Ed,
At 17:40 12/07/2010 -0400, you wrote:
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.
Yes, it is this last one which is the most significant change. Previously,
there has never been such a large discrepancy between the highest skill
level jobs and the lowest. Also, the proportion of the economic
'value-adders' has never been smaller, and the proportion of the dependants
has never been larger. The latter include not only the ill, the old, the
early retired or redundant, the never-have-been employed, those in vastly
extended educational periods, government bureaucrats engaged in transfer
payments and services, but also an increasing body of people in circular
"doing one another's laundry"-type jobs.
I see the question of how increasingly urbanized populations will make
a living as a major problem.
And yes, those of the non-value-adding proportion of the population I've
mentioned above live almost exclusively in cities and sink estates attached
to them. Some cities are fortunate enough to be exciting places for the
young and the intellectually/artistically talented but most of the
super-large cities around the world are becoming filthier and more
dangerous places to live in. The social stratification and demarcation
between habitational zones within large cities has never been greater either.
Increasingly via drugs and crime probably.
Yes, but also the increasingly urbanized and non-value-adding proportion of
the population are also "solving" their job (and responsibility) problems
by having dramatically smaller families. Within a generation or so, the
large cities within what are now called 'advanced' countries are either
going to start depopulating at a high rate or fill up with immigrants from
the Third World. (I wouldn't like to guess which way this will go in the
coming years. The public clamour for immigrant control in the US, UK and
Europe is becoming fiercer from year to year, but yet governmental civil
services are still quietly allowing more in one way or another -- in order
to have more 'workers' to pay for the increasing load of the old. However,
politicians are getting the message and, maybe, these countries might
become as successful as Japan has been in keeping immigrants out.)
Keith
Ed
----- Original Message -----
From: <mailto:[email protected]>Keith Hudson
To: <mailto:[email protected]>Ed Weick ;
<mailto:[email protected]>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
Keith Hudson, Saltford, England
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