Wednesday, January 16, 2013

Proyect on the Economy

I intended to post an article about Louis Proyect's excellent website, The Unrepentant Marxist. Indeed, I had something all thought out and was going to start writing this morning. But Mr. Proyect can write circles around me--his productivity is really amazing--and his most recent post renders my plans and ideas obsolete.

I was, for example, going to claim that he rarely discusses the economy. I think that's true, but it certainly isn't true today. His most recent post is a fascinating piece entitled Is Growth Over? In it, he relates part of the conversation about the future of jobs, the economy, growth, and technology. This is a subject near and dear to my heart, and I have blogged about it before many times, including herehere and here. I have also published several articles elsewhere under my real name on the same issue.

Mr. Proyect comments on Paul Krugman's piece by the same title here, along with work by Robert Gordon (which I have not read). Equally relevant is the article in a recent Economist, here, along with Tyler Cowen's and Alex Tabarrok's work over at Marginal Revolution (my favorite econ blog). An excellent summary is given by Noah Smith, here.

Here is the problem in a nutshell (data from Wikipedia): Walmart, with 2.2 million employees, generates $15.7 billion in income. Google, with 54,000 employees earns $9.7 billion. In a word, Google produces an income roughly comparable to Walmart, but with only 2% of the payroll. Google is a capital-intensive company, while Walmart is a labor-intensive business. Krugman's thesis (and, by extension, Proyect's) is that capital will displace labor and there simply won't be anyplace for us shlubs to work.

On the surface this appears to be true. Lawyers have, indeed, been partially automated out of existence. College professors are not far behind--you can read hilarious wailing and gnashing of teeth here. Medical care is next--all those nurses, physician's assistants, and specialist doctors won't know what hit them. Of course we've seen it all before--just read Gregg Shotwell's description of the auto industry to find out what happens when machines steal your job. Lots of people get laid off, and wages go down, down, down.

It sounds terrible, awful, cataclysmic--indeed, downright Marxist. And it is bad, but for one thing. Prices will go down. College tuition, now averaging about $20K, won't cost more than $2,000. Health care, now 17% of our economy and growing disproportionately, has to get cheaper. Likewise for legal services and automobiles--they are cheaper and better. And Google gives most of its products away for free!

For workers, the trend toward capital is bad in the short term. For capitalists, the trend is bad in the long term, for reasons that Marxists understand better than most--they call it the declining rate of profit. I'd call it ever lower prices because of competition. But for consumers this news is unambiguously good. Better, cheaper, more abundant products improves our standard of living--what's there not to like?

So I am more sanguine than either Mr. Krugman or Mr. Proyect. Better, cheaper products that make us healthier, better educated, happier, and richer is a good thing. The problem will not be poverty, but instead the appropriate distribution of riches. That's a difficult problem, but nowhere near as bad as poverty.

Mr. Proyect mentions some things that seem to me to be just weird. He opposes globalization, an opinion he shares with economic know-nothings on both the Left and the Right. Already 250 years ago, Adam Smith pointed out that larger markets make for a richer people. A global market is bigger than any local market, and countries that are part of the global economy (e.g., USA, Singapore) are substantially richer than those that exclude themselves (e.g., North Korea, Venezuela). This law of economics is as established as any in the business, and I don't believe there are any real exceptions. Denying the virtue of globalization is rather like denying the Law of Evolution. So I'll stick to my thesis that Mr. Proyect is not particularly interested or knowledgeable about economics, today's article notwithstanding.

The second oddity is his affection for the Occupy Movement. To my mind, Occupy was completely incoherent and essentially apolitical. Predictably enough, it faded without leaving a trace. I have yet to read anything that convinces me that the Occupy Movement was of any consequence whatsoever.

These two blemishes notwithstanding, I think Mr. Proyect writes an excellent blog. I'll have more to say about it soon enough. I disagree with him on some issues, but I am strongly supportive of his overall project.

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