The Scarcity of Labor and Its Ineradicability, CAPITALISM: A TREATISE ON ECONOMICS

From Chapter 2: The Scarcity of Labor and Its Ineradicability (pp. 59-61)

This excerpt is taken from George Reisman, Capitalism: A Treatise on Economics. Ottawa, Illinois: Jameson Books, 1996. Copyright © 1996 by George Reisman. All rights reserved. May not be reproduced in any form without written permission of the author. The following limited exception is granted: Namely, provided they are reproduced in full and include this copyright notice and are made for noncommercial use, i.e., for use other than for sale, including use as part of any publication that is sold, copies of this excerpt may be downloaded into personal computers and distributed electronically or on paper printouts from a personal computer; reproduction on the internet is permitted provided the copy of the excerpt is accompanied by the following link to the Jefferson School's home page (which may, and hopefully will, be displayed elsewhere and more prominently): The Jefferson School of Philosophy, Economics, and Psychology. This limited right of reproduction expires on December 31, 1999.

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Wealth not only is the product of human labor, but also could be produced in larger quantity if more labor were devoted to its production. Indeed, the application of more labor is the only fundamental requirement for increasing the supply of wealth. This is because more labor is the source of additional equipment and materials, including additional agricultural commodities and mineral supplies extracted from the ground. Thus, the scarcity of wealth implies a more fundamental scarcity of labor.

As has already been shown, and will be fully confirmed in the next chapter, the fact that the wealth-character of natural resources is the result of labor indicates that in a capitalist society, the supply of natural resources can be indefinitely expanded and therefore does not constitute a long-run limitation on the ability to produce that is independent of the supply of labor. Indeed, as the next chapter will show, even within very short periods of time--weeks or months--the supply of raw materials can almost always be increased through the application of more labor.³⁷

The fundamental scarcity of labor is manifest in the fact that virtually everyone would like to enjoy an income many times greater than the income he is presently capable of earning. For example, today an average worker may earn on the order of $20,000 per year for working forty hours a week. If such a worker had it in his power to earn $100,000 per year, he would have no difficulty in finding ways to live up to such an income. Unfortunately, to earn such an income at his present rate of pay, he would have to work more hours than there are in the week. His maximum actual ability to work is obviously vastly less than corresponds to the income he would like to have.

But this is only another way of saying that the utmost goods and services he is capable of producing are far less than the goods and services he would like to consume. Taken collectively, our desire to be able to spend five or ten times more than we now can afford to spend is an indication that we would like five or ten times more work performed than is now performed. In the present state of technology and productivity of labor (output per unit of labor), this is how much additional labor would need to be performed to produce the larger volume of output we would like to be able to buy.

Consider. It would be very easy for the government of the United States to arrange things so that the average worker could earn and spend $100,000 a year instead of $20,000 a year. Indeed, the governments of many countries have long ago made it possible for all of their citizens to be millionaires! To accomplish such results, all the government would have to do is print enough new and additional paper money. But there is nothing to be gained from such a procedure. It is accompanied by rising prices, which prevent the higher incomes from having any greater buying power than the smaller incomes did before. The only way that earning and spending $100,000 a year instead of $20,000 a year can represent the ability to buy five times more goods is if five times more goods are produced. Only then would prices not rise in the face of five times more spending to buy goods. But in a given state of technology and productivity of labor, this would be possible only if five times as much labor could be performed, which, of course, is itself impossible. People can work themselves to the point of utter exhaustion, and still they cannot produce more than a small fraction of all that it would be useful and desirable for them to produce. Thus, the supply of labor that people can provide falls radically short of the supply whose products they would like to have. Labor is scarce.

(It should be obvious that the scarcity of labor implies there is never any metaphysical reason for the existence of unemployment--that is to say, there is never any reason for it by virtue of the necessary, inescapable nature of things. Unemployment belongs strictly in the category of the man-made. Either it is voluntary and chosen by the individuals concerned, because they prefer to wait to find better terms of employment or because they simply prefer leisure; or, where it is involuntary and unchosen by the individuals concerned, it is forcibly imposed on them. Unemployment is forcibly imposed through the imposition of too high a level of money wage rates by the government or by coercive labor unions operating with the sanction of the government. These policies, of course, could be done away with. The causes of unemployment will be fully clear once we understand the principles governing money and spending, and the fact that under the freedom of competition, purchasing power sufficient to buy all the goods and services that can be produced in the economic system at the point of full employment is automatically generated by the process of production itself. The discussion of these important matters is reserved for later chapters.³⁸)

The scarcity of labor, of course, is also the result of a scarcity of personal services. Virtually everyone, if he could afford it, would like to be able to be served by maids, cooks, gardeners, personal secretaries, and so on. Each individual could probably find worthwhile uses for the labor of half a dozen or more full-time servants, without even giving the matter more than a moment's thought.

The labor that we implicitly desire to have at our disposal, whether to produce goods for us or to provide us with personal services, is, as I have said, limited only by our imaginations. And yet while nature has provided each of us with an imagination capable of forming desires on a grand scale, it has simultaneously equipped each of us with only two arms to provide for the satisfaction of those desires. Each of us is easily capable of forming desires whose fulfillment requires the labor of multitudes, and yet by the laws of arithmetic, the average member of any society can never obtain more than the labor, or products of the labor, of just one person. This is so because for each person who exists to consume, there can be no more than one person present to produce. Indeed, when the very young and the sick and infirm are allowed for, who can only be supported by the labor of others, it turns out that for each person who consumes there is, on average, substantially less than the labor of one person available to produce.

The preceding discussion demonstrates the existence of a fundamental scarcity of labor. The scarcity of labor is not only fundamental, however. It is also ineradicable.

I have already shown earlier in this chapter how increases in the ability to produce are accompanied by new and additional desires for wealth, which grow out of the very same technological advances that make possible the increases in the ability to produce. The effect of this is that the scarcity of labor is not reduced by increases in the productivity of labor. The scarcity of labor is also not reduced by any increase in the size of the population and thus the number of people able and willing to work, because the additional members of that population bring with them their own needs and desires for goods and services that are in excess of their ability to add to the supply of goods and services. Furthermore, as the productivity of labor rises and increases the workers' standard of living, the workers tend to acquire a growing desire for leisure. As a result, not only does the desire for wealth grow as the ability to produce it increases, but also the amount of labor the individual is willing to perform decreases. This represents an additional cause of the continuing scarcity of labor.

Thus, the fundamental and essential nature of economic life is this: the need and desire for additional wealth are there and the nature-given means of producing it are there; all that is lacking is the ability of human labor to transform the nature-given means of production into additional wealth.

On this foundation, the fundamental economic need of rational beings emerges as the overcoming of the limitations on production imposed by the scarcity of labor. Always, what stands between man and his need for greater wealth is his limited ability to produce wealth--his limited ability and also willingness to perform labor. There is only one solution to this problem. And that is continuously to raise the productivity of labor--that is, continuously to increase the quantity and quality of the goods that can be produced per unit of labor, including the variety of goods. An ineradicable scarcity of labor resulting from a need and desire for labor that are always vastly greater than the supply of labor requires that the productivity of labor be rendered greater and greater. The rise in the productivity of labor is the only conceivable way in which man can obtain the progressively greater amounts of wealth that his rational and progressive nature requires.

The problem of precisely how continuously to raise the productivity of labor, to make possible an ever increasing production and enjoyment of goods per capita, is what I call the economic problem.

(Associated with the economic problem is an important but subsidiary problem, which is often mistakenly presented as the central economic problem, namely, how to allocate an existing limited ability to produce in accordance with the choices of individuals to satisfy their more important wants ahead of their less important wants. The necessity of this choice is implied by the existence of needs and wants that have no limit, in the face of a productivity of labor that at any given time is always strictly limited. Regrettably, it is this subsidiary problem that most economists have in mind when they describe economics as focusing on "the allocation of scarce means among competing ends." Closely associated with this mistaken view of the economic problem is the formulation of the fundamental problem of economic life in terms of a scarcity of goods. The actual fundamental problem, of course, is a scarcity of labor and thus how to raise the productivity of labor.)

The next chapter provides a conclusive demonstration of the limitless potential of natural resources and contains a necessary critique of the objections of the ecology movement to economic progress. Following it, Chapter 4 will explain why the focal point of the ongoing solution to the economic problem is the division of labor. The division of labor will be shown to constitute the indispensable social-organizational framework for the progressive increase in the productivity of labor required by man's nature as a rational being. It will be shown to represent in its inner nature the form of society required for the efficient and progressively improving use of man's mind, body, and nature-given environment in production.

As previously indicated, subsequent chapters will then show the dependence of the division of labor on the leading institutions of a capitalist society, above all, private ownership of the means of production and the price system. They will also show the reciprocating and thoroughly benevolent influence of the division of labor on private ownership of the means of production and other essential institutions of capitalism, namely, economic inequality and economic competition. Still later chapters will show how, within the framework of the division of labor and capitalism, the productivity of labor is continuously increased on the basis of capital accumulation--which entails the employment of ever increasing amounts of wealth as means of further production--and the absolute dependency of this process too on the institutions of capitalism.

In effect, the remainder of this book can be summarized as demonstrating a single proposition: in every possible way, with no valid objection, the solution for the economic problem is capitalism.

Notes

37. See below, pp. 6371.

38. See below, Chapters 1219.

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