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News & Analysis > All
News & analysis from Proletarian Internationalist Notes—news, reviews and analysis from a global perspective
Economic slowdown and productivity: where class struggle meets crisis
August 14, 2016
A few months ago, Forbes ran an article discussing slow economic growth that was somewhat interesting in emphasizing the distinct contributions of productivity growth and workforce size growth to the fundamental fact of growth.(1) “To increase GDP you have to actually produce more. That’s why it’s called gross domestic product,” the writer says seemingly to the economically illiterate. It is as if the idea one can’t have economic growth by just employing more American workers would come as a surprise to some. Productivity must remain high, but it isn’t guaranteed to be. The article also discusses demographic issues many ignore. No central bank or finance ministry in the world can force so-superior Amerikan workers to have more babies.
The United States has one of the highest GDPs per capita and per work-hour even among imperialist countries.(2) Because the United $tates is so big (the third-largest in the world and the most populous OECD country), that country as a unit thus seems amazingly productive to many. GDP per hour worked is a measure of productivity, but for those concerned with understanding international economic relations and their impact on global economy and politics, per-hour-worked GDP in the context of other countries’ per-hour GDP can indicate degree of international exploitation. In various ways, a country’s GDP growth is actually not a simple matter of producing more or less (in labor-time or physical terms) inside the country. An increase in international exploitation hiding theft in the prices of goods and services produced in the united $tates can result in GDP increase.
For many racists and chauvinists in the united $tates, u.$. workers are just inherently more productive, or their wages and productivity represent cultural/spiritual superiority or hard-won economic and political successes and norms that everyone in the world should defend and emulate. But it is apparent that u.$. productivity can decrease significantly while other countries’ productivity increases, and that the reasons involve structural issues.
U.$. productivity had decreased for three quarters in a row at the end of June. Bloomberg felt the need to title an article “US workers are pulling their weight.”(3) The article begins by noting how much of an issue the declining productivity has been for everyone, including presidential candidates. Productivity, it is argued, can actually decrease in good times and increase in bad times. “When bad times hit, employers lay off workers but keep production relatively steady – they do more with less, so productivity goes up. When the recovery comes, companies hire workers back, but still keep production relatively constant, so productivity falls.” The interesting thing about this is that the same such ideas can be seen as supporting either the notion that u.$. workers are exploited as is often said by supposed leftists – because of wages not keeping up with productivity (a concern that isn’t too controversial for Bloomberg evidently) etc. – or the idea that the united $tates exploits other countries because so-called value-added can remain constant even when there are fewer u.$. workers doing anything.
Obscuring international exploitation, many assume (misleadingly in both the First and Third World contexts) that increases in what’s called labor productivity are due to workers’ working harder or more efficiently. Having made economic growth their priority, Third World planners and policymakers then proceed with a distorted view omitting or understating the role of trade and hidden transfers in international exploitation, which impacts growth, despite recognizing some of the factors influencing price levels.
To support the idea that u.$. workers are still “pulling their weight,” the Bloomberg article appearing on IndustryWeek suggests productivity decline can be attributed to sluggish total factor productivity, as opposed to diminished labor productivity, and increased use of labor relative to capital – not that productivity of any aspect of inputs itself is decreasing. A chart is titled, “U.S. isn’t getting lazier.” (The implied misunderstanding of labor productivity decline as laziness is remarkable. What was one supposed to think of productivity, a fraction of u.$. productivity for decades, in Third World countries?) “Over the past few quarters it’s using more workers, and less machines and buildings, to produce goods and services” (while TFP stays about the same). However, this raises the possibility that extremely high u.$. productivity hasn’t been due to the efforts of fantastically hard-working u.$. workers. The very definition of total factor productivity involves variation in output with the same inputs. This can be through improvement in how the same equipment and workers with the same training and mental attributes are used, for example. No doubt some Bloomberg and IndustryWeek readers will think Amerikan capitalists or engineers, planners etc. with incredible ingenuity can take credit for spectacular Amerikan productivity – despite concern expressed about “how to translate productivity gains into broad-based prosperity” – but another possibility is the bulk of u.$. productivity has nothing to do with the characteristics of Amerikans themselves except as exploiters. One thing many, trying to have a message friendly to the petty-bourgeoisie, fail to mention is that u.$. workers themselves are exploiters of non-Amerikan workers primarily in the Third World.
Some seem to understand intuitively that productivity growth in places like restaurants is limited. Starbucks workers do more than just gratify the whims of ridiculous customers, but there are only so many customized iced coconut milk mocha macchiatos one can persynally make in an hour, with extra caramel drizzle and a smile. At the same time, there seem to be endless articles in the media lately about office workers and professionals feeling useless. One raises the idea of people other than Bernie Sanders’ “1%” “not doing productive work” and “gaming the system” or feeling like they are gaming the system.(4) “A tiny number of American workers produce anything tangible – less than 2% of the nation’s workforce is directly employed in farming and less than 8.6% in manufacturing. What of the majority of other workers in white collar jobs, who at the end of the day mainly push paper?” The definitions of “productive” and “produce” there involve non-technical ideas. Apparently, though, a sense of not doing anything “of value” leads many to the therapist’s office. As a result, some feel a need to convince others that even paper-pushing related to government regulation is productive, that being productive has nothing to do with producing any particular kind of object or a certain relationship to a kind of production particular to capitalism. It’s easy to take positions because it pleases oneself or others financially, occupationally etc. – science, theory and method be damned.
The services sector, unproductive labor, and the financial sector
The May Forbes article partly explains global economic slowdown by reference to the large services-sector component of the “developed world’s economy.” Looking at some of the same data, contemporary Marxists (the real ones) see an issue of u.$. parasitism including u.$. workers in various industries, potentially playing a role in global economic crisis. The enormous services sector in contemporary imperialist countries, and what’s called the unproductive sector – which plays an important role in parasitism – largely overlap. For more than a century, communists have viewed the “parasitism” of imperialism as being related to both economic crisis and class struggle though some have managed to separate the two (crisis and class struggle) in highly abstract, fragmentary ways ignoring the real extent of parasitism and its geography. Distorting the factors and dynamics giving rise to crisis, parasitism has been hugely underestimated in its concrete and international aspects with u.$. workers treated as the source of most of the profit in the united $tates, rather than an actually exploited working class in the Third World that creates most of the value (regardless of accounting as profit or wages) that appears in the united $tates, engulfing the whole u.$. population in surplus. Unsustainable – and intolerable – levels of international exploitation are hidden in the globally high wages of productive and unproductive u.$. workers.
Beginning with Karl Mark emself, Marxists have contributed to the understanding of the low-growth potential of the services sector. They have explained it in terms of what is unique about capitalism and productive labor under capitalism, surplus-value, and capitalist accumulation. Notwithstanding the theoretical clarity Marxism has provided, some of the potential growth and stability problems of having a large services sector are known by non-Marxists empirically. People can argue all day about whether most services sector work should be classified productive in a Marxist sense while there are obvious sectoral differences in output-per-hour growth rate. In development contexts, having a large services sector is associated with a high level of development and services sector growth is viewed favorably, but emphasis on services is also regarded as possibly hurting growth in countries that haven’t reached an adequate level of development of goods-producing industries.
Over the years and recently, the U.S. Bureau of Labor Statistics, the IMF, the World Bank and other organizations have released reports highlighting or detailing sector-specific productivity – at a global or national level – that are not theory-free, but are informative regardless of theoretical orientation. Globally, ICT (information and communication technologies) goods and services have been a large site of wealth realization/extraction in recent years while certain service industries have had lower or negative productivity growth.(5) Large financial sectors have been a major factor distinguishing many imperialist countries from other countries and had above-average productivity (both globally and domestically) for decades prior to 2007 judging by IMF-provided data, but it has been reported that even before the 2007-2008 financial crisis, the total factor productivity growth difference between financial intermediation services and other industries was nearly absent – between 0% and 2% or slightly negative – in Australia, Britain, France, Germany, Japan, Sweden, and the united $tates.(6) This portends long-term productivity growth issues of the financial sector, as other countries emulate or try to copy the trajectory of the big financial centers and as the financial sector continues to be concentrated in those centers. Alternatively, with financial sector productivity (TFP) growth becoming equal to general productivity growth, the unproductive sector or parasitism as a whole (involving large international differences in productivity in different and many of the same industries) may play a larger role in crisis with the financial sector playing somewhat less of a role than commonly understood.
The Forbes article also discusses the declining working-age population of so-called developed countries and the declining labor force participation rate. In one way or another, many Amerikans aren’t productive workers. A shrinking or aging population eventually requires even-higher productivity if First World countries are to keep what many perceive (to a great extent wrongly) to be their central roles in worldwide growth and stability.
So-called leftists worried about imperialist country government budget cuts and layoffs and the effects of perceiving certain workers as unproductive (in any sense) have sought to narrow the definition of unproductive labor and are inclined to ignore demographic issues as well. This necessarily leads to gaps or weaknesses in understanding of growth and crisis. The unproductive sector includes government and military activities, and sectors like finance, insurance, and real estate, but also includes much more than those. If the size of the productive sector in the united $nakes or the amount of productive labor is severely exaggerated or assumed to have the capacity to support existing government programs (without net international inflows), even analyses referring to unproductive labor will end up being deficient.
Forbes isn’t a Marxist outlet, but people should regard what the Forbes contributor said about the global economy and the First World’s service-heavy economies, positively relative to the utterances of those who blame economic crisis and low growth on alleged Chinese currency manipulation, offshoring, migrants, and declining First World wages, or who put too much emphasis on banks or corporations allegedly making First World workers exploited (rather than joint exploiters). When manufacturing is discussed, it is in connection with bringing it back from the Third World. Neither Forbes nor critics of Forbes acknowledge that a majority in the First World have remained exploiters while people in the First World produced less and less value (in a certain sense) for capitalists in both the goods-producing and service-producing sectors.
Forbes openly represents the viewpoint of business and financial interests, but for Marxists a huge services sector has parasitic implications a First World country’s workers may not want to address. It would be a lot easier for First World workers to hear opportunists suggest, as everyone from some underconsumptionist “Marxists” to u.$. presidential candidates do, that economic crisis can be avoided or alleviated by propping up declining First World wages. Increasing First World wages and consumption – as if they didn’t already represent massive amounts of surplus, created in the Third World, transferred to the First World – is viewed as a way to mitigate crisis, by some. The fact that high wages of First World workers may have a role in crisis seems to never cross various people’s minds or is dismissed as just being the view of First World capitalists interested in lower labor costs.
Research needed relating neglected parasitism realities to crisis
Attention to international aspects of inequality and class increased in the last several years outside Marxism, after genuine Marxists raised many issues forcefully and obvious economic and political facts made continued ignorance difficult. However, crisis theory and analysis have in recent decades developed, for the most part, in the absence of a concrete, comprehensive and accurate picture of value flows and class structure in the world.
As writers discussing unequal exchange have been saying for decades (and others have observed with a much different view of the causation and dynamics involved), high First World wages are related to high First World value-added. But the extent of international exploitation involved with having such a large unproductive sector as the united $tates’, and having the high wages in the u.$. productive sector, likely plays a complex role in global economic crisis. Wage differences based on repression and other things have to be maintained. If wages are less, prices decrease, and the united $tates exploits other countries less, foreign investments will be affected for example. Unproductive sector growth both enabled by exploitation, and contributing to crisis, has to be sustained to avoid further crisis. The overall international exploitation resulting from wage differences and from other causes contributes to internationally uneven growth and to potential global economic crisis in a world that is highly integrated in finance and trade. On the one hand, lower growth in the First World can contribute to global crisis, but so can high First World growth when greater evenness of growth across countries is needed to avoid some of the issues related to oil-exporting and Third World countries’ sensitivity to downturns and fluctuations.
In the midst of these complex dynamics, there is international class struggle possibly manifesting as changes in relative productivity. If it is true there are points at which wages and productivity can become so high that they include net transfers of value from other nations, recent unexpected decline in u.$. productivity potentially signals a quantitative change in exploitation.
Transfers of value involving wage and productivity differences aren’t everything. Just being employed can be a privilege when the Palestinian nation, many Third World countries, many southeastern-European countries, and countries that have been invaded by the united $tates recently, have unemployment in the double digits in some cases in the 20s-40s.(7) At the same time, the reasons people in the Third World aren’t employed are largely different from the reasons people in the First World don’t work. A country could have high productivity in certain industries as is the case in some oil-producing countries, but have an unemployment problem particular to it as an oppressed country. (And proletarians in the Third World who aren’t currently capitalistically productive, but receive incomes, have less privilege than First World unproductive sector and productive sector workers receiving petty-bourgeois-level incomes ten times greater.) In general, though, when one looks at a country’s productivity and wages in context of other countries’ productivity and wages, one can get a sense of who exploits who and how much. In this respect, the important thing isn’t the u.$. productivity decline in isolation, but the decline relative to other countries’ productivity. Global productivity growth has been low,(8) but the united $tates’ productivity has actually been decreasing.
Prior to the decline, the united $tates and other countries had different positive productivity growth rates. That difference is also relevant to international exploitation. Although, a higher productivity growth rate in a Third World country could mask a huge increase in value flowing to imperialist countries. Chinese productivity growth may be decreasing, but remains positive; at the same time, after decades of increasingly large trade surplus with the united $tates, China’s labor “productivity” (GDP per hour worked) is still much lower than the united $tates, currently by an order of magnitude according to the present writer’s calculations. All else equal, a decrease in comparative u.$. productivity could mean less exploitation. But a decrease in u.$. productivity with respect to China could be accompanied by a huge increase in the total amount of surplus-value stolen from China and hidden in the form of u.$. wages and other u.$. “value-added.”
Another thing to keep in mind: If a country’s productivity decreases, but its number of employed workers increases, the absolute level of exploitation of other countries may still increase. Though it is possible for Third World country GDP growth to distract from international exploitation of the country (as if rapid GDP growth by itself meant that the country wasn’t being exploited more and more), it is notable here that u.$. productivity growth not only has been decreasing, but also that u.$. GDP (productivity times hours worked) growth has been low compared with GDP growth of many countries including China and India(9) and unexpectedly low recently.(10)
Regardless of its causes, the coincidence of lower u.$. productivity, and lower global GDP growth with even-lower u.$. GDP growth, is relevant to the intensity and magnitude of international exploitation, and it is something everyone in the world needs to accept. Amerikans, including so-called working-class Amerikans, need to get used to lower petty-bourgeois and bourgeois living standards than those they already have. And the Third World needs to learn to tolerate lower economic growth (if not at this particular moment, then others) because of the complex situation in which decrease in international exploitation can result in temporary global crisis. Enduring low and even negative economic growth in the short term may be necessary to achieve major gains against international exploitation in the long term. Some in Third World governments and institutions already support lower growth for other reasons, but risks have to be taken and real sacrifices made to shrink u.$. parasitism dramatically and eliminate u.$. dominance in the world economy.
None of that may be popular to say, but one way or another the proletariat will advance closer to the goal of ending u.$. dominance and eventually eliminating other obstacles to making a world without class oppression. ◊
1. “These 9 charts explain the global economic slowdown – and why central banks can’t fix it,” 2016 May 6. http://www.forbes.com/sites/johnmauldin/2016/05/06/these-9-charts-explain-the-global-economic-slowdown-and-why-central-banks-cant-fix-it/
2. “International Comparisons of GDP per Capita and per Hour, 1960–2011.” http://www.bls.gov/fls/intl_gdp_capita_gdp_hour.htm
“GDP per hour worked.” https://data.oecd.org/lprdty/gdp-per-hour-worked.htm
3. “Productivity crisis? US workers are pulling their weight,” 2016 August 12. http://www.industryweek.com/workforce/productivity-crisis-us-workers-are-pulling-their-weight
4. “Bernie Sanders’ attacks on the 1% raise important question: Who does productive work today?” 2016 June 1. http://www.forbes.com/sites/michaelbernick/2016/06/01/bernie-sanders-attacks-on-the-1-raise-important-question-who-does-productive-work-today/
5. “The new normal: a sector-level perspective on productivity trends in advanced countries,” 2015 March. http://www.imf.org/external/pubs/ft/sdn/2015/sdn1503.pdf
6. “What is the contribution of the financial sector?” 2011 November 22. http://voxeu.org/article/what-contribution-financial-sector
8. “No rebound in global productivity in sight,” 2016 May 26. https://www.conference-board.org/press/pressdetail.cfm?pressid=6759
“Total Economy Database - Key Findings,” 2016 May. https://www.conference-board.org/data/economydatabase/ “GDP and employment in the U.S. are both projected to grow by 1.7%. As a result, productivity as measured by output per worker will be stagnant, and slightly negative on an output per hour basis.”
“Global productivity: drifting into crisis,” 2015 June 18. http://www.prnewswire.com/news-releases/global-productivity-drifting-into-crisis-300101460.html
9. “GDP Annual Growth Rate.” http://www.tradingeconomics.com/country-list/gdp-annual-growth-rate
“GDP Growth Rate.” http://www.tradingeconomics.com/country-list/gdp-growth-rate
“Prediction: U.S., world economies will experience slow growth in 2016.” 2016 January 1. http://www.northwood.edu/documents/about/whitepapers/Prediction-U-S-world-economies-will-experience-slow-growth-in-2016.pdf
10. “US economic growth of 1.2% misses estimates,” 2016 July 29. http://www.ft.com/cms/s/0/9559f716-557f-11e6-9664-e0bdc13c3bef.html
“US GDP grows 1.2pc despite robust consumer spending,” 2016 July 30. http://www.gdnonline.com/details/103671/us-gdp-grows-12pc-despite-robust-consumer-spending