general depression trends vs. Timesizing®
[Commentary] © 2004-13 Phil Hyde, Timesizing.com, Box 117, Cambridge MA 02238 USA (617) 623-8080 - HOMEPAGE
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"What depression trends?" That's what experts kept asking all through the Roaring '20s despite waves of mergers and downsizings, especially in banking. Well, as Will Rogers put it, "We only know what we read in the papers" and what we read is... ongoing depression, due to more income concentration and less circulation. Here we track trends in our jobless 'recovery' from the deep-structure viewpoint of worktime economics (dba Timesizing) -
4/29/2013 depression trends from WSJ, NYT, regional or online - missing earlier and later dates are handled entirely on post-2003 archive pages -
- The story of our time - Understanding the depression we're in, op ed by Paul Krugman, 4/29 New York Times, A21.
Those of us who have spent years arguing against premature fiscal austerity have just had a good two weeks. Academic studies that supposedly justified austerity have lost credibility; hard-liners in the European Commission and elsewhere have softened their rhetoric. The tone of the conversation has definitely changed.
My sense, however, is that many people still don’t understand what this is all about. So this seems like a good time to offer a sort of refresher on the nature of our economic woes, and why this remains a very bad time for spending cuts.
Let’s start with what may be the most crucial thing to understand: the economy is not like an individual family.
Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too.
[A more signficant BGO here (blinding glimpse of the obvious) would be that my company payroll is your company sales revenue and your company payroll is my company sales revenue.]
And that’s what happened after the financial crisis of 2008. Many people suddenly cut spending, either because they chose to or because their creditors forced them to; meanwhile, not many people were able or willing to spend more. The result was a plunge in incomes that also caused a plunge in employment, creating the depression that persists to this day.
Why did spending plunge? Mainly because of a burst housing bubble and an overhang of private-sector debt [which Krugman is proposing we continue and exponentiate in the public sector] — but if you ask me, people talk too much about what went wrong during the boom years [though there's still no agreement or cleanup of the financial sector and the foxes are still in the henhouse to sabotage any real recovery] and not enough about what we should be doing now [besides a real financial investigation, cleanup and regulation?!]. For no matter how lurid the excesses of the past, there’s no good reason that we should pay for them with year after year of mass unemployment.
[But we will continue to do so without a Bill-Black-calibre cleanup (yes, even with worksharing and timesizing).]
So what could we do to reduce unemployment? The answer is, this is a time for above-normal government spending, to sustain the economy until the private sector is willing to spend again [you mean like we did under Bush with Homeland Security etc.?]. The crucial point is that under current conditions, the government is not, repeat not, in competition with the private sector. Government spending doesn’t divert resources away from private uses; it puts unemployed resources to work. Government borrowing doesn’t crowd out private investment; it mobilizes funds that would otherwise go unused.
[Like the vast sluggish lucre of the rich which government should be activating by taxing and spending?]
Now, just to be clear, this is not a case for more government spending and larger budget deficits under all circumstances [yes it is, because this depression is not cyclical but permanent and deepening] — and the claim that people like me always want bigger deficits is just false [but until people like you switch from makework to workspreading, that's what your view amounts to]. For the economy isn’t always like this — in fact, situations like the one we’re in are fairly rare.
[No, they've been fairly frequent throughout history, usually ended by labor shortage due to war or plague, but now getting worse because war is robotized and plague gets cured too fast.]
By all means let’s try to reduce deficits and bring down government indebtedness once normal conditions return and the economy is no longer depressed.
[Again, this is the new "normal" until we adjust the workweek to depths appropriate to current heights of high-tech worksavings - this depression is secular, not cyclical.]
But right now we’re still dealing with the aftermath of a once-in-three-generations financial crisis.
[No, this is not a "play downturn" like those between 1945 and 1970 when there was still a general postwar labor shortage. This has been building up ever since around 1970 when the babyboomers entered the job market and replaced the labor surplus of the Depression.]
This is no time for austerity.
O.K., I’ve just given you a story, but why should you believe it?
[Because it misses a few key points?]
There are, after all, people who insist that the real problem is on the economy’s supply side: that workers lack the skills they [= resume-drowned employers] need [and don't see why they should train for], or that unemployment insurance [and welfare and disability] has destroyed the incentive to work, or that the looming menace of universal health care is preventing hiring, or whatever. How do we know that they’re wrong?
[Well these may not be The Real Problem but they are certainly accomplices.]
Well, I could go on at length on this topic, but just look at the predictions the two sides in this debate have made. People like me predicted right from the start that large budget deficits would have little effect on interest rates [they didn't help push rates to zero?], that large-scale “money printing” by the Fed (not a good description of actual Fed policy, but never mind) wouldn’t be inflationary [couldn't when all the extra money is going to the richest who spend the tiniest percentage of it], that austerity policies would lead to terrible economic downturns [but the original austerity policy was downsizing instead of timesizing in response to technology and it's still going on]. The other side jeered, insisting that interest rates would skyrocket and that austerity would actually lead to economic expansion [yeah they seem to really believe you can get growth aka UPsizing by downsizing!]. Ask bond traders, or the suffering populations of Spain, Portugal and so on, how it actually turned out.
Is the story really that simple, and would it really be that easy to end the scourge of unemployment? Yes [no, not without workspreading] — but powerful people don’t want to believe it [bet they'll believe gov't spending before workspreading]. Some of them have a visceral [or sadistic] sense that suffering is good, that we [=Leona Helmsley's "the little people"] must pay a price for past sins (even if the sinners then and the sufferers now are very different groups of people). Some of them see the crisis as an opportunity to dismantle the social safety net [they enjoy others' suffering - and additional risk to themselves?]. And just about everyone in the policy elite takes cues from a wealthy minority that isn’t actually feeling much pain.
[Today's wealthy minority can easily afford to draw to themselves all the important decision-making and simultaneously insulate and isolate themselves from any negative consequences of any mixed or bad decisions they make.]
What has happened now, however, is that the drive for austerity has lost its intellectual fig leaf [cute!], and stands exposed as the expression of prejudice, opportunism and class interest it always was. And maybe, just maybe, that sudden exposure will give us a chance to start doing something about the depression we’re in.
[Whoo-ee! On Friday, Krugman used the metaphor of the One Percent throughout his article, indicating creeping awareness on his part that coagulation of the money supply (concentration of too much money among too few people due to too many jobseekers and too few job openings) is THE problem. Today, he seems to actually recognize that what we're in is a depression, not a slow or stumbling or jobless or whatever "recovery." Who knows? Maybe next he'll adopt the metaphor of the diagonally downward spiral! But he still hasn't recognized (A) that because of increasing technological worksavings and the kneejerk downsizing response that greets them, this is a secular not cyclical phenomenon and (B) that a replay of the New Deal was and is inadequate and unsustainable, because we're still talking about The Onepercent owning everything and the 99% being forever in exponentiating debt. And he has not realized that the real strategy that was already getting the USA out of the Depression before the war was workspreading by workweek reduction and enforcement designed o switch from too many jobseekers to "too few" in the eyes of employers. This was and is the only market-oriented answer to too many jobseekers, and the only non-war-or-plague access to "too few" jobseekers in the eyes of employers is emergency worksharing and permanent timesizing. Krugman himself actually did refer to worksharing in Germany (Kurzarbeit), without naming it, as the last thing on a list of potentially helpful items (11/29-30/2009 #1), but as usual, this was another case of having NO IDEA how central, strategic, all-encompassing, powerful and urgent this one strategy is and was and ever more shall be.]
4/26/2013 depression trends from WSJ, NYT, regional or online - missing earlier and later dates are handled entirely on post-2003 archive pages -
- The 1 percent's solution - Who wants austerity, and why, op ed by Paul Krugman, NYT, A29.
Economic debates rarely end with a T.K.O. But the great policy debate of recent years between Keynesians, who advocate sustaining and, indeed, increasing government spending in a depression, and austerians, who demand immediate spending cuts, comes close — at least in the world of ideas. At this point, the austerian position has imploded; not only have its predictions about the real world failed completely, but the academic research invoked to support that position has turned out to be riddled with errors, omissions and dubious statistics.
Yet two big questions remain. First, how did austerity doctrine become so influential in the first place? Second, will policy change at all now that crucial austerian claims have become fodder for late-night comics?
On the first question: the dominance of austerians in influential circles should disturb anyone who likes to believe that policy is based on, or even strongly influenced by, actual evidence. After all, the two main studies providing the alleged intellectual justification for austerity — Alberto Alesina and Silvia Ardagna on “expansionary austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt “threshold” at 90 percent of G.D.P. — faced withering criticism almost as soon as they came out.
And the studies did not hold up under scrutiny. By late 2010, the International Monetary Fund had reworked Alesina-Ardagna with better data and reversed their findings, while many economists raised fundamental questions about Reinhart-Rogoff long before we knew about the famous Excel error. Meanwhile, real-world events — stagnation in Ireland, the original poster child for austerity, falling interest rates in the United States, which was supposed to be facing an imminent fiscal crisis — quickly made nonsense of austerian predictions.
Yet austerity maintained and even strengthened its grip on elite opinion. Why?
Part of the answer surely lies in the widespread desire to see economics as a morality play, to make it a tale of excess and its consequences. We lived beyond our means, the story goes, and now we’re paying the inevitable price. Economists can explain ad nauseam that this is wrong, that the reason we have mass unemployment isn’t that we spent too much in the past but that we’re spending too little now, and that this problem can and should be solved. No matter; many people have a visceral sense that we sinned and must seek redemption through suffering — and neither economic argument nor the observation that the people now suffering aren’t at all the same people who sinned during the bubble years makes much of a dent.
But it’s not just a matter of emotion versus logic. You can’t understand the influence of austerity doctrine without talking about class and inequality.
What, after all, do people want from economic policy? The answer, it turns out, is that it depends on which people you ask — a point documented in a recent research paper by the political scientists Benjamin Page, Larry Bartels and Jason Seawright. The paper compares the policy preferences of ordinary Americans with those of the very wealthy, and the results are eye-opening.
Thus, the average American is somewhat worried about budget deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face. And how should the budget deficit be brought down? The wealthy favor cutting federal spending on health care and Social Security — that is, “entitlements” — while the public at large actually wants to see spending on those programs rise.
You get the idea: The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.
Does a continuing depression actually serve the interests of the wealthy? That’s doubtful, since a booming economy is generally good for almost everyone. What is true, however, is that the years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The 1 percent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.
And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make. To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?
I hope not; I’d like to believe that ideas and evidence matter, at least a bit. Otherwise, what am I doing with my life? But I guess we’ll see just how much cynicism is justified.
[Hey, the Krugster is finding the Occupiers' language of 1 percent (and 99 percent) totally useful here in this article. VERY interesting. And he's inching toward a big synthesis here. He's within hailing distance of including the corelated conditions of coagulated money supply as the cause oops corelative of the funneling of the money supply to the topmost brackets thanks to denied but deepening labor surplus - involving the decreased percentage of money spent or donated as money is redistributed upward - and the corelative of the labor surplus? the downsizing response to incessant injections of productive technology instead of timesizing, thus cutting employment and consumer spending and boosting mutually underbidding jobseekers. Krugman's Plan A is Keynesian makework alias job creation with ever deeper taxpayer megadebt and deficit, same as Jimmy Carter, same as FDR before he got into the 44-42-40-hour workweeks (1938-39-40) and World War II. That is our Plan B. Our Plan A is maintaining employment by flexible downward adjustment of the workweek, however far down it takes, and then the restoring full employment and rising wages and consumer spending and marketable robotized megaproductivity and sustainable mongoinvestment by adjusting the workweek even further downward, both in the context of smooth conversion of chronic overtime into OT-targeted training and hiring. But we are in a time when the vitally necessary economic control variable, the workweek, of proven use and usefulness for over 100 years (1840-1940) has been totally overlooked except by some thoughtless economists who, using a number of rhetorical sophistries, have taken the trouble to ridicule it (the "Lump of Labor Fallacy"). Plan B would eventually wake up more and more onepercenters and get them calling for higher taxes on themselves, since they'd then be the only people with any money. "Plans" C, D & beyond are really just imagining scenarios for planning a few personal safety options because they involve the onepercenters not waking up. So collapsing conditions for the 99% trigger increasing violence, which gets increasingly strategic. Instead of killings of random 99 percenters in the ghetto or the Boston marathon, onepercenters are targeted on Wall Street, in their gated communities, or on their Caribbean islands, etc. It's a situation where it gets harder for the Wall Street Journal to get financial news because so much of it has gone non-public - and hackers get focused on reopening it, etc. - google Dmitri Orlov's 5 Stages Of Collapse, etc. All unnecessary via the most gentle and gradual and market-oriented Plan A = Timesizing.]
4/24/2013 depression trends from WSJ, NYT, regional or online - missing earlier and later dates are handled entirely on post-2003 archive pages -
- Wealth gap grew during "recovery" [our quotes] - Stock holdings outpace homes, by Pauline Jelinek, AP via Boston Globe, B8.
The richest [7% of] Americans got richer during the first two years of the economic "recovery" while average net worth delined for the other 93% of US households, a report released Tuesday said.
[meaning the "recovery" is really a mirage, because as the wealthy redistribute the money supply up the income brackets to themselves, they slow down its circulation since higher brackets spend and donate smaller percentages of their money than lower brackets and change the function of money from spending to saving and investing; and the longer the wealthy take to change their savings into investments, the longer everyone else takes to find jobs and make discretionary purchases; and the more that consumer-purchasing delay weakens markets, the more the wealthy's investments, when they finally happen, remain entirely within their own wealthy financial sector pyramiding into investment bubbles and making a joke of the wealthy's repeated promise to "get that money right back to work creating jobs."]
The upper[most] 7% of households owned 63% of the nation's wealth in 2011, up from 56% in 2009, said the report from the Pew Research Center, which analyzed Census Bureau data released last month.
[So that's 63-56= 7% more of the nation's wealth that is basically out of circulation = on ice, as it were, making any claims of recovery diametrically misleading and based on perverse indexes naively or guilefully defined to count bubble as substance and easily topplible inverted pyramid as well-founded rightside-up pyramid.]
The main reason for the widening wealth gap [or more actionably, the greater concentration of the money supply] is that affluent households typically own stocks and other financial holdings that increased in value [or more accurately, that pyramided and bubbled] while the less wealthy tend to have more of their assets in their home, which has not rebounded from the plunge.
[So any claim of recovery would be more accurate if it was based on homes and not financial froth.]
Tuesday’s report is the latest to point up financial inequality that has been growing among Americans for decades, a development that helped fuel the Occupy Wall Street protests.
A September Census Bureau report found that the highest-earning 20% of households "earned" [our quotes] more than half of all income the previous year, the biggest share in records kept since 1967. A 2011 Congressional Budget Office report said incomes for the richest one percent soared 275% between 1979 and 2007 but just under 40% for the middle sixty percent of Americans.
[This would all be fine and sustainable if it were just play money that were coagulating, but the fact that it can be converted into directed human time means that we are back in a kind of feudal system where anyone outside the richest one percent exists at the pleasure and whim of those onepercenters - we have indeed trod The Road [Back] to Serfdom as Hayek feared - and this adds to the previously noted dysfunctionalities of a highly concentrated money supply = severely impaired feedback and adaptibility, and increasingly diminished circulation. The system (=market forces) can only self-correct if the fundamental market playing field between employers and employees is releveled to "wartime prosperity" (World War) standards, and the system requires overtime-to-jobs conversion and fluctuating workweek adjustment against underemployment to accomplish that. This is now a simple but strict system requirement, no need to plead for fairness or mercy or nicer lifestyles or concern for families or "The Cheeldren" or The Environment or The Oceans or The Planet or sustainable groundwater or energy or any of the other "playing from a weak hand" that we've been doing.]
The wealth of American households rose by $5 trillion, or 14 percent, during the period from $35.2 trillion in 2009 to $40.2 trillion in 2011. Household wealth is the sum of all assets such as a home, car, and stocks, minus all debts.
The average net worth of households in the upper 7 percent of the wealth distribution rose an estimated 28 percent, while that of households in the lower 93 percent dropped by 4 percent. That is, the mean wealth of the 8 million households in the more affluent group rose from an estimated $2.5 million to an estimated $3.2 million while that of the 111 million households in the less affluent group fell from $140,000 to roughly $134,000.
The upper 7 percent were the households with a net worth above $836,033 and the 93 percent represented households whose worth was at or below that. Not all households among the 93 percent saw a decline, but the average amount declined for that group.
Standard & Poor’s 500 stock index rose 34 percent, while the Standard & Poor’s/Case-Shiller index for home prices fell 5 percent.
4/22/2013 depression trends from WSJ, NYT, regional or online - missing earlier and later dates are handled entirely on post-2003 archive pages -
- The jobless trap - Creating a permanent class of unemployed Americans, op ed by Paul Krugman, New York Times, A19.
F.D.R. told us that the only thing we had to fear was fear itself. But when future historians look back at our monstrously failed response to economic depression, they probably won’t blame fear, per se. Instead, they’ll castigate our leaders for fearing the wrong things.
For the overriding fear driving economic policy has been debt hysteria, fear that unless we slash spending we’ll turn into Greece any day now. After all, haven’t economists proved that economic growth collapses once public debt exceeds 90 percent of G.D.P.?
Well, the famous red line on debt, it turns out, was an artifact of dubious statistics, reinforced by bad arithmetic. And America isn’t and can’t be Greece, because countries that borrow in their own currencies operate under very different rules from those that rely on someone else’s money. After years of repeated warnings that fiscal crisis is just around the corner, the U.S. government can still borrow at incredibly low interest rates.
But while debt fears were and are misguided, there’s a real danger we’ve ignored: the corrosive effect, social and economic, of persistent high unemployment. And even as the case for debt hysteria is collapsing, our worst fears about the damage from long-term unemployment are being confirmed.
Now, some unemployment is inevitable in an ever-changing economy. Modern America tends to have an unemployment rate of 5 percent or more even in good times. In these good times, however, spells of unemployment are typically brief. Back in 2007 there were about seven million unemployed Americans — but only a small fraction of this total, around 1.2 million, had been out of work more than six months.
Then financial crisis struck, leading to a terrifying economic plunge followed by a weak recovery. Five years after the crisis, unemployment remains elevated, with almost 12 million Americans out of work. But what’s really striking is the huge number of long-term unemployed, with 4.6 million unemployed more than six months and more than three million who have been jobless for a year or more. Oh, and these numbers don’t count those who have given up looking for work because there are no jobs to be found.
It goes without saying that the explosion of long-term unemployment is a tragedy for the unemployed themselves. But it may also be a broader economic disaster.
The key question is whether workers who have been unemployed for a long time eventually come to be seen as unemployable, tainted goods that nobody will buy. This could happen because their work skills atrophy, but a more likely reason is that potential employers assume that something must be wrong with people who can’t find a job, even if the real reason is simply the terrible economy. And there is, unfortunately, growing evidence that the tainting of the long-term unemployed is happening as we speak.
One piece of evidence comes from the relationship between job openings and unemployment. Normally these two numbers move inversely: the more job openings, the fewer Americans out of work. And this traditional relationship remains true if we look at short-term unemployment. But as William Dickens and Rand Ghayad of Northeastern University recently showed, the relationship has broken down for the long-term unemployed: a rising number of job openings doesn’t seem to do much to reduce their numbers. It’s as if employers don’t even bother looking at anyone who has been out of work for a long time.
To test this hypothesis, Mr. Ghayad then did an experiment, sending out résumés describing the qualifications and employment history of 4,800 fictitious workers. Who got called back? The answer was that workers who reported having been unemployed for six months or more got very few callbacks, even when all their other qualifications were better than those of workers who did attract employer interest.
So we are indeed creating a permanent class of jobless Americans.
And let’s be clear: this is a policy decision. The main reason our economic recovery has been so weak is that, spooked by fear-mongering over debt, we’ve been doing exactly what basic macroeconomics says you shouldn’t do — cutting government spending in the face of a depressed economy.
It’s hard to overstate how self-destructive this policy is. Indeed, the shadow of long-term unemployment means that austerity policies are counterproductive even in purely fiscal terms. Workers, after all, are taxpayers too; if our debt obsession exiles millions of Americans from productive employment, it will cut into future revenues and raise future deficits.
Our exaggerated fear of debt is, in short, creating a slow-motion catastrophe. It’s ruining many lives, and at the same time making us poorer and weaker in every way. And the longer we persist in this folly, the greater the damage will be.
3/29/2013 depression trends from WSJ, NYT, regional or online - missing earlier and later dates are handled entirely on post-2003 archive pages -
MPs want immigrant ban to save British jobs - Britain should be able to block immigration from other EU countries during the current period of high unemployment, according to a group of influential MPs, by Robert Winnett, London Telegraph via telegraph.co.uk
[The depression trend here is immigration quotas unconnected to the job market, which these MPs are trying to correct & connect. And basically, in the age of overpopulation and multidimensional environmental constraints, every economy needs to be moving ASAP to steady-state migration = one out, one in.]
In an article for The Telegraph, the joint chairmen of the cross party group on balanced migration, Frank Field, a former Labour minister, and Nicholas Soames, a former Conservative minister, say that David Cameron must do more to tackle “the elephant in the room” by restricting European immigration.
The MPs, two of the most influential politicians in the immigration debate, suggest that draconian action should now be considered “during periods of high unemployment” — such as now — to protect low-skilled British workers struggling to compete with foreigners for jobs.
One in five young British workers is currently unemployed, with about one million people aged 18 to 24 out of work.
The MPs say that Britain is still facing an influx of people at an “unsustainable level” despite Coalition action to reduce immigration.
They add that the expected wave of immigration from Bulgaria and Romania — which could lead to 50,000 people a year moving to this country from next year — means that the need to tackle the issue “could not be more stark.”
The proposals of the cross party group on balanced migration are regularly adopted by the Government. The group has praised government action to tackle immigration from Asia, Africa and elsewhere, but believes that the focus must now be on Europe.
“[An] area that needs to be considered is whether EU members should have powers, during periods of high unemployment, to restrict the free movement of labour, at present guaranteed in EU law,” the MPs say.
They add: “We will seek to support the tightening of immigration policies in the year ahead, not least to ensure that the public can have confidence in our immigration system.”
Several European countries have recently imposed some limited immigration controls on EU nationals — controls that are legally permitted by the EU in “exceptional circumstances”. In 2011, Spain won the right to reimpose immigration controls on Romanian migrant workers as unemployment soared in the country.
Last year, in an interview with this newspaper, Theresa May said that the Government was drawing up contingency plans to stem immigration if the economic collapse of a major EU country resulted in an exodus of citizens.
Earlier this week, the Prime Minister made a speech on immigration that set out plans to reinforce rules restricting access to benefits, the NHS and social housing for European immigrants.
However, Mr Cameron disappointed many by ruling out more far-reaching restrictions, and the measures were criticised for having an apparently small potential impact.
Mr Field and Mr Soames say that the speech sent an important message that should now be built upon.
“Although Mr Cameron was criticised on the basis that very few migrants would be affected by his new proposals, this misses the point,” the MPs write. “His purpose, instead, was to ensure that future migrants (including EU nationals) are deterred from coming here to seek benefits and services. “His proposals on changing the entitlement rules for benefits, social housing and the NHS are a welcome first step. It is right in principle that access to services should be granted on the basis of contribution, and indeed the cross party group has been active in raising these three issues for some time, most recently calling for an entitlement card to access NHS services to replace the current system whereby anyone can access the NHS after being here for 24 hours.”
In today’s article, Mr Field and Mr Soames also confront suggestions that any further crackdown on immigration would undermine economic growth.
They write: “We yield to no one in our desire to ensure that immigration control does not impede the economic recovery on which so much else depends. We have been forthright in our view that businesses must be able to bring in the talent it needs, and are campaigning to make the process simpler and swifter.”
European immigration currently accounts for about a third of net migration — which is currently running at about 160,000 people a year.
[And yesterday -]
Britain can’t afford this level of immigration - The Coalition is making headway in tackling large-scale immigration, but it needs to do far more , by Nicholas Soames & Frank Field, 3/28 London Telegraph via telegraph.co.uk
There was one big lesson in the Prime Minister’s immigration speech this week. And it was aimed directly at that those who blindly argue in favour of immigration. Put simply, it is this: it is not inconsistent to argue against continued large-scale immigration, while at the same time ensuring that highly skilled workers, who are crucial for economic recovery, are made welcome in Britain.
For nearly five years the Cross Party Group on Balanced Migration, which we co-chair, has been pointing out the consequences of large-scale immigration. We have called for action to reduce it. But, though many of our recommendations have been accepted, the campaign has always been an uphill struggle.
The political debate in recent weeks has, however, been transformed, thanks mainly to Ukip’s strong showing in the Eastleigh by-election. The party’s second place result has forced major responses from all three political leaders on immigration. This new focus presents an opportunity for change.
First, it is worth rehearsing the figures. Immigration has greatly benefited the UK, but it is at unsustainable levels. In 1997, net immigration totalled 50,000 a year. In 2010, the figure was 250,000. Although that is now falling – thanks, in part, to the acceptance of the Cross Party Group’s proposals – the most recent number remains high, at 163,000. The Office for National Statistics projects that our population will reach 70 million (from 63.2 million now) in 15 years. To level our population off at 70 million would require a net immigration level of 40,000 a year.
To put that in context, to accommodate an increase to 70 million – including five million immigrants and their children – we would have to build the equivalent of another Birmingham, Manchester, Liverpool, Bradford, Leeds, Sheffield, Glasgow, Bristol and Oxford. Of course, such a prospect is simply unaffordable. And that’s without even considering whether society can integrate newcomers at anything like that rate.
We yield to no one in our desire to ensure that immigration control does not impede economic recovery. We have been forthright in our view that businesses must be able to bring in the talent they need, and are campaigning to make the process simpler and swifter. However, since the implementation of the Government’s new immigration system, the highly skilled route into Britain has been undersubscribed in every month, and not a single skilled worker has been refused a visa. Perhaps we should do more to boost this stream into Britain – but clearly it is not a problem at present.
Our need for highly skilled migrants to generate economic growth, however, is not to be confused with mass immigration. Most migrants who come to the UK to work take low-skilled jobs, as we saw following the earlier wave of Eastern European migrants. With one million 18- to 24-year-olds out of work, allowing this to continue does not make sense, quite apart from the increasing pressure on our infrastructure.
That is why the Cross Party Group on Balanced Migration wants controlled immigration without endangering our economy. Reducing net immigration to the tens of thousands is the right approach.
The elephant in the room is the EU, which accounts for one third of net migration. EU migration cannot be controlled by an immigration system. Naturally the debate has focused on the impending extension of the EU’s “free movement of workers” policy to Romania and Bulgaria. A recent estimate puts a likely annual net immigration figure from these two countries alone at 50,000. Add this to the current 163,000, and the scale of the issue facing the Government and Opposition could not be more stark.
The Prime Minister’s speech on Monday was therefore a welcome intervention. Although Mr Cameron was criticised on the basis that very few migrants would be affected by his new proposals, this misses the point. His purpose, instead, was to ensure that future migrants (including EU nationals) are deterred from coming here to seek benefits and services.
His proposals on changing the entitlement rules for benefits, social housing and the NHS are welcome. It is right in principle that access to services should be granted on the basis of contribution, and indeed the Cross Party Group has been active in raising these three issues for some time, most recently calling for an entitlement card to access NHS services to replace the current system, whereby anyone can access the NHS after being here for 24 hours.
Another area that needs to be considered is whether EU members should have powers, during periods of high unemployment, to restrict the free movement of labour at present guaranteed in EU law.
We will seek to support the tightening of immigration policies in the year ahead, not least to ensure that the public can have confidence in our immigration system. We were, after all, elected to Parliament to serve in their best interests.
Nicholas Soames is the Conservative MP for Mid Sussex; Frank Field is the Labour MP for Birkenhead.
[And Tuesday -]
Immigration promises are just hot air without a border entry ban - David Cameron must admit that the country is full, letter to editor by Mick Richards of Llanfair Waterdine, Shrops., 3/26 London Telegraph via telegraph.co.uk
Sir – First we had the Labour leader and his cohorts semi-apologising for previously flooding the country with unwanted migrants and vaguely promising to put it right at some point in the future.
Then we had Nick Clegg making yet another U-turn on an amnesty for illegals and resurrecting a previously rejected cash-deposit-on-entry scheme.
Now we have the Prime Minister promising stricter rules on the provision of housing and benefits to immigrants.
All this, of course, stems from the rising public concern at the accumulative effects of allowing consistently too high levels of immigration, accentuated by the growing popularity of Ukip.
The promises being made are mere hot air and those making them are all afraid to grasp the nettle. The fact of the matter is that this country is quite simply full.
Neither the national infrastructure nor its welfare, health or education services can support any further demands on them. It is too late for irrelevant tinkering with an already broken system. An immediate ban must be implemented on all seeking entry to the United Kingdom unless they have a proven job to go to and the means to support themselves. Such restrictions must include all would-be EU immigrants.
The vast majority of the populace clearly recognises the problem and would support such action. For once, the politicians should let democracy prevail.
3/25/2013 depression trends from WSJ, NYT, regional or online - missing earlier and later dates are handled entirely on post-2003 archive pages -
- Hot money blues - Dealing with love-'em-and-leave-'em investors, op ed by Paul Krugman, NYT, A21.
Whatever the final outcome in the Cyprus crisis — we know it’s going to be ugly; we just don’t know exactly what form the ugliness will take — one thing seems certain: for the time being, and probably for years to come, the island nation will have to maintain fairly draconian controls on the movement of capital in and out of the country. In fact, controls may well be in place by the time you read this. And that’s not all: Depending on exactly how this plays out, Cypriot capital controls may well have the blessing of the International Monetary Fund, which has already supported such controls in Iceland.
That’s quite a remarkable development. It will mark the end of an era for Cyprus, which has in effect spent the past decade advertising itself as a place where wealthy individuals who want to avoid taxes and scrutiny can safely park their money, no questions asked. But it may also mark at least the beginning of the end for something much bigger: the era when unrestricted movement of capital was taken as a desirable norm around the world.
It wasn’t always thus. In the first couple of decades after World War II, limits on cross-border money flows were widely considered good policy; they were more or less universal in poorer nations, and present in a majority of richer countries too. Britain, for example, limited overseas investments by its residents until 1979; other advanced countries maintained restrictions into the 1980s. Even the United States briefly limited capital outflows during the 1960s.
Over time, however, these restrictions fell out of fashion. To some extent this reflected the fact that capital controls have potential costs: they impose extra burdens of paperwork, they make business operations more difficult, and conventional economic analysis says that they should have a negative impact on growth (although this effect is hard to find in the numbers). But it also reflected the rise of free-market ideology, the assumption that if financial markets want to move money across borders, there must be a good reason, and bureaucrats shouldn’t stand in their way.
As a result, countries that did step in to limit capital flows — like Malaysia, which imposed what amounted to a curfew on capital flight in 1998 — were treated almost as pariahs. Surely they would be punished for defying the gods of the market!
But the truth, hard as it may be for ideologues to accept, is that unrestricted movement of capital is looking more and more like a failed experiment.
It’s hard to imagine now, but for more than three decades after World War II financial crises of the kind we’ve lately become so familiar with hardly ever happened. Since 1980, however, the roster has been impressive: Mexico, Brazil, Argentina and Chile in 1982. Sweden and Finland in 1991. Mexico again in 1995. Thailand, Malaysia, Indonesia and Korea in 1998. Argentina again in 2002. And, of course, the more recent run of disasters: Iceland, Ireland, Greece, Portugal, Spain, Italy, Cyprus.
What’s the common theme in these episodes? Conventional wisdom blames fiscal profligacy — but in this whole list, that story fits only one country, Greece. Runaway bankers are a better story; they played a role in a number of these crises, from Chile to Sweden to Cyprus. But the best predictor of crisis is large inflows of foreign money: in all but a couple of the cases I just mentioned, the foundation for crisis was laid by a rush of foreign investors into a country, followed by a sudden rush out.
I am, of course, not the first person to notice the correlation between the freeing up of global capital and the proliferation of financial crises; Harvard’s Dani Rodrik began banging this drum back in the 1990s. Until recently, however, it was possible to argue that the crisis problem was restricted to poorer nations, that wealthy economies were somehow immune to being whipsawed by love-’em-and-leave-’em global investors. That was a comforting thought — but Europe’s travails demonstrate that it was wishful thinking.
And it’s not just Europe. In the last decade America, too, experienced a huge housing bubble fed by foreign money, followed by a nasty hangover after the bubble burst. The damage was mitigated by the fact that we borrowed in our own currency, but it’s still our worst crisis since the 1930s.
Now what? I don’t expect to see a wholesale, sudden rejection of the idea that money should be free to go wherever it wants, whenever it wants. There may well, however, be a process of erosion, as governments intervene to limit both the pace at which money comes in and the rate at which it goes out. Global capitalism is, arguably, on track to become substantially less global.
And that’s O.K. Right now, the bad old days when it wasn’t that easy to move lots of money across borders are looking pretty good.
2/28/2013 headlines from hell from WSJ, NYT, regional or online - missing earlier and later dates are handled entirely on post-2003 archive pages -
- “Pervasive” Fraud by our “Most Reputable” Banks, by William K. Black, posted by Devin Smith, neweconomicperspectives.org (finder's credit to ca.mg5.mail.yahoo.com aka Reader Supported News)
A recent study confirmed that control fraud was endemic among our most elite financial institutions: "Asset Quality Misrepresentation by Financial Intermediaries: Evidence from RMBS Market" [Residential Mortgage-Backed Security market], by Tomasz Piskorski, Amit Seru & James Witkin (February 2013) (“PSW 2013”).
The key conclusion of the study is that control fraud was “pervasive” (PSW 2013: 31).
“[A]lthough there is substantial heterogeneity across underwriters, a significant degree of misrepresentation exists across all underwriters, which includes the most reputable financial institutions” (PSW 2013: 29).
Finance scholars are not known for their sense of humor, but the irony of calling the world’s largest and most harmful financial control frauds[ters] our “most reputable” banks is quite wondrous. The point the financial scholars make is one Edwin Sutherland [1883-1950, American sociologist considered one of the most influential 20th-century criminologists - Wikipedia] emphasized from the beginning when he announced the concept of “white-collar” crime. It is the officers who control seemingly legitimate, elite business organizations that pose unique fraud risks because we are so loath to see them as frauds.
The PSW 2013 study confirmed one form of control fraud and provided suggestive evidence of two other forms that I will discuss in a future column. The definitive evidence of control fraud that PSW2013 identifies is by mortgage lenders who made, or purchased, mortgages and then resold them to “private label” (non-Fannie and Freddie) financial firms who were creating mortgage backed securities (MBS). The deceit they documented by the firms selling the mortgage loans consisted of claiming that the loans did not have second liens. The lenders knowingly sold mortgages they knew had second liens under the false representations (reps) and warranties that they did not have second liens. (The authors confirm the point many of us have been making for years – the banks that fraudulently sold fraudulent mortgages did have “skin in the game” because of their reps and warranties. The key is that the officers who control the banks do not have skin in the game – they can loot the banks they can control and walk away wealthy.) The PSW 2013 study documents that the officers controlling the home lenders knew the representations they made to the purchasers as to the lack of a second lien were often false (pp. 2, 5 n. 6), that such deceit was common (p. 3), that the deceit harmed the purchasers by causing them to suffer much higher default rates on loans with undisclosed second liens (pp. 20-21), and that each of the financial institutions they studied – the Nation’s “most reputable” – committed substantial amounts of this form of fraud (Figure 4, p. 59).
The most interesting reaction to the PSW 2013 study is that of a fraud denier, The Economist’s “M.C.K.” In his January 25, 2013 column, (“Just who should we be blaming anyway?”)
M.C.K. argued that we should blame the victims of the fraud (“the real wrongdoers were not those who sold risky products at inflated prices but the dupes who bought them….”).
Only three weeks later, in his February 19, 2013 column discussing the PSW 2013 study, M.C.K. admitted that fraud by banks had played a prominent role in the crisis.
“Bubbles are conducive to fraud. Buyers become less careful about doing their due diligence when asset prices are soaring and financing for speculation is plentiful. Unscrupulous sellers exploit this incaution. The victims are none the wiser as long as the bubble continues to inflate.”
I will explain in a later column why I believe this passage is badly flawed, but my point here is that the fraud denier and “blame the victim” columnist has recanted.
“But, as Charles Kindleberger noted in his seminal historical study Manias, Panics, and Crashes, the most unsavoury practises become evident once prices revert to normal. During America’s housing bubble, mortgage originators were told to do whatever it took to get loans approved, even if that meant deliberately altering data about borrower income and net worth. Many argue that the banks that bundled those loans into securities deliberately and systematically misled investors and private insurers about the risks involved. It is easy to be unsympathetic in the absence of hard evidence. As I argued in a previous post , ‘investors were not forced to take the losing side of so many trades.’
“While I stand by that view, a new paper by Tomasz Piskorski, Amit Seru, and James Witkin [PSW 2013] convincingly argues that banks deliberately misrepresented the characteristics of mortgages in securities they pitched to investors and bond insurers. The misrepresented loans defaulted at much higher rates than ones that were not—a result that would not be produced by random errors. Moreover, the share of loans that were misrepresented increased as the bubble inflated. The authors estimate that underwriters may be liable for about $60 billion in representation and warranty damages (emphasis in original).”
These two paragraphs are worth savoring in some detail. The central point we have been arguing for years is now admitted – and treated as a universally known fact: “mortgage originators were told to do whatever it took to get loans approved, even if that meant deliberately altering data about borrower income and net worth.” The crisis was driven by liar’s loans. By 2006, half of all the loans called “subprime” were also liar’s loans – the categories are not mutually exclusive (Credit Suisse 2007 [??] ). As I have explained on many occasions, we know that it was overwhelmingly lenders and their agents (the loan brokers) who put the lies in liar’s loans.
The incidence of fraud in liar’s loans was 90% (MARI 2006: "MARI [Mortgage Asset Research Institute] Releases Report on Mortgage Fraud" 5/19/2006 mortgagefraudblog.com). Liar’s loans are a superb “natural experiment” because no entity (and that includes Fannie and Freddie) was ever required to make or purchase liar’s loans. Indeed, the government discouraged liar’s loans (MARI 2006). By 2006, roughly 40% of all U.S. mortgages originated that year were liar’s loans (45% in the U.K.). Liar’s loans produce extreme “adverse selection” in home lending, which produces a “negative expected value” (in plain English – making liar’s home loans will produce severe losses). Only a firm engaged in control fraud would make liar’s loans. The officers who control such a firm will walk away wealthy even as the lender fails. This dynamic was what led George Akerlof and Paul Romer to entitle their famous 1993 article – “Looting: the Economic Underworld of Bankruptcy for Profit.” Akerlof and Romer emphasized that accounting control fraud is a “sure thing” guaranteed to transfer wealth from the firm to the controlling officers.
M.C.K. now admits that liar’s loans were endemically fraudulent and that it was lenders and their agents who “deliberately” put the lies in liar’s loans. Given the massive number of liar’s loans and the extraordinary growth of liar’s loans (roughly 500% from 200-2006) it is clear that that they were the “marginal loans” that caused the housing markets to hyper-inflate and created the catastrophic losses (in the form of loans, MBS, and CDOs) that drove the financial crisis. The key fact that must be kept in mind is that once a fraudulent liar’s loan begins with the loan officer or broker inflating the borrower’s income and suborning the appraiser into inflating the home appraisal the subsequent sales of that mortgage (or derivatives “backed” by the mortgage) by private parties will be fraudulent.
The authors of the PSW 2013 study expressly cautioned that their data allowed them to examine only two of the varieties of fraud. Lenders’ frauds in originating and selling liar’s loans were far more common, and far more harmful, than the two forms of fraud the PSW study was able to study. The many forms of mortgage frauds by lenders and their agents, of course, were cumulative and the frauds interact to produce greatly increased defaults.
The greatest importance of the PSW 2013 study is that even the fraud deniers have to admit that our most prestigious banks were the world’s largest and most destructive financial control frauds. Given this confirmation that the banks engaged in one form of control fraud in the sale of fraudulent mortgages (false representations about second liens), there is no reason to believe that their senior officers had moral qualms that prevented them from becoming even wealthier through the endemic frauds of liar’s loans and inflated appraisals. Appraisal fraud is almost invariably induced by lenders and their agents. Given the “pervasive” willingness of the officers controlling our most prestigious banks to enrich themselves personally by lying about the presence of second liens, they certainly cannot have any moral restraints that would have prevented them from creating the perverse incentives that caused loan officers and brokers to put the lies in liar’s loans and to induce appraisers to inflate appraisals – two other control fraud schemes that were far more “pervasive” (and even likelier to produce severe losses) than the two forms of fraud studied by the PSW 2013 authors.
Once the fraud deniers have to admit that one form of control fraud involving mortgages was “pervasive” among our most prestigious banks, it becomes untenable to ignore the already compelling evidence that other forms of control fraud involved in the fraudulent origination and sale of mortgages and mortgage derivatives were even more pervasive at hundreds of financial institutions. The PSW 2013 study destroyed the myth of the Virgin Crisis. It also exposes the falsity of the ridiculous “definition” of mortgage fraud that the Mortgage Bankers Association (MBA) foisted on the FBI and the Department of Justice that implicitly defines control fraud out of existence for mortgage lenders. Attorney General Holder and President Obama have no excuse for their faith in the Virgin Crisis, conceived without fraud and should repudiate the MBA definition immediately and train the regulators and agents to spot and prosecute the epidemic of control frauds that drove this crisis (and the S&L debacle and Enron-era frauds).
1/15/2013 headlines from hell (or at least internal quotes) from WSJ, NYT, regional or online - missing earlier and later dates are handled entirely on post-2003 archive page(s) -
- [Here's an interesting article about a big company trying to do the right thing in a depressed economy (RSA: 25% unemployment) - or at least appearing to be doing the right thing so that it stays out of the bad-PR downsizing category. Again, when these depressed economies (including also Spain and Latvia) already have 25% or more unemployment and associated minimum 25% weakness in domestic consumer spending, one wonders what it's going to take to make them quit straining for enough job creation to maintain a frozen 40-hour workweek forever and just share the vanishing work, however short a workweek it takes.]
Amplats offers new non-mining job for every mining job lost, by Martin Creamer, Creamer Media's Mining Weekly via miningweekly.com
JOHANNESBURG, Republic of South Africa (RSA) – Anglo American Platinum (Amplats), which is setting out to create at least one new non-mining job for every mining job lost in its proposed downsizing, saw its own share price and the global platinum price rise after announcing the most far-reaching restructuring of its 58-year history, which proposes that two mines close, four shafts be mothballed, a mine be put up for sale and the 14 000 mining jobs earmarked for shedding be matched by the creation of at least an equal number of new non-mining jobs.
In addition to redeploying one-third of 14 000 people back into the rest Anglo American group and the mining industry as a whole, Amplats is offering a new non-mining job opportunity, on top of a retrenchment package, to each of the employees who cannot be placed in another mining job and are forced to enter the non-mining space.
The aim in reducing the employee complement to 45 000 is to be job neutral.
["To 45,000" FROM what? And how can "reducing" the employee complement possibly be "job neutral"? Any reduction would be job negative.]
“We’ll seek to ensure that we compensate for any necessary labour restructuring through the creation of an equivalent number of non-mining jobs,” Amplats CEO Chris Griffith said.
[At same or lower pay?]
This saw its share price rise 1.28% on the JSE to R497.30 before 10 am and the platinum price rise to $1 691/oz, overtaking a gold price of $1 653/oz.
But after Mineral Resources Minister Susan Shabangu set off a political row, the share price fell by more than 4% to R464.87 (R= RSA rands, cf: US$], with the Minister reiterating [her objection] that she had not been consulted and her rejection of the Amplats' non-mining job-creation plan as "not workable".
Liberum Capital analyst Ben Davis saw the jobs-neutral target as being “very optimistic", given the continuing 25% South African unemployment rate.
Davis noted further that the news of 400 000 oz/y [ounces per year?] of capacity being put on care-and-maintenance had resulted in the platinum price rising above the gold price for the first time since March 2012.
But South Africa's Chamber of Mines CEO Bheki Sibiya applauded Amplats for setting out to create new non-mining jobs in housing, infrastructure and small business development in Rustenburg and labour-sending areas to make amends for the mining jobs lost.
Griffith told Mining Weekly Online that two job initiatives were being proposed: the first was the redeployment of Amplats mining employees mostly within the Anglo American mining group itself – where there had been a moratorium on additional employment until the completion of the Amplats review.
Amplats would do everything in its power to facilitate that process, including the opening of Teba recruitment offices at its mines to enable maximum redeployment of mining personnel to mining companies.
Once that opportunity was exhausted, the remaining employees, who ended up without an opportunity to continue to work in the mining sector, would be offered work in housing, entrepreneurship, platinum beneficiation and rural development in labour-sending areas.
These were expected to make up about two-thirds [9,333] of the 14 000.
The second initiative would involve Amplats reskilling employees to enable them to obtain new jobs, in addition to receiving the retrenchment package.
Amplats was putting up a fund of R300-million to build 15 000 houses for its employees in Rustenburg as part of what it calls its anchor housing project and expected 6 000 new jobs to be created as a result.
Those workers not redeployed would be reskilled to contribute to a better social environment in Rustenburg and simultaneously provide non-mining employment.
Additional funding was also being offered to Anglo American’s Zimele small-business development company to create entrepreneurial jobs at double the normal cost per job in both the Rustenburg area and the rural areas from which Amplats sourced its labour.
“This is about creating real jobs in real projects to offset the negative affects of potential restructuring, and that’s just the target in the short term, because the projects themselves will have their own momentum,” Griffith told Mining Weekly Online.
Amplats intended partnering with the many government job-creation projects to double the number of mining jobs lost over five years.
“Those are the proposals that we’ll be putting to our unions, and they are in addition to the normal retrenchment process,” Griffith said.
Employees could thus leave Amplats with union-negotiated retrenchment payment; housing, retirement and medical allowances, plus enter reskilling programmes and be assisted in finding non-mining jobs.
Amplats was allowing R800-million for this to be implemented over a period of five years.
Amplats executive marketing head Andrew Hinkly said that retrenched workers would also be considered for employment at the many beneficiation projects that the company had been working on for many years, which set out to add value commercially to the platinum mined.
“For example, we have an exciting project in the fuel cell area which we would anticipate could create up to 100 jobs in the near term and potentially several thousand over the five-year period. This is a high-growth sector that we continue to invest in,” Hinkly added to Mining Weekly Online.
The Amplats review proposed to deliver a R3.8-billion-a-year benefit from 2015, which included a R390-million slashing of overheads.
It would cut production by 400 000 oz/y to keep baseline production at between 2.1-million ounces and 2.3-million ounces a year compared with its previously disclosed planned growth of 3-million ounces.
The priority of the restructuring, Griffith said, was to create a platinum business for the long term, for which the business fundamentals remained strong.
However, the current operating environment was weak, with mine profitability being eroded by escalating costs and capital intensity coupled with lower grades and greater mine depths.
Difficult decisions had to be made to keep the business competitive and to support a long-term future.
The primary objective was to create a quality mine portfolio to produce platinum-group metals on an economically sustainable basis in line with the lower expectation of demand growth.
It was proposing to reduce its production profile by 400 000 oz to align the output with demand.
Rustenburg would be restructured into three operating entities, removing 250 000 oz to 300 000 oz a year of high-cost production.
Four Rustenburg shafts, Khuseleka 1 and 2 shafts and Khomanani 1 and 2 shafts, would be mothballed for the long-term.
The Rustenburg operations would become a 320 000 oz to 350 000 oz a year producer, ensuring more effective capital allocation.
As a result, Amplats would reduce its planned capital expansion over the next ten years by 25% to R100-billion in order to focus investment on low-cost, high-margin projects.
The Union mines were likely to be of greater value under different ownership and would be sold “at the right time”.
In the interim, the Union mines would be reconfigured to protect near-term value.
It was proposed that mining be stopped at the loss-making Union North declines and that the Mortimer Merensky concentrator be put on long-term care and maintenance.
Union North and South would be combined into one operation and the processing operations would be aligned with the proposed mining footprint, which might include closing the Waterval upper-group-two concentrator and the number-two smelting furnace.
Steps were also being proposed to increase the efficiency of some of the joint ventures (JVs) and to simplify the JV portfolio.
“The other platinum producers are the key beneficiaries,” Davis added in his note.
Amplats warned investors earlier this week of potential upcoming losses, in the wake of the labour unrest at its South African operations.
It expected a loss of 491c to 628c a share, down from a profit of 1 365c a share in 2011 when it published its full year-end results on February 4.
1/06/2013 headlines from hell (or at least internal quotes) from WSJ, NYT, regional or online - missing earlier and later dates are handled entirely on recent archive page(s) -
- Your children vs. THE ROBOTS - Will a robot take your kid’s job? - A troubling new signal that technology will mean downward mobility - especially for the young, by Sarah Laskow, 1/06 BSG, K12 target article and bostonglobe.com
They don’t necessarily look like we thought they would, but the robots are already among us. They give us directions when we’re driving. By 2015, Governor Deval Patrick recently announced, they will collect all tolls in Massachusetts. Apple’s personal assistant, Siri, might as well be an early prototype for protocol droids like C-3PO of “Star Wars.” The drones America’s sending into battle could be precursors to the robot army that rises up against humankind.
As robots get smarter and more competent, will we benefit? Robot wars aside, economists, at least, have assumed the answer is yes. The less menial work humans need to do, the more we can focus on the creative and flexible work that humans excel at—jobs that involve talking, listening, selling, inventing, choosing, designing. Most textbook economic models economists learn in school assume that when new-fangled machines drive growth, everyone ultimately benefits.
But a number of economists have noticed that today’s technological changes are affecting workers differently than those models would predict. To the extent that the economy has rebounded, it has added fewer jobs than in past recoveries, as businesses take the opportunity to replace more people with machines.
Some experts, like Jeremy Rifkin at the Foundation on Economic Trends, have gone so far as to predict that we’ll soon be living in a workerless world. But certain people are going to lose their jobs before others—and economists are beginning to take a hard look at the workers for whom robots may be a more immediate menace. Edward Leamer, an economist who teaches at the UCLA Anderson School of Management, has argued that while information technology is creating opportunity for the most talented workers, it’s exacerbating income inequality by reducing the skills needed to perform most jobs. And now a disturbing new study by two researchers at Boston University and Columbia University is suggesting that fast-moving automation may come at the expense of another group of victims: our kids.
Part of the reason economists are rethinking the impact of technological change is that machines can do so much more than they ever could before—enough to replace human workers outright. Not everyone wants to use the word robots: As Leamer pointed out in an e-mail, it “suggests physical labor, as in robots are replacing humans in manufacturing.” But whether you call them robots, smart machines, or computers, they are replacing not only factory workers, but tax preparers, bank tellers, service workers, and other people in jobs for which humans once seemed uniquely qualified.
To Laurence Kotlikoff, a Boston University economist who’s interested in generational equity, the change is obvious. In the past, taxis might have replaced horse-drawn hansom cabs, but both required human drivers. The driverless cars being developing today will conduct themselves. Jeffrey Sachs, an economist who heads Columbia University’s Earth Institute, had made the same observation: “There are auto plants where you go where there are basically no workers inside,” he says. At one he visited a few years back, there was no mess, no grease—“just this humming sound of huge robots working.”
In the context of rising unemployment, these observations prompted Sachs and Kotlikoff to ask an uncomfortable question: “What if the Luddites are now getting it right?” they write. In a new working paper titled “Smart Machines and Long-Term Misery,” they pursue this question and reach a worrisome conclusion: Computer programs and robots may now be competing with workers in a way that leaves some groups—including supposedly tech-savvy young people—worse off in the long term.
It was clear to Sachs and Kotlikoff that something was messing with the wages of younger workers. While 60 years ago, the income of men between 45 and 54 beat out that of 25- to 34-year-old men by 4 percent, today the gap has grown to 41 percent. Young people might be comfortable with smartphones and fluent on the Internet, but that doesn’t necessarily mean they have the skills to land those jobs that robots haven’t made obsolete.
To explore this possibility, Sachs and Kotlikoff created “an admittedly highly stylized life-cycle model” that begins with the idea that machines and unskilled workers can easily substitute for each other. They assume young workers are unskilled workers: It takes time to accrue education and on-the-job training. With this framework (a variant on a standard economic model) in place, they run through a series of equations, the last of which indicates that, over the long term, when machines’ productivity goes up, young people have a harder time investing in their own skills and in the technology that’s boosting economic growth. In other words, when machines can easily replace lower-skilled workers, we move toward a world where every generation is actually worse off than the previous one—even as the economy grows.
The way this model plays out stacks up with other economists’ findings about the downsides of technology. “Tech progress can make the pie bigger yet still make a lot of people worse off. It’s the big paradox of our era,” says Erik Brynjolfsson, who heads MIT’s Center for Digital Business. Although he says he wouldn’t necessarily start with the assumption that young people are unskilled, he believes the paper is raising the right issues. In the center’s work, “we show some broadly similar things that technology can make people worse off,” Brynjolfsson says.
The muddier question is who those people are—and whether, as Sachs and Kotlikoff suggest, younger people are among the groups being harmed. “There is much to the Sachs and Kotlikoff paper, but I don’t view it mainly as an old vs. young effect,” says economist Tyler Cowen. It may not make sense to assume that young people are the unskilled ones: “The key question is who works well with computers and who is competing with computers,” Cowen says. Often, he points out, technological change favors the young—just look at Mark Zuckerberg—so it’s perhaps too simple to group young people as one unskilled mass.
Of course, Zuckerbergs are not the norm. “There are a lot of young people to whom this model actually applies. Probably more than half of young people,” drawn, for instance, from the two-thirds of 25- to 29-year-olds without bachelor degrees, says Sachs. “If our labor force was all young computer programmers, we probably wouldn’t be having this discussion, period.”
Sachs and Kotlikoff are economists, not revolutionaries; they aren’t Luddite enough to want to smash the machines. Instead, they suggest a mechanism for making sure benefits are more evenly shared—in this case, a redistributive tax. Other economists think that it’s still possible to get people the right education to do the jobs robots can’t.
It’s going to be a tough slog identifying those truly irreplaceable human roles, though. “I don’t know if we’re ever going to fall in love with machines,” Kotlikoff offers. But even that’s already happening: In 2009, a Japanese man married his virtual girlfriend.
Sarah Laskow is a freelance writer and editor in New York City. She edits Smithsonian’s SmartNews blog and has contributed to Salon, Good, The American Prospect, Bloomberg News, and other publications.
For earlier collapse stories, click on the desired date -
July 1-15/2002 + Jun 30.
Dec/2001. Earlier 2001 months accessible via links at bottom of Dec/2001 page.
Earlier Y2000 months accessible via links at bottom of Dec.1-10/2000 page.
Earlier 1999 months accessible via links at bottom of Dec.1-15/99 page.
Earlier months accessible via links at bottom of Dec/98 page.
Check also doomtrackers *Roubini and *Dismal Scientist from The Economist (3/13/99 p.7), and how
the way we're using technology makes life harder instead of easier at *NetSlaves.
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