Producers vs. Non- producers

There are many trends in the economy of the United States and the rest of the developed economies that are very disturbing. Yesterday we talked about the increasing number of people on food stamps and that governments are encouraging more people to participate in the food stamp program. Since the financial collapse in 2008, there have been countless articles written on the increasing income gap; i.e., the rich getting richer and the poor getting poorer. During the last presidential campaign season we were reminded countless times that the highest 10% wage earners pay 60% or more of the federal income tax. While we are constantly reminded by the President and his administration and by the MSM that there have been 37 straight months of job growth in the private sector, we know that the number of unemployed plus the number of those that have dropped out of the workforce plus the number of people underemployed keeps increasing. But, while we watch all of these negative trends, we also observe that the stock market is back in record high territory again and corporate CEO are getting big bonuses and so are the investment bankers.

What bothers this self-appointed watcher of the asylum is that these trends are likely to continue. That is: fewer and fewer producers will be supporting more and more non-producing consumers.

Let’s take a look at the thoughts of J. T. Young’s article at Real Clear Politics.

Much has been made of a dichotomy between “makers and takers.” However this is too basic and does not capture the true economic complexity. The real relationship is not an either-or one, it is one of consumers and producers.

We are all consumers – we must do so to survive. However as basic as consumption is, it is secondary to production. Without production, there is no consumption.

The problem is, that despite production’s essential role in this most basic economic equation, while all are consumers, all are not producers. Of course, not all can be. Yet for all to not be, it means producers must willingly produce surpluses. And the higher the ratio of consumers to producers, the greater the producers’ surplus production must be. Again, there is no other way.

And here is what worries Mr. Young:

America’s employment statistics raise serious questions as to how long producers will be motivated to produce if they too can see circumstances where they too could consume without producing.

One of the important factors, if not the most important factor, that allows fewer producers to produce what all consumers need is technology. The advances in areas like nano-technology and robotics is mind-boggling. And, there is 3-D Printing Technology that is still in its infancy, but is likely to revolutionize how many of the products we use are made and made with fewer workers. Mish’s Global Economic Trend Analysis has a post today that addresses recent trends robotic outsourcing.

{In China} Noodle peelers should probably start looking for other things to do around the kitchen – there’s just no competing with these robots.

{…}

In Japan robots are already being used to make sushi, and a robot in San Francisco can serve up 340 hamburgers an hour. But while robotic cooks provide restaurants a novelty for customers and savings for owners, other robots are invading China’s workplace on a much grander scale. Most notably is Foxconn who, last November, began replacing 1 million jobs performed by humans with robotic automation. The metamorphosis is advancing quickly. In late February the company announced it put a freeze on hiring new entry-level workers. This was due in part to a high worker retention rate following pay increases, but it’s also a conscious decision to accelerate the automation of their factories.

In looking for someone to blame, Mish points out some interesting facts:

  1. The Fed (central banks in general) have made the cost of capital so cheap that it encourages employers to replace workers with cheaper alternatives.
  2. The Fed (central banks in general) can enhance trends, but cannot change them. Thus, I am not stating the Fed is the cause of “Robotic Outsourcing”. Rather, I am stating that cheap money has accelerated that trend.
  3. Minimum wage laws, protectionism, unions in general, and inane government policies also encourage “Robotic Outsourcing”.
  4. Long-term, everyone benefits from productivity improvements and associated cheaper prices.
  5. Unfortunately, Keynesian clowns as well as the clowns at the Fed (central banks in general) see cheaper prices as the enemy.
  6. In their effort to prevent falling prices, the Fed has lowered the cost of money so much that it is a no-brainer to replace human workers with technology at an increasing pace.

And he summarizes with this:

With the Fed hell-bent on causing price inflation, Obama on causing wage inflation, and unions on keeping an unsustainable trend in wages and benefits, look for an accelerated trend towards elimination of human jobs.

So, what do you think, dear friends? Will the future convert this asylum into a paradise where machines produce all of the milk and honey mankind could possibly want without their having to work at all? Or, will there come a point in time in three or four decades when there 100 million or more on food stamps and the workforce participation rate is 50% or less and the when the top 10% are paying for 95% of the cost of the federal government and the producers ask themselves why should they continue to care for the non-producers?

I’m having dark thoughts.

Well, that’s what I’m thinking. What are your thoughts?

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10 thoughts on “Producers vs. Non- producers

  1. Technology has been a boon to mankind for the most part. Thinking back even to the 1950’s, the amount of leisure time has increased for many. Unfortunately, our educational system did not provide the required knowledge base to our citizens to participate in the latest revolution. Couple this with the influx for the first time of immigrants who have no desire share the former values of our society and we have a train wreck. Much more to this IMO, but the short version.

      1. Each “age” had its own dislocation. Take whale oil when it no longer lit lamps, cars, gone was the horse and buggy, the furrier. The buggy maker. Bronze Age,, Iron Age, industrial revolution. The population in the past adapted. Now it requires a literate society to function. Thousands of visas are given now to I.t. Positions because we do not have those capable for the positions. Pretty late tonite to be very articulate!

  2. The first thing I’d say is that, if you or your kids are planning on getting a job in the future, figure out a way to be creative. Machines can do dull tasks over and over again, but they are not, nor will they be, creative. You want to be the engineer who designs the machines that replace the workers, not the worker being replaced by the machine. Or, better yet, you want to be the guy who invents the product that the engineer designs a machine to build.

    I think I’ve said this before, but when I was studying Marxism back in my college days I had a thought that the problem with communist revolutions was that they took place in places where the economies were not yet advanced enough to need a revolution. Marx talked about all of the means of production being in the hands of the few capitalists, and the workers being displaced, basically by the capital. What I pictured was an economy where production was literally done by machines (capital) and workers were unnecessary. The communist revolutions had taken place in economies that were just beginning industrial revolution, or, in China’s case, were still largely agrarian. All that is possible in those two circumstances is a government trying, through central planning, to force modernity onto the economy, with absolutely no creativity and the usual drawbacks to central planning (no feedback regarding what is wanted and needed and at what prices, etc.) Even the United States was far from “ready” for the kind of revolution Marx envisioned, because we needed our labor. We were far in advance of Russia and China, but were (are) still building. Until an economy comes to the point where all of the needs, and darned near all of the desires of the population can be provided for by automated production, which means that those who possess the capital literally have all of the wealth because they do all of the production via capital (machines) a socialist/communist revolution would fail.

    Is the Obama administration, through it’s economic policy, trying to force that to happen sooner? It would definitely be too soon, because the needs and wants of people have not been even close to fully met in a way that would allow machines to provide for those needs and wants. When I think about that moment, I think about “Star Trek, The Next Generation” where a machine has been invented that literally replicates anything anyone would want (sort of Jim’s digital printer on steroids), from clothing, to food. It recombines molecules to produce a cup of Earl Grey tea (to exactly the desired flavor and temperature in the desired cup) literally out of thin air, or anything else someone would want, even if the person is inventing it on the spot and describing it to the machine. The guy who invented the “replicator” is probably rich as hell…. except it no longer means anything, because everyone with a replicator can replicate anything his riches could buy. You could use a replicator to produce replicators.

    We are a very long way from that. Humanity needs a lot of creative thinking to be done, and machines simply don’t think creatively. They can simulate creativity, but only when a human being creates a program that is so complex that the machine appears to be creating. (We could get extremely deep into science fiction, here, as was done in “The Matrix” and even “The Terminator”.) If the Obama administration will stop killing the Middle Class (while claiming to be helping it), and stop creating an over-class of rich cronies, we middle class people might actually be able to create our way to a world in which all needs are easily met. The poor will always be among us (as Jesus said a couple of thousand years ago), because their labor can be replaced. The advances in productivity may be able to compensate for them, and even provide for them. But when the big engine of creativity, the middle class people who strive to create better lives for themselves (the entrepreneurs), are thwarted by big government’s policies (cronyism), everything that could bring about that utopian point where we’ve created our way out of need and want, will come to an abrupt halt. The people who consider themselves the elite–those who are smarter, wiser, and more compassionate than the rest of us–simply will not be able to create the better world to come. The only way it will come is if people are made more free to create, experiment, and solve problems. Elites only get in the way.

    1. “Elites only get in the way.”

      Elites and the gvoernments they control.

      Many conservatives believe the time will come in the not to distant future when so many people will be unemployed or underemployed that the masses will revolt (civil disobedience) and the government will fall. I’m wondering if the time will come when the producers are say or even less that it will be they that say Basta ya! Enough allready! Might the producers decide that the non=producers have to go? That is a very dark thought, but is it out of the que

  3. Sorry the above post is so long… I should’ve just made it a blog entry of my own on my own site, but Jim sparked something I’d been thinking about off and on for a long time.

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