Category: One World Economy

Work and the Transition to a Solar Future: A Perspective

Societal change is an unavoidable constant.  The totality of humans, other species, and physical earth systems constitute a single economy (the Inclusive World Economy) that is continuously evolving.  This global process of change is driven by the constant flow of energy from the sun.  Energy must do what it does: change the materials it interacts with and change the forms in which it presents itself.  Materials must do what they do: interact with the flows of energy, be changed, and facilitate the transformation of energy forms into different energy forms. As part of this enormous configuration of processes I call the Inclusive World Economy, the world of work must continuously become different and we must become different in dynamic association with this process — but not necessarily in the ways or at the speed we expect or want.

We humans are among the vast array of material instruments through which the flow of solar energy drives change.  Work is the primary way in which we are instruments of change.  In the last several centuries we have vastly expanded and continue to expand the human role in the processes of change in the Inclusive World Economy.  We did this by borrowing solar energy from the past (stored as fossil fuels) and adding it to the flow of solar energy that daily fuels earth’s myriad systems.[1] This dramatic daily increase in the flow of energy through the Inclusive World Economy accelerated and continues to accelerate the global processes of societal and earth systems change, has changed and continues to change the way societal and earth systems change takes place, and has transformed and continues to transform us and almost everything about our planet.

We already know that we can’t keep increasing the use of fossil fuels to augment the daily flow of solar energy.  We have to dramatically limit our borrowing from past solar energy income.  More unsettling is the possibility that we must learn to share the budget of current solar energy flow with other species and with various earth system processes – such as cleansing water through solar powered processes – to a much greater extent than we now think.  We just do not know how much solar energy we can divert from other species and processes in the Inclusive World Economy without generating a new round of system level changes that are both massive and destructive to human wellbeing.

In a large, complex, and dynamic system, system level change can remain evolutionary even while subsystems are going through deep and far reaching change and components are being created and destroyed at a rapid pace.  This is what is now happening in the Inclusive World Economy.  Species are being destroyed; whole communities of people are losing their ways of life; institutions that have been central to our wellbeing are losing there effectiveness and new institutional arrangements are popping up; planetary threats that we have never encountered before have emerged.  The effects of climate change, species loss, limits to vital resources like fresh water and arable land, and conflicts over these things are multiplying and coming faster and faster.

Not surprisingly, the world’s institutional arrangements, which we took for granted only a few decades ago, are becoming dysfunctional in various ways and being subjected to mounting attacks from various quarters.  This is happening to the world of work, where big changes are under way and conflicts over these changes are growing.  The pay and benefits associated with high end jobs are disappearing; protections against harmful work environments are being weakened; more and more jobs involve the work of repairing the damages inflicted by climate change, wars, and illegal business operations.  The world’s stock of wealth (including its people) is growing older, forcing us to devote much more of our work activity to fighting the ordinary ravages of time.

Everything in the Inclusive World Economy is connected, so this is a very dynamic situation.  No one can escape this global upheaval, so everyone is or will be forced to respond to and manage the specific forms in which these massive and life-altering global crises visit us.  As we take actions to respond, every other part of the Inclusive World Economy will change in response to our actions.   Ironically, as we do more to respond to the crises by exerting more technological control over other species and earth systems rather than adapting our own activities to the laws of the universe as they operate in the Inclusive World Economy, the more we accelerate the intensification of the crises.  Unwittingly and carelessly, we have pushed the Inclusive World Economy into a new and dangerous era of change.

In this increasingly hostile global environment, many of us are already struggling with life-altering consequences of these global crises.  Where this is happening, working people are experimenting with old and new ways of making a living and old and new ways of protecting their work opportunities. They have no choice.  But, some of these efforts only work for the short term because they propagate effects through the dynamic processes at work in the Inclusive World Economy to intensify crises and create new ones.

The future of work is uncertain, but at the moment bad outcomes look more likely than good outcomes.  Rising support for authoritarian governments that divide the world’s workers into categories and help one category by taking from the others is accelerating the destruction of the very institutions we need to respond to global crises effectively.  Much more importantly, though, the world’s leaders continue to strongly embrace the idea that the economic growth “miracle” of the last two centuries has no end in sight.  If only we make the right policy choices,  they continue to claim, the material riches of the world can continue to grow, everyone can enjoy a share of those riches, and the crises will wither away like so many storm clouds.

From the perspective of the Inclusive World Economy, the end of the material growth miracle is right in front of us.  The era of fossil fuel energy is coming to an end, the world’s material riches are beginning to diminish, and the world of work is changing quickly.  A shift to solar energy, no matter how successful and complete, will not sustain the material wealth miracle created by massive fossil fuel energy flows.  The only choice before us is how we make the shift to a world of less.  For now, a democratic and equitable shift seems very out of reach, but an authoritarian and inhumane transition is not inevitable.  An inclusive perspective, attention to the limits of a solar future, and hard and careful political work can move the world in the direction of a much more desirable future than the one now looming darkly on the horizon.

[1] In economics we borrow from future income to augment current income.  In the case of energy, however, we can borrow from past solar energy income.

Paradigm Premises and Insights into Stagnating Global Economic Growth

SOURCE ITEMS

Why does political instability afflict Europe and the United States? The answer is that just as the great transformation of the world economy between 1850 and 1890 generated political instability, so too does the globalization of the present era. In addition, the second great transformation of the world economy is larger than the first, and thus, not surprisingly, generates greater churn. … Those countries able to keep unemployment and inequality within bounds will be more stable. The greater the levels of inequality and unemployment, the greater the political instability and the smaller the chance of achieving stable economic growth.

David W. Brady, Globalization and Political Instability, The American Interest, March 8 2016. Accessed March 24, 2016.

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Political instability reduces the likelihood of defining and implementing a reasonably comprehensive, coherent, and sustained economic-policy agenda. The resulting persistence of low growth, high unemployment, and rising inequality fuels continued political instability and fragmentation, which further undermines officials’ capacity to implement effective economic policies.

Michael Spence and David Brady, Economics in a Time of Political Instability, Project Syndicate, March 23, 2016. Accessed March 24, 2016.

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We tend to focus on the problem of the moment — the subprime crisis, the euro crisis, the China slowdown, the oil bust. But surely these events are connected. What threads link them? I’ve been collecting possible story lines for a while now. … Put these all together, and what do you get? A Great Muddle, perhaps. Some stories overlap. At least two of them contradict each other. They don’t all add up to any kind of consistent narrative.

Justin Fox, Eight Story Lines Explain the Global Economic Crisis, BloombergView, March 10, 2016, Accessed March 24, 2016.

COMMENTS

Statements about what can be done and should be done in a particular arena of human activity rest on foundation premises about how that part of our world works. These premises establish a paradigm for gathering and interpreting data about the world. They pull certain things into view and push other things out of view.

Professor Brady says we are in an era of transformation in the world economy.   Everyone knows that things are changing rapidly and in big ways and Brady is far from alone in concluding that a transformation is underway. This is an important development because the term transformation connotes change that reaches past surface phenomena, change that runs deep into the machinery of a system.

Such deep-running change often exposes weaknesses in a paradigm that worked well in the past. This is the case for theories of economic growth.

The field of economics is in turmoil because of the unpredicted crisis of 2008 and the persisting economic growth stagnation. In the search for answers, the paradigmatic premise that humans act rationally is now widely questioned. But, other premises should be getting more attention.

One premise worth questioning is that systemic continuity is a given. This premise is embraced across the fields of economics and politics. It is reflected in two assertions that are widely made and widely accepted.

The first is that this time is really not different. Although a few economists have argued that the financial crisis of 2008 is unusual, the dominant view is that it is not fundamentally different from numerous other financial crises in the history of capitalism. Brady affirms this view by comparing the transformation of the world economy in our time to the transformation in the 19th century. He sees it as more destabilizing, but not fundamentally different. After the transformation has played itself out, life can return to what we call normal.

The second assertion is that government policy interventions can restore world economic growth. In the past, economic growth has stagnated and stalled, but in every case it was sooner or later restored. Now is no different. By adopting the appropriate economic policies, governments can restore economic growth to levels that restore full employment and steadily increase human wealth and well-being.

The concepts of transformation and systemic continuity do not sit together well. This is a telling juxtaposition to which economists should be giving more attention. Perhaps as I have been arguing in this blog, it isn’t bad policies that are limiting global economic growth; perhaps it is existential limits to economic growth that make all policy interventions fall short.

Perhaps economists, including Brady himself, should set aside the premise of continuity and explore all the implications of applying the concept of transformation to our current circumstances.

Economists are Still Dragging Their Analytic Feet

But right now I’m stuck. I have no idea how the United States economy is doing. And the closer I look at the data, the more contradictory it looks. … Yeah, but what happened in 2008 was a once-a-century kind of storm. If you always think that the big one is imminent, most of the time you’ll turn out to be wrong.

Neil Irwin, Is the Economy Really in Trouble? A Debate, New York Times, October 30, 2015.

 COMMENTS

Yes, but why would anyone, especially an economist, think that the once-a-century kind of storm rule still holds for economic matters. This century is unlike any other century before it, in so many ways. For the first time in human history, virtually every inhabitant on the planet is connected to every other inhabitant through commodity markets, communications systems, transportation systems, and a global financial system.

If economic theories and models can still be applied in any valid way, they can only be applied to the single world economy. National governments exist, nation boundaries exist, but national economies do not exist, except as ghosts of their former selves.  If an economy is a system that produces and distributes wealth, then it is glaringly apparent that the economic activities found within a national boundary do not constitute an economy.

To get un-stumped, economists must abandon the ghosts of economies past.  What’s keeping them stuck with an analytic approach that is a century behind the times?

This Is No Time for Irrational Exuberance about Jobs at Living Wages – We’re in a New World of Work

SOURCE ITEMS

Eurozone GDP still hasn’t gotten back to its 2007 level, and doesn’t look like it will anytime soon. Indeed, it already wasn’t clear if its last recession was even over before we found out the eurozone had stopped growing again in the second quarter. And not even Germany has been immune: its GDP just fell 0.2 percent from the previous quarter.

Matt O’Brien, Worse than the 1930s: Europe’s recession is really a depression, Washington Post, August 20, 2014. Web 9/5/2014.

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Total nonfarm payroll employment increased by 142,000 in August … Manufacturing employment was unchanged in August, following an increase of 28,000 in July. Motor vehicles and parts lost 5,000 jobs in August, after adding 13,000 jobs in July. Auto manufacturers laid off fewer workers than usual for factory retooling in July, and fewer workers than usual were recalled in August. Elsewhere in manufacturing, there were job gains in August in computer and peripheral equipment (+3,000) and in nonmetallic mineral products (+3,000), and job losses in electronic instruments (-2,000).

Employment Situation Summary, U.S. Bureau of Labor Statistics, September 5, 2014. Web 9/5/2014.

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Today’s report also included revisions to first-quarter personal income. Wages and salaries rose by $131.3 billion, revised down from an initially reported $135.1 billion gain. They climbed by $103.6 billion in the second quarter.

Shobhana Chandra, Economy in U.S. Expands 4.2%, More Than Previously Forecast, Bloomberg, August 28, 2014.

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Almost 21 million people are victims of forced labour – 11.4 million women and girls and 9.5 million men and boys. … Almost 19 million victims are exploited by private individuals or enterprises and over 2 million by the state or rebel groups. … Forced labour in the private economy generates US$ 150 billion in illegal profits per year.

Facts and Figures, Forced labour, human trafficking and slavery, International Labour Organization, Web 9/5/2014.

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Comparing the first half of 2014 with the first half of 2007 (the last period of reasonable labor market health before the Great Recession), hourly wages for the vast majority of American workers have been flat or falling. And even since 1979, the vast majority of American workers have seen their hourly wages stagnate or decline…

Elise Gould, Why America’s Workers Need Faster Wage Growth—And What We Can Do About It, Economic Policy Institute, August 27, 2014. Web 9/5/2014.

COMMENTS

The U.S. is deeply tied to the rest of the world economy and the world economy is plagued by contradictory national economic policies, geopolitical instability, extreme weather conditions, and rising prices. These are chronic conditions that will continue to prevent the world economy from achieving a steady rate of economic growth high enough to grow jobs and incomes.

Slow economic growth combined with high levels of global income and wealth inequalities can only produce a steady stream of domestic and geopolitical disasters. Slow economic growth is probably a permanent feature of the 21st century world economy, so we have to learn to live with it. We can, however, do a lot to reduce economic inequalities.

STEM Education Falls Short: The Problem is Too Few Jobs, Not Too Little Education

SOURCE ITEMS

According to new statistics from the 2012 American Community Survey, engineering and computer, math and statistics majors had the largest share of graduates going into a STEM field with about half employed in a STEM occupation. Science majors had fewer of their graduates employed in STEM. About 26 percent of physical science majors; 15 percent of biological, environmental and agricultural sciences majors; 10 percent of psychology majors; and 7 percent of social science majors were employed in STEM.

 Census Bureau Reports Majority of STEM College Graduates Do Not Work in STEM Occupations, U.S. Census Bureau, July 2014.

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Since cohort-wage profiles display a similar pattern, these findings appear to fit with a strong increase in demand for cognitive tasks in the 1990s followed by a decline in the 2000s.

 Paul Beaudry, David A. Green, and Benjamin M. Sand. The Declining Fortunes of the Young since 2000, American Economic Review, 2014

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Chart-Labor Force Participation Rate Trend

The labor force is anticipated to grow by 8.5 million, an annual growth rate of 0.5 percent, over the 2012–2022 period. The growth in the labor force during 2012–2022 is projected to be smaller than in the previous 10-year period, 2002–2012, when the labor force grew by 10.1 million, a 0.7-percent annual growth rate.

 Labor force projections to 2022: the labor force participation rate continues to fall, Monthly Labor Review, December 2013.

 COMMENTS

We now live in a world economy in which economic processes and trends are global. Global economic growth is constrained and will continue to be into the foreseeable future. As a consequence, current patterns of investment, domestic and global, will not generate a sufficient number of jobs to produce anything near global full employment at living wages.

Economic activity in the U.S. does not constitute a separate economy, so U.S. economy policies cannot produce full employment and high wages in the U.S. while the rest of the world is stuck with high rates of unemployment and low wages.   Investment follows profits.  Profits are maximized by producing in low income places in the world economy and selling in high income places.  Unfettered transnational flows of capital and commodities combined with preventing low-skill working people from easily crossing national boundaries in search of work gives the world’s investors the legal framework with which to manage the world’s labor supply to their advantage.

Why are Americans Stumped about the Economy? Nonsense for Analysis

SOURCE ITEMS

Some Federal Reserve policy makers are citing the lowest inflation rate in at least five decades as an alarm bell for the economy. Economists at UBS Securities LLC say the figure isn’t as troubling as it appears. … Among the reasons for slowing inflation are improved efficiency and a stronger dollar, which puts downward pressure on prices of imported goods such as cars and clothing.

“If anything, the price softening is helping to support demand,” and the dollar is set to rise further, said Coffin [an economist at UBS Securities]. … “Households are getting a little bit more purchasing power out of their income growth.”

Michelle Jamrisko, Inflation at 53-Year Low Belies U.S. Demand Vigor: Economy, Bloomberg, June 12, 2013.

COMMENTS

If a stronger dollar means you can buy more T-shirts from Bangladesh, then the manufacturing job growth will be there not here.  Just as importantly, who says you are going to buy another T-shirt or a new Toyota with money saved because a stronger dollar creates lower real prices.  Maybe you just might bank the extra money  or buy a couple more GM stocks.   What happens to demand growth in that case?

Then, there is the other side of the stronger dollar.  While American consumers can buy more T-shirts from Bangladesh with the same wages, the factory owners in Bangladesh have to pay higher real prices for the American parts to keep their sewing machines running.  Maybe they turn to China or Brazil for those parts.   Quite logically, any demand growth at home can easily be offset by losses in demand from abroad.

(Of course, most economists either work for global corporations and investors or support their agendas.  Global corporations and investors don’t care where the demand is rising and where it is falling or where jobs are being created or being destroyed.  Unlike you and me, they are not tied to a particular nation or a particular city or a particular family, so their fortunes do not rise and fall in connection with a particular place or a particular group of people.)

The key point is that supply and demand functions are global.  To write about supply and demand in nation terms is misguided and misguides readers.  The U.S. has to export goods and services to pay for the things we import — although we are now wedded to a way of life in which we buy goods and services made in other countries on credit and then pay our debts by selling ownership of our tangible wealth to global investors in those other countries.

Debt supported buying has obscured the loss of wealth in the U.S.  But, only in the short term can debt do this.   Sooner or later a transfer of real wealth has to take place to clear the debt — then the loss that occurred a decade ago is finally seen for what it is.  (It may well be that one part of the value of  the foreclosed home down the street from you now belongs to an Asian investor and the other part belongs to a Swiss investor.)

In a world economy, what matters for the working people in the U.S. and for working people everywhere else in the world is the structure of global investment decisions that give life to the relationship between global supply and global demand.  Globally, there are now too many businesses and not enough buyers, and tracking the ebbs and flows of demand within the U.S. obscures the far greater power of this global reality over our working lives.

Economists at a Crossroads: The Ideology of National Policy Making Sovereignty vs. the Reality of a Global Economy

 SOURCE ITEMS

When Sweden’s Riksbank was founded in 1668, followed by the Bank of England in 1694, the motivation was that a single economy should have a single central bank. Over the next three centuries, as the benefits of instituting a monopoly over money creation became more widely recognized, a slew of central banks were established, one for each politically bounded economy.

What was not anticipated was that globalization would erode these boundaries. As a result, we have returned to a past from which we tried to escape – a single economy, in this case the world, with multiple money-creating authorities.

This is clearly maladaptive, and it explains why the massive injections of liquidity by advanced-country central banks are failing to jump-start economies and create more jobs.

Kaushik Basu (Senior Vice President and Chief Economist of the World Bank and Professor of Economics at Cornell University), Two Policy Prescriptions for the Global Crisis, Project Syndicate, April 23, 2013.

COMMENTS

Since the economic crisis of 2008, most economists have been telling political leaders and their constituents what they want to hear – that national policy making sovereignty is still viable.  (Implement the right policies and your nation will do well no matter what is happening in the rest of the world.)

The time is up for this kind of political expediency.  With more than four years of policy failure now weighing on the world’s political leaders and no promising economic corners in sight, economists can only lose the last of their credibility by continuing to tell policy makers that they are the sole masters of the destinies of their peoples.

The choice for the field of economics is clear: take a chance that some political leaders and some constituencies are ready to acknowledge that national policy making sovereignty is a thing of the past.  That’s the only approach that will save the field of economics from becoming an object of contempt.

See related source items and comments in earlier blog posts:

Accumulating Evidence Shows That the World’s Nation-Centered Economic Policy Making Paradigm is Obsolete, March 21, 2012.

The World Economy’s Demolition Derby of Competing and Overlapping Economic Policy Making Entities, January 22, 2012.

What Happens In Vegas Doesn’t Stay In Vegas: National Policies Have Global Consequences, November 30, 2011.

Fragmented and Weakened Global Governance Perpetuates the World’s Employment Crisis, September 9, 2011.

The Annual Season of Spending Is Routinely Misinterpreted by Economists and Financial Experts, Creating Cycles of Hope and Disappointment

SOURCE ITEMS

Chart-Employment-Over the month change, 2010-13

The Employment Situation for January 2013 News Release (PDF Version), Bureau of Labor Statistics, February 1, 2013.

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Chart-Quarter to quarter growth in real GDP

U.S. Bureau of Economic Analysis, January 20, 2013.

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Despite a moderate pick-up in output growth expected for 2013–14, the unemployment rate is set to increase again and the number of unemployed worldwide is projected to rise by 5.1 million in 2013, to more than 202 million in 2013 and by another 3 million in 2014.

Executive Summary, Global Employment Trends 2013, International Labour Organization, January 2013.

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As the global economy has gone from crisis to crisis in recent years, the cure has become part of the disease. In an era of zero interest rates and quantitative easing, macroeconomic policy has become unhinged from a tough post-crisis reality. Untested medicine is being used to treat the wrong ailment – and the chronically ill patient continues to be neglected.

Stephen S. Roach, Macro Malpractice, Project Syndicate, Sep. 30, 2012.

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The euro-area recession deepened more than economists forecast with the worst performance in almost four years as the region’s three biggest economies suffered slumping output.

…

The European data chimed with statistics in Japan, where the economy unexpectedly shrank last quarter as falling exports and a business investment slump outweighed improved consumption. GDP fell an annualized 0.4 percent, following a 3.8 percent fall in the previous quarter.

Marcus Bensasson, Euro-Area Economy Shrinks Most Since Depths of Recession, Bloomberg, February 14, 2013.

COMMENTS

Every year a spate of optimistic stories about the recovery from The Great Recession pour into American homes, offices and automobiles, as businesses and consumers rev up for the annual Season of Spending (and Hopeful Signs).  This season begins with the returns to school in August and September and ends with the post-holiday sales in early January.

Soon after the Season of Spending ends, the optimistic stories begin to disappear as the economists and financial experts to whom writers and commentators in the media turn for information begin to grudgingly acknowledge that all is not well, after all, in the land of beautiful spending.  The Season of Spending fades into memory and the artificially pumped up optimism of American business owners and consumers gives way to disappointment.

The annual cycle of positive and negative economic news is real, as the charts of over-the-month employment changes and quarter-to-quarter real growth in GDP illustrate[1].  But, the annual cycle of hope and disappointment is manufactured by influential economists and financial experts who either willfully ignore the flat trend line that cuts through the multi-year cyclical pattern, or worse, aren’t even aware of it.  Ignore the underlying trend line and every fall time spending spree becomes a new “morning in America.”

Instead of pumping up optimism each fall on the basis of positive economic signals that are demonstrably temporary, economists and financial experts should be pointing out that job growth is not accelerating and explaining why the level of job creation remains well below the level needed to restore full employment and grow incomes.  The trouble is, they can’t explain the trend line because it doesn’t make sense in traditional nation-centric models of employment growth.

The cyclical pattern of employment change in the U.S. is influenced by domestic spending, but the trend line around which U.S. employment change fluctuates is greatly influenced by world economic factors.  U.S. employment trends are a subset of global employment trends, which are embedded in global economic processes, investment trends, and spending trends.

The world economy is limping along and recent reports strongly indicate that little improvement will take place over the next couple of years.  GDP growth will be too slow to generate adequate employment growth, so unemployment and underemployment will rise.  In this context it is wishful thinking to suppose that this spring will not bring another round of disappointment about job and income growth in the U.S.

[1] This pattern makes sense given the seasonal pattern of spending by Americans.  The most difficult to resist pressures to spend are concentrated in the last five months of the year, the Season of Spending.  Parents have to pay school fees and buy backpacks, computers, new clothes, and even cars for their children.  During the holiday season, which follows close on the back to school season, spending increases because we all face powerful pressures from family and friends and advertisers, and because many of us have postponed optional spending until the holidays give us dispensation to empty out savings accounts and haul out the credit cards.

More Evidence That Global Policy Making is the Only Path to Job and Income Growth

SOURCE ITEMS FOR YOUR CONSIDERATION

The size and composition of spillovers across countries is one of the many issues that have resurfaced in the wake of the Great Recession. It is now apparent that events in some countries can have profound spillovers elsewhere which are not limited to their immediate neighbors but can ricochet around the globe.

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Although progress is being made, the financial sectors in large macroeconomic models are poorly developed and, at an even more basic level, there are no strong theories as to why financial markets are as closely linked as they appear to be in the data.

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The structure of a typical large macroeconomic model generates low correlations of output, bond yields, and (where modeled) equity prices across countries. This does not correspond to the high correlations actually seen in the data. Imposing these financial market correlations produces estimated output spillovers that are much closer to those seen in the data, but we lack a comprehensive model explaining why these international asset price correlations are so high.

Bayoumi, Tamim ; Vitek, Francis, Macroeconomic Model Spillovers and Their Discontents, Working Paper, International Monetary Fund, January 2013.

COMMENTS

In other words, most economists are holding us back, not leading us forward.

Nations are more economically interconnected that most economists admit.  Really, we live in one world economy, not a world of national economies, and the scope of policy making must match the scope of the economy.  Otherwise, we will keep getting the terrible job and income growth consequences and the associated domestic and geopolitical turmoil we have been getting.

Hard Working? Creative? Strong Language and Computer Skills? Earn Up to $4 Per Hour in the New Global Labor Force

ITEMS FOR YOUR CONSIDERATION

The job didn’t pay much: four bucks an hour if you really hustled. But for Catherine Fraser, a recent community college graduate from Mountain View looking to pick up a little extra spending cash, the work was a hoot.

… said analyst Martin Schneider with 451 Research. “Like manufacturing has done forever, crowd-labor lets us break down a job into tiny components, where one bit of fact-checking or writing a few sentences is now the equivalent of gluing that chip onto a computer board.”

… The larger question — and one with huge global implications as crowd-sourcing redefines and in some cases kills traditional jobs and long-established labor-management models — is whether the crowd-labor pool could essentially become one big worldwide digital sweatshop. While industry studies show average hourly earnings across all categories range from about $7 in India to $16 in Western Europe, the fast-growing segment of micro-taskers earn half that on average, and some make only $1.50 an hour.

Patrick May, ‘Crowd labor’ helps spur social networking revolution, San Jose Mercury News, Updated: 05/01/2012.

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Series Index May

Series Index Apr

Rate of Change

Employment Index

50.8

54.2

 Slower

Business Activity/Production

55.6

54.6

 Faster

New Orders

55.5

53.5

 Faster
Source: May 2012 Non-Manufacturing ISM Report On Business, Institute for Supply Management, June 5, 2012

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For Great Wall, a private sector Chinese car maker that employs 50,000 workers, the Swiss robots and other machinery that line its bright factory floor produce more than cost savings. The company hopes they will help it build cars good enough to compete with the global auto makers.

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According to Nomura, 28 percent of factory machines in China use numerical controls – one measure of automation. That may be far lower than Japan’s 83 percent, but China is growing far faster than Japan did at a comparable stage of development, says Ge Wenjie, a machinery analyst with Nomura.

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In other words, China may soon be known less for cheap Christmas toys and more for high-end medical equipment, luxury cars and jet engines.

By Don Durfee, Analysis: Robots lift China’s factories to new heights, Reuters, June 3, 2012.

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Unit labor costs fell in 23 of 47 service-providing industries, the most since 2003 …

Output per hour increased in 32 of the 47 [service-providing industries] industries studied.  In most of these industries, productivity rose as output growth was accompanied by declines or more modest increases in hours.  Several  industries posted double-digit productivity gains as a result: local as well as long-distance general freight trucking; refrigerated warehousing and storage; radio and television broadcasting; wireless telecommunications carriers; and travel agencies.

In a few industries, productivity rose despite falling output.  In industries such as postal service; couriers and messengers; video tape and disc rental; photofinishing; and newspaper, book, and directory publishers, rising labor productivity reflected declines in both labor hours and output, with hours falling more rapidly than output.

Productivity and Costs by Industry: Selected Service-Providing and Mining Industries, 2010, Economic News Release, U.S. Bureau of Labor Statistics, May 31, 2012.

COMMENTS

During the 20th century each new generation of U.S. workers faced declining employment opportunities in agriculture, mining, and manufacturing.  But those lost employment opportunities were offset by growing employment opportunities in government and private service sector industries.

This is no longer the case.  Job growth in government and service sector industries has slowed considerably.  Moreover, some government agencies and service sector industries are embracing new production technologies and becoming job shedders themselves.

The hallmark of the first half of the 21st century may well be a decades long global employment crisis.  National governments are still trying to apply economic remedies carried over from the 20th century in a world that is vastly different.  National economic sovereignty is gone.  Rich and poor nations alike are now joined at the economic hip in a single world economy.

Sticking with the “each nation goes it alone” strategy for addressing the global employment crisis isn’t working.  Rather than getting increasing prosperity, U.S. working families and local business owners are getting a larger share of the world’s very high level of poverty.

The practical alternative for the U.S. is to join with the world’s other nations to build institutions that coordinate national economic policies and set minimum global standards for corporate behavior, working conditions, wages and benefits.

Globalization cannot be undone, so there is no other choice.