The Case for Ever-Bigger Government
By Matthew Yglesias
Nobody on the left ever really talks about the issue of exactly how big we can envision big government getting down the road. So I’m glad Kevin Drum took this important subject on even though I don’t really agree with his answer:
I am, oddly enough, not really in favor of vastly increased funding for other social programs. Some increased funding is OK, but it should be kept under pretty strict scrutiny — and not just on the generic grounds that all spending ought to be monitored carefully to make sure it’s effective and pruned away when it’s not.
Here’s why. I’m obviously more open to high government spending than most conservatives, but even liberals think there’s a limit to how much of the economy ought to be under government control. Speaking for myself, I’d put that limit at 40-45% of GDP. Somewhere in the low 40s, anyway. Currently, total government spending (state/local/federal) is in the low 30s, which means we can afford to increase spending by about 10% of GDP. I figure that changes to Social Security will eat up about 2% of GDP and funding a true national healthcare plan will eat up around 7-8%. That doesn’t leave room for very much more, and even reductions in defense spending only give us another point or so to work with. So we should be pretty careful with other long-term spending commitments.
The way I think about this goes back to a root dispute I would have with the right about the nature of public sector work. A lot of people on the right point to things being done not-so-efficiently in the public sector and say—aha! government is inefficient, we need to let the market in. I look at it the other way around. Where markets work well—primarily in the field of producing consumer goods—they create incredibly efficiencies. But there are lots of fields of endeavor in which markets don’t work well. Since well-functioning markets are the best method we know of creating efficiency, this is a problem. It tends to leave those fields of endeavor plagued by certain kinds of inefficiencies. But since some of these things are very important, they wind up getting taken over by the public sector. Which is, yes, less efficient than the private sector. But not because the public sector “doesn’t work” and its responsibilities need to be turned over to the market but because the things that belong in the public sector are precisely those things for which turning it over to the market isn’t a realistic option.
Meanwhile, one needs to understand that, somewhat counterinuitively, when you have a very efficient economic sector what happens is that it tends to go away. Consider agriculture. Our modern-day agricultural technology is way better than what was available 200 years ago. But agricultural progress hasn’t meant that everyone goes to work in the super-charged high-tech agriculture of the future. It’s meant that more food than ever is grown with fewer person-hours of labor than ever. We should expect this to continue apace. For all the talk of trade’s impact on American manufacturing, the bigger issue has been automation and robots. But either way, even though people will continue to consume manufactured goods—just as we still eat—manufacturing will be a less-and-less important part of the economy. Not because manufacturing “isn’t important” but because it’ll get more efficient. And that’s how the whole private sector part of the economy will go. Markets, doing their work, will make those sectors more and more efficient leading them to shrink as a share of the overall economic pie.
What will be left is big government. Or, rather, bigger and bigger government. Teaching kids. Taking care of the elderly. Patrolling the streets. Making the SUPERTRAINS run on time. And it’s going to be fine.
Which isn’t to say we should crank spending up to 93 percent of GDP next year. But it does mean I don’t think we should set an arbitrary limit. And it also does mean that it’s always important to find ways to make the public sector more efficient and more effective. It can be done. Public agencies are better-and-worse managed and offer better-and-worse performance. But it’s difficult to do and it doesn’t happen automatically the way it does in a well-functioning market. And it also means, as I’ve been taking to saying lately, that we need to think about garnering more revenue in ways that have non-revenue benefits. For example, market-rate prices for street parking not only raise revenue, but allow for more efficient allocation of parking spaces. Similarly with congestion pricing on crowded roads. Auctioning carbon permits will keep the planet habitable and raise some money. Taxes on alcohol and sweeteners would have public health benefits. And on and on down the road.
91 Responses to “The Case for Ever-Bigger Government”
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January 31st, 2009 at 2:26 pm
I know that this is unconscious, but Matt has bought into a Big Right Wing Lie: that government is inherently less efficient than the private sector.
Ironically enough, the best refutation of this was written by a great scholar of the right: James Q. Wilson, in his book “Bureaucracy.” Nickel version: a well-designed government agency can be very efficient. The main design criteria consist of defining and limiting the agency’s mission: most inefficiencies and dysfunctions come from conflicting missions without a clear metric of performance. Medicare, for example, has awesomely low administrative costs compared to private insurance. The Federal Reserve has a check-collection business that competes well with private banks. The TVA wasn’t half bad at its original mission, either.
January 31st, 2009 at 2:27 pm
> It’s meant that more food than ever is grown with
> fewer person-hours of labor than ever. We should
> expect this to continue apace.
While I agree with your overall point here, keep in mind that what you describe in agriculture is true because Americans essentially eat crude oil, and have since 1960 (if not 1920). Unless a sea-based source of biodiesel is developed we can expect our agricultural miracle to grind to a halt no later than 2030.
> For all the talk of trade’s impact on American
> manufacturing, the bigger issue has been automation and
> robots.
This I am afraid is utterly wrong. Yes, there are many automated and robotic manufacturing operations. But the amount of automation in manufacturing reached its peak around 1985-1990 with GM’s failed attempts to roboticize everything, and as a percentage of operations has declined somewhat since then. What has happened is that manufacturing work has moved to places like Malaysia where women are willing to do precise assembly work 12 hours/day for 25 cents/hour, and China where not only are the labor rates low but there are essentially no pollution or environmental controls and safety and product-quality rules are simply not enforced.
Cranky
January 31st, 2009 at 2:32 pm
“Markets, doing their work, will make those sectors more and more efficient leading them to shrink as a share of the overall economic pie. What will be left is big government. Or, rather, bigger and bigger government. Teaching kids. Taking care of the elderly. Patrolling the streets. Making the SUPERTRAINS run on time. And it’s going to be fine.”
Emphatically agree.
—–
The private sector is not ‘abolished,’ it withers away.
We are in a transitional period, which is obviously lengthy, before we reach the utopian period.
January 31st, 2009 at 2:34 pm
I could have done without the picture of Matthew at the top of this post.
January 31st, 2009 at 2:44 pm
What will be left is big government.
Isn’t this a variant of the discredited “lump of (here: private) labor”?
January 31st, 2009 at 2:48 pm
Markets, doing their work, will make those sectors more and more efficient leading them to shrink as a share of the overall economic pie.
What about when new markets emerge? Sure you may be replaced by a farming robot but now you have a job making robots. True it is theoretically possible for labour to become redundant but when has this happened in the past. Technological advances in one industry often shift labour into another industry (often one that never existed before) and our standard of living rises. You can make an argument for big government but it is fallacious to assume big government is necessary simply because markets could possibly ignore labour.
January 31st, 2009 at 2:49 pm
And that’s how the whole private sector part of the economy will go. Markets, doing their work, will make those sectors more and more efficient leading them to shrink as a share of the overall economic pie. What will be left is big government. Or, rather, bigger and bigger government.
Mabye. And for the record there’s a boatload of government programs enjoyed by the citizens of other developed countries that we don’t have but ought to. Still, it seems at least arguable that deadweight losses will accrue as the public sector’s share of the pie increases. Now, most people are willing to put up with some of that deadweight loss because A) it doesn’t have that much effect when the government is only at US-sized levels; and, B) the government services we get in the bargain are prized. But my guess would be a pretty noticeable erosion in economic performance would ensue if we pushed government much beyond 50%. But I almost forgot my main point: what makes Matt think that many other sectors — most of them services, and most of them not even dreamt up yet — won’t multiply like mushrooms to occupy the space freed up by the shrinkage of manufacturing (if manufacturing even is shrinking)? None of this is a vote against expanding government. What it is is a vote against expanding government ad infinitum.
January 31st, 2009 at 2:59 pm
Matt is confusing his argument for big government with his argument for redistribution. If labour is redundant then perhaps you could justify redistribution of capital but why do you need government to tell you where to spend it? Teaching, trains, looking after old people, aren’t dependent on big government. If parents, commuters, and old people had more money the market economy take care of all of this (I would say more efficiently).
The only argument for big government should be that government is more efficient. Otherwise just give people their money and go away.
January 31st, 2009 at 3:07 pm
Cranky Observer,
You are precisely correct. As the modern fossil fuel economy grinds to a halt, I think that low- to moderate- input agriculture (which is much more energy-efficient than conventional agriculture, and much more labor-inefficient) will become a much bigger part of the world economy. this means that the world of the future will involve many more agricultural laborers and peasant communities, and many fewer people working in ’sales’, ‘marketing’, ‘the media’, and all the other unproductive sectors created by modern capitalism. Hipsters don’t like this, of course, as it would require them to get off their @$$ses and actually dig sweet potatoes for a living, but I think that such a future- a harder, harsher, but more meaningful future- would be much more in tune with nature, and with our natural “telos”.
January 31st, 2009 at 3:13 pm
I think that the reputation of the government would go up hugely if money were given to the states and earmarked for the DMV. People don’t distinguish between the state government and the federal government when they think about the inefficiency of “government.” And one experience everyone has directly dealing with government is enduring the DMV.
One response I’ve heard often to the prospect of single-payer health care (including from Republican lawmakers) is that it would make health care like the DMV. Why not clean up the DMV and agree with them.
January 31st, 2009 at 3:16 pm
I think that you have several things right here, but a lot of things wrong. I absolutely agree that automation and other sources of productivity increases are a larger source of job losses than trade. But from there you make a funny conclusion: that the private sector will eventually shrink until it’s basically nothing. This assumes that the market as it stands would stay fixed, modulo efficiency increases. But this is surely false. Though a lot of attention is (rightly) being paid to Keynes these days, I would claim that this century is going to be Schumpeter’s. Dynamism is (for better and worse) increasing, and the longer-term economic story is rapid rates of innovation. Which means a lot of new market sectors opening, alongside lots of other market sectors being eliminated or merely made absurdly efficient.
The private market sector will always exist so long as we keep wanting more and more goods and services. 10 years ago I couldn’t imagine life with a cell phone, I liked burning music cds, and that email thing was pretty neat. Now my iPhone does all of those things and has improved my life, but not in a way that I would have even recognized 10 years ago. That is what is so neat – the iPhone itself makes me wealthier, because it enhances my life in ways that were not possible (or at least not as cheap) before. The biggest lesson that we can take away from our right-wing friends is that we suffer from huge epistemological limitations. We don’t know what new opportunities will exist in the future, we can’t figure out how to satisfy everyone’s preferences, nor can we determine what resources are available either now or in the future. Centralizing decision-making more than is necessary compounds these problems.
The answer, then, isn’t all markets all the time, simply because as many on the left correctly point out, there are lots and lots of market failures, and markets can’t provide public goods very well. But the answer certainly isn’t no markets, as we would hurt ourselves far more than helping. The answer seems to be one of appropriate institutional design. How do we design our institutions such that, in each sector of our lives, we are using the information available in the most socially productive way, that is also compatible with our commitments to justice? Sometimes the answer will be using markets, and sometimes the answer will be a larger role for the public sector. But this is independent of how labor-efficient individual markets get.
January 31st, 2009 at 3:16 pm
I’m quoting everywhere that Matt Yglesias wrote that “we should crank [government] spending up to 93% of GDP next year.”
Wing
January 31st, 2009 at 3:17 pm
One ought to be careful about that 30% figure for government’s share of the economy. Federal, state and local government consumption and investment is now 20.4% of GDP in the US, compared to 19.3% in 1951. See BEA Table 1.5.5.
What you don’t necessarily want to count as a government share of GDP is transfer payment made by government, any more than you want transfer payments made by insurance companies or pension funds to count as share of GDP (for instance, if my auto insurance pays me $20,000 to buy a new car after I total the one I have, that is my personal consumption, not ‘insurance company consumption’, and you cannot count both my expenditure on the car and the insurance company payment as GDP). If you count transfer payments as part of government you get government, consumption, investment and net exports adding up to much more than 100% of GDP. Scary figures like 40% aren’t as scary when you recognize that they rely on double counting and don’t have. a hard upper bound of 100%.
January 31st, 2009 at 3:23 pm
The right has this false dilemma that’s illustrated by the picture above: the larger the public sector, the less freedom there is. Really, though, a larger public sector can create many more options for citizens in the kind of life they want to live. If there are no busses or trains, people have fewer options on how to get to work. I also think the right tends to reduce the idea of freedom when they present this false dilemma. Why should the freedom to choose one’s doctor (not to buy into one of the silly assumptions the right has about socialized medicine) outweigh the freedom to even see a doctor in the first place?
That said, while I agree with Matt’s post, I kind of chuckled at the last remark, “And on and on down the road.” The road to what? Serfdom, perhaps?
January 31st, 2009 at 3:26 pm
One ought to be careful about that 30% figure for government’s share of the economy. Federal, state and local government consumption and investment is now 20.4% of GDP in the US, compared to 19.3% in 1951
Stefan: You must be reading the tables wrong (I couldn’t find it via the link you provided FWIW). US Federal spending alone has been in the 19-22% of GDP range for a while now.
January 31st, 2009 at 3:27 pm
What you don’t necessarily want to count as a government share of GDP is transfer payment made by government…
Stefan: Oops. Sorry. Shouldda read the whole thing first. Mea culpa.
January 31st, 2009 at 3:29 pm
who are these people who still have trouble at the DMV?
make a damn appointment, show up with all the documentation
you need and be done with it in less than 30 minutes
this is generally less time than you will spend dealing with either your wireless or broadband provider when they fuck something up
January 31st, 2009 at 3:33 pm
No, I am reading the table correctly. The key point is that social security and other transfers are government consumption or investment but as private consumption. The data is there in BEA table 1.5.5. Government consumption and investment is 20.4% of GDP now.
There is a difference between private consumption finance by government transfers and government consumption. Lumping the two together can be very misleading.
January 31st, 2009 at 3:34 pm
Oops, that should be
January 31st, 2009 at 3:36 pm
“And that’s how the whole private sector part of the economy will go. Markets, doing their work, will make those sectors more and more efficient leading them to shrink as a share of the overall economic pie.”
If increasing efficiency of a sector and its share of the “overall economic pie” are inversely related over time, what does this imply for the efficiency of the economy as a whole over time?
January 31st, 2009 at 3:37 pm
> who are these people who still have trouble at
> the DMV? make a damn appointment, show up with
> all the documentation you need and be done with
> it in less than 30 minute
What is this “appointment” of which you speak?
As with many things, blue states tend to have DMVs that are as up-to-date as realistically possible for such a function, and not too bad to deal with. IRRC Illinois first allowed on-line plate renewal – by modem – in 1992.
Red states, on the other hand, tend to have horribly inefficient policies, procedures, and departments. Missouri’s is the worst I have ever heard of, where they actually sell the operation of DMV offices to the highest bidder as selected by each newly elected governor and those operators have a fee-based incentive to make each transaction as INefficient as possible. But many other red states are almost as bad.
Cranky
January 31st, 2009 at 3:40 pm
Not everything good is profitable; I’ll be more precise and say that not everything that’s in the _public good_ is profitable. If you’re lucky, spending money on public health gets “wasted” because people get less sick and consume fewer expensive pharmaceuticals and medical procedures, no? I agree wholeheartedly that “efficiency” is stupid as a one-size-fits-all metric for human enterprises.
January 31st, 2009 at 3:42 pm
I think that such a future- a harder, harsher, but more meaningful future- would be much more in tune with nature, and with our natural “telos”.
And you’ve worked on a farm for how long, Sir Hector The Chaste? Or do you envision riding from field to field on your stallion to survey the serfs?
January 31st, 2009 at 3:48 pm
For me the size of government should be constrained if it doesn’t let me do things that pose no real harm to others. I want to pIay violent vidoo games and say what I want without being detained and tortured me to death. If government wants to make me pay taxes and provide useful services with them then I am fine with that as long as I can help fire the people in charge without cause.
January 31st, 2009 at 4:02 pm
I’m writing just to underline the comments by Ryan and stefan. I often agree with Matt, but in this case I think he’s gotten a couple of things crucially wrong.
The final implication of these errors is difficult to interpret, because Ryan’s point and stefan’s are actually pushing in opposite directions.
Stefan notes that govt consumption is closer to 20% now, but Ryan points out that, on the other hand, there’s no reason to expect the private sector to gradually wither away, because human desires are *not* finite, and increased efficiency usually causes them to expand.
Let me add another point: in reality, the upper limit on our lefty socializing impulses is probably a situational and competitive limit rather than an absolute one. The level of taxation that would cause capital flight is a variable that probably depends very much on existing levels of taxation in Europe and Asia.
January 31st, 2009 at 4:10 pm
23: The phrase ‘Donner party Republican’ comes to mind, but I know Hector isn’t a Republican. He is his own special brand of crazy, but to be fair, his advocacy involves a lot less deception than the Republicans.
January 31st, 2009 at 4:13 pm
Re: While I agree with your overall point here, keep in mind that what you describe in agriculture is true because Americans essentially eat crude oil, and have since 1960 (if not 1920). Unless a sea-based source of biodiesel is developed we can expect our agricultural miracle to grind to a halt no later than 2030.
The world’s agricultural efficiency began to shoot up back in the 18th century (same time as population started to rise– obviously the two are related). Not until the early 20th cnetury did oil become a significant factor in that increase. And while there may no more Great Leaps Forward, I expect that our acricultural productivity will continue to rise gradually, fueled not by innvations with oil but by genetic technology, alternative energy and by other technologies we can only guess at.
Re: This I am afraid is utterly wrong.
No, it’s not. You can build a car with about ten percent the human workforce needed 60 years ago. (To some extent this true becasue the components of car themselves have changed: less steel, more plastic and electronics)
January 31st, 2009 at 4:17 pm
“The private sector is not ‘abolished,’ it withers away.
We are in a transitional period, which is obviously lengthy, before we reach the utopian period.”
‘Twas ever thus, Petey. And ever shall it be.
January 31st, 2009 at 4:21 pm
“who are these people who still have trouble at the DMV?”
It is better in some places. Uniform improvement would be important, as well, perhaps, as trumpeting this.
Here’s a survey on opinions of the DMV:
http://www.govtech.com/dc/articles/103461
It needs to be better. Until it is, right-wingers will point to it as exhibit A of what Government is really like.
January 31st, 2009 at 4:26 pm
For all the talk of trade’s impact on American manufacturing, the bigger issue has been automation and robots.
Not really the point of your post, but there’s no dichotomy here. They’re both facets of the same phenomenon.
January 31st, 2009 at 4:34 pm
I’d be fine with shrinking the size of government–if it centered around cutting the defense budget. Jesus Christ, do we *really* need to spend more on weapons than every other country in the world combined?
January 31st, 2009 at 5:00 pm
P.A.T — hells to the yeah, we do! Duh! That way we can take ‘em all on at once.
January 31st, 2009 at 5:12 pm
I’m sure previous generations had the same argument.
“Government spending is 10% now, I don’t think it will be a big deal if I “improve” that ratio to 12%.” And so on.
Eventually… “Government spending is 95%, what’s the difference if its 100%?”
January 31st, 2009 at 5:28 pm
Matt your central premise is wrong. Yes, agriculture shrank as a share of the GDP, but agriculture became manufacturing which became telecommunications which became the electronics industry which will become something else. Your argument is wrong because it assumes a static set of economic goods and services.
January 31st, 2009 at 6:10 pm
I’m sorry, but I’m not willing to go down the road Matt here thinks we should. In this scenario, there just won’t be enough jobs that pay enough to make anything worthwhile.
What Matt describes is a society with two classes, masters and slaves.
January 31st, 2009 at 6:15 pm
In fact, I really don’t think Matt understands just how much of the anger at trade is based on the fact that all it leaves is service sector jobs. Since he’s never actually worked one of those jobs, he has no concept as to just how shitty people of his class treat the people who work in those jobs. He has no concept of how soul-destroying it really is to have people treat you like shit all day, and having to take it or get fired.
He’s kept man of the upper class. He’s never actually had to live life like most people have, he’s always had his family and the connections they have to fall back on. He’s never had to struggle with the realities most of us have. That’s not to say his life has been without troubles, but he hasn’t been ground into the mud by condescending, often stupid pricks and bitches that think the whole world is their playground and everyone else has to wipe their asses and clean up their messes.
January 31st, 2009 at 6:41 pm
The post that Matt links to should be Exhibit A in the case of Kevin Drum is a Fucking Tool. He pulls the 40-45% figure out of his ass, not out of any principled or pragmatic reason, but just because that figure would entail more government control than we have now, but would still leave most of the economy under the private sector, a state of affairs which is not intrinsically good or bad but which Drum must support to maintain his centrist/mainstream cred.
Thus any proposed government spending that would help the poor or the middle class is to be capped as soon as the government’s share reaches 45%. Why? Just because people like Kevin Drum say so.
Also, enough with the “SUPERTRAIN” stuff. Why does every blogger feel the need to rip off every stupid in-joke from Atrios’s blog?
January 31st, 2009 at 6:55 pm
Many valid points in comments. I’d support in particular the one about efficiency not being an absolute good to be privileged over all others. Quite apart from which, private sector firms are not interested in efficiency per se but in maximising profitability and/or sales. Often efficiency is a pathway to achieving these objectives but not always.
Moreover, the search for efficiency can disadvantage consumers. When electricity supply was a government service in Australia, the suppliers had what I would call an ‘engineering culture’. Their objective was to provide a 100% reliable service; any interruption to supply was regarded as a professional failure on their part. Sure the labour practices were marked by a lot of featherbedding and there was probably more capital investment than was strictly necessary, but the end result was a superb electricity supply.
Since the industry was substantially privatised, supply has become less reliable. The engineering culture has been replaced by a profit maximisation culture in which a certain number of supply interruptions are accepted by management as the justifiable result of maximising efficiency. It’s efficient (or at least profitable) to minimise spending on routine maintenance and purchases of new equipment even if more frequent interruptions to supply are the result. After all, it’s not like customers can go to another supplier.
In other words, there is often a trade off between efficiency and quality. Just look at the quality of many manufactured electronic goods from China – they are lucky to last more than two or three years (that’s if they work at all out of the box), but they’re so cheap nobody cares too much; you just go buy another one when they break. This might be acceptable for cell phones or DVD players but it’s not acceptable in health care or education, where the consequences of poor quality services are likely to be irrevocable.
Governments should provide goods and services in instances where citizens’ want a guaranteed standard of quality rather than the cheapest possible price. Trying to find out what these goods and services are is, needless to say, a complicated political issue but it should be tackled as such and not over-ridden by simplistic ’small government’ ideologies or arbitrary quantitative limits on the government’s share of economic activity.
January 31st, 2009 at 7:50 pm
I predict that after 8 years of Obama, Kevin Drum will vote Republican. Kevin has been getting suspiciously level-headed while everybody else is losing their heads over the power and the glory that is The One.
January 31st, 2009 at 8:03 pm
He has no concept of how soul-destroying it really is to have people treat you like shit all day, and having to take it or get fired.
Because of course, the fulfillment of stamping out widgets on the assembly line is so great it has inspired homeric epics. And all those strikes throughout history must of just been the workers just taking a brief time out to tell the world how awesome their bosses were.
January 31st, 2009 at 8:39 pm
While the impact of trade on current employment can be overstated, per usual, yglesias poses an argument of conjecture based on his politics. Call it back door neoliberalism.
Rather than a traditional neoliberal who tries to extol the virtues of trade, he prefers to just ignore its impact entirely. Sort of clean the slate away.
His logic of automation and so forth is both incomplete and a little dated.
Nonetheless, I think Yglesias’ recent appearance on Maddow maker clear his knowledge of the economy makes clear this reality. He made the point that Clinton’s budget created the prosperity of the 90s. Whatever the merits of Clinton’s budget – which were valid and certainly helpful – they did not create the 90s surge. That was the result of the dot com bubble. Pretty elemental.
January 31st, 2009 at 8:43 pm
Last paragraph should read:
Nonetheless, I think Yglesias’ recent appearance on Maddow makes clear his knowledge of the economy He made the point that Clinton’s budget created the prosperity of the 90s. Whatever the merits of Clinton’s budget – which were valid and certainly helpful – they did not create the 90s surge. That was the result of the dot com bubble. Pretty elemental.
January 31st, 2009 at 8:43 pm
Kolohe,
Industrial workers are actually producing something, whether it be cars, clothing, or whatever, in which they can take pride. That isn’t so for a lot of service workers, and it helps to explain the alienation in modern society, as people’s energies have become employed in ever more meaningful ways. Hence my reference above to man’s telos.
Assembly line work can, also, be alienating, that’s why a healthy industrial society would place control over enterprises in the hands of workers’ cooperatives.
January 31st, 2009 at 9:10 pm
Matt’s right that it’s not ideology that should determine the size of government expenditures as percentage of the economy. I doubt that every sector that is best left to the market is going to be relatively more efficient in terms of productivity per hour of labor.
In short, there’s nothing that a lower-level bureaucrat can do that a government robot could not do better!
On the other hand, there are sectors that (i) will grow over the coming decades (ii) will remain in private ownership, and (iii) will remain labor intensive: Personal training being a good example. I don’t think a government robot could motivate me to do crunches.
January 31st, 2009 at 10:05 pm
“For all the talk of trade’s impact on American manufacturing, the bigger issue has been automation and robots. But either way, even though people will continue to consume manufactured goods—just as we still eat—manufacturing will be a less-and-less important part of the economy. Not because manufacturing “isn’t important” but because it’ll get more efficient. And that’s how the whole private sector part of the economy will go. Markets, doing their work, will make those sectors more and more efficient leading them to shrink as a share of the overall economic pie.”
This is true, as far as it goes, but you leave a big matzoh ball hanging out there: Why is the private sector so eager to minimize the use of labor and replace it with automation? Could it have something to do with liberal policies which make labor more expensive (e.g., OSHA regs for office workers’ ergonomics, affirmative action regs, unionism, etc.)? The more you make an employee a liability — a walking lawsuit waiting to happen — the more you encourage industries to hire as few workers as they can.
That’s not to say that automation wouldn’t reduce the percentage of workers employed in sectors such as manufacturing anyway — of course it would — but why do more to discourage private sector employment?
January 31st, 2009 at 10:06 pm
Kolohe, on the assembly line you aren’t exposed to an endless supply of customers, each willing to make you feel like shit by taking out their personal furstrations on you. Plus, on the assembly line, you generally got paid more than $10 an hour. In most ’service industry’ jobs, you make less than that,
Again, I really don’t think you have any clue what you’re talking about.
January 31st, 2009 at 10:12 pm
Related to this, a few months ago I took <a href=”http://thehackensack.blogspot.com/2008/10/tale-of-two-states-utah-versus-rhode.htmla look at two states with radically different unemployment rates — Rhode Island, which at the time had the highest unemployment rate in the country, and Utah, which, at the time, had one of the lowest. There are a lot of variables at play here, but two jumped out: Rhode Island ranked 50th in business tax climate according to the Tax Foundation, compared to Utah that ranked 17th; and industrial energy costs in Rhode Island were almost three times as high as those in Utah (Utah’s energy costs were low thanks to its copious use of coal). That suggests that government policies to lower tax burdens on businesses and to lower energy costs might encourage more private sector employment.
Was going to elaborate more, but I’m being told dinner’s getting cold…
January 31st, 2009 at 10:13 pm
You rush, you mess up the HTML. That should work. Now, to my lobster ravioli.
January 31st, 2009 at 10:14 pm
Ugh, I should replace myself with automation. Third try.
January 31st, 2009 at 10:16 pm
Matt: “What will be left is big government. Or, rather, bigger and bigger government. Teaching kids. Taking care of the elderly. Patrolling the streets. Making the SUPERTRAINS run on time. And it’s going to be fine.”
You’re an idiot. Government has never done ANY of those things competently and never will, not merely in spite of, but BECAUSE of how much money you pump into it.
January 31st, 2009 at 10:24 pm
Soullite:
While I agree with you about the current indignity of the ser ice sector, I think you have it a bit backwards.
There is nothing inherently dignifying about industrial work. Prior to the labor movement, in fact, it was quite a shaming life. I say this as the proud descendant of generations of steelworkers – including those at Homestead. They fought for the wages, they were not given and it was not pretty. But you are right, after labor came in it created decency and remuneration.
That said, while our current policy of manufacturing decline is absurd and wrong, some dignity can be brought to the service sector – through unionization.
But the assembly line and the factory were not great. It was through collective bargaining, democratization and solidarity that made this work better.
However, the absence of an industrial policy is a wart on America that will damn to a life of indebtedness and places serious problems concerning our productivity differential. But service work can be changed, and must.
January 31st, 2009 at 10:38 pm
I’m going to chime in and agree with the two criticisms everyone has made of Matt’s post, and then turn around and disagree with everyone else who’s made them.
First, Ryan et. al. are totally right about the continued growth of the private sector. Industries that the private sector can handle well ill tend to shrink, because the private sector is very very good at making processes more efficient, when it’s not horribly misaligned (incidentally, I think y’all tend to be a bit cavalier about the magnitude of the efficiency advantage markets have over government planning; but then, libertarians tend to be a bit cavalier about the potential for markets to horribly misfire under the wrong circumstances, so it’s all good). But the private sector is also very good at finding new ways to improve people’s lives, so the old industries will be replaced by new.
You’re making the same mistake that a lot of the socialists in the early 1900’s did, when they said, “Oh, soon automation will advance so much that we won’t need to spend so much time doing manual labor, and then we can all kick back and relax, because everyone will have enough of everything.” They were right that soon it would be really cheap verging on free to have all the stuff they could think of; if we wanted to live at 1920s material standards of living we could all work about five hours a week and then go home. But people found other useful things to do with that free time, so instead we all work a little less and have orders of magnitude more resources.
But it’s true of course that there are some things the government does better, and it seems clear that the government should in fact do those things. What makes me sympathetic to the “hard cap on government outlays” argument is deadweight loss. Anything we can fund out of Pigouvian taxes and legitimate voluntary service fees is good. But from what I’ve read it appears that pushing income taxes above around 40% leads to serious deadweight loss, and you actually risk crossing the max on the Laffer curve if they hit 50% or so. Which is why I’d like to keep, not total government control of the economy, but total government _spending_ below 40% or so. Which answers Stefan’s point; transfer payments don’t increase direct government control of the economy, but they do increase deadweight loss.
January 31st, 2009 at 11:41 pm
Excellent post by Matt, except for the final sentence (Matt’s paternalism is unfortunate).
DTM:
Whether or not there is any fundamental reason that the sectors in which government management is best are less likely to permit declines in labor due to productivity improvement, it sure seems to be the case in practice. Education and healthcare aren’t experiencing productivity-induced declines in labor, nor will they in the near future–there’s just not that much technology can do to improve education, and technology tends to increase rather than decrease the economic extent of medicine.
February 1st, 2009 at 12:27 am
there’s just not that much technology can do to improve education,
Sure there is, it’s just that as a society we frown on it.
It’s called eugenics.
February 1st, 2009 at 1:02 am
soullite, I think you’re getting confused here. MY isn’t talking about the service industry (restaurants/hotels/cleaning) he’s talking about the service sector of the economy, which includes not only the above but also Wall Street, doctors, Hollywood, hairdressers, teachers -and Matthew Yglesias.
Some of it’s shit work- and, yes, I’ve done it- but I’ve also picked strawberries and tomatoes for 12 hours a day, and stood hip deep in chicken guts at a processing plant on a hot August day.
Here in Taiwan, for example, they have to import workers to do construction and factory jobs because all the non-college- graduates who would normally do that prefer to work in nice clean McDonald’s, 7-11s, and box stores.
Personally, I hate the public- but there’s nothing inherently degrading in service work, just as there’s no particular reason for some of it to be so badly paid or have such crappy working conditions.
February 1st, 2009 at 2:26 am
“One ought to be careful about that 30% figure for government’s share of the economy. Federal, state and local government consumption and investment is now 20.4% of GDP in the US, compared to 19.3% in 1951. See BEA Table 1.5.5.”
Conservative writer Charles Murray wrote an interesting book a few years ago called In Our Hands. He proposed abolishing most of the federal government (as you’d expect Murray to propose) but then cash out the savings to citizens on a per-capita payment– I think his number was $10,000 annually to each adult American.
http://crookedtimber.org/2006/06/01/charles-murrays-in-our-hands-left-or-right/
February 1st, 2009 at 3:19 am
DTM,
Yes, I suppose it’s possible that technology will eventually allow us to solve our education and health care problems with a drastically reduced labor force, but we’re not seeing the kind of incremental improvements in those areas that characterized, for example, the productivity gains and labor losses in agriculture and manufacturing. So I think Matt’s argument applies for at least the near-to-mid future.
As for healthcare being “a specific case of innovation inducing new demand”, my point (in agreement with Matt’s) is the sectors which happen to have innovation inducing new demand as opposed to innovation merely reducing the necessary workforce to satisfy existing demand tend to be (in practice) those sectors in which government action is justified.
Finally, whether or not healthcare itself is privately provided is somewhat besides the point; as long as government involvement in the health sector is higher than average government involvement in sectors, then a relative expansion in the health sector will result in an increase in government size and impact.
February 1st, 2009 at 6:55 am
MikeN, I think you’re confused. You can’t seperate what Matt’s talking about from what I’m talking about.
There will NEVER be enough government jobs to employ everyone. Matt is an ardent neo-liberal free trader. As neo-liberals are all liars who make promises they never intend to keep, it’s hard to interpret this as anything else other than one of their ‘we’ll get around to helping normal people… eventually… after corporations have gotten rich enough… after we’ve helped every third world country on the planet get richer at the expense of our own citizens… maybe’ BS excuses. Just like they were going to add worker protections to trade bills. Like they were going to give 50 year olds ‘job training’ to start new careers. Like every other bullshit argument they make that either wouldn’t work, or they never intended to follow through on. Until you people stop lying through your teeth, why should anyone listen to a god damn thing you have to say? Why should anyone take your arguments any more seriously than we take Republican Straussian BS?
No. The only real result of Matt’s ideology is the creation of a country we’re already starting to see: a playground for the wealthy upperclass where the rest of us are nothing but their servants.
And there may not be anything inherently degrading about service work, but as long as US culture is what it is, people degrade service workers. Lets not pretend we live in a world where people don’t act like assholes who piss on everyone they think is beneath them. That’s how Americans act. That’s why everyone else hates American, because we think we’re better than everyone else and we piss all over them.
February 1st, 2009 at 7:00 am
Jeff, lets deal with the world that exists now and not the world that existed in 1904.
Right now, they have labor laws and safety rules and all sorts of government agencies that at least somewhat enforce those rules. they have unions to prevent too many abuses. At worse they have to deal with corporate bastards who may hate them, but have to hold their tongues to a degree that customers of service workers never feel the need to.
Service people have to deal with the ‘customer is always right’ attitude that dictates they let people treat them like shit and grovel for more.
As long as our culture dictates that service worker=servant, this won’t change. There aren’t any labor laws you can pass to change that. Capitalism dictates through it’s markets that people get to treat these people like shit, or those customers will go someplace else where they can treat people like shit.
February 1st, 2009 at 10:07 am
Capitalism dictates through it’s markets that people get to treat these people like shit, or those customers will go someplace else where they can treat people like shit.
Well, it wasn’t any better under socialism (and I have some first hand experience of that), where customers were universally treated badly. And under capitalism it cuts both ways: there are customers who treat service personnel badly, there are companies and by extension service personnel who treat customers badly.
However, and I can only speak from a UK perspective here, I’d say about 80% of my encounters with service personnel are respectful, friendly and productive. If they’re not, I am glad that I have the option of choosing to do business with companies who do things better. And while it’s easier for a customer to move his business elsewhere, it’s in most cases possible for an employee to eventually find a job in a company that appreciates both his work and the business of its customers.
February 1st, 2009 at 11:50 am
The real issue is who gets to spend your money.
For conservatives its you. You earned it so you should keep it or spend it as you choose.
For government lovers (socialists, liberals, democrats and related), its the government because the government better knows how to spend it.
Conservatives claim that the government didn’t help them earn it; the poor didn’t help them earn it; foreign countries didn’t help them earn it; artists, teachers and college students didn’t help them earn it; unions didn’t help them earn it; the old and crippled didn’t help them earn it — so why are these groups demanding handouts (of their money).
Government lovers claim that government did help them earn it and that the various gimme groups helped in some way (or feel – there’s that word again) they should be given money as the money earners have (more than) enough.
When has government ever decreased in size or cost? That is proof it’s already too big.
February 1st, 2009 at 12:09 pm
Conservatives claim that the government didn’t help them earn it; the poor didn’t help them earn it; foreign countries didn’t help them earn it; artists, teachers and college students didn’t help them earn it; unions didn’t help them earn it; the old and crippled didn’t help them earn it — so why are these groups demanding handouts (of their money).
Jesus, if there are conservatives who really think that way, then they are really incredibly stupid and have no grasp of the most basic economic fundamentals.
February 1st, 2009 at 2:31 pm
soulite-
someone already said this but you’re the one, not our ‘culture’ that is equating service sector with ’servant’. Is a bank teller a servant? An electrician? An accountant? A cop? A firefighter? An EMT? A nurse? A doctor? A lawyer? etc..
Productivity gains since the beginning of the agricultural revolution, that really took off with the industrial revolution, have inevitably led to producing more with less people. This is both a blessing and a curse. Marx was right about the past, but wrong about the future.
You fear a post scarcity economy. I would love nothing better than for it to come to fruition.
As a postsrcipt, there’s also the factoid that the median worker at McDonald’s is there for less than 4 years. So even if most of them are treated like garbage, the workers move on after a brief time.
February 1st, 2009 at 5:30 pm
It is a fantasy to think the government can substantially increase its spending. When the total debt of the US is calculated it far exceeds the numbers discussed here. When you add in the unfunded liabilities of the entitlement programs, the debt if 5.5x greater than the roughly $10 trillion the US Government and Congress quote most often. While some want to discuss the health of the US without them. It is like saying you want your doctor to give you a clean bill of health, but you want them to ignore the 40 extra pounds your are carrying and the fact you smoke 4 packs a day.
Of course, that was at the end of the most recent fiscal year for the US Government (Sept. 30, 2008). It excludes the massive spending since then. There is only one report issued by the US Government that actually uses GAAP. It accounts for the current spending of the US Government and its obligations that it owes by current law. It is the “Financial Report of the US Government.” When you take into account the unfunded liabilities of the US Government, the debt is overwhelming. Add in the unfunded liabilities at the state and local level, and the amount of future taxation required to cover the actual debt and future liabilities is already at unsustainable levels.
The accounting games played over the decades are well known. Until the Johnson administration, the payroll tax was not part of the budget deficits or surpluses. The “Unified Budget” made it so the payroll tax was treated as regular tax revenue.
It is a matter of time until US bonds are no longer considered safe and the US will be forced to pay much higher interest rates to attract investors. Along with that will be dramatic inflation. The US will simply start to print money.
February 1st, 2009 at 7:32 pm
Meanwhile, one needs to understand that, somewhat counterinuitively, when you have a very efficient economic sector what happens is that it tends to go away. Consider agriculture. Our modern-day agricultural technology is way better than what was available 200 years ago. But agricultural progress hasn’t meant that everyone goes to work in the super-charged high-tech agriculture of the future. It’s meant that more food than ever is grown with fewer person-hours of labor than ever. We should expect this to continue apace. For all the talk of trade’s impact on American manufacturing, the bigger issue has been automation and robots. But either way, even though people will continue to consume manufactured goods—just as we still eat—manufacturing will be a less-and-less important part of the economy. Not because manufacturing “isn’t important” but because it’ll get more efficient. And that’s how the whole private sector part of the economy will go. Markets, doing their work, will make those sectors more and more efficient leading them to shrink as a share of the overall economic pie.
What will be left is big government. Or, rather, bigger and bigger government. Teaching kids. Taking care of the elderly. Patrolling the streets. Making the SUPERTRAINS run on time. And it’s going to be fine.
Just FYI, though less sophisticated, this argument has a definite similarity to Marx’s discussion of the ‘tendency of the rate of profit to fall‘ – as does the conclusion.
February 1st, 2009 at 11:30 pm
Conservatives claim that the government didn’t help them earn it; the poor didn’t help them earn it; foreign countries didn’t help them earn it; artists, teachers and college students didn’t help them earn it…..;
From one sage
Jesus, if there are conservatives who really think that way, then they are really incredibly stupid and have no grasp of the most basic economic fundamentals.
And another
An educated work force didn’t help them earn it, transportation didn’t help them earn it, policing didn’t help them earn it…/em>
In short, conservatives by this definition are people who don’t understand that without civil society, the life of man would be solitary, poor, nasty, brutish, and short.
So, the response is that either one doesn’t understand basic economics or they don’t understand basic economics.
The street mugger is more honest about it. He doesn’t care if you know basic economics or would rather live a solitary life. He wants your money for his use now. No excuses, no hand wringing, no pleading. Its a simple, yet honest demand. “Give my your money for my use now.”. He will then spend it on his own economic stimulus.
So explain to this economic moron who would rather live a short brutish life, exactly why are you trying to force me to spend my money your way? I’m not trying to dictate how you spend your money.
February 2nd, 2009 at 12:03 am
As each sector other than “Buggy Whips” becomes more efficient, they shrink as a % of GDP. Buggy Whips is the only thing left, so it must be growing as a % of GDP.
February 2nd, 2009 at 3:49 am
Meanwhile, Vladimir sticks it to the West, demonstrating a better grasp of free market economics than just about everybody in the US:
Putin to the West: Take Your Medicine
And don’t go socialist
http://www.antiwar.com/justin/?articleid=14178
February 6th, 2009 at 9:30 pm
No no no. Why can’t robots care for the elderly and patrol the streets and make the supertrains run on time?
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