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Why Do Americans Work So Much?
HughPickens.com writes Rebecca Rosen has an interesting essay at The Atlantic on economist John Maynard Keynes' prediction in 1930 that with increased productivity, over the next 100 years the economy would become so productive that people would barely need to work at all. For a while, it looked like Keynes was right: In 1930 the average workweek was 47 hours. By 1970 it had fallen to slightly less than 39. But then something changed. Instead of continuing to decline, the duration of the workweek stayed put; it's hovered just below 40 hours for nearly five decades. According to Rosen there would be no mystery in this if Keynes had been wrong about the economy's increasing productivity, which he thought would lead to a standard of living "between four and eight times as high as it is today." Keynes got that right: Technology has made the economy massively more productive. Now a new paper Benjamin Friedman says that "the U.S. economy is right on track to reach Keynes's eight-fold multiple" by 2029—100 years after the last data Keynes would have had. But according to Friedman, the key reason that Keynes prediction failed to come true is that Keynes failed to allow for the changing distribution of wealth.
If we lived with the stuff we had in the 1930s you would not have had the economy boom you experienced in the second half of the 20th century.
There's certainly some truth to this, but it oversimplifies things.
Without that demand, nobody would have had a job and no economic growth would have happened.
But take the premise in TFA seriously for a second. Keynes's prediction should have the average work-week around 20 hours by now. To have our current productivity, we would therefore need twice as many jobs as we currently have. But we were reach full employment long before that, so we would have to have significantly lower productivity and consumption while still having enough jobs to go around.
And of course the objection is -- "But don't people who work 20-hour weeks get paid less?" And the point of TFA is that NO -- they still get paid a living wage. The difference in the Keynes future prediction and what we actually got is that that extra money has been siphoned off to the richest folks, rather than rewarding average workers, who might then have to work less hours to still live comfortably.
(Of course, whether that could actually happen given human nature is a separate issue...)
Today the desire remains, what's lacking is the money to actually do it, and as soon as the money for consumption was gone the economy plummeted.
This is also far too oversimplified. Our economy doesn't just depend on consumption -- it depends on irrational assumptions of continuous and perpetual GROWTH of consumption.
You can't have a large corporation today and just continue making the same stuff every year and getting moderate profits that keep up with inflation. Well, you can, but nobody's going to invest in you, because Wall Street has taught us that speculation in growth is normal. Thus, if you're going to attract investors, you need to promise them an irrational and illogical perpetual growth machine that will always beat inflation in its returns.
The consequences of this logic are profound, because it's simply impossible for businesses to sustain such growth over any extended period. Once market saturation occurs, where else do you go? Well, you start doing what we see big corporations in America doing for the past few decades -- you need to keep up the illusion that profits are going up, but you can't get more revenue due to market saturation, so how do you keep up the GROWTH demand of investors?
First, you have the cost of employees. Those darn Americans and their unions cost too much. So, you send manufacturing jobs offshore. Nowadays with the lower cost of global communication, you send service jobs offshore too. And those effects continue to trickle up the offshore game -- to save money, to make greater profits, to satisfy the investment illusion that perpetual growth is possible.
But then you need more money, 'cause you've already sent all your manufacturing (and JOBS! don't forget that's what we were trying to keep in the US!) to China or whatever. But you've exhausted the revenue increases from offshoring, so you make cheaper products, which will break. You make them in such a way that they can't be repaired. Repair shops (which used to be a significant service elements in most American cities) also go out of business... more jobs lost.
You create "planned obsolescence." You spend more and more money on marketing to convince people that they need the newest gadget every year. That marketing money doesn't go to support middle or lower class workers (JOBS!) -- instead it goes to white-collar advertising agencies and such.
Eventually, you need to start tricking people into spending huge amounts of money on your products -- so, you expand the "razor/razorblades" model to products that cost hundreds of dollars. Yeah, you get a "free" iPhone every few years, but it comes with a commitment to a $100+/month phone plan. People wou
Unemployment is high in the US.
"Deadlock" in government is needed and necessary to stop shit from happening.
The ultra-wealthy are in minority, yet their interest are being served at the expense of the majority, thus a "democracy" cannot be a reality.
Charitable institutions is a scam, to lighten the consciences of thieves. Tax the fuck out of the wealthy so they can't afford to be charitable and it won't even be needed.
I think debt is slavery.
Somewhat. I'd more say that debt which cannot be discharged via bankruptcy is like slavery.
There are definitely similarities between renting and borrowing money, but there are important differences. Borrowing money means a (often long-term) obligation that you can't simply walk away from; you have to pay off the debt. If you're renting, you can just walk away once your contact is up. In my case, I only need to give 30 days notice if I want to move out.
The analogy between rent and interest also has problems. Rent means constant payments over time with a fixed total price and no long-term ownership; if you have a one year contract at $1k a month, then you know that you will pay $12k over the length of the contact and you don't own anything at the end of the day.
Repeated borrowing (like in credit cards or loans to pay off loans) means the price is not fixed, in part because the duration of the loan(s) is not fixed. If you have $1k in credit card debt, that could mean paying $1k immediately or it could mean paying a lot more over time. The flip side is that you do get long-term ownership of whatever you buy with the borrowed money.
Mortgages (and fixed-term borrowing) are closer to renting, but you own the property once the mortgage is payed off. Given the tax incentives for mortgages in the US, mortgages can be a pretty good deal.
No, the problem is loans. The top 1% aren't amassing wealth by stealing it from the other 99%. The 99% are willfully agreeing to hand it over to them in the form of interest on all sorts of loans.
Productivity gains haven't translated into increased real income for two main reasons: Increased cost of housing, and increased cost of education. The market price for homes is determined almost entirely by how much people are willing to pay, not by how much it costs to build. If cost were the predominant factor, homes would depreciate as they got older, like cars. Instead they appreciate because of widespread availability of credit (loans) and increased demand (population is increasing, land area is not).
Look at the long-term inflation-adjusted home prices. From the 1890s to 1930s the average real home price decreased as you'd expect from technological progress making them cheaper to construct. But in 1934 the National Housing Act was passed, then Fannie Mae was created in 1938, then the GI Bill after WWII. Real home prices began climbing until they stabilized at nearly double what they were pre-1930 (the graph is a log scale). All of these programs allowed people to cheaply borrow money. If you double the amount of money people are able to use to bid on a home, of course the price of a home is going to double. It happened again during the housing bubble of the 2000s. Extremely low interest rates and relaxed lending standards meant a lot of money was borrowed cheaply, and when lots of people can borrow lots of money, they bid up the price of large purchases like houses.
The same thing has been going on with college education. People wring their hands over the increasing cost of college tuitions which have been vastly outpacing the rate of inflation, asking why is this happening? It's damn obvious why it's happening - the widespread availability of college loans. We've got a perverse positive feedback loop where college gets expensive, people argue that students need assistance to pay for it so we make programs to provide them low-interest loans. That borrowed money allows students to bid up the price of tuition (the school raises the price beyond a point where the student would normally decline to attend because of the high tuition, but instead they get a student loan and pay the higher tuition). That allows tuition to increase even more, leading to people arguing for more student assistance.
So it's the loans which are causing the rise in price of these non-commodity big-ticket items, which are eating up a huge portion of our productivity gains since the early 1900s. The next question is, who is the beneficiary of all these loans? Well to loan someone money, you have to have money. In other words, the 1%. You get a 30-year mortgage whose amortization means half of your total payments will go to principal, half to interest. Basically you're buying a house, and agreeing to pay for an identical house for a 1%er. (Slightly less due to inflation, but we're in a low-interest rate period. At an 8% interest rate, it's 62% interest, 38% principal. At the 16% interest rate of the early 1980s, its 79% interest, 21% principal.)
You want to stop the transfer of wealth to the 1%? Get rid of the loans. Ratchet back the maximum duration of a loan to 15, then 7 years, and make it harder to roll over balances from end of one loan to the start of another. Cap the interest rate so the percentage that's paid to interest over the life of the loan can't exceed 25% or 33%. Yes this will make it harder to buy a house or get an education - that has to happen if you want the price of those things to drop. People will have to learn to save first, buy later; instead of buy now, pay for it later. If you want to assist low-income people trying to buy a home or go to college, do it with supply-side subsidies. Build more government-funded or government-sponsored housing to increase the supply of housing. Create more public universities with capped tuitions to increase the supply of education. Don't do it with things like loans which create more demand.
Yep. I know the Bible isn't necessarily the most popular source of wisdom around here, but Proverbs 22:7 nails it:
The rich rule over the poor,
and the borrower is slave to the lender.