Saturday, December 28, 2013

Why the middle class is so great

Working, but not desperately working.

Last week's post about robots and what happens when humans don't need to do anything raises a basic issue of economics- what is the point of an economic system? Is its point to rape the earth of its biological and mineral resources? Is it to justify the dominance of one class over another? Is it to afford a select few the leisure to do absolutely nothing? Is it to distribute goods of all kinds in accordance with each person's value, Or is it to make as many humans as happy as possible given the means at our disposal, whether those means are limited or unlimited?

People may idolize idleness, as the golden reward after a life of toil, a social right based on the exploitation of lesser classes, or the utopia of a roboticized world. But however arrived at, it is not, in fact, conducive to happiness. Not after the first day or two. Nor does entertainment fill the void on its own. Constant entertainment, without the fundamental bass of productive endeavor, palls quickly. Perhaps competition is the ultimate occupation, coming to the fore when other needs have been sated. But competition is also ultimately destructive when not carefully channeled to productive or legitimate ends.

So one point of an economic system is to keep people productively occupied. Hopefully with work they find interesting and fulfilling, but at any rate with something by which they can be and feel useful to others. If abundance is the norm, with sustanance a given, then this may be the *only point of an economic system. While some people have the fiery self-motivation and talent to create their own productive (or predatory) path- say, in the arts, or in entrepreneurial business, most people need more of a push.

Thus our system of capitalism, where one's income depends on some kind of service rendered to others, judged by the labor market, does its immense work of matching roles and enrollees admirably, for the most part. But it is hardly the last word. If due to the high productivity or ultimate roboticization of the economy as a whole, the vast majority of people do not have to work for sustenance, what then? Should the system allow vast riches to flow to the few so that the rest, while they could be amply provided for with little effort, end up scrambling for low-paying or even non-existent positions in a terrifying game of musical chairs?

Clearly, it is much worse to have no work due to due to the system malfunction of unemployment versus the blight of excess riches. Both waste the energies of a person who could be of service to her fellows. Unemployment adds existential and social terror. Low-paid work is less than optimal, tending to trap people in menial tasks that should be automated, and keep them (and their children) from the education and other cultural resources which would make them capable of greater service to their fellows, not to mention just basic happiness and flourishing. If menial tasks absolutely have to be done, that is bad enough. But why pay poorly for them as well?

My point is that the ideal economic system is one that generates the broadest and largest middle class. This is the economically (and psychologically) optimal condition, not only by way of political bromides aimed at the majority (if the middle class is the majority), but in an objective sense. It is the class that has the incentive to work diligently at productive jobs, the education to be maximally productive, and the means to enrich its communities and its children to generate still better future conditions along the same lines. The possible / prospective services that can keep everyone employed are absolutely boundless- they do not have to be "stuff" manufactured on an assembly line or drilled out of the ground. They can be philosophizing, teaching, music making, writing, street performing.. we just have to find a way to organize payment. It is sort of unfortunate that so much human creativity has over the last decade moved to the internet and become simultaneously far more productive than ever and far worse-paid, if paid at all. But that is a question of business models and what, perhaps, the public sector can do to either directly pay for creative works, or to alter the rules to make them financially sustainable.

Historically, high culture and high education were the preserve of the elite, and if a revolution generated more egalitarian economic conditions, equality would be achieved at a low level, not a high one. Great cultures of antiquity were built on brutal inequality. But after the French Revolution, and much more so in our current developed and wealthy age, this rule has been turned on its head. Cultural leadership is not a matter of wealth at all, and movement after movement of popular music and other arts rise from humble roots, not wealthy ones. Economic leadership comes from our meritocratic educational and corporate structures, not from the skull and bones (and blood) elites of old. The idea that the wealthy provide some special service that enriches us culturally or economically is completely defunct. So the only remaining rationale for wealth is simple just deserts- the reward of special and individual service to others, through leadership, invention, innovation, thought, and the like. Which pretty much leaves the bulk of the financial industry by the wayside, not to mention the lucky (ducky!) inheritors of wealth.

This is not a revolutionary manifesto, just a statement of principle about the point of our economic and political community. As we look ahead to the imperatives of global warming and other dire environmental issues, some observers advocate "degrowth". But this is misguided. Getting off fossil fuels doesn't mean we have to wear hairshirts and eat soy wafers. It doesn't mean that everyone can't or shouldn't be employed doing useful things for each other. The means of economic organization and the distribution of its rewards are separate issues from what it is that we have to distribute.

  • Keynes on the future mix of consumption, leisure, investment. At any rate, involuntary unemployment is the worst possible, and unnecessary, outcome.
  • But it is perfectly fine with corporations: Krugman.
  • And underemployment is the norm in capitalism.
  • Robert Reich on inequality.
  • Carbon needs to stay in the ground... and would need to be written off.
  • Wealth makes us into jerks. Yeah, we built it!
  • Perspectives on the evolution of capitalism- the constant battle between regulatory stabilization and financial innovation, aka destabilization. Such as under surrender monkey Alan Greenspan.
  • For all of the UK's austerity madness, it still has better prospects than the Euro union.
  • Bernanke: good or bad?
  • On the reason for the season.
  • Economic quote of the week, from Bill Mitchell:
"The US economy has stacks of idle capacity so increasing net public spending will bring real resources back into productive use rather than straining the price level. That doesn’t mean I support leaving the tax structure as it is. But I would consider that question quite differently from the aims of improving the fortunes of the poor. 
Further, I would also declare most speculative financial activity to be illegal (given it is unproductive and destabilising) and that, alone, would put a major dent in the incomes of the uber-rich in the US and force them to get a real job."

Saturday, December 21, 2013

A robot conundrum

Can we use them, once they are usable?

The trajectory of future technology is pretty clear. We already talk to computers, and they talk back. Soon they will be driving us around on the open roads. Where will it all end? What I want a robot for is to do my laundry and dust the house. What will it take to get there? Honestly, I think it will take consciousness.

Robots will eventually do all kinds of jobs. But to do general tasks like health care and home maintenance, how smart will they have to be? Very smart. And this leads to a conundrum- if robots are smart enough to fix up around the house, hang the Christmas lights, mow the yard, and do all things we don't want to do, won't they have the consciousness that gives them rights against being callously exploited to do just those jobs?

A great deal of intelligence would be required to be a general helper robot. We consider chimpanzees highly intelligent, and worthy of extensive protections of a humane character. But they are not nearly intelligent enough to be a handy helper around the house. Quite the opposite, in fact. Of course they were never designed for such a role, and in contrast share naturally much more of our emotional makeup, which leads to our mutual empathy. But still, it is hard to imagine that the requisite intelligence could happen without some modest dose of emotion and all-around empathy-engendering sense of self, of purpose, of social facility- in short, human-ness.

A robot-heavy future is portrayed in Isaac Asimov's The Naked Sun, whose planet Solaria has a tiny population of humans, served by countless robots, affording all possible luxury. Robots run all factories, including those making more robots, keep house (i.e. mansions), attend all needs, serve as police, and raise children, all under the most tenuous supervision. It is a little far-fetched to imagine such possibilities without also considering that these robots have a consciousness that reaches as far as that of their masters, comprehending the workings of the world they are in, including their own role in it.

Would they have emotions regarding self-worth, self-determination, freedom? One would imagine that this comes with the territory of consciousness. Such beings must look out for their own interests to some degree, to be able to function. They need to experience pain or some analog in order to avoid damage. They need to function socially, interpreting the unavoidably complex and conflicting needs of humans in order to serve them. Jeeves comes to mind. They may not need to be quite as greedy, competitive, and self-centered as humans are, but some of such emotion is required for independent and useful agency.

Also, at a certain high level of functioning, we may not be able to tell very clearly what such beings feel inside, subjectively. Even if we think they are programmed to feel no social pains at being a servile class, or annoyance at being ordered about by, say, an ignorant or even mischievious child, their complexity at that level is likely going to make it impossible to know for sure. Many complicated computer systems already are quite a bit beyond anyone's full understanding, leading to the many software contracting fiascos in the news.

Ironically, Asimov's Solaria is a sort of hell where the humans neurotically isolate themselves from each other and tend to lose their capabilities and interests- a common syndrome of the overly well-off. So in such a future, it's no good, either for the robots or for us.

  • Krugman on the progressive program, rolling back the feudal class war.
  • Guess which debtors get the shaft, and which creditors get first dibs?
  • Fifth graders must not think for themselves!
  • Will CEOs and other corporate officers presiding over crime be prosecuted?
  • Gun nuts deserve intensive Freudian therapy.
  • Religion is not good for politics, nor is politics good for religion.
  • Yes, she really was a welfare queen, and so much more.
  • The US biomedical research establishment is unsustainable and cruel to trainees. STEM shortages are, incidentally, a "myth".
  • Annals of feudalism- temp workers.
  • Economics graph of the week, from Martin Wolfe, financial times. Where does all that superior US productivity go? Not to ordinary people, let alone to public services.

Saturday, December 14, 2013

Alta California, filibusters, and the exceptional nation

A little California history. Mentioning General Vallejo, by Allan Rosenus, and 75 Years in California, by William Heath Davis.

Is the US exceptional, and exceptionally good? Are we the exceptional nation just because we have the biggest navy, or for some more positive attribute? Are we generous, or greedy? Do we confer democracy and good government on other nations and stand as a beacon of hope to the downtrodden, or do we confer kleptocracies and rob the downtroden of the little mite they have through pernicious trade deals and relentless consumerism?

We have shown many faces to the world over the years, and the recent JFK assassination anniversary was a chance to reflect on some of them. Oswald was apparently incited to some degree by the (true) stories he had heard in Mexico of the plots carried out by the US to assassinate Fidel Castro of Cuba, over and above the Bay of Pigs invasion. Our history in Latin America generally is a rather uninspiring one of rampant meddling and empowerment of the worst elements available. If one looks up the term "filibuster" on Wikipedia, one is met with a cavalcade of such instances of "manifest destiny", where Americans tried, with more or less success, to take over various Latin states, which must have seemed ripe for the picking, in an imperialist kind of way. For filibustering is unlawful predation, hostage taking, free-booting, meddling, etc. in another country, only later becoming that parliamentary gridlocking device.

The history of California is a fine example of this tradition. I have been reading two books: "General Vallejo", an excellent biography by Alan Rosenus, and "Seventy Five years in California", a beautifully written and very detailed memoir by William Heath Davis, an early merchant.

Spain set up a trail of missions up the California coast starting in 1769, enslaving the native indians with the Catholic church's one-way ticket to heaven, forming ranchos where the padres were in charge, each had a small military detachment to maintain control, and a vast flock of "conversos" to do the work. Who incidentally a died like flies from the treatment, the novel diseases, diet, etc. Mexico revolted from Spain in 1821, and the departments of Baja California and Alta California came under Mexican control, the missions were divided up and granted to, typically, former military officers. Such grants gradually encroached inland, past the coastal areas where the missions were originally confined. General Mariano Vallejo, who commanded the Presidio at San Francisco in 1833, among other posts, was granted large ranchos in the Sonoma area, north of the bay.

The rancheros slaughtered a portion of their stock each fall for hides and fat alone, leaving the rest of the carcasses, which attracted bears, which gave rise in turn to the excitement of roping and killing bears. California now has no grizzly bears, and maybe 30,000 black bears.
Mexico's hold over California was remarkably tenuous. Its own post-revolutionary government was tumultuous and unstable in the extreme, so its capacity to pay for or pay attention to the far-away province of Alta California was meagre. Mexicans looked down at their Northern rustic brethren, who used their enormous ranchos to run thousands of cattle and horses, their hides and tallow being pretty much the sole export of the province for the pre-US period, along with the furs of wild animals such as otters. The racheros carried on the Padre's practice of enslaving the native Americans, paying them solely in clothes and food, which was sometimes served from common troughs.

Indeed, it was a close-run thing whether California was going to side with the South or the North in the brewing Civil war. However, the predominant cultural influence from the US came from Boston, whose merchants (including William Davis) had traded up the coast since the Mexican accession,  (Richard Dana's Two Years Before the Mast is another great book in this historical literature), and married into the Californio social system.

"The native Californians [Californios, not Indians] were about the happiest and most contented people I ever saw, as also were the early foreigners who settled among them and intermarried with them, adopted their habits and customs, adn became, as it were, a part of themselves." - William Heath Davis, 75 years in California.

The exception was Sutter's fort. John Sutter was a Swiss/German adventurer and neer-do-well who after various failures around the world arrived in California (1839) with a small German entourage and enough charm to buy up Fort Ross, the Russian outpost North of San Francisco which was shutting down for lack of otters, which they had hunted to extinction. Sutter promised payment in goods (to be sent to Sitka, the remaining Russian outpost) to be raised around his land-grant near what is now Sacramento, also obtained with a good bit of charm from the Mexican authorities. While far from the coast, Sutter's fort (equipped with the materiel from Fort Ross) was still on navigable waters (the American and Sacramento rivers, and strategically placed at the foothills of the Sierras to intercept immigrants coming overland from the East. It soon became a hotbed of Americans and pro-American sentiment.
"Having accomplished my purpose of landing Captain Sutter at the junction of the American and Sacramento rivers with his men and his freight, the following morning we left him there, and headed the two vessels for Yerba Buena [now San Francisco]. As we moved away Captain Sutter gave us a parting salute of nine guns- the first ever fired at that place- which produced a most remarkable effect. As the heavy report of the guns and the echoes dies away, the camp fo the little party was surrounded by hundreds of the Indians, who were excited and astonished at the unusual sound. A large number of deer, elk, and other animals on the plains were startled, running to and fro, stoping to listen, their heads raised, full of curiosity and wonder, seeming attracted and fascinated to the spot, while from the interior of the adjacent wood the howls of wolves and coyotes filled the air, and immense flocks of water fowl flew wildly about over the camp. 
Standing on the deck of the 'Isabel' I witnessed this remarkable sight, which filled me with astonishment and admiration, and made an indelible impression on my mind. This salute was the first echo of civilization in the primitive wilderness so soon to become populated, and developed into a great agricultural and commercial center."

Enter John C Fremont, Major in the US army, whose assignment was to find the source of the Arkansas river. While the US was heading to war with Mexico over Texas, government policy at the time was to be a nice as possible to the Californians and not give any cause for grievance. But greed and glory were overwhelming temptations, and Fremont, who was evidently a persuasive and charismatic figure, led his troop of some 50 soldiers through surveys through the West, into Oregon, and down into California. There he began agitating for a takeover of California, under what seems to be a general sense of imperialism, manifest destiny, ambition, greed, etc. And perhaps competition with the other imperial powers of England and France. At first he kept the US out of it by not using his own soldiers, rather inciting a rabble of malcontents around Sutter's fort to start the proceedings.

Led by William Ide and the stuttering Ezekiel Merritt, this posse descended on General Vallejo's ranch in Sonoma in June, 1846 and took him prisoner, back to Sutter's fort. As Vallejo was the leading figure of Northern California at the time, this esentially decapitated local resistance, in case any was contemplated, which it was not. The Californios had had several revolutions against their governors from Mexico, and other political disagreements, but never were blood shed or manners forgotten. In contrast, Vallejo and several other prisoners were treated poorly, losing a great deal of weight, and the Anglo rabble stole countless horses and other livestock throughout the area. Along the way, they proclaimed a somewhat comical "California Republic", complete with flag, whose mascot was mocked as looking more like a pig than a bear. Fremont took increasing control, and on a foray out to Marin county, ordered three Californios captured in San Rafael to be shot in cold blood.

The original "bear" flag of the bear flag revolt.
It all created a great deal of bad blood between the Anglos and the Californios, and was completely unnecessary, as the direction of the political winds had long been clear. Leading Californios, especially Vallejo, were pro-American, favored development and competent government for the state, and preferred the nearby Republican power to a European imperial monarchy such as England or France. Indeed, U.S. Commodore Thomas Jones had captured the capital of Alta California, Monterrey, in 1842, holding it for a day before, amid a flurry of apologies, lowering the US flag once again when it was made clear that his belief that war had been declared between the two countries was in error. Not a shot had been fired, let alone a drop of blood spilled.

As it happened, while the Bear flag revolt was developing, war had indeed broken out between the US and Mexico over the Texas territory. US Commodore John Sloat pulled into Monterrey on July 7, 1846 and this time proclaimed California a US posession for good, and without any trouble. Upon meeting Fremont, he chewed him out for his filibustering, against orders. Eventually Fremont was court-martialed for his various departures from orders and policy, but let off the hook through his political connections and returned to service in the Civil war, only to be dimissed again by President Lincoln for corruption and insubordination. Vallejo for his part was eventually impoverished through a combination of bad business decisions, excess generosity, chicanery by Anglo partners, and finally a callous decision by the Supreme Court against some of his land claims.

The adventures and meddling of the sort that Fremont engaged in are by no means isolated in US history, under either official or unoffical auspices. The exceptional nation, with manifest destiny, muscular Christianity, a white man's burden, family values, and occupying a shining city on a hill, can do whatever it takes to remake the world in our image, which is naturally the best image imaginable.

Surely we have very beneficial things to offer others. But looking back, we have also run brutally roughshod over so much in the drive to conquer- natural, native, and foreign- that some grief and humility is also called for.

Saturday, December 7, 2013

Inequality- are unions the answer?

What role do unions play in addressing inequality? Relatively little, compared with public policy.

Are unions the answer to the current tide of inequality? I don't think so, either practically or ideally. One enormous fact about unions is that they are incredibly unfair. If you are in one, then great, you may strike it rich, so to speak. If you are in a good one that knows its business, you may be able to capture much of that business's profits. But if your union is ineffective, or non-existent, tough luck. Unions don't do you any good, other than their general political activities, which can be beneficial to the working class. Or not...

The conflict can be even more pointed. Government employee unions, like the local police and firefighters, use their political influence and concentrated money to capture resources that local politicians don't care that much about or regard as their own.. taxpayer dollars. The current public pension debacle is a long story of spineless politicians bought and paid for by unions that attack the public interest for private gain.

Unions also create a great deal of strife, usually for good causes, but not always. They are structured as adversarial institutions with a very narrow scope. When sufficiently successful, they can bring an entire industry to its knees, as the US car industry learned to its dismay. They have a far less complex job than their adversary does, which has to run the complete business.

Unfortunately, in the absence of unions, corporations are happy to capture all the productivity gains of their workers for 1) their management, and 2) their shareholders, leading directly to the inequality that has been culturally and economically so damaging in the US and elsewhere. The labor market is a disaster- for many reasons, it is not efficient or fair in valuing work, let alone lives.

So what is needed? The touchstones for any solution are fairness and effectiveness. One example is raising the minimum wage. This is a no-brainer that lifts all workers at or near the minimum wage level to a more livable level. The minimum wage should be set at least at the poverty level, which currently 23,000 per year, or $11.08 per hour. I would support a wage higher than that, to 1.5 times poverty level, with perpetual indexing in the future. That might actually reduce poverty in the US.

A second element would be a guaranteed minimum wage job, provided by the government, if no others are available, so that all able people can get work and serve others for a decent wage. As previously described, such work is plentiful in principle, and much of the funding would come from lowering the cost of existing safety net programs.

A third element would be universal equity in pensions and workplace benefits. The idea that youngsters contemplating their career paths can make a rational decision at a young age to evaluate prospective professions based on their ultimate pension payouts is insane. That outcomes vary so dramatically is grossly unfair. All workers should get the same treatment, which in an ideal world would involve a beefed up Social Security system, raised to 1.5 or 2 times its current level, and cancellation of the 401K non-system, which just bleeds money to Wall Street. Beyond that, whatever workers save on their own should be their own business, and get special tax treatment at only nominal levels, if at all. Mitt Romney's $100 Million gold-plated 401K is an appalling abuse and must never be allowed to happen. Similarly, health insurance needs to be removed from the workplace, completing the Obamacare trajectory, so that the employer-employee relationship is not clouded with ancillary issues and even more power asymmetries than are necessary.

A fourth element, which goes without saying, is strong Keynesian policy at the federal level. We need a couple trillion more stimulus to resolve the current recession in a timely manner, and a government that actually cared about its people would provide it. The only way a labor market works for workers is if unemployment is low. Then we can worry about inflation, for which there are plenty of other tools.

A fifth element would be to return to the union issue. With a higher minimum wage, and guaranteed work, and strong Keynesian (even MMT) policies on the federal level that keep employment high and the labor market favorable to workers, there would be less need for collective bargaining. Indeed, I would end collective bargaining for pay and benefits. Benefits would be nationalized or standardized, and pay would fall to the labor market and to individual bargaining. Workers could not be fired without cause after working for some probationary time, say a year. Basic protections like that should be standardized, not left up to individual negotiations.

Unions would still allowed, indeed they would be mandatory for all workplaces, but only to negotiate miscellaneous work conditions and manage individual employee negotiations. Every company would be met with an equal sized union composed of its workers, organized automatically, just as the shareholders are organized. And they would be empowered to have a vote on the board of the company, to bargain about most non-monetary conditions. Unions would also be the main employment agent for each worker, bargaining individually for pay, and matching the employee with external jobs and employers as part of the negotiation process.

Any industry-wide corporate grouping would be complemented by a worker group of equivalent size, insuring that worker interests are counted at the table at all levels. Both corporations and unions would be under much greater restrictions against any kind of spending on individual political campaigns and lobbying. There would be no more organizing fights, etc. Insuring the proposed separation between pay and conditions negotiation may well be unrealistic, however. There are many overlaps, such as seniority systems and time off allowances, etc. But in principle, this would be a way to reconcile the true need for unions in countering employer power with a need for a labor market that is effective, fair, and transparent.

One way to make the labor compensation market more effective is to make it transparent. Employers today benefit from the "privacy" of salary data, hiding what they pay employees. The Lilly Ledbetter case would never have happened if such secrecy were not routine, and routinely damaging. It is a huge power assymetry, benefitting employers. Yet public salary and wage data in many other fields, such as professional athletics and boardrooms, doesn't make the sky fall down. James Surowiecki had an interesting article recently on the perverse effect of public CEO pay disclosure, to whit that boards typically want to believe that they have above-average CEOs, so mandated transparency tends to increase CEO pay, not decrease it. The same mechanism is needed in the trenches. Everyone needs to know what everyone else is being paid.

Beyond that, with contemporary technology, the labor market could be much more effective, putting workers and employers into a perpetual market that evaluates talents and needs with great specificity. Each worker could have a personal profile perpetually active that all employers (and anyone else) can see. And vice versa with job positions. The matchmaking could be highly automated and continuous. It would be like having an agent working on your behalf, whether entirely technological, or aided by the worker's union.

The erosion of the middle class may be a natural consequence of laissez faire. But it is not something we have to accept. With a modicum of public management of the system, we can have one that grows the middle class and makes us a more civilized nation.

  • Plight of unions, cont...
  • Excess CEO pay, funded by you and me.
  • Our climate.. apathy running rampant.
  • Community for the godless.
  • The terrible economy, yes, it is crushing the youth.
  • Immunity for financial crimes? They need to be sent to jail, not to GO.
  • Personhood for companies? No, no, no.