Saturday, July 3, 2010

The Decline and Fall of the Great Middle Class

John Robb, over on Global Guerrillas, shows why he's the thinking man's go-to guy as we prepare for the impending great economic collapse, with this article and links on the decline of the middle class.  It's an interesting read, and speaks for itself; I just have a few comments.

First off, the comments have the usual "Democrats started it!", "Oh yeah?  Republicans started it!" bull crap that has come to characterize political discourse in this country.  This polarization is a symptom of the very problem the article talks about. The highlights - well, lowlights -  of this are that anyone who thinks that union wages are a factor is racist; anyone concerned about undocumented workers is racist; open trade is good; open trade is bad; blah, blah, blah.

Can we talk some facts?

Everyone can't be rich.  Pretty simple isn't it?  You can no more have a statistical income distribution without a top than without a bottom (the war on poverty).   The US constitution does not guarantee outcomes, it guarantees access.  It doesn't guarantee your happiness, it guarantees your right to pursue happiness - however you perceive it.  The key to richness isn't in leaching off other people, it's in having a skill other people are willing to pay for. 

Unions have become as corrupt as the old companies they were founded to work against.  Can we talk SEIU?  Open thuggery of the worst kind.  How can a union of civil "servants" be set up to guarantee more pay and better benefits than the people who pay for those benefits have?  I'm not saying government and municipal employees should get slave wages, but they shouldn't be royalty who gets more pay and benefits than the folks who pay for them, either.

A union negotiating the price of labor is like a material supplier negotiating the price of components.  I sure don't have a problem with that negotiation, but it comes with a price.  If a manufacturer finds the supplier of its microprocessors, say, or its brake pads, or whatever, charges too much they either switch supplier or design out the part.  Seen Detroit lately?  As soon as the company paying abnormally high wages is able to, they are going to dump the workers (i.e., automate assembly more) or go offshore.  Labor unions complain about companies outsourcing work, when they are part of the cause of it.  Of course, the federal laws have forced additional costs onto companies that have led to the massive migration of jobs out of the country. 

When they talk about wages being higher in the US than in foreign countries, be afraid.  Doesn't it make sense that instead of bringing Bangladesh or Burkina Faso up to US wages, that our wages are going to be cut?  Maybe we come closer to meeting down at their end of the scale?  Also, don't think for a minute that companies outsource to the cheapest labor source; if they did someplace like Burkina Faso or Angola would have all the factories.  They offshore to the most optimum place; both in terms of the abilities/education of the workers, infrastructure, governmental friendliness (lower taxes), and so on.

The problems we have now are likely to lead to the collapse of states, and possibly the  California is basically bankrupt now (how about "the Governator" cutting state workers' pay to the minimum wage until the budget is fixed?)  Despite these problems being well known for a long time, they have not fixed them.  Doing so will hurt unions and other main constituency groups.  45 other states share the same bed. 

John's answer is Resilient Communities.   That's a topic that could take pages of its own.  Here's a good intro.
"This conceptual model creates a set of new services that allow the smallest viable subset of social systems, the community (however you define it), to enjoy the fruits of globalization without being completely vulnerable to its excesses. These services are configured to provide the ability to survive an extended disconnection from the global grid in the following areas (an incomplete list):
* Energy.
   * Food.
   * Security (both active and passive).
   * Communications.
   * Transportation. 
 Some other authors add in local, small-scale manufacturing, like the 3-D printing article I had a while back. 

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