----- Original Message -----
From: Ed Weick
To: Keith Hudson
Sent: Monday, July 12, 2010 5:40 PM
Subject: Re: More dismal stuff
Keith, I understand what you are saying, but I'd still maintain that the world
has changed greatly over the past half century. Production takes place over a
much larger part of the globe, container ships and aircraft move what is
produced around much more rapidly, communications are instant and America and
Europe have lost much of their economic clout. Because production has become
more efficient it needs fewer people per unit of output and yet the global
population continues to grow and its growth is expected to continue. I see the
question of how increasingly urbanized populations will make a living as a
major problem. Increasingly via drugs and crime probably.
Ed
----- Original Message -----
From: Keith Hudson
To: Ed Weick ; RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION
Sent: Monday, July 12, 2010 1:45 PM
Subject: Re: More dismal stuff
Ed,
At 11:34 12/07/2010 -0400, you wrote:
There's been a lot of discussion, too much in fact, on Keynes and Hayek on
the list recently. I recall reading them, and others like Friedman, a very
very long time ago. They understood the world from the perspective of their
times, but now they're all dead. Well Krugman, essentially a Keynesian, isn't
dead, but the kinds of things he keeps saying in his columns, which I've
characterized as "spend, spend, spend", seems out of place too as belonging to
a past era rather than now.
What kind of a world do we live in now and how might we think about it?
One of the greatest differences between the worlds of Keynes and Hayek is the
extent of globalization.
There was as much, if not more, globalized trade (as between many different
importers and exporters in different countries)(as a percentage of total world
GDP) in the 1870s/80s as now. A very great deal of globalized "trade" today is
the shifting of components and sub-components within and between large
corporations.
Economic decisions and actions that are now made a very long distance
from us can have a huge effect on our well being. When Keynes and Hayek lived,
and thought, unemployment in a particular country was seen as caused by a fall
in effective demand in that country or by market imperfection such as too much
monopolization and too little competition. I don't think that is the case now.
Many Americans for example are unemployed because a large chunk has been
ripped out of their economy and shipped off to China.
But it's still the case that most high-value components (with higher profit
margins) are made elsewhere and only assembled in China. Even so, Chinese wage
rates are rising rapidly now -- just as they did in Japan and Korea in the
1960s and the 1980s respectively -- and will be equivalent to ours in the not
too distant future. Chinese firms will then start to move to the UK and the US
just as the Japanese and the Koreans have done.
Another major difference between the world of Keynes and Hayek and our
world is that of the efficiency of the productive process. Even if production
has or has not been shifted to China and the BRICs, the productive process
employs far fewer people than in would have in Keynes' and Hayek's day. But
because of population growth there are far more people needing work. Even the
production of an increasing proportion of consumers goods in China has done
little to increase the proportion of the Chinese population that is employed.
And globally, while the efficiency of production has increased greatly, so has
the proportion of the global population needing employment. In 1950, global
population was approximately 2.5 billion; by 2000 it had increased to over 6
billion. And a much larger proportion of global population lived in cities
where they would be less able to fend for themselves if they did not find jobs.
Yet another major difference between our world and that of Keynes and Hayek
is the greatly expanded role of the financial sector, which can play a very
large role in global economic illness or health, as the US subprime mortgage
debacle has demonstrated. Yes indeed, as James Galbraith argues, catch the
bastards, incarcerate them, apply tough laws, etc., but will that stop them?
Hardly, given the vast number of hiding places that electronic communications
now provide them.
So, let us nod respectfully in the directions of Keynes and Hayek and
earlier economic thinkers like Adam Smith, Jean Baptiste Say, David Ricardo,
etc., but let's not forget that we live in a very different world than they did.
But the basic nature of economic transactions remains exactly the same as
then -- and probably the same as in 75,000BC when sea-shell necklaces were
traded over long distances.
My greatest fear is that our world of growing population, job shrinkage,
and the growth of nefarious practices could, in a couple of decades, resemble
the world portrayed in Soylent Green, a very classic movie about a world gone
totally out of kilter.
All the signs are that when people are in Soylent green scenarios -- as they
surely will be in many regions of the world -- then fertility rates go way
down. There'll also be a huge amount of starvation but, within a generation or
so, the world population should start to sink. I think the basic technologies
will be extremely sophisticated by then so the big issue within the advanced
countries (not necessarily those of today) will be whether they can educate
their children up to a standard to be able to force job sharing on the adults
with interesting.
Keith
Ed
Keith Hudson, Saltford, England
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