Monday, May 23, 2011

Where to turn?

If their elected officials depend on the corporation for campaign funds, there is no one to whom the miners can turn to make sure their workplace is safe.

-- GIIP Report: "Upper Big Branch"

In this week's Sift:

  • Jobs of the Future. Two consecutive jobless recoveries raise a question: Does the economy work differently now? And is concentration of wealth the culprit or technology?
  • Why I Hate Vouchers. Private-sector competitors to public programs achieve their "efficiency" by skimming off the easy-to-serve. That begins a vicious cycle of erosion, which continues until the public program serves only a small group of very needy, very powerless people -- who can then be ignored. If we had the stomach for it, we could achieve the same savings by ignoring the needy without going through the voucher charade.
  • Short Notes. An independent report lays it on the line: Massey Energy's calculated neglect killed 29 miners. What can we learn from the Rapture? Obama offers substance -- and is mostly ignored. Now that we have a Democratic president and a Republican Senate minority, judicial filibusters are back. The Catholic Church's Woodstock defense. I refuse to care about Arnold. The Onion outs the Facebook-CIA connection. It's OK to be Takei. And more.
  • This Week's Challenge. If not "plastics", then what should we tell this year's graduates?

Jobs of the Future

We've now had two jobless recoveries in a row. The 2001 recession technically ended in November, 2001 (see Wikipedia's list of recessions), but the total number of American jobs didn't return to its pre-recession level until October, 2003. And while the 2007-2009 recession ended in June, 2009, we're still nearly 7 million jobs short of the March, 2007 peak.

So recessions end, but jobs return slowly. Worse, the new jobs aren't as good as the old ones. Laid-off welders don't get rehired at Chrysler, they become shelf-stockers at WalMart.

As different as they seem otherwise, both Bush and Obama followed the widely accepted get-the-jobs-back formula: run deficits and cut interest rates. Interest rates plunged near zero. Bush got his deficit mostly by cutting taxes; Obama mostly by increasing spending. Both fought wars. But neither got a clean bounce in jobs.

What's up with that?

Some economists blame the workers: They don't have the right training for the new jobs. (Structural unemployment, it's called.) But if that were the whole explanation, some industry would be begging for workers, and some credential would be a magic ticket. What is it? If you were remaking The Graduate today, what word could plausibly replace "plastics"?

What if it's not the workers? What if the economy has changed in some sinister way?

Wealth and demand. Regular Sift readers have been down this road before. In November, I explained the argument Robert Reich makes in Aftershock: Concentration of wealth is the underlying problem. A mass-production economy requires a massive number of people with disposable income. If wealth gets too concentrated, demand lags, and then no one wants to invest in new production -- because who's going to buy the new products? So instead of productive investment, capital gets sucked into speculative bubbles like the dot-com bubble that popped in 2000 or the housing bubble that popped in 2007-2008.

Reich's theory solves the jobless-recovery mystery like this: Ordinary recessions start because investment and production get ahead of demand -- builders overbuild, factories over-produce, stores over-order. Then everybody puts the brakes on at once, and times are tough. But after six months or so, the over-stocked inventories run out, new merchandise gets ordered, factories start up again, and workers get re-hired.

By contrast, the expansion phase of a bubble isn't just over-optimistic, it's delusional. (The high-flying start-ups of the dot-com bubble had no business models. No amount of economic growth would have made them profitable.) When the bubble pops, the fantasy is exposed and there's no going back. So it takes longer for the unemployed to find jobs again, because so many of them will have to do something genuinely new.

Reich's diagnosis and prescription focus on politics: Since Ronald Reagan, tax cuts and de-regulation have tilted the playing field to over-favor the rich, leading to an over-concentration of wealth and a bubble economy. Undo that, and you return to the broadly shared prosperity of 1950-1980.

But what if it's not that simple? What if something other than politics has its thumb on the scale?

Technology and the neo-Luddites. Martin Ford's recent book The Lights in the Tunnel argues that concentration of wealth is itself an effect of something else: technology.

His argument is a refinement of the one Luddites made 200 years ago and that was made most entertainingly in the 1951 Alec Guinness film The Man in the White Suit: Eventually, automation and technology will eliminate the need for workers.

200 years ago, it didn't work out that way. Instead, demand expanded to match the increased productivity, which is how the average American or European now lives at a level of luxury that was unimaginable then.

Why won't that keep happening? Most economists are confident it will, but Ford makes two counter-arguments: First, we are approaching a game-changing point where machines become autonomous. The wages of machine-operators won't keep pace because there won't be any machine-operators. Second, the acceleration of technology may reach a point where economic forces can't keep up. In theory new markets would continue to be created, but those too would automate faster than human workers could be trained to fill the new jobs.

Low-demand dystopia. In either case, an unregulated market leads to a low-demand dystopia, where production depends entirely on capital, labor is irrelevant, and so only people with capital are economically viable. In short, income depends entirely on owning things, not doing things. So production shrinks to accommodate the needs of owners, and the unemployed masses subsist on welfare and charity.

If this seems incredible, Ford gives one very good historic example: the slave-holding South. Economically, slaves are capital, not labor. (The are bought and maintained like robots, not hired and incentivized like workers.) So the South was a society in which virtually all production came from capital. The result was a stagnant economy that worked well for the small owning class, but in which an ambitious young person without money had few opportunities. And the South only worked as well as it did because of exports -- external demand. An entire world based on such a model would be a low-demand dystopia.

Marx addressed a similar dystopian vision by having the government own the means of production. In practice, that didn't work out so well -- whether government takes over business (communism) or business takes over government (fascism), the combination becomes totalitarian because it's too powerful to control.

Instead, Ford proposes a complex system in which taxes shift away from wages to focus on capital and production, funding a complicated set of incentives for citizens to live in society-enhancing ways -- thus keeping income widely distributed and maintaining the mass market. I'm not sure this is any more workable than communism, but it does have the virtue that it can be implemented within our current economy, with the incentives supplementing wages rather than immediately replacing them.

Future jobs vs. futuristic jobs. Personally, I believe that Ford's vision is worth keeping in mind as a thought experiment that shows what's wrong with conservative economic policies. But I believe his dystopia is further off than he thinks, because economic forces have quite a bit of resiliency left if we stop sabotaging them by favoring capital over labor.

A short post by Matt Yglesias makes an excellent point: Most "jobs of the future" will not be futuristic. It has never been the case that new industries created the mass of new jobs needed. We're fooled by looking at the huge factories of the 19th and 20th centuries. They employed a lot of people individually, but collectively they didn't come close to absorbing the jobs lost when agriculture automated. (You can see the same phenomenon in China today. Even with a massive export market, Chinese factories are barely keeping up with the flow of peasants into the cities.)

Technology creates jobs through economic growth, not through new industries. For example, one of the growth professions of the 19th century was teaching. Teachers had been around forever, but until the 19th century only rich children had them. The growth industries of the late 20th century weren't rocketry or nuclear power, but health care and food preparation -- because prosperity let people live longer and eat out more.

Rich families today employ lots of trainers, coaches, therapists, decorators, and advice-givers of all sorts. If many more people suddenly became "rich" by today's standards, the economy would need a lot more such advisors -- and not a lot more nano-technologists.

I know it seems crazy to imagine an economy full of people advising each other -- who will make stuff? But it was just as crazy in 1800 to imagine an economy where hardly anybody farmed.

Why I Hate Vouchers

In an LA Times story running down the Milwaukee teachers' union, we get one small fact that sums up why I hate voucher programs.

Low-income parents can use vouchers to send their children to private and parochial schools, a decades-long experiment that [Governor Scott] Walker proposes expanding. That has left the [Milwaukee public school] district with a disproportionate share of students with learning disabilities — 19%. In voucher schools, which can return students to the Milwaukee district if they don't behave, the figure is 1% to 8.6%.

I'll bet it now costs the Milwaukee public schools more to educate their "average" student than the private schools spend. And no doubt voucher supporters are wielding such statistics to prove that private schools are more "efficient". But the underlying phenomenon isn't government inefficiency. It's that vouchers encourage the easy-to-teach students to leave while the hard-to-teach students stay.

That's how vouchers work -- not just in education, but in general. Government programs are based on the idea that we are a community, so we're all in this together. Voucher programs are based on the idea that we are all individuals, so if you can get a better individual deal, you should go for it.

The result is always the same: Fortunate people who are easy to serve can take their vouchers into the private sector and get a better deal. The pool that is left behind in the public program is harder to serve, so average costs go up, making the private-sector voucher a good deal for even more people, in a vicious cycle.

The Walker education-voucher program is eroding Milwaukee's public schools this way. The Ryan healthcare-voucher program will do the same to Medicare and Medicaid.

In the long run, there is only one way that vouchers will save taxpayers money: Eventually the public-program pool gets so small and so needy that it has no political power. Then we can lock them away in some cheap hellhole institution that doesn't serve their needs at all, and what are they going to do about it? Cha-ching!

Of course, we could get the same savings without involving the private sector: Just let public programs throw hard-to-serve people out on the street to fend for themselves. But that would be horrible and heartless, wouldn't it? The rest of us will sleep better if we achieve the same result by sleight-of-hand.

The same shell game is happening in states that privatize their prisons. Do private prisons save money? No. Even though (like private schools and private health insurance programs) they "steer clear of the sickest, costliest inmates", they cost more.

Back in the 90s, Newt Gingrich owned up to the erosion strategy, saying that he favored letting Medicare "wither on the vine" rather than attacking the popular program directly. Afterwards, pundits agreed that it was scare-mongering to quote Newt accurately on this subject.

Now he wants to declare another mulligan: He retracted his criticism of Paul Ryan's Medicare-slashing voucher proposal after a firestorm of protest from the Right. So he says that it's unfair if Democrats use the tape: "Any ad which quotes what I said on Sunday is a falsehood, because I have said publicly those words were inaccurate and unfortunate."

Democrats, as we all know, get to retract any gaffe they make, and no one ever mentions it again. Just ask Howard Dean and John Kerry and Bill Clinton.

Short Notes

The Governor's Independent Investigation Panel has issued its report on the Upper Big Branch mine disaster that killed 29 miners a little over a year ago. Let's skip to the conclusions on page 108:

Ultimately, the responsibility for the explosion at the Upper Big Branch mine lies with the management of Massey Energy.  … The April 5, 2010 explosion was … a completely predictable result for a company that ignored basic safety standards.

Massey didn't ventilate the mine properly, let coal dust build up, and eventually the inevitable spark came that it all set off. Massey was warned, battled federal safety regulators tooth and nail, paid some wrist-slap fines, and did things its own way until 29 miners died. How could that happen? Easy.

Many politicians were afraid to challenge Massey’s supremacy because of the company’s superb ongoing public relations campaign and because CEO Don Blankenship was willing to spend vast amounts of money to influence elections. … If their elected officials depend on the corporation for campaign funds, there is no one to whom the miners can turn to make sure their workplace is safe.

And that's a lesson for all of us. Corporations are sociopaths. If they can make money by killing people, they will. And if elections depend on corporate money, governments will let them.

The failed Rapture prediction triggered two Interesting articles: When Prophecy Fails in Slate and Rapture-Ready: the Science of Self-Delusion in Mother Jones.

Summary: Rationalization has great power to resolve contradictions of all sorts, and religious people aren't the only ones who use it.

While the media has been focused on the antics of Donald Trump and Newt Gingrich, President Obama has given substantive and informative speeches on immigration reform and the Middle East and education.

Out of this, only one line drew national attention: "We believe the borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps." The furor over this -- MIke Huckabee said "The President of United States betrayed Israel" and many other Republicans expressed similar feelings -- is a little mysterious. When has a U.S. president said anything significantly different?

In the spirit of Emma Goldman ("If I can't dance, I don't want your revolution"), here are the biting-but-entertaining political videos of the week: John LIthgow performs a Newt Gingrich press release, a hippyish chorus on a hillside reminds us that the issue with the Koch brothers is "the evil thing", and George (Sulu) Takei offering his name to counter Tennessee's new don't-say-gay law. Also, WhoWhatWhy recalls the classic George Carlin "I'm a Modern Man" routine.

The Onion News Network reveals that Facebook is actually a very efficient CIA program.

BTW, the don't-say-gay bill got watered down before it passed. Now it's only prepared materials that can't mention homosexuality; teachers can still answer questions about it. [Full -- and proud -- disclosure: My nephew Mike Stephens interned for State Senator Andy Berke, who is quoted criticizing the bill.]

Media Matters totals up the partisan split of Meet the Press guests, going back to the Clinton years. Conclusion: When Democrats control the White House, MTP splits its guests almost evenly between the two parties. Under Republican administrations, Republicans get a 60/40 advantage.

Ask yourself: Which failed presidential candidate have you seen more often on national networks: John Kerry or John McCain?

I just shook my head sadly during the John Edwards debacle, so I'm going to similarly restrain my reaction to Arnold Schwarzenegger. We'll have plenty of time to discuss their sex scandals if either of them runs for office again. And if they don't, I don't care.

On his NYT blog, college professor Stanley Fish comments on the deals Florida State has made with the Koch brothers and BB&T, which I wrote about last week.

Is the [Koch] foundation funding the study of free-market economics — a perfectly respectable academic subject — or is it mandating that free-market economics be promoted in the classroom? Is it a gift intended to stimulate research the conclusions of which can not be known in advance, or is it a gift intended to amplify a conclusion — free-market economics is good; regulation is bad — the philanthropists have already reached and want to broadcast using Florida State University as a megaphone?

… If, in the judgment of an instructor, “Atlas Shrugged” will contribute to a student’s understanding of a course’s subject, there is every reason to assign it. But if assigning “Atlas Shrugged” is the price for the receiving of monies and the university pays that price, it has indeed sold its soul.

It was fun to watch Jon Stewart debate Bill O'Reilly about the Fox-promoted, scary-black-guy controversy over the rapper Common (seen here with his monstrous friend Elmo). But I wonder if Stewart lost just by showing up, because his appearance helped Fox keep the story hot.

Remember 2005, when the Democratic minority had just enough Senate votes to filibuster judges nominated by a Republican president? The Republicans threatened the "nuclear option" -- eliminating the filibuster -- until a bipartisan "Gang of 14" rode to the rescue with a compromise under which only "extraordinary circumstances" would justify a judicial-nomination filibuster.

As a result, centrist Democrats did not support a filibuster of the Supreme Court nomination of Samuel Alito, who turned out to be the deciding vote in Citizens United. (Justice O'Connor, the Reagan-appointed judge Alito replaced, has said that she still supports the decision that CU overturned.)

Well, now the Republicans have a Senate minority and a Democratic president is nominating judges, so of course that agreement is toast. Dahlia Lithwick assembles all the that-was-then-this-is-now hypocrisy.

A church-funded study of sexual abuse by Catholic priests attributes the scandal to the social turmoil of the 60s and 70s. The NYT refers to this as the "blame Woodstock" theory.

I agree with Matt Yglesias: It's fine if you want to make the case that a government program isn't working or costs too much. But once you have an arbitrary spending cap, what ends up mattering is the political clout of the beneficiaries, not the effectiveness of the programs.

This is why I get a chill in my bones any time I hear discussion of “caps” on federal spending. … Capping things is code for “let’s keep all the spending that lobbyists love and make up the difference by slashing the incomes of poor people.”

Evidence: Even at a time when the deficit is supposedly Public Enemy #1 and Exxon's profits are at an all-time high, the Senate can't muster the votes to eliminate tax subsidies for the oil companies. Let's take the money out of Medicaid instead, or cut more Pell grants.

Lawrence O'Donnell relates the history of "starve the beast".

This Week's Challenge

Several high school and college students are regular Sift readers. What advice would you give them about preparing for the future economy?

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Mike Ignatowski said...

With regards to technology and jobs, I remember being told the classical story about an imaginary island economy based on lifting large rocks. When somebody invents the lever to do this with fewer people, there are suddenly many unemployed people. But don’t worry, they can all be put to work building better and better levers (sigh). This belief that technology will always create as many new jobs as it replaces seems to be more an act of wishful faith than an established statistic. As you started to point out, as the rate of technology change becomes faster and faster, it seems to be increasingly unlikely that the rate of social change and growth of new industries, along with the retraining necessary for such jobs will be able to keep up.

You may also want to check out Tyler Cowen’s new book on the “Great Stagnation” for a slightly different take on this.

I think there’s another fundamental trend happening, though I can’t explain its cause from first principles. It appears that there are an increasing number of things that need to get done today that greatly benefit society as a whole, but for which no individual person or company can make a profit doing. This ranges from basic scientific research, to increasing various forms of social capital, to improving “the commons”. The only way to get these done is with philanthropy or government funding. Unless this is acknowledged, we will simultaneously have a growing number of skilled people who are unemployed and important jobs being left undone.

Anonymous said...

I teach English at a state university. What advice would I have for young folk?
1. Learn as much as you can about everything; you can't tell just what might be helpful in the future.
2. That includes basic survival skills: how to cook, how to grow and preserve food, how to use hand tools and power tools. How to make and repair anything and everything. Learn camping skills.
3. Learn marketable skills: plumbing, carpentry, electrical work. Even if you find a desk job, you'll save a fortune on repair bills.
4. Stay healthy. Ride a bike. Avoid processed (pre-made) food. Dump cola (HFCS) now. Learn to make good beer.
5. Don't buy stuff you don't NEED. The only things to buy are a bike and helmet, a laptop, a smart phone, a good backpack, and an education. The education you can get for free at a library, but sometimes a credential is useful. Take public transit or live close to where you work/study--that bike will keep you healthy and save a fortune on insurance, repair bills, gas, etc.
6. Save money: Pay yourself first. If you can't pay cash, do without. Put together an emergency stash for 12 months of expenses.
7. Learn basic and advanced first aid. Get EMT training.
8. Entertain yourself. Make your own music. Read. Read. Read.
9. Learn to laugh. It's going to be a rough ride for the next decade or two. Be mobile and flexible.
10. Stay sane. Study zen, pray, dance, find good friends to back you up.

As for a career, do something you love that makes the world a better place. Don't be a bankster. Don't chase money. Leave the world a little better than you found it.