Friday, July 15, 2011

When the US Population Becomes a "Supply Side" Problem

History's "Bait and Switch"

It's no particular revelation that many of the complaints about the current economy, sooner or later, suffer the inclusion of phrases such as "like it used to be" or "in the old days" or "when I was younger."  Although each has its own appeal to the folksy nihilism of barbershop laments, a certain paradoxical element is also at play.

The unexamined innuendo is that matters such as the economy, even with or without the effects of any modernizing changes, simply cycle from one state to the next and then back again.  That is, after accounting for "acts of God" such as droughts, wars, famines, inventions and revolutions, the basic state of the world's economy just rolls ahead, cycling up and down,  more or less independently.

That is, with a "mind of its own."

However, as mentioned already, nestled in each of these "temporal laments" comparing the dire state of current state of economies to the comparatively better conditions in previous ones, a literal barnyard of reasons can be found.  International relations were better, agricultural production had made food cheaper, wars had been won and technology had eradicated one or another threatening pest, weakness, rarity, autocrat or other impediment to the sufficient production levels -- of everything.

However, there is actually a point to all this, in fact, a highly material point which is consistently and conveniently overlooked, that is, not included in the list of more convenient "possible reasons" why the planet's varied economies are suffering the current obstacles.  Further, that "point" runs as a common thread through all the laments, comparisons and other comments.

In fact, once the immense influence of the "point" is rationally injected into the soup, all sorts of other, alternate explanations and reasons for the present economic difficulties begin their descent to more objective places in the big picture.  If you agree with MeanMesa in this matter, you may have lately experienced a certain "out of sorts" feeling with respect to the "burning question of the day" which is "What, exactly, seems to now be basically wrong with the economies which have worked so well in the past?"

More questions flow, right away, from this ominous beginning.

"Why haven't all the manipulative tricks which have been successful before been equally successful this time?"

"What, exactly, is to be done with the collapsed economy we presently see to resurrect it to its old past glory?"

"How, precisely, are we to either fix, change or replace what we have with something which works?"

And, finally.

"How will we decide that we have selected an alternative which does actually work, that is, how will we define 'economic workability' given the conditions and prospects we currently face?"

Needless to say, we have sailed far beyond the point where our  current collection of easy explanations will provide much further comfort, direction or service.  Our current moment is one which has visited before in the history of our race.  It is the moment when what had been accepted before as "common sense"  or as "traditional wisdom" or even as "old wives' tales" has careened into the void of uselessness or irrelevancy, when the suggestions of history and tradition have ceased to offer any relief and when our common optimism as humans begins to falter.

The Point

What, exactly, is the missing parameter which we have neglected to install in the equation which describes our future?

President Reagan presents the "good news" of "supply side" economy (image source)


And, by "people" we are not addressing conceptual catch alls such as "human nature," at least not directly even though "human nature" definitely tends to "turn South" when there are simply too many people.  We are referring to the number of people, the aggregate of all their ambitions and needs and their largely unexamined expectations for their own futures.

As mentioned above, a troubling percentage of this mass of people continues to expect that the planet's conditions of life, that is, the planet's economy, will correct itself and return to the state it presented in better days.  This unfounded expectation is, also as mentioned above, founded on the idea that "if only" the most recent clutch of outrages and obstacles were reversed, all would be "roses, simply roses" once again.

There is among us a shocking absence of statesmen and philosophers who have begun to direct their thoughts to what really lies ahead for us.  It seems that the convenience of our contemporary indictments of both villains and happenstance still offers the foolish promise of solutions adequate for the challenge.

For Americans, it's politics.  If the current politics were to revert to more rational forms, our problems would diminish.  For Eastern Africa, it's rain.  If only the rains would resume in their old pattern, our problems would diminish.  For Libyans, if only the dictator were dead, things could return to normal again.  The list of imagined conditions and corrections is a long one.

Population as an Economic Fundamental

Perhaps the most common of the populist laments refers the American economic collapse to the state of the nation during the time of the Founding Fathers.  Of course, all sorts of things are so fundamentally different now that even a respectful comparison with the conditions met by our early country must be relegated to a search for essence, that is, a search for valuable, fundamental concepts rather than out of date "cookie cutter" talking points.

Given the collapse of educational outcomes, it is not surprising that modern reactionaries are unable intellectually to consider much beyond the absolute and the immediate.  Worse, such considerations are always soiled by an over abundant dose of self-interest and an equally terrifying absence of any essence loyalty or responsibility for the nation or the species.

However, politically the US population has never been given its due in the sense that massive population changes have unquestionably produced massive economic changes.  Rather than introducing a population chart of some sort, let's just take a quick look at a few highlights.

Much of the cultural economic background ideas of modern Americans derive from the writings of the founding fathers.  Very little mass is, however, directed at the startling difference in population between then and now -- especially with respect to how much room per person there was in the new country they saw around them.  After "multiplying" the Negroes and Indians back into full "humanhood" and adding their actual numbers to the white folk,

1776 US Population 2,400,000, (700,000 slaves) growing at around 100,000 per year.

The world population reached its first 1 billion mark at about the same time that the United States declared its independence from England.

When John Kennedy had been President for about a year, the entire planet hit 3 billion people for the first time.  The population of the US was

1961 US Population 185,000,000, growing at around 2,000,000 per year.

When Ronald Reagan became President in 1981, US population growth rates had  begun to increase significantly from immigration -- of all varieties.  The planet's population had grown to around 4.5 billion people.

1981 US Population 225,000,000, growing at around 2,000,000 per year.

When Barack Obama took office in 2008, the world population was around 6.9 billion people,  and,

2008 US Population (official census) 308,000,000, growing at around 2,700,000 per year.

The rate of population growth has slowed due to the economic collapse, and the official census figures deal only very lightly with an estimated 20,000,000 illegal immigrants currently in the country.

The important point to be made here is not just another dire lament about the planet's population problems.  Instead, the question is whether or not traditional economic values, most of which were developed before 1900 (choose your own date) have ever been rationally modified to incorporate these population increases.

As we judge the traditional validity of economic modelling, how could we have assumed that the old economic ideas would simply remain valid regardless of  planetary changes in the volume of labor, consumption, expectations and living standards which all have changed significantly.  In fact, "significantly" may be far too mild a term to describe these changes.

As to economic theory, we are careening down I-8 in a 2011 Infinity while using a drivers manual that went with a Model T.  When out of date, economic presumptions which might have made sense fifty or a hundred years ago are convenient or useful, they are trotted out as facts which justify all sorts of equally out of date economic plans or solutions.

In all other cases, that is, when there don't seem to be any readily available, out dated economic facts to justify some subterfuge, the contemporary explanation is applied.  "Contemporary explanation?"  Yes, the ever present premise that, although modern economic issues don't seem to be following the good old,  common sense, out of date, "tried and true" models of a century ago, these same economic models can now be completely justified because "we are now in a global economy."  

This, of course, explains every possible "puzzle" which might have arisen with respect to why we should continue the head long plunge into total, planetary wealth redistribution.  Things which cannot be validated by their utter failure a century or a decade ago now fall under the "all rectifying glaze" of being essential, vital components of competing in the global economy.

The "Supply Side" of Over Population

First, we have to get down to facts on the ground about what is meant by "over population."  This unhappy state of irresponsible human proclivity can be defined in many ways.  However, in this post, let's look at the idea from a strictly economic point of view.

At the fundamental base of an economy, the production and consumption of goods and services -- even without the complicating factor of the idea of a "global economy" -- involves all or most of the people who are "close" to the process. People work, get paid, purchase things they require for life and consume them.

The US economy, at this point, has "slipped" significantly in precisely this part of the equation.  The prospect of low cost foreign labor has caused a serious discontinuity in this otherwise fairly organic economic design.  Perhaps the greatest contemporary example of this can be seen in the  immense, monthly -- for years, now -- "trade imbalance" with cheap labor suppliers such as China.

The "global economy" model has allowed US domestic labor to be simply eliminated in vast number.  The value of US domestic labor, once determined by US demand, has been slashed as it was replaced with cheap foreign labor.  The simple system described above, that is, "People work, get paid, purchase things they require for life and consume them." has been "shortened" to only the last two of the propositions.

This was made temporarily sustainable by the great colonial wealth the US had accumulated in the earlier period of its growth.  Otherwise, the present day economic collapse would have occurred almost instantly when the labor exportation was first commenced.  Instead, by gradually consuming the wealth of the nation by buying and consuming cheap labor products, the process, at least at first, seemed to be an absolutely glorious economic "invention" and as such, "good business."

You know, "good old, old style global economy business."

However, what had actually occurred when this change was made was the exposure of domestic labor to external sources of low priced labor.  Now, the wealth surplus the country enjoyed at the beginning of this new system has been consumed, the imbalance of trade continues, Americans continue to purchase and consume what they need for their lives, but the domestic capacity to produce such things has fallen to a state of economic collapse.

Because there is less and less domestic demand even for these "trade imbalance" commodities, not even the scheme to continue to expose domestic labor to cheap alternatives is particularly profitable any longer.  The missing jobs which used to provide the pay checks to buy these foreign products have now created a growing vacuum of demand.

At first glance, alternate explanations seem to provide the reasons this is happening.  For example, the idea that "greater productivity" has pushed the domestic economy into a state where the complete amount of products required by the country can be produced by fewer and fewer workers, thus leaving more and more workers in a state of redundancy.

The presumption was that this would have "worked" if the redundant workers had simply vaporized, but those without work continued to consume, continued to host the fundamental requirements of life.  Also not considered, however, is the concomitant development.  Additional supply -- created from increases in productivity -- has less and less intrinsic value as the market of consumers decreases.

The foreign cheap labor, now fully exploited by the profit needs of a "global economy,"  cannot afford to consume the excess, thus providing no market and no demand.  Meanwhile, in the domestic US labor market, incomes of US workers have now also moved significantly closer to their cheaper foreign counterparts with respect demand levels.

Predictably, US unemployment has exploded, leaving what appears to be an "over population" of workers.  There are currently four applicants for every domestic job.  Yet, the domestic economy is far from the point where any domestic commodities or products are scarce.  Domestic demand hardly contains any compelling shortages which might have, in better times, resulted in higher employment.

Worse, this "over population" of workers has now begun to fundamentally create an "under population" of consumers as the cancer stage of exploitive 19th Century capitalism happily continues to strangle itself.  The old colonial prosperity has now, officially, fallen victim to "supply side" over population.

The "trickle down" "supply siders" are making provocative legislative moves to further increase supply by further reducing costs, but this is being done in an economy already vomitously inebriated with "unpurchasable" supply.  When the well lubricated, legislators and other economic "experts" see such schemes dead on arrival in US domestic commercial markets, they are perplexed.

This "perplexion" is the inevitable wage which accompanies the application of 19th Century economic "truisms" to a 21st Century environment where conditions have changed profoundly.  There are no jobs here because no one needs anything done.  The first victims appear when a now dysfunctional government takes bizarre, desperate moves to further increase supply and lower production costs while ignoring the "unpurchasability" -- the demand side -- of the chaos.

The second wave of victims appear as these ambitious oligarchs helplessly cast blame on the last guy still standing.  The main extractions, necessary to maintain the profit levels in years past, have reached their limit.  What is left are the "golden prizes" of what remains "unlooted" -- the Social Security and Medicare Trust Funds, both presently still under the ownership of the "little people" who financed them with years of pay check contributions.

If any of the oligarch class actually ever laid out a schedule  of last minute activities for the final demise of the country, it would be the "conversion" of these public trusts to Wall Street casino investment status where the final looting could be accomplished.  After that, the choices facing the billionaires would be between further fortifying their gated communities or buying their way into some other, unsuspecting country which still had some sort of functioning economy left.

Precisely what would be left behind here in the US would be the stumbling remnants of a "supply side" over population with a purchasing power so feeble as to be worthless in the eyes of the departing oligarchs.

From January, 2008, MeanMesaSpringtime In Paraguay

For the W, Dallas was just a "stop over" (image source)

Ah, Paraguay...a country ready for a good dose of "supply side"over population  economics.

No comments:

Post a Comment