The Pressing Problem Nobody Dares Discuss

The list of pundits jostling for air time to add their two cents to discussions of hot-button issues such as immigration is endless. The airwaves and social media are overflowing with people wanting to comment on hot-button social issues, but when it comes to the the one truly critical dynamic that will shape the future–everyone’s strangely silent.

The reason nobody dares address this problem is that it has no solution within the current mode of production, i.e. the status quo. The problem is an oversupply of labor.

One of the key takeaways from historian Peter Turchin’s new book Ages of Discord is that real wages stagnate or decline in periods of labor oversupply and rise in periods of labor shortages.

This is common sense: the price/value of everything is ultimately set by the dynamics of supply and demand: the price/value of anything that is overly abundant drops. Or put another way: if demand is outstripped by supply, prices decline as long as there is surplus supply.

If supply continues to exceed demand by a wide margin, price can drop to near-zero. Consider the cost of telephony bandwidth. With the advent of fiber optics, the quantity of bandwidth available globally for telephony far exceeded demand, and the cost of bandwidth fell to pennies.

What generates an oversupply of labor? David Hackett Fischer discussed the core demographic dynamic in The Great Wave: Price Revolutions and the Rhythm of History: as labor productivity/land under production increases, food supplies increase. This increase supports a higher birth rate /population, and eventually the population of workers swells to the point that the supply of labor exceeds the demand for labor by employers.

Once the available productive land is under cultivation, the surplus population is pushed onto marginal lands that cannot reliably sustain high yields. The net results are famines and food shortages as crop failures on marginal lands are inevitable.

With labor in permanent surplus, wages stagnate or decline, and the result is a generalized immiseration of the laboring class that eventually leads to instability/upheaval.

In the current era, Turchin identifies three sources of surplus labor: the increase in population from birth rates above replacement levels; immigration and the mass movement of women into the work force after 1970.

Each of these demographic sources added tens of millions of laborers to the work force.

If we set aside the many emotions generated by immigration and just consider statistics, we find that the U.S. added almost 14 million new immigrants in the decade 2000-2010. A Record-Setting Decade of Immigration: 2000-2010.

In periods of strong job growth, demand from employers is high enough to absorb the added supply of labor from native population growth and immigration. In periods of stagnant job growth, immigration adds to the oversupply of native labor from population expansion.

Common sense suggests high immigration becomes an economic issue when job growth no longer absorbs net native population expansion and the influx of immigrants.

The fourth dynamic generating labor supply/demand imbalances is automation.Though automation has been a dynamic force reducing the demand for human labor for hundreds of years, the pace has increased as software and robotics are now increasingly replacing higher-skill workers.

The widespread quasi-religious faith that technology “always creates more jobs than it destroys” is misplaced. As I explain in my books Why Our Status Quo Failed and Is Beyond Reform and A Radically Beneficial World: Automation, Technology & Creating Jobs for All, this was true in the first three industrial revolutions but not in the current Fourth Industrial Revolution.

The Fourth Industrial Revolution: what it means, how to respond

The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.

As software eats the world, it eats higher-level skills that were once immune to automation. This means that the strategy that worked for 200 years–moving up the skill-value chain to tasks that could not be profitably automated–no longer works.

Few conventional economists/pundits understand this, or are willing to confess that the problem of permanent labor surplus cannot be solved by status quo policy tweaks. As I explain in my book, guaranteed minimum income is no solution–humans need the purpose, meaning and goals provided by meaningful work.

This why my book is subtitled The Future Belongs to Work That Is Meaningful.

If you still doubt labor is in permanent oversupply, please glance at these charts of the labor participation rate and the civilian employment/population ratio.

Over 90 million adults (out of a total population of 317 million) are counted as “not in the labor force,” i.e. not working or seeking work due to disability, being in school, domestic duties, early retirement, etc.

The percentage of the population working or seeking work has fallen significantly.

There is a basic structural problem with supporting 100+ million non-employed adults. The economy has to be productive and profitable enough to support this vast populace without relying on debt, which is as we all know borrowing from future workers and taxpayers to fund consumption today.

Given the vast expansion of public and private debt since 2008, it’s clear that we are not supporting the populace out of cash flow, so to speak; we’re borrowing trillions of dollars from future workers/ taxpayers to generate the temporary illusion of solvency.

We need a new mode of production to generate meaningful work for all, and I’ve done my best to lay out a systemic solution. Right now this solution seems “crazy” to the conventional mindset, but perceptions may well change when the global illusions of solvency and “growth” collapse in a heap.

Join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is #8 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book’s website.

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  • ICFubar

    Is it really an vast over supply of labour or an under performing economy? It seems to me that there is lots of work to be done but the emphasis of spending has been placed elsewhere in the very expensive and wasteful war machine. Consider the 8-9 Trillion the Pentagon can’t account for and the corruption, theft and lost allocation just rolls on and that is just one department of the hijacked federal governance by the Wall Street vultures and all their subsidiaries that supply $700 toilet seats and loot the American treasury.

    • You surly must be talking about this. August 16, 2016 Pentagon Cannot Account For $6.5 Trillion Dollars

      A new Department of Defense Inspector General’s report, released last week, has left Americans stunned at the jaw-dropping lack of accountability and oversight. The glaring report revealed the Pentagon couldn’t account for $6.5 trillion dollars worth of Army general fund transactions and data, according to a report by the Fiscal Times.

      http://www.globalresearch.ca/pentagon-cannot-account-for-6-5-trillion-dollars/5541244

      • ICFubar

        If you believe their numbers. Catherine Fitts has estimated and accounts for a 50 Trillion dollar drain from all aspects of the American entity over the years. This includes the 25 Trillion on going bailouts of the ‘FIRE’ sector and outright thefts.

        • I never believe anyone associated in and with government in any form or fashion. I leave it to my questions alone with the results I share daily on topics. You see what I also read daily as well ICFubar. Like this jewel.

          The global debt clock Our interactive overview of government debt across the planet

          The clock is ticking. Every second, it seems, someone in the world takes on more debt. The idea of a debt clock for an individual nation is familiar to anyone who has been to Times Square in New York, where the American public shortfall is revealed. Our clock shows the global figure for almost all government debts in dollar terms.

          http://www.economist.com/content/global_debt_clock

  • Here it is. October 11th, 2016 The Total Amount Of Debt In The World Just Hit A Record $152,000,000,000,000 (152 Trillion)

    If anyone ever asks you how much debt there is in the world, now you will know the answer. According to the IMF, the total amount of debt around the globe has now hit a staggering 152 trillion dollars. That is an amount of money that is almost unimaginable, and the IMF says that it is equivalent to 225 percent of global GDP. It is the biggest debt bubble in the history of the planet, and it is rising at an extremely alarming pace. Experts all over the world agree that when this debt bubble finally bursts, it is going to create an economic crisis on a scale that humanity has never seen before.

    http://theeconomiccollapseblog.com/archives/the-total-amount-of-debt-in-the-world-just-hit-a-record-152000000000000-152-trillion?utm_campaign=shareaholic&utm_medium=email_this&utm_source=email

  • David Schultz

    The laborless American economy is courtesy of the globalists.

    • Wrong,
      Blame big government (excessive regulation, excessive taxation, excessive spending and the Federal Reserve) for hoarding off-shore, outsourcing, corporate inversions and the problems of American workers; not immigration, not globalization, not foreign currency manipulation, not foreign subsidies, not journalists, not the media.

      • David Schultz

        I include outsourcing, corporate inversion as well as poor tariff policy as aspects of globalism. Certainly agree about being over taxed!

        • Reread it.

        • diogenes

          Yessir, those poor corporations, they’re SO “over-taxed” — all the way to the Caymen Islands

          • David Schultz

            Small business like my suppliers are taxed twice as high as the world counter parts. Their employees are taxed (particularly property taxes) twice as high as they should be. We are forced in our business to outsource because America is just too damn expensive.

            America has sloppy tariff policies that allow dumping and all forms of dirty tricks to be played on us. We tax physical business that employ real people but let business models that license and garner royalties all manner of loop wholes. We don’t have a financial transaction tax such that parasitic banks and hedge funds suck up all the wealth of the country.

            Yes the businesses and workers that form the engine of American prosperity are over taxed. Global corporations and billionaires are barely taxed at all.

  • Solution
    3 Cs of economic growth:
    Cut Regulation, Cut Spending, Cut Taxes

    Economic growth will absorb the oversupply of labor.

    • diogenes

      #4) get a lobotomy

  • TimeToWakeUPAmerica

    “There is a basic structural problem with supporting 100+ million non-employed adults. The economy has to be productive and profitable enough to support this vast populace without relying on debt, which is as we all know borrowing from future workers and taxpayers to fund consumption today.

    Given the vast expansion of public and private debt since 2008, it’s clear that we are not supporting the
    populace out of cash flow, so to speak; we’re borrowing trillions of dollars from future workers/ taxpayers to generate the temporary illusion of solvency.”

    Here is perhaps the PRIMARY problem, followed by the need for the solution(s) you outline in your article:

    Why Donald Trump must shut down The Federal Reserve and start issuing debt-free money
    https://www.intellihub.com/why-donald-trump-must-shut-down-the-federal-reserve-and-start-issuing-debt-free-money/