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Bye Bye American Pie: The Challenge of the Productivity Revolution
Here’s the good news. The economic pie is growing again. Growth in the 4th quarter last year hit 3 percent on an annualized rate. That’s respectable – although still way too slow to get us back on track given how far we plunged.
Here’s the bad news. The share of that growth going to American workers is at a record low.
That’s largely because far fewer Americans are working. Although the nation is now producing more goods and services than it did before the slump began in 2007, we’re doing it with six million fewer people.
Why? Credit technology. Computers, software applications, and the Internet are letting us produce more with fewer people.
In theory, this is a huge plus. We can live better and have more time off.
But as Tonto asked the Lone Ranger, “who’s ‘we,’ kemosabe?”
The challenge at the heart of the productivity revolution – and it is a revolution – is how to distribute the gains. So far, we’ve been failing miserably to meet that challenge.
True, some of the gains are widely spread in the form of lower prices and higher value. My 3-year-old granddaughter gets more out of an i-Phone in five minutes than my 98-year-old father ever got out of reading the daily paper (putting to one side their relative capacities to process the information).
But many of the gains are distributed narrowly in the form of profits to owners, and fat compensation packages to the “talent.”
The share of the gains going to everyone else in the form of wages and salaries has been shrinking. It’s now the smallest since the government began keeping track in 1947.
If the trend continues, inequality will become ever more extreme.
We’ll also face chronically insufficient demand for all the goods and services the productivity revolution can generate. That’s because the rich save more of their earnings than everyone else, while middle and lower-income families – with fewer jobs or lower wages – no longer have the purchasing power to keep the economy going at full tilt. (Before 2008 they kept up their buying by sinking deep into debt. This proved to be an unsustainable strategy.)
Insufficient demand – as everyone but regressive supply-siders now recognize – is a big reason why the current recovery has been so anemic and the pie isn’t growing faster.
So while the productivity revolution is indubitably good, the task ahead is to figure out how to distribute more of its gains to more of our people.
One possibility: higher taxes on the rich that go into wage subsidies for lower-income workers, combined with job sharing.
We also need better schools (from early-childhood through young adulthood, followed by systems of lifelong learning) so everyone has a fair shot at a larger share of the gains.
Finally, the benefits of the productivity revolution should be turned into more abundant public goods – cleaner air and water, better parks and recreation, improved public health, and better public transit.
Regressive right wingers want Americans to believe we’ve been living beyond our means, and can no longer afford it.
The truth is just the reverse. Most Americans’ means haven’t kept up with what the economy could provide – if the fruits of the productivity revolution were more widely shared.
Regressives growl about America’s borrowing and tut-tut about future federal budget deficits. The reality is the world is willing to lend us vast amounts of money because we’re so productive. And the productivity revolution is making us ever more so.
Get it? The pie is growing again but most people aren’t getting much of a slice. That’s bad even for those getting the biggest pieces. They’d do better with smaller slices of a pie that grew much faster.
Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations; Locked in the Cabinet; Supercapitalism; and his newest, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.
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33 Comments so far
Show All" the rich save more of their earnings than everyone else,"
That is not quite true. The rich don't spend their money on commodities to the same proportion as the middle class, but they don't really save it. They invest it in exotic securities that are designed to bring in high yields. The money they invest does not help the economy - except on Wall Street.
Reich ignores the money America borrows to fight wars and provide corporate welfare to the non-productive banksters and other government sanctioned criminals.
At some point the attraction of US productivity to foreign creditors will be undermined by serial extortion perpetrated by the corporations and the politicians they own.
Boy, here's a writer who totally misses the point. We don't need any more SHIT in this country, we have way too much already! We can't possibly buy all the crap this system churns out, and why should we anyway? Most of it is a waste of resources, bound for the landfill in 6 months. And don't get me going on I-phones and I-pads and all that electronci crap! How 'bout some talk on steady state economics, a sustainable culture, a real future for our people? Isn't it time we started imagining what that will look like? How long can we cling to a model that has already failed us miserably, living on the false hope that we can resurrrect this dead horse and go for another wild ride? Come on, people! Time to start stocking up on bullets, gas and seeds!
"Time to start stocking up on bullets, gas and seeds!"
1) Firearms and ammunition have a long and delicate supply chain. You're better off with a .22 at least. A crossbow or other bow is a better long term bet.
2) Gasoline degrades over time. You are NOT going to be able to 'Mad Max' your way out of this.
3) When you buy the seeds, make sure you get the non-GMO heirloom variety. That way you can save the seeds that grow from the plants and grow more of the same crop next season.
Reich is an eminently qualified spokesman on "productivity" since he was an architect of the internet-assisted outsourcing of millions of jobs to countries like Mexico, Indonesia, India, and China. You still hear Democrats bragging about what a great economy Clinton created, without even acknowledging the consequences that we're dealing with now.
Over his last few posts, Reich is starting to sound more and more like the high priest of a cargo cult who knows John Frum is not coming back, but who has to keep the locals happy or he's out of a job...
Good one Galen! I just found out about that cult about a year ago. Although i never had any use for this man. He isn't worth publishing here as far as i am concerned.
And he is missing a key element, which is that trillions of dollars go missing from the global 'economy' - Where oh where did all the cash go? Greg Palast has a lot to say on the subject. So does historian Richard Dolan.
I have been viewing the dominant Corporate pseudo-culture as a 'cargo cult' for at least ten years. Always expecting the 'good life' with all of it's attendant luxuries and material goods to just keep rolling in, with no sign of who labors to make them, or the resources that are stolen to produce them.
More phony neoclassical/neoliberal economics. Reich likes to talk 'progressive' but talk is cheap. Just look at who he supports, what (failed) economic theory he espouses and what he has done in the past.
He appears here almost daily as an apologist for the D/R duopoly.
Yet no sign of Prof. Michael Hudson, WK Black, Steve Keen, Richard Wolff?
Reichs' almost ubiquitous presence coupled with their abscence is telling.
They post Black, Hudson and Wolff occasionally, not enough. I never see Palast here. I would love to see him and articles from http://www.neweconomicperspectives.org/ posted here, especially those coming in from the Rimini MMT conference.
Also James Galbraith and David Korten, more mainstream but always well worth the read.
I remember when school was more than just a way to get a better share of the worker's small slice of pie. It was a place to seek out one's avocation. Yes, there was the hope of an adequate salary but also the greater hope of a meaningful life doing, daily, something you at least liked. It was also a sanctuary of a few years where you could learn about the world, about history and politics, and have a chance to mature into a real citizen before being dropped into the double hell of salaried work and debt.
Time to begin to think again about the quality of American life.
Everybody sing:
"Bring Back Bill Black!
Banksters Behind Bars!"
If you don't know who WK Black is, you betta ask somebody.
Try this experiment: Get a tin can. Put ten marbles into it. This represents the sum total of the economist's illusion called 'value' as applied to the extractable natural resources used as capital to operate our present system.
Now, take three marbles out. Still with me? How may marbles do you have left. It should be seven.
Take out four more marbles. As you are doing this, it represents the extraction of natural resources to make the goods that are sold to operate the economic system.
Now take five marbles out of the can.
What's that? There are no more marbles?
That's because in the real world, there is no such thing as the monetary congame called 'interest'. Once the marbles are gone, they are gone. Mother Nature plays for keeps.
Once the resources are extracted, and the money they generate is in the pockets of the Elite, THERE IS NOTHING LEFT.
Sorry to tell you, there will be NO recovery outside of a further transfer of the remaining wealth into the hands of the already obscenely wealthy. They feast, you starve.
What happens next is up to you.
galen, well said
We are human beings. God put us here or your parents got all fuzzy and produced you, take your choice. In either case, you are not required to be "more productive" every single year of your life.
We should already be making enough for all of us. There should already be enough jobs to do for all of us. There should already be enough food and warm shelter to go around for all of us. "Growth" is not what's required, although growth is always nice to have, and we do have millions of engineers on earth moving our robotic factories forward. Economic and legal justice is required.
CD why do you reprint all this guys BS? Lets see what his granddaughter is getting from her magical I-phone it would probably be more useful. So US Americans are more productive now then in 07 and we are doing it with 6 million fewer workers because of new technology, Bullshit. The reality is capitol has told labor get more done with less workers or your jobs will be offshored. Reich knows this he's one of the guys who implemented this new economy. He helped put the Con in eCONomy. Maybe he writes all this crap because he feels guilty about his part in the screwing of the US American worker.
Along with any workers over the age of 60 with a functioning memory, I remember being told in the 1970's: "Your wage increases are TIED TO (increased) PRODUCTION. American production is down, and thus, so are your wages." The 70's panacea was "increased production." And so "We the People" increased production by a variety of means. Did our wages increase? No. Even by the same fractions as THE PRODUCERS? No. ALL THAT WENT TO the 1% or the fraction there-of who own the means of production, and "We the Workers" both lost out on our rightful wage increases and then forgot the Owners' promises. Am I wrong? No.
What to do? Who knows for sure, but we can't let our children stay oblivious of these facts. Awareness, then Action!
I wonder if you know what a CNC lathe or milling machine is. If you did, you wouldn't regard what Reich says about increasing productivity with fewer -many fewer- workers- is bullshit. Another good example for the technologically challenged: a mini-mill which makes as much steel with one worker as a conventional mill did with fifty.This is nothing new-but the technology is.
"Finally, the benefits of the productivity revolution should be turned into more abundant public goods – cleaner air and water, better parks and recreation, improved public health, and better public transit"
Robert Reich, your prescription is so very familiar to everyone, because it's the very same now that it was ten, twenty, thirty, forty years ago. And you know this.
You know it, Robert Reich, but you don't want us to know it. You want us to forget that you are trying to sell the exact prescription that has failed us so miserably already! I have no idea why Common Dreams loves to re-publish your kapitalist propaganda, unless you're paying them under the table, in petro-opiate tokens. Are you?
Isn't Reich peddling the same old same old? He wants to get das ekonomy back on track, to kontinue churning out the same garbage as before, of which about 75% is absolutely unnecessary! And highly destructive!
He wants to because.... das kapitalism has served him oh so very well over the years, served his agenda, served his petro-opiate cravings, and most relevantly, served his craving for imperial spoils! He's an imperialist trying to appeal to the little imperialist in us all! Covertly, under the cover of "common sense"!! What an excellent propagandist you are Reich! Destroyer!
If Reich's agenda were completely overt, he would address the universal human need for fulfillment, beyond makro-ekonomic growath. Not in passing, but as his central theme.
We have a better thing going, Mr Imperium, so sit back and listen for a change! We over here on the far left have for very long noticed something you never mention. This is highly relevant. We noticed that your fellow racketeers never had a plan for the people's prosperity with your gangbusters agenda of mechanization and automation, and exportation and concentration of productivity in the hands of the few!!
Never had a plan!! Never ever had a plan, big guy! We all noticed this! We all have over the past several decades smirked a little smirk while reading/watching your ivy-league appeals, for us to get on board your bandwagon to hell! To grow the ekonomy forever more. Damn the "collateral damage"! Right big guy? Your friends, Robert Reich, buy themselves new Range Rovers every two years! Grow it, grow it, grow it!
You think everyone is going to keep dancing to your jingle? Nope! We found a better way! Our way holds the answers to those festering questions you never answered, Reich! What about the people's prosperity? You pay us lip service old boy but you don't have a plan! You depend on the petro-opiates to dull our memories so we can spin on the same old slave-rat wheels forever, growing your ekonomy, illustrious higher strata for you and your friends to sit on, like clouds in the sky! No can do!
Our plan comes with a vision. In our vision we see generally the range of occupations we know benefit the people, and we allocate wealth into THAT range appropriately to maximize the payoff in terms of our BETTER interests. News to you old boy - you don't even know what our better interests are! Too distracted with imperial spoils you are!
Occupations that benefit the people include production of the things we really really do need, like soap! Personal accessories, tools, a few things you know, to use around the household. We make them ourselves, and we allocate a very very fair reward for ourselves, in making the things we need. Very familiar process across human history, barring your past four decades, Mr. Reich! Spurious ugly glitch in time!
Need we say more? We're busy building our permanent economy of, by and for the people. You'll have to figure the rest out for yourself. Count on us ignoring you in the future.
Going back to where this all started, in the days of Ned Ludd, just imagine if the Jacquard looms and the mills in which they operated had been owned by worker-collectives of those whose parents had made lace by hand. Why, they could all have enjoyed time off, more income, and produced tons of cheap frills for the masses to fetishize. Instead these factories were owned by capitalists with wealth from other sources, who used them to drive the hand lacemakers out of business and extract more labor from fewer workers at lower wages.
The Luddites have been criticized for blaming machinery that in itself was actually a net benefit to humanity as a whole. They rightly took up arms against a new phenomenon which was destroying their livelihoods and well-being. But that phenomenon was not so much technology as it was capitalism, and not capitalism as the market but capitalism as the concentration of wealth and ownership of the means of production by an oligarchy.
Fast forward to today, and the issue still is not technology but rather ownership, and consequently who will benefit and who will suffer from the introduction of new technology. What if anyone being laid off due to increased productivity using new technology had to be kept on the payroll and paid out of company profits? What if workers literally owned the industries they worked in?
The market, and free enterprise, are of course efficient ways to organize production -- given a certain level of regulation. Communism threw the baby out with the bathwater. The problem is not the market system, but the distribution of income, wealth and property. If we can find a way to fix this... oh wait, maybe that would be... TAX THE RICH... SPEND THE MONEY ON PUBLIC GOODS AND A GUARANTEED MINIMUM INCOME. My God, it's so simple.
Excellent post.
The answer you are looking for is called "Syndicalism", or the ownership of the means of production of goods and services by organized labor. "Soviet" in Russian, although the "soviets" never had any real "say" in anything there in Russia. I might add that most Russians were actually better off under Communism than they are now. Reason for this is that income inequality is far higher now than it was then. Under Communism the people all had access to medical care. Perhaps not of the best quality, but they did have the basic services. Now in Russia health care is now something people have to pay for. And only those who can pay for it can have it. Their infant mortality went up to near Third World standards, the life span has fallen, alcoholism is chronic and often causes early deaths. The birth rate is so low thanks to all this that their population has fallen to 148 million, less than half that of the USA.
China under Mao did attempt to have health care for everyone. It was relatively low quality, but rather basic services were accessable by most people. Today they have better quality health care, but again like in Russia, you have to be able to pay for it. The Chinese standard of living has improved for some people, but millions have a life not much different than that of slaves. So the switch from Communism to Capitalism in both countries made life worse for the average person instead of better. This is also why life in the "social welfare" nations of Europe is better for the working class than it is here in the USA. Capitalism does make some people "rich", but for many it worsens life instead of making it better.
Ever since water and then steam powered mills destroyed the hand-loom weavers and the putting-out system, technology has been on a roll: the aim-to produce more with fewer workers.The Luddites were out to wreck the machines, not capitalism, which they did not fully understand. They sure as hell understood that the machines were a real and present danger to their livelihoods, and to customary relationships between workers and owner, which existed prior to the introduction of the machines.Imagining what might have been is a useless endeavor, almost two hundred years after the fact.
...Then, suddenly, in the mid-1970s this ‘Keynesian’ orthodoxy fell apart. The advanced Western economies were all afflicted by recessions – and far from providing governments with a means to avoid them, the methods preached by Keynes seemed only to produce inflation alongside unemployment. Keynesianism suddenly ceased to be fashionable, and was replaced by ‘new classical’ economic theories based on the previously fringe ideas of Milton Friedman and Friedrich von Hayek.
They preached a return to versions of the old ideas that had preceded Keynes. Government intervention, they insisted, worsened rather than improved the performance of an economy. The only ‘legitimate’ economic role any of them accepted for government was the ‘monetarist’ one of controlling the money supply and preventing ‘unnatural monopolies’ interfering with markets, especially the labour market. If left to itself, the market would then always find its own feet, without either deflationary recessions or inflationary booms getting out of hand.
Yet the policies of Friedman and Hayek have been no more capable of stabilising the capitalist system than have those of Keynes. Governments that took them to heart, like the Thatcher governments in Britain, were unable to prevent either inflation or further recessions. As a result, the Hayekian and monetarist economists quarrel openly among themselves. Yet the social democratic parties which used to insist it was so easy to reform the system using ‘Keynesian methods’ have no alternative to the Hayekian and monetarist prescriptions. They declare ‘Keynesian’ reform to be impossible because of ‘globalisation’ and embrace the ‘infallibility of the market’ just as, in theory and in practice, the failures of the market are to be seen more clearly than ever.
There is a crisis in bourgeois economics in the sense that it cannot begin to explain what has gone wrong with the system in the last quarter century or how to put it back on the right track. It is caught between, on the one hand, providing bland apologies for the market of the sort which are to be found in the textbooks or the reports of the IMF and the World Bank, or, on the other hand, of pointing to faults in the system to which it freely admits it has no answers...
http://www.marxists.org/archive/harman/1996/06/bourgecon.htm
Where does one begin with Mr. Reich? First we have the economist's wet dream whereby increased efficiency provides increased production. Of course, increased efficiency occurs by requiring fewer employees, reducing demand. Solution? Why,
"We also need better schools (from early-childhood through young adulthood, followed by systems of lifelong learning) so everyone has a fair shot at a larger share of the gains."
Apparently assumed is, because of increased efficiency, demand for labor is increasingly focused on the more highly educated. Well, perhaps not; perhaps it is on the highly educated in "math and science," Mr. Reich not being clear here. Anyway, after concentrating education on producing a more highly educated work force--ignoring differences in intelligence, which aren't real, since, after all, educational differences are the teachers' fault--voila! As per the "law of supply and demand," there will be so many highly educated workers, they will be "a dime a dozen," and wages will fall! Wages falling, why, demand will fall, rendering surplus all that wonderous increased production because of efficiency, which is inefficient. Wow Robert, it seems the fundamental economic assumptions, upon which you base your analysis, are contradictory. Efficiency is inefficiency because surplus, and inefficiency is efficiency because not surplus. Concerning Mr. Reich's beloved economics, "Abandon all hope, all ye who enter here!"
American Pie, of course, was the name of the plane Buddy Holly and the Big Bopper died in...
Bye, Bye, Miss American Pie, of courser, was the great chorus line in the classic #1 song by Don McLean...
Reich's touching taints both...
Reich seems to be aware of the opposition to this fairly classic Keynsian strategy, but strangely unaware that there is no supporters side (in the political class) to oppose this opposition!
It's like: Uh...ya know the Democrats aren't actually pushing for any of this, right professor?
I say a federally subsidized incremental doubling of the minimum wage over the next five years might help our ability to consume our production -but then, I'm a commie. ;)
Or we could investigate P. Kropotkin's old proposal and put consumption in front of production in the old equation (i.e. only produce what is actually needed).
Problem with the figrues about growth! Figures don't lie, but liars can sure figure.
Keynsianiam "doesn't work" at least when it isn't used. Surprise!
Overall a good article!
"My 3-year-old granddaughter gets more out of an i-Phone in five minutes than my 98-year-old father ever got out of reading the daily paper (putting to one side their relative capacities to process the information)."
Bzzzzt. Dead wrong, Reich.
Could you wear some clothing in your public images that doesn't scream "comfortable bourgeoisie"? No? Why not? Is that a beach house in the background?
If all remains the same, that is, percentages of bills/costs of necessities paid by working, blue-collared workers, with those workers working consistently until retirement age of 65-67 and receiving consistent yearly wage increases that are truly realized in take home pay, then those workers will be able to 'grow' ... perhaps actually staying ahead of the curve. Their 'growth' would benefit not only themselves but their community as well as the country.
The true measure of a society is not how well the wealthy are doing but everyone else.
For everyone else the past 30-40 years has meant living in survival mode. Talk about stress! For those of us not receiving adequate increases in actual take home pay to keep abreast with the continual increases in costs we've been pushed back. We're in the corner and have been there for a very long time. For those who have been lucky enough, holding not just one full-time job per adult per household, but also one or even two part-time jobs each has been a 'way of life'. We've resorted to flogging our household items on popular internet auction sites or popular internet classified ad sites. We've used whatever spare time we have combing the roadsides for the 'freebies' that we can clean up and sell. Scrap metalling has become another part-time job. Collecting cans ... I wonder if Mr. Reich goes out with his grandchild, outfitted with 'i' phone in one hand and plastic garbage bag in the other, for a true 'i' experience!?!?
We're just spinning our wheels and damned tired from it and of it!
Mr. Reich just doesn't get it and probably never will. The wealthy and well-off get it and really like it just the way it is.
Mr. Reich has benefitted from our scourge. It gave him(and many others) a lot during the Clinton years. Gave him(and many others) access to positions and influence since. Gave him(and so many others) plenty to write about, talk about and DO nothing about. It continues to give. It is the perpetual gift.
I find it particularly insulting that the EDUCATION thing is always used as if it will be the cure all. Yes, education is so important. Education is a tool. If you have no place to use the tool then what good is the tool. There is much more to education than preparing a body for work. An educated(and intelligent!) plumber, electrician, carpenter, farmer, grocery clerk, bank teller, auto mechanic, aircraft mechanic, elevator repair person, iron worker, etc... these are just as important, if not more important, than what Mr. Reich and so-o-oo-ooo many others do.
Mr. Reich ... it is JOBS! Good paying jobs! Jobs that can build a future for the worker, NOT just the owner or the investors!
Mr. Reich ... 'PRODUCTIVITY' is NOT something we workers should be proud of! Working longer and harder and faster than ever before for less and less is certainly not something to look to, to seek out, to be proud of.
Our 'PRODUCTIVITY' does not benefit us or our families. Our 'PRODUCTIVITY' does not benefit our co-workers who get laid off. Our 'PRODUCTIVITY' does not benefit the young ... the inexperienced. All this wonderful 'productivity' does is simply, and continually, shrink the 'PIE'. There is now nothing left of the 'pie' except its ghost.
Please Mr. Reich, offer some real world and tangible solutions ... like JOBS ... good paying jobs. Yes, restaurant workers need to be paid a solid living wage too! Yes, domestic workers need to be a solid living wage! Yes, nursing home workers need a solid living wage! Everyone ... not just the college educated ... not just the well-heeled ... not just the well connected ... needs and deserves to be able to live decently with one job per adult.
Stress related illness and disability would be reduced greatly if people had that job ... one job ... pay the bills ... save a little for a future ... enjoy free time doing whatever else besides working ... enjoy an actual vacation now and then ... that would be a first step toward improving PUBLIC HEALTH ... get it!?!?
Why I am directing my comments to Mr. Reich I don't know. I am relatively certain neither my comment nor any others' will be read ... if read then not comprehended. It is a stress reliever perhaps just to put it out there.
"Why? Credit technology. Computers, software applications, and the Internet are letting us produce more with fewer people."
Can't remember the last time I saw a software program carry a shovel. But programs don't go to the bathroom so they don't need sewer systems. Our infrastructure will require human labor again, someday. Lets hope !