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CHAPTER 7
The Wicked Truth About the New Economy
Despite massive advances in
technology, the real average family income has been essentially stagnant since 1973. Why?
Is it because the marketplace substituted cheap technology for humans? Technology has been
used by Big Money to increase productivity or to eliminate jobs -- and not necessarily to
create wealth for citizens. People can now produce slick reports on their personal
computers -- but most cannot find good stable jobs! Many have discovered that loyalty is
no longer reciprocated: what many bosses want is flexible servitude, not loyalty. Obey,
or lose your job! Even governments are threatened -- obey, or we'll move the
factory to a lower-tax jurisdiction! The marketplace economy has become a command
economy. Economic policies amount to dirigisme by monopolists acting as
para-governments.1 That's the ugly reality of the
so-called new economy.
Robots. Today, a large corporation can
record the motions of its best factory worker on computers, then replay them through
Robots to produce the goods it sells. Would such a corporation keep the worker on its
payroll, as a full-time employee? Probably not. Hayek told us that prices (the worker's
salary) reflect the "value" of the worker's work -- not his "merit"!2 And herein lies the dilemma of the
marketplace. The dehired worker, whose perfected Art and Science has been captured by the
Capitalist's Machine for all time, can go to hell. After all, the worker was
informed that his motions would be recorded on the computer! And, nobody coerced
him into helping the company increase its efficiency or productivity! So long as there are
enough consumers for their products and services, should the lords of the marketplace
care?
In America By Design,
David F. Noble explained how corporations monopolize technological intelligence.3 He argued as follows. Monopolists
first take control of "the products of scientific technology," then
extend their control to include "the process of scientific production
itself."4 The monopolist ends up controlling
both product and process. Noble noted that it was Charles Babbage, a British
engineer and "capitalist theoretician," who first understood the necessity for
the capitalist to "dissociate labor from the productive process and reintegrate the
two . . . to maximize the surplus value produced by the labor force in the productive
process"5 -- for the benefit of the
Capitalist. In other words, the key to the Capitalist's prosperity is first to divorce the
workers "form ownership of the means of productive work," then to "divorce
[them] from their own skill, their own traditional store of knowledge . . ."6
Noble's insight can be
generalized. There is no reason to believe that the monopolist would not extend his
control to include all -- product, process of production, and science and technology!
Babbage's
Principle of Capitalist Monopolization and Control. Today, bank public relations and
propaganda tell us that banks care about innovation and entrepreneurs. Consider this gedanken
scenario. A scientist or engineer discovers how to produce inexpensively a portable,
ecologically sound, nuclear power supply with a lifetime exceeding 100 years! Not having
sufficient capital, he negotiates a deal with the venture capital arm of his bank. He gets
capital, the bank gets equity stock -- equity control -- in the innovator's company. With
good planning, sufficient capital, and luck, the company starts growing exponentially. Now
here's the dilemma. The banker used essentially other people's money -- investors' and
depositors' money -- to finance the venture. If he is a true Capitalist, his
first instinct would be to take control and monopolize the very science that is
used in the production process for the power supply. How can the banker achieve his
goal? Simple. He waits for the first opportunity to "divorce" the scientist from
his science and technology . . .
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1
For a discussion of "coalitions of organized interests" and
"para-governments," see Friedrich A. Hayek, Law, Legislation and Liberty,
Vol. 2, 1976, at 13-17 and 143-145. 2 Ibid., Vol. 2, at 131
(discrepancy between merit from effort and corresponding benefit).
3 See David F. Noble,
America by Design, 1977, at 259-260 ("capitalist monopolization of the
intelligence of, and control over, production . . . ").
4 Ibid., at 6
(monopolist control over the products and the process of scientific
production).
5 Ibid., at
259 (Charles Babbage).
6 David F.
Noble, America by Design, 1977, at 267. |
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ECONOMIC STAGNATION
THE
LINK BETWEEN INCOME AND WORLD OIL PRODUCTION |
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Plate 7-1
Why Did the
Economic Fortunes of Canadians and Americans Stagnate After 1973? The Link Between
Personal Disposable Income Per Capita and World Oil Production.The Chart provides powerful evidence
corroborating the fact that Capitalism has failed to deliver real and absolute
increases in family income after 1973. Why? There are several possible reasons for
this:
- The Arab oil embargo -- the
first significant blow to colonial exploitation of resources. The embargo was
followed by increases in the price of oil and inflation.
- The defeat of overt colonial
exploitation -- marked by the fall of Saigon in 1975.
- Misdirected investments.
Substantial evidence corroborates overinvestments in commercial real estate at the expense
of industrialization and technology.
- The increase in the civilian
labor force participation of women. Ironically, this led to the economic exploitation
of women in the marketplace.
- The increased resistance,
mostly in the West, against the despoiling of nature by industry. Considerable
evidence corroborates a substantial increase in the vulnerability of the planet to the
hazards of global industrial pollution, etc.
Of the five reasons, none
appears to be more potent than the Arab oil embargo. Why? Because the growth of
industrial economies is predicated upon the availability of cheap energy. A linear
regression indicates that world oil production explains 83.95% of the variation in
personal disposable income per capita (indexes used). Without cheap energy,
industrial economies falter. Without cheap oil, supergrowth in family income stops.
But what about misdirected
investments? The Economic Report of the President (1997) claimed as follows:
"From an accounting perspective, almost the entire slowdown [which began around 1973]
is attributable to a decrease in multifactor productivity growth, that is, the efficiency
with which capital and labor are used."5 This is only partially true. As
will be shown in Book II, the real issue is not only efficiency, but, much more
importantly, motives regarding the allotment of benefits.
And what about technology
and innovation? IBM introduced the much touted PC in 1981. Did PCs increase real
family income? The Chart shows clearly that the real average family income after tax did
not increase after the introduction of the PC (it oscillated). Why? Because high-tech
firms focus on what consumers could or would be made to buy -- and not necessarily
on what is needed to secure and grow employment and income for others. Capitalists
are driven by money: the primal goal is to increase profits and market share (dominion) --
not to create jobs for, or to increase the wealth of workers. Current Capitalist
arrangements make it almost impossible for people to benefit from
science and technology as increase in net wealth (the Myth of
Progress is discussed in Book III).
A careful examination of
family income, in both the U.S. and Canada, reveals that income has been oscillating
since 1973 -- as if the economy were a PREDATOR-PREY process. The oscillations are not as
evident prior to 1973 because the predation was masked by supergrowth fueled by colonial
exploitation. When colonial exploitation became more costly
and less secure, Capitalists shifted gears. Instead of limiting exploitation to
"colonial outposts," transnationals would exploit
the whole world,-- the GLOBAL MARKETPLACE.
Sources:
The indexes are derived from data from the following publications:
1 R. Famighetti (ed.), The World Almanac and Book of Facts 1996, Funk
& Wagnalls Corporation, 1995, at 505-510 (U.S. History), and 573-576 (World History);
and J.R. Colombo (ed.), The 1996 Canadian Global Almanac, Macmillan Canada, 1996,
at 295-306 (World History).
2 C. Flavin, Oil Production Up, by C. Flavin, in Vital Signs 1995,
at 46-47, L.R. Brown et al., Worldwatch Institute, 1995 (World Oil Production, 1960-1994;
cited sources: API, Basic Petroleum Data Book (Washington DC, 1993), and Worldwatch
estimates, based on BP and Oil & Gas Journal).
3 Statistics Canada, Canadian Economic Observer, Historical Statistical
Supplement 1994/1995, No. 11-210 (personal disposable income, population, and CPI
deflator).
4 Statistics Canada, Income After Tax, Distributions by Size in Canada 1993,
June 1995, No. 13-210 (average family income after tax, in constant 1993 dollars).
5 See Economic Report of the President, transmitted to the Congress
February 1997, at 28-37 (Growth), especially 30 (Box 1-1 -- Explaining the Productivity
Slowdown).
[Copyright © 1998 by
MACROKNOW INC. All rights reserved.]
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