The Neutron Bomb Economy: All Is Well

[marmar]

from the Working Life blog:




The Neutron Bomb Economy: All Is Well

by Jonathan Tasini
Thursday 17 of February, 2011


I am struck every day by the incredibly bizarre world we live in, where "up" is "down" and "down" is "up". I think many people are angry and confused because what they see in their daily lives--upheaval, struggle, fear--does not match much of the rhetoric coming from the people who have their hands on the levers of the economic and government. This morning, it dawned on me that we can explain much of what we see if we just think of living in an era of the Neutron Bomb Economy.

The neutron bomb is a "nuclear weapon that maximizes damage to people but minimizes damage to buildings and equipment. It is also called an enhanced radiation warhead." The beauty--"beauty" used in a deeply sarcastic voice--of the neutron bomb is that it makes it more "attractive" to use nuclear weapons because the bomb can eliminate people but leave everything else standing.

Which is essentially the kind of economy we now live in. Look at the declaration from the Federal Reserve Board trumpeted with the headline, "Fed Forecasts Faster Growth as Economy Improves":

The Federal Reserve disclosed on Wednesday that policy makers had substantially upgraded their forecasts for how much the economy will grow this year, though they expect unemployment to remain painfully high for some time.

Top Fed officials now expect the output of goods and services to grow by 3.4 to 3.9 percent this year, up from the previous forecast, released in November, of 3 to 3.6 percent.

So, we increasingly live in an economy where "growth" is divorced from the ability of real people to survive. Stuff is being made--the Gross Domestic Product is growing--but people don't have jobs, partly because corporations are figuring out how to use fewer workers. And, when they do, work, millions of people can't make ends meet. So, the economy "grows" but the people do not prosper. .................(more)

The complete piece is at: http://www.workinglife.org/blogs/view_post.php?content_id=15107

[uponit7771]

1. The sky isn't falling on a macro level and US middle class has tired of defense related spending to

...the point even conservatives by a majority feel it should be cut.

Slowly, we're headed in the right direction...

[xchrom]

2. Recommend

[Statistical]

3. Productivity gains are a reality of life.

Say demand rises 4%. Requires 4% more workers right? Well only if output of the worker remains static (which it never has in the history of mankind).

If worker productivity rises 2% then half of the growth is handled by productivity. Ok but that is still 2% more workers employed right? Well no. Employers can increase hours. They can use overtime (say that gives them another 0.5% output), and they can also "pump up" part time workers (someone working 22 hours a week is now working 28 hours a week). Say that gives them another 1% aggregate output.

So 3.5% output gains with no payroll increase vs 4% growth. So payroll rises 0.5% to absorb the slack.

Payroll only rises when aggregate growth > productivity gains + worker output (hours worked) gains.