Progress, I think we measure it backwards.

Why do we measure economic success by the employment rate?  More than 2 centuries after the industrial revolution shouldn't we be enjoying the relaxed utopia that all of these machines, energy and technology have provided by replacing manual labor.  But if you happen to read any media, talk to anyone, read statistics, listen to politicians, or live in the real world with financial obligations, it appears that something went wrong on the way to utopia.  High unemployment is considered a bad thing, politicians promise to “create jobs”( because we all know that they have an excellent track record for doing that and doing it efficiently).  Very rarely does anyone tout the statistics of labor productivity.

Being a farmer, I can’t help but compare our economy to a pioneer farm family starting out.  I tried to add enough humor to keep it readable.

Most of our distant forefathers came to the new world with almost nothing, and settled on an undeveloped piece of land.  For the sake of argument, let’s assume the whole extended family came at once early in the spring.  Currency didn’t exist, but everyone had a skill their, labor could be exchanged for a good or service that someone else could provide.  IOU’s on this labor would have been common, implied or implicit.   Immediately, the employment rate was high, but productivity was low. Everyone was required to work sun up to sun down to clear some forest, break the land, capture some food, dig a well, build fences, all by hard manual labor, with only the bare minimum of tools that they could afford. Progress would have been slow.  By our modern measure of economic health, this farms economy is flourishing.  100% employment, everyone is contributing to the economy, but productivity would be pitiful.  The outlook for economic growth is fantastic.  Coming from virtually zero "GDP", any growth will be measured as nearly infinite in percentage terms.  They are experiencing a commodity boom.  Lumber is needed for buildings and fences, wood and coal are needed for heating and cooking, grain, hay and pasture are needed for livestock. Livestock are in great demand.  Water for livestock and household is a high priority.  Food for the families. So the economy is booming, all of the things that these pioneers can produce are in great demand.  In many cases, mere survival depends on producing these commodities.   As summer turns to fall the commodity boom reaches its peak as the crop gets harvested, wells are completed, hay is stowed away, fuel for the winter is accumulated.  The price, which is the labor devoted to those activities declines. ( Even today, I argue that any good or service has no value except for the entire sum of the labor required to produce or perform that good or service, throughout the entire chain) The wood gatherers, and well diggers, the planters and threshers, are now virtually unemployed, they performed their jobs too well and put themselves out of a job.  Time to get depressed, cut back on discretionary spending and ask the government to save them….  Oh wait, that is what happens today.  Back then they would have celebrated thanks giving and the fact that they would likely be able to survive their first winter without starvation, possibly even relax and enjoy a free moment.  A well earned rest after many months of hard labor. 

But here comes a financial savior, there is an acute housing shortage, after living in a tent all summer, winter is approaching, and shelter will be greatly appreciated.   So the elders of the family extend cheap credit and NINJA loans to all members so that they can build houses to stimulate the economy, and revive employment.  Sorry, got mixed up the NINJA( No income, No Job, No Assets) members of the family have long since been kicked out and starved.  But nonetheless, with winter breathing down their necks, the housing boom is on, as all members are now fully employed building housing for themselves and their livestock.  The economy is booming once again, full employment, boom times will last forever, the shortage of housing has never been more acute, a warm dry house is worth a fortune ( in labor) to a pioneer.  Values only go up. Lumber futures hit record highs, anyone who can saw a log is in great demand, they are getting rich in IOU’s from the other members.  Until suddenly, the last family has completed their house and barn.  Housing starts plummet, carpenters and sawyers find themselves unemployed once again.  Log house and log speculators are devastated, ruined financially, half built houses and barns stand unfinished, with no funds ( labor) to finish them.  Oh, sorry, got confused with 2008 again.  They likely had the foresight to count the number of families that needed housing, and contributed enough to deserve the help, and stop building when they reached that point.  Either way, a financial depression now sets in, not only is the commodity boom over, but so is the housing boom.  No one is employed.  Everyone has spare time left to complain about how bad it is that they can’t be out performing back breaking labor all day, no roots to pick, no wells to dig, no logs to cut and skid, crop to thresh……..  I’m sure that is what they did.  Because they loved back breaking labor so much, surely no one celebrated about having excess energy stored for the winter.  I’m sure they got together on Thanks Giving to complain about having nothing to do.  Too much of everything.  High prices cured high prices, causing a depression, so they killed a Turkey.   They had accumulated so much energy due to the perceived shortage and high price, so much excess that the price of firewood plummeted.  No one wanted to trade an IOU for anymore wood.  The wood cutters had to leave it in the forest worthless.  They stored away and preserved so much wild game, and berries and flour from their crops, vegetables from their garden that the shelves were over flowing.  No one would starve.  What a terrible fate for society, too much of what they are good at producing, how depressing.  When only a few short months ago wheat for flour was worth a fortune, virtually non-existent.  Anyone who hoarded wheat has had their fortune decimated by one good harvest.   What terrible times, nothing left to do but eat, drink, and sleep in a warm dry secure house, while waiting for the boom times to return, how tragic, if only they had a good socialist government to save them from this drudgery by creating make work projects…...  Well, nothing to do unless you count cooking, cleaning, hauling water, milking, feeding…….  Day to day necessities of life.

Perhaps they could enjoy this spare time by finding leisure activities.  Perhaps the carpenters could build toys for the children, The musicians could put on a dance, The craftsmen could make decorative trim for the houses.  The creative could try to build better implements for next years crop.  The medically inclined could try to heal the injuries and maladies of the past year of hard work.  But no, since no one is working, no one has any currency( labor) to trade for these goods or services, so the kids go without toys since the parents are unemployed, no one can afford to come to the dance since they have no labor to exchange for the musicians services.  Everyone long since stopped accepting IOU’s for labor towards the next year, they have collected so many they are worthless.  Inflation at it’s worst.  No one expects the issuer of the IOU to ever deliver on his promise.  After all, your neighbor the plowman has been issuing IOU’s to plow your field since November.   It is now March and it doesn’t seem that he ever will keep his promise.  No one will accept his IOU’s at face value now. 

The people revolt, they reject the elders who got them through the winter, they hadn’t created enough jobs, the economy collapsed, no one has any work, just food, shelter, fuel etc. 

Finally, the people appoint new elders, they have to put people back to work the depression has gone on too long.  The new elders create make work projects, winter is ending, they go to work clearing the swamps, the hills that are too steep to farm, building sidewalks to the elder’s cabins.  Capturing the smoke from the wood stoves so it doesn’t block the sun and cause global cooling.  People get back to work.  The economy must be booming again.  Confidence within the colony returns.  Spring finally has arrived.  People try to enlist their neighbors to help them clear more land and seed their crops, but everyone is still too busy with the make work projects, and besides, the price of wheat has never recovered from the commodity bust last winter.  So the crops go unseeded, wood ungathered, gardens unplanted. But everyone is employed on pet projects of the elders, so the economy must be good.  The new elders get full credit for turning around the economy. 

But when they attempt to trade some IOU’s with the colony down the road for some new type of equipment, the other colony won’t accept their new government backed IOU’s. They claim that there is nothing productive about the new make work projects.  How disappointing, now inflation starts anew.  A new financial crisis.

Seasons pass, winter returns, and guess what, more good news, the commodity boom is back, huge shortages of food and fuel , prices soar, labor is in huge demand.  Work for everyone, 100% employment, shortages of everything.  The boom times have returned.  Everyone is needed to try to cut wood and drag it home through 4 feet of snow.  To try to scrounge some food from under the snow.  Any left over grains are worth a fortune. The few souls who don’t starve or freeze to death that winter will respond to the market forces and plant a massive crop the next spring, and collect record amounts of fuel…..  Prices plummet by fall… and the cycle begins anew.

Now imagine what will happen the next year if someone invents a machine to do some of that hard work for them, a reaper, or steam engine.  They people will be so grateful not to have to spend all day literally killing themselves with hard work, right?  They will fully embrace this new technology and enjoy their time off.  They will start measuring their success by how much they can produce per hour of labor, not how much labor they invest, right?  

Now what about growth.  Easy to have huge growth numbers in the first years.  Growing from zero, infinite growth is possible.  So what if these pioneers based their economic success not only on full employment, but also on rate of growth.  They would really be depressed after a few years when the inevitable realities of uninhibited exponential growth catch up to them.  But we in 2015 still measure success by both measures.   

Perhaps we should just go back to being thankful for a bountiful harvest, surplus energy, surplus labor, surplus housing, surplus cheap imported goods........ 

Now if only we could find a way to actually appreciate them.