Last week I was having lunch with a colleague (of sorts) and we were on the topic of the economy, outsourcing of jobs, etc. I mentioned that we were living in, what I’ve taken to calling, a crappy low-rent future*. He pointed out, and I agree, that this is largely because corporations have broken the social contract. It turns out he had been reading Robert Reich’s “Super Capitalism†while I had been reading “The Global Class War.†In their own ways, each of these books tells the story of how corporations from the end of the WWII with the New Deal until the late 1970s were bound by something of a social contract. Corporations recognized that their customer base was their employee base and that while you might not want to pay your employees, not doing so would spiral out of control so that your own customers couldn’t afford your products. Corporations began to slip the social contract in the late 70s with the Regan Revolution. The trend continued in the 80s and 90s as companies began to achieve transnational status: i.e., their customer base and their employee base were no longer the same. NAFTA and the follow-up “free†trade agreements accelerated this trend by allowing companies to shift labor and production to the places where it was cheapest without actually requiring labor or environmental standards that would level the playing field.
These “free†trade agreements began a great race to the bottom. The factory farms of the U.S. put hundreds of thousands of Mexican farmers out of business. Seeking work, these former farmers immigrated to the U.S. to work our farms and to clean our hotels and build our houses. The glut of relatively cheap labor, accompanied by a disgraceful minimum wage in the U.S., led to an increasing large number of people whom have dropped out of the work force. As an aside, don’t be fooled by the unemployment rate. There are two ways to decrease the unemployment rate, you can either increase the number of working people or you can decrease the size of the labor force. Over the past 7 or 8 years, we have not increased the number of working people, but we have decreased the size of the labor force. One simple rule of thumb: every month when the number of new jobs created is less than 150,000 or so (the increase in working age population times the current participation rate), the unemployment rate *should* get worse. If it doesn’t, it’s because more people have stopped participating in the work force.
People often talk about democracy and capitalism as if they were one and the same thing. News flash – they aren’t. For some time, the Chinese have been interested in capitalism as a way to raise living standards in order to keep democracy out of their government. To date they’ve been pretty effective at it, using the tools of capitalism to build instruments of oppression (e.g., the Great Firewall of China). In the U.S., we’ve had both democracy and capitalism for so long that we don’t recognize the differences. However, the founders of the country did recognize the differences. The founders were concerned that naked capitalism would evolve into aristocracy which would kill a new democracy. At times, that prediction has almost come true. That was certainly the case in the first gilded age. Fortunately, FDR’s New Deal pushed back the growth of that aristocracy up until the late 70s. Now we are once again seeing the results of raw capitalism and its ability to direct the efforts of the government to its own end – away from its founding purposes (protecting the rights of citizens).
What bothers me most about this crappy low-rent future is not just that things are worse for people that work for a living; it is the opportunity cost of spending the past three decades increasing corporate profit at the expense of investment in the future. Some of that investment would just have been growing wages at the same rate as corporate productivity, instead of rolling the productivity gains into corporate profits. If we had done that for the past 30 years, you would probably be earning more than twice your current salary. I believe that a true wage increase (instead of just keeping up with inflation) would allow people to think about other important issues such as the environment.
If we had spent the past 30 years focusing on the environment, in particular, developing alternative fuels and higher efficiency cars (or better yet, high efficiency, convenient public transportation), we wouldn’t be seeing the record high oil prices of today. Considering how little (relatively speaking) we’ve put to nuclear, solar and wind power, we have made a lot of progress. I was reading where some engineers have found a way to use ink jet printing technology to print solar cells. If we had been working on this for 30 years, solar power would be cheaper than coal/oil power generation. In just the past 5 years or so, we’ve seen a tremendous increase in the efficiency of wind turbines. They are able to produce power in lower wind conditions reducing the overall cost per kilowatt hour. I also don’t have a major problem with nuclear power, but having sat on our hands for 30 years, it is the Europeans who have all of the experience with it; but if we had spent time and money developing nuclear, we could have had a nice bridge from fossil fuels to renewables. And of course, what can you say about cars. After the oil embargo of the early 70s, we passed the CAFE standards and achieved their goals. But after the crisis passed, we stopped paying attention and as people began to drive trucks and SUVs as personal vehicles, we saw the average fuel economy in the U.S. drop. As an example, K is the original owner of an ’87 Volvo which gets about 25 mpg and I own a 2000 Toyota that gets about 32 mpg. I’ve seen new cars advertised that are less fuel efficient than either of our cars! We developed hybrid technologies in the late 90s and ten years later, there is minimal penetration into the broader car market and about half of the hybrids out there are using the technology to boost horsepower, not efficiency. There is no reason we couldn’t have cars today that get 100 mpg. No reason except that it hasn’t been a concern for the past 30 years.
The world has a limited supply of fossil fuels. We can argue about how large that supply is, but if you don’t think it’s limited, then you haven’t thought it through. That supply of fossil fuels was not all bad. We would have never achieved a technological base without it – it is easy and cheap power. However, we should have used that limited supply and the technological base we built from it to develop new technologies that are unlimited (or at least only limited by the life of the sun). We should have developed nuclear power and hybrid cars in the 70s and 80s as a bridge to completely renewable power and electric cars. But instead we’ve squandered much of the “gift†of fossil fuels and in the process are pumping enough CO2 into the atmosphere to significantly alter the temperature of the planet.
I don’t have much of a point here except to vent about being stuck in this crappy low-rent future. I don’t want flying cars, I want fuel efficient cars. I don’t want billionaires, I want everyone to have enough to eat. I don’t want global warming, I want renewable fuels. And I don’t want trade deals than protect corporate profits, I want trade deals that protect the environment. My guess is that it’s probably too late to avoid many of the problems we can see on the horizon. We’ve got billions of third-world peoples looking for a first-world lifestyle. We don’t have “clean†technologies for them, so we’re going to have billions more people burning coal and oil, making the global warming problem even harder to deal with. The U.S. economy is up to its eyeballs in credit card and mortgage debt, in part due to the lack of wage increases for 30 years. We’re starting to see the effects of this in the mortgage meltdown and the upcoming (ongoing?) recession. I’m sure we’ll muddle through, but that’s about all it’ll be.
In short, welcome to your crappy low-rent future. **
* I blatantly stole the term low-rent future from Shaenon Garrity who was complaining about spam and the “Stupid low-rent world of the future†in her Narbonic director’s cut commentary.
** I’ll try to post some later on possible solutions. For right now I just needed to vent about the problems we’ve caused for ourselves.