants to live upon the public by some office or salary will be despised and disregarded.”

The love of country followed from the love of its freedoms of thought and action, not from a pride in its armies, its monuments, its manners, or its debts. Thomas Jefferson, writing his Notes on the State of Virginia in 1781, envisioned a republic of free-standing husbandmen who till the earth, “the chosen people of God… whose breasts He has made His peculiar deposit for substantial and genuine virtue.” The newfound land and its newfound independence both were to be cultivated by employments bent to purposes of the individual, their joint venture resting on a democratic holding of one’s fellow citizens in thoughtful regard not because they were rich or beautiful or famous but because they were fellow citizens.

The Elephant on the Table of American Politics

So at least was the spirit and intent if not always the practice or the case. In return for the Constitution’s ratification by the Southern slave-holding states, the politicians in Philadelphia in 1789 had compromised the principle that all men are created free and equal. They assumed that slavery was soon to become extinct, certain to be swept away on the rising tide of freedom, and so they allowed the Southern planters to temporarily retain their prize collections of speaking tools.

The invention of the cotton gin in 1793 remanded the case for liberty to the higher court of money. Between 1800 and 1860 the demand for cotton on the part of Britain’s satanic textile mills furnished the newly minted United States with its richest flow of capital, serving the purpose that the Saudi Arabians now extract from oil. The opulence of the trade (60% of America’s export in 1860), in large part conducted, to their immense profit, by New York banks and New England ship owners, financed the country’s westward expansion and the early development of its commerce. Without cotton, there would have been no industry, and without slavery, no cotton.

The “darkies” said by Stephen Foster to be singing sweetly in the fields subsidized the music that Walt Whitman heard elsewhere in the country in the singing of “the carpenter,” “the deckhand,” “the mason,” “the shoemaker,” “the hatter,” “the woodcutter,” and “the plowboy” -- the voices of America’s leaves of grass, the fellow citizens in the 1830s and 1840s plying trades in Massachusetts and Ohio, felling trees and building roads in Illinois, piloting Missouri and Mississippi River steamboats, tinkering with farm equipment and firing pins, going west to Texas and California.

Victory in the war with Mexico added another 529,017 square miles to the inventory of spacious skies and purple mountain majesties acquired in the Louisiana Purchase; the population went forth and multiplied (9,638,453 in 1820; 31,443,321 in 1860), its restless collective energies geared to vocations apt to prove to be their own reward. Frontier people holding fast to what Mark Twain later claimed as “a maxim of mine that whenever a man preferred being fed by any other man to starving in independence, he ought to be shot.”

During the second half of the nineteenth century, the shooting would have needed to become extensive. The Civil War had rousted slavery from the plantations of the South, but the industrial revolution in the North required an even greater supply of hired hands bound to purposes other than their own. The employments on offer in the Kentucky coal mines and the Pennsylvania steel mills matched Karl Marx’s job description of alienated labor -- a “diabolical activity,” entailing the loss of self. “What is animal becomes human and what is human becomes animal.”

How then to accommodate both man and beast under the same beach umbrella of the American dream, make the freedom-loving argument that Franklin’s craftsmen and Jefferson’s husbandmen differ only in their angles to the sun from the hostess in the bunny costume checking coats in a Playboy club? By the turn of the twentieth century, the question of what constitutes the meaning of labor as well as a fair return on its performance was the elephant on the table of American politics.

An alienated proletariat had been imported from China to build America’s western railroads, from Ireland and Eastern Europe to service its eastern factories, and between 1870 and 1914, the bitter, often violent division between the differently purposed lines of work was made manifest in the financial markets and the streets. The great railroad strike in 1877 moved Thomas Alexander Scott, the president of the Pennsylvania Railroad, to suggest that the strikers be given “a rifle diet for a few days and see how they like that kind of bread.” State militia and federal troops complied with the suggestion, killing more than 100 strikers in Maryland and Pennsylvania. The putting down of the Haymarket Riot in Chicago in 1886, and the breaking of the Homestead Strike in Andrew Carnegie’s steel works in 1892, reinforced the rule of money; the bank panics of 1893 and 1907, preceded by heedless speculation in the stock markets, led to widespread unemployment, bankruptcy, foreclosure, and depression.

The disputes varied in their particulars (the protective tariff, the prices paid for gold and silver, the legitimacy of the labor unions), but in every instance what was at issue were the terms of service as defined on the one hand by President Teddy Roosevelt in a Labor Day speech at Syracuse, New York, in 1903: “Far and away the best prize that life offers is the chance to work hard at work worth doing”; on the other hand by Woodrow Wilson, still president of Princeton University in 1909, speaking to the New York City High School Teachers Association: “We want one class of persons to have a liberal education, and we want another class of persons, a very much larger class of necessity in every society, to forego the privilege of a liberal education and fit themselves to perform specific difficult manual tasks.”

Wilson’s way of looking at things aligns itself with what was to become America’s chrome-plated future, Roosevelt’s with its homespun past. The Rough Rider was trading in nostalgia, looking back to his days as a young man, a young man who also happened to be rich, shooting buffaloes in the Dakota Territory. The sentiment shows up in Norman Maclean’s remembrance of the way it was out among the tall trees in the summer of 1927, “As to the big thing, sawing, it is something beautiful when you are working together -- at times, you forget what you are doing and get lost in abstractions of motion and power. But when sawing isn’t rhythmical, even for a short time, it becomes a kind of mental illness -- maybe even something more deeply disturbing than that. It is as if your heart isn’t working right.”

It is here that one finds the dignity of labor and the expression of man’s humanity to man. One can illuminate the feeling on which Eugene V. Debs, president of the American Railway Union, mounted his candidacy for U.S. president in the election of 1912, attracting over 900,000 votes on the strength of his belief that “the workers are the saviors of society, the redeemers of the race.”

Wilson didn’t think so, and Wilson won the election, defeating Roosevelt as well as Debs. The establishment in 1913 of the Federal Reserve Bank overruled the prolonged objection by the instruments of labor to their uses in the hands of capital, shifting control of the nation’s currency from the public to the private sector.

The Labor of Consumption

It is man’s nature to be doing something, or at least to fancy that he’s doing something, but to what purpose, and for whom? Satisfactory answers to the questions lately have been hard to find, not only for the unemployed poor but also for the underemployed remnant of what was once a diligently aspiring middle class. It isn’t simply that the consumer markets don’t value work worth doing; it’s that the society’s ruling and possessing classes regard working for a living as the mark of inferior or damaged goods.

The attitude made its first appearance on the American scene during the Gilded Age, dancing with the newly crowned kings of finance under the ballroom chandeliers in Newport and New York. Thorstein Veblen took note of the arrival in 1899, his Theory of the Leisure Class suggesting that it is the conspicuous consumption of the product of other people’s time and effort that makes up the sum of one’s own worth and meaning. Not the doing of the work, the digesting of it. “Leisure, considered as an employment,” said Veblen, “is closely allied in kind with the life of exploit, and the achievements which characterize a life of leisure and which remain as its decorous criteria, have much in common with the trophies of exploit.”

During the years prior to the Second World War, the attitude was safely confined to a small number of people preserved in the aspic of what was then big money. The victories over Germany and Japan fostered extensions of the franchise. Rescued by force of arms from the Great Depression, America seemed blessed with the enchantments of both Croesus and Colossus, the indisputable proofs of its wealth and military power giving rise to the notion that all its children were the inheritors of a vast fortune and therefore deserving of the best of all possible worlds that money could buy. No reason not to have it all -- a new frontier, a great society, guns for a splendid little war in Asia, butter for the old folks at home, a house in the country, a boat on the lake, the face and fortune in the ad for one of Ralph Lauren’s tennis dresses.

Much of the world in 1945 was either bankrupt or in ruins, and the refurnishing of it supplied the American economy over the next 30 years with an abundance of jobs that afforded the means of independence and a measure of self-worth, while at the same time bringing forth the trophies of exploit to a consumer market more wonderful than the wonderful world of Oz, seeding ever broader acres of the nation’s human topsoil with the presumptions of entitlement favored by Veblen’s Newport heiresses. Don’t worry, be happy; go forth and shop. Leisure considered as employment.

Which was all well and good until it turned out, somewhere in the middle of the 1980s on the yellow brick road with Toto and the Gipper, that the Wizard was easy access to conspicuous credit. For how else could the American leaves of grass join their top-dressed companions on a golf course unless they borrowed money? The country’s working and middle classes discovered that it wasn’t the value of the work itself, or its manufacture of a decent living (as architect, bus driver, sales clerk, actress, lathe operator, automobile mechanic) that made up the sum of the country’s wealth and well-being.

Their great collective enterprise was the labor of consumption, and with it the derivative of debt, a byproduct, like the methane exuded by factory-farmed pigs, that funded the patriotic service owing to God, country, and the American Express card. The work was maybe mindless, a substitution of what is animal for what is human, but it fattened the gross domestic product, enriched the insurance companies and the banks, welcomed the second coming of an American Gilded Age, and now accounts for the increasingly grotesque disparity between the income earned as wages and the revenue collected as rent, interest, dividend, stock option, and year-end bonus.

Americans with jobs imagine they now work longer and harder hours than did their forebears on Mark Twain’s Missouri frontier; if so, their labor serves a purpose other than the one in hand. Finance accounted for 47% of total U.S. corporate profits in 2007; 58% of Harvard University’s male graduates in that same year (the heirs and assigns of Woodrow Wilson’s small class of persons deserving of a liberal education) took up careers as high-end traffickers in the drug of debt. It’s a lucrative trade, up to the standard of the cotton export from the dear old antebellum South. That it doesn’t add to the sum of human happiness or meaning is probably why the gentry on the lawns of Connecticut, together with their upper servants in Washington and the news media, talk about the lost battalion of America’s unemployed as a set of conveniently invisible numbers rather than as a body of fellow citizens.

[A longer version of this essay appears in "Lines of Work," the Spring 2011 issue of Lapham's Quarterly and is posted at TomDispatch.com with the kind permission of that magazine.]

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