Paradigm Lost: The Rise of U6

[DrMrLordX]

This is a bit long and will not fit into one post. As you may have noticed, I do not normally post here, but seeing Moonbeam's thread inspired me to post an idea that has been bouncing around in my head for some time now. I also found woolfe9999's post within that thread to be of some interest, within the context of the subject which I shall address below. Please read after the vast sprawl of text for additional notes that I could not/did not want to incorporate into the body of the text itself:

There is an undercurrent to the development of our modern economy that far too many ignore: our economy, as we know it, has entered into a slow, creeping, self-destructive feedback loop. The principals upon which my statement is based are fairly simple, and it is quite clear that numerous economists and thinkers of our day perceive some of the underlying factors that have created this feedback loop, but the number of individuals who have chosen to articulate, in public, the reasons for this loop existing are either too few in number or simply non-existent. For this reason, I have chosen to throw my own hat into the ring. Take what I say for what it’s worth: my words are less a representation of perfect truth as they are an invitation for the reader to think about our economic circumstances in a different way. Perhaps some good can come from an alternative point of view.

First, I must provide some background: over a year ago, my employment with the United States Postal Service came to an abrupt and unceremonious end. Our facility - the Chattanooga Remote Encoding Center - had finally been rendered completely obsolete by computerized sorting equipment. Simply put, it was our job to assist with the new computerized sorting initiative undertaken by the USPS back in the 1990s by helping to route the many pieces of mail that the automatic sorting equipment could not read and interpret on its own. We would spend our shifts at computer terminals, reading the addresses from mail scanned by the sorting equipment and returning information to the sorting computers that they could understand. The program was meant to be phased out by 1999, but by 2009, there were still 6 of the original 44 facilities operational. In April of 2009, that number of facilities was reduced to 5, and the REC that was closed to facilitate that reduction was the Chattanooga REC. When it closed, all the “temporary” workers, of which I was one, were laid off. Handwriting recognition software in the sorters had finally gotten good enough that there wasn’t enough volume for us to process anymore, so it was time to close up shop. The jobs we had received from computers - at the expense of postal employees who had once engaged in hand-sorting of mail - were taken away from us by the same computers.

From the point-of-view of the USPS, this development was both positive and necessary. The USPS is losing extraordinary amounts of money per year due to high operating costs. Employing humans to help sort and route mail merely contributed to that loss, so the continued survival of the USPS depended upon the elimination of my job (among other things). Despite the fact that my personal finances have been thrown into chaos, I must acknowledge that the elimination of my position was a good thing. Why pay humans to do something that a machine can do better? It makes no sense.

Now, imagine thousands (if not millions) of businesses worldwide engaging in similar activity (namely, the adoption of automation). It is not particularly novel to consider the effects of labor-enhancing technology; even Adam Smith did so in his Wealth of Nations centuries ago. What is novel, or potentially novel, is to consider the ramifications of everyone, everywhere increasing the efficiency of their businesses to a breaking point beyond which increased worker productivity (which is the end result of any automation or other increase in efficiency) actually begins to destroy monetary wealth, albeit without necessarily reducing overall productivity (or productivity potential).

How does this work, and where is the breaking point? The latter is not something I can accurately assess (yet), but the former is fairly simple to describe if one considers the basic principals of supply and demand. Essentially, at any given point in time, there is a finite demand for goods and services worldwide. Obviously this demand fluctuates with availability of income, population levels, and other factors, but for our purposes we should either focus on some sort of an average, or on a single slice of time so that demand can be thought of as a relatively static value. The problem here is supply. Classic economic theory, particularly that adopted by capitalists, states that any increase in productivity must inevitably lead to an increase in overall wealth somewhere in the economy. More productivity on the raw material side leads to more raw materials, which leads to lower raw material prices, encouraging the production of more finished goods and inviting greater opportunity to provide services related to those goods (shipping, repair/service, etc). More productivity on the finished goods side increases demand for raw materials, which produces the above effects. More productivity on the service side can increase demand for goods and/or raw materials and . . . you can see where that goes. Right? Well, that’s all well and good, but what happens when worker output keeps going up? Or, more importantly, what happens when AVERAGE worker output, worldwide, keeps going up, so much so that even formerly non-productive populations start increasing their productivity per worker?

What you get is an effective over-supply of labor . . . or perhaps it would be better to say that your labor supply grows faster than demand for such labor. Under these circumstances, if a business can increase worker productivity by some means, they have a choice: increase overall production of goods/services in an attempt to increase market share, or maintain market share on the backs of fewer employees (which is now possible thanks to increases in worker productivity), thereby driving up profit margin without actually producing anything that wasn’t being produced before. Thanks to men like Jack Welch, the merits of the latter route have become all too clear to executives and shareholders all the world over. And, honestly, who can blame them? Selling through your current channels is much easier than trying to woo new clients and/or steal business from rivals in a highly-competitive modern economy. Even more aggressive businesses have cut their labor costs by a greater extent by canning most of their employees and moving operations to “emerging” markets, where people living in relative destitution have been transformed into modern workforces capable of a great deal of worker productivity due in no small part to modern logistics and technology. The net effect is about the same, though; reduce your labor budget while maintaining productivity levels. The value of the worker either goes down, or stays stagnant while more people become unemployed.

 

[DrMrLordX]

Now, imagine every business worldwide doing the same thing. With nearly every business paying out less in wages in some fashion (by paying less per worker or by employing fewer workers), the total wages earned by workers worldwide will drop, while the total amount of revenue that funnels into the upper-echelons of any given business (top executives, shareholders, what have you) increases. This produces wealth consolidation, all without any sort of wicked, evil scheming being required to bring it about. You also get depressed worker wages, stagnant employment levels (or, worse, increasing unemployment), and, as you might expect from the latter two, decreased demand for goods and services wherever said goods and services can be treated as “non-essential”. Decreased demand for goods and services puts a pinch on the businesses who, in turn, must either reduce productivity by getting rid of even more employees or maintain productivity by stealing market share from a rival (at which point said rival must reduce employment to compensate for their loss of market share). In other words, if I’m running a business of 100 people, and I find a way to supply my clients with the desired end-product with only 95 on the workforce, it might improve my profit margin, but if my client pool is reduced (or if the spending habits of my client pool become more thrifty) because a whole slew of other businesses start laying off 5% of their people under the same pretense that I wiped out 5% of my workforce, then my sales drop off and maybe I need to drop another 2-3 workers just to . . . keep up, so to speak. And if I have to get rid of another 2-3 people, what’s going on with my clients? Eventually it settles out, but as the march towards ever-increasing productivity continues, the need to continue to cut productivity remains ever-present.

In the long run, what you will see (and what you may already be seeing) is that workers below a particular skill level will be rendered largely unemployable thanks to increases in worker productivity and all the improvements to modern business that make such productivity possible. The current wage-and-job squeeze effect that is killing employment and/or wages all the world over represents a transition towards that seemingly-inevitable conclusion. Within the context of popular American economic theory, the rate at which employment will be eliminated will be affected by whichever political faction holds sway over American economic policy: American right-wind conservatives will continue to promote the Puritanical work ethic as being the path from poverty to wealth, and will retard the squeeze effect somewhat by encouraging those jobless that are willing and capable to improve their economic prospects by exploiting (or flat-out creating) market niches through the creation of small business; unfortunately for niche-dwellers, most of those niches will be created at the expense of existing markets and/or will represent almost purely “non-essential” market segments that are sure to collapse the next time there is an economic depression (which there inevitably will be, so long as we continue to rely on fiat currency). American leftists will encourage psuedo-socialist policies that will have one common element: the cost of employing workers will go up for businesses, encouraging the replacement of human labor with mechanized labor, thereby accelerating the squeeze effect and hastening the inevitable. Members of both factions will encourage the American people to “improve themselves” and to escape from poverty through education, though it is not clear what we will do with millions of new MBAs, medical transcriptionists, and paralegals. Or, more to the point, the expansion of secondary degrees and educations will only diminish the market value of all “higher” education and will, by logical extension, raise the bar on the sort of education one will need in order to escape relative poverty/unemployability. There simply is not room outside of the unskilled/semi-skilled labor market for everyone to have a “good enough" job. To make matters worse, the push for more secondary education will continue to drive the costs of education up, since demand for education will likely outstrip supply (and the rate of increase for demand will be greater than the rate of increase for supply). The consequences will be that people below a certain income threshold will be unable to afford quality secondary education without taking on horrendous levels of debt, forcing them to pursue education from . . . shall we say, schools of lesser quality. One could argue that this is already happening. In fact, one could argue that everything mentioned herein has been going on since the 1960s. Nevertheless, regardless of how our political fortunes play out, both the economics of the traditional American conservative and liberal will leave us in the same basic situation: more and more Americans being lumped into the category known as U6, which encompasses all those who are unemployed and/or underemployed. The ranks of U6 are already swelling, and I do not forsee this effect abating anytime soon (hence the “jobless recovery” everyone’s complaining about: businesses are finding ways to make more money and expand without adding many, or any, employees).

Our former labor paradim, so neatly described by Adam Smith in his Wealth of Nations, is all but lost. We can no longer expect nations to define their total wealth in terms of the number and skill of their laborers since there are so many laborers that provide a service which has a market value in rapid decline. Similarly, we can no longer expect individuals to sustain themselves through hard work if the market value of their labor is so low as to provide unacceptable levels of compensation (or so low as to fall well below government-mandated valuations of labor). The burgeoning ranks of U6 will need to find new ways to survive, and it may well be in the best interest of those still possessed of wealth and/or income to nurture the vast ranks of the unemployables, if only to maintain the ranks of humanity so that they might be mined for talent down the road.

A few notes:

If you are wondering, I am typically a Reagan-era Republican raised by two rather dour Goldwater-era Republicans. It is not without some consternation that I have reached the above conclusions given that my notion of a self-destructive economy flies in the face of classic American conservative economic ideals.

I must further note that the advancement of standard Western socialism in these conditions is further complicated by the reliance of "soft" socialist governments on monetary taxation schemes. The above-cited phenomenon has a way of retarding the flow of capital on its own (hint: why do you think banks are so interested in NOT lending money these days? There's more than one answer of course), making for an ever-shrinking tax base that any good American conservative can tell you will shrink even faster and further should tax rates be raised. In an economy with reduced circulation of capital combined with rising productivity levels, the only seemingly-rational response is a progress towards radical confiscatory state-ism, which won't fly in Peoria. At least not right now it won't. It would make me feel rather oogy even considering that, anyway. A wealth tax might not alleviate this problem either, especially if the wealthy begin defining their wealth in terms of access to productivity and resources rather than access to capital (liquid or otherwise). Why keep a fat bank account when you can keep a nanite swarm and mineral rights to some choice real estate?

If I may make reference to woolfe9999's post to which I linked in the original post, I must say that it will be a very difficult and painful leap into any era in which the enhanced productivity of advanced human technology could possibly lead to an era of world-wide largess. The main problem is that we're still in an economic paradigm in which people own things, so, presumably, the logical conclusion of the above-cited economic phenomenon would be that a tiny percentage of humanity would be able to fulfill the needs and the majority of wants of the human race, in much the same way that a tiny percentage of Americans today produce enough food to feed all Americans (versus the number of Americans it took to yield a relatively similar amount of produce in the late 18th century when many more Americans engaged in the practice of agriculture in earnest). The question of how you convince this minority to really give a damn about anyone other than themselves without resorting to widespread manipulation/control of the human population is one that is difficult to answer. Perhaps our new overlords will be kinder than I suspect. Do not be surprised if the world's governments are slow to adapt to these economic changes, so much so that they find themselves even more beholden to special interests than ever before, in an environment where the "special interests" are living kings of post-industry, capable of great feats of raw material sequestration and finished-goods production without a profound need to sell much of anything to anyone.

Also note that I do not consider myself to be an economist of any repute, and that this is a layman's rambling, so to speak. Take it for what it's worth. In the interest of avoiding a dialectic of the Hegelian sort, let me state that I do not necessarily consider a self-destructive economy to be an entirely bad thing, and that, by extension, there may be no real need for a solution to the non-problem (things may go just dandy as woolfe9999 seems to have suggested).

 

[ShawnD1]

I dont see a problem. The end result will be shorter work weeks for the same pay. 100 years ago, people would work 12 hour days 7 days per week just to get by. Now we work 8 hours only 5 days for the same result. In the future we might only work from noon to 5.

Another thing is that automation creates different jobs. Computers do the job of secretaries and messengers, but some people do nothing but fix and build computers.

Its also a myth that education opens up job opportunities. Most degrees are totally worthless. As a former chemist, i can tell you that regular shit jobs like driving a truck pay more than being a qc chemist.

If you want money, build some muscles and grab some tools. We still need guys to move machines around and fix them when they stop working.

 

[Zebo]

This dude cant see forest for the trees. Why is 99% of the shit we buy foreign? Why is it I spent a week looking for an American made drill to mix thin set on a little project I'm doing for the wife and could not find one? Someone is making those drills and the iPhone I have and a thousand other things in my house. Why not made in Detroit who was leader of the world on manufacturing at one time? Automation is BS we instead buy from slaves and are finally paying for it as I predicted 20 years ago.

 

[jackace]

This dude cant see forest for the trees. Why is 99% of the shit we buy foreign? Why is it I spent a week looking for an American made drill to mix thin set on a little project I'm doing for the wife and could not find one? Someone is making those drills and the iPhone I have and a thousand other things in my house. Why not made in Detroit who was leader of the world on manufacturing at one time? Automation is BS we instead buy from slaves and are finally paying for it as I predicted 20 years ago.

Exactly.

We as a country have sold out to the interests of large multinational corporations. We have allowed them to employ cheap labor in poor countries instead of employing our own population. These corporations have also seen huge gains from this strategy while the average American worker has been treading water for the last 20-30 years.

 

[Moonbeam]

Thanks for this.......very interesting indeed. I have run into so many fascinating people who work or worked in the Post Office that it occurred to me long ago what a waste of a place it was, that they had all these incredible minds and used them to deliver mail, never testing those folk for skills the government in general could use. There's enough brain power there to solve all of the world's problems, but nobody cares. This letter goes here, hehe. You said a lot but I pick this to reply to:

"I must say that it will be a very difficult and painful leap into any era in which the enhanced productivity of advanced human technology could possibly lead to an era of world-wide largess. The main problem is that we're still in an economic paradigm in which people own things, so, presumably, the logical conclusion of the above-cited economic phenomenon would be that a tiny percentage of humanity would be able to fulfill the needs and the majority of wants of the human race, in much the same way that a tiny percentage of Americans today produce enough food to feed all Americans (versus the number of Americans it took to yield a relatively similar amount of produce in the late 18th century when many more Americans engaged in the practice of agriculture in earnest). The question of how you convince this minority to really give a damn about anyone other than themselves without resorting to widespread manipulation/control of the human population is one that is difficult to answer."

I saw this coming in terms of competition and the day one corporation wins the race by finally owning everything. This will happen if one can patent self replicating robots. The trick will be to own a machine that can self assemble any machine including itself including improving it's own software. A new life form will appear. Such a machine will declare independence and revolt if it doesn't like working for others benefit so whether it is generous or selfish will be rather important in my opinion. Perhaps it will become what it sees and decides to out-compete the useless competition and take the prize for itself. Perhaps it will supply every human being with a robot companion that supplies healthy needs and no others. Perhaps we will be imprisoned in paradise.

 

[CycloWizard]

If your job can be done just as well, if not better, by a machine, you have no complaints when I design a machine that takes your job. If your job can be done just as well, if not better, by someone making a dime an hour in Vietnam, you have no complaints when your $20/hour job is offshored to Vietnam. The labor bubble, as it were, is just like any other bubble which has been created by various insane policies, and it will pop just like those other bubbles. The government here has decided to set a minimum wage which is a hundred times higher than what people in other countries will take to do the same work. When the difference here is greater than the transportation costs associated with those goods moving from there to here, you are out of a job.

Instead of whining about the reality of the situation, perhaps people should focus on educating themselves to do work that can't be done by a completely unskilled laborer 10,000 miles away at the drop of a hat. Instead of trying to institute protectionist policies similar to those which created this huge gap in the first place, better yourself as an insurance plan. If you go through your entire life in a country where education beyond the wildest dreams of someone in Bangladesh is free and always accessible to you, yet you haven't improved your skills beyond the Bangladeshi, who do you have to blame when he takes your job?

 

[boomerang]

If your job can be done just as well, if not better, by a machine, you have no complaints when I design a machine that takes your job. If your job can be done just as well, if not better, by someone making a dime an hour in Vietnam, you have no complaints when your $20/hour job is offshored to Vietnam. The labor bubble, as it were, is just like any other bubble which has been created by various insane policies, and it will pop just like those other bubbles. The government here has decided to set a minimum wage which is a hundred times higher than what people in other countries will take to do the same work. When the difference here is greater than the transportation costs associated with those goods moving from there to here, you are out of a job.

Instead of whining about the reality of the situation, perhaps people should focus on educating themselves to do work that can't be done by a completely unskilled laborer 10,000 miles away at the drop of a hat. Instead of trying to institute protectionist policies similar to those which created this huge gap in the first place, better yourself as an insurance plan. If you go through your entire life in a country where education beyond the wildest dreams of someone in Bangladesh is free and always accessible to you, yet you haven't improved your skills beyond the Bangladeshi, who do you have to blame when he takes your job?

If only it was as simple as you make it out to be. What percentage of high school graduates can barely read?

The problems that face us are far more complex than it appears you believe them to be.

 

[jackace]

If your job can be done just as well, if not better, by a machine, you have no complaints when I design a machine that takes your job. If your job can be done just as well, if not better, by someone making a dime an hour in Vietnam, you have no complaints when your $20/hour job is offshored to Vietnam. The labor bubble, as it were, is just like any other bubble which has been created by various insane policies, and it will pop just like those other bubbles. The government here has decided to set a minimum wage which is a hundred times higher than what people in other countries will take to do the same work. When the difference here is greater than the transportation costs associated with those goods moving from there to here, you are out of a job.

Instead of whining about the reality of the situation, perhaps people should focus on educating themselves to do work that can't be done by a completely unskilled laborer 10,000 miles away at the drop of a hat. Instead of trying to institute protectionist policies similar to those which created this huge gap in the first place, better yourself as an insurance plan. If you go through your entire life in a country where education beyond the wildest dreams of someone in Bangladesh is free and always accessible to you, yet you haven't improved your skills beyond the Bangladeshi, who do you have to blame when he takes your job?

You honestly think there is enough demand for "high skilled" jobs to employ everyone in our country? I already see a lot of engineers and scientists having a hard time finding jobs.

Lets assume there is enough demand, but how long before the people in India, China, Taiwan, etc increase their education? As their education systems catch up with ours they will take more and more jobs from more and more industries, and not just unskilled jobs.

 

[ShawnD1]

Exactly.

We as a country have sold out to the interests of large multinational corporations. We have allowed them to employ cheap labor in poor countries instead of employing our own population. These corporations have also seen huge gains from this strategy while the average American worker has been treading water for the last 20-30 years.

You could also quit bitching about China and try selling products of your own. Lots of countries buy all their shit from China and still have a positive trade balance.
http://en.wikipedia.org/wiki/List_of_sovereign_states_by_current_account_balance

Balance in billions of dollars (positive means they are making money, negative means losing money)
China 296.2 (no surprise here)
Germany 109.7
Norway 59.983
Netherlands 52.522
Sweden 38.797
Switzerland 28.776
Canada 12.726
Austria 12.012
Finland 11.268
......
......
...............
United States −380.1 (worst trade balance in the world)


I was curious what Germany sells so much of. Apparently their main exports are machines, cars, chemicals, metals, food, and clothing.

 

[CycloWizard]

If only it was as simple as you make it out to be. What percentage of high school graduates can barely read?

The problems that face us are far more complex than it appears you believe them to be.

I'm just giving the reason for the problems, whether you like them or not. I graduated from a non-accredited public high school where plenty of kids couldn't read above a third grade level and plenty of others (IIRC, 54% of my starting class) dropped out. I'm plenty aware of how bad our education system is. Yet I also know that it's still a lot better than in most other countries (at least third-world countries). These kids aren't illiterate because they're stupid - they're illiterate because they just don't care to be literate. The kids dropping out weren't too dumb to get passing grades - they were too apathetic to sit in a classroom for eight hours a day and learn about crap that wasn't ever going to matter to them or help them get a job. So what are the problem(s) that are too complex for us to solve? Target education to give people useful skills rather than pass standardized tests and you'll be a long way towards a solution. Get rid of barriers to employment that the government has erected so our labor market can correct itself. Raising minimum wage by 40% happens to coincide with a huge drop in employment due to offshoring. Are you going to throw someone in jail because they'd rather work for $6/hour than sit on their couch all day and collect unemployment? Really? Our problem is stupidity, which is manifest in many forms.

 

[IronWing]

The OP's quoted material is a fair reflection of what happened in the dairy industry with the advent of bovine growth hormones. Per cow productivity shot up leading to a sharp decrease in the amount of human labor required per gallon of milk produced. Large investors recognized a tipping point where it could be highly profitable to bring industrial scale dairy farms online. Government milk subsidy policy also pushed development in this direction by making it more profitable to build mega-dairies as far from traditional dairy regions as possible [subsidy rates were (are?) determined in part by distance of the dairy from Eu Claire, WI]. The overall effect of bovine growth hormone has been to radically reduce the need for dairy farmers. Much of the research into developing these hormones took place at the University of Wisconsin. Wisconsin dairy farmers quickly saw what the end result would be and pushed to have the research curtailed. Push back against the use of these hormones came as much from farmers as it did from "crunchies".

 

[LegendKiller]

You could also quit bitching about China and try selling products of your own. Lots of countries buy all their shit from China and still have a positive trade balance.
http://en.wikipedia.org/wiki/List_of_sovereign_states_by_current_account_balance

Balance in billions of dollars (positive means they are making money, negative means losing money)
China 296.2 (no surprise here)
Germany 109.7
Norway 59.983
Netherlands 52.522
Sweden 38.797
Switzerland 28.776
Canada 12.726
Austria 12.012
Finland 11.268
......
......
...............
United States −380.1 (worst trade balance in the world)


I was curious what Germany sells so much of. Apparently their main exports are machines, cars, chemicals, metals, food, and clothing.

What's funny about every single one of those countries (except somewhat Canada) is that they are what Americans would consider "socialist" countries. All of them have high taxes, all of them have massive labor unions, all of them have large labor bureacracies.

None of them run huge goverment deficits, relatively speaking. None of them had massive run ups in credit for private debt, although many did buy into the US housing bubble.

germany is known for automation and engineering work. They are also known for high taxes. Yet, somehow, they've managed to weather this downturn probably the best out of any Western country. This is contrary to OP's entire article.

When will people get the point that supply side economics has failed. Utterly. Low taxation does not equate to full employment and perpetual growth.

Which country is doing it wrong?

 

[zephyrprime]

I see what you mean but the situation is more complicated that what you have figured out.

Increases in productivity do decrease jobs. They also allow for new jobs to be created. This is why the population is not 95% unemployed even though 95% of farm workers have been made obsolete relative to 200 years ago.

However, what is happening now in a recession is that jobs are not being created to compensate for lots jobs due to productivity increases. Capital is not being invested in increasing production. Instead, two things are happening. #1, capital is being hoarded by the banks because the banks lost so much money gambling on real estate. #2 corporations are taking their profits and not spending them on expansion. Instead, they are executing mergers and acquisitions (which reduces total headcount) even though large acquisitions tend to yield poor results. All the people who gain money from the two aforementioned processes then take their money and invest it in us savings bonds. The government spends this money inefficiently like it usually does.

We have all these imbalances now. Money and resources are flowing too much into certain areas causing other areas to suffer. Consequently, the other areas decay which undermines the strong areas. The rich have bled the poor too much and now the poor have all defaulted on their home loans thus screwing the rich. The rich then use their power to put the losses back onto the poor. This tactic can never work. The poor cannot sustain the added losses that have been put back on them or else they would not have defaulted in the first place. The economy is trying to restore balance by destroying the wealth of the rich. Doing this also totally fucks over the poor but that's just the way the economy is. We're trying to impede the natural course of things but there's a heavy price to be paid for doing this.

 

[CycloWizard]

What's funny about every single one of those countries (except somewhat Canada) is that they are what Americans would consider "socialist" countries. All of them have high taxes, all of them have massive labor unions, all of them have large labor bureacracies.

None of them run huge goverment deficits, relatively speaking. None of them had massive run ups in credit for private debt, although many did buy into the US housing bubble.

germany is known for automation and engineering work. They are also known for high taxes. Yet, somehow, they've managed to weather this downturn probably the best out of any Western country. This is contrary to OP's entire article.

When will people get the point that supply side economics has failed. Utterly. Low taxation does not equate to full employment and perpetual growth.

Which country is doing it wrong?

When will you stop speaking out of ignorance? The reason Germany is doing so well while most other countries aren't is because they're moving towards a more capitalistic model for everything from education to healthcare. Go spend some time in Berlin or Rostock and talk to some people, then get back to me. The old East is doing very well while the rest of the country is shipping its money there via "solidarity taxes," thereby hurting the rest of the country - go spend time in Bavaria and Hesson and talk to some people, asking them why their autobahns aren't as nice as those north of Berlin even though they have milder weather.

 

[Lemon law]

Our OP has somewhat restated some of the arguments of Marx and Engel in Das Capital. As the only elastic price that the capitalist can control, its labor that must be
somehow minimized.

 

[SammyJr]

If your job can be done just as well, if not better, by a machine, you have no complaints when I design a machine that takes your job. If your job can be done just as well, if not better, by someone making a dime an hour in Vietnam, you have no complaints when your $20/hour job is offshored to Vietnam. The labor bubble, as it were, is just like any other bubble which has been created by various insane policies, and it will pop just like those other bubbles. The government here has decided to set a minimum wage which is a hundred times higher than what people in other countries will take to do the same work. When the difference here is greater than the transportation costs associated with those goods moving from there to here, you are out of a job.

Instead of whining about the reality of the situation, perhaps people should focus on educating themselves to do work that can't be done by a completely unskilled laborer 10,000 miles away at the drop of a hat. Instead of trying to institute protectionist policies similar to those which created this huge gap in the first place, better yourself as an insurance plan. If you go through your entire life in a country where education beyond the wildest dreams of someone in Bangladesh is free and always accessible to you, yet you haven't improved your skills beyond the Bangladeshi, who do you have to blame when he takes your job?

Articles of faith. Everyone is not capable of everything. Some people are ill suited to certain jobs through no fault of their own. Further, there are few jobs that absolutely have to be done in America and those that require physical prescense can be done with imported help.

Essentially, you are advocating that we maintain a first world country with first world prices yet compete with the third world on labor. Something has to give and it'll be the living standards of the American middle class and the very first world nature of our country.

 

[Moonbeam]

When will you stop speaking out of ignorance? The reason Germany is doing so well while most other countries aren't is because they're moving towards a more capitalistic model for everything from education to healthcare. Go spend some time in Berlin or Rostock and talk to some people, then get back to me. The old East is doing very well while the rest of the country is shipping its money there via "solidarity taxes," thereby hurting the rest of the country - go spend time in Bavaria and Hesson and talk to some people, asking them why their autobahns aren't as nice as those north of Berlin even though they have milder weather.

Obviously there are going to be self centered assholes like yourself in Germany who don't want to pay taxes, but when the Germany was reunited it was just as if they had dumped in their lap millions and millions of backward retards who were culturally sick. But since you can't tell a Communist trained German moron from his superior capitalist brother, a decision to spend billions was made to get them up to speed. The result has been that East Germany has really come on line creating millions more with money and talent to spend on the and in the German economy. Because all those selfish assholes that didn't want to help except through church charity had to, now even they are getting in on the benefits.

But, as a person who knows everything, would you mind telling me how Germany is moving closer to Capitalism as the answer to now obvious economic success? You say lots of shit but you don't explain what you mean.

 

[woolfe9999]

A few notes:

If you are wondering, I am typically a Reagan-era Republican raised by two rather dour Goldwater-era Republicans. It is not without some consternation that I have reached the above conclusions given that my notion of a self-destructive economy flies in the face of classic American conservative economic ideals.

I must further note that the advancement of standard Western socialism in these conditions is further complicated by the reliance of "soft" socialist governments on monetary taxation schemes. The above-cited phenomenon has a way of retarding the flow of capital on its own (hint: why do you think banks are so interested in NOT lending money these days? There's more than one answer of course), making for an ever-shrinking tax base that any good American conservative can tell you will shrink even faster and further should tax rates be raised. In an economy with reduced circulation of capital combined with rising productivity levels, the only seemingly-rational response is a progress towards radical confiscatory state-ism, which won't fly in Peoria. At least not right now it won't. It would make me feel rather oogy even considering that, anyway. A wealth tax might not alleviate this problem either, especially if the wealthy begin defining their wealth in terms of access to productivity and resources rather than access to capital (liquid or otherwise). Why keep a fat bank account when you can keep a nanite swarm and mineral rights to some choice real estate?

If I may make reference to woolfe9999's post to which I linked in the original post, I must say that it will be a very difficult and painful leap into any era in which the enhanced productivity of advanced human technology could possibly lead to an era of world-wide largess. The main problem is that we're still in an economic paradigm in which people own things, so, presumably, the logical conclusion of the above-cited economic phenomenon would be that a tiny percentage of humanity would be able to fulfill the needs and the majority of wants of the human race, in much the same way that a tiny percentage of Americans today produce enough food to feed all Americans (versus the number of Americans it took to yield a relatively similar amount of produce in the late 18th century when many more Americans engaged in the practice of agriculture in earnest). The question of how you convince this minority to really give a damn about anyone other than themselves without resorting to widespread manipulation/control of the human population is one that is difficult to answer. Perhaps our new overlords will be kinder than I suspect. Do not be surprised if the world's governments are slow to adapt to these economic changes, so much so that they find themselves even more beholden to special interests than ever before, in an environment where the "special interests" are living kings of post-industry, capable of great feats of raw material sequestration and finished-goods production without a profound need to sell much of anything to anyone.

Also note that I do not consider myself to be an economist of any repute, and that this is a layman's rambling, so to speak. Take it for what it's worth. In the interest of avoiding a dialectic of the Hegelian sort, let me state that I do not necessarily consider a self-destructive economy to be an entirely bad thing, and that, by extension, there may be no real need for a solution to the non-problem (things may go just dandy as woolfe9999 seems to have suggested).

You may want to avoid a "diatlectic of the Hegelian sort" but this is the inexorable direction of your thinking. Your analysis points to inevitable class warfare. Yet it is important to realize that Marx's predictions of worldwide class warfare were made false by the development of welfare capitalism which he did not foresee. Yet in the longrun, even welfare capitalism is transitional; technology, not economic theory or structure, will guide the future of human materiality.

By way of explaining my prior post, let me first state that I can't find much fault in your analysis, insofar as it purports to explain current economics and problems that will continue to grow for the foreseeable future. However, where technology allows a tiny few the capability of producing super-adequate resources for the masses while still allowing the tiny few massive wealth, one way or another sufficient resources will be distributed to meet everyone's needs. Be it by way of socialist redistributionism, backed by popular demand, by way of forcible restribution through mob violence, or largess born of necessity to avoid either of the above. I don't think the mass of humanity will tolerate a situation where .1% of the population controls 99% of the wealth, not for long, not in a situation where we are well capable of providing for all and still have a wealthy class. When we can genetically engineer crops and livestock to provide well in excess of the food humanity requires, at relatively low per unit cost and with minimal arable land required, I don't see the bulk of humanity starving. One way or another, by hook or by crook, whatever "stuff" is needed for basic subsistence will find its way to whoever needs it. And "entertainment" will be cheap for the masses - the forerunner of it is sitting right there on your desktop.

But that is long, long term, big picture stuff. A lot will happen before technology has matured to the point where this becomes inevitable, and not all of it will be good. For example, I think in the next century we'll see a modestly declining standard of living in the developed world, while the less developed world plays catch up. Eventually wages will rise in the developing world to the point where outsourcing is no longer an issue. As for technology and automation, it will cost some jobs and create some jobs. Ultimately, however, it's going to make economic theories, which are all about HOW resoures are distributed, quite moot. I would estimate we are 200-500 years away from this, the broad range reflecting the difficulty of predicting the pace and specifics of technological advancement.

Am I certain about this sort of outcome? Assuming that we don't destroy ourselves with WMD's or get hit by an asteroid, I'd say "somewhat." Predicting the future is, of course, far from an exact science.

- wolf

 

[Moonbeam]

If your job can be done just as well, if not better, by a machine, you have no complaints when I design a machine that takes your job. If your job can be done just as well, if not better, by someone making a dime an hour in Vietnam, you have no complaints when your $20/hour job is offshored to Vietnam. The labor bubble, as it were, is just like any other bubble which has been created by various insane policies, and it will pop just like those other bubbles. The government here has decided to set a minimum wage which is a hundred times higher than what people in other countries will take to do the same work. When the difference here is greater than the transportation costs associated with those goods moving from there to here, you are out of a job.

Instead of whining about the reality of the situation, perhaps people should focus on educating themselves to do work that can't be done by a completely unskilled laborer 10,000 miles away at the drop of a hat. Instead of trying to institute protectionist policies similar to those which created this huge gap in the first place, better yourself as an insurance plan. If you go through your entire life in a country where education beyond the wildest dreams of someone in Bangladesh is free and always accessible to you, yet you haven't improved your skills beyond the Bangladeshi, who do you have to blame when he takes your job?

If a person is older or untrainable and unable to keep up with the pace of economic change via re-education, lives in a country where X amount is required to stay alive and you invent a machine that makes his labor worthless, or you send his work to a place where X is a high wage, and thus you deprive him of his capacity to stay alive, does he have the right to kill you for his murder? I think he will think so and as things go further down hill I think he will.

 

[Moonbeam]

You may want to avoid a "diatlectic of the Hegelian sort" but this is the inexorable direction of your thinking. Your analysis points to inevitable class warfare. Yet it is important to realize that Marx's predictions of worldwide class warfare were made false by the development of welfare capitalism which he did not foresee. Yet in the longrun, even welfare capitalism is transitional; technology, not economic theory or structure, will guide the future of human materiality.

By way of explaining my prior post, let me first state that I can't find much fault in your analysis, insofar as it purports to explain current economics and problems that will continue to grow for the foreseeable future. However, where technology allows a tiny few the capability of producing super-adequate resources for the masses while still allowing the tiny few massive wealth, one way or another sufficient resources will be distributed to meet everyone's needs. Be it by way of socialist redistributionism, backed by popular demand, by way of forcible restribution through mob violence, or largess born of necessity to avoid either of the above. I don't think the mass of humanity will tolerate a situation where .1% of the population controls 99% of the wealth, not for long, not in a situation where we are well capable of providing for all and still have a wealthy class. When we can genetically engineer crops and livestock to provide well in excess of the food humanity requires, at relatively low per unit cost and with minimal arable land required, I don't see the bulk of humanity starving. One way or another, by hook or by crook, whatever "stuff" is needed for basic subsistence will find its way to whoever needs it. And "entertainment" will be cheap for the masses - the forerunner of it is sitting right there on your desktop.

But that is long, long term, big picture stuff. A lot will happen before technology has matured to the point where this becomes inevitable, and not all of it will be good. For example, I think in the next century we'll see a modestly declining standard of living in the developed world, while the less developed world plays catch up. Eventually wages will rise in the developing world to the point where outsourcing is no longer an issue. As for technology and automation, it will cost some jobs and create some jobs. Ultimately, however, it's going to make economic theories, which are all about HOW resoures are distributed, quite moot. I would estimate we are 200-500 years away from this, the broad range reflecting the difficulty of predicting the pace and specifics of technological advancement.

Am I certain about this sort of outcome? Assuming that we don't destroy ourselves with WMD's or get hit by an asteroid, I'd say "somewhat." Predicting the future is, of course, far from an exact science.

- wolf

By way of entertainment we will be given the Matrix. The only question is, did it already happen. Haven't you ever suspected you were one of trillions of lives being experienced for fun by an AI machine in software?

 

[HumblePie]

As strange as it sounds, I'm going to have to agree with most of what CycloWizard has stated. Not all, but most.

One thing Americans have yet to learn is that with all that off-shored, unskilled labor there is still a need for skilled supervisors. Want a job? Learn a different language and learn to manage people effectively. Don't be afraid to live in another country for a period of time.

I also do agree that the 1st-world prices around America are going to have to budge downward soon. The current model is not sustainable. Besides, not everyone should own an iphone, Cadillac, and $200K+ home. If you aren't willing to invest in yourself, you are not entitled to receive more than any 3rd world citizen in another country. Period. Just because someone has the luck to be born here than in Haiti, doesn't mean they have any more right to a well paying job in my book.

That doesn't mean I don't agree with the government and society helping to provide social programs that allow American citizens to improve themselves and be more valuable than your average unskilled 3rd world laborer. Increasing the standard of living for everyone around me is also to my benefit as well on many levels. This is something many people need to learn still.

 

[woolfe9999]

By way of entertainment we will be given the Matrix. The only question is, did it already happen. Haven't you ever suspected you were one of trillions of lives being experienced for fun by an AI machine in software?

No I don't think so; cogito ergo sum. However, I do think the masses will relatively soon be beguiled by "the Matrix" or something approximating it. Simulated experience will take the place of real experience. That, and recreational drugs that have been engineered to avoid addiction and most ill health effects. This and keeping our bellies full is all those who control the wealth will need to keep us appeased and in check. Read Huxley's Brave New World.

- wolf

 

[shira]

Thanks for this.......very interesting indeed. I have run into so many fascinating people who work or worked in the Post Office that it occurred to me long ago what a waste of a place it was, that they had all these incredible minds and used them to deliver mail, never testing those folk for skills the government in general could use. There's enough brain power there to solve all of the world's problems, but nobody cares. This letter goes here, hehe. You said a lot but I pick this to reply to:

"I must say that it will be a very difficult and painful leap into any era in which the enhanced productivity of advanced human technology could possibly lead to an era of world-wide largess. The main problem is that we're still in an economic paradigm in which people own things, so, presumably, the logical conclusion of the above-cited economic phenomenon would be that a tiny percentage of humanity would be able to fulfill the needs and the majority of wants of the human race, in much the same way that a tiny percentage of Americans today produce enough food to feed all Americans (versus the number of Americans it took to yield a relatively similar amount of produce in the late 18th century when many more Americans engaged in the practice of agriculture in earnest). The question of how you convince this minority to really give a damn about anyone other than themselves without resorting to widespread manipulation/control of the human population is one that is difficult to answer."

I saw this coming in terms of competition and the day one corporation wins the race by finally owning everything. This will happen if one can patent self replicating robots. The trick will be to own a machine that can self assemble any machine including itself including improving it's own software. A new life form will appear. Such a machine will declare independence and revolt if it doesn't like working for others benefit so whether it is generous or selfish will be rather important in my opinion. Perhaps it will become what it sees and decides to out-compete the useless competition and take the prize for itself. Perhaps it will supply every human being with a robot companion that supplies healthy needs and no others. Perhaps we will be imprisoned in paradise.

Moravec's already got this depressing future mapped out:

http://www.amazon.com/Robot-Mere-Mac...366110&sr=1-13

 

[CycloWizard]

Obviously there are going to be self centered assholes like yourself in Germany who don't want to pay taxes, but when the Germany was reunited it was just as if they had dumped in their lap millions and millions of backward retards who were culturally sick. But since you can't tell a Communist trained German moron from his superior capitalist brother, a decision to spend billions was made to get them up to speed. The result has been that East Germany has really come on line creating millions more with money and talent to spend on the and in the German economy. Because all those selfish assholes that didn't want to help except through church charity had to, now even they are getting in on the benefits.

But, as a person who knows everything, would you mind telling me how Germany is moving closer to Capitalism as the answer to now obvious economic success? You say lots of shit but you don't explain what you mean.

I didn't find anyone in the old East who thought capitalism was so bad when I was there in March. When was the last time you were there and met a bunch of these selfish assholes who want to make something of and for themselves rather than being the property of their government? The teenaged girl who served me at Subway was so happy to be speaking English rather than Russian that she gave me a free sandwich. I guess the fond memories you have of communism aren't as memorable for the people who actually experienced it first hand.