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The Wrongologist

Geopolitics, Power and Political Economy

Saturday Soother – December 1, 2018

The Daily Escape:

Yukon Grizzly before hibernation – 2014 photo by Paul Nicklen

Quite the week. We had barely digested Thanksgiving dinner when we heard about Russia seizing three Ukrainian Navy vessels in the Azov Sea. We learned that Paul Manafort lied to Robert Mueller, and that his lawyer reported everything that occurred between Manafort and Mueller to the White House. Then, we heard that Trump’s former in-house lawyer, Michael Cohen has admitted to lying to Congress, and is now cooperating with Mueller. Who knows what it all means?

But, the big story this week was that we learned that life expectancy in the US fell to 78.6 years, a 0.3 year decline from our peak. From CNN:

Overdose deaths reached a new high in 2017, topping 70,000, while the suicide rate increased by 3.7%, the CDC’s National Center for Health Statistics reports.

We are witnessing social decay in America. This is consistent with what Angus Deaton and Ann Case called “deaths of despair” in 2017. The WSJ has a detailed breakdown, and also points out how other countries are continuing to show progress:

Data the Centers for Disease Control and Prevention released on Thursday show life expectancy fell by one-tenth of a percent, to 78.6 years, pushed down by the sharpest annual increase in suicides in nearly a decade and a continued rise in deaths from powerful opioid drugs like fentanyl. Influenza, pneumonia and diabetes also factored into last year’s increase.

From Yves Smith:

Americans take antidepressants at a higher rate than any country in the world. The average job tenure is a mere 4.4 years. In my youth, if you changed jobs in less than seven or eight years, you were seen as an opportunist or probably poor performer. The near impossibility of getting a new job if you are over 40 and the fact that outside hot fields, young people can also find it hard to get work commensurate with their education and experience, means that those who do have jobs can be and are exploited by their employers.

The 2017 data paint a dark picture of health and well-being in the US, reflecting the effects of addiction and despair, particularly among young and middle-aged adults. In addition, diseases are plaguing people with limited access to health care.

In the late part of the last century, and the early years of this century, there was a steady decline in heart-disease deaths. That offset a rising number of deaths from drugs and suicide. Now, we’re not seeing those heart-related declines, while drug and suicide deaths occur earlier in life, accounting for more years of life lost.

The worst aspect is that it never had to be this way. These drug and suicide deaths are “collateral damage” caused by the social and economic changes in America since the 1970s.

And we made most of those changes by choice.

Wrongo is reminded that last month, he learned that something similar had happened in Russia under Gorbachev. Under Perestroika, millions of Russians lost jobs. The government’s budget deficits grew. The death rate exceeded the birth rate. Nearly 700,000 children were abandoned by parents who couldn’t afford to take care of them. The average lifespan of men dropped to 59 years.

Are we in a slow motion disaster that could be similar to what Russia went through back in the 1990s?

We’ve become hardened. These American deaths are largely anonymous. When AIDS was ravishing the gay community in the 1980s, people were able to appreciate the huge number of deaths by seeing, or adding to, the AIDS Memorial Quilt, which eventually weighed more than 50 tons.

There is no equivalent recognition for these deaths of despair.

A traitorous American ruling class has sold out its middle and lower classes. If you doubt that, think about Wal-Mart. The Walton’s fortune was made by acting as an agent of Chinese manufacturers, in direct competition with US manufacturers. Doesn’t that seem like treason?

Relax, there’s nothing you can do about all of this today, the first day of December. Time to get what solace you can from a few minutes having a coffee, and a listen to a piece of soothing music.

Start by brewing a cup of Kona Mele Extra Fancy coffee from Hula Daddy Kona Coffee ($64.94/lb.). It has an aroma of dark chocolate, fruit and flowers. And shipping is free.

Now settle back and listen to a few minutes of George Winston’s “December”. Here are Part 1: Snow, Part 2: Midnight, and Part 3: Minstrels:

Those who read the Wrongologist in email can view the video here.

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Capitalism Is Past Its Sell-By Date

“This is a government of the people, by the people, and for the people no longer. It is a government of corporations, by corporations, and for corporations…” Rutherford B. Hayes (March, 1888)

Nearly 130 years ago at the height of the Gilded Age, President Hayes had it right. Capitalism then was an economic free-for-all. Today, capitalism again is rewarding too few people. And data show that the problem is worse than we thought. The WSJ reported on a study by economists from Stanford, Harvard and the University of California that found:

Barely half of 30-year-olds earn more than their parents did at a similar age, a research team found, an enormous decline from the early 1970s when the incomes of nearly all offspring outpaced their parents.

Using tax and census data, they identified the income of 30-year-olds starting in 1970, and compared it with the earnings of their parents when they were about the same age. In 1970, 92% of American 30-year-olds earned more than their parents did at a similar age. By 2014, that number fell to 51%. Here is a chart showing the results:

wsj-30-year-olds-make-less

And we know that real median household income in the US today is basically the same as in 1989. The paper doesn’t provide specific reasons for the decline in incomes for younger Americans, but it generally blames slower economic growth and, especially, the rapidly widening income gap between the top 20% and the rest of society.

They found that the inability of children to out-earn their parents is greatest in the Midwest. This underlines that those who voted for Trump have a point: The Midwest has been hit harder by import competition, especially from Japan and China, and by technological changes, than other regions of the US.

When looking only at males nationally, the decline is even starker: In 2014, only 41% of 30-year-old men earned more than their fathers at a similar age.

There are some issues with the study worth mentioning: Most kids born in the 1940s did well in their thirties, maybe because their parents were 30 during the Depression and WWII. By the 1960s, an industrialized economy brought significantly higher wages to 30 year olds. A high denominator in the ratio of parent’s income to child’s income (compared to the past) made it more difficult for succeeding generations to exceed their parents’ incomes.

The economy also has shifted in the past 30 years and is now service-based, as factories moved overseas, and automation became prevalent. This change swapped higher wage manufacturing jobs for mostly lower wage service jobs. That alone could make it all but impossible for young adults to hit the ratios that their parents did relative to their grandparents.

Maybe the American Dream didn’t die; it just never really existed in the sense of broadly-based income mobility. Have another look at the chart, upward mobility (as measured by making more than your parents) has been declining since the mid-1940s.

Why? Between rising globalization and rapid advances in automation, we now have more people than jobs. And no matter whom we elect, this trend will continue. Those manufacturing jobs are never coming back. Even in China, robots are now displacing workers in factories.

We don’t need “good paying manufacturing jobs”; we need good paying jobs.

This is the most serious challenge capitalism has faced in the US. Without improving personal income, there will be fewer who can afford college, or afford to buy the things that capitalism produces. Low personal income growth puts sand in the gears of our economy.

The left offers a critique of contemporary global capitalism but no real practical alternative. Neither does the right, but their memes of America First, nostalgia for a golden (gilded?) age, and more tax cuts seem like less of a stretch than a Bernie Sanders-like frontal assault on capitalism.

No one in either party has a plan for a world in which robots displace the demand for labor on a large scale. And the under-30 cohort is now spending at least 4 times more (in the case of Wrongo’s university, 10 times) for a college education than what their parents paid, and they are earning less.

If people matter at all to our leaders, and if 90+% of them lack the means to live without working, America must make employment our top priority, despite the fact that many have been deemed redundant by capitalists in the private sector.

Surplus labor drives the price of labor down; allowing the employer class to afford a pool boy, or a nanny, or another cook.

And it makes the waiters more attentive to Mr. Trump.

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Corporations Want Europe to Add Refugees

According to The Guardian, the European Union ministers forced through a plan to relocate Middle Eastern asylum-seekers throughout the EU. The plan would distribute 120,000 souls across all EU countries.

The headline yesterday was that Romania, Hungary, Slovakia and the Czech Republic voted against the proposal, but could be forced to take immigrants anyway. These Eastern European governments have been among the most vocal opponents of plans to relocate refugees across the EU. But, according to The Economist, this position ignores economic logic:

A survey by Manpower Group, a consultancy, found that two out of five firms in Poland struggle to fill vacancies. In Hungary, almost half could not get the staff they need. In the Czech Republic and Slovakia fewer employers report difficulties (18% and 28%) but the share has been climbing steadily over the past few years.

Here is their chart showing the difficulty in filling jobs in the EU:

Where immigrants are needed

The argument in the countries that need to fill jobs but do not want migrants is that they can fill skill gaps by drawing in labor from neighboring countries with more similar cultures. This may fill some positions, but wages are much lower in the countries needing labor. The Economist reports that wages in Germany are 150% higher than in Hungary. And Germany’s social safety net is superior.

These statistics point to serious problems in the EU’s local economies. But the real issue isn’t under population in the EU. We have been told for years that the unemployment rate among young Europeans is very high. Trading Economics reports that the overall jobless rate in the Eurozone fell to 10.9% in July, from 11.1% in the previous three months. That means 17.4 million EU citizens are unemployed. But, youth unemployment averages 21.9%. Here are some depressing Youth Unemployment statistics from summer, 2015: (Source: Statista.com)

  • Greece:     53.7%
  • Spain:       49.2%
  • Italy:          44.2%
  • France:     23.6%
  • Germany:   7.1%

So, even if people in certain EU countries understand that there might be an economic upside to allowing immigrants into their country, their opening position is: “why aren’t we hiring our own kids?”

Then there is the anti-immigrant issue that transcends economic concerns, the ethnic makeup of one’s own country, and what migrants may do to impact these old European cultures. No argument about the economic merits of increased immigration will likely sway voters if they believe their way of life will be compromised. The fear of a “mob at the gates” drives anti-immigrant feeling throughout the world.

So, who says Europe needs all of this migrant labor? Much like in the US, it is the corporations who say they can’t fill jobs with the requisite talent. What they really mean is, talent at a price.

Why can’t German firms import Italian or Spanish kids to do the work?

This sounds remarkably similar to tech firms in the US saying that they cannot find STEM workers, and so ask the government to add more H-1B visas so that migrants from India can fill jobs in Silicon Valley.

The global picture is clear: Many jobs now done by humans are being taken over by machines. Computers will ease our transition to declining populations. Even many low-skilled jobs in manufacturing and agriculture can be handled by robots, requiring a large jump in the skills humans need to learn in order to get the fewer, better paying jobs that remain.

A partial solution may be to import some migrants to fill a few low skilled jobs, but adoption of new technologies rather than population growth, is a better way to go about raising the living standards in Europe.

And we must shut off global population growth sometime soon. The Wrongologist has reported before on “The Coming Jobs War” by Jim Clifton, in which Clifton says that globally, some 3 billion people are looking for work right now, and nearly all of them are willing to work for less than the average American or European.

Every society will be more secure economically if they can promote a high resource-to-population ratio. Those countries who can become close to self-sufficient in food, water, energy, and renewable resources will be the only ones with middle-class living conditions.

Middle Eastern migrants understand this. Some may be fleeing for their lives, but the vast majority are simply economic migrants. The EU is being led by the nose to focus on asylum-seekers, when even they are economic migrants.

Although the poorer parts of the world experience very high population growth, and the developed world does not, it is a safe guess that not a single country today has a population that is low enough to guarantee success in the future world economic order.

Think about what Agent Smith said in The Matrix:

Every mammal on this planet instinctively develops a natural equilibrium with the surrounding environment but you humans do not. You move to an area and you multiply and multiply until every natural resource is consumed and the only way you can survive is to spread to another area. There is another organism on this planet that follows the same pattern. Do you know what it is? A virus. Human beings are a disease, a cancer of this planet. You’re a plague and we are the cure.

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