The decline of the wage system

A Breton blogger, Damien Perrotin, takes the position that earning wages is a historically recent situation for workers:

Wage labor has become so common, so "normal" in today's society, that we have forgotten how marginal - and despised - it was before the Industrial Revolution. In agrarian societies wages were what farmhands, servants and journeymen got - and for the last category it was considered temporary. All respectable working people were self employed, either owning or renting a land or running a small - or even not so small - businesses. Living on wages was something you did when you had no other choice, and, socially speaking, that put you a mere step above a beggar or a slave. It is particularly revealing that in Latin, the word for wages has the same root as the word for prostitute.

I would quibble with his notion that peasants who were allowed to farm a patch of land were actually self-employed, but I suppose they did not normally suffer the vagaries of wage employment.

Perrotin thinks that recent widespread layoffs herald an increase in involuntary entrepreneurship:

This [wage] system began to unravel after the first oil shock, as companies looked for workarounds, so they could dispose of unneeded workers. ... They began to resort to fixed term contracts and interim workers. Large firms, such as my home town's shipyard shifted their manpower to contract manufacturers, retaining only core employees. Ironically , but not without reasons, this move out of "wage slavery" was, and is, as bitterly resisted by unions and left wing parties as the spread of the wage system had been in the XIXth century.

The ongoing collapse of the world economy has triggered a new step in this process. Many small businesses have gone under and most large companies are struggling. ... The result was that a lot of people found themselves jobless - less than in America since a large part of the French manpower works for the State or one of its subsidiaries and is essentially unfirable, but quite a lot nevertheless.

Those people - the majority of whom with very specialized skills - turned to business creation out of desperation, because they felt they had no other way to make a living. Many will fail, of course, and slip into permanent poverty - independent workers have no unemployment insurance in France. Other will eke out a living with a few underpaid contracts - something the government has made easier by creating a special "self-entrepreneur" status for small businessmen , which basically means they can dispense with any decent accounting provided they pay a 21% tax and have revenues smaller than 32.000€ a year. A few will thrive ... but what will matter is that the wage system will have been dealt another blow.

Perrotin follows a number of Peak Oil blogs, and appears to fall into the camp that sees a gradual but persistent economic decline as growth is limited by oil supplies. I have been self-employed a few times, and I could see myself in that role again, but it makes for a very frugal outlook on life when you don't know if you are working beyond the next quarter.

I had to work in the morning, so I watched only the first half of Sunday Night Football. Most journalists, even those at the Sports section of the Wall Street Journal, initially criticized the New England coach for not calling for a punt against Indianapolis at a critical moment:

Belichick Lays an Egg in Indianapolis

We may never know exactly what the New England Patriots coach was thinking when he sent his offense back out onto the field deep in their own territory for an inexplicable fourth-and-two attempt Sunday night against the Indianapolis Colts. ...

... Shortly before midnight Sunday, Mr. Belichick handed the Colts a 35-34 win to preserve their unblemished season. The Colts stopped the Patriots on fourth down and quickly scored to take the lead. ...

But since the Journal is named after Wall Street, they (and Bloomberg) eventually had to trumpet the virtues of gambling:

What's So Great About Punting?

Put simply, Mr. Belichick is taking flak because he decided, in the middle of a close, hard-fought and emotionally charged game against a major rival, to throw caution to the wind. In other words, he's being pilloried for not being a wimp.

Somehow in American football, the punt--a clear and unambiguous symbol of surrender and retreat--has become the hallmark of sensible coaching.

But punting is not a symbol of surrender. Even a casual fan like me knows that in the big picture, punting well is part of winning the battle of field position. Sports differs from Wall Street. In sports, if you lose a lot, you won't make the playoffs. If you never make the playoffs, the fans will hate you and the owner will fire you. On Wall Street (at a certain level), if you lose a lot, you're still in the playoffs. You're always in the playoffs and even though ordinary investors hate you, the boss will fight to keep you around and still give you your huge bonus.

Above all, though, the essence of Mr. Belichick's "crime" may be something simpler than all this: His decision went against the natural instincts of all human beings when they're forced to make high-stakes decisions. In a recent study, researchers from Duke and UCLA found that when faced with a decision involving risk, people have an overwhelming tendency to make the supposedly safe choice--to err on the side of caution--even though doing so may lead to worse results.

...

Why do people embrace caution? "It's because of the regret that people face when they take an action and it doesn't turn out well for them," says Bruce Carlin of UCLA's Anderson School of Management, who worked on the study.

I think it is more likely that average people are cautious because when average people bet the farm and lose, they suffer. They lose their jobs, their small businesses, their health care, their homes and their cars. Their kids suffer, too. There is no one to bail them out - unless they're on Wall Street. And thus, Wall Streeters no longer look at the big picture of industry or the economy as a whole. They see virtue in gambling with other people's money and count on being bailed out if they lose their own. They never really face fourth down.

Update: Paul B Farrell at Marketwatch sees gambling people:

Read more »

The top graph is from the International Energy Agency's World Energy Outlook (IEA WEO). The bottom graph is from an alternate World Energy Outlook prepared by a group from Uppsala Universitet in Sweden.

The IEA's WEO shows continued, and substantial, growth in fossil fuel production over the four decades from 1990 to 2030. At approximately year 2008, the declining output from "Crude oil - currently producing fields" is to be replaced by "fields yet to be developed," "fields yet to be found," "EOR" (enhanced oil recovery), "non-conventional oil" (probably tar sands), and an increase in natural gas production (probably from hydraulic fracturing). Uppsala's WEO predicts a gentle decline in the sum of all categories dating from a plateau in 2006 to 2030.

Which chart should we believe? Well, the big news over the past week has been an accusation in the Guardian that the IEA has been inflating their numbers to placate the US.

Key oil figures were distorted by US pressure, says whistleblower

The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.

I don't find that particularly surprising, but the Peak Oil community is on this story like a dog on a bone. Tom Whipple summarizes for us:

Peak oil review - Nov 16

Publication of the World Energy Outlook 2009 (WEO) was overshadowed by the Guardian story, which may have given the peak oil story the most media attention it has ever had. The core of the Guardian's article: according to a whistleblower who is a senior official at the IEA, "the US has played an influential role in encouraging the Agency to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.... [he] questions the prediction in the last World Economic Outlook that oil production can be raised from its current level of 83m barrels a day to 105m barrels. 'The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year. The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this. Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.'"

...

The issue of whether higher oil prices might stifle the eagerly awaited economic recovery is starting to creep into the US and British mainstream media. This was sparked in part by a warning from the IEA in the November Oil Market Report which said loud and clear -- "The recent price spike, if further extended, risks derailing the recovery."

Last week Time Magazine and the Wall Street Journal carried stores exploring just what a continued increase in oil prices could do to what they consider to be a recovery already underway. Both understand the dynamics of the situation - China and India continue to import more oil and global production is "constrained." There is growing discussion about how the 2008 oil price spike played a significant role in spreading and deepening the recession.

In short, oil prices will establish a ceiling to our ability to grow out of recession. Alternative energy sources are fast becoming our only alternatives. That's why pundits are pushing for investment in nuclear plants while glossing over the long life of the waste. That's why Daniel Yergin lauds natural gas fracking without mentioning the poisoned aquifers that result. That's why wind turbines look better and better despite their environmental impact on avians and deep forests.

Back in 2005, I remember being appalled by the Supreme Court's decision in this case. There are a lot of factors to consider, of course, but in my opinion, invoking "eminent domain" should involve either the taking of distressed properties, or the construction of some very worthwhile public infrastructure or project.

Essentially, the local authorities applied eminent domain to take residential properties away from small private owners and transfer them them to another private owner, a large private owner, for private development. The small private owners had in many cases, owned their property for generations, but the locality, New London, preferred that the property be taken and redeveloped according to a plan prepared for Pfizer, the pharmaceutical giant.

One owner, Susette Kelo, sued to keep her property, and the case was eventually decided in the Supreme Court. What I didn't know at the time was that Stevens, Kennedy, Souter, Ginsburg and Breyer voted to allow the taking of the property. I am well aware that New London, indeed much of New England has been in tough shape, but that the so-called liberal wing of the court would come to such a decision is galling to me.

That Pfizer pulled out of the project once the tax breaks ended is instructive, to say the least. A NY Times blog offers several opinions:

A Turning Point for Eminent Domain?

Paul Bass:

The lesson learned in the City of New London's Fort Trumbull neighborhood -- or what was once the Fort Trumbull neighborhood -- is that urban liberals make mistakes, big mistakes when they stand against the little guy through the misuse of eminent domain.

These urban liberals -- the Democrats running New London at the time -- thought they could build a "better" neighborhood by destroying generations of individual investment. And they used government power, the power of eminent domain, to do it. Eminent domain makes sense when used for public safety, but it doesn't make sense when it means giving already powerful interests an advantage in real estate development.

Now the homes are gone and vast acres remain abandoned. Not only is Pfizer not building the new neighborhood it promised, it is closing its research and development headquarters and moving 1,400 jobs out of town.

Dana Berliner:

No one should be surprised by the aftermath of the Kelo case -- neither the fact that absolutely nothing has been built on the land nor the fact that Pfizer is now pulling out of New London altogether.

The evidence at trial showed that nothing would be built on that land. The developer (who has now left the project) did a study showing there was no market for the biotech office buildings the city claimed would replace the homes. But the courts didn't want to look at that evidence. If they had, Susette Kelo would still be in her home and the rest of us would be safe from eminent domain abuse.

Nor is it surprising that Pfizer has now pulled out. The company took advantage of the phenomenal tax break when it was there and is pulling out just before it ends. The deal and the project didn't make any financial sense for a private company, and no one would have agreed to it without a huge subsidy.

Matthew J. Festa:

New London will be "Exhibit A" for the argument that taking private property for redevelopment projects -- especially projects that depend on one big private entity that is free to leave town -- is not only unfair but bad policy as well.

The legal rationale of Kelo remains intact, but perhaps courts will be less easily persuaded by the comprehensiveness of a proposed redevelopment plan when hearing challenges to eminent domain. The Supreme Court was clearly influenced by the master plan in Kelo, but lawyers in future cases will surely point to the fact that New London's plan ultimately failed.

Ilya Somin:

Far from producing the promised "development," the condemnation of private property in New London under Kelo damaged the local economy by destroying homes and businesses and wasting taxpayer money.

This result should not have been surprising. Government planners who undertake "economic development" condemnations have strong incentives to approve takings that benefit well-connected interest groups, even if they end up destroying more development than they create. Usually, as in Kelo, those targeted for condemnation are poor or politically weak.

So with Pfizer leaving, what do we have on site now?

There once was a soccer mom, Palin
Who quit from a job that was failin'
In her moose country brogue
She wrote Going Rogue
With hope that she'll now have smooth sailin'

Todd and Sarah had a new revelation
They were having a non-wedlocked grandson
After Bristol quit Levi
He sought out the pub's eye
Will we not see the end of this Johnston?

Orly Taitz questioned Obama's birth
Til she made it a subject of mirth
Though her speech may be free
The judge ruled that he
Had to show her what court costs were worth

A fairly believable explanation of why we are where we are:

Bailouts for Dummies

The problem is that the US has never had a 'free' market economy. It subsidizes large corporations to the tune of hundreds of billions of dollars, and ignores international legal and 'free' trade rulings that go against American corporations. It uses its economic wealth and power to bully other nations into giving it easy and uncompetitive access to their resources, labour and markets at bargain prices. So the current state in the US is an "unbalanced economy" -- one where a few rich corporations essentially dictate policy to governments. Any government that refuses to play ball is threatened with the withdrawal of reelection funds by these large corporations in favour of other parties and candidates. In the US it takes a huge amount of money to get elected, and dueling with the corporatists is political suicide. It is not surprising, then, that the wealthiest 1% of Americans now control more than half of the nation's total wealth, resources and private property, and that while the top 5% of Americans have achieved staggering real increases in wealth and income over the past 40 years, real net wealth and real income for everyone else have declined.

So far he makes the US sound like Wal-Mart.

The US economy was substantially built on war. Most of the accumulated wealth of the country was made through war and "defense" activities, a large proportion of American innovations stemmed from huge military investments, and military and defense spending still directly or indirectly provides 20-30% of US economic activity (economic production and jobs).

Or War-Mart.

On top of this, our global economy is addicted to growth. Without steady, continuous, unending growth, corporations could not raise capital or borrow money, so they would collapse. The stock market requires sustained double-digit growth in profits to keep it from collapsing -- current share prices have an implicit "price/earnings multiple" that assumes continuous rapid growth in profits, forever, and if you took away that profit growth, shares would be worth substantially nothing. Every stock market 'investment' is a gamble on perpetual growth.

Read the whole thing.

Trends and lessons emerge from review of Fort Collins bike, car crashes

I'll be cycling to work again soon, so here's another earnest discussion of cycling safety. In this small study, four types of collisions predominate:

The most common collision is "The Broadside," at 60.5% of crashes. That's when a motorist goes straight through an intersection even when there's a bike right in front of him.

Broadsides seem to result from traffic violations by both bikers, such as riding on the sidewalk, riding the wrong way, blowing through stop signs, and by drivers, who blow through signals and fail to yield. As a cyclist, I have little fear of broadsides because I don't ride that way, and I no longer expect cars to yield, but I do see people riding that way every day. What scares me are the 2nd, 3rd and 4th most common accidents.

The infamous Right Hook -- or what the city calls "Overtaking Turn Accidents at Intersections" -- is the second most common collision at 13% of the total in their count.

Cars are so much faster that it is hard to see this coming. I have been cut off by the Right Hook as a runner, cyclist and moped rider. My feeling is that once a car driver passes a slower entity, his attention transfers to what is ahead. Practicing Lane Control, or riding in the center of a lane, is supposed to avoid this situation, but also tends to aggravate auto drivers.

The third most common collision type is the left cross at 9.3% of collisions. This is when a left turning motorist slams into a cyclist going straight through an intersection. Of the 33 left crosses, 3 involved a cyclist riding on the sidewalk, 2 were going the wrong way, and two failed to stop at a signal or sign. The overwhelming number of these were motorists who just kept going in spite of the presence of a bike in their path.

The Left Cross is a notorious killer of motorcyclists, too. I had my worst motorcycle accident when a car turned left right in front of me on a slick road. I put the bike down, sprained both wrists and essentially gave up motorcycling.

After that, the next collision type is the dreaded "Hit From Behind." The 30 "sideswipes" recorded account for 8.5% of bike collisions. With the exception of a single head on, all fatalities are these types.

"All fatalities" is a small number in a small study, but this collision involves the highest degree of auto driver misbehavior: DUI, erratic driving, etc., and therefore is least preventable by cyclists. Again, the standard advice is Lane Control, but on faster roads, lane control is practically asking for road rage. Hence, in a more suburban situation, I will choose the empty sidewalk rather than go rubber to rubber with SUVs going 50 mph.

I always wear a helmet, but a friend on Facebook sent me this article:

Wearing helmets 'more dangerous'

Cyclists who wear protective helmets are more likely to be knocked down by passing vehicles, new research from Bath University suggests.

The study found drivers tend to pass closer when overtaking cyclists wearing helmets than those who are bare-headed.

...

To carry out the research, Dr Walker used a bike fitted with a computer and an ultrasonic distance sensor to find drivers were twice as likely to get close to the bicycle, at an average of 8.5cm, when he wore a helmet.

...

To test another theory, Dr Walker donned a long wig to see whether there was any difference in passing distance when drivers thought they were overtaking what appeared to be a female cyclist.

While wearing the wig, drivers gave him an average of 14cm more space when passing.

I'll bet he got a lot more funny looks, though.