Wednesday, January 29, 2014

Stealing Productivity

Although the pace of growth has slowed recently, over the last three to five decades worker productivity has made huge gains. But pay for workers, adjusted for inflation, has stagnated, and in a lot of cases even declined. The practical upshot of that is that regular people, you and me, are working harder, or at least more efficiently, and we're not getting any of the benefits. Someone is stealing our productivity.

The most obvious culprits are those higher up the corporate ladder who are happy to take the extra profits and loathe to share. Pay for top executives has increased, not only in dollars, but as a multiple of the average worker's pay. For all the talk about hard work being the path to the top of the income ladder, it seems that those who are working the hardest (or at least, working a lot harder than they used to) are making the least.

But it's not just corporate executives who are stealing our productivity, it's the US Government as well. And not just by taking our money in taxes and giving it to, for example, horribly-run banks and investment firms. By spending far more than they take in taxes, the government is making it necessary to borrow money to operate, money that we have to pay, with interest.

Not only that, but the bulk of this money is borrowed from the Federal Reserve, which creates the money out of thin air. And the Fed, on its own, injects money into the banking system. This causes inflation, making prices rise, which further erodes our rewards for a job increasingly well-done.

And in the long run, this is not only unjust. It's stupid. The whole idea that we've been sold that money is what makes an economy run ignores what the money represents: real transaction of trade, trading labor for goods, and goods for labor, and goods for goods. Money is just the store of value.

But if too much of that value is taken away by inflation, or if it flows to the top and gets hoarded, or traded around as if money itself had any value, then the economy flounders.

Because if that CEO takes all the extra money from productivity, and another CEO, and another, who is left with money to buy the goods that their companies produce, or the services they provide? How can they complain that sales are down if they don't give their own workers enough to generate sales? Even Henry Ford, no great friend of labor, understood this simple concept: workers are also consumers.

Who can turn this situation around?The government? What incentive do elected officials, the ones who spend the money, have to do that? They get elected with money from big companies, and they get brownie points for spending money from the public trough regardless of how much hot water that gets us into. That part of the equation will only be resolved in our favor when we stop electing the same parties over and over and start electing those bold enough to end the current system of debt money.

And what of the big corporations? Will it take some act of Congress to stop that injustice?

I'm afraid that may happen if enough people get angry enough. But I think in the long run, government solutions will create more problems than they solve. I think that the real pressure needs to come from shareholders, who must come to understand that the best long-term prospects for their investments come, not from creating more millionaire and billionaire CEOs, but from creating more customers with money in their pockets to spend on what their companies are selling.

And there's only one way to do that: pay workers a wage that reflects the real value they add to the bottom line. It's not just fair. It's a much smarter approach.