(11AM EST – promoted by Nightprowlkitty)
I was really inspired to do some thinking after reading Cassiodorus work here https://www.docudharma.com/diar…
We have a priority problem and a communication / definition problem in the US, and many other parts of the world.
The standard line is the global economy is rewarding us with greater efficiencies, translating in to higher standards of living, and overall growth every year.
The reality is very different, and I want to explain a bit of how that can be.
First, a few realities:
There are two basic labors we do in the world. They revolve around needs vs wants. The needs are food, shelter, basic tools, utilities and other things needed for humans to simply live in the world. Without these things, we are mere hunter gatherers, spending nearly all our time just to live and reproduce.
Wants are those things we can realize with some measure of our free time. These are luxuries, not required things. They might be entertainment, fashion, drama, etc…
One core reality, ignored in many of the economic discussion, is the needs are mandatory. Without these things, we regress as a society and as a people, and simply die. Wants come after needs, given we are wealthy enough to afford to entertain them.
That brings me to wealth. What is wealth? Wealth can be expressed in terms of time. When we have time available to us, after our needs are met, we are wealthy. The more of this time we have, the more wealthy we are. It’s all that simple. Most often, wealth is expressed in terms of dollars, and that’s misleading, because doing this ignores time, focusing on numerical value only.
Why is this a problem?
Let’s look at value. Value is also expressed in terms of time, and is linked to efficiency.
When we labor to meet our needs, it consumes time. If all our time is consumed, we are poor, unable to enjoy our personal freedom, and that’s undesirable. Labor invested in means, methods and tools, can increase efficiency, saving time and reducing the amount of labor required to meet needs, because the product of that labor is multiplied by the means, method, or tool labored with.
Doing that is called innovation.
Some materials have intrinsic value due to their properties. This value comes from the TIME taken to identify, locate and acquire said materials. That’s one way we can see value.
Another way is tools. Labor applied to common materials yields tools that increase the work product of labor. Those tools have value then, because time is freed for those who use the tools, permitting wants to be entertained. Another value.
Education, understanding, thought is also something of value. Reasoning to come to a better understanding of process, or physics has value in that anyone possessing those realizations can then improve their labor output, saving them time.
That is the core of how the world works for us as people. Those are undeniable facts, which are artifacts of our living state, and the physical world we live in.
I’ve defined wealth and value in terms of only time, for the purpose of helping all of you analyze whether or not you are seeing material value and wealth in whatever it is you are trying to understand.
One more reasoning tool here, then I will comment on the great diary!
Growth. What is economic growth really? I will once again express that in the most basic of terms, factoring out all the constructs we use today. (GDP, money, etc…)
Let’s take the example of the lone hunter gatherer. With no society, this person is very poor, having to invest nearly all their time laboring to meet their needs, ideally forming some tools and such, to free enough time to reproduce and educate their offspring.
Now, let’s take a small village. The combined labor frees time for everybody, as does the innovation that can occur with that time. The minimum, status quo labor required is that which meets the needs of everybody. If there is sufficient labor output to exceed those needs, that is real growth. The members of the village can either export that product to others, or reinvest it (store it) for their future to buy down risk. A simple risk example would be a crop failure. If they have stored something away, they can use it, keeping their labor burden ordinary. If they have not, they see a loss, and their labor burden goes up.
Growth then is a state where the product of labor serves wants, or serves to mitigate the cost of risk.
Risk, by the way, always has a cost over time. It’s irregular, which is why we do things like use insurance, so that those costs can be controlled and distributed for the benefit of all subject to that risk.
Now, when you read economic ideas, ask yourself a few basic questions:
What is the impact of these ideas on my wants vs needs time? Am I seeing more time availability, or less?
eg: Moving manufacturing off shore.
The simple idea is “have them do it, because they are cheaper; therefore, we see the need for less labor, because the items are inexpensive, saving us time, making us more wealthy.”
The reality is this: The cost of transportation is always increasing, due to the growing scarcity of natural resources we use for that purpose. Huge investments in time, materials, and energy are required to support the infrastructure needed to bring that chip thing, made there, here. Additionally, there is margin required to make the whole thing profitable, both of which increase cost.
Secondly, if we outsource most basic things, and or privatize needs, margins are required there too.
What happens to the value of your labor in that scenario? It goes down, because there is no demand for it. Your income then goes down, and with that devaluation of your labor, the actual cost of the inexpensive item rises significantly. In terms of actual dollars, it’s cheap!! High definition TV’s for a few hundred bucks!! Sweet right? Well, what if you only make a few hundred bucks? That’s a few weeks wages, traded for a TV.
Factor down your life into needs and wants, to understand the real costs.
Food, shelter, utilities, taxes, cost most people most of their wages. Wages are basically buying power per hour worked. At minimum wage, it’s about an hours worth of work to buy a fast food meal. It can be an entire day to fill your car gas tank, etc…
Most people, laboring in the much lower valued labor market today, have a few hundred dollars worth of buying power per month for wants, the rest being consumed by needs. If your needs are privatized, you have less buying power, because you must also pay a margin for basic things, like electric power.
Most people must also bear risk. With only a few hundred dollars per month, above and beyond their needs, how can one actually afford that HDTV, which represents a coupla months income, while saving for their retirement, paying for very expensive health care, maintain their shelter and vehicle, and have some in the bank for emergencies?
The answer is more labor! Used to be, pre-Reagan, a working person could labor in manufacturing and get enough buying power per hour worked to do those things for a modest family. Labor was worth more, because the work was local, and the costs of transportation were not draining the profit out of it, and the value of it out. People then saw more value for their labor.
Now, with those jobs largely gone, both parents must work, or one works overtime, or both things occur to have the same modest standard of living as we had before.
If you look at the definitions I gave above, the modern family is far more poor now, than they were before, because their time burden to meet their needs has been substantially increased over what it was before.
That increase is due to the cost of transportation, and the margin required by all the entities involved in the infrastructure, all rolling up to consume the value product of the labor overseas.
This is a big double dip on us, but there is more!!
What have big companies been doing lately to “grow?” The answer is to push cost and risk onto us. Self serve this, online that, phone menu this. They use their economies of scale to aggregate many small bits of labor we are forced to do in order to do business with them, into wealth for them. The product of that is more complexity in our lives, which consumes time, which makes us poor.
Now, back to that macro view for a moment. Remember the village I wrote about above? Let’s look at it again, only this time, with a few neighboring villages.
Let’s say our original village has innovated an economy that meets it’s needs very well, has banked resources for risk, and enjoys luxuries because of that. They do theatre, write books, play, and invest in education so that they can continue to grow economically.
With all of that happening within the village, the economy is sustainable there, so long as the natural resources hold up under the load. Such a village operating in a eco-friendly way, would endure so long as some natural disaster, or extreme element of risk, doesn’t snuff it out.
Every year, they improve on that, freeing time, making their people wealthy. The members of that village enjoy a rich life, where the labor they must do is small enough to warrant want to do labor. That’s real wealth, and real growth.
Now, let’s say there is another village somewhere that doesn’t enjoy the same fruits of their labor. Their government is oppressive, denying the people the product of their labor, keeping them poor for ideological reasons, or maybe even simple ignorance.
Until this point, business profit was a product of actually adding value to the village. If time was actually freed by the efforts, or the product of the efforts was seen as a desirable luxury item, profit was made. That’s real innovation that everybody benefits from. Competing business profits from innovation, as each seeks to lower cost and improve efficiency. Profit is not from the simple act of doing the business.
Now, one of those business people sees the very cheap labor in the oppressive village, realizing that they can get a very significant cost advantage by exploiting that labor, allowing for profit WITHOUT ADDING VALUE, so they do this.
The rest of the village sees the cost change, and that business grows in share.
What happens next determines the fate of the village, and by analogy our nation.
If the civic leaders see that exploitation as damaging, they impose a tariff, or some other economic balance so that the overall economy is not impacted. They do this because profit from innovation is real growth. Profit from raw exploitation is a net loss, and a crime against the people, who should be seeing value from the product of their labors.
On the other hand, if they decide to permit it, all the other businesses are forced to do the same thing, or leave the market place, displacing all the laborers they used to employ.
Let’s say that happens for shoes. It soon becomes ordinary to no longer make shoes in the home village, allowing the other one to make them, because it costs less. The laborers are retrained, or new innovation occurs such that they can labor as they did before on the shoes, earning enough to make the new labor worth what the old labor was.
In the shoe making village, the massive demand for shoe labor increases wages, and they gain from that as well, which leaves the cost of transportation as being the limiting factor on whether or not there is real value to be had by centralizing where the shoes are made.
Soon, the shoe makers all realize they can charge what they want to for shoes. Why? Because nobody else is making them, and so they do, slowly ramping up the cost of the shoes to compensate for the losses in transport. If the shoe making village is far away, those costs are higher –perhaps high enough to permit some shoes to be made locally in the home village.
Now, let’s say the pants manufactures are envious of the new found wealth in shoes and desire to do the same thing, or the very wealthy shoe manufacturers decide to also start making pants, cars, jackets, and everything else!!
What happens in the home village? Everybody ends up out of work, borrowing or doing without those things, for lack of wages, and that’s where the US is today.
The answer to these issues is to consider the impact of transportation costs, and to recognize the negative impact doing these things has on the value of labor. The other part of the answer is to differentiate wants vs needs.
Where something is a need, very thin margins are appropriate because the scale makes doing the labor worth while. People can make a living meeting needs, but won’t get wealthy, unless they are abusing the civics. Where needs are met, labor for wants can be driven by real innovation, not exploitation, and that makes people wealthy, and the society they labor in sees improvements over time that are real, not artificial as seen when we play nations off of one another like we have since Reagan.
It’s a poor state of affairs here in the US today. We can’t actually make a Kindle, or an iPad. We’ve sent that out of the country, and with it, our higher paying labor, leaving everybody scrapping along on much lower value labor, unable to meet their needs, and deal with risk and wants, forcing ugly choices.
The answer is to promote local economies to meet needs, value that properly, such that people are making enough to afford wants, and pay down risks. If we look at the nation as the village I wrote about above, we are slowly getting more and more poor, because we are not doing the work needed to meet our basic needs. We are simply consuming, not exporting, and that means we are literally sending our wealth overseas, much like somebody who earns a trust fund, then lives a lazy life draining it away.
The end game on that is not sustainable. Building up local, eco-friendly economies is!!
The difference is we can do that for needs, leaving wants global. We can then meet our needs for a cost that makes sense. Why? Because people have always been able to labor together to become more wealthy. That has never changed. Once they have that wealth, they can afford luxury things made anywhere.
Split the economies! There are needs economies that are local and sustainable and eco-friendly, and there are wants economies that can be global, consumed where there is real demand, based on how well needs are met. That way, we don’t suffer the ongoing loss of standard of living we are today.