BusinessInsider: The Real Problem is the Economy Does not Need You Anymore

As I grope daily with coming up with some catalyst outside of a new Federal Reserve induced bubble to create the millions of needed jobs, I continue to stare blankly at a wall. There can be no comprehensive industrial national policy because that will be deemed socialist, and if there is one thing worse than dying in America, it is being anything within 7 degrees of Kevin Bacon socialist. The "free market" (what little part exists in the U.S.) is doing the correct thing and moving labor to cheaper locales in the 2/3rds of the economy that is "private". [Sep 14, 2009: Global Wage Arbitrage at the Local Level] A few of our other largest sectors are being held up by infinite government intervention. (housing, finance, autos) (so are they private anymore? not really) The other 1/3rd of our economy (healthcare / government) is pure Ponzi scheme - paying for things we do not have the money for with money from tomorrow.

The remaining workers are doing more work after their fellow citizens are punted to the street; which we call productivity gains. And technology is requiring less humans in the "higher end jobs" that we won't lose to China... for at least another 5 years. [Aug 14, 2009: No New Normal Say Some Economists, Prosperity Without Jobs?] But aside from that laundry lists of line items the economy is humming. See the stock market for proof.

So that sort of leaves us back to square one and the national game plan (remember, central policy decisions that almost every other country on the globe has taken to create or support industries are deemed socialism) - is to go back to bubble blowing to create jobs. And government handouts until the bubbles are fully inflated. [Jun 5, 2009: 1 in 6 Dollars of Income Now Via Government; Highest Since 1929] [Jul 30, 2009: Cash for Clunkers a Bit Hit, Government Asks "What Can we Buy You Next?"]

I do see one opportunity for Americans; after the debt bust in Japan many housewives became currency traders (seriously). With the US markets now deemed by the Federal Reserve outpouring of liquidity a "no lose" situation - everyone can now trade pieces of paper back and forth for profits. We don't really even need a real economy under this scenario - the Asians can make stuff, we can daytrade, and consumers can go shopping when the market sits still between 11 AM and 3:30 PM, and after 4 PM. Government and healthcare can move from 1/3rd of our employees to 2/3rds and the rest trade pieces of virtual paper. As long as the market simply goes up - the perfect solution has been found. Win - win - win.

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A good piece from the BusinessInsider - food for thought. I appear not to be the only one who actually thinks about these things (while staring at walls)

Roughly speaking the world's economy has always worked as a giant pass-along-game between the planet’s citizens. Person A needed stuff from person B and person B needed stuff from person C and person C needed stuff from person A. So everyone needed everybody. It has been a kind of giant circle of needs.

But as a smaller and smaller number of people are needed to make the basic things that people need for survival, from food to energy, to clothing and housing, the less likely it is that some people will be needed at all.

When you read in the press the oft-quoted concept that “those jobs aren’t coming back” this “reduction of need” is what underlies all of it. Technology has reduced the need for labor. And the labor that *is* needed can’t be done in more developed nations because there are people elsewhere who will happily provide that labor less expensively.

In the long term, technology is almost certainly the solution to the problem. When we create devices that individuals will be able to own that will be able to produce everything that we need, the solution will be at hand. This is *not* science fiction. We are starting to see that happen with energy with things like rooftop solar panels and less expensive wind turbines. We are nowhere near where we need to be, but it is obvious that eventually everyone will be able to produce his or her own energy.

The same will be true for clothing, where personal devices will be able to make our clothing in our homes on demand. Food will be commoditized in a similar way, making it possible to have the basic necessities of life with a few low cost source materials.

The problem is that we are in this awful in-between phase of our planets productivity curve. Technology has vastly reduced the number of workers and resources that are required to make what the planet needs. This means that a small number of people, the people in control of the creation of goods, get the benefit of the increased productivity. When we get to the end of this curve and everyone can, in essence, be their own manufacturer, things will be good again. But until we can ride this curve to its natural stopping point, there will be much suffering, as the jobs that technology kills are not replaced.

The political implications of this are staggering. Clearly, more and more jobs will move from more developed nations to countries like China, and it is difficult to see how, as this process continues, the United States retains its leadership position. In fact, it seems entirely possible that the U.S. will exchange places with less well-developed nations. Yes, there will certainly be fabulously wealthy people in the US, because many US companies will own these highly productive businesses. Unfortunately, that wealth will be held by a very small number of people. And their operations will need to employ very few people.

In short you will have a few very wealthy folks, and a much larger majority that will just not be needed for the most important things that the country needs to do.

I don’t know what the short-term solution to this problem is. In fact, I fear there may not be one. But it is clear that what I am describing has already started and there is little we can do to stop it. GDP will increase as demand for labor **decreases**! How is that for the ultimate economist's oxymoron?