A world without low hanging fruit
David Brooks hit another homer with his column yesterday in which he discussed Tyler Cowan’s e-book (is it not available in print?) “The Great Stagnation.” There’s a good summary of the book in the Economist. (I’d buy it, but alas, I’m still without a Kindle!) The basic premise of the book, according to both articles, is that economies grow when they have low hanging fruit and can exploit big changes. But now that a lot of people have education and basic needs, there isn’t all that much low hanging fruit left. Hence, we’re left with stagnation. The economic output moves to an area where there is low hanging fruit–i.e. China and India.
Of course there is computer innovation–Facebook, Twitter, etc. But these companies don’t create many jobs. There are only 2,000 people at Facebook, 300 at Twitter, and 17,000 at eBay. That’s hardly anything considering the amount of money that changes hands at these companies. In Brooks’s article, he goes on to compare a man born in 1900 with his grandson born in 1978. The grandson doesn’t chase wealth to the same extent that the grandfather did, and he spends lots of his time enjoying stuff that people create for free, like YouTube videos. If you look at the grandson’s life, he doesn’t really care either. He’s satisfied being the way he is. His activities don’t create many jobs, but then again, the companies who run the internet don’t create that many jobs either.
I think Cowan is right. America is in for a world of hurt. I saw this article yesterday: U.S. Manufacturing Decline Raises Concern About Innovation. There aren’t even any companies in the U.S. manufacturing forks and spoons. The only utensils made in the U.S. are our hands, and with our declining birthrate and reliance on immigration, even these are imported! (Joke yo.) Here’s a telling paragraph:
Losing an industry or ceasing to manufacture a particular product, in this case stainless steel flatware, has indeed become a fairly frequent event. Just in the last few years, the last sardine cannery, in Maine, closed its doors. Stainless steel rebars, the sturdy rods that reinforce concrete in all kinds of construction, are now no longer made in America. Neither are vending machines or incandescent light bulbs or cellphones or laptop computers.
I don’t know what to say. I have no idea where the jobs are going to come from in the future, or whether they will come from anywhere. All I can say is…grab a beer, get in front of your computer, and enjoy/contribute to the free content at bigWOWO. 
(pic from here)
Related posts:
Here’s my RiceDaddies post on this topic:
http://ricedaddies.blogspot.com/2011/02/jobs-for-our-kids.html
A couple of weeks back, I asked my 4 year old son Gun what he wanted to be when he grew up. He said, “I want to be a doctor…and a cowboy.”
I liked the answer. I said, “A doctor? That’s great!”
Gun was silent for a moment, and then he said, “But wait…where am I going to get a white shirt?”
Doctors will always have jobs, as will dentists, plumbers, Xerox machine technicians, and government bureaucrats. I worry about everyone else, including cowboys. In the computer age, most work can be outsourced. A lot of entertainment is now online, created and consumed for free.
I recently put up a post on bigWOWO referencing David Brooks and the Economist’s opinion on Tyler Cowan’s recent book “The Great Stagnation.” Read it here. Cowan’s theory, according to Brooks and the Economist, is that big growth takes place in a society where there is low hanging fruit–when there is a something that people need–food, education, a new technology. Now that almost everyone has computers, food, education, etc., there are no more big gains to be had in the U.S. The knowledge-heavy companies like Facebook and Twitter don’t create that many jobs. Compare that with China and India–that’s where the growth is going to be, according to the low hanging fruit theory.
Do any of you worry about the job prospects for the next generation? If so, what are your thoughts?
Dope! You are saying I immigrated to the wrong continent … and actually missed the boat.
A big part of the problem is the cost of living in the U.S. In my opinion, most of the “low hanging fruit” types of occupations don’t really pay a living wage, let alone the kind of lifestyle that a lot of people have grown accustomed to.
Something’s gonna have to give, one way or the other.
By the way, I thought that by now we wouldn’t have to worry about finding jobs. There would be machines doing our work while we took our hovercraft for a spin.
I like Driftglass’ take on the Brooks column, http://driftglass.blogspot.com/2011/02/nyt-employee-urges-teachers-and.html. Brooks is part of the problem.
For economic analysis I suggest reading, http://bonddad.blogspot.com/
For ideas and ways to foster growth I suggest, http://www.americanprogress.org/
We would also benefit if voters did their due diligence and didn’t vote people in like Gov. Scott Walker in Wisconsin or Gov. Chris Christie in New Jersey. Both turned down high speed rail and are now impinging on workers’ rights. Not really a way to get the economy booming…
As a country we forgot how we got out of this rut the last time. We don’t need Hoovers. We need Roosevelts. We need to quit placating to big business and stop hurting the people who actually build, teach, protect and operate this country. It’s a long road ahead maybe soon people will get fed up. Till then we will remain stagnate while “intellectuals” like Brooks write to us from their NYC lofts.
Add Gov. Rick Scott in Florida to that list, http://www.wftv.com/news/26885361/detail.html
Thanks, guys! I was hoping this would generate some comments. We got a few, I guess!
John, why didn’t our ancestors get a round trip ticket when they got on that boat?
Notty, hey, I’d be happy taking the hovercraft for a spin while a machine cooked up dinner and did my job for me.
Frank,
I agree with you on your point about Roosevelt. These high speed rails would be great for jobs, great for the environment, good for ease of doing business.
I’m a Democrat, but the issue, I think, is whether or not these projects can ever pay for themselves. Brooks wrote another article a while back about how government workers get pensions, and that government these days just can’t afford to pay those out with current tax rates.
Government jobs are really good to have. You usually can’t get fired, most of the time you get paid more than your peers in the private sector, and you get a fat pension. But long term, I wonder whether it’s possible to sustain increased government hiring without either an exit plan or a means of transitioning people to the private sector. I think this is where some of these governors are coming from.
Part of the issue is that back in the 1940′s, there was still lots of low hanging fruit. We had lots of people to educate, there was ample room to bring technology to people, and people wanted more. Now, what can we do once we’ve hit a level where people are comfortable and not adding economic benefit?
Well we can tax people, http://www.usatoday.com/money/perfi/taxes/2010-05-10-taxes_N.htm. It won’t fix everything, but if Brooks and his compatriots paid their fare share it would allow the middle-class to have the decent benefits they require. That’s really the crux of that issue.
As for the Governors: What’s wrong with people having pensions? Nothing. If they serve the public the least we can do is provide them with the same benefits we would expect for ourselves. And the reason the pay is good is to entice people into working for the government. The private sector has 401k plans, profit-sharing and various other options for employees. Government costs money. If people want services to be provided then they have to be paid for. These governors aren’t interested in long term societal or economic factors they simply come from an ideology where government is bad. The logic is government is bad, the private sector is holy therefore government workers are bad. It’s not like they are enacting policies to transition the workers they screw over with new shiny private sector jobs.
The argument when the recession first began was that when the private sector cannot create jobs the government has to step in. Now we did get the stimulus plan (although too small), but there is still a need for strong infrastructure and clean energy jobs. High speed rail files into that category as well, investment into our future. So that’s what I mean by Roosevelt.
The low hanging fruit metaphor doesn’t stick when nearly 9% of the population is unemployed and has been for some time. The reason I make stabs at Brooks is that he doesn’t get this. He has no idea nor does he care to understand the unemployed in America. One way to get people to reach for new heights is to not continually kick them while their down. How can one person innovate if he or she is constantly scraping to get by? That’s a reality for many and it’s a reality guys like Brooks don’t know. Again part of the problem. He’s typing away on his laptop pondering why he thinks people aren’t reaching for “low hanging fruit” when people would reach if they could get off the ground. Also too, wtf economic benefit does Brooks add?
Thanks for posting this, I hope people read those links. And I’m not raging on you I know you’re trying to open up the dialogue.
Thanks, Frank! No worries on the ragging. Actually I was hoping more people would chime in on this issue, but I guess not. So thanks for chiming in.
I agree with the idea that there is nothing wrong with people having pensions. Pensions are great; they provide survival security, and they’re a great incentive for people to stay in one place. The problem that government faces is whether or not they are affordable. For example, they used to be more common in the private sector too, but they’ve all but disappeared due to the high cost. 401ks cost something to create, but they’re dirt cheap compared to paying someone 80k or whatever a year for the rest of their lives after they retire. We’ve tried to raise taxes, and that hasn’t worked. So the only real alternative is to bring government wages down to where the private sector is and to bring government productivity up. In the meantime, the wages are just too high.
Take teachers for example. A high school teacher these days can get a pension that pays an average (including cost of living adjustments) $100k a year for 30 years after retirement. That’s the equivalent of $3 million in an (often nontaxable) IRA. The question isn’t whether it’s good or bad; it’s whether government can afford to pay it. Teachers in general are already very well paid to begin with. (And I won’t say they’re overpaid because I know that’s a hard hard job.) Teachers, of course, are an exception because most government is highly highly inefficient. Most government workers milk the clock.
That’s the thing–if these government pensions didn’t exist, and if government were more efficient, would it possible to get that clean energy infrastructure? Most of us probably agree that we need it.
I don’t know how anyone can read David Brook’s drivel with any seriousness…. Here is a quick reply by a serious economist, Dean Baker, on his blog:
http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-shows-that-you-can-just-say-anything-in-the-nyt
Btw, all the conversation about what we can or can’t afford social services is completely misleading without addressing the major part of the inefficiency of government: military spending, which is about half of the deficit and more than the rest of the world combined, and the high cost associated with a privatized healthcare system.
Charngchi,
When you get a chance, bother Larry again about that podcast. Actually never mind. I’ll bother him.
Dean Baker is WAY off base. For one, David Brooks cited a whole BOOK that describes this low hanging fruit theory. He may not be an economist, but isn’t the person who wrote the article for the Economist an economist? (I don’t know the answer to that, but it sounds right.) He’s also ignoring the whole of Brooks’s argument that some industries create more jobs than others.
People today are slackers. I think that’s pretty evident in talking to people. Plus, we’re beaten down. Look at Japan. Teenagers aren’t even interested in sex:
http://www.cnngo.com/tokyo/life/no-sex-japanese-teens-boys-increasingly-show-no-interest-521163
I should buy myself a Kindle and check out the book.
I agree with you on military spending. Let’s let China foot the bill for that. And let’s get universal healthcare.
what a lame argument. just because someone is an economist and wrote a book dont mean anything. the argument makes no sense. economic output doesnt move to places on its own. its not an animate organism. economic output goes to places like China and India because people consciously send it there to maximize their returns regardless of how it affects others. our economy is crap for a number of things. most importantly because its a capitalist system. but the main problems are tax injustice and outsourcing our manufacturing base. its no coincidence that our “golden age” was when the tax rate for the rich was 91% now its 35% and outsourcing our manufacturing base lowers our wages and makes us more dependent on imports, which is behind our growing trade deficit. 65% of our federal budget goes to war and the police state. Obama gave $13 billion of our tax money for Spanish workers to build our rail system when laidoff workers in Detroit couldve done it. if we raised the taxes on the rich, cut our military spending (we spend half the words budget) and got rid of the growing police state apparatus we would have plenty of money in investing in our economy to get people working and consumer spending up. it also would help to get a singlepayer healthcare system (since it would cost half as much as our private system that leaves tens of millions uninisured, more underinsured or unable to afford what insurance they have, millions in bankruptcy and hundreds dying each day due to lack of care) and to invest in sustainable energy (we spend more on tax breaks for oil companies each year than MIT gets to make breakthroughs in solar technology).
Trying to blame our “woeful economy” on the global market system as if it exists beyond human intervention is just nonsense. If this argument had any merit then workers in, say, Germany would be doing a lot worse than they are.
Can’t comment long, have to go to a teach-in on Egypt. If you don’t like Dean Baker (one of the first to predict the housing bubble, btw, when Brooks was still writing apologetics for the US invasions), Paul Krugman wrote a short reaction to Brooks’ column as well
http://krugman.blogs.nytimes.com/2011/02/15/lifestyles-of-the-rich-but-not-famous/
One thing to add to anarchimedes’ comments, this shifting of the manufacturing capacity to places like China and India is not some mysterious state-craft, but it is INTERNAL to an international corporate system. Sure, the Chinese and Indian states benefited from it, but the effects have been highly concentrated at the top, as in most nation-states, here as well. It also had the effect of pitting US workers against third-world counterparts, when there should be solidarity between them. Brooks and the book he cites from a CATO institute hack completely ignores the major policy changes for the last 30 years.
As for the podcast, I sorta lost interest in it… very busy with some of the new projects I am working on. But we can still do it if you guys like. Also, I have a friend who is a senior at Univ. of Illinois Urbana-Champagne who might also be good for this, she’s Chinese-American, queer, and anarchist.
The reasoning being offered by Brooks and the e-book he’s touting is a deus ex machina that obfuscates economic policies like those responsible for the stagnation of wages,boiling it down to the wind. Nevermind the functioning of state capitalism, neoliberal trade policy,globalization etc. Dean and Krugman are quite spot on in their analysis. Economoists are trying to rewrite how we got here to justify continuing these failed policies and economic theories. Neoliberalism failed,but Austrian so-called Free Market economics are not a solution or option for survival at this point,so CATO-type libertarians’ like Cowan are delusional at this point.
Anarchimedes,
Good point about Germany. Actually that’s the kind of feedback that I was looking for. So thank you very much for that. You’re right, Germany isn’t in the same kind of position that we’re in. I hadn’t thought of that.
I do think there are a number of differences though between Germany and the U.S., and I’d like to hear your opinion on this. What does Germany sell? They sell machines. Cars and finely engineered machines. Why do people buy their machines? Because German engineering is very good, maybe second to none. They’ve got a competitive advantage in engineering for whatever reason–schools, training, cultural values, etc. Other countries pay for that because they can’t get it elsewhere.
What is the U.S.’s competitive advantage? Other than winner-take-all industries like sports, movies, etc., the main advantage (I think) is production. We’ve been good at outproducing others with our systems. America created the assembly line, the Wal-Mart system of fulfillment, interchangeable parts, etc. We’ve got good scientists and inventors, but when it comes to what we sell, our advantage is production. We beat Germany during WWII partially because we had better warfare production capabilities. And that’s the issue with competition with China and India–production there is really cheap, so it cuts into our ability to manufacture stuff.
Now that manufacturing is disappearing because of that competition, some of which comes from American companies outsourcing (which you point out), what have Americans done? The competition (and the lack of low hanging fruit) has changed everything about what we used to do.
I agree with you on the military and the taxes. I’m hoping China takes some responsibility for military stuff. I don’t think we can increase taxes on the rich. The Repub’s care about one issue, and that’s it. We need to find another solution because that one isn’t working.
Even if we decrease taxes though, we’re still left with a hard problem: What business are Americans in? Where’s our advantage? What do we (as a country) export?
Charngchi,
The teach-in sounds cool.
I haven’t read the book yet, and I don’t know if I will, unless I get a Kindle.
Okay, lead-in to the podcast (if we do it)–why should third world workers and American workers have solidarity? They’ve got nothing in common with each other, not even language or culture. I would think that they would be competitors in any system.
Zeno and Charngchi,
Thanks for the Krugman article. I’m finding a little bit of competing data myself. People definitely show that they work longer hours, but I think the style of work is different these days. In the past, people took cigarette breaks a few times a day. Now they shop, do Facebook, and other things at work. That’s why CyberMonday is on a Monday–not on a weekend off company time.
Sorry…thinking again. The U.S. has good weapons and airplanes. Maybe there’s a way for us to undergo some kind of cultural shift where we have a competitive advantage.
I’m still thinking about the example of Germany.
Aside from just normal human decency, there is a class solidarity that the corporate-state nexus are active in destroying. The aspiration of the labor movement has always been creating an international movement, that’s why every major union is called an international.
But increasingly in the last 30+ years, international solidarity between workers have become even more important, given that the so-called Globalization: neoliberal policies that freed up capital movement internationally, have integrated the global economy in favor of the investment class, in the forms of huge multi-national corporations.
Outsourcing manufacturing jobs to the developing world where their governments can oppress the workforce more, where living conditions are so poor that working in a sweatshop began to look like a luxury in comparison, not only represses the workers in the third-world, it also undermines the labor movements at home. First, we are losing the manufacturing jobs that built the middle class after WWII, and they are not coming back. Then, with what little manufacturing is left in the US, if labor makes demands for higher wages, better benefits, and better working conditions, the multinationals can just threaten to move the manufacturing capacity to Mexico or China or India.
So in a global economy where capital has a great deal of integration, why shouldn’t workers also integrate globally as well? Of course many methods are used to break any attempts at it, including a massive amounts of anti-labor propaganda, and talks of cultural wars and clash of civilizations….
The cultural and language barriers can easily be broken, and have been, to the extent that movements have worked to integrate labor issues internationally. We see that closer to home, with the work done on the “illegal” immigrant issues and linking it with the effects of NAFTA. Now, obviously the solidarity isn’t there, given the effective propaganda…. but it ought to be natural and it needs to be built.
More later….
Charngchi,
See my emphasis on your statement:
“Outsourcing manufacturing jobs to the developing world where their governments can oppress the workforce more, where living conditions are so poor that working in a sweatshop began to look like a luxury in comparison, not only represses the workers in the third-world, it also undermines the labor movements at home.”
See why there’s competition? People in these poor countries want these jobs, the same way people in the U.S. would want them. The key difference, of course, is fair labor laws and standards of living. If these megaconglomerates open factories here, they have to comply with higher minimum wages, etc. So these jobs “move” overseas because of the profit motive. But people in these impoverished countries are happy to have these jobs. They’re not demanding rights or benefits or anything like that because these jobs offer an improved life.
Workers have no reason to unite because they have competing interests. They have different cultures and interests. China has been a perfect illustration of why workers in other countries embrace these jobs.
the point about germany is not comparitive advantage. its that the state still protects their industry rather than sacrifice them to global finance so goldmand sachs and others on wall street can make a ton of cash.
no developed country developed with free market policies. none. there is no such thing as a developed economy with a small government. economies develope because the state intervenes heavily in their planning. that was keynes point. markets are inefficient and governments need to step in to build up industries through various forms of protectionist policies (i.e. subsidies, tax on imports, controls on foreign investment, etc). the developed countries who are not experiencing the growing income inequality like we are is because those states still protect those industries. so yeah, germany still makes machines and the US is outsourcing them, killing its manufacturing base and increasing its trading deficit.
if it werent for our subsidizing technology (through the military, and which is now including biotechnology more and more) we would have already bankrupted and turned into something like Haiti.
what increases employment and living wages and turns an economy into an advanced and developed economy is not markets but state planning. the only real discussion that should be had right now is how much can we make this planning participatory and democratic. should the economy be planned by a class of technocrats and ceo’s or by some democratic compilation of workers and consumer councils?
That’s a good point about state protection.
Boeing gets American protection because of the military usage of planes. Supercomputer technology gets protection as well (although China recently surpassed us anyway). The U.S. makes good military weapons, which is also a protected product. These products are also subsidized by government funded research; the Manhattan Project, for example. We’re still ahead in most of these industries.
I don’t know about the practicality of keeping everything here–there’s always the issue of comparative advantage and whether it makes sense to buy/outsource certain components to keep prices competitive. It’s also always going to be a matter of finding a compromise with our foreign trading partners. If the U.S. outlaws a sneaker manufacturer from opening a factory in China, and the Chinese then simply rule that they won’t buy sneakers from American companies, there could be a problem that could hurt us through isolationism, because some other country could easily step forward if America isn’t there. Look at what China was able to do to Japan last year by stopping the flow of rare earth minerals.
In the case of Germany, I think many other countries have tried to duplicate their cars, knives, precision equipment, and whatever else they sell. I mean really, how hard should it be to make a microscope or a camera lens or a hunting knife? But for whatever reason, they’ve either been very good at protecting that knowledge, or other people just haven’t been able to replicate the processes. I wish I knew more about the situation.
“the only real discussion that should be had right now is how much can we make this planning participatory and democratic. should the economy be planned by a class of technocrats and ceo’s or by some democratic compilation of workers and consumer councils?”
The difficulty with having more voices is that there is always gridlock. Look at what happens in Congress on nearly every bill these days. And California–they can’t raise property taxes because it always gets kicked down in the required voter referendums. Too many cooks sometimes prevents the stew from even getting on the stove.
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