Skip to main content

View Diary: World's elite loots at least $21 trillion and stashes it in tax-avoiding hideaways (211 comments)

Comment Preferences

  •  Most productivity... (0+ / 0-)

    ...increases in "real output per hour" are not the result of a worker "working harder" or anything directly tied to the worker. They are much more commonly the result of improvements in technology, business techniques, and capital expenditure.

    Ask yourself, what would you expect to happen as a result of increased productivity in agriculture in the US between 1900 and 2000? In 1900, 42% of the workforce was employed in agriculture, by 1930 that had dropped to 21.5 (almost half in just 30 years) and by 2000 had dropped to 1.9% - over a 20x reduction in the span of 100 years. During roughly the same period, US agricultural exports actually grew 8x and clearly we have plenty of food available in the US today (although, it may not be distributed optimally). "What to do with this productivity dividend?" is the question. One possibility would be that from 1900 on, 42% of the workforce remained employed in agriculture but, today, retired at full pay for the rest of their lives after two years of work - even if we began to require a college degree for these jobs, they would be living a life of leisure by 23 or, at latest, 24! Alternatively, their "real hourly wage" could be increased by 20x and they could work 30 minutes a day instead of 10 hours a day. After all, they are effectively "producing" 20 times as much food per hour of work as their great-great-grandparents - shouldn't they reap the benefits?

    Does that sound absurd? Hopefully it does, because it is! Increased productivity in agriculture came about almost entirely from improved technology, business techniques, and capital expenditure both within and outside of agriculture and the vision of a comparatively small number of people. For example, the internal combustion engine was not created by, or specifically for, agriculture but was trivially exploited by agriculture. Improvements in plant breeding, directed primarily at agriculture, helped as well as did improved refrigeration techniques and supply chain improvements which reduced waste. However, the individual guy feeding the plow horses on a small farm in 1900 had relatively little to do with all this - why would one expect for the equivalent low skill person today (perhaps one responsible for fueling trucks) to be making 20x in real dollars over their lifetime or working 1/20th as long for the same lifetime earnings?

    Increased "productivity" should, overall, result more in higher standards of living than higher real wages. And, in fact, we've seen this nearly across the board. Medical treatments and procedures that reduce suffering, prolong life, and increase the patient's productivity that were not available at any price in 1950 are now routinely available to nearly everyone in the US. The number of owner occupied homes with air conditioning has risen from 52% in 1973 to 89% in 2009. Similar story with indoor plumbing over a longer time frame. Similar story with TV size/capability and mobile phone size/capability over a much shorter timeframe.

    One would expect real, inflation adjusted, wages to be relatively flat. How could it be otherwise in the big picture? In fact, the piece you reference seems to show remarkable unexpected growth over time in "real wages" - which is the sign of a bubble which, scarily, must burst. Now, it's possible (in fact, likely) that some of this effect is that "real wages" and "real productivity" have not been calculated properly - when someone says 2+2=42, one suspects a oversight of some sort.

    Basically, each person can expect to consume over their life what they produce over their life. Of course, most people choose to (and have for thousands of years) specialize in producing A and trade it for B, C, D, and E if they are "better" at producing A than B, C, D, or E. They make this tradeoff because they are willing to accept the frictional losses of trade (such as middlemen and financiers) in exchange for enjoying the benefit of their ability to produce a lot of A efficiently. There is no free lunch and I don't expect one unless we are invaded by denizens of an advanced alien planet which have immense resources and a strong desire to produce and deliver them, at no cost to us, just because, perhaps, they like rather ugly species with patchy hair, fairly nasty temperaments, and a weak ability to evolve.

    If every worker gets a 100% raise when inflation is zero (i.e., an apparent "increase in real wages"), what do you suppose happens? The supply of goods likely won't increase much if at all. The demand for goods won't decrease. So, you have twice the "money" chasing the same supply of goods. So, one would expect 100% inflation (give or take). In fact, the 100% raise will probably reduce productivity and increase demand and maybe temporarily drive inflation even higher before correcting due to deflationary pressures (this because many, perhaps most, people are stupid and will think, incorrectly, that they are now "wealthier" and will take more time off work [reducing supply] and spend more extravagantly [increasing demand]).

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site