Micro to Macro Nonsense. It’s Everywhere Thanks to Neoliberalism

In 1509, a child was born in France, destined to become an influential theologian. His name was John Calvin – what a guy! John loved God; so much so, that he declared the charging of a small bit of interest to be in keeping with the intent of the Almighty Himself, though Calvin was opposed to usury. Apparently, it was not usury if it were only a small bit of interest, you see. Similarly, one would suppose that it is not murder if, through malicious intent, one only kills a small number of people throughout their lifetime. Perhaps it is not theft if one only steals but a small sum of money in total throughout their lifetime. We could also surmise that it is not lying if one only “fibs” occasionally. Do not take the Lord’s name in vain, unless you hit your thumb with a hammer, then it is understandable, but only if the incident occurs very few times.

Anyway…

More to the point of our discussion, Calvin had a few more strange ideas concerning what God had in mind and though these were minor ideas to him, they became a major fiasco for nearly everyone in the future.

Calvin, like other “thinkers”, insisted that we must show our appreciation for God’s sacrifice of his one and only son by working hard. Laziness was sinful. Begging was frightfully vulgar and not in keeping with good Christian character. Thus, any economic prosperity that an individual experienced was a direct result of God showing favour on that individual and conversely, anyone who was poor was clearly out of God’s favour, or grace, as it were. Being rich was evidence of someone who was a responsible, hard-working individual, because God blessed that person with wealth. Being poor was evidence of someone who was lazy and irresponsible, because God turned his back on the person. Again, these were minor thoughts to him, though they did, in fact, contradict the teachings of Jesus concerning the poor. But in 2016, who cares, right?

Let us fast-forward to 2016 where we hear the oft repeated propaganda:

“Business is the job creator. Without business, none of us would have jobs! The reason there is unemployment, is because lazy people don’t want to work. If they did want to work, there wouldn’t be any unemployment. If you want to get ahead, you’ve got to bust your ass, work hard and be responsible. These moochers on welfare don’t want to work. They’re too lazy and irresponsible to find a job. If you do give them a job, these lazy bottom-feeders damage businesses, ‘costing’ business ‘money’ and causing harm to the economy.”

And so, that’s interesting. Sounds familiar. I wonder where I’ve heard that before? In 1509, there was this child born in France, destined to become an influential theologian and his name was John.. John something or other, I can’t remember exactly. But if we rewrite the above using Mr. Something or Other’s thoughts, we can derive:

“Business is (God is) the job creator (the Creator). Without business (Without God), none of us would have jobs (none of us would have any hope)! The reason there is unemployment (The reason why there are poor people), is because lazy people (is because sinful, slothful, lazy people) don’t want to work (don’t love God and are thoroughly disobedient and unthankful for what Jesus did for us). If they did want to work (If they did what God wanted them to do), there wouldn’t be any unemployment (they wouldn’t be punished with poverty for the sin of laziness). If you want to get ahead (If you want to be in God’s grace), you’ve got to bust your ass, work hard and be responsible (show your appreciation for what Jesus did on the cross through hard work. Salvation isn’t freely given to man, you know! God expects more than faith and belief. He wants you to bust your ass and earn your salvation!). These moochers (vile sinners) on (begging for) welfare (free ‘money’, which is the drool of Satan) don’t want to work (don’t love God). They’re too lazy and irresponsible (They’re too sinful and worthless) to find a job (to be in God’s grace). If you do give them a job (If you do show human compassion when God refuses to show them mercy), these lazy bottom-feeders (these vile, ugly, worthless sinners) damage businesses (will only offend God in return), ‘costing’ business ‘money’ and causing harm to the economy (causing harm to the body of Christ).”

Food for thought.

So much for critical thought and education. But, that’s ‘Murica and indeed most of the western capitalist world. You hear the same unrelenting nonsense in the United Kingdom, Europe, Canada and now Australia, though never as intense as one does in the United States. Disdain for your fellow citizens is the national pastime in the US. It is such a fierce sport that some American families will refuse to speak to other family members, or outright disown children and their children’s spouses if they disagree politically. Another pastime in the US, which has gained considerable traction elsewhere in the world, is considering scripted TV shows like “The O’Reilly Factor” and “Rachel Maddow” to be both reality and valid substitutes for an actual education.

When it comes to the subject of unemployment, American society simply drops any references to God, replacing God with business, tells everyone that if you “work hard and play by the rules” you will get ahead and that the poor are poor because they are irresponsible lazy moochers. Then we hear how the federal budget is just like a household’s and the race begins – a race to the bottom, that is.

Neoliberalism begs all of us to see no difference between the micro level of the economy and the macro level. The purpose of an economics education to neoliberalism is to prey upon the political leanings of the people and then disseminate anti-knowledge for the financial industry’s gain. The modern neoliberal mantra of “business is the job creator” is one of the most pernicious lies ever to grace the economics profession and to be handed down as so-called “common knowledge”. Borrowing and modifying a couple of lines from the film “THX-1138” for our purposes concerning work ethics, neoliberalism teaches you, the citizen, that:

“You are to be a true believer in private sector supremacy and freedom. Let us be thankful we have an occupation to fulfill. Work hard, increase production, prevent accidents and be happy.”

Which then follows with a lesson from neoliberalism to you, the citizen, on proper consumer behavior:

“You are to be a true believer in private sector supremacy and freedom. Let us be thankful we have commerce. Buy. Buy more. Buy more now. Buy. And be happy.”

The former, concerning what constitutes a proper work ethic, is abject nonsense. It asserts that through hard work, happiness is the end result. The truth is, the scarcer the federal government makes US dollars, the harder the working class must work to obtain US dollars. For example, if the US government only allowed $300 million to remain in the domestic economy, that’s about $1 per person. Now set everyone to the task of getting ahold of as many dollars as they can. What happens? A vast swath of the population will have to work tremendously hard to even find a job, let alone obtaining what amounts to very few US dollars. If the US government were to add $1 trillion more, then it becomes a bit easier to obtain US dollars, but still, 1 trillion 300 million US dollars is not enough to ensure that everyone, including people in the rest of the world who would like to save in US dollars through international trade, can obtain enough US dollars. You will still have to struggle and work hard. Thus, it can be seen that if the federal government directs its deficit spending towards full employment and the public purpose, basic needs can be met by all citizens without the American definition of what constitutes “hard work” as long as there are enough real resources. US dollars are just tickets the federal government issues enabling you and I to access goods and services. The less it issues through deficit spending, the less we have and the harder we must work to access basic goods and services.

You must understand – it is the goods and services produced from real resources that everyone is after. ‘Money” is required to access them, because we live within a modern monetary economy. We must use the government’s US dollars to gain legal access to those goods and services. We need the ‘money’ first before that is possible and that is why you “think” that “money” is the important thing. The government intentionally keeps the supply of US dollars short, so that is why you “think” that US dollars are naturally scarce. They are not. Real resources are scarce.
Forcing a large number of citizens into hard work to obtain basic goods and services, in a modern monetary economy, is criminal behaviour on behalf of the currency-issuing federal government. It is purposeful waste. It is inefficient. It is recessionary. It is nonsense.

The latter statement regarding consumption, is a mix of truth and a whole lot of nonsense. The latter speaks honestly to a point about how an economy operates.

An economy operates on consumer spending. Without it, there is no economy to speak of. Business is 100% dependent on consumers spending their dollars so that business can derive an income from that spending. It is how a business earns ‘money’. Did you think there was a huge difference between business and a worker with regard to income? Both earn an income. Business earns an income selling goods and services and the worker earns an income using his/her labour to help the former produce goods and services to sell. Everyone, both worker and business owner is a consumer. Somebody’s spending is somebody’s income.

However, that reality is not revealed by neoliberalism in the lesson about consumer spending. What neoliberalism wants consumers to learn is that business is their provider and it is the consumer’s duty to show gratitude by spending, whether you have enough dollars to spend or not. If you are short of dollars, then the financial industry will make credit cards and loans easily available to you. So, swipe credit cards. Go deep into debt to buy stuff, otherwise, people will judge you and you won’t be happy. They will say, “Did you see the house he lives in? What about that ugly old car of his? He uses a prepaid phone! How gross. It is embarrassing having poor people in my family. Everyone knows a man’s success is determined by the size of his wallet.” What this puerile nonsense actually boils down to is not happiness for you, but wage suppression for you and huge profits for the financial industry.

Neoliberalism suppresses wages; an activity people would call “theft”. Here’s why. Wage suppression leaves wages flat whilst production increases. When that happens, the national income is transferred from workers to capital. In other words, more and more dollars earned from all of your “hard work” increasingly flows into the pockets of the rich. You are paid less and less for your contribution to production and business is paid more and more. National Income is the Gross Domestic Product. Think of it as the pool of dollars earned from all production in the nation. Workers and business contribute to create that pool. Business contributes investment capital and workers contribute labour necessary to produce goods and service to sell. In the end, with wage suppression, neoliberalism ensures that workers receive an increasingly smaller portion of GDP for their efforts whilst ensuring an increasingly and undeservingly larger portion for business. The result of wage suppression activity is that wages alone can no longer ensure that what is produced by business can then be sold to consumers.

Workers do not earn enough dollars to spend, which would be income for business, above that which they need to save. Since the federal deficit also continues to be slashed, no extra dollars are being injected which would take the pressure off of consumer savings, allowing them to spend more. So, an alternative must be used. We call that alternative “consumer credit”. The spending gap, which is the shortfall of US dollars needed to sell production, allows the opportunity for banks to make large profits.

Banks lend to creditworthy customers and have the right to determine what they believe constitutes creditworthiness. In order to reap greater profits from interest on loans, banks can reduce their standards for creditworthiness when there is an obviously large spending gap and offer credit cards and loans at greater interest rates to people with low credit scores who normally would not qualify for these products.The low-wage worker can now continue spending, with one caveat: He or she must also pay back what they’ve spent plus interest. You don’t pay back wages. See the difference here? In this manner, business can then maintain both increased levels of production and low wages whilst selling their production to increasingly indebted consumers who otherwise could not afford to buy. The sneakiness of the concept is revealed when consumers cannot take on any more debt, halt their spending and send business into the inventory cycle.

When business enters the inventory cycle, it has too much unsold inventory on hand. Facing the loss of income, it then begins laying off workers in an attempt to offset the loss of income. On aggregate, more workers are now unemployed and also cannot afford to buy production and a recession occurs. So, workers are harmed by neoliberal wage suppression. The main group left unharmed by wage suppression is the financial industry, who has both made handsome profits off of speculation and now also maintains the right to enforce debt collections on both consumers who now have no jobs and businesses who have lost income who now find it difficult to pay back loans they took out to expand operations to meet consumer demand driven by private debt and not wages. When private debt levels rise high enough, as they did in the financial crisis of 2008, both workers and business become so indebted that deleveraging can go on for years and years, dragging out the economic recovery at a snail’s pace, unless the federal government expands its deficit sufficiently, targeting the deficit spending at consumers in order to relieve the condition. But instead, banks are bailed out. Furthermore, recessions and financial crises like 2008 allow for further wage suppression activities and a bias towards low-wage underemployment under the guise of “This is a recovery. Business can’t afford decent wages!” This ensures the cycle of private debt continues as well as huge profits for the financial industry at the expense of you, business and the US economy.

So, in the modern day, it is not business vs workers but everyone vs the financial industry and the politicians whom the financial industry owns.

Usury, it’s a thing. The financial industry is wealthy because it “works hard and plays by the rules”, you see. You cannot call what a bank does, “work”, nor “working hard”. Banks create an IOU via keystrokes, denominate it in the US dollar and then lend their IOUs out to people at interest. In the case of Tim Kaine’s beloved pay day lenders, sometimes as high as 80% and higher. This is “hard work” to get ahead? Please. At least Walmart and Apple actually do something significant (work) to earn US dollars – something that is beneficial to the economy.

I would not define what Goldman-Sachs does as “hard work” to earn US dollars. Perhaps, Goldman-Sachs and Wall Street are in God’s favour, right?

Much of this nonsense and resulting damage to workers is derived from micro level thinking and applying it to the macro level with the added propaganda touch about hard work being the proper “work-ethic”.

Again, we are told that the federal government’s budget is like a household’s, because like a household, the federal government has no money of its own and must tax to earn money in order to spend. It must tighten its belt in bad times just like a household. Therefore, everyone, including the federal government should save to get out of a recession. The micro level nonsense here is thick. If Bob (micro level) decided to save money by not buying Starbucks anymore, Bob is saving and Starbucks loses one customer. But if everyone (macro level) decided to save money and not buy Starbucks anymore, then Starbucks would lose all of its customers, along with its income and go out of business.

The micro level IS NOT the macro level.

When we examine the statement concerning the federal budget being just like a household’s budget, we can derive five major points from this ridiculous micro level reasoning, resulting in total nonsense, namely:

1.) The federal government has no money of its own. Business has lots of money, therefore, business is where US dollars come from and also from where the federal government can get lots of money (income) – by taxing business, but

2.) Business is the job creator, because it has all the money and people clearly work for business and are paid wages by business, but

3.) Taxes are a cost to business and if the federal government taxes business, that is an unfair burden placed on the job creator and it will respond by laying off workers and also,

4.) Wages are nothing but a cost to business. If business is forced to increase wages, that puts an unfair burden on business and it will lay off workers. Therefore,

5.) Business controls the unemployment rate.

Obviously, this line of crack-pot micro level reasoning assumes that business is the sovereign. Unfortunately for fans of “free market” ideas and anti-government hysteria, the federal government is the sovereign. Business is but a user of the government’s US dollar and has no power other than that which the regulatory authority, again the US government, allows it to have. If the federal government chooses to deregulate, that is a choice, and an irresponsible choice at that. This is not a hard thing to understand. The US government issues the US dollar and the nation’s populace (you, me, business, labour unions) use the government’s dollars to participate in economic activity. And because the US dollar is the property of the issuer (the US government) the government is allowed to regulate those who use its property in any way it sees fit.

Another way of putting this reality for those who simply cannot see things from any perspective but the private sector, is the citizens of the US created a federal government. And the citizenry gave the federal government the power via the US Constitution; Article 1, Section 8, to issue US dollars and in order to support the proper function of their government, agreed also in Article 1, Section 8, that the government should lay a tax, thus creating a demand for those US dollars. Then the people agreed to sell goods and services to their government in exchange for US dollars to pay the tax and to use any remaining US dollars obtained from sales of goods and services to the federal government to operate an economy. The government could now provision itself and function properly, whilst the citizens could provision themselves with the government’s dollar and using that dollar, provision themselves with goods and services.

By making the federal government the currency issuer, the federal government became the sole entity that controls the unemployment rate through deficit spending. If it doesn’t issue enough US dollars, there won’t be enough dollars to go around to increase production and buy production, so production will fall and workers will become unemployed. Duh!

Or, as the French would say, “Le Duh!”

Even far more absurd is the notion of wages being a cost only. I have made this point time and time again, but let us once more review it.

When we argue that wages are just a cost to business, we are saying that business loses ‘money’ by paying workers. If business is then forced by the big, bad federal government to increase wages, that places an unfair burden on business and it can only do one thing in response – lay off workers.

The stupidity in this line of reasoning is so utterly obvious that only political bullshit can be the excuse for using such reasoning. So, let’s illustrate the ignorance.

Firstly, if wages are just a cost only and business loses ‘money’ by paying workers, then why would business hire any workers to begin with?

Secondly, if increased wages always harms business, resulting in mass unemployment, then why bother paying wages?

Thirdly, how does a business earn an income if not through consumer spending?

Fourthly, are not workers also consumers?

Here then is the truth one more time – The “wages are just costs” argument assumes that workers never spend their paychecks. (Major LOL moment there.) To claim that workers never spend their paychecks is patently absurd and so is the micro level reasoning in the beginning that gave rise to such a ridiculous claim.

Wages serve both cost and demand functions. At first, business pays a wage. That is the cost. But then the worker takes his or her’s paycheck and spends it, do they not? Of course. That is demand. The business then hopes that workers will spend some of their paychecks on the goods and services produced by that business, which then becomes income for that business. Wages are income for consumers and spending for business. Wages then become consumer spending and in turn, consumer spending is business income.

Business gets what it spends and consumers spend what they get. Capital gets what it spends and workers spend what they get.

And finally…

What the US government spends, the private sector gets. Federal deficits are income for the private sector. (Macro level) The US government is the job creator. (Macro level) The US government controls the unemployment rate. (Macro level) The US government is the only entity that can eliminate unemployment. (Macro level)

“All must save”, “Business is the job creator”, and “The US government is broke and taxes to fund spending” are all delusions; the result of applying the micro level to the macro level. That delusional result is called “The Fallacy of Composition”. If you make any of these claims, you are committing that fallacy. You commit that fallacy, because you’ve been duped into conflating “freedom”, “liberty”, “hard work” and “free market ideas” with economic prosperity which is nothing more than utter bullshit peddled by neoliberalism and the financial industry.

“Freedom and liberty are embodied in the free market. You are to believe that business is the job creator and that the federal government is evil. If you do, then you are a true believer. You are a true patriot; a real American that loves America. Let us be thankful we have an occupation to fulfill. Work hard, increase production, prevent accidents and be happy.” — Wall Street