The end of capitalism as we know it?

[Ivan Seeking]

Since I help to automate factories and to develop new automated processes in general, in order to make a living I often eliminate other people’s jobs. That once weighed heavily on my mind, but I know that in order to compete in a world economy this process of worker displacement simply must happen. Orville Reddenbackers Popcorn Company now operates what’s called a “lights out plant”...I think in Colorado. In effect, during normal production no one works there so the lights in the plant are turned off. The factory becomes a big black box with raw corn, plastic, paper, oil, wood pallets, and electricity going into one end, and pallets of ready for sale popcorn coming out of the other end.

Given that some fewer numbers of new better jobs replace the old nasty ones, I was thinking about where this will lead. I see a clear separation of classes occurring though the course of this change; with fewer and fewer general labor jobs available for the average person who has no college degree or advanced training. One day even the advanced jobs may go to the robots, nanobots, and to the engineering algorithms of quantum and/or biological computers. Where does this leave the workers of the world - us?

Just shooting from the hip, it seems that what we see is that the money that once went into workers pockets is instead put into the pockets of stockholders. If left to run freely in this manner, eventually one might expect the classic two class society to emerge, with perhaps 1% of the world’s population in control of 99% of the world’s wealth. Clearly this cannot be left run amok, but even if it does civil wars and rebellions will surely act to level the systems eventually, so again, where do we land in all of this? How do we transfer the wealth once paid to workers into everyone’s pockets? The way that I see it, the factory must eventually become a public institution.

I have played with many scenarios about how this situation might evolve. What are your thoughts? Do you agree in general with the picture that I paint here? I see this as potentially one of the great changes in the social and economic structure of our soon to be “one world”. Basically, it strikes me as a second industrial revolution.

 

[selfAdjoint]

I think you are absolutely right. One thing though. The US is currently functioning as the world's prime consumer. We are the purchasers of most of the exports of the rest of the world, and it is said the if the US consumer sneezes, the rest of the world comes doen with the flu.

So when the majority of the working class of the US, including the majority of white collar workers too and some of the middle management, are permanently out of work, who is going to buy all those products? This day is coming, unless some "socialistic" measure are taken to prevent it.

That day is coming. The anomalous growth in productivity in the last five quarters is the writing on the wall.

 

[Dissident Dan]

New technology replacing jobs is what the Luddites revolted against, and not without respectable concern. There is very real job loss as a result of new technology.

I believe that new automation technology is essential to progress, but if not done right, it could be progress only for a minority. As stated before, new technology causes people to lose jobs. So far, new jobs have popped up in other sectors, but there is a time gap. What we need is some sort of mechanism to accompany automation that will provide for the lifestyle of those laid off while the economy adjusts.

Thinking farther into the future, what if one day this cycle breaks and the job losses are not replace by fewer jobs? We needs a system that will provide for those laid off or born into an empty job market indefinitely. This could be accomplished through welfare, or some sort of socialistic ownership. Each method has its own concerns.

If no method is in place, and this "final" layoff stage begins, the economy may not be able to support itself. What you would have is a few rich guys serving a few rich guys. And how many trinkets hoola hoops can a rich guy buy? In addition to the new proletariat, whole sectors of the economy that were built on selling to the mass consumer base would collapse. This is all assuming no violent revolution.

Even if such a "final" stage never occurs, it would be a great step for the advancment of quality of life for people to have to do little-to-no work as just about everything would be automated.

The welfare system would be good because it would still allow for capitalists to have greater wealth to shoot for, thereby avoiding the tragedy of the commons and providing incentive. Those on welfare would provide a consumer base for the capitalists. Of course, the only way that the consume base would have money in the first place is if the capitalists had to give currency to them (and, I suppose, the capitalists would essentially be competing for shares of the other captialists' wealth) or they had something else that the capitalists would desire (their souls! haha, j/k). That is a major flaw in this system. Concentration of wealth could be a major problem with this system.

The socialistic system would, if done correctly, provide the goods that the collective owners decide are desired. There could possibly be the tragedy of the commons involved. This system would probably work best at a factory- or corporation-level, as that should optimize efficiency and should also allow for free-market type trade among the different factories/corporations. This system would directly provide the workers with the fruits of their factories.
Concentration of wealth in certain factory/corporation-based communities could be a problem with a market economy.

You could possibly where goods are distributed in a socialistic manner, except that you have administrators who are given more than the typical person in exchange for their labor (in order to provide incentive). Some selection-replacement process such as voting would be required to keep things efficient and working.

OK. That's enough futurizing for one night.

 

[russ_watters]

Where does this leave the workers of the world - us?

You posed the question and I'd like to hear your answer to it. A lot of people say with technology and outsourcing, jobs are going away (you?, Dan and SA). But are they really? What I see is the developed countries getting robots and foreigners to do the jobs we don't want, leaving better jobs for the people who are left.

I had a similar conversation on another board about outsourcing and a couple of guys said over and over again that jobs were leaving and that's bad. And they had hypothetical anecdotal evidence ('hypothetical phone support guy is now unemployed...') But on the other side, I and others posted the DATA which shows the opposite. Our economy is strong and unemployment is low.

If technology and outsourcing are hurting our economy and our workers, where is the data that shows it?

Thinking farther into the future, what if one day this cycle breaks and the job losses are not replace by fewer jobs? We needs a system that will provide for those laid off or born into an empty job market indefinitely.

Or how about this: if the need for workers ever does decrease (like I said - it hasn't yet), we should have the same number of workers doing less work. In the US, we work more than just about every other developed country. How about shorter hours and more vacations?

 

[selfAdjoint]

Your better jobs are for better qualified workers, which is a definition that goes beyond mere training to questions of talent. Suppose that all the jobs teaching piano were to vanish, or be outsourced, and that this somehow doubled the number of positions for concert pianists. What good would that be to all the ex-piano teachers who could never make the cut?

 

[Dissident Dan]

If you read my post thoroughly, you will see that I did not state that jobs are permanently leaving. I said that there is a period of adjustment during which jobs are lost. I also put forth the possibility that this cycle may one day end, and the jobs may be gone for good. Will it? I don't know. I'm not saying that such would necessarily be a bad thing. If done correctly, it could be a pinnacle of progress.

 

[russ_watters]

Your better jobs are for better qualified workers, which is a definition that goes beyond mere training to questions of talent.

I think our workforce is diverse enough that that isn't going to be a problem. We're a long way from robotic garbage men and janitors.

Dan - fair enough.

 

[Dissident Dan]

I think our workforce is diverse enough that that isn't going to be a problem. We're a long way from robotic garbage men and janitors.

Are we? There are experimental cars that have been able to navigate themselves on public roads. Robotic floor cleaners aleady exist (http://www.roombavac.com/buyroomba/defaultB.asp). Changing the trash would be a little harder to implement, but it's probably just a matter of clever programming and getting the technology cheap enough.

 

[hughes johnson]

Are we? There are experimental cars that have been able to navigate themselves on public roads. Robotic floor cleaners aleady exist (http://www.roombavac.com/buyroomba/defaultB.asp). Changing the trash would be a little harder to implement, but it's probably just a matter of clever programming and getting the technology cheap enough.

You miss the obvious. Who maintains and repairs the cars? Who maintains and repairs the roads? Who maintains and repairs the systems that make these cars function? Who maintains and repairs the the floor cleaners? Who maintains and repairs the system that changes the trash?

If we do away with horses for transportation, will all of the people who shovel **** be out of work? How about the people who manufacture saddles and bridles? How about the people who bale our hay? This would be a disaster! We'd all be out of work forever! Capitalism would be DEAD!

 

[Ivan Seeking]

I am going to post more a little later but I wanted to interject a bit here. We are not talking about the loss of an industry, such as the horse and buggy industry, we are talking about the loss of a good part of all industry.

 

[Ivan Seeking]

We're a long way from robotic garbage men and janitors.

If you were a skilled lathe operator for Boeing, would you consider the position of garbage man or janitor a good career option?

 

[hughes johnson]

We are not talking about the loss of an industry, such as the horse and buggy industry, we are talking about the loss of a good part of all industry.

Industries come and go, they always have. As each one dies, two or more new ones are born.

 

[selfAdjoint]

Industries come and go, they always have. As each one dies, two or more new ones are born.

Excuse me, but platitudes like this are small comfort to young people looking for a lifework. If the jobs picture is global, and it seems to be getting there, then the pay in two different countries will only differ by the cost of transporting the product. If the product is information, and travels via the web, the cost is very low, and we can expect IT jobs in the US to pay not much more than IT jobs in India. Likewise the manufacture of complex objects, where the value per volume makes transportation cheap, has already been outsourced.

Where are those new jobs coming from? Real companies, not abstract forces, invest in plant and hire workers. The desirability of doing that in regions of the world where costs are low has been driving industry for generations, and I don't see anything that will stop them.

 

[hughes johnson]

It's a global economy, to survive you have to compete. If you don't want to compete, that's fine by me. Things have never been better than they are right now.

 

[Adam]

Good grief. Ignorance abounds.

The stronger the economy in developed nations, the stronger the unions, the more production is moved off-shore, to places without unions. Workers in said developed nations lose their jobs. So "things have never been better" is rather relative. Things have never been worse for the thousands of blue-collar workers losing their jobs as factories close. Things are great indeed, however, if you're in the minority, the money-shufflers and the management, who gain profits regardless of where the labour is performed.

 

[pace]

My idea is that our two last centuries has mostly been about making things more comfortable for us, giving us more time to think. That we're working ourself up to an adequate comfortable-level. When we are doing less and less manual work, we're going to turn over to more creative work, but basically lively manual work. So more and more focus on arts, animals and plants(restoration and growing of nature) etc. It'll bring in our need for doing work, our need for making things better. There's always things to make better as long it's lively, lively is what making better is about. Also it's a result of people reading more and more fantasy stuff and disliking all the brick-walls; Square-0-1-culture. We want to go back to nature, our instincts and emotions scream for it.
Probably there'll be some crisis along the way, but there's where we're ending up I believe. An optimistic guy I am.

 

[Mattius_]

This is ridiculous... Capitalism in a purist state does tend to separate the classes, not that I am against that, but just to play your view of things, let's call that a bad thing. We have watched automation over the last 50 years revolutionize our labor force. The US now holds the services industry as its primary employer. Manufacturing has taken a nose dive. And yet, we still have the same employment ratio, on top of that, we have double the population. Since a more marginal rift has already come about, and we have seen almsot 0% difference in our employment rate, I see it hard to prophesize such a thing.

Secondly, I stated before that capitalism in its purist state does in fact separate the classes, but the fact of the matter is that the United States is socialist. Why? Democracy. No matter what happens in the US, as long as one individual has one vote, and that it counts for just as much as bill gates' does, then we will always have peasent pleasing politicians. If this class difference is evident, then the masses will milk this difference for all its worth.

Lastly, I have never heard of, nor produced logic for, a rich business man not to withhold his money and quarantine it. The rich indeed do get richer, but only through the expansion of their own endeavors. Their own endeavors, usually the production of goods to feed demand of the consumer, is never going to go away. Rich people invest, and thus, move the economy for average joes.

 

[Ivan Seeking]

Since a more marginal rift has already come about, and we have seen almsot 0% difference in our employment rate, I see it hard to prophesize such a thing.

And the standard of living has dropped accordingly. We are losing the middle class. I have read that in 1950 the average middle class household was able to bank about 30% of the family income. This relied on a single source of income for the house. The latch-key-kids of the 70's were a sign of the decrease in living standards. What I see now is that entire factories are being nearly emptied in nearly every sector of manufacturing.

I will be back later with some supporting information. I haven't had time to dig into the numbers.

 

[Ivan Seeking]

What is the average debt per capita now, as compared to one's yearly earning capacity, as compared to the 1950's.

 

[Ivan Seeking]

I found one quick link that touches on this issue.

Credit Card World Summary
This module explores the sharp increase in world-wide levels of household debt and its impact on contemporary patterns of globalization. Led by the ascent of America?s Credit Card Nation in the 1980s (falling household income, banking deregulation, rising personal debt), the global expansion of the U.S. financial services revolution?especially credit cards?is profoundly shaping national economic development patterns as well as enhancing the material standard of living of low- and middle-income groups throughout the world. The "Magic of Plastic," however, includes a wide-range of potentially negative consequences. This international "democratization of credit" features escalating consumer finance costs, falling personal savings for retirement, unforeseen household debt problems during economic downswings, decline of national economic autonomy due to dependence on foreign banks, loss of cultural autonomy due to influential cross-marketing campaigns of foreign corporations, erosion of
personal privacy through the computer-aided collection of consumer information, rise of financially insolvent households, and new debt-related social problems. The module is divided into three, two-hour sessions. They are briefly summarized below. [continued]

 

[hughes johnson]

And the standard of living has dropped accordingly. We are losing the middle class. I have read that in 1950 the average middle class household was able to bank about 30% of the family income. This relied on a single source of income for the house. The latch-key-kids of the 70's were a sign of the decrease in living standards. What I see now is that entire factories are being nearly emptied in nearly every sector of manufacturing.

I will be back later with some supporting information. I haven't had time to dig into the numbers.

Will your "supporting information" convince me that the "standard of living has dropped"? I think I'll hook my new boat up to my new SUV or my lincoln town car, take the day off again and do some fishing and think about this. At times when I am sitting in my new house, or even when I travel to Wyoming to hunt antelope, I do wonder if my standard of living is dropping. I think that the next time I go down to the airport to fly my Cessna 172, I will ask my buddies if their standard of living is dropping too. Perhaps some of them will be back from their vacations, and they will give me some input on this. Yeah, life is getting tougher all the time...

 

[Ivan Seeking]

Will your "supporting information" convince me that the "standard of living has dropped"? I think I'll hook my new boat up to my new SUV or my lincoln town car, take the day off again and do some fishing and think about this. At times when I am sitting in my new house, or even when I travel to Wyoming to hunt antelope, I do wonder if my standard of living is dropping. I think that the next time I go down to the airport to fly my Cessna 172, I will ask my buddies if their standard of living is dropping too. Perhaps some of them will be back from their vacations, and they will give me some input on this. Yeah, life is getting tougher all the time...

So then "you" is all that counts?

 

[Adam]

Isn't that obvious?

 

[hughes johnson]

So then "you" is all that counts?

America is the land of opportunity, things are better than ever before. Quit whining and get a job.

 

[Adam]

Things have never been better...

Between 2000 and 2001, poverty rose to 11.7% of the population, or 32.9 million people, up from 11.3% and 31.6 million.

23.3 million people sought and received emergency hunger relief from our network of charities in 2001.

Soldiers executing POWs.

POWs held for years without charge.

Using 75% of the world's oil production.

Average unemployment rates in the past year have risen: in 2001, the rate was 4.8%, but jumped to 5.7% in 2002.

In the last decade, the average US household consumer debt (non-mortgage) has increased from approximately $8,500 to $14,500. (Federal Reserve Statistical Releases and U.S. Census Bureau)

According to the Federal Reserve, outstanding non-secured consumer debt rose from $355 billion in 1980 to $1.2 trillion in 1996 to $1.65 trillion in 2001 and is expected to exceed $2.2 trillion by 2004.

Oh yeah, and there's that small problem of NOBODY in the world trusting the word of the US government any more.

http://www.secondharvest.org/site_content.asp?s=55
http://www.mlmdir.com/modules.php?name=News&file=article&sid=52

 

[hughes johnson]

I'm a business man, I'm in contact with people from all over the United States on a daily basis. Except for a few isolated areas, no one can find help anyplace! I spend a lot of money advertising for workers. I can't find help, and either can anyone else. Where are all of these starving poor unemployed people? I even called temp services. I pay well, yet I cannot find labor.

My business is booming! I turn down customers every day. I can't keep up. I keep raising prices only to find out that everyone else is getting more money for their products and services than I get. Also, raising prices is the only way I can limit my business enough to offer decent service to my customers.

Every week the local sunday newspaper lists new companies formed, and the companies who have gone bankrupt. Many new companies are formed every week, and there is only a few a month that go belly-up.

I can't imagine how these government agencies can put out statistics like you've listed. It's a joke. It just doesn't add up.

How can these poor starving unemployed people be using so much oil? How can they borrow so much money to run up consumer debt?

I guess the moral is: Don't believe what you see with your own eyes, believe what the government tells you.

 

[russ_watters]

And the standard of living has dropped accordingly. We are losing the middle class. I have read that in 1950 the average middle class household was able to bank about 30% of the family income. This relied on a single source of income for the house. The latch-key-kids of the 70's were a sign of the decrease in living standards. What I see now is that entire factories are being nearly emptied in nearly every sector of manufacturing.

I will be back later with some supporting information. I haven't had time to dig into the numbers.

The information I see as relevant to that is the Census bureau's income stats, which disagree: incomes across all income groups are rising and have been since stats started being recorded in the '60s.

Latch-key kids? I see that as a biproduct of women's lib: women choosing to work whether they have to or not. That and more single-parent families, a different issue altogether.

Saving less? People are buying bigger houses and more expensive cars than they used to. Again, a choice.

What is the average debt per capita now, as compared to one's yearly earning capacity, as compared to the 1950's.

Its near the highest its ever been - which is unsurprising considering interest rates are near the lowest they've ever been.

Workers in said developed nations lose their jobs. So "things have never been better" is rather relative. Things have never been worse for the thousands of blue-collar workers losing their jobs as factories close. Things are great indeed, however, if you're in the minority, the money-shufflers and the management, who gain profits regardless of where the labour is performed.

Unemployment stats (as Mattius suggested) disagree with you.

Between 2000 and 2001...

The economic cycle lasts about 5-10 years. One year numbers are utterly meaningless for setting a trend. And btw, the numbers for this past year show marked improvement. Care to trend that out?

 

[russ_watters]

I found one quick link that touches on this issue.

...falling household income...

What's your source for this? Its seems at odds with the data:
http://www.census.gov/hhes/income/histinc/inchhdet.html
http://www.census.gov/hhes/income/histinc/h03.html

The income group doing the worst is indeed the lower middle class (2nd fifth) - the average household income of this segment has increased "only" 28% since 1967, inflation adjusted.

This also illustrates what I often say about our skewed view of economic classes in the US. For an economist, classifying by 5ths is useful, but for a lay-person, it clouds the fact that the terms "lower class," "middle class," and "upper class" have largely lost all meaning. A pretty high percentage of people who we call "middle class" today would have been considered "upper class" 40 years ago.

 

[hughes johnson]

russ,
Your statistics agree with reality. Are you having trouble hiring people, and finding contractors who are not swamped with work?

 

[Njorl]

Cost reduction can not kill capitalism. First, it is the minor source for profit, second to demand expansion. Second, if purchasing power declines in the consumer sector, the incentive to cut costs also declines. Cost cutting almost always involves an initial outlay. If there is no one to buy your product, why spend the bucks to reduce production costs? Entrepreneurs stop doing it before it becomes fatal.

This phenomenon does occur in isolated sectors of the ecomony for temporary periods. It can destroy whole towns, but it can not destroy capitalism.


Njorl