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To: Southack
The premise of your objection is flawed.

At any point in history you care to examine, there are always many events, conditions, processes and phenomena occurring, many of which will be blamed (or credited) by one theorist or another with causing subsequent changes to economies, markets, societies, cultures and political alignments.

Consequently, just as you can claim that the Great Depression happened for other reasons, and in spite of the rising productivity resulting from electrification, I can just as easily claim that another Great Depression is coming soon to a world near you, in spite of rising productivity.

I can also claim that rising productivity may be detrimental in some circumstances (but clearly not in all circumstances), because there are multiple cases in the historical record of bad economies following periods of rising productivity.

Capacity utilization is falling. Sales are declining. Businesses have no pricing power. The car manufacturers have to offer zero percent financing, with no payments for a year, and an 8-year loan, in order to sell new cars. In such an environment, the economy needs greater productivity about as much as an overweight person needs to eat more calories per day.

Look, when capacity utilization is this low, the cheapest way to increase production is simply to use more of the existing, but idle, capacity. In fact, the major reason that the productivity numbers are increasing is precisely because of the decreased capacity utilization: it's the high-cost production facilities (and producers) that get shut down first. The least-productive employees who get laid off first. The worst-managed businesses who go bankrupt first. That's what's behind your increase in productivity.

Finally, the core point I wish to make is not that the increased productivity in the 1920's was causative, either partially or wholly, of the Great Depression. My contention is that a) the Great Depression happened immediately after a period of significantly rising productivity, and b) it makes sense that the economic dislocations that resulted from replacing human labor with electric motors would, initially, cause economic hardship. People do not instantly adjust to changes in the job market of that magnitude. Nevertheless, there is no scientifically-accepted way to quantify the significance of this effect (if it exists), relative to whatever other factors may also have caused the Great Depression.

Bottom line: rising productivity does not reliably prevent subsequent recessions and depressions, and may even contribute to them.
74 posted on 02/06/2003 11:18:13 PM PST by sourcery
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To: sourcery
If rising productivity led to depressions, then lowered productivity should lead to the inverse.

Which is true?

76 posted on 02/06/2003 11:37:06 PM PST by Dec31,1999 (France and Germany: The Axis of Appeasement)
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