[p2p-research] What's different about this economic downturn? -- the severe unemployment

[Paul D. Fernhout]

Michel Bauwens wrote:
> I wonder if anyone has seen the different documentaries on the Cuban
> agricultural revolution?

Not me, but sounds interesting if it is online?

> Afther their own Peak Oil, they completely had to reconfigure agriculture,
> to a knowledge-rich, but mostly organic model, which not only led to higher
> productivity, urban agriculture that greened the cities, but a real rural
> renaissance, and farmer coop members now earning twice as much as doctors
> (these coops are independent, though regulated, from/by the state)

 From the 1980s when I was involved with certifying organic farms in New 
Jersey, there are many, many, *many* people who like growing things even in 
a high-tech USA. Most have no access to significant farm land. Yes, in that 
sense, the USA is even worse than in, say, Brazil. The difference is in 
Brazil, those who want to farm still have some hope of it with land reform. 
A would-be farmer in New Jersey has no hope unless they win the lottery (and 
even then, a million dollars does not buy much in New Jersey).
http://www.landandfarm.com/lf/asp/search_results.asp?landstateid=40
"47.04 Acres Working Horse Farm (horse farm, residential land, forest - 
natural) A 47 acre property with an asking price of $1,685,000."

The average US hourly wage is about US$18.50 or so (so, about US$40K a 
year). I'd suggest that many US Americans would be happy to be working doing 
agriculture for that wage (assuming they were not dosed with pesticides 
etc.). But, within the USA, when you can get an "illegal" immigrant to take 
US$5 or whatever for the work, and they don't complain from all the health 
problems of the excessive pesticide use, it is hard for things to change. 
Even for children:
"Pesticides finding way to migrant workers' children"
http://www.newsobserver.com/news/health_science/pesticide_violations/story/461912.html
"""
But advocates said the study would be helpful in pressuring officials to 
focus on enforcement of safety rules, said Fawn Pattison, executive director 
of the Agricultural Resources Center, a nonprofit that supports the use of 
nontoxic pesticides in North Carolina.
   "It certainly informs policy makers, and the officials charged with 
regulating this industry, about dealing with the health and environmental 
questions that are exposed by this research," Pattison said.
   Programs to educate farmworkers and farmers about pesticide safety have 
been under way for years, but with the recent surge in immigration, 
advocates say the need to educate workers has increased. North Carolina saw 
its illegal immigrant population grow 43 percent to 300,000 from 2000 to 
2004, according to the Pew Hispanic Center.
   Concern has heightened since three workers for Ag-Mart, which grows 
tomatoes in Eastern North Carolina, had babies with serious birth defects. A 
state report released in May said pesticide exposure may have caused the 
defects.
"""

Of course, "illegal" immigrants don't qualify for health care because, the 
suggestion is, they are not contributing to the US economy.

Essentially, this is another huge market failure case. There would be huge 
positive externalities in having agricultural jobs available to many US 
Americans (or whatever immigrants) at good wages (as long as pesticide use 
and certain other farm hazards were heavily regulated). The food supply 
would be more secure. Farm workers would be happier. The US consumer would 
be healthier. Agricultural work can leave the mind free to think, too, even 
if the hands are busy. But, because farmers and pesticide companies do not 
have to pay the costs of groundwater contamination, the costs of long term 
health care for immigrants and their families (or a lifetime of lost income 
from cancer), the costs for health care of consumers eating substandard 
contaminated produce, the costs for remediating for topsoil loss, or the 
true cost of oil to run all this (US$500 a barrel or whatever, not US$40 as 
it has been for a decade), the market has failed to price these agricultural 
products correctly. So, people go into a supermarket and US$3 for some 
conventionally raised tomatoes instead of US$5 for some organic tomatoes, 
because, if people had to pay the true cost of the conventionally grown 
tomatoes, they might be more like US$10 (or whatever) for the same amount. 
Instead, the immigrants pay with their lives and their children's lives, the 
consumers pay with their health,  and everyone pays through property tax and 
income tax for Medicare and Medicaid for those "cheap" tomatoes and other 
agricultural products.

> So in this case, in a scenario which ressembles what other countries are
> going to go through, there is actually a revival of agricultural labour.
> 
> I'm remembering Sam suggesting a similar scenario for the U .S.

I agree this is quite possible in the USA. I've mentioned something similar 
-- that going all organic might mean doubling the number of people in 
agriculture. But, with only 2% now in agrictulture, this would bring the USA 
up to 4%, or about another three million jobs. At about fifteen million 
unemployed, that leaves twelve million to go. :-)

Say, guessing, four million people for green energy jobs. Still eight 
million to go, and that is after a complete radical restructuring of how 
food and energy are produced in the USA. :-)

Sure, we should do it, but it is not enough.

> Again I therefore re-iterate, there's nothing 'automatic' about automation,
> which may express itself quite differently in the future, especially in the
> non-western world
> 
> and as Paul says, even a decline of 'jobs', doesn't destroy the need for
> plentiful human activities ...

Agreed. And, the more free time people have, the more many people will 
garden, cook more at home, make their own clothes, learn to play musical 
instruments for live performance, write free software, volunteer at hospices 
and hospitals, and so on -- as a form of personal entertainment or other 
personal happiness.

And for many things, like agriculture, and health care, we will see the 
quality improve. For example, the single biggest factor in US hospital 
outcomes is supposedly the number of nurses per patient -- so people can 
make a big difference.

> the jobless recovery is much less the result of automation, much more about
> outsourcing the U.S. industrial production to cheap labour countries with
> less automation than western countries (though they will eventually catch
> up)

Well, it would be interesting to know an estimate disentangling those 
factors of offshoring and increasing productivity.

This would tend to agree with you:
   "Manufacturing Productivity Growth Isn't What The Government Measures: 
Numbers Are Inflated By Cost Reductions From Offshore Outsourcing "
  http://www.manufacturingnews.com/news/07/0416/art1.html
"""
"The growth of outsourcing and offshoring in industrialized countries makes 
it exceedingly difficult for government statistical agencies to measure 
changes in the flows of inputs into the production process and hence to 
accurately measure productivity growth," Houseman states. "In addition, the 
growth of outsourcing and offshoring raises conceptual issues about what 
productivity statistics do and should measure, with implications for how 
they should be interpreted and who will benefit from measured productivity 
gains."
   Houseman calculated that outsourcing of manufacturing services jobs 
accounted for about half of a percent point of the growth in manufacturing 
productivity between 1990 and 2000, dropping the growth rate from 3.71 
percent to 3.17 percent. It's more difficult to factor in offshoring of 
production overseas in the manufacturing sector because the government does 
not track the shift of production offshore. It's also difficult to ascertain 
productivity growth in the overall manufacturing sector because virtually 
all of the gains in productivity during the 1990s were driven by the 
high-tech industry. That industry was a leader in shipping its work 
offshore. ...
   While economic theory holds that improvement in a population's standard 
of living is directly tied to its productivity growth, one of the great 
puzzles of the American economy in recent years has been the fact that large 
productivity gains have not broadly benefited workers in the form of higher 
wages. A better understanding of what our productivity statistics actually 
measure potentially provides some answers to this puzzle." Houseman says 
that her findings provide "a direct link between productivity measurement, 
offshoring and inequality."
   Productivity improvements from offshoring "may largely measure cost 
savings, not improvements to output per hour worked by American labor," she 
writes. "Productivity trends may be an indicator not of how productive 
American workers are compared to foreign workers, but rather of how cost 
uncompetitive they are vis-à-vis foreign labor. Although the productivity 
numbers may capture some net gains to the American economy from trade, there 
is no reason to believe that these gains will be broadly shared among 
workers. The very process of offshoring to cheap foreign labor places 
downward pressure on many domestic workers' wages and simultaneously 
increases measured productivity through cost savings."
"""

So, it's apparently hard to measure. But even there, at the beginning, is 
the suggestion there is still a lot of productivity growth.

Other points:
http://www.easternidahoieee.org/2005/Offshoring%20Major%20Cause%20of%20Technical%20Unemployment.htm
"WASHINGTON (8 March 2005) -- Offshoring is the second-highest cause of 
unemployment among U.S. technical professionals, according to the 2004 
IEEE-USA Unemployment Survey released today. The leading cause of 
unemployment, cited by 62 percent of U.S. IEEE members who reported being 
laid off, was a business downturn. Fifteen percent reported that their jobs 
were transferred offshore, while 10 percent pegged merger or acquisition as 
the cause of their layoff. A correlation between results of the Unemployment 
Survey and the 2004 IEEE-USA Salary & Fringe Benefit Survey, which showed 
the first median income decline for U.S. IEEE members in 31 years, revealed 
that people in industries reporting the largest drop in income also reported 
the highest percentage of unemployment because of offshoring. ... Other 
findings reveal that 37 percent of the 988 respondents said they considered 
leaving engineering entirely, and 41 percent said they would not recommend 
the profession to their children."

So, I'd like to point out -- declining salaries for electrical engineers in 
the USA amidst a vast increase in dependence on electrical computerized 
technology.

But there is so much political spin involved, it is hard to know what to 
believe on this sometimes.

And there are multiple factors in the USA related to unemployment:
* offshoring
* H1Bs
* saturated demand (or declining demand from a recession)
* better design (so less work needed to make things, and products do more 
and last longer)
* automation
* access to a free commons of technology and information (the internet)
* improved community, so more things can be given or borrowed

Each plays some role. This would be a good question for a good economist to 
answer. Probably someone has done this already?

I can't make any sense of this abstract, but maybe I've read too much today 
already:
   "Offshoring and Unemployment"
   http://www.nber.org/papers/w13149
"We find that, contrary to general perception, wage increases and sectoral 
unemployment decreases due to offshoring."

Sounds spinnish to me. :-)

As, was it Ryan said, the USA improving socially might be indistinguishable 
economically from a total economic collapse? :-) I can wonder if it works 
both ways, a collapse might lead to social improvements? :-)

> Japan, the most automated country in the world, has in fact increasing job
> shortages in many sectors (though an increase in general unemployment after
> this crisis)

But Japan faces a "Peak Population" crisis that drives this -- many old 
people, few young people. Or essentially, when much of the population is on 
a basic income (old people with social security and pensions and other 
retirement income), then it is great that the young people have low paying 
jobs and high taxes to pay for old people to act like teenagers?

Although, I can say one thing that I have not realized until yesterday:
"Unhappy Labor Day"
http://www.washingtonpost.com/wp-dyn/content/article/2009/09/06/AR2009090601194.html
"Last year, the New York Times reports, almost a third of Americans in their 
later 60s were still working. In France, just 4 percent of people that age 
were either employed or looking for work. "

So, I wonder why I have never heard US conservatives trumpeting that fact? 
Basically, in the USA, old people have to work forever. Now, I'm not 
necessarily against anyone of any age working at whatever they want if the 
want to, but this is essentially compulsory labor in the USA.

> again, and again, the simple equation automation = the end of work, is
> simplistic, and not empirically validated,

Well, where do we get better facts? :-)

But, regardless of what recent history shows, from my experience as a 
programmer and a tinkerer, most "work" just seems unneeded if we have better 
design or change our priorities. :-) So, I tend to agree with what was said 
here about rethinking work:
   http://www.whywork.org/rethinking/whywork/abolition.html

Still, better design often requires up-front costs, and someone needs to pay 
them.
   http://en.wikipedia.org/wiki/Green_building
But these costs are often smaller than one might think. Again, part of this 
is market failure (underpriced energy, underpriced future labor repair 
costs, not enough loans up front for these green investments). Part of it is 
educational. And part of it is regulatory. For example, banks should just 
not be giving mortgages to buildings that are not energy efficient, to begin 
with, because such mortgages will be harder to service and such buildings 
will have lower resale value. Building codes should reflect national 
security priorities like energy efficiency. Town should not be putting in 
roads without pedestrian walkways and bicycle paths. But, eventually we'll 
probably see these changes in the USA. And other countries are way ahead in 
various respects.

--Paul Fernhout
http://www.pdfernhout.net/