The US economy (indeed, the global economy) seems to be moving in two directions at once. On the one hand, we see Wall Street, big banks, multinational corporations, energy companies, reporting ever-increasing profits as the months go by. On the other hand, that stubborn unemployment rate remains high, creeping down only slowly. Not only that, but wages remain flat, or even on a decline in real dollars for people in many income brackets.
Yes, it’s the old picture of rich getting richer and poor getting poorer, that we’ve heard about ever since we can remember. But what exactly is driving this disparity, these days?
On the corporate side, there’s a particular indicator that tells the story, summarized in one word: Productivity. There is a positive relationship between rising productivity and rising profitability. But what is productivity, and what drives it? Productivity is a measure of how much economic activity is associated with a given amount of labor: basically, production per man-hour. The more work you can get done with fewer people, the higher your productivity.
This in turn is driven by improvements in technology: miniaturization, automation, robotics, and other economies of scale that comes with the improvements we see constantly happening in the Information Age; or as we could more accurately call it, the Communication Age. By and large, these increases in productivity feed the bottom line and contribute to profits.
Now, here’s the nub: conventional wisdom (from a certain corner of the political landscape) has it that once you have more profits, you have more capacity to hire people, and thus create jobs. But in this economy, actual people working (labor) is looked at as a liability for a company, a cost, a drag on the bottom line; so the tendency is to pocket those profits, rather than hire more people or even pay those more-productive people a better wage.
Thus we see that there are two divergent means of wealth creation in this economy, the old and the new.
Under the old expectation, one could expect to work hard, save some money, increase the wages earned with time and experience, build up a nest egg, and eventually retire with a house and a small pension, based on some of those savings wisely invested (including what was invested into something called Social Security, an insurance program that paid benefits to those (un)fortunate enough to outlive their capacity to earn a wage).
On the other hand there is that wealth creation which comes with owning the means of production. Investors, bankers, large corporations. (Most small business owners are more in the same category as the wage-earners, since their income is dependent on their own ability to put time, sweat, and effort into success.) And what do we see? An increasing disparity between these two categories, because an increase in productivity means that fewer people have been hired, or people who used to do a certain amount of work are no longer needed and have thus become unemployed.
In the political climate of today, however, these large organizations are called “job creators.” Problem is, they do everything possible to create wealth without creating jobs, and are increasingly successful at that. More wealth derived from better technology and resulting higher productivity will not, for the most part, create more jobs, just more profits. And for corporations with the means to do so, the smart way to create jobs, if jobs are needed, is to do so somewhere where the wages are as low as can be, the people are expendable, and there are no pesky regulations involving the health, safety, or secure future of the workers. All those things are, after all, a drag on the bottom line, representing lower productivity, lower profits. Thus these “job creators” are neither inclined to create jobs, nor inclined to look out for the best interests of the workers they do hire. There is no inherent mechanism in the system to slow or reverse the widening of this gap.
The elephant in the room, of course, is that those whose wealth depends on the disparity spoken of above are the source of most of the money supporting the ruling class, the political elite. I’m hearing that in some states there is a move to completely deregulate corporate political donations while at the same time seeking to outlaw political contributions from labor unions.
But now I must mention another glaring aspect of today’s global economy: the fact that it runs on debt. What should be done about that?
Now, in this society, a lot of lip service gets paid to our religious heritage and biblical principles (though more actual obeisance is done to Adam Smith, Ayn Rand and Niccolo Machiavelli, so it seems to me). So let me leave preachin’ and go to meddlin’, for a minute, by pointing out a sadly neglected biblical principal, which has two parts.
Part One — God consistently indicates a desire for all people to enjoy the blessings of life, including wealth, envisioning a time when everyone shall “sit under his own vine and under his own fig tree, and none shall make him afraid.” In the instruction given to Israel through Moses, he lays out a multi-layered enforcement mechanism for this vision, with the goal that “there shall be no poor among you”: (1) the periodic cancellation of debts (every seven years; see Deuteronomy 15); (2) the provision for the poor and the alien to glean the leftovers of the harvest on other people’s land; and (3) inclusion of these at feasts in every household as a part of the periodic celebration of the nation’s freedom. And (4) the year of Jubilee, once every fifty years, when those who had sold their own ancestral land to pay off debts were to get it back from the creditors, free and clear.
These provisions for periodic, systematic, repeated corrections are given precisely because of the natural workings of unrestrained human economic activity which assure that “the poor shall never cease out of the land.” That particular saying, beloved of those who think this is an excuse to do nothing, is in fact quite the opposite, as it is immediately followed by: “therefore you shall be openhanded to your brother, to your poor, and to your needy, in your land.”
Part Two is the clear indication that the moral quality of a government and a judgment about whether that government deserved to continue to exist depended in large measure on how well it upheld the kinds of things envisioned in Part One (see Psalm 82: “Defend the poor and fatherless; do justice to the afflicted and needy. Deliver the poor and needy: rid them out of the hand of the wicked“).
I’ve written elsewhere about how our modern bankruptcy laws are a poor shadow of a remnant of a memory of the provision for the cancellation of all debts. Likewise we could say that the now-almost-never-heeded antitrust laws which used to bear some weight in the United States were founded on a biblical vision that valued the thinking behind the words of the prophet (Isaiah 5:8) who said: “Woe to those who add house to house and field to field!” In fact, I’d go so far as to suggest that the structure of the progressive income tax, from which in recent years we have disastrously retreated, was devised precisely because, once upon a time, the immorality of the excessive wealth of a few at the expense of the many was understood to derive from basic Christian principles, rooted in both Old and New Testaments. Id like for those who yearn for the day that we return to biblical values and principles to uphold with me the need for providing for the least among us through regulation of commerce, employment and economic activity, as those biblical principles enjoin.
Those who create wealth out of debt (pretty much the way our entire financial structure works) seem to me to be enacting an unfortunate parody of the image in which we all were made, by creating something out of nothing. Only, really, less than nothing, since the actual multi-trillions of dollars worth of wealth involved in instruments like credit default swaps is created from future wages yet to be earned by millions of mortgage holders. And there is the real root of that global financial crisis. The same entities who profit from those instruments contribute to a mentality that, generally speaking, considers an honest day’s labor a cost and a liability, and increased wages an economic evil. Where are the prophets?