Stimulating the Economy in the Time of Covid 19 Redux
I concluded my previous essay1 with: “We have ridden the tiger of artificially stimulated demand and consumption for decades to generate wealth, and we have suddenly dismounted, turned a segment of the world-wide economy off almost instantaneously without the slightest idea of the consequences.” Then we borrowed from the future to regain, to re-energize, that artificially stimulated demand and consumption. What if that does not happen?
The shutdown of significant sectors of the economy may be medically necessary. I fear what happens next. Stimulating the economy by borrowing from the future assumes that ‘now’ is short-term and that the future will support the debt of now and the future itself. The size of the debt may be a significant drag upon the economy of the future. What if the future cannot or does not support both? That is a simple question with an unknowable answer. The world has seen a number of economic slowdowns and shrugs them off as ‘business cycles.’ It has seen one catastrophic shutdown of demand in the previous century, the Great Depression, and the Tiger feasted upon a shattered economy. Artificially stimulated demand can disappear instantly. Are we about to be eaten by that metaphorical tiger? I can see him grinning in anticipation.
We are accustomed to a high level of consumption. Wants have become necessities. We believe that we are entitled to have, that it is normal and desirable to have what we want, and the sooner the better. “The time between want and have is wasted.”2
An excellent avatar for artificially stimulated demand is the Pet Rock.3 and combined with a booklet on how to train your rock to be a good pet plus some straw bedding in a cardboard box. All that was shortly consigned to the dump. How many rocks are still coddled pets? How many rocks endure hours of training to be a better and more loving pet? How many are in the dump?
We knew early in the Great Depression that the faster we committed stuff to the dump, the richer we would be. “The way to break the vicious deadlock of a low standard of living is to spend freely, and even waste creatively” (1929) and “consumer engineering must see to it that we use up the kind of goods we now merely use” (1932)4 We, or at least the business and economic elites knew that the very core of consumerism would be waste.
The Per Rock was fun. It was a desire made into a need. It conveyed money from me to Gary Dahl and to his vendors and workers. It transferred resources, transferred fitness, from me to other individuals. It was done by creative advertising. The Tiger of stimulated demand is our own invention, created to solve an economic problem: the over-production of goods that first began to become a problem in the Roaring Twenties.5
Here is how I tell my Tiger story. I begin in the Great Depression where the demand and consumption of the Roaring Twenties disappeared almost overnight. My grandfather speculated in farm land during those boom times, and in the crash of 1929-31 lost everything including the land his father had homesteaded and cleared after the Civil War. He died in the early 1930’s pauperizing my father and leaving him landless, jobless, and responsible for his mother who lived nearly 20 years more. A Mr. Norton, smarter than the average bear, bought farm land after the crash and he allowed my father to remain on one of the farms as a tenant paying rent. Farm prices for food fell about 60%, and my father owed some of his income to Mr. Norton and some to his mother. I’ve no idea of how hungry he was. Only once did he speak of those times: “The mid-west was a good place to live and a good place to starve.” This was an era of genuine rural poverty.
My mother never once spoke of those times. She too came from a mid-west dry-land farm and would have lived near the Dust Bowl during those immensely difficult times. Where she was, what she did and what hunger she endured has been consigned to the dust bin of unrecorded time. I know that she had one out-of-wedlock child, maybe two. What did she endure? She took all of it to her grave with never a word.
Her next younger brother held his small farm through the depression, but would sit at the kitchen table and cry because he could not provide enough food and clothing for his family of six kids. My older half-brother lived with that family.6 Despite his college and law school education, my brother never recovered from his fear of hunger, need, want, deprivation, and destitution. He invested family money believing that “this investment will hit the ball out of the park” and then watched a foul ball drop onto the sidelines. His last years were filled with planning his estate so that his daughters would never want. They are fighting over the estate.
My father-in-law lived for an entire winter with nothing to eat but lima beans for breakfast, dinner and supper. He became a hobo, packed his guitar and a sleeping bag, and hit the rails. He never spoke of those times either.
Even in the early 1950’s, I watched the trains passing through town with men standing or sitting in boxcars watching a world of which they weren’t really members go by. My mother told me they were hobos, told about families that fed them, how hobos would mark fence posts to tell others of their reception – were they fed or chased away – and how they were willing to work, if work could be found. They were not free-loaders, they were freed labor. Freed to survive on their wits in a world in which all resources were owned and protected by law. I have no idea of how they survived.7
What did their eyes see as they rolled by? They saw towns they could not shop in. They saw fields of food they could not eat. They saw houses they could not sleep in. They saw clothes on clotheslines they could not wear. They saw automobiles they could not ride in. They saw families they could not cherish. The Great Tiger had eaten all those good things, taken away all hope. I fear the Tiger.
We did not really recover from the Great Depression until sometime during World War II,8 that third in a row catastrophe (beginning with World War I). How did the war end the depression? War artificially stimulates production and consumption – not consumer but military consumption.9 We beat plowshares into swords to win the war. At the end of the war, we beat those swords back into plowshares to create the new consumer society.10
That suffering, that hunger, is the backdrop for my speculations on our post-Covid 19 economics. In these sketches, I have drawn a picture of excess labor, of unused and unwanted lives, of hunger and need. There was reduced demand for consumption and therefor no demand for labor.
A New Tiger Story
So, I ask, “what happens if our artificially stimulated economy does not come roaring back with demand for more goods and services?” I read about a new normal, what ever that will be. I read about simplification of our lives, of finding out what is important, of learning what we can do without. I read about the new good of reducing personal debt, of saving for hard times. Those good things imply a reduction in consumer demand. And that entails a reduction in demand for labor in a nation that already has surplus labor.
Before the virus, unemployment numbers looked pretty good. But they do not and cannot count those that are not in the labor market, only those who report to a government agency that they are out of work and actively looking. A friend commented that a 35-year-old son with a BA in English Literature living in the basement and playing video games surely indicates some kind of a problem. That son is the analog of the hobos of the 30’s. How many of them are there? No one knows and no one can count them. They are part of our surplus labor, unused, and unwanted, and no one has the slightest idea of what to do with them. They have become invisible, more invisible than the hobos in the rail-side ‘jungles.’
Economists use the phrase ‘clearing the market:’ goods are placed in the market with the expectation that they will be removed from the market by consumer purchases. If they are not, they are surplus, and may be destroyed at a financial loss to the producer and written off the balance sheet.
Services – labor – are also placed in the market with the same expectation and hope. Our lives are for sale on the market. Failure to clear the market of goods results in visible and countable surplus goods. Goods that are not cleared may be consigned to the dump. Labor that is not cleared cannot simply be carted off to the dump, out of sight and out of mind, and written off the balance sheet as a loss. We are simply laid off. We do not go into the dump to be buried by a bulldozer. We do not turn up our toes and die so that we are no longer a burden. We remain, visible, hungry, and on our books but not theirs.11 I have been told that there is no work: “go home for a week and then call me.” I have applied for and received unemployment. I was fortunate. I did not have to hit the road and became a labor tramp. I knew men who had lived those lives: work, eat and drink. Live in a motel and bar. And I wanted no part of it.
I worked on the construction of what was then Intel’s biggest wafer fabrication plant. The project supervision was a company from the South and I worked with one of their managers to do the startup trouble shooting. We got to talking about this and that, and at one point he commented on skilled construction labor in the South “there were always a dozen guys swinging on the gate waiting for someone to get pissed off and quit.”
Surplus, unused, unwanted and unusable labor – visible or invisible – is a problem. An avatar for surplus labor, for hunger and want, in a land capable of feeding, housing and clothing all, but failing to do so, is surely Dorothea Lange’s photo “Migrant Mother.”12 Hunger and hungry children are a powerful inducement keeping labor docile and obedient. There is a tipping point and hunger and hungry children become a powerful inducement for labor unrest, political action and violence.
Demand can disappear instantly. It happened in the Great Depression. Millions were unemployed. There were hunger marches and food riots.13 Organized labor was flexing its muscle and trying to figure out how to get more for their members. There was communist agitation. People were hurting. Why?
The Back Story
First, the demographics of the 20th century: The population of the United States increased at a small exponential rate during the 20th century14 and this would of itself increase demand for goods and services in proportion. Demographics is destiny. Bodies must be fed, clothed, sheltered, given something to do, and some place to do it in.
So far so good, at least for services: supply of and demand for service labor could potentially track each other. But there was another curve: during the 20th century, productivity, our ability to produce goods, increased faster than that required to service an increasing population thereby creating the economic problem of clearing the market of surplus goods. We live in a world that is defined by productivity and have come to worship innovation, the creation of new goods and services, and a rising standard of living.
But productivity implies that a given standard of living may be produced with less labor. The labor supply was increasing, and the net labor to produce a constant standard of living was decreasing. This implies a structural unemployment as the two curves diverge. Unemployment, if not remediated, is socially dangerous. There have been two enormous revolutions, French and Russian, caused largely by a hungry working class.15 Millennia old social structures – in particular the entitlements of the aristocracy and Church – were overturned in a few years, and was accompanied by a difficult struggle to devise new structures.16
About 10 years after the Russian Revolution came the Great Depression. Our standard of living decreased dramatically further decreasing the demand for labor. There was Communist agitation, labor strikes and food riots. There were Communists in the administration of President Roosevelt’s New Deal. Socialists and populists were voted into political power. Social and economic danger abounded. These thunderous events, two revolutions and the Great Depression scared the elites to the core of their very being and have cast a long shadow even into today.
Once upon a time, and not so long ago, I had dinner with some friends. We were a socio-economical diverse group, ranging from one blue-collar worker (myself), a successful small businessman, inherited wealth, to a vice-president of Hewlett-Packard. During the conversation I made a single remark favorable to the working class. I was promptly slapped down with “Someone here is pinko!”, accused of being soft on communism. I was a danger to them, even as a friend, and on the basis of one remark. Labor liberalism – working within the socio-econo-political system – is frequently conflated with or of being in bed with Communism. Shortly after WWII, an American business man opined that “America’s enemies are International Communism abroad and organized labor at home.”17
The dominant forces in mid-20th century were, first, increasing population and increasing ability to produce goods. Think of these as the independent variables. No attempt at controlling population has been successful. The Industrial Revolution has an economic logic of its own: produce equal or better quality goods faster and cheaper, and the market will reward you with profit exceeding the competition. The necessities of war-time production were met by vastly increased productivity. Another part of the population problem was that, beginning in 1945, millions of service men were released from wartime service and returned to civilian employment. There were enormous productivity gains during the war and all of a sudden there was a huge new labor supply to be added to those producing the war goods.18 To those factors, add a residual fear of communist agitation and labor organizing.
I think there were exactly two ways of meeting economic challenges of the mid-twentieth century and we have followed each of them sequentially. We first tried Keynesian stimulation of the economy during the Depression by government intervention, and we borrowed from the future to pay workers for public works projects. The New Deal put people to work and that reduced the possibility of socio-economic revolution. This was socialism implemented in defense of capitalism.19
The conservative economic view of the Depression is that they could have ended it by inducing consumer driven demand. That may as well be, but in fact we took the other direction of trying Keynesian economics first.20 World War II interrupted the New Deal, but the war was essentially a Keynesian economy: war driven employment. The government borrowed money and dictated all sorts of economic practices, in particular consumer rationing. At the end of the war, this artificially reduced consumption of consumer goods and services was no longer politically supported, and American business was freed to demonstrate its prowess, which it did. And maybe over-did?? Remember that pet rock dropped into the waste can. Affluenza?
The second way forward was artificial stimulation of consumer demand driven by mass advertising of goods and services made possible by mass communication. It was an astonishing success. Television was essential to the development of the consumer consumption society – consumerism. Radio and newspaper advertising during the 1930’s would not have been sufficiently effective, thus vitiating the claim by business that they could have ended the depression by themselves without government intervention. Seeing people, young, vivacious, and good looking, is an essential part of the stimulation of demand by emulation.21
World War II may be described as an extremely artificially stimulated demand economy. Vast quantities of goods and services were rapidly created to win the war. The men were in the services and women provided an enormous amount of labor. They now had incomes, the power of the budget and maybe at least some discretionary spending. This new found economic power became one of the cornerstones of the post-war stimulus of the economy as she now asked “honey, don’t you think we could buy a new washing machine?” Needs and wants, always deeply intertwined, became more twisted together as wants morphed into needs. Thorstein Veblen’s Conspicuous Consumption22 was brought into homes by the productivity of machine driven manufacturing capitalism. For a time, a rising tide buoyed most boats ever upwards. We became a consumer economy.
Products needed to find a market and mass advertising was developed to generate mass demand. This is the basis of the consumer society. It was not initially driven by inherent consumer demands, those are relatively small, particularly in the lower classes of the time: primarily water, food, shelter, and clothing, and what is needed to procure those.
Demand had to be ‘artificially stimulated’ and consumption became conspicuous and self-indulgent, showing socio-economic class membership and the ‘taste’ of the consumer, and/or some other ‘need’ real or imagined. This is the province of advertising, and the message is that the individual and collective good is derived from selling and buying goods and services. The more the better, and frivolity may be more valuable than utility or frugality. The quicker something is purchased and then either stored in the attic or consigned to the garbage to make room for more acquisition, the better.23
The Tiger roared to life. Will consumption consume us?24
I may suffer from geriatric pessimism. I am, and have been for some years, lacking in optimism. I am a war baby. I came of age during the post-war boom and the birth of consumerism. That optimism lasted until Rachel Carson published Silent Spring. Love Canal, Three Mile Island, and Bhopal forever blasted such notions as “what is good for General Motors is good for the nation,” “better living through chemistry,” “and progress is our most important product” into shards of fractured optimism.
I am not the only one afflicted with pessimism. Kurt Vonnegut worked for General Electric after WWII and upon understanding the effect of their research into factory automation, wrote Player Piano, (1952) in which he raised the question “…a problem whose queasy horrors will eventually be made world-wide by the sophistication of machines. The problem is this: How to love people who have no use,”25 the unemployed whose numbers were increased by automation and were supported by a New Deal type social welfare.
Today, we may peer into that basement window and see our 35-year-old with a degree in English Literature, unemployed, no longer looking for a job, and happily playing video games. I stop to talk with one of those while I am walking to the library. Nice enough guy, but, so far as I can determine, totally dependent upon his parents. His father is retired and makes small coin fixing and selling bicycles. He is part of that underworld, the discouraged worker, hidden in plain sight, written off, uncounted and unaccounted for.26 He is not on unemployment and in any case, he long ago ran out of eligibility.
The economy cannot love people who have no use, who do not or who will not work.27
Fredrich Pohl wrote “The Midas Plague”28 in 1954 to explore the problem of over-production of goods by robotic labor. A new method had been devised to clear the market. The economics of social class had been turned down. Rich people could now live in a cottage surrounded by nature, living simple lives of minimal consumption. Poor people lived in enormous mansions and were required to consume ever greater amounts of goods and service – an inverse rationing system which required the fulfilment of an ever-increasing consumption ration. Roughly 20 years separates the nascent idea of the consumer society based on the consumption of the Roaring Twenties and articulated during the Great Depression, and these two pessimistic portrayals of the effects of consumerism. The Tiger’s grin was apparent very early.
“The Midas Plague” ends happily when the main character programs his household robots to consume, to use up and wear out – most unusual acts for robots – and our hero is suitably rewarded. From production to trash untouched by human hands. Player Piano does not end happily. The main character(s) incite a revolution that is crushed by the military and they surrender. The irony is that on their way out of the factory to surrender, they passed by a subsidiary character, a tinkerer/inventor who was busily rebuilding machines destroyed in the abortive revolution. He was just having fun fixing smashed things.
There is a lesson of history: cities, can absorb only so much unemployment, hunger and despair until they break down in riots – the only way that the disenfranchised, dis-economized, have of communicating with the elites. (I like neologisms that communicate my meaning. In this case, dis-economized: those who are able to be in the economy but are not due reasons beyond their control: structural unemployment.) There is another lesson of history: the leaders of revolutions, like the main character of Player Piano, are not the workers, but disaffected middle class and intellectuals.
Perhaps the main lesson learned in the Great Depression is that life goes on in the presence of a deep drop in demand and consumption and consequent unemployment. But social disorder, possibly even revolution loomed, so in the post-war years the economic elites decided to artificially increase demand. Demand had, in a sense, been artificially increased during the war to supply the needs of the military, the productive capacity and labor were there after the war, so demand had to be devised.
A potential lesson from the current depression is that we can live perfectly satisfactory lives without artificially stimulated demand and consumption, maybe even better lives. I have read several essays enthusing over the possibility that we might learn to live simpler, less consumptive, less resource demanding lives. Wouldn’t that be wonderful? We would be happier, less busy, less frustrated. That would appeal to a wide range of people. But less consumption entails less production and distribution.
That will strand a segment of our labor. Useless, unemployed and unemployable labor is dangerous. We summoned the Tiger of borrowing from the future to avoid a social catastrophe. Will the Tiger of labor deliver unto us a multitude of unemployed whose poverty will further reduce demand for labor in a downward labor spiral? Will many of us live in our metaphorical basements?
Are there only two tigers? No, there are many ….
“…advertising helps keep the masses dissatisfied with their mode of life, discontented with the ugly things around them. Satisfied customers are not as profitable as discontented ones.” This quote is from about 1930 and I have lost the source. Demand was artificially induced and at nearly the same time credit became available to the lower classes. There are two chains binding the working class and driving them to work: hunger – hungry children especially – and debt taken on to satisfy induced demand. An economist said “study debt” and it is illustrative that debt is enforceable. It is thus another Tiger.
Returning to hungry children: in the midst of the Great Depression, one of my maternal uncles took in my unwed mother’s son, adding him to his growing family. During those trying years he would often sit crying at the dining room table because he was unable to fill the empty stomachs of his hungry sons. He was a farmer. How does a farming family go hungry? My father-in-law, also a farmer during those times, ate lima beans for an entire winter because that was all that they had.
Quote from a friend that dramatically illustrates the consumer society and its ills: affluenza. That this neologism passed my spell checker is itself indicative of our conflicting emotions over over-consumption. It is an illness. ↩
https://en.wikipedia.org/wiki/Pet_Rock)) We owned one and then threw it away. It generated laughs and waste. It generated demand for materials and labor. Rocks were removed from a beach in Mexico, transported to a production facility((leaving the beach less rocky – whether this was a good thing or not is unknown ↩
My uncle took in his sister’s out-of-wedlock child at an enormous sacrifice to himself and his family, and never resented it. A hero in my book. ↩
Today they would be described as the “discouraged” unemployed, no longer looking for work, and surplus to the needs of the economy. ↩
Consumer goods were rationed during the war. Fortunately, many people had the experience of limited consumption during the depression years, and there was a war to be won. ↩
We also created a well-educated society with the GI bill and this education was crucial to the development of the post-war consumer society. ↩
I left out unemployment benefits to make my point. ↩
Protests and riots are the only means that the underclass have of communicating to the upper classes: the out-stretched hand and the destruction of property. Unfortunately riots usually hurt the small businesses that are closest to the impoverished. ↩
And a dis-affected intelligentsia. Workers by themselves cannot form a revolution. We only protest and riot. Leadership of a revolution comes from above. ↩
My half-brother could go on and on, parroting the cant of the conservative economic elites, about the entitlements of the poor and unemployed, without once thinking of the presumed entitlements of the elites. ↩
The conflation of labor liberalism with communism is not accidental. It is deliberate, an attempt to tar labor with the emotions and dangers associated with revolutionary communism which is, by definition, violent, foreign and un-American. ↩
Many women worked in factory jobs and they were laid off to make room for the returning service men. ↩
I’ll return to this irony in a future essay. State socialism, or better, capitalist socialism was first implemented by Chancellor Otto von Bismarck in Germany in the mid 1880’s. https://en.wikipedia.org/wiki/State_socialism ↩
There is little to no evidence that business was able to affect the course of events during the last three years of the business favorable Hoover administration between 1929 and 1932. More on this in a coupla paragraphs. ↩
Individual and familial saving for the future, a private good, is now a public sin. Easy credit was essential and the credit card became ubiquitous. We all began borrowing from the future to consume today. Tigers abound. ↩
We know by now that consumerism will consume the world and its resources. ↩
We still have some compassion, take care of, those who are unable to work because of disabilities of various types. ↩
Galaxy Science Fiction magazine ↩