Crippling Anxiety and Other Hidden Costs of Producing More with Less

Summary

The article discusses the hidden costs of increasing production efficiency, particularly the impact on workers and the middle class.

Abstract

The pursuit of higher profits through technology and globalization has led to a situation where producing more with less has shifted income from labor to capitalists, resulting in widespread worker displacement and anxiety. This trend threatens the middle class, social stability, and democracy by suppressing wages and creating a divide between the wealthy and the rest. The article suggests that a rational redistribution of wealth from capitalists to workers is necessary to maintain a healthy middle class and ensure economic prosperity and political stability. It also warns that the unchecked use of technology and globalization could lead to a significant loss of purchasing power, ultimately harming capitalists themselves.

Opinions

The author argues that the capitalist drive to increase profits by producing more with less has led to a crippling anxiety among the workforce and is detrimental to the middle class.
It is believed that the current situation, where the market favors capitalists over workers, is unsustainable for social health and economic prosperity.
The article criticizes the view that displaced workers should simply pull themselves up by their bootstraps, advocating instead for policies that support the middle class.
The author posits that billionaires and proponents of libertarian policies should be wary of the potential consequences of a disenfranchised workforce, including the rise of demagogues.
It is suggested that even Henry Ford recognized the importance of workers' purchasing power, implying that contemporary capitalists should follow suit.
The author emphasizes that tax policy could be a key mechanism for redistributing wealth in a way that supports the middle class without stifling innovation.

Crippling Anxiety and Other Hidden Costs of Producing More with Less

Capitalism has enabled those who produce more with less to increase profits without charging their consumers higher prices, which has made America, as a whole, wealthier than ever. But this win for capitalists without an obvious loss for consumers comes at a steep cost: an anxiety-ridden workforce, which now threatens to destroy America’s middle class-and with it, our social structure, economy, and political stability.

Producing more with less, the product of using technology and globalization to slash labor costs, has shifted massive amounts of income and wealth from labor to capitalists. In the process, it has displaced millions. These workers now live in a world in which most must:

stomach a permanent cut in their standard of living,

accept a lesser job or get re-trained to qualify for a decent-paying job,

leave friends and family to move to a new area where there are available jobs, and

struggle with the trauma of their families having to cope with a sad new reality.

For displaced workers, what remains of hope lost is a pessimistic state of anxiety over an uncertain future. As the ranks of the displaced workers swell, the Iron Law of Wages compounds their misery by suppressing wages in whatever new jobs they can find. No society can be socially healthy, economically prosperous, and politically stable if the wealthy are too wealthy while the middle class shrinks and becomes poorer.

There are those who believe that anything the market does is sacrosanct, and if displaced workers don’t like it, it’s up to them to pull themselves up by their bootstraps. If this view prevails, America will be mired in a social, economic, and political morass populated with an ever-growing mob of demoralized and undereducated workers who:

can’t compete in global markets,

are socially alienated from those who are well-off,

lack the purchasing power to purchase what capitalists could produce, and

are likely, as voters, to fall prey to any demagogue who convinces them of a convenient scapegoat to blame for their plight.

Billionaires who finance libertarian policies that blame displaced workers for their plight, in particular, should think about what kind of return they can expect on their capital if a disgruntled mob chooses to follow the wrong demagogue. The over-concentration of income and wealth in capitalists to the exclusion of workers attributable to technology and globalization now confronts America with a quandary:

What should be done to simultaneously (a) maximize the creation of national income and wealth and (b) ensure that it is equitably shared between capitalists and workers in a way that grows a healthy and optimistic middle class?

The fate of America’s democracy depends on us adopting policies that promote a healthy, growing, and prosperous middle class while leaving the capitalists free to innovate, even if it results in displacing millions of workers. There’s a deceptively simple policy answer to this quandary:

Rationally redistribute a portion of the increased income and wealth derived from technology and globalization from capitalists to workers so that they can remain in the middle class.

The policy is simple, although politically, it is complicated in the extreme. Even so, it’s worth recognizing as the ultimate aim since saving the middle class could ensure the survival of democracy while leaving capitalists with the ability to maximize the creation of income and wealth through innovation.

Thinking capitalists should remember the old adage, “There can be too much of a good thing.” Whatever profits they gain by displacing millions of workers can deprive them of a substantial chunk of the market for their goods and services, and therefore profits. Even Henry Ford, a ruthless capitalist if there ever was one, increased the pay of his workers so that they could afford to purchase more Fords-and make him more money.

Here’s a thought experiment to help capitalists understand the economic harm arising from a loss of purchasers to buy their goods and services:

Suppose that technology and globalization advance to the point that automation coupled with cheap, foreign labor could produce 100% of what American workers produce at 10% of the current cost, would capitalists be wealthier?

At first blush, a capitalist might think that substantially cutting the cost of goods and services sold will increase profits. But this is short-sighted. Capitalists should instead wonder, in view of the loss of purchasing power, “Who the hell is going to purchase my production?”

If it were possible for just one capitalist to benefit from using technology and globalization to displace workers, then a single capitalist could cut labor costs and still have plenty of workers employed by others to buy their production. Unfortunately, technology and globalization are available to all capitalists, and all capitalists feel pressured to take full advantage of it. Partial redistribution would enable them to lean into what comes naturally while ensuring enough spending power remains in the consumer base.

Once capitalists come to understand that redistribution is an unpleasant necessity, the question arises: How best to do it? In my next several articles, I’ll discuss not only how best to do it but how not to do it. As a hint, tax policy offers the best means of saving the middle class without hindering the innovation necessary for America to prosper. In the meantime, I invite interested readers to visit The Payback Project and check out my proposals in detail. Read this Q&A to learn more.