Awaiting the Luddites’ Return (updated 13oct12)

George Rebane

[This is the transcript of my regular KVMR commentary broadcast on 12 October 2012.]

If we don’t acknowledge its existence, then clearly it doesn’t exist.  That behavior is going on so much today that it requires its own word in the language, and we have one, it’s called hoovering.  The growing systemic unemployment problem threatens the very existence of our dear land, and our national leadership is hoovering the coming shipwreck while making claims and counter claims about something very irrelevant – the dodgy unemployment rate.

What matters is the actual size of our population that is unemployed, and more worrisome, unemployable.  Today the conservative estimates have that number at somewhere between 24 and 30 million Americans.  A sharper pencil will easily let you figure it at above 40 million.  That is more than one out of ten people when we count babies and retirees in the mix.  If we count only people in our workforce – about 150 million - then that fraction increases to one in five who would like to work, but can’t find an employer or an employer who would take them.

Here’s the real situation as we continue this series on America’s workforce.  The four million jobs the government claims it has created, is actually six million short of the ten million that history shows should have been created since Washington says the recession ended in 2009.  You have to understand that the added six million didn’t magically disappear just because some hoovering politician doesn’t mention them.  Just because you don’t create a job doesn’t mean that the worker without a job goes away.  They are all still there, and they are getting more frustrated by the week.

And here’s another thing that we should think about.  Subtracting out deaths and emigration, our net population increases at about 1.3% annually through births, immigration, fence crawlers, etc.  That’s over 4 million people a year, of whom about 3 million attempt to join the ranks of the employed.  Year in year out, that translates into the raw fact that our economy must produce about 250,000 new jobs a month just to keep up – forget about the 40 million still sitting on the sidelines.  You can do it by a little hoovering.

At present levels of worker productivity – that’s the dollars’ worth of goods and services produced by the average worker – our economy or GDP would have to grow by about 1.5% just to keep things stable.  But here’s the big rub, technology is increasing worker productivity just under 4% annually.  That means that even without new workers arriving every year, we could lay off 4% of our employed without reducing the goods and services our country produces.  I hope you are following all this, because it is important?

But in the real America we have a double whammy – every year more workers do arrive, and we do enjoy an ever higher worker productivity.  The only way to stabilize, but not reduce, the number of permanently unemployed is to sustainably grow the economy by a little over 5% a year.  Did you catch the ‘sustainably’ part?  We haven’t grown 5%, year after year, for over a century - a time when America was very different, and government did little to hinder job creation.  Today there’s no plan by either party to ever reach such sustained growth rates again.  Even China is beginning to have a hard time keeping GDP growth above 5%.

So what is going to happen that no one wants to talk about?  We get an idea from the riots spreading over Europe in countries where more than one of four workers are idled by long practiced socialism.  But for the full story of our future we have to go back to early 19th century England at the dawn of the Industrial Revolution, to the days when cottage looms were made obsolete by the new and much more productive steam driven factory looms.

Thousands of workers lost their livelihood and had no economic alternative for putting bread on the table.  They rioted and attacked the new mechanical looms which had destroyed their livelihood.  It took the British Army to put down the riots and hang its leaders.  These people became known as Luddites, workers frustrated beyond their limits by more productive technology that made them redundant.

But most gentle people hearing this commentary might say that I’m taking things too far by such implications.  After all this is America, and soon we will have wealth redistribution programs in place so that the return of the Luddites will not trouble us on these shores.  If you are one of those believers, then congratulations, you have just matriculated in the fine art of hoovering.

My name is Rebane, and I expand on this and related themes in my Union columns and on georgerebane.com where the transcript of this commentary with related links is posted, and where these topics are debated extensively.  However these views are not necessarily shared by KVMR.  Thank you for listening.

[13oct12 update]  3D printing is an example technology that is rushing headlong into a future that will most likely be a big job killer for millions of skilled tradesmen in manufacturing.  Here's a report on the technology - '3D printing may put global supply chains out of business: report' - with a detailed downloadable review by Transport Intelligence of the technology's impact on global business.

But consider also the (remote?) possibility that there could be an interval during which 3D printers would revitalize a small job shop era wherein thousands of local jobbers in thousands of communities will make custom one-off parts for everyone on a local scale - the return of the cottage industry.  Now how can government step in there and get in the way of that potential for broad-based entrepreneurship and job creation?

Comments

[billy T]

Unemployment is rising in Poland, the only country in Euroland that escaped the recession. Polish citizens are leaving the Motherland as inflation is going up, job going down. Thank goodness the EU just grabbed the latest Nobel Peace Prize. That makes everything A-OK.

When they built the Oakland Coliseum in the 30's, paint rollers were banned by the Painter's Union. A painter back then also did the lathe and plaster as part of his trade. Many man hours. Today machines pump out dry wall (sheet rock) and every painter worth their salt has at least one airless sprayer. No rollers, what a hoot. All hand brushed.

A college freshman acquiring technology skills watches as his skills and education becomes obsolete with 5 years from entering college.

Think it was at Futureland at Disneyland back in the day that had a exhibit of all the blessings technology and innovation would bring. Easy life ahead. Everyone would have so much time on their hands that recreation would be the next booming industry. Well, with the unemployment figures coming in and the shrinking workforce, Futureland was partially right. Don't think it was an E ticket ride.

[George Rebane]

billyT 836pm - IMHO the resolution of our chronic and growing unemployment problem is fundamental to our survival as a nation. It far outweighs issues like 'race', 'abortion', 'illegal aliens', ... . But the potential return of Luddites is either totally misunderstood or hoovered as witnessed by the interest our politicians (and even RR readers) take in this real iceberg toward which our ship of state is heading on a direct collision course. This will not be a glancing blow that will allow enough time for lifeboats to be deployed, for the simple reason that no one has yet been able to design such lifeboats.

[billy T]

Summer is the best time to riot in the streets....if they can wait that long. Give them morphine to ease their pain and some powdered milk. Collision course is right, Dr. Rebane.

[Billy T]

Awaiting the Luddites return

http://money.msn.com/technology-investment/c_gallerysidebyside.aspx?cp-documentid=250221329