Ready, fire, aim

readyfireaim

The election result is being explained by any number of causes, but the one I see most invoked is anger at the government and its associated “elites” to provide jobs and a livelihood for many in the lower and lower middle economic classes. I accept the facts of pervasive unemployment, but I think these citizens have the cause wrong. Not only wrong but ironically wrong for their hopes are based on the success of the incoming Trump, conservative government, who are about to make life worse for these folks.

The primary culprit of their situation is not government but capitalism itself as it operates today. The financial sector, which employs a negligible number of the present disaffected classes, channels a large amount of wealth generation to the already wealthy. At last count this sector’s share of all profits was about 40%.

Next factor is the disparity in income between bosses and workers. There is a lot of variation in published data, but the following data from a report by the Economic Policy Institute appears to be typical:

The CEO-to-worker compensation ratio, 20-to-1 in 1965, peaked at 376-to-1 in 2000 and was 303-to-1 in 2014, far higher than in the 1960s, 1970s, 1980s, or 1990s.

This upward trend is due in part to falling wages over the past several decades. I cannot find any way to attribute this situation to any failure of the part of government except its failure to exert more control. Hardly the message that was used to attract these disaffected voters.

The third factor is the pace of disruptive innovation. A, if not the, primary cause of worker displacement is structural change due to technological innovations which substitute for labor. Whole sectors wax and wane with large scale impacts of opportunities for worker. New openings for high-wage skilled technically trained workers cannot match losses due to the new technologies. Replacing toll collectors with automated systems is a good example, but is but one of many such displacements.

The free market ideology that is help out to be a plus for these unemployed tends to be just the opposite. In theory, a free, perfect market should be the most efficient in generating GDP. But markets are far from perfect. The costs of social displacement and environmental/health damage are, at best, only partly reflected in the cost of goods. The models used to guide the political economy of a society can examine and maximize efficiency and output, but at the expense of equity and fairness. The work of Thomas Piketty has shown that growing capitalistic economies tend to increase inequity as a systemic effect.

Most schools of management or business are founded on economic theories that stress efficiency and growth. Profit and growth remains the dominant normative goals of virtually all large firms and many smaller ones. MBA’s, who have little understanding of what a firm really does, populate higher management echelons. They are guided by the abstract rules and metrics they learn in business schools.

Neither is trade the villain. Trade raises the whole ship as does a rising tide, but showers its fruits unevenly, displacing some workers while enabling those with income to dispose of having access to cheaper goods that would have been produced in the absence of trade.

I could continue for some time. I know that many will pick at these reasons as not being accurate. I am not an economist or MBA and accept that I may deviate in degree, but I am convinced that the overall picture I am painting is correct. The culprit is not the government, except as not doing enough. It is the capitalistic system as constituted today.

Most industrially advance nations recognize the structural nature of unemployment and displacement and attempt to compensate through redistribution in some form or other. Some aid may come in direct payments or through access to free or subsidized necessary services like health care, education, or retirement income.

All such programs involve some form of public policy as opposed to the working of a free, unfettered capitalistic market. They are based on both experience and sound theory. They are never perfect, but have responded to the same kinds of concerns that propelled the Trump victory in this election.

I am quite upset by this turn of events because it threatens to set the clock back, possibly a long way back, in some arenas most back to the beginning. What I have written in this blog post is not motivated by these threats as much as it by the likelihood almost certainty that those who have been told everything will be just fine, even great again, will see their fortunes ebb even further. I am sad, almost to the point of tears, when I try to adjust to the results. We have come a long way from Hobbes’s times when the role of government was more clearly juxtaposed against an anarchic alternative.

In such condition, there is no place for industry; because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; no instruments of moving, and removing, such things as require much force; no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.

I find it very interesting and, again ironic, to read his concern that, without a functional social contract and its implementation in the form of government, we would lack trade, adequate knowledge, arts, but not fear. In the language of today, we might say that without the order furnished by the public sector, we would live at the mercy of the private sector. Not a good idea. Both are necessary, but always in some sort of balance. History does have lessons for us and to ignore the past is not a good idea. But conversely the future is never like the past and past lessons always must be altered and shaped to fit the present.

Today I will limit my comments to the irony I have discussed, but I reserve future space to discuss the criticality of understanding the way the immediate world is working. Ignorance or denial is very, very dangerous. Given the daunting challenges of understanding the complex world, the best we can do toward such understanding may be very limited, but, no matter, we must keep trying. If we do not, our plans will be fated as Robert Burns wrote, “The best laid schemes o’ Mice an’ Men, Gang aft agley. An’ lea’e us nought but grief an’ pain, For promis’d joy!(To A Mouse)” Just imagine what he might have written about plans that have little or no basis.

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