In a growth economy, new jobs are created on a regular basis because new production expands the employment base. In a shrinking economy, just the opposite happens. The U.S. and most of the industrial world have enjoyed the benefits of expanded production and employment for many decades, minus the occasional downswings of the “business cycle,” along with some deep depressions. That is the ‘conventional wisdom,’ and within a narrow framework it has worked until now.
However, in addition to sending jobs to low-wage nations, ‘improvements’ in the processes of design, production, and optimizing the supply chain – all of which involve reducing the labor needed for these processes – capital invested in advanced production technology requires less and less labor. That is the key contradiction in the growth economy. Once labor costs are reduced beyond a certain point, buying power can no longer keep up with production. The addition of capital mobility amplifies this problem.
Capital is mobile; labor, not so much. Sure, Mexicans come across the U.S. border seeking work because highly automated production of corn in the U.S. – with the help of government subsidies and NAFTA – allows U.S. agribusiness corporations to undercut Mexican corn prices, flood their grain market, and drive traditional Mexican farmers off their land. Then the same corporations buy up or lease Mexican farmland to produce crops for export to the U.S. – especially those requiring hand picking. Desperate farmers who lost their livelihood can be hired at below poverty wages; some of the remainder head for the U.S. with nothing but hope.
A win-win situation for the corporations and their capital is a lose-lose proposition for both Mexican and American workers and the price of their labor. But when capital moves from the declining cities where American manufacturing once thrived, to the centers of large Asian populations in dire poverty, the immobility of labor is clear. Neither American nor Asian workers without highly specialized technical skills, can follow the movement of investment capital to obtain jobs. That is the real face behind the mask of “free trade.”
Those corporate elites who the pundits of CNBC and Fox News tout as the “job creators,” are, in fact, American-job destroyers. The claim is routinely made that these wealthy CEOs create jobs through investment of their wealth. Well, they do create poverty jobs in Asia to replace middle-class jobs in the U.S. In the process they destroy American jobs. And now we have the TPP, the “Trans-Pacific Partnership,” or “NAFTA on steroids,” formed in secret and intended to wipe out national standards for labor and environmental protection, even further extending corporate rule and economic control over nations.
Through most of the industrial revolution and subsequent expansion of economic production, investment of capital has been directed toward labor saving technologies of production as well as the invention of new products. The first coal-fired steam-driven textile factories in England and Scotland required many workers to maintain the machinery which did absorb some of the farmers driven off their land by the “enclosures” which were part of the first stage of industrialized agriculture. Most of the rest were encouraged to emigrate to Australia, the U.S., or Canada, where expansion into native lands provided new opportunities for workers displaced by the new industrial technology.
The industrial age has been characterized by continued economic growth. That growth absorbed most of the labor lost to automation of industrial processes. We are now at the end of that phase of the growth economy. Despite denials from the industrial and financial elites, the age of economic growth is ending. Converging crises of finance, resource depletion, accelerated climate disruption with increasingly costly expansion of fossil-fuel production, under-funded over-consumption sustained only by increased debt, and even greater over-production, make it inevitable.
Classical economics, the propaganda tool of industrial capital, sustains the illusion of endless growth. But it fails to recognize environmental reality. A new economics that faces ecological limits must assume curtailed fossil-fueled production and reliance on human labor for two reasons. First, no economy works without circulating its money. Wages are necessary for workers to purchase goods and services produced by other workers. Second, an adequately rapid withdrawal from fossil-fuel addiction will require converting many processes from capital-intensive to labor-intensive production. Some might yell “Luddite!” But existing science and technical knowledge will allow invention of many new labor-based methods and modification of old ones, avoiding the back-breaking pre-industrial forms of work. They just will not use so much fossil-fuel energy. Vast opportunities arise to invent new technologies that rely on human energy. Don’t forget the venerable bicycle. It remains the most energy-efficient mode of transportation yet devised.