The paradox is not mine; I had thought it was Bertrand Russel but did not find it easily on Google. The paradox asks a question about productivity and social value.
Imagine a village in which everyone works in a pin factory. The pins are sold across the country, and a steady number of workers make their living working in the factory.
Now imagine a productivity improvement which allows the same number of pins to be made with half as many work-hours. Further assume that the market for pins is steady. Thus half of the pin-makers are laid off.
In an idyllic world, everyone would have worked half as many hours, perhaps, and the village economy could have gone on as before but with more leisure time for barn raising and painting city hall.
Instead, half of the workers go onto social assistance of some kind, and the taxes of the others might increase to help pay for this. Everyone loses, except of course the owners of the factory.
Think of this every time you hear about productivity improvements, especially in places like the Report on Business. Those improvements may be moving dollars from the middle class to the owner class.
I am reminded of newspaper claims that 2.5 trillion dollars are being held by corporations in North America, in cash, instead of going to investment, jobs, and salary increases, let alone tax increases.
Think of this as the recession returns. All that money is still out there, but it’s not working for us. All that productivity is part of the plan to employ fewer of us, for those remaining jobs that can’t be outsourced entirely.
Henry Ford supposedly wanted to build cars his workers could afford. By buying things based on price only, we instead have used today’s opportunity to buy cheaply, while shrinking tomorrow’s employment level. Eventually we end up with a country with nothing but debt and foreign suppliers. Sound familiar?
We should have exported our standard of living to the rest of the world. Instead, we have decided to import theirs to us.
One could argue that we had an immoral, unfair advantage before free trade and the off-shoring of jobs and services. Perhaps we did. We have certainly gone a long way to dissipating that advantage.