As the title shows, it's not about WoW. It's about the real world economy and it's greatest depression, and it's a long-long wall of text. Don't worry, tomorrow I'll be back with morons of the week, like nothing has happened.
The crisis is not over. It's not fixed. It's not even started to be fixed.
What happened is that the patient got supportive therapy. The doctors have no idea what's wrong so they keep it on machines hoping it will heal on its own. It won't. I guess that the batteries of the machines that keep it alive will deplete in 2010 Q4 - 2011 Q1.
The crisis is not financial. Not bankers messed things up. Well they did messed lot of things up, but even if they wouldn't, it would still be a mess. Maybe with different symptoms but no less serious.
The problem is systemic. The idea behind the current system is no longer valid and new foundations must be found to end the crisis.
The American dream is "if you work hard you will succeed". Only laziness stands between you and success. This was the idea of the free market, this was the idea of democracy, this was the idea that elevated a pitiful colony into the strongest country of the world.
The European dream is that you are not alone in your quest to reach the stars. Those who are already there, throw some stardust to you (taxed from them, given to you as education, health care, unemployed support). When you finally reach the stars you return the favor.
The proponents of the American way always attacked the European as "welfare". They claimed that it won't work since many people will take the help from the successful, but won't use it to become successful but simply waste it. The European system is vulnerable to slackers.
They are completely right, but blind to the fact that the same exists in the USA. The only difference is that the slackers of USA gets their money as "prison upkeep costs". That's why in the middle of the last century both systems worked fine. The average Americans and (western) Europeans were equally rich. In the USA the income differences were larger, but it's a variation and not "good" or "bad". Both systems flourished.
Slackers are not the problem why both systems will crumble in 1-2 years. Slackers are rare. Despite American claims, most Europeans were not welfare leeches in the 1950-1980 period. Being a leech was always a shame. No European girl dreamed of getting married to a guy who lives in a 20m2 flat given by the local authority. Despite European claims most Americans were not starving on the streets or sat in prison. In both continents most people were working in a decent job, paid their bills, had a healthy home and educated their children. There were exceptions, there were drunken welfare leeches in Europe and there were evicted families in America, but they were a small minority in the sea of happy middle class people.
The European system is outliving the American by 2-3 years not because it's better. It's outliving it exactly because of its flaw. Because there is welfare. Welfare is the system that holds the front end of the European system together. It is the machine that keeps the patient alive together with loans from China.
The American way was abandoned for the European in the last decades. At first by the bankers who started to "distribute the risks" in "structured financial products". The problem is not the way they did it. Distributing the risk is the very core of the European dream: the "lucky" and successful support the "unlucky" and the not-yet-successful.
The American way was abandoned by the US government with the bank saving fund, where the taxpayers (the successful people with money) "helped" the troubled banks (who were unsuccessful in making business).
Yet the American dream did not die in the last decades. I can even give you a date when it died: 11/26/1976.
On this they the next huge company was formed. It was the "next" in the sense that there were many other companies, that reached multi-billions of dollars after a start in a garage. Yet it was very different from the previous ones. The ones followed it were like it and not like the previous.
The American dream says, you could have been Andrew Carnegie or Henry Ford if you tried hard enough. You could collect your starting money as telegraph operator or machinist and build your business. Of course it is not exactly true, I'm sure Ford had something that 99.999% of the machinist did not. However it's unimportant as the point of a system is not to become billionare. It's to become a middle class man with decent income and you definitely could reach it as a machinist. The chance that anyone could be the next Ford was always a lie, but the reason for it remained obscure.
On 11/26/76 Bill Gates formed Microsoft, followed by several companies in the IT and biotech sector. Anyone could not only not be Bill Gates. Anyone can not even believe he could be without extraordinary scientific skills. It's obvious that one can grind the keyboard forever and not come up with the next world-changing software or the cure for cancer. While the observer saw nothing but hard work and "luck" at Ford, at Gates the "skill" factor is obvious.
Of course the point is not becoming billionare. The point is the decent life. While "luck" was a major factor for Ford, with hard work and no "luck" you could be a properly paid machinist in Ford's company. With only hard work you can only be a janitor in Microsoft.
In the ending decades of the last century the machines and computers reached the grade of development that they can do practically all non-creative work. Million-tons/year product industrial companies are handled by half dozen men, who are mostly sleeping as their job is to intervene in the case of emergency. The normal operation is completely run by computers. With 4-500 horsepower tractors a single farmer can grow food for thousands of men. A crew of a dozen can lead the largest transport ships across the sea.
This automatization shows no end. We can see room cleaning robots, combat robots, dog-walking robots on IT business conventions and they will be in our homes (and armies) in 10-20 years. They are already dominating the agriculture and heavy industry, pushing the vast majority of the population to the services area.
The economical cost of a human work is the opportunity cost of getting a machine that could do the same. That cost was $2-300/hour (if a machine was available at all) in the first half of the XX. century, $10-20/hour in the second half, in the $1-3/hour region now, and will reach $0.1-0.5/hour in a decade.
The loans did not became subprime overnight. Actually it's not the banks getting irresponsible. They are giving the same loans as 30 years ago. The difference is back then the same guy could repay them. Back then everyone could repay his loan if he was not a slacker.
Today to be able to pay your loans and bills you need to be not a slacker and not a moron. If you are not skilled, unable to do creative work, no matter how hard you grind, you'll be poor and powerless in the XXI. century (granted, still less poor than those who don't work at all).
The Chinese found the solution. It's a captain obvious class one: if your work worth $1/hour, you get $1/hour.
However this solution will not be implemented in the USA or Europe until other options are (or rather seem to be) available. The unskilled people will not accept $1/hour and will vote for welfare. That's why the American dream has died to the European. The short term outcome of the crisis is that welfare goes rampart.
Yet the problem of welfare remains. In Europe a single working person support 2.5-3.5 strangers, and with the layoffs the ratio is getting worse as we speak. The core of the European dream is getting help when needed and give when capable. Sharing the risks between equals. Getting the same on the long run as given. When it becomes obvious to the European worker that he just gives and gives with no hope to get anything back from the "less fortunate", this system will collapse the same way.
My guess is that the working people of the US and Europe and also the loaners from China give up hope that they will ever see the fruits of their actions in 2 years. They will not give more loan and cut back on taxed working. When it happens the GDP will drop 10-20% in that quarter. And slowly leak further 1-5%-s in the following quarters, until the governments are not forced to give up on welfare. What will happen when the vast hordes of M&S will no longer get their "well deserved" money? Well... I hope you liked the scourge event before WotLK.
I did.
PS: I'm not claiming that all blue-collar jobs are moronic. For example the plumbing of every house is different, so I doubt that any machine can take the job of the plumber who fix your leaking bathroom or create customized furniture. However people in repetitive, "grinding" jobs are out of luck.
PS2 for trolls: just because the Chinese implemented the "$1/hour for a $1/hour job", it doesn't mean they do other things right. I obviously don't support planned economy. The "wages must cover the expenses" can be implemented in free market systems. Just there must be a political will to handle the disgruntled M&S. China has it, as they break down every protest. Of course there can be democratic ways to handle the M&S (like the government doesn't act on its own, just gives homeowners help to defend their rightfully owned homes/shops from pillaging M&S, and homeowners can act only when the M&S try to illegally enter)
The crisis is not over. It's not fixed. It's not even started to be fixed.
What happened is that the patient got supportive therapy. The doctors have no idea what's wrong so they keep it on machines hoping it will heal on its own. It won't. I guess that the batteries of the machines that keep it alive will deplete in 2010 Q4 - 2011 Q1.
The crisis is not financial. Not bankers messed things up. Well they did messed lot of things up, but even if they wouldn't, it would still be a mess. Maybe with different symptoms but no less serious.
The problem is systemic. The idea behind the current system is no longer valid and new foundations must be found to end the crisis.
The American dream is "if you work hard you will succeed". Only laziness stands between you and success. This was the idea of the free market, this was the idea of democracy, this was the idea that elevated a pitiful colony into the strongest country of the world.
The European dream is that you are not alone in your quest to reach the stars. Those who are already there, throw some stardust to you (taxed from them, given to you as education, health care, unemployed support). When you finally reach the stars you return the favor.
The proponents of the American way always attacked the European as "welfare". They claimed that it won't work since many people will take the help from the successful, but won't use it to become successful but simply waste it. The European system is vulnerable to slackers.
They are completely right, but blind to the fact that the same exists in the USA. The only difference is that the slackers of USA gets their money as "prison upkeep costs". That's why in the middle of the last century both systems worked fine. The average Americans and (western) Europeans were equally rich. In the USA the income differences were larger, but it's a variation and not "good" or "bad". Both systems flourished.
Slackers are not the problem why both systems will crumble in 1-2 years. Slackers are rare. Despite American claims, most Europeans were not welfare leeches in the 1950-1980 period. Being a leech was always a shame. No European girl dreamed of getting married to a guy who lives in a 20m2 flat given by the local authority. Despite European claims most Americans were not starving on the streets or sat in prison. In both continents most people were working in a decent job, paid their bills, had a healthy home and educated their children. There were exceptions, there were drunken welfare leeches in Europe and there were evicted families in America, but they were a small minority in the sea of happy middle class people.
The European system is outliving the American by 2-3 years not because it's better. It's outliving it exactly because of its flaw. Because there is welfare. Welfare is the system that holds the front end of the European system together. It is the machine that keeps the patient alive together with loans from China.
The American way was abandoned for the European in the last decades. At first by the bankers who started to "distribute the risks" in "structured financial products". The problem is not the way they did it. Distributing the risk is the very core of the European dream: the "lucky" and successful support the "unlucky" and the not-yet-successful.
The American way was abandoned by the US government with the bank saving fund, where the taxpayers (the successful people with money) "helped" the troubled banks (who were unsuccessful in making business).
Yet the American dream did not die in the last decades. I can even give you a date when it died: 11/26/1976.
On this they the next huge company was formed. It was the "next" in the sense that there were many other companies, that reached multi-billions of dollars after a start in a garage. Yet it was very different from the previous ones. The ones followed it were like it and not like the previous.
The American dream says, you could have been Andrew Carnegie or Henry Ford if you tried hard enough. You could collect your starting money as telegraph operator or machinist and build your business. Of course it is not exactly true, I'm sure Ford had something that 99.999% of the machinist did not. However it's unimportant as the point of a system is not to become billionare. It's to become a middle class man with decent income and you definitely could reach it as a machinist. The chance that anyone could be the next Ford was always a lie, but the reason for it remained obscure.
On 11/26/76 Bill Gates formed Microsoft, followed by several companies in the IT and biotech sector. Anyone could not only not be Bill Gates. Anyone can not even believe he could be without extraordinary scientific skills. It's obvious that one can grind the keyboard forever and not come up with the next world-changing software or the cure for cancer. While the observer saw nothing but hard work and "luck" at Ford, at Gates the "skill" factor is obvious.
Of course the point is not becoming billionare. The point is the decent life. While "luck" was a major factor for Ford, with hard work and no "luck" you could be a properly paid machinist in Ford's company. With only hard work you can only be a janitor in Microsoft.
In the ending decades of the last century the machines and computers reached the grade of development that they can do practically all non-creative work. Million-tons/year product industrial companies are handled by half dozen men, who are mostly sleeping as their job is to intervene in the case of emergency. The normal operation is completely run by computers. With 4-500 horsepower tractors a single farmer can grow food for thousands of men. A crew of a dozen can lead the largest transport ships across the sea.
This automatization shows no end. We can see room cleaning robots, combat robots, dog-walking robots on IT business conventions and they will be in our homes (and armies) in 10-20 years. They are already dominating the agriculture and heavy industry, pushing the vast majority of the population to the services area.
The economical cost of a human work is the opportunity cost of getting a machine that could do the same. That cost was $2-300/hour (if a machine was available at all) in the first half of the XX. century, $10-20/hour in the second half, in the $1-3/hour region now, and will reach $0.1-0.5/hour in a decade.
The loans did not became subprime overnight. Actually it's not the banks getting irresponsible. They are giving the same loans as 30 years ago. The difference is back then the same guy could repay them. Back then everyone could repay his loan if he was not a slacker.
Today to be able to pay your loans and bills you need to be not a slacker and not a moron. If you are not skilled, unable to do creative work, no matter how hard you grind, you'll be poor and powerless in the XXI. century (granted, still less poor than those who don't work at all).
The Chinese found the solution. It's a captain obvious class one: if your work worth $1/hour, you get $1/hour.
However this solution will not be implemented in the USA or Europe until other options are (or rather seem to be) available. The unskilled people will not accept $1/hour and will vote for welfare. That's why the American dream has died to the European. The short term outcome of the crisis is that welfare goes rampart.
Yet the problem of welfare remains. In Europe a single working person support 2.5-3.5 strangers, and with the layoffs the ratio is getting worse as we speak. The core of the European dream is getting help when needed and give when capable. Sharing the risks between equals. Getting the same on the long run as given. When it becomes obvious to the European worker that he just gives and gives with no hope to get anything back from the "less fortunate", this system will collapse the same way.
My guess is that the working people of the US and Europe and also the loaners from China give up hope that they will ever see the fruits of their actions in 2 years. They will not give more loan and cut back on taxed working. When it happens the GDP will drop 10-20% in that quarter. And slowly leak further 1-5%-s in the following quarters, until the governments are not forced to give up on welfare. What will happen when the vast hordes of M&S will no longer get their "well deserved" money? Well... I hope you liked the scourge event before WotLK.
I did.
PS: I'm not claiming that all blue-collar jobs are moronic. For example the plumbing of every house is different, so I doubt that any machine can take the job of the plumber who fix your leaking bathroom or create customized furniture. However people in repetitive, "grinding" jobs are out of luck.
PS2 for trolls: just because the Chinese implemented the "$1/hour for a $1/hour job", it doesn't mean they do other things right. I obviously don't support planned economy. The "wages must cover the expenses" can be implemented in free market systems. Just there must be a political will to handle the disgruntled M&S. China has it, as they break down every protest. Of course there can be democratic ways to handle the M&S (like the government doesn't act on its own, just gives homeowners help to defend their rightfully owned homes/shops from pillaging M&S, and homeowners can act only when the M&S try to illegally enter)
49 comments:
This sounds like the plot of a certain book published in 1957. Was the author simply wrong about the timeline of the collapse or are there other factors in play that were not included in the original analysis?
Gevlon, I find the logic of your argument suspect at best. You seem to be saying that because of automation, someone who borrows money now has to be not a moron (in addition to not being a slacker), and since that generally isn't true, the entire economy is going to collapse.
First, to say that automation has destroyed the economy is ludicrous. Yes, there are a certain bracket of worker who have had to retrain for either higher or lower jobs, industrial advances have always caused this situation. During the industrial revolution, chicken little types also claimed that machinery was destroying the economy. It wasn't destroying it, it was just changing it. There will be growing pains, but that's normal with change. It does not mean the sky is falling.
Second, a big part of the reason that the American economy is in trouble is that we're based on the idea of spending more than you earn, so you live on credit. Our economy is driven by it. This is a model that cannot be sustained forever because sooner or later someone loses in that particular pyramid scheme. Our current recession is a result of financial adjustments as banks are facing large losses, credit has dried up, and people cannot continue to spend so much more than the yearn. It's painful, but it's a necessary adjustment. "Business as usual" can only carry so far. From everything I've read, it's still nowhere near the level of the Great Depression, and both our country and the world economy survived that, albeit changed significantly.
(I won't comment on the European economic situation simply because I don't have enough facts to support an argument. Not that this stopped you, Gevlon, from commenting on the American economy.)
Third, it is clear from your blogs that you have absolutely no faith in the average man on the street being able to tie his shoes or get through the day. You hate the "M&S" as you refer to them, which you seem to believe is just about everyone but you and whomever thinks like you. Yet, these same M&S are the people that have carried humanity through seven thousand years of recorded history. Yes, they make some of us (including me) want to scream sometimes, yet they still manage carry on the species anyway.
The ultimate problem with your analysis is that you're an elitist who is either unwilling or incapable of understanding how the rest of the world works. That's fine for your daily life as you're free to believe as you wish. It falls quite flat when you try to apply it to international politics or economics, however.
Hopefully, you'll go back to writing about World of Warcraft economics soon. That, at least, you can do well.
It has long been a dream of mankind that machines would free men from the drudgery of work. Unfortunately it also robs us of the dignity of providing for ourselves. Our society is not organized for those that can not provide for themselves. The only solution i see to this is for us to start the colonization of space.
Just being annoying...but early Microsoft had significant contributions from people with no technical background. (eg...history majors) Intel, not so much.
The general point that the current economic system is likely to change with the rise of automated labor is not altogether correct.
It is true that 'mindless grinders' are being displaced. However...
Increases in automation correspond directly to increases in productivity. Therefore, the same competent worker who once supported 3 incompetents may be able to support 7 while still increasing that person's real wages.
I predict, in the short term, steady increases in hiring in the public sector...eg...postal workers.
My outlook is a bit more pessimistic. Productivity increases until barely anyone works. M+S spend no time working and much time reproducing. 40 generations later...life is depressing.
I think gevlon you forget that mankind is greedy, so if and thats a big if people in high paid positions drop down to less paid positions (as u say lower taxed onces) somebody, preferbly the below on the career ladder, will jump in and grab what he can.
Also why should somebody reduce his income when he/she cant see welfare/pension possible for him? Wouldnt you stay in your high paid job and secure your own "welfare"? I think i read at some point that you do that anyway....
Care to bet 50k WoW gold that the GDP of the US will *not* fall 20% in the next 2 years?
If you say "yes", I will send you an email with my login info and you can put all information regarding the bet on your blog. If you say "no", you are not ready to put your money where your mouth is and are just wasting everyone's time.
Time is money, friend.
someone so bent on taking a purely economic view of life claiming that the advent of technology (in this case, automation), and the institution of economic safety nets put in place to ensure those who dare and fail have a chance to dare again (abused as these safety nets are), smacks of irony. I typically love your posts, but this one is wrong-headed. Also, you`re wrong about China having it right, they have minimum wage legislation as well. Therefore labor producing work worth less than the minimum wage is overpriced in the market in an economic sense. Also, China, while on the track of having it right, definitely has a long way to go, especially given the fact that under Mr. Mao, not only was it difficult to even try to be creative, but you stood a good chance at getting shot for it.
I agree with a lot of things Gevlon says, but he got most of this post wrong.
1. The American Dream is not if you work hard you will be sucessful, it's that everyone has the possibility to be succesful, and nobody cares how you make money.
2. The bankers are the one who screwed up the American economy.
3. It's a lot better(job wise) to be a blue collar worker than an average white collar one. These days there's an overproduction of engineers, lawyers, doctors and so on. If you're a plumber, welder or an electrician you have a guaranteed job. If you just graduated from law school, good luck finding a job.
Even though it's a nice post, I don't believe automation can be the problem. It's what humanity has been doing over ages, and what it's "known" for. In the worst case scenario, entertainment will become the nr1 industry, because we need to do something with all that spare time.
On a sidenote, I'm not that crazy about this progress though. Even though technology is supposed to make life easier, which of course it has, it has also made life more complex: easier as in the amount of work you need to do, complex as in the need to understand all technology and processes. Shifting too much from manual labor to "brain" labor is not that healthy imho. I know, I'm in IT and it's constant stress while sitting on your ass.
Great post...
Being a Chinese and live in Hong Kong...
I would not comment on the china history thing (Since its off-topic), but I am sure it's raising now... (Everyone for himself is the rule there)
I agree that welfare leech is ruining the Euro and US system...
Those "Organic-Performance-Increasing-Module" aka Human, would suffer a lot...
The machine-replaceable work will get a huge nerf on pay, and anyone who remain without adapting change will fail...
If the government would support those guy, the system will collapse.
Thanks for the post
This post was so muddled in it's thinking that all I could think was "this isn't right... this isn't even wrong!"
That said, my best reading of this is that Gevlon's argument is: mechanization will take away peoples' jobs and create social problems. While this is true on a small scale (eg, life was bad for saddlemakers after Henry Ford), it has generally been good for society in the medium and long term. Consider: while most of the world used to be farmers, thanks to agricultural machinery now many people direct their energy and creativity towards other (new) pursuits, such as developing computers or hentai tentacle porn.
Rather than looking at mechanization as a way to reduce the number of jobs available, I think it is better to look at it as a way of increasing productivity.
@SiderisAnon: I'm not telling that automatization destroys the economy. It helps the economy. Automatization destroys the place for the "moron but hard working" in the economy. The GDP is now falling not because of automatization but because the system has no answer how to handle the M&S. It's a political crisis, not economical.
Secondly, everyone MUST spend more than he earns at the beginning of his life. We all consume lot of money in childhood with 0 production. We also need education, a home (even rent), transportation to start working. That's why there is loan. The problem is that some people don't even have the chance to ever repay it. Our parents started their lives with loans too. They could repay it if they were not lazy. We must be also intelligent to be able to repay.
"Yet, these same M&S are the people that have carried humanity through seven thousand years of recorded history." Indeed true (well slackers carried nothing, but hard working morons really did). However now we have machines to do it better. That's what changed. They WERE useful to the society. They ARE no longer useful.
@Anonymous: good point, will get an own post.
@Anonymous2: bet accepted. However you must transfer to EU-Arathor to claim it upon winning.
@comradevik: we are in no disagreement on the definition of the American dream. I'm just saying it's no longer valid. If you born with IQ 80, your faith is sealed at the second when your dad's sperm met with mum's egg. No matter what you do, you'll be poor. I've also specifically told that I think most of the wielder, plumber or carpenter jobs are creative as they do one-of-a-kind works like your bathroom that is different from all other bathrooms of the world.
Well, the Luddite movement began in 1811-1812, and they said just the same. Two centuries had gone.
How the world was saved? Simple. Did your father have a cell phone? Did your grandfather have a car? Did your grandmother have a washing machine?
People just produce more and more. Yes, the market is growing for this very purpose, it's mostly done intentionally.
At first, as i've said, they introduce new products.
Second, products now has way less working time than they could. For example a car can serve 20-30 years, but such a car will never be produced, be sure.
And they invite and advertise trends to make ppl buy and use new products even if they are not new, and old can serve well - you've wrote here about purple mammoth :)
Also, just like in WoW, they make vanity products, that cost more and will be advertised and bought.
And new trend, hand-made clothes - someone will spend 8-16 hours to knit somehing a machine can do, but it will be sold for more not cause it's better, but cause it's worse and hand-maded.
You see, they invited a lot of ways to save us from this in that 200 years. They expluatate morons to save them.
Of couse, i'd prefer a more fair way. We don't need money to live, we need goods. If we can produce everything we need faster, why not just work less? Cause someone will abuse the system, and work more (not more than his father, but more than needed) to have some vanity things?
Actually, this way is used to, ppl worked a lot more in luddites' times. 10-12 hours a day with one free day in a week, no holidays. SO i think i should be happy with my 40 hours. Part-time work became more popular in Europe, afaik, so ppl there can work even less.
In Russian economy, the crisis has a particularly ugly aspect: the slackers and leechers are the ones in power. A vast corrupt bureaucracy keeps draining the working populace, morons and smart ones alike, while mercilessly crushing all opposition.
Imo, the "dream" is more pragmatically destroyed by the "all the value goes to the shareholders" new motto. This effectively makes parasites of deciders, instead of builders. Yesterday you could get a decent income because you were skilled. The modern economics don't put any value on skilled work, they say just buy someone unskilled very cheap instead, and let them deal with the problems, as long as you get profit.
Come to think of it, i don't think the market is giving any value to work anymore. I read only about financial profit nowadays.
to be more precise, intermediate management was destroyed, because it's now a "good" management practice to make the workers deal with their own problems. Result = more profit (less skilled people to pay), less productivity and a lot of fuckups. But who cares as long as the share value is going up ? :)
Second, products now has way less working time than they could. For example a car can serve 20-30 years, but such a car will never be produced, be sure.
Oh, but those cars were produced. At least here in Finland, there's still plenty of cars made in the 80ies in good working order. Sure, those cars require maintenance, but what machine with moving parts and routinely exposed to the elements doesn't?
Naturally, people rarely use the same car for 20 years. Fortunately, there's a vibrant used car market, where old cars get re-purposed again and again. The end result is a market where a late teen who just got his/her driver's license can pick up a working car for a few hundred euros and can gradually upgrade to more recent and more technologically sophisticated models as their income increases.
Gevlon, it's probably worth bearing in mind that $1 in China has three times the purchasing-power parity that it does in the States.
@SiderisAnon, the industrial revolution did destroy the economy. It ruined villages and towns to such a degree that generations of their children moved into the cities to get the only jobs they could find - factory work - and support their rural families by sending money home.
Automation replaces those mechanized people with machines who don't have to pay the ever-increasing cost-of-living.
And where do they go? Into the new creative and information-based economy that emerges from the ashes of the old? How many janitors/mechanics/cleaners do you know who even know what kerning is or even give a rats ass.
"American Dream" is just that. A dream. Dream that YOU can be on top. Impossible in a sense that everyone cannot be on top at the same time, someone has to be below you so that you can be "higher" then them. Eventually top can become so high that it is esentially unreachable without significant advantages compared to "average people" (be it IQ, inheritance, luck, or anything else). It wouldn't be "top" for long otherwise.
"European dream" is opposite of that. It's dream that you can be at the bottom but still survive with help of society. Human history has shown that to be useful often enough. We provided food for our elders who couldn't hunt anymore, and they helped with their experience. The system shouldn't collapse as long as society can support it, and with technological advances it becomes easier, not harder. Human basic needs haven't changed much from old days, while our production capabilities have grown.
Perhaps one "working" person supporting life of 3-7 others is DESIRABLE result. Would you prefer that "moron" come to rob your house instead of getting his welfare check? Or unite and revolt? That's how it usually ends if you keep your society bottom as "every-man-for-himself". And Europe had it's fair share of bloody revolutions.
And why would you WANT for moron to work, really? There is no inherent value gain in "working", as there is no inherent value gain in "production" - you might be producing things noone wants and wasting resources.
Hrm.
The gist of the post, as I understand it, is that automation is removing the value from unskilled labor. As a result, only skilled labor (white-collar and professional blue-collar labor) will remain viable, and attempts to artificially protect unskilled labor will ultimately just waste resources.
Assuming this is true, one wonders what will happen if AI continues to advance. What happens if robotics can replace *any* form of labor, not just simple repetitive tasks?
I also can't help but wonder what the limits of education are. If unskilled labor is no longer worthwhile, perhaps the education system can be reworked with the intention of producing as many skilled workers as possible.
I suspect that Gevlon is not trying to accurately predict the future here, but is just using this as a way to provoke discussion. If that is the case, mission accomplished.
Skilled labor is also paid less, leading to the shrinking of the "medium upper class" range, which leads to a decline in spending, which leads to a even smaller market for unskilled labor.
The internet still supports the American dream. Two guys from Belgium built netlog in their basement. It's now one of the most popular sites in the world. You could make the next google, yahoo, facebook...
But it does require skill. It takes hard work and intelligence to create them. But is that so different from a hundred years ago? Henry Ford was clearly also a very intelligent man.
it doesn´t matter if you are in america or in europe. if you are not the owner of the company they will squeeze you as if they were kologarn. actually the american dream is "you can be the one who squeeze instead of the one squeezed".
There's so much more you need to take into consideration. For starters not everything in the world is the same price everywhere.
Unless you're going to provide proper evidence to support your statements then stop making them.
You can't just say if your work is worth this price then that's what you should get according to another country. You need to go through what taxes they pay, how much housing, food, water and heat are.
Relevant Points:
1. What you know and how you apply it is more important to success than being a specialized skilled worker (especially one that can be replaced by an automated process).
2. Welfare systems are parasitic. Eventually they will completely consume that which they feed off of and will collapse.
3. Lenders are extremely short-sighted and assume that someone that looks to be able to pay today will be able to continue to pay for the duration of the loan.
The real source of the problem:
People living outside of their means. The mindset that making payments is just how things is done today.
The solution:
Everyone (from the individual to companies to entire countries) needs to rethink their budget, make as many cutbacks as able (including parasitic welfare programs, and others that depend on the earnings of future generations), and pay off their debt. Only then will they be able to put their income to work for them, rather than someone else.
The next question:
What happens when the loans given by the chinese go into default and they try to sieze assets to cover for their losses?
The above selfish program will work until an accident happens, and you get sick or disabled, or lose your job. Then you'll be steped upon and grounded. From what i read, it's the view of many americans. Sad.
On the second question, as long as china's artificially feeding it's economy like now, it is of no import. Imo the risk is rather internal.
Automation and increases in efficiency RAISE the standard of living and average income, they don't lower it. And they certainly don't ruin the economy. If those advances DID ruin the economy, it would have happened before now. Look at the jobs Gevlon mentioned as "hard work" but not "skill", telegraph operator and machinist...two jobs that certainly came about as a result of technological advances that put less skilled people out of work. One machinist can maintain equipment that does the work of many people, and one telegraph operator replaces several people who deliver messages on horseback. And maintaining a machine or operating a telegraph require more skill than being able to haul on a rope by hand or ride a horse.
So if advances mean work can be done by fewer and fewer skilled people, why hasn't the Gevlon theory of economics meant society has been downhill since we figured out how to irrigate our crops? It's because work inevitably expands to fill capacity, the economy grows given the opportunity. Now that dozen people can handle huge ships, world-wide shipping capacity has exploded, creating many new jobs that rely on shipping goods around the world. Sure, some merchant sailors are out of work, but their jobs have been replaced many times over.
So what DID cause the current economic problems? The "money for nothing" attitude that is (or was) a big part of western capitalism. Somewhere in the advances of the past few hundred years, a lot of people forgot that someone, somewhere has to actually be DOING SOMETHING to make the system work. The rich men of the past built their empires on creating and selling a ton of products, or moving a ton of goods, or drilling a ton of oil, or whatever...they added to the economy. Today, the fallen rich men based nearly their entire fortune on moving money around, often forgetting that there was very little underpinning the value of any of it. Ridiculous mortgages looked like free money, which was a HUGE draw to investors. The idea that there was nothing at the end of the road wasn't a problem, since it didn't even occur to the modern mindset to consider it. Henry Ford was rich because he sold a lot of cars, big investment firms were rich because some number in the computer said they were.
But there is an even bigger problem at the bottom of it...the inability to see past our noses. People took out huge mortgages they couldn't afford because they saw "big house now" and didn't think about how they would actually pay for it. Car companies got into trouble selling ridiculously huge vehicles because "right now" they were popular. Investors got into trouble investing in things that couldn't possibly keep gaining value, because right now they were making money. Long term planning has become a joke, because it won't get you rich right this very nano-second.
Basically our problem is we bought into this fast food idea of wealth, instead of viewing it as something that's earned over a lifetime of hard work and good planning. America was the hardest and first hit because we bought into that idea the strongest...which is why American CEOs are so ridiculously overpaid compared to their counterparts in Asian and European companies. In fact, since we're central to the world economy, I'm not sure America didn't just drag the rest of you down with us...would Asia and Europe have had such major economic problems if American companies weren't run by morons?
The economic model of the world isn't broken, it's just that the people trying to operate it lately happened to be pretty epic M&S ;)
Quite agree :)
Now that everybody living in debt has stopped sustaining the world economy, banks are still making money because the states themselves are living above their ressources... i wonder what's the next step, when the countries fail?
The first bank that fails to collect a state loan because it's bankrupt will start a great domino game ^^
I don't think you understand this issue either.
I think you need to look at the Long Depression and the causes of it to see what is going on. The Long Depression was the Great Depression until the 1929 stock market crash. It lasted 20 years.
It was caused because of rampant speculation and in people that ran companies that cared more for their own compensation than their companies survival.
If you want to blame slackers blame them at the top. Not those that have given up. The top is the problem.
If you want to fix the problem you need to enforce anti-trust and anti-fraud laws and regulations.
This crisis has nothing to do with the leechers, they are a burden to society but didnt cause it.
It was caused by the central bankers who lowered interest rate so much making loans in much higher demand.
See when central bankers lower interest rates they must increase the amount of money supply in the economy. Thats how the central bankers can lower the interest rates lower than the market support. Now that we got an sudden increase of money in to the market, demand for goods increases and companies start investing more for this fake demand after goods.
Than when the central bankers stop pumping in more money because fear of inflation. Fake demand for goods are gone and companies investment were total waste and suddenly we got companies in high debts, people in high debts and recession occurs.
Great post, Just keep in mind that, at least in America, Outsourcing and illegal immigration have been accelerating the automation trend that you talk about. Any job that can't be easily automated has been either outsourced or given to illegal immigrants. This may help hard working M&S in other countries, but it does make it even harder for the hard working M&S in the US to find decent jobs.
Even if the people in the US would be willing too accept the artificially low wages for those jobs, they would not get them because Legal Citizens in the US have rights, while the rights of people in third world countries and illegal immigrants don't have to be respected by their employers. This means that people in the US can never jobs such as picking fruit or making goods (such as Nike shoes in sweatshops) because if employers had to hire US citizens, they would actually have to provide safe working conditions, living wages, and actually pay workers their agreed upon salaries.
Anyway, my point is that we don't need to wait for automation to take every job from people in the US as we already have ways of removing the hard working M&S from the economy through illegal immigration and outsourcing.
This sounds like the plot of a certain book published in 1957. Was the author simply wrong about the timeline of the collapse or are there other factors in play that were not included in the original analysis?
....Cat in the Hat by Dr. Seuss?
I knew we should have listened to the goldfish, not even Thing 1 and Thing 2 can fix this mess...
....Cat in the Hat by Dr. Seuss?
I knew we should have listened to the goldfish, not even Thing 1 and Thing 2 can fix this mess...
No, this if the fault of the negligent mother. A rule set to curtail mischief is worthless if there's nobody to enforce it.
If enough people don't have a place to live, it will indeed be like the pre-wotlk scourge event. I agree that the real problem is not being addressed. I do agree with the French on changing a standard work-week from 40 hours to 32 or 30 hours. I do not believe there is enough work in developed countries for everybody to be working 40 hours a week. There was enough work in the U.S. when everybody was borrowing and spending money, but those times are done for good now. The United States at some point is going to have to accept higher taxes because when there is 10% unemployment, there is a lot of welfare, like you say, either unemployment payments or paying for them in the prisons. Eventually I feel the only solution will be to reduce % debt and standard of living through high inflation, rather than a scourge event but I do think the suffering will go on for a long time.
I'm pretty sure Hirvox's original post was referring to Atlas Shrugged by Ayn Rand. Who is John Galt?
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Today to be able to pay your loans and bills you need to be not a slacker and not a moron
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On a positive spin... hopefully this will deter the human race from a future outlined by the movie Idiocracy. (Once money to fund welfare runs out, of course.)
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....a big part of the reason that the American economy is in trouble is that we're based on the idea of spending more than you earn, so you live on credit.
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This is so true. There is a movement on the internet going on about people deciding to just not pay back on their credit card debits or to bitch and moan about their interest rates so publically that in order to maintain a positive image, banks are forced to take action that they normally would not.
Please. Maybe I'm bias because I work for a Bank. Maybe I'm bias because I've done sales and customer service most of my life. But I HATE it when someone causes a huge scene (cursing, yelling, etc) in order to get their way. Did Ms. Minch not spend the money afforded to her on her credit line? Did she not default on the terms of her credit card?
I believe it boils down to a lack of self control. Don't spend more than you make. Don't take out a loan that once the interest-only period is over you will not have monies to cover the payment. Don't expect that when your 10 year balloon payment is due that you will have the funds to make that payment. Live in your means. Save money.
Ugh, I'm done. *rant over*
"The loans did not became subprime overnight. Actually it's not the banks getting irresponsible. They are giving the same loans as 30 years ago."
Gevron, this statement just is not true. The whole subprime fiasco is a result of Sharp but Unscrupulous businessmen in the banking industry convincing International finance community that these new financial instruments were no-risk. So a lot of money that was traditionally invested in relatively safe things were... thrown away, essentially.
This is one of the clearest explanations I have ever heard on the subject.
http://www.thislife.org/Radio_Episode.aspx?episode=355
There are a lot of other interesting ideas you are trying to frame around the global recession- but I really don't think that you can refer to the recession as proof.
Comparing the american jails to welfare ignores the sorts of crimes that gets one put in jail in america, a lot of cultural hysteria that I think you might actually have to be an american to really appreciate, and the synergy between privatized jail systems, lobbyists, and congress. It's an extremely emotional mess that will get americans screaming at each other at the top of their lungs.
There is just so much wrong with the points you make in this post I don't even know where to begin.
First I will start by saying that we will be fine. We honestly have no other choice. Second the recovery comes in Q4 2010, in the united states.
If there is one philosophy I can point too responsible for the economic woes in this country, it is progressivism. The idea that if you amass wealth you owe society for what you have attained, because with out the society you would have no wealth.
America was founded on the sanctity of the individual. That each individual was endowed by his creator with life liberty and the pursuit of happiness limited by the inalienable rights of his neighbor.
Incidentally democracy is probably the worst way to run an economy. Which is why for most of America's history Governments didn't run business, private individuals did.
The Responsibility of this financial crisis lies squarely on the shoulders of the people. But it cannot be argued that the United States Government Induced reckless behavior, with programs such as the community reinvestment act, the Great Society, and the Sixteenth amendment being probably the most egregious culprit in destroying individual rights. The problem is Government. The problem is special interests. The problem is that this country no longer supports the individual and his rights it's all special interest groups. Group think is killing this country. There's a reason July 4th is called independence day.
Business is not what's wrong with America no matter how big it's Government refusing to fulfill it's primary purpose and that's o protect the rights of the individual.
I don't think you understand enough about computers and robotics to be able to make the claims you are trying to make. There will always be jobs invented by smart people that can be broken down into parts that a few less intelligent people can do. This is not only true of manual labor, but also of office work.
Your claim is that, instead of giving them to people, we could give them to robots and save a ton of money. But the problem is that, no matter how cheap it is to make a robot, it still takes much much longer to break that task into something that a robot can do than it would to break it down into something a human can do.
If you want to tell a robot to open all of the mail and sort it. You would need to create a system where the mail is all stacked in such a way that a robot would have no problem opening it correctly. Then you would have to create another system for the robot to read the labels and send them to the correct person. Then once the system is in place, you still would have to pay a technician to come into the office to do maintenance on the robot and fix it every time it breaks down.
If you take the cost of the office manager's salary full time to monitor and set up the robot workforce and add to it the part time cost of a technician, it will never be more cost effective than hiring even a stupid temp worker to open the mail and then letting the office manager go and do real work.
And this is at the $7.25 minimum wage in the U.S. for stupid work.
The real problem is that, while you can design software that replaces a single task of most office workers, you would have to pay a software developer alot of money to make something that replaces them. So, unless that one task is the person's entire job, it won't pay for itself ever.
Regarding Bill Gates, he hardly has extraordinary scientific skills. About the only thing he did in the early days was write a BASIC interpreter.
What Bill Gates DOES have is extraordinary business skills. Microsoft got its big break by selling IBM an operating system that they didn't have (MS-DOS). IBM needed an operating system for its new personal PCs, and Microsoft promised to license the OS to them. Then, they bought QDOS from someone else and licensed it as MS-DOS.
Of course, this was a genius move on Bill Gates' part. The idea of licensing rather than selling the software to IBM was fairly novel. But in all of Microsoft's history, they have excelled at marketing, while producing mediocre products.
I'd actually blame the current economic woes on the natural evolution of systems based on human time-scales - that and some problems with the regulation of financial firms.
This sort of financial crash is not new. (EG Dutch Tulip Bulb fiasco, Depression, Japanese financial crisis)
One problem is that people have very finite timelines for investment. So, for example, having watched real estate rise rapidly for 15 years, they conclude that prices are likely to keep on rising.
Another ptoblems is that the freedom to fail accorded by US bankruptcy laws works well for starting industrial businesses, but works poorly for maintaining financial firms.
For example, if I try to start the next Google, I won't bother trying if I'm likely to end up in debtor's prison. So, allowing businesses to declare bankruptcy gives me the freedom to attempt this.
Now, if I'm a trader and I have a choice between making a billion dollar bet and not making it on the following terms:
(a) Don't make bet: 0 dollars
(b) Make bet:
i. Win: 10 million dollars
ii. Lose: 0 dollars, firm goes bankrupt
...I'm going to go for (b) even if it isn't optimal for the firm.
There are a lot of methods for improving oversight - but they tend to restrict compensation or restrict the methods the firm can use to make money. The problem is that regulated firms make less money and capital migrates to unregulated firms...
However, given that the financial sector doesn't produce anything beyond making capital available for industry - and stops doing that when there's a crash - there's a real argument for serious government regulation of financial companies.
EG: Control more than 10 M USD investment properties -> you're a bank.
Don't even be so confident that creative jobs (like writing) and semi-creative jobs (like your example of plumbing) will not be displaced. Great advances are being made in the field of computer science allowing machines to do things that were once believed to be uniquely human abilities. As such processes are refined and eventually mastered, a self-programming machine will become a mere variant of the existing technology, and all human work will be displaced by machines.
When I worked for a supermarket, every week some guy would come through and buy $300 worth of smokes and booze, and then use food stamps to pay for that week's groceries.
And he always complained that his food stamps didn't pay for enough food to last the entire week.
IMO welfare leeches should just be shot, but that's why Obama is running the place and not me.
Gevlon, you might enjoy reading UrbanSurvival, "Financial News of the Second Great Depression." There's a post each day M-F, sometimes Saturdays.
http://urbansurvival.com/week.htm
Ha! I’m just reading through the latest UrbanSurvival post myself and here’s a goblinish quote of the author, George Ure.
“…if you're overweight a fair bit, then you shouldn't need to work as hard (and maybe as long) since you won't be around as long so you won't need as big a retirement package.”
Going to have to disagree with what started it. It wasn't Bill Gates and Microsoft it was FDR with social security. And later to Lyndon B. Johnson with his "reforms" that led people in America to thinking they didn't have to work for money, long before Bill created Microsoft
Alexis DeTocqueville's DEMOCRACY IN AMERICA pointed to what made America great was the chance to succeed. But are his whispers from the past relevant with government regulation and federal deregulation? The Eighteenth Brumaire of Louis Bonaparte by Karl Marx attempted to key on the evolutionary dynamic of social evolution, but did he miss the emergence of the middle class? Point being as a very old saying goes ‘…bottom rail on top now…’ The social dynamic is fluid and ever changing not a linear progression.
Perhaps Gevlon is correct, and the West has reached the pinnacle of comfort and ease for the common person. Perhaps it is all downhill from here. I am not willing to write off human ingenuity yet though.
Keep in mind the developed world's demographic situation as well. With more old people than young ones, it should be easy to find work changing old people's diapers over the next few decades. Any moron should be able to handle it.
That being said, predicting rain is easy, building arks is the impressive bit.
The idea that there are enough morons in the world to bring all of humanity down is an idiotic view, unsupported by reality.
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