I’m not entirely sure what the technical difference is between a polemic and a rant. I think it may be organization. The political blogosphere is full of rants—it may even be the dominant form—but there are far fewer polemics. This morning David Stockman provides a fine example of the form. The specific targets of his ire are the last two chairmen of the Federal Reserve:
So what is happening at bottom is that Bernanke is printing money so that Uncle Sam can keep massively borrowing, and thereby fund a simulacrum of job growth in the HES Complex [ed. healthcare, education, and social services]. Call it the Bed Pan Economy.
When it finally crashes, Ben Bernanke will be more reviled than Herbert Hoover. And deservedly so.
To be honest I doubt his conclusion. By the time “it finally crashes” Dr. Bernanke is likely to be long gone. One of his successors is far more likely to be blamed.
I think that Mr. Stockman gets several things right but gets some things wrong as well. Where he’s most right is that our structural problems go back much farther than 2007. I think that 25 years is a stretch but 20 years is about right.
I believe his interpretation of last week’s jobs report is also correct. Trying to spin it into a positive report is like trying to spin straw into gold. What it really says is that we’re continuing to replace permanent full-time jobs with part-time and/or temporary jobs that pay less and carry fewer benefits.
Another thing he gets right is that monetary policy has been one of the factors that have created our present problem.
However, I don’t think it’s the only source of our problems.
Excessive spending on the healthcare sector goes back more than thirty years—far longer than his horizon of “Greenspan-Bernanke monetary profligacy”. Arguably excessive spending in the entire “HES Complex” as well as real estate and defense do as well. I believe that this excessive spending has introduced tremendous distortions into our economy that have resulted in slower growth, particularly slower job growth, and industry consolidation.
To that I would add feckless trade and immigration policies and propping up failing dinosaur companies, preventing the process of “creative destruction” from taking place. We’re getting the destruction without the creation. In essence, we’re replicating what the Soviet Union did during the Great Depression and experiencing the same things the Soviets did after the Depression ended. Oh, yes. And technological obsolescence. I think the last is a factor only because we’re allowing it to be.
Dave:
I asked this on another thread and now I can’t find it to see whether anyone ever answered. So, sorry for the repeat, but what kinds of jobs do we think should be growing realistically? I mean, let’s make you King for a Day. What types of jobs would we see growing?
I’ve produced lists of such jobs in the past. They’re easy enough to find on the Internet. Here’s one.
The additional answer is that I can no more answer that question than somebody asked in 1840 how many telegraph operators there would be in 1860 could although by that point there were tens of thousands of them, hundreds of thousands at the acme of telegraphy.
As I’ve mentioned before, I have eight nephews and nieces, all graduated from college, all employed. None of them have jobs that existed 100 years ago. Most of them have jobs that didn’t exist 50 years ago. Two of them have jobs that didn’t exist ten years ago.
I am extremely confident there will be new industries and new jobs given the economic activity, capital investment, and the space for them to grow and develop. All of those things can be prevented and that’s largely the direction of policy now.
That list was all construction and medical. I thought we didn’t want to see more growth in medical. As for construction, for whom are we building? Are we already running short of houses and office space?
The rest of it is faith. You state your faith that if we set the table someone will put food on the plates. It borders on mysticism, as though jobs and products will necessarily follow the correct economic policies.
The examples of your family (while obviously heartening) isn’t really that on-point, is it? You’re talking about an elite – college educated, smart, good family, etc…. The elites always do well, but they don’t necessarily fill a lot of jobs doing it.
If we are millions and millions of jobs away from full employment, where are those jobs coming from? What are those job categories? On the one hand you point to a list that’s all about nurses and plumbers, on the other hand there are undefined future jobs. Isn’t there a disconnect there?
No. It’s experience. Strict empiricism just as believing the sun will rise tomorrow is empiricism. Thinking otherwise is mysticism. Inductive reasoning is no less scientific than deductive reasoning. We’ve had technological obsolescence for centuries and it hasn’t resulted in mass unemployment. Quite the contrary. New technology alone doesn’t explain the job losses of the last seven years or slow job growth. Low economic activity and propping up failing companies does. Add currency manipulation to the mix and it explains most of the sectoral job loss in the country in sectors other than home building.
In the absence of something really new, what’s your explanation for sudden technological obsolescence?
The past is only prologue, it’s not necessarily predictive.
Think of some of the things that have changed: we no longer have starvation. We no longer have vast numbers of people dying off in various plagues. We no longer have empires to absorb third sons or an expanding frontier with boundless new lands. We no longer have depopulating wars. There are no longer physical barriers to shipment of goods which means we can tap low-end labor anywhere in the world. We no longer have delays or barriers in transfer of information. We’ve grabbed the low-hanging fruit of scientific and technological discovery.
This is not any other time in human history, this is now, and now is very different than the past. We have been shutting down entire categories of jobs that used to employ millions of people of mid-range capabilities. There are not millions of new jobs waiting for people with IQ 90. I’m not sure there are so many jobs waiting for the higher end.
Laws of physics govern the rising of the sun, no such law dictates any part of human affairs.
Our current problems are traceable to the Fed Dual Mandate, enacted in 1977.
http://www.chicagofed.org/webpages/publications/speeches/our_dual_mandate.cfm
This law changed the nature and purpose of the Fed – control inflation. It added employment stability to the Fed’s responsibility. These responsibilities sometimes are in conflict. This allows the Fed to pick and choose at their whim what policies to pursue.
It is also just irrational to believe that a system designed to maximize profits by minimizing expense and maximizing productivity will always come out with a net plus of good jobs. The system is not designed to create jobs, it is designed, where profitable, to obliterate jobs.
And yet we have to assume that we’ll have more jobs? Why? Why should we have faith that even as we race to develop technologies to replace humans that we will somehow end up failing to replace humans? Human workers are a commodity. At very least don’t you think that like any other commodity the demand might fluctuate quite a bit? That we might be off by a bit here or there? That we might end up only needing 90% of our available supply of human workers? Or 70%?
Is there another commodity whose use can be easily predicted merely by establishing textbook economic conditions? If we did everything right would horses regain a role as draught animals? We’ve had pretty severe animal unemployment for quite a long while now, how are animals different in the workplace than humans? Why is it that horses and sheep dogs and oxen can all be permanently replaced, but the need for human workers will always remain at something very close to 100% of the available supply?
The only way you can appeal to empiricism is to set aside a host of changes and equate then with now. You have to deny the possibility of large scale change. You have to adopt a magical reality where setting the right parameters (like we know for sure what those are) will necessarily produce a result, despite a lack of any concrete causation. It’s an engineer’s cosmology applied inappropriately to human affairs, and it ends up sounding a lot like a summoning spell.
Let me put it this way, Michael. If unemployment starts increasing everywhere at once in all sectors and job categories while GDP stays the same or increases, I’ll concede you’re right. On the other hand, if things keep plodding along the way they have been, I’ll continue to believe that whatever the effects of technological obsolescence, they’re dwarfed by other factors. Like bad policies.
@Roy
The purpose of the dual mandate is to prevent tight money during periods of supply side inflation.
If you think it’s a great idea to tighten money when oil gets expensive due to a war in the Middle East, you are flat out wrong. You may be on to something about too much Fed discretion, but there are still ways to do that without piling monetary woes onto structural ones (like NGDP targeting).
Why would it increase in all categories? It increases in areas where cost of labor and technological capability meet. ATM kills bank teller. Email kills mail carrier. Cell phone kills the guy who strings wire. Expedia kills travel agent. Quicken kills bookkeeper. iPad kills bookseller. iPhone app is actually killing Apple store clerks in a nice bit of friendly fire. Computer program kills light rail driver. Just like the combine killed the farmer. The fast food worker is fine only until either the cost of automation comes down still further or we decide we have to pay a decent wage.
What seems to be growing are areas — bedpan changers, burger flippers, Wal-Mart clerks — where we pay so little it’s hardly worth investing in machines, right? Isn’t that exactly what we’re seeing, isn’t that the complaint, that growth is in jobs that aren’t worth the cost of automating?
Slave wages and inertia are keeping alive jobs that will almost surely go to robots eventually. Let’s say we raise minimum wage to $20. Will humans still be flipping burgers? I doubt it. You can play with taxes and money supply all you like, but when we get the self-driving truck, all those UPS drivers are going to be unemployed. They’ll be the economic equivalent of horses. We’re in a race to charge less than our machines and we’ll lose. Unless we’re planning a really bloody Third World War or a decent plague to suddenly reduce the number of workers, we’re going to have more people than jobs.
As for not having a huge effect so far? We’re all freaked out by 7.5% unemployment and we’d be giddy if we got it down to 5%. It doesn’t seem to take much.
@michael reynolds
With few exceptions, animals are not consumers of what they are used to produce. Animals are bred to do a specific task(s). Animals do not have a choice in what they will do. Animals cannot choose to move or change jobs. Animals are serfs or slaves, and like animal unemployment, many slaves cannot find jobs. As for sheep dogs, they eat their own poop, and that makes them ill suited for office work.
Humans are the only animal or machine that can create ideas, and these ideas allow humans to dream up new products and services. As fewer people were needed in agriculture, the number of people available to be employed by factories increased. As manufacturing capacity increased, management capacity and engineering capacity increased to utilize the increased manufacturing capacity.
The overall workforce increased causing people to have disposable income. As the disposal income capacity increased, people developed products and services to obtain this money. Some people used their money to invest in manufacturing capacity to produce products and services for the other people to purchase. Other people lent their excess money, and the borrowers used the loan to purchase more stuff.
As fewer people were needed for manufacturing, the number of people available for services increased, and the number of services available increased. Other industries also were able to use these available workers. The entertainment industry has increased dramatically. The travel industry has increased dramatically. The internet has created opportunities for existing and new industries to utilise, and the ex-manufacturing workers have filled these jobs.
As long as somebody has an extra dollar, somebody else will create some product or service to get that dollar. The what is immaterial. Something will be created. This is the law of human nature, and it is as certain as the sun rising.
I think that we will eventually have those new jobs, I just dont know when. The problem with creative destruction, which is a net positive I believe, is that there is no guarantee that the new jobs will occur right away. This seems to be a standard assumption in libertarian thought BTW.
Steve
@michael reynolds
The robot burger flippers do not purchase burgers, and the people who do are broke. With nobody to purchase the product they produce, the robot burger flippers will be unemployed. The UPS driver will soon join the burger flipper robots, the human & non-human animals, the slaves, and the fast food chain owners.
Presently, most people think the economy is dragging along the bottom, but for those who praise this economy, there should be no problem with 7.5% unemployment. Since the economy is barely moving, there are not a lot of new jobs being created, and because many people are still trapped in their house they cannot move.
There are many jobs today that have been regulated out of existence. The US could be a major exporter of energy, but this is not allowed to occur. Extracting, refining, processing, transporting fossil fuels is a growth industry, but it is not allowed to grow. Instead, alternative energy products are being subsidized to encourage growth in products that China can manufacture cheaper.
With lower energy costs and a reined-in EPA, manufacturing could be done cheaper in the US. Cheap foreign labor is not really as cheap as advertized. There is a lot of additional overhead costs. This is why businesses would rather be located in the US using cheap labor.
The tech industry pushes for H1B visas because Indian workers in India have far more overhead costs than Indian workers in the US.
You have been making the same argument for the past six hundred years. The printing press was putting the scribes out of work. The waterwheel, the steam engine, the internal combustion engine, yada, yada,yada were all going to be the downfall of civilization. At least you are no longer calling each new technology the devil’s work.
Dave, Tasty et al:
I’m not trying to be needlessly tendentious here, I’m actually interested in the topic and testing my own beliefs. feel free to ignore my auto-didactic efforts if it bores you. (As it may well do.)
Listen to the untested assumptions inherent in your own statements. It’s hope and faith. The dots are not connected. You’re making the point that in the past X occurred. Yes, I agree. But you go from there to, “Therefore it will occur in the future, too.” This is faith, not empiricism, not science. The sun rises because the sun is governed by natural laws and lacks free will. People not so much.
A person having this debate 200 years ago (because Luddites, that’s why 200 years) would have said with equal plausibility that we have always had famines, and therefore always will, and have always toiled in the fields and therefore always will. 300 years ago a reasonable man could argue that we have always had slavery, always had women in subordinate positions, and therefore. . . These were economic “facts” that were self-evident in their day, and yet not predictive.
Tasty your animal counter-argument fails in my opinion because there is not necessarily a connection between production and consumption. People who produce and therefore earn nothing can obviously still consume if society allows, if society structures itself that way. Right? Welfare? Social security? (So many opportunities for amusing snark re: people who consume but not produce, but I’m letting that go.) If there were such a direct connection all businesses would follow the Henry Ford example and pay their employees well. But that’s not what happens, is it? In practice the 1% pays the 99% as little as they possibly can, and yet still end up rich. By your logic they’d pay their employees as much as they could manage because then they’d have better consumers.
You argue that properly managed an economy will produce the 100% employment result, but why should it necessarily produce 100% employment, if 95% or 85% or 70% is actually a more efficient and profitable way to do it? Efficient for whom? For the Walton family? Or for the guy flipping burgers? The goal (so to speak, since you can’t have a goal without consciousness) of capitalism is not full employment, it’s profit. Profit necessarily concentrated in the hands of some and less in others. Right? So if 90% or 70% employment is working out just great for the people at the top, what would impel them to alter the situation? Capitalism with 10% unemployment is working just great for the Walton family. I bet capitalism with 20% unemployment would work just great for them, too. Were they noticeably better off with full employment?
How about a reductio ad absurdum for illustration. Dave Schuler builds a robot which provides all he wants and needs and is capable of consuming, forever and ever, and even does great dental work. He spends 10 bucks building it, and now it cranks out 1000 bucks a day in goods and services. Why does Dave Schuler hire Tasty Bits and give some portion of his all to Tasty? The answer is he doesn’t. If Dave has 100% of everything he wants, he doesn’t hire Tasty.
Let me walk it forward. Let’s say the top quintile has these same lovely robots. Why do they hire the remaining quintiles? You only hire someone because you need their services, and if all your needs and wild desires are met, isn’t the rest of humanity essentially surplus to you? Unnecessary?
Back to real life: 50 years ago I’d have had to hire portions of a research librarian, secretary, travel agent, banker, mail carrier, etc… to do what my iPhone does now. The equivalent say, of a full-time employee plus a part-timer. How many people were required to design, build, market, etc… the device and apps I use to replace those workers? Divide that number by the total number of iPhones and app developers and I’m employing what, a hundredth of a Chinese assembly line worker and a tenth of a coder?
And I like it that way. I get no back-talk from my iPhone. It works 24 hours a day. So, why, again, am I going to be hiring? If the Waltons are happy and I’m happy and Dave is happy why are we giving Tasty a job? He’s not doing anything for me. (No offense, Tasty.)
Is there something I’m missing beyond “It’s always worked before,” and “Have faith?”
One other point, then I’ll stop. Tasty, you say this argument has been going on for 600 years. Okay. And during those six hundred years we regularly disposed of surplus workers by means of war, starvation and famine. We’re no longer doing that.
Further, a worker used to be a worker from age 10 to age 40 when he’d die of old age — if he made it that long. 30 years of production. I’ve already worked 43 years. If the prostate doesn’t kill me, I’ll put in 60 plus years — twice as long as I’d have worked a century ago. Simply by not dying we create more potential workers.
So, number of potential workers up by simple virtue of not dying of plague or starvation and thanks to nutrition etc…. Correct?
We deal with this in part by limiting our work weeks. People used to put in six, even seven days a week. Now it’s usually 5. We used to work from sunrise to sunset, now it’s normally 8 hours. (Give or take.) Vacations didn’t exist for regular people until very recently. We’ve excluded children from the workplace and keep them in extended childhood to age 21. Are these not adaptations to the simple fact that we don’t actually need as many workers as we have? You certainly can’t argue the opposite, that we created vacations and weekends because we were short of workers.
All of the issues that Michael cites have been in place for an awfully long time and yet employment increased despite them. Call me crazy, but I’m not so arrogant to believe I happen to live at the exact moment in time when “the jobs ended.” Further, based on prior comments it seems his solution is to put the unemployed on the dole and label them our national pets. Scary.
I look more to horrible policies as job crushers. Just look at the current administration or the corporatist Republicans and their Solyndra’s or ObamaCare or GM bailouts or bank bailouts or regulatory burden. And then of course, there are immigration policies for “the jobs we won’t do.” Misallocations of ginormous proportions. In many ways this is a self inflicted wound.
Before declaring the end of the economic world as we know it we might want to question our policy folly.
I’m worried about low-skill workers. I think the situation really is different with all the different pressures – global competition/outsourcing, automation, immigration, bad policy. I am not as certain as Dave or Drew that things will turn around for this class of people. Better policy would certainly help but I don’t think that is sufficient. Maybe someone will invent new services that require large numbers of domestic low-skill laborers, but right now I just don’t see it happening. This is a trend that isn’t unique to the US either.
@michael reynolds
Sorry for the delay.
The “natural laws” are a man made construct to better understand the physical world. Science is based upon direct or indirect observation, and a rigorous process is applied to form the laws. Part of the scientific method is falsification. A significant amount of time and energy goes to proving the theory false.
The same rigorous process can be applied to the human animal. Once this is done, certain laws will begin to emerge. Humans will try to obtain as much power as possible. We are in a lull period for war. There will be major wars as long as human animal is not extinct. Humans will try to obtain as much stuff as possible. No matter how much a person acquires, a person will try to acquire more.
Any economy more extensive than a subsistence economy works because of human greed. The ability to save allows people to invest and lend. This combination means that the number of products will expand not contract, and this is what we find throughout history. In free societies, the number and variety of available goods is substantial.
Because goods and services must be manufactured, there will always need to be somebody to produce them. There will also need to be people to invent these goods and services. In addition, there will need to be people to manage the process. Many potential products do not get produced because there are better products but not enough manufacturing capacity to produce them. Workers unemployed in one industry will be available for another.
“Free market capitalism” is based upon these principles. It is a man made construct used to understand human economic activity. As such, the profit motive is not imposed upon society. It is part of any human society. The 99% are trying to profit as much as the 1%, and both need each other more than they realize.
In the case of Henry Ford, he was competing for workers, and he needed them to be reliable. In order to obtain them, he relied upon human nature, and he paid them substantially more than the competition. He paid as little as possible to obtain reliable workers. Henry Ford was a shrewd businessman, and he knew the value of PR.
The workforce is based upon the number of humans alive, and as it becomes harder to sustain a large family, the family will become smaller. This is why the population explosions never occur. If the present economic conditions are permanent, humans will adjust.
Society can and does sustain people who would otherwise not be able to live. This is supposed to be temporary help, but in too many cases, it is lifelong. A wealthy society can sustain a substantial number of people, but there are limits. At some point the number of working people needed to support the non-working will exceed the number of people actually working.
By taking the wealth of those with it, the society can continue for a while longer, but at some point, the cupboard is bare. War is one option that is available to use the available workers, and it has been used as a growth industry for many nations and empires.
Unless society pays the unemployed at the same level as an employed person, the number of goods purchased will decrease. As the number of goods decreases, the number of employed robots will decrease. Some of those with decreasing wealth will try to find new investment opportunities to increase their wealth. Some of the unemployed humans will invent new products, and these will allow new employment opportunities for robots and humans.
This is the point where I believe where we diverge. I do not believe that robots can ever function without humans. Unless robots attain consciousness, they will never be able to create. They will be nothing more than a million monkeys with a million typewriters banging keys to produce written works.
You have mistaken me for somebody else. An economy can never be managed properly, and any attempts will increase the efficiency of the managed economy. Even the most efficient economy will have some unemployment. What the natural number is, I do not know, but in a managed economy, it will be higher. People who believe that an economy can be managed efficiently tend to view the future as an extension of the present.
Furthermore, I do not advocate for a libertarian or laissez faire economy. There need to be some regulations to provide a framework within which businesses can function. Not allowing polluting is reasonable. Saving a minnow is not. Government can facilitate business, or it can stifle business.
As Dave has pointed out, there are many new occupations that did not exist 50, 30, 0r 10 years ago, and many of the people your iPhone put out of work have found new jobs. It is not pleasant, but an unmanaged economy will evolve to fit the circumstances.
Also, the workplace can be modified for low-tech workers. When fast food restaurants could not find enough people who could add, they did not hire college grads. The registers were modified to calculate the change. The registers also have pictures so the cashier does not need to know prices. High-tech workers create modifications to the workplace, and this allows the low-tech workers to be employed.
I think I hit on your main points. This has gotten much longer than I intended.
@michael reynolds
In regards to not being able to use the past to predict future human behavior, you will need to apply this consistently.
There is no reason why a US invasion of Syria would not result in the US being hailed as heroes. Cutting off welfare payments could be what wins the War on Poverty. We cannot know that repealing all civil rights laws will result in a return to Jim Crow.
Remember, it could be different this time.