At Real Clear Markets, John Tamny — FreedomWorks Vice President and Director of the FreedomWorks Center for Economic Freedom — manages to fit an impressive number of fallacious talking points into one column. FreedomWorks, as you might know, is the outfit founded by Dick Armey — the crook extraordinaire who (along with fellow dumpster fires Jack Abramoff and Tom DeLay) attempted to transform the Marianas Islands into an offshore haven for sweatshops staffed by indentured guest workers. Armey went his own way in 2012 based on his perception that FreedomWorks’ then-president Matt Kibbe was even more crooked than he was; but his vision of transforming the United States into another Saipan still lives on at FreedomWorks.

All of Tamny’s errors hinge on the received right-libertarian dogma that capital accumulation creates jobs. The simple truth is that wealth is greatest where jobs are being destroyed the fastest. Think about it. What is investment but the commitment of capital to individuals and businesses who aim to develop advances that facilitate the production of more and more goods and services with less and less human effort.

The truth, contrary to Tamny, is that investment is simply the commitment of capital to activities that promise a return. Far more often than not, in today’s monopoly capitalist economy, the return is unearned income in the form of economic rents. (An economic rent is the term for an unearned income, greater than the return that would have been necessary to incentivize delivering a given good or service in a competitive market, that results from position or privilege rather than production.) The greatest source of profit is not finding better ways of doing things, or even doing things at all, but collecting tribute for the “service” of not impeding other people’s attempts to do things. 

It’s always been the nature of capitalism to restrain progress when doing so is more profitable than actually innovating, going back to the virtual halt in steam engine improvements while Watt’s patents were in effect. And as modern capitalist economies have fallen under the control of finance capital and oligopoly markets, that tendency has only increased. The Big Three American automakers, for example, colluded to suppress the introduction of antipollution devices until all three were ready to introduce them. As Paul Goodman described the oligopoly model: “Three or four manufacturers control the automobile market, competing with fixed prices and slowly spooned-out improvements.” 

Tamny continues along the same track…

Lest readers forget, jobs don’t just magically appear as much as they’re a logical consequence of investment….

From there, just try to think reasonably. If AI is set to lay waste to all sorts of jobs (300 million according to an estimate cited in the New York Times), the companies and industries set to experience this rapid change the most will vacuum up investment. The latter isn’t an insight as much as it’s a statement of the obvious. Businesses and industries producing much more with much less are major recipients of capital….

Applied to Austin, it’s no outre speculation that Texas’s capital city is more exposed to the AI revolution that awaits than is Huntsville. What this means in reality is that Austin will be the beneficiary of even greater capital inflows, and the abundant job creation that the inflows imply.

…and finishes up with this:  “…[W]here there’s productivity there’s endless opportunity, where there isn’t productivity opportunity is slight.”

So, where does Tamny go wrong? Three major ways:

1) Investment doesn’t create jobs. Most investment of necessity goes into non-productive outlets because the combination of capitalism’s chronic tendency toward idle capacity, surplus capital, and stagnant wages means there’s insufficient aggregate demand to keep even existing plants and equipment in operation at full capacity. These tendencies are the reason that a growing share of investment, over the past generation, has gone into FIRE (finance, insurance, and real estate) economy bubbles and rent extraction, as well as the asset-stripping of productive enterprises by private equity. In fact half a trillion dollars of investment capital goes into government bonds, with their nominal returns — a sort of farm price support program for surplus capital that couldn’t find a productive outlet elsewhere.

Increased productivity from technical innovation only makes this problem of surplus capital worse. In “How the Tech Boom Terminated California’s Economy,” Douglas Rushkoff argued that increases in productivity from high tech, by reducing the capital outlay needed to perform a given function, exacerbated the problem of idle capital.

2) Who benefits from increased productivity depends on who owns the productivity increases. In an economy of worker-controlled production, and open-source technology, productivity increases will result in increased pay or shorter hours for workers and in lower prices for consumers. In an economy of absentee-owned, hierarchically managed enterprises, artificially reduced bargaining power of labor, and proprietary technology owned by corporations, the opposite is true: the productivity increases will result in downsizing and speedups for workers, with cost savings enclosed as a source of increased dividends and management compensation.

3) “Jobs” aren’t even the point. As Adam Smith said, consumption is the sole end and purpose of all production. The result of technical innovation should be, not to “create jobs,” but to reduce the total amount of labor needed to provide a comfortable standard of living for everyone. Our goal should not be an endless spiral of growth and job-creation, but a steady progression of shorter work weeks for the same or higher income — with more and more goods and services becoming “too cheap to meter,” and the link between labor and consumption attenuated and ultimately broken.

This is especially true given that innovation is for the most part the creation of collective intellect, and large corporations and billionaires are only in a position to appropriate increased productivity for their private benefit because of intellectual property and a finance system that gives them a state-created monopoly on the investment and credit functions.

So despite all his talk of productivity, job-creation, and benefits for other people, Tamny is exactly what his position at FreedomWorks would suggest: an apologist for techno-feudalism.