What if we STRUCTURALLY have more people than there are jobs?

Discussion in 'Economics' started by gnome, Feb 25, 2009.

  1. Higher productivity guarantees more output per worker. To offset the productivity increases, consumption possibility is enabled to go up. If rates of increases of consumption don't keep up with rates of productivity increases, you get price deflation and unemployment.

    The answer is to enable consumption to increase. Last I checked, 95% of the world has way way lower consumption than the upper 5% (the US, Europe, etc). There's plenty of room for the developing world to generate aggregate demand for all of the stuff the producer nations of the world create.

    Anyone who argues that technology increases will only result in job losses forgets to remember most of the world lives in relative poverty to the upper 5%... There's a lot of potential for agg demand to increase.

    A broken credit system is the problem that has only to do with destroying the fundamental relationships between prices, wages, etc. in developed nations. A breakdown of the credit system is equivalent in a developed economy to a nuclear bomb hitting. For us to arbitrarily revert to become a cash society, you need a lot more base money in circulation to keep most capital assets (property, plant, etc) near current price levels. On the flip side, I guess that that same increase in money supply will astronomically increase the price of base commodities that most of us need to survive (ie food).

    Just wait what can happen to demand in the second tier nations of the world when they develop their own credit systems more substantially. Everyone forgets Russia, much of Asia, etc. are generally cash societies with inefficient use of capital.

    The Austrians (even though they believe in capitalist evolved credit - which in reality will not naturally evolve in substantial means for a few decades without govt intervention) are basically arguing for us to become a cash society. The outcome will be massive unemployment, destruction of wealth of capital holders, lower wages, etc.. a paradigm downshift in the size of the economy. Not to mention since taxbase will be essentially chopped in half, a situation that results in the govt forced to print or default on debt unpayable under new balances. Or of course, gutting of budgets if money's value is to be preserved. (basically, no defense, no health care, minimal social security) Real trend into poverty.


    Each economy runs on the assumption of certain balances .. ie, amount of available credit, labor, technology, capital, etc. If you alter any one of those substantially, we know the result.

    Free markets don't care about social welfare. So your stand on these matters depends on if you give a shit if we collectively experience massive social chaos and poverty or not... If you only care about buying assets on the cheap with a cash hoard despite the welfare of your neighbor, then you likely are an Austrian.
     
    #21     Feb 25, 2009
  2. That was a good article, I do remember it. One problem though.

    One of the main problems with this thought process is that demographics is destiny - if you decrease birth rates through population control, you end up with a gazillion old folks and not too many youth to take care of them. Particularly in a system where the majority (the elderly) can vote to tax the young, although wage pressures coming from the youth create an indirect tax on the elderly.

    The problem is this - growth requires people. Each person is born, and acquires the ability to assume debt. That debt assumption keeps the US economy (and therefore the world ) propagating. I agree with Scrappy that the lack of credit availability is a nuclear bomb dropped upon our business system which has had inflation contractually assumed and written into its life cycle. Deflation just doesn't work for it. This is a crisis of confidence more than anything else - everyone just woke up at the same time and decided that the emperor wasn't wearing clothes. Therefore, hoarding of liquid assets (cash, gold, whatever).

    That static world is going to be pretty unstable - after all, elites don't particularly like to do their own physicial labor! That's why we became elite.... and probably soft in the process. Plenty of jobs for the farmers, bellboys,butlers, soldiers, police, etc... The main disagreement is whether the elite is going to be a hereditary one (generational wealth - Bush model) or a meritocratic one (university selection, etc... - Obama model)
     
    #22     Feb 25, 2009
  3. gnome

    gnome

    I don't see that as "either, or"... America has ALWAYS been a meritocracy for those able and willing to do the work, including the Bush years. Hell, haven't minorities usually been given college entrance preference even if they were only average?

    Just because NObama wants to send every kid to college doesn't mean they'll want to do the work when they get there...
     
    #23     Feb 25, 2009
  4. Good point. As sick and twisted as this may sound, wars are sometimes a good thing...necessary even in some cases.
     
    #24     Feb 25, 2009
  5. gnome

    gnome

    True.... years ago there were wars and plagues.... thinned the population, but times were economically better for the survivors.

    Way back when, the planet was not as close to "saturation" with people like it is now.

    So, when the planet has 10-11 billion people, will there be a meaningful job for everybody?
     
    #25     Feb 25, 2009
  6. Yes plagues too. With advancements in health care people are living longer, decreasing the natural population control.

    Say for example (theoretically), scientists discover the cure for aids, or cancer. Millions of people who would have died are now alive and well and looking for jobs. Do enough jobs exist for these people? It's a very interesting question.
     
    #26     Feb 25, 2009
  7. gnome

    gnome

    I think we're going to see some of this in the aftermath of this credit bubble collapse.

    For one reason, it won't be "borrow and spend" any longer.... no housing bubble... people will charge less... will be living below their means to pay down credit cards and build up savings for a while.

    All of that equates to a "lack of demand" for goods and services... and that will translate into lost jobs.... and not temporarily lost, either.
     
    #27     Feb 25, 2009
  8. Yes I would have to agree with this rather than say that wages are too high. It’s not that wages have increased, but that that the cost of living has increased at an even faster rate. Until recently, people could just borrow more and more because they weren’t making more money to pay for higher prices. Now that credit has been somewhat cut off, we should be seeing lower prices. Although I haven’t noticed this at all. My health insurance is going up 15 % this year. All my credit cards are jacking the interest rate while the Fed is lowering them. So it seems the little guy is screwed in good times and bad.
     
    #28     Feb 25, 2009
  9. G-Boa

    G-Boa

    I don't think Obama and co. realize this (or don't care) and, in turn, will chase away capital with high tax environment.
     
    #29     Feb 25, 2009
  10. People have been saying the world is over populated since there were 500 million people on the earth.

    There are now nearly 7 billion, and no plague in sight.

    Avian flu was a dud.

    Ebola? Not a big deal.

    AIDs was going to wipe out half the world according to some at one time.
     
    #30     Feb 25, 2009