Wednesday, October 08, 2014

Reluctant pessimism...

One unspoken reason for my posting pause was a fear I was becoming just another grumpy fault-finder. My theory was I would wait until the clouds cleared and I was able to ferret out good news and how it could apply to agriculture. I thought the myriad changes occurring in our farm and lives were distorting my views.

This could still be the case. But it could also be the reasons I am unsettled have some basis in reality. For example, while I am moderately secure in the outlook for Jan and I, and confident our sons will manage well, I am troubled by the future I see for our grandchildren.

Turns out I'm not alone. (And I am aware that this mindset will incline me to seek out confirming data.) But consider typical look forward from someone whose judgment I value.
It’s certainly possible that we’re on the verge of a pay surge, much as we were in the mid-1990s, when the situation also seemed bleak. It’s also possible that the forces behind the great wage slowdown – from globalization to our often-sclerotic government to (at least for many workers) technological change – are still more powerful than the positive forces. In that case, the wage slowdown won’t end until the country makes much more progress in improving education, cutting medical waste and energy costs and creating a more responsive, nimble government.Either way, the great wage slowdown, or the end of it, will help set the tone for American life in the coming decade. It has already done so in the century’s first 15 years, causing widespread unhappiness with the country’s direction and leading voters to shift partisan directions multiple times. The political turmoil isn’t likely to end until the economic reality changes. [More of a short must-read]

The value of a meritocracy has always struck me as worth the strain to operate under. The competition will keep you strong or some such nonsense. But two things seem to have intruded on the theoretical workability of such a system.

First, we now can choose between the merits of 7B people instead of those in our local community. This meant that before there was room for the mediocre to achieve mediocre rewards simply because they were the best around at that level. Now we sort out the best from the globe, which means the fortieth-best is still the best ever somewhere. 

The second is the growing possibility of not enough work. This is what Leonhardt (above) talks around, and Ryan Avent addresses full on.
The world has more than enough labour. Between 1980 and 2010, according to the McKinsey Global Institute, global nonfarm employment rose by about 1.1 billion, of which about 900m was in developing countries. The integration of large emerging markets into the global economy added a large pool of relatively low-skilled labour which many workers in rich countries had to compete with. That meant firms were able to keep workers’ pay low. And low pay has had a surprising knock-on effect: when labour is cheap and plentiful, there seems little point in investing in labour-saving (and productivity-enhancing) technologies. By creating a labour glut, new technologies have trapped rich economies in a cycle of self-limiting productivity growth.Fear of the job-destroying effects of technology is as old as industrialisation. It is often branded as the lump-of-labour fallacy: the belief that there is only so much work to go round (the lump), so that if machines (or foreigners) do more of it, less is left for others. This is deemed a fallacy because as technology displaces workers from a particular occupation it enriches others, who spend their gains on goods and services that create new employment for the workers whose jobs have been automated away. A critical cog in the re-employment machine, though, is pay. To clear a glutted market, prices must fall, and that applies to labour as much as to wheat or cars.Where labour is cheap, firms use more of it. Carmakers in Europe and Japan, where it is expensive, use many more industrial robots than in emerging countries, though China is beginning to invest heavily in robots as its labour costs rise. In Britain a bout of high inflation caused real wages to tumble between 2007 and 2013. Some economists see this as an explanation for the unusual shape of the country’s recovery, with employment holding up well but productivity and GDP performing abysmally.Productivity growth has always meant cutting down on labour. In 1900 some 40% of Americans worked in agriculture, and just over 40% of the typical household budget was spent on food. Over the next century automation reduced agricultural employment in most rich countries to below 5%, and food costs dropped steeply. But in those days excess labour was relatively easily reallocated to new sectors, thanks in large part to investment in education. That is becoming more difficult. In America the share of the population with a university degree has been more or less flat since the 1990s. In other rich economies the proportion of young people going into tertiary education has gone up, but few have managed to boost it much beyond the American level.At the same time technological advances are encroaching on tasks that were previously considered too brainy to be automated, including some legal and accounting work. In those fields people at the top of their profession will in future attract many more clients and higher fees, but white-collar workers with lower qualifications will find themselves displaced and may in turn displace others with even lesser skills. [More good stuff]
I am coming to the reluctant conviction the system I have thoroughly believed in is not so much broken as superseded - no longer applicable. We simply never envisioned machines that are doing what they do today, let alone a population as large as we now support fairly easily if not evenly.

While I do not think agriculture will be exempt from this questionable advance of progress, there are intrinsic brakes that may slow the concentration in crop farming, at least. Land ownership, cultural patterns, relative isolation from faster evolving urban areas, and other factors could retard but not redirect this trend.

IF this is even close to correct, what should we do as a profession and individually? Those answers I think are contradictory - a tragedy of the common future, as it were. The things I think important for family survival will almost certainly diminish the outcomes for the community.

This has slowly been uncovered as the great weakness of free market systems - without constraint they tend to proceed to wildly unequal systems. Sort of like gravity forming planet, in my mind.
In this at least, Marx was correct. Preventing, or even slowing this, confounds us economically and especially politically.

Proposed solutions all seem an enormous reach from current entrenched positions. Historically, only political turmoil - even revolution has been able to effect such drastic changes. Which leaves us in an uncomfortable position. 

Even as we know our goals will worsen the problem, they make the most sense individually. It's becoming obvious there will only be a few winners in our future. This is the grim future I cannot see how to avoid. And it gets worse. As the competition gets more intense, even broad rules could be discarded. Judging from the accounts of the world of finance, this seems to be verified by fact. Social capital and human links will dwindle and the divide will grow.

This all seemed far too unlikely as it required broad participation from individuals and groups, and went against moral and religious teaching. But with technology empowering the need for fewer participants in the economy, and weaker belief systems, such an outcome is more imaginable.  Not in my lifetime as much as my children and grandchildren.

As I stated, these could just be words arising from my own personal funk. But I'm having great difficulty finding plausible alternative outcomes to argue for.


Anonymous said...

Lots to think about. It could be that your experience as a youth and young man was an aberration in history...that is the post WWII boom the U.S. enjoyed. Consequently, that frames or distorts your relative point of view. Maybe what you're describing and what the United States is experiencing is a return to a long term historical norm in the human experience. You might be trying to find a pattern or explanation where none exists.

John Phipps said...


Good point. Others agree and I will outline their thinking in an upcoming post.

Kelly Haag said...

I appreciate your insight on this issue. I also worry about the future for our children and grandchildren. We have encouraged our children to pursue careers outside of agriculture even though they love the life and value the experience of growing up in rural America and working the land. The economic inequality in this country is not just an urban issue, as stereotypes lead us to believe. It is alive and well here in agricultural community although many are sticking their heads in the sand (dirt?) as a way to ignore the pain associated with admitting that the system that we seem to have bought into is not working. I agree that what seems best for the family farm at this time does not seem best for the community. This is also the problem with the current model of capitalism as it is being practiced in the world. We have abandoned our belief in the importance of community and instead focused in individual success, to the detriment of the global community and also to a growing number of individuals. I do not know how this will play out. I pray that the spirit of humanity will prevail, and we will begin to move toward a new understanding of how human beings will survive and thrive on this blessed planet.