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Tuesday, April 17, 2012


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It's obvious that the growth in health care spending is unsustainable. At some point that has be reigned in. Everyone is pinning their hopes on eds and meds but as you note, this isn't possible. We're also seeing increasing concern about the so called "education bubble." The party can't go on forever on these.

"..all that outsourcing and automation mean the economy itself is working just fine and certainly is highly efficient. It's just the people who live within that economy are suffering."

Gee, does that mean that the 1980s busted /diminished Unions, the 1992 anti-NAFTA protestors, the 1998 anti-globalization / WTO Protesters, the 2010 US Social forum activists, and the 2011+ Occupy Movement actually had valid points?

"Free-Trade" Pollyanna economists, meet the barn door.
A shame about the horses having left, though.

Channeling Kurt Vonnegut ("Player Piano") this week?

Higher capital investment in manufacturing technology results in higher-paid manufacturing technicians, and skilled jobs designing, building, installing, and maintaining the automation equipment. Corporations typically do this close to home.

The days of the 5,000-employee factory are mostly over (though there are still quite a few auto-assembly plants that do employ thousands). But that does not mean that America's manufacturing jobs will disappear.

It'll be a lot like farming, where 3% of the population today produces more than 30% used to.

What you've missed is that growth in producing higher-value tradeable goods supports growth in the provision of non-tradeable goods. The economic concept is "surplus": the US initially became a rich country by producing an agricultural surplus and then had enormous productivity gains. Now it's true of our manufacturing, too.

When housing starts finally normalize (i.e. revert to something closer to the long-term norm), it will pull up a lot of the current slack in the economy.

Chris, look at your own apt analogy ("it's a lot like farming..."), and understand how it undermines your prediction. Productivity gains are effectively becoming unlinked from, divorced from, labor inputs. An economy can be productive and woefully underemployed. And that should, and must, be understood as a serious - the serious -political problem.

The very stake most of the population could ever hope to have in "the economy" - their ability to do needed work - is dissolving.

But they are still human beings. And before academia capriciously parted politics and economics, the realm of contemplation was called "political economy". There are very, very good reasons for that. And they have quite little to do with mechanistic concepts of factor inputs, etc.

civisisus, I disagree. My point is that the economy keeps inventing new jobs when old ones go away. The innovation engine has not stalled out.

How many people worked for Amazon, Home Depot, or Lowe's in 1995? For FedEx in 1980? I think Amazon is up to 7 distribution centers in Indiana. FedEx's second-largest US air-package hub is in Indy. Just because manual laborers no longer make the products doesn't mean there isn't manual labor available. Today's manual workers handle boxes instead of making what's inside them.

And there is a more-clear divide between those with higher education or vocational certification, and those without. I get that. But any individual still has opportunity; as long as there is hope, social disaster is avoided.

Chris, our gracious host did not talk about retail in this post, but I will.

There has been almost no new net retail job added to the US economy since 1997:


Two of the ten largest retailers, Best Buy and Sears/Kmart, are in serious trouble and barring a turnaround may not not be around in a few years. Even Target's revenue is been mostly flat. (Like many top retailers all three are Headquartered in the Midwest.)

The culprit besides the poor economy and higher commodity prices has been Amazon which last year grew around 40% and this year is expected to grow around 30%. Basically retailers, even Walmart has problems competing with Amazon on price and also Amazon is perceived as a quality retailer unlike Walmart. Amazon is expected to exceed both Best Buy and Sears/Kmart in revenue this year.

Amazon has only around 65,000 employees including warehouse personnel. As for the jobs created by the seven new distribution centers just opened up in Indiana, don't expect many of them to last. Amazon just bought Kiva Systems for 775 million dollars after being one of their big customers.

What does Kiva make? It makes robots that work in warehouses and replace half the staff. Here is one of the many videos:


Naturally this is only the beginning of automating warehouses. Experts expect by the end of the decade to see completely automated warehouses.

So I am a bit stumped where the jobs will come from.

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