By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK
I mentioned yesterday that I was going to a model railway show. I duly did so, and greatly enjoyed myself.
A thought, inevitably, occurred to me as I was wandering around. In economic terms, model making (and many other hobbies) must be amongst the most unproductive things we can do. Vast amounts of effort is usually put into very small quantities of material input with a result that, if it were to be sold, rarely reflects the value of that time. And yet, what is produced is of great value to those making it.
This is virtually the exact opposite of what the economist values. They want to minimise labour input into any product, always seeking to maximise the material input instead. The result is a profoundly homogenised product that they actually say has only marginal value.
And before anyone sys I am playing with words when making that last claim, of course I am. And yet when doing so I seem to find an inner truth: most of what can be bought actually appears to have little value attributed to it. That is why we live in a such a throwaway society.
Further thoughts followed, of course. One was that until we cure the world of the economists’s obsession with productivity that maximises material input in proportion to labour cost we will not solve three problems.
One is sustainability. Productivity as defined by economists demands we consume ever more material resources in proportion to human effort. We know that is not possible now. It is, literally, killing us.
Second, we need find ways to create meaningful work, which seems to me to be one of the great problems of our age. David Graeber described the world of work as being full of bullshit jobs. I would simply call them shit jobs, because that is what they are.
These jobs treat people as if they are material inputs into a process. Impossible demands are made (I have never yet been able to reconcile the commonly made demand for team players who simultaneously have a high degree of individual creative flair). Worse, meaning is absent. That is what productivity demands.
Third, public services and most things of value are destroyed. I refer, of course to what is called Baumol’s Law.
What this economic law says is that as the private sector improves productivity, as it has been able to do by destroying the planet and creating shit jobs, those engaged in the public sector, the arts and other creative sectors like education have not been able to match those productivity gains.
A 50 minute therapy session still takes 50 minutes. Doubling the speed of most music does not make it better. The time taken to explain algebra to a child struggling with it is pretty much a constant, I suspect.
However, wages in the private sector have risen over time because productivity has increased. As a result those in the public, creative, education and other such sectors must do so as well or people engaged in them will have to move to the private sector. Politicians miss the point when they demand increased productivity in exchange for those public sector pay rises: that supposed increase in productivity actually destroys the service the public and other such sectors supplies.
The reality is that the public sector cannot and never will match productivity gains that can be achieved in the private sector as a result of destroying the planet. But that does not mean we should abandon public sector services as unaffordable, which is the supposedly logical consequence that economists now says follows from this because those services have, apparently, become unaffordable. Instead, it means that we should now accept that a higher proportion of labour resources must go to the state to supply those essential public services that we have always enjoyed, with a resulting increase in cost that we need to now pay. It’s either that, or we destroy everything of value.
Can we expect politicians to get their heads around this very obvious idea? Or should we accept that what was once entirely affordable is now not so entirely because the costs of trashing the planet are not taken into account in economists’ (and accountants’) estimates of productivity?
What is it to be? A sane economics that says we must stop trashing the planet so that we not only have a chance of survival but also can have the things (like the NHS) that we value, or are we to just live in a literal throwaway society where everything of worth is going to end up abandoned and destroyed?
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Given the cost of living and it’s associated debt service has far outpaced the majorities ability to earn enough…It is hard to produce furniture or gadgets that would satisfy both the producer (labor) and the purchaser (labor) in that the former is not paid enough to act the later, my view is the huge toll the overhead and extractive economy play in speculating basics to unaffordable levels and gaming the tax laws to advantage (tax should equal taxing ie: impose an impediment to some negative activity)
“The great sore spot in our modern commercial life is found on the speculative side. Under present laws, which foster and encourage speculation, business life is largely a gamble, and to “get something for nothing” is too often considered the keynote to “success”. The great fortunes of today are nearly all speculative fortunes; and the ambitious young man just starting out in life thinks far less of producing or rendering service than he does of “putting it over” on the other fellow. This may seem a broad statement to some: but thirty years of business life in the heart of American commercial activity convinces me that it is absolutely true.
If, however, the speculative incentive in modern commercial life were eliminated, and no man could become rich or successful unless he gave “value received” and rendered service for service, then indeed a profound change would have been brought in our whole commercial system, and it would be a change which no honest man would regret.”- John Moody, Wall Street Publisher, and President of Moody’s Investors’ Service. Dated 1924
“Laborers knowing that science and invention have increased enormously the power of labor, cannot understand why they do not receive more of the increased product, and accuse capital of withholding it. The employer, finding it increasingly difficult to make both ends meet, accuses labor of shirking. Thus suspicion is aroused, distrust follows, and soon both are angry and struggling for mastery.
It is not the man who gives employment to labor that does harm. The mischief comes from the man who does not give employment. Every factory, every store, every building, every bit of wealth in any shape requires labor in its creation. The more wealth created the more labor employed, the higher wages and lower prices.
But while some men employ labor and produce wealth, others speculate in lands and resources required for production, and without employing labor or producing wealth they secure a large part of the wealth others produce. What they get without producing, labor and capital produce without getting. That is why labor and capital quarrel. But the quarrel should not be between labor and capital, but between the non-producing speculator on the one hand and labor and capital on the other.
Co-operation between employer and employee will lead to more friendly relations and a better understanding, and will hasten the day when they will see that their interests are mutual. As long as they stand apart and permit the non-producing, non-employing exploiter to make each think the other is his enemy, the speculator will prey upon both.
Co-operating friends, when they fully realize the source of their troubles will find at hand a simple and effective cure: The removal of taxes from industry, and the taxing of privilege and monopoly. Remove the heavy burdens of government from those who employ labor and produce wealth, and lay them upon those who enrich themselves without employing labor or producing wealth.” Unknown author 1924
In spite of the ingenious methods devised by statesmen and financiers to get more revenue from large fortunes, and regardless of whether the maximum sur tax remains at 25% or is raised or lowered, it is still true that it would be better to stop the speculative incomes at the source, rather than attempt to recover them after they have passed into the hands of profiteers.
If a man earns his income by producing wealth nothing should be done to hamper him. For has he not given employment to labor, and has he not produced goods for our consumption? To cripple or burden such a man means that he is necessarily forced to employ fewer men, and to make less goods, which tends to decrease wages, unemployment, and increased cost of living.
If, however, a man’s income is not made in producing wealth and employing labor, but is due to speculation, the case is altogether different. The speculator as a speculator, whether his holdings be mineral lands, forests, power sites, agricultural lands, or city lots, employs no labor and produces no wealth. He adds nothing to the riches of the country, but merely takes toll from those who do employ labor and produce wealth.
If part of the speculator’s income – no matter how large a part – be taken in taxation, it will not decrease employment or lessen the production of wealth. Whereas, if the producer’s income be taxed it will tend to limit employment and stop the production of wealth.
Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the source from whence they are drawn.
Written around 1925
Financial Predators v. Labor, Industry and Democracy
August 2, 2012
By Michael Hudson
Europe’s sovereign debt crisis in historical perspective
Sankt Georgen University, Frankfurt, June 22, 2012
Michael Hudson’s new book The Bubble and Beyond
“The purpose of business enterprise is pecuniary gain. The method usually buy and sell”
Thotstein Veblen 1904
Pretty simple. He went on to explain how business enterprise would eventually devour industrial enterprise.
We could have done without the NHS spending £12billion on IT, all for nothing!
And with no consequences for anyone involved.
That’s a symptom, not a cause….
You say 12 billion like that’s a lot of money
https://www.statista.com/statistics/263102/pharmaceutical-market-worldwide-revenue-since-2001/
adding to this is that IT in medicine is pretty much a siloing device beneficial mostly to the administrative bloat at the top of this pile of bunny pellets making sales easier and more opaque helping to make western sick care all the more expensive and profitable.
It is when there’s no consequences for the incompetent.
12 Billion pounds is a function of multiple things
– not spending money properly earlier.
– allowing contractors to take over and outsourcing work to them
– not building internal IT teams and investing in them and keeping those resources in house.
IT is very key in any business now and the leading tech players know that – the googles, Amazons, Microsofts, Facebooks, Draftkings, UnitedHealthGroup – they do not outsource the core pieces of it. If they do outsource, it is the non-critical stuff.
When the org is a govt one like NHS, there is pressure to outsource to the govt contractors – like the outsourcing of IT to the likes of BCG, SAIC, Deloitte, etc in the US.
A low productivity job: https://www.youtube.com/watch?v=AenBnjKhPPo
Done singing…Gaelic Waulking Song
One may wonder: has he finally read Karl Marx’s Capital?
I wish somebody would. He seems to be groping towards a Labour theory of value, where surplus value, and profit comes from, competition leading to a rising organic composition of capital and therefore a declining rate of profit. But he doesn’t quite get there. I recommend Michael Roberts:
https://thenextrecession.wordpress.com/
This comes full circle because we have enjoyed prosperity at the expense of the planet. We have literally plundered our way to modern living and rationalized it by calling it productivity. Productivity minimizes the value of service because service takes time. So that productivity destroys the value of time. Past, present and future. In fact productivity has destroyed aeons of constructive evolution in only about two centuries. And still brags about it. Why can’t we just turn the tables and make time as valuable for people and nature as it once was. That might automatically make time very unproductive for finance. Oh shudder the thought.
We just might be better without any money at all. Stop all groups that use money starting with the Central Banks, all other banks, any organization that uses money as the means to make money: start with private equity, hedge funds, all profit-making banks and profit-making companies and industries and profit-making religions. When you take the money out of the company, you have to depend on groups of people who will work and share their work; for example, we need food so farmers would grow foods and make them available to those who build houses or make clothing. Sounds simplistic, but the only thing to not create is more filthy lucre.
The way indigenous peoples shared the things created by their work is a good example of how people can organize so that all people enjoy the fruits of all they labour for. If we don’t try to live in a way that replenishes rather than depletes the earth, then we will be forced by climate circumstances to live as the indigenous people did or perhaps we may not live at all.
In tropical climates such as Hawai‘i, before refrigeration technology became available any excess of perishable food like just-caught fish or just-slaughtered meat pretty much had to be promptly given away and/or shared with others, or it would spoil and go to waste.
Hence the propensity for group feasting (the luau).
I agree that the political rhetoric is to apply neoclassical/neoliberal (Junk Economics) economic theory (ideology) to public sector workers. This concept is doubly flawed.
“…However, wages in the private sector have risen over time because productivity has increased…”
This is not really true, that’s what neoliberal/neoclassical Junk Economics would have us believe. A perusal of real wages and labor productivity charts over time will make this glaringly obvious. Wages DO NOT rise with labor productivity, as taught to us in Econ courses. (Mainstream academic Econ is ideology and indoctrination, not science, not theory).
Also, I would bet that so-called productivity (how that is measured for public services is flawed) in realty in the NHS has risen dramatically – in fact I would bet that NHS wages have risen more slowly than labor productivity. So we could throw the Junk Economics rhetoric right back at the austerity kleptos
Bottom line: do you want to pay (the most expensive on earth) US-style private health extortion prices and still die young and in debt, or do you want a well-funded NHS and live longer without becoming a debt peon?
To answer your question – obviously, the people driving the boat want the expensive US style system for them, and a failing system for everyone else so they die young and in debt.
Re your pull quote – the author’s intent wasn’t that private labor wages rose in lockstep with productivity, but that private labor wages rose more relative to public sector wages. The basic idea is a teacher still has to teach the same 6 hours (the only way to improve ‘productivity’ is to stuff more kids into the classroom, thus gutting quality), while the auto executive can improve ‘productivity’ by sending all the jobs overseas; so in principle there is a bigger pool of funds to pay the private sector with relative to the equivalent ‘work’ in the public sector.
Now whether the auto executive uses the increased funds to either a) give the jr account manager a raise or b) give himself a bigger bonus is another question – that’s what leads to your observation.
Thanks, I hear you. I just wanted to point out that the prevailing discourse on wages and “productivity” is flawed to begin with.
Err no:
and a failing system for everyone else so they die young and in debt
Yes
and a failing system for everyone else so they die young with debt settled.
It is generally agreed that greed is the worst of the seven deadly sins, because Greed is unique in having no limits – when one is greedy there is no “enough is enough”.
Hunter gatherers as limited by the quantity of spoils they can eat and then carry. In addition they havef few ways to store food.and other possessions.
Except for females. They could be “Collected,” and were not very amenable to be shared among the tribe.
And that part of Human Behavior leads to greed and the system we have today, and I believe there is little we can do to change our basic nature.
And our basic nature leads to survival of the fittest, via a massive die off.
Too gloomy? What is the civilization in Human history that has conquered greed?
The terraforming civilization of the Amazon basin appeared to have conquered or at least domesticated greed before the Great Germocaust of the European Diseases.
A number of other Indian Nations appeared to have gotten the greed-drive under control, perhaps by steering it into non-economic directions, such as greed for the respect of all one’s co-tribesfolk?
And perhaps such examples exist in AfroEurAsia but are kept suppressed from common knowledge by the “greed is human nature” lobbyists.
I see a big block questionairre keeps coming up for every single attempt to read this blog. It just keeps coming and coming and I can’t find a way to stop it from appearing so I can read in peace.
The end product of Capitalism is cheap junk and trivialized lives. Artisans, on the other hand, create beauty and enjoy themselves. Luddites had the right idea.
Too rigid and unnanced a distinction between efficient, private, profit-making workers and inefficient , labor-intensive government workers. Operation Warp Speed, the internet, management auditing, mass surveillance are all government activities that fit the efficient paradigm.
Planned obsolescence: the efficiency of Keynes’s digging a hole and then filling it up.
Problem with NHS is multifold.
It is the best health system of the world but victim of its own Success.
The more patients it saves more money it needs to keep those very patients safe (if someone live for 20 years post MI or Stroke or Cancer then they are on medications and other support from health workers for those 20 years increasing cost) so the more lives it saves the more it costs government.
It is best as it is free and if someone falls ill then they do not have to think of insurance number/money or which part of UK they are in.
Again Government and Common Joe think that health workers should not be paid more than journalists of BBC or others. most occupation are better paid than nurse/Health Care assistants/Junior Drs and even Consultants. Trying to squeeze the pay of health worker has led to exodus of these health workers moving to better paying countries including Canada/Australia/New Zealand/USA/MiddleEast in search of better work/home life balance. But the government still thinks they can squeeze the health workers more (remaining ones) who gradually will move increasing works of the ones remaining or burning them out. Now in Private sector if you increase work then your pay increases. In NHS illusion is that pay shouldn’t increase but amount of work can be increased, courtesy lot of managers who think health workers are all the same and any patient can be seen by any health worker of any department and that health workers cannot have anytime to sit down as that is waste of time not realising that that is the time health workers use to recuperate from stress of the job, reflect on what they have seen. Result of this is as we said health workers are either retiring or moving abroad to greener pastures, but it has still not dawned on managers/govt or common joe that people do move to better paid or better working condition jobs as they become more experienced.
only way to stop this is to either pay more or make working condition better.
Brexit and stopping immigration of Highly Skilled people like Drs and Nurses also played a part in decreasing the number of Drs working. Now some countries from which some of these Health workers used to come from are better paid. Also health workers immigrating end up paying more for visas and also encounter very unfriendly terms for immigrating despite shortage of them here. This adds to problem. There was a time when for every 1 job there used to be 500 applications from immigrants. Now reverse is true and for every 100 jobs there is one immigrant applicant
Government and common Joe have started believing that for everything they should be looked after by NHS, including if they are in debt or if they have housing problems, or have any sort of social issue etc. This takes away precious time from the actual things that a health worker can helpfully do. Government and common Joe all think that there is an answer for every little symptoms they have or everything including an innocent itch or the usual sore throat is treatable and needs medication. This leads to overburdening with actual ill people being pushed to back.
Before I forget, government started reducing number of AEDs and Hospital Beds in 2005 for more streamlined health services and also to push more things to community for them to look after the ill patient. They forgot that in a small ward you only need few health care workers to look after ill patients whereas in a City or Town or villages you needs 5-6 times more number of people to look after these ill patient, increasing cost and delaying care causing more people to be more severely ill. Logistics dictate that it is going to take more time reaching out to ill patients spread across a geographical area compared to in a small hospital. It is easier to keep an eye and respond quickly to illness in hospital admitted patient whereas same ill patients in community will take longer and more workers to reach them. Now reduced number of beds and AED are coming back to haunt everyone along with reduced number of health care workers
Snark #1: When did this happen?
Snark #2: Clearly, the US is not in danger of being Baumol’d anytime soon.