Saturday, August 31, 2019

"What Happened to American Labor?"

"What Happened to American Labor?"
by Brian Maher

"Editor’s note: Here, on this Labor Day weekend, we pause to acknowledge the American worker. In real terms, he has barely budged a jot in 40 years. But why? Today we grope for answers, and take a gander ahead. Will automation put him permanently to pasture?

"Overall U.S. productivity has increased 77% since 1973, the Bureau of Labor Statistics informs us. But average real hourly pay (adjusted for inflation, that is) has barely increased 13% over 45 years. 45 years! Thus the average American worker finds himself a hamster upon a wheel… jogging largely in place.

Here our co-founder Bill Bonner reduces to concrete the abstract plight of the American worker: "In 1971, you could buy a new Ford F-150 for $2,500. At $4 an hour, it took 625 hours to buy the truck. Today’s model costs $30,000, and the average hourly wage is $26. So the wage earner has to work for 1,154 hours to get a standard F-150. Put another way, he has to sell almost twice as much of his time to get a set of wheels.

But it is not only the F-150 owner who has lost the value of his dearest commodity - time: You can do the same calculation for housing. An average man paid about $24,000 for the average house in 1971. Today, he pays $371,000. Priced in time, the house cost 6,000 hours in 1971 and 14,269 hours today… It takes more than seven years of work for the average guy to buy the average house today - four years more than it took in 1971."

Is it coincidence that Mr. Bonner selects the year 1971 to draw a contrast? It is no coincidence in the least.

The Fiat Dollar and Globalization: In August 1971, old Nixon slammed shut the gold window... and the gold standard was no more. The gold standard, a shell in its dying days, nonetheless kept the balance of trade in a range. A nation running a persistent trade deficit risked depleting its gold stocks. The unbacked dollar, the ersatz dollar, removed all checks. America no longer had to produce in exchange for goods… or fear for its gold.

“By the sweat of your brow you will eat,” Genesis instructs us. But under the new dollar standard America could eat by the sweat of others’ brows — without perspiring a bead of its own. Scraps of paper, rolling off an over-labored and groaning printing press, were its primary production.

Ream upon ream went abroad in exchange for goods - real goods. The international division of labor was suddenly opened to hundreds of millions, particularly peasants from the labor-rich fields of China. They entered the factories in their millions, each toiling for one dollar per day. Perhaps two. The competition depressed average American wages - wages that have never recovered. Meantime, the past decade has only deepened existing trends…

The Sparrows Go Hungry: The trickle-down theory of economic progress argues you must first feed the horses in order to feed the sparrows. It contains much justice - poor men do not open businesses. They do not furnish employment to others. They do not put bread in mouths. But because of the massive distortions in today’s economy, the sparrows have largely starved.

Meantime, the Federal Reserve’s false fireworks have pushed the stock market to record heights - even with the recent blood and thunder trade war drama. The artificially inflated market has put the asset-owning classes in easy waters. As our own Charles Hugh Smith reports, those earning $1 million or more have captured 63% of all capital gains. But the Main Street economy has rubbed along at a lilting 2.1% annual pace. Is there a way out of the maze? Yes, argue the technologists...

The Promise of Technology: They insist automation, robotics and artificial intelligence (AI) will soon catapult the economic system into vastly more productive realms. By 2030 alone, they believe it could yield an additional $16 trillion to global GDP. They further claim 40–50% of human occupations will be subject to automation over the next 15–20 years. These occupations are not limited to trucking, taxi driving or manufacturing and construction. To these we must add white-collared jobs in law, finance, medicine, accounting, etc.

What will become of the attorney at law, we wonder - and the human conductor of the ambulance he chases? We are unconvinced automation will proceed at the projected gallop its drummers claim. But suspend all assumption for the moment. And drive on to the inevitable question: What happens when robots acquire the brains to perform nearly all human labor?

Creative Destruction: Economist Joseph Schumpeter (1883–1950) drove “creative destruction” into general circulation. For Schumpeter, capitalism was the “perennial gale” of creative destruction. Capitalism blows away the old and inefficient. It brings in the new and improved. Because of capitalism’s perennial gale, today’s serf lives more royally than yesteryear’s king.

Explains economist Richard Rahn of the Cato Institute: "The average low-income American, who makes $25,000 per year, lives in a home that has air conditioning, a color TV and a dishwasher, owns an automobile and eats more calories than he should from an immense variety of food…

Louis XIV lived in constant fear of dying from smallpox and many other diseases that are now cured quickly by antibiotics. His palace at Versailles had 700 rooms but no bathrooms (hence he rarely bathed), and no central heating or air conditioning."

There you have it. Here is progress itself. All because capitalism’s creative gales flattened everything in sight. The obvious benefits of capitalism are why most focus on the “creative” side of the ledger. But what about the equally critical “destruction” side?

The Destructive Side of Capitalism: Innovation and technology have always allowed humans to mine fresh sources of productive employment. The 19th-century farmer became the 20th-century factory worker… became the 21st-century computer programmer. But an omnipotent robot would likely lead the human laborer to the end of the chapter.

A robotic brute that can drive home a rivet is one thing. But a genius robot that could do anything a human can do - yet better - is another entirely. This robot would tower above the human as the human towers above the beasts of the field. An Aristotle, a da Vinci, an Einstein wouldn’t rise to its hip.

What human ability would lie beyond this unnatural beast? Artistic expression? A 900-IQ robot might run its circles around the human antique, you say. But it could not appreciate beauty - much less express it. The robot is all brains… but no soul. No, the kingdom of the arts belongs to man alone. Well, please introduce yourself to Aiva…

Will the Next Mozart Be a Computer? Aiva is a computerized composer. Programmers battered its ears with the music of Bach, Beethoven, Mozart and other colossi of the classical canon. Avia learned, and taught itself to compose original music. Its music is indistinguishable from a carbon-based professional’s. Its melodies have been featured in cinematic soundtracks, advertisements and computer games. Will the next Mozart be a computer?

Not even the oldest profession is safe from robotic invasion - but let it pass for now. There are the jobs displaced, yes. But what about the general community? Schumpeter’s creatively destructive gales tear apart the social fabric …

Winners and Losers: Capitalism puts out its tongue at tradition. It uproots communities. It swings the human being around hairpin turns of social and technological change… like a dizzied fly upon a wheel. Within a generation, the centuries-old farming community is given over to the assembly line and the punch clock. A generation later the factory goes dark as creative destruction blows the jobs clear to China… or Vietnam… or wherever labor is cheapest.

Americans must constantly rip up themselves and their families to follow the jobs — they can sink no roots into the local topsoil. Meantime, advancing technology makes today’s job obsolete tomorrow. Not everyone can take up new lines. Many are simply left behind, broken… and can never catch up.

Capitalism, Progress, Must Advance:  Please, do not throw a false label upon us. We are heart and soul for capitalism - authentic capitalism, that is. But today’s capitalism is but a faint reflex. The central banks have sucked the life from it. But the river of progress carries forward, as it must. And yes, it must.

Do you reject progress? Then you must believe the man who tamed fire should himself burn eternally damned. That the inventor of the wheel you must set down as a colossal villain... That Ford should have been flattened by an auto. That  Franklin fried in an electric chair. And that Salk should sulk in timeless grief for scotching polio. If this is your case, please drive on. We disagree... with the highest respect.

But let us recognize the advancing river of progress sometimes takes the human note with it. And not all change is progress. Within the cold and lifeless economic data, behind the dense forests of statistics, exist living human beings with beating hearts. And many with broken hearts.

To these, our fellow Americans… We lift a toast of acknowledgment on this Labor Day weekend…"

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