Productivity, public sector, and Red Tape

Understanding the difference between harmful and useful regulation is essential for the left. But, focusing on supposed "inefficiency" of government does not get us there.

Ever since the collapse of support for liberal left politics in the USA, the main questions being asked are around how working people could have veered away from such a perfected brand as the Democratic Party.

The answer from liberals falls into several broad categories:

1. The populism of the liberals went too far "Left" (not economically but socially through a focus on identity) and did not appeal enough to assumed backwards sentiments of workers.
2. American liberal policies have worked for middle class urban voters, but not the working class found in suburban, rural, and "communities" voters who are needed to win elections.
3. That the left has over-done regulation, which is now in the way of getting things done.
4. The public sector has grown too much and become a burden on the economy.

Essentially, the assumption by centrists in America is that there is something wrong with liberal branding and that working people are annoyed by a too complex world.

It is a strange position for liberals to take given that organizations run by workers tend to be further left on the social side and have a demand for more democracy, not less, in response to an ever more complex economy.

Unions regularly demand more regulation of the workplace in response to issues, not fewer, through collective agreements, increased safety, and limits on corporate or management power.

Organized working class communities also tend to have lengthy debate in assigning resources. Complaints are rarely about too much input from community members.

So, why is it that the liberals are now clamouring for less democracy and less government regulation?

According to centre left publications and commentators, governments are too often trying to fix problems by establishing regulations instead of "just fixing issues."

Apparently, being too focused on social and economic injustice means you cannot focus on fixing potholes and building housing. You have to pick one.

Many Democrats are of the mind that, like the pendulum of the previous 50 years, eventually they will win because the opposition will eventually lose. In the meantime, there must be an internal reckoning of those who were responsible for them losing. Namely, they want to focus on the Left who do not understand that being an activist is un-American.

It is amazing how the centre can both claim they lost the working class vote, but in the same breath blame the left for alienating "real" workers.

While I think much of the debate is a delaying tactic by centre right Democrats who believe that the Trump victory is not that different from last time, there is something to the ineffectiveness of government.

There is truth in the lie, as it were.

The solution is, frankly, more government not less. Specifically, more government ownership and direction of productive work. If the government directly employed the workers who fix potholes, they would be fixed, not just have reports filed about the number of potholes that are around.

Unfortunately, even left liberals are looking for any other way to deal with this issue than spend government money. Many cannot understand why they had not thought of taking a chainsaw to the public service. Well, maybe not with a big chainsaw (scary), but destruction in a more thoughtful way.

Why did they try to defend the state apparatus they had pretended to build over 100 years?

This is a rather bizarre anti-historical position to take after liberals lead the charge to dismantle most of the post-World War social democratic state. The state is so diminished now that barely anyone thinks it can do a good job, even it was directed to.

No matter the facts that per-capita funding on social programs is not particularly high or that public sector employment growth is just in line with population growth.

A true return to the 1990's cuts to operations spending is seen in every supposed centre left government policy around the world. They all point to years-old data showing spending and debt at the end of the pandemic years.

We have talked previously about how this makes little sense. But, there continues to be confusion even on the left about what it is that we want government to do.

To be clear, workers are mad at the government doing too little for them, not too much. The idea that cuts to government will solve this is strange.

At an economic level, things are confusing for liberals because their economic ideologies do not identify production properly.

Building an alternative vision to the chaos of chainsaws to public regulation is going to have to start with rejection of the neoclassical notion of government expenditures being a negative.

From the classical point of view, most of government services might be non-productive labour, but like doing the dishes, laundry, and cleaning (all non-productive, unpaid labour) it is necessary to sustain productive labour. It is part of the support mechanism to value creation in society.

"Unproductive" labour is just that which does not directly add to the exchange value of a good or service.

We could all benefit from going back to how value is created and found in society, reviewing concepts of value creation, use value, exchange value, and the circuit of capital.

But, it is probably easier to simply say that much of the work people do is not adding to the exchange value of goods, but that does not mean you can cut that work without consequences.

A ticket agent and a security officier limiting access to a sports or cultural event isn't productive labour. But, just try collecting the fees without them. Safety regulations are similar, defence spending, and public spending generally is like this.

In a complex society, there is an ever increasing amount of this kind of non-value creating work that needs to be done. Societies that have complex economies have to have a corresponding understanding of that complexity to attempt to respond to problems effectively. The more complexity, the more work it takes to understand and respond to the complexity.

The discussion for liberal capitalism has historically been focused on the socially determined aspects of how much of the surplus created by new exchange value-creating labour is spent on non-value creating labour. Not just by government, but in the struggle between labour and capital, leisure time, security, surveillance, management, R&D, and limiting the worst aspects of real existing people.

The current shift of both sides of neoclassical policy to (liberal and right-wing) focusing on cuts will not have socially desired outcomes. But, more to that, there is reason to believe it will not have even the economic outcome capital wants.

There are several reasons for this, but let's focus on the ones from a classical economic perspective.

1. There is no productivity gain of government services to be had from cutting funding to the public sector. Even in the value producing private sector, you must invest more money to raise productivity.
2. Attempting to increase efficiency of the public sector does not result in an increase in the "output" in the rest of society. Cutting back on support hours of elderly does not result in more cars being made in the real world no matter what the economic model says.
3. All new regulations have unintended consequences, but removing regulations also have negative consequences. Namely the issue that the regulation was trying to solve returns.
4. Democratically identifying and fixing problems is done through regulation, but dealing with the unintended consequences of those regulation takes more work. Potholes are fixed through the process of identifying them and fixing them, but then also figuring out if you can reduce them. All that has to happen to have fewer potholes.
5. "Smart" regulation starts with understanding the real world is complex and regulations need additional state supports and review, not fewer, to be effective and have a positive impact. This is not the "market will figure it out" attitude. Bad regulation leads to reaction to the increased cost (financial and mental) of implementation.
6. Regulation sets the rules for competition between firms. The removal of a regulation will also have negative effects for some firms already producing because it shifts those rules.
7. The key to support investment in the face of regulation is a framework of support provided by the state to fulfill the goal of the regulation, not just a program of restating the problem in different forms.

The short of it is: to increase the efficiency of the government, additional state support for productive activity is necessary.

The same goes for childcare, healthcare, and education since these all facilitate an internationally competitive environment without providing profit subsidies.

The political discussion within this real economy is about deciding the amount to spend. It is better then to base that discussion on a real understanding of the effects the type of spending on economic activity.

In an increasingly complex society, these decisions eventually come to a head when the economic system we have is unable to provide sufficient resources to meet demands.

For the left, it is about demanding and then exposing these limitations.

So, let's stop pretending that we forgot what regulations are there for and start demanding the necessary supports to move beyond just measuring the bad things and onto fixing them.