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We all live in Ponzi land
I was talking to a very shrewd and well informed friend of mine, a now sedate notary who was once a sort of Spanish Gordon Gekko in the 1980s. He gave me a very intelligent analysis of the crisis.
At the bottom of it, he said, was the enormous increase in productivity brought on by information technologies. We simply produce much more than we can possibly consume: we need lots of consumers and much fewer workers.
How are underemployed people supposed to buy anything? On credit. Something has to give, has given. I think he's right.
A very good example might be how much supermarkets have changed in the last 20 years. Remember (if you can) the days before bar code cash registers existed. Totaling up the merchandise, taking payment and making change was much slower work than today. Check-out girls needed a much bigger skill set in that environment: to add and subtract accurately in their heads to begin with.
Now, passing the product over the laser reader, passing the banker or credit card through the card reader and getting the customer's signature is only the work of seconds and if the customer pays in cash, the cash register tells the check-out girl the exact change to give. A person of average or better than average intelligence, who has successfully completed high school is wasted in such a job.
At the same time that the products are being checked out, the system is seamlessly keeping track of the inventory and calculating the buying needed to keep the shelves full and may even send the orders directly to the head office, several states away, where the orders are also processed electronically and trucks are filled and dispatched with a fraction of the human input needed only a few years ago. Now, project this technological productivity explosion onto almost any human activity. More work done with a shrinking work force.
It is easy to see that with this system it is possible to have much bigger stores with a much wider variety of products, employing many fewer and much less skilled, therefore lower paid, workers than ever before.
With lower costs and more technology, profits rise and much of this gain is reinvested in more productivity-raising technology, which makes more skills and the people who have them redundant. This means, perversely, that more profits usually lead to less jobs or much poorer jobs. This paradigm, which until recently only held true for the poorly educated, is now reaching the ranks of university graduates. Now, with digital technology, even high intellectual output tasks can be outsourced to where people with postgraduate degrees can be hired for the same cost per hour as high school graduates in a developed country.
Result: As more money is invested in raising productivity, fewer and fewer people can produce more and more for a market glutted with products that fewer and fewer people can afford to buy without going into debt.
Salaries don't rise because most workers are not really needed that badly and are easy to replace if they go on strike, complain or even report in sick.. and thus they have no bargaining power. Any shortages such as one resulting from low birthrate in developed countries can be solved by outsourcing the jobs to poorer countries with high birthrates.
All people are really required to do is to buy many things that they don't really need, which they can do, even with a McJob, by using a credit card... hereby kicking the can into the future: a future with poorer paying jobs, less horizon, more need of credit to participate, with less chance of ever paying back the debts incurred.
To make underpaid workers buy things that objectively they don't need, an entire industry (marketing) exists to make them dissatisfied with what they already have. Perversely, unhappiness becomes a social good in such an economic arrangement. A thrifty person, content with his lot, who for thousands of years was seen, in all traditions, as a wise and sensible man; in this contemporary situation is seen as a public enemy to be "stimulated".
In a sense our entire "civilization" is sort of a universal "Ponzi scheme". If the wheel stops even for a moment it all comes tumbling down.
It's amazing that a structure this artificial, that fills so few truly human needs, has taken so long to nearly collapse.
http://seaton-newslinks.blogspot.com/
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"Check-out girls needed a much bigger skill set in that environment: to add and subtract accurately in their heads to begin with." This wasn't true since the first mechanical cash register, you're an idiot.
And many kinds of work don't involve information technology to any make-or-break degree, it doesn't shrink the work force. And apparantly you haven't seen what kind of work force maintains all of that technology either. For every several thousand gadgets that are made, there are gadget designers, producers and maintainers of various kinds. Your premise is as shallow as your thinking. And credit isn't endless, either.
Did you just go see Wall-e, maybe? And you need to go out into nature for a while, and see just how much animals do for the shear pleasure of it. This thinking is so shallow I couldn't wet my ankles in it.
December 22, 2008 4:45 PM | Reply | Permalink
Without getting in to other matters... Have worker's salaries and their purchasing power risen with their increased productivity?
December 23, 2008 1:49 AM | Reply | Permalink
Brant is being too touch on you.
There is a structural Ponzi scheme. There is a structural conspiracy by the economic oligarchy.
At any rate, I like your metaphor.
December 22, 2008 4:49 PM | Reply | Permalink
Brantlamb, I think you might stop flashing your ignorance and think for a moment. David Seaton is correct that technology was responsible for the great explosion in productivity. That fact is widely acknowledged as being a key factor in the economic boom of the Clinton years. Of course somebody has to make the gadgets. But the shift in our economic arrangements brought about by the computer is staggering.
He is also talking about "conspicuous consumption" a term coined by Thorstein Veblen in the late 19th Century. The Buddha tells us (I am not a Buddhist) that unhappiness is caused by desire. The Hindus believe that if you shed all desire you will eventually arrive at nirvana. That's going a bit far. You don't have to be a Hindu to conclude that there might be a better or more satisfying way to live other than being judged by what we consume.
You might trying to read Henry David Thoreau's Walden. In that book, he talked about the people of Concord who lived "lives of quiet desperation."
What we now need are people who think, not people who pick zits and fancy that they are being clever by saying crappy things about a thoughtful post. When you talk about "shallow," you need to get a dictionary and look up the word "irony."
December 22, 2008 5:45 PM | Reply | Permalink
I thought I read this in Nietzsche but Google gives zero results for the wording:
"He who possesses much is so much the more possessed."
December 23, 2008 11:40 AM | Reply | Permalink
Oops, that should be "largely responsible" for the great explosion... There were clearly many variables at work. Technology was just one of them, but Seaton is right, it is an important one. We're not yet clear about the consequences.
December 22, 2008 5:47 PM | Reply | Permalink
Oops, that should be "largely responsible" for the great explosion... There were clearly many variables at work. Technology was just one of them, but Seaton is right, it is an important one. We're not yet clear about the consequences.
December 22, 2008 5:48 PM | Reply | Permalink
Also on this subject, The Ponzi Scheme as a Way of Life:
http://sharonastyk.com/2008/12/19/the-ponzi-scheme-as-way-of-life/
December 22, 2008 7:46 PM | Reply | Permalink
Your question has been asked by multiple sci-fi writers.
There may be a way out of this trap, mainly the Ponzi relationship itself. It forces the slowing of consumer economy when the buying stops, and the need to buy food and stay warm will lead at least some people to create new businesses addressing the need for lower-cost energy. The economy will become different, with possibly much pain in the transition, but I think we will change somehow. As TPM member rdf has repeatedly pointed out here, before your arrival, the standard growth economy is unsustainable in physical principle. Malthus' projection was wrong but not his question.
Consider the real basis of value. It is, at root, increased availability of food and shelter. But since we are a species of competitive individuals, the basics will always be only an underpinning to bower-bird displays of fancy houses, or caribou antlers, or peacock's tails, or BMWs. And that drive will never go away as long as the more competitive individuals survive disasters or diseases more than their down-ladder conspecifics.
So there will always be a somewhat consumption economy, and there is in fact a kind of real basis for the conspicuous consumption. When it affects who gets married and who has a house to live in during tough times it will persist. Four billion years of evolution implies more of the same.
December 22, 2008 8:08 PM | Reply | Permalink
The transition from an expanding economy to a static economy has interested me for years, since I began to realize that the ever expanding model could not sustain itself indefinitely. Given an increasing awareness of workers worldwide that without them, in either a manufacturing capacity or a consuming capacity, there is no real economy to speak of, I wonder if the real adaptation to these changes, and concurrent hardship might not be centered in the elites of our society rather than the out of work check out girls. They will be the ones who will have to adopt new business strategies, where increasing 'output' by x% each year is replaced by initiating further efficiency savings, in turn reducing the number of gainfully employed workers/consumers to produce/buy their products. The future, to me, ultimately looks a lot less trickle down than our current paradigm, though as you say Tom, the transition will have a distinct 'pain' component. In the meantime if you've still got the stomach for investing, agriculture looks solid.
December 22, 2008 9:30 PM | Reply | Permalink
A few Anarchist leaning thinkers have been predicting the inevitability of "Zero-Work" labor paradigms since the mid 1970s. Many of them were looking forward to the extra free-time and the drastic mind-shifting world views it would bring about. It was common to see the subject bandied about on early net News Groups, prior to the internet's creation with hypertext. I just posted links to four essays on the topic. It doesn't necessarily have to end-up in mayhem.
Society used to dream sweetly of the future's manufacturing over-supply with Utopian musing, and not a wake dance for humanity at the apocalypse's onset.
December 23, 2008 7:34 AM | Reply | Permalink
Thanks for the heads up.
December 23, 2008 8:00 AM | Reply | Permalink
You should exercise a forward looking due caution, titling your blog post, so that you do not become embroiled in an intellectual property lawsuit defending against the owners of the Lennon/Mccartney portfolio. It's very close to the Beatle Hit titled:
"We All Live In A Ponzi Sub-Prime Dream"
December 23, 2008 1:21 AM | Reply | Permalink
What I think we are doing is recovering terms and vocabulary that an endless series of bubbles has made seem "obsolete".
Look at the term "worker",for example.
If we define a worker as somebody with no other property to sell but his labor, then, all of a sudden, this terms fits a lot of people who didn't see themselves that way at all and these neo-workers are looking afresh at subjects such as:
- Homeownership
- Consumption
- Pensions
- Retirement
- Share portfolios
- Healthcare
- Education
And so on and so on. All of them things that kept these neo-workers from seeing themselves for what they really are: workers.Since the economic decisions are taken by the small (and getting smaller) percentage of the population that controls the greatest percentage of the economy, we will probably see a further fall in salaries and working conditions.
Again we are going to see that each of us will have examine the reality of who we are and what we need and how to get it.
Too many people thinking for the systems good.
December 23, 2008 6:05 AM | Reply | Permalink
I know I'm taking it slightly out of context, but I disagree that there could ever be "too many people thinking..." But that's just an aside.
This is a very interesting line of thought--I am just going to give my small perspective. I am a youngish worker and I am just now getting into a position where, relative to my father and his generation, I am realizing just how far behind we are. While he and I work in very different fields, I can still see how different the marketplace is now, how incredibly different, dangerous and difficult it is to have and keep a decent job in today's America. And with unions being pushed to the ground by the condition of the economy and the disgusting greed of corporate interests and right-wing demagogues I don't see the situation getting any better any time soon. When you have college graduates taking paper routes and secretarial positions rather than more stable careers, then we have veered very seriously away from respectability. I don't pretend to have the solutions, but I can certainly see the problems. I hope dearly that the Obama Administration can clearly see a way beyond this--from my perspective we're much closer to the beginning of a long term ailment than the end.
December 23, 2008 10:18 AM | Reply | Permalink
Obviously I'm being ironic when I say "too many people thinking", when in fact there are way too few people thinking.
We are talking about a classic process of pauperization that has been disguised by cheap credit and now the disguise has been ripped off.
December 23, 2008 1:30 PM | Reply | Permalink