In a recent Question of the Week, we sought to determine why the so-called good life has edged beyond the reach of the broad middle class. If this perplexing turn of events is causing pain and frustration for many, it is about to rain calamity on the lives of Baby Boomers, who as a group have not saved nearly enough for retirement. This means they will have to rely on today’s twenty- and thirty-somethings to pay a hefty chunk of their Social Security and Medicare benefits. This is preposterous on its face, since there are not nearly enough good jobs for young people to meet their own financial needs, let alone those of scores of millions of new retirees.
Is there a chance the situation will improve? Probably not. America’s standard of living appears destined to remain in a downward spiral that will abate only as wages in the U.S. move toward equilibrium with those paid elsewhere in the world. The most lucid explanation of this we have seen was posted recently at ZeroHedge, where the rough-and-tumble discussion often yields insights that will forever elude a mainstream media that knows only how to pander. The author has identified himself as ‘chindit13’, and although we are unable to credit him by his real name, we are most thankful nonetheless for the brilliant clarity of his thoughts, to wit:
The Debt Problem
“All the arguments and frustrations expressed in these periodic meat-tossing, cross-generational smackdowns are symptoms, not causes, of the underlying problem, which is that on a worldwide basis, labor has lost its pricing power. The world is too efficient at production, and cannot create sufficient demand, except through debt. The debt problem is a symptom. Debt was the stop gap solution as society tried to find a reason to be for everyone. No solution was found, and now the debt itself has become a secondary problem.
“Thirty years ago, those who thought about it felt blessed that they weren’t born a female in rural Bangladesh. As labor has lost its pricing power worldwide, the opportunity gap between that female born in rural Bangladesh and a white male born in the US has closed considerably. The Bangladeshi girl will still argue that the gap is wide, and it is, but objectively one can see that it is closing. Despite the hand wringing and frustration, though, few of the young US white males would trade places with that rural Bangladeshi girl. With time, the gap will close further and it will be six of one, a half dozen in the other. It’s not going to get any better.
Reaper Displaced Workers
“A hundred fifty years ago the world saw the introduction of the McCormick Combine. A machine could do in a single day the work it took fifty men two weeks to perform. Efficiency thus came first to farming and the production of food. The most developed parts of the world were lucky, because there was an Industrial Revolution to absorb displaced farm workers. Also, worldwide labor wasn’t yet arbitrage-able.
“Manufacturing has seen a thousand different McCormick Combines come to the fore. Improvements in shipping, technology, and eventually the internet made labor a commodity, no longer limited by location, and major advances in efficiency and productivity chipped away at labor’s pricing power. Thus we had increased supply and decreased pricing power at the same time. That is not a recipe for upward mobility for those entering the workforce.
No Industrial Revolution
“There is no Industrial Revolution to absorb the redundant and superfluous. The only thing we’ve got, and it is a distant second, is social networking. Facebook, Google and their bastard offspring, however, cannot absorb all the labor looking for gainful employment.
“Some will argue that the solution is protectionism. They will argue that those accidentally whelped behind a particular border owe it to others whelped behind the same border to support them and give their lives meaning. So far, most people have chosen not to join what Kurt Vonnegut called a ‘granfalloon’, an artificial community based on some arbitrary or random commonality, such as place of birth. The main reason is because it costs too much. People, being ‘human’, might speak in homilies, but in their heart of hearts they want all labor outsourced except their own, especially when they get to the check-out counter in the store.
Plague Ended Feudalism
“The last time labor had such little pricing power, the predominant economic construct was feudalism. That ended when labor gained pricing power. That pricing power came in the form of The Plague. That was quite a price to pay. Many who realize what is happening now are grabbing for all they can while they can, all the while keeping their mouths shut about the grand and inexorable trend, lest a general panic set in. If there is any grand conspiracy, this is it.
“Existence moves in great cycles. Accidents of birth leave us all in a place and of a time not of our own choosing. We can do little but make the best of what we were dealt. Sad to say, Millennials showed up at a bad time, albeit still in a good place relatively, compared to that rural born Bangladeshi female. Those looking to blame someone might turn to their church, or absent faith, just scream at the great beyond. Neither will do a lick of good, but it might make some feel better.
“There is no solution. This is just the beginning of the singularity. Sorry.”
