Today the world economy is capable of produsing a plethora of goods and services - almost an embarassment of riches. So why is there so much poverty, such an unequal distribution of wealth and income and too few good paying jobs. The answer is simple. There is no direct connection between the jobs provided by an economy and the goods and services that economy is capable of producing. In order for people to consume, where consumption means both necessary and unnecessary items, they need money, and, for most people, the only way to get money is by means of a job. There are, however, other ways to acquire money both legitimate and illegitimate. For instance, one can get money via a return from capital. This comes in the form of interest, rent and dividends. Once money has been accumulated, it can be loaned out and the return to capital is in the form of interest. Or an asset can be purchased like a house and that asset can be rented out. Then the return to capital comes in the form of rent. Money can also be acquired if the government doles it out in the form of welfare or unemployment insurance. For an economy to work and for people to be reasonably well off, enough money has to be in enough hands so that goods and services can be bought, and then jobs can be created to provide those goods and services.
Ironically, though, the more capable an economy is of producing goods and services, the less money there is in enough hands to purchase them because less labor is required to produce them. Automation, computerization and robotization make human labor less necessary in the production process. Therefore, just as unlimited production with minimal human drudgery becomes a reality, people become less able to consume that production because requisite labor (and hence jobs) becomes less necessary. So there is a glut of possible production and also a glut of unneeded labor with a consequent diminished ability to purchase that production. One way around this dilemma is for the public sector to create jobs that the private sector seems incapable of creating precisely because it has created labor saving (and hence job reducing) machines. Another way is for government to simply increase the money supply by printing money and handing it out to consumers so they can make purchases. Keynesian economics is based on the principal that government spending can get the economy moving again by priming the pump, getting money into consumers' hands, and then having the economy create jobs when those consumers spend that money. This works as long as the increased production from consumers' spending their money leads to more job creation. In an advanced economy, however, increased production can be had simply by cranking up the machines - computers, robots etc - and not necessarily by hiring more human labor.
So what to do? Government can not afford to simply print money or borrow it indefinitely. If something like full employment does not come about as a result of the government temporarily spending money into the economy, the only rational solution is to tax the owners of the means of production and use that money either to create jobs in the public sector or dole it out to consumers. This then becomes a way effectively to equalize ownership and forestall the increasing inequality brought about by the concentration of capital and the means of production in fewer and fewer hands.
This excerpt is from William Greider's new book, Come Home, America.
First, every American who is willing and able ought to have the right to a job that pays a livable wage. If the private sector will not provide these jobs, then the public sector should be the employer of last resort. Franklin Roosevelt described the goal -- the practical equivalent of full employment -- in his "second Bill of Rights," and the public has overwhelmingly endorsed the principle ever since. In recent decades, the economy has drifted even further from the promise, creating in its place a broad labor market of the underclass -- temporary jobs paying unlivable wages and often filled by undocumented immigrants. Guaranteed public jobs paying more than the minimum wage would permanently and automatically stabilize the economy, swelling the ranks of public workers in recessions and shrinking them when private jobs become more abundant. Instead of punishing the working poor most severely in downturns, as the system does now, the government would redistribute the costs of recession so that all taxpayers would share the burden as a public obligation.
The social consequences of a change like this could be profound: it would be a direct assault on the poverty and hopelessness of inner-city precincts and decaying rural towns where the same pathologies ravage families and young people without regard to race or ethnicity. Real jobs would mean that reliable incomes would flow into those communities, providing a concrete basis for economic development and neighborhood restoration as well as the redemption of damaged lives, especially the prospects for young people.
The advantage of public sector jobs is that the government can decide what kinds of jobs to create and what should be the production goals of those jobs. Unlike the private sector where jobs are created strictly in response to enterprises undertaken with the goal of making a profit, government can create jobs with socially desirable production like infrastructure creation and repair, for example, something that would be considered unprofitable by the private sector. The private sector might consider a more profitable enterprise to be one which caters to human vices like gambling, for instance. Immense casinos are invested in with the intention of profiting from relieving people of their money by encouraging them to gamble. Casino ownership has produced billionaires while infrastructure rebuilding has produced none.
The Keynesian scenario is that economies will eventually recover from depressions and recessions if only government temporarily primes the economic pump, runs temportary deficits. But what if the government must permanently prime the pump because of a jobless recovery. Just because consumers are buying again doesn't necessarily mean that jobs are being created again or being created in parts of the world where labor is relatively more expensive. Offshoring of jobs to parts of the world where labor is cheap combined with more automated production and less unionization results in a situation in which maldistribution of income can lead to a permanent recession unless government is willing to run deficits indefinitely or print money indefinitely or tax the rich and redistribute the money indefinitely. Of these prospects, only a redistribution of income is fiscally sound. Large corporations, however, which are the primary repositories of wealth and capital will choose to abandon consumer markets where consumers don't have the means to purchase for more promising consumer markets in countries where money is distributed more widely because that's where the cheap labor is located.
It is because of this contradictory conundrum of the concentration and centralization of capital due to increasing production capacity leading to increasing immiseration of the masses that the people eventually demand a reorganization of economic systems.
California Free Press