Is Growth Over? — MY COMMENT

by John Brian Shannon

Read Paul Krugman’s fascinating New York Times economics blog “Is Growth Over” which deals with the political, economic and social picture of the future.

Some nations are replacing retiring workers with robots at an accelerating pace — and for good reason.

In Germany, this is an absolute necessity as a huge pool of German workers are approaching retirement and there aren’t nearly enough Germans to replace them. Germany imports (low) millions of workers from Turkey and the MENA nations, but Germany still can’t keep up with the demand for labour in their export-driven economy.

What’s a country to do? Phone all their export customers and tell them they can’t produce all the widgets they ordered? Not the German way!

So, I understand, precisely, the position of the Germans and agree with their moral reasoning and their necessary choice.

While at the same time, I worry about other nations (us) making a massive shift to robotics – for very different reasons, and none of them moral — causing workers (who are human beings, after all) to become redundant while concentrating evermore billions into the hands of the infamous 1% of the population.

A switch to robots to improve the bottom line could become a threat to millions of workers in the coming decades and might become the most profound, social issue since the 1960’s anti-war movement.

Replacing retiring workers with robots (as is the case with Germany now) is a moral decision, which was made to ensure the German economy does not falter and thereby harm large numbers of citizens.

In this case, it is a completely understandable and moral decision, one that benefits vast numbers of German citizens.

Replacing presently-employed workers with robots so that 1% of the U.S. population can make more profit is an immoral decision, which will allow the 1% to keep evermore of the U.S. money supply for themselves at the expense of the other 99% of the population.

In this case, it is not understandable, nor is it a moral decision – as it primarily benefits 1% of citizens over 99% of citizens.

It will come down to this, will we assure human rights for American citizens who want jobs and want to contribute to their nation’s economy, or will we favour a small number of people (the 1%) who want more, more, more, for themselves?

Who is America in business for? The 1% or the 99% of American citizens? It is a political, economic and social decision that voters will need to make in the next election cycle.

Or, put another way, should 3.1 million citizens have near total employment and economic control over 315 million citizens? [315,091,138 U.S. Census Bureau Jan 1, 2013 estimate]

Unfortunately, the 1% may be holding all the cards by the time a full conversation can occur and by the time the masses fully realize this, it may be far too late to do anything about it.

There is a better way. Read the Financial Post‘s “Employee compensation is an integral part of corporate culture” by Marty Parker, for one shining example of a better way. While just the tip of the iceberg, this one example could foreshadow a quiet and heart-warming revolution, one that benefits workers and corporations, while strengthening the very fabric of our Western society.

JOHN BRIAN SHANNON

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King Ludd is Still Dead — MY COMMENT

by John Brian Shannon

Please read “King Ludd is Still Dead” by Kenneth Rogoff — at Project Syndicate.org.

Professor Rogoff’s excellent article has outlined the way our modern economic systems work and his statement succinctly describes the need for change to our present paradigm;

“…and the great economist Wassily Leontief worried that the pace of modern technological change is so rapid that many workers, unable to adjust, will simply become obsolete…”

Workers do become obsolete and must then train for other jobs. Which is VERY inefficient from the national economy standpoint. Not to mention lowering the quality of life for that worker and the family that worker supports.

I believe it is in our best national interest to enhance the ability of skilled workers to continue in their chosen career — rather then having their careers suddenly ended by the economic whims of a local marketplace.

Which is why economists everywhere should be proactively calling for the freedom of movement for skilled labour and semi-skilled labour to match local market demands all over the planet.

For just one telling example, take the people who work in high steel. These are the people who build skyscrapers, communications towers and bridges. These are highly skilled workers and it would be a shame for them to become unemployed, or under-employed on account of local conditions.

Such workers add to the knowledge base of a nation and for them to enter training programs to become bus drivers, painters, or insurance salesmen, is deplorable.

But this is what is happening all over America and other Western nations — and not just to the workers in high steel!

Rather than list all of the skilled occupations which face such calamities worldwide, (that would be most occupations which require skilled workers AND also suffer from the boom and bust economic cycle) suffice to say that many skilled workers can be laid off as a national economy tanks. What then?

Economists should be leading the charge in calling for an international treaty to guarantee and enhance the ability of skilled and semi-skilled labourers to go to where the work is, to live in that country with their immediate family until the project is completed, and then move on unhindered to the next project — wherever it may be in the world.

Most often, these workers will return to their home country when their own nations’ economy rebounds and they are again in demand at home.

Instead of staying in the U.S.A. and becoming bus drivers or shopping mall security guards, they will still be in top form — having kept their skills sharp in the interim and will have learned new techniques and practices from working in different jurisdictions around the planet. They will return with a sharp skill-set, positive experiences, they will be more rounded-out and their quality of life will have been enhanced.

This contributes more to the national knowledge base than allowing these people to drift into other employment, unemployment or under-employment during local economic slowdowns.

Economists should not be leading from behind on this, but should research and arrive at a common position which they should present to politicians and separately to the UN, in order to facilitate economic change for the better — change that will benefit all nations. If economists don’t impart this knowledge to political leaders, then who will?

Freedom of skilled labour to swiftly and easily move to where the work is — equals a more efficient world economy, better quality of life for those workers and their families and additional knowledge for the national skilled labour knowledge base.

John Brian Shannon

ABOUT JOHN BRIAN SHANNON

I write about green energy, sustainable development and economics. My blogs appear in the Arabian Gazette, EcoPoint, EnergyBoom, Huffington Post, United Nations Development Programme, WACSI — and other quality publications.

“It is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.”

Green Energy blog: http://johnbrianshannon.com
Economics blog: https://jbsnews.wordpress.com
Twitter: @JBSCanada

Communist Price — or Western Value?

by John Brian Shannon

Hey, stop, what’s that sound? Take a look around. Is everyone driving the cheapest car or carrying the cheapest handbags?

Hell no!

And why is that, exactly? Why isn’t everyone driving the latest Chery car — which is an extremely affordable car built in communist China? Or, why isn’t everyone buying the blue communist party uniforms made from a long-wearing material that will stand up to the elements for decades? Why are people all over the world buying expensive cars, handbags, jewellery and electronics, just for a few examples?

The reason is; There are effectively, only two kinds of markets in the world. Upmarket and downmarket and there are legitimate reasons for the existence of both markets.

On the one hand, you have upmarket goods and services, which have traditionally been the preserve of the rich Western nations along with an entire middle class in the West able to well-afford those upmarket goods and services. How convenient!

Could it have been planned this way? Why yes, it was. It has been the economic miracle of recorded history.

On the other hand, downmarket goods and services which have traditionally been manufactured and sold in the developing world — are priced according to local market conditions there. Very convenient for the developing world.

Since the industrial revolution, this is how the marketplace has worked. Upmarket goods were manufactured and sold in wealthy Western countries and downmarket goods were manufactured and sold in poorer countries.

Until now.

Suddenly, many upmarket goods are being manufactured in developing nations and a small but growing percentage are being purchased in developing nations.

The West used to own this part of the market, but for the first time since the Industrial Revolution, the East is increasing it’s ownership of this formerly Western-only marketplace. At the same time, the downmarket goods and services haven’t gone anywhere and are still being manufactured by and sold in the developing nations.

Translating into ‘a loss for the West’ if you see things through the Western prism. If you see things through the Eastern prism, you might call it, ‘Advantage East’ or something like that. I call it something else, but more later.

Let me speak clearly on the situation the West now finds itself in; When you haven’t manufactured downmarket products in the first place, but then relatively suddenly, you lose fully half of your upmarket manufacturing to the developing world — that can only be called a paradigm shift in the marketplace.

Some Western politicians, corporations and junior economists have looked at this and in a panic, have announced that we must lower our costs — to match our competitors costs in the developing world! And, either by lack of action, or by actively supporting this line of thought, they have allowed this trend to continue in the Western nations and over time the problem has become much worse. Unwitting traitors, all.

Wages, benefits, unions, workers, unemployment, health care, retirement age, the housing market, traditional Western upmarket manufacturers — all these have felt the winds of change blowing in from the developing nations. It’s a race to the bottom.

“We must compete with China, we must match their labour rates, lower our social entitlements, we must lessen our national infrastructure spending — otherwise we will be beaten in the international marketplace by countries which already have those lower costs built right into their economy” — or so the thinking goes.

Which is wrong.

Rather than call this new paradigm, ‘Advantage East’ or ‘Loss to the West’ — I call it what it really is, ‘Opportunity Knocks‘ for that is what it is. The shift in the world economy is not a time to recoil in horror and then race to the bottom to try to match our competitors costs.

It is a time to do what we do best. It is a time to do what we do better than any other nation or bloc of nations. It is time to remember what has made us great since the beginning of the industrial revolution — and profoundly, do more of it.

If the great wisdom says that we must win, or at least compete in the great race to the bottom by lowering our labour and other costs and manufacture products of lesser quality, why aren’t we all driving Chery cars and buying no-name handbags?

Why are car companies like GM, Ford, Mercedes, BMW, Land Rover, Toyota, Lexus, Infiniti and the like, selling at near-record volumes and recording great profits? Why are Chanel, Louis Vuitton, lululemon and many others selling their wares at good volumes and profits?

Value vs. price.

In the race to the bottom, the only thing that matters is price. Price of labour, materials, production line, merchandising and profit. Price, price price, comrades!

If price was all that mattered, wouldn’t we all be driving cars built by China’s Chery Motors, or India’s Tata Motors? But, we’re not. And that is not to knock those cars — as I said above, there is a legitimate market for BMW’s, just as there is a legitimate market for economically-priced cars.

If price was all that mattered, we would all wear the blue communist party uniforms, which cost the equivalent of $2.00 U.S. dollars. But, we don’t. Many of us in the West think nothing of walking out of the mall with a $60.00 pair of jeans, or a $100.00 pair of dress shoes. Why? The ‘price-only mindset’ says it is illogical to spend money on clothes.

But we do, because we know the value, of, well, value. If you are fortunate enough to own a Toyota or a Mercedes, you know that you enjoy the ownership experience of a quality vehicle, that you will be well-protected in case of a crash, it will last a long time (assuming you do the proper maintenance) and you can in good conscience, gift it to one of your kids after they graduate and know that they will have a safe, reliable car to drive to college and it will still be in great condition many years later.

Why do many women buy a Louis Vuitton handbag? Why not a purchase based on price alone? Well, I can’t answer that question for you. But, I notice those bags continue to be very popular and it is the rare woman in this part of the world that doesn’t have at least one. It is completely illogical from the ‘price-only’ perspective.

Which is my entire point. The price of something is just the price. Anybody with any disposable income will always opt for a better-quality ownership experience and will pay more for a better quality product  and sometimes, much more!

Which proves it’s not about price. It’s about value for money. So, let’s stop trying to compete on price.

Our economists must convince government policymakers of that fact. We need to stop trying to out-compete the communist system and their communist-priced products. It is a battle we will lose every time, for they have already won that battle. The  downmarket was always theirs. It is a state-subsidized market. We can’t compete in that low-profit world, unless we merge our corporations with our government to create our own communist state. Not many takers on that idea, I’ll bet. Goodbye Louis Vuitton — goodbye Mercedes!

We need to compete on what we do best. And why not? The statists compete on what they do best.

Here in the West, we build quality. It costs a little more. Our products have something intangible, something that will convince people to pay more — and that intangible is called value. This is what we do best, so let us return to compete on what we do best. We not only build products — we build value.

Let’s not race to the bottom trying to beat state-subsidized companies. We can’t win there. Rather, let’s create products with value, not only for Western consumers — but for a huge, new and growing middle class with real disposable incomes — the (conceivably) five billion (non-Western) consumers in the developing world, many of whom are approaching middle class status in their respective countries.

And, lets keep the manufacturing of our value products here, to provide jobs to Western citizens — so that the West can continue to have a middle class too!

.

John Brian Shannon writes about green energy, sustainable development and economics from British Columbia, Canada. His articles appear in the Arabian Gazette, EcoPoint Asia, EnergyBoom, the Huffington Post, the United Nations Development Programme – and other quality publications.

John believes it is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.

Check out his personal blog at: http://johnbrianshannon.com
Check out his economics blog at:
https://jbsnews.wordpress.com
Follow John on Twitter: https://www.twitter.com/#!/JBSCanada