Why doesn't business care about unemployment?

[HomerRamone]

http://www.populareconomics.org/2014/02/whose-recovery/

There is a story that when the late union leader Walter Reuther was given a tour of a GM plant, a manager introduced him to a set of the company’s new robots. The manager challenged Reuther to say how he would organize the robots into the UAW. The union leader supposedly responded by asking: how will General Motors sell cars to the robots? While American unions have failed to organize the workers in the new economy’s factories, its capitalists seem to have figured out a good answer to Reuther’s question.

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What should surprise us is that so few in the business community are pushing back against these ideologues in support of policies to bolster economic growth and employment. Robert Reich asks whether capitalists and managers have forgotten the basic Fordist compromise, in which businesses rely on affluent workers to consume their products? If a rising tide lifts all boats, don’t capitalists benefit when unemployment falls and workers have more to spend? And shouldn’t they support policies that bring the tide in?

They don’t because American capitalists have learned to profit from recession. They have so well insulated their economic fortunes from the rest of us, that they no longer depend on rising wages and growing effective demand to maintain profitability. The “recovery” from the Great Recession of 2008 has been different from past recoveries, because it has been led by profits, which have grown even though economic growth has been relatively slow, and employment and wages have stagnated. Four years into the “recovery,” the GDP has grown at an anemic 2.4% per annum, the slowest growth rate of any post-war recovery and less than half that of the recovery in the 1960s. Since the recession bottomed out in 2009, job creation has been only a third the rate of past recoveries. Compared with past recoveries, this one is short 8 million jobs and the employment ratio, the share of the adult population with jobs, has fallen back to the level of the early 1970s, down 5 percentage points from 2008.

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At least for now, American capitalists have solved the problem that bedeviled their Fordist forebears. They have found ways to profit even when their workers cannot buy their stuff. Since 2009, inflation-adjusted spending by the top 5% has risen 17 percent, compared with an anemic 1 percent among the rest. While Sears and J.C. Penney drift towards bankruptcy, Nordstrom and other luxury brands flourish. Rather than depending on sales to working-class and middle-class consumers American corporations are doing very well selling to rich consumers, here and abroad. Rather than promising workers high wages to ensure productivity, they maintain labor discipline through fear.

It seems that capitalists and managers have found answer to Reuther’s question. Business can’t sell stuff to robots, but they don’t need to sell stuff to workers either.

[Vinnie From Indy]

1. how will General Motors sell cars to the robots?

Brilliant response!