To Increase America's Productivity, Ban This...

Aside from short-lived booms in the 1990s and 2000s, US productivity growth has averaged just 1.2% from 1975 up to today after peaking above 3% in 1972.

As we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today.

If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

As we reported last year, users spent 51% of their total internet time on mobile devices, for a total of 5.6 hours per day snapchatting, face-booking, insta-graming and taking selfies.

It"s an everyday sight - people using their phones while sitting on the train, waiting for a bus, or even having a meal with their partner.

What exactly are they doing the whole time though?

When it comes to social networks, Verto Analytics may have the answer. The most time spent in the U.S. on a "mainstream" app is the 899 minutes per month of the average Facebook user.

The social network whose users invest the most time though is a networking app for gay, bi, and curious men - Grindr. WIth a huge 1,040 minutes on average, that"s over 17 hours every month.

In third place, Growlr is also a networking/dating app for homosexual men. The average user here spends 665 minutes per month.

In eighth, Twitter"s struggles are again highlighted, with only 176 minutes in Q3 2017.

Figures refer to usage across all platforms, not just mobile.

You will find more statistics at Statista

So, maybe in their next wide-ranging study, economists could include a test group of workers who leave their phones in a locker at the beginning of the work day, and try to measure how much their “productivity” improves. So, while every effort can be made by Ivory Tower academics to solve the problem of American worker productivity, perhaps it can be summed up simply as "Put The Smart-Phone Down!"

Which Countries Have The Most Economic Complexity?

As Visual Capitalist"s Jeff Desjardins notes, rvery country has an economy that is unique.

In some places, such as the United States or Germany, economies are able to produce many different goods and services that get exported around the world. These countries tend to house world-class businesses in sectors like financials, technology, consumer goods, and healthcare, with companies that produce highly specialized goods like automobiles, software, or pharmaceutical products. Ultimately, these are innovative economies that can roll with the punches, creating growth even when prospects are dim.

In other places, this level of sophistication is just not there. Innovation and knowledge are stunted or non-existent for most industries, and these countries may focus exclusively on one or two goods to pay the bills. Venezuela’s reliance on oil is an obvious example of this, but there are even many Western countries that miss the mark here as well.

MEASURING ECONOMIC COMPLEXITY

In 2009, a team at Harvard formalized a measure of economic complexity that compared nations based on the sophistication of their economies. Now known as the Economic Complexity Index (ECI), the exact measurement is complicated, but it essentially uses data on two main things to uncover the underlying level of economic complexity:

1. Economic Diversity 
Measures how many different products a country can produce.

2. Economic Ubiquity
Measures how many countries are able to make those products.

In other words: if a country produces only a few goods, that economy is not very complex. Further, if a country produces many different products, but they are all simple ones that can be replicated elsewhere, the economy is still not complex. See full details on the project here.

RANKING THE MOST COMPLEX ECONOMIES

Here are the most complex economies in order, along with the changing rankings over time:

As you’ll notice, the most recent set of data is from 2015.

Topping the list are the economies of Japan (1st), Switzerland (2nd), Germany (3rd), and South Korea (4th). The United States sits in 9th place, and Canada is further down at 33rd.

Australia, which relies heavily on commodities, ranks notably low for Western countries in 73rd place, where it is sandwiched between Kazakhstan and the Dominican Republic.

MOVERS AND SHAKERS

The most recent iteration of the index also highlighted some movers and shakers over the last 10 year period:

In particular, the crisis in Venezuela has had an effect on economic complexity, eroding any sophistication that existed.

Meanwhile, Cuba’s economy is also in the decline in terms of sophistication – and with major exports including raw sugar (27%), rolled tobacco (15%), nickel (12%), oil (11%), hard liquor (7%), and crustaceans (4%), it’s not hard to see why.

On the opposite side of the spectrum, the Philippines is the biggest mover upwards, ascending 28 spots.

Some African countries are also moving fast up the rankings: Botswana, Malawi, Uganda, and Cameroon each jumped over 20 spots.

Capitalism - A New Idea

Authored by Jeff Thomas via InternationalMan.com,

Capitalism, whether praised or derided, is an economic system and ideology based on private ownership of the means of production and operation for profit.

Classical economics recognises capitalism as the most effective means by which an economy can thrive. Certainly, in 1776, Adam Smith made one of the best cases for capitalism in his book, An Inquiry Into the Nature and Causes of the Wealth of Nations (known more commonly as The Wealth of Nations). But the term “capitalism” actually was first used to deride the ideology, by Karl Marx and Friedrich Engels, in The Communist Manifesto, in 1848.

Of course, whether Mister Marx was correct in his criticisms or not, he lived in an age when capitalism and a free market were essentially one and the same. Today, this is not the case. The capitalist system has been under attack for roughly 100 years, particularly in North America and the EU.

A tenet of capitalism is that, if it’s left alone, it will sort itself out and will serve virtually everyone well. Conversely, every effort to make the free market less free diminishes the very existence of capitalism, making it less able to function.

Today, we’re continually reminded that we live under a capitalist system and that it hasn’t worked. The middle class is disappearing, and the cost of goods has become too high to be affordable. There are far more losers than winners, and the greed of big business is destroying the economy.

This is what we repeatedly hear from left-leaning people and, in fact, they are correct. They then go on to label these troubles as byproducts of capitalism and use this assumption to argue that capitalism should give way to socialism.

In this, however, they are decidedly wrong. These are the byproducts of an increasing level of collectivism and fascism in the economy. In actual fact, few, if any, of these people have ever lived in a capitalist (free-market) society, as it has been legislated out of existence in the former “free” world over the last century.

So, let’s have a look at those primary sore spots that are raised by suggesting that collectivism will correct the “evils” of capitalism.

Prices Are Driven From the Top Down

This is unquestionably the case in the aforementioned countries, however, it is not so under capitalism. Under capitalism, each producer tries to get as much as he can for his product, but, as others are also creating the same product, those with the lowest price are the ones who will succeed. Therefore, the consumers effectively set the prices, based upon what they’re willing to pay.

But in any country where cronyism exists between big business and government, regulations can squeeze out the competition, allowing a monopoly for a given product. The definition of this marriage between business and government is “fascism.” The government makes it increasingly difficult, through regulation, for the small producer to compete with the larger producer (who gives kickbacks to the government).

Capitalism Only Benefits Those at the Top

Capitalism benefits those who produce the most, but it also benefits all others, as they have a free choice to purchase whatever products they wish, at a price they’re prepared to pay. If the producer demands too high a price, consumers instead buy his competitor’s product, putting him out of business. The consumer is therefore in charge of the price of goods. A producer only rises to the top if he produces the most affordable product (as did Henry Ford, 100 years ago, with his Model T. Through the free market, he lowered his price repeatedly and, in so doing, put America on wheels).

Capitalism Impoverishes the Masses

The free market offers more goods to more people at lower prices, which enriches the lives of all consumers, no matter how rich or poor. In so doing, it raises up the masses over time, providing them with more and better goods, education, health care, etc., enabling them to rise out of poverty. By contrast, overregulation and entitlements enslave those same people to poverty.

Capitalism Can Only Work if It’s Heavily Regulated

The whole idea of the free market is that it’s free from interference by others—most importantly, governments. If left alone, the free market will produce the goods the public are most willing to pay for, which results in an ever-self-levelling of products and prices. As soon as regulation enters the picture, the free market is compromised. What exists today is not a free market, as Adam Smith would have recognised it, but a bloated, dysfunctional socialist/fascist/capitalist mongrel of a system. Of course it doesn’t work.

Fascism is capitalism in decay.

—Vladimir Lenin

Quite so. Regulation is a cancer that slowly eats capitalism until it morphs into fascism.

Do not their leaders deprive the rich of their estates and distribute them among the people; at the same time taking care to preserve the larger part for themselves?

—Socrates to Adeimantus

What was true ca. 400 BC in Athens is true today. Fascism (or corporatist cronyism) results in 99% of the population coming under the diktat of the 1%, which is made up of government leaders and corporate leaders, working in concert, to the exclusion of all others. This is, in fact, the opposite of a free market.

The creation of new wealth is the only functional weapon against poverty.

—Doug Casey

New wealth comes from the bottom up - it’s as simple as someone building a better mousetrap, or building the old one more cheaply. In such a market, both the producer and the consumer benefit.

In a fascist system, the wealth gravitates to the top, eventually choking out the middle class and expanding the poorer class, and that’s just what we’re witnessing today. The solution is not to go further in this direction, but rather to try something new… or at least new to anyone living under the fascist system. Although it still retains some capitalist overtones, it is unquestionably not capitalism.

A last word—capitalism does exist today, but it lives in select countries that have not yet given in to overregulation. In those countries, the average person thrives and has opportunities far beyond what’s allowed in the former “free” world. Should the reader conclude that his present country is unlikely to go in the direction of capitalism, he may choose to vote with his feet in order to prosper the way his ancestors did 100 years ago.

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Today, Washington’s dangerous fascist policies have pushed the US economy to the tipping point. Years of overregulation, corporate bail outs, manic money printing, and artificially low interest rates, have bloated and warped the economy. Now it’s about to unravel… That’s why New York Times best-selling author Doug Casey and his team just released an urgent video. Click here to access it now.

Why Robots Won't Cause Mass Unemployment

I made a small note in a previous article about how we shouldn’t worry about technology that displaces human workers:

The lamenters don’t seem to understand that increased productivity in one industry frees up resources and laborers for other industries, and, since increased productivity means increased real wages, demand for goods and services will increase as well.

They seem to have a nonsensical apocalyptic view of a fully automated future with piles and piles of valuable goods everywhere, but nobody can enjoy them because nobody has a job.

I invite the worriers to check out simple supply and demand analysis and Say’s Law.

Say’s Law of markets is a particularly potent antidote to worries about automation, displaced workers, and the so-called “economic singularity.” Jean-Baptiste Say explained how over-production is never a problem for a market economy. This is because all acts of production result in the producer having an increased ability to purchase other goods. In other words, supplying goods on the market allows you to demand goods on the market.

Say’s Law, Rightly Understood

J.B. Say’s Law is often inappropriately summarized as “supply creates its own demand,” a product of Keynes having “badly vulgarized and distorted the law.”

Professor Bylund has recently set the record straight regarding the various summaries and interpretations of Say’s Law.

Bylund lists the proper definitions:

Say’s Law:

• Production precedes consumption.


• Demand is constituted by supply.


• One’s demand for products in the market is limited by one’s supply. 


• Production is undertaken to facilitate consumption.


• Your supply to satisfy the wants of others makes up your demand for for others’ production.


• There can be no general over-production (glut) in the market.

NOT Say’s Law:

• Production creates its own demand.


• Aggregate supply is (always) equal to aggregate demand.


• The economy is always at full employment.


• Production cannot exceed consumption for any good.

Say’s Law should allay the fears of robots taking everybody’s jobs. Producers will only employ more automated (read: capital-intensive) production techniques if such an arrangement is more productive and profitable than a more labor-intensive technique. As revealed by Say’s Law, this means that the more productive producers have an increased ability to purchase more goods on the market. There will never be “piles and piles of valuable goods” laying around with no one to enjoy them.

Will All the Income Slide to the Top?

The robophobic are also worried about income inequality — all the greedy capitalists will take advantage of the increased productivity of the automated techniques and fire all of their employees. Unemployment will rise as we run out of jobs for humans to do, they say.

This fear is unreasonable for three reasons.

• First of all, how could these greedy capitalists make all their money without a large mass of consumers to purchase their products? If the majority of people are without incomes because of automation, then the majority of people won’t be able to help line the pockets of the greedy capitalists.


• Second, there will always be jobs because there will always be scarcity. Human wants are unlimited, diverse, and ever-changing, yet the resources we need to satisfy our desires are limited. The production of any good requires labor and entrepreneurship, so humans will never become unnecessary.


• Finally, Say’s Law implies that the profitability of producing all other goods will increase after a technological advancement in the production of one good. Real wages can increase because the greedy robot-using capitalists now have increased demands for all other goods. I hope the following scenario makes this clear.

The Case of the Robot Fairy

This simple scenario shows why the increased productivity of a new, more capital-intensive technique makes everybody better off in the end.

Consider an island of three people: Joe, Mark, and Patrick. The three of them produce coconuts and berries. They prefer a varied diet, but they have their own comparative advantages and preferences over the two goods.

Patrick prefers a stable supply of coconuts and berries every week, and so he worked out a deal with Joe such that Joe would pay him a certain wage in coconuts and berries every week in exchange for Patrick helping Joe gather coconuts. If they have a productive week, Joe gets to keep the extra coconuts and perhaps trade some of the extra coconuts for berries with Mark. If they have a less than productive week, then Patrick still receives his certain wage and Joe has to suffer.

On average, Joe and Patrick produce 50 coconuts/week. In exchange for his labor, Patrick gets 10 coconuts and 5 quarts of berries every week from Joe.

Mark produces the berries on his own. He produces about 30 quarts of berries every week. Joe and Mark usually trade 20 coconuts for 15 quarts of berries. Joe needs some of those berries to pay Patrick, but some are for himself because he also likes to consume berries.

In sum, and for an average week, Joe and Patrick produce 50 coconuts and Mark produces 30 quarts of berries. Joe ends up with 20 coconuts and 10 quarts of berries, Patrick ends up with 10 coconuts and 5 quarts of berries, and Mark ends up with 20 coconuts and 15 quarts of berries.

The Robot Fairy Visits

One night, the robot fairy visits the island and endows Joe with a Patrick 9000, a robot that totally displaces Patrick from his job, plus some. With the robot, Joe can now produce 100 coconuts per week without the human Patrick.

What is Patrick to do? Well, he considers two options: (1) Now that the island has plenty of coconuts, he could go work for Mark and pick berries under a similar arrangement he had with Joe; or (2) Patrick could head to the beach and start catching some fish, hoping that Joe and Mark will trade with him.

While these options weren’t Patrick’s top choices before the robot fairy visited, now they are great options precisely because Joe’s productivity has increased. Joe’s increased productivity doesn’t just mean that he is richer in terms of coconuts, but his demands for berries and new goods like fish increase as well (Say’s Law), meaning the profitability of producing all other goods that Joe likes also increases!

Option 1

If Patrick chooses option 1 and goes to work for Mark, then both berry and coconut production totals will increase. Assuming berry production doesn’t increase as much as coconut production, the price of a coconut in terms of berries will decrease (Joe’s marginal utility for coconuts will also be very low), meaning Mark can purchase many more coconuts than before.

Suppose Patrick adds 15 quarts of berries per week to Mark’s production. Joe and Mark could agree to trade 40 coconuts for 20 quarts of berries, so Joe ends up with 60 coconuts and 20 quarts of berries. Mark can pay Patrick up to 19 coconuts and 9 quarts of berries and still be better off compared to before Joe got his Patrick 9000 (though Patrick’s marginal productivity would warrant something like 12 coconuts and 9 quarts of berries or 18 coconuts and 6 quarts of berries or some combination between those — no matter what, everybody is better off).

Option 2

If Mark decides to reject Patrick’s offer to work for him, then Patrick can choose option 2, catching fish. It involves more uncertainty than what Patrick is used to, but he anticipates that the extra food will be worth it.

Suppose that Patrick can produce just 5 fish per week. Joe, who is practically swimming in coconuts pays Patrick 20 coconuts for 1 fish. Mark, who is excited about more diversity in his diet and even prefers fish to his own berries, pays Patrick 10 quarts of berries for 2 fish. Joe and Mark also trade some coconuts and berries.

In the end, Patrick gets 20 coconuts, 10 quarts of berries, and 2 fish per week. Joe gets 50 coconuts, 15 quarts of berries, and 1 fish per week. Mark gets 30 coconuts, 5 quarts of berries, and 2 fish per week. Everybody prefers their new diet.

Conclusion

The new technology forced Patrick to find a new way to sustain himself. These new jobs were necessarily second-best (at most) to working for Joe in the pre-robot days, or else Patrick would have pursued them earlier. But just because they were suboptimal pre-robot does not mean that they are suboptimal post-robot. The island’s economy was dramatically changed by the robot, such that total production (and therefore consumption) could increase for everybody. Joe’s increased productivity translated into better deals for everybody.

Of course, one extremely unrealistic aspect of this robot fairy story is the robot fairy. Robot fairies do not exist, unfortunately. New technologies must be wrangled into existence by human labor and natural resources, with the help of capital goods, which also must be produced using labor and natural resources. Also, new machines have to be maintained, replaced, refueled, and rejiggered, all of which require human labor. Thus, we have made this scenario difficult for ourselves by assuming away all of the labor that would be required to produce and maintain the Patrick 9000. Even so, we see that the whole economy, including the human Patrick, benefits as a result of the new robot.

This scenario highlights three important points:

(1) Production must precede consumption, even for goods you don’t produce (Say’s Law). For Mark to consume coconuts or fish, he has to supply berries on the market. For Joe to consume berries or fish, he has to supply coconuts on the market. Patrick produced fish so that he could also enjoy coconuts and berries.

(2) Isolation wasn’t an option for Patrick. Because of the Law of Association (a topic not discussed here, but important nonetheless), there is always a way for Patrick to participate in a division of labor and benefit as a result, even after being displaced by the robot.

(3) Jobs will never run out because human wants will never run out. Even if our three island inhabitants had all of the coconuts and berries they could eat before the robot fairy visited, Patrick was able to supply additional want satisfaction with a brand new good, the fish. In the real world, new technologies often pave the way for brand new, totally unrelated goods to emerge and for whole economies to flourish. Hans Rosling famously made the case that the advent of the washing machine allowed women and their families to emerge from poverty:

And what’s the magic with them? My mother explained the magic with this machine the very, very first day. She said, “Now Hans, we have loaded the laundry. The machine will make the work. And now we can go to the library.” Because this is the magic: you load the laundry, and what do you get out of the machine? You get books out of the machines, children"s books. And mother got time to read for me. She loved this. I got the “ABC’s” — this is where I started my career as a professor, when my mother had time to read for me. And she also got books for herself. She managed to study English and learn that as a foreign language. And she read so many novels, so many different novels here. And we really, we really loved this machine.

And what we said, my mother and me, “Thank you industrialization. Thank you steel mill. Thank you power station. And thank you chemical processing industry that gave us time to read books.”

Similarly, the Patrick 9000, a coconut-producing robot, made fish production profitable. Indeed, when we look at the industrial revolution and the computer revolution, we do not just see an increase in the production of existing goods. We see existing goods increasing in quantity and quality; we see brand new consumption goods and totally new industries emerging, providing huge opportunities for employment and future advances in everybody’s standard of living.

The Over-Quantification Of Life

Authored by Charles Hugh Smith via OfTwoMinds blog,

The idea that all endeavors can be distilled down to statistics has put us in the Over-Quantification Box.

Correspondent Chad D. recently submitted a thought-provoking commentary on the Over-Quantification of Life:

"I think you could constructively explore the over-QUANTIFICATION of the US. Or we could call it the Wal-Martization of the US. The only that that counts is a number (i.e. price, sales, clients, patients, tickets, arrests, convictions, fines, sex partners, scores, averages, etc.).

What is missing is quality. I think you"ve mentioned something similar before talking about junk products with a short lifespan, but this way of doing things pervades our society.

I would argue that in nearly every area of society, quantity rather than quality rules the day. In the Criminal Justice system, officers and their immediate supervisors are evaluated based on how many tickets/arrests are made and/or how many complaints are answered. Prosecutors are judged by how many defendants go to jail. Judges are judged by how many cases they clear and how many cases are on their docket. Prisons want more prisoners. Legislators are rated on how many laws they passed. I remember Ron Paul was castigated for not passing many if any laws while in office.

I could go on with banking, investing, medicine, education, sports, farming, etc. Quality has been left in the dust by the system. The quality that remains is due to the good people who are still in the system. I don"t know what really drives this phenomena, but I would say that usury is part of it. Usury demands that the system go ever faster to "produce" more and more to feed its ever hungry stomach.

But there must be something more to it than that. Ideas/thoughts?"

Thank you, Chad, for an insightful introduction to a profound topic we all experience in daily life.

Let"s start with Chad"s reference to usury, i.e. interest on debt. When we borrow money, the interest we pay over the term of the loan can add up to far more than the sum borrowed, depending on the rate of interest and the duration of the loan.

Over time, indebtedness and the interest due on all the debt diminishes the net income remaining to pay for everything other than interest, and the household/ state / economy is hollowed out.

This is one reason for the biblical notion of debt jubilees, in which all debts are periodically forgiven to remove the drag of debt on debtors and the economy at large.

The only way to sustain expanding debt is 1) inflation, which enables borrowers to pay interest with "cheaper" money and 2) expanding income.

Let"s say I owe $10,000, and my annual wage is $30,000. With modest but sustained inflation, my wage eventually doubles (assuming it keeps up with inflation) while my debt remains $10,000 minus whatever principal I"ve paid.

Alternatively, if inflation is near-zero but my wage rises by 10% a year, eventually my wage will double to $60,000, while my debt remains $10,000 minus whatever principal I"ve paid.

I think Chad is describing something rather subtle but very real: expanding debts require an equivalent expansion of income, i.e. productivity, to provide debtors with enough income to service the rising debt loads and have enough left to pay the rest of their obligations and to fund the consumption the economy depends on for growth.

This is a driver of demand for increased productivity that is rarely if ever recognized. This demand for increased productivity then drives the over-quantification of the processes and outcomes of every sector and endeavor.

If we think back to the early days of industrialization, a key tool to identify bottlenecks in production and improve productivity was breaking down the entire process into discrete steps that could be measured and quantified.

Quality control was also quantified, which enabled the gradual improvement not just of production but of the quality of the output. This is the foundation of the Deming Prize for Development of Quality Control/Management in Japan, which recognizes contributions to Total Quality Management (TQM).

The prize honors Dr. W. Edwards Deming, who taught that "by adopting appropriate principles of management, organizations can increase quality and simultaneously improve productivity."

It was all too natural, if fundamentally false, to reckon that these same statistical tools of quantification could be profitably applied to every field, from education to criminal justice to healthcare.

While certain aspects of these endeavors might benefit from being measured, counted and quantified, the idea that all endeavors can be distilled down to statistics has put us in the Over-Quantification Box Chad described: by relying solely on quantification, we"ve lost a truly useful sense of quality and outcome.

There are multiple problems with quantification. I often mention the key flaw: we only recognize what we measure. If it isn"t measured, it simply ceases to exist in a quantified world.

Another flaw: many activities and endeavors cannot be distilled down to statistics. We can go through the motions of counting something or other, but this process misses the essence of the endeavor or process.

We"re also tempted to invoke flawed methods of measure. Take the system many colleges now use in which students are invited to rate (quantify) their professors.

Any such survey method is self-selecting, i.e. the students who choose to rate their professors are self-selected. So if the 20% who dislike a teacher complete the survey while the 60% who liked the teacher do not, the teacher"s rating will be harmfully inaccurate.

Students are not unbiased observers. Those who received poor grades might seek a form of payback by giving the offending professor low marks.

There are even subtler flaws in what we measure and how we measure. In a previous Musings Report, I discussed the World War II-era damage reports on aircraft returning from bombing missions over Nazi Germany. The idea was to study the damage inflicted by fighters and flak with an eye on strengthening the aircraft"s weak points.

Mathematician Abraham Wald hit on a profound flaw in the methodology: the really important damage reports could not be filed, because it was the bombers which had been shot down that held the vital clues to the aircraft"s weaknesses. The aircraft that had been shot down could not be studied, so they effectively ceased to exist. This fatally distorted the results of the statistical analysis.

Here is a link that describes the study: Survivorship Bias

The goal of improving productivity is laudable, but justice (and many other aspects of human society) cannot be reduced to counting convictions. This dependence on quantification creates perverse incentives to game the system and push up the numbers to evoke a success that is phantom.

The infamous "body counts" of the Vietnam War come to mind, as do prosecutors" heavy reliance on plea bargaining to up their conviction count.

Students are now slavishly instructed to serve one goal: to improve their scores on tests that like the WWII bomber study, ignore what cannot be measured easily, yet is actually vital.

Quantification is easier than actually studying complex problems and situations, and it can generate an illusion of knowledge and insight. This is the danger of over-quantification and Big Data, that is, the over-reliance on over-quantification to make assessments and judgments about endeavors in which the key dynamics and meanings cannot be captured or illuminated by quantification alone.

"Technology Is Replacing Brains As Well As Brawn" - Challenging The 'Official' Automation Narrative (& Social Order)

Academics and economists have repeatedly underestimated the impact that immigration and automation would have on the labor market. As data on productivity gains and labor-force participation clearly show, the notion that innovation ultimately creates jobs by allowing workers to focus on higher-level problems is an illusion. If it were true, then why aren’t we already seeing more of the 20 million prime-age men who have inexplicably dropped out of the labor force welcomed back in?

As we"ve noted time and time again, after decimating American manufacturing jobs in the 1990s, automation is now coming for service-industry workers like those in the retail and food-service industries. Earlier this week, we shared an analysis from Cowen that showed new kiosks being adopted by McDonald’s will result in the destruction of 2,500 jobs at its US eateries. And now, Bloomberg has published a “quick take” questioning this “official” narrative and pointing out the very real carnage that service sector workers are already facing. In it, the reporters noted how economists have repeatedly misjudged how our capacity to innovate would impact the labor market. For example, 13 years ago, two leading economists published a paper arguing that artificial intelligence would never allow a driverless car to safely execute a left turn because there are too many variables at work. Six years after that, Google proved it could make cars fully autonomous, threatening the livelihood of millions of taxi and truck drivers. And now Google, Uber, Tesla and the big car manufacturers are all exploring and testing this technology. Ford has said it plans to introduce a fully autonomous car by 2021.

“Throughout much of the developed world, gainful employment is seen as almost a fundamental right. But what if, in the not-too-distant future, there won’t be enough jobs to go around? That’s what some economists think will happen as robots and artificial intelligence increasingly become capable of performing human tasks. Of course, past technological upheavals created more jobs than they destroyed. But some labor experts argue that this time could be different: Technology is replacing human brains as well as brawn.

When politicians talk about jobs, they tend to focus on iconic, goods-producing industries, such as mining, steel production and auto making, that have traditionally been the hardest hit by global competition and technological progress. Lately, though, the loss of manufacturing jobs in the U.S. pales in comparison to the much larger losses in parts of the services sector.

Overall, services accounted for three-fourths of the job losses among more than 350 sectors of the private economy in the last year. That’s a big shift from previous decades, when goods-producing categories tended to suffer the most losses.”

Bloomberg used the retail industry as an example, noting that as customers increasingly purchased goods via the internet, department stores, which employ 25 times more workers than coal mining companies, are shedding workers at an accelerating rate. In the retail industry more broadly, average employment in the first four months of 2017 was down 26,800 from the same period a year earlier, against just 2,800 job losses in coal.

In retail and beyond, the modern services industry - which accounts for more than 70% of the US"s economic output - is facing unprecedented challenges. Here’s a breakdown of some of the research cited in Bloomberg"s analysis.

• The true extent of job losses could be much more severe than most workers expect. As Bloomberg notes, researchers at the University of Oxford estimate that nearly half of all US jobs may be at risk in the coming decades, with lower-paid occupations among the most vulnerable.


• In the U.K., the Bank of England estimates that about 15 million mostly service jobs—half the country’s total—could succumb to automation and widen the gap between rich and poor.


• A McKinsey Global Institute study of the labor force in 46 countries found that less than 5 percent of occupations could be fully automated using today"s technology, but almost a third of tasks involved in 60 percent of occupations could be.

But if robots are truly taking over, mainstream academics would ask, then why haven’t we seen the attendent rise in productivity that one would expect from the increase in labor power?

While it"s true that, in the past, innovation has led to job creation, it"s foolish to believe that this trend will continue uninterrupted, especially as machines learn to perform increasingly high-level functions. As we’ve noted in the past, most of the new jobs that have been created are in low-wage, moderate-skill positions that cannot move the productivity needle much, causing the creation of new full-time jobs to stagnate.

But even if the academics are right and new high-skill jobs emerge to replace the ones that are being automated away, huge disruptions would still await. Large portions of the global workforce would still need retraining. And if work becomes a luxury, widespread joblessness and greater inequality could make it increasingly more difficult for the government to maintain social order.

* * *

To close out, here is a snapshot of the math that Cowen analyst Andrew Charles used to calculate the impact of McDonald’s “Big Mac ATMs” on the company’s minimum-wage workforce.

“MCD is cultivating a digital platform through mobile ordering and Experience of the Future (EOTF), an in-store technological overhaul most conspicuous through kiosk ordering and table delivery. Our analysis suggests efforts should bear fruit in 2018 with a combined 130 bps contribution to U.S. comps. We believe mobile ordering better supplements the drive-thru business where 70%+ of U.S. sales are transacted. In our view, MCD"s differentiation lies in the operational enhancements of mobile ordering that includes curbside pick-up of orders in order to not disrupt the drive-thru.”

We are most excited for mobile ordering, Experience of the Future and the launch of fresh beef to help drive U.S. same store sales in 2018. We provide analysis for the latter three, which cumulatively we expect to contribute roughly 150 bps to U.S. same store sales in 2018, respectively. This gives us confidence to raise our 2018 U.S. same store sales forecast from 2% to 3%, in excess of Consensus Metrix’s 2.5%.
 
Experience of the Future Features Lower ROI Than Mobile Order, But Offers Greater Potential Longer Term
 
We are constructive on the use of guest facing technology for the restaurant industry. MCD’s longer-term U.S. story revolves around Experience of the Future (EOTF), a holistic operational and technological overhaul to the store base. MCD’s March 2017 investor meeting centered around the initiative with interactive displays. Perhaps the most conspicuous piece of Experience of the Future lies in digital kiosk ordering, which have seen success in International Lead Markets. Additionally, food ordered via the kiosk is delivered to the customer’s table. We believe EOTF better enhances the instore experience, which represents roughly 30% of domestic sales compared to mobile ordering, which allows customers to avoid leaving their cars.

Our ROI math suggests EOTF leads to a 9% cash/cash return in Year 1 in the 55% of domestic stores that do not require a store remodel, and 5% in the 45% of stores that require a remodel, which is a predecessor to implementing EOTF. Our math is premised on total costs of $150,000 for the Experience of the Future enhancement, and $700,000 of all-in costs when including EOTF as well as a store remodel. MCD has offered to pay 55% of the cost for Experience of the Future, in excess of the 40% the company contributed to the store remodel initiative beginning in 2010, for restaurants that commit to the program by the end of 2017.
 
McDonald’s targets a high-teens return on incrementally invested capital (ROIIC, or Mcspeak for evaluating ROI), improving to the mid-20% range beginning in 2019. We believe EOTF’s ROI is captured over time as the sales lift does not dissolve as in the case of a traditional restaurant remodel. Rather, the lift should sustain as we expect consumers to increasingly embrace technological change. This is evidenced across concepts, such as Panera’s experience with 2.0, as well as McDonald’s own experience in Canada, where kiosks saw 12-13% sales mix in Year 1 and 27% in Year 2. We also note kiosk ordering will also likely lead to labor savings over time which should help boost ROIIC, but is unlikely for the foreseeable future.
 

In 2017, MCD expects to end the year with EOTF offered in 2,500 domestic locations from 500 at 2016-end. MCD targets much of domestic locations to feature EOTF by 2020, but has not given intermediary targets. The amount of stores adding EOTF depends on franchise reception to the initiative but we see positive indicators given our checks as well as the company’s disclosure that 90% of franchisees approved of the initiative after taking the same interactive tour that was given at the March 2017 investor day.
 
We estimate 3,000 locations to add EOTF in 2018, which should lead to a 70 bps contribution to U.S. same store sales assuming an even cadence of restaurants adding the initiative over the course of the year. Further we assume the mix of stores adding EOTF in 2018 reflects the mix of overall stores needed to add EOTF, or 55% of stores that already have a remodel while 45% require a store remodel. McDonald’s  has previously announced plans to remodel 650 restaurants in 2017, which we expect will also add EOTF.

Infrastructure 'Stimulus' - Chinese Ghost Cities & The Big Money Drain

As President Trump"s "Infrastructure Week" comes to an ignominious end, NIRP Umbrella"s Alex Deluce reminds us that spending money on bridges to nowhere and cities of the future is anything but the stimulating panacea it is talked up to be...

Is a Chinese credit bubble in the cards? Well, it will be interesting to see if China’s authorities can get through the unwind of US $3 trillion worth of excess credit and the distressed debt on banks’ balance sheets.

From 2009 to 2016, more than 10 trillion of Chinese investment was thrown at infrastructure, ghost cities, and corruption thanks to a helping hand from the Chinese banks and foreign lenders eager to participate in the Chinese growth story.

In fact, hundreds of new cities in China are essentially empty. The hope is that rural population someday move in.

Roughly 40% of the 300 million Chinese expected to move into a town by 2030 will mostly be moving to smaller cities in the “chengzhenhua” system.

As OfTwoMinds" Charles Hugh Smith recently explained, building bridges to nowhere isn"t just a waste of money in the present; it saddles the economy with productivity-draining costs for decades to come.

If there is anything the political left, right and center can agree upon, it"s the lasting benefits of spending more (borrowed) money on infrastructure: roadways, rail lines, airports, seaports, pipelines, dams, electrical lines and so on: the physical networks of advanced civilization.

That Roman roadways constructed 2,000 years ago are still visible illustrates the longstanding value of reliable infrastructure: Roman political control and trade depended on roadways and sea transport to tie the sprawling empire together.

This is the basic assumption behind the notion that virtually any and all infrastructure spending will create value far into the future.

But is this really true? Does rebuilding and/or adding infrastructure create economic value?

To answer, we need to look at two issues: productivity and cost-benefit.

Infrastructure creates new value when it boosts productivity, generally by lowering costs of moving goods, energy, etc.

The value created by increased productivity must far outweigh the cost.

Consider the classic "bridge to nowhere" infrastructure project: a bridge is constructed between a sparsely populated island and the mainland. The payoff is a handful of residents are spared the time and inconvenience required to ship their vehicles between the island and mainland on a ferry.

Does this time savings translate into increased productivity, or merely extra leisure? And what was the cost to gain this very modest increase in leisure/productivity? Spending tens of millions of dollars on the bridge actually reduces the productivity of the entire economy due to the opportunity cost: the millions of dollars could have been more productively invested elsewhere, and spending the money on a low-value-creating bridge deprived the economy of the capital, labor etc. that could have been better invested in productivity-generating projects.

As correspondent Bart D. explains, opportunities to boost productivity via new infrastructure are scarce:

Why anyone believes that building "infrastructure" somehow promotes economic growth in this day and age (as though it were 1950’s) is delusional. The reason "infrastructure" worked back then to build economic activity was simply because it lagged behind the burgeoning private industry. These days there is no ‘hard industry’ left to "lag behind." Building a bigger road between the suburbs and the Mall won’t create prosperity for anyone except the owners of the road building company. Unlike a 1950’s road linking a steelworks to a port or a Beef farm to a meatworks."

In other words, when commerce already exists but is cumbersome, infrastructure that smooths the flow yields enormous productivity gains.

One example of this from history is the construction of the first stone bridge across the Seine River in Paris. This single structure changed commerce, tourism and social relations in the city, as it enabled two carts to pass side by side and enable pedestrians to cross the river safely.

For more on this impact of a single durable, commerce-enabling bridge in Paris, read this book: How Paris Became Paris: The Invention of the Modern City.

Replacing existing infrastructure is also problematic. It may well be necessary, but since it won"t boost regional productivity (since it"s merely replacing existing structures), it acts as a tax on the regional economy: if the replacement costs $1 billion and generates no real gains in productivity, it is in essence a tax that bleeds capital from the economy that could have been productively invested elsewhere.

Rebuilding a bridge generates higher spending on materials and wages, but if it doesn"t generate additional productive capacity equal to its cost, this additional spending (in our world, always paid for with borrowed money that accrues interest for decades to come) runs out once the project is complete, but the costs of paying for the replacement continue on for decades.

As a rule of thumb, if a replacement bridge costs $1 billion, it will cost users and taxpayers $3 billion over the life of the loan/bond that funded the project.

Borrowing immense sums to spend on infrastructure that doesn"t boost productivity actually cripples an economy by channeling scarce capital and tax revenues into projects that only boost spending for a few years at best, while the costs of borrowing the money pile up for decades to come.

In other words, building bridges to nowhere isn"t just a waste of money in the present; it saddles the economy with productivity-draining costs for decades to come.

This high future cost for no-productivity gain infrastructure effectively bleeds the economy of income and capital for decades, for the temporary sugar-high of infrastucture spending today.

A rigorous cost-benefit analysis might conclude that some aging, marginal infrastructure should be torn down rather than replaced. If self-driving vehicles will reduce vehicles on the roads significantly-- and some estimates range as high as an 80% reduction in traffic--perhaps we should wait for this technology to mature before spending trillions of dollars on infrastructure that is about to be under-utilized.

We should instead ask: where are the big gains in productivity going to come from going forward? The answers to that question should guide our public and private investment decisions.

In the meantime, we should question whether proposed infrastructure spending is actually an "investment in our future" or just another bureaucratic boondoggle designed to enrich crony-cartels and justify rising bureaucratic budgets:

Smartphone Addiction Tightens Its Global Grip

How long is it since you last used your phone? Chances are, you"re using it right now to view this post. Analysts from Statista"s Digital Market Outlook have revealed that the amount of time we"re spending with our smartphones online has increased substantially over the last few years.

You will find more statistics at Statista

The term "smartphone addiction" is by now pretty well-established (you can take a test here to see if you might be a sufferer). As our infographic shows, across the world, this addiction seems to be tightening its grip. Of the countries surveyed, smartphone owners in Brazil spend by far the most amount of time online. The average user in 2016 spent close to 5 hours per day surfing - more than twice as long as in 2012.

Perhaps this explains the collapse of global worker productivity, as we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

The Answer to the economic dilemma of our time is simple then - "Put The Smartphone Down"... but then again, what will happen to Amazon, Google, Netflix, Snapchat, Instagram, Facebook and all the "real" economy drivers behind the stock market illusion?

Servitude In America's Plantation Economy

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

The only possible output of low social capital is rising inequality.

One of the themes I"ve been addressing since 2008 is the neocolonial-plantation structure of the U.S. economy. The old models of colonial exploitation that optimized plantations worked by cheap imported labor (or situated in peripheral nations with plenty of cheap labor) have, beneath the surface, been adapted to advanced capitalist democracies.

The adaptations have been so successful that not only do we not even recognize the Plantation structure--we love our servitude within it.

As noted yesterday, the current mode of production optimizes the commoditization of everything: computer chips, fish and chips, labor, expertise, everything.

This commoditization optimizes the Plantation Model of integrated production, global supply chains and distribution to global marketplaces, a hierarchical management focused on maximizing profits to send back to the owners, a ruthless focus on lowering costs via labor arbitrage (commoditize the work so it can be performed anywhere labor is cheaper/more desperate) and a fanatical desire to eliminate competition or fix prices via cartels to ensure high profits.

Global capital has optimized the Plantation Model in the form of global corporations. Wal-Mart is the quintessential example. Like a classic agricultural plantation, Wal-Mart enters a region with a diverse, employment-rich ecology of small businesses and supply chains of local and regional manufacturers and distributors, and it bulldozes the entire "forest" of businesses, suppliers and distributors with the irresistible blade of integrated global supply chains and "lower prices, always."

Wal-Mart replaces the localized economy with a low-pay, highly efficient plantation economy in which the townpeople"s only choice is to work for Wal-Mart or scrape out a living feeding the Wal-Mart workers, doing their laundry, etc.--exactly as on a classic plantation.

On a classic plantation, the wages are low and the "company store" offers easy credit, binding the workers to the corporation not just for wages but for credit.

Those few who manage to save up enough capital to start small service businesses-- laundry, cafes, etc.--must do so in the shadow of the Company, which can always drive them out of business should they speak against their corporate overlords.

A once-diverse landscape is reduced to a monoculture wasteland dependent on subsidies, either implicit or explicit. Wal-Mart"s low wages leave many of its workers" families on state aid or food stamps to survive, and so it prospers on the backs of taxpayers who subsidize its low wages.

The alternative is not some fantasy of "old-time America"--this model still exists where citizens refuse to submit to the mono-tyranny of "low prices."

Isn"t it odd how this statement--the nation does not exist to benefit corporations, corporations exist to benefit the nation and its citizenry --sounds breathtakingly revolutionary in today"s politics of experience?

One of the key concepts in the Survival+ critique is the politics of experience. This is an elusive concept because what we take for granted is invisible to us, and we have to go back in time, so to speak, to rediscover a history in which the experience of daily life was quite different from the present.

Today, we accept it as "normal" that marketing worms into every once-private area of our lives. Not that long ago, adverts and marketing were limited to print media (newspapers and magazines) and TV--fundamentally passive media.

The key concept in all marketing now is supremely pernicious: any advert or campaign which reaches deep into the last refuges of privacy is considered highly valuable.

Where the only public adverts were once billboards, now there are adverts on the shopping carts in the supermarket--another violation of what could be considered temporary private space--and on the floor of the supermarket. Even the rubber dividers used to separate one"s own purchases from the next customers now display an advert.

The colonization of the plantation of the mind is now complete. It is not coincidental that those citizens who "consume" the most media are also the biggest buyers of junk food and its accompanying junk worldview based on consumption, faux novelty ("get the new chicken-bacon-cheese-double-burger today!") and a passive disengagement from the real world: we endlessly watch cooking shows rather than actually cook real food in our own kitchens.

The plantation of the mind optimizes consumption, impulse buying and short-term thinking: just buy the junk we"re pushing, and what happens to you afterward is your problem.

Experience itself has become so derealized that we don"t even recognize our perceptions and experiences have been organized into neatly internalized plantations.

It doesn"t have to be this way. As I explain in the Survival+ / Survival+ The Primer chapter entitled The Crisis of Neoliberal (Predatory) Global Capitalism, global capitalism has reached the limit of the plantation model in terms of exploiting new colonies around the globe and exploiting new sources of cheap, abundant energy.

The only possible output of a hyper-financialized Plantation Economy is rapidly increasing wealth and income inequality--precisely what we see now.

What we need is a social economy, an economy that recognizes purposes and values beyond maximizing private gains by any means necessary, which is the sole goal of hyper-financialized Plantation economies.

Given the dominance of profit-maximizing corporations and the state, we naturally assume these are the economy. But there is a third sector, the community economy, which is comprised of everything that isn’t directly controlled by profit-maximizing companies or the state.

What differentiates the community economy from the profit-maximizing market and the state?

1. The community economy allows for priorities and goals other than maximizing profit. Making a profit is necessary to sustain the enterprise, but it is not the sole goal of the enterprise.

2. The community economy is not funded by the state.

3. The community economy is locally owned and operated; it is not controlled by distant corporate hierarchies. The money circulating in the community stays in the community.

4. The community economy is not dominated by moral hazard; the community must live with the consequences of the actions of its residents, organizations and enterprises.

The community economy includes small-scale enterprises, local farmer’s markets, community organizations, social enterprises and faith-based institutions. Its structure is decentralized and self-organizing; it is not a formal hierarchy, though leaders naturally emerge within civic and business groups.

The Plantation Economy institutionalizes poverty, parasitic finance, externalized costs, moral hazard (since the corporate/state overseers do not live in the community being cannibalized) and centralized wealth and political power. These are the only possible outputs of the hyper-financialized Plantation Economy.

Once the Plantation Economy has displaced the community economy, opportunities for work and starting small enterprises shrivel, and residents become dependent on state social welfare for their survival. By eliminating the need to be a productive member of the community, the welfare state destroys positive social roles and the inter-connected layers of the community economy between the state and the individual.

When the individual receives social welfare from the state, that individual has no compelling need to contribute to the community or participate in any way other than as a consumer of corporate goods and services. State social welfare guts the community economy by removing financial incentives to participate or contribute.

Why is the community economy so important? The community economy is first and foremost the engine of social capital, which is the source of opportunity and widely distributed wealth.

Corporations cannot replace communities for the simple reason each organization has different purposes and goals. The sole purpose and goal of a corporation is to expand capital and profits, for if it fails to do so, it falters and expires.

The purpose of a community is to preserve and protect a specific locale by nurturing social solidarity: the sense of sharing a purpose with others, of belonging to a community that is capable of concerted, collective action on the behalf of its members and its locale.

It is not accidental that the current system of corporations, banks and the state increases inequality and erodes the community economy: the only possible output of low social capital is rising inequality.

(I discuss community economies in my book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.)

We have a choice. We can continue loving our servitude in our Plantation Economy, or we can choose another model and another mode of production.

The Protected, Privileged Establishment Versus The Working Class

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

Meanwhile, back in reality, household income for the bottom 95% has declined while the owners of capital and their privileged, protected servants in the Establishment have gorged themselves on private wealth.

As noted yesterday in The Collapse of the Left, the working class has finally awakened to the Left"s betrayal and abandonment of labor in favor of the protected privileges of the elitist Establishment. I also described the Left"s Great Con:

To mask the collapse of the Left"s economic defense of labor, the Left has substituted social justice movements for economic opportunities and security. This has succeeded brilliantly, as tens of millions of self-described "progressives" now parrot the Great Con that "social justice" campaigns on behalf of marginalized social groups are now the defining feature of Progressive Social Democratic movements.

This diversionary sleight-of-hand embrace of economically neutered "social justice" campaigns masked the fact that social democratic parties everywhere have thrown labor into the churning propellers of globalization, open immigration and neoliberal financial policies--all of which benefit mobile capital, which has engorged itself on the abandonment of labor by the Left.

Meanwhile, the fat-cats of the Left have engorged themselves on capital"s largesse in exchange for their treachery. Bill and Hillary Clinton"s $200 million in "earnings" come to mind, as do countless other examples of personal aggrandizement by self-proclaimed "defenders" of labor.

But it isn"t just the Left"s fat-cats who have feathered their own nests while denigrating the Working Class with arrogantly contemptuous scorn: the entire protected, privileged "liberal" elitist Establishment has responded with a very illiberal outrage that their protected, privileged skims and scams might be endangered by an uprising of the loathed and ridiculed Working Class that they reckoned would remain safely cowed and conned.

As noted yesterday, the only moment in recent history in which the Wall Street-cartel-state strongholds of privilege, wealth and power (i.e. owners of capital) felt threatened by political insurrection by disenfranchised labor was The Great Depression of the 1930s.

With the first iteration of global debt-based capitalism in near-collapse (systemic bad debt was not written off, lest the big banks" insolvency be recognized), owners of capital and the political class reluctantly swallowed modest social-democratic reforms that gave labor enough of the pie to stave off revolt / revolution (as noted by Arshad A. on my Facebook thread).

Just as Marx had predicted, this crisis of global-debt-cartel-state capitalism was the result of internal contradictions built into all forms capitalism dominated by capital and the state that protects and serves capital.

Now we face another crisis of the current iteration of global-debt-cartel-state capitalism, also the result of internal contradictions--not just financial, but cultural, energy-based and political contradictions.

The privileged, protected elitist Establishment reckoned the social-welfare programs of the 1930s and the Left"s Great Cons would keep the disenfranchised Working Class permanently cowed and conned. If welfare (now called "disability," "crazy money", etc.) and the distractions of "social justice" campaigns didn"t keep the Working Class fragmented and powerless, then the ceaseless drumbeat of arrogant dismissal and disdain aimed at any Working Class resistance would do the trick.

Any Working Class individual who recognized that globalization, open immigration and neoliberal financial policies were the propellers dismembering the Working Class economically and disenfranchising the Working Class politically was immediately labeled with the worst that "liberal" privileged, protected elites could spew: you"re racist, Luddite, backward, etc.--in other words, you"re not a rootless Cosmopolitan who loves your servitude to capital and the state like us.

Since the Left has masked its abandonment and betrayal of the Working Class with "social justice" speech acts, the worst insults the Left can dish out are those that suggest opposition to the Left"s social justice campaigns.

Self-identified "Progressives" are fine with the destruction and disenfranchisement of the Working Class, as long as the politically correct speech acts praising the Left"s Great Con are being uttered.

The self-serving, privileged, protected "liberal" Establishment is enraged that the Working Class is no longer following the script, i.e. remaining cowed, conned and fragmented. Like every other disenfranchised group, the Working Class has essentially zero choice of representational leadership, as the machinery of governance, finance and the mainstream media are all controlled by the privileged, protected elites of the Establishment.

So it boiled down to: choose more disenfranchisement and cowed servitude to "liberal" Elites, or vote for Trump. There was no other choice, so the Working Class voted for Trump as their only option other than surrender and servitude.

This rejection of their "betters" script has enraged their "betters," who now demand the destruction of their proxy voice (Trump) and their rebellion. The Establishment"s war on Trump is beneath the surface also a war against a Working Class that has finally had enough of its arrogant, hubris-soaked, self-serving, privileged, elitist "betters" of the Establishment.

If the Establishment had deigned to offer a radical-Left leader who correctly called out the American carnage that is the Working Class experience of the globalized, open-immigration neoliberalism that has so enriched the owners of capital and their "liberal" apparatchiks, then the Working Class may well have voted for the radical-Left truth-teller.

Alas, the Left ground down any opposition to "we "earned" $200 million" Hillary Clinton and her corrupt coterie of self-serving elites. Having beaten down, stripmined, insulted, denigrated, scorned and exploited the Working Class (whose "proper role" is to provide cannon fodder for the Elites" neocon Permanent War), the privileged, protected Establishment (like every other elite that suddenly finds its entitled dominance challenged) is in a full-blown fury: how dare the Working Class not accept our self-serving rule! We are entitled to rule! How dare they!

Meanwhile, back in reality, household income for the bottom 95% has declined while the owners of capital and their privileged, protected servants in the Establishment have gorged themselves on private wealth.

Here"s what"s happened as the Left and its armies of privileged fake-Progressives threw the Working Class overboard in favor of serving capital on the First Class deck:

What will it take to shift the balance of power decisively in favor of labor? My guess is the downward mobility of another 10 or 20 million people who currently reckon themselves "middle class" into the unprotected, disenfranchised ranks of the Working Class will do it.

David Rosenberg: "The Travesty Is We Have 23.5 Million Americans Aged 25-To-54 Outside The Labor Force"

Some observations on recent negative trends in productivity, employment mismatch, and labor training and education from the increasingly more bearish David Rosenberg, who notes that the Trump"s proposed policies may end up helping growth on the margins, but fail to focus on what is really important, making tens of millions of US workers competitive and qualified for today"s jobs market.

From Breakast with Rosie, via Gluskin Sheff

I don"t think we have a productivity problem — in fact, the demise of productivity is vastly overstated and that is because the Bureau of Labor Statistics (BLS) is likely vastly overstating labor input, and I’m talking here about how hours worked are estimated.

But the real travesty, and what I think deserves top priority (but I don’t see it), is that we have, in addition to 7.5 million officially unemployed (a number that is closer to 15 million when all the hidden unemployment is accounted for), 23.5 million Americans aged 25-to-54 who reside outside the confines of the labor force. And at a time when job openings are at record highs.

The problem is that unqualified applicants for these openings also are at a record high. The number of jobs available that are not being filled because the skill set is absent is at an unprecedented level — and this was an overriding theme in the latest edition of the Fed"s Beige Book.

The question is what is in the policy playbook to redress this situation?

What we need is a policy playbook that makes education, apprenticeship and training a major priority — the one plank that I had hoped would be yanked out of Bernie Sanders" platform.

While deregulation and simplifying the tax code obviously are constructive segments of the Trump plan, they are not the most important obstacles in the way of growth. Neither is globalization.

Even the most ardent ""supply-sider" would admit that labor input is key to the outlook and this should really be at the top of the agenda — closing the widening and unprecedented gap between job openings and new hiring. There simply is no replacement for excellent education achievement with respect to maximizing labor productivity.

I see scant attention being paid to this file — surely this is more important than U.S. involvement in Brexit or trying to play a role in breaking up the European Union, don"t you think?

In A Free Market, No Profit Is "Excessive"

Authored by Ludwig von Mises via The Mises Institute,

Profits are never normal. They appear only where there is a maladjustment, a divergence between actual production and production as it should be in order to utilize the available material and mental resources for the best possible satisfaction of the wishes of the public. They are the prize of those who remove this maladjustment; they disappear as soon as the maladjustment is entirely removed. In the imaginary construction of an evenly rotating economy there are no profits. There the sum of the prices of the complementary factors of production, due allowance being made for time preference, coincides with the price of the product.

The greater the preceding maladjustments, the greater the profit earned by their removal. Maladjustments may sometimes be called excessive. But it is inappropriate to apply the epithet “excessive” to profits.

People arrive at the idea of excessive profits by confronting the profit earned with the capital employed in the enterprise and measuring the profit as a percentage of the capital. This method is suggested by the customary procedure applied in partnerships and corporations for the assignment of quotas of the total profit to the individual partners and shareholders. These men have contributed to a different extent to the realization of the project and share in the profits and losses according to the extent of their contribution.

But it is not the capital employed that creates profits and losses. Capital does not “beget profit” as Marx thought. The capital goods as such are dead things that in themselves do not accomplish anything. If they are utilized according to a good idea, profit results. If they are utilized according to a mistaken idea, no profit or losses result. It is the entrepreneurial decision that creates either profit or loss. It is mental acts, the mind of the entrepreneur, from which profits ultimately originate. Profit is a product of the mind, of success in anticipating the future state of the market. It is a spiritual and intellectual phenomenon.

The absurdity of condemning any profits as excessive can easily be shown. An enterprise with a capital of the amount c produced a definite quantity of p which it sold at prices that brought a surplus of proceeds over costs of s and consequently a profit of n per cent. If the entrepreneur had been less capable, he would have needed a capital of 2c for the production of the same quantity of p. For the sake of argument we may even neglect the fact that this would have necessarily increased costs of production as it would have doubled the interest on the capital employed, and we may assume that s would have remained unchanged. But at any rate s would have been confronted with 2c instead of c and thus the profit would have been only n/2 per cent of the capital employed. The “excessive” profit would have been reduced to a “fair” level. Why? Because the entrepreneur was less efficient and because his lack of efficiency deprived his fellow-men of all the advantages they could have got if an amount c of capital goods had been left available for the production of other merchandise.

In branding profits as excessive and penalizing the efficient entrepreneurs by discriminatory taxation, people are injuring themselves. Taxing profits is tantamount to taxing success in best serving the public. The only goal of all production activities is to employ the factors of production in such a way that they render the highest possible output. The smaller the input required for the production of an article becomes, the more of the scarce factors of production is left for the production of other articles. But the better an entrepreneur succeeds in this regard, the more is he vilified and the more is he soaked by taxation. Increasing costs per unit of output, that is, waste, is praised as a virtue.

The most amazing manifestation of this complete failure to grasp the task of production and the nature and functions of profit and loss is shown in the popular superstition that profit is an addendum to the costs of production, the height of which depends uniquely on the discretion of the seller. It is this belief that guides governments in controlling prices. It is the same belief that has prompted many governments to make arrangements with their contractors according to which the price to be paid for an article delivered is to equal costs of production expended by the seller increased by a definite percentage. The effect was that the purveyor got a surplus the higher, the less he succeeded in avoiding superfluous costs. Contracts of this type enhanced considerably the sums the United States had to expend in the two world wars. But the bureaucrats, first of all the professors of economics who served in the various war agencies, boasted of their clever handling of the matter.

All people, entrepreneurs as well as non-entrepreneurs, look askance upon any profits earned by other people. Envy is a common weakness of men. People are loath to acknowledge the fact that they themselves could have earned profits if they had displayed the same foresight and judgment the successful businessman did. Their resentment is the more violent the more they are subconsciously aware of this fact.

There would not be any profits but for the eagerness of the public to acquire the merchandise offered for sale by the successful entrepreneur. But the same people who scramble for these articles vilify the businessman and call his profit ill got.

The semantic expression of this enviousness is the distinction between earned and unearned income. It permeates the textbooks, the language of the laws and administrative procedure. Thus, for instance, the official Form 201 for the New York state income tax return calls “earnings” only the compensation received by employees and, by implication, all other income, also that resulting from the exercise of a profession, unearned income. Such is the terminology of a state whose governor is a Republican and whose state assembly has a Republican majority.

Public opinion condones profits only as far as they do not exceed the salary paid to an employee. All surplus is rejected as unfair. The objective of taxation is, under the ability-to-pay principle, to confiscate this surplus.

Now one of the main functions of profits is to shift the control of capital to those who know how to employ it in the best possible way for the satisfaction of the public. The more profits a man earns, the greater his wealth consequently becomes, the more influential does he become in the conduct of business affairs. Profit and loss are the instruments by means of which the consumers pass the direction of production activities into the hands of those who are best fit to serve them. Whatever is undertaken to curtail or to confiscate profits impairs this function. The result of such measures is to loosen the grip the consumers hold over the course of production. The economic machine becomes, from the point of view of the people, less efficient and less responsive.

The jealousy of the common man looks upon the profits of the entrepreneurs as if they were totally used for consumption. A part of them is, of course, consumed. But only those entrepreneurs attain wealth and influence in the realm of business who consume merely a fraction of their proceeds and plough back the much greater part into their enterprises. What makes small business develop into big business is not spending, but saving and capital accumulation.