The John Henry Law

George Rebane

For several years I have attempted to explain and prognosticate the future of labor in the developed world (e.g. see ‘The Great American Labor Squeeze’).  I will try to simplify the cause of the growing systemic un/der/employment, that is ignored throughout our political spectrum, by introducing what we shall call the John Henry Law –

The company that pits its labor against another’s use of technology loses.

The workings of the John Henry Law are made clear by the lead graphic in ‘New People, New Jobs’.  The law simplifies understanding of the vicious circle that all competing enterprises must join.  If you don’t maintain your place in that commercial whirlwind, another will take it, and you will see the impact in your profit/loss accounting.  The individual's corollary to the law is - The worker who pits his labor against technology loses.  Labor is a cost, technology reduces costs.

Next case please.

Comments

[billy T]

I expect to hear some our our beloved progressives to curse Eli Whitney for his cotton gin. In a ironic twist, large companies have cut expenses (exorbitant labor costs) which will help them stay afloat and not sink the economy. I have been following Germany for years and was intrigued several years back when they started a mentor program in various trades. These high school grads where not put in college, but rather went to work for violin makers and in machine shops to work under the master craftsmen. Read last week that a machinist in the USA makes 100k a year and there is something like up to 100,000 current openings with few skilled enough to fill the slots. A quick search of the internet has lists of dying professions and jobs that will go the way of the Doodoo Bird within 5 years. I had to apologize to a daughter recently. The topic was college grads working at small retail stores locally for 8-9 bucks an hour. I told her I helped perpetrate a lie. The lie is that if your get a degree in anything, then you will get a better job and have a more secure life financially. I told her I finally got it and it was a nice meeting of the minds and hearts between Father and Daughter. This is after she announced she is leaving college for awhile and taking a job in South America. She thinks it is a waste of money to take college courses without a chosen vocation in mind. I did tell her that a X-Ray technician and other fields in the Health Care field does not require a 4 year degree and listed many other examples of jobs that will service an aging population. I also showed her a site on what employers are looking for when hiring. Many companies give preferred status to applicants that have been aboard and know different cultures as we are now in a global economy. Of course there are always exceptions to the rule. I have a niece who got her Masters in psychology and never took a creative writing course in her life. Entered a writing contest and was hired by the Boston Globe. Then she got head hunted by a West Coast paper and has moved back to California. Yes, a newspaper writer has a bleak future in general, especially for someone that has never walked into a journalism classroom. Raw talent and drive abounds with some our young people which gives me hope, with or without a liberal arts degree. The majority will slog thru life while others will take the bull by the horns and then storm the castle.

[A Facebook User]

Labor (intellectual or physical) is what creates wealth, plain and simple. Without it we have nothing. Where corporatists fall short on the idea of a race to the bottom for wages is the way to prosperity is the fact as productivity increases wages must follow if their is to be a demand to purchase goods and services. When wages do not track productivity a gap is created. That gap is filled with debt if we are to continue the established lifestyle. This is what has happened over the last 30 years or so but in 2007 the credit ran out for the average American.

Wealth is created with labor and wages for that labor creates the demand that sustains the economy. Our nations economic strategy for the last three plus decades has been inverted and we are paying the price for it now.

[George Rebane]

Facebook (Ben Emery) 839am - a very clear response that lays the economic woes of the country squarely on shoulders of free enterprise capitalism while exonerating the roles of government in mangling markets, destroying poor families, and devastating the nation's public educational systems.

Yes, labor properly applied does help create wealth by offering such capital to enterprises that need it. But government induced compensation levels to labor have the opposite effect. And government induced social engineering through machinations of the money supply will create pockets of extraordinary (technically, super-exponential) 'growth' like what happened in real estate. Competitive private industry did/does not have the power to create a '2007'. And the forces to such financial whirlwinds, when they come about, are mostly invisible to the unsophisticated consumer who then continues to bet on never-ending and accelerating growth.

One may ask again, where was Bernanke's Fed when house flipping reached astronomical rates? Why were interest rates held ridiculously low, and why was credit worthiness abandoned by government mortgage guaranteeing outfits like Fannie and Freddie? The progressive remains eternally blind to how economies work, and don't.

[billy T]

Dr. Rebane, Fannie and Freddie are still exempt from Dodd/Frankie ManBoy as we speak, despite having 300 government full time auditors between the two. Yes, these government auditors continued to report to Congress that all was well as the boat sprang one rather humongous leak. Concerning the tale of two cities, lets look at Stockton and Feds. To be fair to our brain dead robots from the left armpit, not all of Stockton's problems are from unfunded pensions and labor costs. Lets be fair. Stockton spend way too much money. The city got involved in businesses they had no expertise in, just like the Energy Department's foray into solar panel manufacturing. Millions down the toilet. Stockton overspent on building a marina and new stadium. Bad business plan. Just like the bankruptcy list of failed green businesses. The Stadium now is home to a minor league hockey team, albeit that was much cheaper than the 2 billion Hillary gave the eco nuts last week as a mere down payment of the 30 billion pledged for developing green stuff in 3rd world countries. Yep, a real job creator. Stockton is only 70 million in the hole for thir current budget right now, but owes 700 million for its "job creating " revitalization of its waterfront. Hey, anybody feel like going down to Stockton to spent a day and burn some moola? Think Stockton's underemployment rate is 15%. All government can do is hire the unemployable and private sector rejects. That might save some idiots from a life of struggle, but does not produce anything. Wonder what Uncle Sam's deficit to debt ratio is?

[A Facebook User]

George,
Your constant misrepresentation of what progressives think gets old. You would find progressives and true conservatives agree on many key issues despite having different reasons for the agreement. The problem is you are very eager to slam progressives as ignorant and naive.

[Earl Crabb]

Being one of those "unsophisticated consumers" and the self-appointed Village Idiot, it boggles my pea-sized brain that so many invested in so much with so little. I've probably mentioned it before, but I looked at a sub-prime loan to pay off my house back in '06. I was so appalled by the wink-and-nod nature of the terms offered that I immediately said "thanks but no thanks" and stayed with my original payment plan. We can blame the bankers and politicians, but when it really comes down to who's at fault it really lands squarely on the shoulders of those who thought they could get something for nothing.

[George Rebane]

Facebook (BenE) 936pm - that's a charge I take seriously, and in no way have I ever accused progressives of being "ignorant and naive". My entire message has been that we live in cognitive domains that are separated more widely than is commonly believed. And that is hard to accept because we both look and act similarly in the daily round. Our differences bloom when we start considering what makes society work and which direction should social orders take. Any implied naivete is only in the relative sense of our world views (welt anschauung).

I, and I suspect other RR readers, would dearly love to see you expound on the "many key issues" that conservatives and progressives agree on. Because a critical mass of such issues would give a basis for saving the Republic. Please accept my invitation to give us your thoughts.

EarlC 1027pm - Bob, your behavior, in light of the inducements of that period, definitely puts you out of the league of "unsophisticated consumers". But then we all knew that, for the mantle of 'Village Idiot', which you have fashioned for yourself, allows you to be the interpreter and pedagogue of no recourse that wise kings and societies have always tolerated and/or solicited for their unvarnished and spontaneous observations of the human comedy. You do your best when you don't try to peg yourself into the muddled middle, and instead remain yourself regardless of where you land in the ideological spectrum with any one of your pithy observations.

[Ian Random]

Cracks me up that progressives never notice that wages eventually rise in offshoring countries and they become less competitive. Wages may have been flat, but total compensation hasn't over the last 30 years.

http://www.csmonitor.com/Business/new-economy/2012/0510/As-Chinese-wages-rise-US-manufacturers-head-back-home

[A Facebook User]

George,
We had a death in the family and over the last week I have spent many hours talking with my very conservative relatives and we agree on much more than disagree. Obamacare was a key example, they claimed to hate the ruling and I asked why. All the reasons they disliked the ruling and law were based on viral rightwing emails that totally give bad information. We broke out the computer and fact checked their claims and when it was all over they no longer hated the law but left it with "we'll see". Obamacare has many good things in it but it also has many give aways such as the 30 million new costumers. It's really sad when the fear of corporate backlash is so great the government contorts itself into a pretzel trying to please all and in the process totally pleases none. That contortion is why it is 2000 pages long.

Saying progressives are eternally blind to how economies work is calling progressives ignorant.

ig·no·rant/ˈignərənt/

Lacking knowledge or awareness in general; uneducated or unsophisticated.
Lacking knowledge, information, or awareness about something in particular: "ignorant of astronomy".

B. Emery

[Todd Juvinall]

Forward those emails to George so he can read them BenE. Also, their seems to be nothing in your reply to cause anyone to believe the left and the right agree on anything as George asked you to supply and you stated exists. Give us a top ten list of where we agree as regards important contemporary issues. I am waiting.

[billy T]

Ben Emery, my deepest condolences to you and your loss. Concerning Obamacare, it was pure genius of the Democrat Congress to front load all the goodies and freebies while back loading all the taxes and hidden expenses. I had a conversation with an ex over the weekend. She was railing against the Supreme Court ruling. I was quite surprised as she is uninsured and "poor". Makes about 12-20k a year living off investments and odd jobs. She has been paying cash for trips to the doctor. I mentioned that Obama Care might help her and she became unhinged. She said that she once checked into Medicaid and no way. She has a fairly new car, horses, pick up trucks, about 90k in the market, 40k in a CD and would have to sell her nest egg she has built up for the golden years to qualify. She lives in a RV, shops only at the Grocery Outlet, watches every penny, and scrubs floors if necessary to live within her means. She never sets foot into a movie theater or restaurant. I explained to her that the Obamacare tax (called tax by the Supreme Court and called penalty by the White House) would "affect" only those who could afford insurance and do not buy it per the President's own words Thursday, thus her. Boy was she pissed. She paid 5k cash for dental work last year and taking on any debt like a credit card or any additional expenses (like health insurance) is out of the question and a budget buster. Then she railed about the PSAs about food stamps. People like me and her and my other ex's believe that taking the white man's freebies is akin to selling our souls. Yes, we have paid into SS and will draw upon it someday, so I guess we are not pure. We like the independence to live life as we choose (good or bad) and wave the "don't thread on me" flag. We see government as the agency that passed out small pox laden blankets to the Indians. We are off the government's reservation are pay every penny of our taxes and do no run stop signs. You can stay on the res. There is a great divide. If you don't like the Health Care delivery system now, just wait until it is "affordable". Tell me, how does a tax on wheelchairs make health care more affordable? Beware of free blankets.

[George Rebane]

Facebook(BenE) 631am - Our condolences for your loss.

I accept your clarification on how you see me using 'ignorant' when describing progressives. Yes, you are right. It is demonstrable that progressives are largely ignorant of how economies and human nature work.

Would still like to see your view of our common ground, and hope that the list is longer than shorter.

[David King]

Ben-

Sorry to read of your loss.

[A Facebook User]

List of policies where true conservatives and true progressives agree. The list would be endless if we talked about everyday commonalities. This is about policy not political party's. I could give the generic answer I get so often when I pose similar questions on right wing websites- Liberty and Freedom. But I prefer to try and answer questions instead of divert and distort them. Here are five quick ones off the top of my head

Patriot Act

FISA Act

2008 Bush bailouts of the big banks

Decentralization of power

Due Process

[A Facebook User]

Thanks for the condolences. My cousin was like an older brother to me. I gave the eulogy. He taught me how to drive a tractor, truck, motorcycle, harvester/ receiver, backhoe, forklift, and how to handle and shoot a gun before I was a teenager. We had many good times. He had his issues like we all do but my relationship with him was a very good and positive one.

B. Emery