The Growing Inequality of Wealth in America and the Globe: Revisiting the Red Queen of Productivity and the False God of ‘Profit’ (July 19, 2013)

Is America's economic 'INEQUALITY' increasing (e.g., Robert Reich's new movie, Inequality for All)? Is America becoming an economically locked-down caste system? Has American class mobility, the basic promise of our democracy, been lost? America’s and the world’s drift in this direction has been seen and felt for some years. Prior to seeing Professor Reich’s movie, this blogger mused in a previous previous post on (July 19, 2013), that in the glare of immense wealth and a ‘Bling’ culture, America seems to have forgotten a basic economic reality - an economic market is an interdependent world of consumer-product-and-capital - and when the consumer is removed or de-emphasized in this ‘model-equation’, everything breaks down. Why? Because we seem to have forgotten that ultimately, economics is all about someone being able to consume, i.e., BUY. So, when the buyer is stripped of the means to perform their function by losing jobs or being paid less than rising costs of living, the reality of the model dictates a collapse. Robert Reich’s movie presents this ‘truth’ with elegant clarity. Even though there are many graphs and tables to look at in his movie, the story is easily seen.

Are we at the economic crisis point Reich believes we are? Joel Kotkin’s October 6, 2013, article , 'California’s New Feudalism Benefits a Few at the Expense of the Multitude’, presents a detailed case that we are near Reich’s economic crisis point by looking at the growing ‘skewedness’ of California’s wealth and power. Kotkin reluctantly focuses on the current-context mis-directedness of liberalism’s previously held sacred icons of environmental protection and the advantages of clean industry, notably the digital technologies. Kotkin makes a good point that there are ‘unforeseen consequences’ of these old standards that today makes environmental protection equate with job loss and overseas outsourcing. But, overall is it really true that the 'good' guys and causes (e.g., politically 'progressive techies' and environment protection) are actually bad medicine for our economic health?

The following is Mr. Kotkin’s view of the changed value of environmental protection and clean-industry laws; previously I've thought this pov was right wing propaganda against the EPA but now things seem fuzzier as the mix of trade-offs among protection costs vs benefits has grown more complex. So, are even the techies guilty of riding globalization to bigger profits...and contributing to wealth inequality? Also, the article floats a new meme, 'techno-coolies', which will probably pop up more and more - imported technical labor for the digital hubs like Silicone Valley because US education is failing to teach our kids math and science. "Digital Oligarchy" is another descriptor that seems meme-destined.

"...The state’s digital oligarchy, surely without intention, is increasingly driving the state’s lurch towards feudalism. Silicon Valley’s wealth reflects the fortunes of a handful of companies that dominate an information economy that itself is increasingly oligopolistic. In contrast to the traditionally conservative or libertarian ethos of the entrepreneurial class, the oligarchy is increasingly allied with the nominally populist Democratic Party and its regulatory agenda. Along with the public sector, Hollywood, and their media claque, they present California as “the spiritual inspiration” for modern “progressives” across the country.
Through their embrace of and financial support for the state’s regulatory regime, the oligarchs have made job creation in non tech-businesses—manufacturing, energy, agriculture—increasingly difficult through “green energy” initiatives that are also sure to boost already high utility costs. One critic, state Democratic Senator Roderick Wright from heavily minority Inglewood, compares the state’s regulatory regime to the “vig” or high interest charged by the Mafia, calling it a major reason for disinvestment in many industries."

And Mr. Kotkin writes this about California's mal-distribution of wealth:

"...The gap between the oligarchic class and everyone else seems increasingly permanent. A critical component of assuring class mobility, California’s once widely admired public schools were recently ranked near the absolute bottom in the country. Think about this: despite the state’s huge tech sector, California eighth graders scored 47th out of the 51 states in science testing. No wonder Mark Zuckerberg and other oligarchs are so anxious to import “techno coolies” from abroad."

Also from Mr. Kotkin’s article is his use of the term, ‘liberal apartheid’which though harsh-sounding strikes home regardless of one’s political loyalties:

“"...liberal apartheid,” a sharp divide between a well-heeled, mostly white and Asian population located along the California coast, and a largely poor, heavily Latino working class in the interior. But the class divide is also evident within the large metro areas, despite their huge concentrations of affluent individuals. Los Angeles, for example, has the third highest rate of inequality of the nation’s 51 largest metropolitan areas, and the Bay Area ranks seventh."

Another of Mr. Kotkin’s word-inventions is his assertion that with the new California mal-distribution of wealth has come an increasingly wide communication gap between the ‘have’s an have not’s’. And, despite the legality of the map-distributed wealth which is supported by the historical religious-political iconizing of wealth and accumulation in America, this gap is, in summation, dysfunctional because it describes the loss of common societal goals which are useful to maintain a smoothly functioning and stable society. To help resolve this disfunction and the associated communication gap between classes, Mr. Kotwin proposes that there has risen a middle-situated class by analogy with medieval-feudal society in Europe. This 'mid-class’ (not middle class) serves to mediate between the oligarchy and the rest of America. He terms this class the “Clerisy” which in his words, does the dirty work of the oligarchy:

"...in today’s hyper-secular America, the job of shaping the masses has fallen to the government apparat, the professoriat, and the media, which together constitute our new Clerisy. The Clerisy generally defines societal priorities, defends “right-thinking” oligarchs, and chastises those, like traditional energy companies, that deviate from their theology".

Mr. Kotkin’s proposal has much credibility in defining a need for a mediating bloc to soften the friction between the Oligarchy and the ‘Serfs’ (Mr. Kotkin). But, this blogger disagrees with the expectation that the ‘Clerisy’ is/will be a somewhat independent ‘estate’. Although This blogger agrees a ‘Clerisy’ has been created, this blogger also believes the ‘Clerisy' has been co-opted by Big Money in the hands of and almost completely controlled by the ‘Oligarchy. This corruption of a theoretical modeling of America as a system of 'power-blocs-in-balance’ is especially exampled by the controversial (to some) Supreme Court (SCOTUS) decisions in recent years that extend corporate election funding prerogatives.

But, Mr. Kotkin goes further to propose an extended future for this feudalism:

"...Yet except for occasional rumbling from the left, neo-feudalism likely represents the future."

But, this future of a feudal longevity is too much a stretch for this blogger. Contrary to Mr. Kotkin’s conclusion that economic feudalism in California and the rest of America is here to stay, this blogger believes the keystone and the miracle of America is still its democratic basis which remains intact and ever ready to show its strength through the ‘vote’. This means change is always at most 2 years away and thus makes it impossible for Kotkin’s dire modeling of a long, feudal American future. And, as we are seeing now, the balance of powers written into the Constitution remains a very powerful ‘check’, though sometimes it appears to be mis-applied as in the current stoppage of government by the GOP dominated House (US)(October 2013).

This blogger doesn't agree with all of Mr. Kotkin’s views. Or maybe this blogger takes issue that Mr. Kotkin, despite his admirable effort to sort out what is happening, or has happened, to California and by extension, to America, needs to risk going further to envision what kinds of paradigm changes might work. Such an adventure would be especially fruitful about environmental protection: 'Yes, there are economic penalties to pay (right now) for a clean environment but what about the reduction in medium-to-long health costs to cities, states and the nation? And doesn’t this just mean we have to find new paradigms to pay for and justify the costs? One hopefully sees a multitude of articles, and books and books, on this subject of new paradigms. Right now it appears no one or very few are taking risks to stretch imaginations and conjecture about a workable future of economic equitability and re-establishing the ‘good society’ looked forward to in 1776.

The False God of Productivity, The Red Queen of Profits and Fewer Jobs (A Potential for Social Collapse): More MBA Follies

This is offered both as another example of an MBA fallacy and as a response-in-agreement to a recent article in The Daily Beast that discussed the notion of how might the emphasis in the market place on increased productivity lead to fewer jobs ((Robert Shapiro. 'Robotic Technologies Could Aggravate the U.S. Problem of Slow Jobs Growth’. July 19, 2013). Mr. Shapiro poses a fundamental problem with 19th century industrial capitalism that was bound to eventually require our attention: in the headlong pursuit of maximizing profit by reducing labor costs among other factors, where is the boundary to how many people can be laid off before the system collapses? He notices that since 1981, recoveries from boom-busts have been slower and slower which he sees as a sign of technology-displaced, unrecoverable jobs:

In the four years, since the Great Recession of 2008–09 ended, private employment has risen at an annual rate of 1.4 percent. That’s 61 percent below the rate of job creation following the deep downturn of 1981–82, after which jobs rose at an annual rate of 3.6 percent. A similar disparity is evident between job creation in the first four years of the two most recent expansions that followed more moderate recessions. The 0.7 percent annual rate of job growth over the first four years of the 2002–07 expansion was 68 percent less than the 2.2 percent annual job gains seen in the first four years of the 1991–2000 expansion. Something has clearly changed.

Clue - the goal of productivity is 100% efficiency, 0% wasted resources and NO (human) LABOR COST (100% productivity is a theoretical limit). These objectives, especially the last, are built into profit-focused capitalism where the overall, effective goal (realized or not) is the elimination of labor cost which, believe it or not, translates to the elimination of human labor. This is an absurd idea but our current, 19th century industrial capitalist view of people as a faceless labor pool might soon lead to machines doing all the work... and no-one has a job.

An economic system needs consumers to buy product and consumers need money to perform their necessary function which is to shop. This is an interdependent system which existed for 1000’s of years before industrial capitalism. But this system might be in the process of breaking down. Why? Because basically this equation exists because of the fundamental difference between machines and humans - machines don’t eat, wear clothes, sleep, drive cars, prefer tastes, etc. - all those things which define the need for, and essence of, an economic market. Writing people out of this simple equation destroys the whole system. (Sorry, Mr Romney.)

SO, WHAT DOES ONE DO WITH ALL THOSE JOBLESS PEOPLE who don’t have money to buy products? The classic capitalist was not concerned and assumed the overall system had enough vacant jobs in another city, county, state or country to take care of his laid off labor while ‘he’ sprinted blindly toward more profit. But if this previously-assumed, always ready, labor sponge might be ending (saturated), what is to be done with redundant humans displaced by higher productivity? How does one regard and sustain humanity - unless the plan is to eliminate people which is an idea that hopefully no one takes seriously? Or, if it is in planning, it (depopulation) will be implemented with a smile or on a time scale of generations.

One solution to runaway capitalism (free-market style)is ‘managed’ capitalism whose first, or at least parallel goal with GDP, is to preserve society through sustained employment achieved by de-prioritizing profit, or rather redefining profit to include social utilization (preserve jobs), or maybe even to reduce human population by natural attrition such as people having one child instead of two or three - either by choice as the result of natural economic forces or by national policy (e.g., China). But then we'll face religious plus economic boundaries which is a deeply sensitive subject deserving a separate blog post. But, as for ‘managed capitalism’, nearly every industrialized country has such a system in some form, and even America has it although disguised in various ways to avoid upsetting fundamentalist orthodoxy of both religious and economic factions.

Absent a serious approach to looking for alternative paradigms to the classic 19th century industrial capitalism model for our and the global economy, we might at least pay attention to helping workers cope with the growing stress of working under increasing productivity pressure and increasing uncertainty about job security. And there is such a movement, the ‘Third Metric’concept championed by several thinkers including Arianna Huffington who is committing the weight of her online assets to conferences and other support venues to promulgate worker education in ways to combat stress. The Third Metric ‘way’ chooses to untangle the worker from the faceless pressures imposed by corporate life and survival through meditative techniques such as the currently faddish ‘mindfulness’ method (which is actually very ancient and a pillar of Buddha’s '8-fold Way’). This approach is helping many workers, largely women right now, but will hopefully lead to a national discussion about evolving new paradigms for redefining corporate profitability, social utility (contribution to social stability) overall success.