Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Today, I saw these headlines:
“Waste Management will trim some management”
“Telenor to cut 2000 jobs in India”
“Alcatel-Lucent Plans to Cut 5000 Jobs”
“Mangano cuts 200 jobs”
“Morgan Stanley plans further staff cuts”
“Fairfax to shed 1900 staff”
“China’s ZTE May Cut Employees”
“HP confirms layoffs; Cutting 500 jobs”
If you think this is symptomatic of a world-wide recession, you’re right – but only somewhat. It’s also symptomatic of something else. Consider these articles:
JCPenney to get rid of check-out counters and clerks, use self check-out machines and RFID chips
Posted: 07/19/2012, By: Ann Geyser, newsnet5.comTAMPA -CEO Ron Johnson said JC Penney it will remove check-out counters in stores and replace them with a system that won’t require clerks. Shoppers will be able to use self check-out machines, similar to those found in grocery stores. Johnson told “Fortune” magazine he hopes to phase out check-out counters by 2014.
Translation: “We don’t need people to do what computerized machines can do.”
A Day Job Waiting for a Kill Shot a World Away
Heather Ainsworth for The New York TimesHANCOCK FIELD AIR NATIONAL GUARD BASE, N.Y. — From his computer console here in the Syracuse suburbs, Col. D. Scott Brenton remotely flies a Reaper drone that beams back hundreds of hours of live video of insurgents, his intended targets.
By 2015, the Pentagon projects that the Air Force will need more than 2,000 drone pilots for combat air patrols operating 24 hours a day worldwide. Until this year, drone pilots went through traditional flight training before learning how to operate Predators, Reapers and unarmed Global Hawks. Now the pilots are on a fast track and spend only 40 hours in a basic Cessna-type plane before starting their drone training.
True, drones cannot engage in air-to-air combat, but Colonel Brenton said that “the amount of time I’ve engaged the enemy in air-to-ground combat has been significant” in both Reapers and F-16s.
Translation: As computerized equipment improves, people need less training time. Though today, drones cannot engage in air-to-air combat, tomorrow they will. Every day, computerized machined do the work people formerly did.
At the start of the Industrial Revolution, it was feared machines would cause unemployment by doing “people” jobs. That didn’t happen. The machines actually helped create jobs, not just because machines needed to be guided by human hands, but by increasing the need for “back office” hands. Slowly, machines forced people from blue collar to white collar work.
Today, we are in the Computer Revolution, and the rules have changed. Not only can machines do the blue collar work; they can do the white collar work; they can be creative; they can answer questions as Watson did.
In the May 16th post, “Coming soon to a world near you: Economics for cyborgs. Humans as a transition species” we spoke of humans being a transition species. Eventually, computerized machines will be able to do almost every physical and mental task humans now can do.
The immediate question is: What will happen during the transition?
As computers become smarter, the U.S. standard 8-hour day, with 2-3 week vacation plus various holiday, no longer is sustainable. The nation neither needs nor wants that much human labor.
Business doesn’t want it, because human labor usually is less efficient and more costly than machine labor. People don’t want it, because we wish to pursue our own personal interests rather than an employer’s interests.
The trend takes us on two divergent paths:
1. Unintentional massive unemployment, with growing starvation and homelessness
or
2. Shorter work day/year.
The first, unintentional unemployment, leads to poverty. The primary purpose of employment is to obtain dollars with which to pay for goods and services, many of which are necessary for, or at least contribute to, a happier life.
The second, shorter work day, has begun in some nations. Eurofound published a report showing the “Average collectively agreed normal weekly hours, 2010”. Some examples:
Greece, Hungary, Poland: 40 hours; Ireland: 39; Spain: 38.6; Italy: 38; Germany: 37.7; UK: 37.5; Denmark: 37; France: 35.6
Clearly, there is nothing sacred about the 40-hour week, or any workweek length, but this leads to the problem of pay. Will companies pay less for a less than 40 hours of work?
If workers now receiving, for instance, $20 per hour for a 40 hour week ($800 per week), and later go to, for instance, 30 hours a week, will they still receive $20 per hour — a 25% pay reduction to $600 per week? Why not?
The same question appears if we visualize annual job sharing, in which, for example, one person works January – June and a second person works July – December. No matter how hours, days or months are split, it is hard to imagine why employment matching population growth will not lead to reduced per-person salaries.
Although worker productivity continues to rise, workers themselves are not more valuable to employers. The rise in productivity is due to the computerized machines “digging holes faster,” not because people have learned to run the machines faster. Human work is becoming less necessary.
So, the total available work must be spread to more humans. By federal law, there could be shorter days (8 hours), shorter weeks (down from 5 days) or shorter years (fewer weeks of work).
This leaves the question: How do we maintain per-person income in the face of reduced need for human labor? I suggest the answer lies with our Monetarily Sovereign government.
One approach would be for the government to provide a “citizen salary” for every man, woman and child in America. In essence, the government could be an “employer” that pays all Americans a salary for life — a extension of Social Security — sufficient to provide a moderate quality of life.
Other approaches would be for the federal government to provide benefits people now must pay for:
*Free Medicare for all
*Discounted food
*Discounted clothing
*Reduced federal taxes
*Reduced sales and other local taxes (made possible by federal subsidies to local governments)
*100% free college education
*Additional salary for people who wish to work in areas most likely to improve the quality of life for Americans: Research & Development in Medicine, Biology, Physics, etc.
This proposal lacks details, and many devils lurk in those details, but we must face the fact that human labor will be less necessary in the future, while human needs will continue. There simply will not be sufficient job-related pay to spread among a growing population. Unemployment will be a growing problem, which will cause more frequent and more severe recessions, in turn causing more unemployment.
Yes, we can attempt the Chinese solution to population growth, but that seems to cause hardship, when our goal should be the improvement of our lives.
The new paradigm will be disemployment. We must recognize this inevitability and begin to formulate plans to deal with it. Else it will reduce our lives to misery.
If not this, what? If not now, when?
Rodger Malcolm Mitchell
Monetary Sovereignty
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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Nice extension from your last blog. I wanted to know where you were going with your idea massive debt expansion. Still not clear how to control greed and power, divide resources for peoples time or how to limit how many hours someone works especially if they are not paid hourly but I guess those are the details that are so hard to move past.
I believe you left a 3rd option off the table which would reduce demand. Global War. Cut population in half and not destroy the planet and you have the 1950’s. Hey we did it twice in the last century. Limited resources and an exponential growth in population can cause real problems with demand. As long as the US can be a self sustained island, then it does not have to worry so much about outside resource, or hope the rest of the world can fight it out without us in our Utopia. Remember how many Presidents have promised to keep us out of war?
Like the Spanish American War which was fabricated with the false sinking of the USS Maine, or the Lusitania that was carrying weapons, or Pearl Harbor, or Gulf of Tonkin that showed in recently released tapes that the US Navy was not fired upon by anyone and who can forget WMD’s, getting into a war gets easier and easier. As a matter of fact we are currently at War against terror and drugs.
I like your Gene Roddenberry solution and will think of rainbows, sunshine, little fluffy clouds, and unicorns.
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Rather than using the pejorative words “massive debt expansion,” how about “massive private savings expansion.” Remember: Federal Deficits – Net Imports = Net Private Savings
We already limit how many hours employees work. It’s called “overtime pay.” As for self employed people, they are free to work as much as they wish — so long as they have a viable business that a computer can’t do better.
I don’t know what “divide resources for people’s time” means.
What is your solution to “greed and power”?
While you’re dreaming about rainbows, sunshine and unicorns, your boss will “hire” a computer to do your job. It will work 24 hours a day, no coffee breaks or holidays. And it will not annoy your boss by asking for raises, going on strike or taking long lunches.
But do enjoy those fluffy clouds. Perhaps, while dreaming, you can think of a solution to your future unemployment.
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We were talking about government spending. That is not the same as private savings unless we will have so much of it that everyone will have a chicken in every pot.
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Federal Deficits – Net Imports = Net Private Savings
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Rainbows + Ponies = Unicorns?
You have to give a little better answer explaining your formula.
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Hmmm.
People used to need food, shelter, clothes.
Now they need a 42-inch plasma and 250 channels of 24-hour entertainment to go with their cell phone, laptop, tablet and streaming media.
Then they need to go out for dinner 3 times per week and have 100 pair of shoes.
I don’t see why computers will make humans obsolete any more than the steam engine did. People will now be free to do other things we haven’t even thought of yet.
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Yes, people will be “free” to do other things. They will be free of a job, i.e. unemployed and needing income.
There are very few existing jobs that future computerized machines will not be able to do faster, cheaper and more accurately.
The steam engine couldn’t think. That was the point I was making about the difference between the Industrial Revolution and the computer revolution.
What is your current job? Do you think the computers of tomorrow couldn’t do it? Be worried.
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I am an environmental consultant, which doesn’t involve producing anything, but is really boils down to regulatory compliance: going to collect soil and groundwater samples, evaluating the data, and finding creative solutions to protect people and the environment while saving my clients money. We are pretty much saturated with computers: We only have 1 CADD operator instead of 20 drafters, our groundwater modeling is all on computer taking a fraction of the time, etc.
Like I said, there are things we haven’t even thought of yet. But like the medical field (except mostly back office staff), regulatory compliance is not something easily automated.
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There are a couple of machines on Mars doing something similar to your job. Are you saying you can’t visualize future machines doing everything you do?
No problem. 50 years ago I couldn’t visualize the Internet.
The computers you now are “saturated with,” will look like children’s toys in the near future.
Yesterday, I took my car in for service. The tech inserted my key into a reader, which instantly told him the entire history of all my car services, and what needed to be done — all from reading my key.
Don’t feel too secure about what can and cannot easily be automated. Tomorrow that tech won’t have a job; I’ll insert the key, myself. Then, I’ll push a button, and machines will service my car.
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This is why I don’t think an aging population is the problem so many mainstream economists do, constantly fretting about the looming shortage of workers needed to support the elderly. The machines will free up plenty of people to care for our elders, that is if the machines aren’t doing it themselves. Just look at many European countries, for all their “bad” demographics compared to the US, Canada or Australia, they have massive unemployment of their youth, even before the current crisis.
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Anywhere that technology advances such that jobs go away suffers from unemployment and poverty. The problem is not the technology, but that the “ownership culture” where we allow private parties and a small handful of people to own and control the resources everyone else needs to survive. The end result is that they demand tribute from everyone seeking those resources.
If you want land on which to farm, build a business, or put up a house, you must first pay the land-owner for the privilege of using the land they own. Those land-owners become very wealthy. Over the course of many generations, their descendants have most of the community’s wealth. Now technology advances and those descendants use that wealth to make capital improvements for the businesses they own. This eliminates jobs, reducing the business’ cost of labor. It also causes local poverty. Continue on for a few more generations and you see how private ownership of land and natural resources soon makes for a small class of very wealthy people and a huge class of serf’s begging for the chance to work for a piece bread.
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That is until a few of them sit down and declare independence and write down on a piece of paper a set of rights. Then stand up to the knights that are enforcing the rules of the money group. The problem happens when the money group becomes too small or the knights become poor.
Today the money group has the advantage because they now are global and not stuck within a border. If they see riots, they live in another place until the riots are over.
In recent news the Department of Homeland Defense has placed an order for up to 450 million non-training .40 cal pistol bullets. DHS has not made it clear what they plan on using that much ammo since they are not planning on invading another country. In Iraq last month the US used about 5 million bullets.
http://www.reuters.com/finance/stocks/ATK/key-developments/article/2498806
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Roger –
Good points… perhaps I overemphasized the science. The real meat of my job – consulting – is going to meetings and talking with clients, holding their hands and making them look good. Many jobs have nothing to do with science, but more with politics – and that is something we’ll have for a long time.
Plus, just as you are correct that 50 years ago we couldn’t imagine today, we can’t imagine 50 years from now all the new things people will do with their time in an attempt to acquire wealth. I don’t see why humans will give up the desire for acquisition of wealth 50 years from now when all the advancement in last 10,000 hasn’t done it.
Finally, there’s the supply / demand of labor: as there’s more unemployed people those people will be willing to work for less, maybe even in fact less than it costs to buy a robot. And as it becomes less expensive to make things, sellers will be willing to sell for less – so in the end it will balance out.
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So you don’t actually DO anything. You don’t do “regulatory compliance: collect soil and groundwater samples, evaluate the data, and find creative solutions to protect people and the environment while saving your clients money.”
No, you just “go to meetings and talk with clients, hold their hands and make them look good.” Sounds like something a pretty college coed could handle — or a machine that answered everything with “You’re right, sir.”
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I guess instead of being an a-hole about it, you could comment on the economic theory I put forth.
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Sorry, I didn’t see any theory. What was it?
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As I pointed out in the statistics in the previous blog, GDP grew by 50% since 2000 yet total number of people with jobs went down by 400,000 people which is the basis of this current blog post.
The question I posted before is what do we do we do with janitors that are made redundant by automation. They often became janitors because of lack of choice. You can not train them to design robots.
The problem with your theory that price will drop as people work for less is a transition state we have now before labor becomes worthless and people revolt. The best and brightest will flourish but the majority will not as technology works its way up the IQ ladder. IQ is going up as nature and nurture take hold and that high IQ college couple has children while the uneducated procreate with others uneducated. This will be a social problem of the future. Too many people will be idle and hungry.
Working for less than a robot is fiction. The typing pools of the past can never stand against the printer or electronic billing systems of today. Robots will eventually last longer then people.
The good news is consulting is still going to be required for many years to come due to the fact that the human brain still can outperform the computer and give arbitrary weight to variables that are important to the one making the decision.
In 50 years a great deal will move to automation and the point AI will impact everyone but the calculator never removed the person making the decision. That is still going to be human. Just very few of them.
2000 – 131.7 Million Non-Farm Jobs
2011 – 131.3 Million Non-Farm Jobs
ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb1.txt
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this is, to a certain extent, a point i’ve made on a few of your blog posts in the past.
and, as per usual, on this particular point, i don’t think you go far enough. we are at a point technologically where nearly all (but not all) human labor is obsolete. in a (nearly) “laborless” society, what would be the point of currency issuance?
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If we ever were in a truly “laborless” society (heaven forbid), there would be no need for money. Wise machines would provide everything, then do away with us.
But, I can’t believe that will happen. Even with Star Trek replicators, people had “gold pressed latinum.”
But then again . . . 🙂
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Yukon,
Federal Deficits – Net Imports = Net Private Savings is a standard formula in economics. It describes the interaction of the three financial sectors: The federal sector, the non-federal sector and the foreign sector.
If federal deficits decrease and imports increase, money flows out of the economy. The only way for Net Private Savings to increase is for dollars to come from somewhere — either from federal deficit spending and/or from exports.
You can see this explained at: http://pragcap.com/understanding-modern-monetary-system
Check figure #4 for a graphic illustration.
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