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December 1, 2016


We are told by politicians and other apologists for the status quo that our jobs went to China and Mexico via American multinational corporations because of lower wage and environmental costs, and that is true, but only to a limited extent. We have lost 7 million manufacturing jobs since 1984, and some industries such as apparel and textiles have almost completely disappeared from the American scene, but for the most part other such jobs have simply disappeared in the course of things, and following is an explanation of “the course of things” from an economist’s point of view rather than that in vogue with politicians in which we shall see that many more jobs have simply disappeared in the ether than were sent overseas, victims (so to speak) of much greater worker productivity, automation, and general technological efficiencies.

Truth be told, economists know that today the manufacturing sector in this country is the largest in our economy and accounts for more than a third of our economic output. They also know, contrary to politicians’ pretense and laments, that our factories now produce twice as much as they did in 1984 per the Federal Reserve, but (and get this crucial number) with one-third fewer workers. The culprits? Sharply increased worker productivity, automation and technology in general. Factories that used to thus require, say, 3,000 workers, now on average require only 2,000 workers. Those jobs didn’t go overseas; they just faded away as the result of enhanced efficiency in manufacturing processes.

The manufacturing sector is doing just fine; it is employment that is suffering due to the technological reconfiguration of manufacturing as well as in other sectors of our economy. Multiply the foregoing differential of 1,000 jobs by thousands of factories and the resultant unemployment is more easily understood to be the price of progress rather than some dastardly plot of international traders to destroy America. After all, why should such traders kill the goose that laid the golden egg?

The politicians are beating a dead horse; they should instead be trying to come up with some good ideas on how to feed and educate the masses as even more efficient technological processes idle the American workforce, especially with an increasing population (which will exacerbate the problem). They cannot udo the past; they should better prepare for a future in which humans have even fewer jobs to go to and speculate on how we are going to keep non-productive humans alive by distributing robot-based wealth fairly and simultaneously obey the Protestant Work Ethic of “no work – no pay” (though the owners of such latter day enterprises will be doing little work as we currently understand it as well). Such a new world and solution of such problems will require bold thinking well beyond the trivialities politicians spout off these days in their quest for office and the power and prestige that goes with it.

Trump, for instance, has gone to great lengths to crow about how he is going to restore America’s manufacturing base to its former glory by bringing jobs back to America, jobs that will pay good wages, tariffs for our cheating trading partners who are ripping us off via unfair trade treaties etc. This won’t happen because it can’t; the majority of such lost jobs are in the ether, never to be recovered. They simply are not available to be returned; better he should look down the road with a view toward fashioning a society and economy that can remain cohesive and survive in the jobless future.

Economists (at least those not running for office) know that the manufacturing base in America is alive and well even though employment in such sector has been drastically reduced because of what I have outlined above. As my followers know, my main problem with what has happened since the 1970s is not technological change, which cannot be muzzled by some revolt akin to that of Luddite textile workers in Leeds and Manchester during the Industrial Revolution in England. Change is here to stay.

As my followers further know, my oft-stated complaint is that owners and management of corporations have not shared vastly enhanced worker productivity with corporate workers and others with wage increases commensurate with the greatly increased profits of the corporate owners and bonuses to management, profits that have been instead diverted to corporate bottom lines as proven by historic Dow averages these days. Median wages since the 1970s as adjusted for inflation have not moved while the Dow today sits at historic highs. This is proof positive of wage inequality, the domestic issue I think most pressing today given its deadening effect on demand – which provides a clear explanation for our underperforming economy and tepid economic growth – a problem politicians have largely ignored.

Finally, it occurs to me that the present practice of non-sharing the income the economy provides is not a good rehearsal for how we are going to handle the jobless Luddites down the road when the economy only requires minimal human effort due to technological progress beyond where we are now. What then, Mr. and Mrs. Politician?     GERALD      E


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