Monday, June 02, 2014

Losing it.....

Please pardon me quoting myself, but...
My clearest reading of 2014's tea leaves is "instability": worldwide instability and in my opinion this instability has its origins at the heart of the most developed economies of the western world. The causes? We are undergoing a technological revolution and process of globalized outsourcing, combined with a reduction of the welfare state that is severely degrading the middle class in developed countries and converting them slowly, but surely into working-poor. Anyone who has read a bit of history could tell you how dangerous that is. Newslinks - 2014 and Welcome To It
On top of that, like whipped cream, I would put the following from today's Financial Times
Economic forecasters have yet to internalize the fact that the US economy has fundamentally altered. The purchasing power of the majority of Americans has not only stagnated since the recovery began five years ago – it has actually declined. Edward Luce - Financial Times
 And on top of that, like a maraschino cherry, this from no other than His Holiness the Pope:
Populism in Europe, trust and mistrust, some theories about the Euro ... I don’t know much about this kind of thing. But unemployment is serious: we have a global economic system that is centered on money, not on the human being. In order to keep going, this system discards things. It discards children: birth rates are not high, in Italy the average couple has less than two children and in Spain even less. It discards the elderly, even through euthanasia in disguise, medicine is only administered up until a certain point. And young people are discarded too.  I think unemployment among Italy’s young is 40%, in Spain it’s 50%, in Andalusia, 60%. There is an entire generation of people that is not studying or working. This culture of waste is very serious. Europe is not the only place where it exists, but it is strongly felt in Europe. It is an inhumane economic system. Pope Francis
Spain, where I live, is not anywhere near collapsing, but the conditions that the Pope mentions are leading to some of the most coherent, practical, active, alternative politics that I have ever seen:
Until recently, it appeared that the Spanish indignados movement had fizzled out. But on Sunday evening, a fledgling party born from its ashes proved otherwise, winning five seats and 1.2 million votes in Spain's European elections. - The Guardian
The name of the new party is "Podemos", which most translate as the first person plural of the verb "poder", "We Can", but Spanish speakers notice that podemos is also the subjunctive, first person plural of the verb "podar" (to prune) or "Let's Prune". 

The elections were on Sunday the 25th of May

I suppose it's just a coincidence, but the King of Spain has abdicated exactly one week later.

How has technology caused so much pain and confusion?

At the bottom of it is the enormous increase in productivity brought on by information technologies. We simply produce much more than we can possibly consume: we need lots of consumers and much fewer workers.  How are underemployed people supposed to buy anything? On credit. Something has to give, has given.

With lower costs and more technology, profits rise and much of this gain is reinvested in more productivity-raising technology, which makes more skills and the people who have them redundant. This means, perversely, that more profits usually lead to less jobs or much poorer jobs. This paradigm, which until recently only held true for the poorly educated, is now reaching the ranks of university graduates. Now, with digital technology, even high intellectual output tasks can be outsourced to where people with postgraduate degrees can be hired for the same cost per hour as high school graduates in a developed country.

Result: As more money is invested in raising productivity, fewer and fewer people can produce more and more for a market glutted with products that fewer and fewer people can afford to buy without going into debt.

Salaries don't rise because most workers are not really needed that badly and are easy to replace if they go on strike, complain or even report in sick.. and thus they have no bargaining power. Any shortages such as one resulting from low birthrate in developed countries can be solved by outsourcing the jobs to poorer countries with high birthrates.

All people are really required to do is to buy many things that they don't really need, which they can do, even with a McJob, by using a credit card... hereby kicking the can into the future: a future with poorer paying jobs, less horizon, more need of credit to participate, with less chance of ever paying back the debts incurred.

To make underpaid workers buy things that objectively they don't need, an entire industry (marketing) exists to make them dissatisfied with what they already have. Perversely, unhappiness becomes a social good in such an economic arrangement. A thrifty person, content with his lot, who for thousands of years was seen, in all traditions, as a wise and sensible man; in this contemporary situation is seen as a public enemy to be "stimulated". 

As to what the contributions technology and advanced communications might make to improving America's economy, awhile back I read Fareed Zakaria's, "The Post American World", where Zakaria writes about advances in nanotechnology:
At some point in the future, or so I'm told, households will construct products out of raw materials, and businesses will simply create the formulas that turn atoms into goods.
The idea is that you put some powder you order on the Internet into a washtub, add water and out walks a TV set, thus putting millions of Chinese people out of work.

Whether this ever happens or not, the fact that somebody might think it was a good idea and that a lot of money was being invested in making it happen would have to put you on your guard a bit: it's the thought that counts.

In a sense our entire "civilization" is sort of a universal "Ponzi scheme". If the wheel stops even for a moment it all comes tumbling down.

It's amazing that a structure this artificial, that fills so few truly human needs, has taken so long to nearly collapse.

What will collapse, if it ever comes, look like?

The best metaphor, the most poetic illustration of political collapse that I have ever seen is the video below this piece: Rumanian dictator Nicolae Ceausescu's last speech, a man of absolute power for decades, only a matter of hours before being shot. In itself, like a perfect work of art it shows in less than ten minutes a process that in a country as marvelously structured as the USA might take more than twenty years, if it happened at all.

I think that America's system is so well carpentered that if it ever collapses it will appear till the last moment like a termite-ridden piece of furniture: absolutely normal looking till someone or something puts too much weight on it. DS

1 comment:

Rod Ruger said...

All our problems scream, "Birth control". Politicians will never so advocate. Thus, doom.