Eduardo Porter(NYT 3/19/14) reviews the issues of globalization. Viewed from the aggregate world perspective, millions of poverty victims have risen to survival status in other countries by becoming marginal workers. While millions of middle class workers in the developed countries have been driven down to lower class or poverty by the collapse of the value of their labor in comparable industries. This is not hypothetical but data. At the same time, the capital wealth has become more concentrated in a fewer number throughout the world. This should not surprise anyone since in a capitalist economy it is the control of capital that determines how things happen or develop. This change was happening slowly after the 60s but accelerated rapidly in the Clinton-Rubin era when Democrats surprisingly aligned themselves with Wall St. (Wall St. is the center for capital manipulation and management and is utterly agnostic about how it is used as long as the returns are good and secure!) Clinton masked the acceleration of the labor market collapse by the “internet bubble”. And after 911 challenged the role of American financial markets, Bush/Greenspan masked the effects again with a “housing bubble” fueled by artificially low government interest rates. The fiery intensity of this bubble and how expertly it was fueled by Wall St made it shorter and more desperate, and more global than probably any other bubble in history, and also more focused on the developed countries and the middle class. Ironically, what was supposed to protect the middle class eroded its financial position even more rapidly.
What is the prospect for the future of workers in the US? It is important to recognize that local solutions may not generalize to the whole economy. England experienced much of this economic collapse at the contraction of the “empire” after WW2 and attempted to become the “financial center” of expertise for Europe. This has not protected the English economy from severe collapse, as it is not possible to pay enough people working in the financial sector to support even a small country like Britain. This is more true in the US economy despite the heyday in the 90’s when the financial industry was a major sector of the economy's growth (and again in the early oughts).
Tech and the internet cannot provide this broad economic support because tech hires too few workers, who are too leveraged in their production impact, and at least at present the industry depends for revenue almost entirely on marketing and advertising returns, and is thus a generalization of the media sector and consumer sectors. There is a potential for the tech-internet sector to provide new business creation solutions over time, but these will not involve large work forces, and as in the cellphone, the hardware component quickly becomes of marginal value as competition sets in. Tech companies, like Apple, follow a model originally developed by Nike, in which the design and marketing expertise are maintained by the core company, while production is outsourced to minimize the low return on material production compared to intellectual production. It would seem that intellectual production is the new key to wealth, but here the digital world provides an odd reversal: digital media erode the ability to sustain unique intellectual products and the value of marketing intellectual property is undermined, and pirated.
Viewed globally, the world economy is evolving toward a pattern in which there is relatively sustainable food, shelter, and clothing at just above a subsistence level for the majority of folks. Agriculture, manufacturing, and marketing-transportation are primary industries, but of marginal value to the participants and only of value to a small handful of stakeholders. (And the ownership through joint stock holding is becoming less and less reliable and more manipulated by large capital aggregates called “hedge funds”.) Above this world wide layer of persons living on the edge of poverty and up toward marginal subsistence. There is a thin layer of middle class service persons with additional skills that allow them a slight advantage over the lowest class, but who are not in control of their work, but part of large corporate aggregates with no job security or stability. With the outsourcing of technical and medical skills, these jobs now include lawyers, doctors, engineers etc. While still middle class they are marginally so. And they do not have the control over their economic stability originally viewed as characteristic of this class. Rising from this group is a class of corporate players: persons who work up through levels of corporate authority so that their compensation distantly reflects the returns of heads of corporations. Such persons appear wealthy even by current standards, but this is an illusion: they have sacrificed many years at lower paying returns and will have only a few high paying years before they are replaced by the next wave. Only a tiny few will retain their role as corporate leaders and earners for a sustained period. This “corporate ladder” group earns above the minimal middle class level but the life style demands of their jobs and lives make them less wealthy than their income suggests, especially as they often live in cities with high costs of living.
There is only one class remaining who are potentially truly wealthy: these are capital entrepreneurs: those persons who risk their own money and time to build successful enterprises by planning and luck and get dramatic returns on their capital. As is fitting in a capital economy, their risk of capital is the controlling variable, and the potential for failure is statistically high. This is in essence, a “lottery economy” and all intelligent entrepreneurs attempt, as J P Morgan did, to get as much control over the risk as possible by eliminating competition and other oligarchic or outright monopolistic practices. The same instincts can be observed in modern tech companies with only minor interference by regulators.
This draws a fundamentally undemocratic picture of society. The control of vast low return workers by a small cadre of successful capitalists is the recipe for “banana republics” or “plantation economies” in the agricultural sphere. The evidence that these financial entities are attempting to control democratic governments and influence their direction to favor this process is obvious in every detail of modern governmental policy in the developed countries, especially the US, and is relatively true in the developing ones. Everyone is willing to give up most everything else for the hope of becoming rich. Globalization did not cause this shift but it accelerated it. (And one wonders how much of the Arab world’s turmoil is due to the frustration of their citizens who had not been able to participate in this transformation to the same extent.)
What will the future look like from here? There will be a vast subsistence consumer economy, in which consumer goods become cheaper and cheaper until they are just barely more than trash. We can see this evolution in the computer and the cell phone, as well as many other basic products. We can see this evolution in the development of “manufactured food” which has less and less complex nutritional value but is adequate for sustenance and cheap to produce, and tasty enough to be consumable. This mass public is entertained by an array of electronic information which fills in the non-working hours and is successful in diverting and managing urges for more complex life experiences. This group of workers produce sufficient low cost consumer goods to sustain the world, and a small amount of more expensive “middle class” and “wealthy” goods for the rest. It is a world in which children are indoctrinated early to become mindless consumers, and as people age they provide economic energy to the “healthcare industry” until they perish at suitable points for recycling. Basic satisfaction is encouraged to avoid rebellion or reaction to the status quo. There is marginal opportunity for rising through the system to ensure that subsequent generations sustain the process. The birth rate falls to sustain a stable population, and education becomes privatized and is highly geared to integrate citizens to their “place” in society and discourage independent thinking. It is, in short, a world very close to the current one. Events like severe unemployment and housing finance manipulation must be controlled to minimize social unrest, and these are the tasks of “hired” “political servants” (not “public servants”). The analysis of Porter, and his sources is essentially correct about the changes occurring in the world, but they do not go far enough in seeing the long term changes in the social order that such a transformation predicts.
This vision of the future is not inevitable. No prediction of the future is. If some other factor is identified as the key source of value: the individual, the capacity for self determination, etc, then the role of capital as the controlling factor in society can be regulated. But if capital and its direction of economy and production is the determining control of the society, and if it is allowed to control the development of civilization, then this looks like a pretty good prediction.
