The Economy: changes and predictions.

It may be that the US, along with all the other developed nations, will never again achieve full employment in peacetime. I have concluded that we are in a transition phase between a period when manufacturing required human labor and a period when most labor is done by machines. In such an environment, workers get laid off. For a while, there will be a need for humans to supervise the work of the machines (robots) and maintain them. But as the machines become more sophisticated, even that is likely to vanish. Design of new products is likely to remain a human endeavor for the foreseeable future. Design is after all the process of examining human needs and attempting to meet them with products that humans will find necessary or at least appealing.

Much of what I’ve described in the paragraph above is already happening. Programmers instruct computers about what movements are to be made and when, the robots do those things, and somewhere down the line a human inspects the work. If the robot begins producing substandard work, a human stops the process and a maintenance worker comes in and fixes the robot. In some cases, the robots can self-diagnose. A controller is plugged in, an error message appears to “Replace module C”, and so the maintenance worker does that. It’s very like what happens to your car when you take it into the shop. There’s an error message, a device that will read this, and then a human to replace the defective item. The process is relentless. Every new iteration of robots features new self-diagnostic features. Numbers of human workers are reduced.

But how are those human workers to buy the products that the robots make? That’s the unanswered question. Government is supposed to answer such. Political leaders are expected to see what’s happening now and predict what is likely to happen in the future; certainly company leaders don’t do this. They try to forecast new trends, but the larger picture of the economy doesn’t really concern them.
And governments aren’t very good at this. Like military leaders, they study what has happened before and try to prepare for it to happen again.

History, and lessons from history:

There was a time when major disruptions in economies happened fairly often. Industries came into being, some disappeared. Those who once manufactured buggy whips went out of business, and street cleaners didn’t scoop up manure and take it to a dump. Needs changed. Jobs reflected the new needs.

An example is what happened to farmworkers as mechanization came to the farms. Farmhands got laid off and found that looking for a job at the next farm wouldn’t work, because the farmhands there had also been laid off. Cowboys became obsolete in most areas. Open range gave way to fenced pastures and barns and central feeding points. The displaced labor could move into urban areas and get jobs in manufacturing, and that’s what happened. Soon, with far less human labor but with huge machines to do what human labor had done before, farms and ranches became more profitable and much more efficient.

Even the few remaining farmworkers are likely to see further reductions. Tractors and combines now can be programmed to follow a GPS-directed course, leaving the ‘driver’ to simply look on occasionally to ensure that nothing has gone wrong. In the future the GPS course can be set by radio link, and the machines will drive themselves to the field and begin work. With a position indicator reporting back to the central communication and control device, drivers won’t be needed.

If you doubt this, large tractors and combines already have the GPS control system. All they lack is the ability to receive input and transmit information back via radio link. And the technology that allows a few cars and light trucks to drive themselves over various courses is already in development. Drones are becoming more autonomous all the time. The technology will spread inevitably to farms and to manufacturing.

So where are the excess workers to go this time? As farmhands find themselves unemployed, they’ll be joining the unemployed factory workers.

We in the US have already gone from a society based on middle class prosperity to one of underclass semi-poverty. That middle class was based on workers who possessed the skills to work in manufacturing. The service society doesn’t need such, and pays accordingly. So the middle class is squeezed and overall income drops. A few at the top manage to maintain their income or even see it rise; but this is temporary, I think. Even mid-level workers in the financial and office occupations are facing layoffs and the prospect that they will need to take jobs of less social standing which will also pay less.

That in turn means that people who sold houses and cars and other goods to middle class customers won’t have a market for their goods. The employees of the service economy won’t be able to pay for expensive things. There will be a need for cheaper housing and cheaper cars. Those who provide for these needs will be more likely to do well than those who continue to market to a middle class that is vanishing.

It is a fact that most, if not all, developed nations do not need all of their manpower. As an example, consider Spain. Spanish unemployment currently stands about 25%, and it’s closer to 50% among younger Spaniards. France has much the same; even well-educated French and Spanish citizens now face the prospect of leaving their nations to find work. The question is where to go; all of Europe faces this glut of labor, as does the USA and Canada. With a quarter of Spaniards not working, there is still no shortage of goods or services for Spanish consumers. And some Spaniards, like Americans, are ‘underemployed’; they have only part-time or temporary jobs.

More history: as labor became surplus to domestic needs, it was possible to employ the surplus workers in manufacturing for export. That worked for a while. It’s not likely to soak up all that labor now, though. The markets for exported goods have shrunk as those nations mechanized their own factories. Even cheap-labor nations such as China, which relied on that cheap labor to gain economic advantage, have now seen their cheap labor supplanted by even-cheaper robots and machines.

There is still an opportunity for export, but it must be based on quality rather than price. If something is among the best of its type in the world, people will always want it. Mercedes, Volvo, Lexus, BMW, Porsche; Nikon, Canon, Hasselblad, Leica; Italian leather goods; French fashions and perfumes and brandies. Such products are more expensive, but still find a ready market because they’re superior to domestic products.

There is a revival of craftsmanship and craftsman-made products. Furniture, wooden goods, beers and wines and specialty liquors, art objects all find a ready market. And all command premium prices. People pay the premium prices because the objects are based on quality rather than mass-production.

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