
Don’t Be So Sure the Economy Will Return to Normal - jseliger
http://www.nytimes.com/2015/05/17/upshot/dont-be-so-sure-the-economy-will-return-to-normal.html?smid=tw-upshotnyt&_r=1&abt=0002&abg=0
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stegosaurus
"Normal" is hilarious in context.

In the UK we have a housing crisis so acute that even "well paid"
professionals are paying 50%+ of income on a 1 bedroom flat.

We have a government that sees the unemployed as vermin, rats to be
extinguished. A government with a puritanical "work will set you free"
mindset.

And overlaid on that, in the past decade we've had the Internet go mainstream.
Working class kids now have an acute awareness of what the other half is up
to.

The whole model is bloody broken. It makes me depressed that people even
engage with this tripe. It's like having a discussion about how best to cook a
slab of meat that's been left out for months and has gone fuzzy and green.

We can't go on with this nonsense class based serfs and lords stuff. Really,
we can't. It's not just bad for the squeezed middle, it's bankrupt from top to
bottom. People working in shit jobs for shit pay to die early. Middle class
kids buckling themselves in with the student debt and the mortgage to spend
their entire adult life under the heel of the capitalists.

And now they _know_ it. It's not just 'how life is', any more. It's how life
was made to be for them, by those.

We don't need kebabs or movies or dry cleaning. This stuff exists and these
people are working in crap conditions for the sole reason that we decided as a
society that people don't deserve the basics unless they submit to the
machine.

It can be fixed. The difference between a landlord and a tenant is a piece of
paper or a few bytes in a database.... but we cling on to the model.

When and how will it end?

~~~
Ntrails
_We have a government that sees the unemployed as vermin, rats to be
extinguished. A government with a puritanical "work will set you free"
mindset._

I'll give you that, as a somewhat tinted perspective on the governments views,
but I'm not sure where you want to go with it? Every government aims for
minimal unemployment, it's one of their key tasks - to get people into work.
I'm not sure you'll find anyone willing to say "You can work if you want to
[you can leave your old friends behind], otherwise here just live on other
peoples taxes".

 _People working in shit jobs for shit pay to die early_

Most people work jobs that they do not enjoy. Working is a means to an end,
survival. Please do define for me a system where the jobs are all lovely and
nobody has to do anything they don't want to do. There seems to be this theory
that everyone should be happy, it's pure myth. Life never has worked like that
for the majority of the population in any historical system.

~~~
stegosaurus
Ehhhh... I don't really know where to start here. We have viewpoints and value
systems that differ on the most basic level. I don't give a single fuck for
the historical system. The historical system is a system of rich and poor, of
serfs and lords, full of exploitation at every level. Forget about it.

'Living on other peoples taxes' is total nonsense. It posits a world within
which my work allows you to be lazy when that is not the case at all. You can
be lazy regardless of whether or not I work in the vast majority of cases.
Very few jobs are actually essential and even fewer are useful to the 'lazy'
person (because they would not be wealthy enough to patronise restaurants,
take luxury holidays, drive flash cars, etc.)

The UK has a ton of housing stock. It exists, it's there. We need a bit more,
but generally, people work in order to pay a wealthy landlord; they don't work
because the home needs any labour in order for it to persist.

We do need some level of labour in order for society to continue. But I argue
that we don't need to force people by withholding (yes, withholding. not
failing to present them - land ownership is a withholding of the commons)
basics from them.

People will work anyway because they want more. The bottom level doesn't have
to be serf status.

Money is a distraction. It is the current way of distributing resources. It
doesn't have to be.

There is a distinction between giving people the opportunity to work and
therefore increase their wealth; and forcing them to work by withholding
things and renting it back to them. The former is great! The latter is evil.

~~~
mindslight
Money itself isn't so terrible. It's a fungible unit of value. People are
always going to engage in private transactions. Getting rid of money would
just make the second side of the transaction more subjective and therefore
less efficient. (yes, markets getting more efficient combined with the baked
in assumptions are why the system is coming unglued. but that doesn't mean
trying to make them less efficient will fix it)

The real problem is, as you said, extremely high rent (even if you "buy") just
for a place to _exist_. This puts labor in an extremely weak negotiating
position (people being worried about losing their jobs!), which any true free
market proponent should be _against_.

Imagine how things would change if a minimum wage worker made enough in a few
months to cover their expenses for a year IF they mostly stayed home, ate
inexpensive food, didn't buy more clothes/gadgets, etc. Run the numbers with
current prices and you'll see that this isn't some planned economy dream, but
pretty close to current conditions if the rent paid to banks (on money they're
mostly allowed to conjure from thin air) were taken out of the picture! Gosh
after several months of work and no longer under duress, workers might even be
in a position to _demand_ a raise!

~~~
stegosaurus
Spot on. I'm not against money per se; I take issue with the fact it's used at
every level rather than only where it makes sense.

It doesn't make sense to use pure supply and demand for land at the very
bottom level of human sized parcels. It makes sense to say that a studio
should be cheaper than a 1BR should be cheaper than a 2BR and so on; but not
that the studio should be allowed to tend towards its absolute maximum price
(e.g. roughly minimum wage).

Why? You don't even need a moral argument. It's simply inefficient, a huge
drag on the economy. It means people spend 90% of their time scrambling just
to exist and never do anything more.

It is like if I had to spend 90% of my CPU power just to run the OS. Bonkers.

It benefits no-one but landlords who in many cases are in a zero risk
situation (you own a home and then you still own a home; the monetary value is
really a game, it's not a real risk).

~~~
mindslight
> _It doesn 't make sense to use pure supply and demand for land at the very
> bottom level of human sized parcels_

I don't think you even have to go this deep.

The banks are the ones that create new money, multiplying deposits tenfold
based on the _valuation_ of the assets they're writing notes on. But that
valuation is set entirely by the selling prices!

So in this circular situation, the _only_ downward pressure on housing is what
the banks will loan (especially with further down-payment-erosion like PMI),
which is set by the carrying cost of the capital (interest) times what people
are willing to pay per month. There is no risk of default since on paper, the
asset is worth slightly more than the loan.

I think if you were to revoke financial primacy and eg disallow repossession
of residences in bankruptcy, you'd see a pretty quick correction as there
would then be an actual risk that someone would take a loan to buy a house and
then decide servicing that debt was pointless.

But there's no political capital, since everyone that has bought property
(even and especially with a mortgage) wants to see the bubble keep going up
forever.

------
jqm
I read a theory somewhere that one of the the reasons Japan and Germany did so
well in the post war years was that the war had completely cleaned out the rot
and corruption from their institutions and they were starting over with a
clean slate.

I have no idea how true this is. But I do suspect some of the troubles in
America are more than economic... they are structural. Corruption in
boardrooms. Profits without production. Institutions far deviated from their
original purpose. Workers showing up and barely going through the motions with
a sense of entitlement. Managers who have long since ceased to serve any
useful function holding on to their jobs and perniciously cutting out anyone
who would threaten them by innovating or producing. It's no one persons fault.
It's not even the systems fault. It's just I think what happens when systems
grow stale and a bit corrupt. Maybe there does inevitably have to be a real
reset before things can get better again.

~~~
meric
The situation is getting a bit like the late Qing dynasty, the late Ming
dynasty, the late Ming dynasty, the late Song dynasty and before that, the
late Tang dynasty, the late Jin dynasty, and the late Han dynasty before them.

The corruption amongst the wealthy and the powerful, as well as overreach of
power from the central state causes instability in the empire, and with
revolts, crisis and invasions abound, the empire collapses, and a new one
arises like a phoenix out of ashes, along with a new era of prosperity where
government officials work to the benefit of the people.

Dynasties in China rarely last more than 300 years before the corruption and
the reach of the state expands too much and collapse the dynasty with it. The
current global hegemon is the United States of America...How long has it been
since the last rebellion in the Americas, against the last global hegemon
before them, the British Empire?

239 years.

I am optimistic my future grandchildren will live in more optimistic times
than my future children will.

~~~
f3llowtraveler
> where government officials work to the benefit of the people.

hahahahahahahaha

~~~
meric
Sounds funny now, but it happened in the early-Han, early-Song, early-Ming and
early-Qing. In each of those times the new government had fewer regulations to
begin with, needed popular support (to raise more armies and crush the
remaining opposition) and would pass reforms that would allow prosperity to
happen. Each of those periods are considered one of China's golden ages.
Perhaps you might also want to take a look at:
[http://www.newworldeconomics.com/archives/2014/092814_files/...](http://www.newworldeconomics.com/archives/2014/092814_files/TheFateofEmpiresbySirJohnGlubb.pdf)
which describes these cycles well.

------
jedharris
Cowan talks about a "reset". Perhaps part of the "reset" will be putting some
of benefits of productivity back in everyone's pocket.

~~~
csense
The real issue here is globalization. In the post-WW2 years, US workers had a
monopoly on labor provided to US firms, and thus were able to extract some of
their firms' economic surplus (either through unionization or the threat of
unionization). Company owners shared some of their profits with their workers
because they had no other choice.

Now that trade borders are relatively open, companies have the option of
looking elsewhere. US workers can no longer extract the surplus because if
they attempt to, their company will simply relocate operations to a different
country.

It's an either-or proposition: You can have free global trade, _or_ you can
have a job market that pays high wages to workers of average skill. You want
both, but it's impossible; so we have to make a choice. We've chosen free
global trade, and (as the article notes) there's a slow adjustment time in
institutions. Figuring it began in the 1970's with Nixon opening up China, it
took about 25 years to really be felt (in the dotcom bust, financial crisis
and subsequent slow recovery).

~~~
oxymoron
There are other factors here:

Automation. East asia remains the manufacturing powerhouse of the world, but
even that region is losing production jobs in absolute numbers. Low skilled
labour opportunities are disappearing everywhere.

Transport. Free trade doesn't cause a sudden loss of jobs to abroad. Cheap and
effiecient logistics did. The incentives for moving jobs abroad is there with
or without trade treaties.

Regulation and incentives. Not sure if it remains the case but most of the
major US tech companies including the likes of Microsoft, Dell and Intel used
to be headquartered on Ireland due to tax incentives.

Unions. Love 'em or hate 'em, they do cause disturbances in the market
equilibriums.

\---

All of this has happened without treaties with either the EU nor the pacific
countries. Some automotive factories may have ended up in Mexico, but NAFTA is
hardly the reason that the US is where it's at.

~~~
gonzo

      > Automation
      > ...
      > Transport
    

Now combine them. There was an article on HN yesterday about autonomous semi
trucks.

about the only thing that will stop this is the cost of energy, which is all
but artificially low right now. If/when it climbs, the economy is in for the
mother of all "resets".

------
mempko
People of the west. The capitalists are abandoning you. They don't give a fuck
about you. You live in a 'mature' economy. They are going where the growth is
like China.

But don't fight it. Take it like a man. Watch more TV, drink more. Weed is
being legalized so you feel better about all of this.

------
f3llowtraveler
The entire financial and monetary system is a government-enforced cartel. I
don't expect that to change anytime soon. Things will just keep getting worse.

