Obama Does Not Care About Reducing Unemployment
As I’ve repeatedly documented, Obama is not concerned with reducing unemployment. Indeed, despite his faux populism, Obama’s policies increase unemployment. D.C. is like a separate country, and the politicians are increasing jobs … but only for their wealthy buddies, and not the average American.
Indeed, former Secretary of Labor Robert Reich says that Obama is simply trying to distract us, so we forget how grim the unemployment situation is. And, no, it is not bad advice from his advisers, but Obama himself which has made the calls on ignoring unemployment.
Americans are getting hammered, and so it is no surprise that unemployment is America’s number one concern.
Obama Considers Unemployment to Be a Good Thing
A new book by Ron Suskind shows that Obama thinks high levels of unemployment show that :
A few weeks later the economic team was back to the discussion of stimulus versus deficit reduction. The October jobless figures, out in mid-November, were now clear: unemployment had jumped to 10.2 percent.
Both [Director of the National Economic Council Larry Summers and chair of the Council of Economic Advisers Christina Romer] were, in fact, were concerned by something the president had said in a morning briefing: that he thought the high unemployment was due to productivity gains in the economy. Summers and Romer were startled.
“What was driving unemployment was clearly deficient aggregate demand,” Romer said, “We wondered where this could have been coming from. We both tried to convince him otherwise. He wouldn’t budge.”
Summers had been focused intently on how to spur demand, and on what might drive a meaningful recovery. Since the summer, in meeting after meeting, he’d ticked off the possible candidates, and then dismissed them – “it won’t be construction, it won’t be exports, it won’t be the consumer.” But without a rise in demand, in Summers’s view, nothing else would work.
But productivity? The implications were significant. If Obama felt that 10 percent unemployment was the product of sound, productivity-driven decisions by American business, then short-term government measures to spur hiring were not only futile but unwise.
The two economists strained their shared memory of dozens of meetings: had they said something he’d misconstrued? At one point, Summers had mentioned how Keynes once wrote in a 1938 letter that the labor movement depressed productivity, and maybe Obama saw that the disruptions in the economy from the Great Panic gave employers an opportunity – an excuse, actually – to harvest latent productivity gains.
After a month, frustration turned to resignation. “The president seems to have developed his own view,” Romer said.
Obama is wrong. Economists Lawrence Mishel, John Miller, Jeannette Wicks-Lim, Mike Konzcal, and many others have shown that unemployment is not a good sign, and that this episode of joblessness is not caused by increased productivity.
As the Wall Street Journal reported last year:
[In] a new paper[,] Steven Davis of Chicago Booth School of Business, R. Jason Faberman of the Philadelphia Fed and John Haltiwanger of the University of Maryland — take a deep dive into Labor Department data and come up with an estimate of what they call “recruiting intensity,” a measure of employers’ vacancy-filling efforts including advertising, screening and wage offers.
Their finding: Employers haven’t been trying as hard as they usually do.
Depressing as it might seem, the finding is in some ways encouraging. It suggests that the trouble with hiring might be more a “cyclical” function of low business confidence than a chronic, “structural” ailment that will last for years to come.
As Business Insider notes, survey after survey shows that lack of demand is the main problem businesses face, and the main reason they aren’t hiring.
The rich may love unemployment, but small businesses don’t. Grim conditions for the average American means that small businesses are slowing down, rather than hiring.
There is nothing wrong with productivity driven unemployment, if you reduce hours of work in response.
What about income? If every employer reduce work hours and income too much, guess what? We’re still in the same predicament aren’t we?
The ONLY way a reduction in working hours can work is if prices go down too. But, oh surprise! prices like college tuition, banking fees, medical services, insurance and pretty much everything in between is NOT dropping. Moreover, since Wall Street is allowed to speculate on food commodities, food increases too.
If we don’t break apart the financialization of the economy, prepare to live through the second Dark Ages.
…and share productivity gains with labor.
Pardon me, but Yves has trained me to be quite suspicious of economists – and the neo-liberal crowd in the White House, especially so. So, are we to now believe Christina Romer and Larry Summers simply because they present a line that fits the prevailing image of Obama?
The truth may be quite a bit more nuanced than this piece suggests. Obama would have a terrible time getting a sizable stimulus package through Congress, particularly the House. Thus, even though he has proposed a new jobs bill, he may be adopting this productivity line to lessen the pain of failure. That is, he is planning on losing and wishes to paint a happy face on that loss.
Or, he really is a tool of Wall Street. I think I know what Matt Stoller would say.
This is from the book, and the above passages are on events of November 2009. The Democrats controlled both houses. You are thinking that it is about events happening right now.
Lack of AD was Keynes’ argument. Keynes is still the man of the hour when it comes to depression era economics, and Washington is making the same argument here.
Uh, riiiiight…..so 2 billion formerly sequestered laborers join the global market at very low wage rates, in regions that offer arbitrage opportunities in environmental, regulatory, and taxation dimensions, but it’s either “AD or productivity”.
I’ll lend a clue: consumers have to also be employed to
grow the economy….increasingly, we have first world unemployed (formely debt-powered) consumers and third world employed labor and manufacturing, and then we have a global 1%, who apparently haven’t noticed the flaw in the machine
yet. Or maybe they have and don’t care…there is a name for
the sort who doesn’t care.
stemming from lack of AD is the fact that we have unemployed workers…have you even heard of Keynes, pal? At least know what i’m saying before you respond.
Obama wasn’t wrong, he was (is?) right. Technology has been killing jobs since the 90s. We are experiencing a sea change brought on by small powerful computers, the internet, and containerized shipping, all developed over the last twenty years. The “phone” I carry around in my pocket is more powerful than a room full of processors and drives in the 80s. The post office is essentially bankrupt because of this. That’s hundreds of thousands of jobs. Borders? They killed thousands and thousands of book stores, and now they are dead. Big box stores? You know the drill, although Best Buy has maybe a few more years before the virtual world sends a spike through it’s heart. In my business, a product can be made in India for one third the total cost here, and communication is a breeze using broadband throughout the process. With only one person directing from here, instead of the hundreds out who were in this business as late as 1995.
All the blah blah blah I’ve heard about Keynes and tax breaks and QEs and stimulus this and stimulus that, and nobody has the cajones to talk about this. I’m glad to see our president is at least aware of it. What he can do about it, I don’t have a clue.
“Technology has been killing jobs since the 90s.”
Technology has been killing jobs since the Industrial Revolution started in the 18th century.
“We are experiencing a sea change brought on by …”
Automated looms and spinning machines, blast furnaces, steam engines, railroads, steamships, the telegraph, the electric light, radio, gramophones.
Most amazingly of all this job destruction only really showed itself at the same time as a financial panic a few years ago. What a coincidence!
No, you weren’t paying attention. This job destruction has been occuring since the early ninties, when powerful computing became affordable to most and worldwide shipping modernized. The most recent violent episode of UE was the result of the millions of jobs lost in the illusory housing bubble.
I have been working with “powerful computers” since 1962, and at every single step along the way, I’ve been told about how they were all going to put us out of a job. It’s never happened. More importantly, it will never happen because it presumes that current production meets current desires; that there is no more work left that could be done because everyone has everything they want.
So tell me, Mike, do you have everything you want?
“Technology has been killing jobs since the Industrial Revolution started in the 18th century.”
After re-reading that statement, I find it absurd. The Industrial revolution created millions of jobs. Where and when was the destruction of labor? Give me some examples.
“Where and when was the destruction of labor?”
Automated looms and spinning machines put hand spinners and weavers out of work. What do you think the Luddites were upset about?
Blast furnaces put charcoal burners and the makers of bloom iron out of work.
Steam engines reduced the need for hand and draft animal work, and hence the jobs of those raising and caring for the draft animals.
Railroads also reduced the need for draft animals, teamsters, canal barges, etc.
Steamships greatly _reduced_ the number of sailors needed and also lead to the “first great age of globalization” (ended only by WWI).
The telegraph put the Pony Express and numerous other fast courier services out of business.
The electric light put candle makers out of work.
Gramophones reduced the demand for live musical performances, and hence musicians.
Evolution is not a one time event. Rather a continual process due to the advancements of the collective; society–civilization. To label productivity as the culprit (Mike postulates)is to deflect the truth of the majority’s (collective) financial misery. A small group of individuals, ahem, “the Gates of the World,” are reaping the financial largess of the collective’s knowledge and societal infrastructure. Rather than an equitable redistribution of societal advancements, The Gate Hoarders claim technological evolution was due to personal innovation. Even in 1786, Thomas Paine’s Agrarian Essay was making this argument. Could the Bill Gates, Steve Jobs, Zuckerberg, Buffetts, and the Derivative Financier Emperors have achieved their “personal” success without the collective? No.
The “pull yourself up by the bootstraps” is a myth. We are lifted upon the shoulders of generational evolution. In other words, Bill Gates would have been another guy climbing the coconut tree for supper without the collective’s evolutionary/technology platform. The Gates do not innovate outside the sphere of the collective as they would have us believe. Redistribution of technological wealth into the “pot”–labor, is necessary to rebalance the scales.
Remember when “we” were told technology would provide more leisure hours! For the many it’s called unemployment. For the few it’s societal wealth hoarded.
But Alex, at the same time, new industries and jobs were created.
Take the Pony Express example. Think of the number of workers necessary to build the rail lines, the steam and diesel locomotives, additional steel production, the increased commerce and jobs created from the ability of manufactures to reach new markets.
New technologies, products and innovations will arise. Values will change. As traditional energy products become depleted, practically every home in America might be torn down, materials salvaged, and new energy efficient living space created given advances in energy and material science technologies.
I recently read an article about a team of engineers that developed a machine that flies like a bird (flapping wings controlled programmatically). It’s just a prototype, but with a little imagination one could see how somewhere in the not to distant future, people will have safe “machine birds” to transport them to and from their homes, replacing “horseless carriages” Think of the jobs industries like these will create. We are only limited by our limited imaginations.
I don’t want to sound too “Star Treky”, but there is an entire universe out there waiting to be explored.
And lastly, China seems to have created millions of new jobs over the last several decades, many of them with state of the art, high tech production facilities. How do we reconcile that?
rps: A small group of individuals … are reaping the financial largess of the collective’s knowledge and societal infrastructure. Rather than an equitable redistribution of societal advancements.
Very true. How else is it that an increase in productivity could leave so many worse off? Unemployment is a poor, and horribly inequitable, way to deal with productivity improvements.
While no system will ever be perfect, a common ideology nowadays is that it’s somehow “right and proper”, or worse “natural and unavoidable”, that a handful of those who manage to corner some of the financial advantages of productivity improvements get almost all the benefits. And as you point out, these are often not even the people who actually develop these technological improvements.
It’s a mentality every bit as absurd as the medieval mentality that it was “right and proper” or “natural and unavoidable” that the lord of the manor should enjoy so many advantages over his serfs.
avgJohn: at the same time, new industries and jobs were created
Heartily agreed. My point in listing the job destruction of the Industrial Revolution was just to counter Mike M’s idea that it didn’t happen then, but only with the computer improvements of the 1990’s. I think he lacks historical perspective.
The reference to Paine’s Agrarian Justice essay, Paine argues for a redistribution of wealth.
Paine states, “Separate an individual from society, and give him an island or a continent to possess, and he cannot acquire personal property. He cannot be rich. So inseparably are the means connected with the end, in all cases, that where the former do not exist the latter cannot be obtained. All accumulation, therefore, of personal property, beyond what a man’s own hands produce, is derived to him by living in society; and he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came.”
alex, “a common ideology nowadays is that it’s somehow “right and proper”, or worse “natural and unavoidable”
It’s called Manifest Destiny, and that is the actionable blueprint deemed necessary in the name of Progress. MD is the perpetuation of the ideological “winners” and “losers” ingrained in the US’s mindset. Are marginal technological advancements worthwhile at the exponential rate of wars, destruction, human annihilation, and resource plundering? All guised under the flag bearing mantra of democracy and freedom.
So the question becomes, when is enough, enough? When will we move out of obscene materialism as the sole gratification, and move toward human development? Materialism as a tool to enhance the physical life has overreached the reason of existence and became the primer of life. Outward consumption with a life of inward starvation. We hunger for the Renaissance and Enlightenment, and are told to go shop.
Walmart, giant HDTV’s, and Hollywood are the empty calories of our existence.
“historical perspective”?? Please. You point to little bumps in the road during a period of massive employment gains and urbanization. And, I’m not saying that all of this technology will not create new world of employment, eventually. But, that may take a generation or two (I refer you back to our late 19th century). And, of course, we all know where we all end up, eventually.
Mike M: You point to little bumps in the road …
You think of them as little bumps in the road because you didn’t live through them. To the people who did the elimination of cottage industry and craftsmen by factories was a radical change, and society didn’t do a great job of handling it.
rps: The reference to Paine’s Agrarian Justice essay …
So one of the heroes of the Revolutionary Era was a commie :) Who knew. Maybe they better stop teaching about that guy in school .. he was so anti-American.
“You think of them as little bumps in the road because you didn’t live through them. To the people who did the elimination of cottage industry and craftsmen by factories was a radical change, and society didn’t do a great job of handling it.”
What world do you live in? Or, what perfect world do you want to live in? As i said before, you (and others commenting here) make me think of the stern men in beards who brought down the czar and created a nightmare for the next century, or, worse, the horrible little men who marched into Phnom Penh and shooed everyone out to their death or near death in the rice paddies. Do yo actually think you can engineer a form of capitalism that would be fair and just? If not, what is your alternative?
Mike M: you (and others commenting here) make me think of the stern men in beards who brought down the czar
The last refuge of scoundrels is to yell commie (terrorist, anarchist, whatever is in vogue).
Mike M: Do yo actually think you can engineer a form of capitalism that would be fair and just?
What’s your point, that if you can’t make something perfect then there’s no point in making it better? No, I can’t think of a way to make capitalism fair and just, but I can think of ways to make it more fair and just than what we have now. For historical perspective, that’s exactly what people in the late 19th and early 20th centuries did, instead of treating the status quo as some sort of natural and unalterable state.
There is truthiness in what you say Mike M, alas, not much truth. Yes, productivity reduces the number of people it takes to do a set unit of some types of work. And yet, despite how cheap it is to make crap in India and China, somehow countries like Germany are able to support a highly-productive, high-paid, high-skill manufacturing workforce and have low unemployment. How is the magic done? And that is just one point — the main point here is that in the USA, 70% of the economy is domestic consumption. That means that if Americans are consuming at a high rate (a questionable goal in any event but we won’t destroy capitalism all at once here) then there would be more demand for products and services, and businesses would hire. That is not happening for reasons all too familiar to those who regularly read this blog. Economies always change, and yes some jobs come and others go, but the real reason for our jobs going is mainly the industrial policy of our government — which is to encourage shipping jobs to the third world (oh sorry I mean “emerging markets”) in addition to the deflationary effects of the criminally-conspired housing bubble popping, the resulting local, state and federal government layoffs, the lack of infrastructure upkeep spending, not to mention modernization of energy, public transport, etc., etc. The problem with jobs is a massive lack of investment in both the public and private sector, because stupid people like Obama think we “can’t compete” anyhow.
There, I said it, its true — Obama is not very bright. Oh, he’s like a W for the left — he knows how to play the part of the “intelligent thoughtful educated man”, and has a strangely compelling charisma (at least for “progressives”), just like W did for the right (and also like W a concomitant ability to make the “other side” spew hate and disgust). I see my rant has gone off course, but any discussion that centers around Obama has the tendency to inevitably meander back to his shear incompetence.
Truly, Obama is Making W look more like HW every day.-
-Not that Poppy was particularly brilliant but he at least knew what “voodoo economics” looked like when he saw it, even if he became a voodoo high-shaman anyway.
“And yet, despite how cheap it is to make crap in India and China, somehow countries like Germany are able to support a highly-productive, high-paid, high-skill manufacturing workforce and have low unemployment.”
I live and work in Germany, and I can assure you the story is not that simple. There is no minimum wage, far too much low-wage work, wage rises are hard to come by, and unemployment is stubbornly high, particularly in the old east.
The broader point about technological unemployment, a phenomenon I believe lies behind the flat wages of industrialized countries these last 30 or so years, is that we don’t need to consume ever more stuff, nor can we. Human productive capacity per man hour has risen enormously over the last century or so, and now that computers and narrow AI are automating even soft skills, the range of jobs left for exclusively human hand is falling precipitously. On top of that, money incentives for the creative and cooperative types of work left to humans has negative effects on humans. In short, we need a new way of organizing ourselves in the economic sphere.
This trend is, as Alex points out, of course very old (it goes back to the advent of farming actually), and it is not going to stop. Why should it? Look at labour participation rates falling worldwide even alongside GDP growth and ever improving productivity. I read recently that we are only at about 40% industrial productive capacity, but unless you’re talking about developing countries, why should we, particularly where population growth has slowed or even gone into reverse, consume more and more stuff per capita? What for? Why should we work harder and harder? Where is it written that the purpose of life is to be enslaved to a pointless rat race of cyclical consumption of so-called luxuries like MP3 players, smart phones, laptops, etc? Change is the only constant. And we live on a planet of finite resources. That rules out infinite growth.
Why not shrink the economy, shrink the sphere of production-for-exchange, as gently or aggressively as required, initiate a social dividend, enact a debt jubilee, full power ahead with renewable energies and sensibly designed and built cities that deal with energy consumption and transportation intelligently, enact deep monetary reform, deep educational reform, and so on? It’s not like the current system is delivering prosperity or stability, or happiness. It’s not as if we are obliged to keep doing things as we ‘always’ (these last few decades) have done. It’s not as if constant lusting after material ‘wealth’ is a genetic and uncontrollable impulse, or even one that delivers happiness. Technological unemployment is, at least in potential, an opportunity to embrace. It just requires rethinking almost everything we do in the socioeconomic domain to turn it to our advantage.
“On top of that, money incentives for the creative and cooperative types of work left to humans have negative effects on performance.”
NO. EDIT. BUTTON. Proofread before posting!
well said toby, but what you are asking for is a radical new economic and social thinking which implies a questionning of the current economic system known under the term of capitalism. And at this point you will realize that there still is a very broad coalition firmly willing to do anything to preserve this very existing system, from the right as well from the left. The dichotomy of the political mainstream is nothing but an illusion as they essentially share the same ideological framework
btw I live myself in Germany, and know what you are talking about, the myths about Germany’s progressive labour and social safety net
a very good piece by Bill Mitchell
Yeah it’s an unprecedented challenge, but I think it’s the only way forward from here. Realizing the kinds of changes our situation demands, including ending growth, will probably only begin after catastrophic collapse, at which point the cacophony of voices will be so discordant there’s no telling which sort of order will emerge from the mess.
Thanks for the link, I’ll take a look, but MMT, being pro-growth and pro full employment (come what may, it seems), isn’t really my thing. The theory has bags of potential though, it just seems to me that its advocates don’t follow through deeply enough on their own logic.
Germans often try to deflate American conceptions by pointing to parallels with the decline of the middle class and war on organized labor in the U.S., but they miss the bigger picture. Yes, Germany has moved markedly to the right, but the fact remains: manufacturing is a much larger segment of the economy than the U.S. and employs far more workers as a fraction of total employment. Moreover, Germany exports hi-tech manufactures that the U.S. has often lost the technology and skill base to produce.
Unfortunately your dream of a rational economy is based upon the mistaken idea that humans are collectively more intelligent than sheep. I see no evidence in history for that assumption. Humans are individually capable of beauty and genius, but they seem incapable of forming non-destructive social organizations much larger than the tribal village level.
History doesn’t repeat, it merely rhymes. However, I agree with you that the kinds of changes humanity is tasked with introducing will not be undertaken by the large national and multi-national institutions that are crushing our future as I write. Profound change begins at the level of the ‘individual’ and can affect things and alter our socioeconomics at the local level. I suspect larger than village tribe is doable, after which communication technologies can assist in a loose federation of local polities. That or our extinction.
What humans are capable of in groups, large or small, is not wired into our genes, at least, I don’t think so. Everyone I know has empathy for the plight of strangers and foreigners. Most humans want to help those suffering and would do more if they could. What’s lacking is the economics which allows this to flourish. We are suffering from a failure of collective imagination, not a congenital inability to live in any other way than ‘I’m all right, Jack’. Empathy has been evolving in the human species for thousands of years, co-evolving with culture and language. Change is happening. We are not still in caves, we are not still wandering the plains. History has not ended.
One other thing. You say humans are individually capable of beauty. This is not true. Totally isolated a human is capable of nothing. It is only in society and culture that each of us has a chance of creating beauty. Humans raised by dogs and wolves prove this; they are unsocializable and incapable of language if rescued at an age much past 8 years or so, maybe younger. Babies kept untouched in incubation pods have a high chance of dying. I know of a story of a king determined to find out what the first human language was. He acquired new borns from his villagers and raised them in his castle with nurses told never to speak a word to them. The nurses went too far and did not even show the children any affection, fearful they would talk if they did. The children were otherwise well looked after; clean, well-fed, well dressed, good medical care, etc. Apparently, all the children died by about age 10 or 11.
As I see it, this idea of the ‘potent individual’ is due a radical change. We are in fact embedded in our environment so completely, are so shaped and formed by it, including language, it is literally impossible to say what we are, or what humanity is, absent language and culture. As culture and language change, so do we. We are at the zenith of (or nadir, take your pick) selfishness and competition as guiding principles of ‘how life works.’ But these are just ideas we have developed. As they change, the way we organize and understand ourselves will change too.
I’d ask that people also consider that the productivity gains of the past, of the Industrial Revolution and since, were consumed by people who hadn’t had much to start out with: goods were provided to people who had dwelt in hovels, sod ‘caves’ and shacks. No over-production elsewhere, either.
Now, conveniently forgetting the impoverished of our own countries, “those who gots gots lots”.
The homes that impressed me in my youth are now seen as mere modest starters, or ‘inner-city teardowns: ‘snouthouses’ line the roads of new communities. How many oversized rooms do childless families count as enough?
How many other goods can be stuffed into our homes?
Do we need the periodic destruction of war, or other plans for obsolescence, commented upon by Blair (Orwell) in 1984?
Creating and sharing the wealth amongst more and more people result in other problems, especially in a world that contains 7,000,000+ people.
My guess is that the strategy that Obama appears to support involves reducing housing prices over an extended period of time with the expectation that wages can then be reduced afterwards. Huge increases in public service pay were based on the cost of living. Housing is the biggest portion of cost of living. With lower housing prices, wages can cycle down to those of India, Mexico, etc. without any diminished quality of life..Makes sense to me? Why do I not feel comfortable? Hmmm. did we get to vote on being subject to a global corporatocracy? Not that I recall…
“the strategy that Obama appears to support involves reducing housing prices over an extended period of time”
Really? How so? I mean, if he really wanted cheaper housing, he’d call off Ben and his mortgage buying and REALLY start bashing Fannie and Freddie to eliminate that support. I know HAMP was wimpy as hell, but, he seems to be neutral on the subject. That health care thing sorta drained his resolve, I guess.
Two notable things about this version of events from Suskind:
1. Obama has his own ideas…about “productivity gains”? Seriously? WTF?
2. Less surprising is the fact that the president’s handlers seem as shocked as I am to learn that Obama has his own ideas.
You do the math, but sumthin don’t add up.
The problem is that he isn’t looking at it from any sort of left-of-center perspective. That there are unemployed people is of no consequence to Obama, because the policy response is decidedly left-of-center.
Does it matter at all if his original ideas are quakery? How about if his quack diagnoses continues harming millions of people?
Did he take Henry Manne’s economics course, I wonder?
— Harvard — Columbia — maybe he taught it!
Agree. Suskind’s flair for a story has the whiff of PR but not for Obama. For Larry Summers. This stuff tries to make Summers look like he offered Obama one suggestion after another to address unemployment. It doesn’t say much about Romer who resigned in total frustration. To make Summers look like the good guy who was rebuffed at every turn by the self-confident Obama, making his own economic decisions, ranks right up there with the story of the immaculate conception. Summers is such a prince.
There are lots of things we could do to fix this shit. We could give the Pentagon a new mandate: clean up all the toxic sludge created by remission and ignorance during the last 50 years all over the world. Use American made equipment. Bring most of the soldliers home to work on it right here. Pay them well. If the Navy is really looking to be the white knight of the new world order then it should turn its ships into freighters and deliver food-American grown; it should refit its ships to clean up the oceans from toxics and plastics; it should refit its ships to be state of the art hospitals (equipment purchased from US manufacturers) and cruise the world doing medical work, not sneaky warmongering.
The simple fact that nobody in the “Obama Administration” has come up with any solutions whatsoever leads me to one conclusion: they have an agenda.
aah, work is overrated. Just ask Obama. He would know.
Just to be clear, the idea of Barack “Profits and Earnings Ratios” Obama trying to school Larry Summers on “productivity gains” is just astonishing.
But if that’s what the little microphone implanted in his ear was telling him, what’s Larry gonna do?
“Both were concerned by something the president had said in a morning briefing: that he thought the high unemployment was due to productivity gains in the economy. Summers and Romer were startled.”
Well, the way I think this works is, when Obama knocks off at 10am, and goes out to shoot hoops with Timmy and the Treasury Boyz from Goldman Sachs, it’s because he just had a really productive day.
Remember, Obama is importing record numbers of foreign workers – over 100,000 a month, not counting their families. This is clearly a policy designed to keep unemployment high and wages low. What could be more obvious?
Remember: the issue is not ‘immigrants’. The issue is the RATE at which we import ADDITIONAL foreign nationals. A business or a University that encounters hard times cuts down on hiring – why not moderate population growth until things get better? Unless of course you don’t want them to get better.
Oh, and please, the notion that unemployed foreign nationals magically create jobs our of thin air while unemployed US citizens and permanent residents cannot is just too absurd to mention. If importing 100,000 foreigners creates 200,000 jobs, well, where are the jobs?
I mean, just because Obama just had a really productive day, doesn’t mean he’s not still *in demand.* The smack still be callin’ Bam, Timmy, and the Boyz back to the oval office desk when the game is done.
Uh, Yves, could you ban this degenerate? This is disgusting.
What’s the matter? The perverse mingling of diverse Street cultures in the People’s House is not to your liking?
“So, are we to now believe Christina Romer and Larry Summers simply because they present a line that fits the prevailing image of Obama?”
Oh, h@ll no. I know where he gets his stuff.
The next real and rational idea Obama has will be number one! What do folks expect?
Recall Obama thinks ATM machines cause unemployment for bank tellers!
After a month, frustration turned to resignation. “The president seems to have developed his own view,” Romer said.
Actually, Barry is using a dismissal that’s common among cornucopians, those every hopeful faith-based snake oil salesmen who do the “best of all possible worlds” act. Resources appear out of nowhere, all transactions are frictionless, and the march of progress makes us all young, pretty, and well spoken upper middle class office workers. Technology is the answer to everything. Think of the phrase “assumption of abundance”.
It’s very much the right wing thing, since it allows a charitable indifference to any and all suffering, especially the suffering of those who work for a living. There are overtones of Rand, designating “producers” and “consumers” by ignoring the interdependent nature of economies. Often, it’s religious, such as the heave-producing tour of trickle-down economics Paul Zane Pilzer’s God Wants You to be Rich: The theology of economics.
Is Barry a closet evangelical? Or is any stick good enough to beat us working class dogs?
Saltwater economists from Harvard and Berkley debate Chicago constitutional scholar. Confusion ensues.
ROFL well put.
In a very limited sense, President Obama is right in that productivity increases are measured by fewer inputs required for the production or delivery of a given service or product(fewer workers, less waste, less overhead). Improved technology and manufacturing processes do increase productivity.
But in the real world, productivity increases usually translate into delivering a manufactured product with additional enhanced features. Consider your coffee maker. I remember buying my first “Mr. Coffee” in the 80’s and I thought it a great product, an attractive addition to the kitchen. But it pales in comparison to the coffee maker I have today. Now my coffee maker has a digital clock, is programmable with the ability to automatically begin brewing, automatically shut down, self-cleaning, etc. I’m sure you get where I’m going with this. You can pick just about any product and almost without exception your looking at an item that has evolved with richer features but still delivers the same basic functionality, so much of the productivity gains translate to enhanced product features.
What’s missing from the Presidents’ logic is the impact of global labor arbitrage. Just for grins and giggles, google the history of Mr. Coffee. I think you will find it was a small successful company that manufactured it’s product line in Cleveland, O. Fast forward to today, and check out it’s parent company’s financial statements. Check out their gross profit on sales for 2010 on page 26. Now scroll down to page 48 and look at their federal income tax expense for the U.S. You can see from the notes on taxes, how much they have deferred. When do you think they are going to recognize that as an expense? Probably never. Now, as near as I can tell anyway, Mr. Coffee is made in S. America or China, probably both. Folks, this story has been repeated 1000’s of time over and over again over the last several decades and it’s destroyed our economy.
Geesh! You don’t have to be an economist with a PhD to figure this out!
Here’s a link, check it out yourself and forward it to President Obama if you get a chance.
If by productivity one means increasing profits with fewer workers, then yes, corporations have seen increased productivity. But this increase is largely with transnational corporations, rather than mid to small businesses.
Where these transnational corporations have hired its been largely overseas, which harbors the cheap labor to increase productivity.
We are constantly being reminded of the large cash amounts in corporate accounts, due in part to borrowing (sell corp. bonds), in part to said profit increases, and in part due to hoarding, or limited re-investment opportunities which typically leads to jobs increases.
During the green shoots period of not long ago Shays thesis prevailed, in which it was anticipated that increasing investments in production would result in job creation, thus leading to increased consumption. Of course that never materialized. Instead, the realization of profit comes about due to reducing overhead, meaning reducing the labor force. With global overproduction and over capacity, there is little need to increase production. So Shays thesis went out the door.
Now the prevailing argument is a kind of reverse of Shays thesis, that what is missing is a lack of consumption. The hope is to increase consumption by way of government stimulus/deficit increases is required to take up the slack of underconsumption. Increased consumption would then result in increased corporate investments to meet the increased need to produce to meet the increasing demand. However, with global over capacity there exists little need to increase that capacity to produce, thus no need for investing. Consequently, increasing consumption has its limits in creating jobs.
The difficulty is structural, its global, and increasing consumption to increase jobs simply doesn’t add up.
You’d be more correct if we ignored:
— the huge housing bubble and the financialization and corruption of our economy, and its resulting crash
— the replacement of rising wages with debt, which has now run its course and caused a huge drop in demand (people ain’t got no money for to buy shit with)
— US industrial policy to hollow out our manufacturing and technology sectors
— US importation of huge numbers of third-world laborers for tech jobs, etc.
— there’s more I’m forgetting right now.
I’ll take my chances and bet that we would be a hell of a lot better off right if all the above had not happened, and you can keep your “global over-capacity” theories (in other words your “there’s nothing to be done” theory, which sounds just like… Obama!!). We’ve come full circle :). I’m so happy now.
U.S. industrial capacity saved the world at least once. What happens if or when the same or similar crisis appears? National security is an idea that appeals to the least progressive among us, but there is no one who will say that we are endangering the country as we ship jobs abroad. Romney can’t be any worse than Obama.
Romney can’t be any worse than Obama.
Heard in the UK, every regime change:
“Well, Wilson can’t be any worse than Hume.”
“Well, Heath can’t be any worse than Wilson.”
“Well, Wilson can’t be any worse than Heath.” (???!)
“Well, Thatcher can’t be any worse than Callaghan.”
“Well, Blair can’t be any worse than Major.”
“Well, Cameron can’t be any worse than Brown.”
Democracy as she is spoken.
Neoliberalism is hardly monolithic. Neither is kleptocracy. A bunch of kleptocratic, corporatist neoliberals squabbling among themselves over jobs is comical. It’s a great reason why no one should take Suskind’s book at all seriously.
9% unemployment and 18% disemployment depress wages. What’s not to like from their point of view? Anti-labor for employers and anti-inflationary according to the Fed dogma of the last 35 years.
All Obama’s jobs talk now does is give an opportunity to the Obamabots to come out and try to sell this tired, pathetic bilge.
The original stimulus was for 2 years, a third of the size needed. It was 40% tax cuts when it should have been 90-100% spending. We actually have seen a couple of mini-stimuli since then. The current jobs bill is more bad design and too small. It is transparently a campaign gimmick.
Anyone who wastes their vote on a Democrat or a Republican is voting for more of what we have now. Just say no.
President Obama thinks unemployment is merely a consequence of productivity gains, I wonder where he got the idea?
It appears Obama’s position on unemployment is closer to Steven Ratter than his economists in the CEA. Here’s Rattner:
“Perversely, the nagging high jobless rate reflects two of the most promising attributes of the American economy: its flexibility and its productivity. Eliminating jobs – with all the wrenching human costs – raises productivity and, thereby, competitiveness.
Unusually, US productivity grew right through the recession; normally, companies can’t reduce costs fast enough to keep productivity from falling.
That kind of efficiency is perhaps our most precious economic asset. However tempting it may be, we need to resist tinkering with the labor market. Policy proposals aimed too directly at raising employment may well collaterally end up dragging on productivity.”
So who has benefited from the tremendous productivity gains in the last two years? Not workers. They are contributing more to economic output-but wages have declined considerably in the last two years.
High unemployment ensures that corporations capture nearly all of the productivity growth.
When one out of ten workers is unemployed–the other nine cannot get a raise.
Ratter’s policy advice against intervening in the labor market guarantees a continuation of the jobless, wageless recovery.
Did they ever discuss the lack of good jobs? The collapse of the Middle Class?
Of course, asking Summers to undo every shitty thing he’s done for the last twenty years that wrecked the middle class is never going to happen.
And fixing Wall St?
Corporations are firing employees. The money they “save” on not having to pay as many workers is what 0 is calling “productivity”.What a mighty, gleaming engine of economic development. 0bmama is its ideal president
The big drain on jobs has been the availability of cheap labor overseas. We have three more free trade agreements awaiting Congressional approval, with Korea, Colombia, and Panama. Colombia is known for its oppressive labor policies and the risk to life even taken by those who try to stand up for improved conditions. China is now itself beginning to lose jobs to cheaper labor in smaller Asian economies. Officials in the Chinese economy have forbidden US companies to cut their workforces there.
Why can the Chinese make US corporations give THEIR citizens jobs but our government sits by idly while they ship them off for our own citizens?
If work was all that great, the rich would have grabbed it all along time ago. Haitian proverb
I like it.
There’s an old Yiddish proverb that expresses a very similar sentiment: “If the rich could hire other people to die for them, the poor could make a wonderful living.”
Thanks for posting that Mark, it’s a keeper.
I kinda agree with Obama on the productivity thing.
Consider war. During WWII, if you include WACs and nurses and other non-essential mercenary personnel, we needed roughly 14 million low paid warriors, and warrior helpers, to win just one single war.
Today, we’re fightin’ six wars, simultaneously, and we need what? 3.8 million? 4.4 million? Whatever, (low paid) warriors, warrior helpers, and (HIGHLY PAID) mercs, to win — easily!! — six wars at the same time.*
That’s a productivity gain where I come from — a big one. Now I’m not good at math, I’m an American, but I’m guessing, if you added things up, you’d find we are several thousand percent more productive in our war fighting capacity than we were 70 years ago.
So in conclusion, I conclude, this unbelievable war fighting productivity gain is costing us millions of (low paid) jobs.
* We are easily winning all six, aren’t we?
There is a fundamental thing that confidence can’t fix….much more difficult lending standards for small businesses even if they wanted to expand. The other is the lower credit scores of millions of people due to job loss etc…….
Confidence is hard to fabricate when the results of the past few years are full of examples as to why there should not have been confidence. The growth of the economy relies on banks willing to lend money quite liberally. Regardless of what everyone says about banks need tighter standards or that the crisis wouldn’t have happened if they would have had higher credit standards, which is BS anyway, but the past 50 years of growth would not have happened if the banks had the same standards they have now.
Lending Money is inherently risky. Trying to eliminate all of the risk by using credit scoring models and computers will stifle the economy.
The banks that have been bailed out over and over now are not lending like they have the past 50 years because they are holding us hostage trying to get a free pass on the mortgage fraud.
Our economy can’t grow if it is based on cash only or 30 percent down on all items.
WE don’t need Obama’s “get me re elected plans” we need the banks to take more lending risk without screwing the economy by creating this products that can not be parsed when a few foreclosures happened. If they could have been plucked out of the security the few foreclosures would have been contained and the recession would have been reasonable.
You can’t fake confidence of the entire nation and get them to start spending money or using their retirement fund to risk expansion and more hiring.
It all is based on the housing market. The banks failed to take the tarp money and clear their books so they could get back to lending, the regulators let the banks run wild with mbs and now the government does not have the stones to stand up and tell the banks to cut mortgage principals across the board or DEMAND that banks sell their underwater mortgages to investors for .25 on the dollar with the stipulation that they new buy will rewrite the loan at .5 or.7 % on the dollar. Create private banks solely for this purpose and make the TBTF banks write down the numbers and clear the books, and then clear the executives and boards and start over.
Interesting commentary Chris. A lot of what you talked about had me curious three months ago about the percentages of credit availability. What drove my interest was an article I saw from the Feds new blog that asked “Are Consumer Deleveraging?”
I sent out a survey out to the broad public asking them about how they are doing paying down debt, difficulty this year vs. prior years of obtaining credit and how likely they are now are for asking for credit versus those other years. I tabulated the survey results with the questions posed and posted the results for you to see here:
Do individuals want more credit Chis? The 42% or the respondants said that they are very unlikely to request credit next year. That is a big number bud compared to the other prior years (starting in 2007).
Disclosure: The survey was done for my own purpose and is not affiliated with any other corporate entity outside of my own.
Everything is interconnected. To believe that we can have some program to increase employment while we should deflate the credit bubble that was built over the last 25 years or so, is to believe in a fairy tale.
The adjustment is difficult and we only have the choice to do it fast or slow. Me, I am for an end with horror instead of horror without end.
Anticipating even worse times ahead, people should be encouraged to learn how to grow their own food. It’s hard work, believe me, but it will help get the lard out of the millions of Americans couch potatoes out there. And it sure beats starvation. Could be a kind of jobs program, too.
Summers and Romer throw Obama under the bus. We tried to give good advice, dang it, but the man just would not listen.
When I look at the DOW riding along at 11,282.87(fair value) how much of that is leverage( hyper inflated false stock value) What would the DOW look like if we took 20 times leverage divided into 11,282.87 gives us a base DOW reading of 00564.14 of course some people don’t use leverage and the government goes 40 times with its leverage. I may have gone about this wrong way but I think my answer is closer to the truth than that 11,282.87 figurer is.??? Wow we almost have a 600 DOW and a S&P of 6.00 . :)
We got a Penney stock market at best and they are playing us for the knobs that we are for the moment..
There is so much fantasy money in this market it really don’t matter what happens on the ground The DOW can still stand high with their leverage manipulation. The Dow can go to 2000000. and still leave people starving on the street with their phony markets.
Greece is out of money the Euro on the ropes and they say the Fed is talking Quantitative Easing. How much stimulus was made off the last round of QE loans the U.S. gave to the world for Jobs. Oh silly me that was just a big welfare package for Banks and the Market investors of the world and by golly they were able to report some record profits with all that Leverage, No Product Sales Needed,less over head to. Who the hell needs Jobs?
The Elite Class needs another infusion of QE welfare before they start bellyaching about taxes again. They got to keep up their end of the show ya know. They just don’t feel like they are getting a fair shake and They need Black market labor to dispose of a living wage for all but them selves.
PS: They (Globalist/ Centrist) want their money back + for Nothing AND tax Free in the USA.
Increased automation in the 18th and 19th century didn’t affect all areas of the economy, leaving some unaffected where people could get work and benefit from the availability of the cheaper products. The new factories also produced entirely new products, that had been unavailable before, so new demand and eventually new employment was created. And for those who still couldn’t find work, they could go to the United States, Canada, Brazil, Argentina, Australia etc. where the populations were low and there was plenty of land available. The development of these places also expanded the economy.
In short, automation during what is known as “the Industrial Revolution” was different from automation today in just about every way that mattered. Automation today affects most sectors of the economy, substitutes for the production of products that had been available anyway, and even mass produced, using the old labor intensive methods, and the non-Western world is sending its surplus workers to the Western world instead of the opposite. But Great Depression of the 1930s was also significantly different from today’s economy and what worked then won’t work now.
In other words, Obama is right, but that still leaves the problem of feeding, clothing, housing, and providing places in society for the people whose jobs have been eliminated, in many cases permanently.
Suskind says that Obama thinks……
What is this high school? You think we should believe what someone says another thinks? This is petty unsubstantiated gossip of the highest order. Like every other idiotic behind the scenes book put out.
I’m disappointed in the administration but this is just stupid.
One thing I omitted from my last post is that in the current situation, production of at least one fossil fuel, oil, is not expanding, has not expanded since 2005, and is not likely to expand.
The original industrial revolution was essentially made possible by increased exploitation of fossil fuels, and the 1930s Great Depression coincided with the discovery of the largest oil fields, in fact their exploitation may have been what ended it.
I think it is a mistake to approach the current crisis as the sort of resource misallocation problem that was behind past economic crisises. There is in fact a huge amount of resource allocation, but that just exacerbates (and may be caused by) the underlying problem of contracting resources.
But if more radical measures than the political system can tolerate turn out to be appropriate, the best thing Obama can do would be to do absolutely nothing on the grounds that anything politically feasible would make things worse. But if he realizes this its not something he would be able to explain to the likes of Summers and Romer.
I think this is exactly right. Even if this was BAU – business as usual – the ‘stablishment policies would just prime once more the gerbile wheels of debt for the next round of boom and bust. But this isn’t BAU anymore. Rare earths or accessible crude oil, the increasing tension between economies – and economic policies – predicated on quantitative “growth” of “consume more, excrete more” and stagnating – eventually decreasing – raw material access is obvious. Whether it is China’s near-monopoly or the 2008 oil speculation, these are short time erratic distortions possible only because supply increasingly falls short of demand, and the impact “disconsumption” by the poorest consumers is no longer sufficient to buffer the winners trying to take all.
In short, we are screwed the same way we were screwed in previous bubbles, recessions, depressions, but on top of that we are meta-screwed as even if we actually applied what we learned from Keynes et.al., plus rule of law, plus the requirements of any open society vis-a-vis multi-generational concentration of resources in the hands of inbred, anti-social wealth, it still would not be enough, because what might have worked 80 years ago when new oilfields were discovered is not going to work once Cantarell and Ghabar are in terminal decline.
I do disagree on Ed’s last paragraph. This is not 11-dimensional chess at the expense of his own re-election, it’s a vain man struggling to stake out an idea – any idea – he can call his own, cornucopian apocalypse-of-the-nerd worship included. I am not sure about Obama making W looking like HW, but Obama sure looks more like W every day.
The rich may love unemployment, but small businesses don’t. Grim conditions for the average American means that small businesses are slowing down, rather than hiring.
which is great from the point of view of big business, it raises the barriers to entry and keeps their small business competitors small.
This commentary I cut and pasted on Zerohedge should provide some insight. The net out on this topic is massive debt issuance masked the outsourcing of our productive base. Technological unemployment is a lagging indicator of a lack of productive investment and now highlight the malinvestment mentioned above.
“Your comment is 99% correct but you do not know that the U.N. has been sidelined completely have you? Did you think it was coincidence the Clintons are interested in taking Zoelicks job at the World Bank instead of being Secretary General of the U.N. like they were yapping about back in late 1990’s?
Not that I agree with any NWO that doesn’t include the actual PEOPLE, but the world actually would have had better representation under the U.N. vs. World Bank via BIS. Bankers make loans. They do not do any kind of fiscal policy.
This conversation is kind of irrelevant. The global financial system is flying apart before American/Chinese financeers have finished the Chinese peg. China becoming the reserve currency and America “losing it” is not a BUG. It is a FEATURE. It is for this reason Sr. Politicans and IB’s felt there was little risk in looting the Treasury these last few years. They were wrong.
The Bankers made a couple of mistakes with their grand plans for the Chinese peg. They did not factor variance in the accelerated rate of business. The second mistake is investor confidence in China and the cultures do not harmonize yet and need much more time (perhaps couple more decades). But all back-door arrangements are 2014 and 2015 which is now making it out in Mainstream News. Because of these mistakes the Chinese will be screwed, America is screwed, Europe is screwed, the trade wars have begun and where trade stops flowing, armies do. The only silver lining in all of this is that the worlds economic financial system will be rebuilt after WW3 and become a utility like Bitcoin is trying to do. The political system will be digital as well. Mankind may get 250-300 years out of Republics because they will be a bit more resiliant to attempted and misguided centralization. Natural cycles of centralzation and decentralization should not be so carelessly screwed with and nor should Bankers run the world. They make LOANS, they do not enjoy fiscal policy whatsoever.
As for Summers, I have mixed opinions. He fucked up, bad but I do know he did actually make many attempts to convince the President on proper revene generating ideas which would have helped labor. Perhaps little in the short run but better in the long run.”
I don’t know. That sounds a little dubious when you consider the tendency of Summers’ fellow illuminati–including Bernanke– to promote the skills deficit as the critical factor behind US unemployment, as per Lawrence Mishel in this March 2011 article:
Against which blame the victim account, Obama’s insistence that the US workforce is too productive could almost start to look like a progressive defense of American capabilities.
Most people naively believe productivity improvements are a good thing. Wrong! Productivity improvements in today’s corporatocracy does not mean doing MORE for less. Instead, it means skipping tests, inspections, documentation, etc (i.e., doing LESS for less) with the end result being more defective final products. Here’s hoping the airline industry is not on productivity improvement kick.
[Note: How did those productivity improvements at the big banks work out with their mortgage products?]
Obama has been a huge disappointment but I find it highly dubious Summer’s was the voice of reason.
“Indeed, former Secretary of Labor Robert Reich says that Obama is simply trying to distract us, so we forget how grim the unemployment situation is.”
My impression is he does not expect to be re-elected.
Convulsions, come election time?