What Is Unemployment and A Recession??

[moda0306]

There seem to be debates as to what a recession/unemployment actualy represents.

Folks like melveyr and myself point out that it's a natural result of a monetized economy, within which economic errors, financial shocks, or malinve.  Others seem to think differently... here's one of a few interesting artices I've found on the nature of a recession and the natural will and difficulty to bartar in such times in the modern economy.

http://marginalrevolution.com/marginalr ... cfq8B.dpuf

If proof were needed that overproduction is not the cause of the depression, barter is the proof – or some of the proof. It shows goods not over-produced but dead-locked for want of a circulating transfer-belt called “money.”? Many a dealer sits down in puzzled exasperation, as he sees about him a market wanting his goods, and well stocked with other goods which he wants and with able-bodied and willing workers, but without work and therefore without buying power. Says A, “I could use some of B’s goods; but I have no cash to pay for them until someone with cash walks in here!”? Says B, “I could buy some of C’s goods, but I’ve no cash to do it with till someone with cash walks in here.”? Says the job hunter, “I’d gladly take my wages in trade if I could work them out with A and B and C who among them sell the entire range of what my family must eat and wear and burn for fuel – but neither A nor B nor C has need of me – much less could the three of them divide me up.”? Then D comes on the scene, and says, “I could use that man! – if he’d really take his pay in trade; but he says he can’t play a trombone and that’s all I’ve got for him.”? “Very well,”? cries Chic or Marie, “A’s boy is looking for a trombone and that solves the whole problem, and solves it without the use of a dollar. In the real life of the twentieth century, the handicaps to barter on a large scale are practically insurmountable…. Therefore Chic or somebody organizes an Exchange Association… in the real life of this depression, and culminating apparently in 1933, precisely what I have just described has been taking place.

[Pointedstick]

The problem with abstract examples such as that one, or the manicurist-hairdresser-masseuse one given in the article, are that they all seem to assume nonsensical things for the purpose of the thought experiment that are inapplicable in the real world--like the idea of nobody having any money. If that were the situation, what we would be seeing is homelessness and starvation, not unemployment. The issue is that a lot of people don't have enough money, not that they don't have any. Clearly they have enough money to eat and pay the rent, at the minimum.

Let's ask: why don't these people have enough money to afford any discretionary spending? This is where doodle will say that robots have replaced their jobs, and you or Gumby will say that their balance sheets are junked up with bad debt that they can't get rid of and Libertarian666 will say that their taxes are too high and so on and so forth.

I think we need to focus on those possible root causes rather than the idea that we can simply juice the system by greasing the gears with money when it may turn out that there are very real and significant problems with the quality and performance of our gears. At some point, even if they're sitting in an oil bath, they're not gonna turn anymore if they're falling to pieces.

So is the real economy fine, but suffering from insufficient liquidity, or are there significant underlying problems with the real economy? Personally, I vote for the latter.

[doodle]

My primary question is why in order to maintain economic growth and provide jobs for everyone, the private debt to gdp ratio has to climb to 3:1? It seems like people are mighty hardworking and productive, but the money system and how that money is being poorly distributed is causing some problems. Obviously private consumers cannot take on more debt, but if they cut back we get a vicious self perpetuating downturn with rising unemployment. Seems like the average working man is damned either way....take on more debt, or lose you job.

[moda0306]

The problem with abstract examples such as that one, or the manicurist-hairdresser-masseuse one given in the article, are that they all seem to assume nonsensical things for the purpose of the thought experiment that are inapplicable in the real world--like the idea of nobody having any money. If that were the situation, what we would be seeing is homelessness and starvation, not unemployment. The issue is that a lot of people don't have enough money, not that they don't have any. Clearly they have enough money to eat and pay the rent, at the minimum.

Let's ask: why don't these people have enough money to afford any discretionary spending? This is where doodle will say that robots have replaced their jobs, and you or Gumby will say that their balance sheets are junked up with bad debt that they can't get rid of and Libertarian666 will say that their taxes are too high and so on and so forth.

I think we need to focus on those possible root causes rather than the idea that we can simply juice the system by greasing the gears with money when it may turn out that there are very real and significant problems with the quality and performance of our gears. At some point, even if they're sitting in an oil bath, they're not gonna turn anymore if they're falling to pieces.

So is the real economy fine, but suffering from insufficient liquidity, or are there significant underlying problems with the real economy? Personally, I vote for the latter.

PS,

They aren't assuming no money, just not enough money in an already monetized economy, though the term "no cash" might appear otherwise.  A recession and high unemployment isn't just a bunch of lazy f*ks and people that bought too many flat tv's on credit trying to continue to consume... It's an entire economy out of equilibrium.  I have no problem with some people having to work harder to pay off irresponsible debt.  I do however have a problem with them as a whole not being able to because we're in an economic Mexican standoff.  That's what a recession is in a monetized economy.

Simply put, unemployment is everywhere and always a monetary phenomenon.  Ok, slight exaggeration, but in the end no less of an obfuscation than the original quote.

There may be some things fundamentally wrong with our economy, but they have as much to do with pollution, ecological issues and sprawl as they do with idiots running up debt.  Lets not forget that any over-consumption comes from the supply created by a "Galt" somewhere in the economy. We can't simultaneously praise "job creators" while deriding the consumption of their products.

[doodle]

I really think that Marx provides a lot of insights into the capitalist mode of production that help to elucidate these crisis. I know he is spurned in America because of our history with the soviet union....but if one can put that perversion of Marxist philosophy aside, there are a lot of gems to be uncovered in his work. I mean, even though this was written 150 years ago...it still seems relevant today.

Modern capitalist society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of capitalism and of its rule.It is enough to mention the commercial crises that by their periodical return put the existence of the entire capitalist society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity – the epidemic of over- production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of capitalist property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of capitalist society, endanger the existence of capitalist property. The conditions of capitalist society are too narrow to comprise the wealth created by them. And how does capitalism get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.

[doodle]

With regards to our unemployment issues and robot automatization discussions, Marx offers up this:

The lower strata of the middle class – the small tradespeople, shopkeepers, and retired tradesmen generally, the handicraftsmen and peasants – all these sink gradually into the working class partly because their diminutive capital does not suffice for the scale on which Modern Industry is carried on, and is swamped in the competition with the large capitalists, partly because their specialised skill is rendered worthless by new methods of production. Thus the workingman is recruited from all classes of the population.

Is this not what we see happen when a Walmart moves into town? Is this not the trend of capitalism and the massive wealth disparity that we see arising in our country?

Im not arguing for a communist utopia here, Im just trying to understand the development and evolution of a capitalist economy. Im trying to understand the way this system develops over time, not criticize it.

With regards to improving standards of living among the working class, how much of this is related to unsustainable expansion of debt? The average person in America over the last thirty years has taken on enormous debt to purchase the products that society creates. In other words, they are in a double bind. Their job within the capitalist system depends on further spending which they seemingly can only accomplish by taking on greater and greater amounts of debt. To cut back on debt is to eliminate their job. To cut back on work, is to diminish their purchasing power.

Something just seems broken to me in all of this.

[doodle]

You are horrified at our intending to do away with private property. But in your existing society, private property is already done away with for nine-tenths of the population; its existence for the few is solely due to its non-existence in the hands of those nine-tenths. You reproach us, therefore, with intending to do away with a form of property, the necessary condition for whose existence is the non-existence of any property for the immense majority of society.

This seems very close to actual conditions, no? To me, when I read Marx, I see our society being described as if he were writing today.


• The richest 20 percent of Americans hold 84 percent of the nation’s wealth, while the bottom 40 percent have less than 1 percent.

• The top 1 percent have a bigger slice of the pie (40 percent) than nine of out 10 Americans believe the top 20 percent should have.

• While the top 1 percent command 40 percent of the wealth, the bottom 80 percent have a measly 7 percent.

• The top 1 percent “own half of the country’s stocks, bonds and mutual funds. The bottom 50 percent of Americans own only half a percent of these investments.”?

• “The average worker needs to work more than a month to earn what the CEO makes in one hour.”?