American Capitalism is Maximizing Profits by Destroying Jobs

American Capitalism is Maximizing Profits by Destroying Jobs Robert R. Odle, Ph.D. an aspiring good citizen of the earth

…capitalism is not about creating jobs ....

Capitalism Does Two Things Well

• It creates wealth and,
• It maximizes profits.

The people in a capitalist system can either be long term or short term thinkers.  In America, they are short term thinkers, generally with a long term lookout of one quarter, the current relevant time period in American business.  Some great companies in this country have a long term look out of a year or more.  Serious five year plans are very rare.

The creation of wealth comes primarily by inventing products for consumers that did not exist before.  Some of the creations, like the cell phone, create wealth all over the world because of improved efficiencies, in this case improved flow of information.

Capitalism maximizes profits in the early hours after a creation by mobilizing resources to sell and distribute the new product.  In this growth period, the use of labor is most intense and frequently grows rapidly as a new creation takes off.  The current business cycle of most new products is relatively short, a few years at most, often a few months.

As the product matures, capitalism maximizes profits by reducing costs.  The most common reduction of costs is to reduce people.  This is done by improving efficiency by the use of machines instead of people, working less people harder, and using the computer to identify and eliminate bottlenecks and to use resources more efficiency.  Automation, although the most obvious way capitalism cuts costs by eliminating human jobs, is only the tip of the iceberg in how computers reduce costs by eliminating jobs.

Job Elimination Creates Excess Capacity

As computers and automation reduces costs by eliminating jobs, excess capacity is needed in each company and the system as a whole since all companies are utilizing similar technology to reduce workers. As the number of workers in America decrease, the number of consumers decrease.  As the number of consumers decrease, further reduction of cost via more worker layoffs is warranted to maximize profits.  Repeat that scenario for 40 years and you have America as you see it … with 62 percent of the work force utilized, 40% of the population getting a few percent of the wealth created.

Each Round of Creations produces less Employment

With each round of creations, the number of viable consumers for the new product is reduced from the previous round job eliminations from computers and automation (and outsourcing -- although that is not the current discussion).  And as computers and automation improve, each round of job destruction is worse that the last one -- hence the 40 year decline in the labor participation rate and the growth of poverty in the United States.

In summary, American Capitalism is maximizing profits by reducing costs primarily from eliminating workers via computerization and automation.

This problem will not be fixed by any automatic mechanism in capitalism.  Capitalism as perfected in America creates wealth and distributes that wealth to the super-rich and those that the super-rich need to maintain and increase their wealth.  With the invention of supercomputers and automation the group needed to increase the wealth of each corporation/super-rich decreases in numbers with each cycle.

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