Monday, October 31, 2011

Recession-Free Zone

Via News of the Wierd:

Student Loans' Perfect Storm: Like clockwork, college campuses continue to be recession-free zones: Tuition rises (at public schools because governments need revenue; at private schools because it can). Job prospects without degrees are more dismal than ever. Loans are floated like cocaine in front of worried, not-fully-formed adults. Proprietary schools convince marginal students they'll be superstars. Banks rake in low-risk money. But, Newsflash: Young adults can't pay it back right now. Banks: Great! More money for us in interest! (Newsflash: Maybe they can't ever pay it back. Banks: Wait . . what?) But . . why does tuition rise so faithfully? Here's one example: The University of California Berkeley has a new "vice chancellor for equity and inclusion," base salary, $194,000 (equal to 3½ new assistant professors), with his own "chief of staff" and 16 underlings. KausFiles via Daily Caller

Incidentally, according to this graphic, that salary puts this college administrator squarely in the top 10 percent of income earners. So I think we know where those high-worth individuals are coming from now, don't we?

On a related note, I saw a potent sign today that the occupy protests are doing what they are supposed to do: focus attenation on the destruction of the middle class. While shopping at my co-op, I practically dropped my groceries at the sight of the cover of the latest Milwaukee magazine. Now my take on Milwaukee magazine's politics has been that it skews right of center - it's targetted mainly to high-income folks in the tony near suburbs and downtown condo residents, thus it always presents a rosy picture so as not to affend their readers. Like most of the local media, it steadfastly refuses to acknowledge that anyone lives in Milwaukee besides the supper-club set. So when I saw this cover, I was amazed:

It reads: The Incredible Shrinking Middle Class: Declining Income. Vanishing Jobs. Disappearing Health Insurance. Both public and private sector workers are scared. Can anything save the middle class?

It appears we have reached a crossroads where this subject can no longer be ignored. I have never in my lifetime seen so much focus on the destruction of the middle class much less it being openly acknowledged by the media, despite the fact that the middle class has been dismantled over the course of my lifetime (I was born in '73). Maybe we are seeing a turning point?

P.S. I haven't read the article, but I doubt it seriously answers the question posed on its cover.

Sunday, October 30, 2011

You Killed My Master, Sahib!

What must surely be one of the coolest stories ever on the BBC Web site tells the story of the last practitioner of a Sikh martial art that dates back centuries. It seems he is the last holder of the tradition, and he is having difficulty finding an apprentice to pass the art onto. He is afraid the skills may die with him. That would be a tragedy, indeed:

BBC: The Only Living Master of a Dying Martial Art:

This awesome graphic makes it even cooler.

The history of this Sikh martial art is fascinating. You hear a lot about Chinese maritial arts, which are world-famous, but very little about Indian martial arts, which is too bad. Many scholars think that Chinese martial arts actually descend from Indian martial arts and yoga practices brought to China. This is given credence by the legend of Boddhidarma (Ta Mo), the Indian Buddhist master who is credited with originating Zen (Chan) Buddhism teaching Kung-Fu to the monks of the Shaolin Temple. In India, they also practiced a martial art called Vajramushti (thunder-fist).

In any case, I hope Mr. Singh finds a worthy successor. The article should help. And I hope they make a film about this art. I can scarcely imagine what kind of dance numbers the Bollywood version would feature. And I'm sure the martial arts choreography would be great.

Saturday, October 29, 2011

What Kind of Buddhist Was Steve Jobs, Really?

Once again, way too much stuff building up. I try to keep to one post a day, so I don't run out of things to write about, but it seems I keep finding stuff in the interim.

Here's a fascinating article: What Kind of Buddhist Was Steve Jobs, Really?

Actually, the big surprise for me was that when I clicked on the link to the article, I expected it to deal with Jobs' very un Zen-like behavior. For example, his abandonment of his first biological daughter, his outsourcing of work to China and his callous dismissal of the suicides of workers at FoxConn where Apple's products were made, his "locking down" of products to stop people from tinkering with them, and his efforts to "destroy" (his words) Google for poaching operating system software. I even read that he refused to accept a badge that had him as employee #2 (#1 was Steve Wozniak) in the early days of Apple; he insisted on being #1 (he ended up at #0 as a compromise; computer scientists will understand why that's valid!). Decidedly un Zen-like behavior all of it. One is forced to wonder whether the seeking of power as a CEO must do and religious enlightenment are compatible. A CEO must strive to be number one at all times, otherwise they will not be a CEO. A Zen Buddhist, by contrast, seeks humility and enlightenment. How can all these powerful celebrities be Zen Buddhists? Is it just a fashion statement? This article barely touches on these issues, yet is fascinating throughout, and very well-written, especially in explaining some of the concepts of Zen Buddhism and how they effect the world. As a dilettante in Zen Buddhism myself, it makes me want to once again get more highly involved in practice.

Here's a related story: The Most Anal CEO Ever

On a related note, I find the effect that these new, "countercultural" thoughts had on the emergence of personal computing and Silicon Valley culture fascinating. We see the computer revolution as having a transformative effect on society. We see it today as the main driver of social change, GDP growth, political transformation, etc. Yet it came out of this countercultural, "hippie" background that was dismissed at the time as a sideshow at best, and antithetical to American values at worst. There is a fascinating book I have meant to read about this called What The Dormouse Said about the effect 60's counterculture had on the emergence of computers and the Internet. Here's a great post here by Charles Hugh Smith about whether we can manufacture creativity:

I recently watched the documentary Dogtown and Z-Boys about the surfers and kids in Venice, California, who launched modern skateboarding in the 70s, with a good friend in Hawaii. He wondered why so many innovations, not just technology but skateboarding, mountain biking and Leo Fender's Stratocaster electric guitar seem to begin in California. As a third-third-third resident of California and Hawaii--first third of my life in CA, next third in HI, recent third back in CA but spending lots of time in HI--this set me to pondering the same question. It has been pondered elsewhere at great length, most recently, in a book by John Markoff What the Dormouse Said: How the 60s Counterculture Shaped the Personal Computer. Markoff posits that the values of the counterculture which found such fertile ground in California were the direct progenitor of the computer and Internet revolutions.

Which leads to a simple conclusion: future technological revolutions will not come from autocratic societies like Singapore, Malaysia, Japan or Korea (throw in France and the rest of the EU, too, for different reasons) because whatever counterculture lives in these societies is entirely marginalized, where in California it is heralded and admired.

So what makes a counter-culture? You can start with: a roving, curiosity-driven desire to question authority, to strike out on one's own, to think freely, to tolerate creativity's inherent messiness, to accept failure, however painful it might be personally, as part of the process and as part of the deal. Accepting failure, even repeated failure, isn't easy, but California is blessed with numerous successful role models--not just Steve Jobs, Larry Ellison, George Lucas and Steven Spielberg, but less well-known heroes like James McKerrow, whose lab at UCSF has tackled the six worst parasitical diseases around the world--those that affect poor people in poor countries--and is close to developing treatments for three of them.

Truly innovative and world-changing ideas constitute a break with previous thinking. Why are we assuming that the new modes of thought are going to emerge out of corporate America? In my experience, corporate America is a recipe for groupthink, conformity and sycophantism. Everyone simply parrots what the "big man" wants to hear, and people who are similar to the "big man" at the top get promoted, while the rest get marginalized or cut loose. All the efforts are dedicated to maintaining the status-quo "gravy train", and so-called "new" ideas are merely variations on the old ones that benefit those at the top. Truly revolutionary, truly new ideas are always threatening to those on the top of the hierarchy; they are disruptive by their very nature and are therefore ignored and often suppressed. Just ask Preston Tucker.

So the fact that the most innovative thing that's transforming society came out of a completely unforeseen and unexpected place should give us pause. Maybe instead of looking for "the next big innovation" in the corporate boardrooms of America (which is where we seem to be looking), we should be looking where we least expect it. Maybe the next big thing is not a technology at all. A lot of transformative ideas are being ignored by the mainstream. Just off the top of my head, I can think of quite a few:

The sharing economy - car sharing, tool sharing, etc.
Local currencies, demurrage currencies
Distributed manufacturing
New urbanism
Publicly owned banks

And so on. And the thinkers that are putting these ideas forward, the type of people I follow and listen to, are usually ignored by the"mainstream" media, people like James Greco, Charles Eisenstein, Manfred Max-Neef, Herman Daly, John Robb, and many others. One of the intention of my blog is to showcase and to think about a lot of those transformative ideas. To conclude, and this seems related to our theme, here is a terrific interview a great example of the kind of innovative thinker that we need right now, Vinay Gupta:

Tools To Not Die With: An Interview with Vinay Gupta, creator of the Hexayurt (via BoingBoing)

Vinay Gupta is a man between worlds, and he’s got a lot of arms. Born to Scottish and Indian parents, he was programming from a young age. But looking back on the advent of web-culture in the late 90s, he found that he wasn’t satisfied with the thought of sitting around on .com cash and helping to empower the same old corrupt systems of power and influence just because they’d now found homes online.

No, no. Vinay packed up and went west to the American desert. There he did work with the Rocky Mountain Institute (he was on the editorial team for Small is Profitable and Winning the Oil Endgame by Amory Lovins, spent years meditating and learning Nepalese magical practices, and found himself on the playa trying to live out of a cardboard box. That struggle with the box lead him to make observations about a sort of pixelated version of the yurt, that ancient and highly efficient house of the high Mongolian desert. Thereby: the hexayurt.

Now it’s been ten years of struggle for Vinay, and he’s shown his invention (and the many conclusions that follow from it) to .biz high-rollers, .mil doves, and .org worldchangers. He has become a worldchanger. We caught up by email in October.

Friday, October 28, 2011

Why the Chinese Are Good At School

Once again, the west is amazed at China's academic prowess. Why are the Chinese so good at school?

China's education performance - at least in cities such as Shanghai and Hong Kong - seems to be as spectacular as the country's breakneck economic expansion, outperforming many more advanced countries.

But what is behind this success?

Eyebrows were raised when the results of the Organisation for Economic Co-operation and Development's international maths, science and reading tests - the Programme for International Student Assessment (Pisa) tests - were published.

Shanghai, taking part for the first time, came top in all three subjects.

Meanwhile, Hong Kong which was performing well in the last decade of British rule, has gone from good to great. In this global ranking, it came fourth in reading, second in maths and third in science.

These two Chinese cities - there was no national ranking for China - had outstripped leading education systems around the world.

The results for Beijing, not yet released, are not quite as spectacular. "But they are still high," says Andreas Schleicher, the OECD's head of education statistics and indicators.

Cheng Kai-Ming, Professor of Education at Hong Kong University, and closely involved in the Hong Kong and Shanghai tests, puts the results down to "a devotion to education not shared by some other cultures".
How China is Winning the School Race (BBC)

Why is there such a devotion to education in China? It turns out the roots of it go a long way back. China was the first country in the world to require the administrators of its vast empire to take an examination for qualifications. This was begun ages ago, all the way back in the 600's A.D., when Europe was in the throes of the Dark Ages after the collapse of Rome. Many centuries later, the British instituted a similar system in concept to administer their far-flung empire. So it's just my opinion, but I believe that the roots of China's educational progress are a consequence of its history. Here's Wikipedia on the subject:

The Imperial examination was an examination system in Imperial China designed to select the best administrative officials for the state's bureaucracy. This system had a huge influence on both society and culture in Imperial China and was directly responsible for the creation of a class of scholar-bureaucrats irrespective of their family pedigree. Neighboring Asian countries such as Vietnam, Korea, and Ryukyu also implemented similar systems to draw in their top national talent.

Established in 605 during the Sui Dynasty, the system was used only on a small scale during the Tang Dynasty. Under the Song dynasty the emperors expanded the examinations and the government school system in order to counter the influence of military aristocrats, increasing the number of those who passed the exams to more than four to five times that of the Tang. Thus the system played a key role in the emergence of the scholar-officials, who came to dominate society. Under the Ming dynasty and Qing dynasty, the system contributed to the narrowness of intellectual life and the autocratic power of the emperor. The system continued with some modifications until its 1905 abolition under the Qing Dynasty. The system had a history (with brief interruptions, e.g. at the beginning of the Yuan dynasty) of 1,300 years. The modern examination system for selecting civil service staff also indirectly evolved from the imperial one.

Thus it seems inevitable that the Chinese would be superior at modern schooling, which is ultimately based on a Chinese model - sitting still, passively absorbing information and regurgitating it under controlled conditions in order to fit into a faceless bureaucracy and follow orders. The U.S. educational model is based on this via the Prussian educational system.

Wednesday, October 26, 2011

Jobs For Machines, Not People

Economists See More Jobs For Machines, Not People, via the New York Times

A faltering economy explains much of the job shortage in America, but advancing technology has sharply magnified the effect, more so than is generally understood, according to two researchers at the Massachusetts Institute of Technology.

The automation of more and more work once done by humans is the central theme of “Race Against the Machine,” an e-book to be published on Monday.

Many workers, in short, are losing the race against the machine,” the authors write.

Erik Brynjolfsson, an economist and director of the M.I.T. Center for Digital Business, and Andrew P. McAfee, associate director and principal research scientist at the center, are two of the nation’s leading experts on technology and productivity. The tone of alarm in their book is a departure for the pair, whose previous research has focused mainly on the benefits of advancing technology.

Indeed, they were originally going to write a book titled, “The Digital Frontier,” about the “cornucopia of innovation that is going on,” Mr. McAfee said. Yet as the employment picture failed to brighten in the last two years, the two changed course to examine technology’s role in the jobless recovery.

The authors are not the only ones recently to point to the job fallout from technology. In the current issue of the McKinsey Quarterly, W. Brian Arthur, an external professor at the Santa Fe Institute, warns that technology is quickly taking over service jobs, following the waves of automation of farm and factory work. “This last repository of jobs is shrinking — fewer of us in the future may have white-collar business process jobs — and we have a problem,” Mr. Arthur writes.

But Mr. Brynjolfsson and Mr. McAfee argue that the pace of automation has picked up in recent years because of a combination of technologies including robotics, numerically controlled machines, computerized inventory control, voice recognition and online commerce.

Faster, cheaper computers and increasingly clever software, the authors say, are giving machines capabilities that were once thought to be distinctively human, like understanding speech, translating from one language to another and recognizing patterns. So automation is rapidly moving beyond factories to jobs in call centers, marketing and sales — parts of the services sector, which provides most jobs in the economy.

During the last recession, the authors write, one in 12 people in sales lost their jobs, for example. And the downturn prompted many businesses to look harder at substituting technology for people, if possible. Since the end of the recession in June 2009, they note, corporate spending on equipment and software has increased by 26 percent, while payrolls have been flat.

Corporations are doing fine. The companies in the Standard & Poor’s 500-stock index are expected to report record profits this year, a total $927 billion, estimates FactSet Research. And the authors point out that corporate profit as a share of the economy is at a 50-year high.

Productivity growth in the last decade, at more than 2.5 percent, they observe, is higher than the 1970s, 1980s and even edges out the 1990s. Still the economy, they write, did not add to its total job count, the first time that has happened over a decade since the Depression.

From the author's Web site:

The stagnation in median income and employment is not because of a lack of technological progress. On the contrary, the problem is that our skills and institutions have not kept up with the rapid changes in technology. In the past, as each successive wave of automation eliminated jobs in some sectors and occupations, entrepreneurs identified new opportunities where labor could be redeployed and workers learned the necessary skills to succeed. In the 19th and 20th centuries, millions of people left agriculture, but an even larger number found employment in manufacturing and services.

In the 21st century, technological change is both faster and more pervasive. While the steam engine, electric motor, and internal combustion engine were each impressive technologies, they were not subject to an ongoing level of continuous improvement anywhere near the pace seen in digital technologies. Already, computers are thousands of times more powerful than they were 30 years ago, and all evidence suggests that this pace will continue for at least another decade, and probably more. Furthermore, computers are, in some sense, the “universal machine” that has applications in almost all industries and tasks. In particular, digital technologies now perform mental tasks that had been the exclusive domain of humans in the past. General purpose computers are directly relevant not only to the 60% of the labor force involved in information processing tasks but also to more and more of the remaining 40%.

As the digital revolution marches on, each successive doubling in power will increase the number of applications where it can affect work and employment. As a result, our skills and institutions will have to improve faster to keep up lest more and more of the labor force faces technological unemployment. We need to invent more ways to race, using machines, not against them.

In the end, Andy and I are optimistic that that we can harness the benefits of accelerating innovation. But addressing the problem starts with a correct diagnosis, and that’s what our e-book sets out to provide.
Commenting on Tyler Cowen's book, The Great Stagnation, Kevin Drum wrote:

So here's what I think Tyler missed: it's true that we've already made our big improvements in access to education, and we can't do that again. But even if the number of college grads stays about the same as it is now, and even if the quality of their education stays about the same as it is now, the effectiveness of their management skills is multiplied tremendously by the computerization of the workplace. The human beings who are managing our country might be about the same as the ones who managed it 30 years ago, but they're managing it with steadily improving software and networking. They'll keep doing that for a long time, and that will keep GDP growing in the same way that better and better exploitation of electricity did during most of the 20th century.

In other words, computerization isn't just about the internet, and it's not just about whether Facebook generates a lot of utility without generating a lot of traditional GDP. That's the sexy stuff, but for the next 30 years it's continuous improvements in the computerization of industry and the computerization of management that will be the big GDP driver. Providing well-educated humans with better computers is every bit as important as simply churning out more well-educated humans.

(And after that? I'm a true believer in artificial intelligence, and I figure that 30 or 40 years from now computers are literally going to put humans out of business. They'll dig ditches better than us, they'll blog better than us, and they'll make better CEOs than us. This is going to cause massive dislocations and huge social problems while it's happening, but eventually it will produce a world in which today's GDP looks like a tinker toy.)
Strangely, he does not follow up at all on that statement (!!). Later, he followed that up by writing:

Most of the best known inventions of the early 20th century were actually offshoots of two really big inventions: electrification and the internal combustion engine. By contrast, the late 20th century had one really big invention: digital computers. Obviously two is more than one, but still, looked at that way, the difference between the two periods becomes a bit more modest. The difference between the offshoots of those big inventions is probably more modest than we think too. Just as we once made better and better use of electrification, we're now making better and better use of digital computing. And to call all these computing-inspired inventions mere "improvements" is like calling TV a mere improvement of radio. These are bigger deals than we often think. We have computers themselves, of course, plus smartphones, the internet, CAT scans, vastly improved supply chain management, fast gene sequencing, GPS, Lasik surgery, e-readers, ATMs and debit cards, video games, and much more.

The flip side of this is that it's all too easy to overlook backroom process improvements. Looking at the first half of the 20th century, cars and radios and TV get all the attention, but the moving assembly line was probably more important than any of them. In the second half, Facebook and smart phones are the attention-getters, but the containerization revolution was far more important than either one. Likewise, Walmart revolutionized the retail industry in the '90s via its logistics and supply chain innovations, but hardly 1 person in 100 knows it. You could put the recent revolution in global finance in this category as well (though we obviously still have a few wee wrinkles to iron out of that one.) Computerization may be changing our daily lives, but it's arguably changed backroom operations even more, and will continue to do so.
But the key quote is this one:

"The key to innovation is the exploitation of really big inventions. Computerization is as big as it gets, and it has a much longer tail than electrification. We're not even close to mining its full potential yet."

It's as big as it gets, and it has a much longer tail than electrification. Exactly my point. I think Drum is really onto something here, which is why I quoted him at length. But the end game of computerization is the replacement of much of the workforce. When I mentioned my What Are People Good For thesis to someone, he challenged me by saying that computerization has created many more jobs than it has destroyed. After all, look at all those workers in the IT field who would not have jobs otherwise. Look at all the information technology programs and the good salaries that graduates receive. What would they be doing otherwise? It's a common argument, and one I've heard before. And it's true, there has been a tremendous boom in IT work and IT workers. From that perspective, computers have been like the assembly line, net job creators, at least for those whose skills tend toward computers. they've been more helpful than destructive.

So as I thought about it, I had to admit, he was right, to date. But where he goes wrong, and where the argument goes wrong, is in expecting that to continue into the future. To date, IT has created more jobs than it has destroyed. But going forward I believe will see a radical shift as we finally begin to mine the IT revolution as effectively as steam power and electrification. As Kevin Drum points out, we've merely scratched the surface. This is an important point (and we've already glutted the market for IT workers thanks to India, but that's another story).

A few posts ago I commented on the Singularity movement, and where I thought it goes wrong in it's thinking. But, despite my criticisms, one thing I have to admit about the movement is that it has done an excellent job of visualizing where the IT revolution is headed; its "long tail" as Kevin Drum put it. Just like Mormons are good at genealogy because it ties into their religious beliefs, Singularitarians seem particularly good at looking at future technology because it's a part of their religion. While Moore's Law may not explain all of society, it's been pretty good at predicting the trajectory of computer power.

And what they see is pretty spectacular. Almost every aspect of society can be automated using the artificial brain of the computer chip. As I pointed out in WAPGF, the vast majority of jobs are repetitive. Using a simple Pareto formula, it's easy to estimate that 80 percent of jobs are repetitive, while only 20 percent require real creative, managerial thought. How will we cope with 80 percent unemployment?

You see, it's the imperative of Capitalism to create more output with less labor. If you take this to its logical conclusion, the Omega Point if you will, it's goal is to create infinite output with zero labor!

Of course, this is impossible, but with computerization and other manufacturing techniques (lean manufacturing, 3D printing, nanotechnology), it may get a lot closer than we realize. And long before that happens, the economy will collapse. And it will happen long before we get to 80 percent unemployment. We're heading towards 20 percent already.

To reiterate, IT and automation do not have to replace all workers, they just have to prevent enough jobs from being created (and salaries being paid) to cause a crisis. Higher productivity causes the economy to become unglued if displaced workers cannot find new work. I'm glad that another set of economists is finally taking this on. The fact that they came to their conclusion, after initially being skeptical, by examining all the evidence is promising. I hope more people will finally start to take this seriously.

But as for optimism, I find very little reason for that. I know it's obligatory to put the final "optimism" chapter in any book highlighting whatever dire problem we're facing, but somehow they always seem half-hearted. They offer solutions that we know are completely impossible to implement given current political and social realities, yet we're supposed to "hope" that our leaders will rise to the challenge of making the necessary changes. Meanwhile, our leaders, like cargo cultists, still pray for "growth" and innovation" to save our dying economic system. Ain't. Gonna. Happen.

What WILL happen? Nobody know for sure, but over the next few months, we'll take a look at what history has to teach us. One thing's for sure, unless something major changes, the future isn't brighter than we think. It's much, much darker.

Monday, October 24, 2011

Frugal Future

Joseph Fonseca lives on $20,000 a year:

But there's more. Glenn Morrissette lives on $11,000, eats good food, and lives in a camper:

This guy lives on $7,000 a year:

and, of course, Mark Boyle lived on $0.00 a year, and wrote a book about it:

Mark's blog:

I postponed posting these for a while, thinking on what I wanted to say about them. I'm posting them anyway, despite the fact that I still don't know what to say about them. I guess I'll put forward a few comments:

1.) These men's stories are very similar to my own in certain ways, different in others.

2.) Coping with lonliness is, in my opinion, the most difficult part of these lifestyles. Notice they are all single men (as am I).

3.) I find it ironic that conservatives always criticize the poor for not living within their means, but when the population really does live within their means (i.e. spend based on their [falling]salaries and without credit), the economy plummets. Then the poor are criticised for not spending.

Anyway, a couple of related links:

Materialism Kills Marriages, Study Finds

In a survey of 1,700 married couples, researchers found that couples in which one or both partners placed a high priority on getting or spending money were much less likely to have satisfying and stable marriages.

"Our study found that materialism was associated with spouses having lower levels of responsiveness and less emotional maturity. Materialism was also linked to less effective communication, higher levels of negative conflict, lower relationship satisfaction, and less marriage stability," said Jason Carroll, a BYU professor of family life in Provo, Utah, and lead author of the study.

Researchers gauged materialism using self-report surveys that asked questions such as to what extent do you agree with these statements? "I like to own things to impress people" or "money can buy happiness." Spouses were then surveyed on aspects of their marriage.

Materialistic people liked less by peers than 'experiential' people, study says

People who pursue happiness through material possessions are liked less by their peers than people who pursue happiness through life experiences, according to a new study led by University of Colorado at Boulder psychology Professor Leaf Van Boven.

P.S. I wish I was named "Leaf"

Friday, October 21, 2011

America is Broken

Last spate of bad news for a while, I promise.

High income workers' share of total wages grows
WASHINGTON (AP) — Fifty percent of U.S. workers earned less than $26,364 last year, reflecting a growing income gap between the nation's rich and poor, the government reported Thursday.

There were fewer jobs, and overall pay was trending down — except for the nation's wealthiest. The number of people making $1 million or more soared by over 18 percent from 2009, the Social Security Administration said, citing payroll data based on W-2 forms submitted by employers to the Internal Revenue Service.

Despite population growth, the number of Americans with jobs fell again last year, with total employment of just under 150.4 million — down from 150.9 million in 2009 and 155.4 million in 2008. In all, there were 5.2 million fewer jobs than in 2007, when the deep recession began, according to the IRS data.

The figures are just one more indication of the toll that the worst downturn since the Great Depression has taken on the U.S. economy. They were published as demonstrations rage on Wall Street and in cities across the nation protesting a widening income gulf between average wage earners and the nation's wealthiest.

The unemployment rate remains stuck at 9.1 percent, with more than 14 million out of work and 11 million other discouraged people who have stopped looking for work or are stuck in part-time jobs. Since 1980, roughly 5 percent of annual national income has shifted from the middle class to the nation's richest households, according to the Census Bureau.

While the average U.S income last year was $39,959, the mean income — the figure where half earn more and half earn less — was much lower, $26,364. This disparity reflects the fact that "the distribution of workers by wage level is highly skewed," according to Social Security.

Median compensation last year was just 66 percent of the average income, compared with nearly 72 percent in 1980.

I’m sure more tax cuts, free trade deals and globalization will cure that up soon, right? Meanwhile, Herman Cain blames the unemployed for their plight and pushes the most regressive tax in America’s history. Jesus wept.

Economist Mark Thoma laments:

I wish I could find a way to adequately express the frustration I feel over the way Congress has all but turned its back on the unemployed. Even now, the only reason we're hearing anything from Democrats about job creation is because there's an election ahead. The legislation is timed for the politicians -- it needs to maximize reelection chances -- minimizing the struggles of the unemployed is a secondary consideration (if that). If the election were further away it's unlikely we'd be hearing about this much at all. And Republicans are worse, they have no plans at all except to use unemployment as an excuse to further ideological goals (balanced budget amendments, tax cuts for the wealthy, etc.). How can politicians be so indifferent to the struggles that the unemployed face daily? Are they really so disconnected from the lives of ordinary people that they don't understand how devastating this is to those who lost jobs due to the recession, people who can't find a way to get hired again no matter how hard they try?

How can politicians be so indifferent to the struggles that the unemployed face daily? Here's why, Mark:

Analysts at Bloomberg News examined new Census data and found that the area surrounding the nation's capital is now the richest in the nation:

Federal employees whose compensation averages more than $126,000 and the nation's greatest concentration of lawyers helped Washington edge out San Jose as the wealthiest U.S. metropolitan area, government data show.

The U.S. capital has swapped top spots with Silicon Valley, according to recent Census Bureau figures, with the typical household in the Washington metro area earning $84,523 last year. The national median income for 2010 was $50,046.

Total compensation for federal workers, including health care and other benefits, last year averaged $126,369, compared with $122,697 in 2009, according to Bloomberg News calculations of Commerce Department data. There were 170,467 federal employees in the District of Columbia as of June.

A survey in March of federal government job openings in the area found hundreds of well-paying gigs on offer. Highlights from those listing include an offer for up to $115,000 a year to update the Facebook page and manage new media projects for the Assistant Secretary for Indian Affairs and a deputy speechwriter gig for Office Of Personnel Management Director John Berry that paid up to $81,204 annually.

Of course, federal pay isn't the only factor contributing to Washington's new status. The proliferation of high-priced lobbyists, contractors and consultants, combined with one of the most stable (and pricey) real estate markets in the country, means that the D.C. region is one expensive place.

Meanwhile, in the rest of the nation:

A mid-September survey ascertained that a full one third of Americans were living paycheck to paycheck, and if they lost their job, they would not be able to make their next rent or mortgage payment. And the article stresses this was not a function of being in or near the poverty line (hat tip reader May S):

Despite being more affluent, the poll found that even those with higher annual household incomes indicate they are not guaranteed to make their next housing payment if they lost their source of income.

Ten percent of survey respondents earning $100K or more a year say they would immediately miss a payment….

Sixty-one percent of those surveyed said if they were handed a pink slip, they would not be able to continue to make their mortgage or rent payment longer than five months.

The implications are grim. The odds of an economic recovery any time soon are close to non-existent. Many large companies (like Bank of America) have announced layoffs.

Flagging top lines and a likely to be weak Christmas season, if Chinese shipping volumes are any guide, means more cuts are likely go be announced next year. And that’s before you factor in the impact of a strengthening dollar, state and local government belt tightening and a possible financial crisis.

Globalization works! More Americans than Chinese are struggling to put food on the table:
The number of Americans who lack access to basic necessities like food and health care is now higher than it was at the peak of the Great Recession, a survey released Thursday found. And in a finding that could worsen fears of U.S. decline, the share of Americans struggling to put food on the table is now three times as large as the share of the Chinese population in the same position.

The United States' Basic Index Score, a Gallup measure of access to necessities, fell to 81.4 in September--even lower than the 81.5 mark it reached in February and March, 2009. The recession officially ended in June of that year, but the halting recovery hasn't given a sustained boost to the number of Americans able to provide for themselves. The government reported last month that a record number of Americans is living in poverty.

Between September 2008 and last month, the share of Americans with access to a personal doctor plummeted from 82.5 percent to 78.3 percent. The share with health insurance fell from 85.9 percent to 82.3 percent. And the share saying they had enough money to buy food for themselves and their family dropped from 81.1 percent to 80.1 percent. Gallup's surveys are based on phone and in-person interviews.

Meanwhile, Gallup found that just 6 percent of Chinese said there were times in the past 12 months when they lacked enough money for food for themselves or their family, compared to 19 percent of Americans. Just three years ago, those results were almost reversed: 16 percent of Chinese couldn't put food on the table at times, compared to 9 percent of Americans.

Five Fact About the Wealthiest 1 Percent:

How Wealthy are the 1 percent?:
[...] Moreover, Piketty and Saez show that in the most recent business cycle, from 2002 until 2007, about two-thirds of all income gains went to the top 1 percent of households. The top 1 percent saw their incomes increase more than 10 percent per year, adjusted for inflation. The 99 percent saw their incomes increase a measly 1.3 percent per year. And the trend goes back further. As noted by Tim Noah in his excellent Slate series on inequality, from 1980 until 2005, the 99 percent saw just one-fifth of the overall gains in income.

The 1 percent’s income did take a knock during the Great Recession: It dropped 20 percent, whereas the 99 percent took a 7 percent hit. But that mostly was caused by the stock market crash and falling capital-gains earnings among the rich, not by salary cuts.

The 99 percent’s fortunes look even worse if you focus on wealth, rather than income—the total value of a household or individual’s assets, such their house and their investment funds. According to data compiled by economist Edward Wolff (PDF), in 2007, the 99 percent held about two-thirds of American wealth, meaning the top 1 percent has nearly one-third.

The 1 percent has about 43 percent of all the nonhousing wealth, which has held up comparatively better. Sociologist William Domhoff reports that the 99 percent hold just 38 percent of equity in businesses, 40 percent of financial securities, and 62 percent of stocks and mutual funds. Among the 99 percent, about one in three households has more than $10,000 in stock. Among the 1 percent, nearly nine in 10 households do.

In short, inequality has increased in the past decade, leaving the 99 percent with smaller and smaller proportions of income and wealth. And it has many economists, public policy wonks, and, well, protesters very, very worried. As put by Nobel laureate Joseph Stiglitz, “growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible.”

Oh, and about the 43 percent of supposed freeloaders? Well, many of them are due directly to the Bush tax cuts! This is the very definition of chutzpah – murdering your parents and then pleading for leniency because you are an orphan. So, give loopholes so less middle class people pay taxes (largely subsidies for breeding and land ownership), and then berate poor people for not paying enough so you can raise their taxes. The flat tax proposal is much the same – insert loopholes for your rich buddies

[...] The short answer is: deductions and poverty. About half of households within that 47 percent do not end up paying federal income tax because they qualify for enough breaks to cancel their tax obligations out. Of that group, 44 percent are claiming tax benefits for the elderly, like an exemption for Social Security payments. And 30.4 percent are claiming credits for “children and the working poor,” like the child-care tax credit. The remainder get breaks for investment income, spending on education, itemized deductions, and a mish-mash of other things. When combined, it’s all enough to cancel out their income tax requirements.

In short, it is not that they are not paying their taxes. It is that the country’s tax structure lets them off the hook. Indeed, you can draw a straight line between the Bush tax cuts and the growing number of households exempted from income tax. For instance, the 2001 cuts, extended under the Obama administration, doubled the child tax credit from $500 to $1,000 and expanded eligibility for the Earned Income Tax Credit among married taxpayers. Additionally, the Bush tax cuts lowered income taxes in every bracket, making it easier for a household’s liability to get fully offset by deductions and credits. And on top of all that, the stimulus bill introduced a host of further tax cuts.

That covers about half of the households that don’t pay any federal income taxes. The other half of households are just too poor to pay them. The Tax Policy Center provides a handy example: A couple with two children earning less than $26,400 per year pays no income tax if it takes standard deductions and common exemptions, for instance. “The basic structure of the income tax simply exempts subsistence levels of income from tax,” TPC’s Roberton Williams writes.

That pool of too-poor households has grown much bigger because of the recession and its aftermath: Average incomes have kept on declining even though the recession has officially ended, and millions of households have lost one or both of their wage-earners. Households are earning about 10 percent less than they did in 2007. About 12 percent of families live in poverty. That means a lot of folks simply aren’t eligible for income tax.

So what of the claim that the 53 percent are subsidizing the 99 percent? Well, just because 47 percent of households do not pay federal income tax does not mean that they do not pay any federal taxes. Indeed, almost everyone pays some: There are federal taxes for Social Security and Medicare, on gas, alcohol, and cigarettes. Plus, there are also state and local taxes, and property taxes. You’d have to be freegan to escape paying any tax at all.

And then there's this:

From 1979 to 2007, the inflation-adjusted pre-tax incomes of the highest-income 1 percent of families (in 2011, the 1 percent are those with incomes exceeding $441,000) increased 224 percent. Think that’s impressive? The incomes of the top 0.1 percent rose 390 percent. So where does that leave the rest of us?

For the bottom 90 percent of Americans, incomes grew just 5 percent over the same 28-year period. Whether it’s the bottom 90 percent or the OWS folks’ 99 percent, this much is clear: We have a winner-take-all economy and the substantial rise in economic inequality has prevented the vast majority from improving their living standards in line with what was possible. The nation’s not broke, even if the bottom 99 percent are.

Thursday, October 20, 2011

Reply to G-Man's Comment and Some Thoughts on the Singularity

On my What Are People Good For page, someone left a comment (finally). I intended to reply under the comment but a.) my comments are too long b.)In the act of replying, I came up with a lot of other ideas that I wanted to explore, and c.) The software did not let me. On a side note, the Blogger software is awful - it's nearly impossible to format stuff. Anyway, here is my response:

OK, you have clearly laid out the various possible paths, and Kurzweil posits that technology will inexorably take us toward Drexler's 'radical abundance', so the best personal strategy is probably to hunker down, be frugal with your money, and work towards a sustainable (low cash) lifestyle, centered on local relationships.

Hello, G-man, thank you for visiting my site. I hope you return often. Yours was the first comment I have received, and I apologize for taking so long to respond.

Not long ago, We installed a new version of Autocad in our office. It was incompatible with several of our printer drivers. If you printed to the wrong printer, your Autocad would completely shut down without warning. And yet, we're supposed to be able to load our consciousness into machines a few years hence? No thank you. It still takes me 20 minutes to boot up my laptop. And just today I see the following information via BBC:

Millions of Blackberry owners across Europe, the Middle East and Africa have been left without services following a server crash.

And later the outages spread to North America. Imagine if all our consciousnesses were all on Blackberries! Would millions of us now be deceased?

I kid, but as you see, I don't think much of Kurzweil or his predictions. In fact, I think they are ridiculous, and Kurzweil is a loony. Technology does not exist in a vacuum; it is inextricably bound in a social and cultural matrix. Our political and social systems are failing, and this will have an effect on technology, whether we like it or not. Technology is more than just microchips - how does Kurzweil explain Deepwater Horizon or Fukushima? Even important ideas like moving to a post-carbon economy are proving impossible to implement, and most of the core inventions to make that happen (solar panels, fuel cells, etc.) have already been invented! Even the computer I'm using is not fundamentally different from what we were using in 1970 - just faster and more bells and whistles. Speed and size do not equal sophistication. More and more authors are talking about stagnation rather than some sort of Utopian future.

Per Kurzweil in The New York Times:

What’s predictable is that these measures grow exponentially, not linearly, though our intuition about the future is linear, which is hard-wired in our brains. This makes a remarkable difference. Thirty steps linearly gets you to 30, whereas 30 steps exponentially (2, 4, 8, 16. . .) gets you to a billion.

This “law of accelerating returns,” as I call it, tells us that any area of information technology will grow enormously in power while becoming ever smaller in size. This law has continued for the three decades since I first noticed it, and goes back decades before that.

And it’s not just electronics and communications that follow this exponential course. It applies as well to health, medicine and its related field of biology. The Human Genome Project, for instance, saw the amount of genetic sequencing double and the cost of sequencing per base pair come down by half each year

He believes these trends will continue forever. I don't. I find it hard to believe that someone as intelligent as Kurzweil does not know basic mathematics. Outside of theory, in observable nature, populations go up exponentially until they reach some sort of limitation (food, space) and then they level off (or crash). This describes the behavior of bacteria in a vat, for example. If bacteria even in a small wine vat went on multiplying at the initial exponential rate forever, the bacteria would be the size of planet earth in a matter of months. That obviously does not happen with bacteria, and I doubt it will happen with technology. Kurzweil has forgotten that accelerating returns are eventually followed by the law of diminishing returns, or somehow he thinks it does not apply to technology. Yet there are limits, not only to resources but to knowledge. Perhaps he should reread Gödel’s theorem or the Heisenberg uncertainty principle. I think Jaron Lanier is more on target in the same forum:

The best forecasters benefit from a lack of engagement in the particulars and are drunk on beginner's luck. I am always amazed at the conversation about technology and modernity that took place in the 19th and early 20th centuries. Writers like Mary Shelley, Jules Verne, H.G. Wells, Mark Twain, Karl Marx and Forster articulated more vibrant sensibilities about technology and the future of mankind than we can easily find in today's gigantic online chatter.

Times have changed since the 19th century. Technologies that used to be new have become old and entrenched, and we've invested in them to the point of madness. Thus we find it hard to respond to the threat of global climate change. We have built careers and empires around old technologies, and defend them by disadvantaging the development of new and better ones. The oil business is defended and subsidized vastly more than new energy research.

Looking ahead, the better we get at technology and understanding its consequences, the more predicting the future becomes about caution and prohibitions. In that way, prognostication will become drearier than it used to be.

As for Drexel's radical abundance theories, I can disprove that easily without even resorting to what's technologically possible. If you look at all of human history since the beginning of civilization, it has been the story of elites withholding things from the masses to create an environment of scarcity. That's how they hold onto power. Unless human nature fundamentally changes, radical abundance is not possible under any of our social or economic paradigms. Important discoveries will be exploited and withheld by those at the top to benefit themselves. Sometimes discoveries trickle down to the masses, sometimes they do not. Already a lot of life-saving medical technology is unavailable to many people because of cost. We already have enough technology to enable us to work for only a few hours a week. But do we? How would Drexler or Kurzweil explain that? Without scarcity there would be no control systems, and humans are too inherently hierarchical to ever let that happen. That's what happens when you know a whole lot about technology and nothing about society. They assume, against all historical evidence, that these discoveries will radically change the social structure. Why do they think that? I think there is much more evidence to the contrary.

Look at the Industrial Revolution. By all rights, having machines to do useful work should have freed up human labor. A Singularitarian of 1776 would have predicted the exponential growth of fossil fuel power leading to an unprecedented life of leisure and prosperity. In fact, some did predict that. Instead, we had workers working sixteen-hour days six days a week and living in urban slums with barely any sanitation. Not even children were immune. Yet our use of fossil fuels did, in fact, increase exponentially! What would our steampunk Singularitarian make of it? That life of leisure for the masses through mechanization never materialized, not even to this day. Yes, we have washing machines, but we use the extra time to work instead.

Even in our own time - Moore's law has been in force for decades, yet has our life gotten any better? Our productivity has soared by using Turing machines, but has life really changed? Every person today has more computer power at their fingertips than the scientists who planned the Apollo moon landing had. Yet we still trudge to work every day, work our 8+ hours making profits for sociopaths, and fear for our jobs. Computing power didn't change that, did it? In fact, we have less job security, and less jobs per capita than we had in 1969. No wonder we are so pessimistic. In fact,, most of our productivity went straight to the elites. So if the exponential growth of computers since 1969 hasn't changed the basic facts of our existence or the basic underpinnings of society, why would the continued exponential growth of computers in the future, even if it continues? I'm still waiting for technology to substantially change my life. I still eat, sleep shit, and entertain myself, not much different than someone in 1800, except entertainment and personal mobility is alot more convenient.

In fact, most technologies are making our lives worse. As less work is needed, jobs are disappearing leading to widespread desperation. Our large existing stock of materials (building, cars, appliances) is enough that we do not much new growth to have a decent living standards. Our social/economic system has not caught up to this new reality, and sadly it seems it will not until our societies become completely unravelled. More technology continues to lead out to hollowed states with vast disparities between rich and poor and high unemployment - not utopias. And more technology has led to environmental destruction as well.

Now I think the Singularitarians believe that the changes will be so powerful ,and so substantial, that society will have no choice but to change to adapt to the new reality. Kurweil himself talks of a "rupture in the fabric of human society." That is the crux of their argument. But based on what evidence? I read somewhere that the fundamentals of money exchange and banking have not changed since the Middle Ages. How much technological change has happened since the Middle Ages? How much exponential growth? Yet our economic system, based fundamentally upon gambling, has remained the same. While we cannot see the future, the best guide we have is past history. Why should we believe technology is going to rewrite our social and economic systems for the better when it has never happened? Where is the evidence? Extraordinary claims require extraordinary evidence. All I see from Singularitarians is a lot of fanciful speculation. Weren't these the same people who told us we'd all be living in space by the year 2000? Instead, our entire space program is nearly bankrupt, and it's not for lack of technical knowledge.

In fact - just look at space technology. In the sixties, it was depicted as the average person taking a trip to the Moon, much the same way as a trip to the Magic Kingdom. It was a vision of technology for a middle class society. In 2011, what do we have? A billionaire opening a spaceport in the Arizona desert (partially paid for by taxpayers) launching other millionaires and billionaires into space, even while the global economy is disintegrating and society is falling apart! That's the reality of the twenty-first century - a reality of elites and plebeians, or Morlocks and Eloi, to get science fiction-y. And that brings me to my final criticism - technology has enabled the rise of an elite class more insulated and with more power over our destiny than ever before in history. I hear a lot from Singularitarians about how biotechnology will revolutionize humanity. And what will happen when they get power over the genetic code? I'll tell you exactly what will happen: they will engineer us to be docile, obedient workers, while they genetically engineer their own offspring to be smarter, stronger and more able than the rest of us. Then, while we slave away for their benefit, they will claim that their exalted position is justified because of their inherent superiority. When we no longer serve their purposes, these superior people will throw us away like old mules. That's the future I see, unless there are major changes. It's not a future I'm looking forward too.

Technology affects societies in different ways. The way it affects a society has to do with that society's underlying structure. My favorite example is the car. The car caused a lot of Utopian dreaming back in the day. Now, we can't even maintain our motoring infrastructure. What the car unleashed - suburban sprawl, pollution, oil dependence, the assembly line, wars in the Middle East, traffic accidents, ambulance-chasing lawyers, an insurance industry, massive government bureaucracies, racial and ethnic ghettos - has little to do with technology and everything to do with the society they were introduced into. What happens when thinking machines are dropped into the mix - a utopia, or something else. Consider the car and space examples above before you talk about how technology will "liberate" us. Remember, the main cause of problems is solutions.

So the advice you give is spot on - but not to await the Singularity, but to prepare for the coming dark ages. After the fall of Rome, we forgot how to make concrete for a millennium or two. Obviously, that knowledge did not continue to accelerate exponentially, or we would have had steel and glass skyscrapers by the time the first Gothic cathedrals were built. Computers may not solve all our problems, but they could make our lives easier if used in the right way. Unfortunately, they are now used in a completely dysfunctional economic system where they must make profits for a small class of capitalists while putting the rest of us out of work. There's no reason for them to be used this way, rather than, say, allowing us to work less, besides the way we've structured our economic system. That system is now failing. And as it fails, our social systems will fail too, because we’ve structured them around the medium of exchange. This will prevent any "singularity" from occurring. Oh, they'll be rebuilt eventually, but not without a lot of pain and suffering. Maybe then we’ll earn to use them as Lewis Mumford wrote about - by using machines to enhance human society, not to bend human society to the will of machines (or more precisly the owners of the machines).  I think Singularitarians ought to close their laptops, and pick up some paper books about history, sociology, anthropology, ethics and philosophy. Maybe they would have a more realistic view of where we're headed.

There's no better illustration of my point than the current "Singularity Summit" in New York City. While hyper-educated and privileged commentators sat in their comfortable conference rooms and debated technology, thousands of protesters were in the same city demanding to be heard, thousands who have lost everything and see how the powerful are crushing us under their feet. Talk about ivory tower isolation! For some reason, elites always seem to forget that there are other people. No wonder their designs seem to never play out according to plan!

So, in summary, technological innovation without social innovation is a recipe for catastrophe. As John Michael Greer has pointed out, the Singularity is just a modern religion in technical drag. History is going in a different direction. Doomers tend to dismiss technical change, but techno-utopians always forget the social aspect. That's what makes prediction so difficult, especially about the future. So yes, get ready, save your money, build local relationships, hunker down, try to skate where the puck will be rather than where the puck is, and try and enjoy the ride.

Wednesday, October 19, 2011

Is Something Happening in Greece?

As I said in an earlier post, it’s fascinating to me that Greece, the wellspring of what we call Western culture (as distinct from the orientalism of the Middle East and Asia), is ground zero for the meltdown of Western civilization, and perhaps the birth of what comes after. Scholars have for many years maintained that there is a “Western Idea” that is unique and distinct from the rest of the world – an idea that originally flourished in Europe and has now influenced the world (Oswald Spengler comes to mind). From Classical Greece through the Enlightenment was the flourishing of this idea. Now, it is undergoing transformation.

Earlier we documented the trend of Greeks leaving the big cities and returning to their home villages Here, the BBC looks at what that village life entails:

Roger Jinkinson, a British writer who lives in a remote village on the Greek island of Karpathos, reflects on how the profound economic crisis is affecting his small rural community more than 400km from Athens.

Although times are hard, he believes that a long tradition of thriftiness, a thriving barter economy and the return of young people to work on the land will help the village weather the crisis.

The older generation in the village are thrifty and hard working; they are used to a frugal existence and times of extreme hardship.

Hundreds of thousands of Greeks died of starvation and the complications of severe malnutrition during World War Two and the Civil War that followed.

Memories of those times can be seen etched in the faces of the old people and the habits handed down to their children.

Women are in charge of the home, a loaf of bread is kept until it is used and, if you could see the effort it takes to produce, you would understand why.

Hand-sowing wheat and barley, reaping, winnowing and grinding the grain is back-breaking work, and kneading dough for the huge loaves baked in outside wood ovens is not light work either, so it is easy to sympathise with the women as they carefully store a week-old loaf back in its bag.

In Britain we throw away millions of tonnes of food a year. In the village they throw away nothing.
The article is fascinating throughout:

Very different from America, no? In his book Reinventing Collapse, Dmitry Orlov talks about how Russians lived in generational villages because mobility was so limited and because dwellings were assigned to people and it was very difficult for them to change hands. People’s roots went back very far and they knew their neighbors. He contrasts this with America’s “mobile” society where nobody knows there neighbors and all relationships are commercial only.

This article is fascinating: Battered by Economic Crisis, Greeks Turn To Barter Networks:
VOLOS, Greece — The first time he bought eggs, milk and jam at an outdoor market using not euros but an informal barter currency, Theodoros Mavridis, an unemployed electrician, was thrilled.

“I felt liberated, I felt free for the first time,” Mr. Mavridis said in a recent interview at a cafe in this port city in central Greece. “I instinctively reached into my pocket, but there was no need to.”

Mr. Mavridis is a co-founder of a growing network here in Volos that uses a so-called Local Alternative Unit, or TEM in Greek, to exchange goods and services — language classes, baby-sitting, computer support, home-cooked meals — and to receive discounts at some local businesses.

Part alternative currency, part barter system, part open-air market, the Volos network has grown exponentially in the past year, from 50 to 400 members. It is one of several such groups cropping up around the country, as Greeks squeezed by large wage cuts, tax increases and growing fears about whether they will continue to use the euro have looked for creative ways to cope with a radically changing economic landscape.

“Ever since the crisis there’s been a boom in such networks all over Greece,” said George Stathakis, a professor of political economy and vice chancellor of the University of Crete. In spite of the large public sector in Greece, which employs one in five workers, the country’s social services often are not up to the task of helping people in need, he added. “There are so many huge gaps that have to be filled by new kinds of networks,” he said.

The group’s concept is simple. People sign up online and get access to a database that is kind of like a members-only Craigslist. One unit of TEM is equal in value to one euro, and it can be used to exchange good and services. Members start their accounts with zero, and they accrue credit by offering goods and services. They can borrow up to 300 TEMs, but they are expected to repay the loan within a fixed period of time.

Members also receive books of vouchers of the alternative currency itself, which look like gift certificates and are printed with a special seal that makes it difficult to counterfeit. Those vouchers can be used like checks. Several businesspeople in Volos, including a veterinarian, an optician and a seamstress, accept the alternative currency in exchange for a discount on the price in euros.

A recent glimpse of the database revealed people offering guitar and English lessons, bookkeeping services, computer technical support, discounts at hairdressers and the use of their yards for parties. There is a system of ratings so that people can describe their experiences, in order to keep transparent quality control.

The group also holds a monthly open-air market that is like a cross between a garage sale and a farmers’ market, where Mr. Mavridis used his TEM credit to buy the milk, eggs and jam. Those goods came from local farmers who are also involved in the project.

After years of rampant consumerism and easy credit, such nascent initiatives speak to the new mood in Greece, where imposed austerity has caused people to come together — not only to protest en masse, but also to help one another.

Similar initiatives have been cropping up elsewhere in Greece. In Patras, in the Peloponnese, a network called Ovolos, named after an ancient Greek means of currency, was founded in 2009 and includes a local exchange currency, a barter system and a so-called time bank, in which members swap services like medical care and language classes. The group has about 100 transactions a week, and volunteers monitor for illegal services, said Nikos Bogonikolos, the president and a founding member.

Greece has long had other exchange networks, particularly among farmers. Since 1995, a group called Peliti has collected, preserved and distributed seeds from local varietals to growers free, and since 2002 it has operated as an exchange network throughout the country.

Beyond exchanges, there are newer signs of cooperation from the ground up. When bus and subway workers in Athens went on strike two weeks ago, Athenians flooded Twitter looking for carpools, using an account founded in 2009 to raise awareness of transportation issues in Athens. The outpouring made headlines, as a sign of something unthinkable before the crisis hit.

With unemployment rising above 16 percent and the economy still shrinking, many Greeks are preparing for the worst. “Things will turn very bad in the next year,” said Mr. Stathakis, the political economics professor.

Christos Papaioannou, 37, who runs the Web site for the network in Volos, said, “We’re in an uncharted area,” and hopes the group expands. “There’s going to be a lot of change. Maybe it’s the beginning of the future.”

Unfortunatley, Greece may be on the leading edge of a much more unfortunate trend: violence and suicide:

Last month the Greek Minister for Health, Andreas Loverdos, reported that suicides may have increased by as much as 40% in the first few months of 2011.

"In reality it is very likely that those figures are much higher," says psychologist Dr Eleni Bekiari, who works at Klimaka.

The social stigma surrounding suicide in Greece is enormous, she explains, and is further compounded by the Greek Orthodox Church's refusal to carry out burial ceremonies for anyone who has taken their own life.

"Many callers tell us that they plan to drive their car off a cliff or into a rock to make it seem like an accident so that their family and community will never know it was suicide," says Dr Bekiari.

For others, the strain is just too much and their mental anguish makes a very public appearance.

That was the case with Thessaloniki businessman Apostolos Polyzonis, who last month set fire to himself outside his bank.

The bank had recalled the loan it had given his company forcing him into bankruptcy and leaving him penniless.

Unable to pay for his daughter to continue her university education and fearing the bank would seize his home he went to beg for a loan.

"When they refused to see me I felt so desperate that I just lost it," he says.

He stood outside the bank, doused himself in petrol and set himself alight.
He was taken to hospital and treated for burns but the biggest scars he has suffered, he says, are on the inside.

"My son has just finished his military service and he cannot find a job, my wife and I are both unemployed, and often we have to go without the basics," says Mr Polyzonis.

"We hardly leave the house any more; it has destroyed my family's self respect."

"But I am not alone; millions of Greeks are suffering because a few thousand thieves have squeezed this country dry with their corruption," he says.
Confronting Suicide as Greek Social Problems Mount
Certainly I have never seen here in Athens such crowds in the streets. The electricity workers were still trying to reach Parliament Square - four hours after the protests started.

One lawyer told me that she was not prepared to accept it any more. She had friends whose salaries have been cut by 35%.

And with the marchers came young men and women in black hoods and masks. They began tearing at a wire fence that the police had slung across the road at the side of the parliament.

When eventually the police lost patience and fired the first tear gas grenade, the sound echoed across Syntagma Square and the crowd cheered.

There is a sense here that this is the key battle if spending cuts and wage increases are to be defeated.

Then skirmishes became running battles. Some of the anarchists had petrol bombs that snaked through the air falling around the riot police.

They replied with volleys of tear gas and stun grenades. But the numbers involved in the fighting was greater than before.

In the front of the parliament the police had withdrawn to the steps. The crowd pushed forward to the spot where the honour guard usually high steps. One of their guard posts was set alight.
Athens Erupts Over Austerity Cuts

Tuesday, October 18, 2011

A Reformation of Capitalism?

A number of commentators have made the case that what we’re seeing now is similar to the Reformation in Europe. The similarities are there: the Catholic Church was a hierarchical control system dictating the social lives of the people of Europe. It had become corrupt and sclerotic, and benefitted only those within the system, while screwing everyone else. Eventually, someone said enough, an event happened, and a paradigm shift started to occur. Are we seeing the same shift in our fundamental secular religion – free-market economics?

Ran Prieur:

October 2. People are asking my thoughts on Occupy Wall Street. Here's an article about five ways OccupyWallStreet has succeeded. But notice the level on which it has succeeded: public opinion. In the middle ages, there was universal agreement that the church was corrupt for hundreds of years before the church began to reform. Even then it did not reform because of public opinion, but because it was losing to competing churches. Wall Street has no incentive to change, because it has a monopoly on our lives. We can't buy houses or go to college without bank loans; we can't drive without oil companies; we can't eat without agribusiness. Predictable assholes are saying we have no right to protest if we use products made by the systems we're protesting against. They're so wrong, they're almost right: the whole reason we're protesting is that we can't get what we need without going through corrupt systems; but until we have other ways of getting what we need, we have no leverage to do anything but shout into the wind.

John Robb independently has the exact same idea:

JOURNAL: A Capitalist Reformation?

Here is some thinking that you might find interesting. Remember, history rhymes but doesn't repeat.

Here's a simplification of the historical pattern of Reformation. Think of it in terms of the global Capitalist system:

•Universal system.
•Compliance and participation enforced by violence.
•Bureaucratic and lethargic. Corrupt and unfair. Hardship and misery.
•Loss of legitimacy.
•Challenged by reformers. Corruption exposed.
•New technology unleashes a cacophony of criticism.
•Reforms are rejected by the existing bureaucracy.
•New, competitive systems are launched.
•An exodus begins. People leave the old system to join the new.
•The old system fights back. It reforms itself.
•A fight ensues between the old and the new.
•Eventually a peace is achieved and a new era begins.

Note that a Reformation doesn't mean complete rejection of the current system. It means a rejection of the existing implementation/hierarchy/rules due to corruption, failure, and injustice.

Earlier, Robb made an interesting comparison between the Chairman of the Federal Reserve and the Pope:

The Chairman of the Federal Reserve is part:

•Religious figure. The Pope of the Church of Capitalism. The leader of the Church. Final arbiter on the meaning of scripture (arcane economic indicators and economic papers). Is trained in ancient mysteries (economics). Has a council of Cardinals (the Fed board). He also issues indulgences (bailouts and free loans) to banks that he likes.

•Royalty. A king of Capitalism. Surrounded by the noble houses of Goldman, JP Morgan, US Bank, and Citibank. Is trotted out to "stabilize" and "orient" government action. Protector of the privileges of nobility (a national/perpetual first night). Be-suited in the garb of royalty. Sometimes (as above) deigns to speak to the assembly of commoners.

•Ideologue. General Secretary of the Capitalist Party. When he speaks, the party faithful in the markets listen. He ensures the purity of the ideology (Capitalism). Fights to expand the party's influence around the world. Has analysts devoted to watching/deciphering the actions of his Capitalist Politburo.

And finally, Treehugger made the exact same comparison:

At a time when the Tea Party, Occupy Movement and climate scientists and environmentalists are voicing impassioned, alarmed and radical ideas that point to the need for major changes to the current systems of power, I can't help but think of another man with radical ideas and how he sparked a movement.

On 31 October 1517, [Martin] Luther wrote to his bishop, Albert of Mainz, protesting the sale of indulgences. He enclosed in his letter a copy of his "Disputation of Martin Luther on the Power and Efficacy of Indulgences," which came to be known as The Ninety-Five Theses. ... "Why does the pope, whose wealth today is greater than the wealth of the richest Crassus, build the basilica of St. Peter with the money of poor believers rather than with his own money?"

Martin Luther probably never really nailed his Ninety-Five Theses to a church door (Thanks, Wikipedia!). But we don't need legendary drama to be inspired by what Luther did. While major change never happens without collective action, some of the great moments in history are simply a human presenting an alternative idea. Stepping outside of the norms of one's time and questioning if things really have to be this way sounds so easy, but deep down we all realize how difficult this can be. It's easier to go along, to think that things are just the way they are and there's nothing you can do about it.

I believe progress - on a long enough time line - is inevitable. Just as things evolve, albeit slowly, all around us, so to will humans continue to figure things out to make life better for all life. I like to think this, at least. I have my moments.

But on the time line of history, where we see the spikes of progress we also see the humans, leaders and movements that made it happen.

Martin Luther is the man we recognize today for putting to paper ideas about the Catholic Church and what it meant to believe that had probably passed through, in one way or the other, the minds of many other people of his time. To suggest that his actions were not wholly original is not to discount what he did. In fact, I think it makes what he did even more interesting. Consider how Luther's ideas rippled across Europe, again via Wikipedia:

It wasn't until January 1518 that friends of Luther translated the 95 Theses from Latin into German, printed, and widely copied, making the controversy one of the first in history to be aided by the printing press. Within two weeks, copies of the theses had spread throughout Germany; within two months throughout Europe.

When faced with a giant, entrenched systems, like the Catholic Church or Wall Street, Congress or a flawed global economic system, it's not difficult to spot things we disagree with or think are wrong, but few of us have the intelligence to understand the full context of a moment, as well as the desire or ability to pull together the right ideas in a way that sparks a movement of change.

Look again at Luther's line above questioning the economic injustice of the Catholic Church system of indulgences. With minor changes it could easily fit in with the Occupy Wall Street manifesto. I think that's an important point.

The reason Luther's respectful letter ended up being shared across Europe is because
enough people had concluded things weren't quite right with the existing system and the timing was just right for a movement to emerge.

Whether you look at the Reformation, the American abolitionist movements, the labor movements of the late 19th and early 20th centuries or the woman's suffrage or civil rights movements, all of these progressive change movements happened because of a combination of collective action, good timing and leaders that wove together the ideas and actions needed to enact the desired change.

Prior to either of these, I myself wrote in a comment on Decline of the Empire:

I’m always flabbergasted when people turn to their pet economic theory as a way to justify some outrage. Economics is a pseudoscience. Economists like Thoma flatter themselves to think they are dealing with any sort of true “science”.

It starts with a foregone conclusion – like the idea that so-called “free” markets, lack of regulations and globalization will make everyone better off - and then gathers evidence to support those conclusions. And isn’t it interesting how the forgone conclusions of economists always end up supporting the wealthy and powerful? In fact, its antecedent is medieval theology. References to sacred texts like The Bible and Aristotle were substituted for any type of empirical evidence, and anything that did not fit that world view (like a receding glacier or a dinosaur fossil) was discarded or explained away by tortured logic.

Many observers have compared the economics profession to the Catholic Church of the Middle Ages. In fact, their role is precisely the same – to provide a philosophical justification for a clearly dysfunctional and unjust social order. Rather than kingship by divine right, it attempts to justify to the masses things that are clearly absurd – like Americans competing against workers all over the world will make all of us more prosperous. Or that supply creates its own demand (Say’s law). Or that infinite growth is possible on a finite planet. Of course the conclusions of economists always support those who wield the money and power. Coincidence? The sole purpose of economics as it is practiced today is to come up with justifications for the status quo. Think about it – the “father of classical economics,” Adam Smith, did not attempt to come up with some sort of ideal, rational system, he merely described what was already happening. Then later, these observations became a “science.”

The conceits of modern economics come out of Enlightenment attempts to make social governance as “rational” as Newtonian physics. Two critical ideas underlie this - that individuals were atoms whose interactions were as precisely quantifiable as the effects of gravity on physical objects, and that the “laws” of economics were as immutable as Newton’s laws, such as F=MA. Never mind that every “law” of economics has been proven false (even supply and demand – have you looked at college prices lately), and that the money system is an entirely artificial creation, subject only to whatever rules we wish to apply. This has gotten even worse as what used to be called institutional economics was replaced with abstract mathematical models promoted by game theorists and think-tanks. With institutional economics, the effects of policy were implicitly an object of study. When the idea of the market as a perfectly rational, all-knowing machine that correctly allocates all resources became gospel, any questions about social effects were tossed out the window. Economics finally realized their Enlightenment goal. Too bad their “Market” seems to be identical to the Medieval Catholic Church’s notions of God – all-knowing, all-powerful, capricious, and most of all, never to be questioned under any circumstances. That why economists can no more explain financial crises than medieval monks could explain famines or the Black Death to the suffering populace.

The truth is, markets have always been driven not by scientific principles, but by greed and fear. Is there a quantifiable unit that measures greed (may I propose the “Blankfein” as such a unit).

Like the Catholic Church, modern economics does not tolerate dissent. Remember Galileo? If you look up heterodox economics you can see what happens to people and ideas that do not fit in the current economic free-market paradigm. Any apostates from this world view , no matter how intelligent and qualified, are dismissed entirely. In fact, the ultimate “heterodox” economist, Karl Marx, seems to have predicted exactly what is happening to capitalism, and a few more intelligent observers are starting to note that uncomfortable fact,.

As Adam Curtis so aptly put it in a recent blog post, mainstream economists and think-tanks are designed not to come up with solutions, but rather to limit our ideas to those that benefit the already powerful and preserve the status quo. Here is an eloquent statement from his blog:

“The guiding idea at the heart of today's political system is freedom of choice. The belief that if you apply the ideals of the free market to all sorts of areas in society, people will be liberated from the dead hand of government. The wants and desires of individuals then become the primary motor of society.”

“But this has led to a very peculiar paradox. In politics today we have no choice at all. Quite simply There Is No Alternative.”

“That was fine when the system was working well. But since 2008 there has been a rolling economic crisis, and the system increasingly seems unable to rescue itself. You would expect that in response to such a crisis new, alternative ideas would emerge. But this hasn't happened.”

“Nobody - not just from the left, but from anywhere - has come forward and tried to grab the public imagination with a vision of a different way to organize and manage society.”

“It's a bit odd - and I thought I would tell a number of stories about why we find it impossible to imagine any alternative. Why we have become so possessed by the ideology of our age that we cannot think outside it.”
We cannot think outside it. That brilliant quote sums up exactly where the intellectual life of Europe was during the domination of the Church. What are alternatives to the current system. We'll look at what's happening in Greece tomorrow.

Monday, October 17, 2011

Is Inequality Breeding a Contempt for Democratic Institutions?

John Robb writes:

The real reason we are seeing this movement right now is because Capitalism, the last great ideological system, is in crisis.

This isn't merely a crisis of outcomes (economic depression, financial panic, etc.), it's a crisis of BELIEF. While people generally believe in the idea of capitalism, a critical mass of people now think that the global capitalist system we currently have is so badly run, so corrupt, so terrible at delivering results that it needs either a) a complete overhaul or b) we need to build something new.

It’s important to note that the massive rise of inequality is not exclusively an American problem. It has happened all across the world. Even societies that are still growing such as China and India are experiencing massive inequalities, leading to social unrest. This is inherent to unregulated Capitalism: the rich get richer, the poor get poorer. Stein’s law holds: what cannot go one forever must stop. When will inequality stop growing? When the elites own it all? Or when a revolution resets the clock? Is there even a third option anymore? As Kennedy famously said, those who make peaceful revolution impossible make violent revolution inevitable.

This blog post documents this trend:

This Wikipedia post on economic inequality is enlightening:

Some facts from the article:
  • A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned barely 1% of global wealth.
  • "The richest 1 percent of people in the world receive as much as the bottom 57 percent, or in other words, less than 50 million richest people receive as much as 2.7 billion poor."
  • The three richest people possess more financial assets than the poorest 10% of the world's population, combined.
  • As of May 2005, the three richest people in the world have assets that exceed the combined gross domestic product of the 47 countries with the least GDP, (calculation based on data from list of countries by GDP (PPP) and list of billionaires).
  • 1% of the world population own 40 % of the global assets. The richest 2 % of the world population own more than 51 % of the global assets, the richest 10 % own 85 % of the global assets.
  • 50% of the world population own less than 1 % of the global assets.
  • 1.125 Dollar-Billionaires own 4.4 trillion US$. They own 4 times more than the 50% poor people of the world.
  • Over 80% of the world population lives on less than 10 US$/day; over 50 % of the world population lives on less than 2 US$/day; over 20 % of the world population lives on less than 1.25 US$/day.
  • The top 10 percent of the US population has an aggregate income equal to income of the poorest 43 percent of people in the world, or differently put, total income of the richest 25 million Americans is equal to total income of almost 2 billion people."
This New York Times article is critical. It discusses the fact that around the world, there is growing contempt for the ballot box. People no longer believe voting changes anything. As George Carlin once opined, if voting changed anything, they would have made it illegal.
Hundreds of thousands of disillusioned Indians cheer a rural activist on a hunger strike. Israel reels before the largest street demonstrations in its history. Enraged young people in Spain and Greece take over public squares across their countries. Their complaints range from corruption to lack of affordable housing and joblessness, common grievances the world over. But from South Asia to the heartland of Europe and now even to Wall Street, these protesters share something else: wariness, even contempt, toward traditional politicians and the democratic political process they preside over.
They are taking to the streets, in part, because they have little faith in the ballot box. “Our parents are grateful because they’re voting,” said Marta Solanas, 27, referring to older Spaniards’ decades spent under the Franco dictatorship. “We’re the first generation to say that voting is worthless.”
Economics have been one driving force, with growing income inequality, high unemployment and recession-driven cuts in social spending breeding widespread malaise. Alienation runs especially deep in Europe, with boycotts and strikes that, in London and Athens, erupted into violence. But even in India and Israel, where growth remains robust, protesters say they so distrust their country’s political class and its pandering to established interest groups that they feel only an assault on the system itself can bring about real change.

The whole article is fascinating worth reading. This seems to fit well with Robb's description of the rise of the hollow state. The failure of democratic institutions is being openly acknowledged around the world, not just in America. What’s fascinating to me is that the behavior of Western liberal democracies is increasingly indistinguishable from non-democracies like China and the former Soviet Union. It seems that the state needs to coerce people more and more to keep the economic system functioning. This is what I have termed authoritarian capitalism. It seems that democracy and capitalism are incompatible. Here’s why: Capitalism is designed to benefit the holders of capital, which is always a tiny minority of society. Liberal democracy, by contrast, is designed to benefit society as a whole, that is, all of us - the majority. As capital has become more concentrated, and more global, it has become more oppressive. Holders of capital now wield almost dictatorial control over economies, and because their fortunes are fluid and transnational, they are a new power elite beyond the reach of government institutions, yet with power over them.

Here’s another reason democracy is failing: The economic system exerts much more control over your daily life than does the political system, yet we as individuals have little to no control over the economic forces that rule our lives. While centuries of battles were fought to put the political system under control of the people, i.e. liberal democracy, the economic system has followed no such trajectory. The economic system favors centralized control and eschews democratic participation. And due to its basic premises, economic control has become more and more concentrated, as concentrated as political power was in your average dictatorship or feudal arrangement. People fell they have no control over their economic lives anymore. Even business owners are subservient to larger forces that interlock. For example, if the president of a country does not pay bond holders, capital will flee a country causing its economy to crash. Who’s really in charge here, the president, or the capital holders? The people can elect the former, but not the latter.

The second factor is, the political system has become subservient to the economic system. Paying off bond holders, keeping banks solvent, settling international accounts, attracting capital flows, keeping currency stable, and protection from speculative attacks; all this has become more important than the general welfare of the people under democratic governments. Under capitalism, the former are often hostile to, or in opposition to the latter. Thus, even though democracy is under public control, concentrated economic power has consistently undermined democratically elected governments. This is most egregious in the United States, where politicians are bought and sold due to the revolving door and campaign contributions. Politicians are often actively hostile to the general welfare. Rather than high wages and a social cohesion, politicians actively work to undermine social cohesion and create a society with low wages, high unemployment, and poor job security to benefit their paymasters. They remove regulations that benefit society. Then they construct and ex-post-facto explanation about how this benefits everyone (you’re no longer “dependent” on government, the “free market” solves all problems, etc.).

Related: here’s a good analysis from the NYT Economix blog:

As a poster I admired at the park last Wednesday succinctly put it: “We want democracy, not plutocracy.”

The protesters don’t necessarily demonize the top 1 percent or suggest that taxing them at a higher rate will balance the budget. What brings them together is the conviction that this group exercises disproportionate control over our economic and political life.

Republicans seem to confirm this view when they assert that higher taxes on millionaires would stunt employment growth – as though a small reduction in disposable income would demoralize otherwise mighty job creators.

What seems to be emerging is what the historian Gar Alperowitz described as a process of “evolutionary reconstruction.” It might start by making capitalism more distinct from feudalism.

This idea came to me while reading about a great new product that just hit the market: a $6,400 toilet with its own remote control for water spray and drying fan. Marie Antoinette would have loved it for Versailles.

Whether the ramparts are breached or not, I predict a long and fascinating siege.

Inequality, economic and social, will be the central theme of this era of human history; 2010 – 2100.

Incidentally, how did unequal, hierarchical societies become the norm? Why were egalitarian societies pushed aside? Perhaps military conquest has something to do with it. This important study takes a look at that: