David Smith On Productivity

[wonderpup]

Yeah we should ban all labour saving devices, lets ban tractors and get people back into the fields to plough 50 square metres in a day, lets ban computers and go back to typing pools, infact lets ban calculators because we can employ more people if everyone had to do multiplication by hand.

The average western worker was better off materially in the recent past than now- they could afford houses, could raise their families on a single man's wage and had a better life in many ways- so increasing productivity does not seem to have made the ordinary person better off- what it has done is enrich the the top 1%.

As a Goldbug I am sure you can appreciate that scarcity is value- and the more productive labour is the less scarce it is and so the less value it can command in the marketplace.

[wonderpup]

The positions are always relative. If a worker in england improves and produces 2 unit but the guy in germany produces 4, he will never the less be worse off. Another issue that needs to be taken into account is that modern increase in productions are seldom due to workers' working faster/better, but due to introductions of significant amount of capital (ok.. or in simple words.... comptuers and robots).

But viewed globally the more productive labour becomes the less bargaining power it will have because it reduces it's own scarcity value.

So from labours perspective increasing productivity simply weakens it's position relative to capital- leading to wage declines leading to demand declines.

Productivity is presented as an unalloyed benefit to all- but is this really the case?

[wonderpup]

Or doing work of twice the value.

What good does this do the worker if that value is totally captured by capital?

In a world of global wage arbitrage all that happens is that productivity gains are captured by the owners of capital.

For labour increased productivity is a zero sum game in which the shrinking pie of global wages is fought for via declines in pay, working conditions and workers rights.

We are constantly told by our leaders that increased productivity will lead to prosperity for all, when in reality it leads to prosperity for the few and increased powerlessness and poverty for the many, as they produce themselves into irrelevance and expendability.

[easy2012]

But viewed globally the more productive labour becomes the less bargaining power it will have because it reduces it's own scarcity value.

So from labours perspective increasing productivity simply weakens it's position relative to capital- leading to wage declines leading to demand declines.

Productivity is presented as an unalloyed benefit to all- but is this really the case?

Yes (i.e all who would be customers), except the relevant competing parties (assuming it is not a monopoly/duopoly) that deliver the enhanced productivities.

That is unfortunately the basis of capitalism - competing forces to deliver better outcome for all (and hopefully, but not always to themselves too).

Of course, the scarcity values are relative to the scarcity value of money, which the governments print a plenty to capture that productivity advantages. So, customers win, government (and their civil servants and crones) win.

[the shaping machine]

The average western worker was better off materially in the recent past than now - they could afford houses, could raise their families on a single man's wage.

Only really true from about 1945 to 1970. It also ought to be obvious to you why this was the case.

[the shaping machine]

But viewed globally the more productive labour becomes the less bargaining power it will have because it reduces it's own scarcity value.

Productive workers are worth more because of their scarcity.

[the shaping machine]

What good does this do the worker if that value is totally captured by capital?

In a world of global wage arbitrage all that happens is that productivity gains are captured by the owners of capital.

You read too much Marx. Productivity benefits the worker because they can then buy more stuff with an hour's labour.

For labour increased productivity is a zero sum game.

No, increased productivity means the pie gets bigger.

We are constantly told by our leaders that increased productivity will lead to prosperity for all, when in reality it leads to prosperity for the few and increased powerlessness and poverty for the many, as they produce themselves into irrelevance and expendability.

What do you think reduced productivity leads to?

[easy2012]

What do you think reduced productivity leads to?

As above - depends whether you have monopoly (or near monopoly).

For a developers with a bit of stock an in, say Mayfair, reduce the rate of house building (i.e. productivity lead to. .... ? )

£££££

[wonderpup]

Only really true from about 1945 to 1970. It also ought to be obvious to you why this was the case.

But true non the less. Yet large productivity rises beyond this period did occur- but the benefits went to the top, not to the workers. So we can at least agree that there is no innate linkage between increased productivity and the living standards of the worker.

[wonderpup]

Productive workers are worth more because of their scarcity.

How does reducing the need for something make it more scarce? The more productive each worker becomes, the less workers are required to achieve the same output. So productivity is not helpful if it increases the surplus of workers because this surplus will drive wages down.

[wonderpup]

You read too much Marx. Productivity benefits the worker because they can then buy more stuff with an hour's labour.

A man with no job can't buy anything- and a man whose wages are falling behind the price of essentials like energy and food can buy less, not more. And it's by no means clear that the margin compression caused by cheaper selling prices brings long term benefits to anyone.

No, increased productivity means the pie gets bigger.

Yes the pie gets bigger- but the number of customers does not automatically increase to meet that extra production- in which case we get margin compression which is exacerbated by layoffs as surplus labour is dumped.

The idea that merely increasing supply magically creates extra demand is pure fantasy- if it were true then business success would consist of simply ramping up production to infinity- we could all be rich.

What do you think reduced productivity leads to?

More jobs and less surplus labour? Ask yourself this- would you rather be a scarce resource in less affluent world- or a disposable commodity in world full of riches that you will never taste?

Yes it's nice that a dwindling section of our societies can live like kings- but for the majority it's now about working longer hours for less money and renting a rabbit hutch to house a family you barely get to see because the wife's out there being more 'productive' as well- and the kids see more of the childminder than either of their parents.

All this 'productivity' seems to have benefited a small number of people at the top- so why is this such a good thing?

[erranta]

We're losing productivity as a nation because of outsourcing.

A large company which outsources its manufacturing to China doesn't need its UK factories anymore so it can sell them off. This means that as well as benefiting from cheaper manufacturing abroad, the company has significantly lower capital requirements. Less capital tied up means Return On Capital increases, and management can pat itself on the back for being so clever. They don't care about all the newly unemployed people now claiming benefits.. That's not their job. Their job is to maximise shareholder value..

Neither management nor the shareholders care that long term profits will fall because of lack of demand due to high unemployment. Management earned such big bonuses for increasing RoC that the can retire in a few years anyway, and shareholders can simply sell their shares.

.

Its the same zero-sum game the City/Bankers/our beloved elites are playing.

Only encouraging supplying big business chains to expand at the expense of Small/Medium business is sucking all the wealth out of local economies just to enrich the rich replacing business owner salaries with Govt subsidised salaries below a living wage.

They also avoid paying Trillions £££s in taxes - unlike smaller businesses.

Note how the Govt 'pretend' to force the bankers to support smaller businesses during this recession deliberatly caused by them, and prolonged by Osborne/BOE policies. (Exactly like the Roose_velt deliberately extended depression in 30's which killed millions in the USA. I just found out he was a cousin of some sort to Hitler!)

Nobody will be buying from them soon enough after enriching a few City fatcats at the expense of the UK population.

All in their Masonic Manifesto.

Edited February 20, 2013 by erranta

[crash2006]

You read too much Marx. Productivity benefits the worker because they can then buy more stuff with an hour's labour.

No, increased productivity means the pie gets bigger.

What do you think reduced productivity leads to?

That is if the wage matches productivity, which it has not, divergence since the end of the 70s productivity up but not the wage.

THE past decade has been a trying one for workers across the developed world. According to the International Labour Organisation’s latest Global Wage Report, between 1999 and 2007, productivity growth outstripped real wage growth in many economies (

Edited February 20, 2013 by crash2006

[goldbug9999]

The average western worker was better off materially in the recent past than now- they could afford houses, could raise their families on a single man's wage and had a better life in many ways- so increasing productivity does not seem to have made the ordinary person better off- what it has done is enrich the the top 1%.

The problem is the distribution of the fruits of the increased productivity, not the increase itself. The monetary system is the primary means by which the banks steal the productivity gains of the average worker. If we reduce productivity who do you think will suffer - the 1% or the rest.

As a Goldbug I am sure you can appreciate that scarcity is value- and the more productive labour is the less scarce it is and so the less value it can command in the marketplace.

Gold isnt "wealth" or "value" its a means of exhange, a currency. Food is wealth, clothes are wealth, medical care is wealth, more is better.

[goldbug9999]

Gold isnt "wealth" or "value" its a means of exhange, a currency. Food is wealth, clothes are wealth, medical care is wealth, more is better.

People gain more through the increased productivity of others than they lose through being unable to "corner the market" for their own efforts.

[Bearly Audible]

That is if the wage matches productivity, which it has not, divergence since the end of the 70s productivity up but not the wage.

THE past decade has been a trying one for workers across the developed world. According to the International Labour Organisation’s latest Global Wage Report, between 1999 and 2007, productivity growth outstripped real wage growth in many economies (

You could see how this also might be a *cause* of low productivity in the long run (and we have had a long run in the UK). If the employee's share of productivity gains dwindles to zero, the *incentive* to be more productive will surely follow.

[wonderpup]

The problem is the distribution of the fruits of the increased productivity, not the increase itself. The monetary system is the primary means by which the banks steal the productivity gains of the average worker. If we reduce productivity who do you think will suffer - the 1% or the rest.

This is my point- we are told that increasing productivity is the way to make the average person better off- this is no longer true since the benefits of that productivity are captured by the 1%.

If we reduce productivity then more workers will be required leading to more wages being paid leading to more demand.

Consider the ultimate productive worker- it's a humanoid robot that works 24/7 for zero wages- which means it's productivity is off the charts compared to a human worker.

However it has replaced that human worker who now has zero income while his former boss is richer than ever.

As I said- the average worker was better off in the past when he was less productive- mainly due to the fact that his ability to demand a greater share of that production was stronger because he was not forced to compete with cheap overseas labour or too much automation.

So when the elites talk about increased productivity making people better off they mean themselves- they dream of a cheap and flexible labour force because this is what they need to consolidate their wealth- they could not give a shite about the common man, who exists only to serve their ambitions.

Gold isnt "wealth" or "value" its a means of exhange, a currency. Food is wealth, clothes are wealth, medical care is wealth, more is better.

And if it rained Gold coins tonight all over the world would that impact on it's value as a currency? As I said-scarcity is value- and anything that reduces scarcity reduces value. So a hyper productive labour force is destroying it's own scarcity value and thus impoverishing itself.

Productivity increases will not make working people better off in a world where they lack the power to enforce a claim on the benefits it brings-on the contrary- the more productive they are the less power they have, since they are eroding their own scarcity value by creating more surplus labour.

[the shaping machine]

So we can at least agree that there is no innate linkage between increased productivity and the living standards of the worker.

There is no 1:1 relationship of course, but increases in productivity benefit the worker both directly (a more productive worker = worth more pay) and indirectly (more general productivity means stuff costs less to buy so the same money buys more stuff).

[easy2012]

This is my point- we are told that increasing productivity is the way to make the average person better off- this is no longer true since the benefits of that productivity are captured by the 1%.

If we reduce productivity then more workers will be required leading to more wages being paid leading to more demand.

Consider the ultimate productive worker- it's a humanoid robot that works 24/7 for zero wages- which means it's productivity is off the charts compared to a human worker.

However it has replaced that human worker who now has zero income while his former boss is richer than ever.

As I said- the average worker was better off in the past when he was less productive- mainly due to the fact that his ability to demand a greater share of that production was stronger because he was not forced to compete with cheap overseas labour or too much automation.

So when the elites talk about increased productivity making people better off they mean themselves- they dream of a cheap and flexible labour force because this is what they need to consolidate their wealth- they could not give a shite about the common man, who exists only to serve their ambitions.

Productivity increases will not make working people better off in a world where they lack the power to enforce a claim on the benefits it brings-on the contrary- the more productive they are the less power they have, since they are eroding their own scarcity value by creating more surplus labour.

With a caveat I am afraid - provided that the competitors (foreign or domestic) stay at low productive level too - else the business will go bust and the worker will get zero. Yes - we are in some sort of relative competitive spiral such that if Foxconn goes fully robotic, then Flextronics, Jabil etc must follow suit - if they stay happy go lucky, then they will be wiped out, obviously.

It is actually unclear if the labour wage share worldwide have dropped much over the last 30 years. There are many workers and hence if they merely lose 2% of the share and the 2% share get captured by the few 'elites', then the elite will get enormously rich.

The real problem in the wage share is the gap between the unskilled/semi skilled with the professional/technology/managerial group.

While the labour share stays more or less constant, the former share within the wage share has shrunk significantly.

p.s. Then we have the case of EU farmers destroying potatoes to create scarcity in potatoes and farmer pouring milk away during the great depression...

Edited February 20, 2013 by easy2012

[the shaping machine]

Yes the pie gets bigger- but the number of customers does not automatically increase to meet that extra production- in which case we get margin compression which is exacerbated by layoffs as surplus labour is dumped.

Cars were once expensive and very few people had them, then they got cheap and lots of people had them. Each worker in a car factory was more productive, but there were more workers making more cars.

The idea that merely increasing supply magically creates extra demand is pure fantasy- if it were true then business success would consist of simply ramping up production to infinity.

Reductio ad infinitum is very poor logic.

Supply, demand and price are highly linked. Therefore increases in productivity means things become cheaper, which causes supply and demand to increase.

Ask yourself this- would you rather be a scarce resource in less affluent world- or a disposable commodity in world full of riches that you will never taste?

False binary choice.

Remember that in the 20th century communism made people a disposable commodity in a less affluent world, while at the same time free markets in the west made people a scarce resource in a world full of riches.

for the majority it's now about working longer hours for less money and renting a rabbit hutch to house a family you barely get to see because the wife's out there being more 'productive' as well- and the kids see more of the childminder than either of their parents.

More productivity could equally mean more time at home. Working hours have (generally) been on a downward trend since the industrial revolution.

All this 'productivity' seems to have benefited a small number of people at the top- so why is this such a good thing?

If it were true it would be a bad thing. However it seems to me the lot of the average person is better off now than at any point in previous history.

[the shaping machine]

With a caveat I am afraid - provided that the competitors (foreign or domestic) stay at low productive level too - else the business will go bust and the worker will get zero.

This is essentially what happened to the US auto industry; while they were effectively sheltered from real competition they could afford to pay workers very generous wages and benefits packages. As soon as the rest of the world caught up and started exporting then it was game over.

[Harry Sacks]

The rent seeking economy certainly have a lot to do with it but a major factor is the rise of the self employed post 2008 crisis.

Many went self employed, do minimal amount of useful work (voluntarily or otherwise) but clock up the number of hours required to collect tax credits which is one of the factor the lead to the fall in productivity number.

The problem with a globalised workforce is that western workers, fed, clothed and safe are put in the ring with people who have ****** all, live under a regime and barely have enough to eat. This scenario benefits a minority greatly and may give a glimmer of hope to the poor souls in those countries. However, in the west it's a slow decline in living standards.

Look at the shops, they are full of marginal need crap. There's no case for increased productivity today, it's counter productive.

[goldbug9999]

This is my point- we are told that increasing productivity is the way to make the average person better off- this is no longer true since the benefits of that productivity are captured by the 1%.

We all accept there is a problem with distribution so at this point its a straw man argument that you are using purely to give the illusion that your incoherent ramblings have some thread of coherence (which they dont).

If we reduce productivity then more workers will be required leading to more wages being paid leading to more demand.

No they wont be better off because the their higher wages will be more than offset by the price increases due to lower output.

Consider the ultimate productive worker- it's a humanoid robot that works 24/7 for zero wages- which means it's productivity is off the charts compared to a human worker.

Or stated another way "the hare cant catch the tortoise".

[wonderpup]

Cars were once expensive and very few people had them, then they got cheap and lots of people had them. Each worker in a car factory was more productive, but there were more workers making more cars.

Those car workers had strong unions and the ability to demand wage rises in line with that increased productivity- this is no longer the case.

Reductio ad infinitum is very poor logic.

Supply, demand and price are highly linked. Therefore increases in productivity means things become cheaper, which causes supply and demand to increase.

Some things become cheaper- but not all. Fixed costs like energy, housing and food are rising relative to wages. But labour cannot demand higher wages because it has no scarcity value- increasing it's productivity will further decrease it's scarcity value by adding to surplus labour. So it really makes no sense from labours perspective to increase it's productivity- in fact it needs to reduce productivity to increase the demand for labour in order to strengthen it's bargaining power.

False binary choice.

Remember that in the 20th century communism made people a disposable commodity in a less affluent world, while at the same time free markets in the west made people a scarce resource in a world full of riches.

And those same free markets have now commoditised labour and destroyed it's bargaining power relative to capital. I agree that while labour could exert enough muscle to gain a share of increasing productivity it made sense for labour to be more productive- my point is that this is no longer the case- what we see now is that almost all the gains from productivity go to the top, while labour's position is weakened by it's own success in reducing the need for labour.

More productivity could equally mean more time at home. Working hours have (generally) been on a downward trend since the industrial revolution.

It could- had the benefits been shared more widely. In practice we see both parents forced to work full time to sustain a standard of living that is in some ways worse than that enjoyed by their parents who often only had one parent at work.

If it were true it would be a bad thing. However it seems to me the lot of the average person is better off now than at any point in previous history.

You have already conceded the point that the post war period was better for the average person than today- so when our leaders tell us that the way to prosperity now is for labour to produce more this is only true if we take this to mean the interests of the 1%- because it is they who will benefit from that productivity increase- not the ordinary person.

[wonderpup]

We all accept there is a problem with distribution so at this point its a straw man argument that you are using purely to give the illusion that your incoherent ramblings have some thread of coherence (which they dont).

If you accept that the benefits of increased productivity will go mostly to the top 1% then you have grasped the full extent of my argument-

Which is simply to point out that the claim that increasing productivity will increase prosperity for all is not true- it will in fact only increase prosperity for the 1%.

And it's not a great leap in thought from this point to realise that if you work twice as hard for no gain you lose out twice- first you get nothing for your efforts and second you damage the scarcity of your labour by doubling the supply of it.

No they wont be better off because the their higher wages will be more than offset by the price increases due to lower output.

It depends on how large a slice of the pie they get relative to other players. In the days of strong labour unions the pie was more equally shared and as a result a single man's wage was enough to provide a good standard of living for a family- unlike today. People could do strange things back then like buy homes to live in and have families instead of living like nomads in rented rat holes.

Or stated another way "the hare cant catch the tortoise".

The point about the robot is that it demonstrates the flaw in the idea that being hyper productive will lead to a widely shared prosperity- it won't. The more productive we become the less economic value our labour will have- it sounds counter intuitive but it's true.

If we could all transform ourselves into such hyper productive machines our reward would be that we would find ourselves virtually worthless commodities on the labour market, barely able to command a living wage- why? Because we would have created a massive oversupply in the one thing we all have to sell- our labour.

And what happens when a thing is massively in surplus? It's market value goes down.