Dried Up Rivers in the Heat of Maumie Ohio
There was great heat in Maumie Ohio today. What will it take to get America’s unemployed back to work? The President felt the heat and offered two answers that are always among the top five for progressives:
- Fund more education so that people will have the training needed for new jobs
- Fiscal stimulus in the form of building infrastructure (roads, high speed rail and schools)
- What new jobs? People are hiring for McDonald sure. Lots of those jobs. And yes, there are jobs at the high end. But if we could snap our fingers and everyone had the perfect training for those jobs, there are not enough of them to even keep pace with population growth. This is not doom and gloom talking. This is labor department statistics talking. Just look at the numbers of job openings and where they are. Something profound has changed about this high tech economy’s need for labor. The job market has polarized. Plotting a graph of numbers of jobs versus the salary paid, you are looking an ever deepening U shape over time numbers of middle income jobs is depressed, with movement to the tails of the graph, some towards the high end (but increasingly after 2008) mostly towards the low end.) America is being hollowed out.
- Big projects are great. Krugman and others say there is no structural problem and that the best thing to use is fiscal stimulus. He is correct if “structural problem” is code from the right about the “structure” of liberal institutions that conservatives wish to deconstruct via austerity solutions. Krugman is right about kick starting the economy, and the Keynesian theory he is applying is time tested- If we get more money out there in the hands of consumers we will reignite spending and get back to where we were in 2006.
The problem is, the glide path in 2006 was downward, even with the help of the Wall Street fueled bubble in construction. So we have to do better than get us back to 2006. Beyond the stimulus effect of these massive infrastructure programs, after they are built, what enduring impact do these big solar, wind and high speed rail projects have on job demand? If they are built using the latest technology, large solar and wind farms can be run using only a few employees. The immediate jobs impact of high speed rail, is that more truckers are out of work.
This is the systemic problem, and we can’t blame this part on the conservatives. However much evil intent and deeds committed byRomney and other Bain types, such projects will have the same impact on job demand and make the same decisions about trying to minimize labor needed to keep the facilities running. Though conservatism plays a large part of the havoc on the jobs situation, the inexorable improvement of technology is driving the other part. It is not necessarily inherently bad. Futurists have long predicted the end of work as technology improves.
This disruption of the old pattern of ever increasing demand for labor has ended. We are beginning the arc downward, and it is so unprecedented in mankind’s history that most economists dismiss it as modern day luddism. The problem with this analysis is that the writers pointing out this shift are not the victims of the machines, but the technologists, engineers and entrepreneurs like me who have devoted their careers to building this technology. The technology can be used for great good. At society makes the transition, we are warning that there will be disruptive consequences.
Certainly, high tech energy projects have merit independent of their impact on jobs and energy security. They are key to the other great challenge of our generation: global warming’s threat to the world’s population. Considering the the threat to the middle class, we need other plausible economic strategies that generate jobs, strategies that do more than Manhattan Project scale national projects. After all, how many people does it take to run a vast solar or wind farm? Don’t get me wrong- I am a technology guy and it is simply ludicrous that the National Science Foundation is given less than one tenth of one tax penny to fund research at universities and other institutions. For the hundreds of billions in profits that past research at these institutions are today generating every per quarter, it is a smart investment to make that at least a half penny. Quantum physics may seem bogus to most people, but if we hadn’t figures it out there would be no cell phones, no GPS, and lots of other microelectronics we rely on every moment. No- we should do that. I am just saying that unlike sci fi and action films, technology or the decisive machine is has no the crucial role in the solution.
The key thing progressives must focus on is our premise. As Johnny Carson said, if you buy the premise, you buy the bit. The premise that conservatives offer we are all too familiar with. What an economy is for is like nature- rugged individualists educate themselves and go from rags to riches. Accommodating the weak is the entitlement culture- and leads to a society’s destruction.
The problem with their premise is the pitch that there are enough jobs to go around. The way low labor intensive high technology works, we no longer need armies of workers in the factories, and there aren’t enough of the jobs taking care of the machines to absorb the displaced workers. This isn’t Luddism. This is simply a fact about how labor saving our technology has become.
Obama has an alternate premise which reflects the dominant view amongst the “wise” economic elites of the Democratic party establishment. It is that income inequality is created by top down economies, and if workers had a fair playing field and adequate education, with the rich paying their fair share, then America would do just fine.
This stock Democratic answer to the conservatives would be reasonable if the jobs were there to fill. They aren’t.
Progressives must get a grip about what has been happening to labor demand since 1980. They must confront the new reality that the job market is radically polarizing. America, along with the rest of the industrialized world is facing the impending destruction of their middle class. Economists like David Autor at MIT have documented it (such as in this paper). Technology and market forces are driving business to aggressively cut numbers of workers needed. Businesses may understand that if everyone cuts jobs, then there will be no consumers to buy their products, but they can’t know that with any certainty, or is it their responsibility to harm their bottom line to head off a macro economic risk that to them is shear speculation. It’s not their job. It is a truism that their goal is to extract as much money from the economy with as few employees as possible. Some may even understand that the math that economists like Autor is using is not lying. Macroeconomics simply is not their problem. If what technologists like Martin Ford and David F. Noble, Jeremy Rifkin, Marshall Brain, and James S. Albus are saying about reduced labor demand is correct, this is a systemic threat that independent businesses are not equipped to solve.
So let’s return to the question: What are economies for? The conservatives answer it is ok if economies benefit the fittest- never mind that it is only the 1%. What is the answer from progressives? What is our vision of what an economy for?
The economy is to benefit the largest number of hard working Americans as possible.
It seems common sense, but if the obsolescence of middle class jobs is as technologists like Martin Ford predicts, then what Obama is doing is getting fundamentally new structural challenge to our economics. Anyone examining in depth media coverage of the economy is familiar with the idea that if the middle class is not there to buy goods, the consumer economy collapses. If the purchasing power of the middle class is a river, then what companies are doing by reducing their workforces is pumping lots of purchasing power out of the rivers, and returning very little water in terms of wages and lower cost goods. Rivers are running dry not just because we have gotten very good at putting carbon dioxide into the atmosphere, the purchasing power river is drying up because technology has allowed us to get very good about not hiring humans to do the work that can now be automated.
An apocryphal tale is told of Henry Ford II showing Walter Reuther, the veteran leader of the United Automobile Workers, around a newly automated car plant. “Walter, how are you going to get those robots to pay your union dues,” gibed the boss of Ford Motor Company. Without skipping a beat, Reuther replied, “Henry, how are you going to get them to buy your cars?”
Citizens buy the proposition that government must make sure the companies pump more than a fair share of water from rivers and lakes. We must take the step of showing that it is a valid proposition that companies may not pump more purchasing power out of an economy than they return.
There are lots of policy ways of achieving this, and a vast set of them are totally capitalistic in case any of the traditional readers are thinking this sounds like yet another pitch for the failed philosophy of centrally managed economies. No- companies are allowed ridiculous profits in reward for their insanely cool innovations. The only proposition is that what they return to the purchasing power river must be no less than their fair share required to keep the consumer economy healthy.
So that has nothing to do with building big dams or wind or solar farms which literally require a few dozen maintenance workers after they are built.
One way of doing this is tax policy. If a company does not pay out a sufficent percentage of their profits in middle class wages to, then the surplus is taxed at extremely high rates. For the free traders in the crowd, this could even be devoid of any reference to national boundaries. The argument that might convince some progressives not to be concerned is the optimism that given the choice of an American manager who is required as a cost of doing business to provide a middle class salary for a job, they would prefer to have that job to be in the US rather than in the far East.
This is not socialism- this purchasing power regulation is simply to prevent the collapse of our consumer economy. Since it is a cost of doing business that all companies have, it is level playing field and businesses still win and fail based on how intelligently they play the game within those constraints.
That’s the key game changing paradigm shif more progressives need to make. Ask Americans what the economy is for. Simply asking the question points out that it is a human creation, and that it is not as pointless a question as asking what dirt is for. People create economies, and spend a great deal of effort managing them. Surely we can articulate what such an important thing is for. Although people will offer differing answers, every American knows that if only a small minority sees the benefits, then the system stinks. And that moral indignation is a powerful political force. I’m not talking about a populist appeal to the mob. Teddy Roosevelt’s pitch at Osawatomie was for fairness.
Obama’s election must be more than moral disgust for Bain companies cannibalizing the American dream. There must be a positive vision and believable account for how he is committed to a game changing move that gets at America’s systemic economic challenge: the threat to purchasing power caused by dried up demand for labor.
6/3/2014 Edit: deleted use of jpg from a malware site. replaced with a hosted version of same jpg