The problem with US manufacturing is not that it has been shrinking – despite the “offshoring” of textile and electronics manufacturing to China, US manufacturing output rose by 3.9 per cent a year between 1997 and 2007. However productivity grew 6.8 per cent annually in the same period, so millions of jobs were lost. If manufacturing carries along the same path, McKinsey estimates that it could shed another 2.3m jobs by 2020, while the economy needs to create 21m more jobs to return to full employment. John Gapper – Financial Times
I was talking to a very shrewd and well informed friend of mine, now a sedate Spanish notary, who in the 1980s was a sort of Gordon Gekko. He gave me a very intelligent analysis of the crisis.
At the bottom of it, he said, was the enormous increase in productivity brought on by information technologies. We simply produce much more than we can possibly consume: we need lots of consumers and many fewer workers.
How are underemployed people supposed to buy anything? On credit. Something has to give, has given. I think he’s right.
A very good example might be how much supermarkets have changed in the last 20 years. Remember (if you can) the days before bar code cash registers existed. Totaling up the merchandise, taking payment and making change was much slower work than today. Check-out girls needed a much bigger skill set in that environment: to add and subtract accurately in their heads to begin with.
Now, passing the product over the laser reader, passing the banker or credit card through the card reader and getting the customer’s signature is only the work of seconds and if the customer pays in cash, the cash register tells the check-out girl the exact change to give. A person of average or better than average intelligence, who has successfully completed high school is wasted in such a job.
At the same time that the products are being checked out, the system is seamlessly keeping track of the inventory and calculating the buying needed to keep the shelves full and may even send the orders directly to the head office, several states away, where the orders are also processed electronically and trucks are filled and dispatched with a fraction of the human input needed only a few years ago. Now, project this technological productivity explosion onto almost any human activity. More work done with a shrinking work force.
It is easy to see that with this system it is possible to have much bigger stores with a much wider variety of products, employing many fewer and much less skilled, therefore lower paid, workers than ever before.
With lower costs and more technology, profits rise and much of this gain is reinvested in more productivity-raising technology, which makes more skills and the people who have them redundant. This means, perversely, that more profits usually lead to less jobs or much poorer jobs. This paradigm, which until recently only held true for the poorly educated, is now reaching the ranks of university graduates. Now, with digital technology, even high intellectual output tasks can be outsourced to where people with postgraduate degrees can be hired for the same cost per hour as high school graduates in a developed country.
Result: As more money is invested in raising productivity, fewer and fewer people can produce more and more for a market glutted with products that fewer and fewer people can afford to buy without going into debt.
Salaries don’t rise because most workers are not really needed that badly and are easy to replace if they go on strike, complain or even report in sick.. and thus they have no bargaining power. Any shortages such as one resulting from low birthrate in developed countries can be solved by outsourcing the jobs to poorer countries with high birthrates.
All people are really required to do is to buy many things that they don’t really need, which they can do, even with a McJob, by using a credit card… thereby kicking the can into the future: a future with poorer paying jobs, less horizon, more need of credit to participate, with less chance of ever paying back the debts incurred.
To make underpaid workers buy things that objectively they don’t need, an entire industry (marketing) exists to make them dissatisfied with what they already have. Perversely, unhappiness becomes a social good in such an economic arrangement. A thrifty person, one content with his lot, someone who for thousands of years was seen in all traditions as a wise and sensible man, is in this contemporary situation seen as a public enemy to be “stimulated”.
In a sense our entire “civilization” is sort of a universal “Ponzi scheme”. If the wheel stops even for a moment it all comes tumbling down.
It’s amazing that a structure this artificial, that fills so few truly human needs, has taken so long to nearly collapse.
Cross posted from: http://seaton-newslinks.blogspot.com/