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Guest Post: Why the Job Market Will Continue Shrinking

Tyler Durden's picture





 

Via Charles Hugh-Smith of Of Two Minds blog,

The paradox of an advanced post-industrial economy is that the number of jobs needed declines even as the cost of living rises.

The fundamental dynamic of America's job market is simple: we need relatively few workers to provide the absolute essentials of life even as the cost-basis of the economy inexorably rises. In other words, there are fewer jobs even as the costs of maintaining a "middle class" life rise.

Let's start by observing how all the financial data in the world does not necessarily describe the primary dynamics of an economy. There are a number of factors that cause this disconnect between the primary forces at work beneath the surface and the data.

One is that economists tend to focus on situations with abundant, easy-to-interpret data. If you're only looking for roses, then you ignore everything that isn't a rose. So economists seek dynamics that can be easily explained by available data, and financial factors that they are paid to examine. Everything else is ignored, especially if the act of examining it casts a skeptical light on a self-serving Status Quo.

One key reality that is rarely if ever discussed is that the number of workers needed to provide the bare essentials of life to the 313 million residents of America is modest. Let's stipulate that bare essentials include food, heat in winter, clean water, sewage and waste disposal, public health (innoculations against pandemics, etc.), public safety and enough energy to fuel these essentials. If life were suddenly reduced to these basics, and no energy were available for anything but these essentials, then how many full-time workers would be needed?

Roughly 1% of the workforce raises the vast majority of our food, and a modest number of workers maintain the water and sewage systems, natural gas pipelines, furnaces, etc., A similarly modest number of workers maintain public health and safety and provide transport of essentials.

Of the official workforce of 154 million, how many fall into this "absolute essentials of life" category? Perhaps 10% or 15 million people? Even if we double that to include all sorts of non-essential but "critical" goods and services, then that's perhaps 30 million workers, roughly 10% of the population and about 12.5% of the real workforce of 240 million (the Federal government has relegated roughly 88 million working-age people to the zombie-status of "not in labor force" to keep the official unemployment rate low).

We all know the dynamic behind this dramatic reduction in the number of people needed to provide the essentials of life: enormous increases in productivity based on abundant fossil fuels and advanced technology.

Even well-made infrastructure requires maintenance, but this process of replacing aging transmission lines, water mains, highways, refineries, etc. requires a relatively modest number of workers because machines do much of the work.

If you doubt this, stop and count the workers on a major repaving project or the construction of a highrise building. A very large multi-story building is generally assembled by about 100-150 workers, more during certain stages and less during others. Most of the components are fabricated in factories where machines do most of the work.

Ask how many frontline police officers are on your local force. Cities of a few hundred thousand might have 200-300 officers, larger cities might have 800-1,000. It's not a large number.

On a macro-scale, the challenge in advanced economies is creating "make-work" for 80% of the working age population. This is not an issue in developing economies, as most of the workforce is non-market and does not participate much in the cash economy. For example, only 7% of India's vast workforce of hundreds of millions of people gets a paycheck. The other 93% survive via barter, raising their own food, a bit of trade or occasional labor for cash, etc.

Before industrialization, roughly 50% of the U.S. population and workforce lived and worked on farms. The surplus of their labor fed the other 50% who lived in urban areas, and that cash supplied the few essentials the rural dwellers needed.

The paradox of post-industrial economies is that the cost of living rises even as the efficiencies of providing essentials reduces the number of essential jobs. Some of this may be due to Baumol's Disease, a topic I have covered before (Productivity, Baumol's Disease and the Cliff Just Ahead, December 8, 2010).

Baumol's cost disease is named after economist William J. Baumol, who with William G. Bowen described a critical difference between goods-producing and labor-intensive work.

Baumol and Bowen noted that if productivity/wages rose by 2.2% a year and costs rose by 2%, then over time workers could buy more of everything--goods, services and government services paid for with taxes.

They also observed a critical, long-term difference between the rates of productivity growth in goods-producing industries and labor-intensive industries such as nursing and teaching. (I would also include the Armed Forces as an example.)

Goods-producing industries could achieve very high productivity growth as labor-saving automation and supply-chain efficiencies scaled up, while nursing and teaching required the same number of hours with patients or students as in years past. In other words, productivity in labor-intensive services has intrinsically lower rates of productivity increases than goods-producing industries.

Baumol and Bowen then described the peculiar result of this: as GDP increased due to goods-producing improvements in productivity, the relative share of low-growth-productivity services would rise.

Thus machine-produced TV sets and computers fall in price while labor-intensive healthcare costs rise.

While this is undoubtedly one causal factor, it is not the only causal factor. I think there is an implicit assumption being made on both a policy and cultural level that higher costs are acceptable because it "means more people are being put to work."

So when the cost per military fighter aircraft leaps from $56 million each (the F-18) to $200 million and $300 million (the F-22 and F-35), then we accept this as OK because we assume more jobs will be created as costs rise.

Gross waste and inefficiency is thus accepted as the "cost" of creating more jobs.

The problem with this implicit pact is that a rising percentage of these jobs are friction: they do not increase productivity or wealth, they merely consume wealth. In the case of fighter aircraft, the cost has leaped so dramatically that it is now apparent the nation cannot afford a fleet of these hyper-costly (and apparently troubled) aircraft.

Will 100 of these aircraft prevail over 1,000 dirt-cheap drones? How about 10,000 drones? If the future of warfare is increasingly powerful unmanned networked drones (and it clearly is), why are we spending $1 trillion+ on hyper-costly aircraft that are essentially designed for a previous era?

We're not building miltary dominance with these programs, we're sinking money down ratholes, just as we're not "buying" more health with our 17% of GDP spent on sickcare, we're simply managing more chronic diseases.

In the case of healthcare, patients being issued $1,000 a month in medications are not necessarily "getting better," rather many thousands are dying of accidental overdoses. Though the U.S. spends twice as much as other advanced democracies as a percentage of GDP on healthcare, Americans are arguably less healthy in aggregate than the citizens of Japan and Australia, nations that spend about 8% of GDP on healthcare while the U.S. spends 17% of GDP.

These are but two examples of trillion-dollar friction that is sapping the nation's wealth and vitality. Since the nation cannot actually afford to spend $1 trillion on the F-35 program or $2.5 trillion every year on a healthcare system of which at least 40% is fraud or paper-pushing, then we have been borrowing $1.5 trillion every year to maintain the illusion that these trillion-dollar sinkholes are sustainable.

The solution to the post-industrial decline of labor is not unproductive "make-work" jobs and borrowing trillions of dollars until the system implodes, it's lowering the cost basis of the entire economy and culture. The central paradox of an advanced post-industrial economy is that the number of jobs needed declines even as the cost of living rises. The only way out of that paradox is to radically reduce the cost-basis of the entire economy, which means eliminating all the systemic sources of unproductive friction.

I will discuss this further in the days ahead.

 


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Tue, 05/08/2012 - 19:19 | Link to Comment Seer
Seer's picture

Henry?  Henry Kissinger, is that you?

Who do you think is of value?

Tue, 05/08/2012 - 23:21 | Link to Comment Bartanist
Bartanist's picture

What small minority?

One of the premises of capitalism is those that provide capital realize greater benefit from the labor of others than those who provide the labor.

Who is subsidizing whom?

Tue, 05/08/2012 - 17:00 | Link to Comment AchtungAffen
AchtungAffen's picture

"which means eliminating all the systemic sources of unproductive friction"

 

As finance? That's one damn suckler of the economies teat.

Tue, 05/08/2012 - 17:13 | Link to Comment GreatUncle
GreatUncle's picture

Like this comment as it create a paradox.

"lowering the cost basis of the entire economy and culture"

Keynes stlye economies require an ever inflating economy to deflate debt away. Currently all countries are in a quandry and cannot pay down debt and it is increasing.

The first country that used a Keynes style economy as a get out of jail card all of a sudden requires all other industrial countries to use the same system.

You end up caught in a system you can never end as there is never enough money to pay the absolute debt so you carry on. Where it gets worse is if the rate is inflated then to try and reduce it will create a recession.

What is the maximum, not in number in the value a person acquires in a lifetime through work does not deflate away to nothing from when they retire until after they are dead.

Tue, 05/08/2012 - 19:23 | Link to Comment Seer
Seer's picture

While it's Keynesian economics that's driving things, I don't think that the paradigm of "perpetual growth" ("growth is the be all end all") is the sole domain of the Keynesians.  As such it's always going to be a march toward the inevitable cliff.

Tue, 05/08/2012 - 19:41 | Link to Comment Rynak
Rynak's picture

Quick inspiration. "Growth" (actually, expansionism, but let's keep stuff simple for now) has been a "get out of jail" card, for entire human history so far, up to the so called industrial revolution.

Think about this: The entire time in which human evolution - and especially cultural evolution happened - was, short of the last 60 or so years.... dominated of always being able to "compensate" issues, by simply being good at expanding territorial, natural and human ressources...

What type of "superculture" do you think this encourages? And what would happen, if the premises that were true all the entire ***** time, suddenly changed?

Pretty much all currently popular economical models.... be they similiar to capitalism, communism, socialsism, mixed stuff.... whatever.... all those popular understandings of models, are pregnant with a history, that no longer matches current reality. This has nothing to do with all capitalist or communist or whateveryoucallit ideals being generally false... it more has to do with the entire social mindset still being stuck in pre-industrial culture, and interpreting ideals relative to this viewpoint... and the massmedia as well as the elite enrouraging you to remain stuck in it.

Tue, 05/08/2012 - 20:44 | Link to Comment blunderdog
blunderdog's picture

Nice comment.  Anthropology is where it's at.

Tue, 05/08/2012 - 17:24 | Link to Comment GeezerGeek
GeezerGeek's picture

Talking of unmanned drones, has anyone else here read Keith Laumer's book "Bolo"? Mechanized, computerized, self-aware supertanks, as envisioned in 1976.

Tue, 05/08/2012 - 17:26 | Link to Comment amadeusb4
amadeusb4's picture

"The central paradox of an advanced post-industrial economy is that the number of jobs needed declines even as the cost of living rises. The only way out of that paradox is to radically reduce the cost-basis of the entire economy, which means eliminating all the systemic sources of unproductive friction."

Because wages keeping up with productivity is unthinkable? Also, as the poster child for systemic source of unproductive friction, Paris Hilton may have something to say about her trust fund not achieving the kind of return that her lifestyle demands.

The article was a grand spectactle of the kind of mental gymnastics it takes to not blame this on the capitalist class. I guess I should be happy with warfare making the list of "unproductive friction".

Tue, 05/08/2012 - 17:47 | Link to Comment dexter_morgan
dexter_morgan's picture

LOL, yeah, our version of facism since 1913 has had nothing to do with it.........

Tue, 05/08/2012 - 17:25 | Link to Comment Dingleberry
Dingleberry's picture

Here is the bottom line: the PRODUCTIVITY gained has been syphoned off by both government (thru taxation and inflation) and corporations (profits).  The NATURAL order of things should be a declining in price when productivity (mainly driven by technology) reduces the cost to produce a good or service.  Too bad that doesn't happen. Society could really benefit, even if wages were relatively low (like they are).  

Now look at all the "new" industries that have sprung up since tech has really got going and shredded the workforce.......cell phone salemen, barristas at Starbucks, tattoo artists.....the list is endless!  

Tue, 05/08/2012 - 18:06 | Link to Comment Rynak
Rynak's picture

No... what the article recognizes, is actually true.... at least for things neccessary for survival and by todays standards "basic comfort": Efficiency has gone up, which means that in theory, everyone has to work less for the same benefits without a reduction in purchasing power.

I explained this a dozen times by now, with an "island" example that every kindergarden kid could understand.

The problem is that at least in the midterm, it in corporatism is possible to "sell below price"....

Why would anyone do that? Let alone, why would the entire global lower-to-upperclass (excluding the elite) do such a thing?

The answer lies in the something so generic, that most people don't even realize it's existence anymore, let alone question it, or it's implementation:

The need to work to be granted the right of survival.

See, this model arose, when there was actually a shortage of workhour supply... when the only limits to growth and expansion, were "human ressources", territory and technology. A time where supply of work was actually a bottleneck on production.

In that environment, it worked perfectly.

But now, such an environment exists no more. We increasingly are living in an economy, where IN REALITY (as opposed to pretty much ALL economic models and fancy terms... which all are totally out of touch with reality)... we have an oversupply of available workhours, because via tech and industrial design, a lot of work can be done by machines.

The funny thing is that in theory and in a sane economy, this would actually be a good thing.... it means that everyone could now get the same usual stuff, while everyone having to work less.

BUT, existing economic infrastructure, power balance and more, cannot deal with this scenario. Furthermore, whenever a transaction is done, we have at least two parties who discuss the "contract"... for the contract to be fair and reasonable (which is THE core assumption of free market proponents).... both parties must be able to say no to unfair proposals.

BUT, how do you say no, if your survival depends on the transaction happening? How do you say no, if you literarily have a gun pointed at your head, threatening you with death if you say no?

How could this happen? Well, again.... that old doctrine: You must have a job to be granted the right of survival. Thus, and contract between an "employee" and an "employer", is biased from the start: The employee needs the employer, but the employer does not need this specific employee: Buyers' market!

So, with this biased established.... and then the economic premises suddenly changing and in theory requiring workhours to DROP, and wage/hour to RAISE.... what are the odds of this happening consistently across the planet?

What are the odds, that instead some groups (nations) on the planet starting a pricewar, to this way in the shortterm attract an oversupply of job-offerings? And what are the odds of other nations then joining into this pricewar, in a race to the bottom, this way escalating the deficit of PURCHASING POWER ever further......

And what are the odds, if there were some cartels that basically control all wealth.... that they would actually encourage the nations to further this price war globally, on credit of said cartels.... so that everyone on the planet would become indebted to said cartels.... by trying to outrun a change of environment in a way, that is similiar to fucking for virginity?

Tue, 05/08/2012 - 20:24 | Link to Comment Rynak
Rynak's picture

P.S. (since that post got at least some approval):

Above, i really only focussed on the problem/contradiction, but didn't propose any "solution".

After all, even if there weren't said global pricewar, and even if we would try really hard to "distribute" available workhours (instead of some working fulltime, and others being unemployed).... at least some people would for logistic reasons stay unemployed.

And this would of course cause social infighting, because if we were to solve this with plain "socialism" (aka throw money at the problem), some would get more without "investing" anything, than others. Sure, "throwing money at the problem" is an option for minor issues, because for minor issues, "plain redistribution" may actually be more efficient, than implementing a solution (reason: There will ALWAYS be inbalances, as small as they may be... and for small imbalances, the cost of implementing infrastructure to deal with them, is more costly than simply rerouting wealth).

However, i wouldn't call the mentioned unemployment problem "small".... not even with a national policy of reduces workhours per employee, as well as tarrifs and similiar "shields"....

...especially not looking into the future (even if one were to balance this stuff nowadays, the causes won't get any better.... which is to say: merely balancing it for today, would not actually provide any solution for the causes themselves).

So, what's my take on actually addressing the issue of someone possibly not being needed on the "free market"?

Well, i naively look at it like this: Here is someone who has a need (demand) and simultaneusly is able to provide workhours (supply).

Phrased another way: ignoring job qualification, the "imbalance" which this person suffers from (wants something, but is REJECTED to pay for it!!!!!!!), is actually a model anomaly. Macroscopic and mass-anything considerations, have no demand for him, even though he in theory would be willing to "JUST PROVIDE FOR HIMSELF, IF HE COULD".

Killer-question: Why can he not provide for his own survival needs??? Why are "unemployed" unable to satisfy their own demand, even though they'd be willing to "just do it themselves", if they were offered a way to do so?

What this IMO hints at, is actually a dual-market: An traditional capitalistic one, that - despite of the "individualistic" nature of capitalism - does not calculate as finegrained as individuals.

AND: on the other hand, a market of people falling through the capitalist matrix, even though they in theory would be willing to provide for themselves.

What am i hinting at? Well, so called "cooperatives" actually fit this bill quite well. At least in theory, cooperatives are concerned with their members sustaining themselves.... precisely the situation we're dealing with.

So, what i propose, is to rethink the role of cooperatives.... making them do more than merely a different legal form of free market capitalism. Basically, i'm proposing to let the so called "free market" do the majority of work.... yet letting the "drop-outs" sustain themselves quasi-communist style via well-networked cooperatives.

Tue, 05/08/2012 - 20:51 | Link to Comment blunderdog
blunderdog's picture

Bravo.

And check this shit out: all the elements and frameworks which enable the smooth operations of those "cooperative" entities already exist.  All you actually need is a small-number of like-minded individuals prepared to make some changes in their lives.

Someday this war is gonna end.

Tue, 05/08/2012 - 22:58 | Link to Comment Rynak
Rynak's picture

Actually - as easy as i would wish it to be- it isn't.

See, a popular impression of people (partially totally justified, partially totally unjustified), is that management as well as "design" means shit, and that instead, all the current borgs could just do all he "engineering and design, and management" of the upper ups.

Actually, yes they to some extend could do so: IF THEY'D EVOLVE TO BE MORE THAN THEY ARE NOW.

They aren't just now. And sadly, a whole lot has no intention to think "above his own role" (this is one of the "funny" dilemmas that i get to see all over again and again in "middleclass corps": The management recognizing that they cannot cope with it all, yet the "grunts" being prohibited from being able to think.... let along being SELECTED for partially being able to do the management's jobs).

But i'm drifting off.

Let me explain the situation with an analogy.... open source software.... a lot of (less experienced) open source proponents think, that just by providing the "grunt workforce" at all... let alone ignoring why and how it should form.... instantly will create an efficient project management team be magic.

which is to say: There actually are no coordination and management skills needed at all - drones can just coordinate and design efficient automagically.

To keep it halfway short: Not happening by immediate empirical evidence... and please let's not even think about it logically making no sense.

Sooooooo.....

Apparently, at least coordination skills..... even if not "designer skills"... os not something which everyone gets born with. Mind you, i'm NOT talking about the type of coordination that is plain "commandment from above (read: marketing)".... i'm simply talking about people being talented at organizing a team, and acting like an "interface" for the rest of the team.... i.e. translating different interessts, like having different types of specialists on the team.

Why am i mentioning all this stuff?

The environment and economic infrastructure you currently work in, has been designed to you NOT having to think about such things. The roles of "coordinators" have been filled with people not actually giving a fuck about what you, or even your customers want.... they have been filled with believers of a religion, that has crap to do with your concerns.

At this point of this post, it would really help if the reader had experience with open source projects, and lost some of the believe in them (yet also, is dreaming if what were possible, if they'd understand their shortcomings).

But since i doubt most readers have experience with this, i'll try to summarize it: Currently, if you haave a typical job, a cartel or subscribers of their religion are guding you and have the big picture. OR you're one of those said fellas, who actually do a good job at caring about your company and nothing else... said because, statistically, he/she will be fired as soon as he/she burns out being the only idiot caring about the well-being of your corp. So my question is: If you want to get rid of the parasites, and keep those actually caring.... what are you gonna do? More importantly: What will change about your occupation, if you partially have to share responsibility?

 

Wed, 05/09/2012 - 09:50 | Link to Comment blunderdog
blunderdog's picture

I didn't say anything about it being "easy."  I said all the frameworks are in place.

You can't expect everyone to have even rudimentary ability with all disciplines--the world is too complicated.  You can't even teach everyone on Earth to read, you certainly aren't going to get automatically-coordinated work-teams performing at "greater efficiency" than the currently-structured teams.

But that's OK.  We could even LOSE a fair amount of efficiency in the creation and distribution of goods and services and still provide more than adequate resources to every individual--that's the key realization.  If even only 50% of the global population was HAPPIER in a cooperative society, it would be worth attempting, even if no other benefits were realized.

I don't expect to see it, but it was realized 2000 years by a fictional hero named Jesus that we actually possess the capacity to create paradise on Earth.  Some 600 years before that by a guy named Siddartha.  Depending on your interpretation of the Upanishads, the Indians may have achieved that realization first.

But hey, none so blind as those who will not see.

So it's hard to coordinate open-source projects?  OK.  It's not easy to maintain the infrastructure of a top-down corporate tyranny, either.  That's why they sink such huge amounts of money into bullshit like "comfortable work environment" and "employee morale."  You end up with the inefficiencies being shifted from one place to another, that's all.  If there's a significant difference in overall productivity between self-directed teams and management-directed teams, it could be useful to get some quantification before worrying that it's all too hard to deal with.

Fri, 05/11/2012 - 00:37 | Link to Comment Rynak
Rynak's picture

Personally, i don't even think that your mentioned "50%" is neccessary..... if even just 10% were capable of thinking on the level of scale immediatelly above them (which does not need them knowing "everything"... just having an understanding of the next level up")... it could work.

So i personally actually see the requirements lower than you put them. Yet i'm sceptical of people in the *short-term* being able to provide just that. Sure, in the mid- or longterm, a culture could be created that makes people more inclined to think above the level of their own nose, even if just one level.

But this brings up the next delay: Such society-wide changes in cultures do not happen tomorrow, unless they are pushed hard on all communication channels. I mean, seriously, we here are talking about a fundamental change in social culture... we're talking about supporting something which has been suppressed for a long time: A 180deg U-turn.

So, while technically all the elements exist already.... on a cultural level society has been programmed to think the opposite way. And fixing this will require a big social environmental push, one way or another.... be it by design (it being "declared") or pure sudden survival neccessity (i.e. traditional economy crashing, and people suddely being required to think differently to sustain themselves).

This may sound like i'm argueing for something really surprising, but it actually is quite mundane: Current social mindset has been trimmed for the current economic order (Which is a steep absolute master-slave pyramid). Of course, any approach not fitting that order, would see resistance from the existing cultural mindset.

P.S.: After the fact, i honestly feel sorry about they way i originally responded to you - not just because of the many grammar errors - but also because i think i could have explained the "mindset"-problem of current employees in a way, that would have provoked a more useful dialogue.

Tue, 05/08/2012 - 19:32 | Link to Comment Seer
Seer's picture

"Productivity" is what, exactly?  Being busy?  People can rationalize just about anything as being "productive."  GDP measures destructive activity as a "plus!"

REAL "productivity" gains has primarily been the result of OIL.  Google "amount of man hours in a barrel of oil."

Our problem lies in our addiction to our own hubris.

 

Tue, 05/08/2012 - 17:38 | Link to Comment Westcoastliberal
Westcoastliberal's picture

A good solution would be to break up all the monopolies that have sucked the life out of the American job market.  And while we're dreaming, let's throw the banksters in prison.

Tue, 05/08/2012 - 19:37 | Link to Comment Seer
Seer's picture

"A good solution would be to break up all the monopolies that have sucked the life out of the American job market."

Robots have sucked the jobs out of the "American 'job' market!"

All you're doing is encouraging more tax breaks so that the corporations can high-tail it out of the soon-to-be-hostile foreign countries back to the US.  A few jobs at best.

The reality is is that it'll be more human brawn employed than human brains. This will be the result of diminishing energy.  Or, you can continue to believe that bringing "back" [robotic] jobs to the US so that the products can be exported to China (we have to pay off our debts!) is preferred?

‘More than any time in history mankind faces a crossroads. One path leads to despair and utter hopelessness, the other to total extinction. Let us pray that we have the wisdom to choose correctly.’ - Woody Allen

Tue, 05/08/2012 - 17:42 | Link to Comment Rynak
Rynak's picture

Math's says: Article's premise does not add up.... LITERARILY.

But hey, i'm getting a bit tired of explaining a basic school math problem over and over.... so i'll skip the "why?" this time. Maybe i should get a blog too, so that i don't have to repeat stuff over and over, and can instead just post a link to an FAM (frequently assumed myths) article.

Tue, 05/08/2012 - 17:47 | Link to Comment W10321303
W10321303's picture

M-O-N-O-P-O-L-Y creates prices above what real CAPITALISM would bring. This blessing of the sociopath plutocrats also reduces the number of jobs that would exist a competitive economy. Then we musn't forget the billions of $$$$$ that go to subsidize the lazy shiftless wealthy (Corporate Welfare) But, the 800 pound gorilla in the room is........

In news from Washington, the Republican-led House Budget Committee approved a plan Monday to cut at least $260 billion in social spending over the next decade in order to protect military spending. The cuts would target food stamps, child tax credits and Medicaid healthcare for the poor. The Republican bill also abolishes the Social Services Block Grant that provided $1.7 billion last year for programs such as Meals on Wheels. The full House is expected to approve the measure later this week, but it is not expected to pass the Democratic-controlled Senate.(democracynow.org)

The only way the sociopaths will 'CREATE' jobs is if they are allowed to bring back institutionalized chattel slavery.....Make work my ass

Tue, 05/08/2012 - 20:02 | Link to Comment Seer
Seer's picture

"M-O-N-O-P-O-L-Y creates prices above what real CAPITALISM would bring."

Doesn't capitalism look to accumulate/concentrate capital?  How could anyone be surprised that it would do anything other than condense in to less and less entities?

I marvel at how well BIG entities can leverage, but I also know that they cannot continue to do this.  I also know that the SMALL entities cannot compete (other than briefly*) because they can't leverage.  The leverage is all about being able to employ equipment over people, about being able to leverage oil/energy.

* And this is kind of the model, whereby the System is all about raising up smaller entities so that they can be swallowed by larger ones.  Yeah, sure, there are some anomalies, but on the whole this is how reality works.

Wed, 05/09/2012 - 09:53 | Link to Comment blunderdog
blunderdog's picture

Capitalism results in monopolies, yes.  It's impressive how many folks still haven't come to understand this.

Tue, 05/08/2012 - 17:59 | Link to Comment Precious
Precious's picture

This is the most insightful, constructive and rational articie of the year on Zero Hedge. 

Until people get a grip on these kind of economic, supply/demand facts, we will never have shared prosperity.

We have a monumental battle ahead as the ordinary population becomes no more than inconvenient baggage for the privileged class.

Tue, 05/08/2012 - 20:02 | Link to Comment Seer
Seer's picture

We have a monumental battle ahead as the ordinary population becomes no more than inconvenient baggage for the planet.

There, fixed!

Tue, 05/08/2012 - 18:00 | Link to Comment W10321303
W10321303's picture

 

March 23, 2012BRAZIL - Drought has spread from Argentina and Paraguay to Brazil and is hitting soy yields at a time of concerns that regional economic growth may suffer as pressures mount on commodity prices. Argentine yields of soy were affected by drought and labor disputes in that country are making farmers and grain traders jittery. Drought caused widespread economic dislocation in Paraguay, which was also hit by cattle disease. Analysts said drought-related developments in Brazil had led to lower yield estimates, slicing about 2.8 million tons off an original estimate of 67.1 million tons for this year’s harvest. The revised estimates are subject to further review, said the analysts. Soy oil has gained importance in the energy market as a feedstock for the booming international bio-fuels sector. Soy produced by Brazil, Argentina and Paraguay accounts for about half the world’s soy exports. Although current worries have caused spikes in prices and buoyed futures trade in Chicago, Latin America and elsewhere, underlying worries over the eurozone crisis and an economic slowdown in China continue to cloud the outlook. Some analysts predicted a 10 million ton shortfall in Brazil’s soy crop when compared with last year. –Terra Daily

But not to worry, the size of the population is on the verge of significant reduction - The first Tipping Point of Climate Change outlined in the study by Allianz Insurance .....coming soon....The prediction is 2015, however all of the so-called prediction of been off for 30 years

Amazon die-back - Several model studies have now shown the potential for significant dieback
of the Amazon rainforest by late this century and into the next century and that
ecosystems can be committed to long-term change long before any response is observable.
Any estimate of the cost of Amazon die-back is likely to fall far short of true costs but an

Amazon drought - In 2005, large sections of the western Amazon basin experienced severe drought. Recent studies (3) suggest that droughts similar to that of 2005 will increase in frequency from 1-in-20yr to 1-in-2yr and above by between 2025 and 2050 if stabilization at
450 to 550 ppmv CO2e is achieved (with a higher probability if not). The drought of 2005 resulted in a range of impacts including increases in wildfire (with knock-on effects including human health and closure of airports, schools and businesses), interference with navigation
(and therefore trade), reductions in agricultural productivity (with knock-on effects to industries servicing agribusinesses and food shortages) and impacts on hydroelectric power generation (which supplies 85% of Brazil’s electricity). These impacts reduced contribution to Brazilian GDP in affected regions including Mato Grosso do Sul, Santa Catarina, Paraná and Rio Grande do Sul.   http://www.boston.com/lifestyle/green/greenblog/report.pdf

If you are not a member of the Billionaires Boys Club, then they want you dead. They want your Social Security and all of your "Entitlements"

After all, THEY are the only ones who are entitled...."Let 'em Die, Let 'em Die in the gutter......

Tue, 05/08/2012 - 20:06 | Link to Comment Seer
Seer's picture

This can't be of any importance, otherwise the US presidential candidates and the MSM would be talking about it... (YES, this is sarcasm!)

Tue, 05/08/2012 - 19:00 | Link to Comment Sub Dude
Sub Dude's picture

An excellent book that goes much deeper into these and similar ideas is: The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future by Martin Ford

Some quotes from the book:

The current crisis has been perceived as primarily financial in origin, but is it possible that ever advancing technology is an unseen force that has contributed significantly to the severity of the downturn?

Put yourself in the position of a business owner and think of all the problems that are associated with human employees: vacation, safety rules, sick time, payroll taxes, poor performance…maternity leave. If an affordable machine can do nearly any routine job as well as a human worker, then what business manager in his or her right mind would hire a worker?

The reality is that a substantial fraction of the routine, specialized jobs held by average people—including many people with college degrees—simply do not really require the full intellectual breadth of a human being. This is the reason that a lot of jobs are boring. If computers can already beat the best chess players in the world, isn’t it likely that they will also soon be able to perform many routine jobs?

As we will see, technology is not just advancing gradually: it is accelerating. As a result, the impact may come long before we expect it—and long before we are ready.

At some point in the future—it might be many years or decades from now—machines will be able to do the jobs of a large percentage of the “average” people in our population, and these people will not be able to find new jobs.

an economy driven by mass-market production must ultimately go into decline. The reason for this is simply that, when we consider the market as a whole, the people who rely on jobs for their income are the same individuals who buy the products produced.

making a few people richer will not make up for losing a large number of potential customers…

extremely wealthy individual may purchase a very nice car, or perhaps even several cars. But he or she is not going to purchase 100 or 1000 automobiles. When income is too concentrated, it undermines the mass market.

 as nearly all businesses continue to automate jobs, at some point the decrease in the number of potential customers began to outweigh the advantages gained from automation.

Once this happens, businesses are forced to cut even more jobs, which eliminats even more consumers from the market and caused demand to fall still further.

What are the implications for our economy if a large fraction of these traditional jobs are ultimately automated away? Automated checkout lanes are currently in use at a number of retail stores. We can be sure that in the future, these will become more reliable, easier to use, and more popular. What will we do if someday a substantial percentage of the three and a half million cashiers in the U.S. no longer have jobs? What additional education and training can we offer these workers? And what jobs would it prepare them for?

The computer’s advantage arises not from the fact that it is genuinely smart, but because it is almost unimaginably fast. It’s natural for us to give this brute force accomplishment a lower status than the creativity and precise thinking exhibited by an exceptional human being. But the question for us here is: will that protect us from brute force algorithms that can do our jobs?

China, in spite of its low wage workforce, lost nearly two million textile jobs to improving automation technology between 1995 and 2002.

 

Much more in the book - very thought provoking. 

Please make an effort to read (books) and take notes. As Mark Twain once said: "The man who won't read books has no advantage over the man who can't read."

Tue, 05/08/2012 - 20:10 | Link to Comment Seer
Seer's picture

So, machines are going to take over my farm?  Well fine!  I suppose then that I won't bother to repair them then!  Entropy, machines are no match for it.

Tue, 05/08/2012 - 20:14 | Link to Comment Sub Dude
Sub Dude's picture

 

"In her book Travels of a T-shirt in the Global Economy, economist Pietra Rivoli tells the story of cotton farming in West Texas. Up until the 1920s, every aspect of cotton farming was highly labor intensive. Fields were ploughed with mules, and once the crop was planted, a constant backbreaking vigil was required in order to keep the weeds at bay. Harvesting required the availability of large numbers of workers at precisely the right time— before unfavorable weather conditions destroyed or reduced the value of the crop. Over the decades, however, the process has become increasingly mechanized. Today cotton farming in West Texas is almost literally a “one-man show.”  A single farmer with access to tractors, specialized machinery and chemical herbicides can now function almost entirely alone. No workers are required, and the labor content of cotton produced in West Texas is essentially zero. Obviously, not every agricultural sector is as automated as cotton farming, but there can be absolutely no doubt that the mechanization of agriculture in developed nations has resulted in a massive and irreversible elimination of jobs."

 

Ford, Martin (2009-10-05). The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future (pp. 124-125). Acculant Publishing. Kindle Edition. 

 

Tue, 05/08/2012 - 21:07 | Link to Comment Seer
Seer's picture

"but there can be absolutely no doubt that the mechanization of agriculture in developed nations has resulted in a massive and irreversible elimination of jobs."

Care to wager?

Agriculture has existed for over 10,000 years, and of all of this time oil-powered industrialized agriculture has only been around for about 60 years.  SIXTY FUCKING YEARS and you think (as voiced through someone else's voice) that this anomaly is the norm?  Ha, ha!

I think that we've learned from the failures of the cotton farming bubble.  And, I suspect the next-go-round won't be controlled by the likes of a Randolph Hearst (hemp will likely find its proper place [though my land wouldn't support it]).

Tue, 05/08/2012 - 23:03 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Agriculture has existed for over 10,000 years, and of all of this time oil-powered industrialized agriculture has only been around for about 60 years.  SIXTY FUCKING YEARS and you think (as voiced through someone else's voice) that this anomaly is the norm?  Ha, ha!

In another sixty years, half of the labor force will be working in farming or agriculture of some sort. We'll also be going back to the days when the produce available in grocery stores was dependent on what was in season.

 

Wed, 05/09/2012 - 09:58 | Link to Comment blunderdog
blunderdog's picture

I think you're right in the first point, wrong on the second.

We aren't going to *lose* the ability to move cargo from one part of the world to the other.  With a bit more intelligence to how such things are done, we could maintain a fairly broad variety of produce for most folks in the developed world.  One of the big problems now is spectacular waste due to poor signalling of demand from the customer to the producer/transporter.  This is relatively easy to address.

Tue, 05/08/2012 - 20:15 | Link to Comment Seer
Seer's picture

"The computer’s advantage arises not from the fact that it is genuinely smart, but because it is almost unimaginably fast. It’s natural for us to give this brute force accomplishment a lower status than the creativity and precise thinking exhibited by an exceptional human being. But the question for us here is: will that protect us from brute force algorithms that can do our jobs?"

I'm sure that Buffett and his clan use plenty of machines to operate "unimaginably fast," yet, my slow brain (as well as plenty of other's slow brains) have kicked his computers asses:

http://finance.yahoo.com/news/financial-face-off-warren-buffett-19210010...

And while Uncle Warren continues to apply capital towards the financial sector my SLOW BRAIN will continue to apply capital towards farming.

Tue, 05/08/2012 - 21:08 | Link to Comment Seer
Seer's picture

One word reply: brownouts (sometimes reality just gets in the way)

Wed, 05/09/2012 - 09:45 | Link to Comment emersonreturn
emersonreturn's picture

+1

 

thank you, sb, these are precisely our challenges (exacerated by a global economic meltdown).  how will we shape a world where the mass are a superflulous, wasted resource?  do we simply allow the redunant to fend, outcasts resentfully subsidized, overlooked commodities never utilized?  or do we configure a way to foster entrepreneurial creativity?  what a challenge! no doubt some corners will revert to the medieveal template, but some, norway, germany, perhaps will find ways to utilize the untapped potential of their cirizens and do more than simply survive in a world of serfs and barons. 

Tue, 05/08/2012 - 19:18 | Link to Comment Sub Dude
Tue, 05/08/2012 - 21:39 | Link to Comment carlnpa
carlnpa's picture

Create a unit of labor, make this unit a store of bankable wealth, like currency but undilutable.  One unit today will be guaranteed to equal one unit a hundred years from now.

Create a value for the labor the machine offsets and Tax the owner of the machine on the social value his machine costs.

We are subsidizing the owner of the machine by not taxing the true social cost of  the machine. If the machine displaces a worker the owner is liable to contribute heavily to the workers future support needs.

How about we require the owner of the machines to trade labor credits so the displaced worker can keep their hands and minds employed.

ON further thought, isn't the root of the US/Europe problem the cheap Chinese state subsidized material.  We could solve this by the stroke of a pen creating labor cost leveling tariffs on subsidized imports.

Wed, 05/09/2012 - 00:13 | Link to Comment Andre
Andre's picture

Actually, consider this-

If we have so little work to do, why are we shipping jobs to China and so on?

Why is so much of the stuff we buy from China, Mexico, Japan, Taiwan?

Another thing to think about, while complaining about American workers - how inspired are you when the management is abusive and/or dishonest? And this has been going on for how many decades?

I'm lucky at the moment, but I have not always been so.

Wed, 05/09/2012 - 07:35 | Link to Comment Abraham Snake
Abraham Snake's picture

I thought the dream of a hyper advanced post industrial economy was that everyone received full-time pay for increasingly part-time work, with ample slack time to spend with their families and/or hobbies. Our society isn't a just society if 30% of the population is working 2000+ hours per year, and 70% of the population has 0 work, living below margin in unpaid despair.

Wed, 05/09/2012 - 18:14 | Link to Comment thurstjo63
thurstjo63's picture

Well Mr. Smith is just flat out wrong. His statement of costs continuing to rise is only due to inflation (i.e. money printing). Otherwise, with a stable money supply (i.e. without central banks), the gains in productivity would be reflected in a reduction in costs which would free up more money for the consumer to use on other wants and desires. Also the gains in productivity generate a "raise" in the income of workers as the same remuneration is now able to purchase more goods and services. That is the way the economy is supposed to work. As for the bare necessities, I refer to Mises who stated that every innovation started out as a luxury and then became a commodity that one could consider a necessity. A computer or mobile phone being a case in point in the modern world. What he say is "true" only if you consider the systematic theft of people's earning by bankers as a given. Otherwise, it's just nonsensical to think that his arbitrary view of necessities can be used as a basis for defining "true" labor requirements. The market evolves and creates new wants with the introduction of every new innovation. And as long as people have ever evolving wants, there will always be opportunity for the overwhelming majority of people to be gainfully employed in supplying products and services to satisfy these wants. That is the nature of the market.

Sun, 05/13/2012 - 23:10 | Link to Comment qiongqiong
qiongqiong's picture

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