Friedman NY Time Editorial "The Inflection is Near"

[Zoocat]

"We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...
We can’t do this anymore. "

This is a very provocative editorial. My question is how will retirees adapt if Friedman's prediction is true and it's all different this time? I agree with him that we are undergoing profound economic, social, climate changes that will create an entirely new world with a different set of assumptions. What will those assumptions be? Very interesting to think about.

http://www.nytimes.com:80/2009/03/08/opinion/08friedman.html?th&emc=th

 

[Meadbh]

“Mother Nature doesn’t do bailouts.” So true. Time to get green, people!

 

[RAE]

I think Friedman is probably right. As a longtime LBYM-type, educated in science/ecology, I've felt for a long time that this ravenous consumption-based, highly leveraged, wasteful economy we have relied upon for a while now was not sustainable. Of course, no one, including me, knew when the breaking point would come (or even if it would occur in our lifetimes). Perhaps 2008 is the year that we will all look back on as the time when things changed forever, as Friedman suggests. As for how retirees (or anyone) will adapt, I'd say that those who have always had a LBYM, non-wasteful, green-based, healthy lifestyle, will probably survive, and perhaps even prosper. Those that have never lived like that may be forced to acquire those skills in a hurry. I think some very good things can come out of this change in the long run, but the problem is that it is happening so fast, a lot of people will inevitably be hurt badly in the short-term, through no real fault of their own.

 

[youbet]

“Mother Nature doesn’t do bailouts.”

No, but She does flushes. Hold your nose, spin, gurgle, down we go!

 

[youbet]

"My question is how will retirees adapt if Friedman's prediction is true and it's all different this time? I agree with him that we are undergoing profound economic, social, climate changes that will create an entirely new world with a different set of assumptions. What will those assumptions be? Very interesting to think about.

Beyond that, it's interesting to comtemplate what the USA will do about the poor nations of the world during these times. Assuming with our wealth we're able to adjust so that we're living greener, more efficiently, less wastefully but with little to spare after all are fed, housed and supported. Will we continue to allow massive immigration when jobs are scarce and resources to take care of the indigent are few? Will we be able to send massive foreign aid to regions where lack of our trade dollars is pushing untold millions beyond poverty?

Should be some interesting times ahead.

 

[dex]

This is a very provocative editorial. My question is how will retirees adapt if Friedman's prediction is true and it's all different this time? I agree with him that we are undergoing profound economic, social, climate changes that will create an entirely new world with a different set of assumptions. What will those assumptions be? Very interesting to think about.

I like your question. But I do not agree with his premise.
First the cause of today's economic problems are not ecological, so why would the solution be found there?
Second, take away the ecological aspect - what is he saying? What others have said before - the USA is a consuming nation not a manufacturing nation (China does that for us) and that a "service" nation does not work economically in the long run.

It is too early to tell if we are undergoing a profound economic etc change. Look back at recent history - 9/11 was said to have done the same thing; it didn't. So, I think we will return to our spending ways once the recession is over.

If we allow for a ecological aspect we must not think of China as another country but as the place where the USA offshored its manufacturing to get around ecological laws and other costly factors. We benefited from that. Will we change China? No time soon; especially since we lost our financial and moral leverage over them.

I do think the USA is on the down slope of its' empire phase. It isn't a straight fall to the bottom, there will be ups and downs. We have expended our financial capital, our moral capital, etc.

What to expect? The USA is and will continue to be a debtor nation with a larger part of the budget going to service the national debt. We are working for the Chinese.

 

[Zoocat]

A couple of assumptions about life in the USA that will probably change:

1. "We are a wealthy nation." As Dex pointed out we are a debtor nation. Think about how high taxes would have to be, how many budget cuts would have to occur to pay off the national debt and pay retiree entitlements. That fact may change our attitudes toward poor nations and toward immigrants, if it hasn't already

2. "China is our friendly banker." As things progress, will China continue to be able to/want to buy treasuries? If not, then even more downsizing will occur here in the US because China is one of the largest buyers. If they can't buy as much then we have to sell less or find another buyer. Either alternative presents problems that we haven't even thought of yet.

3. "If you LBYM then you can save enough for retirement." If the consumer economy contracts further, as Friedman maintains, then jobs will be scarcer and LBYM will likely be the new subsistence lifestyle. Saving for retirement? Probably unlikely.

 

[Zoocat]

In case I haven't presented enough gloomy speculation here is an intelligent assessment of the future of the US by "blackswan" who posts regularly on
Mish's Global Economic Trend Analysis

The comment appeared in response to Mish's post "Rolling the Dice on Jobs."



"Tech and the world wage arbitrage have forever changed the employment picture in America. The US has "evolved" from a agrarian economy, to an industrial economy, and, as of late, to a FIRE (finance, insurance, real estate) and service economy. We are now in a period in which the FIRE economy has burned out and the flame under the service economy is losing heat rapidly. There is no new wave of jobs anywhere on the horizon.

"People tell me that new, labor intensive industries have to materialize, because that's the way it's always been. No one can believe that we have too much of everything, including labor. Gone are the days when everyone in Boulder, Co. or Santa Fe, NM could classify themselves as either real estate agents, psychotherapists or massage therapists. No one is interested in paying for those services anymore. In fact, no one is interested in paying for much of anything anymore. The average American is learning just how few things are needed to get by in life. The days of buying things we don't need with money we don't have to impress people we don't like are over.

"The future is that we will have a large, chronically unemployed class of people. Actually, we already have large, chronically unemployed classes of people in America. I estimate that the U-6 unemployment rate for Hispanics is 20%, 24.5% for Blacks and 39.5% for teenagers. I estimate the California U-6 unemployment rate to be 18.5%. This is not surprising, because California is now 58% non white. What this means is that the Hispanics, Blacks, teenagers and the State of California are already well into the depression.

"The choice is clear, either we continue to have growing classes of unemployed workers, or we go to four day work weeks and have growing classes of underemployed workers. It will be a lose-lose situation far into the future, unless you believe what the present Administration has been telling us. In my heart, I'd like to believe them, but in my brain, I can't."

 

[RonBoyd]

"Rolling the Dice on Jobs."

In the early 90's, I decided that I had a way with words and should write a book. This was how I began the Preface:

The writing of this book began when I overheard the following statement:

The business organization of the future will have two employees — a man and a dog.
The job of the man will be to feed the dog. The job of the dog will be to prevent the man from touching the machines.
Warren Bennis

After the laughter died down, I thought, "Where is the humor in that." We should be angry it took so long. After all, humankind has been trying to reach this point for at least sixty thousand years and perhaps as many as one hundred and fifty thousand years. Certainly, the first domesticated animal was an attempt to "delegate" physical labor to a non-human entity.

So I asked, "What’s wrong with having a man and a dog as the only employees? Wouldn't it be wonderful?" Well, it turns out not to be so wonderful. It seems everybody wants to be that guy. After thinking about it I came to the conclusion that our collective logic will allow only this result. It is, after all, the same logic involved in: "Everyone wants to go to heaven but nobody wants to die."

The question then becomes: Do we, as individuals, really have any influence over who this last person will be? Or is life more like that described in the Bible: "… that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happenth to them all."

Blah, blah, blah

There are, today, 800 million human beings unemployed or under-employed in the world (that’s greater than three times the total population of the United States). If that is what we wanted, why is it bad? If, in fact, the goal is to have the "one man and a dog" doing all the work, then don’t we suppose that some of us will be "unemployed"?

and on and on for six more pages.

Anyway, after 525 single-spaced typed pages and twenty-two chapters, I sobered up and decided this issue was way over my head (and my pay grade). And so lies this big box full of notes gathering dust somewhere.

 

[Hal3]

Always look on the bright side of life!

Or maybe, we are reaching a point where everyone doesn't have to work!
We are so efficient that only a fraction of the population needs to work to keep us all fed, clothed, and educated!

Cool!

So, who wants to stay home all day and watch Jerry Springer and who wants to get up at 6AM to collect the trash or make rounds at the local hospital?

That is a mere detail.

Remember that we live in a country that pays farmers not to grow food and pays dairymen to slaughter their herds.

There is enough.

This could work out OK!

In case I haven't presented enough gloomy speculation here is an intelligent assessment of the future of the US by "blackswan" who posts regularly on
Mish's Global Economic Trend Analysis

The comment appeared in response to Mish's post "Rolling the Dice on Jobs."



"Tech and the world wage arbitrage have forever changed the employment picture in America. The US has "evolved" from a agrarian economy, to an industrial economy, and, as of late, to a FIRE (finance, insurance, real estate) and service economy. We are now in a period in which the FIRE economy has burned out and the flame under the service economy is losing heat rapidly. There is no new wave of jobs anywhere on the horizon.

"People tell me that new, labor intensive industries have to materialize, because that's the way it's always been. No one can believe that we have too much of everything, including labor. Gone are the days when everyone in Boulder, Co. or Santa Fe, NM could classify themselves as either real estate agents, psychotherapists or massage therapists. No one is interested in paying for those services anymore. In fact, no one is interested in paying for much of anything anymore. The average American is learning just how few things are needed to get by in life. The days of buying things we don't need with money we don't have to impress people we don't like are over.

"The future is that we will have a large, chronically unemployed class of people. Actually, we already have large, chronically unemployed classes of people in America. I estimate that the U-6 unemployment rate for Hispanics is 20%, 24.5% for Blacks and 39.5% for teenagers. I estimate the California U-6 unemployment rate to be 18.5%. This is not surprising, because California is now 58% non white. What this means is that the Hispanics, Blacks, teenagers and the State of California are already well into the depression.

"The choice is clear, either we continue to have growing classes of unemployed workers, or we go to four day work weeks and have growing classes of underemployed workers. It will be a lose-lose situation far into the future, unless you believe what the present Administration has been telling us. In my heart, I'd like to believe them, but in my brain, I can't."

 

[armor99]

In a way.... the US is a victim of it's own success. Our standard of living has grown so large that manufacturing in the US is no longer cheap enough to compete on the world stage. I find it interesting that some long for a return to days when our standard of living was lower.

Once again Utopian societies do not, and cannot exist. If this is the country that has a standard of living so high that the low paying jobs are going away, then we should become extra good at other jobs, not long for a return to the "good old days" whenever those really were..

 

[FinanceDude]

In a way.... the US is a victim of it's own success. Our standard of living has grown so large that manufacturing in the US is no longer cheap enough to compete on the world stage. I find it interesting that some long for a return to days when our standard of living was lower.

Once again Utopian societies do not, and cannot exist. If this is the country that has a standard of living so high that the low paying jobs are going away, then we should become extra good at other jobs, not long for a return to the "good old days" whenever those really were..

It's back to the 1950's..........

 

[REWahoo]

I find it interesting that some long for a return to days when our standard of living was lower.

Long for it or not, it would appear that's the direction we're headed.

 

[socca]

If you want to tighten a screw, you use a screwdriver. If you want to tighten a nut, you use a wrench.

Our current economic system was built to tighten a screw. We are beginning to realize that we should be tightening a nut instead. The problem is that there is no intermediate useful tool between a screwdriver and a wrench. In fact, trying to build and use such a tool may leave us unable to tighten either screws or nuts.

I'm still waiting to read a book written by an economist who is willing to fashion an entirely new and much more appropriate set of assumptions and build an economic system based on those assumptions. If anyone is aware of such a book, let me know.

 

[eridanus]

I find it interesting that some long for a return to days when our standard of living was lower.

Perhaps the definition of "standard of living" needs to be changed.

 

[FUEGO]

I'm still waiting to read a book written by an economist who is willing to fashion an entirely new and much more appropriate set of assumptions and build an economic system based on those assumptions. If anyone is aware of such a book, let me know.

Adam Smith wrote something a while back. You'll have to ask around about the name of the text - it is escaping me at the moment, but some here may have heard of it.

 

[eridanus]

Adam Smith wrote something a while back. You'll have to ask around about the name of the text - it is escaping me at the moment, but some here may have heard of it.

Works great in theory.

 

[FUEGO]

Works great in theory.

Ahhh... I see you have heard of this author?

I'll be the first to admit that capitalism really sucks. But, like others have said about democracy, it is better than all the other options.

 

[RonBoyd]

Ahhh... I'll be the first to admit that capitalism really sucks. But, like others have said about democracy, it is better than all the other options.

And where is the evidence to support that theory?

 

[FUEGO]

And where is the evidence to support that theory?

It's just a theory. It can be proven wrong. Many continue to attempt to disprove it. Would you like to take a swing at the pinata?

 

[RonBoyd]

It's just a theory. It can be proven wrong. Many continue to attempt to disprove it. Would you like to take a swing at the pinata?

Not me. Much too lazy... hoping you had done the testing.

 

[FUEGO]

Not me. Much too lazy... hoping you had done the testing.

I have only experienced the capitalism system first hand, but have heard less than positive reviews of other economic systems. From the survivors of those systems, anyway. I guess the dead ones don't speak much. Maybe those that really like other economic systems and the conditions they bring about stick with them and don't try to escape. If I was a head honcho in the politburo I might prefer a non-capitalist system, for example. But from a Rawlsian-original position viewpoint, I like capitalism, having been well acquainted with it's pluses and minuses.

 

[armor99]

Capitalism is the only system that I know of where a coercive govt structure is not really needed. In such a system people trade objects or services to mutual benefit. If people feel a trade is fair... then they do so... if not... then not. Govt coersion is not required. The only pupose of govt in such a system is to prevent dis-honest dealings, and to prevent physical force aquiring things from other people.

 

[Gone4Good]

And where is the evidence to support that theory?

If you're looking for a system that maximizes per-capita GDP (a.k.a. standard of living) than we haven't yet found a better system than free market capitalism.

Anecdotally you can also look to the differences in living standards between Russia & the US circa 1980, East & West Germany, North & South Korea, Hong Kong and main land China . . .

Are there any examples were the reverse is true?

 

[RonBoyd]

If you're looking for a system that maximizes per-capita GDP (a.k.a. standard of living) than we haven't yet found a better system than free market capitalism.

Anecdotally you can also look to the differences in living standards between Russia & the US circa 1980, East & West Germany, North & South Korea, Hong Kong and main land China

Good work. I concede your point.