THE BLOG
10/27/2014 12:27 pm ET Updated Dec 27, 2014

Sky High Robbery

fStop Images - Stephan Zirwes via Getty Images

A classic strategy for keeping under control the poor souls toward the bottom of the social pyramid is to set them quarreling among themselves over the small goods that are left for them. So it is since hewers of wood were first pitted against drawers of water. That serves the dual purpose of distracting attention from the cause of their miserable state and dissipates discontent which otherwise might be directed at those who rule their lives. Such is the nature of the daily battles being fought in the skies among the passengers in Sardine Class over the incline of airline seats.

The media world is saturated with graphic accounts of these encounters. Everyone chimes in: those defending the God-given right to lean back versus those who gripe about the consequent injury to laptops/tablets or upended drinks. More judicious Solomons offer sage counsel, Obama-like, on modes of reconciliation, e.g. the tilter should consider giving fair warning and refrain from sudden, full tilts. The law-and-order slice of the public sternly reminds us that resort to violence is impermissible under any circumstances since it threatens the domestic peace and tranquility.

Almost no one notes that the root problem is the cramming of passengers into spaces far too confined to permit humane travel -- much less anything that passes for rest or work. The radical deterioration of air travel is felt at its most painful in the shrinking of seating to 17" width (armrest included), 31" pitch micro-spaces. Those are now the standard dimensions even on the newest planes flying the longest distances. In fact, at this very moment the last 747s with somewhat more generous dimensions are being retrofitted so as to deny travelers their last hope for avoiding crippling conditions. To add insult to injury, official economic statistics make no allowance for this phenomenon. They still treat every airline seat as being equal over time, so that inflation numbers are kept down (along with all the cost-of-living data that derives from them). In other words, they make believe that the product is the same when it manifestly is not. It is as if the base model of a family sedan were reduced to the size of a FIT without that change registering in the assigned value of the product.

The much abused airline passenger thereby suffers a double insult. Travel in economy has become an ordeal while he is told officially that nothing has changed in the service that he buys. Nice trick if you can get away with it -- which is exactly what the airlines and government agencies succeed in doing. Yet somehow this dishonesty evades public attention in this "age of communication." We are so conditioned to overlook our own exploitation that "brainwashing" isn't required -- an occasional quick rinse will do.

The horrors of airline travel defy all notions of Progress. In this domain, Regression has been institutionalized. This odd phenomenon is illustrative of other ways in which the realities of contemporary measures of well-being are misused to the public's disadvantage. Let's leave aside the inconveniences of the post 9/11 security regime which operates on a planet of its own. These further uncalculated afflictions imposed on the airlines' clientele all stem from the pervasive business model that stresses profit through administrative efficiencies. It is a central theme of business school indoctrination. These so-called "efficiencies" take the form of cutbacks in labor costs, i.e. fewer workers, lower pay/benefits, less security of employment, heavier workloads (speeding up the assembly line and longer hours) -- plus cutbacks in what is provided passengers from food to checked luggage. The assemblage is mislabeled "productivity improvements."

This virtual rise in productivity bears no resemblance to an actual productivity increase. It merely expands profit by squeezing more out of workers and transferring the resulting reduction in the value of the product (services) onto the unwitting consumer. The net benefit to the economy is zero. In truth, that effect is negative since it inflicts wear-and-tear on both workers and consumers that shows up as unmeasured costs in other sectors of the economy. Official statistics, here again, make no distinction between "virtual" and "real" productivity increases. If it were honestly calculated, the United States' already modest standing in the international league table of productivity would fall further. (The league leaders: Belgium, "socialist" France, Luxembourg and "socialist" Norway).

Genuine improvements in productivity depend on technical innovation (substituting tractors for horses, typewriters for plumed pens) or innovation in methods of work (double entry bookkeeping). What we see now is the reversion to "sweated labor" under the false name of increased efficiency. It worked for Stalin and the Pharaonic pyramid builders, so it's fit for 21st century America.

Let's get concrete -- beginning with airlines.

Parable I

Consider this situation:

Phase 1: A trip to Washington and other cities is planned. Ms. E calls United Airlines; the call is forwarded -- after normal delay -- to outsource phone center in India; operator cannot find flights desired because she (and whatever database she is accessing) is ignorant of the fact that two airports serve D.C. Two subsequent calls (to India and the Philippines) are needed before a reservation is made. E's time lost = 3/4 hour. Economic statistics register a gain in productivity for United thanks to its lower costs and savings through under-trained, lower-paid staff. Do they register an economic cost for Ms. E's time lost? No.

Phase 2: Aircraft is regional jet, despite flight distance of 1,300 miles. Seating configuration makes it impossible to work. United gains -- in productivity and profits -- from operating small aircraft at full (physically) capacity and paying staff in this subsidiary company 1/3 less than they earned as employees of United proper. E's work time lost and productivity diminished?

Phase 3: Arrival at gate, disembarking delayed 20 minutes because operator of ramp is busy at another gate; questioning confirms that staff has been cut and workload increased. Wait on ramp for hand baggage that could not be accommodated by small aircraft, additional 20 minute delay because one slim woman baggage handler cannot handle 3-tier wheeled cart and push it onto hydraulic lift. Several passengers, including Ms. E, miss connecting flights due to delays. United has registered a further productivity and profit gain. How is the lost time of passengers registered?

Phase 4: Frazzled, rescheduled passengers buy alcohol and/or aspirin in immoderate amounts. Boost to GDP. Later visit to HMO to check out chest pain coincidental to the agonized trip adds to HMO staff productivity and, via her co-payment, profitability. Contribution of last two to economy in real terms = zero. Ms. E's time and suffering?

Phase 5: Due to income lost thanks to missed flight, Ms E decides to do home repair by herself to save money. Goes to Home Depot; inordinate time spent trying to find staff, items needed, and explanation of use. Return trip because under-trained staff gave misinformation. Economic statistics register rise in productivity for Home Depot and US economy. Ms. E's costs are, I suppose, 'externalities' compensated by the psychic gain of feeling superior to the Europeans who -- due to inflexible labor costs, and retrograde performance in learning the science of mass marketing -- have experienced lower productivity growth in the retail service sector.

Parable II

Consider the following:

Harry 'X' is an independent commercial artist. He receives a fee of $1,000 from an advertising outfit for work done on a pharmaceutical company 'A' ad aimed at consumers/patients that touts the virtues of a new prescription drug. (Transaction 1). Harry 'X,' approaching 65, pays a health care advisor $1,000 to help sort out the 70+ brochure offers he has received in the mail for accessing the prescription drug benefit and/or Medicare Part B supplemental insurance policy. (Transaction 2). The health care advisor pays a financial consultant $1,000 as initial payment on preparing an investment plan for his own retirement. (Transaction 3). The financial consultant pays $1,000 to a Medicare licensed provider of residential care services for his mother who is a Texas resident. (Transaction 4). The facility pays its administrative staff $1,000 to submit a claim (along with others) for a matching amount to an intermediate private company (company 'Z') that is contracted by the state of Texas to make such distributions. (Transaction 5). Company 'Z' pays its administrative staff $1,000 to submit a claim for reimbursement (along with others) from the state of Texas. (Transaction 6). The state of Texas pays $1,000 to a private company 'Q' to administer a student loan program for students enrolled at the state university campuses. (Transaction 7). Harlan J, senior partner in 'Q', pays $1,000 to a stockbroker for purchase of equity in pharmaceutical company 'A' (Transaction 8).

Each of these transactions registers as an addition to GDP -- using conventional statistical measures. The aggregate is substantial. But what has been the actual increase in national wealth? What value has been added to the economy by them? to the national welfare? Individuals have received some services, but what is the real value of that good? If the transaction amounts had been $2,000 instead of $1,000, would that mean we had added twice as much value to GDP? twice as much benefit to purchasers of services? Or are we misinterpreting the velocity of money (turnover or transfer rate) as an exact measure of economic activity? Let us consider the implications.

Implication 1. A service sector organized to maximize transactions would be registering greater economic growth than one that minimized them to serve the same ends. Therefore, the more inefficient the system, the wealthier the country would appear to be.

Implication 2. A national economy where these services were privatized would register markedly greater growth than one that concentrated them in more rationally organized, lower total cost public agencies.

Implication 3. The American health provision 'system' spends 45% more than anyone else as a fraction of GDP, this although tens of millions remain without adequate coverage or care. This correlates with uniquely high velocity of money involved in transactions in the health services sector. What is the connection, in real terms, between the monetary value of those transactions, conventionally measured, and the provision of actual services to those in medical need? How accurate is the statement of GDP in the first place since a large fraction of it is measured in terms of money velocity?

Lessons:

• Additional questions about the way economists appraise productivity jump to mind. One, where nominal productivity is increased by transferring non-quantified costs onto the consumer, how is this figured in the equation?; and two, why is 'remedial' economic activity that meets needs created by the failure of economic performance added, rather than subtracted from GDP?

• In today's modern world there is a presumption that academics and those other professionals who employ their ideas are committed to finding objective truth. It ain't necessarily so.

• Academics, like all persons, are prone to groupthink reinforced by peer pressure. It is all the more pronounced when underpinned by the conviction that a scientific truth has been discerned. The tenacity of dogma has an affinity with the natural dynamics of social solidarity

• An elite group will be especially reluctant to let go of valued ideas whose discovery by recondite means (statistical analysis using advanced mathematical techniques) places them on a higher plane that their fellow citizens. In other words, professional thinkers are not immune to status considerations.

Market fundamentalist economists are sociological monophysites. That is the heart of the matter. They believe that humans, and therefore society, has only one, unitary nature -- that of calculating, narrowly self-interested economic man. Observation of the world around us tells us that this is untrue. Man and society have multiple natures. That is what makes them human.

You call fool all of the People some of time; you can fool some of the People all of the time;
You can usually count on fooling enough of the people enough of the time to get away with whatever mischief you have in mind