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."

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