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On Range Anxiety

By       Message Siegfried Othmer       (Page 1 of 1 pages)     Permalink    (# of views)   No comments

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I was standing in line at Chipotle when the guy in front of me asked the staff, "I've got seven bucks. What can I get?" I knew that $7 was just below the threshold for getting anything at Chipotle, so I slipped him a few bills. Then as I stood there looking at the back of his head, I wondered if this fellow was just budgeting carefully, or whether he did not know at that point where his evening meal would come from, or if there was even going to be an evening meal. Here I was confronting true range anxiety! This in the middle of Woodland Hills, a prosperous region of Los Angeles. His is obviously not an isolated case. Two thoughts arose: How did we come to this, in our opulent society? And: There must be a better way.

First, there came globalization. Paul Krugman at one point early on looked for evidence that globalization was affecting American wages, and at the time he had difficulty coming up with data in support. Perhaps it would have helped if he had thought about the problem like a physicist instead of like an economist. Imagine a balloon billowing up and filling out under internal pressure. That pressure symbolizes the higher wages inside versus outside. Now puncture the balloon with a few tiny holes. What happens? The result is inevitable. The balloon deflates--slowly but relentlessly.

Here's the magic part: Everywhere you test inside the balloon, you find it to be in an equilibrium state. The only point at which you can tell a deviation from equilibrium is right at the leak itself. The state of equilibrium is maintained all the way down. No wonder Paul Krugman did not find what he was looking for. But the end result is apparent to all. American wages in the manufacturing sector were squeezed. The smaller towns and cities where one manufacturer was dominant were particularly hit hard. Even a virtual hole in the balloon was sufficient, as a factory owner could simply hold the threat of abandonment over his workers to gain compliance. This leaves little macro-economic evidence for the economist to find.

At that point, the American labor market was split in two. One part was directly affected by world labor prices and the other was not. This was the state of affairs in manufacturing, but that was not to last. Capital had gotten a taste of bending labor to its will. A permanent power shift had taken place. Labor had been strongest in manufacturing, and it was crushed.

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Immigration did the rest. Here the balloon was punctured with respect to labor itself, not just goods. Immigration placed all other labor categories into the status of surplus--service and construction--with the exception of those that were protected by licensure or the requirement of American citizenship (i.e., for classified government work). Immigration was yet another potentially bottomless resource of cheap labor, available as needed. The balloon deflated by way of many small punctures, each individually negligible. American labor of all stripes lost market power.

Here we had American employers brazenly asking their American employees to train the very immigrants who would be taking their jobs, while Wall Street was gathering the fruits. Meanwhile, our government was a by-stander, a silent co-conspirator, marginalized as a mere instrumentality of the financial powers.

Then there is the impact of technology. Diffusing widely throughout the economy, technology disrupted existing product categories and placed much labor into surplus. This is the new normal. Technology will increasingly become the driver of labor surplus, displacing trade and immigration. The sorting that occurs in consequence will become ever more virulent, and the category of those who cannot rise to the demands of the new economy will swell.

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What has been the consequence? Wages are so low at Walmart, McDonald's, Disneyland, and Amazon, that substantial fractions of their workforces are supported by the State through food stamps and other income support programs. We are well into what one might call the Walmart/Amazon economy. The titans of capital are obviously ok with this, so let's not hear any more complaints about people on the dole from these same folks.

With a large fraction of our citizens dependent on government aid of one kind or another, perhaps it is time to confront this creeping reality and make something of it. May we see this as an opportunity rather than as an affliction? Could this be an opportunity for the convergence of right and left? A sober, rational, and humane voice on the right, in the person of Charles Murray, has come out in favor of a minimum personal income. His desire, as a conservative, is to get the government out of the business of micromanaging people's lives. Hurray for that, says this inveterate liberal.

Here we have the great equalizer. After all, the man or woman on the assembly line who is competing with workers in Bangladesh still has to pay American housing prices. The college graduate with huge debts to pay is not in a good position to compete against the immigrant from India whose education was paid for. A stipend for the American worker re-levels the playing field. It restores some negotiating power to the employee--the option to say no. But there is more.

The many artists whose work by its very nature does not yield a paycheck every week would have a base of support on which to sustain themselves. Young people can be more fluid in their career choices and won't be so tethered to their parent's homes. Folks can commit to volunteer work while their own basic biological needs are covered. They can take time out from the working world to take care of ill or aging family members. Forward-looking people can act on the recognition that what our society needs is not congruent with what it is willing to pay for. There would be a great flourishing of creativity, and of a redirection of our personal energies to meet societal needs rather than wants.

A minimum personal income can serve to revitalize rural America, allowing people to build a life independent of the cash nexus that is the city. It can help to equalize the competitive prowess between the small family farmer and the industrial farming enterprise. On the other side, if there were to be an economic collapse, we would have a buffer that was not available in the crash of 2008, giving people who are thrown off the bus a soft landing.

One thing that could precipitate such a collapse is a trade war. With the above equalizer, there is no need for tariff wars such as we are engaging in now. American labor costs, complemented by a universal income, will not be an undue burden to American manufacturers facing International competition.

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Above all of these material considerations, which are plentiful, there are additional major benefits: First of all, we'll see the restoration of dignity to the person--the recognition that each of us is of intrinsic value. There is a floor below which we will not allow citizens to sink while we are witness to their distress. Secondly, we'll see the moderation of our insane degree of income inequality, presently a key factor distorting both our economy and our politics. This is also a pre-condition for the third major impact: the revival of faith in our democratic governance through the common bond of mutual support.

Surely there will be folks who will rely on their meager stipend to stick their toes in the warm sand on the beach and smoke pot. So be it. Many more will be empowered to initiate a new venture, to take a chance on something, to abandon tyrannical bosses and switch jobs. Those who will be empowered will more than compensate for any 'slackers.' I have seen this at work in my own life. As an entrepreneur for over thirty years, I was nevertheless glad to be getting my Social Security check and Medicare. It made me more venturesome, not less, because now certain risks were being managed. I had a firm cushion to rely on, if worse were to come to worst.

My own Social Security cushion also sharpened the contrast between me and the fellow at Chipotle. Age qualified me for assistance, independently of need. Perhaps it is time to generalize that principle: Citizenship qualifies you for a floor on income. We have a shared interest in everyone's wellbeing. The impact, of course, would be most salutary for those in need. How may we judge the state of desperation that exists in our society presently? One marker is the flourishing of the payday lending business. No one in his bloody right mind would ever resort to a payday lender unless they were absolutely at the end of their resources and in a state of great need. A second marker is the prevalence of the homeless. About one percent of Los Angeles residents are presently homeless. At least that many are at the margin of homelessness, darkly confronting that prospect. The need is manifest. We have no other remedy on offer for those who have been marginalized. The ratio of perceived social value to actual cost is likely substantial.

 

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Siegfried Othmer is a physicist who over the last 33 years has been engaged with neurofeedback as a technique for the rehabilitation and enhancement of brain function. He is Chief Scientist at the EEG Institute in Los Angeles. Coming to (more...)
 

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