"Ignoramus10488" wrote in message
...
On 2010-04-23, Winston wrote:
Here is the deal for folks who still cling to that belief:
In a Republican administration, the poor are prevented from becoming
poorer until after the rich become richer.
In a Democratic administration, the rich are forced to become richer
before the poor are permitted to become poorer.

My own theory in the widening income gap between well paid people and
badly paid people is very simple. It is not very much about politics
and mostly about economics, IQs and productivity.

http://www.nytimes.com/2007/03/29/business/29tax.html

The economics of this is that work contributions of not so
intelligent, or unqualified, people are replaced by computers. The
easiest example, besides CNC manufacturing, is to see how store
cashiers are being replaced by automatic checkouts. Same applies to
very many other professions.

As computers become smarter, more and more people are being pushed out
of the economic bandwagon and fall on the fringes. They simply cannot
contribute much that is within their abilities.

This is significantly different from the past industrial revolutions,
where people replaced by machines simlpy learned to operate such
machines and overall, produced more. Now, there essentially is a
lesser need to have anyone operate any machines, as computers do it
better.

I do not know what the future holds, and possibly, we will stumble on
the answer on what to do with such displaced people, and the society
will continue happily employing them for something useful. Possibly,
we will be forced to improve our education system, with some minor
gains due to that.

It is also possible that we will not stumble on any such solution and
more and more people will be pushed to the fringe, as computers can
substitute for a greater percentage of population every year. The
bleak social consequences will be easy to imagine.

I find this trend to be very disturbing, as eventually almost everyone
will be eventually displaced from productive activity. Remember that
even now, world chess champions barely win chess matches against
computers. For more food for thought, read

http://en.wikipedia.org/wiki/Technological_singularity

Tax policy or trade policy cannot do much to stop this essentially
technological, microeconomic development. Social policy may make the
fate of displaced workers a bit better, and in the meantime an
economic solution may be found.

The individual answer to this is that to be successful, it is
important for young people who are not wealthy, to become
sophisticated, focused and highly educated individuals. This is,
clearly, not feasible for everyone, but it is important to at least
try.

I do think that this issue will be a fundamental source of instability
for decades to come.

i

FWIW, ca. 1963 - 1970 or so, there was an expected answer to this problem
you identify, which, for forward thinkers in economics, was apparent even
then. Trend lines in automation were already making the logical conclusion
quite clear. (This was a central subject in Policy Science at the time, and
the academic analysis and thinking on this was what I was studying.)

The assumptions were that the work week would be shortened to four days;
eventually less. More people would be required to fill a certain number of
man-hours of work. Education would take up many of the remaining hours for
individuals, as technical developments would require an increasingly
well-educated work force.

Capital would be under pressure except for truly entrepreneurial
opportunities; dividends would be reduced because more profit would return
to workers. The gap between returns on capital invested in mature industries
and the rates of return possible for new enterprise would keep innovation
well-funded and expansive.

It was a vision that was similar to European social democracy. It went to
hell in the US for a variety of reasons, and globalization has given capital
the upper hand, basically undercutting the social democracy model in the US.
(It remains effective in Germany, however, which beats our pants off to this
day in balance of trade.)

This was before globalization and the proliferation of finance. It was
assumed that the pool of capital would have nowhere to go as dividend rates
dropped -- except to innovative projects.

You have an economics background, so you'll recognize the Stockholm School
thinking involved (think Gunnar Myrdal, and _Beyond the Welfare State_). The
view of labor and capital in this thinking comes from Post-Keynesianism. It
didn't anticipate the rise of Japan or the Asian Tigers, or Asian economic
models, and of course it didn't anticipate the rise of China.

So now we're basically stranded with a neoliberal model that's just taken it
in the shorts. Also known as the Washington Consensus, it's in ill repute
around the world. Several European countries are taking a fresh look at
Germany's flavor of social democracy, which is going to cause a lot of
turmoil in international trade and finance if major trading countries adopt
conflicting models.

--
Ed Huntress