The Equanimist

Part III.C. Regarding US Unemployment

1. ‘The proof is in the pudding’

Relatively-high, steady unemployment is not compatible with civil society when a relatively acquisitive, motivated people confront social programs that only reinforce hardship and success.

Now, it appears that there are more US Americans who would work than there are US jobs to do. This is not the case. The US people need challenging, satisfying work now more than ever because they are “on edge” and strapped for cash. Moreover, innovation will be product of a lot of hard work.

Notwithstanding that recent “boom” times were characterized by relatively high US unemployment (see Fig. 1 below for data on the US Unemployment Rate since 1948) there must be work for the unemployed to do.

2.

Human-capacity utilization is being slashed instead. It would appear that the steward class does not see high employment as a responsibility of US stewardship. US pundits wonder aloud, who’s at fault for high unemployment?

Many so-called conservatives cry, “People refuse to work! Fat, lazy, beer-drinking, out-of workers – socialists living on the fat of the land are the problem. It’s un-American.”

The left is flabbergasted. “Now, now… It’s the corporate fat cats,” they tell the middle class, as if they had taken vows of poverty. “It’s CEOs and corporate lobbyists, who laze about smoke-filled rooms, while you build America.”

3. ‘Finger-pointing’ (AKA, Proximal cause)

Of course, an individual must be incentivized and make a choice to work. Individuals do not incentivize themselves. Who is responsible to incentivize workers? Are they doing that or not?

Data on US income inequality clearly show diverging pay scales of small-and-shrinking proportion at the bottom and large-and-growing proportion at the top. That is, it looks like the topmost tier is and has been consolidating wealth and removing some portion of monetary incentives for decades.

Further, relatively “high-paying” (middle-class) jobs are disappearing to foreign nations where they can be done more cheaply. In place of such jobs, so-called “McJobs” have appeared. Many find such work neither satisfying nor worthwhile.

But, now, all jobs are coming under the axe as stewards and managers ‘restructure’ to ‘maximize efficiencies and profits’.

These data strongly suggest that US workers are and have been losing battles for middle-class wages and satisfying jobs. Individuals within the steward class that makes policy and those under them, who manage finance and companies, and those under them, who manage divisions, and so forth must be accountable because stewards create jobs, set pay scales, hire and fire.

However, in that stewards want to live a little bit better than they have at any instant (e.g., now) are they not just like their compatriots? They’re just a little better at getting what they want.

4. ‘The meat of the matter’ (AKA, Distal cause)

What an individual feels and believes and can accomplish for itself has steadily gained importance in the western world, esp. the US. Now, it appears that the individual matters more than societal concerns, of which we admit fewer and fewer over time. The result is a new west where, much like the old west, it’s every man for himself. A middle-class democracy cannot exist indefinitely in such a state.

Some examples stand out from the pack. Bernard Madoff and Allen Stanford clearly take first and second place, respectively. Others fade into the woodwork. If, for example, we assume that Ben Bernanke had compelling evidence to suggest that the Merrill deal must go through and pressed Ken Lewis to make the deal, does it matter if Mr. Bernanke did what he believed was best for the country in pressing Mr. Lewis to complete the deal? It must! Can Mr. Bernanke have violated US law if he did what a preponderance of evidence suggested was best for the country despite the fact that a relatively small group of risk takers suffered a financial setback, or, he might have violated the terms of an imperfect law? Which is more important, an individual or the country? The country or the law?

The good of a country does not change over time. Our understanding of it does, and so, our laws change to better approximate the national interest because a country’s laws exist first and foremost to effect the national interest! As such, absent foreseeable, avoidable and/or greater wrong, it hardly seems an act can violate law if it is reasonable, appears the best of alternatives and is intended to effect national prosperity.

Yet, secular, self-centered individuals now want and believe that they can do whatever they like within the law without repercussion (because “it’s a free country”, virtually everything not specifically addressed by current law). The law is become sacrosanct. The law is become an offensive weapon.

This may be par for the course among third-world ruling classes, but, it cannot work within the context of a middle-class democracy precisely because it obviates the possibility of a middle class: When one societal group is so inclined, capable of outmaneuvering another group and consistently allowed to take advantage of same, the long term result must be oppression or eradication of the weaker group, here, the US middle class.

Approaching an extreme in the US, when a plurality of individuals threatens civil society, self-centered and selfish individuals give only cursory thought to others – rarely more than is absolutely necessary – and, generally, persuade themselves of the rightness and goodness of their own interests: freewill, as a philosophy, does not allow the possibility of responsibility for actions that do not violate the law but only actions that violate the law. Believing thus absolves law-abiding individuals of guilt and, in so doing, sets in motion a positive and pleasurable feedback loop. Moreover (in free countries like the US) coupled, extreme visions of freewill and individuality effectually subvert the justice system: laws addressing specific actions cannot possibly foresee infinitely-diverse bad actions, and, because we do not admit an enforceable “spirit of the law”, bad actors are free to act unless there’s a law that prevents them from doing so.

When bad actors act in the self-interests described, while they fight to keep the law off their bad actions and achieve success as a result, they attract and make converts of others.

The result is a socioeconomy so corrupt that is does not see itself as corrupt. Corruption is become business as usual. And, rising unemployment over time (as illustrated below) is just a symptom.

Fig. 1, Unemployment Rate 1948 Jan – 2009 Aug, based on unemployment rate data by month over a period 1948 Jan thru 2009 Aug obtained from the Bureau of Labor Statistics. Red line is linear regression calculated by Microsoft Excel. Upper (green) and lower (yellow) brackets highlight amplitude of swings.

The unemployment rate has clearly trended up over this time period (from approx. 5% to approx. 6.3% – a rise of approx. 25% in the portion of the population that is unemployed at any instant). More disturbing, however, is the change in unemployment-cycle amplitude in the postwar period, illustrated by the brackets. The highs and lows seem to be diverging. But, finally, the troughs are getting higher. During “boom” times US unemployment is staying higher.

5. The positive feedback loop in action

I can make more money if I pay less. I want to make more money because I want and believe that I deserve more. Nobody is stopping me from employing fewer people. And, I can employ them at a lower rate.

Since I don’t believe that I have any responsibility to employ people, and, I have no responsibility to my fellow countrymen, I will find ways to increase productivity with fewer workers and pay them less.

…I have done so, and, I have kept more money. I live a slightly more lavish lifestyle and have consolidated more wealth. But, I know I can live a more lavish lifestyle and consolidate more wealth if I can further increase worker productivity while keeping money in my pocket. Moreover, I can pay even less if I outsource relatively “high-paying”, middle-class jobs to “business-friendly” nations.

I will invest in technologies that eliminate the worker and outsource middle-class jobs to lower-class countries where I will pay middle-class workers according to lower-class rates.

…Success!

Other people see what I am doing. They are impressed. And, they do it, too.

The unemployment rate ticks ever up. Some hypothesize that the natural unemployment rate might not be even 5% but something higher. And, so forth and so on.

Of course, the principles that underlie this logic extend beyond employment to all facets of human endeavor.

6. A curious justification: human rights

While the justification described may be sufficient to have set the loop in motion, still, present justification for actions that negatively impact the domestic socioeconomy jibe nicely with “progressive-”liberal ideology. Specifically, so-called “bleeding hearts” would put an end to injustice in the world. Irrespective merit-of-the argument, the argument supports substantial US investment in foreign countries: it takes a lot of money to elevate a poor population from poverty into the middle class.

Will to furnish that money never existed in the US steward class. (The same people have used profits of outsourcing and insourcing to pay themselves more.) Yet, the plan was clearly lucrative over the short term.

Jobs were moved overseas, and, money that would have lined US-middle-class pockets went with them. This would have been fine and could have been sufficient to raise many poor foreigners out of poverty if it had been temporary. But, wages of poor foreign workers did not rapidly approach US-middle-class wages, and, adequate foreign demand would not develop. (It seems plausible that many foreign populations are generally less acquisitive than the US population and will, as such, tolerate a low standard of living that US people will not. Further, foreign workers who might pressure foreign stewards routinely migrate to the US leaving a vanishingly motivated people behind. Thus, foreign stewards might easily fail to see the benefit of higher domestic standards of living.)

While outsourcing and insourcing effectively grew the US workforce out of all proportion to the number of available US jobs and the same globalization replaced US workers with cheaper foreign workers, US-middle-class income continued to decline. Moreover, the goods that the US middle class consumed and the services with which it was furnished originated overseas with greater frequency. This further diminished US capacity for demand.

When the US middle class could no longer afford the effort to spread US-middle-class democracy in a hostile world, US stewards doubled down. In order to pay for the plan in the face of diverging pay scales, rising US unemployment and relatively weak foreign demand, the bankrupt US middle class was furnished credit that US consumers were eager to use. But, now the plan must work because there was never any hope that US-middle-class people could repay the staggering debt they would accrue if foreign wages did not rise to US-middle-class levels, and, outsourced jobs never “returned” home. Further, the US steward class was ill-prepared to cover its losses and never intended to do so.

We now know it was a bad bet. The US middle-class could not prop up poor foreigners whose steward classes would not adapt to the demands of progressive-liberal US ambitions. The US middle class was gambled into servitude.

But, the US people didn’t “come to America” to be poor, indentured servants. Just the opposite. “No taxation without representation!” they cry. “Live free or die!” The US has always attracted relatively acquisitive and extremely motivated people who are looking for a “better” life, revolutionaries. Moreover, many tens or hundreds of millions of US Americans have already lived some version of the “American dream”. Taken together, these facts strongly suggest that the US middle class, without anyplace to go, will revolt.

It must be time to retrench.

7. Solution to the example, unemployment (AKA, “It’s past time to get tough”)

The US steward class must cover its losses and, then, institute the changes that must be made in order to regain standing in the world and maintain a vibrant civil society:

(1) (a) Raise minimum wage for all those emancipated and/or adult US individuals to some “relatively-high”, middle-class level (based not on a USD amount but some fraction of the upper wage); and (b) guarantee unemployment benefits (at some significantly lower, “poverty” rate) to every citizen whose household income is below the minimum-wage figure per capita.

(2) Guarantee health coverage to every US American.

(3) (a) Stop trade with countries that refuse to adopt similar policies; (b) severely limit immigration from same; and (c) prevent domestic entities and other entities based in trading-partner countries from outsourcing services to and developing products in non-trading-partner countries.

8. How it works

The unemployed cannot pay their own unemployment benefits, let alone medical bills. And, under this plan, there is significant benefit to work. Still, the plan is ineffectual if US business entities can get visas for cheap labor and employ cheap labor abroad. So, the law must be reformed to stanch the flood of cheap foreign labor.

Thus, under this plan, US employers are effectively compelled to employ every emancipated or adult US citizen and end the deadly trend to mass poverty that results when the steward class does not rightly estimate its relationship to a civil, acquisitive and motivated middle class. At the same time, the unemployed have strong incentive to work to stay out of poverty.

Which is better for the employer: an employee who does nothing and gets paid, or an employee who adds to net income?

Domestic employers will bend over backward attempting to make money off of those whom they have to pay (i.e., US Americans) and the number of US jobs will expand out of proportion to the number of US workers. Otherwise, US companies might (1) move to the third world, where they need not pay or (2) regress (i.e., forfeit high quality of life). In the event that more than a very few choose (1) they’ll have either to change the third world, or, as in (2) they won’t live well because demand for their goods will be much lower and, as a result, their incomes will drop substantially while they will face a hostile population in relatively wild lands. That is, there isn’t enough room at the top tier of the third world to absorb a mass exodus of top-tier first-worlders, and, it seems unlikely that the steward class would choose to recreate the third world at home.

For the same reason that companies will not relocate en masse, the US people will find it better to enjoy the comforts that a little work brings. It appeals to virtually everybody to work for “something better” because it’s human nature (as will be explored in some later part).

In any case, the US will retain advantages that it has always had: diverse, creative, motivated US people working within the framework of the US constitution and (now centuries-old) institutions. While restored domestic-demand capacity will grow the socioeconomy, the kind of work that US people have done historically will breed continued innovation and further progress.

That this plan is good for every US American and the citizens of all US trading partners is self-apparent. But, further, it is good for citizens of our non-trading partners because it provides the strongest incentive to make progress on issues that plague these countries (e.g., income inequality and human rights). They will have no choice but to commit to change or squander US investment. Now that these countries have experienced growth and higher living standards associated with US-middle-class investment, it should be hard to go back to the old ways.

A sliver of a slice of US American and foreign stewards will understand that it means an end to tyranny and, because they cannot see how that benefits them (either because they actually cannot understand or because it flies in the face of the supreme belief that their interests are more important than their nations’) the plan will not suffice to persuade them that the next phase in the evolution of civil society will afford a higher quality of life for all.

They will fight it tooth and nail – not because it’s a bad plan (bad for the US and US-trading partners) but because it is a good plan that is good for the US, US-trading partners and the world; and, to their way of thinking (which equates personal benefit with personal wealth) that’s bad for them.

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