Dislocation Coming

Where do we live? Where do we work? Where are the people that are needed going to work?

There is a generational changing of the guard coming. The jobs that existed during my parents and my generations’ are changing. For example, there is less need for people in my field, accounting and finance, than there was three decades ago when I joined the profession. (In the states, there are both less need in general in the world, and much has been outsourced.)

My friends that are journalists, musicians, professors, are all finding jobs scarce.

That is the current and continuing  job/economic trend. Declining employment needs is the norm. The trends of productivity from technology and effects of globalization continue. Neither trend is completed yet.

The effects are less value-added activity needed and conducted domestically, more automation, less jobs needed, global competition and specialization, outsourcing, high fixed costs of doing business (land, rent, power, administrative regulation, oligopolies with fierce competitive advantage in existing fields), high labor burden costs of doing business (health insurance, workers’ comp, litigious society), and some effect of high variable costs of doing business (volatile commodity prices, volatile demand, increasing taxes).

In the economy as a whole, the concerns about the decline of productivity and increase in services for the baby boomer bulge (talkin about my generation) are coming due. The fear is that there won’t be an economy to keep enough young people employed to actually contribute to prospective social security payout needs. Wages and salaries aren’t currently rising, and the number of jobs aren’t rising, but the prospective draw on those funds will be certainly.

Thats more of the same trend, coming home to roost.

But, that fearful analysis ignores another factor of the generational shift. That is that in the course of the next decade or two there will also be massive (literally) waves of retirement in fields that NEED to replenish. There is a permanent and unavoidable need for teachers, for business administrators, for government employees, for food manufacture/distribution, for trades, for banking, for culture, for transportation services, for energy services.

While it is hard now for individuals in their 50’s to find work, in five years it will be less so. While now there is a discontinuity between the number of jobs available for 50 – 60 year olds, compared to expectations of later retirement age, that will gradually, then abruptly change, leaving employment available until for whomever wishes to retire later than our parents for example.

Ironically, we will likely see NEW 65 year-old teachers, nurses, etc.

The employment prospects for younger people, new graduates, will also improve. (Who will mentor them is a different question). While those graduating this year or next face a very frustrating  job search, those graduating from college and/or graduate school in five years will face a challenging world, but better job prospects than curretly (unless the economy totally tanks).

The aspect that will be difficult is how will rural and currently depressed communities recruit the young and/or old employees that they will need?

Currently, in rural Vermont, New Hampshire, Maine, older individuals do much of the administrative work that younger people perform in Boston or New York. Somebody’s got to to do it. When those folks retire inevitably at some point, who will then?

I expect that many people will find that they have to move, with many risks.

Its a river upstream to sustainability, a river upstream to the formation of an equitable maintenance oriented economy that is stable and generationally integrated.

But, maybe that just confirms that those of us that are sensitive to sustainability, have to act creatively and assertively to make those institutions functional while we are still able to construct them.

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Structural Economic Conundrums

In a sustainable economy there is a readily available path for survival for all and a path for all to contribute to social welfare. Full employment in a word.

That is not the case now. Currently we have structurally large unemployment, and the degree of socially required employment is decreasing.

The presence of structurally unemployed well-serves a surge economy, an economy that responds to the ups and downs of global market demand and has reserves to put to work, meeting that demand. In contrast, an economy that offers full employment at moderate levels of economic demand, cannot respond to surges.

That creates a sadly ironic condition of the most successful economies in the competitive marketplace being the ones that can most easily respond to surges, or the ones that are able to maintain a “reserve army of unemployed”.

Ironically, socialist economies can accommodate surges, by the common ownership of productive assets that can fund survival through dividends in periods of decline in output (and profits). I don’t know if or to what extent China is doing that currently.

But individual human beings cannot easily accommodate surges. The convention in even developed countries are families without reserves, savings, net worth. Net worth is concentrated, not a universal value.

We need either a universal ethic and application of developing net worth reserves (supported by confident charity), a social commonwealth (could be voluntary/cooperative as another “private” entity), a confident safety net (not unemployment benefits cut off), and/or government guaranteed employment (perhaps more useful than paying unemployment benefits).

Long-term the American economy has been decreasing the number of necessary employees. In general, the last generation of digital tecnology (hardware and software) reduced the number of administrative employees necessary to maintain an economy, and made improved production efficiencies possible (requiring less manufacturing employees).

The most recent generation of digital technology, the web, went further in adminstrative savings, facilitating outsourcing of everything. Importantly, the web has changed (read destroyed) the former economies in intellectual and culture. The recording industry is harmed. Newspapers. Theater. Art. Crafts. Face to face discussion.

To the extent that we do those things, we do it for our fun rather than our norm. The most important feature though, is that far fewer can make a living at music, writing, acting, drawing, craft.

Many other formerly domestic industries that were healthy two decades ago, are now decimated, more due to global trade than to the web. Other industries and commerce is now decimated due to the acceptance of very predatory competitive commerce particularly by Walmart and wannabes, that eliminated competition from regional retailing and the regional supporting infrastructure.

This morning in the New York Times, there is a discussion on the prospects for full employment. http://roomfordebate.blogs.nytimes.com/2010/06/24/can-obama-create-more-jobs-soon/?hp

They argue common economic prescriptive remedies.

They omit the federal government or state governments serving (fully funded) as the employer of last resort, particularly in the cultural fields (as occurred during the Great Depression of the 30’s).

They omit policies to restrict homogeneous international trade in favor of geographically regional trade.

They omit community generated creation of local and regional money supply through local currencies distributed at a discount, but tied to dollars in a social contract to modify legal tender of dollars solely.

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The Experience Economy and Financial Bubbles

The “experience economy” or “welfare economy” implies a description of value that includes optimal current human experience, and sufficient capital to provide for future fulfillment of human needs.

Unfortunately, current economy does not emphasize experienced welfare as its measure of success, except perhaps within technical circular reasoning that assumes by definition that the dollar votes in the marketplace result in optimal human welfare. A proof of itself, circular reasoning.

When the self-referencing theoretical definition of wealth or value predominates in governance, income and wealth tend to concentrate, increasing slowly (or not so slowly) over time.

The wealth that individuals or organizations accumulate beyond their current and lifelong needs, must be invested in some form.

The individuals don’t need that excess. Their lives would be as comfortable with sufficient wealth as with excessive, but increasing one’s personal net worth is a game with a clear method of scoring.

Most with free capital choose to invest the majority of their capital in wealth multiplying securities, real estate, businesses.

Where do they invest? Some invest in the infrastructure of meeting human needs, consumers’ needs. Wal-mart invests competitively in the infrastructure of meeting human needs (getting manufactured products to end users). Owners of rental real estate do similarly. Food manufacturers, clothing manufacturers, residential building materials, home heating fuel, etc.

They all serve actual human consumers’ needs, well or poorly, ethically or corruptly.

The majority of the modern economy however is not oriented to ultimate consumers’ needs. The most profitable and most volume of investment in the modern economy applies only to business to business trade.

Computers, software, internet services are primarily for commercial users, business to business. Most trucking is business to business. Fuel consumption is 50% business to business. All commercial real estate including plants, offices is business to business. Most manufacture of materials is for business to business purposes. All defense expenditures by government is business to business (institution to business).

Society needs businesses to expend to be able to conduct their business, to ultimately meet consumers’ needs, the welfare economy. But, the extent of business to business transactions is increasing, beyond what supports the actual to consumer economy, the actual welfare economy.

It amounts to a bubble in business to business trade.

At some points, the bubble will burst. Most of the companies that experienced volatility during the last few years, were those that were dependant on business to business trade. Those that produced products to common consumers did not experience the same radical vacilations in revenues.

The business to business trade is still grossly inflated.

Its an artery with an embulism, a bubble, blood going to the wrong places, not to productive communities to create improvements in communities’ and citizens’ experience, but just in circles.

The big question is “will the artery burst”, or will it strengthen and do its real job? Will it do it on its own, or will it take a skilled physician’s intervention?

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Limits to Growth

In the mid-70’s, there was a visionary book published entitled “Limits to Growth” written by Donella Meadows and the Club of Rome that commented on the relationships of trends of availability of resources compared to demand and use for those resources.

They reasonably accurately predicted shortages and stresspoints of key minerals and fuels, stress points for various environmental toxins, and provided the foundation for the term “ecological footprint” in wide use currently.

How many of us can the planet tolerate? And, how many of us consuming resources as we do?

Great questions, with no compelling answers provided yet.

A personal acquaintance and colleague, Chris Martenson has recently compiled a seminar (better than Al Gore’s) articulating the trends of three perfect storm factors; carbon sink, peak oil (consumption beginning to exceed discovery, exacerbated by the BP off-shore oil spill/leak), and geometric increase in unsupported debt throughout the economy.

http://www.chrismartenson.com/crashcourse

It adds up to either a perfect storm disaster or a perfect preparation (perfect in preparing for the worst in a way that also keeps the bicycle wheel of the economy spinning securely).

Chris, like the Club of Rome, and like Malthus prior, commented on the mathematical relationship between a fixed or additive supply of key resources, and a multiplicative or geometric increase in demand for those resources.

If there is 1000 units of a commodity available and 100 units are discovered annually, and there is demand for 50 units of that commodity increasing by 5% per year, comprising a current net increase in supply, the following supply/demand relationships appear.

Year                                 Total Supply        Total Demand   

0                                           1000                          50                         

5                                             1223                            61

10                                           1371                           78

15                                           1421                             99    We’re here for oil

20                                           1347                           126

25                                            1114                             161

30                                            678                             206

35                                            0                                   263

Additive increases in supply compared to multiplicative increases in usage.

In my world of personal financial planning, similar dynamics apply.

People save arithmetically, maybe $5000/year for five years until they can afford to make a down payment on a home. Maybe the multiply that a little, so they own slightly more than $25,000 at the end of the five years.

But, investors expect and need multiplicative returns on their net worth. If they are seeking an 5% return (after risk adjusted out), and the economy itself is growing in scale by 4%/year (multiplying at least, productivity measures), then the only way for capital to receive its goal of 5% return is to redistribute wealth from the earning economy as a whole.

This is the primary logic of Marx’s Das Capital. His elaboration is set within a the manufacturing norm of the 19th century, but the redistributive norm of ownership applies even more pronounced within a service economy, until a perfect storm.

Marx’s elaboration of classes do resemble modern economic relationships, but not literally. The mathematical relationship of ownership extracting multiplicative returns on their investment and net worth remains. And, the increasingly skewed relationships of income derived from the contribution of work relative to the geometically increasing payments on capital invested remains.

The physical setting is different.

Marx observed those relationships and concluded that revolution of the proletariat was needed. Other prominent socialists and other thinkers (including some very wealthy) concluded that significant social change was needed, but not revolution in the sense of violent overthrow of ruling class.

We are facing a different perfect storm than only the one of class that Marx and later socialists observed. We are now facing the combining of the economic with the ecological, and need to solve both.

The perfect storm will not converge on us this year likely, but nearly certainly early flashes of the economic/ecological perfect storm within a decade.

Our current storming is still largely in the strictly economic realm. Even that is difficult to address.

My sleeves are rolled up.

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Where does wealth come from?

Its not a simple question.

As speculative bubbles burst periodically, net worth can change dramatically without any real change in behavior or character.

Property comes from three sources only:

1. On the basis of one’s existence. For all children, that is the basis of their living from birth through the end of their education. Some children are only supported through a young age, a tragic injustice. Children with supportive parents and cultures are supported on the basis of their existence for 20+ years.

Children are largely unable to work, and therefore unable to earn.

Unemployed don’t earn (now 9.8% of adults officially – 18,000,000, much higher unofficially). Prisoners don’t earn (now 2,000,000 adults in the US). Disabled don’t earn. The ill don’t earn. The retired don’t earn. Some regard the military as not value-added earning.

Socially, a large portion of society does not earn its way, either living on charity, public welfare, parental support, and/or prior earnings.

Existence is substantiated by nature. The sun shines. There is no exchange, “I will shine for you, if you do this for me”. Nature can be understood as a commons that all have some share in.

A minority of income is currently distributed on the basis of one’s existence, perhaps 10% of income socially.

2. Earnings for work performed. From completion of one’s education to one’s retirement (excepting periods of illness or unemployment), the majority of individuals’ cost of living, and cumulative saved wealth, comes from income earned from one’s work. Excepting sunlight and its resulting ecological services, society as a whole derives all of its value from people’s work, that is not wasted (which is much).

Its necessary substantively. All value comes from work performed carefully and skillfully, secondarily efficiently. In the US financially, everyone anticipating  receiving social security and medicare benefits actively and directly depends on those in the earning years, actually earning.

Earning from one’s work includes some of the work otherwise involved in managing capital. For example, determining a company’s optimal allocation of assets to productive purposes (a portfolio of investments), is someone’s work, necessary, earned in a real sense.

All other income derived is unearned. Some call that “parasitic”, and it is in ways, but it is also natural.

Likely 70% of income received in the US is from work.

From earnings, if one can earn more than one’s living expenses, then individuals can save, an additive process. $5,000 saved per year for three years is close to $15,000 (maybe some slight increase for interest “earned” – not really earned, more “received”).

3. Income from return on investments – As a result of one’s own prior earnings (or one’s benefactors), the whole world of investment is oriented to a multiplication of one’s principal/savings, or return on investment. Its how people preserve their net worth, and how their children, grandchildren, great-grandchildren, etc stay rich and powerful.

Return on investment includes:

Interest that multiplies slowly.

Speculation on commodities, stocks, currencies, mortgages, land, homes, can multiply quickly or dissipate quickly.

Longer term speculation (called investment) in shares of enterprises, can multiply.

Actual investment in enterprise can multiply (mix of earnings and unearned return on investment).

Its legal, moral, and essential financial planning, but also exerts less than ethical social consequences, particularly a maldistribution of wealth and income, and secondarily – but inevitably –  an inefficient use of invested capital.

I speculate that return on capital represents 20% of income received in the US, and the vast majority of that in the control of a small number.

The dollar is still legal tender, and in our simple-minded search for single references of success, net worth is the primary measure applied.

Individual and ecological income comes from:

Existence,

Work,

Capital

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Gaza – What is Going On?

The unfolding of events in Gaza were close to my worst fears associated with civil disobedience. Nothing went right. Every party reported on, acted in ways that were negligent, inciting, futile.

Specifically,

1. Israel allowed the blockade to both occur at all, and to occur over an extended period (in spite of agreements during the 2008 truce which were kept to a higher degree by Hamas than by Israel, and the unilateral cessation of shelling by Hamas in the past year)

I am extremely critical and distrustful of Hamas. It embarrasses me to say that Hamas acted with more consistency and integrity than Israel.

One primary theme I present consistently is to look at reality from multiple perspectives and time frames. That Israel did not apparently coolly review their practice of maintaining the blockade, at all and the form of it, both from the perspective of effectiveness and morality, is a grave negligence.

There were other options, particularly greatly increasing the allowed transfers over its land routes that could be monitored carefully as a border.  It would have entirely eliminated the need for any flotilla by sea entry, and eliminated the “humanitarian aid” argument.

2. The fiasco of the manner of the confrontation with the Free Gaza flotilla. It will be discussed in Israeli and world press for a very long time.

Specifically, the ships could have been disabled underwater by relatively simple sabotage to the propeller, then towed into port. Instead, a frightening night-time raid with helicopters was undertaken with no element of surprise (consistent with a commando operation), nor advance communication with the dissenters on the boats (consistent with a policing operation).

The negligences led to inhumane and inneffective policies, and now extreme embarrassment to the point where many are challenging Israel’s legitimacy to exist as a state. (It is not just talk by a fanatic few, now.)

3. The hypocrisy of the claims of non-violence, stated by the participants and proponents of the flotilla. There is a horrid video circulating the web in which dissenters clubbed Israeli commandos (absurdly exposed militarily by being dropped by line onto the ship’s deck).

It lends credence (more than credence) to the claims by Israel that shooting occurred only on the basis of the commandos’ fears for their lives.

A perfect storm of negligence and indiscipline.

Its the old game there. Which story gets told? What starting point? All propaganda.

At the risk of sounding vain, I predicted all of this, that the civil disobedience wasn’t in fact non-violent, that the confrontation with the flotilla would be botched, that the engagement of Turkish flagged ships would be construed as a military assault on Turkey, that the event would be seen as parallel to the 1946-48 dramatic Exodus ships arriving in Israel.

I have to apologize for myself not practicing what I preach. Specifically, I (like the Israeli high command) did not review the policy of blockade from multiple perspectives. I was swayed in reaction to the dogmatism of dissent, and allowed myself to form positions in reacton rather than in thought.

But most importantly, there is still no practical proposal offered by dissent, US, EU, Arab League, Israel. There is no clear set of demands that can be conditionally evaluated, negotiated, applied.

There actually are pieces of proposals floating around published and web sources, but you have to dig to find them. The journalists (right-wing, centrist, or left) aren’t articulating them. Its still in the blame phase.

The only feasible proposal that has emerged, that I heard, came from Hamas of all sources, but prior to the confrontation. Saturday, an interview that Charlie Rose conducted with the Hamas leader Meshal (from Syria) was published. Meshal offered to allow a Gaza international port to be developed and managed by international supervision (not by Hamas). It was a surprise to hear.

I don’t hear any viable long-term proposals though. The status of Hamas as alternatively a militia/governance remains. The Palestinians are still not subjects of any sovereign state (neither Gaza, West Bank, refugee camps in Lebanon where even after 60 years residence they are denied citizenship). There is no reliable proposal for Palestinian unity government with any moderation within a two-state setting. Fatah and Hamas are still in a heightened state of conflict, though this will push Fatah towards a more militant stance, and possibly towards a unity government, but not likely a moderate one.

There is much talk even among otherwise sober and less fanatic dissenters for abandoning the goal of two-states for two-people, in favor of a single state from river to sea (but including Gaza). It would appeal to western sensitivities for a democratic civil state like modern western states, but without precedent in the region (maybe Lebanon, not a great precedent). And, it would be the end of Zionism as a state effort, the end of the dream of it (worth preserving), and of the current status of it (worth changing).

I think Zionism is important, Jewish self-governance, in protection from persecution and in its own right. But, if we don’t self-govern in a way that lives and lets live, it will and has devolved to suppression.

Politics born of anger are a car careening down a winding road, successfully moving forward fast, but ignoring exhaust fumes, road kill, bicyclists and pedestrians, and ignoring smelling the roses.

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