NPR has a very interesting article about the modest and illegal beginnings of China’s booming economy. Way back before the agricultural reforms of the 1980s, farmers didn’t own anything: they worked on farms, but whatever they produced was given to the collective, which then redistributed the goods. It was a communist utopia: from each according to his ability, to each according to his need. And it would’ve worked fantastically, if it wasn’t for human nature; as one of the farmers in a village in central-eastern China put it:
“Work hard, don’t work hard — everyone gets the same,” he says. “So people don’t want to work.”
Yen Jingchang, one of the original capitalist Chinese farmers
As a result, that village didn’t have enough food. So one day in 1978, the farmers got together and came up with a plan to illegally divide the farms up into plots; they all had to give food to the collective, but the farmers that met a certain quota could keep some food for themselves. They then signed a secret contract formalizing the agreement, and included a clause saying that in the event a farmer got arrested for the practice, the other villagers would raise their children. The result of this risky enterprise would make Ayn Rand proud: that season’s harvest was more than the previous five years combined.
When the government eventually got wind of what they were doing, the farmers were hauled in front of officials; but since you can’t argue with results, the government decided that instead of punishment, they deserved praise. So the economy was reformed, the farmers were held up as heroes, and the secret contract is now in a museum. Since then, 500 million Chinese have risen out of poverty.
But it was just a start: the government still takes businesses away from their owners once they become too profitable, and a lot of wealthy Chinese are looking to move their money abroad, out of governmental reach.
The peak of the American economy before the recent recession happened at the end of 2007, when the GDP was 13.33 trillion$ and 138 million people were employed. After almost 4 years (three times longer than our average recovery time), the GDP is finally back above that level, to 13.35 M$ — but with 7 million fewer workers. Those people have been replaced partly by their former, more productive co-workers who picked up the slack, partly by cheaper workers in India, China and the like, and partly by computers who have gotten a lot more adept at doing sophisticated things around the office.
For example, there’s a lot less need for secretaries these days: between Outlook, GMail, the decline of postal mail, easy-to-use calendars with reminders on all the smartphones, files becoming electronic without need for filing (thanks to Google desktop search), and now even Siri, a lot of a secretary’s job has been largely replaced by software from Google and Apple. Travel agents have been replaced by Travelocity and Expedia (dot cooom). Accountants, by Excel, Turbotax, and Mint. Broadcast engineers, by streaming Internet video. Police and security officers, by cameras and security systems. Paralegals, by scanners, optical recognition, text search software, and the Internet. Librarians, by Google Books and Amazon. Bank tellers, by ATMs. Even bakers, by vending machines. All middle class jobs that are disappearing.
And that’s just the beginning: Watson – the IBM computer that mopped the floor at Jeopardy! with the two best people that ever played the game — is going to replace all kinds of Jeopardy! contestant-like jobs that depend on recalling trivia from large amounts of knowledge: doctors, lawyers, government employees, etc. Of course, technology doesn’t eliminate those jobs completely: we’ll need surgeons, trial lawyers and DMV clerks for the foreseeable future. Same goes for the other jobs (e.g., we’ll always need some accountants and traffic cops), because we’re unlikely to ever automate everything, but what will happen is that one person will be able to do the job of several. Agriculture was one of the first industries to become automated, and now a couple of people can run an entire giant farm that used to take dozens; over the past century, those jobs went from 38% to 2% of the workforce.
Watson on Jeopardy!
As a specific example of what’s coming, NPR has an article that highlights how disruptive automation will be to the auto industry: in the past 30 years more Americans have been killed by cars than by all the wars in the past 300 years — 1.5 million people. Because of that, and also because they’re really cool, driverless cars are coming to improve safety and efficiency. When they do, right off the bat, they’ll put a lot of people out of work: taxi drivers, valets, bus drivers, traffic cops, etc. And people that don’t drive too often may forego owning a car altogether and just use services like Zipcar; this means less need for mechanics and parking maids, less government revenue from drivers license fees, registration fees, traffic tickets, parking tickets, etc.
Google's driverless car. Illustration by The Globe And Mail
One interesting thing is that lower-skill jobs are not yet being targeted by robots, because those jobs tend to pay too little and aren’t worth replacing by an expensive machine that does them probably much worse: all kinds of cleaning jobs (janitors and maids, garbage men, bus boys), fast food cooks, animal caretakers, etc. And then there are the jobs no one wants to see a machine doing, mostly in the service industry: waiters, receptionists, nannies, hair dressers, retail salesfolk. Because of the high-cost and largely impersonal nature of middle-class jobs, it’s mostly those that are at risk for being replaced by machines.
So what do you do when the metal ones decide to come for you? Besides getting Old Glory Insurance, re-education is pretty much the only alternative to hoping you’re one of the few that get to stay behind. The loss of jobs to automation is nothing new and has been an issue since the days of John Henry, almost 150 years ago. And so far, every time an industry is disrupted by machines, a new industry pops up to take its place and create the new jobs needed. For example, when agriculture started to decline, radio and television were invented, as were cars and airplanes. Now, at the very least, we’re going to need people to design all those new robots… until someone builds one that can reproduce.
And in case you’re interested in some of that robot insurance:
NPR has an article about an economic report from the year 2000 that pretty much foresaw a collapse of the global economy if America ever paid its national debt. And back then, when the economy was booming and there was a budget surplus, it looked like the US would be debt-free in 2012.
The problem with that scenario would have been that the government would no longer sell Treasury bonds (since the proceeds from those sales goes to pay debt), which would probably be catastrophic because much of the national, as well as global, economy is built on those bonds sales. For example, a lot of investors buy bonds because they’re an extremely safe investment: the US government will likely never default on its debts. And pretty much all interest rates are in some way tied to the yield on Treasury bonds. And the government uses bonds to try to steer the economy in one way or another. No more bonds means no more safe investments, the foundation of the interest-bearing banking system collapsing, and no way for the government to control the economy.
The all-seeing eye on the dollar bill
Luckily for the global financial system, that scenario never played out, and instead of being debt free by next year, it now looks like the US will be lucky to ever get back down to a manageable debt level. In other words, Treasury bonds and the modern economic structure are here to stay for as long as anyone can tell.
But any conspiracy theorist worth his salt would look at the way recent history played out and say there was no luck about it and that in fact, this is what actually happened:
The Illuminati (or whomever runs the world from the shadows) saw the report forecasting a debt-free America and the subsequent collapse of the financial system that keeps them in power.
They realized that for that system to remain in place, America had to be plunged into such enormous debt that it would take decades to recover.
For that kind of enormous debt, the country would have to make deep cuts to revenue and massive spending increases.
So they struck a deal with Bush & Cheney and got them elected by coercing the Supreme Court into its landmark decision on the Presidential election in 2000.
They made 9/11 happen in order to bring the US into a state of perpetual war on terror, which would take monstrous amounts of perpetual funding. As a happy coincidence, it would also limit freedom in the name of security and significantly increase federal police powers.
The Bush administration introduced massive tax cuts, supposedly to recover from the Internet bubble, but really in order to cut revenue.
It then invaded Iraq, knowing it would cost untold amounts of money before the war was over.
The Fed cut interest rates to record lows, again supposedly to help the economy grow, but really to create the real estate bubble that would lead to the collapse of the stock market, followed by high unemployment, followed by a bigger decrease in tax revenue on top of the existing tax cuts.
For good measure, the administration also spent money wherever else it could: increasing entitlements (mostly Medicare), federal subsidies, education and discretionary spending.
All told, the second Bush administration vastly increased federal spending while at the same time lowering taxes, leading to the enormous debt devised in step 2.
The government lost money every single year in which the Bush administration created the federal budget: 3.5 trillion dollars total. Federal spending almost doubled from 1.8 trillion in 2001 to 3.5 in 2009. Over the same period, federal tax revenue shrunk: from 20% of the economy to 18%; in dollar amounts, it went from 2 of the 10 trillion dollar economy (by GDP PPP) in 2001, to 2.5 of a 14 trillion dollar economy in 2009. The result: instead of shrinking to zero from 2000 to 2012, the government debt more than tripled, from about 3 to over 10 trillion.
So there you have it: ten easy steps to keep the Illuminati in power by creating enormous American debt in eight short years. The movie version should be riveting.
Update: the New Scientist has a well-timed article about a Swiss study that found, among the world’s companies, a network of some 43,000 interconnected transnational corporations, 1318 of which control about 80% of global revenues. Of those, an even more tightly-knit “super entity” of 147 corporations (mostly banks) control 40% of the network’s wealth; they include JP Morgan, UBS, Merrill Lynch, etc. The Occupy Movement would call them the 1%; conspiracy theorists would probably call them the Illuminati; the Simpsons would call them the Stonecutters.
With the 10th anniversary of 9/11 coming up very shortly, the newsmedia is of course inundating the Internet with 9/11 stuff. Most of it is about how much of an effect the attacks had on the world, but Foreign Policy has an interesting article about ten events from the past decade that were more important than 9/11. Their list, ending with the most important:
The strengthening of the relationship between the US and India
The stagnation of developed economies
The skyrocketing use of social media
Mobile computing, via smartphones and tablets
Wall Street’s crash of 2008
The current Eurozone economic crisis, especially concerning the PIIGS (Portugal, Italy, Ireland, Greece, Spain)
The failure to address global warming
The rise of the BRIC countries (Brazil, Russia, India, China)
Photo by Ahmad Hammoud
About half the items on that list are bogus: the response to 9/11 can’t be separated from 9/11 itself and called a more important event. And the stagnation of developed economies as well as the current Eurozone crisis can safely be lumped in with the crash of 2008 as “the global recession”. The failure to address global warming may be an issue in 50 years, but it’s definitely not significant for the past decade: global warming hasn’t affected anything from 2001 to now. It’s like saying that the failure to remove Kim Jong-Il from power is an important event in the last decade: it may be that he’ll nuke South Korea in 10 years, but only then could it be argued that failing to remove him was important, because he could also die tomorrow. Ditto for the US-India relationship: nothing important has come out of it up to now.
Finally, the rise of social media is tied to the rise of mobile computing: social media is a parasite that could not have survived without iPhones, because Facebook and Twitter use is as prevalent as it is exactly because people can change their status while waiting at the doctor’s office, upload pictures from the beach they’re on or the revolution they’re at, and check-in at their favorite bar. Conversely, mobile computing would probably not have taken off as quickly as it did were it not for people demanding to do those things.
So the list should actually go something like this:
The Arab Spring
The rise of social media and mobile computing
The global recession starting in 2008
The rise of the BRIC countries — mostly China though
One could argue that the Arab Spring wouldn’t have happened without the combination of 9/11, the rise of social media/mobile computing and the global recession, but that would be reaching about as far as Foreign Policy reached to stretch four items to ten.
In light of the recent, unprecedented American credit rating downgrade, one article from just over a year ago has been making headlines. It was written by Treasury Secretary Timothy Geithner in The New York Times, and it was called “Welcome to the Recovery“. Bush gave his “Mission Accomplished” speech in mid-2003, and 2007 was the deadliest year for American soldiers in Iraq. Eight years later, we’re still there. Hopefully this recession won’t last until 2018.
The Onion is reporting on a new bi-partisan Congressional report which says that the nation’s economy is in dire straits because the nation is built on top of ancient Indian burial grounds. From the video, “Republicans want the curse to hold in order to paint Obama as being soft on poltergeists”.
Yahoo! Finance has an article saying that by one measure of economic size — purchasing power parity (PPP) — China will surpass the US in 2016. That’s what’s predicted by the IMF, and it’s a lot sooner than the mid-2020s that most people thought. However, America will still be ahead of China by a different measure: that of exchange rates. The problem is that using exchange rates is flawed because China is still the Soviet Union’s rich cousin, and currency is not traded on the free market like the US dollar: it’s controlled by the Chinese state, and severely undervalued.
Purchasing power parity on the other hand, is what’s used by the CIA’s own World Factbook to rank countries in terms of the size of their economies. By that measure, the American economy was three times as big as China’s a decade ago; last year, it was about one and a half times bigger. The US has been the largest economy in the world for well over a century, and therefore the enormity of this milestone cannot be underscored enough. Before taking the reigns as the biggest economy, the only country America ever beat down was Mexico; after, Japan and Germany — at the same time. So what all of this means is that whoever gets (re-)elected in 2012 will be the last President to run the US as the undisputed leader of the world.
We could say that the British — from whom America took the economic lead at the end of the 19th century — did well for themselves… but then again, the US is as close an ally as the UK has. The relationship between China and the US however, is a much different animal — like if early 1900s Imperial Japan took over from Britain — and it will be interesting to see what the world will look like under Chinese economic hegemony. But, hopefully the Illuminati have some craziness up their sleeve to keep the West in power.
