Thursday, February 25, 2021

Economic Civil War — Joel Kotkin

Our national divide is usually cast in terms of ideology, race, climate, and gender. But it might be more accurate to see our national conflict as regional and riven by economic function. The schism is between two ways of making a living, one based in the incorporeal world of media and digital transactions, the other in the tangible world of making, growing, and using real things.
Birth pangs of the transition from the chiefly industrial age, when even agriculture was industrialized, to the digital age, where as many functions as possible are being digitized. In the transition from the agricultural age to the industrial age, agricultural workers were marginalized and replaced by machines. In the digital age, industrial workers are being marginalized and displaced.

This dynamic has become focused on energy and climate change in US policy and politics.

The American Mind
Economic Civil War
Joel Kotkin | Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute

18 comments:

Peter Pan said...

When some people cannot make a living, there's a schism.

Unlike academics, the ruling class views division as a strategy.

Mike Norman said...

This guy is all out gung-ho fossil fuel.

Matt Franko said...

When they crash it I think I’m going back in full Industrials....

Matt Franko said...

https://fordauthority.com/2021/02/ford-stock-surges-after-farley-calls-for-u-s-battery-production-initiative/


Peter Pan said...

Article says nothing about his investments...

Matt Franko said...

The article is exemplary of the current consensus view that somehow the industrial economy is over or something... it’s a contrarian opportunity...

Peter Pan said...

The days of high school diploma + factory job = middle class lifestyle, are over.

Old Economy Steve could tell you all about it...

Matt Franko said...

That’s because mercantilists built the next gen of facilities in foreign countries... not because industrial economy was ended...

Where is the next generation of facilities going to be constructed ? POV that it should move back to US is nascent ... for both domestic employment purposes and now lately with the global pandemic interrupting the international supply chain ...

While at the same time these people who don’t even work in the industrial economy are all saying “the industrial era is over”... might be getting ready to really take off...

Matt Franko said...

Everybody is bearish on industrials... very out of favor right now... article is evidence of this...

Matt Franko said...

https://en.m.wikipedia.org/wiki/Contrarian_investing

Mikes been a pioneer in this and imo the current leading voice in this type of investment approach... in addition to the MMT stuff....

If you combine the 2 things it’s pretty powerful investment approach imo...

Peter Pan said...

High tech industrials won't yield enough good paying jobs. US has a thriving manufacturing sector, but doesn't employ what its predecessors did.

The article is ostensibly about employment.

Peter Pan said...

If the author of that piece has investments that bias his opinion, they should be disclosed. But IMO the article is neutral.

Ahmed Fares said...

Ball State University did a study which showed that 87% of job losses in manufacturing were due to automation, only 13% were due to offshoring. Of that 13%, most of it comes back in trade. Think exporting soybeans to China here.

The following link opens up a pdf file (The stats are from the Summary on page 6):

The Myth And Reality Of Manufacturing In America - Ball State University

Peter Pan said...

Yup, old Steve no longer has the skills to land today's manufacturing jobs.

Matt Franko said...

“ The article is ostensibly about employment.”

This blog is ostensibly about contrarian views leading to better informed investment and trading....

Ahmed Fares said...

re: capital-labor substition

Suppose a city needs to dig a 100-foot drainage ditch and the city hires Dora’s Ditch Diggers (DDD) for the job. DDD has been experimenting with two combinations of labor and capital that can each get the ditch dug in the same amount of time.

Combination 1: A rented backhoe and skilled driver.

Combination 2: Ten unskilled workers each with a shovel.

The table below summarizes the costs of employing these two combinations.

Combination 1: One skilled driver = $500 Rented backhoe = $2500 Total cost = $3000

Combination 2: Ten unskilled workers = $100*10 = $1000 Ten shovels = $25*10 = $250 Total cost = $1250

Clearly the low-tech way of digging ditches is preferred and DDD will choose Combination 2 with men and shovels.


source with table: A substitutes and complements in factor markets

Now have those ten workers unionize and push for higher wages. Add to that the historically low interests rates from the Global Saving Glut which decreases the cost of capital.

What you then have is increased capital-labor substitution.

Now consider the effect of a higher minimum wage. More capital, less labor.

Tom Hickey said...

More capital, less labor.

This is what is supposed to happen.

When labor is uncompetitive with capital, capital substitutes for labor, meaning that this is more space for leisure as a result of the application of technology to production.

The issue is distribution.

For the economic system to work, leisure needs to be funded in order to complete the production - distribution - consumption cycle.

This has already been the case since the industrial revolution, for example, with an eight-hour work day, a five-day work week, vacation time, and benefits.

The trend toward capital/labor substitution can smoothly continue as long expanded leisure is compensated.

Leisure is the basis of culture (Josef Pieper).

Peter Pan said...

The minimum wage is zero... and leisure is free.