Say goodbye to more jobs

March 16, 2004 11:38 PM

Say goodbye to more jobs?This is an interesting research report from the Gartner Group on the future of banking, money and economic transition. One of the participants at a conference that Gartner cites is Bernard Leitaer, who is interviewed here. Leitaer is the author of the book The Future of Money. He argues " the malaise Japan has suffered since the early 1990s reflects an economic challenge the whole developed world has begun to face. Today, European and U.S. factories, too, suffer from overcapacity. The vaunted productivity growth spurred by the digital revolution has raised the economy’s stall speed. If the natural growth rate of the U.S. economy has risen to 4% annually, anything less than that rate will cause firms to trim capacity. A firm’s revenue growth often must come at the expense of competitors as well as its own profits because companies have trouble raising prices. In response, companies cut costs any way they can, usually by laying off employees and squeezing suppliers, which causes further layoffs. For developed countries, the safety valves that limited damage during contractions in manufacturing may not work. In past recessions, laid-off factory workers in the Great Lakes states, for example, could migrate to the growing Sun Belt to find new jobs. In the present transition, areas with job growth may lie overseas." The long heralded rise of the information economy, the death of distance and the rise of the global knowledge workers is paradigm shift that our goverment leader's seem ill equiped to handle.
posted by thedailygrowl (36 comments total)

I posted an interview with Lietaer (sp?) on MeFi last year.

"Complimentary currencies for social change."
posted by gen at 12:00 AM on March 17, 2004

[this is good!]
posted by gen at 12:04 AM on March 17, 2004

Doh! I got the url in my first post wrong. Hazukashii! (How embarrassing, in Japanese.)

"Complimentary currencies for social change."
posted by gen at 1:45 AM on March 17, 2004

Thanks Dailygrowl, the interview is excellent.
posted by atom71 at 4:13 AM on March 17, 2004

"...what is called a "demurrage charge." The demurrage charge is a concept developed by Silvio Gesell about a century ago. His idea was that money is a public good - like the telephone or bus transport - and that we should charge a small fee for using it. In other words, we create a negative rather than a positive interest rate....What would that do? If I gave you a $100 bill and told you that a month from now you're going to have to pay $1 to keep the money valid, what would you do?

I suppose I would try to invest it in something else..... In the Gesell system, people would only use money as a medium of exchange, but not as a store for value. That would create work, because it would encourage circulation.....Has this ever been tried?

There are only three periods I have found: classical Egypt; about three centuries in the European Middle Ages, and a few years in the 1930s.....Egypt was the breadbasket for the ancient world, the gift of the Nile. Why? Because instead of keeping value in money, everybody invested in productive assets that would last forever - things like land improvements and irrigation systems.....Proof that the monetary system had something to do with this wealth is that it all ended abruptly as soon as the Romans replaced the Egyptian 'grain standard' currency with their own money system, with positive interest rates. After that, Egypt ceased being the grain-basket, and became a "developing country" as it is called today."

Fascinating.
posted by troutfishing at 4:55 AM on March 17, 2004

Meanwhile, here's Sears CEO Alan Lacy on outsourcing :

"But I think, beyond that, to me, a very interesting trend right now is the whole non-U.S. opportunity that's available, and ... if you think about personal intelligence and drive being randomly distributed by population -- you know, there are four or five times as many smart, driven people in China than there are in the U.S. And there's another four or five, three or four times as many people in India that are smarter or as smart or have more drive. And if technology is now going to basically reduce location as a barrier to competition, then essentially you've got something like whatever that was, seven or nine times, more smart, committed people that are now competing in this marketplace against certain activities.

"So, I think that the outsourcing potential -- particularly of some of the more commodity-like knowledge worker activities -- we're just beginning to see the first of that curve. I think that, just given the nature of technology and given the nature of those workforces, and given the fact that we've had a decrease in the supply, prices are going to fall.

"So we're going to see, I think, this huge incentive to shift some of these more commodity-like, knowledge worker jobs offshore." [Sears CEO Alan Lacy sings praises of offshore outsourcing, early January, 2004 during a panel discussion at the National Retail Federation's annual conference. ]

It's a very simple argument and, as far as I can tell, irrefutable.
posted by troutfishing at 5:04 AM on March 17, 2004

Does this mean Ayn Rand and the Great Invisible Hand concepts are in error?

Worldwide serfdom, here we come!
posted by nofundy at 5:10 AM on March 17, 2004

Does this mean Ayn Rand and the Great Invisible Hand concepts are in error?

No, because we do not have anything even close to laissez faire capitalism.

For all the talk of "free markets" there is almost endless government intervention.

Perhaps we could start with eliminating state-sanctioned corporate charters, and move on to removing subsidiaries for farmers and manufacturers. Oh, and we'll have to allow for the free movement of *all* capital, including manual labor, across all borders.

Then let's see.
posted by Ayn Marx at 5:42 AM on March 17, 2004

Wrong? Why, no indeed. This is the Great Invisible Hand improving the lot of the hardworking capitalist masses of India and China. Surely you don't oppose reapportioning the excess American wealth progressives have been handwringing about for forty-odd years? My, how swiftly positions flip-flop. (But this, too, shall pass...)
posted by jfuller at 5:52 AM on March 17, 2004

move on to removing subsidiaries for farmers and manufacturers

Of which multinational corporation would the WhiteWash House Inc. be a subsidiary? :-)
posted by nofundy at 6:05 AM on March 17, 2004

i cant get to the report anymore, anyone got another link>??
posted by yeahyeahyeahwhoo at 6:08 AM on March 17, 2004

If laborers couldn't increase the value of their social benefits claim by moving from the third world to the first world, I don't think many free-traders would object to that move. When a family can increase the value of their government benefits and services from $500 a year to $25,000 a year by the simple virtue of running the LAX or JFK immigration gauntlet, that unsettles the calculus of "free" movement of labor severely.

Troutfishing is right -- the competitive picture when India and China combine to have 10 times the theoretical human resources that America has is pretty grim. When you add in the fact that India and China have miniscule divorce rates and educational and welfare systems which are relentlessly focused on the proper incentives, it's even harder for the American system to compete.

Four things might help. First, we need to support continued economic progress in India and China -- we need for those countries to be richer so that their wage levels can rise; the prognosis for us is grim if the top 1% of Indians and Chinese by IQ will work for under $10,000 a year indefinitely. Second, we need to be diligent about eliminating the perverse incentives and indulgences from our education and welfare system. Third, we need to be ruthless in enforcing our intellectual property. Indians and Chinese routinely, and under the de facto or de jure protection of their governments, steal our intellectual property. Absent corrective action, we should load a tarrif on Indian goods and services equal to the theft from U.S. pharmaceuticals by the Indian patent-violating "generics" manufacturers, and a tarrif on the Chinese goods and services for the copyrights they so routinely vioalte. Fourth, we should be open about develping a low-wage, low regulation manufacturing environment. Low-skilled people work for $7 an hour at McDonalds and are happy to do so while they train and school for better work; why can't the same be true for entry-level manufacturing work?
posted by MattD at 6:41 AM on March 17, 2004

In the mean time, Gartner is looking more and more to depend on off-shore outsourcing firms to handle data colleciton work that was previously handled in, for example, the Portland office. Which is why there are half as many people working there today as there were six months ago.
posted by cortex at 6:59 AM on March 17, 2004

Wrong? Why, no indeed. This is the Great Invisible Hand improving the lot of the hardworking capitalist masses of India and China. Surely you don't oppose reapportioning the excess American wealth progressives have been handwringing about for forty-odd years? My, how swiftly positions flip-flop. (But this, too, shall pass...)

Yes, much better that we ALL be poor...
posted by eas98 at 7:08 AM on March 17, 2004

I don't mean to derail this high-brow thread, but what is up with the Rod Stewart trackback!
posted by thekorruptor at 7:14 AM on March 17, 2004

> Yes, much better that we ALL be poor...

Well, but exactly. Equally rich, equally poor, the level doesn't matter, the important point is the equality. "The mass outcry against American hegemony is the voice of the true, the eternal and the compassionate left." (I myself am, need I mention? in favor of hierarchy, hegemony, oppression and more jobs for Americans so they can afford bigger SUVs.)
posted by jfuller at 7:29 AM on March 17, 2004

Does anyone else get a Rod Stewart audio trackback on this post? WTF?!
posted by gen at 7:54 AM on March 17, 2004

That d*W$#d Rod Stewart trackback is crashing my Firefox browser! I had to make this post with IE. I'm gonna hurl... Maybe I should try Opera?
posted by PigAlien at 8:02 AM on March 17, 2004

> embed src="http://www.superseventies.com/midijukebox/doyathinkimsexy.mid" > autostart="true" loop="true"

Wow, it didn't take 'em long to ruin trackback.
posted by jfuller at 8:08 AM on March 17, 2004

DO YA THINK I'M SEXY?
posted by Steve_at_Linnwood at 8:08 AM on March 17, 2004

MetaTalk
posted by Steve_at_Linnwood at 8:09 AM on March 17, 2004

Last night, NPR aired some reports on global outsourcing. Three things caught my attention.

The first was an interviewee who said that we USians are experiencing the results we've been working for for decades: raising standard of living and education in less developed countries. Our policies have worked to build the work force that's now competing for our jobs.

The second was something Paul Ford said in his commentary: we in high tech built the tools that allow people in distant locations to do our work. Irony.

Paul also commented on the nature of programming. For decades, he said, people have pondered whether it's an art or a science. Many programmers are disconcerted to learn now that it's actually just a commodity.
posted by tippiedog at 8:46 AM on March 17, 2004

"Surely you don't oppose reapportioning the excess American wealth progressives have been handwringing about for forty-odd years? My, how swiftly positions flip-flop. (But this, too, shall pass...)"

It is kinda amusing. For years I have listened to 'progressives' on public radio boo-hoo about how unfair it is that the US has so much of the money when there are so many people out there poor and so on...

Now all they do is whine and complain that the money is actually moving in that direction. I suppose it might actually teach them to re-think their positions... but they don't. They just blame it on what they call "fat cats" :)
posted by soulhuntre at 8:49 AM on March 17, 2004

you know, there are four or five times as many smart, driven people in China than there are in the U.S. And there's another four or five, three or four times as many people in India that are smarter or as smart or have more drive

Everyone PH3AR the crafty Asian hordes and their MA|> SK1LZ! We will be OWNZ0R3D!

Except that, wait a minute, by the same logic, the US has about 3 and a half times as many smart, driven people as Germany does, and 10 times as many as Canada does, and thirty times as many as Belgium does, and sixty times as many as Norway does, and six hundred times as many as Luxembourg does.

So all of those countries simply must be jobless, poverty-ridden hellholes, utterly unable to compete against the vast hordes of smart, driven Americans.
posted by ROU_Xenophobe at 8:51 AM on March 17, 2004

Actually, much of the whining and complaining that I've read about this online comes not from liberals, but the people affected (at least a couple of whom happen to be very conservative on social issues and are clearly GOP-centric). It's almost purely self-interest involved.
posted by raysmj at 8:53 AM on March 17, 2004

For years I have listened to 'progressives' on public radio boo-hoo about how unfair it is that the US has so much of the money when there are so many people out there poor and so on...

No, see, we've been whining about the decline of living wages in the U.S. and how it's becoming increasingly difficult to make it if you're living in the lower or middle class. This doesn't change any of that, does it.


Everyone PH3AR the crafty Asian hordes and their MA|> SK1LZ! We will be OWNZ0R3D!

I should have known this from the time I started playing street fighter II in the arcades as was consistently whupped by 11 year old asian kids (actually, 11 year old kids period).

Except that, wait a minute, by the same logic, the US has about 3 and a half times as many smart, driven people as Germany does, and 10 times as many as Canada does, and thirty times as many as Belgium does, and sixty times as many as Norway does, and six hundred times as many as Luxembourg does.

As is often true, ROU_Xenophobe makes one of the best points in the whole thread. How do they do it?
>
posted by namespan at 9:13 AM on March 17, 2004

Actually, I've been one of those progressives advocating for spreading the wealth. And now, my job is in danger of going overseas.

It sucks to be affected personally by this trend, but I stand by belief that spreading the wealth is a good thing. And I do believe that, as much as it may suck, if increasing the wealth of people in other countries entails lowering the standard of living in the US (it's not possible to bring everyone up to US's current standard of living), then so be it.
posted by tippiedog at 9:46 AM on March 17, 2004

I LOVE THIS POST, WHY?, I AGREE.

let us bow our heads to Ross P. for his prophecy of
the giant suckin sound.
posted by clavdivs at 9:59 AM on March 17, 2004

It's good for software engineers if the price of computer code is high. It's good for everyone else if it's low.

I don't think declining standards of living in the US is likely. Has there ever been a period of prolonged increased poverty in the history of the US? I don't buy the tired old argument that "everything is different this time around". People have been saying that since the dawn of time.

By the way, ROU_Xenophobe, excellent point.
posted by Triplanetary at 10:04 AM on March 17, 2004

What is happening now is a continuation of a trend that has been happening for 200 years since the start of the industrial revolution. The only difference is it is happening to us personally and is not some dry read in a text book about what happened to our grandfathers generation. The pro arguments are correct, this will free up time and resources for continued innovation in new areas while offload the grunt work to others. There will be some pain along the way, capitalism is creative destruction.

The Steel Industry is a good example, in my grandfathers generation Steel was like the computer industry today. Bethlehem Steel in Baltimore was the worlds largest steel factory and turned out more innovative technologies that were replicated from the USSR to China to elsewhere to this day. Now, the factory is just about dead and gone, most steel production is done overseas. Was that a mistake are we worse off for it?
posted by stbalbach at 10:16 AM on March 17, 2004

lietaer recently launched the terra, sorta the latest incarnation of graham and keynes' commodity reserve currency :D

re: job migration etc, i like paul mcculley's take:

Mercantilism does reign in much of Asia, with high domestic saving rates, huge foreign exchange reserves, undervalued currencies on a purchasing power-parity basis, and large current account surpluses. Speaking as an American, this combination would not be pleasing to me, as it makes consumption an after thought in the pursuit of ever-greater stores of international wealth. Americans operate on the thesis that hearses don’t come with U-Haul trailers and spend accordingly.

Neither the Asian model nor the Anglo Saxon model is inherently right or wrong. Peoples’ utility functions are not homogenous: different strokes for different folks. And because peoples’ utility functions are different, there is scope for win-win international trade.

Except, of course, in the delicate matter of citizenship. There is no free market in passports. Indeed, the very definition of the sovereignty of nations includes the right – at the point of a gun – to define who is and isn’t a citizen: entitled to vote; subject to laws of the land, including the obligation to pay taxes and submit to conscription; and eligible for the social safety net funded by fellow citizens.

Accordingly, the leaders of sovereign countries rationally respond to exigencies beyond the economic doctrine of comparative advantage through free trade. This is nowhere more clear than in considering the political hot button of today called “outsourcing” – the creative destruction of American jobs in the (capitalist!) pursuit of profits through lower labor costs beyond America’s borders. Every sensible economist agrees that in the long run, “outsourcing” is a winning trade for both America and the countries who are the beneficiaries of outsourcing: American consumers get to buy more for less, and foreign workers get to move up the value-added chain, increasing their prosperity, too.

The problem is that the economist’s long-run dream is the politician’s short-term nightmare. Voters who benefit from free trade – employed consumers – do not reward politicians with yea votes, but those whose jobs are creatively destructed do punish politicians with nay votes. Thus, politicians are rationally less enthusiastic about free trade than economists.1 This is particularly the case in times of weak global aggregate demand growth, which begets “beggar thy neighbor” pathologies: political leaders rationally want to get re-elected!

basically he's saying that if the massive demographic influx of the world's population into the capitalist system -- 2.5 billion people or about half the world over the last two decades, viz. china and india (causing the secular decline in interest rates?) -- is without concomitant movement of those people (human capital as it were) to a) where they're most productive and b) where their utility is maximised, then in the absence of a "free market in passports," it's the govt's prerogative to affect their 'collective' preferences as best it can, e.g. thru monetary policy :D

i would also just add that politics -- in addition to suffering chronic short-sightedness -- also tends to be local, i.e. politicians having a certain constituency (since they're elected locally) aren't about maximising global utility, just the welfare of said constituency. this is where game theory and appealing to so-called 'enlightened' self-interest come into play :D

oh and, i think you're sexy!
posted by kliuless at 12:00 PM on March 17, 2004

stbalbach makes a good point. I think one additional factor now is that some of the people whos' jobs are getting outsourced are well-spoken types that can use the Internet to make their complaints heard.
posted by moonbiter at 5:42 PM on March 17, 2004

stbalbach makes a good point... provided that the USA can continue to out-innovate. That's what got it from steel to silicon: innovation.

Stumble on the innovation front, and you're stomped. So what process is the US going to invent, akin to going from manual to machine labour, and from machine labour to silicon labour?

I'm having a hard time imagining it. On the other hand, were I a steam-era geek back in the time, I'd not have been able to imagine computer technology.
posted by five fresh fish at 7:11 PM on March 17, 2004

"Most Britons have never heard of nanotechnology and have no idea what it is, according to a survey released on Monday." .. there will always be somthing.
posted by stbalbach at 7:49 PM on March 17, 2004

it's the pace of innovation that's the difference tho, from this wired article...

Agriculture jobs provided decent livelihoods for at least 80 years before the rules changed and working in the factory became the norm. Those industrial jobs endured for some 40 years before the twin pressures of cheap competition overseas and labor-saving automation at home rewrote the rules again. IT jobs - the kind of high-skill knowledge work that was supposed to be our future - are facing the same sort of realignment after only 20 years or so. The upheaval is occurring not across generations, but within individual careers.

also btw, it appears there's a preference to substitute capital for labor...

Why is the US having so much difficulty generating jobs? I argue that the super-low interest rate stance in the US has had an unintended effect of skewing the incentives in favour of firms expanding capital rather than labour. The irony here is that, as long as interest rates stay low, the job market will struggle to recover, with labour being crowded out by capital.

this has also been blamed on healthcare costs (among other things) associated with hiring, which further drives jobs either to machines or abroad. stephen roach has called this the global labor arbitrage.
posted by kliuless at 7:56 PM on March 17, 2004

"Except that, wait a minute, by the same logic, the US has about 3 and a half times as many smart, driven people as Germany does, and 10 times as many as Canada does, and thirty times as many as Belgium does, and sixty times as many as Norway does, and six hundred times as many as Luxembourg does." ( ROU_Xenophobe ) - An invalid point. This comparison doesn't hold up for the simple reason that US and European wages are roughly in the same league. Not so for the US/China India equation.

"...I don't think declining standards of living in the US is likely. Has there ever been a period of prolonged increased poverty in the history of the US?" - (Triplanetary) - Well, yes. Not for everyone, but this happened during the great depression. And it also seems to have been happening, for past two or three decades, to the bottom 20% of American wage earners.

"stbalbach makes a good point... provided that the USA can continue to out-innovate. That's what got it from steel to silicon: innovation.....Stumble on the innovation front, and you're stomped. So what process is the US going to invent, akin to going from manual to machine labour, and from machine labour to silicon labour?" (five fresh fish) - I generally agree with this point but I'd add this :

There is a world of difference between noting a trend and "whining" about it. The trend - gradually declining standards of living in the US - seems clear to me. Remember, world trade - in the last 100 years - had not increased past levels seen in 1913 until the end of the Cold War. So the ongoing explosion in world trade is VERY recent. The impacts are only now being felt.

But let's be clear on one thing - the rate of economic change in our age is unprecedented and is driven by above all now, the migration of technical knowledge, from the developed to the developing world. What does it mean when most of the material taught at MIT goes online, to be freely available? - It means the advent of a time when the developed world can no longer assume that it is in possession of superior knowledge and techniques. The developed world is rapidly closing (with our aid, incidentally) the knowledge gap.
posted by troutfishing at 9:46 PM on March 17, 2004