Thursday, September 29, 2011

Is a War with China (and India) Inevitable?

Yesterday I made the economic case why a war with China is probably going to happen. In that post, I forgot to make mention of one of the other reasons I think this is inevitable. Niall Ferguson, a historian who has gone on record as believing a war between China and America is likely, wrote a piece called Men Without Women, where he noted that in China and India, various social customs and policies have led to there being many more men than women, rather than the natural balance of about 50/50. He notes that his has historically caused the excess males to seek other outlets, usually war:

The question left open by economists is what the consequences will be of such a large surplus of young men. History offers a disquieting answer. According to the German scholar Gunnar Heinsohn, European imperial expansion after 1500 was the result of a male “youth bulge.” Japan’s imperial expansion after 1914 was the result of a similar youth bulge, Heinsohn argues. During the Cold War, it was youth-bulge countries—Algeria, El Salvador, and Lebanon—that saw the worst civil wars and revolutions. Heinsohn has also linked the recent rise of Islamist extremism in countries like Afghanistan, Iraq, and Pakistan to an Islamic youth bulge. Political scientists Valerie Hudson and Andrea den Boer warn that China and India could be the next countries to overdose on testosterone.

That has scary implications. Remember, most of Hemingway’s stories in Men Without Women are about violence. They feature gangsters, bullfighters, and wounded soldiers. The most famous story is called simply “The Killers.”

It may be that the coming generation of Asian men without women will find harmless outlets for their inevitable frustrations, like team sports or videogames. But I doubt it. Either this bachelor generation will be a source of domestic instability, whether Brazilian-style crime or Arab-style revolution—or, as happened in Europe, they and their testosterone will be exported. There’s already enough shrill nationalism in Asia as it is. Don’t be surprised if, in the next generation, it takes the form of macho militarism and even imperialism. Lock up your daughters.
Here is the situation in China:

More than 24 million Chinese men of marrying age could find themselves without spouses by 2020, says the Chinese Academy of Social Sciences.

The gender imbalance among newborns is the most serious demographic problem for the country's population of 1.3 billion, says the academy.

It cites sex-specific abortions as a major factor, due to China's traditional bias towards male children.

The academy says gender selection abortions are "extremely common".

This is especially true in rural areas, and ultra-sound scans, first introduced in the late 1980s, have increased the practice.

The latest figures show that for every 100 girls born in China, 119 boys are born, the academy says in a new book.

And the situation in India is possibly even worse:

In India, female foeticide - the sex-selective abortion of girls - has led to an alarming "gender gap" in the country's population. In 1990, when the census showed that there were 25 million more males than females in India, the government reacted by introducing a law making it illegal to detect the sex of a foetus through ultrasound examination. Yet by 2001, thegender gap had risen to 35 million, and now experts estimate it as high as 50 million.

In addition to the above, both countries are youthful, vastly overpopulated, nationalist, and running hard up against resource limits. The lack of opportunities to start a family has already roiled the Middle East, where extreme sexual repression and polygamy have also caused distortions in male/female relationships. We all know how violent the Middle East is. As the job situation deteriorates and the gaps between rich and poor grow ever wider, is this not a recipe for conflict?

What Ferguson missed is that not only is there a disproportionate share of men, there are also decreasing opportunities for employment. Both of these combined make an even more toxic stew than either one alone. In the United States, there may not be a gender imbalance between men and women as there is in China and India, but the current depression has decimated male jobs particularly. In the United States, there is a lack of family supporting jobs. You cannot raise a family working at Home Depot, yet these are the only jobs America is creating for the majority of people. A shrinking pool of decent-paying jobs are reserved for a small cognitive elite, with everyone else dismissed as irrelevant. And what will testosterone-fuelled males not in that elite do when they cannot earn enough to support a family? Where will the energies of these men go? Today only 55 percent of young people have employment of any sort, much less decent paying wages. As I’ve said so many times before, there is no industry that is going to employ all these people, and wages are only going to continue to decline in real terms. Is it coincidence that American men are becoming ever-more attracted to radical right-wing populism, with its toxic brew of bellicose militarism, virulent nationalism, violent eliminationist rhetoric and enthusiasm for firearms? Where have we seen this before?

This, combined with the reasons I outlined yesterday, make a powerful case for a global conflagration involving not only the United States and China, but India as well. America is already fighting a secret war in Pakistan. China and India have exchanged fire over border disputes many times in the past several decades. India, China, Pakistan, and the United States are all nuclear powers. The United States and India are allies. China and India are rivals. Are we headed for something resembling the powder keg that set off World War 1?

Wednesday, September 28, 2011

Is a War with China Inevitable?

Recently, an author named Stephen Glain made headlines by going on the record and declaring that a war between China and the United States is more than likely in the not-to-distant future:

Like many others, Stephen Glain, author of State vs. Defense, believes the U.S. and China are, indeed, on a collision course. "Absent a good faith attempt to negotiate this thicket of disputes between China and Taiwan and the Philippines and Brunei and others, I think it's inevitable," he says. "The Chinese are not going to back down."

Just as America adopted the Monroe Doctrine to project power in the Western Hemisphere, the Chinese believe they have a right to their own sphere of influence in the Asia-Pacific region. "China is after all a 3000-year old country; Asia has been throughout most of that history Sino-centric," he says.

But to those who believe the U.S. and its allies must "bottle up" China, Glain says "there's nothing in those 3000 years of Chinese history" to suggest China's intentions are to militarily dominate the region. "On the contrary, they've always remained close to their own territory," he notes. "They have always been the Middle Kingdom between heaven and earth."

However, Glain fears the U.S. and its allies might provoke China into a war that might otherwise be avoidable. "Arms races tend to develop their own immutable momentum," he says, noting the Pentagon is embarking on an "enormous military buildup" in the region.

In his new book, Glain laments the rise of the "military industrial complex" President Eisenhower warned about 50 years ago, suggesting defense contractors and their patrons in Congress and the Pentagon have an undue influence on U.S. foreign policy. American hubris is also playing a role in the march to war, he says.

"Without an admission by the U.S. of its limitations, both fiscal and militarily…I think some kind of conflict between the U.S. and China is inevitable, probably in our lifetime," he says.

In this regard, he joins rock-star financial historian Niall Ferguson, who also has gone on record as anticipating a future conflict between China and the United States.

I happen to think they are both right, but for a very different set of reasons. One of the scenarios I outlined at the conclusion of What Are People Good For was the War Scenario. As I’ve said in a series of recent posts – there is no way in our current economic paradigm of globalized corporate capitalism to fix the festering problems we are now dealing with – political corruption by financial elites, mass unemployment and inherent resource limits (along with an increasingly unstable environment). The imperatives in the system of capital accumulation and eternal growth will force the system to continue careening uncontrollably down its current path to either self-destruction or transformation. There are no other viable options. Already, citizens of the United States are becoming poorer and poorer by the day; by many measures we have given back all gains since the Great Depression. Unemployment is rising, cities are crumbling, counties are bankrupt, homes are sitting empty while tent cities are springing up everywhere. China continues to advance, but the way the system works, some people will benefit while that majority will not. Will the millions of economic losers in both countries simply tolerate this without complaint? And even China’s tentative middle-class growth is contingent on being part of a functioning wider global economy. What will happen as that seizes up? China is limited even further than the West by resource limits due to its enormous population and its degraded ecosystem.

As most are no doubt aware, the only thing that ended a ten-year run of Depression in the West was the plunging of the world into war. By pointing this inconvenient fact out, economist Paul Krugman was pilloried by some critics as advocating a war (he was not, of course, but he was advocating massive government spending on non-war measures). But he unwittingly speaks an inconvenient truth: a war does solve capitalism’s overproduction and overpopulation crises, as I pointed out in previous posts. Glain’s thesis was also covered over at Decline of the Empire, where I made the following comment:
The drumbeat has already started – we are already being primed for war. The conflict between the U.S. and Japan was predicted DECADES in advance of it actually happening, as far back as the Russo-Japanese War. After Russia’s defeat, Japan’s increasing militarism and territorial expansion in the East Asia sphere was seen by geopolitical experts as inevitably bringing Japan into conflict with the other rising power in the Pacific – The United States. In retrospect, when the precipitating event took place in December, 1941, it was not really a surprise to many – including possibly the Roosevelt administration who some still accuse of having had foreknowledge of the attack.
Read this recent opinion piece in the New York Times: For Jobs, It’s War. The subtext is clear: the global economy is a zero-sum game, and there can only be one winner. The alarmist book described in the piece asserts that the next decades will be “an all-out war” for jobs:
“The war for global jobs is like World War II: a war for all the marbles. The global war for jobs determines the leader of the free world. If the United States allows China or any country or region to out-enterprise, out-job-create, out-grow its G.D.P., everything changes. This is America’s next war for everything.”
This is America’s next war for everything. Get it now? And see this article – Does the American Government Consider Economic Rivalry to Be A Justification For War? The reason for this is twofold - the National Security State is a huge moneymaker for the plutocracy, without having to worry about the vagaries of the “free” market or declining consumer incomes – they can just extract all the money they need via taxes, and route it directly into the companies they control. No messy competition or declining sales figures to worry about. It needs perpetual war and conflict to justify itself and keep the money flowing to the corporatists and their political handmaidens.
The second reason is even more important - Capitalism requires war in order to continue. By destroying productive capacity and killing off millions of idle workers, once the conflict is over the wealthy owners of the means of production once again can continue their path of growth and profitability. If current trends continue, China will require essentially all the world’s oil, grain, and raw materials to keep growing. Although they profess otherwise, the elites know that this is impossible:
The following facts are from Lester Brown of the Earth Policy Institute:
If China's economy continues to grow by 8.0 percent annually, per capita income will equal that of current levels in the United States by the year 2030, when the nation will boast a population of 1.45 billion people, Brown said.
China grew 9.9 percent last year and 10.3 percent in the first quarter of 2006 and looks set to expand at similar rates going forward.
On the same model, Brown said China's annual grain consumption would equal two-thirds of current world grain output and annual paper consumption would be double current world production by 2030.
"There go the world's forests," he said.
On oil, Brown pointed to a similar scenario of simply not having enough to meet China's demands.
"If oil consumption per person reaches the US level by 2031, China will use 99 million barrels a day.
"The world is currently producing 84 million barrels a day and may never produce much more."
If three out of every four people in China own cars, as in the United States, there will be 1.1 billion vehicles on Chinese roads, compared to the current world fleet of 800 million, Brown said.
At a time of globalization and intense competition to produce more at ever lower prices, the contemporary economic model is doomed, Brown said.
Note that World War 2 happened after capitalism had run into a cul-de-sac created by an overproduction glut resulting in persistent unemployment of the masses. In both cases, the wealthy corporations and banks bankrolled the arms buildup and supplied weapons technology to both sides of the conflict. Isn’t it convenient that unemployment is highest among the cohort of young people who are just the right age to go to war? And what about those massive millions of rural Chinese migrants heading to the gleaming cities to look for factory work? Might putting a rifle in their hand solve that inconvenient demographic problem, and prevent a revolt of the jobless? Voila – unemployment and overproduction solved in one fell swoop, and people will be effectively distracted from their declining standard of living. Once it’s all over, the same elites on both sides of the Pacific can pick up the pieces. War solves all the problems of the elites, which is what makes it inevitable. And if you think there will be some sort of resistance, may I remind you how easily we were led to war less than a decade ago against an insignificant country that did not even attack us? Remember the climate of frothing-at-the-mouth nationalism and “you’re either with us or against us?”
As anyone who reads this blog knows full well, We The People have no control whatsoever over this process, we can only sit back and watch it happen. And now you know the burden of knowing.
So for the many reasons outlined above, its seems to me like a war with China is inevitable. As horrible as it is to contemplate, I see it as the only way out for the elites to keep us from transitioning to more democratic economic systems. This will not be a nuclear war, despite both sides being armed with nuclear weapons, because the radiation would cause too much contamination for too long a time prohibiting vast areas from ever being used again. Remember, the idea is to rebuild after the war to return GDP to growth and provide employment for the survivors. Remember, GDP only counts economic activity and discounts destruction, as this article so saliently points out. The aftereffects of destruction are counted as a net plus, because all the existing things that were swept away (including human lives) are not figured into its calculus. Since “growth” is the one and only imperative of the system, not the quality or even the preservation of human life, war is the logical solution to the crisis from the view of our sociopathic elites. If growth cannot continue, we would have to begin to ask questions about distribution, and they will do anything, and I mean anything, to stop that from happening.

In a pure sense of selfishness, if it’s going to happen, it might as well happen soon. I’m past the prime age for serving in a war, and it beats having nothing to look for but a long downward spiral. When you take away all the death and dying, nothing is more exciting than wartime. Still, I wish it could be avoided.

Monday, September 26, 2011

Slate Magazine Wonders What People Are Good For

Not long after I wrote "What Are People Good For?" Farhaad Manjoo, who is a technology writer at Slate Magazine online began soliciting for stories about workplace automation. In other words, he was pondering exactly what I was pondering when my local library became automated.. At the time, he announced that he was going to write a series detailing exactly how computers were taking over jobs from human beings. In this vein, he was following in the footsteps of Marshall Brain, Martin Ford, The New York Times, David Autor, and Paul Krugman.

Well, the wait is over. Slate is publishing his series this week. Hopefully this will add to the discussion, and we'll start to see a new interest in dealing with this. Remember the headlines from a short while ago: no new jobs were created in the month of August. From the article:

This is not a new story. People have been fretting about the rise of the machines since Ned Ludd took a hammer to his knitting frames, and probably before. In general, these fears have been unfounded. Yes, better technology sometimes replaces workers in the short run, but over the long march of history, technological improvements have been a key to economic growth, and economic growth improves prospects for workers across a range of industries. Indeed, economists have a name for the popular but misguided notion that technology will displace human workers: They call it the Luddite fallacy, after old Ned himself. To many in the academy, it's an iron-clad law of how economies work.

But this time could be different. Artificial intelligence machines are getting so good, so quickly, that they're poised to replace humans across a wide range of industries. In the next decade, we'll see machines barge into areas of the economy that we'd never suspected possible—they'll be diagnosing your diseases, dispensing your medicine, handling your lawsuits, making fundamental scientific discoveries, and even writing stories just like this one. Economic theory holds that as these industries are revolutionized by technology, prices for their services will decline, and society as a whole will benefit. As I conducted my research, I found this argument convincing—robotic lawyers, for instance, will bring cheap legal services to the masses who can't afford lawyers today. But there's a dark side, too: Imagine you've spent three years in law school, two more years clerking, and the last decade trying to make partner—and now here comes a machine that can do much of your $400-per-hour job faster, and for a fraction of the cost. What do you do now?
Manjoo is specifically dealing with higher-skilled jobs; that automation has already eliminated lower-skilled jobs he treats as a fait accompli. That's old news, he says; now we can start looking at all the college-educated professional carrers that are going to be eliminated. His first entry - pharmacists, which happens to be his father's proefession (he takes a look at his own later in the week). He quotes MIT economist David Autor, one of the few economists to even consider the question of automation (emphasis mine):

Autor argues that middle-skilled jobs tend to have two factors in common—they are composed of lots of tasks that are both routine and geographically portable. What does a secretary do all day? He files, sorts, organizes, watches for calendar conflicts, and in other ways manipulates information. What does a tax preparer do? He asks you a series of questions, and performs some calculations based on your answers. These are all tasks that can be written in software—and, once there, they can be done faster, and more cheaply, by machines. And even when a computer can't completely replace these middle-skilled jobs, it can make them easier to transfer to lower-wage humans—you still need a human being to answer tech support questions, but now you can hire someone in Andra Pradesh rather than Alabama. This decimation of middle-skilled work explains another unsettling trend in American business. New companies today are starting up with far fewer workers than in the past, and they're staying smaller as they grow.
Manjoo quotes Martin Ford in the intro to the piece (emphasis mine):

When I spoke to him recently, I asked Ford about economists' standard rebuttal to fears of automation—the story of the decline of agricultural jobs in the United States. In 1900, 41 percent of the American workforce was employed in agriculture. Over the next 100 years, the technological revolution in farming dramatically increased productivity, enabling fewer and fewer people to produce more and more food. By 2000, just 2 percent of the workforce was employed in agriculture. Yet this shift, which required millions of people to move off farms and acquire new skills, didn't ruin the economy. Instead, by reducing food prices and freeing up people to do more profitable things with their time, it contributed to massive growth. Why won't that happen again with information technology—why won't we all just learn new skills and find other jobs?

"There's no question that there will be new things in the future," Ford says. "But the assumption that economists are making is that those industries are going to be labor-intensive, that there are going to be lots of jobs there. But the fact is we don't see that anymore. Think of all the high-profile companies we've seen over the past 10 years—Google, Facebook, Netflix, Twitter. None of them have very many employees, because technology is ubiquitous—it gets applied everywhere, to new jobs and old jobs. Whatever appears in the future, whatever pops up, we can be certain that IT will get applied right away, and all but the most non-routine-type jobs won't be there anymore."
And we all know how rare non-routine jobs are. We all want them, but they are reserved for the well-heeled and well-connected. What will the rest of us do?

Martin Ford himself has written a piece for the Washington Post about how IBM's Watson supercomputer is being applied to medicine:
Dr. Watson: How IBM’s supercomputer could improve health care

Here is another view:
Doc in a Box

Go back and reread my post entitled "Our Jobless Future" to see where this is all heading. You can be sure our leaders do not care; they will just invest their taxpayer-funded millions in the companies making the robots. The pain and suffering this will unleash will not matter one whit to those on the top who will be doing the firing. Essentially all upper-level business leaders and management are sociopaths who care only about themselves and their immediate blood relatives, not about their country or their fellow citizens (look at the tax debate). They will just lay us all off, high-five one another, and reread their copies of Atlas Shrugged.

It strikes me that what we're now seeing is the plutocracy's version of the Final Solution. Just like that atrocity, if you are not directly affected, and still have a job, you will not notice what's going on until it is too late. That is, if you even notice what is happening around you at all. The best part is that the victims will be blamed for their own misfortune by those fortunate enough to have the resources to escape - "they should have gotten more education, worked harder, etc." is what the survivors will say. Indeed, we've already seen that attitude for years as manufacturing and labor were hollowed out. Rather than herding people into poison gas showers, the plutocracy will just deny you the opportunity to earn wages, depriving you of the basic necessities for life. Prisons will begin to overflow with people, and all sorts of social dysfunction will take over in the desperate pools of surplus workers as the rich lounge comfortably in their high-rise condos and gated suburbs, robots slaving away ceaselessly making their profits. No wonder in a time of unparalleled technological sophistication and scientific knowledge, Americans are living in their cars and learning to grow their own food.

Sunday, September 25, 2011

Has the Collapse Already Happened?

Well, here we are at 100 posts. So to celebrate, I thought I would give a brief roundup of where we are as a country. It is one of the conceits of this blog that the United States is essentailly crumbling as a society. As an American, I take no pleasure in making that statement, and I wish it were not so, but pretending does not make reality go away. In order to understand our world today, we need to know where we are. Many of these statistics have just come out over the past few weeks, and they are shocking. Although all the sources are taken from the mainstream media, the media avoids any discussion of the ramification, much less asking the question of whether society as a whole is failing. After all, their job is to sell advertising. But like a Seurat painting where the whole picture is comprised of a series of small colored dots, I think there is a larger picture being painted here.

To begin with, and as a background, please read this post by Immaneul Wallerstein. In an amazingly brief post, he summarizes everything that has happened since the end of the Second World War:

So lets sum up what we've learned over the past few months. All statements are factual.

To begin with, the United States now has more people in poverty since the end of the Second World War. One out of every six Americans is "officially" in poverty:

In yet another sign that the Great Recession cuts deep and long--the number of Americans living below the official poverty line reached 46.2 million, the highest in 52 years since the Census Bureau started tracking the figures in 1959.

The overall poverty rate also climbed to a 17-year high at 15.1%, which means 1 in 6 Americans are living below poverty line largely due to the high unemployment and underemployment rate. The official poverty line for 2010 is defined as an annual income of $22,314 for a family of four, and $11,139 for an individual.

Poverty among blacks and hispanics is higher than 1 in 4. Almost 1 in 4 - 22 percent of those under 18 years of age are in poverty:

The Census Bureau data also showed that poverty among black and Hispanic people was much higher than for the overall US population last year - at 27.4% and 26.6% respectively.

Outside of the poverty line, the average annual US household income fell 2.3% in 2010 to $49,445 (£31,228).

Even younger Americans were also strongly affected. Twenty-two percent of those under 18 were living under the poverty line - up from from 20.7% in 2009.

Three out of four of those below the poverty line work: half have full-time jobs, a quarter work part time. Only a quarter do not work at all.

The medium income in America has fallen to what it was in 1997, despite record corporate profits:

The Census Bureau's annual report released on Tuesday, Sept. 13 gives a very grim snapshot of American households in 2010. As the U.S. economy expanded 3% in 2010, and corporations reported good profits, the gains are not trickling down to workers. The median household income in 2010 dropped to $49,445, which is virtually unchanged from the level in 1997. Overall, household income has fallen by 6.4% since the recession began in December 2007

Moreover, income inequality across households also increased between 2009 and 2010. According to CNNMoney, adjusted for inflation, the middle-income family only earned 11% more in 2010 than they did in 1980, while the richest 5% in America saw their incomes surge 42%.

That means that 50% of American households (the median) make $49,400 or less.

Only 55 percent of young Americans have jobs, also the lowest percentage since World War 2:

Unemployment among young adults is at its highest point since World War II, new data show. And it's having a disconcerting impact on the trajectory of their careers and lives.

“We have a monster jobs problem, and young people are the biggest losers," Andrew Sum, an economist with the Center for Labor Market Studies at Northeastern University told the Associated Press.

Just 55.3 percent of people between 16 and 29 were employed in 2010 on average, the according to new figures released by the Census Bureau. That represents an enormous drop from 67.3 percent in 2000. Among teens the figure was less than 30 percent.

No new net jobs have been created in the past ten years, depite an addition thirty million people added to the U.S. population:

In the face of the most stimulative fiscal and monetary policies in our history, we have experienced the loss of over 7 million jobs, wiping out every job gained since the year 2000. From the moment the Obama administration came into office, there have been no net increases in full-time jobs, only in part-time jobs. This is contrary to all previous recessions. Employers are not recalling the workers they laid off from full-time employment.

The real job losses are greater than the estimate of 7.5 million. They are closer to 10.5 million, as 3 million people have stopped looking for work. Equally troublesome is the lower labor participation rate; some 5 million jobs have vanished from manufacturing, long America's greatest strength. Just think: Total payrolls today amount to 131 million, but this figure is lower than it was at the beginning of the year 2000, even though our population has grown by nearly 30 million.

The most recent statistics are unsettling and dismaying, despite the increase of 54,000 jobs in the May numbers. Nonagricultural full-time employment actually fell by 142,000, on top of the 291,000 decline the preceding month. Half of the new jobs created are in temporary help agencies, as firms resist hiring full-time workers.

Today, over 14 million people are unemployed. We now have more idle men and women than at any time since the Great Depression. Nearly seven people in the labor pool compete for every job opening. Hiring announcements have plunged to 10,248 in May, down from 59,648 in April. Hiring is now 17 percent lower than the lowest level in the 2001-02 downturn. One fifth of all men of prime working age are not getting up and going to work. Equally disturbing is that the number of people unemployed for six months or longer grew 361,000 to 6.2 million, increasing their share of the unemployed to 45.1 percent. We face the specter that long-term unemployment is becoming structural and not just cyclical, raising the risk that the jobless will lose their skills and become permanently unemployable.

Don't pay too much attention to the headline unemployment rate of 9.1 percent. It is scary enough, but it is a gloss on the reality. These numbers do not include the millions who have stopped looking for a job or who are working part time but would work full time if a position were available. And they count only those people who have actively applied for a job within the last four weeks.

Include those others and the real number is a nasty 16 percent. The 16 percent includes 8.5 million part-timers who want to work full time (which is double the historical norm) and those who have applied for a job within the last six months, including many of the long-term unemployed. And this 16 percent does not take into account the discouraged workers who have left the labor force. The fact is that the longer duration of six months is the more relevant testing period since the mean duration of unemployment is now 39.7 weeks, an increase from 37.1 weeks in February.

The inescapable bottom line is an unprecedented slack in the U.S. labor market. Labor's share of national income has fallen to the lowest level in modern history, down to 57.5 percent in the first quarter as compared to 59.8 percent when the so-called recovery began. This reflects not only the 7 million fewer workers but the fact that wages for part-time workers now average $19,000—less than half the median income.

According to John Williams of, after you add in all short-term discouraged workers, all long-term discouraged workers and all Americans that are working part-time because they cannot find full-time employment, the real unemployment rate should be approximately 23 percent.

Nearly half of Americans say that they definitely or probably couldn’t come up with $2,000 in 30 days, according to new research, raising concerns about the financial fragility of many households:

In a paper published by the National Bureau of Economic Research, Annamaria Lusardi of the George Washington School of Business, Daniel J. Schneider of Princeton University and Peter Tufano of Harvard Business School used data from the 2009 TNS Global Economic Crisis survey to document widespread financial weakness in the U.S. and other countries.

The survey asked a simple question, “If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?” In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable. The $2,000 figure “reflects the order of magnitude of the cost of an unanticipated major car repair, a large copayment on a medical expense, legal expenses, or a home repair,” the authors write. On a more concrete basis, the authors cite $2,000 as the cost of an auto transmission replacement and research that reported low-income families claim to need about $1500 in savings for emergencies.

Lusardi, Schneider and Tufano also looked at the ways in which people coped with an unexpected expense. Most would use multiple methods ranging from dipping into savings, asking for help from family and friends, using loans or credits cards, taking out payday loans or selling possessions. “Taken together with those who would pawn their possessions, sell their home, or take out a payday loan, 25.7% of respondents who were asked about coping methods (equal to 18.6% of all respondents) would come up with the funds for an emergency by resorting to what might be seen as extreme measures,” the authors write. “Along with the 27.9% of respondents who report that they could certainly not cope with an emergency, this suggests that approximately 46.5% of all respondents are living very close to the financial edge.”

This may be why credit card debt is rising once again:

According to a new study from, we’re on track to increase our collective credit card debt by $54 billion in 2011. We added only $9 billion in new credit card debt in 2010, and actually reduced our credit card debt in 2009 — so this is a significant reversal. All told, Americans now have roughly $772 billion in outstanding credit card balances.

Only the most educated 3 percent saw wage gains between 2000 and 2010. Even those with Masters degrees saw falling wages over a decade. Not stagnant, falling:

And notice who is in that 3 percent: MBA's, Lawyers and Ph.D's. Most of the Harvard/Yale/Princeton set are in this category, and have certainly skewed the data upward. Most PhD.'s work in universities who have seen their tuition increase. Joing that 3 percent will be nearly impossible for most Americans in the future. Education will almost certainly be out of reach, if it isn't already. Over the past 10 years, the cost of college has risen by 60 percent at private colleges, and nearly doubled at public colleges:

Meanwhile, colleges are bidding up tuition prices faster than a hedge fund manager at an art auction. Over the past 10 years the cost of private college has jumped more than 60%, nearly three times as much as incomes over the same period, and will now set you back $42,000 a year on average.

Prices at public colleges have shot up even more, nearly doubling to $21,000 for in-state students. Got younger kids? By 2020 you're looking at a four-year bill that's likely to top $240,000 for private schools and $155,000 at public universities. Sure there's financial aid, but scholarships aren't keeping up with tuition inflation. So long, retirement hopes; hello again, boss.

According to The New York Times, colleges are now recruiting based mainly on the student's ability to pay the enormous tuition amounts without loans:

Money is talking a bit louder in college admissions these days, according to a survey to be released Wednesday by Inside Higher Ed, an online publication for higher education professionals.

More than half of the admissions officers at public research universities, and more than a third at four-year colleges said that they had been working harder in the past year to recruit students who need no financial aid and can pay full price, according to the survey of 462 admissions directors and enrollment managers conducted in August and early September.

Similarly, 22 percent of the admissions officials at four-year institutions said the financial downturn had led them to pay more attention in their decision to applicants’ ability to pay.

Student loan debt is higher than credit card debt, at over a trillion dollars. Defaults are on the rise:

A recent study by the Institute for Higher Education Policy found that for every borrower who defaults, at least two more fall behind in payments. The study found that only 37 percent of borrowers who started repaying their student loans in 2005 were able to pay them back fully and on time.

The high default rate at for-profit colleges, the fastest-growing sector of higher education, has become an increasing concern for the government, since such institutions depend on federal student aid for more than 80 percent of their revenues. Last spring, in internal documents gathered from the publicly traded for-profit colleges for hearings on the student debt problem, the Senate Health Education Labor and Pensions Committee found that some companies estimated that their students had staggeringly high lifetime default rates — in one case, 77.7 percent.

Even before college, over the past decade, the cost of raising a middle-income child has risen by 40 percent:

According to the US Dept of Agriculture, the cost of raising a child in a middle-income family has increased by 40 percent over the past ten years. Every major category of child-rearing expense has seen steep increase: day-care, education, food, gas, medical insurance, and so on. At this rate, childrearing may become a luxury item for America's increasingly wealthy super-rich.

Are we headed for a demographic collapse a la Russia or Japan? I think so.

15 percent of the United States population is on food stamps, including many who have jobs:

(Reuters) - Genna Saucedo supervises cashiers at a Wal-Mart in Pico Rivera, California, but her wages aren't enough to feed herself and her 12-year-old son.

Saucedo, who earns $9.70 an hour for about 26 hours a week and lives with her mother, is one of the many Americans who survive because of government handouts in what has rapidly become a food stamp nation.

Altogether, there are now almost 46 million people in the United States on food stamps, roughly 15 percent of the population. That's an increase of 74 percent since 2007, just before the financial crisis and a deep recession led to mass job losses.

At the same time, the cost doubled to reach $68 billion in 2010 -- more than a third of the amount the U.S. government received in corporate income tax last year -- which means the program has started to attract the attention of some Republican lawmakers looking for ways to cut the nation's budget deficit.

While there are clearly some cases of abuse by people who claim food stamps but don't really need them, for many Americans like Saucedo there is little current alternative if they are to put food on the table while paying rent and utility bills.

"It's kind of sad that even though I'm working that I need to have government assistance. I have asked them to please put me on full-time so I can have benefits," said the 32-year-old.

She's worked at Wal-Mart for nine months, and applied for food stamps as soon as her probation ended. She said plenty of her colleagues are in the same situation.

Here are some salient facts from The Economic Collapse blog:

The percentage of American men that are employed continues to plummet. In July, only 63.5 percent of all men in the United States had a job. Since 1948, that number has only been lower one time (63.3 percent in December 2009).

Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs. That's nearly half. Back in the 1950s, manufacturing accounted for about 28 percent of U.S. GDP. Last year, it accounted for just 11.7 percent. America's largest employer used to be General Motors. It is now Wal-Mart. The second biggest employer in the U.S. is McDonalds.

Between 1969 and 2009, the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation.

According to a report released in February from the National Employment Law Project, higher wage industries are accounting for 40 percent of the job losses in America but only 14 percent of the job growth. Lower wage industries are accounting for just 23 percent of the job losses but 49 percent of the job growth.

Half of all American workers now earn $505 or less per week.

Last year, 19.7% of all U.S. working adults had jobs that would not have been enough to push a family of four over the poverty line even if they had worked full-time hours for the entire year.

The number of Americans that are going to food pantries and soup kitchens has increased by 46% since 2006.

According to the Washington Post, the average yearly income of the bottom 90 percent of all U.S. income earners is now just $31,244.

When you look at the ratio of employee compensation to GDP, it is now the lowest that is has been in about 50 years.

At this point, the poorest 50% of all Americans now control just 2.5% of all of the wealth in this country.

Between 1999 and 2009, total spending on health care in the United States nearly doubled, from $1.3 trillion to $2.5 trillion. During the same period, the percentage of the nation’s gross domestic product devoted to health care climbed from 13.8 percent to 17.6 percent. Per person health care spending grew from $4,600 to just over $8,000 annually, according to a Rand Corporation Study.

Just about 50 million people lacked health insurance last year, about 16.3% of the population. America is the only advanced industrialized country to link health care access to employment status.

In 2008, the latest year for reliable statistics, the U.S. spent more than $2.3 trillion on health care, three times more than in 1990.

Comparing these numbers to other industrialized countries, the U.S. spends a greater share of gross domestic product on health care, by as much as 50 percent in some cases.

The reasons Americans pay more, say analysts, boils down to a complicated system that requires a profit motive.

"The U.S. pays higher costs for the same service in part because the government plays a smaller role in negotiating prices," says Gerry Wedig, associate professor of business administration at the University of Rochester. "Overseas, governments compress patient demand by acting as a tough regulator and negotiator for the whole system."

"Our labor costs are higher for doctors, nurses and other health care professionals than other parts of the world," says Paul Keckley, executive director for Deloitte's Center for Health Solutions. "Specialists easily make more money here than in other countries."

A private insurance market and an overworked legal system are also behind the cost differential, says professor Colin Pritchard of Bournemouth University in Great Britain and who has co-written a comparison study on health care costs.

"Profits have to be made by insurance companies, so premiums are high for some people considered bad risks," says Pritchard. "And the U.S. culture is litigious, so more protective medicine needs to be done and there are often unnecessary and costly investigations."

Medical paper work alone is enough to help drive up costs, argues Robert LeFlar, professor of law and the University of Arkansas and a specialist in comparative health law.

"Other nations save on health care costs by simplifying administration of the system," LeFlar explains. "Countries like Japan and Canada rely on private sector professionals but pay them through a single government plan. That eliminates paperwork that drowns doctors and patients."

There's also the cost of medicine, such as prescription drugs, for which U.S. patients pay more, says Lee Graczyk, lead organizer or RxRights, an advocacy group for cheaper medicine and importation of foreign drugs.

"Americans pay twice as much for drugs compared to other nations," says Graczyk.

Americans currently average about $7,538 a year in medical costs, including out-of-pocket expenses. Meanwhile, the average cost per per person, including taxes for 'sickness funds' for industrialized countries like Great Britain, Norway and Switzerland is $2,995, according to the Organization for Economic Co-operation and Development.

Health care in the U.S. is not going to get any cheaper in the years ahead, analysts say. The Congressional Budget Office projects that total national spending on health care in the U.S. will reach 31 percent of GDP by 2035.

In 2009, if you were to add up the total fortune of America's richest 400 people, that amount—$1.27 trillion—would be more than the holdings of the bottom 50 percent of Americans, less than $1.22 trillion.( And in fact, in 2010 the net worth of the Forbes 400 jumped to $1.37 trillion.) That top 400, by the way, represents .0000035 percent of all households in the United States.

Most comsuming is now done by the very wealthy:

According to new research from Moody’s Analytics, the top 5% of Americans by income account for 37% of all consumer outlays. Outlays include consumer spending, interest payments on installment debt and transfer payments. By contrast, the bottom 80% by income account for 39.5% of all consumer outlays.

It is no surprise, of course, that the rich spend so much, since they earn a disproportionate share of income. According to economists Emmanuel Saez and Thomas Piketty, the top 10% of earners captured about half of all income as of 2007.

As the middle class shrinks, marketers are aiming more and more at high-end earners and abandoning everyone else. The United States level of income equality is now equal to Mexico and the Philippines:

To monitor the evolving American consumer market, P&G executives study the Gini index, a widely accepted measure of income inequality that ranges from zero, when everyone earns the same amount, to one, when all income goes to only one person. In 2009, the most recent calculation available, the Gini coefficient totaled 0.468, a 20% rise in income disparity over the past 40 years, according to the U.S. Census Bureau.

"We now have a Gini index similar to the Philippines and Mexico—you'd never have imagined that," says Phyllis Jackson, P&G's vice president of consumer market knowledge for North America. "I don't think we've typically thought about America as a country with big income gaps to this extent."

Major power outages have more than doubled in the last decade. Blackouts disrupt power to at least a third of U.S. homes each year, and studies show the number of outages is rising. Many electrical transmission lines are outdated, and parts of the grid date back to the time of Thomas Edison.

America's internet service quality has fallen to twenty-fifth worldwide, just below Romania.

The United States of America has an incarceration rate of 743 per 100,000 of national population (as of 2009), the highest in the world. In comparison, Russia has the second highest 577 per 100,000, Canada is 123rd in the world with 117 per 100,000, and China has 120 per 100,000. While Americans only represent about 5 percent of the world's population, one-quarter of the entire world's inmates are incarcerated in the United States.

The United States has the highest rate of incarceration in the world, with 2.3 million Americans behind bars, a 300 percent increase since 1980, the report states. This country has more inmates than the top 35 European countries combined.

"One in 87 working-aged white men is in prison or jail, compared with 1 in 36 Hispanic men and 1 in 12 African-American men. More young (20-34) African-American men without a high school diploma or GED are currently behind bars (37 percent) than employed (26 percent)."

Perhaps most disturbing is the 2.7 million American children who have a parent behind bars, a massive increase from 25 years ago when 1 in 125 kids had an incarcerated parent compared to 1 in 28 today. And, "two-thirds of these children's parents were incarcerated for non-violent offenses," the report says.

"One in 9 African-American children (11.4 percent), 1 in 28 Hispanic children (3.5 percent) and 1 in 57 white children (1.8 percent) have an incarcerated parent," according to Collateral Costs.

The report notes that "serving time reduces hourly wages for men by approximately 11 percent, annual employment by 9 weeks and annual earnings by 40 percent." The typical former inmate, by age 48, will have earned $179,000 less than if he had never been incarcerated.

Before being imprisoned, more than two-thirds of male inmates had jobs and more than half were the primary source of financial support for their children, the study shows. When a released inmate can't take care of his family, guess who bears the costs?

According to the study, "Children with fathers who have been incarcerated are significantly more likely than other children to be expelled or suspended from school (23 percent compared with 4 percent).

And noting that education and parental income are strong indicators of children's future economic mobility, the report points out: "Family income averaged over the years a father is incarcerated is 22 percent lower than family income was the year before a father is incarcerated. Even in the year after the father is released, family income remains 15 percent lower than it was the year before incarceration."

In these statistics we concentrated on the state of America's domestic economy. We have not even discussed state and local bankruptcies, the national debt, the Eurozone crisis, or environmental catastrophes like natural disasters, droughts, Peak Oil and Global Warming.

No wonder the mood in America is so bleak. I present these statistic not to depress you, although it may seem that way, but to let you know what's really going on. We get so wrapped up in our individual lives sometimes, that we cannot see the forest for the trees. If our house were burning down around us, only by knowing that it is burning down can we have some hope of taking appropriate measures to escape. In that sense, I hope this entry acts as sort of a fire alarm.

What is particularly striking to me is how many of these statistics are the worst since the Second World War! And, of course, most of these records were only began after the War, so it is reasonable to conclude that they are the worst since the end of the Great Depression. Even the true unemployment rate, which takes into account people who are unable to find the jobs they really need, temporary and part-time work, discouraged workers, and people dropping out of the workforce, is at Great Depression levels. And I don' t think that is even couting the number of people in America's prisons - the highest number in the world. Jobs have failed to keep up with population growth for years, and companies continue to downsize, automate and outsource to shore up profits. It seems that all of capitalism's progress since the Great Depression is being erased, and even the social safety net that was put in place then is under constant attack by politicians in both parties. Even the overall number of jobs is misleading, since most of the people in poverty actually have jobs!

The other summary fact is that wages have stagnated since the 1970's despite increasing corporate profits, and wages are unchanged since 1996 levels. Yet the costs of everything from health care to child rasing to education to transportation has risen anywhere from 40 to over 200 percent! How can an economy based on consumer spending sustain itself? Can we have an economy where only the very rich can afford goods and services, while the rest of the population lives in perpetual debt servitude?

Now, I'm going to make a statement here - I do not think the above situation was caused by high taxes and too many regulations on business. Our current politics offers us no hope of fixing the situation. As Decline of the Empire put it succinctly, "when was the last time a problem got fixed in America?" In the future, we will discuss what I believe to be the source of these problems, and ways they can be fixed. Unfortunately, I have no faith that the fixes will be implemented. Therefore, we will discuss steps that you can take in you own life, armed with the above knowledge, to try and create a livable, decent life for yourself.

I will end with a quote from Jakob Augstein in Der Speigel, and an excellent video interview of Dmitry Orlov, who dispenses some good advice on how to live in a collapsing empire:

By any definition, America is no longer a Western nation.

The US is a country where the system of government has fallen firmly into the hands of the elite. An unruly and aggressive militarism set in motion two costly wars in the past 10 years. Society is not only divided socially and politically -- in its ideological blindness the nation is moving even farther away from the core of democracy. It is losing its ability to compromise.

The country's social disintegration is breathtaking. Nobel economist Joseph Stiglitz recently described the phenomenon. The richest 1 percent of Americans claim one-quarter of the country's total income for themselves -- 25 years ago that figure was 12 percent. It also possesses 40 percent of total wealth, up from 33 percent 25 years ago. Stiglitz claims that in many countries in the so-called Third World, the income gap between the poor and rich has been reduced. In the United States, it has grown.

Economist Paul Krugman, also a Nobel laureate, has written that America's path is leading it down the road to "banana-republic status." The social cynicism and societal indifference once associated primarily with the Third World has now become an American hallmark. This accelerates social decay because the greater the disparity grows, the less likely the rich will be willing to contribute to the common good. When a company like Apple, which with €76 billion in the bank has greater reserves at its disposal than the government in Washington, a European can only shake his head over the Republican resistance to tax increases. We see it as self-destructive.

The same applies to America's broken political culture. The name "United States" seems increasingly less appropriate. Something has become routine in American political culture that has been absent in Germany since Willy Brandt's Ostpolitik policies of rapprochement with East Germany and the Soviet Bloc (in the 1960s and '70s): hate. At the same time, reason has been replaced by delusion. The notion of tax cuts has taken on a cult-like status, and the limited role of the state a leading ideology. In this new American civil war, respect for the country's highest office was sacrificed long ago. The fact that Barack Obama is the country's first African-American president may have played a role there, too.

Friday, September 23, 2011

Goodbye Middle Class

Only Most Educated 3 percent Saw Wage Gains Between 2000 and 2010.
The chart show that 97 percent of the population without education beyond a master's degree experienced declining income over the past decade. Not stagnant – declining.  Even people with Master’s degrees are seeing their wages decline! Only a miniscule 3 percent saw wage gains. Notice who they are: MBAs – I’m sure this data was skewered by upward by the Harvard/Yale/Princeton set – and Ph.D.’s, the lion’s share of whom work at universities where average  tuition has increased over 400 percent since the seventies:

And in case you’re thinking you have any chance of becoming one of that 3 percent, please see this: Universities Seeking Out Students of Means:

Money is talking a bit louder in college admissions these days, according to a survey to be released Wednesday by Inside Higher Ed, an online publication for higher education professionals.

More than half of the admissions officers at public research universities, and more than a third at four-year colleges said that they had been working harder in the past year to recruit students who need no financial aid and can pay full price, according to the survey of 462 admissions directors and enrollment managers conducted in August and early September.

Similarly, 22 percent of the admissions officials at four-year institutions said the financial downturn had led them to pay more attention in their decision to applicants’ ability to pay.

Goodbye class mobility. Been nice knowin’ ya.

Wednesday, September 21, 2011

Watching America Crumble Before Our Eyes

Recent Blackout Highlights Nation's Aging Electricity Grid

Experts say the cascading blackout that put millions of Westerners in the dark last week was no surprise: Major power outages have more than doubled in the last decade.

Blackouts disrupt power to at least a third of U.S. homes each year, and studies show the number of outages is rising.

The grid's shortcomings have been well-documented, but efforts to modernize it haven't kept up with demand. Many electrical transmission lines are outdated, and parts of the grid date back to the time of Thomas Edison.

The chairman of the Federal Energy Regulatory Commission, which oversees the nation's grid, acknowledged increasing problems with the system.

In a July interview with ProPublica, FERC Chairman Jon Wellinghoff said that while the electric grid is reliable, it is degrading. "It's not getting better," he said. "It's getting worse."

America’s Internet service slips to #25 worldwide

The New York Times reported on Wednesday that the U.S. has sunk to 25th in a global ranking of Internet speeds, just behind Romania.

Why? Because our nation's regulators abandoned an earlier commitment to foster competition in the marketplace for Internet access providers.

In the years that followed the signing of the 1996 Telecommunications Act, lobbyists working for powerful providers like AT&T, Comcast and Verizon pressured a compliant FCC to tear down all of the important safeguards established by Congress.

Under the Bush administration, the FCC tossed out competitive broadband safeguards such as open-access requirements, which opened lines to other providers. In 2002 the agency declared that high-speed cable Internet access would no longer be considered a telecommunications service that opened the network to competitors, but rather an “information service” that did not. Following a 2005 court decision, the FCC also reclassified broadband delivered by the phone companies as an “information service.”

These were radical policy shifts that went against the long-held assumption that open communications in competitive markets were essential to economic growth and innovation.

While the U.S. blindly followed a path of "deregulation," other nations in Europe and Asia beefed up their pro-competitive policies. The results are evident in our free fall from the top of almost every global measure of Internet services, availability and speed.

“Downscaling Ambitions and Finding Creative Solutions”: Infrastructure 2011: A Strategic Priority Warns of Strain on U.S. Cities to Maintain Assets & Build Infrastructure Projects As Federal Funding Declines

"For those who have read our infrastructure reports over recent years, one consistent finding is that the U.S. seriously lags behind the rest of the world in addressing its infrastructure issues" said Howard Roth, Ernst & Young's Global Real Estate Leader. "The US is facing increasing federal, state and municipal budget deficits, and lacks any type of comprehensive national policy or the political will to develop a long-term approach to funding the significant maintenance needs of aging U.S. infrastructure, much less the modernization and greenfield development of critically-needed new projects. We need to refocus our priorities: streamline the procurement process, attract private capital more efficiently, strategically invest in projects with national merit, and regain our stature as a global competitor. We need to take a page out of the playbooks of several nations around the world highlighted in our report, or we face the risk of serious deterioration of our country's economic and social well-being."

With $2 trillion needed just to repair and rebuild deteriorating roads, bridges, water lines, sewage treatment plants and dams, the nation’s infrastructure woes will only get worse, as the politically fractured government erodes support for both existing upgrades and new initiatives, noted ULI Executive Vice President Maureen McAvey. (Public spending on transportation and water infrastructure as a share of the U.S. gross domestic product peaked at 3.1 percent in 1963, then declined steadily to 2.4 percent in 2007, according to Congressional Budget Office data.)

It’s pretty obvious to see where our tax money was spent instead:

Muffins costing $16 (£10) and biscuits at $10 were among the "extravagant and wasteful" conference spending by the US justice department, a report has found.

Critics voiced outrage at the spending shown in the internal audit, including $8 coffees and $32-per-person snacks.

The justice department said it accepted the findings, adding that it had taken steps since 2009 "to ensure that these problems do not occur again".

The US owes more than $14tn and has an annual budget deficit topping $1.4tn.

The report found that the justice department had spent $4,200 on 250 muffins at an August 2009 legal conference at a hotel near the White House.

A justice department spokeswoman told reporters that took place at a time when there were no strict limits on food and beverage spending.

The department spent $121m on more than 1,800 conferences in 2008 and 2009 - exceeding its own spending limits, according to the audit.

It spent $600,000 just on planning for five conferences.

Infrastructure Has Another Meaning Too

It seems like our social and cultural infrastructure is crumbling as well.

Tuesday, September 20, 2011

Our Jobless Future

Yesterday we talked about the fact that one article in the mainstream media by an unconventional thinker put forward the point that we can produce everything we really need with a fraction of the workforce, and that we don’t really need “jobs” at all – we need incomes. There is simply not enough work to go around, especially with massive differences in education made by the artificial scarcity of educational opportunities in this country, along with the rampant overwork of those who still have jobs. That lack of work is why so many jobs are “part-time” – 20 hours a week or less. That wouldn’t be so bad, if it weren’t for the fact that (most) part-time jobs do not pay enough to live on with the cost of living in America, and provide no benefits such as health care, forcing people to go without.

I took a rather skeptical view of Rushkoff’s solution. However, seeing this article on the BBC today, I’m thinking maybe I owe Rushkoff an apology. This seems to be exactly what he meant about a new economy where everyone creates online content for a living:

Videobloggers make millions through online content

Of course, the “fortunes” being raked in by these YouTube stars are dependent upon people earning money doing real things in the actual economy. It wouldn’t work if we all did it; that would be essentially the proverbial economy where we all take in each other’s laundry. As I said, Rushkoff is an interesting thinker, but his economic understanding is terrible. That’s too bad – I myself have no formal training in economics either, yet I don’t think it’s too hard to figure out. Despite this, I think his Life Inc. book is still worth a read.

On more solid economic footing is Jeremy Rifkin’s book, The End of Work, which made a great impression on me when I first read it in the Nineties. I realized then how our whole economy was all smoke-and mirrors, with the ridiculous overconsumption of the “consumer economy” buoyed by advertising designed to keep us consuming all the output that our businesses could produce, avoiding another oversupply crisis like the Great Depression. Many of the jobs that emerged since the war are in “marketing” and “advertising,” two completely needless occupations designed simply to keep us spending on things we don’t need (if we needed it we would seek it out of our own accord), and encouraging wasteful competition. As John Kenneth Galbraith so aptly put it, “businesses create the wants they seek to satisfy.”

So now, via Mark Thoma’s blog, comes this post from Daniel Little about another book on the exact same topic that came out around the same time, called “Our Jobless Future,” by Stanley Aronowitz and William DiFazio. His blog post is worth reading in full:  Here are some main points from the blog entry (emphasis mine):

Stanley Aronowitz and William DiFazio wrote a pretty gloomy book in 1994 with the striking title, The Jobless Future. What is most discomforting in reading the book today is the degree to which the factors they identify seem to be today's headlines. What does jobless mean here? In a word, it means that the US and other OECD countries will never recover the number and quality of jobs they need in order to regain the middle class affluence they had in the 1950s and 1960s. The future will involve work -- but not enough jobs to ensure a low unemployment rate.

The central structural factors they identified in 1994 are still key parts of our economic environment today: technology innovation replacing labor, rising productivity producing persistently flat labor demand, shifts in the structure of the economy towards finance and service sectors, and internationalization of production.

"Technological progress and capital accumulation seem to disrupt the social fabric in the United States. A weakened position in the international economy demands that American industry increase its productivity and cut its unit labor cost. As Carl G. Thor, president of the American Productivity Center in Houston, says, "The trick is to get more output without a surge in employment." Technological change and competition in the world market guarantee that increasing numbers of workers will be displaced and that these workers will tend to be rehired in jobs that do not pay comparable wages and salaries. Women and minorities will suffer the most as the result of these changes; the increased participation in an occupational sector by women and minorities is often an indicator of falling wages in that occupation." (3)

"The second explanation, more sobering, emphasized the role of huge federal and consumer debt accumulated beween the late 1970s and the early 1990s that has drained public and private investment, inhibiting recovery and growth." (5)

"This, in brief, is the context within which a severely reduced job "market" began to take shape, not only for U.S. workers, but potentially for all workers. In this book we argue that the progressive destruction of high-quality, well-paid, permanent jobs is produced by three closely related developments." (8)

The implication they draw is stark: new jobs will never be created at a rate to satisfy rising demand for jobs.

"Our first argument—that the Western dream of upward mobility has died and it is time to give it a respectful funeral—may have at long last seeped into the bones of most Americans, even the most optimistic economist. The dream has died because the scientific-technological revolution of our time, which is not confined to new electronic processes but also affects organizational changes in the structure of corporations, has fundamentally altered the forms of work, skill, and occupation. The whole notion of tradition and identity of persons with their work has been radically changed." (15)

The blogger concludes:

So far the strategies on the table about employment are either about job creation (Democrats) or providing even more tax relief for business and the wealthy (Republican). None of these voices consider the more radical implication: we may need to consider a dramatically new way of thinking about income, work, social distribution, and lifestyle in the future. And that's what Aronowitz and DiFazio proposed almost 20 years ago.

The post concludes with a great discussion of how our jobless future is looking more like the dystopian world cyberpunk authors envisioned twenty years ago, than the one predicted by futurists at the turn of the century, such as Edward Bellamy’s Looking Backward. There is a link to an article about Universal Basic Income at the end of the post, a topic we covered in the final entry in What Are people Good For?

The other book was featured in an op-ed in the New York times entitled For Jobs, It’s War. The article highlights a book positing a view that decent jobs will be such scarce commodities that countries will go to war for them! As insane as that is, it seems to be the direction we’re heading. All the arguments that Capitalism is not a zero-sum game seem to be disproven by this thesis. The fact is, capitalism as it is practiced today is a zero sum game – for every winner there is a loser. Here is the relevant portion (emphasis mine):

And it’s not that most of these people don’t have jobs. It’s that they don’t have good jobs that pay enough to push them out of poverty. Three out of four of those below the poverty line work: half have full-time jobs, a quarter work part time. Only a quarter do not work at all.

This raises an important distinction — not only do we need to create more jobs, we need to increase the number of good jobs. And we can’t see that quest for good jobs as an internal skirmish between warring political ideologies. It’s an international war. At least that is the way Jim Clifton, chairman of Gallup, frames it in his fascinating — and frightening — new book, “The Coming Jobs War.”

According to Clifton, “the coming world war is an all-out global war for good jobs.”

(He defines a good job, also known as a formal job, as one with a “paycheck from an employer and steady work that averages 30-plus hours per week.”)

In the book he makes this striking statement, drawing from all of Gallup’s data: “The primary will of the world is no longer about peace or freedom or even democracy; it is not about having a family, and it is neither about God nor about owning a home or land. The will of the world is first and foremost to have a good job. Everything else comes after that.” The only problem is that there are not enough good jobs to go around.

Clifton explains that of the world’s five billion people over 15 years old, three billion said they worked or wanted to work, but there are only 1.2 billion full-time, formal jobs. Therefore his conclusion “from reviewing Gallup’s polling on what the world is thinking on pretty much everything is that the next 30 years won’t be led by U.S. political or military force.”

“Instead,” he says, “the world will be led with economic force — a force that is primarily driven by job creation and quality G.D.P. growth.” And guess who is vying for the lead? That’s right: China.

The article goes on with the usual pointless liberal hand-wringing that China is going to eat our lunch, and we have to get “competitive” by sending kids to more college, building infrastructure, etc., etc.. Of course, China’s rise is entirely contingent on U.S. overconsumption and investment from Western plutocrats, both of which will be in short supply if the buying power of the West continues to decline. As usual, the article posits no ideas or solutions aside from some sort of competitive struggle to the death for what’s left of industrial civilization. The article concludes with words from the book’s author:

“The war for global jobs is like World War II: a war for all the marbles. The global war for jobs determines the leader of the free world. If the United States allows China or any country or region to out-enterprise, out-job-create, out-grow its G.D.P., everything changes. This is America’s next war for everything.”

“America’s next war for everything.” I think we see how the debate is being shaped by the elites. Perhaps we can add jobs to the Wars on Drugs and Terror. I invite you to read the comments to this article, which are more insightful than the article itself. It seems the elites will do anything to prevent the logical solution – local economies, less work, shared ownership, higher wages. In my original article, I posited the war solution – elites in the US and China decide that all-out war is the only way to kill enough people and destroy enough capacity to keep growth going to enrich elites on both side of the Pacific. We can already see the nationalism and militarism ramping up in both countries. Corporate capitalism, which would make hefty profits from such a venture, would then have plenty of room to continue on the dead corpses of countless millions of people. After all, it’s what happened last time.

Finally, for an alternative view, see this Charles Eisenstein piece on the oil drum. Charles is another alternative thinker in the mode of Rushkoff; he too has written a book on economics that is being promoted on a lot of the “alternative” media that I pay attention to. Ran Prieur has a good summary of the article.

"Eisenstein is the best writer going on alternative money systems, and he argues that the present economy, based on exponential growth and highly concentrated political power, is related to the high concentration of energy in oil. As oil declines, energy sources will be more diverse and distributed, and political power might also be more diverse and distributed, if we can change the money system with ideas like negative interest, "commons-backed currency, local and bioregional currency, mutual credit and P2P banking, gift economics, shifting taxation away from income and onto resource and pollution, and a social dividend."

Good luck with that. I fear Charles’ advice may be in vain. I tend to be a bit cynical about our prospects. the corporate controlled media will make sure that we continue to imagine some sort of "growth" will fix everything, even as society crumbles around us. As the line from the poem goes, “the best are full of doubt, while the worst are full of passionate intensity.” If the human race does manage to die off, I think these words will be our epitaph.

Monday, September 19, 2011

Douglas Rushkoff Wonders What People Are Good For

So lately I’ve been a bit overwhelmed with topics. My backlog is filling up. I’ve been posting comments to sites, rather than writing here. Initially, I was going to cross-post comments I wrote elsewhere here as well, but I’ve been lax in that department. I’ll try to correct that in the next few postings.

We’ll begin with this article which received a good deal of attention. In a special piece to CNN online, author Douglas Rushkoff violates the taboo and asks essentially the same question I posed months ago in “What Are People Good For, specifically, “Are Jobs Obsolete?”

He begins by describing how the postal service is losing money not because of bad management, but because of new technology – specifically email. He then extrapolates this to the overall economy, and asks whether “job creation” is really a goal we should be pursuing in an age of automation (emphasis mine):

And so the president goes on television telling us that the big issue of our time is jobs, jobs, jobs -- as if the reason to build high-speed rails and fix bridges is to put people back to work. But it seems to me there's something backwards in that logic. I find myself wondering if we may be accepting a premise that deserves to be questioned.

I am afraid to even ask this, but since when is unemployment really a problem? I understand we all want paychecks -- or at least money. We want food, shelter, clothing, and all the things that money buys us. But do we all really want jobs?

We're living in an economy where productivity is no longer the goal, employment is. That's because, on a very fundamental level, we have pretty much everything we need. America is productive enough that it could probably shelter, feed, educate, and even provide health care for its entire population with just a fraction of us actually working.

According to the U.N. Food and Agriculture Organization, there is enough food produced to provide everyone in the world with 2,720 kilocalories per person per day. And that's even after America disposes of thousands of tons of crop and dairy just to keep market prices high. Meanwhile, American banks overloaded with foreclosed properties are demolishing vacant dwellings to get the empty houses off their books.

Our problem is not that we don't have enough stuff -- it's that we don't have enough ways for people to work and prove that they deserve this stuff.

This is an essential point. The reason we need to create jobs under this economic system is to get people working, not to fulfill any specific need that is going unfulfilled. Corporations are eliminating jobs left and right because they find them unnecessary. Shouldn’t that be a good thing?

As many have pointed out over the years – we require an environment of scarcity in order for our economic system to function. Rushkoff addresses this:

The Industrial Age was largely about making those jobs as menial and unskilled as possible. Technologies such as the assembly line were less important for making production faster than for making it cheaper, and laborers more replaceable. Now that we're in the digital age, we're using technology the same way: to increase efficiency, lay off more people, and increase corporate profits.

While this is certainly bad for workers and unions, I have to wonder just how truly bad is it for people. Isn't this what all this technology was for in the first place? The question we have to begin to ask ourselves is not how do we employ all the people who are rendered obsolete by technology, but how can we organize a society around something other than employment? Might the spirit of enterprise we currently associate with "career" be shifted to something entirely more collaborative, purposeful, and even meaningful?

Instead, we are attempting to use the logic of a scarce marketplace to negotiate things that are actually in abundance. What we lack is not employment, but a way of fairly distributing the bounty we have generated through our technologies, and a way of creating meaning in a world that has already produced far too much stuff.

Where he looks to solutions is where he falls apart in my opinion. First, he aptly describes the current level of debate:

The communist answer to this question was just to distribute everything evenly. But that sapped motivation and never quite worked as advertised. The opposite, libertarian answer (and the way we seem to be going right now) would be to let those who can't capitalize on the bounty simply suffer. Cut social services along with their jobs, and hope they fade into the distance.

But he ends with some sort of bizarre proposal that we all write computer games for one another:

But there might still be another possibility -- something we couldn't really imagine for ourselves until the digital era. As a pioneer of virtual reality, Jaron Lanier, recently pointed out, we no longer need to make stuff in order to make money. We can instead exchange information-based products.

This sort of work isn't so much employment as it is creative activity. Unlike Industrial Age employment, digital production can be done from the home, independently, and even in a peer-to-peer fashion without going through big corporations. We can make games for each other, write books, solve problems, educate and inspire one another -- all through bits instead of stuff. And we can pay one another using the same money we use to buy real stuff.

Clearly Rushkoff’s piece was prominent enough to hit a nerve – so much so that the corporate right assigned their chief propagandist to do a smear job on Rushkoff, which is where I initially heard about the article:

Which is bizarre, since their usual tactic is to just ignore any idea outside of the corporate-defined mainstream. They must be getting afraid that such ideas may catch on to assign one of their minions to even risk calling attention to the idea. I consider that a hopeful sign.

Anyway, here’s my comment to the BoingBoing article (with typos and misspellings corrected):

I've been arguing the same thing for a long time. Simply put, most of our jobs are unnecessary makework, and have been for some time. Much of what we do is useless paper shuffling, or is actually deleterious (advertising, personal injury lawyers, etc.). The fact is, we invent work just to give people something to do, rather fulfilling any sort of pressing needs.

I like Rushkoff's work and think he adds valuable viewpoint on a lot of topics, but reading Life Inc., I realized he's a bit shaky on economics (e.g. corporations were actually started to unify disparate trading companies so as to maximize national advantage in the age of mercantilism, not out of some fear of industrious common folk.) My problem with Rushkoff is his techno-optimism. He seems to think the internet is a magical solution for everything. Who is going to buy all this content we create without any money? Are we going to eat digital food? As one commenter pointed out 2/3rds of the world is not even online. What about the millions of uprooted Chinese peasants? Will they create online content when factories close because the incomes to buy their output have dried up? What about the millions of unemployed and unoccupied youth who fomented revolution in the Middle East? What will they do now? Write apps? Marx's surplus labor pool is now a tidal wave. There is simply not enough work in the world today to employ everybody, and the sooner we realize this, the better off we will be. Workers around the world must compete with each other in a global labor pool that numbers in the billions in an age of industrialism and automation. The Technocrats realized as far back as the 1930's that our extraordinary productivity meant that fewer workers would be needed. They also realized that as our industrial output increases, the purchasing power to buy that output is destroyed. This is chronicled very well in Jeremy Rifkin's seminal The End of Work. Since the world rebuilt after the war, we've fooled ourselves with consumerism, cheap trinkets, bubbles, inflated valuations and cheap credit. None of these are sustainable solutions. This problem has been festering for eighty years. No wonder people are starting to ask if Marx was right, and capitalism is doomed?

There are solutions. The logical solution is to take advantage of our extraordinary productivity and work less. I've seen statistics that if we traded in all the productivity gains since the 1950s for time instead of money (all of which went to the richest 10 percent for the last 20 years anyway), we would be working an average of FIFTEEN HOURS A WEEK!. I mean it's an obvious solution - if everyone worked less, we could share the work more evenly. Even lousy jobs are bearable with plenty of time off. This will never happen in America because of our outdated Calvinist notions of work as sacred and our elevating Libertarian corporate capitalism to the status of a religion.

Without government intervention, corporations will strive towards maximum efficiency (i.e. squeezing blood from a stone), and extracting the maximum amount of surplus value from each worker, without bounds. Unemployment and overwork will continue side-by-side. Meanwhile, the system will fall apart as jobs fail to materialize and provide the purchasing power required to consume goods, real OR virtual. If you read descriptions of the future from the late 1800's through the 1960's, they all assumed we would be working only a few hours a week (including John Maynard Keynes). Ideas like this are what terrify Limbaugh and other corporate shills.

BTW, The idea that we need wages to coerce us to work is absurd. People spend countless hours volunteering, that is, working FOR FREE on things that they love and find meaningful. People do everything from plant gardens to rebuild houses to tutoring children to writing software FOR FREE without any compensation whatsoever. The "lazy worker" is just a myth that capitalists use so that they can preserve artificial scarcity, which preserves their power and forces us into the meaningless, alienating, mind-numbing drudgery that no one wants to do today so they can get ever richer, which we waste away the precious gift of life.

Someone responded that they were with me up until the “there are solutions” part, and that they think we’re in for a long, slow slide. Anyone who’s read enough of my work knows that I basically agree with that, but I wanted to distinguish between problems that have no solutions versus solutions that we cannot implement because of our dysfunctional social and political systems. I responded:

There are solutions - but notice I said they had no chance of getting implemented. The current thinking is that more education will magically cause jobs to appear. We already have very highly educated unemployed people. The other is to reduce taxes even though the government is supposedly broke, to "stimulate" demand. Actually, what is needed is for workers to keep more of the value they produce, but, once again, that will not happen either, as long as corporations effectively control the elections process and "globalism" continues unabated.

I think such ideas may have a chance outside of the United States, where politicians have some level of accountability and cannot simply ignore the plight of the unemployed by mollifying them with promises of "a long slow recovery" that never arrives, celebrity gossip and spectator sports. As far as the US goes - I think we're in for long slow deterioration to a standard of living leaving America looking like a cross between Mexico and post-collapse Russia.

I ended my initial post with a link to my original article from March, which led to my very first comment (thank-you poster!) which I will respond to shortly.

Another commenter to this article made what I thought was a good point – that our stores are still full of goods, and our groceries are still full of food, and the planes are still flying, the gas is still pumping, the TV is full of shows – all with a much smaller fraction of the workforce actually working. Our higher productivity is translating into joblessness rather than leisure. There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million people to the population since then. Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job. In July, only 81.2 percent of men in that age group had a job. Workforce participation overall has slid from above sixty percent to fifty-eight percent, meaning less than six in ten individuals who can work are working. Globally, there are 5 billion people over 15 years old; three billion said they worked or wanted to work, but there are only 1.2 billion full-time, formal jobs. Yet despite all these people sitting idle, food is plentiful, goods are piling up on the shelves unsold, and houses are sitting empty and abandoned. Yet the conventional solution is that “government can’t create jobs”, and that some magic pent-up demand will surge forth and employ all these people if only businesses are freed from paying taxes and from any sort of governmental oversight. Good luck with that.

Which is why I don’t even pay the slightest bit of attention to the jobs pseudo-debate. As I said earlier: there is no solution under the current economic paradigm. We will all end up working a lot less no matter what. The questions will be – will it be by choice, or due to an economic collapse?

As a final aside, there’s this : the 10 most hated jobs in America. I couldn’t help but notice that all of these awful jobs are exactly the type of jobs were supposed to want!!! These are the “good” jobs were’re supposed to covet, and go heavily into debt to be “qualified” for, according to corporate America. Yet it looks like even those with the successful, high-paying jobs are miserable. It reinforces Rushkoff’s point above – what we want is not so much a “job” as meaningful work and a decent standard of living. The thing that stood out for me on this list is that none of these jobs except one actually make anything – and a good number are merely shifting bits around in a computer or forcing people to buy stuff they don’t need. Most of them, I would opine, are totally unnecessary. Notice the subtext at the end: be grateful for your shitty job!

1. Director of Information Technology

For all the press that teachers and nurses get for their long hours, low pay and thankless tasks, it may be surprising to see the most hated job was that of information technology director, according to CareerBliss. After all, the salary's pretty good and with information technology such a prevalent part of everyday business, an IT director can hold almost as much sway over the fate of some companies as a chief executive.

Still, IT directors reported the highest level of dissatisfaction with their jobs, far surpassing that of any waitress, janitor, or bellhop. Of those who responded to the survey, one simple, five-word response summed up the antipathy very well: "Nepotism, cronyism, disrespect for workers."

2. Director of Sales and Marketing

Sales and marketing directors reported the second-highest level of job dissatisfaction of all survey respondents. The majority who responded negatively cited a lack of direction from upper management and an absence of room for growth as the main sources of their ire.

3. Product Manager

The level of job dissatisfaction was very high for this position. One respondent complained that it restricted growth, saying that it was "very hard to grow up the ranks." Another was less polite and said "the work is boring and there's a lot of clerical work still at my level."

4. Senior Web Developer

Senior developers reported a high degree of unhappiness in their jobs, attributable to a perception their employers are unable to communicate coherently, and lack an understanding of the technology.

5. Technical Specialist

The job is a lead position that requires intimate knowledge of engineering; familiarity with Linux helps, too. However, technical specialists reported that for all their expertise, they were treated with a palpable level of disrespect. They cited a "lack of communication from upper management" and felt their "input was not taken seriously."

6. Electronics Technician

Employee dissatisfaction in this job is attributable to several factors. One respondent complained of having "too little control," while another had a litany of complaints: "Work schedule, lack of accomplishment, no real opportunity for growth, peers have no motivation to work hard, no say in how things are done, hostility from peers towards other employees."

7. Law Clerk

The job clearly beefs up a resume. Yet law clerks still report high levels of dissatisfaction. The hours are long and grueling, and the clerk is subject to the whims of sometimes mercurial personalities. The Bureau of Labor Statistics also reported the job brings in a median salary of $39,780 a year—not exactly striking it rich—and those looking for advancement within the position simply will not find it.

8. Technical Support Analyst

In the words of one of the respondents, "You can do better, really."

9. CNC Machinist

Now that the CNC operator has had most of the physical hazards of manufacturing replaced by a machine, there's not a lot to do but push buttons and perform equipment inspections to make sure the coolant is at a safe level. Since it's a specialized skill, the job offers no room for advancement, which caused respondents to report a high degree of dissatisfaction.

10. Marketing Manager

According to CareerBliss, respondents in this position most often cited a lack of direction as the primary reason for job dissatisfaction. The most optimistic respondent described it as "tolerable," and gave it the faintest praise possible by saying, "It's a job." (In this labor market, that's not such a bad thing.)

Tomorrow: more on the coming jobs war.

Additional sources: