"Miracle" of productivity

Louis Proyect lnp3 at SPAMpanix.com
Sun Feb 25 10:41:25 MST 2001

But a change might also take place in an opposite direction. By virtue of
the increased productivity of labour, the same amount of the average daily
necessaries might sink from three to two shillings, or only four hours out
of the working day, instead of six, be wanted to reproduce an equivalent
for the value of the daily necessaries. The working man would now be able
to buy with two shillings as many necessaries as he did before with three
shillings Indeed, the value of labour would have sunk, but diminished value
would command the same amount of commodities as before. Then profits would
rise from three to four shillings, and the rate of profit from 100 to 200
percent. Although the labourer's absolute standard of life would have
remained the same, his relative wages, and therewith his relative social
position, as compared with that of the capitalist, would have been lowered.

Karl Marx, "Value, Price and Profit"


NY Times, Sunday, February 25, 2001

Economic View: A 'Miracle,' But Maybe Not Always a Blessing


Rising productivity is a wonderful thing. Income and living standards
improve when companies find ways for their workers to produce more in each
hour they spend on the job. But sometimes surges in productivity backfire,
and this may be one of those times. . .

The mathematics of this process are easily illustrated. A company employs
100 people to assemble 1,000 refrigerators an hour. By installing
computerized machines or reorganizing the assembly line, the company raises
the output to 1,030 refrigerators, a productivity growth rate of 3 percent.
Through raises, the workers can share in the income from the sale of the
extra 30 refrigerators.

They are likely to keep their raises in a slowdown. But if demand falls
back to 1,000 refrigerators an hour, and the assembly line maintains its
newly acquired efficiency, then jobs disappear, often through layoffs. The
company no longer needs 100 workers to assemble 1,000 refrigerators an
hour. Five or six jobs are lost, and this process, multiplied across the
economy, can help to turn a mild downturn into a very painful one.

That happened during the Depression. Numerous innovations and market
efficiencies raised the productivity growth rate in the 1920's and 1930's,
and as unemployment rose so did the outcry about "the effects on employment
of increased productivity and technological change," according to a history
of the Bureau of Labor Statistics. Under pressure, the bureau began to
measure productivity and job displacement in many industries. The
information was deemed by the unions of the day to be "necessary in
collective bargaining for dealing with the problem of technological

Public works projects in the 1930's eventually absorbed hundreds of
thousands of displaced workers. That sort of government spending is out of
fashion today, of course. The main tool for reviving the economy is
concentrated in the Federal Reserve's power over interest rates. And the
surge in productivity, which the Fed's chairman, Alan Greenspan, has
welcomed so joyously, is now, in the short run, a potential burden.

Full article: http://www.nytimes.com/2001/02/25/business/25VIEW.html

Louis Proyect
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