Archive for the ‘Economics’ Category

Of Statues, and Past History

August 26, 2017

Fitzhugh Lee, writing about his father, probably knew Robert E. Lee better than anyone. He served during the Civil War and later as a general in the Spanish American War.
His analysis of Lee’s thinking in 1860 is pertinent.
He pointed out that prior to the war, it was not illegal for a state to leave the union. That became so after the war; had it gone the other way, the union would be a lot different! But the issue was settled by war.
What I see in the current discussion is lack of empathy, of being unable to put yourself in Lee’s place AT THE TIME, knowing only what he knew then.
We cannot accurately judge a historic figure if we use only modern perceptions and ideals. We must look at their history and their times.
The USA had come into existence less than a century before. States were fearful of handing too much power to the newly-formed federal government. We ACCEPT that same federal government without question now (mostly!), but in the 1850s things were very different. STATES were considered to be independent. Hence the name, the UNITED STATES of America. We view a ‘state’ as a subdivision of ‘nation’. But state can also mean an independent nation. Such was the situation in the 1770s.
Lee’s father had fought in the Revolution (‘Light-horse Harry’). Family and ancestry were very important to his family; the ‘melting pot’ was still in the future. Family was not only the Lees who had settled in Virginia (successful, for the most part). There were others, including the Washingtons and many of the early presidents, who intermarried and formed extended families.
Fitzhugh makes the point that R.E.Lee wasn’t willing to lead an invasion of his home, his county, his neighbors. He understood what most didn’t; that it wouldn’t be a short, easy war, that invasion and conquest would be necessary.
So in a time when states were wary of the federal government, he made a choice.
It’s illuminating to look at what Lincoln intended to do and how Grant carried out the terms of Lee’s surrender. Neither intended to humiliate or punish the Confederates or the states of the Confederacy. Including Lee.
That came after Lincoln’s assassination.
It’s fashionable now to claim that the only issue for the Confederacy was slavery. Not so. Lincoln did not free the slaves immediately; that didn’t happen until 1863,  a year and a half after the war began.
There WAS no confederacy at first; individual states made the decision to remain in the Union or leave. Had the Federal government simply decided to leave them alone, there would likely have been no confederacy and no war.
Slavery as an issue would have vanished within a short time. Simply put, machines had already begun to take the place of people. Economics ruled then, just as it does now.
And we’d have a very different history.
But we have to deal with history as it is.
We know a lot more about slavery now than most people did then. We know a lot more about people, period. Not only the people who write history, or lead nations, but about the ordinary person who has no say in what happens. More on that in a moment.
Right now, history is less important than what a significant segment of our American population believes: that the statues represent the worst of the old south, bigotry and white supremacy (hatred came later).
I suspect they’re right. And for that reason alone, the statues have to go.
As some have suggested, we need at the very least balance, where the crime against humanity called slavery is held up for what it is. Because that’s what it was; legalized kidnapping, where the government supported an industry based on raiding, on taking human beings by force. On systematic murder, where victims were chained in a ship under conditions almost unimaginable. Where a significant portion of them died. Because black lives were cheap and economics ruled; a fast trip, very profitable, and if a third of the cargo died, hey, it’s just capitalism. Investors profited. Capitalism then, capitalism now; foreclose, turn people out, let them beg in the streets. Or die without medical care. It’s not about human beings, it never was. It was, and is, about money.
We know more now. But how many knew it back then?
How many now know of the Enclosure Laws in England? (Look it up)
How many know of the Potato Famine in Ireland? (Research that one too).
How many know of the moneyed classes, who ran governments, ALL of them, and how they treated people? Look that up too. Of how press gangs kidnapped men and brutalized them on the British Navy’s ships. Of soldiers who were considered subhuman, gutter sweepings, ordered to charge into cannons because their lives were worthless, and if not killed outright were turned out to starve or beg when they could no longer serve. It’s worth your time to look at WWI, of conditions in the trenches, of incompetent generals and the ‘nobility’ who sent a generation into machine guns to die.
Of the highly moral people in New England who saw nothing wrong with introducing disease into Indian lands to reduce the population, of forcing them systematically from rich lands so that whites could settle it. Slavery was evil; genocide less so. One was unprofitable. Guess which one that was?
Read the full history of the times, the 1700s, the 1800s, and even the 1900s. Understand it.
Then, and only then, can you really judge Robert E Lee and the others in the old south.
But judge softly; future generations will judge US just as harshly as we judge our ancestors now.
They’ll judge us by how many homeless there are in our society. By our inequality. By our unwillingness to make healthcare a human right. By our unwillingness to educate our people, by our willingness to turn a blind eye when our youth are exploited. By our unwillingness to deal intelligently with social issues such as drug use and care for our mentally ill.
By our unending wars, most of which are based on profit for the few, death and misery for the many.
Of our unwillingness to face head on the global climate change that WE, not our ancestors, caused.
By our stubborn resistance to change that would benefit all, not just the few.
You may judge our ancestors (and the statues they put up) harshly.
I, who live in this age, cannot. I lack the moral authority to do so.



Society, and the Judicial System

May 17, 2015

I’ve been commenting about the decision to execute Tsarnaev for his part in the Boston Bombing case. I’ve read other comments about Charles Manson and similar ones that have to do with a different aspect of our system: correction, or punishment?
My first post was about society’s responsibility to remove a danger to society. This time I’ll look at a different aspect: punishment, or correction?
‘Punishment’; what’s the purpose? Think about it for a moment.
We punish children. Why? Consider that too.
Is it done to correct a person’s behavior, or is it a kind of societal revenge? Manson and Tsarnaev harmed our society, so we must have vengeance? Neither will be, probably cannot be, ‘corrected’. They’re a danger to the rest of us.
The main problem with correction is that we don’t have a way to ensure that it happens. Prison doesn’t do it. Far too many come out worse than they went in. Death won’t do it, because the person executed is permanently removed, not ‘corrected’. Society is safer, but that’s it.
Those who favor the death penalty believe that it provides both revenge and conditioned avoidance, in that it will frighten others from doing what got the convicted one executed.
I don’t see that working. Are there fewer crimes in Texas? That’s the state with the most executions, yet murders and crimes of violence still happen there.
How about long years in prison? A judge was convicted recently of selling people, including children, to a private prison company to be locked up. He got 28 years behind bars. If he survives, he’ll be an old man when he gets out. Will this encourage others not to become corrupted? Will he be ‘corrected’? To what end? Can he become a productive member of society when he gets out?
This same question applies to anyone who is incarcerated.
The number of people in prison or awaiting execution in the US tells me something different: our society has failed, is failing.
Too many of our people are exploited, hopeless. They see no better future ahead, just work, be exploited by the neo-nobility until they finally die. And their children will fare no better. They rebel.
To me, the cause of our societal problem is uncontrolled capitalism and corruption. There’s more to it than that, but it’s where the rot starts. Religion plays a part too, as does a kind of faux patriotism. Taken all together, it’s an unholy mix.
It’s a failure. We can do better. And we should. We must, or it will only get worse.
While you’re muttering ‘communist!’ at me, think about sports.
Football and basketball are good examples.
“If you ain’t cheatin’, you ain’t tryin’.” Ever heard that?
The New Orleans Saints put a bounty on opposing players. Cheating. The coach got a year’s suspension, now he’s back. Tom Brady is facing suspension for cheating, but it won’t be a heavy one. Why? Both men are draws, moneymakers. And professional sports is about money, not sportsmanship. Basketball? Even notice why it takes so long to finish the final few seconds of a close game? Deliberate fouls, deliberate breaking the rules. Cheating. Two or three free throws, no problem. Fifteen yards penalty for deliberate cheating, holding a defenseman or a wide receiver, no problem. If you ain’t cheatin’ you ain’t tryin’.
And oh, the uproar when ‘fans’ hear that their team is moving to another city! More false patriotism, in a sense.
My team right or wrong is pretty similar to my country right or wrong. We never seem to ask why we shouldn’t make both right instead of blindly supporting their wrongs.
Back to ‘justice’. How do we ‘correct’ early offenders? The judge scolds them, gives them ‘probation’. Over and over again. It’s expensive to lock someone up, you see. And they have no money to pay fines. As for the economic conditions that caused them to act out, nothing is said about that. Nothing will be done in Baltimore or Ferguson, either. Rioters will be scolded, most will be released, maybe a few policemen will get fired, nothing changes.
And unless we force it to happen, nothing will change.
Oh, and that youthful offender? Probation, probation, a short lock-up in a juvenile prison (maybe), until he grows up…then lock him up forever.
Or execute him.
After all, he got due process. Right?

Of Riots, and Causes

April 29, 2015

The president has condemned the rioters, as have most politicians.
I’m not happy with them either. They did indeed burn businesses, loot them, put their neighbors out of work. All those and more beside.
I read a few statistics about that neighborhood in Baltimore. I hope you’ll take the time to look up things for yourself. I certainly don’t know everything about it. I don’t know anything at all about the police who arrested the young man or what they did to him. I’ll only say it’s suspicious, and that officials are looking into the matter. Six officers have been suspended. Some will probably be charged, although it hasn’t happened yet. An investigation is ongoing, although it seems to be moving far slower than a similar investigation would take that involved a civilian.
So what’s the neighborhood like, other than that it’s filled with minorities who are likely overwhelmingly black?
Less than half of the residents have jobs. Why?
One in four young men have been arrested by the police in the past. Why?
There are gangs in the neighborhood, criminal gangs. We know that because the police know it and implied that they’d received intelligence that major gangs were allied and were going to ‘take out cops’. The gangs quickly responded and said that no, there was no such alliance and they weren’t going after the cops. Duh.
I wonder how these folks live? You can be sure their income is less than the official poverty income. So how do they buy food, buy clothing, pay for electricity and gas service, things like that?
And of all those politicians, from President Obama all the way down to the mayor and city council, how many have had an opportunity to do something about the impoverished, black neighborhoods of Baltimore?
And decided that no, it wasn’t worth fighting the entrenched interests who insist on no taxes. No taxes to improve people’s lives. No taxes to build good schools, hire good teachers, hire enough policemen to suppress the gangs and the drug trade that supports them. No taxes for urban redevelopment.
It’s a vicious slope. The residents don’t have enough money to do anything, including pay the necessary taxes. State and federal politicians aren’t willing to spend the money on a blighted neighborhood filled with blacks.
And then, when a trigger point is reached, the riots erupt. Arson. Looting. Violence and vandalism. Police cars torched. Rocks thrown, sometimes shots fired.
Most major cities have neighborhoods just like the one in Baltimore. And, before Baltimore, Ferguson.
It will happen again. Los Angeles? New York? Kansas City? Atlanta? Birmingham, New Orleans, Dallas, Houston…
I expect a long, hot, summer of unrest.
And all the politicians, including the wannabe’s, will wring their hands and condemn the rioters.

Economics, and the Best Economic System

April 26, 2015

So many curse the idea of ‘socialism’, but have no idea of what that means.
Look at the history of the Great Depression; it was caused by unrestrained capitalism, and only socialism was beginning to reverse the economic disaster. Things like the CCC, the WPA, others, where the government became the employer of last resort.
Consider for a moment what would happen if we made the government the employer of last resort now and paid those employees a living wage, not a punitive wage? Say, for example, $15 an hour.
No more unemployment insurance, or the taxes to pay for it.
No more minimum wage. What the government paid becomes de-facto the ‘minimum wage’.
Food stamps and disability insurance only for the truly disabled. Yeah, they exist; and if we expect to be called a civilized nation, we have to take care of our own. My son drew disability from Social Security for about five years. Before dying of the disease that rendered him unable to work, at age 44.
No more ‘booms’ and ‘busts’ from gambling capitalists. No more bailouts. Let the banks go broke, no golden parachutes left, take over those failed businesses and make them part of the ‘socialist’ government employment of last resort.
Use it as a governor for the economic system, in other words. When labor is needed, employers will have to pay more, hence fewer people on direct government employment. When a downturn comes, automatically pump more money in and employ more people.
About the people employed: they have to spend the money, buying food, housing, clothing, appliances. No foreclosures. No default on education loans. All that spending generates economic activity in the private sector. That’s why I consider socialism the governor for a mature economic system.
Private enterprise? Absolutely. Capitalism, where invested money earns income? Absolutely. Regulated private enterprise/capitalism (gas service, phone service in some cases, insurance when ownership of insurance is made mandatory), absolutely.
The best economic system is a mix of private enterprise, regulated private enterprise, capitalism, and socialism.

Economics, Consumerism, and Individual Responsibility

August 6, 2014

I posted this today on Facebook; it represents my musings about trends I see in the American economy, but it also reflects on world economics.
Something worth considering:
We’ve built a middle class consumer economy in this country based on Henry Ford’s model; pay the workers enough that they can afford to buy the products. I’ll note that Ford didn’t go broke doing that; he got pretty rich, if I recall. And soon other industries leveraged that prosperity by paying steelworkers and miners and construction people better, albeit with a lot of union arm-twisting thrown in.
But then unions became overly powerful and many became corrupt. Membership declined; it’s a great cycle when looked at in this way. Much of the reasoning behind unions went away as government began doing what only unions had done before. To make it seem as if they were still needed, unions demanded ever higher amounts of money, so a cycle of inflation boomed; people got more wages, but they also paid more because everything else went up.
And government pushed quality of life issues; reducing pollution, cleaning up mine and industrial waste residue, things like that; these cost manufacturers instead of increasing profits. So they went offshore.
Gradually we’re taming this; other nations are also being faced with the necessity of controlling pollution of water, earth, air; safety of workers is also a rising issue. The great consumer market in the US, the one China leveraged to raise herself from backwardness to leadership, is faltering.
Competition has become something that companies avoid in the drive for ever greater profits. Those profits are concentrated at the very top. This really is a ‘zero sum’ game; what goes to the oligarchs isn’t available to those who once fueled the great consumer market. Not even the insane advertising industry can prop it up for long. Simply put, there’s just not enough money at the bottom or in the middle.
We once turned our economy ‘outward’ when recessions hit; we employed people making exports and brought in money from other nations. But now they’re largely in the same boat we are. All those developed nations are attempting to export goods and bring money home to aid their economies. Europe calls it ‘austerity’, but it’s the same problem; profit isn’t to be found in manufacturing, in making goods for people to buy, it’s increasingly gained by manipulating money. The stock market is part of that, banking is a large part of it, real estate and speculating in general is a part of it.
And the fallout is distrust in major employers, as well as in the oligarchs controlling our political system. People are fed up in general, disgusted with political scheming and manipulation, they dislike what the president is doing and detest Congress.
One immediate improvement is to begin teaching children that self employment is preferable to employment by a corporation. Once, an employee had a living wage, benefits, and job security if he/she worked for a large corporation; and if the corporation was multinational, that provided security against economic downturns.
No more. All those things have largely vanished. You can spend half your working life becoming skilled at making widgets, only to find yourself turned our with no prospects because a worker in some foreign nation can afford to work for half what you can work for without starving or becoming homeless.
If you become a plumber or an independent mechanic or dentist, you’ll never be unemployed; you might not get rich, but you also need not suddenly find yourself homeless.
It’s time we stopped aiming our children at a future of neo-slavery under the corporate whip; it’s time to emphasize individual initiative, individual responsibility, the necessity of taking care of our individual selves rather than expecting someone else to do it for us.
Corporations specifically won’t. Unions won’t, or can’t. Government won’t, because they’re the lackeys of the oligarchs who run the corporate world.
For those in the middle, there probably isn’t a universal solution. What’s left of your working life is more bleak than rosy.
But maybe it’s not too late to let the future learn from what’s happened in the late 20th–early 21st Centuries.

Grass Roots Economics

March 11, 2013

Economics, grass roots approach:
If you wander until you find yourself a piece of unclaimed wilderness; and then clear the land with a flint axe you’ve chipped out yourself; and then made a tool to put seeds into the ground; and then collected seeds and planted them; and if the rains failed, or came at the wrong time, you either added water from a bucket you made yourself or ditched to take off the excess water. Then you harvested whatever grew from those seeds and sold the produce.
Continue until you’re rich.
And do all this while feeding yourself and any family you’re responsible for. Also, protect yourself, because there are those who will take the easier approach and simply take your harvest.
Doesn’t sound very practical, does it?
But if you’re not going to clear the land by yourself, then you’re going to have to pay someone to do it for you, perhaps with a share of the crop. If you need water or ditching to protect the field, you’ll need someone to do that. And if you want to send that crop to a market, then someone must build the road. And if you want warriors to protect you and the other workers, you must also pay them.
They now expect a share of the crop, because they’ve done their part in seeing that it got to harvest.
If you want to get rich, you’re going to have to take more than a proportional share.  You’re going to have to exploit the others who helped you.
Or you can come in afterward, plant a field, and then use a road that someone else built and have your fields protected by someone who’s there. And whine about taxes because you didn’t hire those warriors or road builders or educate the workers to raise your crops and harvest them.
And in time, you can manage your affairs by hiring others to do the work. But by this time, you aren’t doing any of that work yourself. And invariably managing others begins to seem more important than simply working in a field or at a bench, so you must take a larger share for yourself.
You can also apply this logic to mining or manufacturing or whatever. Oh, and if you’re manufacturing, you might want someone to protect you from competition. Government will do that, if suitably bribed. Somehow, it seems more macho to bribe government officials than to meekly pay taxes.
Here’s the kicker: if you followed the first example, doing everything yourself, you won’t ever get rich. Peasants proved this over the thousands of years that primitive farming existed. The practice was called ‘subsistence farming’ for a reason; the farmer was lucky if indeed he managed subsistence. The work required is dawn-to-dusk. Children are needed to help with the work and to care for parents if they survive beyond working age.
The other corollary is that generally speaking, if you get wealthy, you got that way by exploitation.
‘Nobles’ exploited serfs, basically land-slavery. Manufacturers exploited workers. Instead of paying a proportionate share of what’s produced, find desperate people and employ them for much less. Or buy slaves and provide minimal housing and clothing and poor food.
Or you can exploit by trade; pay a pittance to the weaver of carpets and then ship the carpets to a place where they can be sold at a profit. The less you pay to the weaver, the higher your profit.
And of course always avoid any taxes; after all, it’s YOUR money, right?
You earned it all by yourself.

Management, labor, unions; influences on the economic transition.

December 11, 2012

Economic cycles see management (owners, in earlier times; management in the modern age) vying with production for profits. Go back to the beginnings of the industrial age and you’ll find management firmly in control. Political moves and periodic shortages of labor provided changes that weakened the near-absolute control of management. The long term trend has seen empowerment of labor and a diminishment of the control exerted by management. The relationship between the two was changed in the past by such things as disease and war and famine; more recent changes have been based on the rise of labor organizations such as unions.

Let there be no doubt: labor unions came into being as a counter to the power and exploitation of workers by management. We’re seeing some of that again where long-term employees are tossed out with no regard for the years they’ve spent building up a company by their work. Management feels free to make such decisions because once again power has shifted to the management half of the equation.

Unions began as a way to protect workers against the excesses of management. But unions then joined together into large aggregations which were capable of exerting national political influence. What was necessary in the beginning became something that had to demand ever more in benefits for workers in order to maintain power and relevance. A single powerful union could, and frequently did, demand more for employees. Under the umbrella of cross-union agreements, where one union would refuse to cross the picket lines of another, a single union could shut down not only a company but even an industry. In some cases they demonstrated the ability to shut down the national economy by strikes that closed ports or shut down rail services. Military personnel were sometimes used to break strikes. On one occasion, President Reagan acted to destroy a union; he fired all the air traffic controllers who’d gone on strike, and made it stick.

Meantime, unions had exerted a ratcheting effect on the economy. Autoworkers would begin negotiating a new contract for more wages and benefits. During the 20th Century wages were subject to taxation and unions worked to increase benefits such as health care insurance and retirement policies. Such benefits, being not taxed, became popular. The negotiations were between a company, say Ford or perhaps GM, and the Autoworkers Union.  Negotiations  were backed by threat of a strike, and inevitably workers received more in wages and benefits and prices of the product would rise to reflect the new cost structure. Prices would go up on autos, and steelworkers and other unions producing the materials that supported auto manufacturing would also see price raises as their unions demanded more in wages and benefits. And soon it would result in a slight but recognizable rise in prices and compensation across the national economy.  At some point even the national minimum wage would rise.

Unions needed to always demand more. By the late 20th Century, unions had the status of medium-sized corporations. They paid their top leadership salaries in the hundreds of thousands and donated millions to political campaigns. Dues paying members expected that the union would always provide raises in the next series of contract negotiations as well as protection from arbitrary decisions by management. A citation is appropriate here: Largest unions pay leaders well, give extensively to Democrats. The citation is from the Wall Street Journal, March 30, 2011.

A long term trend thus came to fruition. Management used their money and influence to gain power in politics; labor gained influence and power through money and the ability of union management to influence the voting patterns of members.

The economic result of the union vs management contest was to slowly raise prices in the US. The American national economy thus became considerably higher in nominal value, compared to Asian economies and even the economies of Eastern Europe. Foreign governments often resisted raising their own monetary system to true parity, because the differences acted to encourage export versus imports in their domestic economy.  The result of this was to effectively price many American products out of world markets.

Still, the American market was the largest in the world. As American products became more expensive, Asian and European products became relatively cheaper and so gained a long-term competitive advantage in the American market. At the same time, transportation costs were dropping worldwide. Larger ships, fewer crewmen, containerized shipments, computer routing, ever more efficient (and thus cheaper) ports…add this to low labor costs and a new paradigm became possible.

Management regained the advantage. Managers now had the option of evading union demands by simply bypassing the union. A number of strategies were employed in this effort. Outsourcing was one of the easiest; a company could avoid paying higher union wages to janitors and maintenance workers, for example, by laying off employees and contracting with another company to provide the services. There would no longer be any requirement to provide benefits, and usually even labor costs would be reduced. This was a win for management; but those well paid janitors and maintenance workers no longer got salaries that put them in the middle class. They had less disposable income and sometimes not even enough income to sustain mortgage payments or buy items such as new cars. Or even send their children to college. The prospective student thus needed loans to finance education, and paying back those loans in time removed the student from the consumer society for long periods. What went to banks and lending institutions wasn’t available for a house or a new car, or for health insurance or savings.

Offshoring was another option for management. While Boeing was working to move a plant from Washington (a state with union work rules) to South Carolina (a ‘right-to-work’ state, where union power was much reduced), other plants simply closed. Workers lost jobs. The products that had formerly been made by American workers were now being made offshore by workers in various countries: Ireland for a time, then Eastern Europe, and finally in Asia. American companies changed from manufacturers to importers. The goods still came in, but now profits were higher than ever and there was no need to share them with production employees. There was no need to worry about the well-being of foreign workers or rules regarding pollution of the environment. That was the problem of the manufacturing company and the government of the nation where the plants were located.

And management had no reason to consider that they were effectively destroying the American economy that their prosperity depended on. Profits to management was up; the middle class that drove the consumer market shrank. Upper middle class was forced down, and lower middle class became part of a swelling impoverished class.

And unemployment began to rise. As economies contracted, unemployment rose above 10% (and in some Western nations such as Spain and Greece, it went above 25%; Depression levels, in other words). Unemployed workers couldn’t buy; management sequestered much of their swollen income in investments which effectively removed their money from circulation.  Sales dropped across the board.  Bank foreclosures began to rise. Financialization, a major trend in the late 20th and early 21st Centuries, even took a hit as subprime loans were exposed as the junk they’d always been. Banks lost billions.

Unions now began to recognize that they were in a weakened position. New contracts were for less money, fewer benefits. And the negotiations were no longer under threat of a strike, but were driven instead by the threat of closure of the plant and loss of all jobs.

The Economy: changes and predictions.

December 10, 2012

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.

Economic Madness

December 7, 2012

Written in response to Paul Krugman’s column in today’s NY Times, Dec 7, 2012:

“The danger is that the deficit will come down too much, too fast. And the reasons that might happen are purely political; we may be about to slash spending and raise taxes not because markets demand it, but because Republicans have been using blackmail as a bargaining strategy, and the president seems ready to call their bluff.

Yet there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now — except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused.

Meanwhile, there is almost no organized pressure to deal with the terrible thing that is actually happening right now — namely, mass unemployment. Yes, we’ve made progress over the past year. But long-term unemployment remains at levels not seen since the Great Depression: as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year.

Worse yet, there are good reasons to believe that high unemployment is undermining our future growth as well, as the long-term unemployed come to be considered unemployable, as investment falters in the face of inadequate sales.”

‘Investment’, above, means by private industry. They’re collectively sitting on some $2 trillion that they won’t ‘invest’ because there’s no immediate guarantee of profit. And by doing so, they guarantee that there won’t be customers for their goods.  It’s madness; but it’s understandable.  That’s what over-emphasis on private economic activity instead of a balance between private and government economic activity gets you.

Only government investment, in the form of stimulus directly to job seekers, can do what private industry won’t. For that matter, if you forced the banks to forgive the debt of all those who are paying back loans, you’d see immediate recovery of the economy.  There is some slight activity, enough to keep unemployment under 10% (I suspect the official numbers aren’t really reflective of those who can’t find jobs, and who have given up for the moment) and underemployment at much higher levels.  But a lot of this economic activity doesn’t go to purchases of goods.  It goes to bankers.  People are paying off existing loans on homes, even when many of those are underwater.  They are paying off credit card balances that they acquired back when credit was easy and people had jobs.  And many are paying off student loans.

Whatever money is being paid to banks and financiers isn’t buying new cars, or new homes, or new clothing, or better food.  It’s not paying for vacations or any number of other things.  And until that debt is paid off, those debtors won’t be consumers.  And they won’t be stimulating the marketing economy through purchases.  We are no longer a manufacturing economy, we’re a service economy; and people who work in service economies don’t make enough to pay off loans very quickly or in many cases pay them off at all.  And unless that changes, we’re on the path to becoming a third world nation.

We’re not, yet; but when we’ve become a nation where most of our citizens work for minimum wage in a store or restaurant or office, do you think we can really afford to pretend that we’re still a nation of wealth and power?

Madness?   Just gave everyone a hundred thousand to spend.  Or just print the bleeping money, hire people to paint lampposts and sweep streets and build a national system of water collection and distribution that would move it from where it’s in excess (floods, such as occurred after Sandy and Katrina and spring snowmelts) to where it’s short, where wildfires and catastrophic drought endangers the nation’s food supply.

Put money not into the hands of banks that won’t lend it, but directly into the hands of middle class people who would spend it and thus revive the economy. They wouldn’t be willing to go work for Walmart or Amazon or McDonald’s at minimum wage, so wages for those place would have to go up. Maybe the executives wages might come down, or at least they’d get skinnier bonuses.  Give money to the spenders instead of the gamblers.  Or in other words, revive the consumer market.

Put ME in charge of the bleepin’ Treasury. I’d print the money, hand it to the government directly (no DEBT! For that matter, here’s an extra trillion, go pay off the Chinese), fund food stamps and employment of teachers and firemen and first responders and hospitals. If private industry wants to compete in those areas, then compete on the basis of quality; provide BETTER services than are available through basic public services.

While you’re chuckling at that concept, think about this: would it be any worse than what the clowns in Washington and New York are currently doing?

Tax structures, the New Nobility, and Social Inequality

November 30, 2012

We’re really going to have to do something about the overall tax structure. None of the approaches put forward by our political leaders will do enough, so I’ve been considering non-standard approaches.  I think this is what is necessary.

I’ve advocated a gross-receipts tax, which forces companies to absorb all the costs of such things as corporate jets and business lunches rather than charge them off to taxpayers. Current tax policy actually reduces efficiency by reducing competition, something that the capitalist economy claims to love but which capitalist companies do all that they can to reduce. I’ve also allowed for deductions from company tax liabilities for salaries and benefits paid directly to American workers, but only if such were available for ALL employees. Anything paid out in bonuses or stock options to executives would not be shielded from tax. And what’s paid to workers, whether in the form of direct salary or bonus or health insurance or company car, would constitute income that would be taxed to individuals. Equally, if it’s investment income or capital gains, that would constitute income to be taxed, whatever the individual tax rate would eventually be.

So long as all income is considered to be taxable, actual tax rates could indeed be lowered. Our current system taxes only a proportion of income from a narrow range of sources, and this turns out to fall heavily on the middle class and the poor while being a shield for the wealthy.  A shield which allows them to acquire and sequester wealth by selecting whichever source of income will reduce their taxable income.  It’s why there was so much effort by Mr Romney to hide his taxable-income information.  It’s the mechanism that allows certain individuals with multimillion dollar incomes to pay little or even NO tax at all.

Inevitably, our current system leads to more and more inequality and reduces social mobility, a major problem for democracies.

It’s led to a USA which has a few, the new nobility who lack only titles to be considered such, and the many, serfs in effect who are slaves to corporate rule. Who do not even have the traditional rights of serfs who were tied to the land; the new enslaved class can be dismissed through layoffs, ‘turfed out’ if it appears that managerial elites might realize a slight gain in profit by doing so. In such a system, the employee who’s worked faithfully for a corporation for 25 or 30 years has no rights and can now be dismissed, to attempt to make a living when they’re in late middle age, no longer able to start over in a new career.

The Constitution was written to protect citizens from the excesses of government.

There is nothing to protect us from the unrestrained greed that has become the hallmark of the new nobility.

A REAL tax overhaul might the first step in that effort. And along with it, government programs that provide more protection for citizens than is currently available from Social Security or Medicare.

A best approach might be to start with a commission that included not only the members of the new nobility but also representation from the middle and lower classes.  Such a commission would look at what’s fair to those lower classes as well as what benefits those elites who have a system that they can exploit differentially to gain ever-greater wealth.  Such a commission would consider where society should go, and would have the best interests of all American citizens at heart.

It would do what Congress was supposed to do, but what Congress has failed to do.  Our system of laws is in large part a listing of failures by past Congresses.  Failures patched here and there, but with ever more failures tacked on top of past failures and patches.

Perhaps it’s time to consider a real rewrite of the Constitution.

I won’t see any of this in my lifetime. But maybe, if we think about it and force our elected officials to represent VOTERS rather than those who bribe them with ‘campaign contributions’, something like this might be possible in your lifetime.