The Invisible Hands Green Thumb

You can create an increased demand for labor in a static economy by shortening working hours to compensate for increased production efficiency, i.e. you get a growth in 'spare time' which is not measured by normal methods but which certainly has a value.

No, continued economic growth is not impossible. Not all consumption is damaging to the ecology. All you have to focus on is increasing the quality rather than the quantity of what you consume. This may not be how the economy usually works today, but there is no reason why it can't be like that.

One reason why we tend to produce more and more junk rather than a few, expensive, quality items is that labor is taxed a lot heavier than pollution or raw materials. Switch to environmental taxes and it will be a lot more attractive to focus on making better things which can either be recycled or has a long lifetime.

Switching to a service economy also reduces environmental strain. If A cooks ever more tasty meals for B and B sells paintings for A there is no reason they can't keep increasing the price of their services forever creating infinite economic growth. (Is this any different from inflation? Who knows, the border is often blurry.)

Engles actually commented on that issue in the second part of an article about Thomas (?) Malthus (?). In the first part he is critical of Malthus for using unemployment as a measure of limited resources, and claiming that he does not think that there is any limit to resourses that cannot be overcome with labor, but he accepts that he might be wrong. He then mentions that the population will not accept any limits to growth, unless the reasons are clearly understood.

If our pro growth media ever did decide to examine the issue, they still would lack credibility. Here in Tampa, I did a local informal survey on the question of advertising and the commercial media providing a class or wealth 'bias'. Basically, I asked if they believed that the media competed to serve the interests of the general public or the stockholder/advertisers.

I was surprised that I got a yes from 20 out of 20. The group tended to be from the lower income half of the population, and included - some state college students - some more state college students who identified themselves as Christian - some retired military and retired on social ,that I talked to at a vacant lot flea market - and some 'blue collar' workers I talked to while shopping and getting my car repaired.

About 25% admitted that they had never really thought about it before I explained the way it works. However the most common term used to describe the media was 'crooks.'

There is one positive note, I run a personal newsbox at the local bus terminal, and my regular readership is mostly in the lower 30% income group. They are very intested in the internet. They were very interested to learn that you can find the names of write-in candidates on the internet. Unlike the 'liberals' and 'leftists' they are totally uninterested in the two party system. They do consider the Greens to be a 'Yuppie party' that will promise much to the poor, to get their votes, but will actually only serve 'yuppie' interests if elected, but they did agree that voting for the Greens would send a good message to the Democratic party

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Now Tim. I know how easy it is for you to get confused.

But worth pointing out to those who do not know how much communism and democracy are derived from the same philosophical political roots, and how socialist and capitalist economics are tied together as well by Adam Smith.

I didnt' see anything about monopolies or monosponies. The claim was that they formed a tightly knit and cohesive community and thus could influence each other in their drive for lowering wages to the worker. It is no more a monopoly or monospony to do this than a labor union would be a monopoly.

Tim Tim. Off track again. Sigh....

There is plentiful logic if you consider the power of the masters vs the power of the worker. The masters have the cohesive structure of 'old boys network' and communications within the industry, as well as a major incentive to reduce labor wages. The worker, on the other hand, has nothing but his abiltiy to secure a job and usually has only a choice of one or sometimes two. The wages that are offered are offered by the master. He has no choice but to accept or decline. Clearly the worker has less control over the process, especially in an era of high unemployment and globalisation where 'competitive bidding' for work among the 'final candidates' can take place or the number of required workers can be filled even with lower wage offers.

I would have thought you would at least understand Adam Smith.

One word. Microsoft. Yah yah. Tell us another one Tim.

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Tim, which 'modern world' are you inhabiting? I guess maybe in the UK, where you have a Labour Government in power and a long tradition of 'radical Tories' like Churchill and Disraeli, who often legislated against corporate abuses even while espousing Conservative views, it may be fair to say that 'we punish severely those businesses that conspire against either their workforces or their customers.'

In the United States today, in the era of George Bush II and in the wake of Ronald Reagan, it's a lot less clear that this is happening. We may punish those who can be caught 'conspiring' against the public interest, but often enough, no conspiracy is necessary.

American corporations regularly shut down factories and move production overseas to poor Third World countries, leaving thousands of Americans behind to seek alternative employment or welfare, and no ones get punished for it.

When corporate management schemes to defraud the shareholders, of course - as in the Enron scandal - we Yanks take it more seriously, because here, it's the alleged 'owners' of the corporations who are getting swindled. But even so, it's far from clear that many of the managers and CEOs who manipulated stock prices and investor expectations in the late 1990s are going to be punished for what they did.

As for those CEOs who have merely spread poverty and unemployment among their former employees by presiding over mass layoffs and factory closures, generally stockholders 'punish' them by voting them hefty pay raises.

Also, I think you need to reread your Adam Smith, as noted below.

If I remember Smith's discussion of wages in The Wealth of Nations, it isn't only that employers can 'conspire' secretly against workers. It's also that in the normal course of market society, the employers, being fewer in number, usually find it easy to organize themselves to resist wage increases, while the workers, being many in number, find it hard to organize to keep wages from decreasing.

I believe modern capitalist economists call this a problem of 'transaction costs,' and I believe that the conservative AMerican economist Mancur Olson, in his book 'The Logic of Collective Action,' has demonstrated that this generally means workers have a very hard time organizing themselves to promote their own economic interests, except through violence.

There's also another inherent problem with the labourer/employer relationship that I believe is addressed by Adam Smith directly, and which in any case has been addressed by many labour economists since his day.

And that is that the employers, being richer than the workers, can generally survive the loss of the workers' labour for much longer than the workers can survive the loss of paying employment. Which gives them a clear advantage when it comes to negotiating pay agreements.

It's inconvenient, of course, for a large corporation to go without the toil of its employees for a week, and if it has to go without workers for a long period of time, it may well go bankrupt. But depending on how well the corporation's workers are being paid, it may be catastrophic for any one of them to miss a week's or two week's wages. For people who are being paid very badly and are on the brink of poverty as a result, of course, the loss of a week's wages can be very destructive indeed.

In the ordinary course of things, then, the employers can survive a brief interruption in the wage/work relationship with relatively little damage to themselvs, while the employees may find that this interruption in paid employment forces them into poverty, or in some extreme cases into homelessness.

In the ordinary course of business, then, the employers have the advantage over the employed in wage negotiations, and in the ordinary course of business they take advantage of it.

At least this seems to be true in the United States, where during the long period of economic troubles lasting from roughly 1973 through 1995, the average wage of the least educated white men in the workforce declined in real, ifnlation-adjusted terms by some 17 percent - while the wealth of upper class people investing in the American market, of course, rose dramatically.

Are things all that different in Britain?

Since Thatcher was elected in the 1980s, have the lowest paid British workers seen a dramatic rise in their incomes, while the major stockholders of British corporations have had to struggle for profitability due to the workers' ability to make ever-increasing wage

Tim, I think the fundamental error in your whole approach comes at the very end of your post below, where you essentially say it's important not to view the economy as a zero/sum game, and the point is for capitalists and workers to 'keep the whole pie growing' so that everyone can benefit.

This is now the conventional capitalist wisdom, obviously; you're in very good company when you write this, and the ideal of 'keeping the whole pie growing' to avoid zero/sum conflicts is one that most Western politicians, most capitalist business leaders, and most capitalist labor leaders have all endorsed repeatedly for about a century now.

The problem I have with it as an environmentalist is that I think it's intuitively obvious that the 'keeping the whole pie growing,' on a virtually perpetual and indefinite basis, is impossible. At least it's impossible within the confines of the earth, which of course is enormous and well stocked with many different kinds of resources, but nevertheless is a LIMITED and FINITE system.

Within a finite system, I think, we just can't have infinite growth of any subcomponent of the system. The ideal of pursuing infinite growth within a finite system, to borrow a phrase from the currently unpopular Paul Ehrlich, is the 'ideology of the cancer cell.'

That's why we urgently need to invent something better than growth-dependent Western capitalism, I believe. And why we urgently need to invent a better system than the old growth-addicted 'Communism' of the Soviet Union as well.

Both systems of perpetual growth - perpetual growth that is largely designed to ameliorate conflicts between the workers and the management, between society's elite and its working stiffs - are virtually certain to trigger ecological and human disasters as the impulse for infinite growth bumps up against natural limits in the global ecosystem.

How to devise a HUMANE and libertarian and decent way of limiting growth and living within natural boundaries, of course, is the big question for environmentalists of the 'no-growth' camp.

The 'Deep Ecology' people, as far as I can tell, have a plan for moving away from growth that would entail skipping backwards in human development to the pre-Paleolithic stage, and that would require the disappearance of about 80% of the world's present human population. To me, that's barbaric and morally unacceptable.

But I think you and the vast myriads of Western politicans, economists, labor leaders and business leaders who all insist on 'growing the pie' are proposing to head human civilization off a steep cliff, at least in the long run.

Let me see if I can answer some of your other points below:

Yes, Archers Daniel was fined.

I've been reading up on the history of environmental regulation in the United Kingdom, and I agree with what you write about being 'Conservative' - well, up to a point. In the 1800s, it was Disraeli and the Conservative Party, not Gladstone and the Whigs or Liberals, who pushed through the first laws to regulate air and water pollution. I believe it also was Conservative governments who enacted many of the first laws regulating child labor in the mines and textile mills and the exposure of workers to smoke, poisonous chemicals and other hazards on the job.

But this was partly because the Conservatives, in a nineteenth century context, were at least partly the party of the landed aristocracy, and they rejected 'laissez faire' economics as Adam Smith had first formulated it and as his latter-day disciples among the 'classical liberals' and the 'radicals' were promulgating it in a Victorian context.

Disraeli's brand of Conservatives, in short, had certain pre-capitalist ideas based on aristocratic notions of noblesse oblige. They didn't mostly depend on the votes of large factory owners, as Gladstone's Liberals did, and so they could accept the need to use the power of the government to regulate the worst excesses of the market system. Whereas 'classic liberals' with radically laissez faire ideas like John Bright and Richard Cobden, I believe, opposed market regulation pretty consistently.

I wonder - damaging to WHOM? The powerful British labor unions of the 1970s were certainly damaging to British corporations, I believe. How did they do at protecting the living standards of their members? How have British working people fared in terms of income levels and working conditions since Margaret Thatcher largely broke the power of the unions in the early 1980s?

If I remember right, you had a period of 10 percent unemployment in there that dragged on for many years, didn't you? Are British working people now recovered form all that, and gleefully spending lots of money in a vibrant consumer economy now?

Actually, in the United States there's been a pattern of the seemingly powerful Teamsters Union actually making 'sweatheart deals' with the employers, with organized crime enforcing the terms of these deals. Although I haven't studied the subject in detail, I've read articles and had conversations with Teamsters Union members that suggest the union has enforced wage caps in many companies, with the local business agent receiving money under the table for doing a secret deal with management.

This was one reason for the victory a few years back of the 'Teamsters for a Democratic Union' (TDU) movement, whose elected leader Ron Carey, unfortunately, was then embroiled in scandals of his own.

To answer your question, I've read radical labor analysts who argue that the Teamsters Union has historically been quite weak compared to the employers, in large part because of the decentralized nature of the industry. The union might have the strength to take on a number of the smaller trucking companies, but it's faced such a large, varied and complicated organizing task that it's had a hard time making progress - without the help of organized crime, that is.

Admittedly, this is not the popular stereotype of the Teamsters, but you can catch glimpses of it in Danny DeVito's movie 'Hoffa,' made about a decade ago, and more powerfully in Sylvester Stallone's forgotten film 'F.I.S.T.,' which is a fictional account of a Hoffa-like figure rising to power in a union that's a thinly disguised version of the Teamsters.

Well, if all you're doing is screwing the U.S. worker by moving by Malaya, and you aren't 'conspiring together' to screw the U.S. consumer, then that's all right then, isn't it?

I mean, if you take away the jobs of thousands of people at a go because of perceived economic necessity, forcing the working people of Detroit or Youngstown Ohio or Seattle to go elsewhere for work, and maybe compelling them to sell their houses

The question then can be stated: does the use of GNP with all its flaws do more good than bad? As long as people shrug and say that they'll use GNP lacking anything better it's not likely we will get anything better either.

You assume here that in the absence of government regulation every employee could decide for himself how long he wanted to work. In reality it is much more common that employers have standard working hours. Perhaps it is possible to work part time but that certainly won't be good for your career. There may be lots of people who find themselves working long hours just because they feel demands from theier employer to do so to keep their job.

Companies spend billions trying to convince us that we need all the stuff they produce, which also means we have to work enough to pay for it. There is little in the way of propaganda for 'laziness'.

Another problem when it comes to reducing working hours is that the people on the top, whether business owners, union leaders or politicians in effect skims off a percentage of the economy and it is therefore in their interest that everyone else works as much as possible. There also will be an accumulation of workoholics in the top. They have interesting jobs, work long hours and meet others doing the same. This may give them the wrong idea of what ordinary people want.

That would mean deflation which is generally considered to be a bad

Intuitively obvious ? Does that mean that you don't have to prove it ? I will agree that you cannot have infinite growth in a finite system. Now, can we actually define what it is that we are going to have infinite growth in, and then what are the finite limits that affect that system ? Take economic growth as measured by GNP. Let's assume that this is what we are looking to have infinite growth in. OK, what is GNP ? It is the sum of value added in the economy. It is not, repeat not, the total of physical items produced in the economy. Is it possible to add value to an item without increasing resource consumption ? Yes, indeed it is. We can take a 1,000 tonnes of sand and make some sand pits for kiddy play grounds. Or we can take the same amount of sand, turn them into PIV's and we have Intel. The latter is adding a great deal more to GNP than the sand pits. So, by the addition of technology ( knowledge, human capital, accumulated wisdom, call it what you will )we have had an increase in GNP, a substantial one, while using the same amount of the original resource, sand. Now, if you want to make this an even tighter example, we can use the transition from PIII to PIV.c We have the smae sand consumption, energy consumption etc etc. We've just added capital ( which is after all just the saved labour of previous generations ) and technology, and hey presto, we have a rise in GNP, certainly when we measure it properly to take account of increasing quality. So, there we have it. GNP rises are not limited by the availability of physical resources ( or rather, it is possible for there to be GNP rises without an increase in consumption of physical resources....I'm not doubting that an increase in oil extraction is also an increase in GNP ). So, you are saying that we cannot have infinite growth in GNP becasue physical resources are finite. And yet GNP growth does not depend upon such physical resources, it depends more on the ingenuity of the human being, and his ability to discover new technology. So, while as above, I agree that you cannot have infinite growth in a finite system, when you refer to economic growth, you are referring to the wrong set of limits....and that's why your argument falls down. Just to recap. You can't have infinite growth in population. You can't have infinite growth in resource extraction ( although as Simon points out, and is grossly misunderstood for doing so, the limits to those two are a long long way away in the future....he doesn't say that such infinite growth is either possible or desirable. He just points out how far away the limits are .) . But you can have infinite economic growth, becasue it does not depend on either of the first two.

And as an economist, Ehrlich is a pretty good insect entomologist. A reasonable guide to being correct in this world is to assume that everything Ehrlich says is dead wrong. If he said the sun rises in the East I would want to check the earth's magentic poles just to check it.

As above, becasue you misunderstand what GNP is, and thus growth, you are applying the wrong limits to its continued expansion. As and when we discover everything, and apply those technologies, then I agree that we will not have economic growth. Not before, unless the Marxists get back in.

Err....Peel and the Corn Laws ? Wasn't he a Tory ?

Indeed, liberals would oppose market regulation. Although you might

I'm all for people working on alternative measures. Just want to see the details of what they are. So many of the proposed alternatives encapsulate political views. Such as one ( can't remember the name ) which assumes that an increase in income equality is a contribution to growth. Maybe it is and maybe it isn't , but I would say that it is a social, moral or political viewpoint, which is best left out of a supposedly impartial measure of growth.

I'm sure that happens. I'm also sure that many people would like to work more than 35 hours a week, something the French Govt currently bans them from doing. The point is, to me, at what level is the sum of utility maximised ? 80 hours a week may be too high, although there are plenty of investment bankers who regularly work that, and 20 hours is , I would argue, obviously too low as an upper limit.

No, deflation is not considered to be a bad thing per se. A general deflation in the price level is. A deflation in which prices were static but quality improved would be regarded as a good thing.

Tim Worstall