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Guest Post: Inequality And The Decline Of Labor
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Inequality has many sources, but political and technological dynamics are key factors.
You may have seen this video on Wealth Inequality in America, which has gone viral. I have shown the same data for years in charts and discussed it at great length: Made in U.S.A.: Wealth Inequality (July 15, 2011).
The bottom 80% of American households held a mere 7% of these financial assets, while the top 1% held 42.7%, the top 5% holds 72% and the top 10% held fully 83%.
Here is a snapshot of total assets by category:
"Other assets" include Treasury and corporate bonds, favored holdings of pension funds and the wealthy due to their relative safety and guaranteed yield.
Here is a snapshot of stock ownership:
No surprise there: the top 1% owns roughly 40% of all stocks, and the top 10% own 81%.
Wealth comes from earned and unearned (rent, dividends, etc.) income and capital appreciation, so it's no surprise that the income of the wealthiest segment has also far outpaced the lower 95%:
I have long held that the greatest source of wealth inequality is political: those with great wealth have captured the for-sale machinery of governance, and "persuaded" the Central State to carve out quasi-monopolies and cartels that enable artificially high premiums. They also buy subsidies, exceptions and tax breaks for their income streams.
This is the result of a dominant Central State and an electoral process that lives and breathes cash and lobbying.
In other words, the primary source of wealth inequality is political corruption and an overly powerful centralized State that can grant monopolies and enforce cartels. For example, Attorney General Holder admits megabanks are ‘too big to jail’.
Setting aside the fact that the financial and political Elites are two sides of the same Aristocratic coin, we find an erosion of middle class jobs and wages.
Many observers (including myself) have noted that robotics and networked software are replacing both unskilled and skilled labor at a faster clip than technology is creating jobs. Some believe the rise of robots and software pose little threat to human labor, for example: The robot menace:
As technology improves, Mr Autor writes, a pattern emerges. Machines take over routine tasks like repeated number-crunching or the welding of car parts. Such jobs can be programmed into machines using detailed, specific instructions. Displaced human workers are then reassigned to do more improvisational or intuitive work. At airline check-in counters, say, computers are displacing employees from mundane tasks like printing boarding passes. That makes it easier for the humans to respond to unexpected problems like cancelled flights or changed itineraries.
A faster pace of "jobsolescence" could create a huge number of niches like that: human workers needed to facilitate the automation taking over many routine tasks.
This sort of article never gets around to acknowledging the obvious reality: that the number of airline employees "doing improvisational work" is considerably lower than the total number of employees that once did both improvisational work and the duties that have been replaced by networked machines and software.
In the lived-in world these analysts apparently avoid, costly human interactions in many settings are increasingly rare, and this elimination of waiting to interact with an employee is a great boon: print your boarding pass at home, no waiting.
In airports, the only human interaction required in most cases is Homeland Security. In retail settings, self-checkout elminates the need for all but a thin slice of "improvisational work."
Developing economies often have a great many people available for improvisational work, but their pay is very low, as improvisational work does not carry much of a premium when labor is in surplus.
Few commentators dare wonder if the entire model of distributing output via wages is broken. The implicit assumption is that there will always be an unmet demand for labor of all skill levels.
This assumption has two ideological flavors:
1. This demand for labor only comes alive when the price of labor is free-floating, i.e. price adjusts for supply and demand. In other words, if I won't pay $15 an hour for someone to mow my lawn, I might hire someone to do the work for $5 an hour. This is the free-market perspective.
2. Education is the key, as the higher the skills and knowledge base of workers, the more they are worth to potential employers. This is the progressive perspective.
To the degree these are ideological, they are unhelpful, as "believers" are blinded by their respective convictions to any concepts outside their circle of faith.
While it is true that the market will distribute labor and wages, a huge imbalance i.e. massive labor surplus, opens the door to exploitation by those with scarce cash to pay for labor.
As for education, I have often pointed out the fallacy in this assumption: training 100,000 people to become PhDs does not automatically create 100,000 jobs for them. Granting 100,000 advanced degrees in chemistry does not create jobs for these 100,000 newly minted chemists. The demand must be organic, i.e. employers see some way to generate $200,000 of value in the marketplace from paying one of these graduates $100,000. (Recall that the pay scales for advanced degrees are high, so the bar of value creation is also higher.)
There are saturation points to all high-skill labor categories. At some point, there is no need for more physicists, attorneys, etc. because there simply isn't enough demand for their skills.
So education is not some sort of blanket panacea to a systemic surplus of labor.
There are many forms of labor that have so little value or the value is diffused to the point that no one will pay to have the work done.
Consider building a free bikeway. Since there is no income stream generated by the bikeway, no enterprise will pay for the bikeway. The city labor contracts require paying workers $75,000 each (or more, once all benefits and pension costs are included), and the diffused benefits to the city often do not justify this major expense.
As a result, the bikeway never gets built. The same applies to picking up litter throughout town; it isn't cost-effective to pay people $75,000 to pick up litter, but since there is no incomes stream, then private enterprise can't do it, either. So nobody does it, other than prisoners (community service) or random unpaid volunteers.
In other words, there is a lot of work that could be done or needs to get done that is not cost-effective for either the public or private sector.
The ideal scenario in a State-dominated consumerist economy is the complete commoditization of labor, meaning people are wealthy enough to pay others to do everything for them. The ideal consumerist household earns about $200,000 a year (bare minimum) and pays others to: walk their dog, bathe their dog, clean their house, watch their kids, take their elderly parents down to the Seniors Center, teach their kids martial arts, piano, dancing, etc., tutor the kids when needed, maintain their house and prepare their meals.
In this scenario, there is always plenty of demand for a variety of skilled labor because the wage earners make so much money doing some high-skill job that they can afford to hire a veritable army of helpers and assistants to manage everyday living.
This is the fantasy scenario of all State-dominated consumerist economies because the high-earning household distributes virtually all its disposable income to downstream labor: the State gets to tax every wage and every transaction, and everyone earning a wage has money to spend on goods and services, keeping money velocity and tax revenues high.
There are two problems with this: one, only 5% of households make enough money to support the commodification of labor on this scale (The top 5% of households, three-quarters of whom had two income earners, had incomes of $166,200 or more: Affluence in the United States), and two, many Americans don't want jobs as domestics, dog-walkers, etc. Their expectations are far higher than what the labor market has to offer.
In other words, everyone wants to be in the top 5%, but the number of positions paying these wages is limited. Training 50% of the populace to perform the top 5% of jobs does not mean 50% of the populace will magically earn top 5% wages.
As a thought experiment, suppose we trained 50% of the workforce to be doctors, attorneys and PhDs in STEM (science, technology, engineering, math). Would the economy magically create jobs for 75 million doctors, lawyers and PhDs? Unfortunately, no. The number of positions requiring this level of training is limited by the demand, the money floating around to pay for these skills and the value created.
Let's return to the starting observation: Few commentators dare wonder if the entire model of distributing output via wages is broken. Those few who do dare wonder if there simply won't be enough paid work to go around have a conventional solution: the Central State should tax the remaining wage earners (and everyone's unearned income) and pay everyone without a job a guaranteed annual income.
In the State-dominated consumerist economy, this is the only possible conceptual solution, because it gives the State more power and distributes enough income to keep the consumer-based economy well-greased.
Is there no other model? I believe there is: an economy based on the forgotten decentralized, networked foundation of society, the community. In my recent books Why Things Are Falling Apart and What We Can Do About It and Resistance, Revolution, Liberation: A Model for Positive Change, I identify the three fundamental components of society: the State (government), the marketplace and the community, i.e. the non-State, non-marketplace functions of family, neighborhood, church, community group, fraternal organization, etc.
An economy in which surplus is distributed to decentralized communities rather than being concentrated in the Central State and its financial Elites, where the spoils are divided up according to bought-and-paid-for political favoritism, is perhaps the most efficient, practical, sustainable and fair distribution system possible in an era of structural labor surplus.
Most people have difficulty even conceptualizing this framework because they have internalized the dominance of the State. Community has withered to the point it has lost experiential meaning; it has ceased to exist in an economy where 50% of the populace receives a payment from the State. Community has been reduced to a myth that receives lip-service from politicos and others in the State's food chain.
When the current system of State-enforced inequality collapses, we will collectively have to re-establish the framework and meaning of community, one piece at a time.
Subscribers and major contributors will hear more about these topics in the weekly Musings Reports.
Part II Roundtable discussion with CHS, Gordon T. Long and Bill Laggner-- Central Banks: Perception of Omnipotence (27 Minutes, 43 Slides)
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Me thinks Darwin is in charge....Adapt or perish....The weak get eaten...
“It is not the strongest of the species that survives,
nor the most intelligent that survives.
It is the one that is the most adaptable to change.”
Charles Darwin
Socioeconomic Darwinism confuses what is the case in the natural world with what ought to be the case in the world that is under human's deliberate control. This critical thinking error is known as the naturalistic fallacy. 'Might' and 'right' are two different things so don't confuse the two.
Once I can grow it in my backyard or make it in the garage and sell it at my front curb I will be happy.
Capitalism would be great if I could do it too.
Decentralize, local cottage industries, specialty products. Despite all our "choices" the monopolies of our times (including local ordinances, certifications, licensing, permiting, payola payola payola) stifle innovation and initiative.
NWO. yes, I'm going there. The top 1% and their flunkies have it all worked out. reduce the labor pool by 80% or so. depending which faction they're on, fascists opt for quick genocidal methods, war, plague, socialists for gradual eugenics, gmo's, toxic exposures, reduced fertility rates. The elites stay at the top. flunkies get to be retainers and court jesters, the remainder get to be serfs. just like the good old days of feudalism.
One subject that is occasionally touched upon but is a major problem is OVER POPULATION! I married young and started working for $64 a week. When I packed it in, it was $1400 a week. Popped out 4 kids and just made it. What if I popped out 15 kids? It's no different on a global scale. We kept the game going on credit but now the gig is up yet everyone is trying to figure out how we get back to where we were. We can't go back and eventually everyone will accept that. Unfortunately, only after making things worse. Gold standard? I have some gold but most don't. If we were to go to a gold standard, thet $50,000 an ounce figure would have to prevail. Yup, hyper-inflation but anyone without gold is screwed. Can't pay 7 billion people enough to live on and there's not enough gold to cover that amount even if we could. There's just too many people and nobody's gonna volunteer to die. I'd love to volunteer a few though. I don't know exactly what's going to happen but as I read here every day, it ain't gonna end well.
Since OVER POPULATION! is your biggest issue, maybe this will cheer you up:
"the rate of global population has slowed. And it’s expected to keep slowing. Indeed, according to experts’ best estimates, the total population of Earth will stop growing within the lifespan of people alive today. And then it will fall."
http://www.slate.com/articles/technology/future_tense/2013/01/world_popu...
And regarding the debt problem, nothing a good old Jubilee and mass destruction of wealth can't solve! It'll help with the inequality problem as well!
Don't normally revist my post but thanks for the link. I think it would be too little too late. However, take heart. The radiation leaking from the Fukushima meltdowns that will continue for thousands of year will not only solve the OVER POPULATION problem, but spur population growth initiatives.
I'm not buying into the zero sum game presented in the article much less the fallacy of automation putting the majority of people out of work.
In 1700, no one in the US imagined there would be 300+ million people in 2000. No one imagined cars, trucks and airplanes. No one imagined nuclear power plants, a phone in every home much less a phone in your pocket. Human imagination and opportunity are only limited by the litigative busy bodies in government.
I would remind everyone that until the end of 2006, unemployment in the US was 4%, the annual budget deficit was dropping, then Democrats took power in January 2007 and it went downhill ever since. Those are indisputable facts. Elections have consequences, this is a republic and you get the government you deserve. The American people got exactly what they deserved for being gullible. As Einstein was reputed to say, the definition of insanity is doing the same thing over and over again expecting a different result. All politicians are not the same. It's time to grow up, stop your whining and take responsibility for the outcome. If you vote Democrat/Socialist in 2014 you deserve more poverty and unemployment.
So, pay no attention to that little Global Financial Crisis that happened before "the Democrats took power in January 2007"? You think that little detail would have been fixed up quickly if the other half of the Duopoly had won? How would that have worked, genius?
Like it has always worked...when you don't interfere. The Democrats promised to lower the price of gasoline in the 2006 election cycle and what was their first action when taking control? It was to hold witch trial hearings blaming the oil companies instead of taking responsibility and leadership as W did when he rescinded the executive order on banning off shore drilling.
Democrats NEVER followed through even though they had control of Congress. The result was a temporary reduction in the price of gasoline until it became clear that Democrats would continue to obstruct domestic oil and gas development. Why? Because they wanted the price of gas to go up because of their crony green contributors. The Green Industry is neither cost effective or mature enough to supply America's energy needs outside of niche areas without billions in subsidies, tax credits and mandates. After Obama took office in January 2009, the price of gasoline doubled. These are indisputable facts.
Had the Democrats kept their promise in 2007, the price of gasoline would have never gone over $2.50/gallon and the resultant price shock would have never caused millions of people who are economically disadvantaged to loose their jobs. You might prefer to ignore the facts but that doesn't change the order of how the dominos fell. Gasoline Price hike > Massive unemployment via the recession > Mortgage Debacle.
You be correct to point out the failure of the banks in lending terms trapping people of low economic means in loans they could not pay back, but remember Obama's friends Rahm Emmanual and Franklin Raines were the CEO's of Freddie and Fannie who set the terms to buy those loans from the banks. Had it not been for the greed of Emmanual and Raines reaping millions in bonuses for themselves under the guise of social justice, that recession would never have brought about the Mortgage debacle. Barack Obama as the lawyer for ACORN forced Citibank to make liar loans in the name of diversity. Again, indisputable facts.
The facts are Mr. Genius is that continued meddling in the economy under the guise of social justice harms the poor. The solutions are obvious but not politically correct > unleash the oil and gas industry & abolish Freddie Mac and Fannie Mae to let the economy correct the imbalances. Democrats will never do these things because it would undermine their tax revenue plans (carbon tax) from global warming and cronism of Green Energy.
"I have long held that the greatest source of wealth inequality is political:"
Hmmm, now where have I heard that before...?
that's the whole problem, right there.
everythingin this society is so topsy-turvy that you have to be obscenely wealthy to have the priviledge of doing real work.
if you are poor in this culture, you are forced to sit on the couch all day, consume vast quantities of pizza and frozen french fries and coca-cola, and to watch tv for hour after hour with no respite ....
Unless you are too poor to have a couch, a TV and an appliance and electricity to cook that SNAP food, which hopefully got you through the month.
You have some serious misinformation about what welfare provides for in this country.
The "Last Ditch of Capitalism"
http://www.wealthandwant.com/docs/Andelson_HGRC.html
Counterpunch:
Where is America’s Hugo Chavez?
"Two events coincided this week that illustrate the crisis of political economy in the capitalist West—the premature and intensely sad death of Hugo Chavez and the trite idiocy symbolizing the class warfare declared by the rich against the rest of us as the Dow Jones stock index reached its highest point ever. Where Mr. Chavez dedicated (and likely gave) his life to improving the lot of Venezuela’s and the regional South’s poor and building the infrastructure of real economic and political democracy, America’s ‘liberal’ President Barack Obama claimed the right of extra-judicial assassination of the citizenry at his whim while ‘sequestering’ the economic interests of poor and working Americans to bolster the already substantial fortunes of the pirate financiers and industrialists he serves. To the political ‘left’ that voted for Mr. Obama, the contrast is there if you care to see it."
read the rest at http://counterpunch.com/
Yet another article providing good analysis of the problems, followed by bullshit idealistic solutions.
The problems we have are going to result primarily in more genocidal wars, along with democidal martial law, AFTER which nothing left will be remotely close to being the same as it is now ... We may well get back to decentralized communities, but only AFTER the systems go through collapse into chaos, causing mass murders.
What peeves me is when these high and mighty elitists and financiers discount the difficulty and complexity of blue collar jobs in the real world. Many of these jobs actually require a lot more problem solving and strategic thinking skills than people who don’t do them realize. I challenge everyone on Wall Street to calculate the compound angles for a flat cut on crown molding when the wall angle is 88 degrees instead of the presumed 90 degrees. I bet less than 1% of them could ever figure it out, and most of those could only do it with considerable thought. And guess what, size matters. When the crown molding is seven inches or more you have to make the adjustment or the joint will look like shit. Surprise assholes, in the real world things can be too big and fail.
I challenge everyone on Wall Street to calculate the compound angles for a flat cut on crown molding when the wall angle is 88 degrees instead of the presumed 90 degrees.
I'm certainly no blue-collar tradesman, but the way I have dealt with such issues in the past is to use a short scrap piece of the moulding and mark it with some kind of writing instrument. There's no calculation involved if ya just build a visual guide.
But sure, if the average professional woodworker would pull out his laptop and open up a CAD program to model the thing for better results, that'd be why they get paid for that shit and I can only do it well enough for myself.
No solutions apparent here, but a good start would include repeal of the 16th amendment where, except for defense and true interstate commerce functions, taxation would be returned to competitive individual states.