How to fix the Economy

To understand the economy, one must understand the concept of value. All of economics is the study of people thinking of their own self-interest, and then responding to it. It is how people interact with each other to satisfy their own personal desires; why someone chooses one job over another, one product over another, one investment over another. All of these actions drive back to how we understand the concept of trade value.

When an economy fails and jobs become rare, there is no inherent failure in humanity's productivity. Depressions do not happen because machines produce less, harvests bring less, and mines dry up. These are events that can both cause a boom or a bust in the economy. Overall, there has been no real connection between the productive output of the people and their wealth; there is no direct relationship between how much one produces and how much one receives.

For the surest proof of this, we know that a single person working today, with the aid of machinery, can produce a thousand times as much as anyone working three or four centuries ago. We know that the amount of food produced by a single working family has risen from enough to feed itself to enough to feed ten thousand. It is similarly a fact in manufacturing, mining, transportation, and all essential sectors of our economy. A person who is fired for "underproductivity" today is a thousand times more productive than the European peasant -- potentially they have better living conditions, but it is arguable how much better.

There are some economists who talk about improving the economy by "producing more," by "production and supply," by outworking our competitors. They must not have noticed that human, productive power has been exponentially increasing since 1800.

The question of unemployment does not rely on trends of technology, industrial development, or productive output. Rather, the question of unemployment relies on the human conception of value. Employment depends on two things: the person providing the employment, the capitalist proprietor, and the conditions which influence and effect the capitalist's decision-making. Such conditions include the public's buying patterns, which relies on the valuation of the workers-turned-into-consumers; and, similarly, the valuation of the employer in setting wages or prices enters into this equation, as well.

Overall, the real question is how human beings decide to value commodities; and then, how this relates to the workers and the bosses, those who labor and those who live off the labor of others.

The Marginal Theory of Utility provides us with an accurate understanding of how humans value commodities. Developed by William Stanley Jevons, Carl Menger, and Léon Walras, it is an economic outlook that balances quantity with quality. The more an individual possesses of a single product, the less enjoyment that individual gains from receiving an additional one of those products. If someone has a bowl of rice, and another person has fifty sacks of rice, which person would gain more pleasure from a pint of rice? It would certainly be the poorer of the two. As Jevons perfectly explained in 1860...

"One of the most important axioms is, that as the quantity of any commodity, for instance, plain food, which a man has to consume, increases, so the utility or benefit derived from the last portion used decreases in degree. The decrease in enjoyment between the beginning and the end of a meal may be taken as an example." [*1]

When it comes to seeking our own desire, we always come to the market, or some type of market; whether we are buying food or selling hours of labor. There are two trends of society's overall market that are easily noticeable: the boom and the bust. The boom occurs when the public's ability to consume and purchase more increases at a greater rate than the growth of new, luxury products and services to buy. The bust occurs when industries produce too much to satisfy human needs, the people cannot consume it all, and affected businesses lay off their employees. Eugene V. Debs, the Socialist and union organizer, clearly explained the latter...

"A panic comes, industry is paralyzed, because with machinery you can produce so much more than your paltry wage will allow you to consume. You make all things in great abundance, but you can not consume them. You can only consume that part of your product which your wage, the price of your labor power, will buy. If you cannot consume what you produce, it follows that in time there is bound to be overproduction, because the few capitalists cannot absorb the large surplus. The market is glutted, business comes to a standstill and mills and factories shut down. At such a time Chicago is hit, and hit hard; and you workingmen find yourselves out of employment, a drug on the market. Nobody wants your labor power, because it cannot be utilized at a profit to the capitalist who owns the tools, and when he cannot use your labor power at a satisfactory profit to himself he doesn't buy it." [*2]

The boom leads to the bust. An excess of consumption spending leads to new businesses, and new businesses lead to new employment. That means new capitalists and new profits, or at least, the same amount of capitalists with more profits. This means that a greater section of wealth is being channeled towards the pockets of a few -- whether they're "technically employed" CEO's or shareholders in a corporation. And the wealthy have a very low value of marginal utility. A house for a homeless family would be a home, but to a wealthy family, it would be a vacation home.

The boom leads to a situation where money starts to become idle. There is no use in extravagant spending on behalf of the high class, if they feel fully satisfied by their current consumption of the market's goods. This means that wealth piles up, in bank accounts, under beds, and in bonds, wherever, it amasses and withdraws from circulation. A slow, money starvation of the public. In this respect, the wealthy cannot do the one thing that would get the economy moving again: overconsume.

It is a monument not to the limits of human luxury, but to the ability of the people to produce more than their masters can eat. And, it is to our own detriment, because there is no use in feeding slaves, when they can offer no useful or productive work to their owner, since they already have everything that they need.

The boom leads to a bust: it leads to overproduction on the part of the workers, and underconsumption on their part as consumers. There are two interpretations of the cause: either, it is because the wealthy have no interest in consuming more of the market, thus leading to loss of industry and jobs. Or, it is because of the difference of the prices in stores versus the wages of the workers. Those who work and have very little would have every interest in spending their income on serving their personal needs, and maybe to even taste new types of luxury and art.

Those are the two things that might save a failing economy: if the wealthy would consume more, and spur on industry, or if the poor would earn more, and spur on industry. The wealthy have the power to consume, but they are too fully satisfied to take more; the workers have the desire to consume, but they are disempowered by economic exploitation and miserable wages. The boom leads to a bust, but the bust does not lead to a boom. Knowing the causes and the potential solutions of an economic depression, what is the ready and easy way to end it?