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A word on Abenomics, QE and doing Stimulus right

2014 November 20
by Ian Welsh

Quantitative Easing, to put it simply, no matter what form you do it in, is only marginally effective.

Most of the money goes to the rich, you may or may not get a technical win in GDP, and in many cases the money may flow out of the country.

If you want to improve the economy overall, enough that it shows up for everyone and you get an actual good economy (as opposed to an economy where the poor and middle class actually get poorer) you have to target where the money goes very carefully, and not just use it to buy various financial instruments.

The idea that buying more bonds, or mortgages or whatever, is an effective way to help the overall economy has been disproven over and over again.

Be clear, QE picks winners.  Buying mortgages or buying bonds is picking winners.

Any effective government intervention in the economy must pick winners.

In most cases this is not about infrastructure.  Japan poured ludicrous amounts of concrete over the last 4 decades and it did very little: infrastructure is great if you don’t have enough, but building more than you need is stupid.

In early 2009 I wrote about how to do stimulus right.  Here are the parts that are most applicable right now.

Provide a direction private industry and individuals can get behind

The stimulus bill and other economic policies need to show where the industry of the future is going to be, so that private actors know where to build up their own capacity, where to hire and what to buy capital equipment for.  Commit 200 billion a year to a massive telecom buildout for the next 4 years, and companies are going to line up to get involved in that business.  Make it clear you’re going to massively expand health infrastructure and they’ll line up for that business.  They’ll make long term investments, hire people, train people and do R&D. Programs that look like they will go away almost immediately won’t make businesses decide to invest in increase capacity—it might not be there next year.  Right now the only large scale project that looks really certain to occur for years under the Obama administration is a war—the Afghan war.

Restructure to allow unfettered growth in the future

The last economy cracked up for a reason.  Or rather, for multiple reasons.  You need to know what those are, and you need to get rid of them, so it doesn’t happen again.  If you don’t properly regulate the financial industry they will do another bubble (especially since you bailed them out of the downside, so why shouldn’t they?  They got the profits, and the public paid the losses.)  If you don’t do something to make sure that oil prices don’t spike again (both on the demand end and in terms of reigning in speculative excess) then the next time there’s a half decent economy they will strangle growth again.  There are plenty of other places where problems need to be fixed (too low corporate tax rates leading to cashing out instead of reinvestment, if you want a third).  If you don’t fix them, all you’re doing is putting electrical paddles to a patient whose heart is still a piece of junk and who is still going to have another heart attack when he eats his next cheeto ™.

In addition to these two things, one should spend when it’s cheap (aka. in recession or have the government buy up houses in distress, fix them and rent or sell them), and it should move money to people with a marginal prospensity to spend.  (AKA. cutting food stamps is idiocy, since people on food stamps spend all of them.)

This isn’t difficult and it is complicated only in the details so that it isn’t and wasn’t done indicates a combination of ideological blindness, greed and corruption.  It isn’t done because the people at the top don’t want to do it.

Why the Sharing Economy is Destroying Prosperity

2014 November 13
by Ian Welsh

Let us start with Uber drivers:

Uber has become like Walmart. Drivers now make less than the minimum wage when we do the math,” said Abdoul Diallo of the newly formed Uber Drivers Network, which opposes new lower fare rates set by the company.

The high-tech livery-service firm recently slashed passenger fares to compete with car services such as Lyft, Gett and regular yellow cabs, a move that drivers say takes money out of their pockets.

Some Uber drivers claimed fares — and their paychecks — had been chopped 25 percent in recent months.

Other drivers said they make less than a living wage, just $7 to $12 an hour after expenses and fees — far less than the $25.79 an hour Uber promises drivers can make by joining its fleet, protesters said.

Drivers began complaining that Uber was taking them for a ride back in July, when the company temporarily launched its less-than-taxi-rate Uber X service.

In late September, Uber ­extended those cuts permanently — outraging drivers.

Uber treats drivers like private contractors, saddling them with insurance, gas and vehicle expenses but the company has total control over fares.

In its essence the sharing economy is similar to offshoring and outsourcing in how it works.

Let us establish the basics: high income for individuals, absent government fiat, is based on a tight supply of whatever it is they are selling, and nothing else.

This can be a generally tight labor market, as in the late 90s or most of the years from 45 to 68, or it can be in a specific area.  If you have an occupation where most people can’t compete, you make more money.  This could be because you have skills they don’t have, it could be because of artificial scarcity imposed by regulation (most professions which require licensing), it could because of geography, and so on.

Hotels make decent money because any Joe or Jill can’t sell their rooms.  Taxi drivers (or, more accurately, those who own the licenses) used to make decent money because any schmo with a car couldn’t compete.  And so on.

In manufacturing terms, when those jobs pretty much had to be in a first world country, and the government enforced the ability of unions to strike by forbidding replacement workers, assembly line workers made good money.

So the sharing economy increases capacity.  It increases supply to areas which had constricted supply.

Supply increases, and the profits and/or wages of those in the old sector go down.  Spotify claims artists receive 6 cents to .84 cents per thousand plays.  That means 1 million plays will get you 6K to 8.4.  But there’s reason to doubt those numbers, Swift has refuted them, and earlier reports were lower as well, plus Indie labels get less.

All of these platforms: Spotify, AirBnB, etc… take huge margins.  Spotify takes 30%.  This is in line with what App Stores take, again, 30% being standard.

That number is one we’ve become numb to, but it’s essentially oligopoly or monopoly profits, a huge distribution rate. If you add that much to the cost of a product, it will sell far fewer copies and make far less money.  That percentage comes directly out of profits.

In most cases, one or two sites control most of the business.  Maybe three.  That makes them oligopolies or monopolies. You go through them, or you don’t make a living, and once they are established, they are essentially impossible to dislodge.

In the fifties or sixties this would have been recognized as clear abuse of monopoly or oligopoly power and they would have been busted up or regulated.

But they aren’t. Instead what they do is lower prices, vastly concentrate earnings (30% is a lot, and makes you billions if you control any reasonable platform, even if that billions is from equity), and they lower wages and earnings to everyone who doesn’t control the platform.

Now the sharing plaftorms would be ok (minus the oligopolistic abuse) in a genuinely booming economy where there genuinely weren’t enough workers, and where companies were competing for workers by increasing wages and treating them well (think how programmers were treated during the late 90s internet boom.)

Bring the extra resources online, let people earn some extra cash by driving occasionally, and move people over to the parts of the economy that are booming and need workers.

We don’t live in that world.  We haven’t, absent a few years, since somewhere between 1968 and 1980.

Instead what the sharing economy does is lower the value of specific types of labor and assets, allowing more people to compete, but reducing the actual earnings for those who are in that market.

Reduced prices might increase standards of living, and in any single case they do. The number of musicians who can’t earn a living under the new regime (not just Spotify) is much less than the number of people who can consume much more music.  People who want to be driven prefer to pay less to Uber.  AirBnB makes it cheaper to travel.  Etc… There are genuine gains.

But added to offshorng, outsourcing, oligopolistic storefronts like AppStores and Amazon, and with increase parts of the economy moving into the sharing economy, while in the meantime older jobs have been deskilled (all fast food is deskilling of cooks jobs, for example), and you reach a point where “there are hardly any good jobs”.  Prices are not dropping faster than good jobs.

The other effect of this is that because many of these trends are naturally oligopolistic or monopolistic (even fast food is, if you take a bit of time to think about all the small business restaurants they put out of business), they tend to concentrate wealth and income radically.  That leads to capture of the political process by the rich (yes, even more than already), and that leads to policies like, well, turning anti-trust law into a dead letter, or endless copyright extension, or vast numbers of anti-union policies.

As Stirling Newberry once pointed out to me the more humans are fungible; that is one human can replace another and do whatever that person is doing, the less they have value.  That doesn’t mean that fungibility is necessarily bad, it increases efficiency, can increase economic capacity, and so on, IF we choose to distribute the gains properly.  But absent trends moving in opposite directions it decreases the amount everyone except those who control the points of coordination of the economy make while vastly centralizing wealth, income and power.

The Sharing Economy really isn’t.  Sharing is the wrong word.  And for now, while some of us many win and get income we need for it, overall we’re losing.

The way we distribute resources; the way we distribute necessities and the good stuff of life is going to have to change.  Ultimately a market which  clusters into oligopolies;  deskills jobs; makes humans interchangeable; is not one which can produce widespread prosperity, let alone well being.  If we continue to distribute goods and power primarily by market success, even if we manage a fix, it will only last a few decades at most—and there is no guarantee, this time, that we will manage a fix.


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Character as Personal Destiny

2014 November 11
by Ian Welsh

I’ve commented before on character as destiny for societies.  Character, or personality if you prefer, determines how we act.  We all know people whose anger, or curiosity, or greed is predictable: people where you know exactly what they’ll do given a particular event.  Indeed, we truly know someone when we can make such predictions and get them right most of the time.

The idea of karma is related to this.  You’re born at a particular time, with a particular personality, to particular parents, in a particular place.  Your nurture and your nature (the personality that even babies have) is predetermined, therefore your life is predetermined, because how you will react to events is a matter of your character, which is your original personality plus the circumstances you grow up in.

The fully enlightened are said to be largely immune to karma.  This is because, often, as you meditate, it becomes clear that personality is a choice.   You don’t have to act in accordance with your personality if it’s not in your self interest.  This is true of everyone, but it’s one of those abilities most people don’t use.  As you meditate you become detached from your own character, it doesn’t seem important to you, and as a result it loses much of its power.  As it loses its power you become free to act as you please, and in that sense you break your karma.  (And by act, I also mean think.  The sort of terrible thoughts that plague many people lose much of their power.)

Some karma is harder to break.  Your body has karma (your genetic endowment, how you treated it while under the sway of your personality), and you can be stuck with that, or at least find it very difficult to change.  But in general, as personality weakens, you become free of what you may have considered most precious about yourself—your personality, which many of us consider to “ourself”.

Nor will you necessarily bother to change your personality most of the time, because as you meditate such things seem less important: to be sure, the effective strength of your personality diminishes, but you also don’t care. It’s a personality, it’s not you, and why bother to act against it except in the case of important decisions? (And, again,  fewer things seem important.)

Meditation, then, can make you free and rob you of much of the juice required to make use of that freedom.  The less you care, the happier you are (I know many people won’t believe that, I’ll just say that in my experience it’s true, and many other people attest to the same).  I walk around these days, and I have a nice meal and I think “this is wonderful”, and I read a book and “this is great”, and even though my material situation is unsettled and precarious, I have everything I need – food, shelter, internet, books – and that’s enough to be happy (I haven’t been entirely robbed of ambition, mind, but then I’m not super-advanced in my practice.)

Still, I think it’s worth remembering that your personality isn’t anything super-precious, and that it can be your chains. Acting in ways that aren’t beneficial to you (or, often to anyone else) because of your personality serves no one.  Personality is often chains, and yet we treasure it.  If you want to be happier, be less attached to who you are.

(My previous article on the difficulties of meditation, and what it teaches.)


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The End of the American Dream and How Democratic Apologists are Creating It

2014 November 7
by Ian Welsh

I’m going to be even more blunt than usual. Democratic apologists (and Obamabots) are a huge part of why the US is becoming a worse and worse place to live for most of the population.

The only “progressive” group who really got any of what they wanted from Obama were gays.  Why did they get it?

  • They CUT OFF DONATIONS
  • The got in OBAMA”S FACE AND HIS WIFE’S FACE

They did everything they could to hurt Obama, politically and personally.

I will be even more frank, the contempt I have for Democratic apologists and Obamabots is far greater than what I feel for Republicans.  Republicans tend to be pretty straight: they intend to repeal the last millenium worth of social progress and institute a new Gilded Age.

Democrats, on the other hand, lie about how they care, care, care, but their ACTIONS show that they want to repeal the last millenium of non-identity based civil liberties and re-institute the Gilded Age.

Do not even dare to talk to me about the financial crisis.  The most important thing that happened to allow the financial crisis was the repeal of Glass-Steagall, which happened under Bill Clinton (D) with his whole-hearted approval.  Which is why Bill is worth 100 million or so now.  He made a lot of bankers and brokers very rich, and if you were hurt in the financial collapse and the shitty economy since then, well, he’s even more to blame than George W. Bush.

Furthermore things like the no-fly list and “1st Amendment Zones” started under Clinton.

Yes, the Big Dog may have had a pretty good economy, and may have been competent, but he is massively complicit in what happened after he left.

As for Obama, he has been worse on civil liberties than George W. Bush.  It is not even close.  He is significantly worse.

The thing is Obama promised to be great on civil liberties. He campaigned on that.

Democrats, as a group, are liars.  They make promises they do not keep.  People who cover for them are enabling this.

Now let me be even more clear.  The US and the developed world are in a Depression.  I know, I know, no one has told you that.  But when during the recovery and the boom the jobs don’t come back and the wages don’t increase, that’s a depression.  You just had the recovery and the boom and are moving into a recession.

You aren’t just going to lose twenty years.

You are going to lose your prosperity forever.  Sure, there will be good years (like about 3 years at the end of Clinton’s reign.

That is the smart money bet.  It is not that it couldn’t be stopped, it could be.  The policies required are known, the technology is available, and so on.  But they aren’t going to happen, because both parties want it to happen.  They compete to give money to the rich, that is their job, and apologists (for whichever party) enable it.

People keep using the Japanese lost decade as an analogy.

Japan did not lose a decade, it never recovered.  And it is still getting worse.  And Japan, remember, started with a huge trade surplus and a massive savings rate (though it did have a demographic time bomb.)

You redeem one of the two parties, by taking out bad actors, or you create a viable third party, or you lose your prosperity unless you get very lucky (and by very lucky I mean “get an FDR at the right time.”)

Obama could have been FDR. He was given the opportunity. He blew it.

And Dem apologists made excuses for him all the way along.  “The Republicans are worse.”

Yes, well, I’d rather be killed by an axe murderer than a guy with a chainsaw, but at the end of the day, I’m still dead.

And so will be your prosperity.


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Could Obama have fixed the economy?

2014 November 6
by Ian Welsh

I’m hearing “Obama couldn’t have fixed the economy.  Wage stagnation is not his fault, it’s been going on for decades!”  (For the record it’s been going on for at least 34 years, probably 39, and for some parts of the population, for 46 (that’s when wages for working class white males peaked.  Which is why they’re pissy.))

This argument is, to give it more courtesy than it deserves, bullshit.  I wrote about this back in 2010, and you can read that article, but let’s run through this one more time, because you will never get good leadership if you keep excusing your leaders for betraying you.

Part of the argument is that Obama couldn’t do almost anything because Obama only controlled the House, the Presidency and didn’t quite have 60 votes in the Senate in his first two years.  Because this is the case, I’ll deal with this argument in two parts.  In the first we will discuss something that needed Congressional approval.

The Stimulus: Negotiating 101, people, is that you always ask for more than you want.  Obama asked for too little, and a huge part of his stimulus was tax cuts. Worse than this, his stimulus was structured terribly.  What you do with a stimulus package in a recession and financial collapse is you use it to restructure the economy.  That means things like moving the entire federal package of buildings over to solar, and buying from American companies. (Don’t even try to natter on about trade deals, the US is more than happy to ignore trade rulings it does not like.)  That means putting aside a huge amount of money to refit every American house to run on renewable energy, which are jobs which cannot be offshored or outsourced, they must be done in America.

That means building high speed rail, and using eminent domain to get it done.  It also means moving money off the sidelines which would otherwise sit there by providing a clear direction for the economy so that private actors invest hire and invest.

Note that Obama did not negotiate properly, he did include a huge amount of tax cuts (right wing ideology), and he produced a stimulus which did not restructure the economy or get private money off the sidelines.  I wrote extensively about this at the time.   None of this is post-facto judgement:

January 5, 2009: The day the news leaked that 40% of the stimulus was tax cuts, I wrote it wouldn’t work.

January 17, 2009: The full details are out, I write: “For ordinary people however, there will be both wage deflation and real asset deflation…

Now, all the things Obama could have done which DID NOT require Congressional approval:

Prosecute the Bankers: This is an executive decision.  Entirely an executive decision.  There was widespread fraud, and no senior executive on Wall Street could credibly claim to not know of it.  Seize their emails, indict them under RICO statutes (ie. take away all their money and force them to use public defenders), and throw them in jail.  Do not let them get off with fines that are less than the profits made, effectively immunizing them.  This means they will keep doing fraudulent and destructive things, because doing so made them personally rich.

Oh, also, there are now fewer, bigger banks.

Take Over and Break Up the Banks: The Federal Reserve had trillions of dollars of toxic sewage on its books which it borrowed at par, which could not sell on the market at par.  But Ian, you cavil, “the Federal Reserve is independent of the President.”  No. The President can fire any member of the Board of the Federal Reserve except the Chairman for cause and replace them.  Letting the financial collapse happen might qualify as cause.  Even if Bernanke refused to leave, he would be outvoted on every issue by Obama’s people.  Once you control them, you return all the tosic sludge to the banks.  They go bankrupt.  Which leads to:

Make Stockholders and Bondholders Take their Losses: Yes.  This will wipe them out.  That’s the point.  The problem with the rich isn’t primarily that they are rich, it is that wealth allows them to largely control the government (I trust this is non-controversial. If it isn’t, I hope you’re on the payroll and paid to believe such sewage.)  Making them take their losses breaks their power. Once their power is broken, it’s a lot easier to get everything else done.  This is also a popular move. (There are ways to fix the pensions which go bankrupt, another time on that.)

Using the Banks you Took Over and Broke Up, Lend!  These banks are now under Federal control. They do what the President wants, when the President wants it done.  They start lending to create small business, rebuild the nation’s infrastructure, move to renewable energy, and so on and so forth.  (Read THIS, for what the US needed to do at the time. Again, written at the time.)

This article is not exhaustive

There are many other things Obama could have done, that he chose not to do.  It is entirely fair to judge Obama on the economy because not only did he never do what was needed to fix it, he did not even try.  Everything he did that was supposedly to fix the economy was insufficient and he was told so at the time by people who had been right about the oncoming financial crisis, in advance.

Even in small things, like aid for homeowners, the Obama administration, even when it had both the authority and the money (which it did), chose to do as little as it could.

Obama is a Right Wing President.  That is all. He is a Reaganite, and to the right of Reagan, but somewhat to the left of the Tea Party, which puts him in spitting distance of Atilla the Hun (his record on civil liberties is, according to the ACLU, substantially worse than George W. Bush’s. He deported more Hispanics than George Bush ever did, etc…)  Obama had plenty of power to make more of a difference than he did, and he chose not to.  In the small things, in the big things, when it came to economic policies and to non identity based civil liberties, he virtually always did the right wing thing.

Obama is the first President in post-war history (and maybe all of history) whose economy gave more money to the top 10% than the entire value of all productivity gains in his Presidency.  Even George W. Bush didn’t manage that.

Yes, stagnation of wages and wealth, and even the drop of both in many sectors while it concentrated in the hands of the rich is something which has been going on for decades. It is hard to stop.

But, because of the financial crisis, Barack Obama had the opportunity.  Calls against TARP were running, according to my sources, 200:1 to 1200:1 against. It failed to pass the first time.  Nancy Pelosi said she would not pass it if an equal proportion of Republican House members would not vote for it also.  They refused to do so.  It would have died except for one thing: Obama twisted arms to make it happen.  As the Presidential candidate (and likely future President), he had the ability to do that, and he did.

Again, Obama did not fix the economy because he did not want to. Or rather, keeping rich people rich was  more important to him.  You can argue, if you wish, that he was not willing to break up the banks because it would have been catastrophic.  That argument cannot be dealt with fully here, without doubling the length of an already long essay, but I will be gauche and quote myself, once more, from 2008:

Now it’s the US. America can try and sweep this crisis under the carpet and pretend there isn’t a huge overhang of bad loans and worthless securities. If it does so, the best case scenario is that the next twenty years or so will be America’s Bright Depression (Stagnating economy). Best case.

I will tell you now that the best case has not happened.  As the charts in this post show, the economy stagnated for ordinary people through the recovery and boom of this business cycle.  During the recession there will be job losses again. Most of them will not come back in the next recovery and boom, and neither will wages.

This is Barack Obama’s legacy.  Those like Paul Krugman (what happened to Paul?), who pretend that Obama is a great president are laughable.  History does not grade on a curve “well, we aren’t all chewing on our boots”.  Obama had a historic opportunity to be the next Franklin Delano Roosevelt. Instead, he chose to save the rich, and let them eat everyone else.  This was a choice, he could have done other things.

Nor is this a noble failure: he did not try.  He did not use the real tools he had at his disposal.

I note, finally, again, because I know most readers will have heard over and over again that Obama saved you from armaggedon, that the US economy cannot be fixed until the wealth, and therefore power, of the very rich is broken. It can not be done.  However bad you think it would have been if that had been allowed to happen, this economy will continue to get worse because it was not done.

The Federal Reserve has printed trillions of dollars, and given them to the rich.  Imagine another world, where it had printed that money and used it to restructure the economy for prosperity and growth again.

That, my American friends, is the future Obama stole from you.  Indeed, as the rest of the developed world would have followed his lead, stole from all of us.


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The Secret Democratic Plan to Win!

2014 November 5
by Ian Welsh

Our plan is to have an even worse economy for longer than Bush.

To top it off, we will give MORE money to the rich than Bush did, and less to everyone else.

Surely, this will lead to re-election!

(No, but it will lead to Obama making even more $$$ than Clinton did after his Presidency, and faster)


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Falling Oil Prices Are Mostly Bad News

2014 November 5
by Ian Welsh

Yes, it’s nice to play less for gasoline and heating fuel, but while some of the decline in oil prices are a result of the new unconventional oil supplies which have come on line, much of it is that the world is going into recession—demand is down from every major economy.  That’s not good.

Yesterdays’ post showed what happened in the US job market over the last 6 years.  It never recovered for most people.  Remember, in terms of business cycle that was the recovery and the boom.  Those were the good times.

As for oil, the drops are to many conventional oil producers advantage if they can sweat them out. Much of the unconventional oil which came online is not viable below $80/barrel. The viability numbers you see for countries like Saudi Arabia are not their profit break even numbers, pumping Saudi oil costs less than $10 a barrel, rather they are what the Saudi government budget needs.  But the Saudis can handle a few years making less if it send their competitors into bankruptcy.

Remember that in the late 90s oil was under $20 a barrel.  I would want to see oil under $40 a barrel, with excess supply, to expect an economy as good as the late 90s one was.  Remember also that this is not the first time this “run a shitty economy until new sources of oil come on line” play has been tried—while the details were different, this is exactly what Carter, Reagan and the Fed of the late 70s and early 80s did. Temporize waiting for the new oil supply.

But while new oil did eventually come online, notice also that the economy never really got good ever again: you have about 4 good years in the late 90s and the rest is crap (again, for ordinary people.  The wealthy did very well).

Finally, those fools in places like Canada (my home and native land) who thought the good times would never end and that letting the mixed economy (aka. manufacturing) die, are about to reap the whirlwind.

All Commodity Booms End.  No exceptions.  Always.

Repeat that until it sinks in.

The old Canadian economy ran as follows: during times when commodity prices were high the Canadian dollar went up making our manufactured goods uncompetitive, but we used the money from selling commodities to subsidize manufacturing.  During times when commodity prices were low, the profits from manufacturing were used to subsidize the the resource producing areas of the country.

Harper, that feckless provincial incompetent and neo-liberal ideologue, has broken the Canadian mixed economy, which existed before him for over 100 years.  This is probably because he’s an economist, meaning he was indoctrinated to believe neo-liberal dogma.  Or perhaps he’s just a fool, hard to say.

The only Federal leader who understands the Canadian mixed economy is NDP leader Mulcair (Justin Trudeau, while has nice abs, is not very bright, unlike his father, who was a genius.)

It might not be too late to rebuild Canadian manufacturing during the oncoming recession.  My fellow Canadians, think carefully about who you vote for, especially those of you in Southern Ontario. Your housing values will not stay where they are if Canada’s entire economy is based on boom and bust commodity cycles and there are no jobs except in resource extraction, flipping burgers and finance.  Mulcair tried to warn you, years ago.

Learn.  Or reap the consequences.


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Two Charts Show Why the Obama Economy Sucks

2014 November 4
by Ian Welsh

The Employment-Population Ratio (measures the portion of the working age population which is employed, from the BLS):

Median Household Income:

 

http://research.stlouisfed.org/fredgraph.jpg?hires=1&type=image/jpeg&chart_type=line&recession_bars=on&log_scales=&bgcolor=%23e1e9f0&graph_bgcolor=%23ffffff&fo=verdana&ts=12&tts=12&txtcolor=%23444444&show_legend=yes&show_axis_titles=yes&drp=0&cosd=2007-01-01&coed=2013-01-01&width=670&height=445&stacking=&range=Custom&mode=fred&id=MEHOINUSA672N&transformation=lin&nd=&ost=-99999&oet=99999&scale=left&line_color=%234572a7&line_style=solid&lw=2&mark_type=none&mw=1&mma=0&fml=a&fgst=lin&fq=Annual&fam=avg&vintage_date=&revision_date=

All of the blather about how the unemployment rate has decreased, the stock market is up, and so on, conceals the fact that there are less jobs for ordinary people, and they pay less.  Yes, the rich are doing great, but that’s all.

Why are Democrats losing the Senate?  I won’t say it’s just this, it’s not.  But if the economy was actually good for most people, they probably would be holding it.


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Are you going to be thirsty or hungry in the future?

2014 November 3
by Ian Welsh

As I’ve warned before, aquifers are being massively depleted, and it’s happening in places that grow food.  California, which is in drought, is now draining its aquifers especially fast.  Note also that fracking uses immense amounts of water.

This is also a problem in other nations, most notably India, where some farmers are already losing their farms due to aquifer depletion.

Expect to move to massive desalination, and attempts are on to find cheaper ways to desalinate water.  Combined with cheap solar, this may be feasible for some areas.  Interior continental areas, however, may not find it so useful.  Still, we can expect project to build desalination plants and massive canals driving the water into the interior.

The question with this, assuming it is done, will be who does it: public or private, and how regulated they are.  Even if water is theoretically available, it may be much more expensive than it is now, and we can expect that to make food even more expensive.


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The Internet Makes Real Organizing Harder (Technology and Prosperity #2)

2014 November 3

When it comes to communications technologies and their effect on freedom and prosperity we have to remember that income and wealth share is a product of power.

All wage increases are a result of either scarcity of labor, whether labor in general or a shortage of specific skills; or they are a matter of organizing to convince powerful people, whether corporate bosses or politicians, to give you more money.  (There should be no shame in this, the rich spend billions influencing politicians to give them more money and power.)

This means that there are three conditions where wages are good:

1) Labor is scarce and people can easily find a new job.  The job market is, therefore tight, there are really more jobs employers want done than there are people who want work.

2) Wages can be good in specific jobs even if they are lousy elsewhere if there is a shortage of workers in that field: see computer programmers during the late 90s.

3) People can make a good living without working for someone else, or at least a good enough living so that they have to offer a good job for people to stop doing so.

The more fungible labor is, that is the more one person can be replaced by any other, the less it is paid.  If every job is skilled, workers are harder to replace.  The more jobs are Taylorized – easy jobs that anyone can do, as with the de-skilling of fast order cooking by places like McDonalds, the less the workers get paid.  (Short order cooks, before the rise of fast food, were well paid.)

Communications technology influences this in two ways:

1) the ability of management to control workers without being there themselves.

2) the ability of workers to organize, either politically, or in the work place for work stoppages, strikes and so on.

Before the telecom revolution it was very hard to offshore or outsource so much work.  It wasn’t impossible, the telephone and the jet airplane existed, but it was hard.  You couldn’t control the people working for you overseas.  As a result, you tended to want to keep your factories close to hand.  Generally in or near your home town or city; and if you moved to a cheaper locale, it was still in the country.  If you wanted to properly control workers and production in foreign countries you had to send your own executives to do it because you just didn’t have the easy communications we have today.

This was one thing if you were sending them to Canada or Western Europe. It was another thing entirely if it was some third world country where, servants aside, the executives would hate living.

So the telecom revolution makes it much more practicable to offshore production to both lower cost domiciles and to domiciles where you can expect the government to beat, jail, torture, rape and in many cases kill any labor organizers.  Even if you don’t move overseas, you can easily keep your wages cheap by playing domestic workers off against foreign ones: “if you don’t make concessions, we’ll move this factory to China/Bangladesh/Mexico.”

(There are many other factors.  In a very fast moving market there are reasons to keep production at home for the fastest turnover, for example, but in an economy where there are only 3 real smart phone companies, why bother?)

The second question is of organizing ability. In the work place people can organize if they know their fellow workers, if they trust their fellow workers, and if withdrawing their wages will leave their employers unable to produce (which is why scabs are so hated.)  In the days of classic union organizing everyone worked in a few huge factories; they knew each other; and they worked with dangerous machinery and trusted each other.

The internet fragments people.  Instead of grouping people geographically so that they can learn to trust each other even if they have some differences, it finds ways to group us with like minded people.

Worse, it makes real political disruptive political organizing extremely difficult.  The bottom line about the internet is that everything you do can be tracked, and tracked easily. If you use the internet to organize a strike or a demonstration or to shut down a city: whatever it is, the authorities know.   Most of it is public, what isn’t public is spied on.

Worse are cell phones.  Everyone carries one, and it is a bug you carry in your pocket, which can even be turned on remotely to listen in on you.

One result of this is pre-emptive arrests.  You get organized to protest the G20, or whatever, you show up, and the day before the summit, the key organizers are all arrested on trumped up charges.  Even if they beat the rap, they aren’t there for the key days making sure things work.

And if you intend to do any serious work: a strike large enough to shut down a city or a major corporation: something that actually inconveniences the rich and powerful, they will know as well.

If you significantly encrypt and use one-off cell-phones and so on, this sends up a red flag as well, and there are a variety of ways around it. (If your laptop has ever been out of your sight, it is not your laptop.  If you ordered it online and had it shipped, it may well have been intercepted, as with one TOR developer’s laptop (diverted to Richmond, I kid you not.)

Cameras, computer, license plate, and cell phone surveillance mean that it’s almost impossible not to be surveilled.  As routine use of recognition systems is rolled out, as audio pickups are added to cameras in larger numbers, and as drones are added to the domestic surveillance mix, it will become even harder.

Oh sure, if they don’t know you’re organizing they can’t narrow down to you.  But they will know, because to organize most significant actions you have to be visible.

Politics is ultimately where most of distribution is decided.  Absent a vast array of “free trade” treaties and protections, the massive movement of jobs offshore from the late 70s on would not have happened.  Absent the breaking of unions by Reagan and Republicans and Democrats from 80 onward, wages would not have stagnated nearly so much.

If you can’t organize effectively, you are politically mute.  And, by and large, workers are in the US, and increasingly so in almost every other Western country.

A communications technology that actually enables people to organize requires ways of vetting people that can’t be goosed by the government. It needs to bring people together in geographic areas where they can actually work together. It needs to allow the experiences which create solidarity amongst them, and generally that means they must meet and do things together which build trust.

By taking so much of the talk that used to occur in unlistenable, unwatchable ways, and making it visible to the government and any corporation willing to make friends with the right people, the telecom revolution has made actual revolution much, much harder. In the old days you basically had to have spies, and you could never be certain how reliable they were.

Now you can just listen in or watch.  You can see the networks developing in real time, you can identify the leaders, and you can use the information you have to take the leadership out and to be ready for any action before it happens.

The telecom revolution may less about freedom that in it is about control.  It enables the surveillance state revolution: the 24/7 panopticon and rather than putting power into the hands of the people, it puts power into the hands of those who control it.  That’s not to say it has no use: Twitter wasn’t banned in Turkey because it wasn’t making the authorities’ lives harder, after all.

But it is a two-edged sword.  As with most things, it works well only for movements which are so large that taking out the leadership is effectively impossible.  For any movement which isn’t a real mass movement, it is a death trap (and remember, most mass movements start as less.)  And you must have victory if you are a mass movement. If you aren’t, when the mobs die down, and the people go home, well the leaders have been identified, and not just the biggest ones, as in the old days, but the people who are influential without showing up on the podium.

And then the big men come.

Any technology which makes top-down control easier and which makes it easier to replace workers, will reduce prosperity.  The telecom revolution might, one day, make some sort of networked democratic decision-making possible.  But it equally might be used to create a surveillance state that would leave Big Brother in awe.


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