The Biggest Risk to the Economy in 2012, and What’s the Economy For Anyway?

[abelenkpe]

The Biggest Risk to the Economy in 2012, and What’s the Economy For Anyway?

http://robertreich.org/post/16773820312

Treasury Secretary Tim Geithner, speaking at the World Economic Forum in Davos a few days ago, said the “critical risks” facing the American economy this year were a worsening of Europe’s chronic sovereign debt crisis and a rise in tensions with Iran that could stoke global oil prices.

What about jobs and wages here at home?

As the Commerce Department reported Friday, the U.S. economy grew 2.8 percent between October and December – the fastest pace in 18 months and the first time growth exceeded 2 percent all year. Many bigger American companies have been reporting strong profits in recent months. GE and Lockheed Martin closed the year with record order backlogs.

Yet the percent of working-age Americans in jobs isn’t much different than what it was three years ago. Yes, America now produces more than it did when the recession began. But it does so with 6 million fewer workers.

(snip)

All of which raises a basic question: Who or what is the economy for? Surely not just for a few at the top, and not just big corporations and their CEOs. Nor can the success of the economy be measured by how fast the GDP is growing, or how high the Dow Jones Industrial Average is rising, or whether average incomes are turning upward.

The crisis of American capitalism marks the triumph of consumers and investors over workers and citizens. And since most of us occupy all four roles – even though the lion’s share of consuming and investing is done by the wealthy – the real crisis centers on the increasing efficiency by which all of us as consumers and investors can get great deals, and our declining capacity to be heard as workers and citizens.

(more at link)

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We need global labor unions that demand living wages, a five day work week, 8 hour days, no child labor, safety protections and environmental protections for all workers everywhere. If workers don't organize globally we will continue to be pitted against one another.

[Citizen Worker]

1. I've been encouraging international solidarity for 25 years. We are closer but...

[xchrom]

2. Du rec. Nt

[lumberjack_jeff]

3. The purpose of an economy is to allocate resources in a way which maximizes society's happiness.

http://www.ou.edu/class/econ3003/book/area1c2.htm

If you'd ask the average politician what the purpose of an economy is, you'd probably get one of three responses. Response Number One: "The purpose of the economy is to create jobs." This is a bad answer. To see why, ask yourself, why do people work? Here's a little thought experiment to help you answer that question. Suppose that starting tomorrow, everybody's wages, salary, and pay went to zero. Who would show up for work? Most people work not because of the intrinsic joy they receive from working, but because they get paid for it. (Economists have a word for jobs that people would do without pay. They call it play.) People want jobs because those jobs give them money, and that money allows them to go out and buy the things they want. People work so they can consume more. Thus, creating jobs is a means to an end. It is not the end itself.

This leads us to Response Number Two: "The purpose of the economy is to increase wages." This is an even worse answer than responding that an economy should create jobs. Suppose that the government outlawed all private sector jobs and placed everybody in jobs producing dumb stuff--things that nobody wanted. However, it compensated them by paying all workers a wage of $1000 an hour (plus paid vacation and time and a half on holidays). That's $40,000 a week! Would this be the kind of economy you'd want to live in? Think about it. While it might be nice to look at your monthly pay check and see that you are making approximately as much money as your favorite professional athlete, you'd have a rude awakening when you went to the local WalMart. There would be nothing there but dumb stuff to buy. Wages are also a means an end--the end of having nice things to buy--and not the end itself.

Response Number Three states, "The purpose of an economy is to increase production." By now you should be able to explain why increasing production is also the wrong purpose for an economy. We care about production only because it is necessary for consumption. Think of it in these terms: if we produced cars, stereos, and hamburgers, but didn't let anybody consume them, society would be no better off. Likewise, if we produced left-handed smoke shifters, square wheels, and Ringo Starr solo albums--i.e., goods that nobody wanted--society would again be no better off. In fact, in both cases we would be worse off because we expended valuable resources to make goods from which no one was able to derive pleasure. It would be like slaving away in the kitchen all day making a pot roast and then discovering your dinner guests were vegetarians. You just wasted a pot roast as well as your time and energy.

We are now ready to state what we think most people, after some thought, would choose as the overriding purpose of an economy. THE PURPOSE OF THE ECONOMY IS TO ALLOCATE RESOURCES IN A WAY WHICH MAXIMIZES SOCIETY'S HAPPINESS. This response probably makes the most sense to you, but we bet you haven't thought about it this way before. The other goals of more jobs, or higher wages, or more production are merely means to an end. The end is greater happiness for consumers.

[B Calm]

4. Oil speculators hurt the economy!

It seems like every time the economy starts rolling, oil speculators drive the price up at the pump and the economy goes into free fall.