by J. W. Smith, Ph.D
We all want a peaceful and prosperous world, yet nations continually battle over the planet's natural wealth and keep the world impoverished. If the citizens of the industrialized world knew that poverty could be largely eliminated, even as they worked fewer hours, politicians would have no choice but to work for peace and the prosperity that it would bring.
Industrialized societies seem to be on a treadmill, producing more and more but gaining little, and at times even regressing in standards of living. The rest of the world also seems to be on a permanent treadmill, of endless poverty. With technology becoming ever more efficient and productive, why is this?
The cause of most poverty in the world is the waste of the three foundations of production - labor, industrial capital, and resources.
More than 50 percent of American labor is wasted; at least 30 percent of the nation's industrial capital is wasted; and 30 percent of the country's resources are wasted. The Cold War alone wasted five times the wealth necessary to do away with most poverty.
Unnecessary Labor
In 1953, it was estimated that half of the US's 1.3 million railroad workers were performing unnecessary work. Looked at another way, 50 percent of their wages were only an honorable form of welfare. In 1990, with the country's railroads hauling almost twice the freight, only 230,000 railroad employees remained. Railroad managers say they can soon operate with only 100,000 workers - four percent of the labor per ton-mile that was required 40 years ago. (One hundred tons hauled one mile is one hundred ton-miles.)
With such a dramatic reduction in labor costs, why have freight charges steadily increased? Economist Ralph Borsodi noted the phenomenon in his 1927 book, The Distribution Age:
Bigger freight cars and locomotives ought to lower transportation costs, but they do not seem to do so. Speedy delivery cars and powerful five-ton auto trucks ought to lower drayage costs, but they do not seem to do so. Larger grain elevators, more efficient cold storage warehouses, better terminal facilities, a better currency and a better banking system, typewriters, adding machines, bookkeeping machines, cash registers - automatic machines for even such trifling operations as stamping and sealing envelopes - all ought to lower the cost of distribution. But they do not seem to do so.
The explanation lies in the waste of resources, industrial capital and labor.
Emeritus Professor Seymour Melman, an industrial engineer at Columbia University , has calculated that more than 50 percent of the administrators of corporate America are unnecessary. The Theodore H. Barry consulting firm has concluded that "on average, only 4.4 hours of a typical employee's work day are used productively." Of the approximately 115 million employed US citizens (1989 figures), roughly 37 million were engaged in unnecessary labor.
Other authorities have described wasted labor and inefficiency in insurance, law, farming, communications, and the arms industry. Some people within these industries work diligently at jobs, but 50 percent of their labor, or more, is expended unnecessarily. These people are not malingering; they are performing what they believe to be productive and socially necessary tasks. But to recognize that the work could be done with 50-80 percent less labor is to invite the elimination of one's job.
A good example of "wasted labor" can be found in the modern health industry. The US medical community claims to provide the best medical service in the world, yet we have nine million children who lack routine medical care and 37 million uninsured Americans who receive little or no health care. Meanwhile, millions of citizens are paying for costly and unnecessary medical care.
In 1984, more than 20 percent of births in the US were cesarean, twice the rate of ten years earlier. By 1988, it was almost 25 percent. One million older Americans have cataract surgery each year at a cost of $4 billion, of which $2 billion is considered overcharge. One-third of these operations are unnecessary.
In 1977, after a Senate subcommittee concluded that 30,000 people died each year from adverse reactions to prescribed drugs, the American Medical Association (AMA) conducted its own investigation. The AMA was astonished when its own study found that "medications in hospitals alone kill from 60,000 to 140,000 Americans per year, and make 3.5 million others more or less seriously ill."
A National Institutes of Health study found that 60 percent of all medications and 80-90 percent of all antibiotics used in the US were unnecessary. There are 3000 different antibiotics on the market with 30,000 derivatives, yet experienced clinicians have judged that from two-four dozen basic drugs would suffice for 98-99 percent of drug-treatable illnesses. The health care industry generates millions of jobs - but how many of these jobs are necessary or beneficial?
"Classic economic competition would leave you to believe that the more competition, the lower the cost," University of California health economist Harold Luft has observed. But Luft's studies of the healthcare industry have revealed that "the more competition, the higher the cost." Competitive monopolies functioning in corporate medicine were found to have increased, rather than decreased, labor and costs. Because corporations must maximize the use of their goods and services to maximize profits, there is a direct conflict between the pursuit of health and the pursuit of wealth.
The Half-Day Work Week
Members of the world's surviving hunter-gatherer tribes work less than four hours a day. Even during the Middle Ages, normally half of one's waking hours were available for leisure time. But during the Industrial Revolution, the pressure to increase profits forced a steady increase in working hours.
In Europe, between 1600 and 1850, the average working hours-per-year doubled. After 1850, the strength of unions reversed the process and, by 1939, had almost halved the average working hours. Unions were moving toward the thirty-hour week but, in the aftermath of WWII and the Cold War, union strength declined. From 1873 to 1988, working hours increased from 40.7 hours to 47 hours.
Two hundred years ago, Benjamin Franklin proposed that, if everyone worked productively, the workday need be only five hours long. In 1923, British philosopher Bertrand Russell estimated the necessary daily labor at four hours. In 1931, Lewis Mumford, the noted American authority on cities and culture, was even more emphatic: "with the elimination of duplication and parasitisms, probably less than 20 hours would suffice to produce a far greater quantity of goods than is produced at present." Today, Juliet Schor, associate professor of Economics at Harvard University, argues that "We actually could have chosen the four-hour day. Or a working year of six months. Or every worker in the US could now be taking every other year off from work - with pay." (emphasis is original.)
There has been more than a 20 percent decrease in the hourly wages of non-supervisory labor between 1973 and 1993, even as average productivity gains rose 30 percent. If these workers had received their share of the productivity increases, their earnings would have increased 30 percent. They could have been working 30 percent less for the same standard of living, or working the same number of hours for a 50 percent higher standard of living.
For 30 years, economists have predicted the potential for reducing the work week by half, or a retirement age of 38. However, this has been denied US workers and a secure life has been denied most of the world. The right to a productive job and a full share of the fruits of technology and free time can only be realized by eliminating wasted labor, wasted capital and wasted resources.
GATT and NSC Directive 68
US industry after World War II was calculated to be twice the size necessary to supply all the nation's needs. In the 1950s, former Secretary of State Dean Acheson explained the concerns of US corporate leaders:
[Y]ou could fix it so that everything produced here would be consumed here. That would completely change our Constitution, our relations to property, human liberty, our very conception of law... and nobody contemplates that.
Therefore you must look to other markets and those markets are abroad.
In his post WWII memoir, Present at the Creation, Acheson admitted that the Soviet Union posed no overriding military threat to the West and exposed National Security Directive 68 (NSC-68) became the secret master plan for the Cold War. NSD 68, which Acheson crafted, called for increasing the US military budget 350 percent to wage a worldwide covert war to suppress the rising tide of social and economic revolution. If these revolutions were successful, the First World would lose resources and markets. To maintain control, it was necessary to suppress and/or contain both the rising centers of capital to the East and the emerging countries that might tie their economies to those centers of capital.
The wasted labor and resources that went into the defense budgets of NATO and Warsaw Pact countries represented fictitious wealth - nothing of value was produced for society.
Although done in the name of peace, freedom, justice, rights, and majority rule, the fundamental goal of NSC-68 was the same as that of the General Agreement on Tariffs and Trade (GATT) - reclaiming of control over resources and markets for the First World.
War's Wasted Wealth
In the period between 1982-1991, roughly 20 percent of US industry was wasted on arms. At least another ten percent supported the distribution by unnecessary labor within the civilian economy and was lost in trade wars. Another 20 percent was idled by the slack economy of the 1980s and 1990s. Allowing for some overlap, fully 30 percent of US industrial capital is wasted.
Since WWII the world has spent an estimated $28 trillion (1990 dollars) on arms. Professor Melman, who has laboriously measured the squandering of wealth on the arms race, has concluded that:
Without considering the full social cost to the American community, the combined Pentagon budgets of 1946-1981 represent a mass of resources equivalent to the cost of replacing just about all (94 percent) of everything manmade in the United States [every house, railroad, airplane, household appliance, etc.]. But when we take into account both the resources used by the military, as well as the economic product forgone… the social cost of the military economy, 1946-1981, [amounts]… to about twice the reproducible assets of US national wealth.
Almost one trillion dollars a year were being spent on arms worldwide when the Soviet Union collapsed in 1990. Since Professor Melman's 1983 calculations, more than $2.5 trillion (in 1990 dollars) has been thrown away by the US, more than $6 trillion by East and West, and more than $7 trillion by the rest of the world.
At the moment, it appears the only choice the world's over-capitalized [explain] nations have is to continue the waste of arms production. Tools built for war subtract from the world's potential wealth. When used, they destroy already produced wealth - the wasted land, labor and capital is gone forever.
Those employed building unnecessary planes and other weapons could just as well have been producing useful products to trade for others' useful labor.
If the world's leaders can build a trillion dollars' worth of military hardware every year, they can certainly build productive tools and loan (or give) them to needy societies.
Tools lent for productive purposes can be repaid from the wealth generated. It is critical that aid be weighted toward tools of production for people to produce for their needs. Aid that precludes development of local industry and creates dependency is a gross misapplication of resources and effort.
Alternative Economies
The subtle monopolization of land, capital (technology) and finance capital, and the excessive privileges incurred, are structured in law. The overwhelming share of unearned income generated by this system is claimed by the ten percent of the population that owns 86 percent of the nation's wealth.
An economy structured to eliminate these subtle monopolies and the wasted labor that creates fictional values, could provide a global living standard about 50 percent that of US citizens. Depending on one's guidelines, the quality of life in a world society not based on an "automobile/throwaway economy" could even exceed US standards. Witness the Indian state of Kerala, which, while it is one of the poorer areas of India, enjoys what may be that country's highest average quality of life ["Kerala: Development Without Growth," Spring '92 EIJ].
The Mondragón cooperatives in Spain rapidly accumulated capital even as Spain went through a severe recession. Ninety-seven percent of Mondragón's cooperatives were successful, compared to the long-term success rate of US small businesses of only 20 percent. This suggests that if the guilds and free cities of the Middle Ages had not been overwhelmed by feudal lords, capital could likely have been accumulated faster under a system granting equal rights to all, rather than under the current system that grants superior rights to a few.
A more just paradigm requires a recognition of quiet days and evenings spent with the family while working two days per week, as offering a far higher quality of life than driving $30,000 cars and $100,000 boats to the detriment of the rest of the world. By avoiding an automobile/throwaway economy, a secure, quality living can be attained while consuming roughly 20 percent per capita what the US currently consumes.
We have calculated that a society can be well cared for with as little as 14 percent of US per capita industrial capacity. In the US, as of 1990, the value of industrial tools stood at about $5600 per person. By the above calculation, 14 percent of that - or under $900 per person - should be adequate for sustaining an efficient, peaceful society.
If Rob Bishop, Amory Lovins and Patricia Cantrell of Rocky Mountain Institute are correct, a respectable standard of living can be attained for the world's impoverished while consuming only 3.5 percent of the fossil fuels currently consumed by Americans.
If society utilized solar, wind, and other renewable energy sources, the nonrenewable fossil fuels used could be almost eliminated and only used largely in smelting, air travel, ocean shipping, etc. The fuel expended commuting to unnecessary jobs could be saved, as could the fuel and labor consumed to build unnecessary industry and mine unneeded resources.
Wealth for the World
It would require $3.15 trillion of industrial capital over a 45-year period to extend the same quality of life to everyone living on the planet - an amount equal to 18.5 percent of the money spent on arms since World War II. Assuming that the Third World's population doubled in that timespan, the larger figure would be $140 billion annually, or 14 percent of the $1 trillion spent on arms worldwide at the time of the Soviet collapse.
If the world's unemployed and impoverished could gain access to land, they could grow high-protein/high-calorie crops using mostly calories that their bodies would be burning every day anyway. Food production that, under capital intensive farming currently consumes seven-ten calories of fossil energy for every food calorie produced, would consume a fraction of those limited and expensive resources.
In his book, From Global Capitalism to Economic Justice, Arjun Makhijani shows how some Third World labor actually out-produces First World labor, while being paid one-fifth (or less) that of workers in developed countries. If there were true equal rights worldwide - meaning labor being equally paid for equal work - it is likely that the average person would have to work no more than two-and-one-half days per week. Equalized wage rates would still mirror differences in productivity, but the range would be much narrower than that which exists today.
That a few powerful people are able, through patronage and the creation of enemies, to control a wasteful social policy for their gain - while depriving billions throughout the world, depleting resources and devastating the ecosystem - points to the urgent need for all people to reclaim the last of their rights: the right to work at a productive job, claim their proper share of the world's wealth and start healing the damage to our mother Earth.
Bio on J. W. Smith:
J. W. Smith holds a doctorate in Environmental/Political Economics. The World's Wasted Wealth (558 pages) is the result of 11 years of research. It has been hailed by Richard J. Barnet of the Institute for Policy Studies as a "remarkable piece of research and synthesis." Robert Swann, president of the Schumacher Society, praised the book for "making our banking system understandable to the layperson" and noted that Smith's "concept of how a large country, or even possibly one large bank, could force honest money on the world, is original and something all intellectuals should look at seriously." Environmental NGOs presented copies of the book to officials of the World Bank and International Monetary Fund during last year's annual meeting in Madrid, Spain and the book's printing negatives have been made available to Third World universities for publication and distribution "at the lowest possible cost." The World's Wasted Wealth is available for $27.95 from The Institute for Economic Democracy, PO Box 303, Cambria, CA 93428; (805) 927-1873.
Wasted Labor, Industrial Capacity and Resources
In his extensive study, The World's Wasted Wealth, J. W. Smith analyzes the intrinsic inefficiencies in a variety of modern industries, ranging from insurance companies, the health care industry and the legal profession, to nuclear technology, agriculture and weapons manufacturing. Here are a few of his examples of "wasted labor" in the global automobile industry.
In 1973, Honda Motor Company patented rights to a stratified charge auto engine that met federal emissions standards without the need of catalytic converters. The US auto industry, since it did not control the patent rights, proceeded to equip US cars with expensive catalytic converters and other pollution-control devices. These were supposed to cut carbon monoxide by 90 percent and nitrogen-oxide by 70 percent. In fact, CO was reduced a mere 19 percent and NO by only four percent. Assuming the cost of the converters was a modest $300 and the extra gas consumed during an auto's life added another $500, this corporate decision added $800 in unnecessary cost to every car sold. The annual waste due to the monopolization of the stratified charge engine approaches $24 billion a year.
That money did not go into someone's pockets: it was wasted. The resources and labor that went into those unnecessary catalytic converters, extra fuel consumed and the time value of the wasted money, consumed $24 billion. Even the auto companies did not profit.
Yearly model changes require shutting down auto factories for retooling and account for 25 percent of a car's final price. A study of more than 225 marketing, planning and engineering executives concluded that unnecessary labor in management, distribution and services have added $2200 to the cost of US autos in the last nine years.
In the auto industry today, there are nearly twice as many sales personnel as workers. Nothing of consequence is done to a car from the time it leaves the factory until it is driven off the salesroom floor. It is an accepted consumer product. When people want one, the will buy one. Why cannot one order a car from a mail-order catalog?
Other examples of wasted labor in the automobile industry include the unnecessary duplication of radial tire brands. Supplying a single, standardized radial tire would have cut the purchase cost by 75 percent. - GS
The World's Wasted Wealth