The Role of Productivity in the Economy’s Problems

According to an economist on Bill Maher’s show, economists look at finance, labor, and productivity. I haven’t directly discussed that last, although it’s a part of our economic problem.
Productivity gains have been a part of our economy for centuries, but they really took off in the period of the world wars. Here, and also in other countries, productivity was seen as a weapon to win the wars, and every part of the economy got a boost.
Meantime, labor came to be in short supply because so many men went into the armed services. Even with this lack, even with less capital available for development (government capital was also being siphoned off to buy weapons and pay troops), productivity boomed. I googled a history of shipbuilding during the war years and found this: “In the decade prior to 1940, America’s shipyards launched only 23 ships. In the five years after 1940, American shipyards launched 4,600 ships. San Francisco Bay Area shipbuilders produced almost 45 percent of all the cargo shipping tonnage and 20 percent of warship tonnage built in the entire country during World War II. The war lasted 1,365 days. In that span of time Bay Area shipyards built 1,400 vessels–a ship a day, on average.” Auto manufacturers made airplanes as well as trucks, typewriter manufacturing turned part of their effort to making weapons, and all of them made more in a shorter time and used less labor in the process.
Since that time, innovation has continued. Farmers use machines instead of farmhands; miners use machines instead of miners, and this includes not only deep-shaft mining (boring machines, etc) but also the huge machines that scoop up multiple tons in one pass and load it on huge trucks that require one driver rather than a hundred to move the equivalent amount of ore.
John Henry lost eventually. So did all the other laborers.
With productivity gains, education became more important. Unskilled workers had no place in most industries. And labor became excess. We no longer need large numbers of workers, but I can only provide an estimate: perhaps 60% of our workforce is needed to provide everything we need in goods and services. I tried to google this and found nothing. So I’ll go with my estimate; if you have better data, please share it.
So by my figures, 4 of every 10 workers aren’t needed in the domestic economy. They must provide goods for export, or act as a drag on the economy.
But we aren’t really keeping up with exports when they are compared with imports. Free trade agreements are more harmful than helpful. I’ve written about this before so I won’t rehash it here.
We import; manufactured goods, but also commodities. We have a potentially strong manufacturing sector, but we don’t make full use of it. Our manufactures come from places where labor is perhaps 1/10th the cost of labor here. Only through political control, e.g. tariffs and taxes, can we address this. But the business sector favors the higher profits from importing as compared to manufacturing, and they have extraordinary clout in politics. Politicians refuse to act. For some, influence from management elites combines with simple lack of understanding of the economy.
So: productivity gains reduced the demand for domestic labor, failure of the export process made that labor valueless, and government borrowing propped the economy up so that this was hidden for too long. And now a failure of our education system, coupled with a failure of our politics, has rendered an once-addressable problem critical.
And no one in government appears to understand the problem, much less be involved in devising a solution.


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