This is the last post in the series of my doom prophecies, aimed on proving that without serious changes, the GDP will fall, due to the incompatibility between the economy of a technologically advanced country and the legal-social system of the same countries.
First let me re-introduce the graph that I've presented in a badly written post:
What is important is that the green line is much-much smoother. It's more or less immune to recessions and booms, including the current great recession. It's shows something fundamental: the productive power of the average worker. It's slowly but surely rising all times as technological makes man more and more powerful. The market trends have little effect on it, as it's a deeper layer, it's defined only by the underlying technology.
The red line on the other hand dances around the green. In booms it jumps above it, in recessions it fall below it. If we divide red by green, the GDP falls out from the equation, and we get "worker/person" aka "employment rate". So we get to the fundamental conclusion:
Booms and recessions are only defined by employment rate, as GDP/employed is a fundamental thing and unchangeable for politicians or market actors. (except by education in 20-30 years)
I mean in booms people get employed to create value (so they do), and in recession they are fired (so they do nothing). Captain obvious says: "keep employment rate high and we'll be in a forever boom". Yet - as communist countries so clearly proved - it's impossible. You can't keep a company running if no one buys its products. The last two boom-recession pairs were doing exactly this.
To prove that let's see this graph:
The data above shows income shares of different percentile classes (source is the appendix of an IRS study). It says that the red group (richest 20%) of the USA is not only get much more income than the the other 20% segments (that's obvious) but also that their share of wealth increases every year.
In 1980 the red group got 50% of all salaries and other incomes. In 2000 they had 60%! Captain obvious says that in 2080 they will get 100% of the income, meaning everyone else will get nothing!
Captain obvious is wrong, we don't have to wait for 2080. There are social transfers, meaning no one can reach 0. You will have income, even if you work nothing. If we guarantee 5% income share to every group, then the red group needs to get "only" 80% to put everyone else to welfare. They will reach it in 2040.
If you think that the cake grows faster than the slice of the red group, look at the graph below (from the same IRS study). It shows the group limits in 1983 dollars (inflation-free dollars, about 0.46 2009 $). As you can see, the slice of the other groups decrease in absolute terms (as far as inflation-free $ is absolute).
The employment rate of the USA was 44% at 2008 (considering the whole population 100%, 65% if you define the working age as 100%). To decrease this to 20% by 2040, we have to decrease it by 0.75% of the whole population. That's 2.5% decrease of the actual workforce every year (the 100% is the previous year). Remember the picture from my two weeks ago post?
Wait a minute! GDP/worker increases by 3-4%/year, so it could overcompensate the employment rate decrease. Our GDP will still increase, just the world will change a bit: only 20% will work, the rest will just enjoy life, granted in a poor fashion.
In the last post this optimistic view will be destroyed, along with the wrong hopes that the people who are too dumb to work in a technically advanced workplace could go to services area, to work as waiters, home-cleaners, baby-sitters and such.
First let me re-introduce the graph that I've presented in a badly written post:
What is important is that the green line is much-much smoother. It's more or less immune to recessions and booms, including the current great recession. It's shows something fundamental: the productive power of the average worker. It's slowly but surely rising all times as technological makes man more and more powerful. The market trends have little effect on it, as it's a deeper layer, it's defined only by the underlying technology.
The red line on the other hand dances around the green. In booms it jumps above it, in recessions it fall below it. If we divide red by green, the GDP falls out from the equation, and we get "worker/person" aka "employment rate". So we get to the fundamental conclusion:
Booms and recessions are only defined by employment rate, as GDP/employed is a fundamental thing and unchangeable for politicians or market actors. (except by education in 20-30 years)
I mean in booms people get employed to create value (so they do), and in recession they are fired (so they do nothing). Captain obvious says: "keep employment rate high and we'll be in a forever boom". Yet - as communist countries so clearly proved - it's impossible. You can't keep a company running if no one buys its products. The last two boom-recession pairs were doing exactly this.
- The first one employed lot of people in the .com business, paying them from investors money who invested in the hope of huge profit. When they realized that these profits will never come as the .com markets simply does not have enough customers, the .com balloon popped, the investors lost their money and the workers creating useless products were fired.
- The second was powered by the subprime loans. People bought homes, cars, consumer electronics, restaurant services, travels and so on without money. When it became obvious that the loans will go default, the further loaning stopped, the buying force disappeared and the workers who created the products for the loaners were fired.
To prove that let's see this graph:
The data above shows income shares of different percentile classes (source is the appendix of an IRS study). It says that the red group (richest 20%) of the USA is not only get much more income than the the other 20% segments (that's obvious) but also that their share of wealth increases every year.
In 1980 the red group got 50% of all salaries and other incomes. In 2000 they had 60%! Captain obvious says that in 2080 they will get 100% of the income, meaning everyone else will get nothing!
Captain obvious is wrong, we don't have to wait for 2080. There are social transfers, meaning no one can reach 0. You will have income, even if you work nothing. If we guarantee 5% income share to every group, then the red group needs to get "only" 80% to put everyone else to welfare. They will reach it in 2040.
If you think that the cake grows faster than the slice of the red group, look at the graph below (from the same IRS study). It shows the group limits in 1983 dollars (inflation-free dollars, about 0.46 2009 $). As you can see, the slice of the other groups decrease in absolute terms (as far as inflation-free $ is absolute).
The employment rate of the USA was 44% at 2008 (considering the whole population 100%, 65% if you define the working age as 100%). To decrease this to 20% by 2040, we have to decrease it by 0.75% of the whole population. That's 2.5% decrease of the actual workforce every year (the 100% is the previous year). Remember the picture from my two weeks ago post?
Wait a minute! GDP/worker increases by 3-4%/year, so it could overcompensate the employment rate decrease. Our GDP will still increase, just the world will change a bit: only 20% will work, the rest will just enjoy life, granted in a poor fashion.
In the last post this optimistic view will be destroyed, along with the wrong hopes that the people who are too dumb to work in a technically advanced workplace could go to services area, to work as waiters, home-cleaners, baby-sitters and such.
38 comments:
The fundamental problem with this analysis is that you're not explaining what's so different NOW. Trends are trends, and so far all you've shown is that the trends are relatively stable in the long term. GDP ALWAYS tends to go up, while short-term economic fluctuations result in job loss and gain (because obviously some people are more expendable than others). As far as I can tell, there is nothing special about this particular period in time that will result in an irreversible decrease in GDP and a rapid increase in unemployment rates.
But that's not the real problem...the real problem is that you present these unemployment and income and whatever-else graphs, and make HUGE assumptions about what they really show. If your assumptions about morons getting laid off were true, why are a lot of relatively highly skilled workers being let go as well? Income disparity also affects those skilled workers. I don't know about in your country, but in the United States, a LOT of skilled professionals don't make it into the top 20% in terms of income. And beyond that, the "top 20%" is a very wide range...your thesis would be kind of silly if most of the growth in that band was a result of the top 5%, or top 1%, wouldn't it?
I have a different theory. It's not the stupid dragging us down, it's the top per percent PUSHING us down. Study after study suggests that something like the wealthiest 5% control over half of the income in the United States. The trend has grown since about 1980, and is MUCH worse in the US than other advanced industrialized countries.
So what? Well basically you end up with a really unbalanced economic model when wealth is so concentrated. Mistakes or bad calls or simple stupidity among the privileged few affect a huge portion of the economy. And because nobody else has any wealth, there is nothing to counterbalance it.
Who's to blame though? I think the graphs Gevlon posted have the answer. Despite the bumps, the GDP per worked has gone up tremendously, yet the overall share of the wealth among the vast majority of those workers has gone way down at the same time. If EVERYONE was getting richer, our economy would be experiencing stable growth. But since our dramatic GDP increases have mostly gone into the pockets of a few, our overall economy is starting to stutter.
@Brian: I'm fully aware I didn't prove collapse yet, wait for Friday.
You are also right that the greatest part of the increase is done by the top 1%. 2-5% is increasing nicely, 6-10% is increasing lightly, 11-20% is DECREASING very slowly but still. However these groups seem to be able to hold their wealth and jobs, so from my point of view they belong to the "will be employed" group.
About the "top pushes it down". Come on! Didn't you learned anything from WoW? If I make 10K G from 100 farmers, whose fault it is?
Unless you take someone's wealth with a gun, it's their stupidity. And that's part of the point. Wait for Friday.
@Gevlon:
In 1980 the red group got 50% of all salaries and other incomes. In 2000 they had 60%! Captain obvious says that in 2080 they will get 100% of the income, meaning everyone else will get nothing!
Because the red group got 10% in 20 years they will get 50% in 100 years? By that logic in 2180 they will be at 150%, which is clearly nonsense. What you predict is not only far from obvious, it is untrue. You are assuming linear progression where there is none.
The employment rate of the USA was 44% at 2008 ... To decrease this to 20% by 2040, we have to decrease it by 0.75% of the whole population. That's 2.5% decrease of the actual workforce every year (the 100% is the previous year). Remember the picture from my two weeks ago post? I see 2.7%/year decrease here. Just coincidence, right?
Ouch, you are assuming that this decrease in the workforce will stay constant year over year? Why?
Seriously, Gevlon, you are trying to be logical, but it looks like all you are doing is tying facts to your views of how the world works, whether consciously or not. Let's get this little theory of yours debunked once and for all so that you could go back to writing about WoW.
@Ten: I used linear estimation. If it's less then linear it will still displace everyone, just later. Can you prove that it will stop before it reaches the wall (100%, or 100%-welfare)?
What about constant growth of the population? How do you factor it in your model?
Of course the GDP/Worker goes up. In the real world, if a company is struggling, they fire staff and get the rest of the staff to fill the duties. Hence GDP/Staff goes up.
The real problem is Global. There is more Debt thatn money that exists. Thats what created the recession.
I saw it myself, pension funds, investers etc stopped buying bank bonds (the main funding source for those crappy loans). They did this because of a report that actually made sense. That it would be impossible for the usery lenders to reclaim their money back, since the money upon which they expected intrest does not exist.
Thats why there is a bust and why there will always be boom and bust.
Gevlon,
What would the graph look like if you controlled for inflation? Over the last several years, the inflation rate in the US has been relatively stable and may be the reason for the observed behavior in GDP.
If your theory is as strong as you claim, you need to show that it holds true independent of inflation.
(Note: you can find the Consumer Price Index historical data on the US Dept of Labor webpage here: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt)
In WoW, the majority of players can cover all of their needs (repairs, consumables, flight costs) by walking to the welfare office - otherwise known as 'daily quest giver' - and receiving their share of gold.
In Cataclysm, this trend will continue: thanks to the guild advancement system, 20 active players will be able to provide a 10000-player guild with a constant supply of bonuses, crafting reagents, and other nice things.
Oddly enough, this "Golden Age of Welfare" didn't result in any major economic catastrophes or mass riots. I'll write more on this tomorrow.
P.S. On an unrelated note, I think I've figured out the flawed reasoning behind the "let's fix glyph prices at 50g and share the market" mentality.
I used linear estimation. If it's less then linear it will still displace everyone, just later. Can you prove that it will stop before it reaches the wall (100%, or 100%-welfare)?
I won't (and probably can't), but that's beside the point as I am not the one trying to make a prediction. Can you prove that the red line will reach 100%? No? Thought so.
More importantly, the red line is increasing. But note that with the ever-increasing wealth, there can at any moment of time be enough wealth in the bottom quintiles for everybody to have a salary, and the average salary in each quintile can be growing over time. You seem to argue that this won't happen. Why?
@Anonymous:
If your theory is as strong as you claim, you need to show that it holds true independent of inflation.
There is no need to discuss the finer points like the one you just brought up because there is not even a theory, just this one strange induction: "the relative weight of the top income quintile is growing over time" -> "sooner or later it will get to 100%, at which point other quintiles won't be producing any wealth at all", coupled with "and by the way, it will get to 80% by 2040, it was climbing there this year and will continue to climb at more or less the same speed".
As of yet, there is no real reasoning behind the induction and no numbers behind those in the final prediction.
Gevlon said:
"About the "top pushes it down". Come on! Didn't you learned anything from WoW? If I make 10K G from 100 farmers, whose fault it is?"
It is certainly the M&S farmers' fault.
However, when an economic system is broken, it must be fixed regardless of whose fault it is.
An economic system does not work if the M&S has given all wealth to non-M&S because of its own stupidity.
You need to either stop the 100 farmers from spending their whole 10k G, or you need to find a way to take some of that 10k G back and give it to the M&S farmers.
In RL there are not mobs that drop silver and gold pieces, and there are not questgivers that give ridiculous amonts of gold. When the money runs out, the economy stops.
guys... even tho gevlon's model has its flaws and a lot of information is based on superfluous data interpretation, you clearly agree that there exists a valid point into all this.
We live in the age of welfare!
In the precedent centuries hard work was mandatory for each and every human being in order to survive. Not only that, but a form of natural selection existed that weeded out the M&S who would eventually die from all the slacking.
Right now they are all (or almost all of them) being carried ( to use wow terms).
you can clearly agree that this is a PLAGUE to today's society which is literally held down by the herds of slobbering no good retards that live onto our backs. Again, a connection to wow...
The problem is in our mentality. Modern philosophy and modern human rights which imposed onto the richer and the more capable the care for the slackers. A society like this is without a doubt very ill. What gevlon is trying to point out is that with the technological advancement, this illness will continue to carry on, and more and more people will live off welfare, and useless jobs simply made in order to keep the useless alive.
I see it everyday around me: beggars, thieves, long-term unemployed, illegal immigrants, bureaucrats, even mediocre people with college degrees getting into well paid positions though the means of a connection... all of them dragging society down.
And who supports all of these? Clearly whosoever creates value. And who does that: obviously, people in production(from the blue collar factory workers or drivers to the engineers and executives of that company).
So there you go... the point is validated. As technology goes on advancing, less people will be in the production of value and more will be in annexe jobs like services or even worse in useless welfare or welfare jobs (as in giving someone the illusion that he is doing a job).
Now I do agree that the way he is presenting it with the doomsday prediction is a bit exaggerated, but the fact remains: aren't we supporting too much morons on our backs already? (in wow or elsewhere)... maybe its time to /gquit
@Okrane S.:
even tho gevlon's model has its flaws and a lot of information is based on superfluous data interpretation, you clearly agree that there exists a valid point into all this.
I am sorry. No. Besides several utter trivialities (like "if more people work, they will produce more wealth"), I find almost every point made in these recent articles too simplistic and untrue with varying degrees of strength.
What gevlon is trying to point out is that with the technological advancement, this illness will continue to carry on, and more and more people will live off welfare, and useless jobs simply made in order to keep the useless alive.
Disagree that this is "illness". Agree that it will continue. Agree with "more and more" in absolute terms but not in relative terms (it is not at all clear that the equilibrium point is at 100% unemployed). Disagree with the jobs for the less skillful being useless besides keeping them busy.
So there you go... the point is validated. As technology goes on advancing, less people will be in the production of value and more will be in annexe jobs like services or even worse in useless welfare or welfare jobs (as in giving someone the illusion that he is doing a job).
Can't see how you got the point validated. You see beggars every day... so?
Same for Gevlon.
Okrane S, what's controversial about what Gevlon is suggesting with his post isn't the idea that if a large number of people are free riding, in the form of living off transferances it is a problem. This is uncontroversial.
The problem is that he claims that such free riding will inevitably increase due to to technological advances. That is utter nonsense and he doesn't have a shred of evidence to support this idea. If anything history shows the exact opposite. Jobs lost due to technological advances will be replaced by new, more profitable jobs. The fact that the we, if Gevlon's graphs are to be believed, see increased inequality in the US lately can have a number of other, more probvable, explanations, such as tax policies and employment regulations than simply technological advancement.
But hey, maybe Gevlon could pitch this theory to some actual economists. It might be fun to see what they think.
Here are a few suggestions:
http://www.becker-posner-blog.com/
http://cafehayek.com/
http://thinkmarkets.wordpress.com/
http://www.marginalrevolution.com/marginalrevolution/
http://econlog.econlib.org/
/N
@Ten
So if you're saying that welfare isn't an illness what do you call the parasites inside an organism?
@last anonymous
Tnx for the links. Also, nice clarification for my lack of understanding of the topic.
atm to answer that particular question (will technological advancement diminish the need for jobs) I believe there are not enough facts to support any of the two sides as technology, in its most recent form is too young to provide us with a good understanding of this dynamic.
However, to answer Ten's remark about the equilibrium point, I believe it has something to do with the fact that not all people like to slack. The equilibrium ratio is equal to the ratio between the people who put meaning in their work and those who put meaning in pleasure... you estimate that...
I share a great deal of the skepticism with the theoretical validity of Gevlon's simplistic model and I don't share the populism view expressed in several comments about "M&S helding us down".
But let's assume for the sake of the argument that the model has some merit in terms of predictability. Its basic prediction (and that's a general statement for naive economic liberalism) is that the rich get richer, the poor get poorer and, that the proportion of rich is getting lower as the rich get richer.
The projection Gevlon makes is that it's going to continue and the 20 first % is going to make all the production and have all the money and distribute a welfare to the remaining 80%. But it's also the same inside those 20% : only 20% of them are actually concentrating money whereas the other 80% are getting down to levels of income that did belong to the 20-40% class before. And with this assumed concentration process, the obvious limit is that all money is going to be held by one person that will "generously" support everybody else by welfare.
Out of the several commentators supporting this view several (if not all) are going to be part of the everybody else getting this welfare. The same that they call M&S sometimes, that are unemployed, that held "us" down, and so on: everybody is the M&S of somebody else.
There are several obvious flaws in this reasoning, but it's really only the consequences of Gevlon's assumptions.
There are no perfect economic liberalism: justice, health, defense, state administration, education, research, firemen, welfare... are dayly examples (different depending on country) of exceptions to this perfect rule that, alone just makes these assumptions wrong.
There is no simple binary distinction between skilled and unskilled jobs, the first ones being held by productive humans and the other ones being converted to technology. When you're sick, you need a nurse and a doctor and there's no way it can change (and what should change is not the nurse, but the physician). As a research scientist, even if my work could be considered as mostly creative, I spend a non trivial part of my time on stupid tasks. In every job there are skilled and non skilled tasks that are mixed in a way you can not separate the second from the first.
And finally, I cannot understand people supporting a scheme in which (i) most of the humanity is explicitely going to suffer from it (and actually is presently suffreing), and (ii) even themselves are the long term losers.
Remember: in your fantasy world, only one is going to be free from pain and suffering. How can you presume to be this one? and even though, how long before somebody else gets your lonely throne from you (in some particular gentle way, we can be sure)?
@Okrane S.:
So if you're saying that welfare isn't an illness what do you call the parasites inside an organism?
I think the analogy does not hold, but I'd rather not discuss that in this particular topic. For the sake of the argument, I can take my words indicating that I disagree with the welfare being classified as an "illness" back. That's just a word after all.
@Last anonymous:
Great points!
One thing I'd add is that defining "poor" as X% of population with the lowest income, which is how it is frequently done in the media and which is how it is being done implicitly in Gevlon's posts, has the following interesting consequences:
* You can't ever reduce the percentage of "poor" people. Nothing you do is going to help.
* The "rich" do get richer and the "poor" do get poorer in any case of events as long as the population grows and people have reasonable freedom over their actions.
In absolute terms, during the last century, the rich got richer and the poor got richer as well. Roughly speaking, as, again, this is much more complicated than that.
Thank you for finally pointing out a major problem with the top of society.
If the IRS had broken the top 20% down further you'd find that its really the top 5%. Even those making 250k/year are struggling to keep their jobs now in 2009. Its only the top that are getting raises.
Its the morons at the top that are doing this. Some are "smart" in the sense that they do it on purpose because they can. But its not sustainable so thats why I call them morons.
@Okrane S.
Your whole theory that people with value are by definition those that produce is just an old and tired screed. Ayn Rand and her followers were pratically a cult back in the 50's and 60's. Many people subscribed to her "philosphy" including Alan Greenspan. Many of the so-called free economic thinkers still exist today among US politicians. Check out her legacy:
http://en.wikipedia.org/wiki/Ayn_Rand_Institute
@Ten: there is a new graph in the post, just for you (and everyone else thinks the same as you)
Hehe, about those in production having real value: lets take a little story I cooked up while thinking about this:
On a feudal domain live some people with their families each with their own task (and nobody else is capable of doing the same task but them)
* The farmer: provides food for everyone else
* The cook: cooks the food the farmer provides
* The butler: serves the food the cook prepares
* The noble: well... you know what he's about.
* The beggar: lives of the mercy of the noble with the leftovers from the table.
Now :)
-the farmer dies: everyone else dies too of starvation
-the cook dies: everyone else is forced to eat raw vegetables, so they survive for a while but might have problems in the long term
-the butler dies: well, they have to eat the food in the kitchen, with their hands, unpleasant, but they keep on living.
-the beggar dies: nobody gives a shit
-the noble dies: they share his wealth and continue to live just as before.
There... a funny read :)
@Gevlon:
there is a new graph in the post, just for you (and everyone else thinks the same as you)
You mean the one which shows GDP adjusted for inflation? Well, thanks, but that is far from my argument at all. As I said in a previous post, before delving into fine details like inflation, you have to establish your basic logic. So far, you haven't done it. See my previous posts for details.
Prices, that includes wages, are not a product of demand alone, but a product of supply and demand.
You, above all, should know that.
Water costs almost nothing in rich countries.
That's not because there is no demand. There is actually nothing more important than water to a human. We'd pay our very last cent, our very last million to get the very last litre.
It costs nothing because of ample supply.
Charwomen do not earn little, because the work is not in demand.
They earn little, because there is a lot of supply of this kind of work.
So much for your try to measure the contribution of a human to society by his wage.
In a market the most important things often are not the most expensive ones: The private plane is rather unneccesary - but quite expensive, while the last litre of water is absulutely essential but doesn't cost anything in the western world.
To add to my previous post; it's common knowledge that correlation doesn't equal causality, so just because you see technological progress correlating with an increase in income inequality that doesn't mean the inequality is caused by the advance in technology. In this case there are a large number of factors that serve as alternative explanations, such as labour laws and taxation policies.
However in this case you haven't even shown that there is a correlation to take note of. You have provided data regarding an increase in income inequality, but you have provided zero evidence that there is some corresponding technological progress. For instance by showing that nations were technology has improved slower than the US see less or no increase in income inequality or that previous time periods in the US, when the GINI coefficient sunk saw less technological progress.
/N
@Nils: it doesn't change the result. If there are 10x more wannabe charwomen than charwomen positions, than 90% of the wannabe charwomen will be unemployed. Jobs being necessary doesn't matter if most of them are displaced by machines.
@/N At first it's kind of obvious, when everyone were farmers in the prehistoric ages, there were equality. Inequality increases with disposable wealth and technology increase production therefore disposable wealth.
Secondly, I don't have to prove it. If you want to believe that the tooth faery causes the top 20% to increase its wealth, than the article for you: "the tooth faery will displace huge amount of people therefore collapsing the economy". As I've already written, the problem is political and not economical. The direct cause of the crisis is inequality. While the inequality was mitigated by subprime loans, all was fine.
@Nils: it doesn't change the result. If there are 10x more wannabe charwomen than charwomen positions, than 90% of the wannabe charwomen will be unemployed. Jobs being necessary doesn't matter if most of them are displaced by machines.
I agree. This was just to show that a market doesn't care about the importance of work or the contribution to society.
Markets care about supply and demand and this is a good thing for several reasons. Sometimes there is even a good correlation with the contribution to society and sometimes there just isn't.
Important to note also that GDP is seen as, at best, a fatally flawed indicator of actual economic strength, productivity, etc. For example, Goldman Sachs pays out $130B in bonuses largely generated by high speed trading, making money on the margins in fractions of seconds between the time other people place a trade and actually execute it. This is $130B to GDP but generates no actual productivity.
Discuss
1. The fact that there used to be no inequality in agrarian pre historic societies is flawed. To begin with what we percieve as inequality might just be a much starker form of inequality, i.e. you either had enough to live on, or you were dead. Among those who managed to stay alive there was less income spread, since there was much less available wealth in total, but to see that society as more equal would still be mistaken.
Then you are also ignoring the wealth structure of pre-industrial economies in your claim that technology is making us less equal. Do you really believe that ancient Egypt, the Roman Empire or medival Europe were moree equal, income wise, than today's societies?
Your second statement makes zero sense. No one is disputing that growth as a whole, and with that the rising income of the wealthiest 20% derives to a great extent from technological progress, among other factors. What is in dispute is that the same progress is also the reason for increasing inequality, when in fact this does not correspond with any historical data regarding inequality and technological progress. Looking at Sweden for instance the gini coeficent during the second half of the 20th century we see that the gini coeficcient was high in the 50s and then dropped fairly sharply, until the 70s, where it leveled out until the early 90s, when it started to rise slowly again. If your thesis, that technological prrogress drives inequality, and not just growth, then that curve should instead have shown a steady rise. What it much more probably shows is the rise of the Swedish welfare state up until it's peak in the late 70's and it's corresponding collapse and the slow but steady move towards market liberalisation that we see now, from the 90s and onwards.
Technology only increase the total wealth of society. Inequality is a product of politics, and quite often not something we should fight, since it's often a natural result of people's voluntary actions in a free market.
/N
@Gevlon
Part of the problem here is that you are selecting a trend that applies to one country and then extrapolating that to global doom. Whilst it is true that wealth inequality (as measured by the Gini index) has risen in the USA, the same is not true in other Western countries. There's a good graph of Gini trends
here.
Since 1980, the Gini index has risen in the USA & UK for example, but in Canada & Germany, it's fallen. This suggests that the growth in inequality is not an inevitable consequence of technological advance (which has affected all the countries listed above), but rather is caused by other factors (e.g. government policy).
Looking at the evidence presented in the graph on the page I linked, the solution to your "problem" appears simple. Don't worry about technology, ditch Goblinish neo-liberal economics and move towards regulated social markets.
I'm not sure that was really what you were hoping to prove ;)
Gevlon, the US is not some kind of free market fantasy land. It's become pretty clear in the aftermatch of the financial crisis that our political and media class is largely owned by big business. As predicted by everybody from Hayek to Lenin, they do not use this power to establish a truly free market, but instead to collect rents from taxpayers, for instance the Greenspan/Bernanke put, corn subsidies, marching toward infinite copyright, the warfare state, etc.
Our power broker billionaires like to talk like John Galt, but most of them act a lot more like Orren Boyle (to use the atlas shrugged archetypes).
I don't see anything in your data that is compelling enough to back your conclusions. Especially since, other than the employment data you got from the BLS, none of your data goes before 1980 (which was the last time the Income tax rate on the top earners in the US was substantially adjusted).
Setting aside the flaw in the idea that you can extrapolate the data for the US and apply it to the rest of the world, the other problem is simply that you are taking "income per person" and making it equivalent to "income per household". You are also ignoring demographics.
Even if you are right and jobs magically disappear so more people stop working, the end result is not a move towards welfare (per se), but most likely a move towards the single income households that were around in the start of the 20th century.
If you also take into account the fact that more of these people will be old/retired what you will probably end up with is a single income household, where the primary worker can produce so much (and is correspondingly paid so much) that he/she can take care of a family including income that is supplemented by savings from retirees (and retiree benefits, which are a form of income redistribution).
If you take an extra 10% from the glut of retirees, add another 10-15% from people who are now homemakers and we're pretty close to being back in the 1940s-50s demographically speaking.
@Myname: the traditional single income household needed that the women of the SAME social class be "unemployed" where the man was employed. This was supported by the patriarchal society.
In other words it was normal that your son was a lawyer and your daughter was the housewife of a lawyer.
Today the females are expected to have carriers of their own. A woman with no carrier is - just like men was 50 years ago - is considered a loser.
People marry with other people of their social class. So there will be both-employed and both-loser households. (mostly, as shades of gray always exist)
Here is another idea.
One should look this post with a close relation to the previous one. They are very very linked. In fact the reason for the situation described in the present post is the logic behind the previous one or the statement " If I make 10K G from 100 farmers, whose fault it is?". If you consider that the society is ill than you can easily find that the reason for this is the goblin way of thinking. Do not get me wrong I do not believe that the society is ill and I am goblin myself.
So now let me explain. The goblin way is to maximize his own profits (see Adam Smith). Such way of thinking lead to redistribution of the M&S wealth towards the goblins which is true both in WoW and the real life. Nothing wrong with you say. However, this disparity will continue (creating "crysis" after "crysis") until it unevitably leads to a revolution. Simply one day the M&S will got pissed and take the wealth from the goblin by the help of a gun. This has happened many times in the history and will happen again. It is simply the way the society works (see Hegel laws).
In contrary to this I should state that majority of the human society has shown that it could work the other way arround. In fact for a period ending somewhere in mid 70s (cannot trace its beggining) the western society was having an economy that valued the increse of the product rather than profits. The companies were having profits in the 1-2% margin and the society was progressing. After that many goblins required that the profits rise up to 7% or more and it resulted in supression of jobs and disparity. So if you want to "fix" the society it is enough to say all profits above 2% of your income goes to the state.
All I wanted to say is someone has to work the crap jobs.
Also I think there is an issue with the amount of people getting into the job zone. To many people not enough kinda thing. Even above and beyond what you say.
Gevlon: You do realize that your last graph actually predicts that unemployment will go back down. E.g. it won't continue decreasing. Unless there's a fundamental shift from the say the 2001 recession and this one, a neutral observer would expect that the employment rate will climb back up to the 0% line.
Thus it seems that your argument that GDP will decrease has to first explain why employment won't increase. Your entire theory hinges upon this and I believe you cited increasing technology as a potential reason, but as that graph clearly disproves, the rate always comes back up regardless of technology level. All I'm seeing with that is you shooting yourself in the foot.
Also as to increasing wealth gap:
Remember that if anything, the income gap is lower now than in many points in history. I mean what was the income percents of kings versus peasants, robber barons and child laboroers? I'd put good money on more than 60% made by just the top 1% of the population.
So clearly there have to be times where it has decreased, so your ever increasing (if not necessarily linearly) remark is refuted by history.
GDP per worker is not Corellative to wealth, education, political philosophy. or whatever. Looking at your graph by the way did you notice when that red line start to trend down it happens to be around the same time baby boomers are retiring? Are you accounting for the Illegal immigrant population since practically ALL of them work. is this per employed and does employed include part-time and self employed?
You are not winning this one. you haven't given us a definite enough lens through which to view your arguments.
And my point is that society went along just fine for years with single income households. Then expectations changed (mainly because of labor saving devices at home).
However, if the number of jobs out there drops (which I still haven't conceded), then expectations can change again. Society changes in response to changing resources, not the other way around.
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