Tuesday, January 05, 2010

Unemployment

Economist and former Clinton Labor Secretary Robert Reich believes unemployment is likely to stay high:
  • Double-dip recession (10%): Recession deepens, unemployment rises
  • Stalled recovery (20%): Unemployment remains high
  • Jobless recovery (40%): Already-employed workers work more hours; unemployment remains high
  • Solid recovery (20%): Some jobs created, but mainly overseas; American unemployment remains high
  • Strong recovery (10%): American jobs created, but more people start looking for jobs; nominal unemployment remains high
Reich notes that the Democrats' electoral success in the mid-term elections next year will depend not on the facts — Reich believes that no matter how you slice it, we'll be looking at 10% nominal unemployment — but rather on how the Democratic party manages public perception of those facts. You'll excuse me, I hope, if I'm not terribly confident in the Democratic party's ability to do so. Obama and the Democrats pulled off a last-minute squeaker against the party of the Worst. President. Ever. and Obama was running behind until the financial system flew into the side of the mountain just before the election. I think it's very likely that the Democrats will not just lose seats (which always happens) but might actually lose their majority in one or more houses of congress. And with the new 60 vote requirement in the Senate, even losing one or two seats there will block even a capitalist-friendly Keynesian recovery, much less any progressive gains.

Health care reform isn't going to help the Democrats. Even if they manage to pass a bill before the mid-terms, it won't be a progressive victory until it's actually implemented, and a hostile congress can very easily gut the implementation. (The easy way is to structure eligibility so that the working poor somehow never manage to qualify, or are required to sacrifice too much of their "disposable income" (the income that creates economic demand) and then paint the program as a give-away to the lazy and idle.

It's not so much that communists such as myself want to see more suffering among the people and the working class. It's more that, under dialectical materialism, such suffering is virtually inevitable. The government is run by the capitalist ruling class: conflicts within the class will reach a point where the interests of the people are the first sacrificed. This will go on until either the people themselves being demanding their own interests — and enforcing those demands or until some demagogue organizes them for the interests of a new ruling class.

7 comments:

  1. Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn't account for the relationship between population density and per capita consumption.

    Following the beating the field of economics took over the seeming failure of Malthus' theory, economists adamantly refuse to ever again consider the effects of population growth. If they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.

    And these effects of an excessive population density are actually imported when a nation like the U.S. attempts to trade freely with other nations much more densely populated - nations like China, Japan, Germany, Korea and a host of others. The result is an automatic trade deficit and loss of jobs - tantamount to economic suicide.

    Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

    If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at http://PeteMurphy.wordpress.com.

    Pete Murphy
    Author, "Five Short Blasts"

    ReplyDelete
  2. [T]he field of economics doesn't account for the relationship between population density and per capita consumption.

    Interesting. What is this relationship? How can you demonstrate it?

    [A]n in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own.

    That's certainly suggestive, but it's not at all revealing.

    ReplyDelete
  3. Here's just one example of the correlation between population density and per capita consumption that I've provided in my book: housing (or "dwelling space" - the term used by the UN). Consider the difference between Japan and the U.S. Per capita dwelling space in Japan, a nation ten times as densely populated as the U.S., is less than one third of Americans', not because the Japanese like living in cramped quarters but because there is no room for anything else. The per capita consumption of vehicles is similarly affected. So too is virtually everything, to a greater or lesser extent.

    Think about what that does to the per capita consumption of everything used to build, furnish and maintain a home. All of it is cut proportionately. Therefore, so too is their per capita employment in these industries. Not a problem as long as the per capita consumption of something else is so much greater that the labor freed up by low consumption in the housing market is absorbed somewhere else. But it isn't. This is why every densely populated developed nation on earth is utterly dependent on manufacturing for export in order to gainfully employ their labor forces, robbing the employment in manufacturing from those countries who must bear corresponding trade deficits, countries like the U.S.

    ReplyDelete
  4. "[Housing is] just one example of the correlation between population density and per capita consumption..."

    That doesn't sound like one example, that sounds like the whole enchilada, and only under extremely specialized circumstances (a highly industrialized nation on a small island).

    And I'd like to see the effect on multipliers (the "consumption of everything used to build, furnish and maintain a home") rigorously documented. Even so, investment in residential housing is less than 10% of GDP in the US, so I don't see why a 10% or 20% difference in that number between two countries would make all that much difference, or how you could even tell if 1% or 2% was actively transferred to other consumption.

    But it's more important, however, to understand what metric of consumption you're using. If we're talking about consumption of costs, then as we produce the same amount of use value for the same amount of cost, it will look like consumption is being reduced, when it is merely being made more efficient in real terms. Such a fall in cost consumption is not an economic problem; indeed in real terms it's a Good Thing. The only "problem" in the moral and political sense, in that beyond a certain point, gains in real efficiency undermine our moral and political constructions underlying the allocation of effective demand.

    ReplyDelete
  5. In short, Pete, I'm not convinced that you understand economics at a very deep, fundamental level, which I don't intend as a put-down: economics is harder to understand than philosophy, for much the same reason: the promulgation of vast quantities bullshit by supposed authorities.

    ReplyDelete
  6. If you'd like to see the multipliers "rigorously documented," you can find it in my book.

    Regarding the housing data I presented, it's clearly presented in terms of per capita dwelling space, not the cost of housing.

    Japan is not "a small island." It's the second largest economy in the world. You asked for an example. I gave you one. The same relationship holds true for other nations.

    You're willing to shrug off the entire housing sector of an economy and you accuse me of "not understanding economics?" While I don't profess a complete understanding of the subject (only a fool would), it seems that my lack of understanding is surpassed by your denial and closed-mindedness.

    ReplyDelete
  7. If you'd like to see the multipliers "rigorously documented," you can find it in my book.

    If you'd like to send me a free copy, I'd be happy to read it.

    You're willing to shrug off the entire housing sector...

    I'm not "shrugging off" the entire housing sector. I'm noting that it's a matter of established fact that residential housing is at best less than 10% of GDP, and your thesis relies on relative differences between that 10% in different countries. Assuming that these differences are at most 20% in developed countries, we're talking 2% of of GDP. Which is a fair amount of economic activity, but doesn't seem enough by itself to have profound macroecnomic consequences, even for Japan, a physically small archipelago relative to its population.

    Indeed, Japan by itself is a huge prima facie counterexample to your thesis: a very dense nation with a relatively high per capita standard of living. Russia, a physically huge and sparse country with a relatively low standard of living, also seems like a counter-example.

    However, housing by itself is not why I'm suspicious of your grasp of economic fundamentals. I'm suspicious because your comments here appear to confuse real and nominal economic efficiency. I could be wrong, but its up to you to correct my impression.

    [I]t seems that my lack of understanding is surpassed by your denial and closed-mindedness.

    Labeling criticism and a request for evidence as denial and close-mindeness is a classic symptom of crackpottery.

    ReplyDelete

Please pick a handle or moniker for your comment. It's much easier to address someone by a name or pseudonym than simply "hey you". I have the option of requiring a "hard" identity, but I don't want to turn that on... yet.

With few exceptions, I will not respond or reply to anonymous comments, and I may delete them. I keep a copy of all comments; if you want the text of your comment to repost with something vaguely resembling an identity, email me.

No spam, pr0n, commercial advertising, insanity, lies, repetition or off-topic comments. Creationists, Global Warming deniers, anti-vaxers, Randians, and Libertarians are automatically presumed to be idiots; Christians and Muslims might get the benefit of the doubt, if I'm in a good mood.

See the Debate Flowchart for some basic rules.

Sourced factual corrections are always published and acknowledged.

I will respond or not respond to comments as the mood takes me. See my latest comment policy for details. I am not a pseudonomous-American: my real name is Larry.

Comments may be moderated from time to time. When I do moderate comments, anonymous comments are far more likely to be rejected.

I've already answered some typical comments.

I have jqMath enabled for the blog. If you have a dollar sign (\$) in your comment, put a \\ in front of it: \\\$, unless you want to include a formula in your comment.