ns 3 CANADA Perhaps the most common and most plausible of the economic principles that are daily doled out to us by the press, as well as by the intellectual elite of the country, is that our national well-being, as well as our individual standards of living, are critically dependent on ever- rising productivity. Workers are constantly exhorted to raise their produc- tivity as the only sure way of securing their jobs. Unions are constantly lectured on the impossibility of achieving higher real wages, i.e. of negotiating wage increases that will not be immediately cancelled out by inflation, unless wage increases are based on increased productivity. Meanwhile the general public is told that Canada has an outstandingly poor record of productivity, that we fall behind in the competition for international markets be- cause our workforce is unproductive and overpaid.- Canadians, we are told, are overfed, lazy and inordi- nately greedy. It is ironic that the people who make such assertions are the same ones who advocate greed as the necessary motivating force of the economic system. Milton Freedman and his followers, for example, believe that all policies that are adopted for unselfish ends lead to evit results and that actions taken {rom purely selfish pur- poses lead to good results*. In this, of course, they are echoing the sentiments expressed by Adam Smith in the Wealth of Nations, two hundred years ago. The productivity argument is so simple and compel- ling that it requires the most careful examination to expose its flaws. : First, however, one must begin by recognizing the obvious underlying truth that anything consumed must first have been produced, and moreover that the greater the production, the greater the potential consumption. That, of course, is elementary. The problem lies in the false and self-serving conclusions that are almost inva- riably drawn from these true premises. “These principles are set forth with great clarity in the Fraser Institute book, Freedman on Galbraith. ; Economics for you It is but a short rhetorical step from the assertion that there can be no consumption without prior production to the conclusion that workers should not receive wage increases until they have increased their productivity. Apart from sweeping, unsubstantiated general state- ments, the question whether the necessary increase in productivity has already taken place, is rarely if ever raised. The listener, or reader, is instead counted upon to assume that there has been no such increase. No ‘Perfect Competition’ The other side of this argument is the suggestion, sometimes stated, but more often merely implied, that if productivity increases, wages will increase accordingly. The basis of this notion is the theory of marginal produc- tivity which holds that in a state of perfect competition, the wage of labor is equal to the marginal product of labor. The catch is in the words ‘‘perfect competition,’ a state of affairs which does not and cannot exist in the real world. . To see what is the relation between wages and produc- tivity in the real world; we are indebted to Professor Wassily Leontieff of Harvard University for a particu- larly illuminating illustration. Professor Leontieff points out that when he came to America in 1923,-a typical grain farm employed five horses and produced about 2,500 bushels of grain. Ten years later, with the introduction of the farm tractor, the same farm would have one horse and one tractor. Thus _ Exploding the productivity myth the productivity, or output per horse, had increased by 400 per cent as the result of mechanization. Ten more years and the same farm has two tractors and no horses. Theoretically, therefore, the productivity of the horse was now infinite. What reward did the horse receive for — that? Why, as everyone knows, he got sent to’the glue factory. If automation raises the output per worker in the — same manner that it has already done to the output per © horse, why should the worker expect a better outcome? — Nothing in Long Run The fact, which most workers eventually learn from — their own experience, is that increased productivity in- creases the competition for jobs, and therefore, if it has — any effect on wages, that effect is likely to be negative. — Lay off 500 workers from a plant that has been re-equip- — ped with labor-saving machinery, and wages will fall. — The 500 who have been laid off will be willing to work for — less than their former wage rather than exist on unem- ployment insurance or welfare, and the 500 who remain — on the job will be afraid to ask for higher wages, or even — enough to retain their real wages in the face of increased cost of living for fear of the unemployed taking their jobs. — Orthodox economists will often agree that layoffs and — wage cuts may be the immediate result of increased — productivity, but, they argue, in the long run, the fact ~ that productivity lowers the labor costs per unit of output — will lead to an increased demand for the product and — therefore for the labor that produces that product, and — bring wages into line with the higher marginal product. In a friction-free world that might be true, but in the ~ real world it takes time for workers to transfer to areas — where there are jobs, or to upgrade their skills from jobs — that have become redundant to ones that are in rising — demand. And since the process of renovation of industry is a continuous one, by the time the market has had time to adjust for the consequences of one adjustment, it has — been obliterated by the next one. The long run, in short, — is a series of short runs, and as Lord Keynes remarked, — .in the long run we shall all be dead. ‘nenuanuseuernnannennananeugenuerateunennenneeraveeeeor eu seugeee cece see Uaeeaneenueuevnevzneaueveeezneseucaunenaceueveeneuveenacevneacanat a (1 Bulgaria wows Canadian kids ) Burnham dies, right — TORONTO — “It was an experience we'll never forget,”’ 16-year old Katerina Kontopidis said last week recalling the Cana- dians’ participation in Sofia, Bul- garia at the third International Children’s Assembly, known as the ‘‘Banner of Peace.” Banner of Peace was founded in 1979 by the late Lyudmila _ Zhivkova, daughter of. Bulgarian president Todor Zhivkov, as an international children’s festival dedicated to ‘‘unity, creativity and beauty”’. _ Along with Katerina, Canada was represented by 14-year old Toussaint Farrell, also of Toron- to, and Paul Mirza, 14, from Hamilton Group leader Brigid Kemp said the assembly attracted kids from 116 countries around the world, from the socialist, capitalist and developing countries. The 10-day event was packed _ with sports, artistic, cultural and social activities as well as oppor- tunities to see Bulgaria. The _ Canadians visited the evocative, _ Second World War monument at Shumen and swam in the Black Sea at Varna. . Children’s Parliament Toussaint Farrell read his peace poem at a poetry and litera- ture presentation and saw it pub- lished with other children’s poetry coming from the assem- bly. He also met with prominent Bulgarian and international writ- ers at the assembly. Paul Mirza represented Canada _ 4 PACIFIC TRIBUNE, AUGUST 14, 1985 ergo alone SNA ects nano megeess in the World Parliament of Chil- dren, which adopted an appeal to parents, governments and to the children of the world to fight for peace, and eliminate the nuclear war danger. The youthful parliamentary appeal urged: ‘‘Do not allow the songs of birds to cease and chil- dren’s games, drawings and songs to be cut short! Do not allow this earth to become a desert! Remove the nuclear danger once and for all! Protect children! Protect our, desire to live and create art under .. a peaceful sky!"’ The friendliness of the Bulga- rians they met and the obvious importance the entire country attached to the children’s assem- bly deeply impressed the Cana-- dians. importance of Peace Everywhere they went they were welcomed with the tradi- tional presentation of bread and salt. “It was fantastic. We’d be driving down a road and workers along the way would wave at us. and applaud us as we passed by,”’ Katerina recalled. The importance Bulgaria’s socialist government places on educating children about peace and in mobilizing the people for it also left an impression on the Canadians. They contrasted this exper- ience with what they see in Canada where people have to unite, to mobilize, to pressure governments to address the issue positively. “The assembly underlined to me how important it is to look into things for yourself and not just to take your information from one. direction,’’ Toussaint said. . “What we saw in Bulgaria isn’t anything like the picture we get of a socialist country in our news- papers and on television.”’ Canadian Maple Canadian life, and conditions for children in this’ country, equally fascinated the Bulgarian. and other children at the assem- bly. ‘A lot of the other kids were especially interested in break dancing,’’ Paul Mirza said. The Canadians left with a long list of friends and pen pals, some of whom have already started writing. Appropriately, they left behind a real symbol of Canada to - mark this country’s place in the park surrounding the Banner of Peace monument —a seven anda half foot long Schwedler Maple. Taking the tree to Bulgaria was an adventure in itself. ‘‘It seemed to stump the people at British Airways’, Brigid Kemp said. ‘‘It ~ took us an hour to get the tree through customs here, they even put it through the X-ray ma- chine.”’ Thanking the Communist Party for recommending them to attend the assembly, the three parti- cipants say their experience has encouraged them to step up their efforts for peace and to promote friendship with the children of the world. appears to profit Forbes Burnham, president of Guyana since 1980, and previous to that, prime minister since 1968,-died August 6 at the age of 52, after a throat operation. The actual cause of death was said to be heart failure. Burnham, whose People’s National Congress has ruled Guyana since 1968, and led the country to almost complete economic catas- trophe, has been exposed from many sides of rigging elections and using violence against the opposition, trade unionists and any media not friendly to his regime. He was immediately succeeded by the former prime minister Desmond Hoyte, who was sworn in as president. Another Burnham minister, Hamilton Green, moved from vice-president to prime minister. New elections are expected this year, although constitutionally - the government could hold out till March. — Former prime minister Cheddi Jagan, leader of the opposition, who heads the People’s Progressive Party, a consistent critic of the Burnham regime, wrote recently: “Since 1968, elections have been routinely rigged. The last more or less free and fair election was held in 1964 under an independent, governor-appointed elections commission. And that election was observed by a Commonwealth Observer Team.”’ ' The Lord Avebury Observer Team for the 1980 elections nuted that *‘the worst fears of the Guyanese people regarding the viola- tions of the electoral process have been confirmed.” — The two persons replacing Burnham — Hoyte and Green — are members of the right faction of the PNC and, according to Herman Ali, assistant general secretary of the Canadian support group, the Association of Concerned Guyanese, will not restore democracy or try to work out a political solution. (There had been initial discus- sions between the PNC and the PPP on finding common ground to improve conditions.) : ee — Burnham wanted to try to reach some compromises, but now the _ right seems to have gained power in the inner struggle with the PNC’s smaller left tendency, Ali suggested. : _ It was only days ago, while Burnham was alive, that the govern- ae extended the National Security Act to make it a permanent We oo