“The health of the economy is correctly measured by assessing how well the wealth is distributed. Human beings have always been driven to create and acquire more wealth and hence people's private fortunes have always grown and will continue to do so - so there's no need to worry about economic growth. Instead, we need to ensure that the wealth is circulating throughout the society and isn't just collecting in the hands of the few.”
We explore this idea over multiple posts. The previous one examined how the metric of production is disconnected from the well-being of the entire society. In this post, we explore the issue of the economy and job creation. In the remaining posts, we will in sha Allah examine how the Capitalists got the problem so wrong, as well as a brief look at what problems arise when the wealth is concentrated in the hands of the few.
Part 2: What about measuring job creation?
The business press and the Federal Reserve monitor the amount of jobs added to the economy, which may be argued is an evidence that the mainstream policy makers are actually concerned about wealth distribution. This is not true. Jobs are instead seen as a leading indicator of economic growth. For example, this is how the Wall Street Journal (WSJ) reported on the rise in jobs in July 2016 [emphasis added]:
"The firm employment picture has helped to propel consumer spending. But an improving labor market doesn’t entirely square with other data showing a deep slowdown in overall economic growth since the end of 2015. Gross domestic product, a broad measure of economic output, rose a meager 1% at a seasonally adjusted annual rate during the first half of the year, the Commerce Department reported in late July."
WSJ and other mainstream analysts see job growth as a proxy for consumer spending, which in turn is linked to the growth in GDP. So the issue of understanding how people are actually doing is only incidental to the overall goal of increasing production.
To understand the issue of jobs clearly and fully we need to look at why our focus is on getting a "good job"?
It reminds me of the monster.com advertisements that were popular in the late 90s where kids describe the drudgery of work. This award winning ad was aired during the 1999 Super Bowl that resonated with the public:
All of us who work for a living can understand why this ad was so popular!
Although humorous, it highlights the all-but-forgotten idea that labour activists didn't see much difference between chattel slavery (i.e. being owned by a master and being beholden to him for one’s welfare) and wage slavery (i.e. being beholden to one's employer for one's welfare).
As American historian Eric Foner, points out in "Free Soil, Free Labor, Free Men: The Ideology of the Republican Party before the Civil War", 19th century Americans saw employment as follows [emphasis added]:
"...do not complain of wages slavery on account of the poverty it occasions...They oppose it because it holds the laboring classes in a state of abject dependence upon capitalists."
What the labour activist is highlighting is the reality which every working person knows all too well, that a better paying job does not emancipate oneself from unfulfilling work and the whims of one's employer - who can fire someone for such a thing as not wearing high-heeled shoes.
More broadly, the corporation has supplanted government as the go-to-institution that we seek to take care of our affairs. Who will ensure we have enough to feed ourselves and our families? Who do we ask to provide us health & dental? Who provides daycare to take care of our kids while we are at work? We don't look to our political representatives to provide us such things, but instead to our employers for such "benefits" as a part of our compensation package.
What I am arguing is that the average person is essentially forced to seek employment due to a lack of choices since the capital is not readily accessible - especially for the lower middle to low income classes i.e. who don't have rich dads (Bush or Trump; take your pick). Instead, wealth has been so greatly concentrated in the hands of the few, that 1,318 companies collectively control the "world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues".
Moreover, the levers of controlling the flow of the capital have also been handed to these cartels of capital, who can freeze the economy by withholding cash flow from businesses as the banks did during the 2008 Financial Crisis causing a "credit crunch":
This power in the hands of the banks prevented companies from paying their employees or buying raw materials, essentially either preventing them from doing business or forcing them into bankruptcy.
All this leads to our current situation which makes it hard for the "penniless entrepreneur" to start a business. So the focus on creating jobs doesn’t solve the entire society’s problems as just having a job does not give one independence, fulfillment, and satisfaction of their needs. In contrast, by focusing on the distribution of wealth, we give the people in society a choice as to whether they want to work for others or own their own business. As pointed out in our discussion around partnerships, the talented and ambitious employee "will have the option to keep working as an employee or start their own business...if his current employer wants to keep him, then she may have to make him a partner or let him go and find other investors to start his own business..."
In the next installment, we will look at how the Capitalists came to the incorrect conclusion about what is the key economic problem that society must solve. This analysis will also allow us to appreciate how Capitalism is not a natural progression of man and society but a uniquely constructed way of thinking that has led us to where we are today.