An Economic Problem

I listened to most of the Republican debate last night and I have to wonder what universe they're living in... for that matter, a similar question can be raised with the Dems.

Again and again, I heard how they were going to rebuild a growth economy that would provide good, well paying jobs for Americans.  Regardless of how I feel about their tactics, the truth is I don't think that is a possibility right now.

Let's imagine the very best possible outcomes... a bunch of these big multi-national companies decide to come back to the US and build big modern factories... The fact is that those factories will hire some folk, but not nearly the number that a similar factory would have hired 50 years ago.  Automation is the word.  Robots and computers would be doing the work that Tom, Bill, John, Jean, and Sally did in the 50's.  Bob might still have a job making sure things are going well but the productivity of the individual worker is way higher which basically means that fewer flesh and blood employees are needed to produce even more goods.  As time goes on, there will likely be fewer of these jobs in the factories with more and more of the work becoming automated.  Even if those few workers did get higher pay (which in today's economy they do not), because of increased productivity, the lions share of income goes up the ladder to those who own the capital.  Labor doesn't count as capital and besides, there are scores of folk who would love to leave the fast food job for a chance at a position that pays closer to a living wage.  Of course we still need folk to design and program the robots... but those aren't blue collar jobs that pay well.

We could use serious work on infrastructure which does require skilled labor and just plain labor... but that requires bigger government and nobody is really talking about the kind of government commitment required to rebuild crumbling roads and bridges all across the country. 

Which leaves us service jobs which have grown.  The Obama presidency produced significantly more jobs that previous Republican administrations but the observation is correct, many are not jobs that provide a living wage.  The reality is that fewer of those service jobs will be needed in the near future.  Retail has rapidly shifted to the internet, putting scores of retail clerks out of jobs and moving those tasks to large distribution centers where much of the work can be automated and even that which is not requires radically fewer workers than your local Macys.  Think of it, there is no real reason that McDonalds really needs more than one or two people.  Virtually everything done at a fast food restaurant could be automated.  You could punch your order into a ouch screen, swipe your card, and wait for a series of computerized robots to provide you with a custom made burger without the possibility that someone overlooked your order or put extra pickles on when you had clearly stated none.  It won't be long until it is less expensive for a new franchise to do just that vs. hiring  real people who make mistakes, get sick, and get weekly paychecks.

So much work can be centralized.  More and more Universities are moving to online classes where a video of a professor who died a decade ago can continue to  "educate" students while, yes, computers can grade the papers.  Surgeons can use robots across the globe to perform surgeries and my insurance is rewarding customers who use online physicians.  Multi-site churches use star preachers and show the sermon on a big screen while volunteer musicians lead the worship.  One of our local wine tasting rooms has a bank of spigots on a wall with a touch pad, a description of each wine, and a card reader.  When you arrive, you receive a card with a computer chip to use at the pouring stations.  You then choose the wine you want to taste, slide your card, push the size of the taste, and hold your glass under the spigot where you receive exactly the pour you ordered.  At the end of your tastings you hand the card to the one person (not really required) who places the card in another reader that then tells you your bill... which as likely as not, you pay with a debit card swiped through another card reader.  The few places where real people are required - wait staff at a high end restaurant, a real pourer at the wine tasting room, artisan crafts, personal care givers for the elderly, etc.  - are luxuries.  We simply need fewer people to do more work... and as the technology improves, we will need fewer yet. There simply are not and will not be enough jobs out there.   And some of the work that does require real people, such as music, art, literature, is becoming devalued by the current means of distribution (digital via the internet) and those folk are less able to make a living at their work.

What all of that adds up to is that the current direction of our economy does not bode well for those without significant capital in the short term and for just about anyone in the long term (owning an automated factory doesn't do much for your bank account if there is no customer base to purchase your goods).

It really does feel to me as if we're headed to a choice between a future that looks like Star Trek The Next Generation where people spend their time doing things that bring meaning to their lives or a world like Blade Runner or The Hunger Games where the vast majority of folk live in dangerous and depressing places, just on the edge while a few reap whatever rewards there might be and live behind walls in gated, protected areas.

Now, I'll get a bit political... those who argue for smaller government push us towards a world like the latter.  That is certainly the world their current patron saint - Ayn Rand - would have advocate (think of the places in the world with "small government" like Somalia and tell me you'd really rather live there).  Even the more left leaning, worker centered views of some Democrats like Bernie Sanders just holds off that new world for a few short years.  As a society we will have to make decisions and a radical rethink of the way our economy needs to be shaped is necessary if we want to avoid that future.

I can do math

On the day after Labor Day, I feel the need to write a short piece about what strikes me as the most important social issue for us in the US right now - jobs. There simply aren't enough of them. Far too many people have been out of work for far too long. Safety net programs are both inadequate and losing their efficacy and more and more folk are falling through the cracks. All of the politicians are marching out their plans to create jobs and frankly all of them fail to consider the long term. That is fine and indeed, that is appropriate at this time when we are in such a crisis. The question then is, do the programs work.

 Here's where the math comes in. Laying off government workers makes more people unemployed. Immediately. Unemployed people don't spend money which causes businesses to lay off people which causes spending to go down which causes businesses to lay of more people and the spiral goes down. Take away jobs... and the number of jobs goes down... in a spiral. Cutting government contracts makes people unemployed. Similar but more complicated arguments could be made regarding infrastructure and education although both are more long term issues and so probably don't fit in this discussion. 

Some folk will come out with plans that advocate lowering taxes on businesses or lessening environmental regulations and safety regulations. Again, I think in the short term, that might be fine as a stop gap to get things moving.  Here's the problem. Neither works. Businesses already have money, what they don't have is customers. Cutting taxes on businesses doesn't create customers. Lowering safety standards and environmental protections doesn't create customers. Even cutting taxes on individuals doesn't help that much because it only impacts the folk who have jobs. What we need are jobs... and they will follow customers... but without jobs, we get no customers.

So what can the government do? Spend more money. Yes, I know that would raise the deficit and it certainly isn't a good strategy for the long term, but in our immediate crisis, it is what we need. Jobs are the presenting problem. If your house is on fire you don't stop the firefighters from hosing down the house because you're worried about water damage. You deal with that after the fire is out. The deficit is like water damage while the job situation is clearly a fire. Government should be hiring more people, not laying them off. Government should be passing money out to the states for every program that can be kick started with an infusion of cash not cutting back. Government should be hiring folk to go in and clean up after Irene. Government should be investing in research, supporting new technologies and strategies to make us more competitive. Government should be spending more, not less. If it means borrowing money. Borrow it. Interest rates are lower than they have ever been. Take advantage of that. Spend. Spend. Spend. And do it in a way that the money ends up in the pockets of real people and puts real people back to work so that businesses can begin to see customers and so need to hire more workers... and the spiral begins to go back up again. Then, when the population are more stable financially, the government can begin to wrestle with dealing with the long term problems.