Unemployment is the dominant issue of the new millenium. I recall government leaders boasting that economic growth without job creation is simply the byproduct of rapid productivity growth…thanks to quantum leaps in technological innovation “we” get more for less. Indeed our society is driven (more about this below) to this end. Technology replacing people is rampant – algorithms have replaced traders and money managers, and computerized trading is rapidly doing away with stock exchanges. Every industry continues to evolve so “we” get more for less, but the question of the hour is: Who is “we” anyway?
If higher productivity is good, then how come the real median household income in the U.S. was $49,445 last year (2010) and in 1996 it was $48,449? Okay we’ve been in a financial mess, but even back in 2007 the number was only modestly better at $52,823.
Sometimes using data (inflation adjusted by statisticians) just doesn’t paint a picture that simple-minded folks (like me) can digest. Say you were making $50,000 in 1996, and spent it all. If you were to spend it on the same items today, it would cost roughly $69,500. Nothing wrong with that if you’ve a job also paying you more, but more likely you’d be grateful just to have a job at all; even if it’s paying you the same as you earned back in 1996! It certainly doesn’t feel like the average American is the “we” in “we get more for less.”
I have posted before on the bleak job situation in financial services (see Shrinkage: Jobs in Financial Services), but the same phenomenon has been evident in all industries. Productivity improvements due to innovation is only partially to blame. There’s something altogether more sinister going on. I’d argue that our fixation with ‘GROWTH’ has mutated (just like viruses mutate) to the point that we’ve gradually been forced to transfer wealth from our own pockets in order to facilitate a false “image” of a growing economy. Sure, improving technology got the ball rolling no doubt, but when innovation (in techniques, systems, logistics etc.) no longer contributes to growth, the only other option is to pay people less and/or fire them. I can think of no other explanation. Increasing unemployment and a smaller paycheck is the price we agree to pay in order to make it appear as if growth continues unabated.
I was visiting my doctor recently, and she made an interesting observation. We don’t assume a person is sick or dying just because they stop getting fatter and fatter. But if a company’s sales and/or its earnings momentum stops, it must be a short. The sentiment is also applicable to a country’s economy and increasingly the global economy. (see – ‘wild ride in the momentum economy’) What caused the financial crisis that destroyed real (and fraudulent) weath matters not; what the crisis uncovered is the reality that over many years prior thereto we wasted more and more wealth in order to prop up the deception (that there is growth where there is none) and that now we can no longer afford to pretend.
Governments feel pressured to spend more in an effort to transfer wealth back into private hands, but this (as everyone knows) is merely a stopgap measure. Moving money around isn’t going to replace lost wealth.
Worse, the source of funding to keep the pyramid from toppling continues to shrink. The private sector is tapped out, as evidenced by the growing worldwide debt – growing because there’s not even enough incoming cash to pay interest never mind reduce the burden.
Does it matter which political party is in power? Not likely. The dilemma is that western society’s values (which have also been adopted in Asia) are just screwed up. ‘Growth’ isn’t the panacea it was thought to be. It’s not just about losing face anymore, it’s also about who has to make the sacrifice and how? Even if all the money being “borrowed” to sustain the great deception – that ‘growth’ is possible and good (even if it’s only a mirage) – is in reality bad debt (whether mortgages or Greek bonds that can never be repaid) we just cannot admit it. Better we all die of starvation slowly than have to assassinate a few.
So what? It means that the percentage of people living below the poverty level will continue to grow. It also means that our earnings will shrink and that savings (earning no real return on investment) will have to grow and yes….we all work harder for less.
The good news? Gas prices are falling and I can ride my Harley a bit further on a tank of gas. That’s MY idea of productivity.