2016-08-08

Dumb Boy Economics

So, let me get this straight:
  1. We live in a world of ever increasing population.
  2. Technology is increasing productivity, thus reducing the number of people required to contribute to the production of any given item.
  3. This increase in productivity reduces the cost of the end product(right? Labor being the most expensive part of productivity..?...ask any CEO or head of HR)
  4. Thus, driving up productivity by reducing labor, drives down the cost of products/services which are then sold to that shrinking number of folks who no longer have as much, if any, income to purchase the products they no longer work on and get paid to make.
Yeah... somehow the logic there just does not work for me.  The logical conclusion of that scenario is that a few very large institutions produce all the products as cheaply as possible, all the while complaining that 'lazy people' won't come to work for their flat paychecks and shrinking benefit packages.

A recent article entitled,  This Is a Jobs Report That Democrats Can Boast About, has an interesting summary of why the celebration of fewer unemployed folks might not be all that great a celebration:

"The United States economy is creating jobs at a rapid pace; most people who say they want a job are able to find one, and employers are having a hard enough time finding workers that they’re having to pay higher wages. But large segments of the population, especially those without advanced education, left the labor force during the last several years, and relatively few of them are being pulled back in by this improving job market. Fixing that will be an important goal of the next president. Meanwhile, for reasons that aren’t fully understood, economic output is growing much slower than job creation, which will mean lower living standards in the future if that continues. ...."

This is not rocket science: This is a result of a very simple equation, most of the parts of which are listed up there at the beginning of this little rant. However, it is not just that we are using less labor to produce products, we are producing products with less value. Namely, services. I have worked in the service sector at various times in my career. It is not for me. At the end of the day, I don't really feel like I did much. There is no 'widget' to look at and say "Yeah, I processed that today." In many cases, some numbers got re-arranged, a meeting was engaged in, and.... nothing. But America is shifting towards service sector jobs, and corporate America really seems to think that a four year degree is a requirement to have such a job.  Oh, and they really are not interested in re-training...it is expensive and the ROI is variable.  And therein lies the rub: The blue-collar worker is expensive to retrain, can't afford to retrain on their own, and besides, who gives a damn?  They can pull themselves up by their bootstraps again if they are worthwhile.  And if they can't?  Well, it is not like America owes them anything, does it?  Of course not... as any Libertarian or Tea Party hack, or half the GOP for that matter.  After all, the market is God, and God randomly drops some through the cracks now and again....  
Speaking of open and free markets and all that opportunity out there: "Value Added" has been a buzz word for a while now, about the same amount of time (in my experience) as "Shareholder Value Added". The first has some reasonable facsimile of meaning, the second is so utterly meaningless in a healthy economy that it should be struck from all language. It is a despicable term. And it has contributed to our economic woes as much as any other factor. It is not in and of itself bad, but the focus on it is absolutely destructive! All one has to do is think about it a bit to know why.... Please do. Oh yeah... and feel free to tell me what compelling 'fact' makes me wrong.  Shareholder Value Added is what drives companies to pay the investors before paying their people, all while blathering on about how the "employee is our most valuable asset".  Yeah, right!  Now days, the shareholders are more a part of the company than the folks making the product.  Ask any CEO... (just don't expect an honest answer unless you are swinging the same brand of golf club.)

Another Dumb Boy over-simplification is as follows:  We are not, and will not be for some time, ready for wide open Global Trade.  We the people are not ready for it, our Government certainly is not ready for it, and Economists are not ready for it. As is clearly shown below, political scientists certainly are not ready for it.  Economists have been preaching one side or the other of our economic system forever, and they are mostly wrong.  We were told that NAFTA would be great for us (except for Ross Perot of course), it has not been.  I have not seen one convincing paper written which would lead me to say "Gosh! Lets have another trade agreement!  It is so good for us!"   Not one.

In the article entitled "Why Voters Don’t Buy It When Economists Say Global Trade Is Good", the author points out some characteristics of anti-globalizationists which I frankly think are mostly crap... as follows:

"The first is isolationism more broadly. Trade skeptics tend to think, for example, that the United States should stay out of world affairs and avoid getting involved in foreign conflicts. They are not eager for the United States to work with other nations to solve global problems like hunger and pollution.

The second is nationalism. Trade skeptics tend to think that the United States is culturally superior to other nations. They say the world would be better if people elsewhere were more like Americans.

The third is ethnocentrism. Trade skeptics tend to divide the world into racial and ethnic groups and think that the one they belong to is better than the others. They say their own group is harder-working, less wasteful and more trustworthy."

So why is the crap? 

The first one is actually partly correct I think. We are sick and tired of constantly being at war, of paying trillions for our defense when it is rather unclear what it is that is offensive or otherwise against our interests, and having those trillions disappear into some country which really did not like us much to begin with and still does not like us much when we are done 'defending' them. On the other hand, I don't think we have any problem contributing to the economies of other countries in order to address hunger, pollution, disease, education or any of a myriad of other issues. That is not a problem! What is a problem is sending a bunch of our tax money to some country where that money never gets to the folks that need help. I have no interest in helping developing countries! I do have an interest in helping people who need help though, and I mean in terms of 'teaching them to fish' as compared to 'giving them fish'.

Nationalism is a bunch of bunk as far as a reason for ant-globalization.  It has nothing to do with who might be better, or worse or superior or inferior.  It has to do with policies which encourage jobs to go elsewhere.  Guess what, if my job goes elsewhere and I am not trained for the next job, I am now not only out of a job, but I have to fund my re-education all while trying to maintain what I have earned over the years doing the job which is now gone.  Or am I supposed to sell everything and use my retirement to retrain myself.  This is what bothers drives our distrust of globalization.  It is not about bringing others the same opportunities we have.  It is about taking our opportunities, and giving them to someone else with whom we are not willing to compete, and should not have to all of a sudden.  Eventually, sure.  But at the stroke of some politicians pen?  No!

Ethnocentrism is yet another red herring.  Sure, it exists.  Show me somewhere in the world where it does not.  Generalizations around ethnicity are natural.  That is cultural differentiation.  It takes time to learn to work with someone whose point of reference is very different, who sees the world from a very different perspective.  Do these 'experts' really think that such differences should not be a reason to approach global trade slowly and carefully?  Apparently.  Supposedly one is supposed to be able to drop into any culture in any given society at the drop of a hat and be successful and productive....  Get real!  Working successfully with those from other cultures and societies takes time, patients, and a great deal of understanding.  I have made the attempt, and sometimes done fairly well.  Others have not had such good experiences.  Others have had no experience at all.  And they are supposed to just 'fit in' and be productive all of a sudden?

Really?  



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