Posted by: CS | April 9, 2013

When a Pair of Hands Is No Longer Worth a Living Wage

The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes.

Among civilized and thriving nations, … though a great number of people do no labor at all, many of whom consume the produce of ten times, frequently of a hundred times more labour than the greater part of those who work; the produce of the whole labour of the society is so great, that all are often abundantly supplied, and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniencies of life than it is possible for any savage to acquire.

Adam Smith. The Nature and Causes of the Wealth of Nations

In Adam Smith’s day the productivity of labor varied greatly from one worker to another, but as Smith noted, in a “civilized and thriving nation,” a workman “even of the lowest and poorest order,” is better off  if he is frugal and industrious than the most prosperous “savage.”

With 47.3 million citizens on food stamps, America is no longer, by Adam Smith’s definition, a “thriving” nation. For lack of a household member earning a living wage, fifteen percent of the American population is now dependent on state handouts to avoid malnutrition if not outright starvation, a condition far inferior to that of Adam Smith’s most prosperous “savage.”

The same condition exists throughout the West. High and seemingly irreducible unemployment is endemic, throughout most of North America and Europe. What Adam Smith would no doubt have considered the most “civilized and thriving nations” now have tens of millions of workmen and workwomen of “the lowest and poorest order” who, even if “frugal and industrious,” are not worth employing at the state-dictated minimum wage.

The reasons for this epidemic of Western poverty are five-fold.

First, in pursuit of cheap labor (or wage arbitrage as the economists call it), global corporations have exported capital and technology, and thus jobs, from the West to the Rest, while promoting mass immigration to the West of competitive Third-Worlders and East Europeans happy to exchange working for pennies an hour at home for either the minimum-wage job of an indigenous citizen, or welfare in the West extracted from the incomes of host country workers.

Second, the substitution of diesel- or electric-powered machinery  for virtually all forms of muscle power on the farm and elsewhere, the automation and robotization of an increasing proportion of what factory operations remain in the West, and the computerization of most clerical and low-level administrative functions, have made a pair of hands or a high-school diploma virtually worthless.

Third, the service economy that provides the greatest number of low-skill jobs, depends for its existence very largely on the mass market, which is to say the market made up of those very workers whose jobs are disappearing. Thus the service economy, where virtually all new jobs are expected to arise, is beginning to fall in on itself.

Fourth, the ability of government to create make-work projects that recirculate wealth from those productively employed in the private sector to all those people from the government who are there to help you with forms and permits, and crazy rules and regulations, is hitting limits. Kiribati, amazingly, manages to achieve government spending equal to 114.6% of GDP, and Zimbabwe is right behind at 98%, with civilized countries rushing to catch up: Iceland 58%, France and Sweden at 53%, with Britain pushing 50%, and Canada and the US at 40% — but the trend cannot continue indefinitely.

Fifth, business concentration, cartelization and technological intensification makes it increasingly difficult for the little guy to compete as an entrepreneur. For example, it was a lot easier 25 years ago to start a coffee shop than today when Star-Bucks, with their near minimum wages and their buying power to keep supply costs low, dominate just about every street corner in major North American cities. The same applies even more forcefully in the on-line world where markets tend to be dominated by giant monopolistic or oligopolistic tech companies such as Google, Microsoft, PayPal and Amazon.

So what means exist to aid the growing proportion of Western labor which is no longer worthy of its hire?

There are five approaches.

First, is the left-of-center political platform that offers more money for education, skills training, healthcare and roads and bridges to nowhere. 

Second, is the right-of-center political platform that offers lower taxes, smaller government and greater freedom in the market place.

Third, is the totalitarian approach, which offers an iron rice bowl in exchange for authoritarian top-down social control.

Forth is the globalist plan, which offers the revival of Western economies through a ruthless convergence of wages and living standards between the West and the Rest, while providing a handout to the fifty or one hundred million Westerners who fail to make the adjustment.

Fifth, is the the nationalist approach, which opposes the genocidal destruction of the nation state, a goal implicit in the globalist agenda of free movement of capital, goods, and people throughout the world in the interests of global corporate profitability.

The left-of-center approach breaks down when rising debt and taxes drives emigration of wealthy individuals and successful foot-loose industries. Moreover, as increasing resources are devoted to essentially unproductive public sector activities the wealth creating capacity of the nation declines, making increases in government revenue and spending difficult to sustain.

The immediate effects of the right-of-center approach are increased unemployment as unproductive public sector jobs are axed, and a hue and cry over “give-aways” to industry, with the result that serious attempts at rebooting the economy tend to be shirked. Margaret Thatcher’s government in the UK was among the few rightest regimes to survive long enough to see some economic stimulus from its “harsh and heartless” reforms.

the totalitarian approach is not much in evidence today — but the Fascist and Communist beasts are licking their chops in anticipation as Western economies deteriorate and the masses become increasingly desperate to find relief from the relentless economic undertow.

Beneath the rhetoric of left and right, the globalist plan is now the bi-partisan policy of the mainline Western political parties and will be pursued indefinitely, as long as the London riots, the Occupy movement and similar phenomena fail to cause substantial disruption of the capitalist system.

The nationalist approach, which postulates the development of national economic policies to serve explicitly and exclusively the interests of the people of each sovereign nation state, is almost forgotten and whenever discussed by the capitalist media is invariable smeared as far-right extremist, racist emulation of Nazi fascism.

Of the five approaches, the nationalistic approach is the only democratic solution, and is thus the greatest threat to the capitalist oligarchy of financiers and global corporations that own the media and buy the loyalty of “democratically-elected” Western governments.

The object of sound national economic policy must be to retain industrial, technological and scientific skills and traditions accumulated over the generations so that the people of the West can once again make shoes and shirts, computers and car parts for one another rather than relying on the exploited labor of Asian sweatshops to produce such goods for us at wages that, because of differences in cost of living, are below the Western starvation rate.

Such an industrial revival, as I have discussed elsewhere, could be achieved either by adjusting wages on a national basis according to the unemployment rate, thereby bringing down the cost of living and increasing international competitiveness where unemployment is high; or by the provision of market-based wage subsidies that would be cheaper and more productive than existing welfare arrangements and the costs of crime and mental illness associated with mass unemployment.

But why waste one’s breath. The ruling elite don’t give a damn.

See also: 

FT: The End of the US Nursery Rhyme Economy (Link thanks to Aangirfan)

Canspeccy: End Welfare Now

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