The blogging software refused to take all my changes to Chinese Checkers, so here’s a new post to follow up.
I wanted to say that I should have titled yesterday’s post “We’re All Marxists Now”, but more accurate would be, “We’re All 1930’s Keynesians Now”. I’m reminded of all of Ataturk’s dam building projects, the huge Kruschev block houses - just pour concrete and stir. Mao had The Great Leap Forward where every peasant was making his/her own pig iron in the back yard (millions died in the ensuing famine). Pol Pot had “Return to Year Zero” - everyone out of the cities, back to the fields and rice paddies - full employment, manual labor at its finest. Yes, we can race towards the bottom of the pit or pyramid, every American manning a shake machine or a maquiladora worker or out busting our backs on a road crew.
Think for one about currency velocity - how money turns over. Money for construction is
slow money, and let’s just say if this is the only level of jobs we’re capable of growing, we should be ashamed.
Now take an example of Amazon.com. 16,000 workers, estimated revenue for the year $17 billion, profit of roughly $500 million - almost $30K profit per worker - much of it on growing exports, based on extremely fast transactions - money in seconds, product in a few days. How efficient is it to push growth on a company like Amazon vs. pouring concrete? How easy is it to export our concrete business? How easy is it to increase productivity of an Amazon employee vs. a concrete pourer? How easy is it to grow Amazon’s business model? (They’re now doing probably as much electronics as the books they started with). Note that Amazon has introduced the Kindel for convenient downloadable portable reading - what kind of increased efficiency effect will that have on the rest of our & the world’s economy? Compare that to whatever minimal multiplicative effects from construction?
Now apply the same principles to Google and eBay and Microsoft and Cisco and the myriad of small, efficient, guerrilla startups. What are the effects of our pharmaceutical developments on world health? (Not just slow development - distribution, affordable availability). The steel in our cars is not the most interesting part - it’s the increased electronics sophistication, the composite materials, improved fuel system designs, battery technology. (Many of our huge steel mills of yesteryear can be efficiently replaced by localized flexible minimills such as hot roll mills.) Certainly we need physical infrastructure, but let’s not worship it like the throwback days of early civil engineering, building the Hoover Dam and Empire State Building. There will be no breakthrough technologies coming out of added road construction.
We also risk another misstep like we had with ethanol - big windfalls to corn farmers with a distortion of our food prices and destructive effects on arable land - if we just throw money at alternative energy, not to mention the slow pace of introducing new energy approaches (look at the turtle-like pace for CFL bulbs and the high premium to pay for them) . In short, it’s probably not the prime candidate for quick stimulus cash to provide high velocity job-affecting returns, unless there are promising near-market products to roll out.
Rather than low-tech industries like concrete-pouring highways and construction of new schools, low-footprint virtualized service areas like software and finance are much more flexible, innovation pays off handsomely, results can be exported and replicated elsewhere, and the benefits roll out in a number of ways, such help improving sales, greater efficiency in functions like searching and assisting consumers, and lowered costs and time.
And one of the dirty little secrets of our current educational system is that like the library before it, the resources of schools are more and more affordable and accessible at home, with teaching methodologies changing as well. I recall a time when school books were basically rented for the year (don’t write in the margins!!!). Now with a $400 computer, on-line resources and lesson plans, books for $15-20 (used for less), and additional inexpensive teaching tools, the educational portion of our schools revolves around the face time with teachers, their skills, as well as how conducive the environment is to learning. Will we keep pouring money into the school system of the 1800’s Great Plains, or actually address “No Child Left Behind” in a meaningful 2009 fashion?
Economics has changed as much as the world has changed in terms of technology and organization and distribution of resources. Marx and Malthus would be amazed, and it seems so would we. Catch up.