On Monday, the Thinkmash discussion centered on Capitalism and a particular individuals disdain for the practice in “Giving the Finger to Capitalism”. It also revealed the moment of realization of a Capitalist fully embracing the title pressed upon him.
In spite of the virtues of this economic and political system, it is not without its dark side. In fact, there is evidence that this process has become highly evolved, on a global scale and it would be impossible for any country in the world to contemplate their future without a sensible consideration of the subject. It is a powerful and world changing force. It also, in numerous forms is at the core of American commerce.
Without question, this subject is expansive and would require an exhaustive discussion just to start scratching the surface. That is not what follows. This is a set of narrow opinions and observations that are hoped to have some relevance to market decisions being made on our behalf today. Decisions about trade, about employment and about how best to optimize our way of life. It I pretty easy to agree that any “tinkering” with the mechanisms of Capitalism can create and drive significant changes in Americans lives.
A reasonable question might be “why has some form of Capitalism become a foundation block in almost every working economic system in the world?” In a word, efficiency. Capitalism parallels Darwinism in many ways, with evolution being a part of an ongoing change and drive to eliminate the inferior and replace with improvements that exceed the predecessor. Certainly a never ending elimination of inefficiency with something that drives the highest level of return, from the lowest level of investment (Capital), to achieve reward. If you set any moral discussions aside, it is a beautiful system to behold as it rewards creativity, intellect, and even failure (rewarded with knowledge). It has likely been the most powerful force unleashed by Western civilization.
So looking at this from a mechanical/scientific perspective, it is quite common to see efficiency accomplished by the elimination/automation of steps, or via a reduction in investment to achieve the same or better results. We see this played out in the American economy every day. Inferior products are replaced by superior ones and if the value prop is there, we abandon the old and invest in the new. The good news is this efficiency tends to unlock a multitude of opportunities (look no further than the technology sector where the dreams of software are realized when the efficiency of the hardware rises to meet the demands of an application). It could be argued that the challenges of yesterday (efficient creation and delivery of goods) has been exceeded beyond our capacity to keep up in demand creation. Realizing a point where tool utilization is not evolving as fast as tool creation. This is actually destabilizing, but a good problem to have. Our future is incredibly encouraging, but is rapidly evolving toward the creation of a severe shortage of human knowledge and creativity to address it. This is where either knowledge, automation, or a combination of both must step in to fill the void.
So, what does this mean from an employment standpoint? In production, efficiency is accomplished via the reduction of Capital (labor being one form of Capital) or the improvement of output via process or other means. When a task becomes highly efficient it requires less people. From a holist perspective this too is good, but it can lead to a consolidation of wealth in the hands of the capitalists and a reduction of opportunity in the lives of labor. This is where governments must step in to maintain a working society. Political parties and policies must constantly balance both their constituents, as well as the industries they serve our needs in a way to continue to enhance efficiency. Maintaining our American way of life depends on it and is likely more a feat of politics today than it has been in quite a while due to these myriad of forces.
What are some of the short comings in the political process relative to this bounty of efficiency we find ourselves in and how did some of this play out in our recent election? On the right, you have a predisposition towards the highly efficient model of capitalism, that all barriers that inhibit this should be lessened or removed. Barriers such as regulation, taxes, social programs, etc. that interfere with the highly efficient engine of progress that the right believes is the creator of jobs and an improved way of life. The challenge in my belief, is that the increasingly rapid creation of efficiency has reached a point where it is eliminating jobs at a far faster pace than it is creating them. So, you gain efficiency which is the long term good, but perhaps at the cost of labor opportunity which is a short term negative for society. This is further being compounded by the fact that automation is now moving up the skill set and will soon be able to begin replacing highly skilled jobs of today. The net effect is more polarization between the top and the bottom of earnings while the middle moves to one of those poles.
So, how does society cope with this highly efficient, yet increasingly concentrated wealth that occurs with this abundance of efficiency? Well the left has a lot of ideas about that, most of them seated within a believed set of moral principles and concern for individuals. Some on the right call this “the feels”. The truth is the left understands the outcomes of this bounty of efficiency and also the need to protect the working class from the capitalists. People’s lives are upended, and with a sense of empathy, guilt and a host of other emotions, the left tries to tackle the problems in the same ways that in their mind have worked in the past. In fact, the left find themselves astonished when voters rejected those “solutions of the past” with a shift to the right. There is a lot of hand wringing and confusion on the left as they feel that labor and their normal constituents are running in the very direction of the problem. In essence, the thinking is people are moving away from “the help on the left for all those in need”. Here’s part of the issue. There’s a disconnect with the core American value of dignity and a work ethic. Americans do not want a handout and are offended by the very notion of it. They have witnessed handouts enough to know its corruptive nature and destructive course for the work ethic. Somewhat to American’s credit, they would rather move to the right, keep their dignity in tack and trust their hard work will pull them through as it has in the past. Problem is, that may not work this time (at least not in the current state of transition).
Isolationism, protectionism, tariffs, America First, etc. are all policies trying to address this issue. Here’s my take on why they are wrong and not going to work.
First, I believe to my core in Capitalism and that means I believe in efficiency. Its not perfect but you put it up an other model and it is likely going to win. Capital and labor will naturally disperse to the most efficient means of production, which in today’s world is not the U.S. (due to labor costs). So if you believe in the American way you have to believe that we will always try to squeeze the most out of available resources, and artificially mandating against that (attendants that pump gas, elevator operators, to some extent unions, etc.) will eventually fade to a more efficient way. When you create trade barriers, or in many cases regulations, you are inhibiting efficiency and it cannot be optimal over the long run.
So what really is important today and how could we reframe some of our challenges. Education, education, education. We desperately need highly qualified and educated members of society in order to create the new ideas, technology, and companies that create the new demand to sop up the efficient elimination of labor. And like it or not, we are getting plenty of that educated class as immigrants that have always wanted to come to the best country on earth, a country with a high tolerance for failure and endless resources to accomplish those things. And what is the real problem we need to address? (It is not fighting the relocation of jobs outside the U.S. that is yesterday’s battle). The battle we need to be fighting is how are we going to evolve our society when the net jobs needed worldwide drop precipitously? When automation can actually do half of the jobs of today without us? I work in technology and I promise you it is right around the corner.
China is probably doing a better job of evolving towards this than us. They are emulating the American style of training their youth, right down to putting them in art and music classes (while we try to eliminate them). They aren’t doing this just because they like music and art, no they want to build humans that think like Americans (or at least how we used to think). They want creativity and are willing to do what they once thought was crazy to do it.
I am here to tell you folks, what I see is a lot of the wrong behavior here. Not that we are ignoring it. I believe that collectively, we all now our system is broken and in need of radical change and our current President is the most significant change agent we have seen in quite some time. The status quo has failed us. The problem is we are looking backwards to fix our issues rather than forwards. We worry and argue about immigration, about bringing jobs back (in a way that absolutely drives inefficiency), we worry about outsiders derailing what we believe, and we fight when we should be unified. Too much artificial fixes without working on the core problems.
It is going to become a necessity to take a look at the redistribution of wealth. If efficiency is optimized it is inevitably going to concentrate wealth and it is going to happen to the most of us (at least until we drive our education at a quality and pace that can exploit the tools already in our possession). It doesn’t have to be a bad thing, a handout or someone stealing someone else’s hard earned labor. Sometimes worrying about fairness instead of outcome nets less for everyone (including those that control the capital). Our country works best when wealth is distributed and in today’s climate hard work alone may not be enough. It is a cornerstone of American values, and we don’t want it to change, but we better get a heck of a lot better at either creating work to maintain dignity or at least btter at the distribution of work (more free hours), if we stay more efficient than creative.
The future is indeed fantastic. Improved healthcare, increased leisure, intellectual freedom, unity, a reduced workweek and above all else dignity are within our grasp. Kennedy made assumptions about what the world would be like if he put a man on the moon and executed against it. I don’t think it is unreasonable for us to assume our lifestyles can improve as we cut our working ours in half. But most of this is not a technology issue but a political one. Concentrating on radical Islam seems awfully negative and limiting to me. I am not saying it is not a real threat, but I am saying we have to move way beyond this as a society. If it is increased vetting or selective admissions, than we need to do that in a humane way that benefits our country. We need to be realistic to the threat and our response should match the risk, not eliminate the risk (elimination is probably too high of a price to pa if we want to remain a free country).
In the end, I think Bill Clinton has something right in mind when he said “It’s the economy, stupid”. We have to get back to saying on all sides of the political spectrum “How do we continue to be the most efficient means of creating Capital in the world” and not say “how do we keep from eliminating jobs”. The technology world lives this every day, if you want to find leadership I suggest we need more engagement from those mindsets. They are the best demonstration of Capitalism in America available, but they do not really feel the outcomes of the dislocation they create. It will take others to blend the benefits of creating highly efficient models with the real need to address the requirements of our population. There is a place at the table for those on the left, those on the right, and certainly those in the middle, each with a unique perspective and skillset we need for this country.
I look around now and think back to when I was a young man, watching TV and waiting to be drafted in to service of my country in Vietnam. And I recall the real poverty, real civil strife and the significant threats of the cold war and think we really have it made. We just need to figure out what to do with the wealth/safety we have, rather than focus on the wealth/safety we don’t have. My opinion, and I welcome you to share and comment. Thinkmash.com
A few interesting links on the subject.