Good morning (over here) Keith,
I'm not denying that the availability of new status goods have had a
significant effect in determining economic behaviour, but I think a great deal
also depends on how people feel about their world and their ability to do
things that can effect it positively. Right now, we are living through a
period of doom and gloom compared to how we felt, say, a decade ago and we feel
there isn't much we can do about it. People, governments and the economy in
general are over leveraged and the value of most peoples prime asset, housing,
is falling. Unemployment is high and many people of prime working age have
dropped out of the labour force. Some commentators tell us that we are into a
double-dip recession, while others tell us to forget about double dip, we are
into a recession that will not end for a long time. Non-economic factors feed
the dark mood: the high hopes of military action in Iraq and Afghanistan are
crashing to the ground.
At a time like this, one has to try very very hard to remain optimistic. No
dark age has lasted forever and I'm hopeful that we'll see this one move on as
well.
Ed
----- Original Message -----
From: Keith Hudson
To: RE-DESIGNING WORK, INCOME DISTRIBUTION,EDUCATION
Sent: Thursday, September 09, 2010 3:34 AM
Subject: Re: [Futurework] Trouble, trouble and more trouble
Ed,
Yes, a good article.
My hypothesis, as you know, is that from about the 1980s there were no more
uniquely new (mass producible) status goods to motivate the masses. This was
the real, underlying reason why credit expanded so enormously at that time.
However, whether one believes that my view is correct or not, there still
remains the problem that the Western industrial economy seems to have reached
structural buffers in employment, as Steven Pearlstein well describes. There
are no resource constraints -- so far -- to account for this.
Meanwhile, the birth rate of the advanced countries is declining fast. Even
if an amazing new technology with a full-employment structure were to be
presented to us right now, we (parents or governments) couldn't afford to
educate our children to the higher standards that would be required. The only
solution I can think of -- and it's one I don't like -- is that the 20% or so
of the population who are still thriving in today's (and tomorrow's) recession,
and can afford to educate their children in the best schools and universities,
will have more children in the coming years and reverse the negative
replacement trend. There is anecdotal evidence (enough to convince me) that
this trend is already starting. (It's in the category of being fashionable at
present.) But there is no hard evidence as yet that this is a real trend.
Keith
At 15:12 08/09/2010 -0400, you wrote:
From the Washington Post
Ed
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The bleak truth about unemployment
By Steven Pearlstein
Tuesday, September 7, 2010; 9:04 PM
Somewhere between the rantings of the Republican right, which is peddling
the nonsense that excessive government spending is to blame for high
unemployment, and the Democratic left, which clings to the false hope that
another helping of fiscal stimulus is all that is needed to get millions of
Americans permanently back to work, is this stubborn reality:
The loss of 8 million jobs reflects problems that are largely structural,
not cyclical, which means they won't be brought back by fiddling with a magic
dial in Washington that controls how much the government spends.
When I say that the problems are structural, I mean something more than
what labor economists refer to when they talk about the mismatch between the
skills of the people who of are out of work and the skills needed for the jobs
that are being created - although that certainly seems to be a factor.
Since 2007, the manufacturing and construction sectors have each lost 2
million jobs, with finance, hospitality and retailing accounting for 2 million
more. Those categories alone account for three-quarters of the nation's job
losses, and while a fraction of those jobs might return as the economy
recovers, it will be a long time before automakers or home builders or
investment banks or retailers see the sales numbers they had at the height of
the biggest credit bubble the world has ever seen. Some of those laid-off
workers may have been in this country illegally and have now returned home, but
most will be looking not only for new jobs but also new careers.
In other cases, the mismatch has more to do with geography than skill - the
businesses with jobs are in one place, and the people with the necessary skills
in another. But with many Americans living in homes they cannot sell, or can
sell only at a price less than the value of the mortgages they took out to buy
them, the willingness and ability of workers to move to a new city have been
noticeably diminished.
One telltale sign of this mismatch is the number of job openings and the
length of time it takes to fill them. As Narayana Kocherlakota, president of
the Federal Reserve Bank of Minneapolis, noted in a recent speech, those
numbers have been going up over the last year, not down, as you would expect.
Another sign, he said, was the widening gap in unemployment rates between the
states with the highest rates and those with the lowest. Before the recession,
it was just over four percentage points; now it is more than six.
The structural problems, however, go well beyond these mismatches. The
reason there were 8 million additional jobs back in 2007 is that demand for
goods and services was artificially - and unsustainably - inflated by cheap,
plentiful credit. Between 2002 and 2007, household debt was increasing at the
torrid pace of more than 10 percent annually, while business debt and the debt
of state and local governments was growing at an average of 9 percent. Much of
that money was used to finance present consumption.
Now all that has reversed. Household debt is shrinking at a rate of 2.4
percent per year as the savings rate has risen from nearly zero to more than 5
percent. Meanwhile, business debt declined 2.5 percent last year and is now
flat, as is the case for state and local governments.
All that deleveraging and living within our means is obviously a good thing
in the long run. But what it means for the economy in the short run is that
neither the excess consumption nor the jobs it supported are coming back.
During the past two years, the federal government has been actively trying to
take up some of the slack by going on a borrowing-and-spending binge of its
own. But continuing on that path is also unsustainable - certainly politically,
and probably economically as well. And once federal deficits begin to decline
next year, we'll have yet another drag on economic growth and employment.
At this point, there is only one clear path out of the unemployment box we
have created for ourselves.
Right now, the United States is running a trade deficit that is likely to
reach $450 billion this year. That's down considerably from the $750 billion at
the height of the economic bubble, but still more than a wealthy advanced
economy should have. Bringing it down - either by producing more of what we
consume (fewer imports) or more of what other countries consume (more exports)
- represents the path toward sustainable, long-term job creation.
The problem with that strategy is that for the past two decades we have
allowed our industrial and technological base to deteriorate as talent and
capital were grossly misallocated toward other sectors of the economy, even as
other countries were able to attract the investment, the technology and the
know-how to serve the U.S. and global markets.
For a time, none of this seemed to matter because we were consuming so much
that we were able to support job creation at home as well as overseas. But now
that the debt-fueled consumption binge is over, we find that we don't have the
companies, the workers or the competitive products to replace the stuff we now
import or expand our share of export markets. Even when we do, our companies
are disadvantaged by an overvalued currency or unfair trading practices.
As Daniel Gros, director of the Centre for European Policy Studies, wrote
this month for Project Syndicate, a wonderful new economics Web site: "It is
relatively easy to manage a structural shift out of manufacturing during a
real-estate boom, but it is much more difficult to re-establish a competitive
manufacturing sector once it has been lost."
A structural shift toward exports and import substitution," Gros warns,
"will be difficult and time consuming." He might have added that it will also
be expensive, requiring sustained investment by government and industry, and
internationally disruptive, requiring a much tougher line with trading partners
that consistently tilt the playing field in their favor.
In this election season, the politicians who are really serious about
creating jobs and bringing down unemployment won't be the ones screaming about
tax cuts, or stimulus or some imagined government takeover of the economy.
They'll be the ones talking about how to make the American economy competitive
again.
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Keith Hudson, Saltford, England
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