Labor

There was an interesting op-ed piece in the New York Times talking about how Henry Ford, followed by most of American industry, considered labor a stakeholder in their enterprise and felt an obligation to pay them a large enough salary to help them be good consumers.  This was a change from the robber baron mentality that preceded Ford and which we have now returned to.

Labor is simply an expense and an asset that has to be acquired as cheaply as possible.  Corporate obligations are only to the shareholders and maximising profit the only mantra.  Of course many companies like to say that their employees are their greates asset, and they most likely are, but they want that asset cheap.

There is a trend that develops in all societies that leads to a separation between wealthy people and everyone else.  As F. Scott Fitzgeral noted in the Great Gatsby, the wealthy are not like you and me.  They feel entitled and believe that they earned there place, even if that was an inherited place.

I recently read a quote from an heiress in Australia who opined that poor people should drink less beer and work harder.  Since she had inherited something like $30 billion dollars, it is unlikely that she ever really worked a day in her life or tried to find a job.  She probably doesn't drink beer, by choice and outside of being incredible insensitive (see Marie Antoinette) may actually mean well or believe that everyone can become rich if they justj work at it.

This being labor day, it would be nice to see a debate about how we treat labor in the future.  The Op-Ed piece points out that in Germany labor occupies a much higher rung of society than in this country and they remain both competitive and prosperous.

Whither

You hear talk about a "new normal" and how the world of the future isn't going to look like the world we became used to in the last 40 years or so where rampant consumerism was the rule. This is the world that really started during the period depicted on the AMC series "Mad Men" where the post WW2 dominance by America, the great number of children born and the seemingly endless expansion into the suburbs created a tremendous amount of wealth and prosperity.

This period seems to be over. We found places to build houses that had no reason to have houses, except to house the people building the houses. Further, the tremendous increase in the Western Standard of living led to a worldwide disequilibrium that will ultimately fix itself. Americans have no intrinsic right to be wealthier than anyone else. Yes the country has great resources and has been a bastion to capitalism, leading to some tremendous growth, but really, once we built the suburbs, the highways, the endless malls and saturated the automotive market, where is the next great expansion? Probably not here.

To some extent we are exporting the American way of life to the rest of the world. We see countries that were poor, such as China and India starting to become, if not wealth, less poor. This expansion has come, to some extent at the cost of American jobs, as cheaper labor and less stringent oversight makes it more economical to open factories or enter into partnerships with manufacturers and service providers there.

So what does it mean? Millions of American jobs are gone. Further, trillions of dollars of perceived wealth has vanished in the housing collapse. The people who have suffered the most from this are the factory workers and the construction workers. There is plenty of opportunities for American companies to sell and expand in the new markets. However, without the equity that was tapped so frequently over the last 20 years, Americans have less disposable income. Worse, a lot of the disposable income has become tied to Government payments in the form of unemployment, social security, welfare etc.

We are seeing the birth of a two class society, where those with certain skills will thrive and those without those skills will not. We have seen this before. In this country we saw great prosperity driven by the drive west and the settlement of our virgin farmlands. Then we saw the small family farms give way to a great expansion in industrialization. That period is ending, but of course just like we still have farms, we still have industry, its just not expanding like it once was. Where is the next expansion?

This is still unclear, although we have seen a tremendous shift to service jobs already. Unfortunately, many of the service jobs simply do not provide the level of income we have come to expect.

Common Sense

Every so often I see or hear someone talk about how a little common sense would go a long way to solving our problems.

The problem with common sense, is as I believe Will Rogers put it, it isn't very common.

It also contradicts itself.

Common sense tells you that if the Government keeps running up debt, we will eventually go bankrupt.

Common sense also tells us that reduceing spending or raising taxes in a weak will lead to economic contraction and lower tax revenues, driving up the debt.

Without actually lookng at the details, a lot of people talk about the wasteful Government spending that we need to stop.

In realitiy, the vast majority of spending is on defense or entitilements.  Sending a check to a social security recipient isn't wasteful spending.  Paying our military isn't wasteful spending.

Not to say there isn't waste in Government spending, inevitably, there is some waste in every human endeavor.  It's just that reducing spending won't get rid of the waste, we don't know how it got there and can't find it most of the time.

If we could find it, we would get rid of it, no one is for waste