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Spare Time Dilemma
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The Spare Time Dilemma It is somewhat ironic that a significant world-wide positive trend is causing so much economic trauma for western economies.

Literally hundreds of millions of people in countries like China, India, Brazil, Indonesia and the Philippines have been moving from subsistence living.  They have been moving from lives of having to spend all of their working time simply growing enough food to support themselves and their families to being able to purchase commodities and have life styles that have been enjoyed in the west for years.  They are doing this by applying technology in agriculture allowing far fewer people to be able to supply enough food to feed the population and then using the spare time created to produce all types of manufactured goods and supply a large variety of services from call centres to accounting.  This trend on a world-wide scale is surely a major positive development.

However for the west this trend is causing a major economic upset because many manufacturing and service jobs that were previously performed by workers in the west can now be performed by these previously “developing” countries.   As a result higher levels of unemployment are becoming chronic in many western countries as well as causing a major shift in economic wealth.  The debt crisis in the west is mostly due to western countries purchasing more from the developing world than they are selling. These purchases are for the manufactured goods and services that the “developing” countries are now supplying.

This issue can be termed a spare time dilemma because due to the application of technology a large amount of human resources has been freed up from a subsistence life style to be able to perform other tasks.   It has provided an increase in wealth for the poorer nations but has caused the displacement of workers in the west.  In other words the spare time that has been created is being used by people previously having no spare time to increase their standard of living but has caused a lot of unemployment and underutilized spare time in the west.

Surely this is a dilemma that we can manage.  There are so many ways that we can use this spare time that is now showing up in western countries by increasing conservation efforts, improving health care, increasing education and simply increasing the time for pleasure.  Unfortunately our innovative skills in being able to address this problem are restricted by financial systems which are supposed to service us and instead they have become our masters.

In subsistence societies where close to 100% of effort is required for the bare essentials, good times and bad times are caused by weather events, disease, and war.  In developed societies good times and bad times are generally caused by how we utilize our surplus effort.

Political leaders should have the following two economic objectives: 1. Ensure that the maximum number of individuals are employed 2. Maximize the efficiency of the effort being expended by individuals while working

Right Wing Folly The general folly of right wing politicians is that they tend to overly emphasize the second objective.  They are usually very critical of government bureaucracy and in particular the number of employees at all levels of government.  If 20% of the least productive employees in the government sector are laid-off, the efficiency of the government sector will improve.  However, the number of individuals unemployed will increase and the efficiency of society as a whole may very well decrease. 

Along with this desire to increase efficiency is the desire to balance the budgets; the right wing priority is that governments must not spend more than they earn.  This can result in a depression spiral, the government spends less lays off employees as a result the GDP diminishes, the government then earns less and has to lay off more employees.   This was actually the story of the great depression.  It is interesting to note that that economic cycle was finally reversed when huge amounts of government stimulus money was input to the economy as a result of the second World War.   In effect the surplus effort that was so abundant in western societies was used up by the war effort.

Left Wing Folly The general folly of left wing politicians is that they tend to overly emphasize the first objective.  They often promote policies which increase the number of government employees or jobs sponsored by government funds in order to increase employment.  There is often very little attention paid to the efficiency of the effort in the work being performed by the individuals employed under these policies. Employment efficiency is the usefulness of the work being performed by an individual.  Usefulness is whether other individuals in a society benefit from the function being performed.   A nurse helping patients recover from sickness is obviously a useful endeavour.   A group of employees having endless meetings where nothing is decided is obviously not a useful endeavour. The collapse of the Soviet Union was an example of the failure of extreme left wing policy.  The Soviet society theoretically had 100% employment; however the efficiency of the employed people became so low that their standard of living fell to almost a subsistence level. 

Economic Cycles Understood Economic cycles in developed society are to a great extent a function of the fluctuation in our ability to handle surplus effort as it becomes available.  From 1800 to 1950, technology enabled western society to produce the food that they needed with fewer and fewer people.   As the surplus agricultural labour became available, the boom times represented periods when this surplus labour was efficiently utilized to provide more goods and services, a good portion was used to produce cars; other portions were used to provide increasing levels of health and education.  

The depression and recession eras were times when the surplus effort was not being efficiency utilized.   These eras were usually started with a market upset where the general population for whatever reason decided that it didn’t want as much of the type of market products that were being produced.  Often it has been cars and houses.     At certain levels of production the supply exceeds the demand, causing a fall in prices and profits resulting in layoffs.  This situation can then be compounded, if the different government levels decide that they have to cut back because of the downturn and reduce education and health services.

Fiscal and Monetary Policy Governments are now trying to moderate economic cycles by both fiscal policies, controlling spending and monetary policies, controlling money supply.   Governments are generally doing much better during this current dilemma than they did in the 30’s but they are being hampered by not having adequate tools for monitoring the health and prosperity of a society.  Considering that the two objectives should be to simultaneously maximize employment and maximize efficiency additional metrics is needed.

New Metrics Required for Measuring Prosperity The two key metrics used to monitor the prosperity of a society are Gross Domestic Product (GDP) and percent of unemployment.  Percent of unemployment is self explanatory; GDP is measured in different ways but basically it is the sum of all the incomes earned by individuals, corporations and non-governmental organizations.  These two metrics by themselves do not adequately measure the ability of a society to utilize its surplus effort as it becomes available.

As a society applies technology and innovation, effort previously required is freed up.  For example the effectiveness of search engines like Google reduces the need for information research personnel.  Private and public organizations used to require a large number of employees to find and categorize information.   Much of the work that these individuals have performed can now be done easily without any training.  From a society perspective this is a positive because these individuals are now available to expend effort in other ways.

The key to a society increasing its prosperity is to effectively utilize this type of surplus effort.   If organizations continue to employ these individuals but have them do redundant tasks, the GDP level is maintained and the unemployment level is not increased, however, the level of prosperity is not increased either because the surplus effort that has become available is simply wasted.   On the other hand if the individuals are laid-off the GDP is reduced the unemployment level is increased and generally it is recognized as a decline in a society’s prosperity level.  However, in actuality the impact is the same for both types of actions, prosperity is not increased because the surplus effort is wasted. In the above example, if the information research personnel find employment in producing new market place products or in providing additional public services the prosperity of society is increased.

   Justice in Reaping Benefits of Technology Justice is another consideration in dealing with the situation.   The benefits of technology and innovation should be shared by all of society and not just corporate executives.  In the current situation international corporations are shifting manufacturing facilities out of the western world to where the new surplus effort is available and are reaping the benefits while former employees are being laid off.  These executives are not the ones that by themselves created the technology that has resulted in these benefit s and accordingly it is unfair that they reap huge financial rewards while their former colleagues suffer.  The financial and government policy structure must be such this type of injustice is corrected.

Effort Index and Efficiency Index With our increased computational capacity, we should be able to develop and utilize metrics that are based on people economics that can more accurately measure society’s ability to make use of surplus effort.

An Effort Index would be a measurement of the total hours of effort expended within a society.  This measurement would be a computation of the total hours of work expended regardless of the salary level and would also include voluntary work.  One of the difficulties of the GDP measurement is that the effort of a professional athlete earning $2 million a years is given the same value as 30 to 40 public school teachers because it is a financial measurement and not a people measurement.  The GDP measurement is an important indicator of a society’s prosperity but it should be enhanced with an Effort index.

An Efficiency Index would be much more involved and would be difficult to establish.  It would be a measurement of useful product or service provided per hours worked.  In the private sector this calculation is already performed for many types of organizations.  There is already good data on the hours required to manufacture a car and to produce food products.  For the public sector it would be a greater challenge but it should be attempted.  The number of hours to administer and collect taxes should be monitored, as should the amount of effort to provide basic health and education services.  Of course, for health and education there would need to be a recognition that the level of health and education services is continually increasing so that the efficiency could be continually increasing but at the same time the number of individuals involved in these areas could also be growing  because additional services are being added.

People Economics Should Govern Financial and Monetary Policies If additional metrics such as Effort and Efficiency indices were developed, they could be used to govern fiscal and monetary policies.  The amount of money supply available and the level of government spending should be tied to the objectives of maximizing employment and effort efficiency.   It these two objectives are met a society will be prosperous and financial system should be adjusted as necessary to obtain them.  

Paul Willis

Street Talk

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