There is a competing explanation.The wages for low-skill jobs stay depressed in the USA because supply continues to exceed demand.

In plain English,immigrants from countries even more impoverished,like Mexico and Pakistan for example, are bidding down the wages in first-world countries with open immigration policies*.I don't have the numbers here,but I believe the same problem is evident in Britain and Netherlands,while relatively absent in hard-to-get-to countries such as Norway.

I'm not engaging in anti-immigration rhetoric here,mind you.It's just that these factors need to be taken into account when designing social and economic policy.Open immigration comes at a price.

(*If this is not true,why are business interests in the US lobbying to keep immigration controls loose?)

I agree that this is a real problem -- and I think it's critical to emphasize the importance of social mobility in our country. We've always had more of it than most other nations, but what we've seen since the 40's really has been extraordinary -- and there's no iron rule that we couldn't backslide a ways.

Though I'm much, much more hostile to gov't economic interventionism than I used to be, I have never put it entirely out of the picture.

Of course, the Democrats are identified with the kind of intervention that might be necessary to address this problem -- the trouble I have with that is that there's no way I would trust the present-day Democrats to implement such programs without freighting them with a crippling load of ideological horsesh*t.

It's possible the R's might rise to the occassion -- there definately seems to be more fresh thinking on their side of the aisle these days than the D side. Of course, the R's have their own big-gov't addictions, as well, but they would probably be more copacetic to the idea that gov't programs should be implemented with mechanisms designed to actually shut the program down when no longer needed, instead of persisting in perpetuity.

In any case, I am more optimistic than not.

Quite simply, there needs to be a determined effort to increase the bottom rung's marginal product of labor.

This may sound harsh--but we set a lot of kids up for failure by not having a well-developed techinical education system. Here in Pittsburgh, there's a ton of effort spent re-educating high school graduates to better align their skills with those needed by the labor market. Somehow, our education system needs to adapt, and to reward students for things other than being able to write papers on Shakespeare.

Brilliant, A.L.--you've managed to include just about everything. Globalization, production, and unionization; popular sovereignty, political legitimacy, and equality. Thanks for pulling together all these random points, and for taking such a firm stand on the need democracy has for both social mobility and economic equity. I wish more people would. Two quick points:

1) Jussi is absolutely correct to widen our focus to include the question of immigration. Wal-Mart, like just about every other powerful, low-cost producer and service provider (Tyson's poultry, the entire California agribusiness sector, etc.), has only benefitted from our inconsistent and ill-informed immigration policies, by being able to use (and often abuse) desperate, cheap labor that it, at the same time, has next to no legal or social obligations to. Unfortunately, as long as we are essentially individualistic in our economic thinking, then it will be difficult to articulate the kind of concern for the "common (economic) good" which will have to part of any overall reform (in regards to immigration as well as other issues) in protecting, expanding, and distributing what we have in "common."

2) Praktike is also correct: we have not only not invested in enlarging and preparing people for work in the blue-collar, technical sector, we have also drained that sector of dignity, treating it to consistent marginalization from not just an economic but also a social and intellectual perspective. It may well be that our post-industrial capitalist context simply can't provide large numbers of technical jobs any longer. But I'm sure we can do better than we are currently--and building (economically and socially) up those schools that proudly produce individuals trained for practical service, and thereby undercutting some of the self-importance (and economic advantages) of "knowledge work," would only work to the benefit of our society in the long-term. (And I say that as an admittedly irrelevant, or at least mostly irrelevant, academic.)

Thanks for a thoughtful post. I'm concerned about the general lack of intelligent discussion on the trade issue. On the one hand, we have lunatic anti-globalizers, whose loathing for trade seems to be based more on their psychological issues than anything to do with economics. On the other, we have absolutist free-traders, who seem incapable of understanding how their paradigm might be defective when dealing with non-free economies.

Warren Buffett's proposal, in the last issue of Fortune, may or may not be a good idea, but it deserves far more serious attention and discussion than it has received.

I agree with your concerns on social mobility, but I think there's an important factor you're not taking into account when weighing the costs and benefits of using cheap foreign labor to deliver commodity goods and services: The need for American manufacturers to stay competitive in the global marketplace. Needless to say, American corporations aren't just competing with each other, but with foreign firms as well. By increasing the prices of the products they need to manufacture goods and deliver services, we leave them more vulnerable to foreign competition.

Bush's steel tariffs are a good example: Much of the domestic agitation over the tariffs ended up coming from the auto industry, which had to raise prices in order to take into account the higher cost of American steel relative to foreign imports. Thus, a move that was aimed at protecting the jobs of American steel workers wound up working to the benefit of Nissan and Toyota, and in doing so threatening the jobs of American auto workers. Electrical appliance manufacturers weren't thrilled about the tariffs either. I'm sure there are some fields where protectionism won't have much of an effect on the global competitiveness of American corporations, but I suspect their number is far below that of those fields that do.

I do believe that social mobility is ESSENTIAL for the wellbeing of society. (Have you noticed where social mobility has become stagnant historically that is where the bloodiest of revolutions have happened? Russia, China, France...)

However, I have to say, as someone who comes from a family without a lot of college degrees if you believe that you need a college degree to earn a good living your brain is full of horse****.

To be upwardly mobile what you do need is a good K-12 education. You need to have completed at least algebra in math class, you need to be able to write a 5 paragraph essay that is coherant.

If you have these skills you can climb the corporate ladder without a degree--it may mean starting at the bottom, but it also means that you won't have spent 4 years of your life in college.

Before we start complicating our world with more funding for higher education (which, judging by the quality of some college graduates, is not money neccessarily well spent), lets just try and get the basics right.

Does this mean more money? I'm not sure, probably NOT.

I'm living this nightmare right now.
As one of nearly forty thousand aerosapce workers let go by Boeing, I know and understand what is happening quite well.
Most of the new 7e7 jetliner is going to be built overseas, and the remainder in right to work states who made big payoffs to Boeing for the priveledge.
It's simple. I cannot compete. It's not that I don't want to.
I cannot compete with a chinese or malay who works for 75 cents an hour. By the same token, I cannot compete with a BETTER paid Japanese worker, who's government is willing to shell out billions in development costs to Boeing to get the work. Instead of pressing for government action against airbus subsidies, Boeing gets it's money from foreign governments, and gives away American jobs as a reward.
Then it takes billions in taxpayer dollars for defense contracts and has those for dessert.

The upshot of all this will be increasingly vitriolic class warfare and political division.
I fully intend to participate when not busy trying to keep my family's nose above water.
I am in technical school learning to be a cook.
It's about all I could afford under the government program for aerospace worker retraining.
It probably won't be the last time that I belly up to the government's bar for a drink. The BEST I can hope to earn is half my former wages. And at 44 years of age, thats a hit. That means working until I am DEAD.
Yes,I have given up on the idea of retirement.
I don't like taking public money, and I don't like the idea of no retirement.
But America is no longer the land of opportunity. Sure, you can get lucky, or be born that way.
But I played by the rules of the game, and the rules have changed.
This is my adaptation to those new rules.
Don't like it? I don't either. You won't like the strife and social upheaval that are bound to follow either, the kind that always happens when an underclass is created an penned in with little chance of something better.
It will be the Gen-x's and those that follow on, the ones without wealthy parents who will lead the revolt. Outnumberd and out voted by greedy baby boom geezers (think the latest medicare bill, only a hundred fold more onerous)they will get tired of low wage jobs and onerous taxation and just opt out of the society that put them in that position.
Think of that. The baby boomers facing a redeux of their own 60's dissaffection.
It's going to be interesting, but horrible.

The Wal-Mart You Don't Know

The giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?

http://www.fastcompany.com/magazine/77/walmart.html

I would attribute much of this problem to the existence of the very regulatory state which was supposed to prevent inequities and the abuse of power by the wealthy. Adam Bellow's world of nepotism exists because the game is increasingly rigged. It is increasingly rigged because our society is less and less about wealth creation and more and more about rent-seeking. This is turn is only possible because our highly regulated economy creates opportunities, in the regulatory code, the tax code, the assignment of rights to the electromagnetic spectrum, the abuse of eminent domain, and many other ways, for people to use government power for private benefit and to foreclose opportunities and thwart competition.

Nonetheless, the political consequences of worsening inequality, especially if we face a deep recession, will probably to be a "reregulation" of the economy ala Howard Dean which drives a final stake through the heart of a society which believed in meritocracy, competition and a turn in the batters box for everybody. The cure will be worse than the disease.

I'll agree that this could be a problem, but not that it has to be, or that the solution is to stop Wal Mart from charging low prices. The solution is to let those jobs go, and train the people who would have been in them for something better. If we attack it from that direction, we have an improving overall economy and a middle class which shares in it.

The problem isn't to save middle class status for grocery checkers. The problem is to put former grocery checkers in new middle class jobs.

The class warfare I saw in Steve Ramsey's post was the war of the rich in the US (a cook in the US is rich by world standards) vs. the poor overseas.

Any egalitarianism caused by immigration restrictions is a fake. It is a case of exporting class stratification. In any case, a substantial part of traditional US social mobility is the mobility of the children of poor immigrants climbing the ladder. The immigration restrictions of a generation ago stopped that in the subsequent generation and we're only recovering now.

Illegal immigration is a problem, as your first commenter noted. But if you consider yourself an optimist for humanity and not just America, then shouldn't you be glad that people all over the world have actual earnings and can help their families with income? Nike has provided jobs, usually the highest-paying, all over Third World regions where previously there was no demand for work, just subsistence farming or something similar. The best way to raise wages, in that case, is to continue pushing for economic liberalization in countries where labor is cheap because authoritarian governments won't let market forces intrude, and have a high level of corruption. Pushing isolationism as a salve for American jobs simply makes America less productive instead of encouraging entrepreneurship and real economic growth.

I have some questions for liberals.

There's all this complaining about jobs going overseas. What about the people getting those jobs? Don't they deserve them? How can a liberal criticize a process that gives jobs to those at the brink of starvation, even if it cost the job of someone who has had: free high quality education K-12, access to the best health care in the world, access to quality libraries, close proximity to the apex of the world economy.

And all this criticism of WalMart. What's wrong with low prices? I don't feel like paying high prices just to subsidize inefficient operations. If they wind up paying a lower wage to people who are more desperate for a job than the whiner down the street, so be it.

Any attempt to tilt the system to favor American workers is doomed to failure for the reasons mentioned in the previous posts: talent wasted on rent seeking, loss of competiveness due to tariffs, and just general swimming upstream against the creative energy of 6 billion intelligent human beings.

To his credit, Clinton continued the work of Reagan and Bush I in recognizing this. The Republicans seem to have rejected the Buchanans and Perots for now, but either party is susceptible to populism.

America will do well as just as long as she keeps to her core compentency: freedom.

This discussion has been going on since the Left accused Reagan of producing nothing but burger flippers. What all these "studies" miss is the huge number of people working "off the books"; independent contractors doing every skilled job you can think of. Case in point: me. Twice.

Lost my job and a friend of mine connected me with someone who was a "distributor" of glassware. Every AM I loaded my station wagon with 20 cases of glasses and I'd sell them at factories. I was making $600 per week CASH, equal to $950 or $1,000 per week. Millions of people do things like this.

Two, again got fired for telling a manager to go fuck himself and immediately made business cards as a consultant. Within a week I was pulling down $1,500 per week cash.

I don't know how big this market is, but it is not measured and it is huge. Business startups are also off the books. Out source for factory jobs replacing people WHO BELIEVE they have no skills is a real problem.

This is the reason Bush is imposing tariffs right now.

"upward mobility is determined increasingly by a college degree that's attainable mostly by those whose parents already have money or education."

What really scares me about this is that this is happening at the same time the required amount of actual education in a 4-yr degree and HS diploma is heading toward zero. I have friends who are underpaid because they don't have degrees to match their skills so I believe credentialism is a real problem. Meanwhile the people getting degrees can be completely ignorant as long as they've paid tuition and put in chair time.

I'm one budget cut away from being in Steve R's positon so I understand his worries. I don't think protectionism will fix that, just delay it. I want to work toward a better education system with more alternatives (vouchers, etc) and more opportunity for starting your own business with fewer gov't obstacles. Cooks make less than aerospace workers, but restaurant owners make more.

Note that this is a diagnosis, not a prescription. I'm not sure what the right answer is - but I am sure that it's an issue.

As far as the very real benefit to workers in other countries - absolutely that's a good thing. The issue, of course is how to get them the benefits without destroying the social cohesion of this country.

It's not all about standard of living; we could certainly live with less, if that were required.

It's an issue of a) seeing if there are ways to get there that don't require it; or b) seeing if there are ways to go through it without imploding the Republic.

A.L.

Let's not confuse the difficulties of finding roles for workers whose job skills are no longer adequate with the difficulty people without college degrees face in a job search.

Some people face both sets of difficulties and may have difficulty separating the two, but fundamentally a college degree is a credential used by many employers as a means of screening out people less likely to do the jobs they need done. Given a large enough universe of applicants, a college degree is probably a good indicator that an applicant may have the ability an employer requires. But individual applicants often discover that the education behind the degree is not relevant to the job they are applying for -- and employers willing to look beyond an applicants credentials often discover that people without degrees make excellent employees.

The older the applicant the truer this is likely to be (older applicants will have experience younger ones will not, and a college degree earned 20 years ago will weigh less compared with that than it will with a younger worker). It would be a waste and a pity to push large numbers of people through an expensive educational process just to enable them to show an employer a piece of paper; this will not help the employers or the workers, though it will continue to make the jobs of corporate human resources departments easier.

Cheap communications and relatively cheap transportation are part of the explanation of jobs going overseas. If a college education is required for upward mobility, it is also probably cheaper and in many ways better in India and China. But rather than send our kids over there, yow would think the information of a college education could be transfixed more cheaply mythos internet. I believe MIT has put many of their engineering Courses on for free. this model would seem to be one even out of work Boeing workers might be able to take advantage of.

Sorry for the bad spelling in my above post on cheap communications. I was writing to quickly for my tablet pc.

I forgot to mention that job losses at Boeing are also dueto Airbus being sold more cheaply than 7×7s. Much of this may be due to what may be illegal subsidies from Euro govts.

First of all, Wal-Mart gets a bad rap; there are other chains like it, specifically company's like France's Carrefour (second only to Wal-Mart in retail sales) and Germany's CostCo.

Second, the best way to handle these issues is competition; de-regulation and the lowering of taxes is important.

Third, if you want a social safety net, privatize it, and fully fund it like Chile's. In the long term, public, unfunded social safety net programs will only spell doom for an economy.

I can't be the only person who thinks Wal-Mart should be required to pay a living wage. From what I've heard about Wal-Mart they offer health benefits to even the lowest paid employees but charge the employee such a large amount for the health care that it's essentially unaffordable given how little they pay.

Here's an interesting article on outsourced jobs brought back to the US by Dell because of quality complaints.

Could be we need a shaking of the middle classs. A class that has grown accustomed to living on consumer debt and a fat christmas bonus just for showing up to "work."

Clue in. People forgetting that SOMEONE created the corporation. That someone was a person. That someone, history tells us, more than likely did not have a college degree nor a wealthy background.

We middleclassers have grown up as spoiled brats. Let the punishment begin. We have been undisciplined. We have been demanding. Now we are damned.

Me? No need to moan. I made the switch years ago to what my grandpa told me to do in the first place. Create my own way.

It just sucks that I now can't blame anyone else when my SUV payment can't be met...

Lindsey,

What is needed then is a health plan with a level of care that employees can afford. Any company that pays them more than they produce will go bankrupt. Ford will be headed that way because of their retirement benefits. US Social Security may follow.

A.L. - The Neil Stephenson quote at the top of this page has a serious flaw that leads the whole column astray.

It suggests that wages worldwide will basically average out by dividing current wealth equally.

But wealth is not a fixed quantity. The only way a job gets sent overseas is that those workers are more cost effective. They can get by with lower productivity for now because wages are very low. But when workers get enough money to move their community beyond sustenance, their potential is unlocked and their productivity will increase. The economic activity they generate will increase demand locally for labor in the same cycle that drove the US from 50% poverty in 1940 to a much lower levels, whereupon the Great Society removed the economic drive for many people to lift themselves further.

Stephenson forgets to account for that boost in productivity coming from the creativity and education of the the world's poor. We are now struggling through one of many cycles of innovation (seen now as job transfer) that causes disruption. As usual this cycle will lead to the bottom coming up rather than the middle class falling.

Any claims that the middle class in this country is disappearing is ludricrous on its face and is obviously the result of bogus statistics. Looking for phrases like "shifting quintiles" to find cooked statistics quickly. The main problem in the real world of this country is so many people looking for big, comfy homes that they are driving housing prices up.

It isn't just workers, both high and low tech, who are affected by offshoring jobs. Many small to mid-sized American companies are really caught in a squeeze. There was piece in the WSJ last Friday, I think, about how the American tool & die business is dying because of overseas competition that might be considered monopolistic or anti-competitive if they were located in this country. How can you compete with free? To get the production business, foreign manufacturers are now offering to provide tooling for free.

I own a small custom embroidery business, NYC that would do it for 0.17/k. I've seen overseas companies quoting prices as low as 0.07/k. At those prices, the machines, which are expensive, need to be run 24 hours a day by operators making very little money to be profitable. How can I compete with someone charging a fifth or sixth of what I charge?

By not competing with them. I focus on custom and highly personalized items and use the fact that the process is computerized to do custom work efficiently.

ronnie schreiber,

Well, first of all, the US (and the EU) needs to rid itself of its anti-monopoly laws. They are anti-competitive in nature, and harm national economies.

"It's no longer good enough for a company to turn a profit."

Are you some sort of socialist? Capitalism leads to capital maxizimation. And if overseas workers benefit from this, which they surely are, as those factory jobs that you disparage allow them to make much more than they could in a rice paddy, that is all the better. And to be frank, if your idea of progress is to force American, European, etc. companies to stay at home with "low-skill" jobs, then I don't want to be part of your future.

A couple of thoughts come to mind on this debate. If companies are willing to ship the jobs overseas, why aren't they willing to expect their money to come from those companies? I don't know of any companies that expect to turn profits from their sales in India or China. They expect the US consumer to do that for them. They need to start expecting those other countries to be profitable markets. Another thought, why is it that it is okay to drive down wages for most of us, yet executive compensation continues to skyrocket? Why not outsource a few of those positions? That is where the big savings will be.

Having gone to less than half what I used to make, I will not be buying any new consumer goods, Walmart or otherwise, any time soon. No new cars for me, no new appliances, no new nothing. I don't yet know if I can continue to make payments on my extremely modest home. I went back to school 7 years ago. I still owe for that training, yet can't find a job with those computer & supervisory skills.

The only reason that jobs are outsourced is economic benefit to the company doing it. Make it unprofitable for them to do it and US workers will suddenly look more attractive. We need to compete on a level playing field here and penalize companies that outsource jobs and still expect US workers to somehow provide them with profits.

Steve Ramsey said "Instead of pressing for government action against airbus subsidies, Boeing [...]"

As I seem to remember, Boeing did, and the government tried, but failed. "Blame the French!" (and Brits, Germans, etc. who are part of the Airbus consortium)....

Many companies including Boeing are "up against a wall", fighting foreign government subsidies, low cost production (e.g. the Japanese have been furiously outsourcing/setting up foreign factories), etc. etc. We don't play by the rest of the world's rules (e.g. bribery, essentially unlimited immigration, etc. (at least to a large extent)), and there is a price to be paid for this.

Mr. Ramsey's comments about the intergenerational conflict being set up between the Boomers and those later are well taken. But there are two additional factors than need to be considered that may or will make things nasty for the Boomers:

"Present consumption must by definition come out of present production".

What the retiring Boomers consume will have to come from someone's production at the time. Taxing the younger generations to penury isn't going to help them in that.

Related is "The Greater Fool Theory":

It's also a fact that to liquidate financial assets, you must find a "greater fool" than yourself to sell them to. If there isn't a strong demand for the savings of the Boomers when they try to cash them in, the prices of their assets will drop, and things will get ... ugly.

(Note that we can't really predict the latter, although it argues for significant national strength including military; a stable and "hard to kill" country is a desirable place to put your assets, like Switzerland in times past (which rather than having an army is an army)).

I would add to Jon Cohen's comments that poor communities that move beyond sustenance will be buying more products from developed nations; we all make something (or things) better than others.

Harold,

Yes, in America, everything is pristine, everyone is honest, there is no bribery, and everyone lives like on the show "Leave it To Beavers." America has high subsidies on its agricultural products, much to the chagrin of African producers (America's cotton subsidies have been very damaging to a lot of African economies), it has illegal tariffs on steel, and is about to start a trade war with China in the area of textiles. Your Fed Chairman just the other day warned of creeping protectionism in the US. Not that the EU, etc. also don't have subsidies on agricultural produce, and tariffs and bans on products, but Americans play as much by the world's rules as any other country does.

Terri Pittman,

Actually, India and China are fast growing markets for sellers of goods; which is why European car companies are proceeding like mad to sell things like cars, TVs, etc. there. US car companies as far as I can tell are well behind the likes of Renault and VW in those markets; and of course there are Japanese car sales there too. In fact, China's car buying boom is especially large; which has the ever worrisome environmental crowd all afraid.

Terri,

"Make it unprofitable for them to do it and US workers will suddenly look more attractive. We need to compete on a level playing field here and penalize companies that outsource jobs and still expect US workers to somehow provide them with profits."

In other words, you want to practice socialism.

Jon Cohen -

First, you're right that the path out of here is increasing prosperity elsewhere; if other economies hit a 'light off' point, we'll all do very well indeed.

The problem is simple, getting to that point without demolishing the middle-class economy here. Again, I haven't got a clue about how to do it (but I'm reading a lot and hope to be more clueful at some point soon), but that seems to be the high-wire we're facing.

And my issue isn't that the middle-class are more strapped or have a flat or declining standard of living - it is a) what the political and consequences of that decline are if it is perceived that the 'investor' class isn't flat or declining and is in fact profiting from the forces that are flattening the middle class; and b) the increasing stratification of our society as it becomes harder and harder to bridge the widening gaps between classes.

A.L.

Lexington Green: "This is turn is only possible because our highly regulated economy creates opportunities, in the regulatory code, the tax code, the assignment of rights to the electromagnetic spectrum, the abuse of eminent domain, and many other ways, for people to use government power for private benefit and to foreclose opportunities and thwart competition."

You left out the two prominent examples of patent and copyright law. As a computer programmer, I am keenly aware that software patents are stiffling progress in one of few fields left that will only increase in prominence as we continue to build our electronically-connected society. The USPTO is aparently critically inept at understanding the nuances associated with technological innovation that cannot be seen by the naked eye or grasped by hand. (Either that, or it is being paid off behind the scenes, but we all know about Hanlon's Razor, right?) This is leading to overly-broad, blatently-obvious patents that are being used to bully both large and small corporations into submission. If the losing companies can continue operation after multi-million dollar settlements, you can bet that they "pass the savings along to you!"

I’ll not go on a rant about social issues, but don’t overlook them. We welcome folks from south of the border because they work hard, a lot harder than native born. Part of the reason is that they had dads at home who instilled in them the virtues of manliness, of working, leaving their moms free to work even harder, thereby instilling in their offspring a respect and appreciation for women.

Native-born oafs are the result of single-parent (predominantly female) households thanks to the double-barreled scattershot of illegitimacy and divorce. Look at the trash coming out of middle-class families (regardless of race). Lots of young men are supported in part by their hard-working, single moms well into their twenties; if there was a dad involved, he's off with a cutie, a bottle, or some other bad habit.

The result is that the guys can’t finish college or hold a job that requires too much diligence, sweat, or perseverance. Oh, and they don’t respect women too much at all.

Enough of the rant.

The Free Market system ideally should be able to handle the Walmarts of the economy. The money saved by American consumers + the money that returns to the USA from India/China/elsewhere should create jobs to enable the cycle to flourish.

The problem: The Free Market system doesn't punish free-riders like India, China, and Japan that don't buy American goods and services - and instead sit on vast amounts of dollars. Ultimately, those foreign currency reserves should damage those economies, but... they aren't Free Market oriented so they don't suffer.

So what do we do? Develop our own hybrid that incorporates most of the elements of the Free Market system but protects the producers at the expense of the consumer. Any idealistic Free Marketer should gag at that, but the realists out earning livings under pressure from foreign competition know that it's the only way for us to survive this game of running faster to stay in place....

The best thing that could possibly happen to us is for us to lose all of our jobs making the stuff we've been making, and have them replaced with jobs making personal skycars, commercial passenger spacecraft, ant-aging pills, and so on.

The second part will happen if we engage in massive regulation to remove barriers to the production of all the futuristic stuff we were promised as kids.

Then the foreigners will take those jobs away and we'll move on to personal spacecraft, orbiting habitats, Belt mining operations, and so on.

Repeat as necessary until we rule the Universe, or at least that part of it that isn't already claimed by sentient beings. That should keep us busy for a while.

"Talking to younger folks, though, I've hit plenty of anecdotal evidence that even state universities are now available only to those lower-class compeers who are willing to assume crippling -- I mean, legs-chainsawed-off crippling -- debt while simultaneously working like a dog and trying to study full-time."

If you aren't expecting your income to increase enough to pay off the loans you're taking on to go to college, then college is a losing investment for you. Just like you'd never take out a loan to buy a factory whose revenues wouldn't justify paying off the loan, you shouldn't embark on a college education if the higher income isn't high enough that you're better off even after paying back the loan.

If, instead, you take on that college education and someone else is paying for it, then that someone else is covering your losses and making a losing investment in your education. Not a smart plan, overall.

If you want less pointless credentialism, the solution is very simple: let employers hire according to their own judgement alone, without answering to anyone about why they hired this person over that person, or a person of this race over a person of that race. If you demand justification for hiring decisions, then employers will in turn demand credentials from their potential hires in simple self-defense.

Also, employers must be allowed to use IQ tests. Having been forbidden to use cheap IQ test that take about an hour or so, they've been resorting to demanding that their potential employees take an "IQ test" that costs thousands of dollars and requires four years to complete - a college education - and thereby wasting years of everyone's life.

A.L.,

Actually we do one other thing better than anyone else - start businesses.

I wrote a piece on it. And how Congress has decided to add a handicap to the process. Perhaps you can prevail on Joe to run it.

==================================
Scott. We send them pieces of paper they send us stuff. I don't see tthe problem.

Simon

Now would seem like a good time. As you'll notice, other than Saturday I have not been mosting much for the last week and a bit. Time's a bit tight.

Simon
Then you don't understand the parameters of the problem. As HL Mencken said, "For every problem, there is a solution that is simple, neat, and wrong."

Regards,
Scott Kirwin
www.itpaa.org

Matt Bruce has an interesting response over at Green Field Gerbil.

We are now at the bottom of the business cycle. It would be a serious mistake to extrapolate the trends since the recent bubble burst. Our middle class is not disappearing, but there is some adjustment needed at the individual level as the US economy finds its footing again. I know that the pain of moving to find work, etc. is real, but no one ever promised us otherwise. We enjoy the prosperity in this country that we do because our social contract calls for that flexibility from us all, rich and poor alike.

Clinton's campaign in 92 was based on the idea that Reagan and Bush were destroying the middle class, the 80s only benefited the rich, blah, blah. Later we found that the recovery had been well underway by then. The subsequent boom and bubble was bound to happen regardless of whatever tinkering happened to the tax rate because it was due to technology.

The question before us is whether the world economy will support our standard of living while the rest of the world catches up through job transfers. I submit that the continually housing cost around the major metropolitan areas is evidence that the market still pays for proximity. The costs of doing business with partners overseas are still high enough that Americans can benefit from being close to the centers of wealth creation.

What do we need to do to maintain those centers? Not only providing education to Americans, but also by keeping immigration of talented entrepeneurs and engineers into this country open and the protect the financial rewards to them from excessive taxation. By keeping our talent pool up we maintain our edge. The downside is that it may take longer for those immigrants homelands to catch up.

Great post, A.L. Me, I'm most worried about what happens when wages start dropping faster than retail prices. And that's not even going into potential deflation spirals (e.g., Japan).

I'm not an economist, but I've been around for quite a while and I think what you're all talking about is just the normal cycle.

A big store comes to town. At first the clerks are all very helpful, the stock is neatly stacked on the shelves, then more and more items and services are offered and the small store owners give up and close.

Time passes and customers start to complain that the big store help is surly and doesn't know the stock or where to find items the customer wants, so a hardware store opens provides personalized service and appeals to the more upscale customer, etc. Soon other speciality stores open and thrive. It starts in upscale neighborhoods and then moves on down to the middle class towns.

The big stores add groceries to appeal to more customers, but the groceries aren't as appealing or fresh looking as the neighborhood supermarket everyone was accustomed to. Another cycle will surely start it all over again. The only certainty is that change will occur.

The inner city slums never even get the big stores or the big supermarket chains. It doesn't pay for them to build in the poorest neighborhoods, so the very poor survive on price gouging and defective merchandise from their local markets.

The drug war has proved you can't stop people from trading. Don't even try.

Supply and demand tend to equalize. Even in labor.

The only way to bring the poor up is to make them more productive.

Most of the A.L. rant seems to be nostalgia for the buggy whip factories of yore. Just like farm labor - it ain't coming back.

Whew. Now that we are back in reality what are we going to do about it?

The soundest thing is to take stock of our strengths and weaknesses and see if we can't capitalize on our strengths and minimize our weakness.

We have been through situations like this before where the competition got really rough. Remember the car wars? The Dynamic RAM Wars ? The world was coming to an end. Except it didn't.

Very little dynamic RAM is made in the US of A these days. No point. It is not very profitable. America is constantly abandoning low profit lines and continually taking up new high profit lines.

There are fifteen or twenty private companies making commercial space transportation. One or
two of them will be successful.

We got biotech going like gang busters.

There are organic LEDs about to come to the market.

There are products complicated and simple that have yet to come to the market.

Within a few years camshafts in auto engines will be a thing of the past. Valves will be controlled by coils of wire and computers. Auto braking is moving from hydraulic to electrical. Steering too.

We need to design new stuff and sell it. Let the Chinese sweat in factories making it. Good for us. Good for them.

You see Marx was correct. Capitalism squeezes the profit out of any product. I say that is a good thing.

Whining over a lost era is a fools game. And we are no fools here.

I wanted to get comments on whether anyone thinks unions contributed to our current situation? Wal-Mart is certainly a factor but could unions also shoulder some of the blame?

Dear AL:

Once again a very thought-provoking post. There seem to be two central questions:

1. Is there a problem?
2. What to do?

In answer to the first question I would suggest that you can measure the severity of the problem by measuring the unemployment rate of engineers, computer scientists, mathematicians, chemists, and physicists (biomed is so heavily regulated that it's difficult to use employment figures to prove anything). These are the people who create the new ideas that turn into the industries of tomorrow. Conversely, measure the unemployment rate of lawyers and MBA's, the native guides through "the system". Neither create anything--they just "work the system". Hmmm. Looks like a problem to me.

In answer to the second question, there appear to be only two satisfactory answers: either a) create a situation of really free trade (no tariffs, duties, copyrights, patents, licensing, certification, etc.) i.e. level the playing field or b) regulate and tax the winners (copyright and patents holders, members of protected jobs and professions, etc.) to the benefit of the rest of us. Folks, a) ain't gonna happen and no sane person would want it to.

I was about to post an encomium on how Indiana has a network of commuter colleges, but then got to my alma mater's page and found out that tuition comes to $2139/semester for a new student taking a full load of courses, $2850 when including fees ($170) and books. For four years of study, a student would expect to pay $22,800.00. The same course of study cost about $7,000.00 fifteen years ago.

I'm not sure that the numbers add up. When I took Japanese at Purdue Calumet, the class size was six which would result in a revenue of $2,264.40 from tuition and a similar amount in state subsidy. Of the $4,500 coming in, $1,350 would go to the (adjunct) instructor, leaving $3,150 to university to spend as it pleased. Without the state subsidy, the markup would be a mere $914. Every additional student would represent a pure profit of $360.00.

I know that there are research costs, but Purdue Calumet is a commuter campus and the professors' main responsibility there is to teach students. A typical full professor has one class with 50-100 students, two with 15-25 students, and a grad-level course of 6-10 students. One hundred students bring in over $75,000/semester including state funding, and $150,000/year is beyond the dreams of avarice for most full professors.

The proceeds of endowments and grants beyond the state subsidy are not mentioned in this discussion, mainly because I do not know what sort of endowment Purdue Calumet enjoys.

One would think that such a markup would motivate a swarm of competition. Yet somehow Purdue Calumet's education is the least expensive education of reliable quality even when the state subsidy is added in! There are plenty of places that will offer a semester's worth of "instruction" for $5600 (or whatever amount coincides with the maximum student loan available!) that leaves the student as ignorant as when she enrolled.

Somebody from the university world, please enlighten me.

Scott,

Please explain how China loading up boats and sending us stuff in exchange for pieces of paper is a bad thing.

In the old days terms of trade like this were called reparations and were thought to be a net advantage to those on the recieving end. I guess Germany ought to have been happy to send France reparations at the end of WW1. Stupid Germans. Didn't know what was good for them. And the French? Stupid of them to ask for all that free stuff. You have to ask yourself what governments in those days were thinking? Well certainly not the same thoughts as Scott.

Manufacturing like farming will no longer support the masses it once did. Improved productivity locally along with external competition is the cause. The farming jobs are not coming back. No Congressional program has done a thing to increase farm sector employment. Zip. Nada. The USDA still has lots of jobs though. In fact some think there are now more USDA employees than farmers. How did that happen?

Marx was right. Capitalism drives costs and profits towards zero. What Marx did not see was that whole new ranges of needs and wants would take the place of the commodities. If Marx didn't need a computer why do we?

A.L. I'd just liked to point out a few things that were alluded to in the above posts:

First, you're correct in saying that the current middle class is disappearing, but you're incorrect in postulating why, or rather you have only part of the story. Competition from other nations and companies that can find cheap access to labor is killing manufacturing sector jobs, and in some respects jobs that provide services (such as technical support jobs). The result is that businesses are trying to find new ways to make money in the US, the one place that they seem to always have an edge in is in R&D. Let me give you an example of that, the silicon wafer industry in the US is non-existent currently. So what do manufacturers do when they want an integrated chip or circuit? They fund the DESIGN of the chip that they wish and then they send that design overseas to be printed on silicon wafers where the cost for manufacturing those wafers is cheaper.

This outsourcing causes the shift that we're currently seeing, to compensate for that we're seeing more people turn to education as a stop-gap in terms of trying to gain new skills or knowledge.

If theres any way to combat this kind of trend it would be to develop either new manufacturing possibilities, develop niche markets, or keep designing an researching new systems that are so totally new that they make the old type of systems obsolete. In every case the problem that hurts the most is that there is a large chunk of the population that has to relearn new skills or find new ways to adapt and that takes time.

I seldom make two responses in a forum like this, I try to make statements that stand on their own and let them lie.
But valentine, I had to ring in with this:
Just days ago, my former employer, Boeing, announced the outsourcing of R+D to India.
No, I'm not making it up.

Steve,

The question is what do we do about it? Which is to say how do we lower our costs enough to compete?

My answer is to turn every garage and basement into an R&D center. Lets go on an invention binge.

Dave,

Too much regulating and taxing of winners and they will go elsewhere.

There is an area in Switzerland that is making taxes regressive. The more you earn the lower the marginal rate you pay.

The question then is: do we want all our big earners to move to Switzerland? Or would we prefer to attract them here? The top 1% in America pay 30 to 40% of all taxes. Do we really want to send them to Switzerland?

M Simon..I don't think your reparations analogy works. When Germany was required to send trainloads of coal (for example) to France, they did not receive "pieces of paper" in return.

Today's "pieces of paper" are dollars, which are used to purchase other pieces of paper--treasury securities, stocks, bonds, etc. All of these represent claims on wealth and on future income production.

The fact that something is a pice of paper--or the electronic equivalent thereof--does not mean that it is valueless.

Steve, that doesn't surprise me, I live in San Jose, CA and one of the things thats irritating a lot of people here is that a lot of companies are outsourcing things software ENGINEERING and DESIGN to places like India. But the complaints don't stop there, apparently in their haste to get a better bottom line managers of such companies are finding out that the standards they expect in industry in the US (regarding protocol for timeliness of project completion, manpower usage, and even the whole design aspect) are not usually the same (okay in some cases that would be the understatement of the year). What we're seeing in that area is that after a lot of this outsourcing of design and engineering theres a lot of conflicts over the final product and after revisions have to be made and additional consultations the costs come to as much or more as if it were outsourced to a US firm or done by US employees.

M. Simon, we're reaching that point only now, hopefully we can speed it up. Let me give another example to illustrate, in the software/computer engineering side whats considered something of a holy grail of programming and design is if we can make modular components of programming so that even a 8-10 year old can put them together to make new programs, throw a GUI interface to make it nicer and thats what we'd like to see. We're only now seeing businesses and industry attack this through a lot of modules that are industry standard and best of all..some of these modules can even be accessed on the web.

I happen to know that the subject of this post is something that's been on A.L.'s mind for some time -- we discussed it at the reception after Dave "Redwood Dragon" Trowbridge's wedding in October. His core idea -- as expressed in that conversation -- was to watch what happens, not to the rich or the poor, but the median.

I'm in an awkward position, because I'm in that "10% of sons" who did much better than their fathers in the 1990s. And I did it without a degree.

But I may yet have to drastically reinvent myself. Many current service-sector and information-technology-related jobs will go the way of agricultural jobs in the first half of the 20th century and manufacturing jobs in its final quarter. They'll be replaced with something that doesn't exist yet. (For an idea of what that might be, read http://reason.com/9606/Fe.TURNER.shtml [~4,600 words; reading time ~20 minutes].)

It is not going to be easy, especially on the more stereotypical IT guys. But we can't stop the world. Lifetime employment in the same career, let alone for the same employer, is utterly unrealistic.

Additional stressors include: an uncompetitive and therefore failing public education system (see also Karl Gallagher's comment); actuarially problematic entitlement programs; and protectionism, which always, always backfires; the turning away, by the present Administration, of the roughly consistent pro-market policies of its predecessors all the way back to, and including, Jimmy Carter.

I will not be among those who accuses A.L. of "trying to ... justify the New Deal and Great Society and all of the baggage that came with them." I applaud his call for us to do some serious thinking. Of all the mistakes we cannot afford, a failure of imagination would be the worst.

Very interesting discussion going on here. A good friend of mine works for Albertson's (Jewel Food Stores) in Chicago and was shipped out to California to man one of the stores during the lock-out. He was not happy to do it, and he found the entire exercise to be pointless. Wal-mart is coming, and if Albertson's (and the rest of the traditional grocery stores) don't get a handle on their health care costs, they are doomed. He is not even concerned about competition from Jewel's traditional competitors. Only Walmart. There is plenty of blame to go around but I find that in general, unions have to be the most short-sighted entities on the face of the planet. Will the last union member please shut the lights off when the store/warehouse/plant closes?

The middle class squeeze is real. I happen to be one of those that has been through: reverse discrimination("Please don't tell anyone sweetie, but I cannot hire you, you are the wrong color." Lucent), Japanese management techniques (quality circles wipe out all of middle management, ConAgra), bankruptcy (Big-box retailers roll in, ColorTile), and now I am getting hit by: illegal immigrants driving wages down by half and internet sales taxLESS competition on material sales.

I have been out of college for 13 years and now have to start on my FIFTH career!! I am about as Conservative Republican as you can get, and am currently stocking up on weapons. After the REVOLUTION, I am going to get mine! I have HAD IT!

How in the Hell am I supposed to plan for my retirement, when I cannot even plan for next month? Change I can handle, having my life turned upside down on a daily basis is something else entirely.

I want GWB and Treasury to drive the dollar so stinkin' low that an imported car, tv set, computer, or ladies bra would cost as much as a five bedroom house. ENOUGH with the cheap imports. They're great if you already got yours, but they are killing those of us who don't.

Just curious, how does someone who believes that the middle class is disappearing explain an 8.2% GDP growth rate? Who's buying all that stuff?

C'mon, Jon ask a hard one.

If ten of us are the economy, imagine that two of us represent 40% of the activity, four of us represent 40% of the activity, and four of us represent 20% of the activity - that's not radically off from the current income/wealth distributions (I'm blending the two because wealth drives spending as does income).

Imagine that the top two increase their activity by 25%. The next four reduce their activity by 5%. The next four increase their activity by 15%.

What's the aggregate change?

40% * 25% = +10%
40% * -5% = -2%
20% * 15% = 3%

Aggregate change = +11%

In reality it's more complex as a) we're dealing with slowly inflating dollars, which mask declines in puchasing power, and most middle-class hosueholds have assets which they can spend down (typically through refinancing houses and HELOC's) as wll as debt which they can assume which allows them to keep spending.

But it's silly to look at aggregate GDP figures and opine about the health of one layer of the income pyramid.

A.L.

Good discussion going on ... I've been in I.T. since 1980, and have seen the trend that has lead up to this uncertain economic future for America's I.T. community.

This is also being discussed on Good Morning America's forum (http://boards.abcnews.go.com/cgi/abcnews/request.dll?MESSAGE&room=abcnews_gma&id=185123) ... I'll not repeat my postings there, but you can read them for yourself ... I go by TulsaDavid there.

A few related topics being discussed there are:

http://boards.abcnews.go.com/cgi/abcnews/request.dll?MESSAGE&room=abcnews_gma&id=185123
http://boards.abcnews.go.com/cgi/abcnews/request.dll?MESSAGE&room=abcnews_gma&id=183475
http://boards.abcnews.go.com/cgi/abcnews/request.dll?MESSAGE&room=abcnews_gma&id=183450
http://boards.abcnews.go.com/cgi/abcnews/request.dll?MESSAGE&room=abcnews_gma&id=183446
http://boards.abcnews.go.com/cgi/abcnews/request.dll?MESSAGE&room=abcnews_gma&id=183441

A.L. -

Thank you for your hypothetical numbers. Now please explain which number in the US Census Historical Income Tables - Income Equality (table is linked) is a bad number.

For those not interested in looking at the real numbers, the table shows CPI adjusted household income by quintile.

Anyone who looks at the soaring income levels across the scale and can find bad news because of some bogus statistical manipulation of quintile percentages is quite simply engaged in class warfare.

Now what I would like to do next is account for how the massive immigrant into this country affects that table. What we see is a powerful economic engine that takes a stream of people into the country at the bottom level and gives them the opportunity to rapidly increase their wealth.

Jon, I'm on some deadlines today, but I'll toss out the stats in this Calpundit post as an appetizer.

A.L.

Dammit, Jon, you're going to make me miss my deadline!! (I couldn't help but do a quick analysis on your numbers...I'm not an addict, really, I can quit at any time...)

First, this is a bad measure of true spending power, as it simply sets the threshold at which one joins a decile, as opposed to, say, the aggregate income or median of the decile itself. I'll look for some better numbers, but probably not until tomorrow. It also doesn't address my core issue which the % of the population which can be termed 'middle class'.

But quickly, the % increase in income by decile from 1977 - 2001 was:

top 10%: 49.8
next: 44.5
next 34.4
next: 20.3
next: 19.9
next: 19.9

And the median for 2001 was $62,800, while the median for 1977 was $48.560 - an increase of 29.3%

So you'll note that the bottom half of the population fell behind the aggregate level of income growth - they lost ground.

Given that the two big determinants of class mobility are the ability to move to better housing and the ability to afford a post-secondary educatiom, it'd be very interesting to map these against housing cost spreads among neighborhoods and against increased in educational costs.

Back to you, Jon...

A.L.

I'm not it's wise for me to step into this debate between AL and JC, but what the hell:

1. Income inequality is measured by the Gini coefficient. Since 1968, and since 1981 in particular, it has risen, with a leveling-off period during the 90s. These are incontrovertible facts.

2. From those commies at the Census Department:

More highly-skilled, trained, and educated workers at the top are experiencing real wage gains, while those at the bottom are experiencing real wage losses making the wage distribution considerably more unequal. Changes in the labor market in the 1980s included a shift from goods-producing industries (that had disproportionately provided high-wage opportunities for low-skilled workers) to technical service industries (that disproportionately employ college graduates) and low-wage industries, such as retail trade.

3. At the same time, however, the poverty level has actually increased in real terms: " there is an impressive body of empirical evidence from the United States, Britain, Canada, and Australia
showing that successive poverty lines developed as absolute poverty lines show a pattern of getting higher in real terms as the real income of the general population rises."

4. Technology, and concomitant productivity increases, have driven this real increase in the poverty line, as well as a gradual overall decrease in poverty levels since 1959.

5. At the same time, poverty levels have risen recently from 11.7 to 12.1 percent. Strangely, this rise took place in suburbs and not in cities or rural areas.

6. According to the Federal Reserve Bank of San Francisco, "while inequality unquestionably increased and the size of the middle class declined during the 1980s, the decline occurred through disproportionate increases, rather than through large-scale reductions in economic well-being," as this graph sort of shows. I'm not sure I trust this graph, but it's the only relevant one I could find right now.

7. The real cost of living has greatly declined over time.

In short, the real problem seems to be price increases in important, Rawlsian sort of things like college education and health care. And these affect the middle class as well as the poor.

A.L.

I'll try keep this brief so the two of us don't miss our deadlines and migrate to the bottom quintile.

Your Calpundit link appears to show the exact same numbers I did. But the graph there used bright colors and fuzzy lines and depends on a trick based on the fact that big numbers look like they increase faster than small ones.

Your second post makes a more subtle point.

Is the bottom falling behind because those jobs are going to India, or is the top quintile taking off, like The Bell Curve predicted it would.

Are you more concerned about how many people can afford X sq ft of house (ie. middle class) or how jealous they are of the top quintile? The raw numbers I cited suggest the middle class is increasingly well provided for. My taxes suggest that the poor are quite well provided for. In an environment like that, what does it matter how rich the rich are?

Neil is a moroner. He needs to pull his face out his still warm pizza long enough to count up the number of noble prizes won by Americans over the last few decades. Can he say scientific research? How about satellite launches? IIRC the USA still puts up 66% of the Launches and 80% of the tonnage. I would also submit that the US military is more efficent at killing enemies and sparing civilians then anyone else in history.
919

Can someone answer two simple questions? When GM starts manufacturing cars in China and finds that they can build them cheaper over there, whats going to stop them from building all there cars over there in the future and ship them back to the USA. Whats going to stop all merchandise from being made overseas period and imported back?

Matt - that day is already there. A lot of the parts that are assembled to make 'American' cars are made in India or Mexico.
We WILL lose Manufacturing jobs. The question is whether this is a bad thing. After all, a majority of Americans used to work in Agriculture a couple hundred years ago. Those jobs went away but it was accompanied by a HUGE increase in the standard of living.

I think one of the key points here is that many on the left perceive the process of outsourcing enriches stockholders and CEOs in the 1st world who are already wealthy.

This is another reflection of the fact that class-envy is the original sin of the Left, equality run amuck. Racial and religious chauvinism, of course, are the orginal sin of the Right, fraternity run amuck.

The potentially powerful thing about the anti-globalization movement is that it blends class-envy and chauvinism.

On a less macro level of analysis, economic growth only occurs through change. Change is almost always painful for someone. Automobiles put horse and buggy makers out of business. Mechanized agriculture meant the consolidation of farms. Textile mills relocated from New England to the South, etc etc.

International trade is only one of the many ways that change occurs. The sensible response to economic change is to cushion the blow to the losers, not to prevent the change.

The huge standard of living was a direct result of moving from agricultural to manfacturing sector which pays better. If we move manufacturing, information technolgy,telemarketing,engineering overseas will someone tell me what kind of equal paying jobs are going to replace them.

"The huge standard of living was a direct result of moving from agricultural to manfacturing
sector which pays better."

Actually, the huge standard of living increase was the direct result of technological change that enabled us to have all the food we need and a whole bunch of manufactured goods through the efforts of the same people that once could only deliver the food (most of the time) and little else.

"If we move manufacturing, information technolgy,telemarketing,engineering overseas will someone tell me what kind of equal paying jobs are going to replace them."

Jobs making stuff that isn't being produced today by anyone. Loosen the regulatory environment, and investment in "World of Tomorrow" products will increase, bringing jobs and a better standard of living, much like the massive hemorraging of jobs from the agricultural sector did.

Ideally, we need to lose every job we have now, and replace those jobs with brand new ones, so that we can have all the stuff we have now plus lots and lots of new stuff.

The issue is the increasing isolation of capital markets and equity wealth from wage-earning wealth. There is a growing - call it a Chinese Wall - separating the two kinds of wealth.

We were taught in the Reagan era that supply-side economics demonstrated a ‘trickle down’ effect as increased availability of capital translated into increased investment opportunities, which in turn translated into more jobs. What we see happening instead is that increased capital (typically through the ‘tax cuts for the wealthy’ agenda) feeds directly into the capital markets by financing any multitude of underwriting opportunities, but typically a merger and acquisition. When companies are combined, the phenomenon of entrepreneurial synergies is all too often an anxiously awaited event that emerges with all the coyness of a debutante, but one event is as predictable as ants at a picnic and that is job losses due to elimination of redundant functions and technology-driven increases in operational efficiency. The new and enhanced company is consolidated, stream-lined, and sold, all at a very tidy profit for those whose major source of wealth derives from the capital and equity markets.

What happens when jobs are created? A previous poster summarized an all too frequent situation in which new skills are suddenly required. So the enterprising gear up with new skills only to find themselves unemployed yet again at the end of the cycle. In the meantime, let’s assume the clever enterprising employee attempts to invest in equities. One can only hope that the mutual fund and equity markets have been sufficiently cleaned of the corruption that currently makes the markets inhospitable and downright dangerous to non-institutional investors. As it is now, equity investment by a ’little guy’ is about as safe as a Vegas crap shoot.

This is not about education or even retraining. I wish it were because the solutions would be easy. This is about a very unhealthy aspect of the capitalist system that some are mistakenly tolerating as an inevitable consequence of competitive market economies. The consequence may very well be inevitable but it need not be tolerated. There used to be such a concept as ‘labor rights’ and I believe the old concept needs to be dusted off, resurrected, and redefined to provide some protection and some stability and some civility within a system that I do not trust to function without some form of externally imposed constraints. Socialism? How about some of Thomas Paine’s Common Sense?

I was raised in a third world country that for many years had an official UN standard of living that ranked it as one of the least developed countries (LDC) in the world. That standard of measurement was primarily monetary. Recent adjustments in that UN standard to account for quality of life and other non-monetary factors (i.e. political & social stability, life expectancy, subsistance food production and the like) raised this country's official standing substantially and out of the LDC status. My life and the life of others in that country may have not been as materially rewarding as life in the US but my observation was that consumption beyond what was really necessary to maintain food, shelter and health was not necessary to a happy and productive life.
The problem in the United States is that generally the public and individual perception of the quality of life is inexticably tied to a montary valuation of their worth, be it in accumulated material possessions and wealth or, for most of us, the increasing wage earning capacity. This perception of quality of life drives the private sector to increase consumer angst through advertising so that more unnecessary materials are purchased. It drives the Federal Reserve to interfere with a consumer's normal desire to reduce purchases in economic hard times by slashing interest rates to encourage consumer purchases through debt financing. It drives labor unions to decry outsourcing to foreign countries and seek protection. What Americans need to understand is that many of the countries in the world are growing powerful economically and politically and have a right to expect a fair distribution of the world's resources. Any closing of the outrageous gap between the haves and the have-nots of the world could not help but reduce the political and social tensions apparent now. This means that in the future Americans may not enjoy all of the material benefits that came with being the sole economic superpower after World War II. If individual Americans adjust their lives to a lowered future expectation of material wealth and demand that our government use its economic and military might in futherance of an orderly tranfer of economic opportunity throughout the world while maintaining food on Americans table, a roof over their heads and healthcare then there is a positive future. It will take courage and imagination to see it through.

"but one event is as predictable as ants at a picnic and that is job losses due to elimination of redundant functions and technology-driven increases in operational efficiency. The new and enhanced company is consolidated, stream-lined, and sold, all at a very tidy profit for those whose major source of wealth derives from the capital and equity markets."

And the end result is that the same goods and/or services are produced with fewer workers. Multiply that throughout the economy, and let new companies making new things get organized and take advantage of the workers freed up from their previous tasks of making the old stuff, and we all end up better off.

"So the enterprising gear up with new skills only to find themselves unemployed yet again at the end of the cycle."

Well, yeah. Why should we expect to do the same old thing throughout our working lives, especially when we don't expect to be stuck with the same old goods and services at retirement that were on the shelves when we were 18? (Or at least we shouldn't!)

If you want new products and services, then the people making them will have to do different things than they were doing when they were making the old stuff.

"There used to be such a concept as ‘labor rights’ and I believe the old concept needs to be dusted off, resurrected, and redefined to provide some protection and some stability and some civility within a system that I do not trust to function without some form of externally imposed constraints."

We don't want stability - "stability" is just another word for "the same old crap", the same products and the same services, and none of that technological development that we once rightfully regarded as the best way to alleviate misery that mankind has ever come up with.

Remember that our lives depend on rapid technological progress - our bodies will fall apart in less than a century and kill us unless we find a way to fix them or replace them. Stability is a death sentence; technological progress might grant us a reprieve if we let it.

"If individual Americans adjust their lives to a lowered future expectation of material wealth and demand that our government use its economic and military might in futherance of an orderly tranfer of economic opportunity throughout the world while maintaining food on Americans table, a roof over their heads and healthcare then there is a positive future."

Can't let that one pass. One of the reasons why America is the globe's economic powerhouse is that we refuse to lower our expectations of material wealth. It's the same answer to Armed Liberal's comment about the fact that we can easily live with less -- of course we CAN, but we DON'T WANT TO.

And economic opportunity isn't "transferred" -- that would imply that economic opportunity is a zero sum game. Economic opportunity can be INCREASED (and it is) through investment and, yes, mobility.

Regarding an earlier comment about the
predictive nature of the Bell Curve, I believe
the axiom "The cream always rises to the top"
applies irrespective of one's academic credentials.

There will ALWAYS be those who have and use their innate "common business sense" to get ahead and they will economically and politically rule the masses.

However The Bell Curve also posits that IQ and EQ are more heritable traits than learned ones.
It is not how poor you are, it is rather how smart you are to begin with that will generally determine your eventual economic and political status.

To put it bluntly (leftist, rightist, centrist elitism intended), the "teeming masses below" are too stupid and too nascent to get their tushes off the couch (or dirt floor) and get on with making it up the economic ladder.

Human history is rife with examples where a physically or numerically less powerful group has used wits and intelligently applied technology to rule large masses of people.

Our modern technology will only exacerbate
the problem, where the smart and technologically sophisticated can now simply eliminate or totally subjugate those who are are unable or unwilling to adapt.

"I am smarter and have better weapons than you,
therefore I will make and apply the rules...and there's nothing you can do about it."

Darwinism his now reached the pinnacle of expression, where now the elite ( That's means ME he he he ) can prevail simply due to the fact I can use my superior smarts and superior technology
to subject you to my whims.

Dangerous Thoughts, n'est ce pas?

America must now be very, very careful lest small numbers of very smart people with large egos and megolamaniacal tendencies who have unrestricted access to very sophisticated technology suddenly bring about a "Shock and Awe" strategy upon those of us who wish only to live simple lives and enjoy simple pleasures.

The point of all this is that our American society has produced such intense social, economic and political competition that the very fabric of American life has been ripped into two very irreconcilable pieces. Those who have innate ability have been pushed to every higher levels of accomplishment and realization while those who do not have that mostly heritable trait have been more and more marginalized and will continue to be marginalized until soon there will be two entirely separate species of humanity; the ever larger-brained one and the modern equivalent of the Neanderthal. Guess who wins ...

Kim -

Remember, I'm the liberal who likes creative destruction. But my ongoing issues are twofold; one is that a financial revolution is accompanying the current technical one, and that the consequences of that are significant and lasting - and second, that it won't do us a lot of good to create a dynamic economy if it tears the polity apart in doing that. In fact, it won't happen, and I'll back Schumpeter's prediction, that the government will clamp down on innovation instead. Both of those outcomes are a disaster, in my book.