Tuesday, February 22, 2011

Arc of a Diver

Bear with me, because I'm really thinking out loud here.

But I wanted to talk about something that I've been worried about for some time now.

Let's start with some of the elements that have been elemental to human life since Sumer, and some others that appear to have become more essential to life in the United States in the early part of the 21st Century.

First, let's begin with the proposition that human well-being comes from a variety of sources, but that the basic principles of Maslow remain sound. Physical needs like adequate food, shelter, and safety come first. If you are starving under a bridge in the February rains it doesn't really make much difference whether you are in a terrific love match. You will be dead soon of exposure, leaving your amorata bereft and looking for a new place to sleep.So securing those fundamental needs is the primary concern of humans everywhere.

For most of us in 21st Century America this means a job; gainful work, work that pays enough to secure that rented flat, food enough to live on, clothing, and the small fripperies that differentiate living from existing.

Let us further assume that political ideals and concerns will always come second to the primary need for security and well-being. Mark Twain called this "cornpone opinions"; tell me where a man gets his cornpone, said Twain, and I'll tell you what his opinions are.

To put it another way, a person fearful of want and hardship, of losing his job, that she will fall into desperate straits, is unlikely to worry much about the abstracts and deeper implications of policies and politics. As hard cases make bad law, frightened people make bad politics. While it would be nice to think that humans respond to desperate times with calculated courage, my experience is that the pressure of fear and want make fools of the hardiest of us. The usual reaction to pressure is panic. The main reason that the Framers of the U.S. Constitution wanted to limit the franchise to men of property is that they feared the "passions of the mob" - by that they meant the impact of the landless and moneyless being led, or driven, by their need to truckle to those whose patronage employed or supported them.And that brings us to the moment, the second Winter of our economic Discontent.

We the People have been assured, reassured, re-reassured that the key to economic strength is through the unshackling of the creative engine of capitalism. That the Market would bring us all prosperity, and that the best way to spread that prosperity was to lift the bonds of taxation and regulation on the Masters of the Universe, the financiers and entrepreneurs and captains of industry.

The rising tide that their flood of wealth creation would break loose would raise all our little boats alongside their yachts. We would lave ourselves in the streams of lucre they would bring forth, like Moses bringing forth water from the rock.

So we helped them, we cut their taxes - lower than anytime since their grandfathers smashed the Republic on the rocks of the Depression - and we waited. We, many of us, demanded the end of public unions, the crushing of deficits, the end of public spending, just as the powerful and wealthy told us would help - and we waited.

And certainly their tide has risen. The stock market is rising, many of the largest companies and corporations are awash with profit.

But for many of us the water is still at low ebb.Employment is still around 10 percent. Worse, many more of us have just stopped looking for work, or are working at menial or part-time jobs that pay little of what we earned before and not enough to live on above the meager minimum.

And here is the worst part of my fears.

I think that this Great Recession may be the harbinger, the slow drawback of the sea that fortells the arrival of the tsunami.

I think we are seeing a great convergence of political, economic, and social changes that spells trouble for those of us ordinary citizens of the Republic.

I think we will find that many of the lost jobs may never return. And I think that this may portend the end of the great "Middle Class Era" of the U.S.

When you think about it, wealth for the ordinary American went through two great periods of expansion. In the late 18th and early 19th Centuries that expansion was literal, physical; the nation prospered as it grew larger, incorporating huge territories into itself. If an American needed or wanted to try and prosper, he or she could move physically to a richer or newer part of the land.

By the end of the 19th and into the 20th Century, the expansion was technological and industrial; people left off farming and started making things, and the things we made became ever more complex and valuable.

But this depended on two things;

First, it depended on resources, and, more importantly, on domestic resources. The iron and coal were mined here, the petroleum drilled and refined here, the cotton grown here and the fabrics woven here. Americans largely used American resources to make American products. That economic power enabled us to purchase resources we couldn't find in North America and still have wealth to spare; our manufactured goods were as much in demand overseas as the resource materials were here.

Second, it depended on tariffs. For much of our nation's history we protected our industries with tariff barriers that made trade within the nation more economical than trade without, despite the relatively high wages we payed each other.In some cases we protected our industries absolutely; in the early 19th Century importing German or British steel would have been cheaper than using steel from Pittsburgh or Cleveland, even though the German and British steelworkers made no less (tho probably little more, and that little enough) than our own. But high tariffs forced Americans to trade with each other.

Well, the resources - especially petroleum - are gone and will not return. And we have chosen to lower the tariffs in the name of free trade and the acquisition of volumes of Cheap Plastic Crap. That has been good in the short run, and for the manufacturers of CPC. Now I think the bill is going to come due.

Because corporations have realized, and, soon, I think the American people are going to find, that many, many formerly living-wage jobs can and will be done by people in places like Brazil, Rangoon, Calcutta, and Guangzhou.These jobs don't take a vast amount of mental acuity, and, what's more, the education the people in Calcutta and Guangzhou is becoming no worse than our own. And their costs are much less than ours. We simply cannot compete with engineers in Mumbai who can design as well as engineers in San Francisco and for a fraction of the price. I think that we will be surprised, and dismayed, by the number and type of jobs that can and will be offshored.

I think that we are going to find ourselves with an indigestible 10 to 20 percent of the population that is going to become "long-term un/under-employed". I think this will have a disastrous effect on U.S. politics.

It's easy to forget that prior to the War on Poverty that roughly a quarter of the U.S. population was poor. Really poor.Shotgun shack, barefoot-hookworm-and-pellagra, bad teeth and rickets poor. What saved us, to a great extent, is that most of those poor were either immigrants living in city slums or the rural poor. The first were too cowed and frightened to be much trouble, the latter were always able to eke out some sort of living, even in bad times.

But the rural poor are pretty much gone; what's left are agribusinesses feeding crap to the poor and lower middle class and the craft farmers feeding slow food to the upper middle class and wealthy. The bulk of the urban poor and suburban poor have lost the skills to farm; the countryside has lost the ability to insulate us from culture shocks. And the likelihood of as much as 20-30 percent of the U.S. becoming poor again, really poor - especially if the recent Republican fervor for dismantling the social safety net takes effect - is likely to remove much of the fear from the urban slums.

In revolution the real devastation begins with the thought "What the hell do I have to lose?"

And the gulf between the rich and the poor is widening again, to an extent unseen since, again, the Depression.It's worth remembering that FDR wasn't some sort of aristocratic Santa Claus. Yes, he had concern for and interest in those suffering from the worst of the Depression. But he was also a cunning politician, a frighteningly bright guy, and an old New York patroon. He could see what was happening as hard times made desperate people make mad and bad choices; the wealthy and then the middle class dead and imprisoned in Russia, fascists springing up in Germany and Italy, class war in Spain, and he didn't want to see it here. His opportunity came when the banksters and the free-marketeers shit the bed in 1929, and he rammed through some arguably unconstitutional measures that bought social peace for the succeeding fifty years.But I think that deal, that New Deal, is falling apart.I honestly have no idea what can be done. I can't see hopes for reviving the U.S. middle class the way it was created after the Depression; by raising the working class into the "middle" by paying them a wage that brought with it middle class expectations, manners, and mores. The competition from foreign workers is just inescapable.

I can't really see the creation of "new industries"; we're at the tag end of a technological cycle.

For example, look at the pace of technological progress, say, between 1910 and 1940 - practically the entire industrialized world changed! An American of 1910 would have had a hard time recognizing the world of 1940.

Another thirty years - from 1940 to 1970 - saw great changes as well. But not was great as the preceding thirty.

Between 1970 and 2000, still more changes. But changes in scale, or type, rather than in method. We went from landlines to "bricks" to cellphones to iPods - but a phone is a phone. We went from mainframes to laptops - but a computer is a computer. The next great technological leap may well be out there...but it seems increasingly like a "black swan". The arc of the present technologies seems predictable and increasingly incremental.

So the U.S. seems presented with the prospect of an increasingly divided society, with a small group of very wealthy at the top, a sullen lump of intractably poor and unemployable at the bottom, divided by a frightened and dependent remnant of the middle class between.Unwilling to tax themselves, the wealthy retreat to their gated enclaves. Unable to pay for themselves, the poor are lost, increasingly nothing more than a mob of votes to be bought and sold. Resented by the proles and ignored by the aristos, the rump of the middle finds themselves chained to the rock of their stagnant mortgage values with the vultures of the rich and poor rending their livers as they dread the day their job is finally outsourced or offshored.Now - don't get me wrong. I don't think that we're crash-diving into some Mad Max apocalypse, or that the U.S. is going to become Afghanistan tomorrow.

This country has always been tremendously resiliant. We have great reserves of human energy and creativity, and there are always events that can break favorably, unlike the gloomy scenario I've painted.

But combine everything we've talked about with a world that wants, and is getting to the point of being able to demand, what we have kept to ourselves for fifty years; with the increasing possibility that we are producing and consuming petroleum orders of magnitude faster than it can be formed from biomass; with the collapse of the post-WW2 political center into the repolarized politics of the Oughts and Teens...

I wondre if we have the wherewithal - political, social, economic - to reverse this trend and reestablish a broad middle class of the sort that had such a large effect in stabilizing the nation between 1945 and 1980; that is, the nation that most of us grew up in and take for granted.Is it?

One solution could be to "lighten" or "open" the U.S. economy. Until now we've rested like a massive stone wall on agriculture, resource extraction, and manufacturing. Above that foundation are the wood floors, the service industries, from the architects, engineers, and designers to the attorneys and the doctors. Above that are the gingerbready attics; the caterers, beauticians, the financial gamblers, the writers, the graphic artists, and the people who sell kitschy knick-knacks in twee little shops.

Agriculture and mining long ago lost their mass employment potential; most of us now work in the service industries. But there has to be a foundation, and that foundation is increasingly looking rather seedy. But do we need "mass employment"? Can we design a society that uses technology to replace human bodies, relies on creativity and a "nimble" exchange of good and services? One that is based on fewer people, but those people capable of more complex tasks? Could the way out of the dilemma of the un/under-employed be to simply have fewer people to BE unemployed?Or perhaps that next wave discovery occurs and revitalizes the U.S.

Or...or something.

I hope.

Because if not I am worried about my children and the nation that they will grow up in. If not I am worried because of what I see as the political and social state of the nation; I'm not convinced that we are prepared to deal sensibly and effectively with the sort of problems I've discussed.

If not I am worried that my children's lives will be more difficult than mine was, and that is every parent's worry.

And I am worried now.


Lisa said...

"I think we will find that many of the lost jobs may never return. And I think that this may portend the end of the great 'Middle Class Era' of the U.S." --

That's the crux of the biscuit. "Plastics, Benjamin" -- truer words were never spoken, it's just that we weren't the kings of the plastic.

Less people? Necessary, yes, but how do we arrive at that? We are not China, and lax immigration law and religious dogma pretty much assure no end of replacement or growth of future Coneheads to consume mass quantities of ... tripe.

En masses, we seem a pretty dissolute culture.

Pluto said...

I've started this comment three times already and will undoubtedly rewrite it a few more times before I'm done. This is a tough, smart post and hits with a real wallop.

First, I need to congratulate you on a very nice piece of reasoning, Chief. Not many have the guts or the smarts to follow it through to the logical conclusion.

Second, I need to emphasize I don't have any sort of a crystal ball. I can be so very, very wrong. But I agree with everything you said with a few exceptions and clarifications.

You're overly optimistic about the workforce. We've already hit 10-15% structurally unemployed; I expect us to hit 33% structurally unemployable by 2025 at the latest.

Your comments on the trickle-down theory of economic stimulation are dead-on except that this country, which has benefited from cash-inflows is beginning to see cash fleeing this country.

If you're a wealthy person, are you going to invest here in the US where you can expect a maximum annual profit increase of 2-3% or are you going to invest in China and India where you can expect 8-12%? It's pretty easy to figure out when put in those terms.

Yes, the stock market is going gang-busters but that is mostly because of two factors:
1) The market is now controlled by speculators. They are going to pump it up to levels not seen since 1929, 1999, or 2007.
2) The government is currently giving the bigger corporations some breaks in their accounting rules that make profits almost mandatory. Unfortunately since these profits are only on paper the shareholders aren't seeing any benefit and are slowly wising up to this fact.

Your comments comparing the rate of change between 1910-40 etc. are not completely accurate. The primary reasons the earlier years saw such awesome changes was multi-fold:
a) Cheap energy
b) Learning how to use the Internal Combustion Engine
c) Major burst of research between 1870-1920 revolutionized science

Technology has actually been changing faster since 1980 than in the 1910-40 period. But it is utilizing increasing information muscle instead of physical muscle.

(1 of 2)

Pluto said...

This is much of what is driving the structural unemployment situation as workers are having major troubles moving from the industrial workplace to the information workplace.

As a result your suggestion of re-imposing tariffs would backfire. Our poor could not afford high-tariff cheap Chinese crap and couldn't manufacture plastic crap here cheap enough to be able to afford to buy what they make. If it is any consolation, the Chinese are at most 20 years away from falling into the same trap we are in. Likely losing most of their manufacturing jobs to Africa and other places where people will work for less than the rising Chinese standard of living can afford.

We really aren't at the tag-end of an industrial cycle, we're in the middle of one of the most disruptive technology change-overs in the history of the world. The real question is what we are going to do with all the labor and intellectual capacity (people) that the system doesn't need anymore to sustain itself. The answer will have a huge impact on the history of the world for the next several centuries and I have NO clue as to what the answer will be.

Your comment about "What the hell do I have to lose?" is very perceptive and the crux of the matter. People WILL find a way to survive regardless of the circumstances but there's survival like 1950's America and there's survival like 1990's Ethiopia.

I prefer the first but fear we'll get the latter.

I fully understand the source of Lisa's comment about our dissolute culture but don't think that really matters much.

The country pretty well knows now that we're in trouble (except Washington but you can't tell them anything) but doesn't fully understand the depth of our problem or the real options. This results in a splintered society that can't really agree on anything and feels decadent (look at late 1920's Berlin for a similar feeling).

I think we'll have a much better understanding of our options in 5-10 years and will start behaving in a more intelligent fashion (except maybe Washington). The threat of imminent destruction has a marvelous way of focusing the mind...

(2 of 2)

Pluto said...

Huh, the parts of my message got scrambled.

FDChief said...

Pluto: your first part got caught in the spamcatcher for some reason. I've given it its freedom.

I cannot really argue with any of your observations, especially regarding the trajectory of the U.S. economy; my knowledge of economics and business is no better than can be had from the popular press and a semester of Econ 101 in college thirty years ago.

I do think that, while the PACE of innovation in the past 30 years may have been exceptionally high, I think the effects have been incremental, largely because I think the intellectual heavy lifting had been done by the Eighties. For example, high-speed internet and e-commerce has overwhelmed the market in ways we had no notion of in 1980. But...even then (and I was just out of college and joining the Army then) we were seeing the effect of the PC and digital communications, and I knew many people who were looking at careers in the fields of electronics, computing, software design...all the things we take for granted today.

We can do MORE, a lot more, because of the improvements in both hardware and applications. But the digital revolution is now about changing speed and capacity rather then direction.

But I think we're going towards the same place (and so are you, Lisa) with our concerns; in whatever the "next" U.S. economy is there are going to be people - I think, a LOT of people - who aren't going to "make it" in a society and an economy where creativity, innovation, intellectual agility, and mental throw-weight are crucial. What the hell do you do with these people? I can see a lot of ways that they will...end badly, if you will. But not to many ideas of how to make things work.

I wish I could see someone out there with a clue, but our political process is so utterly fucking hosed that you have to be a mendacious whore to even get nominated, let alone elected.

I think that WASF for the next couple of decades. I hope it's only that long...

Ael said...

It is a distribution of wealth problem.

What happens when you need 5% of the workforce to grow all the food for everyone and 15% to make all the stuff for everyone. What happens to the 80% who do neither?

The obvious answer is the service economy. However, you need to be able to convince the 20% that they need those services (or you can rob them via taxes) and then pay the rest of the people money so that they can buy the food and stuff from the 20%.

America has long organized itself as a "scarce labor" economy. It may need to restructure towards a more "plentiful labor" economy.

This will inevitably involve higher taxes. I expect that the days of tax cuts for high income people are numbered.

FDChief said...

Ael: But I think that 80-20 sort of economy - and I tend to agree with you that it's coming (probably not in that extreme a form, but I still wonder if we won't wind up with as much as 20-30% "structural" unemployment for decades) - has got to be unstable even in the medium term.

So as Lisa points out, the solution may be, for the first time in human history, to engineer a society that actually reduces the number of people in it.

But she also points out some of the problems inherent to our polity (religion and open borders) and I will point out a third; a really low-density population is at tremendous rick of defeat in war. I'll see your technology and raise you millions of expendable bodies...so the very notion will be, I think, unobtainable.

FDChief said...

Lisa: I suspect that our "dissolution" is as much surficial as it is genuine. I think we look worse to each other because much of the image we see is reflected through the popular media, which is, as you quite correctly point out, a sewer.

However, if by that you mean a "deteriorating" culture, well...

I think we have worked hard in the past 40-50 years to lower the intellectual and moral (hate the word, but it can't be avoided, really) of the high end of our culture. Pop culture is what it is and always has been. But the cachet of middle-class-ness in the U.S. had been aspiration to the mores and manners of the oligarchy. So even if the proles might not have gone to the symphony or eaten off fine china they taught their kids to work hard, listen politely, read and write as well as they could. The general aspiration was towards "civility", for lack of a better word.

The current emphasis is the other way around. Greed is good, bling is king, being humble and hardworking is for chumps. Honor? What is honor? a word. Who hath it? he that died o' Wednesday. Dudes need a lot of cock and a fat bankroll, chicks need a tight little body and the libido of a bitch in heat - or that's what you'd think if you absorbed 80% of mainstream culture.

This isn't the sort of thing that is going to make the sort of citizens needed in the times that try men's souls.

We seem to be breeding herds of summer soldiers and sunshine patriots. That can't be good in good times; I shudder to think what it will mean if the times I fear are in fact the times to come.

Pluto said...

Per Lisa's comment about needing less population (which I'd missed in my first reading of her comments):

That's a hard one. I can see exactly where she's coming from but there's one giant problem with it. Yes, we can get by with a lot fewer people making stuff. But who's going to buy it?

A healthy economy needs a lot of people to purchase stuff. Otherwise you go into a death spiral (make fewer goods-need fewer workers-smaller work force can't afford to buy current amount of goods-so you make even fewer goods. Repeat 10 times and you don't have an economy because everybody is laid off).

In my spare moments I've been toying with some sort of industrial fiefdom where each worker hires (subjugates?) 8-10 people to take care of them for room, board, and a small wage.

This would include house-cleaning, grocery shopping, clothes-washing, gardening and yard care, etc. It has the advantage of making a McMansion a reasonable purchase (to store all the people in your household) but I can see way too many things that could go wrong with it.

This thought is based in part of the British experiments with wealthy industrialists taking on large estates with large staffs to maintain them. The advantage is that it soaks up a lot of currently unnecessary labor and gives them something halfway meaningful to do (wait hand and foot on those luckier or smarter than themselves). As you'll recall this experiment ended with the changes brought by WWI.

But there were a lot of abuses during this time and I can't think of a good way to prevent them from happening again.

Ael said...

Well, the fundamental problem is that economies are organized around the concept of scarcity. This is why economics is called the dismal science.

Where there is no natural scarcity (e.g. information) our society creates artificial scarcity through laws like copyright, patents etc.

We are facing a new world where keeping everyone in food, shelter and clothing does not consume the vast majority our our efforts. We simply don't know how to re-organize ourselves to cope with that. (yet)

FDChief said...

The "problem" of the dispensable people is one that I think will loom large for the industrialized societies over the next twenty years. We're well on our way to a digital/industrial economy that, as you point out, needs substantially fewer people than the old, labor-intensive model we've lived with since the Industrial Revolution.

I really don't see a return of the "upstairs/downstairs" economy unless we end up going full oligarchy. That may happen! - but if and when it does it'll be a societal turning point in the same way industrialization changed human societies from designed around a predominantly rural model to a predominantly urban one. That's too big a change for me to try and figure...